**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





**FORM
      10-K**




x Annual
      Report
      Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934





For
      the
      fiscal year ended June 30, 2007





o Transition
      Report
      Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934





For
      the
      transition period from ______ to ________





*Commission
      File Number 000-50283*




**RADIANT
      LOGISTICS, INC.**


(Name
      of
      Registrant as Specified in Its Charter)




Delaware
              
              04-3625550(State
                  or other jurisdiction of
              
              (IRS
                  Employer Identification Number)incorporation
                  or organization)




1227
      120 th Avenue
      N.E


Bellevue,
        WA 98005
 
 (Address
        of Principal Executive Offices) (Zip Code)


(425)
      943-4599





Registrant’s
      Telephone Number, Including Area Code)





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




Title
                  of Each Class
              
              Name
                  of Exchange on which RegisteredCommon
                  Stock, $.001 Par Value
              
              None




**Securities
      registered under Section 12(g) of the Exchange Act** **:**





Common
      Stock, $.001 Par Value per Share





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      rule 405 of the Securities Act. Yes oNo x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange Act. o





Indicate
      by check mark whether the issuer (1) 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 xNo o





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





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 o
              Accelerated
                  filer o
              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 oNo x





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant based on the average bid and asked price of
      the
      registrant's common stock as reported on the OTC Bulletin Board on September
      24,
      2007 was $12,326,011.





As
      of
      September 24, 2007, 33,961,639 **** shares
      of
      the registrant's common stock were outstanding.





Documents
      Incorporated by Reference: None









TABLE
                  OF CONTENTS**PART
                  I**ITEM
                  1.
              BUSINESS
              2ITEM
                  1A.
              RISK
                  FACTORS
              9ITEM
                  2.
              PROPERTIES
              17ITEM
                  3.
              LEGAL
                  PROCEEDINGS
              18ITEM
                  4.
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              18**PART
                  II**ITEM
                  5.
              MARKET
                  FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERMATTERS
                  AND ISSUER PURCHASES OF EQUITY SECURITIES
              19ITEM
                  6.
              SELECTED
                  FINANCIAL DATA
              20ITEM
                  7.
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS
                  OF OPERATIONS
              23ITEM
                  7A.
              QUANTITATIVE
                  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              46ITEM
                  8.
              FINANCIAL
                  STATEMENTS AND SUPPLEMENTARY DATA
              46ITEM
                  9.
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTSON
                  ACCOUNTING AND FINANCIAL DISCLOSURES
              46ITEM
                  9A.
              CONTROLS
                  AND PROCEDURES
              46ITEM
                  9B
              OTHER
                  INFORMATION
              46**PART
                  III**ITEM
                  10.
              DIRECTORS
                  AND EXECUTIVE OFFICERS OF THE REGISTRANT
              46ITEM
                  11.
              EXECUTIVE
                  COMPENSATION
              49ITEM
                  12.
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND
                  MANAGEMENT AND RELATED STOCKHOLDER MATTERS
              56ITEM
                  13.
              CERTAIN
                  RELATIONSHIPS AND RELATED PARTY TRANSACTIONS ANDDIRECTOR
                  INDEPENDENCE
              57ITEM
                  14.
              PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES
              59ITEM
                  15.
              EXHIBITS
              60Signatures
              
              61Financial
                  Statements
              F-1










**CAUTIONARY
      STATEMENT ABOUT FORWARD-LOOKING STATEMENTS**







**Cautionary
      Statement for 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 objectives
      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 our ability to: (i) to use Airgroup as a “platform” upon which we can build
      a profitable global transportation and supply chain management company; (ii)
      retain and build upon the relationships we have with our exclusive agency
      offices; (iii) continue the development of our back office infrastructure and
      transportation and accounting systems in a manner sufficient to service our
      expanding revenues and base of exclusive agency locations; (iv) continue growing
      our business and maintain historical or increased gross profit margins; (v)
      locate suitable acquisition opportunities; (vi) secure the financing necessary
      to complete any acquisition opportunities we locate; (vii) assess and respond
      to
      competitive practices in the industries in which we compete, (viii) mitigate,
      to
      the best extent possible, our dependence on current management and certain
      of
      our larger exclusive agency locations; (ix) assess and respond to the impact
      of
      current and future laws and governmental regulations affecting the
      transportation industry in general and our operations in particular; and (x)
      assess and respond to such other factors which may be identified from time
      to
      time in our Securities and Exchange Commission (SEC) filings and other public
      announcements including those set forth below in Part 1 Item 1A. Furthermore,
      the general business assumptions underlying the forward-looking statements
      included herein represent estimates of future events and are subject to
      uncertainty due to, among other things, changes in economic, legislative,
      industry, and other circumstances. As a result, the identification,
      interpretation and use of data and other information 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,
      we
      can provide no assurance regarding the achievability of those forward-looking
      statements. Except as required by law, 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.




1





**PART
      I**





**ITEM
      1. BUSINESS**





**The
      Company**





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, our 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, we: (i) elected to discontinue the Company’s former
      business model; (ii) repositioned ourselves as a global transportation and
      supply chain management company; and (iii) changed our name to
      “Radiant Logistics, Inc.” to, among other things, better align our name with our
      new business focus.




We
      completed the repositioning of our business model when we completed the
      acquisition of Airgroup Corporation (“Airgroup”) effective January 1, 2006.
      Airgroup is a Seattle, Washington based non-asset based logistics company that
      provides domestic and international freight forwarding services through a
      network of exclusive agent offices across North America. Airgroup services
      a
      diversified account base including manufacturers, distributors and retailers
      using a network of independent carriers and international agents positioned
      strategically around the world.




By
      implementing a growth strategy based on the operations of Airgroup as a
      platform, 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.





Our
      growth strategy will focus on both organic growth and acquisitions. From an
      organic perspective, we will focus on strengthening existing and expanding
      new
      customer relationships. One of the drivers of our organic growth will be
      retaining existing, and securing new exclusive agency locations. Since our
      acquisition of Airgroup in January 2006, we have focused our efforts on the
      build-out of our network of exclusive agency offices, as well as enhancing
      our
      back-office infrastructure and transportation and accounting
      systems.




As
      we
      continue to build out our network of exclusive agent locations to achieve a
      level of critical mass and scale, we intend to implement an acquisition strategy
      to develop additional growth opportunities. Implementation of an acquisition
      strategy will rely upon two primary factors: first, our ability to identify
      and
      acquire target businesses that fit within our general acquisition criteria
      and,
      second, the continued availability of capital and financing resources sufficient
      to complete these acquisitions. Following our acquisition of Airgroup, we have
      from time-to-time identified a number of additional companies that we believed
      could be suitable acquisition candidates. However, for a variety of reasons,
      primarily due to pricing concerns, due diligence issues or risks associated
      with
      operational integration, we have not yet completed a follow-on transaction
      to
      our platform acquisition. On a longer-term basis, we remain committed to our
      acquisition strategy and continue to search for targets that fit within our
      acquisition criteria. Our ability to secure additional financing will rely
      upon
      the sale of debt or equity securities, and the development of an active trading
      market for our securities, neither of which can be assured.




Our
      growth 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. 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.




2




Successful
      implementation of our growth strategy depends upon a number of factors,
      including our ability to: (i) continue developing new agency locations; (ii)
      locate acquisition opportunities; (iii) secure adequate funding to finance
      identified acquisition opportunities; (iv) efficiently integrate the businesses
      of the companies we acquire; (v) generate the anticipated economies of scale
      from the integration; and (vi) maintain the historic sales growth of the
      acquired businesses in order to generate continued organic growth. There are
      a
      variety of risks associated with our ability to achieve our strategic
      objectives, including our ability to acquire and profitably manage additional
      businesses and the intense competition in our industry for customers and for
      acquisition candidates. Certain of these business risks are identified or
      referred to below in Item 1A of this Report.




*Industry
      Overview*




As
      business requirements for efficient and cost-effective logistics services have
      increased, so has the importance and complexity of effectively managing freight
      transportation. Businesses increasingly strive to minimize inventory levels,
      perform manufacturing and assembly operations in the lowest cost locations
      and
      distribute their products in numerous global markets. As a result, companies
      are
      increasingly looking to third-party logistics providers to help them execute
      their supply chain strategies.





Customers
      have two principal third-party alternatives: a freight forwarder or a
      fully-integrated carrier. A freight forwarder, such as Airgroup, procures
      shipments from customers and arranges the transportation of cargo on a carrier.
      A freight forwarder may also arrange pick-up from the shipper to the carrier
      and
      delivery of the shipment from the carrier to the recipient. Freight forwarders
      often tailor shipment routing to meet the customer’s price and service
      requirements. Fully-integrated carriers, such as FedEx Corporation, DHL
      Worldwide Express, Inc. and United Parcel Service (“UPS”), provide pick up and
      delivery service, primarily through their own captive fleets of trucks and
      aircraft.  Because freight forwarders select from various transportation
      options in routing customer shipments, they are often able to serve customers
      less expensively and with greater flexibility than integrated carriers.
 Freight forwarders, generally handle shipments of any size and can offer a
      variety of customized shipping options.





Most
      freight forwarders, like Airgroup, focus on heavier cargo and do not generally
      compete with integrated shippers of primarily smaller parcels. In addition
      to
      the high fixed expenses associated with owning, operating and maintaining fleets
      of aircraft, trucks and related equipment, integrated carriers often impose
      significant restrictions on delivery schedules and shipment weight, size and
      type.  On occasion, integrated shippers serve as a source of cargo space to
      forwarders. Additionally, most freight forwarders do not generally compete
      with
      the major commercial airlines, which, to some extent, depend on forwarders
      to
      procure shipments and supply freight to fill cargo space on their scheduled
      flights.


We
      believe there are several factors that are increasing demand for global
      logistics solutions. These factors include:





·
            Outsourcing
                of non-core activities.
                Companies increasingly outsource freight forwarding, warehousing
                and other
                supply chain activities to allow them to focus on their respective
                core
                competencies. From managing purchase orders to the timely delivery
                of
                products, companies turn to third party logistics providers to manage
                these functions at a lower cost and greater efficiency.





·
            Globalization
                of trade.
                As barriers to international trade are reduced or substantially
                eliminated, international trade is increasing. In addition, companies
                increasingly are sourcing their parts, supplies and raw materials
                from the
                most cost competitive suppliers throughout the world. Outsourcing
                of
                manufacturing functions to, or locating company-owned manufacturing
                facilities in, low cost areas of the world also results in increased
                volumes of world trade.





·
            Increased
                need for time-definite delivery.
                The need for just-in-time and other time-definite delivery has increased
                as a result of the globalization of manufacturing, greater implementation
                of demand-driven supply chains, the shortening of product cycles
                and the
                increasing value of individual shipments. Many businesses recognize
                that
                increased spending on time-definite supply chain management services
                can
                decrease overall manufacturing and distribution costs, reduce capital
                requirements and allow them to manage their working capital more
                efficiently by reducing inventory levels and inventory
                loss.




3




·
            Consolidation
                of global logistics providers.
                Companies are decreasing the number of freight forwarders and supply
                chain
                management providers with which they interact. We believe companies
                want
                to transact business with a limited number of providers that are
                familiar
                with their requirements, processes and procedures, and can function
                as
                long-term partners. In addition, there is strong pressure on national
                and
                regional freight forwarders and supply chain management providers
                to
                become aligned with a global network. Larger freight forwarders and
                supply
                chain management providers benefit from economies of scale which
                enable
                them to negotiate reduced transportation rates and to allocate their
                overhead over a larger volume of transactions. Globally integrated
                freight
                forwarders and supply chain management providers are better situated
                to
                provide a full complement of services, including pick-up and delivery,
                shipment via air, sea and/or road transport, warehousing and distribution,
                and customs brokerage.





·
            Increasing
                influence of e-business and the internet.
                Technology advances have allowed businesses to connect electronically
                through the Internet to obtain relevant information and make purchase
                and
                sale decisions on a real-time basis, resulting in decreased transaction
                times and increased business-to-business activity. In response to
                their
                customers' expectations, companies have recognized the benefits of
                being
                able to transact business electronically. As such, businesses increasingly
                are seeking the assistance of supply chain service providers with
                sophisticated information technology systems that can facilitate
                real-time
                transaction processing and web-based shipment
                monitoring.




**Our
      Growth Strategy**





Our
      objective is to provide customers with comprehensive value-added logistics
      solutions. We plan to achieve this goal through domestic and international
      freight forwarding services offered by Airgroup. We expect to grow our business
      organically and by completing acquisitions of other companies with complementary
      geographical and logistics service offerings. Our organic growth strategy
      involves strengthening existing and expanding new customer relationships. One
      of
      the drivers of this strategy is our ability to retain existing, and secure
      new
      exclusive agency locations. Since our acquisition of Airgroup, we have focused
      our efforts on the organic build-out of our network of exclusive agency
      locations, as well as the enhancement of our back office infrastructure and
      transportation and accounting systems. However, on a longer-term basis, we
      intend to pursue an acquisition strategy to consolidate and enhance our position
      in our current markets and to acquire operations in new markets.





We
      believe there are many attractive acquisition candidates in our industry because
      of the highly fragmented composition of the marketplace, the industry
      participants' need for capital and their owners' desire for liquidity. Our
      target acquisition candidates are generally expected to have earnings of $1.0
      to
      $5.0 million. Companies in this range of earnings may be receptive to our
      acquisition program since they are often too small to be identified as
      acquisition targets by larger public companies or to independently attempt
      their
      own public offerings.





On
      a
      longer-term basis, we believe we can successfully implement our acquisition
      strategy due to the following factors:





·
            the
                highly fragmented composition of our
                market;


·
            our
                strategy for creating an organization with global reach should enhance
                an
                acquired target company’s ability to compete in its local and regional
                markets through an expansion of offered services and lower operating
                costs;


·
            the
                potential for increased profitability as a result of our centralization
                of
                certain administrative functions, greater purchasing power and economies
                of scale;


·
            our
                centralized management capabilities should enable us to effectively
                manage
                our growth and integration of acquired
                companies;


·
            our
                status as a public corporation may ultimately provide us with a liquid
                trading currency for acquisitions;
                and


·
            the
                ability to utilize our experienced management to identify, acquire
                and
                integrate acquisition
                opportunities.




