**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-Q**




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




For
      the
      quarterly period ended: December 31, 2006




[
      ] 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
      120thAvenue
      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, or a non-accelerated filer. See definitions of "accelerated
      filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated filer [ ]  Accelerated filer [ ]    Non-accelerated filer [x]





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 33,961,639 issued and outstanding shares of the registrant’s common stock,
      par value $.001 per share, as of February 12, 2007.








1







**RADIANT
      LOGISTICS, INC.**






**(f/k/a
      Golf Two, Inc.)**






**TABLE
      OF CONTENTS**




PART
                I. FINANCIAL INFORMATIONItem
                1.
            
            Condensed
                Consolidated Financial Statements - UnauditedCondensed
                Consolidated Balance Sheets at December 31, 2006 and June 30,
                2006
            
            
            3Condensed
                Consolidated Statements of Operations for the three and six months
                ended
                December 31, 2006 and 2005
            
            
            4Condensed
                Consolidated Statements of Stockholders’ Equity at December 31,
                2006
            
            
            5Condensed
                Consolidated Statements of Cash Flows for the six months ended December
                31, 2006 and 2005
            
            
            6-7Notes
                to Condensed Consolidated Financial Statements
            
            
            8Item
                2.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            
            20Item
                3.
            
            Quantitative
                and Qualitative Disclosures about Market Risk
            
            
            35Item
                4.
            
            Controls
                and Procedures
            
            
            35PART
                II OTHER INFORMATIONItem
                1.
            
            Legal
                Proceedings
            
            
            36Item
                1A.
            
            Risk
                Factors
            
            
            36Item
                2.
            
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            
            36Item
                3.
            
            Defaults
                Upon Senior Securities
            
            
            36Item
                4.
            
            Submission
                of Matter to a Vote of Security Holders
            
            
            36Item
                5.
            
            Other
                Information
            
            
            36Item
                6.
            
            Exhibits
            
            
            36






2




**RADIANT
      LOGISTICS, INC.**


**(f/k/a
      Golf Two, Inc.)**


**Condensed
      Consolidated Balance Sheets**




December
                31,2006
            
            June
                30, 2006(unaudited)
            
            (audited)ASSETSCurrent
                assets -Cash
                and cash equivalents
            
            $
            192,614
            
            $
            510,970Accounts
                receivable, net of allowance for doubtful
            
            
            9,879,759
            
            
            8,487,899accounts
                of $201,682 and $202,830 respectfullyCurrent
                portion of employee loan receivable andother
                receivables
            
            
            40,400
            
            
            40,329Prepaid
                expenses and other current assets
            
            
            102,417
            
            
            93,087Deferred
                tax asset
            
            
            296,013
            
            
            277,417Total
                current assets
            
            
            10,511,203
            
            
            9,409,702Technology,
                furniture and equipment, net (Note 5)
            
            
            550,757
            
            
            258,119Acquired
                intangibles, net (Note 4)
            
            
            2,095,685
            
            
            2,401,600Goodwill
            
            
            4,718,189
            
            
            4,712,062Employee
                loan receivable
            
            
            80,000
            
            
            120,000Investment
                in real estate
            
            
            40,000
            
            
            40,000Deposits
                and other assets
            
            
            109,572
            
            
            103,376Total
                long term assets
            
            
            7,043,446
            
            
            7,377,038$
            18,105,406
            
            $
            17,044,859LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities -Accounts
                payable
            
            $
            5,674,959
            
            $
            4,096,538Accrued
                transportation costs
            
            
            2,022,556
            
            
            1,501,374Commissions
                payable
            
            
            658,632
            
            
            429,312Other
                accrued costs
            
            
            145,475
            
            
            303,323Income
                taxes payable
            
            
            719,319
            
            
            1,093,996Total
                current liabilities
            
            
            9,220,941
            
            
            7,424,543Long
                term debt (Note 6)
            
            
            1,167,143
            
            
            2,469,936Deferred
                tax liability
            
            
            712,533
            
            
            816,544Total
                long term liabilities
            
            
            1,879,676
            
            
            3,286,480Total
                liabilities
            
            
            11,100,617
            
            
            10,711,023Commitments
                & contingencies (Note 7)
            
            
            -
            
            
            -Stockholders'
                equity: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: 33,961,639 at December 31, 2006and
                33,611,639 at June 30, 2006
            
            
            15,417
            
            
            15,067Additional
                paid-in capital
            
            
            7,036,127
            
            
            6,590,355Accumulated
                deficit
            
            
            (46,755
            )
            
            (271,586
            )Total
                Stockholders’ equity
            
            
            7,004,789
            
            
            6,333,836$
            18,105,406
            
            $
            17,044,859






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





3





**RADIANT
      LOGISTICS, INC.**


**(f/k/a
      Golf Two, Inc.)**


**Consolidated
      Statements of Income (Operations)**


**(unaudited)**








THREE
                MONTHS ENDED
              DECEMBER
                31,
            
            SIX
                MONTHS ENDED
              DECEMBER
                31,2006
            
            2005
            
            2006
            
            2005Revenue
            
            $
            18,343,928
            
            $
            -
            
            $
            32,761,029
            
            $
            -Cost
                of transportation
            
            
            11,655,542
            
            
            -
            
            
            21,078,861
            
            
            -Net
                revenues
            
            
            6,688,386
            
            
            -
            
            
            11,682,168
            
            
            -Agent
                Commissions
            
            
            5,242,753
            
            
            -
            
            
            8,970,070
            
            
            -Personnel
                costs
            
            
            581,090
            
            
            54,174
            
            
            1,088,120
            
            
            54,174Selling,
                general and administrative expenses
            
            
            612,593
            
            
            71,837
            
            
            1,018,500
            
            
            85,912Depreciation
                and amortization
            
            
            204,841
            
            
            -
            
            
            390,947
            
            
            -Total
                operating expenses
            
            
            6,641,277
            
            
            126,011
            
            
            11,467,637
            
            
            140,086Income
                (loss) from operations
            
            
            47,109
            
            
            (126,011
            )
            
            214,531
            
            
            (140,086
            )Other
                income (expense):Interest
                income
            
            
            2,505
            
            
            14,433
            
            
            4,311
            
            
            14,433Interest
                expense
            
            
            (2,961
            )
            
            -
            
            
            (10,452
            )
            
            (500
            )Other
            
            
            (2,281
            )
            
            -
            
            
            (2,681
            )
            
            -Total
                other income (expense)
            
            
            (2,737
            )
            
            14,433
            
            
            (8,822
            )
            
            13,933Income
                (loss) before income tax benefit
            
            
            44,372
            
            
            (111,578
            
            
            205,709
            
            
            (126,153
            )Income
                tax benefit
            
            
            (20,932
            )
            
            -
            
            
            (19,122
            )
            
            -Net
                income (loss)
            
            $
            65,304
            
            $
            (111,578
            )
            $
            224,831
            
            $
            (126,153
            )Net
                income (loss) per common share - basic
            
            $
            -
            
            $
            -
            
            $
            .01
            
            $
            -Net
                income (loss) per common share - diluted
            
            $
            -
            
            $
            -
            
            $
            .01
            
            $
            -Weighted
                average shares outstanding:Basic
                shares
            
            
            33,958,378
            
            
            28,052,009
            
            
            33,805,389
            
            
            27,008,094Diluted
                share
            
            
            34,468,711
            
            
            28,052,009
            
            
            34,464,533
            
            
            27,008,094






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




4




**RADIANT
      LOGISTICS, INC.**


**(f/k/a
      Golf Two, Inc.)**


**Condensed
      Consolidated Statement of Stockholders’ Equity**






ADDITIONAL
            
            
            
            TOTALCOMMON
                STOCK
            
            PAID-IN
            
            ACCUMULATED
            
            STOCKHOLDERS'SHARES
            
            AMOUNT
            
            CAPITAL
            
            DEFICIT
            
            EQUITYBalance
                at July 1, 2006
            
            
            33,611,639
            
            $
            15,067
            
            $
            6,590,355
            
            $
            (271,586
            )
            $
            6,333,836Issuance
                of common stock for training materials at$1.01
                per share (September 2006) (unaudited)
            
            
            250,000
            
            
            250
            
            
            252,250
            
            
            -
            
            
            252,500Issuance
                of common stock as bonus compensation at$1.01
                per share (October 2006) (unaudited)
            
            
            100,000
            
            
            100
            
            
            100,900
            
            
            -
            
            
            101,000Share
                based compensation (unaudited)
            
            
            -
            
            
            -
            
            
            92,622
            
            
            -
            
            
            92,622Net
                income for the six months endedDecember
                31, 2006 (unaudited)
            
            
            -
            
            
            -
            
            
            -
            
            
            224,831
            
            
            224,831Balance
                at December 31, 2006
            
            
            33,961,639
            
            $
            15,417
            
            $
            7,036,127
            
            $
            (46,755
            )
            $
            7,004,789





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





5


**RADIANT
      LOGISTICS, INC.**


**(f/k/a
      Golf Two, Inc.)**


**Condensed
      Consolidated Statements of Cash Flows**


**(unaudited)**










For
                six months ended December 31,2006
            
            2005CASH
                FLOWS PROVIDED BY OPERATING ACTIVITIES:Net
                income (loss)
            
            $
            224,831
            
            $
            (126,153
            )ADJUSTMENTS
                TO RECONCILE NET INCOME (LOSS) TO NET CASHPROVIDED
                BY OPERATING ACTIVITIES:non-cash
                contribution to capital (rent)
            
            
            -
            
            
            300non-cash
                compensation expense (stock options)
            
            
            92,622
            
            
            29,238non-cash
                issuance of common stock (services)
            
            
            -
            
            
            29,500non-cash
                issuance of common stock (interest)
            
            
            -
            
            
            3,500amortization
                of intangibles
            
            
            305,915
            
            
            -amortization
                of deferred tax
            
            
            (104,011
            )
            