4




An
      acquisition strategy would focus on acquisitions in key gateway locations such
      as Los Angeles, New York, Chicago, Seattle, Miami, Dallas, and Houston to expand
      our international base of operations. We believe that our domestic and expanded
      international capabilities, when taken together, will provide significant
      competitive advantage in the marketplace.




**Our
      Operating Strategy**




Leverage
      the People, Process and Technology Available through Airgroup .
      A key
      element of our operating strategy is to maximize our operational efficiencies
      by
      integrating general and administrative functions into the back-office of our
      platform acquisition and reducing or eliminating redundant functions and
      facilities at acquired companies. This is designed to enable us to quickly
      realize potential savings and synergies, efficiently control and monitor
      operations of acquired companies and allow acquired companies to focus on
      growing their sales and operations.





Develop
      and Maintain Strong Customer Relationships .
      We seek
      to develop and maintain strong interactive customer relationships by
      anticipating and focusing on our customers' needs. We emphasize a
      relationship-oriented approach to business, rather than the transaction or
      assignment-oriented approach used by many of our competitors. To develop close
      customer relationships, we and our network of exclusive agents regularly meet
      with both existing and prospective clients to help design solutions for, and
      identify the resources needed to execute, their supply chain strategies. We
      believe that this relationship-oriented approach results in greater customer
      satisfaction and reduced business development expense.




**Operations**





Through
      our exclusive agency relationships, we offer domestic and international air,
      ocean and ground freight forwarding for shipments that are generally larger
      than
      shipments handled by integrated carriers of primarily small parcels such as
      Federal Express Corporation and United Parcel Service. As
      we execute our growth strategy, our revenues will ultimately be generated from
      a
      number of diverse services, including air freight forwarding, ocean freight
      forwarding, customs brokerage, logistics and other value-added
      services.





Our
      primary business operations involve obtaining shipment or material orders from
      customers, creating and delivering a wide range of logistics solutions to meet
      customers' specific requirements for transportation and related services, and
      arranging and monitoring all aspects of material flow activity utilizing
      advanced information technology systems. These logistics solutions will include
      domestic and international freight forwarding and door-to-door delivery services
      using a wide range of transportation modes, including air, ocean and truck.
      As a non-asset based provider we do not own the transportation equipment used
      to
      transport the freight. We expect to neither own nor operate any aircraft and,
      consequently, place no restrictions on delivery schedules or shipment size.
       We arrange for transportation of our customers’ shipments via commercial
      airlines, air cargo carriers, and other assets and non-asset based third-party
      providers. We select the carrier for a shipment based on route, departure time,
      available cargo capacity and cost.  We charter cargo aircraft from time to
      time depending upon seasonality, freight volumes and other factors. We make
      a
      profit or margin on the difference between what we charge to our customers
      for
      the totality of services provided to them, and what we pay to the transportation
      provider to transport the freight.





**Recent
      Developments**





In
      May 2007 **,** we
      launched a new logistics service offering focused on the automotive industry
      through our wholly-owned subsidiary, Radiant Logistics Global Services, Inc.
      (“RLGS”).




5




In
      connection with the launch of our automotive services group, we entered into
      an
      Asset Purchase Agreement (the “APA”) with Mass Financial Corporation (“Mass”) to
      acquire certain assets formerly used in the operation of the automotive division
      of Stonepath Group, Inc. (the “Purchased Assets”). In its capacity as a senior
      secured creditor, Mass agreed to sell RLGS the Purchased Assets in connection
      with a foreclosure and disposition process that began in April 2007. The
      purchase price consists of a $100,000 refundable deposit, $150,000 to be paid
      at
      closing, and up to an additional $2.5 million in cumulative earn-out payments
      equal to 25% of the annual earnings before interest, taxes, depreciation and
      amortization, as defined in the APA, generated from the automotive group in
      future periods. The APA contains negotiated representations, warranties,
      covenants and indemnities by each party.





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




As
      more
      fully explained under Item 1A, “Risk Factors”, since the execution of the APA,
      certain events, including a recent dispute with a judgment creditor of
      Stonepath, have adversely affected Mass’ ability to convey the Purchased Assets
      to us in accordance with the APA. We are uncertain as to whether all closing
      conditions under the APA can be satisfied. If a closing under the APA does
      not
      occur, the outlook for our continued development of an automotive services
      group
      is also uncertain. On or about September 28, 2007 Mass filed suit against us
      seeking to compel us to close the APA and damages for alleged breach of the
      APA.
      See ITEM 3. LEGAL PROCEEDINGS below.




**Information
      Services**





The
      regular enhancement of our information systems and ultimate migration of
      acquired companies and additional exclusive agency locations to a common set
      of
      back-office and customer facing applications is a key component of our growth
      strategy. We believe that the ability to provide accurate real-time information
      on the status of shipments will become increasingly important and that our
      efforts in this area will result in competitive service advantages. In addition,
      we believe that centralizing our transportation management system (rating,
      routing, tender and financial settlement processes) will drive significant
      productivity improvement across our network.





We
      utilize a web-enabled third-party freight forwarding software (Cargowise) which
      we have integrated to our third-party accounting system (SAP) that combine
      to
      form the foundation of our supply-chain technologies which we call
“Globalvision”. Globalvision provides us with a common set of back-office
      operating, accounting and customer facing applications used across the network.
      We have and will continue to assess technologies obtained through our
      acquisition strategy and expect to develop a “best-of-breed” solution set using
      a combination of owned and licensed technologies. This strategy will require
      the
      investment of significant management and financial resources to deliver these
      enabling technologies.





**Our
      Competitive Advantages**





As
      a
      non-asset based third-party logistics provider, we believe that we will be
      well-positioned to provide cost-effective and efficient solutions to address
      the
      demand in the marketplace for transportation and logistics services.  We
      believe that the most important competitive factors in our industry are quality
      of service, including reliability, responsiveness, expertise and convenience,
      scope of operations, geographic coverage, information technology and price.
       We believe our primary competitive advantages are:  (i) our low cost;
      non-asset based business model; (ii) our information technology resources;
      and
      (iii) our diverse customer base.





·
            Non-asset
                based business model.
                 With relatively no dedicated or fixed operating costs, we are able
                to leverage our network of exclusive agency offices and offer competitive
                pricing and flexible solutions to our customers.  Moreover, our
                balanced product offering provides us with revenue streams from multiple
                sources and enables us to retain customers even as they shift from
                priority to deferred shipments of their products.  We believe our
                model allows us to provide low-cost solutions to our customers while
                also
                generating revenues from multiple modes of transportation and logistics
                services.




6




·
            Intention
                to develop a Global network.
                 We intend to focus on expanding our network on a global basis. Once
                accomplished, this will enable us to provide a closed-loop logistics
                chain
                to our customers worldwide.  Within North America, our capabilities
                consist of our pick up and delivery network, ground and air networks,
                and
                logistics capabilities. Our ground and pick up and delivery networks
                enable us to service the growing deferred forwarding market while
                providing the domestic connectivity for international shipments once
                they
                reach North America.  In addition, our heavyweight air network
                provides for competitive costs on shipments, as we have no dedicated
                charters or leases and can capitalize on available capacity in the
                market
                to move our customers’ goods.





·
            Information
                technology resources.
                 A primary component of our business strategy is the continued
                development of advanced information systems to continually provide
                accurate and timely information to our management and customers.
 Our
                customer delivery tools enable connectivity with our customers’ and
                trading partners’ systems, which leads to more accurate and up-to-date
                information on the status of shipments.





·
            Diverse
                customer base.
                 We have a well diversified base of customers that includes
                manufacturers, distributors and retailers. As of the date of this
                Report,
                no single customer represented more than 5% of our business reducing
                risks
                associated with any particular industry or customer concentration.





**Sales
      and Marketing**





We
      principally market our services through the senior management teams in place
      at
      each of our 42 exclusive agent offices located strategically across the United
      States. Each office is staffed with operational employees of the agent to
      provide support for the sales team, develop frequent contact with the customer’s
      traffic department, and maintain customer service. Through the agency
      relationship, the agent has the ability to focus on the operational and sales
      support aspects of the business without diverting costs or expertise to the
      structural aspect of its operations and provides the agent with the regional,
      national and global brand recognition that they would not otherwise be able
      to
      achieve by serving their local markets.





Although
      we have exclusive and long-term relationships with these agents, the agency
      agreements are terminable by either party subject to requisite notice provisions
      that generally range from ten to thirty days. Although we have no customers
      that
      account for more than 5% of our revenues, there are four agency locations that
      each account for more than 5% of our total gross revenues.





As
      we
      continue to grow, we expect to implement a national accounts program which
      is
      intended to increase our emphasis on obtaining high-revenue national accounts
      with multiple shipping locations. These accounts typically impose numerous
      requirements on those competing for their freight business, including electronic
      data interchange and proof of delivery capabilities, the ability to generate
      customized shipping reports and a nationwide network of terminals. These
      requirements often limit the competition for these accounts to a very small
      number of logistics providers. We believe that our anticipated future growth
      and
      development will enable us to more effectively compete for and obtain these
      accounts.




**Competition
      and Business Conditions**




The
      logistics business is directly impacted by the volume of domestic and
      international trade. The volume of such trade is influenced by many factors,
      including economic and political conditions in the United States and abroad,
      major work stoppages, exchange controls, currency fluctuations, acts of war,
      terrorism and other armed conflicts, United States and international laws
      relating to tariffs, trade restrictions, foreign investments and taxation.




7




The
      global logistics services and transportation industries are intensively
      competitive and are expected to remain so for the foreseeable future. We will
      compete against other integrated logistics companies, as well as transportation
      services companies, consultants, information technology vendors and shippers'
      transportation departments. This competition is based primarily on rates,
      quality of service (such as damage-free shipments, on-time delivery and
      consistent transit times), reliable pickup and delivery and scope of operations.
      Most of our competitors will have substantially greater financial resources
      than
      we do.




**Regulation**




There
      are
      numerous transportation related regulations. Failure to comply with the
      applicable regulations or to maintain required permits or licenses could result
      in substantial fines or revocation of operating permits or authorities. We
      cannot give assurance as to the degree or cost of future regulations on our
      business. Some of the regulations affecting our current and prospective
      operations are described below.





Air
      freight forwarding businesses are subject to regulation, as an indirect air
      cargo carrier, under the Federal Aviation Act by the U.S. Department of
      Transportation and by the Department of Homeland Security and the Transportation
      Security Administration.  However,
      air freight forwarders are exempted from most of the Federal Aviation Act's
      requirements by the Economic Aviation Regulations. The air freight forwarding
      industry is subject to regulatory and legislative changes that can affect the
      economics of the industry by requiring changes in operating practices or
      influencing the demand for, and the costs of providing, services to customers.





Surface
      freight forwarding operations are subject to various federal statutes and are
      regulated by the Surface Transportation Board. This federal agency has broad
      investigatory and regulatory powers, including the power to issue a certificate
      of authority or license to engage in the business, to approve specified mergers,
      consolidations and acquisitions, and to regulate the delivery of some types
      of
      domestic shipments and operations within particular geographic
      areas.





The
      Surface Transportation Board and U.S. Department of Transportation also have
      the
      authority to regulate interstate motor carrier operations, including the
      regulation of certain rates, charges and accounting systems, to require periodic
      financial reporting, and to regulate insurance, driver qualifications, operation
      of motor vehicles, parts and accessories for motor vehicle equipment, hours
      of
      service of drivers, inspection, repair, maintenance standards and other safety
      related matters. The federal laws governing interstate motor carriers have
      both
      direct and indirect application to the Company. The breadth and scope of the
      federal regulations may affect our operations and the motor carriers which
      are
      used in the provisioning of the transportation services. In certain locations,
      state or local permits or registrations may also be required to provide or
      obtain intrastate motor carrier services.





The
      Federal Maritime Commission, or FMC, regulates and licenses ocean forwarding
      operations. Indirect ocean carriers (non-vessel operating common carriers)
      are
      subject to FMC regulation, under the FMC tariff filing and surety bond
      requirements, and under the Shipping Act of 1984, particularly those terms
      proscribing rebating practices.





United
      States customs brokerage operations are subject to the licensing requirements
      of
      the U.S. Treasury and are regulated by the U.S. Customs Service. As we broaden
      our capabilities to include customs brokerage operations, we will be subject
      to
      regulation by the Customs Service. Likewise, any customs brokerage operations
      would also be licensed in and subject to the regulations of their respective
      countries.





In
      the
      United States, we are subject to federal, state and local provisions relating
      to
      the discharge of materials into the environment or otherwise for the protection
      of the environment. Similar laws apply in many foreign jurisdictions in which
      we
      may operate in the future. Although current operations have not been
      significantly affected by compliance with these environmental laws, governments
      are becoming increasingly sensitive to environmental issues, and we cannot
      predict what impact future environmental regulations may have on our business.
      We do not anticipate making any material capital expenditures for environmental
      control purposes.




8




**Personnel**





As
      of the
      date of this Report, we have approximately 74 full-time employees. None of
      these
      employees are currently covered by a collective bargaining agreement. We have
      experienced no work stoppages and consider our relations with our employees
      to
      be good.




**ITEM
      1A. RISK FACTORS**





**RISKS
      PARTICULAR TO OUR BUSINESS**




***We
      are largely dependent on the efforts of our exclusive agents to generate our
      revenue and service our customers.***





We
      currently sell principally all of our services through a network of 42 exclusive
      agent stations located throughout North America. Although we have exclusive
      and
      long-term relationships with these agents, the agency agreements are terminable
      by either party subject to requisite notice provisions that generally range
      from
      10-30 days. Although we have no customers that account for more than 5% of
      our
      revenues, there are four agency locations that each account for more than 5%
      of
      our revenues. The loss of one or more of these exclusive agents could negatively
      impact our ability to retain and service our customers. We will need to expand
      our existing relationships and enter into new relationships in order to increase
      our current and future market share and revenue. We cannot be certain that
      we
      will be able to maintain and expand our existing relationships or enter into
      new
      relationships, or that any new relationships will be available on commercially
      reasonable terms. If we are unable to maintain and expand our existing
      relationships or enter into new relationships, we may lose customers, customer
      introductions and co-marketing benefits and our operating results may
      suffer.





***If
      we fail to develop and integrate information technology systems or we fail
      to
      upgrade or replace our information technology systems to handle increased
      volumes and levels of complexity, meet the demands of our agents and customers
      and protect against disruptions of our operations, we may suffer a loss in
      our
      business.***




Increasingly,
      through our exclusive agents, we compete for business based upon the
      flexibility, sophistication and security of the information technology systems
      supporting our services. The failure of the hardware or software that supports
      our information technology systems, the loss of data contained in the systems,
      or the inability to access or interact with our web site or connect
      electronically, could significantly disrupt our operations, prevent clients
      from
      placing orders, or cause us to lose inventory items, orders or clients. If
      our
      information technology systems are unable to handle additional volume for our
      operations as our business and scope of services grow, our service levels,
      operating efficiency and future transaction volumes will decline. In addition,
      we expect our agents to continue to demand more sophisticated, fully integrated
      information technology systems from us as customers demand the same from their
      supply chain services providers. If we fail to hire qualified persons to
      implement, maintain and protect our information technology systems or we fail
      to
      upgrade or replace our information technology systems to handle increased
      volumes and levels of complexity, meet the demands of our agents and customers
      and protect against disruptions of our operations, we may lose suffer a loss
      in
      our business.




9




***Because
      our freight forwarding and domestic ground transportation operations are
      dependent on commercial airfreight carriers and air charter operators, ocean
      freight carriers, major U.S. railroads, other transportation companies,
      draymen and longshoremen, changes in available cargo capacity and other changes
      affecting such carriers, as well as interruptions in service or work stoppages,
      may negatively impact our business.***




We
      rely on commercial airfreight carriers and air charter operators, ocean freight
      carriers, trucking companies, major U.S. railroads, other transportation
      companies, draymen and longshoremen for the movement of our clients’ cargo.
      Consequently, our ability to provide services for our clients could be adversely
      impacted by shortages in available cargo capacity; changes by carriers and
      transportation companies in policies and practices such as scheduling, pricing,
      payment terms and frequency of service or increases in the cost of fuel, taxes
      and labor; and other factors not within our control. Reductions in airfreight
      or
      ocean freight capacity could negatively impact our yields. Material
      interruptions in service or stoppages in transportation, whether caused by
      strike, work stoppage, lock-out, slowdown or otherwise, could adversely impact
      our business, results of operations and financial condition.





***Our
      profitability depends on our ability to effectively manage our cost structure
      as
      we grow the business.***





As
      we
      continue to expand our revenues through the expansion of our network of
      exclusive agency locations, we must maintain an appropriate cost structure
      to
      maintain and expand our profitability. While we intend to continue to work
      on
      growing revenue by increasing the number of our exclusive agency locations,
      by
      strategic acquisitions, and by continuing to work on maintaining and expanding
      our gross profit margins by reducing transportation costs, our ultimate
      profitability will be driven by our ability to manage our agent commissions,
      personnel and general and administrative costs as a function of our net
      revenues. There can be no assurances that we will be able to increase revenues
      or maintain profitability.





***We
      face intense competition in the freight forwarding, logistics and supply chain
      management industry.***





The
      freight forwarding, logistics and supply chain management industry is intensely
      competitive and is expected to remain so for the foreseeable future. We face
      competition from a number of companies, including many that have significantly
      greater financial, technical and marketing resources. There are a large number
      of companies competing in one or more segments of the industry, although the
      number of firms with a global network that offer a full complement of freight
      forwarding and supply chain management services is more limited. Depending
      on
      the location of the customer and the scope of services requested, we must
      compete against both the niche players and larger entities. In addition,
      customers increasingly are turning to competitive bidding situations soliciting
      bids from a number of competitors, including competitors that are larger than
      us.





***Our
      business is subject to seasonal trends.***




Historically,
      our operating results have been subject to seasonal trends when measured on
      a
      quarterly basis. Our first and fourth fiscal quarters are traditionally weaker
      compared with our second and third fiscal quarters. This trend is dependent
      on
      numerous factors, including the markets in which we operate, holiday seasons,
      climate, economic conditions and numerous other factors. A substantial portion
      of our revenue is derived from clients in industries whose shipping patterns
      are
      tied closely to consumer demand which can sometimes be difficult to predict
      or
      are based on just-in-time production schedules. Therefore, our revenue is,
      to a
      larger degree, affected by factors that are outside of our control. There can
      be
      no assurance that our historic operating patterns will continue in future
      periods as we cannot influence or forecast many of these factors.





***Our
      industry is consolidating and if we cannot gain sufficient market presence
      in
      our industry, we may not be able to compete successfully against larger, global
      companies in our industry.***





There
      currently is a marked trend within our industry toward consolidation of the
      niche players into larger companies which are attempting to increase global
      operations through the acquisition of regional and local freight forwarders.
      If
      we cannot gain sufficient market presence or otherwise establish a successful
      strategy in our industry, we may not be able to compete successfully against
      larger companies in our industry with global operations.




10




***Our
      information technology systems are subject to risks which we cannot
      control.***




Our
      information technology systems are dependent upon third party communications
      providers, web browsers, telephone systems and other aspects of the Internet
      infrastructure which have experienced significant system failures and electrical
      outages in the past. Our systems are susceptible to outages due to fire, floods,
      power loss, telecommunications failures, break-ins and similar events. Despite
      our implementation of network security measures, our servers are vulnerable
      to
      computer viruses, break-ins and similar disruptions from unauthorized tampering
      with our computer systems. The occurrence of any of these events could disrupt
      or damage our information technology systems and inhibit our internal
      operations, our ability to provide services to our customers.





***If
      we are not able to limit our liability for customers’ claims through contract
      terms and limit our exposure through the purchase of insurance, we could be
      required to pay large amounts to our clients as compensation for their claims
      and our results of operations could be materially adversely
      affected.***




In
        general, we seek to limit by contract and/or International Conventions and
        laws
        our liability to our clients for loss or damage to their goods to $20 per
        kilogram (approximately $9.07 per pound) and $500 per carton or
        customary unit, for ocean freight shipments, again depending on the
        International Convention. For truck/land based risks there are a variety
        of
        limits ranging from a nominal amount to full value. However, because a freight
        forwarder’s relationship to an airline or ocean carrier is that of a shipper to
        a carrier, the airline or ocean carrier generally assumes the same
        responsibility to us as we assume to our clients. When we act in the capacity
        of
        an authorized agent for an air or ocean carrier, the carrier, rather than
        we,
        assumes liability for the safe delivery of the client’s cargo to its ultimate
        destination, other than in respect of any of our own errors and
        omissions.


We
      have, from time to time, made payments to our clients for claims related to
      our
      services and may make such payments in the future. Should we experience an
      increase in the number or size of such claims or an increase in liability
      pursuant to claims or unfavorable resolutions of claims, our results could
      be
      adversely affected. There can be no assurance that our insurance coverage will
      provide us with adequate coverage for such claims or that the maximum amounts
      for which we are liable in connection with our services will not change in
      the
      future or exceed our insurance levels. As with every insurance policy, there
      are
      limits, exclusions and deductibles that apply and we could be subject to claims
      for which insurance coverage may be inadequate or even disputed and which claims
      could adversely impact our financial condition and results of operations. In
      addition, significant increases in insurance costs could reduce our
      profitability.




***Our
      failure to comply with, or the costs of complying with, government regulation
      could negatively affect our results of operation.***





Our
      freight forwarding business as an indirect air cargo carrier is subject to
      regulation by the United States Department of Transportation (DOT) under the
      Federal Aviation Act, and by the Department of Homeland Security and the
      Transportation Security Administration (TSA). Our overseas independent agents’
air freight forwarding operations are subject to regulation by the regulatory
      authorities of the respective foreign jurisdictions. The air freight forwarding
      industry is subject to regulatory and legislative changes which can affect
      the
      economics of the industry by requiring changes in operating practices or
      influencing the demand for, and the costs of providing, services to customers.
      We do not believe that costs of regulatory compliance have had a material
      adverse impact on our operations to date. However, our failure to comply with
      any applicable regulations could have an adverse effect. There can be no
      assurance that the adoption of future regulations would not have a material
      adverse effect on our business.





***The
      prospects for our recently formed automotive services group are
      uncertain.***





In
      May 2007 **,** we
      launched a new logistics service offering focused on the automotive industry
      through our wholly-owned subsidiary, RLGS.





In
      connection with the launch of our automotive services group, we entered into
      an
      Asset Purchase Agreement (the “APA”) with Mass Financial Corporation (“Mass”) to
      acquire certain assets formerly used in the operation of the automotive division
      of Stonepath Group, Inc. (the “Purchased Assets”). In its capacity as a senior
      secured creditor, Mass agreed to sell RLGS the Purchased Assets in connection
      with a foreclosure and disposition process that began in April 2007. The
      purchase price consists of a $100,000 refundable deposit, $150,000 to be paid
      at
      closing, and up to an additional $2.5 million in cumulative earn-out payments
      equal to 25% of the annual earnings before interest, taxes, depreciation and
      amortization, as defined in the APA, generated from the automotive group in
      future periods. The APA contains negotiated representations, warranties,
      covenants and indemnities by each party.




11




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




Shortly
      after commencing operation of the Purchased Assets pursuant to the MSA, a
      judgment creditor of Stonepath (the “Stonepath Creditor”) issued garnishment
      notices to the automotive customers being serviced by us disputing the priority
      and superiority of the underlying security interest of Mass in the Purchased
      Assets and asserting that we were in possession of certain accounts receivable
      or other assets covered by the garnishment notice. This resulted in a
      significant disruption to the automotive business, including a delay in the
      payment of outstanding RLGS invoices as the garnishment notices required that
      all such amounts be directed to a court sponsored escrow arrangement. Although
      Mass recently posted a letter of credit that resolved the outstanding
      garnishment action, we have incurred significant out of pocket costs while
      operating the Purchased Assets under the MSA. We expect to be able to recover
      a
      significant amount of these costs as customers begin to remit payment for
      outstanding invoices, or through indemnification claims under the MSA. Based
      upon these circumstances, it is uncertain as to whether all closing conditions
      under the APA can be satisfied. If a closing under the APA does not occur,
      the
      outlook for our continued development of an automotive services group is also
      uncertain.




The
      issue
      of the priority of Mass’s security interest in the former Stonepath assets will
      be determined by the Court after discovery and a possible hearing. If the Court
      determines that the Mass security interest in the former assets of Stonepath
      is
      not superior to the judgment of the Stonepath judgment creditor, such creditor,
      may be entitled to draw upon and satisfy his judgment from the letter of credit
      posted by Mass. If Mass is successful in establishing the superiority of its
      security interest in the subject assets, the Stonepath judgment creditor would
      not be able to draw upon the letter of credit and may or may not pursue other
      enforcement actions, including an action against us to recover the value of
      the
      garnished assets. We view any such action as without merit, would vigorously
      defend any such action, and seek all available remedies including an
      indemnification claim against Mass.




***Our
      present levels of capital may limit the implementation of our business
      strategy.***





The
      objective of our business strategy is to build a global logistics services
      organization. One element of this strategy is an acquisition program which
      will
      require the acquisition of a number of diverse companies within the logistics
      industry covering a variety of geographic regions and specialized service
      offerings. We have a limited amount of cash resources and our ability to make
      additional acquisitions without securing additional financing from outside
      sources will be limited. This may limit or slow our ability to achieve the
      critical mass we need to achieve our strategic objectives.





***There
      is a scarcity of and competition for acquisition
      opportunities*** *.*




There
      are
      a limited number of operating companies available for acquisition which we
      deem
      to be desirable targets. In addition, there is a very high level of competition
      among companies seeking to acquire these operating companies. We are and will
      continue to be a very minor participant in the business of seeking acquisitions
      of these types of companies. A large number of established and well-financed
      entities are active in acquiring interests in companies which we may find to
      be
      desirable acquisition candidates. Many of these entities have significantly
      greater financial resources, technical expertise and managerial capabilities
      than us. Consequently, we will be at a competitive disadvantage in negotiating
      and executing possible acquisitions of these businesses. Even if we are able
      to
      successfully compete with these entities, this competition may affect the terms
      of completed transactions and, as a result, we may pay more than we expected
      for
      potential acquisitions. We may not be able to identify operating companies
      that
      complement our strategy, and even if we identify a company that complements
      our
      strategy, we may be unable to complete an acquisition of such a company for
      many
      reasons, including:




12




·
            a
                failure to agree on the terms necessary for a transaction, such as
                the
                amount of the
              purchase
                price;·
            incompatibility
                between our operational strategies and management philosophies and
                those
                of the potential acquiree;·
            competition
                from other acquirers of operating companies;·
            a
                lack of sufficient capital to acquire a profitable logistics company;
                and·
            the
                unwillingness of a potential acquiree to work with our
                management.





***We
      have not completed an acquisition since January 2006.***




Following
      our acquisition of Airgroup Corporation (“Airgroup”), we have from time-to-time
      identified a number of additional companies that we believed could be suitable
      acquisition candidates. However, for a variety of reasons, primarily due to
      pricing concerns, due diligence issues or risks associated with operational
      integration, we have not yet completed another acquisition. We remain committed
      to our acquisition strategy and continue to search for targets that fit within
      our acquisition criteria. If we are unable to successfully compete with other
      entities in identifying and executing possible acquisitions of companies we
      target, then we will not be able to successfully implement the acquisition
      element of our growth strategy. This may limit or slow our ability to achieve
      the critical mass we need to achieve our strategic objectives.