            -depreciation
            
            
            70,726
            
            
            -amortization
                of employee loan receivable
            
            
            40,000
            
            
            -amortization
                of credit facility
            
            
            14,306
            
            
            -change
                in purchased accounts receivable
            
            
            (6,128
            )
            
            -CHANGE
                IN ASSETS AND LIABILITIES -accounts
                receivables
            
            
            (1,391,860
            )
            
            -other
                receivables
            
            
            (71
            )
            
            -prepaid
                expenses and other current assets
            
            
            (48,428
            )
            
            (25,055
            )accounts
                payable
            
            
            1,578,421
            
            
            145,388accrued
                transportation costs
            
            
            521,182
            
            
            -commission
                payable
            
            
            229,320
            
            
            -other
                accrued costs
            
            
            (56,847
            )
            
            -income
                taxes payable
            
            
            (374,677
            )
            
            -Net
                cash provided by operating activities
            
            
            1,095,301
            
            
            56,718CASH
                FLOWS USED FOR INVESTING ACTIVITIES:Acquisition
                of Airgroup - see Note 3
            
            
            -
            
            
            (15,907
            )Purchase
                of technology and equipment
            
            
            (110,864
            )
            
            -Net
                cash used for investing activities
            
            
            (110,864
            )
            
            (15,907
            )CASH
                FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:Net
                proceeds from issuance of common stock
            
            
            -
            
            
            5,202,525Net
                payments on long term debt
            
            
            (1,302,793
            )
            
            -Proceeds
                from stockholder’s notes payable
            
            
            -
            
            
            -Net
                cash provided by (used for)financing activities
            
            
            (1,302,793
            )
            
            5,202,525NET
                INCREASE (DECREASE) IN CASH
            
            
            (318,356
            )
            
            5,243,336CASH,
                BEGINNING OF THE PERIOD
            
            
            510,970
            
            
            23,115CASH,
                END OF PERIOD
            
            $
            192,614
            
            $
            5,266,451SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:Income
                taxes paid
            
            $
            409,376
            
            $
            -Interest
                paid
            
            $
            10,452
            
            $
            800






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


6




**RADIANT
      LOGISTICS, INC.**


**(f/k/a
      Golf Two, Inc.)**


**Condensed
      Consolidated Statements of Cash Flows**


**(unaudited)**










**Supplemental
      disclosure of non-cash financing activities:**





In
      September 2006, the Company issued 250,000 shares, of its common stock, at
      a
      market value of $1.01 per share, in exchange for $252,500, in value, of domestic
      and international freight training materials for the development of its
      employees and exclusive agent offices, and was included in the balance sheet
      as
      technology, furniture and equipment.





In
      October 2006, the Company issued 100,000 shares of common stock, at a market
      value of $1.01 a share, as incentive compensation to its senior managers which
      was recorded against other accrued costs.





7


**RADIANT
      LOGISTICS, INC.**


**(f/k/a
      Golf Two, Inc.)**


**Notes
      to Condensed Consolidated Financial Statements**


**(unaudited)**







**NOTE
      1 - NATURE OF OPERATION AND BASIS OF PRESENTATION**





**General**





Radiant
      Logistics, Inc. (formerly known as “Golf Two, Inc.”) (the “Company”) was formed
      under the laws of the state of Delaware on March 15, 2001 and from inception
      through the third quarter of 2005, the Company's principal business strategy
      focused on the development of retail golf stores. In October 2005, the Company’s
      new management team, consisting of Bohn H. Crain and Stephen M. Cohen, completed
      a change of control transaction when they acquired a majority of the Company’s
      outstanding securities from the Company’s former officers and directors in
      privately negotiated transactions. In conjunction with the change of control
      transaction, management: (i) discontinued the business model; (ii) repositioned
      the Company as a global transportation and supply chain management company;
      and
      (iii) changed the Company’s name to
      “Radiant Logistics, Inc.” to, among other things, better align its name with its
      new business focus.




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.





The
      Company’s growth strategy will focus on organic, as well as acquisitive
      features. From an organic perspective, the Company will focus on strengthening
      existing and expanding new customer relationships. One of the drivers of the
      Company’s organic growth will be the retention of existing, and securing of new
      exclusive agency locations.





The
      Company’s acquisition strategy relies upon two primary factors: first, the
      Company’s ability to identify and acquire target businesses that fit within its
      general acquisition criteria, and second, the continued availability of capital
      and financing resources sufficient to complete these acquisitions. The Company’s
      ability to secure additional financing will rely upon the sale of debt or equity
      securities, and the development of an active trading market for the Company’s
      securities, neither of which can be assured.





The
      Company’s strategy
      has been designed to take advantage of shifting market dynamics. The third
      party
      logistics industry continues to grow as an increasing number of businesses
      outsource their logistics functions to more cost effectively manage and extract
      value from their supply chains. Also, the industry is positioned for further
      consolidation as it remains highly fragmented, and as customers are demanding
      the types of sophisticated and broad reaching service offerings that can more
      effectively be handled by larger more diverse organizations.





Successful
      implementation of the Company’s growth strategy will rely on a number of
      factors, including the ability to efficiently integrate any acquired businesses,
      generate the anticipated economies of scale from the integration, and maintain
      the historic sales growth of the acquired businesses in order to generate
      continued organic growth. There are a variety of risks associated with the
      Company’s ability to achieve its strategic objectives, including the ability to
      acquire and profitably manage additional businesses and the intense competition
      in the Company’s industry for customers and for the acquisition of additional
      businesses.




8


The
      Company accomplished the first step in its strategy by completing the
      acquisition of Airgroup effective as of January 1, 2006. Airgroup is a non-asset
      based logistics company that provides domestic and international freight
      forwarding services through a network of, originally, 34, and presently 36
      active, exclusive agent offices across North America. Airgroup, a Seattle,
      Washington based company, services a diversified account base including
      manufacturers, distributors and retailers using a network of independent
      carriers and over 100 international agents positioned strategically around
      the
      world.





**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/T for the
      year ended June 30, 2006.





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 Consolidation**





These
      consolidated financial statements include the accounts of Radiant
      Logistics, Inc. and its wholly-owned subsidiary, Airgroup Corporation.
      All significant inter-company balances and transactions have been
      eliminated.





**NOTE
      2 - 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, 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.





**b)**  **Cash
      and Cash Equivalents**





For
      purposes of the statement 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**





9


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)
      Technology, Furniture and 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 the Company to determine the fair value of each reporting unit,
      and compare the fair value to the reporting unit's carrying amount. To the
      extent a 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. In the future, the Company will perform 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. As of December 31,
      2006 there are no indications of an impairment.





**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 over a 5 year
      period.





10


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,
      2006.





**h)**  **Commitments
      and Contingencies**





The
      Company has operating lease commitments some of which are for office and
      warehouse space and are under non-cancelable operating leases expiring at
      various dates through December 2010. Annual commitments, 2007 through 2011,
      respectively, are $242,929, $87,122, $86,498, $78,008, and $31,800.





**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 and the tax effects of net operating loss and capital loss
      carryforwards. 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.





**j)**  **Revenue
      Recognition and Purchased Transportation Costs**





The
      Company recognizes revenue on a gross basis, in accordance with Emerging Issues
      Task Force ("EITF") 99-19, "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. In accordance with EITF 99-19,
      revenue from freight forwarding and export services is recognized at the time
      the freight is tendered to the direct carrier at origin, and direct expenses
      associated with the cost of transportation are accrued concurrently. At
      the
      time when revenue is recognized on a transportation shipment, the Company
      records costs related to that shipment based on the estimate of total purchased
      transportation costs. The estimates are 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.





11


**k)**  **Share
      based Compensation**





In
      December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
      No.
      123R, "Share Based Payment,” a revision of FASB Statements 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, in March 2005 the Securities and Exchange Commission
      ("SEC") released 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. Generally, the approach in SFAS 123R is
      similar to the approach described in SFAS 123. However, 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.
      Pro
      forma disclosure of fair value recognition, as prescribed under SFAS 123, is
      no
      longer an alternative. The Company adopted Statement 123R in October 2005 using
      the modified prospective approach.





For
      the
      six months ended December 31, 2006, the Company recorded a share based
      compensation expense of $92,622, which, net of income taxes, resulted in a
      $61,131 net reduction of net income. For the three months ended December 31,
      2006 the Company recorded a share based compensation expense of $47,630, which,
      net of income taxes, resulted in a $31,436 net reduction of net income. Prior
      to
      October 2005 the Company did not have a stock option plan therefore no expense
      was recorded. For the three months ended December 31, 2005, the Company recorded
      a share based compensation expense of $29,238 which resulted in reduction of
      net
      income by $29,238 as there was no tax benefit due to the ongoing net loss since
      inception.





**l)**  **Basic
      and Diluted Income (Loss) Per Share**





The
      Company uses SFAS No. 128, Earnings Per Share for calculating the basic and
      diluted income (loss) per share. Basic income (loss) per share is computed
      by
      dividing net income (loss) attributable to common stockholders by the weighted
      average number of common shares outstanding. Diluted income per share is
      computed similar to basic income (loss) 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 had been issued and if the additional
      common shares were dilutive. There were outstanding options to purchase
      2,570,000 and 2,000,000 shares of common stock for both the three and six months
      ended December 31, 2006 and 2005, respectively. For three months ended December
      31, 2006 and 2005, the outstanding number of potentially dilutive common shares
      totaled 34,468,711 and 28,052,009 shares of common stock. Options to purchase
      1,045,000 shares of common stock were not included in the diluted EPS
      computation for the three months ended December 31, 2006 as the exercise prices
      of those options were greater than the market price of the common shares and
      are
      thus anti-dilutive. Options to purchase 2,000,000 shares of common stock were
      not included in the diluted EPS computation for the three months ended December
      31, 2005 as there was a loss in this period and thus the shares would be
      anti-dilutive.