***Risks
      related to acquisition financing*** **.**





In
      order
      to pursue our acquisition strategy in the longer term, we will require
      additional financing. We intend to obtain such financing through a combination
      of traditional debt financing or the placement of debt and equity securities.
      We
      may finance some portion of our future acquisitions by either issuing equity
      or
      by using shares of our common stock for all or a substantial portion of the
      purchase price for such businesses. 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 common stock 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 maintain our acquisition
      program. If we do not have sufficient cash resources, we will not be able to
      complete acquisitions and our growth could be limited unless we are able to
      obtain additional capital through debt or equity financings.




***Our
      credit facility places certain limits on the type and number of acquisitions
      we
      may make.***





In
      February 2007 we renewed our $10 million credit facility with Bank of America,
      N.A. to provide additional funding for acquisitions and for our on-going working
      capital requirements. Under the terms of the credit facility, we are subject
      to
      a number of financial and operational covenants which may limit the number
      of
      additional acquisitions we make without the lender’s consent. In the event that
      we were not able to satisfy the conditions of the credit facility in connection
      with a proposed acquisition, we would have to forego the acquisition unless
      we
      either obtained the lender’s consent or retired the credit facility. This may
      prevent us from completing acquisitions which we determine are desirable from
      a
      business perspective and limit or slow our ability to achieve the critical
      mass
      we need to achieve our strategic objectives.





***Our
      credit facility contains financial covenants that may limit its current
      availability*** *.*





The
      terms
      of our credit facility are subject to certain financial covenants which may
      limit the amount otherwise available under that facility. Principal among these
      are financial covenants that limit funded debt to a multiple of our consolidated
      earnings before interest, taxes, depreciation and amortization, or “EBITDA”.
      Under this covenant, our funded debt is limited to a multiple of 3.25 of our
      EBITDA measured on a rolling four quarter basis. Our ability to generate EBITDA
      will be critical to our ability to use the full amount of the credit
      facility.




13




***To
      the extent we make any material acquisitions, our earnings will be adversely
      affected by non-cash charges relating to the amortization of intangibles which
      may cause our stock price to decline.***





Under
      applicable accounting standards, purchasers are required to allocate the total
      consideration paid in a business combination to the identified acquired assets
      and liabilities based on their fair values at the time of acquisition. The
      excess of the consideration paid to acquire a business over the fair value
      of
      the identifiable tangible assets acquired must be allocated among identifiable
      intangible assets and goodwill. The amount allocated to goodwill is not subject
      to amortization. However, it is tested at least annually for impairment. The
      amount allocated to identifiable intangibles, such as customer relationships
      and
      the like, is amortized over the life of these intangible assets. We expect
      that
      this will subject us to periodic charges against our earnings to the extent
      of
      the amortization incurred for that period. Because our business strategy focuses
      on growth through acquisitions, our future earnings will be subject to greater
      non-cash amortization charges than a company whose earnings are derived
      organically. As a result, we will experience an increase in non-cash charges
      related to the amortization of intangible assets acquired in our acquisitions.
      Based on our financial statements, this will create an appearance that our
      intangible assets are diminishing in value, when in fact they may be increasing
      because we are growing the value of our intangible assets (e.g. customer
      relationships). Because of this discrepancy, we believe our earnings before
      interest, taxes, depreciation and amortization, otherwise known as “EBITDA”, a
      non GAAP measure of financial performance, provides a meaningful measure of
      our
      financial performance. However, the investment community generally measures
      a
      public company’s performance by its net income. Further, the financial covenants
      of our credit facility adjust EBITDA to exclude costs related to share based
      compensation and other non-cash charges. Thus, we believe EBITDA, and adjusted
      EBITDA, provide a meaningful measure of our financial performance. If the
      investment community elects to place more emphasis on net income, the future
      price of our common stock could be adversely affected.





***We
      are not obligated to follow any particular criteria or standards for identifying
      acquisition candidates.***





Even
      though we have developed general acquisition guidelines, we are not obligated
      to
      follow any particular operating, financial, geographic or other criteria in
      evaluating candidates for potential acquisitions or business combinations.
      We
      will target companies which we believe will provide the best potential long-term
      financial return for our stockholders and we will determine the purchase price
      and other terms and conditions of acquisitions. Our stockholders will not have
      the opportunity to evaluate the relevant economic, financial and other
      information that our management team will use and consider in deciding whether
      or not to enter into a particular transaction.




***We
      may be required to incur a significant amount of indebtedness in order to
      successfully implement our acquisition strategy.***





We
      may be
      required to incur a significant amount of indebtedness in order to complete
      future acquisitions. If we are not able to generate sufficient cash flow from
      the operations of acquired companies to make scheduled payments of principal
      and
      interest on the indebtedness, then we will be required to use our capital for
      such payments. This will restrict our ability to make additional acquisitions.
      We may also be forced to sell an acquired company in order to satisfy
      indebtedness. We cannot be certain that we will be able to operate profitably
      once we incur this indebtedness or that we will be able to generate a sufficient
      amount of proceeds from the ultimate disposition of such acquired companies
      to
      repay the indebtedness incurred to make these acquisitions.





***Risks
      related to our acquisition strategy*** **.**




We
        intend
        to continue to build our business through a combination of organic growth,
        and
        if possible, through additional acquisitions. Growth by acquisition involves
        a
        number of risks, including possible adverse effects on our operating results,
        diversion of management resources, failure to retain key personnel, and risks
        associated with unanticipated liabilities, some or all of which could have
        a
        material adverse effect on our business, financial condition and results
        of
        operations.


14




***Dependence
      on key personnel.***





For
      the
      foreseeable future our success will depend largely on the continued services
      of
      our Chief Executive Officer, Bohn H. Crain, as well as certain of the other
      key
      executives of Airgroup, because of their collective industry knowledge,
      marketing skills and relationships with major vendors and owners of our
      exclusive agent stations. We have secured employment arrangements with each
      of
      these individuals, which contain non-competition covenants which survive their
      actual term of employment. Nevertheless, should any of these individuals leave
      the Company, it could have a material adverse effect on our future results
      of
      operations.





***We
      may experience difficulties in integrating the operations, personnel and assets
      of companies that we acquire which may disrupt our business, dilute stockholder
      value and adversely affect our operating results.***





A
      core
      component of our business plan is to acquire businesses and assets in the
      transportation and logistics industry. We have only made one such acquisition
      and, therefore, our ability to complete such acquisitions and integrate any
      acquired businesses into our Company is unproven. Increased competition for
      acquisition candidates may develop, in which event there may be fewer
      acquisition opportunities available to us as well as higher acquisition prices.
      There can be no assurance that we will be able to identify, acquire or
      profitably manage businesses or successfully integrate acquired businesses
      into
      the Company without substantial costs, delays or other operational or financial
      problems. Such acquisitions also involve numerous operational risks,
      including:





·
            difficulties
                in integrating operations, technologies, services and
                personnel;·
            the
                diversion of financial and management resources from existing
                operations;·
            the
                risk of entering new markets;·
            the
                potential loss of key employees; and·
            the
                inability to generate sufficient revenue to offset acquisition or
                investment costs.





As
      a
      result, if we fail to properly evaluate and execute any acquisitions or
      investments, our business and prospects may be seriously harmed.





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





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




15





***Provisions
      of our charter, bylaws and Delaware law may make a contested takeover of our
      Company more difficult.***





Certain
      provisions of our certificate of incorporation, bylaws and the General
      Corporation Law of the State of Delaware (the “DGCL”) could deter a change in
      our management or render more difficult an attempt to obtain control of us,
      even
      if such a proposal is favored by a majority of our stockholders. For example,
      we
      are subject to the provisions of the DGCL that prohibit a public Delaware
      corporation from engaging in a broad range of business combinations with a
      person who, together with affiliates and associates, owns 15% or more of the
      corporation’s outstanding voting shares (an “interested stockholder”) for three
      years after the person became an interested stockholder, unless the business
      combination is approved in a prescribed manner. Our certificate of incorporation
      provides that directors may only be removed for cause by the affirmative vote
      of
      75% of our outstanding shares and that amendments to our bylaws require the
      affirmative vote of holders of two-thirds of our outstanding shares. Our
      certificate of incorporation also includes undesignated preferred stock, which
      may enable our Board of Directors to discourage an attempt to obtain control
      of
      us by means of a tender offer, proxy contest, merger or otherwise. Finally,
      our
      bylaws include an advance notice procedure for stockholders to nominate
      directors or submit proposals at a stockholders meeting.




**RISKS
      RELATED TO OUR COMMON STOCK**





***Trading
      in our common stock has been limited and there is no significant trading market
      for our common stock.***





Our
      common stock is currently eligible to be quoted on the OTC Bulletin Board,
      however, trading to date has been limited. Trading on the OTC Bulletin Board
      is
      often characterized by low trading volume and significant price fluctuations.
      Because of this limited liquidity, stockholders may be unable to sell their
      shares. The trading price of our shares may from time to time fluctuate widely.
      The trading price may be affected by a number of factors including events
      described in the risk factors set forth in this report as well as our operating
      results, financial condition, announcements, general conditions in the industry,
      and other events or factors. In recent years, broad stock market indices, in
      general, and smaller capitalization companies, in particular, have experienced
      substantial price fluctuations. In a volatile market, we may experience wide
      fluctuations in the market price of our common stock. These fluctuations may
      have a negative effect on the market price of our common stock.




***The
      influx of additional shares of our common stock onto the market may create
      downward pressure on the trading price of our common
      stock.***





We
      completed private placements of approximately 15.4 million shares of our common
      stock between October 2005 and February 2006. The availability of those shares
      for sale to the public either by prospectus or by Rule 144 of the Securities
      Act
      of 1933, as amended, and sale of such shares in public markets could have an
      adverse effect on the market price of our common stock. Such an adverse effect
      on the market price would make it more difficult for us to sell our equity
      securities in the future at prices which we deem appropriate or to use our
      shares as currency for future acquisitions which will make it more difficult
      to
      execute our acquisition strategy.




***The
      issuance of additional shares in connection with potential acquisitions may
      result in additional dilution to our existing
      stockholders.***





We
      will
      require additional financing to fund the acquisition component of our growth
      strategy. At some point this may entail the issuance of additional shares of
      common stock or common stock equivalents, which would have the effect of further
      increasing the number of shares outstanding. In connection with future
      acquisitions, we may undertake the issuance of more shares of common stock
      without notice to our then existing stockholders. We may also issue additional
      shares in order to, among other things, compensate employees or consultants
      or
      for other valid business reasons in the discretion of our Board of Directors,
      and could result in diluting the interests of our existing
      stockholders.





***We
      may issue shares of preferred stock with greater rights than our common
      stock.***





Although
      we have no current plans or agreements to issue any preferred stock, our
      certificate of incorporation authorizes our board of directors to issue shares
      of preferred stock and to determine the price and other terms for those shares
      without the approval of our shareholders. Any such preferred stock we may issue
      in the future could rank ahead of our common stock, in terms of dividends,
      liquidation rights, and voting rights.




16




***As
      we do not anticipate paying dividends, investors in our shares will not receive
      any dividend income.***





We
      have
      not paid any cash dividends on our common stock since our inception and we
      do
      not anticipate paying cash dividends in the foreseeable future. Any dividends
      that we may pay in the future will be at the discretion of our Board of
      Directors and will depend on our future earnings, any applicable regulatory
      considerations, covenants of our debt facility, our financial requirements
      and
      other similarly unpredictable factors. Our ability to pay dividends is further
      limited by the terms of our credit facility with Bank of America, N.A. For
      the
      foreseeable future, we anticipate that we will retain any earnings which we
      may
      generate from our operations to finance and develop our growth and that we
      will
      not pay cash dividends to our stockholders. Accordingly, investors seeking
      dividend income should not purchase our stock.





***We
      are not subject to certain of the corporate governance provisions of the
      Sarbanes-Oxley Act of 2002***





Since
      our
      common stock is not listed for trading on a national securities exchange, we
      are
      not subject to certain of the corporate governance requirements established
      by
      the national securities exchanges pursuant to the Sarbanes-Oxley Act of 2002.
      These include rules relating to independent directors, and independent director
      nomination, audit and compensation committees. Unless we voluntarily elect
      to
      comply with those obligations, investors in our shares will not have the
      protections offered by those corporate governance provisions. As of the date
      of
      this report, we have not elected to comply with any regulations that do not
      apply to us. While we may make an application to have our securities listed
      for
      trading on a national securities exchange, which would require us to comply
      with
      those obligations, we can not assure that we will do so or that such application
      will be approved.





***We
      will be required to comply with Section 404 of the Sarbanes-Oxley Act of 2002
      in
      2008, and if we fail to comply in a timely manner, our business could be harmed
      and our stock price could decline.***




Rules
        adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
        require annual assessment of our internal controls over financial reporting,
        and
        attestation of this assessment by our independent registered public accountants.
        The SEC has extended the compliance dates for smaller public companies,
        including us, such that an annual assessment of our internal controls
        requirement will first apply to our annual report for our first fiscal year
        ending June 30, 2008 and that the first attestation report of our assessment
        that our independent registered public accounting firm will need to complete
        will be required in connection with the preparation of our annual report
        for our
        fiscal year ending June 30, 2009. Compliance with these rules will require
        us to
        incur increased general and administrative expenses and management attention.
        The standards that must be met for management to assess the internal control
        over financial reporting as effective are new and complex, and require
        significant documentation, testing and possible remediation to meet the detailed
        standards. We may encounter problems or delays in completing activities
        necessary to make an assessment of our internal control over financial
        reporting. In addition, the attestation process by our independent registered
        public accountants is new and we may encounter problems or delays in completing
        the implementation of any requested improvements and receiving an attestation
        of
        our assessment by our independent registered public accountants. If we cannot
        assess our internal controls over financial reporting as effective, or our
        independent registered public accountants are unable to provide an unqualified
        attestation report on such assessment, investor confidence and share value
        may
        be negatively impacted.


**ITEM
      2. PROPERTIES**





**Principal
      Executive Offices**





Our
      offices are located at 1227 120 th Avenue
      N.E., Bellevue, Washington 98005 and consist of approximately 14,500 feet of
      office space which we lease for approximately $14,020 per month pursuant to
      the
      lease expiring April 30, 2009. We also maintain approximately 8,125 feet of
      office space at 19320 Des Moines Memorial Drive South, SeaTac, Washington which
      we lease for approximately $5,460 per month pursuant to lease that expires
      December 31, 2010. In addition, we own a small parcel of undeveloped acreage
      located at Grays Harbor, Washington which is not material to our business.
      We
      believe our current offices are adequately covered by insurance and are
      sufficient to support our operations for the foreseeable future.