For
      the
      six months ended December 31, 2006 and 2005, the outstanding number of
      potentially dilutive common shares totaled 34,464,533 and 27,008,094 shares
      of
      common stock. For the six months ended December 31, 2006, dilutive common shares
      included options to purchase shares of common stock computed by calculating
      the
      weighted average of the number of incremental dilutive shares added to each
      quarter.





Options
      to purchase 1,045,000 shares of common stock were not included in the diluted
      EPS computation for the six months ended December 31, 2006 as the exercise
      prices of those options were greater than the market price of the common shares
      and thus are anti-dilutive. Options to purchase 2,000,000 shares of common
      stock
      were not included in the diluted EPS computation for the six months ended
      December 31, 2005 as there was a loss in this period and thus the shares would
      be anti-dilutive.





**NOTE
      3 - ACQUISITION OF AIRGROUP**





12


In
      January of 2006, the Company acquired 100 percent of the outstanding stock
      of
      Airgroup Corporation (“Airgroup”). Airgroup is a non-asset based logistics
      company that provides domestic and international freight forwarding services
      through a network of, originally, 34, and presently 36 active, exclusive agent
      offices across North America. Airgroup, a Seattle, Washington based company,
      services a diversified account base including manufacturers, distributors and
      retailers using a network of independent carriers and over 100 international
      agents positioned strategically around the world. See the Company’s Form 8-K
      filed on January 18, 2006 for additional information.





The
      transaction was valued at up to $14.0
      million based on meeting all incentive and contingent factors. This consists
      of:
      (i) $9.5 million payable in cash at closing (before giving effect for $2.8
      million in acquired cash); (ii) an additional base payment of $0.6 million
      payable in cash on the one-year anniversary of the closing, provided at least
      90% of Airgroup’s locations remain operational through the first anniversary of
      the closing (the “Additional Base Payment”); (iii) a subsequent cash payment of
      $0.5 million in cash on the two-year anniversary of the closing; (iv) a base
      earn-out payment of $1.9 million payable in Company common stock over a
      three-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, i n
      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. The Company has recently
      agreed with the former shareholders of Airgroup to modify the terms of the
      $.6
      million payment otherwise contingently due on January 11, 2007. See Note 12
      Subsequent Events.





The
      acquisition, which provided the platform operation for the Company’s
      consolidation strategy, was accounted for as a purchase and accordingly, the
      results of operations and cash flows of Airgroup have been included in the
      Company’s condensed consolidated financial statements prospectively from the
      date of acquisition. The total purchase price, including acquisition expenses
      of
      $104,779, but excluding the contingent consideration, was $10,104,779. The
      following table summarizes the allocation of the purchase price based on the
      estimated fair value of the assets acquired and liabilities assumed at January
      1, 2006:




Current
                  assets
              
              $
              11,671,691Furniture
                  and equipment
              
              
              231,726Other
                  assets
              
              
              196,634Goodwill
                  and other intangibles
              
              
              7,460,189Total
                  acquired assets
              
              
              19,560,240Current
                  liabilities assumed
              
              
              8,523,181Long
                  term deferred tax liability
              
              
              932,280Total
                  acquired liabilities
              
              
              9,455,461Net
                  assets acquired
              
              $
              10,104,779




For
      the
      three and six months ended December 31, 2006, the Company recorded an expense
      of
      $152,956 and $305,915, respectively, from amortization of intangibles and an
      income tax benefit of $104,011 and $52,006, respectively, from amortization
      of
      the long term deferred tax liability; 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
      $403,806 in fiscal year 2007, $361,257 in 2008, $394,079 in 2009, $318,862
      in
      2010, and $107,052 in 2011. Also see Note 4.





13


The
      following information for the three and six months ended December 31, 2006
      (actual and unaudited) and December 31, 2005 (pro forma and unaudited) is
      presented as if the acquisition of Airgroup had occurred on January 1, 2005
      (in
      thousands, except earnings per share):





Three
                  Months ended
              
              Six
                  Months EndedDecember
                  31,
              
              December
                  31,2006
              
              2005
              
              2006
              
              2005Total
                  revenue
              
              $
              18,344
              
              $
              14,677
              
              $
              32,761
              
              $
              28,111Income
                  from operations
              
              
              47
              
              
              (130
              )
              
              215
              
              
              172Net
                  income
              
              
              65
              
              
              (
                  25
              )
              
              225
              
              
              180Earnings
                  per share:Basic
              
              $
              0.00
              
              $
              0.00
              
              $
              0.01
              
              $
              0.01Diluted
              
              $
              0.00
              
              $
              0.00
              
              $
              0.01
              
              $
              0.01





**NOTE
      4 - ACQUIRED INTANGIBLE ASSETS**





The
      table
      below reflects acquired intangible assets related to the acquisition of Airgroup
      on January 1, 2006. The information is for the six months ended December 31,
      2006 and the year ended June 30, 2006. Prior to the Company’s acquisition of
      Airgroup, there were no intangible assets for prior years as this is the
      Company’s first acquisition.





14







Six
                months ended
              December
                31, 2006
            
            
            Year
                ended June 30, 2006Gross
              carrying
              amount
            
            
            Accumulated
                Amortization
            
            
            Gross
              carrying
              amount
            
            
            AccumulatedAmortizationAmortizable
                intangible assets:Customer
                related
            
            $
            2,652,000
            
            $
            628,315
            
            $
            2,652,000
            
            $
            331,400Covenants
                not to compete
            
            
            90,000
            
            
            18,000
            
            
            90,000
            
            
            9,000Total
            
            $
            2,742,000
            
            $
            646,315
            
            $
            2,742,000
            
            $
            340,400Aggregate
                amortization expense:For
                the three months ended December 31, 2006
            
            
            
            
            $
            152,956For
                the six months ended December 31, 2005
            
            
            
            
            $
            -For
                the six months ended December 31, 2006
            
            
            
            
            $
            305,915For
                the six months ended December 31, 2005
            
            
            
            
            $
            -Aggregate
                amortization expense for the year ended June 30:2007
                - For the remainder of the year
            
            
            
            
            $
            305,9122008
            
            
            
            
            
            547,3592009
            
            
            
            
            
            597,0902010
            
            
            
            
            
            483,1242011
            
            
            
            
            
            162,200$
            2,095,685





**NOTE
      5 - TECHNOLOGY, FURNITURE AND EQUIPMENT**





The
      Company, prior to acquiring Airgroup, did not carry any fixed assets since
      its
      inception. Property and equipment consists of the following:





December
              31,
            
            June
              30,2006
            
            2006Vehicles
            
            $
            3,500
            
            $
            3,500Communication
                equipment
            
            
            1,353
            
            
            1,353Office
                equipment
            
            
            258,523
            
            
            6,023Furniture
                and fixtures
            
            
            10,212
            
            
            10,212Computer
                equipment
            
            
            159,068
            
            
            96,653Computer
                software
            
            
            246,888
            
            
            198,438Leasehold
                improvements
            
            
            10,699
            
            
            10,699690,243
            
            
            326,878Less:
                Accumulated depreciation and amortization
            
            
            (139,486
            )
            
            (68,759
            )Technology,
                furniture, and equipment - net
            
            $
            550,757
            
            $
            258,119




Depreciation
      and amortization expense for the six months ended December 30, 2006 was $70,726
      and for year ended June 30, 2006 was $68,759.





15


**NOTE
      6 - LONG TERM DEBT**





To
      complete the Airgroup acquisition and ensure adequate financial flexibility,
      the
      Company secured a $10,000,000 revolving credit facility (the "Facility") in
      January 2006. The
      Facility is collateralized by our accounts receivable and other assets of the
      Company and its subsidiary. 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 prime
      minus 1.00% or LIBOR plus 1.55% 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 75% of the Company’s
      eligible accounts receivable.





As
      of
      December 31, 2006, the Company had no amounts outstanding under the Facility
      and
      had eligible accounts receivable sufficient to support approximately $4.6
      million in borrowings. 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 70.0%).
      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 $2.0 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 our
      strategic objectives. At December 31, 2006, the Company was in compliance with
      all of its covenants.





As
      of
      December 31, **** 2006,
      the
      Company had no advances under the Facility but had $667,143 in outstanding
      checks which had not yet been presented to the bank for payment. The outstanding
      checks have been reclassed from our cash accounts, as they will be advanced
      from, or against, our Facility when presented for payment to the bank. The
      $667,143, in addition to a $500,000
      payable to the former shareholders of Airgroup, totals
      long term debt of $1,167,143 .





At December
      31, **** 2006,
      based on available collateral and $305,000 in outstanding letter of credit
      commitments, there was $4,563,997 available for borrowing under the
      Facility.





**NOTE
      7 - COMMITMENTS AND CONTINGENCIES**





In
      December 2006, the Company entered into finders fee arrangements with third
      parties to assist the Company in locating logistics businesses that could become
      additional exclusive agent operations of the Company and/or candidates for
      acquisition. Any amounts due under these arrangements are payable as a function
      of the financial performance of any newly acquired operation and contingently
      payable upon, among other things, the retention of any newly acquired operations
      for a period of not less than 12 months. Payment of the finders fee may be
      paid
      in cash, Company shares, or a combination of cash and shares.





16


**NOTE
      8 - 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.





The
      Company accumulated a net federal operating loss carryforward of $342,272 from
      inception though its transition into the logistics business in January of 2006
      which expires in 2025. Utilization of the net operating loss and tax credit
      carryforwards is subject to significant limitations imposed by the change in
      control under I.R.C. 382, limiting its annual utilization to the value of the
      Company at the date of change in control times the federal discount rate. A
      significant portion of the NOL may expire before it can be utilized. The
      Company is maintaining a valuation allowance of approximately $116,000 to
      off-set the deferred tax asset associated with these net operating losses until
      when, in the opinion of management, utilization is reasonably
      assured.





For
      three
      and six months ended December 31, 2006, the Company recognized net
      income tax benefit of $20,932 and $19,122 consisting of $52,005 and $104,011,
      respectively, of income tax benefit offset by the amortization of the deferred
      tax liability attributed to the acquisition of Airgroup, in accordance with
      FASB
      109.