17




**ITEM
      3. LEGAL PROCEEDINGS**




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


*Team
      Air Express Proceeding*





On
      or
      about February 21, 2007, Team Air Express, Inc. d/b/a Team Worldwide ("Team")
      commenced an action against the Company, as well as Texas Time Express, Inc.,
      Douglas K. Tabor, and Michael E. Staten, in the District Court of the State
      of
      Texas, Tarrant County (the “Court”) captioned Cause No. 017 222706 07; *Team
      Air Express, Inc. d/b/a Team Worldwide v. Airgroup Corporation, Texas Time
      Express, Inc., Douglas K. Tabor, individually and as officer of Texas Time
      Express, Inc., and Michael E. Staten, individually and as officer of Texas
      Time
      Express, Inc.*




In
        its
        complaint, Team alleges that we, in conjunction with the other named defendants,
        tortiously interfered with an existing contract Team had in place with VRC
        Express, Inc. ("VRC"), its then existing Chicago, Illinois station location.
         In their petition, Team alleges that we and other defendants caused VRC to
        leave the Team network of companies, and become a branch office of Airgroup
        Corporation.  The suit seeks damages for the loss of business opportunity
        and profits as a result of VRC leaving the Team system. We have tentatively
        concluded that no interference of the VRC contract occurred, and we intend
        to
        vigorously defend the matter.


*Automotive
      Garnishment Proceeding*




On
        June
        15, 2007, writs of garnishment issued by a judgment creditor of Stonepath
        were
        directed to, among others, the automotive customers being serviced by our
        RLGS
        subsidiary pursuant to the Management Services Agreement between RLGS and
        Mass.
        Together with Mass, we intervened in the matter and objected to the writs
        of
        garnishment for the reason that Mass’s interest in the former Stonepath assets
        originated as the result of a prior perfected security interest that was
        properly foreclosed upon by Mass. The matter is pending in the Circuit Curt
        for
        the County of Wayne, State of Michigan, Case No. 04-433025-CA. Ultimately,
        on
        August 14, 2007, a Stipulated Order Regarding Writs of Garnishment was entered
        whereby Mass posted a letter of credit in the amount of $2,750,000 for the
        benefit of the Stonepath judgment creditor. Upon posting of that letter of
        credit, the garnished customers were released from the writs of garnishment
        and
        directed to release all garnished funds and make all future payments as directed
        to Mass and our RLGS subsidiary. Further, the Stonepath judgment creditor
        was
        ordered to refrain from further garnishments and enforcement action against
        the
        former assets of Stonepath. The issue of the superiority of Mass’s security
        interest in the former Stonepath assets will be determined by the Court after
        discovery and a possible hearing.


*Mass
      Proceeding*




On
        or
        about September 28, 2007, Mass Financial Corp. (“Mass”) commenced an action
        against the Company and Radiant Logistics Global Services, Inc. in the Federal
        District Court for the Western District of the State of Washington at Seattle.
        In its complaint, Mass has sought specific performance, injunctive relief
        and
        damages against the Company and RLGS, seeking to compel a closing under an
        unexecuted draft amendment to the Asset Purchase Agreement between the parties.
        The Company has only recently become aware of this action and believes the
        claims are without merit, will vigorously defend the claims, and bring all
        available counterclaims against Mass.


**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.




18




**PART
      II**





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





**Market
      Information**





Our
      common stock currently trades on the OTC Bulletin Board under the symbol
“RLGT.OB.” The first reported trade in our common stock occurred on December 27,
      2005. The following table states the range of the high and low bid-prices per
      share of our common stock for each of the calendar quarters since the first
      reported trade, as reported by the OTC Bulletin Board. These quotations
      represent inter-dealer prices, without retail mark-up, markdown, or commission,
      and may not represent actual transactions. The last price of our common stock
      as
      reported on the OTC Bulletin Board on September 24, 2007, was $.52 per
      share.




**High**
            
            
            **Low**Twelve
              Months
              Ended June 30, 2007:Quarter
                ended June 30, 2007
            
            $
            .66
            
            $
            .47Quarter
                ended March 31, 2007
            
            
            .80
            
            
            .51Quarter
                ended December 31, 2006
            
            
            .70
            
            
            .55Quarter
                ended September 30, 2006
            
            
            1.05
            
            
            .85Six
                Months Ended June 30, 2006 (Transition Period):Quarter
                ended June 30, 2006
            
            $
            1.05
            
            $
            .85Quarter
                ended March 31, 2006
            
            
            1.05
            
            
            .95Year
                Ended December 31, 2005:Quarter
                ended December 31, 2005
            
            $
            1.05
            
            $
            .95





**Holders**





As
      of
      September 24, 2007, the number of stockholders of record of our common stock
      was
      128. **** We
      believe there are additional beneficial owners of our common stock who hold
      their shares in street name.




**Dividend
      Policy**





We
      have
      not paid any cash dividends on our common stock to date, and we have no
      intention of paying cash dividends in the foreseeable future. Whether we declare
      and pay dividends will be determined by our board of directors at their
      discretion, subject to certain limitations imposed under Delaware law. The
      timing, amount and form of dividends, if any, will depend on, among other
      things, our results of operations, financial condition, cash requirements and
      other factors deemed relevant by our Board of Directors. Our ability to pay
      dividends is limited by the terms of our Bank of America, N.A. credit
      facility.




**Transfer
      Agent**





Pacific
      Stock Transfer Company, 500 East Warm Springs, Suite 240, Las Vegas, Nevada
      89119, serves as our transfer agent.





**Equity
      Compensation Plan Information**




The
      following table sets forth certain information regarding compensation plans
      under which our equity securities are authorized for issuance as of June 30,
      2007.




19




Plan
                  Category
              Number
                  of securities to
                be
                  issued upon exercise
                of
                  outstanding warrants
                and
                  rights
                
                (a)
              Weighted-average
                exercise
                  price of
                outstanding
                  options,
                warrants
                  and rights
                
                
                (b)
              Number
                  of securities
                remaining
                  available for
                future
                  issuance under
                equity
                  compensation
                plans
                  (excluding
                securities
                  reflected in
                column
                  (a)(c)Equity
                  Compensation
                Plans
                  approved by
                security
                  holders
              0
              --
              0Equity
                  compensation
                plans
                  not approved by
                security
                  holders
              3,150,000
              $0.605
              1,850,000Total
              3,150,000
              $0.605
              1,850,000







A
      description of the material terms of The Radiant Logistics, Inc. 2005 Stock
      Incentive Plan is set forth in Item
      11.
      EXECUTIVE COMPENSATION- Stock Incentive Plan.





**Recent
      Sale of Unregistered Securities**





Pursuant
      to an agreement dated May 15, 2007, we agreed to issue up to 200,000 shares
      of
      our common stock to Richard Manner in connection with his agreement to assist
      us
      in connection with the establishment of our automotive services segment, with
      issuance of the shares to be subject to certain benchmarks. Mr. Manner has
      vested in 50,000 of the shares. The shares are to be issued in a transaction
      exempt from registration under the Securities Act, in reliance on Section 4(2)
      of the Securities Act and/or 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. Vesting and issuance of
      the
      balance of the shares remains subject to uncertainty.








**ITEM
      6. SELECTED FINANCIAL INFORMATION**





Effective
      on June 30, 2006, we changed our fiscal year end from December 31 to June 30.
      This change was made in
      order
      to make our fiscal year conform to the June 30 fiscal year of our principal
      operating subsidiary, Airgroup Corporation.




The
      selected financial data 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 : (i) equity offerings
      completed during 2005 and 2006; (ii) the acquisition of Airgroup Corporation
      during 2006; (iii) our 2006 change in fiscal year to conform to the June 30
      fiscal year 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 results are also adjusted to reflect a consolidation
      of
      the historical results of operations of Airgroup and Radiant as adjusted to
      reflect the amortization of acquired intangibles. Similarly, pro forma
      statements of income have been presented for twelve months ended June 30, 2007
      and 2006 as if we had completed our equity offerings and acquired Airgroup
      as of
      July 1, 2005, effectively the beginning of fiscal year 2006.




The
      pro
      forma financial data presented is 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 obtained in the
      future.




The
      following table sets forth selected historical financial data as of and for
      the
      periods ended June 30, 2007 (historic and audited) and 2006 (historic and
      unaudited), respectively and is not complete. The data is derived from our
      consolidated financial statements. The selected financial data should be read
      in
      conjunction with “Management’s Discussion and Analysis of Financial Condition
      and Results of Operations,” the Financial Statements and the Notes to Financial
      Statements included elsewhere in this report.




20




Consolidated
      Statements of Operations Data for the twelve months ending June 30, 2007
      (historic and audited) and 2006 (historic and unaudited); (in thousands, except
      per share amounts):






**Historic**
              **Twelve
                Months Ended June 30,****2007**
            
            **2006**
              (unaudited)**Consolidated
                Statement Of Operations Data: (In Thousands, Except Per Share
                Amounts)**Total
                revenue
            
            $
            75,527
            
            $
            26,469Cost
                of transportation
            
            
            48,813
            
            
            16,966Net
                revenue
            
            
            26,714
            
            
            9,503Operating
                expenses
            
            
            26,301
            
            
            9,597Income
                (loss) from operations
            
            
            413
            
            
            (94
            )Other
                income (expense)
            
            
            (49
            )
            
            -Income
                (loss) before income taxes
            
            
            364
            
            
            (94
            )Income
                tax expense (benefit)
            
            
            156
            
            
            (39
            )Income
                (loss) before minority interest
            
            
            208
            
            
            (55
            )Minority
                interest
            
            
            45
            
            
            -Net
                income (loss)
            
            $
            163
            
            $
            (55
            )Net
                income (loss) per common share(1):Basic
            
            $
            -
            
            $
            -Diluted
            
            $
            -
            
            $
            -Weighted
                average common shares:Basic
                shares outstanding
            
            
            33,883
            
            
            30,071Dilutedshares
                outstanding
            
            
            34,325
            
            
            30,071




(1)
            For
                all periods presented, the weighted average common shares outstanding
                have
                been adjusted to reflect 3.5:1 stock split effected in October of
                2005.




**As
                of June 30,****2007**
            
            **2006****Consolidated
                Balance Sheet Data (In Thousands)**Cash
                and cash equivalents
            
            $
            720
            
            $
            511Working
                capital
            
            
            779
            
            
            1,985Total
                assets
            
            
            25,024
            
            
            17,045Long-term
                debt
            
            
            1,974
            
            
            2,470Stockholders'
                equity
            
            
            7,044
            
            
            6,334





The
      following table sets forth selected historical financial data as of and for
      the
      six months ended June 30, 2006 and the years ended December 31, 2005, 2004,
      2003
      and 2002. The data is derived from our audited financial statements. The
      selected financial data should be read in conjunction with “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations,” the
      Financial Statements and the Notes to Financial Statements included elsewhere
      in
      this report.




21




Consolidated
      Statement of Operations Data for the prior Five Years ended June 30 and December
      31 (historical and audited); (in thousands, except per share
      amounts):




**Selected
                Financial
                Data****Six
                Months**
              **Ended**
              **June
                30,**
            
            **------------Twelve
                month ended December
                31, -------------****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****Consolidated
                Statement Of**
              **Operations
                Data: (In Thousands,**
              **Except
                Per Share Amounts)**Total
                revenue
            
            $
            26,469
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —Cost
                of transportation
            
            
            16,966
            
            
            —
            
            
            —
            
            
            —
            
            
            —Net
                revenue
            
            
            9,503
            
            
            —
            
            
            —
            
            
            —
            
            
            —Operating
                expenses
            
            
            9,457
            
            
            162
            
            
            23
            
            
            30
            
            
            124Income
                (loss) from operations
            
            
            46
            
            
            (162
            )
            
            (23
            )
            
            (30
            )
            
            (124
            )Other
                income (expense)
            
            
            (14
            )
            
            13
            
            
            (2
            )
            
            —
            
            
            —Income
                (loss) from continuing
              operations
                before income taxexpense
            
            
            32
            
            
            (149
            )
            
            (25
            )
            
            (30
            )
            
            (124
            )Income
                tax (benefit)
            
            
            (39
            )
            
            —
            
            
            —
            
            
            —
            
            
            —Net
                income (loss)
            
            $
            71
            
            $
            (149
            )
            $
            (25
            )
            $
            (30
            )
            $
            (124
            )Net
                income (loss) per common share:Basic
            
            $
            —
            
            $
            (0.01
            )
            $
            0.00
            
            $
            0.00
            
            $
            (0.01
            )Diluted
            
            $
            —
            
            $
            (0.01
            )
            $
            0.00
            
            $
            0.00
            
            $
            (0.01
            )Weighted
                average common shares(1):Basic
            
            
            33,186
            
            
            26,490
            
            
            25,964
            
            
            25,964
            
            
            22,424Diluted
            
            
            34,585
            
            
            26,490
            
            
            25,964
            
            
            25,964
            
            
            22,424







(1)
            For
                all periods presented, the weighted average common shares outstanding
                have
                been adjusted to reflect 3.5:1 stock split effected in October of
                2005.






**June
                30,**
            
            **-----------------------December
                31, -----------------------**Consolidate
                Balance Sheet Data(In
                Thousands)**2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002**Cash
                and cash equivalents
            
            $
            511
            
            $
            5,266
            
            $
            19
            
            $
            51
            
            $
            27Working
                capital
            
            
            1,985
            
            
            5,143
            
            
            17
            
            
            42
            
            
            20Total
                assets
            
            
            17,045
            
            
            5,307
            
            
            19
            
            
            51
            
            
            27Long-term
                debt
            
            
            2,470
            
            
            —
            
            
            50
            
            
            50
            
            
            —Stockholders'
                equity
            
            $
            6,334
            
            $
            5,159
            
            $
            (33
            )
            $
            (8
            )
            $
            20




**Supplemental
      Pro Forma Financial Information**





Consolidated
      Statements of Operations Data for the twelve months ended June 30, 2007
      (historic and audited) and 2006 (pro forma and unaudited); (in thousands, except
      per share amounts)




Supplemental
      pro forma information is being provided since historical data merely reflects
      the prior period results, for two quarters, of the Company on a stand-alone
      basis prior to the acquisition of Airgroup would provide no meaningful data
      with
      respect to our ongoing operations.




22




**Pro
                Forma****and
                unaudited**
              **Years
                Ended**
              **June
                30,****Consolidated
                Statement Of Operations Data: (In Thousands, Except Per****Share
                Amounts)**
            
            
            **2007**
            
            
            **2006**Total
                revenue
            
            $
            75,527
            
            $
            54,580Cost
                of transportation
            
            
            48,813
            
            
            35,192Net
                revenue
            
            
            26,714
            
            
            19,388Operating
                expenses
            
            
            26,301
            
            
            19,175Income
                from operations
            
            
            413
            
            
            213Other
                income (expense)
            
            
            (49
            )
            
            (22
            )Income
                before income taxes
            
            
            364
            
            
            191Income
                tax expense
            
            
            156
            
            
            217Income
                (loss) before minority interest
            
            
            208
            
            
            (26
            )Minority
                interest
            
            
            45
            
            
            -Net
                income (loss)
            
            $
            163
            
            $
            (26
            )Net
                income (loss) per common share(1):Basic
            
            $
            -
            
            $
            -Diluted
            
            $
            -
            
            $
            -Weighted
                average common shares:Basic
                shares outstanding
            
            
            33,883
            
            
            30,071Dilutedshares
                outstanding
            
            
            34,325
            
            
            30,607




(1)
            For
                all periods presented, the weighted average common shares outstanding
                have
                been adjusted to reflect 3.5:1 stock split effected in October of
                2005.





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





On
      July
      31, 2006, the Board of Directors of the Company resolved to change our fiscal
      year from December 31 to June 30 effective for the fiscal year 2006 resulting
      in
      a six month fiscal year ending June 30. This change was made to conform the
      Company’s fiscal year to the June 30 fiscal year of the Company’s principal
      operating subsidiary, Airgroup Corporation.





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




23




**Overview**




In
      conjunction with a change of control transaction completed during October 2005
      and discussed under Part 1 Item 1, of this Report, we: (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
      Seattle-Washington based non-asset based logistics company providing domestic
      and international freight forwarding services through a network of exclusive
      agent offices across North America. Airgroup services a diversified account
      base
      including manufacturers, distributors and retailers using a network of
      independent carriers and international agents positioned strategically around
      the world.





By
      implementing a growth strategy, 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 actually be growing the value of our intangible
      assets (e.g., customer relationships). Thus, we believe that earnings before
      interest, taxes, depreciation and amortization, or EBITDA, is a useful financial
      measure for investors because it eliminates the effect of these non-cash costs
      and provides an important metric for our business. Further, the financial
      covenants of our credit facility adjust EBITDA to exclude costs related to
      share
      based compensation expense and other non-cash charges. Accordingly, we intend
      to
      employ EBITDA and adjusted EBITDA as a management tools to measure our
      historical financial performance and as a benchmark for future financial
      flexibility.




24




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.




**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. We perform our annual impairment
      test during our fiscal fourth quarter unless events or circumstances indicate
      an
      impairment may have occurred before that time, and we have found no
      impairment.





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





Under
      the provisions of Statement of Position 98-1, *“Accounting
      for the Costs of Computer Software Developed or Obtained for Internal
      Use”* ,
      we capitalize 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.




25




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





As
      a
      non-asset based carrier, 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.





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.





**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 unaudited information
      to include the effects on our consolidated financial statements of: (i) equity
      offerings completed during 2005 and 2006; (ii) the acquisition of Airgroup
      Corporation during 2006; and (iii) our 2006 change in fiscal year to conform
      to
      the June 30 fiscal year 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,
      prior to our acquisition of Airgroup, on a stand-alone basis, would provide
      no
      meaningful data with respect to our ongoing operations since we were in the
      development stage at that time. The pro forma information has been presented
      for
      fiscal year ended June 30, 2006 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 Financial Statements included within this
      report.




26




The
      pro
      forma financial data presented is 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.




***Twelve
      months ended June 30, 2007 (historic and audited) compared to twelve months
      ended June 30, 2006 (historic and unaudited), six months ended June 30, 2006
      (historic and audited) to six months ended June 30, 2005 (historic and
      unaudited), and twelve months ended December 31, 2005 (historic and audited)
      compared to twelve months ended December 31,
      2004.***





We
      generated transportation revenue of $75.5 million and net transportation revenue
      of $26.7 million for the twelve months ended June 30, 2007. This reflects the
      revenues derived from the operation of Airgroup. We had six months of revenues,
      $26.5 million, and net transportation revenue of $9.5 million for the
      comparative prior year period as we remained in the developmental stage prior
      to
      the acquisition of Airgroup. Net income was $163,000 for the twelve months
      ended
      June 30, 2007 compared to a net loss of $55,000 for the twelve months ended
      June
      30, 2006.





We
      had
      adjusted earnings (loss) before interest, taxes, depreciation and amortization
      (EBITDA) of $1,412,000 and $441,000 for twelve months ended June 30, 2007 and
      2006, 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 adjusted EBITDA to net income
      for
      the twelve months ended June 30, 2007 (historic and audited) and twelve months
      ended June 30, 2006 (historic and unaudited):*




**Twelve
                months ended June 30,**
            
            **Change****2007**
            
            **2006**
            
            **Amount**
            
            **Percent**Net
                income (loss)
            
            $
            163
            
            $
            (55
            )
            $
            218
            
            
            NMIncome
                tax expense (benefit)
            
            
            156
            
            
            (39
            )
            
            195
            
            
            NMNet
                interest expense
            
            
            6
            
            
            (3
            )
            
            9
            
            
            NMDepreciation
                and amortization
            
            
            830
            
            
            423
            
            
            407
            
            
            NMEBITDA
                (Earnings before interest,
              taxes,
                depreciation and amortization)
            
            $
            1,155
            
            $
            326
            
            $
            829
            
            
            NMShare
                based compensation and other non-cash costs
            
            
            257
            
            
            115
            
            
            142
            
            
            NMAdjusted
                EBITDA
            
            $
            1,412
            
            $
            441
            
            $
            971
            
            
            NM






27




*The
      following table provides a reconciliation of adjusted EBITDA to net income
      for
      the twelve months ended June 30, 2007 (historic and audited) and six months
      ended June 30, 2006 (actual and audited):*




**Change****Twelve
                months****ended**
              **June
                30, 2007**
            
            **Six
                months****ended**
                **June
                  30, 2006**
            
            **Amount**
            
            **Percent**Net
                income
            
            $
            163
            
            $
            71
            
            $
            92
            
            
            NMIncome
                tax expense (benefit)
            
            
            156
            
            
            (39
            )
            
            195
            
            
            NMNet
                interest (income) expense
            
            
            6
            
            
            11
            
            
            (5
            )
            
            NMDepreciation
                and amortization
            
            
            830
            
            
            423
            
            
            407
            
            
            NMEBITDA
                (Earnings before interest,
              taxes,
                depreciation and amortization)
            
            $
            1,155
            
            $
            466
            
            $
            689
            
            
            NMShare
                based compensation and other non-cash costs
            
            
            257
            
            
            86
            
            
            171
            
            
            NMAdjusted
                EBITDA
            
            $
            1,412
            
            $
            552
            
            $
            860
            
            
            NM




*The
      following table provides a reconciliation of adjusted EBITDA to net income
      for
      the six months ended June 30, 2006 (historic and audited) and six months ended
      June 30, 2005(historic and unaudited):*




**Six
                months ended June 30,**
            
            
            **Change****2006**
            
            
            **2005**
            
            
            **Amount**
            
            
            **Percent**Net
                income (loss)
            
            $
            71
            
            $
            (23
            )
            $
            94
            
            
            NMIncome
                tax expense (benefit)
            
            
            (39
            )
            
            -
            
            
            (39
            )
            
            NMNet
                interest expense
            
            
            11
            
            
            1
            
            
            10
            
            
            NMDepreciation
                and amortization
            
            
            423
            
            
            -
            
            
            423
            
            
            NMEBITDA
                (Earnings before interest,
              taxes,
                depreciation and amortization)
            
            $
            466
            
            $
            (22
            )
            $
            488
            
            
            NMShare
                based compensation and other non-cash costs
            
            
            86
            
            
            -
            
            
            86
            
            
            NMAdjusted
                EBITDA
            
            $
            552
            
            $
            (22
            )
            $
            574
            
            
            NM




*The
      following table provides a reconciliation of adjusted EBITDA to net income
      for
      the six months ended June 30, 2006 (historic and audited) and year ended
      December 31, 2005(historic and audited):*




**Change****Six
                months ended**
              **June
                30, 2006**
            
            
            **Year
                  ended**
                **Dec.****31,
                  2005**
            
            
            **Amount**
            
            
            **Percent**Net
                income (loss)
            
            $
            71
            
            $
            (149
            )
            $
            220
            
            
            NMIncome
                tax (benefit)
            
            
            (39
            )
            
            -
            
            
            (39
            )
            
            NMNet
                iInterest (income) expense
            
            
            11
            
            
            (13
            )
            
            24
            
            
            NMDepreciation
                and amortization
            
            
            423
            
            
            -
            
            
            423
            
            
            NMEBITDA
                (Earnings before interest,
              taxes,
                depreciation and amortization)
            
            $
            466
            
            $
            (162
            )
            $
            628
            
            
            NMShare
                based compensation and other
              non-cash
                costs
            
            
            86
            
            
            -
            
            
            86
            
            
            NMAdjusted
                EBITDA
            
            $
            552
            
            $
            (162
            )
            $
            714
            
            
            NM




28




*The
      following table summarizes transportation revenue, cost of transportation and
      net transportation revenue (in thousands) for the twelve months ended June
      30,
      2007 (historic and audited) and twelve months ended June 30, 2006 (historic
      and
      unaudited):*




**Twelve
                months ended June
                30,**
            
            
            **Change****2007**
            
            
            **2006**
            
            
            **Amount**
            
            
            **Percent**Transportation
                revenue
            
            $
            75,527
            
            $
            26,469
            
            $
            49,058
            
            
            185.3
            %Cost
                of transportation
            
            
            48,813
            
            
            16,966
            
            
            31,847
            
            
            187.7
            %Net
                transportation revenue
            
            $
            26,714
            
            $
            9,503
            
            $
            17,211
            
            
            181.1
            %*Net
                transportation margins*
            
            
            35.4
            %
            
            35.9
            %
            
            35.1
            %




We
      generated transportation revenue of $75.5 million and net transportation revenue
      of $26.7 million for the twelve months ended June 30, 2007. This reflects a
      full
      12 months of revenues derived from the operations of Airgroup, which was
      acquired as of January 1, 2006. We had six months of revenues, $26.5 million,
      and net transportation revenue of $9.5 million for twelve months ended June
      30,
      2006 as we remained in the developmental stage prior to the acquisition of
      Airgroup. Domestic and International transportation revenue was $49.1 million
      and $26.4 million, respectively, for twelve months ended June 30, 2007 compared
      with $15.0 million and $11.5 million, respectively, for twelve months ended
      June
      30, 2006 as we remained in the developmental stage prior to the acquisition
      of
      Airgroup.




For
      twelve months ended June 30, cost of transportation was 64.6% and 64.1% of
      transportation revenue for 2007 and 2006 respectively. 2006 reflects only six
      months of Airgroup operations as it was acquired as of January 1, 2006.




Net
      transportation margins were 35.4% and 35.9% of transportation revenue for the
      twelve months ended June 30, 2007 and 2006 respectively. 2006 reflects only
      six
      months of Airgroup operations as it was acquired as of January 1,
      2006.




29




*The
      following table compares condensed consolidated statement of income data as
      a
      percentage of our net transportation revenue (in thousands) for the twelve
      months ended June 30, 2007 (historic and audited) and twelve months ended June
      30, 2006 (historic and unaudited):*




**Twelve
                months ended June 30,****2007**
            
            
            **2006**
            
            
            **Change****Amount**
            
            
            **Percent**
            
            
            **Amount**
            
            
            **Percent**
            
            
            **Amount**
            
            
            **Percent**Net
                transportation revenue
            
            $
            26,714
            
            
            100.0
            %
            $
            9,503
            
            
            100.0
            %
            $
            17,211
            
            
            181.1
            %Agent
                commissions
            
            
            20,048
            
            
            75.1
            %
            
            7,037
            
            
            74.1
            %
            
            13,011
            
            
            184.9
            %Personnel
                costs
            
            
            2,916
            
            
            10.9
            %
            
            1,209
            
            
            12.7
            %
            
            1,707
            
            
            141.2
            %Other
                selling, general and administrative
            
            
            2,507
            
            
            9.4
            %
            
            928
            
            
            9.7
            %
            
            1,579
            
            
            170.2
            %Depreciation
                and amortization
            
            
            830
            
            
            3.1
            %
            
            423
            
            
            4.5
            %
            
            407
            
            
            96.2
            %Total
                operating costs
            
            
            26,301
            
            
            98.5
            %
            
            9,597
            
            
            101.0
            %
            
            16,704
            
            
            174.1
            %Income
                (loss) from operations
            
            
            413
            
            
            1.5
            %
            
            (94
            )
            
            -1.0
            %
            
            507
            
            
            539.4
            %Other
                expense
            
            
            (49
            )
            
            -0.1
            %
            
            -
            
            
            -
            
            
            (49
            )
            
            NMIncome
                (loss) before income taxes and minority interest
            
            
            364
            
            
            1.4
            %
            
            (94
            )
            
            1.0
            %
            
            458
            
            
            487.2
            %Income
                tax expense (benefit)
            
            
            156
            
            
            0.6
            %
            
            (39
            )
            
            -0.4
            %
            
            195
            
            
            500.0
            %Income
                (loss) before minority interest
            
            
            208
            
            
            .8
            %
            
            (55
            )
            
            -.6
            %
            
            263
            
            
            478.2
            %Minority
                interest
            
            
            45
            
            
            .2
            %
            
            -
            
            
            -
            
            
            45
            
            
            NMNet
                income (loss)
            
            $
            163
            
            
            .6
            %
            $
            (55
            )
            
            -.6
            %
            $
            218
            
            
            396.4
            %




30




Agent
      commissions were $20.0 million for the twelve months ended June 30, 2007, an
      increase of 184.9% from $7.0 million for the twelve months ended June 30, 2006
      as a result of our substantial revenue growth. As a percentage of net revenues,
      agent commissions increased from 75.1% for the twelve months ended June 30,
      2007
      from 74.1% for the twelve months ended June 30, 2006. The twelve months ended
      June 30, 2006 only included six months of Airgroup’s operations as it was
      acquired January 1, 2006. The Company was in the development stage prior to
      the
      acquisition of Airgroup.