The
      Company’s consolidated effective tax rate during the six month period ended
      December 31, 2006 was 34.0%. No tax benefit was recorded in December 31, 2005
      due to the ongoing losses as discussed above.





**NOTE
      9 - 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, 2006, none of the shares were issued or
      outstanding (unaudited).





**Common
      Stock**





In
      September 2006, the Company issued 250,000 shares of our common stock, at a
      market value of $1.01 per share, in exchange for $252,500, in value, of domestic
      and international freight training materials for the development of its
      employees and exclusive agent offices.





In
      October 2006, the Company issued of 100,000 shares of common stock, at a market
      value of $1.01 a share, as incentive compensation to its senior managers.





**NOTE
      10 - SHARE BASED COMPENSATION**





The
      Company issued its first employee options in October of 2005 and adopted the
      fair value recognition provisions of SFAF123R concurrent with this initial
      grant.




For
      the
      three months ended December 31, 2006, no options to purchase shares were issued.
      During the six months ended December 31, 2006 the Company issued employees
      options to purchase 100,000 shares of common stock at $0.74 per share in August
      2006 and 45,000 shares of common stock at $1.01 per share in September 2006.
      The
      options vest 20% a year over a five year term.




Share
      based compensation costs recognized during the six months ended December 31,
      2006, 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 September 30,
      2006.





17


For
      the
      six months ended December 31, 2006, the weighted average fair value per share
      of
      employee options granted in August 2006 was $.60 and $.81 in September 2006.
      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:


August
              
              September2006
              
              2006Dividend
                  yield
              
              
              None
              
              
              NoneVolatility
              
              
              112.7
              %
              
              110.0
              %Risk
                  free interest rate
              
              
              3.73
              %
              
              3.73
              %Expected
                  lives
              
              
              5.0
                  years
              
              
              5.0
                  years
  In
      accordance with SFAS123R, the Company is required to estimate the number of
      awards that are ultimately expected to vest. Due to the lack of historical
      information, the Company has not reduced its share based compensation costs
      for
      any estimated forfeitures. Estimated forfeitures will be reassessed in
      subsequent periods and may change based on new facts and
      circumstances.




For
      the
      three months ended December 31, 2006 and 2005, the Company recognized stock
      option compensation costs of $47,630 and $29,238, respectively, in accordance
      with SFAS 123R. For the six months ended December 31, 2006 and 2005, the Company
      recognized stock option compensation costs of $92,622 and $29,238, respectively,
      in accordance with SFAS 123R.




The
      following table summarizes activity under the plan for the six months ended
      December 31, 2006.




Number
                of shares
            
            
            Weighted
                Average
              exercise
                price per share
            
            
            Weighted
                average
              remaining
              contractual
              life
            
            
            Aggregate
              intrinsic
              valueOutstanding
                at June 30, 2006
            
            
            2,425,000
            
            $
            0.593
            
            
            9.38
                years
            
            $
            1,109,250Options
                granted
            
            
            145,000
            
            
            0.824
            
            
            -
            
            
            -Options
                exercised
            
            
            -
            
            
            -
            
            
            -
            
            
            -Options
                forfeited
            
            
            -
            
            
            -
            
            
            -
            
            
            -Options
                expired
            
            
            -
            
            
            -
            
            
            -
            
            
            -Outstanding
                at December 31, 2006
            
            
            2,170,000
            
            $
            0.602
            
            
            8.94
                years
            
            $
            86,750Exercisable
                at December 31, 2006
            
            
            400,000
            
            $
            0.625
            
            
            8.83
                years
            
            
            10,000





**NOTE
      11 - RECENT ACCOUNTING PRONOUNCEMENTS**





In
      September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
      158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R).” This
      Statement improves financial reporting by requiring an employer to recognize
      the
      over funded or under funded status of a defined benefit postretirement plan
      (other than a multiemployer plan) as an asset or liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income of a business entity or
      changes in unrestricted net assets of a not-for-profit organization. This
      Statement also improves financial reporting by requiring an employer to measure
      the funded status of a plan as of the date of its year-end statement of
      financial position, with limited exceptions. The
      Company does not expect the adoption of SFAS 158 to have any impact on its
      financial position, results of operations or cash flows.





18


In September
      2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157
      “Fair Value Measurements” which relate to the definition of fair value, the
      methods used to estimate fair value, and the requirement of expanded disclosures
      about estimates of fair value. SFAS No. 157 is effective for financial
      statements issued for fiscal years beginning after November 15, 2007, and
      interim periods within those fiscal years. We are currently evaluating the
      impact this interpretation will have on our consolidated financial
      statements.





In July
      2006, the Financial Accounting Standards Board ("FASB") issued FASB
      Interpretation ("FIN") No. 48, “ Accounting
      for Uncertainty in Income Taxes ,”
with
      respect to FASB Statement No. 109, “ Accounting
      for Income Taxes ,”
      regarding accounting for and disclosure of uncertain tax positions. FIN No.
      48 is intended to reduce the diversity in practice associated with the
      recognition and measurement related to accounting for uncertainty in income
      taxes. This interpretation is effective for fiscal years beginning after
      December 15, 2006. The
      Company does not expect the adoption of FIN 48 to have any impact on its
      financial position, results of operations or cash flows.





In
      February 2006, the FASB has issued FASB Statement No. 155, “Accounting for
      Certain Hybrid Instruments.” This standard amends the guidance in FASB
      Statements No. 133, “Accounting for Derivative Instruments and Hedging
      Activities,” and No. 140, Accounting for “Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities.” Statement 155 allows financial
      instruments that have embedded derivatives to be accounted for as a whole
      (eliminating the need to bifurcate the derivative from its host) if the holder
      elects to account for the whole instrument on a fair value basis. Statement
      155
      is effective for all financial instruments acquired or issued after the
      beginning of an entity’s first fiscal year that begins after September 15, 2006. The
      Company does not expect the adoption of SFAS 155 to have any impact on its
      financial position, results of operations or cash flows.





**NOTE
      12 - SUBSEQUENT EVENTS**





In
      February 2007, the
      Company’s $10,000,000 revolving credit facility (Facility) was extended into
      2009 with more favorable terms to the Company. The
      Facility is collateralized by our 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 funded debt to EBDITA ratio of 3.25 to 1.0. The third financial
      covenant requires the Company to maintain a basic fixed charge coverage ratio
      of
      at least 1.1 to 1.0. The fourth 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.





19


In
      January 2007 the former shareholders of Airgroup agreed with the Company to
      make
      the first contingent payment of $600,000 payable in two installments with
      $300,000 payable on June 30, 2008 and $300,000 on January 1, 2009. The liability
      was not recorded at December 31, 2006 as the liability was still contingent
      at
      that time since an agreement had yet to be reached by the parties.





**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
      facts included or incorporated by reference in this report, including, without
      limitation, statements regarding our future financial position, business
      strategy, budgets, projected revenues, projected costs and plans and objective
      of management for future operations, are forward-looking statements. In
      addition, 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, projections
      and assumptions about future events. These forward-looking statements are not
      guarantees and are subject to known and unknown risks, uncertainties and
      assumptions about us that, if not realized, 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: (i) our ability to use Airgroup as a “platform” upon which we can build a
      profitable global transportation and supply chain management company, which
      itself relies upon expanding our network of exclusive agents and implementation
      of a successful acquisition strategy neither of which can be assured; (ii)
      our
      dependence upon our network of exclusive agents; (iii) our ability to at least
      maintain historical levels of transportation revenue, net transportation revenue
      (gross profit margins) and related operating expenses at Airgroup; (iv)
      competitive practices in the industries in which we compete, (v) our dependence
      on current management; (vi) the impact of current and future laws and
      governmental regulations affecting the transportation industry in general and
      our operations in particular; and (vii) other factors which may be identified
      from time to time in our Securities and Exchange Commission (SEC) filings and
      other public announcements. Furthermore, the general business assumptions used
      for purposes of the forward-looking statements included within this report
      represent estimates of future events and are subject to uncertainty as to
      possible changes in economic, legislative, industry, and other circumstances.
      As
      a result, the identification and interpretation of data and other information
      and their use in developing and selecting assumptions from and among reasonable
      alternatives require the exercise of judgment. To the extent that the assumed
      events do not occur, the outcome may vary substantially from anticipated or
      projected results, and, accordingly, no opinion is expressed on the
      achievability of those forward-looking statements. We undertake no obligation
      to
      publicly release the result of any revision of these forward-looking statements
      to reflect events or circumstances after the date they are made or to reflect
      the occurrence of unanticipated events.





20


**Overview**





In
      conjunction with a change of control transaction completed during October 2005,
      we have recently: (i) discontinued our former business model; (ii) adopted
      a new
      business strategy focused on building a global transportation and supply chain
      management company; (iii) changed our name to
      “Radiant Logistics, Inc.” to, among other things, better align our name with our
      new business focus; and (iv) completed our first acquisition within the
      logistics industry.




We
      accomplished the first step in our new business strategy by completing the
      acquisition of Airgroup effective as of January 1, 2006. Airgroup is a non-asset
      based logistics company providing domestic and international freight forwarding
      services through a network of, originally, 34, and presently 36 active,
      exclusive agent offices across North America. Airgroup, a Seattle-Washington
      based company, services a diversified account base including manufacturers,
      distributors and retailers using a network of independent carriers and over
      100
      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.





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
      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.




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 be actually 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 and other non-cash charges. Accordingly, we intend to employ
      EBITDA and adjusted EBITDA as a management tool to measure our historical
      financial performance and as a benchmark for future financial
      flexibility.





21


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.