Personnel
      costs were $2.9 million for the twelve months ended June 30, 2007, an increase
      of 141.2% from $1.2 million for the twelve months ended June 30, 2006 as a
      result of our substantial revenue growth. As a percentage of net revenues,
      personnel costs decreased to 10.9% for the twelve months ended June 30, 2007
      from 12.7% for the twelve months ended June 30, 2006. The twelve months ended
      June 30, 2006 only included six months of Airgroup’s operations as it was
      acquired January 1, 2006. The Company was in the development stage prior to
      the
      acquisition of Airgroup.




Other
      selling, general and administrative costs were $2.5 million for the twelve
      months ended June 30, 2007, an increase of 170.2% from $.9 million for the
      twelve months ended June 30, 2006 as a result of our substantial revenue growth.
      As a percentage of net revenues, other selling, general and administrative
      costs
      decreased to 9.4% for the twelve months ended June 30, 2007 from 9.7% for the
      twelve months ended June 30, 2006. The twelve months ended June 30, 2006 only
      included six months of Airgroup’s operations as it was acquired January 1, 2006.
      The Company was in the development stage prior to the acquisition of
      Airgroup.





Depreciation
      and amortization costs were approximately $830,000 for the twelve months ended
      June 30, 2007, an increase of 96.2% from $423,000 for the twelve months ended
      June 30, 2006 as a result of our substantial revenue growth. As a percentage
      of
      net revenues, depreciation and amortization decreased to 3.1% for the twelve
      months ended June 30, 2007 from 4.5% for the twelve months ended June 30, 2006.
      The twelve months ended June 30, 2006 only included six months of Airgroup’s
      operations as it was acquired January 1, 2006. The Company was in the
      development stage prior to the acquisition of Airgroup.





Income
      from operations was $413,000 for twelve months ended June 30, 2007, an increase
      of 539.4% from a loss of $94,000 for the twelve months ended June 30, 2006
      as a
      result of our substantial revenue growth. As a percentage of net revenues,
      income from operations increased to 1.5% for the twelve months ended June 30,
      2007 from a loss from operations of 1.0% for the twelve months ended June 30,
      2006. The twelve months ended June 30, 2006 only included six months of
      Airgroup’s operations as it was acquired January 1, 2006. The Company was in the
      development stage prior to the acquisition of Airgroup.




Net
      income for the twelve months ended June 30, 2007, was $163,000 and a net loss
      of
      $55,000 for the twelve months ended June 30, 2006. The twelve months ended
      June
      30, 2006 include only six months of Airgroup’s operations as it was acquired
      January 1, 2006. The Company was in the development stage prior to the
      acquisition of Airgroup.





***Supplemental
      pro forma information for the twelve months ended June 30, 2007 (actual and
      audited) compared to the twelve months ended June 30, 2006 (pro forma and
      unaudited) as if the Airgroup acquisition happened July 1,
      2005***





We
      generated transportation revenue of $75.5 million and $54.6 million and net
      transportation revenue of $26.7 million and $19.4 million for the twelve months
      ended June 30, 2007 and 2006, respectively. Net income was $163,000 for the
      twelve months ended June 30, 2007 compared to net loss of $26,000 for the twelve
      months ended June 30, 2006.





We
      had
      adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)
      of approximately $1.4 million and $1.1 million for twelve months ended June
      30,
      2007 and 2006, 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.




31




*The
      following table provides a reconciliation of adjusted EBITDA to net income,
      the
      most directly comparable GAAP measure in accordance with SEC Regulation G (in
      thousands) for the twelve months ended June 30, 2007 (historic and audited)
      and
      twelve months ended June 30, 2006 (pro forma and unaudited):*




**Twelve
                months ended June 30,**
            
            **Change****2007**
            
            **2006**
            
            **Amount**
            
            **Percent**Net
                income (loss)
            
            $
            163
            
            $
            (26
            )
            $
            189
            
            
            NMIncome
                tax expense
            
            
            156
            
            
            217
            
            
            (61
            )
            
            -28.1
            %Net
                interest expense (benefit)
            
            
            6
            
            
            (9
            )
            
            15
            
            
            NMDepreciation
                and amortization
            
            
            830
            
            
            793
            
            
            37
            
            
            4.7
            %EBITDA
                (Earnings before interest, taxes,
              depreciation
                and amortization)
            
            $
            1,155
            
            $
            975
            
            $
            180
            
            
            18.5
            %Share
                based compensation and other non-cashcosts
            
            
            257
            
            
            86
            
            
            171
            
            
            198.8
            %Adjusted
                EBITDA
            
            $
            1,412
            
            $
            1,061
            
            $
            351
            
            
            33.1
            %




*The
      following table summarizes the transportation revenue, cost of transportation
      and net transportation revenue (in thousands) for the twelve months ended June
      30, 2007 (historic and audited) and the twelve months ended June 30, 2006 (pro
      forma and unaudited):*




**Twelve
                months ended June
                30,**
            
            **Change****2007**
            
            **2006**
            
            **Amount**
            
            **Percent**Transportation
                revenue
            
            $
            75,527
            
            $
            54,580
            
            $
            20,947
            
            
            38.4
            %Cost
                of transportation
            
            
            48,813
            
            
            35,192
            
            
            13,621
            
            
            38.7
            %Net
                transportation revenue
            
            $
            26,714
            
            $
            19,388
            
            $
            7,326
            
            
            37.8
            %*Net
                transportation margins*
            
            
            35.4
            %
            
            35.5
            %
            
            -





Net
      transportation revenue was $26.7 million for the twelve months ended June 30,
      2007, an increase of 38.4% over total transportation revenue of $19.4 million
      for the twelve months ended June 30, 2006. Domestic transportation revenue
      increased by 48.4% to $49.1 million for the twelve months ended June 30, 2007
      from $33.1 million for the twelve months ended June 30, 2006. International
      transportation revenue increased by 22.9% to $26.4 million for the twelve months
      ended June 30, 2007 from $21.5 million for the comparable prior year period.
      The
      increase in both domestic and international transportation revenue is a result
      of new stations added over the year.




Cost
      of
      transportation was 64.6% of transportation revenue for the twelve months ended
      June 30, 2007, or unchanged, when compared to 64.5% of transportation revenue
      for the twelve months ended June 30, 2006.




32




Net
      transportation margins were unchanged, 35.4% to 35.5%, when comparing the twelve
      months ended June 30, 2007 and 2006, respectively.




*The
      following table compares certain condensed consolidated statement of income
      data
      as a percentage of our net transportation revenue (in thousands) for the twelve
      months ended June 30, 2007 (historic and audited) and twelve months ended June
      30, 2006 (pro forma and unaudited):*




**Twelve
                months ended June 30,****2007**
            
            
            **2006**
            
            
            **Change****Amount**
            
            
            **Percent**
            
            
            **Amount**
            
            
            **Percent**
            
            
            **Amount**
            
            
            **Percent**Net
                transportation revenue
            
            $
            26,714
            
            
            100.0
            %
            $
            19,388
            
            
            100.0
            %
            $
            7,326
            
            
            37.8
            %Agent
                commissions
            
            
            20,048
            
            
            75.1
            %
            
            14,341
            
            
            74.0
            %
            
            5,707
            
            
            39.8
            %Personnel
                costs
            
            
            2,916
            
            
            10.9
            %
            
            2,313
            
            
            11.9
            %
            
            603
            
            
            26.1
            %Other
                selling, general and administrative
            
            
            2,507
            
            
            9.4
            %
            
            1,728
            
            
            8.9
            %
            
            779
            
            
            45.1
            %Depreciation
                and amortization
            
            
            830
            
            
            3.1
            %
            
            793
            
            
            4.1
            %
            
            37
            
            
            4.7
            %Total
                operating costs
            
            
            26,301
            
            
            98.5
            %
            
            19,175
            
            
            98.9
            %
            
            7,126
            
            
            37.2
            %Income
                from operations
            
            
            413
            
            
            1.5
            %
            
            213
            
            
            1.1
            %
            
            200
            
            
            93.9
            %Other
                expense
            
            
            (49
            )
            
            -0.1
            %
            
            (22
            )
            
            -.8
            %
            
            (27
            )
            
            122.7
            %Income
                before income taxes and minority interest
            
            
            364
            
            
            1.4
            %
            
            191
            
            
            1.0
            %
            
            173
            
            
            90.6
            %Income
                tax expense (benefit)
            
            
            156
            
            
            0.6
            %
            
            217
            
            
            1.0
            %
            
            (61
            )
            
            -28.1
            %Income
                before minority interest
            
            
            208
            
            
            .8
            %
            
            (26
            )
            
            0.0
            %
            
            234
            
            
            NMMinority
                interest
            
            
            45
            
            
            .2
            %
            
            -
            
            
            -
            
            
            45
            
            
            NMNet
                income (loss)
            
            $
            163
            
            
            .6
            %
            $
            (26
            )
            
            0.0
            %
            $
            289
            
            
            NM




Agent
      commissions were $20.0 million for the twelve months ended June 30, 2007, an
      increase of 39.8% from $14.3 million for the twelve months ended June 30, 2006
      as a result of revenue growth. As a percentage of net revenues, agent
      commissions increased to 75.1% for the twelve months ended June 30, 2007 from
      74.0% for the twelve months ended June 30, 2006.





Personnel
      costs were $2.9 million for the twelve months ended June 30, 2007, an increase
      of 26.1% from $2.3 million for the twelve months ended June 30, 2006 as a result
      of our substantial revenue growth. As a percentage of net revenues, personnel
      costs decreased to 10.9% for the twelve months ended June 30, 2007 from 11.9%
      for the twelve months ended June 30, 2006.




Other
      selling, general and administrative costs were $2.5 million for the twelve
      months ended June 30, 2007, an increase of 45.1% from $1.7 million for the
      twelve months ended June 30, 2006 as a result of our substantial revenue growth.
      As a percentage of net revenues, other selling, general and administrative
      costs
      increased to 9.4% for the twelve months ended June 30, 2007 from 8.9% for the
      twelve months ended June 30, 2006.




33




Depreciation
      and amortization costs were approximately $830,000 for the twelve months ended
      June 30, 2007, an increase of 4.7% from $793,000 for the twelve months ended
      June 30, 2006. As a percentage of net revenues, depreciation and amortization
      decreased to 3.1% for the twelve months ended June 30, 2007 from 4.1% for the
      twelve months ended June 30, 2006.





Income
      from operations was $413,000 for twelve months ended June 30, 2007, an increase
      of 93.9% from $213,000 for the twelve months ended June 30, 2006 as a result
      of
      our substantial revenue growth. As a percentage of net revenues, income from
      operations increased to 1.5% for the twelve months ended June 30, 2007 from
      1.1%
      for the twelve months ended June 30, 2006.




Net
      income for the twelve months ended June 30, 2007 was $163,000. We incurred
      a net
      loss of $26,000 for the twelve months ended June 30, 2006.





*The
      following table summarizes transportation revenue, cost of transportation and
      net transportation revenue (in thousands) for the six months ended June 30,
      2006
      (historic and audited) and six months ended June 30, 2005 (historic and
      unaudited):*




**Six
                months ended June 30,**
            
            
            **Change****2006**
            
            
            **2005**
            
            
            **Amount**
            
            
            **Percent**Transportation
                revenue
            
            $
            26,469
            
            $
            -
            
            $
            26,469
            
            
            NMCost
                of transportation
            
            
            16,966
            
            
            -
            
            
            16,966
            
            
            NMNet
                transportation revenue
            
            $
            9,503
            
            $
            -
            
            $
            9,503
            
            
            NM*Net
                transportation margins*
            
            
            35.9
            %
            
            -
            
            
            35.9
            %
            
            NM




Transportation
      revenue was $26.5 million for the six months ended June 30, 2006. Domestic
      and
      International transportation revenue was $15.0 million and $11.5 million,
      respectively. There were no revenues for the comparable prior year
      period.




Cost
      of
      transportation was 64.1% of transportation revenue for the six months ended
      June
      30, 2006 with no comparable data for the prior year period.




Net
      transportation margins were 35.9% of transportation revenue for the six months
      ended June 30, 2006 with no comparable data for the prior year
      period.