**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: (i) equity
      offerings completed during 2005 and 2006; and (ii) acquisition of Airgroup
      Corporation. Historical financial data has been supplemented, where appropriate,
      with pro forma financial data since historical data which merely reflects the
      prior period results of the Company on a stand-alone basis, would provide no
      meaningful data with respect to our ongoing operations since we were in the
      development stage prior to our acquisition of Airgroup. The pro forma
      information has been presented for three months and six months ended December
      31, 2006 and 2005 as if we had completed our equity offerings and acquired
      Airgroup as of July 1, 2005. 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, 2006 (actual and unaudited) and December
      31,
      2005 (actual and unaudited)***




We
      generated transportation revenue of $18.3 million and net transportation revenue
      of $6.7 million for the three months ended December 31, 2006 reflecting
      Airgroup’s operations. We had no revenues for the comparative prior year period
      as we remained in the developmental stage prior to the acquisition of Airgroup.
      Net income was $65,000 for the three months ended December 31, 2006 compared
      to
      a net loss of $112,000 for the three months ended December 31,
      2005.





We
      had
      adjusted earnings (loss) before interest, taxes, depreciation and amortization
      (EBITDA) of $337,000 and ($97,000) for three months ended December 31, 2006
      and
      2005, 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 goodwill,
      leasehold improvements and other intangible assets. We further adjust EBITDA
      to
      exclude costs related to share based compensation expense and other non-cash
      charges consistent with the financial covenants of our credit facility. 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.





22


Three
                months ended December 31,
            
            Change2006
            
            2005
            
            Amount
            
            PercentNet
                income(loss)
            
            $
            65
            
            $
            (112
            )
            $
            177
            
            
            NMIncome
                tax benefit
            
            
            (21
            )
            
            -
            
            
            (21
            )
            
            NMInterest
                expense (income) - net
            
            
            1
            
            
            (14
            )
            
            15
            
            
            NMDepreciation
                and amortization
            
            
            205
            
            
            -
            
            
            205
            
            
            NMEBITDA
                (Earnings before interest, taxes, depreciation and
                amortization)
            
            $
            250
            
            $
            (126
            )
            $
            376
            
            
            NMShare
                based compensation and other non-cash costs
            
            
            87
            
            
            29
            
            
            58
            
            
            NMAdjusted
                EBITDA
            
            $
            337
            
            $
            (97
            )
            $
            434
            
            
            NM





*The
      following table summarizes December 31, 2006 (actual and unaudited) and December
      31, 2005 (actual and unaudited) transportation revenue, cost of transportation
      and net transportation revenue (in thousands):*




Three
                months ended December 31,
            
            Change2006
            
            2005
            
            Amount
            
            PercentTransportation
                revenue
            
            $
            18,344
            
            $
            -
            
            $
            18,344
            
            
            NMCost
                of transportation
            
            
            11,656
            
            
            -
            
            
            11,656
            
            
            NMNet
                transportation revenue
            
            $
            6,688
            
            $
            -
            
            $
            6,688
            
            
            NM*Net
                transportation margins*
            
            
            36.5
            %
            
            -





Transportation
      revenue was $18.3 million for three months ended December 31, 2006. Domestic
      and
      International transportation revenue was $11.7 million and $6.7 million,
      respectively. There were no revenues for the comparable prior year
      period.




Cost
      of
      transportation was 63.5% of transportation revenue for three months ended
      December 31, 2006 with no comparable data for the prior year
      period.




Net
      transportation margins were 36.5% of transportation revenue for three months
      ended December 31, 2006 with no comparable data for the prior year
      period.





*The
      following table compares certain December 31, 2006 (actual and unaudited) and
      December 31, 2005 (actual and unaudited) condensed consolidated statement of
      income data as a percentage of our net transportation revenue (in
      thousands):*




23





Three
                months ended December 31,2006
            
            2005
            
            ChangeAmount
            
            Percent
            
            Amount
            
            Percent
            
            Amount
            
            PercentNet
                transportation revenue
            
            $
            6,688
            
            
            100.0
            %
            $
            -
            
            
            -
            
            $
            4,994
            
            
            NMAgent
                commissions
            
            
            5,243
            
            
            78.4
            %
            
            -
            
            
            -
            
            
            5,243
            
            
            NMPersonnel
                costs
            
            
            581
            
            
            8.7
            %
            
            54
            
            
            -
            
            
            527
            
            
            NMOther
                selling, general and administrative
            
            
            612
            
            
            9.1
            %
            
            72
            
            
            -
            
            
            540
            
            
            NMDepreciation
                and amortization
            
            
            205
            
            
            3.1
            %
            
            -
            
            
            -
            
            
            205
            
            
            NMTotal
                operating costs
            
            
            6,641
            
            
            99.3
            %
            
            126
            
            
            -
            
            
            6,515
            
            
            NMIncome
                (loss) from operations
            
            
            47
            
            
            0.7
            %
            
            (126
            )
            
            -
            
            
            173
            
            
            NMOther
                income (expense) - net
            
            
            (3
            )
            
            0.0
            %
            
            14
            
            
            -
            
            
            (17
            )
            
            NMIncome
                (loss) before income taxes
            
            
            44
            
            
            0.7
            %
            
            (112
            )
            
            -
            
            
            156
            
            
            NMIncome
                tax benefit
            
            
            (21
            )
            
            (0.3
            %)
            
            -
            
            
            -
            
            
            (21
            )
            
            NMNet
                income (loss)
            
            $
            65
            
            
            1.0
            %
            $
            (112
            )
            
            -
            
            $
            177
            
            
            NM




Agent
      commissions were $5.2 million for the three months ended December 31, 2006,
      or
      78.4% of net transportation revenue. There were no similar comparable costs
      for
      the comparable prior year period.





Personnel
      costs were $581,000 for the three months ended December 31, 2006, or 8.7% of
      net
      transportation revenue. For the three months ended December 31, 2005, personnel
      costs were $54,000.





Other
      selling, general and administrative costs were $612,000 and 9.1% of net
      transportation revenues for the three months ended December 31, 2006 compared
      to
      $72,000 for the three months ended December 31, 2005.





Depreciation
      and amortization costs were approximately $205,000 or 3.1% of transportation
      revenue for the three months ended December 31, 2006. There were no similar
      comparable costs for the comparable prior year period.





Income
      from operations was $47,000 for the three months ended December 31, 2006
      compared to a loss from operations of $126,000 for the three months ended
      December 31, 2005.





Net
      income was $65,000 for three months ended December 31, 2006, compared to a
      net
      loss of $112,000 for the three months ended December 31, 2005.





***For
      the six months ended December 31, 2006 (actual and unaudited) and December
      31,
      2005 (actual and unaudited)***




We
      generated transportation revenue of $32.8 million and net transportation revenue
      of $11.7 million for the six months ended December 31, 2006 reflecting
      Airgroup’s operations. We had no revenues for the comparative prior year period
      as we remained in the developmental stage prior to the acquisition of Airgroup.
      Net income was $225,000 for the six months ended December 31, 2006 compared
      to a
      net loss of $126,000 for the six months ended December 31, 2005.





24


We
      had
      adjusted earnings (loss) before interest, taxes, depreciation and amortization
      (EBITDA) of $735,000 and ($111,000) for six months ended December 31, 2006
      and
      2005, 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 goodwill,
      leasehold improvements and other intangible assets. We then further adjust
      EBITDA to exclude costs related to share based compensation expense and other
      non-cash charges consistent with the financial covenants of our credit facility.
      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.





Six
                months ended December 31,
            
            Change2006
            
            2005
            
            Amount
            
            PercentNet
                income(loss)
            
            $
            225
            
            $
            (126
            )
            $
            351
            
            
            NMIncome
                tax benefit
            
            
            (19
            )
            
            -
            
            
            (19
            )
            
            NMInterest
                expense (income)- net
            
            
            6
            
            
            (14
            )
            
            20
            
            
            NMDepreciation
                and amortization
            
            
            391
            
            
            -
            
            
            391
            
            
            NMEBITDA
                (Earnings before interest, taxes, depreciation and
                amortization)
            
            $
            603
            
            $
            (140
            )
            $
            743
            
            
            NMShare
                based compensation and other non-cash costs
            
            
            132
            
            
            29
            
            
            103
            
            
            NMAdjusted
                EBITDA
            
            $
            735
            
            $
            (111
            )
            $
            846
            
            
            NM





*The
      following table summarizes December 31, 2006 (actual and unaudited) and December
      31, 2005 (actual and unaudited) transportation revenue, cost of transportation
      and net transportation revenue (in thousands):*




Six
                months ended December 31,
            
            Change2006
            
            2005
            
            Amount
            
            PercentTransportation
                revenue
            
            $
            32,761
            
            $
            -
            
            $
            32,761
            
            
            NMCost
                of transportation
            
            
            21,079
            
            
            -
            
            
            21,079
            
            
            NMNet
                transportation revenue
            
            $
            11,682
            
            $
            -
            
            $
            11,682
            
            
            NM*Net
                transportation margins*
            
            
            35.7
            %
            
            -





Transportation
      revenue was $32.8 million for six months ended December 31, 2006. Domestic
      and
      International transportation revenue was $20.2 million and $12.6 million,
      respectively. There were no revenues for the comparable prior year
      period.





Cost
      of
      transportation was 64.3% of transportation revenue for six months ended December
      31, 2006 with no comparable data for the prior year period.




Net
      transportation margins were 35.7% of transportation revenue for six months
      ended
      December 31, 2006 with no comparable data for the prior year
      period.




25




*The
      following table compares certain December 31, 2006 (actual and unaudited) and
      December 31, 2005 (actual and unaudited) condensed consolidated statement of
      income data as a percentage of our net transportation revenue (in
      thousands):*





Six
                months ended December 31,2006
            
            2005
            
            ChangeAmount
            
            Percent
            
            Amount
            
            Percent
            
            Amount
            
            PercentNet
                transportation revenue
            
            $
            11,682
            
            
            100.0
            %
            $
            -
            
            
            -
            
            $
            11,682
            
            
            NMAgent
                commissions
            
            
            8,970
            
            
            76.8
            %
            
            -
            
            
            -
            
            
            8,970
            
            
            NMPersonnel
                costs
            
            
            1,088
            
            
            9.3
            %
            
            54
            
            
            -
            
            
            1,034
            
            
            NMOther
                selling, general and administrative
            
            
            1,018
            
            
            8.7
            %
            
            86
            
            
            -
            
            
            932
            
            
            NMDepreciation
                and amortization
            
            
            391
            
            
            3.4
            %
            
            -
            
            
            -
            
            
            391
            
            
            NMTotal
                operating costs
            
            
            11,467
            
            
            98.2
            %
            
            140
            
            
            -
            
            
            11,327
            
            
            NMIncome
                (loss) from operations
            
            
            215
            
            
            1.8
            %
            
            (140
            )
            
            -
            
            
            355
            
            
            NMOther
                (expense) income - net
            
            
            (9
            )
            
            -0.1
            %
            
            14
            
            
            -
            
            
            (23
            )
            
            NMIncome
                (loss) before income taxes
            
            
            206
            
            
            1.7
            %
            
            (126
            )
            
            -
            
            
            332
            
            
            NMIncome
                tax benefit
            
            
            (19
            )
            
            -0.2
            %
            
            -
            
            
            -
            
            
            (19
            )
            
            NMNet
                income (loss)
            
            $
            225
            
            
            1.9
            %
            $
            (126
            )
            
            -
            
            $
            351
            
            
            NM




Agent
      commissions were $9.0 million for the six months ended December 31, 2006, or
      76.8% of net transportation revenue. There were no similar comparable costs
      for
      the comparable prior year period.





Personnel
      costs were $1.1 million for the six months ended December 31, 2006, or 9.3%
      of
      net transportation revenue and $54,000 for the six months ended December 31,
      2005.





Other
      selling, general and administrative costs were $1.0 million and 8.7% of net
      transportation revenues for the six months ended December 31, 2006 compared
      to
      $86,000 for the six months ended December 31, 2005.





Depreciation
      and amortization costs were approximately $391,000 for the six months ended
      December 31, 2006. There were no similar comparable costs for the comparable
      prior year period.





Income
      from operations was $215,000 for the six months ended December 31, 2006 compared
      to a loss from operations of $140,000 for the six months ended December 31,
      2005.





Net
      income was $225,000 for six months ended December 31, 2006, compared to a net
      loss of $126,000 for the six months ended December 31, 2005.





***Supplemental
      pro forma information for the three months ended December 31, 2006 (actual
      and
      unaudited) compared to three months ended December 31, 2005 (pro forma and
      unaudited)***





We
      generated transportation revenue of $18.3 million and $14.7 million and net
      transportation revenue of $6.7 million and $5.1 million for the three months
      ended December 31, 2006 and 2005 respectively. Net income was $65,000 for the
      three months ended December 31, 2006 compared to a net loss of $25,000 for
      the
      three months ended December 31, 2005.





26


We
      had
      adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)
      of $337,000 and $60,000 for three months ended December 31, 2006 and 2005,
      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 goodwill,
      leasehold improvements and other intangible assets. We then further adjust
      EBITDA to exclude costs related to share based compensation expense and other
      non-cash charges consistent with the financial covenants of our credit facility.
      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.





*The
      following table provides a reconciliation of December 31, 2006 (actual and
      unaudited) and December 31, 2005 (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,
            
            Change2006
            
            2005
            
            Amount
            
            PercentNet
                income(loss)
            
            $
            65
            
            $
            (25
            )
            $
            90
            
            
            360.0
            %Income
                tax benefit
            
            
            (21
            )
            
            (107
            )
            
            86
            
            
            80.4
            %Interest
                expense (income) - net
            
            
            1
            
            
            (22
            )
            
            23
            
            
            nmDepreciation
                and amortization
            
            
            205
            
            
            185
            
            
            20
            
            
            10.8
            %EBITDA
                (Earnings before interest, taxes, depreciation and
                amortization)
            
            $
            250
            
            $
            31
            
            $
            219
            
            
            706.5
            %Share
                based compensation and other non-cash costs
            
            
            87
            
            
            29
            
            
            58
            
            
            200.0
            %Adjusted
                EBITDA
            
            $
            337
            
            $
            60
            
            $
            277
            
            
            461.7
            %





*The
      following table summarizes December 31, 2006 (actual and unaudited) and December
      31, 2005 (pro forma and unaudited) transportation revenue, cost of
      transportation and net transportation revenue (in thousands):*





Three
                months ended December 31,
            
            Change2006
            
            2005
            
            Amount
            
            PercentTransportation
                revenue
            
            $
            18,344
            
            $
            14,677
            
            $
            3,667
            
            
            25.0
            %Cost
                of transportation
            
            
            11,656
            
            
            9,562
            
            
            2,094
            
            
            21.9
            %Net
                transportation revenue
            
            $
            6,688
            
            $
            5,115
            
            $
            1,573
            
            
            30.8
            %*Net
                transportation margins*
            
            
            36.5
            %
            
            34.9
            %





Transportation
      revenue was $18.3 million for the three months ended December 31, 2006, an
      increase of 25.0% over total transportation revenue of $14.7 million for the
      three months ended December 31, 2005. Domestic transportation revenue increased
      by 31.5% to $11.6 million for the three months ended December 31, 2006 from
      $8.9
      million for the three months ended December 31, 2005. The increase was primarily
      due to increased volume handled by the Company over 2005. International
      transportation revenue increased by 15.0% to $6.7 million for the three months
      ended December 31, 2006 from $5.8 million for the comparable prior year period,
      mainly attributed to increased air and ocean import freight volume.





27


Cost
      of
      transportation decreased to 63.5% of transportation revenue for the three months
      ended December 31, 2006 from 65.1% of transportation revenue for the three
      months ended December 31, 2005. This reflects increased domestic volume which
      historically has lower transportation costs as a percentage of
      revenue.





Net
      transportation margins increased to 36.5% of transportation revenue for the
      three months ended December 31, 2006 from 34.9% of transportation revenue for
      the three months ended December 31, 2005 as a result of factors described
      above.





*The
      following table compares certain December 31, 2006 (actual and unaudited) and
      December 31, 2005 (pro forma and unaudited) condensed consolidated statement
      of
      income data as a percentage of our net transportation revenue (in
      thousands):*





Three
                months ended December 31,2006
            
            2005
            
            ChangeAmount
            
            Percent
            
            Amount
            
            Percent
            
            Amount
            
            PercentNet
                transportation revenue
            
            $
            6,688
            
            
            100.0
            %
            $
            5,115
            
            
            100.0
            %
            $
            1,573
            
            
            30.8
            %Agent
                commissions
            
            
            5,243
            
            
            78.4
            %
            
            3,837
            
            
            75.0
            %
            
            1,406
            
            
            36.6
            %Personnel
                costs
            
            
            581
            
            
            8.7
            %
            
            777
            
            
            15.2
            %
            
            (196
            )
            
            -25.2
            %Other
                selling, general and administrative
            
            
            612
            
            
            9.1
            %
            
            446
            
            
            8.7
            %
            
            166
            
            
            37.2
            %Depreciation
                and amortization
            
            
            205
            
            
            3.1
            %
            
            185
            
            
            3.6
            %
            
            20
            
            
            10.8
            %Total
                operating costs
            
            
            6,641
            
            
            99.3
            %
            
            5,245
            
            
            102.5
            %
            
            1,396
            
            
            26.6
            %Income
                (loss) from operations
            
            
            47
            
            
            .7
            %
            
            (130
            )
            
            -2.5
            %
            
            177
            
            
            136.2
            %Other
                income - net
            
            
            (3
            )
            
            0.0
            %
            
            (2
            )
            
            0.0
            %
            
            (1
            )
            
            -50.0
            %Income
                (loss) before income taxes
            
            
            44
            
            
            .7
            %
            
            (132
            )
            
            -2.6
            %
            
            176
            
            
            133.3
            %Income
                tax benefit
            
            
            (21
            )
            
            -.3
            %
            
            (107
            )
            
            -2.1
            %
            
            86
            
            
            80.4
            %Net
                income (loss)
            
            $
            65
            
            
            1.0
            %
            $
            (25
            )
            
            -.5
            %
            $
            90
            
            
            360.0
            %




Agent
      commissions were $5.2 million for the three months ended December 31, 2006,
      an
      increase of 36.6% from $3.8 million for the three months ended December 31,
      2005. Agent commissions as a percentage of net transportation revenue increased
      to 78.4% for three months ended December 31, 2006 from 75.0% for the comparable
      prior year period as a result of the mix of domestic and international
      transportation.





Personnel
      costs were $581,000 for the three months ended December 31, 2006, a decrease
      of
      25.2% from $777,000 for the three months ended December 31, 2005. Personnel
      costs as a percentage of net transportation revenue decreased to 8.7% for three
      months ended December 31, 2006 from 15.2% for the comparable prior year period
      as a result of lower headcount and compensation.





Other
      selling, general and administrative costs were $612,000 for the three months
      ended December 31, 2006, an increase of 37.2% from $446,000 for the three months
      ended December 31, 2005. As a percentage of net transportation revenue, other
      selling, general and administrative costs increased to 9.1% for three months
      ended December 31, 2006 from 8.7% for the comparable prior year period as a
      result of professional fees incurred by the Company associated with operating
      as
      a public company.





28


Depreciation
      and amortization costs were approximately $205,000 and $185,000 for the three
      months ended December 31, 2006 and 2005 respectively. Depreciation and
      amortization as a percentage of net transportation revenue decreased for three
      months ended December 31, 2006 to 3.1% from 3.6% for the same period last year.





Income
      from operations was $47,000 for the three months ended December 31, 2006
      compared to loss from operations of $130,000 for the three months ended December
      31, 2005.





Net
      income was $65,000 for the three months ended December 31, 2006, compared to
      net
      loss of $25,000 for the three months ended December 31, 2005.





***Supplemental
      pro forma information for the six months ended December 31, 2006 (actual and
      unaudited) compared to six months ended December 31, 2005 (pro forma and
      unaudited)***





We
      generated transportation revenue of $32.8 million and $28.1 million and net
      transportation revenue of $11.7 million and $9.9 million for the six months
      ended December 31, 2006 and 2005 respectively. Net income was $225,000 for
      the
      six months ended December 31, 2006 compared to a net income of $180,000 for
      the
      six months ended December 31, 2005.





We
      had
      adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)
      of $735,000 and $568,000 for six months ended December 31, 2006 and 2005,
      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 goodwill,
      leasehold improvements and other intangible assets. We then further adjust
      EBITDA to exclude costs related to share based compensation expense and other
      non-cash charges consistent with the financial covenants of our credit facility.
      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.





*The
      following table provides a reconciliation of December 31, 2006 (actual and
      unaudited) and December 31, 2005 (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,
            
            Change2006
            
            2005
            
            Amount
            
            PercentNet
                income
            
            $
            225
            
            $
            180
            
            $
            45
            
            
            25.0
            %Income
                tax expense (benefit)
            
            
            (19
            )
            
            6
            
            
            (25
            )
            
            nmInterest
                expense (income) - net
            
            
            6
            
            
            (22
            )
            
            28
            
            
            127.3
            %Depreciation
                and amortization
            
            
            391
            
            
            375
            
            
            16
            
            
            4.3
            %EBITDA
                (Earnings before interest, taxes, depreciation and
                amortization)
            
            $
            603
            
            $
            539
            
            $
            64
            
            
            11.9
            %Share
                based compensation and other non-cash costs
            
            
            132
            
            
            29
            
            
            103
            
            
            355.2
            %Adjusted
                EBITDA
            
            $
            735
            
            $
            568
            
            $
            167
            
            
            29.4
            %







29


*The
      following table summarizes December 31, 2006 (actual and unaudited) and December
      31, 2005 (pro forma and unaudited) transportation revenue, cost of
      transportation and net transportation revenue (in thousands):*





Six
                months ended December 31,
            
            Change2006
            
            2005
            
            Amount
            
            PercentTransportation
                revenue
            
            $
            32,761
            
            $
            28,111
            
            $
            4,650
            
            
            16.5
            %Cost
                of transportation
            
            
            21,079
            
            
            18,226
            
            
            2,853
            
            
            15.7
            %Net
                transportation revenue
            
            $
            11,682
            
            $
            9,885
            
            $
            1,797
            
            
            18.2
            %*Net
                transportation margins*
            
            
            35.7
            %
            
            35.2
            %





Transportation
      revenue was $32.8 million for the six months ended December 31, 2006, an
      increase of 16.5% over total transportation revenue of $28.1 million for the
      six
      months ended December 31, 2005. Domestic transportation revenue increased by
      20.9% to $20.2 million for the six months ended December 31, 2006 from $16.7
      million for the six months ended December 31, 2005. The increase was primarily
      due to increased volume handled by the Company over 2005. International
      transportation revenue increased by 10.2% to $12.6 million for the six months
      ended December 31, 2006 from $11.4 million for the comparable prior year period,
      mainly attributed to increased air and ocean import freight volume.





Cost
      of
      transportation decreased to 64.3% of transportation revenue for the six months
      ended December 31, 2006 from 64.8% of transportation revenue for the six months
      ended December 31, 2005. This reflects increased domestic volumes over
      international volumes which historically have higher transportation cost as
      a
      percentage of sales.





Net
      transportation margins decreased to 35.7% of transportation revenue for the
      six
      months ended December 31, 2006 from 35.2% of transportation revenue for the
      six
      months ended December 31, 2005 as a result of factors described
      above.





*The
      following table compares certain December 31, 2006 (actual and unaudited) and
      December 31, 2005 (pro forma and unaudited) condensed consolidated statement
      of
      income data as a percentage of our net transportation revenue (in
      thousands):*





Six
                months ended December 31,2006
            
            2005
            
            ChangeAmount
            
            Percent
            
            Amount
            
            Percent
            
            Amount
            
            PercentNet
                transportation revenue
            
            $
            11,682
            
            
            100.0
            %
            $
            9,885
            
            
            100.0
            %
            $
            1,797
            
            
            18.2
            %Agent
                commissions
            
            
            8,970
            
            
            76.8
            %
            
            7,304
            
            
            73.9
            %
            
            1,666
            
            
            22.8
            %Personnel
                costs
            
            
            1,088
            
            
            9.3
            %
            
            1,283
            
            
            13.0
            %
            
            (195
            )
            
            -15.2
            %Other
                selling, general and administrative
            
            
            1,018
            
            
            8.7
            %
            
            751
            
            
            7.6
            %
            
            267
            
            
            35.6
            %Depreciation
                and amortization
            
            
            391
            
            
            3.4
            %
            
            375
            
            
            3.8
            %
            
            16
            
            
            4.3
            %Total
                operating costs
            
            
            11,467
            
            
            98.2
            %
            
            9,713
            
            
            98.3
            %
            
            1,754
            
            
            18.1
            %Income
                from operations
            
            
            215
            
            
            1.8
            %
            
            172
            
            
            1.7
            %
            
            43
            
            
            25.0
            %Other
                income (expense) - net
            
            
            (9
            )
            
            -0.1
            %
            
            14
            
            
            .2
            %
            
            (23
            )
            
            nmIncome
                before income taxes
            
            
            206
            
            
            1.7
            %
            
            186
            
            
            1.9
            %
            
            20
            
            
            10.8
            %Income
                tax expense (benefit)
            
            
            (19
            )
            
            -.2
            %
            
            6
            
            
            .1
            %
            
            (25
            )
            
            nmNet
                income
            
            $
            225
            
            
            1.9
            %
            $
            180
            
            
            1.8
            %
            $
            45
            
            
            25.0
            %




30




Agent
      commissions were $9.0 million for the six months ended December 31, 2006, an
      increase of 22.8% from $7.3 million for the six months ended December 31, 2005.
      Agent commissions as a percentage of net transportation revenue increased to
      76.8% for six months ended December 31, 2006 from 73.9% for the comparable
      prior
      year period as a result of the mix of domestic revenue and international
      transportation revenue.





Personnel
      costs were $1.1 million for the six months ended December 31, 2006, a decrease
      of 15.2% from $1.3 million for the six months ended December 31, 2005. Personnel
      costs as a percentage of net transportation revenue decreased to 9.3% for six
      months ended December 31, 2006 from 13.0% for the comparable prior year period
      as a result of lower headcount and compensation which is partially offset by
      share based compensation expense.





Other
      selling, general and administrative costs were $1.0 million for the six months
      ended December 31, 2006, an increase of 35.6% from $751,000 for the six months
      ended December 31, 2005. As a percentage of net transportation revenue, other
      selling, general and administrative costs increased to 8.7% for six months
      ended
      December 31, 2006 from 7.6% for the comparable prior year period as a result
      of
      professional fees incurred by the Company associated with operating as a public
      company.





Depreciation
      and amortization costs were approximately $391,000 and $375,000 for the six
      months ended December 31, 2006 and 2005 respectively. Depreciation and
      amortization as a percentage of net transportation revenue decreased for six
      months ended December 31, 2006 to 3.4% from 3.8% for the same period last year
      due to lower amortization of intangibles.





Income
      from operations was $215,000 for the six months ended December 31, 2006 compared
      to income from operations of $172,000 for the six months ended December 31,
      2005.





Net
      income was $225,000 for the six months ended December 31, 2006, compared to
      net
      income of $180,000 for the six months ended December 31, 2005.




**Liquidity
      and Capital Resources**





Effective
      January 1, 2006, we acquired 100 percent of the outstanding stock of Airgroup.
      The transaction was valued at up to $14.0
      million. This consists of: (i) $9.5 million payable in cash at closing; (ii)
      a
      subsequent cash payment of $0.5 million in cash on the two-year anniversary
      of
      the closing; (iii) as recently amended, an additional base payment of $0.6
      million payable in cash with $300,000 payable on June 30, 2008 and $300,000
      payable on January 1, 2009; (iv) a base earn-out payment of $1.9 million payable
      in Company common stock over a three-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,
      i n
      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.




The
      following table summarizes our contingent base earn-out payments for the fiscal
      years indicated based on results of the prior year (in thousands) (1) :





31




Fiscal
                Year Ended June 30,2008
            
            2009
            
            2010
            
            2011
            
            TotalEarn-out
                payments:Cash
            
            $
            --
            
            $
            --
            
            $
            --
            
            $
            --
            
            $
            --Equity
            
            
            633
            
            
            633
            
            
            634
            
            
            
            
            
            1,900Total
                earn-outPayments
            
            $
            633
            
            $
            633
            
            $
            633
            
            $
            --
            
            $
            1,900




Prior
                year earnings targets (income from continuing operations)(2)




Total
                earnings targets
            
            $
            2,500
            
            $
            2,500
            
            $
            2,500
            
            $
            --
            
            $
            7,500




Total
            
            
            25.3
            %
            
            25.3
            %
            
            25.3
            %
            
            --
            
            
            25.3
            %





(1)
            During
                the fiscal year 2007-2011 earn-out period, there is an additional
                contingent obligation related to tier-two earn-outs that could be
                as much
                as $1.5 million if Airgroup generates at least $18.0 million in income
                from continuing operations during the period.(2)
            Income
                from continuing operations as presented here identifies the uniquely
                defined earnings targets of Airgroup and should not be interpreted
                to be
                the consolidated income from continuing operations of the Company
                which
                would give effect for, among other things, amortization or impairment
                of
                intangible assets or various other expenses which may not be charged
                to
                Airgroup for purposes of calculating earn-outs.





In
      preparation for, and in conjunction with, the Airgroup transaction, we secured
      financing proceeds through several private placements to a limited number of
      accredited investors as follows:





**Date**
            **Shares
                Sold**
            **Gross
                Proceeds**
            **Price
                Per Share**●
                October 2005
            2,272,728
            $1.0
                million
            $0.44●
                December 2005
            10,098,934
            $4.4
                million
            $0.44●
                January 2006
            1,009,093
            $444,000
            $0.44●
                February 2006
            1,446,697
            $645,000
            $0.44





In
      February 2007, the
      Company’s $10 million revolving credit facility (Facility) was extended into
      2009 with more favorable terms to the Company. The
      Facility is collateralized by our 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 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 funded debt to EBDITA ratio of 3.25 to 1.0. The third financial
      covenant requires the Company to maintain a basic fixed charge coverage ratio
      of
      at least 1.1 to 1.0. The fourth 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.




32


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
      our
      ability to achieve the critical mass we may need to achieve our strategic
      objectives.





As
      of
      December 31, 2006, we had no outstanding advances under the Facility and our
      eligible accounts receivable were sufficient to support approximately $4.6
      million in borrowings.





Net
      cash
      provided by operating activities for the six months ended December 31, 2006
      was
      $1.1 million compared to net cash used by operating activities of $.06 million
      for six months ended December 31, 2005. The change was driven by improved
      profitability of the business and further enhanced by a greater reduction in
      accounts receivable and a greater increase in accounts payable.





Cash
      used
      for investing for the six months ended December 31, 2006, see Note 5 to our
      financial statements, was $.1 million for the purchase of equipment compared
      to
      $.02 million for six months ending December 31, 2005 for initial expenditures
      of
      acquiring Airgroup; See Note 3 to our financial statements.





Net
      cash
      used by financing activity for the six months ended December 31, 2006 was $1.3
      million compared to $5.2 million of cash proceeds from issuance of stock for
      the
      six months ended December 31, 2005.





Non-cash
      financing activities for the six months ended December 31, 2006 consisted of
      the
      Company issuing 250,000 shares of our common stock, at a market value of 1.01
      per share, in exchange for training materials and 100,000 shares of common
      stock, at a market value of $1.01 a share, as incentive compensation to its
      senior managers; See Note 8 to our financial statements.





We
      believe that our current working capital and anticipated cash flow from
      operations are adequate to fund existing operations and our organic growth
      strategy. However, our ability to finance further acquisitions is 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
      Airgroup. 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 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 the 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.




33


The
      Company’s principal source of liquidity is cash generated from operating
      activities. The business is subject to seasonal fluctuations and the third
      quarter is typically slower than the remaining quarters. The cash flows reflect
      the first quarter of Airgroup operating as a wholly owned subsidiary of the
      Company.




**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 each reporting unit, and compare the fair value
      to the reporting unit's carrying amount. To the extent a 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. In the future, we will perform
      our annual impairment test during our fiscal fourth quarter unless events or
      circumstances indicate an impairment may have occurred before that
      time.





Acquired
      intangibles consist of customer related intangibles and non-compete agreements
      arising from our acquisitions. 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.





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 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.





As
      a
      non-asset based carrier, we do not own transportation assets. We generate the
      major portion of our air and ocean freight revenues by purchasing transportation
      services from direct (asset-based) carriers and reselling those services to
      our
      customers. In accordance with Emerging Issues Task Force ("EITF") 91-9 "Revenue
      and Expense Recognition for Freight Services in Process", revenue from freight
      forwarding and export services is recognized at the time the freight is tendered
      to the direct carrier at origin, and direct expenses associated with the cost
      of
      transportation are accrued concurrently. These
      accrued purchased transportation costs are estimates 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 to reflect differences between the
      original accruals and actual costs of purchased transportation.





34


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
      3. Quantitative and Qualitative Disclosures About Market
      Risk.**




The
      Company’s exposure to market risk for changes in interest rates relates
      primarily to the Company’s short-term cash investments and its line of credit.
      The Company is averse to principal loss and ensures the safety and preservation
      of its invested funds by limiting default risk, market risk and reinvestment
      risk. The Company invests its excess cash in institutional money market
      accounts. The Company does not use interest rate derivative instruments to
      manage its exposure to interest rate changes. If market interest rates were
      to
      change by 10% from the levels at December 31, 2006, the change in interest
      expense would have had an immaterial impact on the Company’s results of
      operations and cash flows.




**Item
      4.**  **Controls
      and Procedures.**





**Evaluation
      of disclosure controls and procedure**





Our
      Chief
      Executive Officer/Principal Financial Officer evaluated the effectiveness of
      the
      design and operation of the Company's disclosure controls and procedures as
      of
      December 31, 2006. Based on that evaluation, he concluded that, as of the end
      of
      the period covered by this quarterly report, the Company's disclosure controls
      and procedures are designed to and are effective to give reasonable assurance
      that the information the Company must disclose in reports filed with the
      Securities and Exchange Commission is properly recorded, processed, summarized,
      and reported as required.





**Changes
      in internal controls**





There
      were no changes in the Company’s internal control over financial reporting in
      connection with this evaluation that occurred during the fiscal quarter ended
      December 31, 2006 that have materially affected, or are reasonably likely
      to materially affect, our internal controls over financial reporting.




35


**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 the normal course of
      operations. Management believes that these matters will not have a material
      adverse effect on our financial position or results.




**None**




**Item
      1A. Risk Factors**




**None**




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**




In
      September 2006, we issued 250,000 shares of our common stock to an accredited
      investor at a market value of $1.01 per share in exchange for us to acquire
      $252,500, in value, of domestic and international freight training materials
      for
      the development of the Company’s employees and exclusive agent offices. The
      shares were issued in a transaction exempt from registration under the
      Securities Act of 1933, as amended (the “Securities Act”), in reliance on
      Section 4(2) of the Securities Act and the safe-harbor private offering
      exemption provided by Rule 506 promulgated under the Securities Act, without
      the
      payment of underwriting discounts or commissions to any person.




In
      October 2006, we issued 100,000 shares of our common stock to senior managers
      of
      the Company as a bonus incentive at a market value of $1.01 per share. The
      shares were issued in a transaction exempt from registration under the
      Securities Act of 1933, as amended (the “Securities Act”), in reliance on
      Section 4(2) of the Securities Act and the safe-harbor private offering
      exemption provided by Rule 506 promulgated under the Securities Act, without
      the
      payment of underwriting discounts or commissions to any person.




**Item
      3. Defaults Upon Senior Securities.**




**None**




**Item
      4. Submission of Matters to a Vote of Security Holders.**




**None**




**Item
      5. Other Information.**





Renewal
      of Credit Facility





The
      information set forth below is included herewith for the purpose of providing
      the disclosure required under “Item 1.01- Entry into a Material Definitive
      Agreement” of Form 8-K.





The
      Company entered into a $10 million two year revolving credit facility with
      Bank
      of America, N.A.(the “Facility”) effective February 13, 2007. This replaces a
      January 2006 Facility with Bank of America, N.A The Facility is collateralized
      by our accounts receivable and other assets of the Company, its subsidiaries
      and
      affiliates. 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
      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 funded debt to EBDITA ratio of 3.25 to 1.0. The third financial
      covenant requires the Company to maintain a basic fixed charge coverage ratio
      of
      at least 1.1 to 1.0. The fourth 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.




36


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
      our
      ability to achieve the critical mass we may need to achieve our strategic
      objectives.





The
      co-borrowers of the Facility include Radiant Logistics, Inc., Airgroup
      Corporation, Radiant Logistics Global Services Inc.(“RLGS”) and Radiant
      Logistics Partners, LLC (“RLP”). RLGS is a newly formed, wholly owned subsidiary
      of the Company, that intends to focus on the Company’s agenda for international
      expansion. RLP is owned 40% by Airgroup and 60% by an affiliate of Bohn Crain,
      the Chief Executive Officer of the Company. RLP has been certified as a minority
      business enterprise, and intends to focus on corporate and government accounts
      with diversity initiatives. Both RLGS and RLP remained inactive during the
      quarter covered by this report, however, we expect them to commence operations
      during the quarter ending March 31, 2007. As a co-borrower under the Facility,
      the accounts receivable of RLP and RLGS will become 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.





Commencement
      of Operations of Radiant Logistics Partners, LLC (“RLP”)





RLP
      is
      owned 40% by Airgroup and 60% by an affiliate of Bohn Crain, the Chief Executive
      Officer of the Company. 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, Mr. Crain’s ownership interest entitles him 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. RLP commenced work in February of 2007, however, as of the date of
      this
      report, has not conducted any business that would be considered material to
      the
      Company’s operations. 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.




37




**Item
      6. Exhibits**




**Exhibit
                No.**
            
            **Exhibit**
            
            **Method
                of Filing**10.1
            
            Loan
                Agreement by and among Radiant Logistics, Inc., Airgroup Corporation,
                Radiant Logistics Global Services, Inc., Radiant Logistics Partners,
                LLC
                and Bank of America, N.A. dated as of February 13, 2007
            
            Filed
                herewith31.1
            
            Certification
                by Principal Executive Officer and Principal Financial Officer 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
                herewith99.1
            
            Press
                Release dated February 14, 2007
            
            Filedherewith





SIGNATURES




In
      accordance with the requirements of the Securities Exchange Act of 1934, as
      amended, the registrant caused this report to be signed on its behalf by the
      undersigned, thereunto duly authorized.







RADIANT
                LOGISTICS, INC.Date:
                February 14, 2007
            
            /s/
                Bohn H. Crain
              Bohn
                H. Crain
              Chief
                Executive OfficerDate:
                February 14, 2007
            
            /s/
                Rodney Eaton
              Rodney
                Eaton
              Vice
                President, Chief Accounting Officer and
                Controller




38


**EXHIBIT
      INDEX**




**Exhibit
                No.**
            
            **Exhibit**10.1
            
            Loan
                Agreement by and among Radiant Logistics, Inc., Airgroup Corporation,
                Radiant Logistics Global Services, Inc., Radiant Logistics Partners,
                LLC
                and Bank of America, N.A. dated as of February 13, 200731.1
            
            Certification
                by Principal Executive Officer and Principal Financial Officer pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 200232.1
            
            Certification
                by Principal Executive Officer/Principal Financial Officer pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of 200299.1
            
            Press
                Release dated February 14 , 2007







39