*The
      following table compares certain condensed consolidated statement of income
      data
      as a percentage of our net transportation revenue (in thousands) for the six
      months ended June 30, 2006 (historic and audited) and six months ended June
      30,
      2005 (historic and unaudited):*




**Six
                months ended June 30,**
            
            **Change****2006**
            
            
            
            **2005****Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**Net
                transportation revenue
            
            $
            9,503
            
            
            100.0
            %
            $
            -
            
            
            NM
            
            $
            9,503
            
            
            NMAgent
                commissions
            
            
            7,037
            
            
            74.1
            %
            
            -
            
            
            NM
            
            
            7,037
            
            
            NMPersonnel
                costs
            
            
            1,154
            
            
            12.1
            %
            
            -
            
            
            NM
            
            
            1,154
            
            
            NMOther
                selling, general and
              administrative
            
            
            843
            
            
            8.8
            %
            
            22
            
            
            NM
            
            
            821
            
            
            NMDepreciation
                and amortization
            
            
            423
            
            
            4.5
            %
            
            -
            
            
            NM
            
            
            423
            
            
            NMTotal
                operating costs
            
            
            9,457
            
            
            99.5
            %
            
            22
            
            
            NM
            
            
            9,435
            
            
            NMIncome
                (loss) from operations
            
            
            46
            
            
            0.5
            %
            
            (22
            )
            
            NM
            
            
            68
            
            
            NMOther
                expense
            
            
            (14
            )
            
            -0.2
            %
            
            (1
            )
            
            NM
            
            
            (13
            )
            
            NMIncome
                (loss) before income taxes
            
            
            32
            
            
            0.3
            %
            
            (23
            )
            
            NM
            
            
            55
            
            
            NMIncome
                tax (benefit)
            
            
            (39
            )
            
            -0.4
            %
            
            -
            
            
            NM
            
            
            (39
            )
            
            NMNet
                income (loss)
            
            $
            71
            
            
            .7
            %
            $
            (23
            )
            
            NM
            
            $
            94
            
            
            NM






34




Agent
      commissions were $7.0 million and 74.1% of net revenues for the six months
      ended
      June 30, 2006. There were no similar costs for the comparable prior year
      period.




Personnel
      costs were $1.2 million and 12.1% of net revenues for the six months ended
      June
      30, 2006. There were no similar costs for the comparable prior year
      period.




Other
      selling, general and administrative costs were $843,000 and 8.8% of net revenues
      for the six months ended June 30, 2006, compared to $22,000 for the six months
      ended June 30, 2005.




Depreciation
      and amortization costs were approximately $423,000 and 4.5% of net revenues
      for
      the six months ended June 30, 2006. There were no similar costs for the
      comparable prior year period.





Income
      from operations was $46,000 for the six months ended June 30, 2006, compared
      to
      a loss from operations of $22,000 for the six months ended June 30,
      2005.




Net
      income was $71,000 for the six months ended June 30, 2006, compared to a net
      loss of $23,000 for the six months ended June 30, 2005.




***Supplemental
      pro forma information for the six months ended June 30, 2006 (historic and
      audited) compared to the six months ended June 30, 2005 (pro forma and
      unaudited)***




We
      generated transportation revenue of $26.5 million and $27.6 million and net
      transportation revenue of $9.5 million and $10.9 million for the six months
      ended June 30, 2006 and 2005, respectively. Net income was $71,000 for the
      six
      months ended June 30, 2006, compared to a loss of $11,000 for the six months
      ended June 30, 2005.





We
      had
      adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)
      of approximately $552,000 and $366,000 for six months ended June 30, 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.




35




*The
      following table provides a reconciliation of six months ended June 30, 2006
      (historic and audited) and six months ended June 30, 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 June 30,**
            
            
            **Change****2006**
            
            
            **2005**
            
            
            **Amount**
            
            
            **Percent**Net
                income (loss)
            
            $
            71
            
            $
            (11
            )
            $
            82
            
            
            NMIncome
                tax (benefit)
            
            
            (39
            )
            
            (7
            )
            
            (32
            )
            
            NMInterest
                expense (benefit)
            
            
            11
            
            
            (13
            )
            
            24
            
            
            -Depreciation
                and amortization
            
            
            423
            
            
            397
            
            
            26
            
            
            6.5
            %EBITDA
                (Earnings before interest, taxes, depreciation and
                amortization)
            
            $
            466
            
            $
            366
            
            $
            100
            
            
            27.3
            %Share
                based compensation and other non-cash costs
            
            
            86
            
            
            -
            
            
            86
            
            
            NM
            %Adjusted
                EBITDA
            
            $
            552
            
            $
            366
            
            $
            186
            
            
            50.8
            %





*The
      following table summarizes the transportation revenue, cost of transportation
      and net transportation revenue (in thousands) for the six months ended June
      30,
      2006 (historic and audited) and the six months ended June 30, 2005 (pro forma
      and unaudited):*




**Six
                months ended June 30,**
            
            
            **Change****2006**
            
            
            **2005**
            
            
            **Amount**
            
            
            **Percent**Transportation
                revenue
            
            $
            26,469
            
            $
            27,603
            
            $
            (1,134
            )
            
            -4.1
            %Cost
                of transportation
            
            
            16,966
            
            
            16,696
            
            
            270
            
            
            1.6
            %Net
                transportation revenue
            
            $
            9,503
            
            $
            10,907
            
            $
            (1,404
            )
            
            -12.9
            %*Net
                transportation margins*
            
            
            35.9
            %
            
            39.5
            %
            
            -





Transportation
      revenue was $26.5 million for the six months ended June 30, 2006, a decrease
      of
      4.1% over total transportation revenue of $27.6 million for the six months
      ended
      June 30, 2005. Domestic transportation revenue decreased by 13.8% to $15.6
      million for the six months ended June 30, 2006 from $18.1 million for the six
      months ended June 30, 2005. The decrease was due primarily to project services
      work performed in 2005 which was nearly completed by June 2005. International
      transportation revenue increased by 14.4% to $10.9 million for the six months
      ended June 30, 2006 from $9.5 million for the comparable prior year period,
      due
      mainly to increased air and ocean import freight volume.




Cost
      of
      transportation increased to 64.1% of transportation revenue for the six months
      ended June 30, 2006 from 60.5% of transportation revenue for the six months
      ended June 30, 2005. This increase was primarily due to increased international
      ocean import freight volume which historically reflects a higher cost of
      transportation as a percentage of sales.




Net
      transportation margins decreased to 35.9% of transportation revenue for the
      six
      months ended June 30, 2006 from 39.5% of transportation revenue for the six
      months ended June 30, 2005 as a result of the factors described
      above.




36




*The
      following table compares certain condensed consolidated statement of income
      data
      as a percentage of our net transportation revenue (in thousands) for the six
      months ended June 30, 2006 (historic and audited) and six months ended June
      30,
      2005 (pro forma and unaudited):*




**Six
                months ended June 30,****2006**
            
            **2005**
            
            **Change****Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**Net
                transportation revenue
            
            $
            9,503
            
            
            100.0
            %
            $
            10,907
            
            
            100.0
            %
            $
            (1,404
            )
            
            -12.9
            %Agent
                commissions
            
            
            7,037
            
            
            74.1
            %
            
            7,906
            
            
            72.5
            %
            
            (869
            )
            
            -11.0
            %Personnel
                costs
            
            
            1,154
            
            
            12.1
            %
            
            1,946
            
            
            17.8
            %
            
            (792
            )
            
            -40.7
            %Other
                selling, general and administrative
            
            
            843
            
            
            8.8
            %
            
            694
            
            
            6.4
            %
            
            149
            
            
            21.5
            %Depreciation
                and amortization
            
            
            423
            
            
            4.5
            %
            
            397
            
            
            3.6
            %
            
            26
            
            
            6.5
            %Total
                operating costs
            
            
            9,457
            
            
            99.5
            %
            
            10,943
            
            
            100.3
            %
            
            (1,486
            )
            
            -13.6
            %Income
                (loss) from operations
            
            
            46
            
            
            0.5
            %
            
            (36
            )
            
            -0.3
            %
            
            82
            
            
            227.8
            %Other
                (income)expense
            
            
            (14
            )
            
            -0.2
            %
            
            18
            
            
            0.2
            %
            
            (32
            )
            
            -177.8
            %Income
                (loss) before income taxes
            
            
            32
            
            
            0.3
            %
            
            (18
            )
            
            -0.1
            %
            
            50
            
            
            277.8
            %Income
                tax (benefit)
            
            
            (39
            )
            
            -0.4
            %
            
            (7
            )
            
            -0.0
            %
            
            (32
            )
            
            NMNet
                income (loss)
            
            $
            71
            
            
            .7
            %
            $
            (11
            )
            
            -0.1
            %
            $
            82
            
            
            NM




37




Agent
      commissions were $7.0 million for the six months ended June 30, 2006, a decrease
      of 11.0% from $7.9 million for the six months ended June 30, 2005. Agent
      commissions as a percentage of net revenue increased to 74.1% for six months
      ended June 30, 2006 from 72.5% for the comparable prior year period as a result
      an adjustment of freight costs in 2005 which increased net transportation
      margin, or net transportation revenue, yielding a lower commission percentage
      for 2005.




Personnel
      costs were $1.2 million for the six months ended June 30, 2006, a decrease
      of
      40.7% from $1.9 million for the six months ended June 30, 2005. Personnel costs
      as a percentage of net revenue decreased to 12.1% for six months ended June
      30,
      2006 from 17.8% for the comparable prior year period as a result of contractual
      reductions in compensation paid to certain of the selling shareholders of
      Airgroup.




Other
      selling, general and administrative costs were $843,000 for the six months
      ended
      June 30, 2006, an increase of 21.5% from $694,000 for the six months ended
      June
      30, 2005. As a percentage of net revenue, other selling, general and
      administrative costs increased to 8.8% for six months ended June 30, 2006 from
      6.4% for the comparable prior year period primarily as a result of transaction
      costs incurred by Airgroup in connection with the sale of the company to us
      and
      the incremental costs associated with operating as a public
      company.





Depreciation
      and amortization costs were $423,000 for the six months ended June 30, 2006,
      an
      increase of 6.5% from $397,000 for the six months ended June 30, 2005. Personnel
      costs as a percentage of net revenue increased to 4.5% for six months ended
      June
      30, 2006 from 3.6% for the comparable prior year period.




Income
      from operations was $46,000 for the six months ended June 30, 2006, compared
      to
      a loss from operations of $36,000 for the six months ended June 30,
      2005.





Net
      income was $71,000 for the six months ended June 30, 2006, compared to a net
      loss of $11,000 for the six months ended June 30, 2005.




38




***Year
      ended December 31, 2005 (historic and audited) compared to year ended December
      31, 2004 (historic and audited)***




*The
      following table compares consolidated statement of income data as a percentage
      of our net transportation revenue (in thousands) for the year ended December
      31,
      2005 and 2004 (historic and audited):*





**Year
                ended December 31,****2005**
            
            **2004**
            
            **Change****Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**Net
                revenue
            
            $
            -
            
            
            NM
            
            $
            -
            
            
            NM
            
            $
            -
            
            
            NMOther
                selling, general and administrative
            
            
            162
            
            
            NM
            
            
            23
            
            
            NM
            
            
            139
            
            
            NMTotal
                operating costs
            
            
            162
            
            
            NM
            
            
            23
            
            
            NM
            
            
            139
            
            
            NMLoss
                from operations
            
            
            (162
            )
            
            NM
            
            
            (23
            )
            
            NM
            
            
            (139
            )
            
            NMOther
                income (expense)
            
            
            13
            
            
            NM
            
            
            (2
            )
            
            NM
            
            
            15
            
            
            NMLoss
                before income taxes
            
            
            (149
            )
            
            NM
            
            
            (25
            )
            
            NM
            
            
            (124
            )
            
            NMIncome
                tax expense
            
            
            -
            
            
            NM
            
            
            -
            
            
            NM
            
            
            -
            
            
            NMNet
                loss
            
            $
            (149
            )
            
            NM
            
            $
            (25
            )
            
            NM
            
            
            (124
            )
            
            NM





As
      we
      remained in the development stage for all of 2005 and 2004, we had no
      transportation revenue for these years and incurred operating costs of
      approximately $162,000 for the year ended December 31, 2005 compared to
      operating costs of approximately $23,000 for the year ended December 31,
      2004.





The
      year
      over year increase in operating costs resulted from our increased activities
      in
      the fourth quarter of 2005 in connection with the Company’s change in management
      and strategy to enter into the logistics business. Net loss for the year ended
      December 31, 2005 was approximately $149,000 compared to a net loss of
      approximately $25,000 for the year ended December 31, 2004.




***Supplemental
      Pro Forma Information for the year ended June 30, 2006 (historical and
      unaudited) compared to the year ended June 30, 2005 (pro forma and
      unaudited)***





We
      generated transportation revenue of $54.6 million and $51.5 million, and net
      transportation revenue of $19.4 million and $21.6 million for the twelve month
      periods ended June 30, 2006 and 2005, respectively. Net income was $10,000
      for
      the year ended June 30, 2006 compared to net income of $35,000 for the six
      months ended June 30, 2005.





We
      had
      earnings before interest, taxes, depreciation and amortization (EBITDA) of
      $1,061,000 and $835,000 for fiscal years ended June 30, 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 useful in analyzing our results, it is not
      intended to replace any presentation included in our consolidated financial
      statements.




39




*The
      following table provides a reconciliation of EBITDA to net income, the most
      directly comparable GAAP measure in accordance with SEC Regulation G (in
      thousands) for the years ended June 30, 2006 and 2005 (pro forma and
      unaudited):*




**Year
                ended June 30,**
            
            
            **Change****2006**
            
            
            **2005**
            
            
            **Amount**
            
            
            **Percent**Net
                income(loss)
            
            $
            (26
            )
            $
            35
            
            $
            (61
            )
            
            NM
            %Income
                tax expense
            
            
            217
            
            
            19
            
            
            198
            
            
            NMNet
                interest income
            
            
            (9
            )
            
            (13
            )
            
            4
            
            
            -23.1
            %Depreciation
                and amortization
            
            
            793
            
            
            794
            
            
            (1
            )
            
            6.5
            %EBITDA
                (Earnings before interest, taxes,depreciation
                and amortization)
            
            $
            975
            
            $
            835
            
            $
            140
            
            
            16.8
            %Share
                based compensation and other non-cash costs
            
            
            86
            
            
            -
            
            
            86
            
            
            NM
            %Adjusted
                EBITDA
            
            $
            1,061
            
            $
            835
            
            $
            226
            
            
            27.1
            %




*The
      following table summarizes transportation revenue, cost of transportation and
      net transportation revenue (in thousands) for the years ended June 30, 2006
      and
      2005 (pro forma and unaudited):*





**Year
                ended June
                30,**
            
            **Change****2006**
            
            
            **2005**
            
            
            **Amount**
            
            
            **Percent**Transportation
                revenue
            
            $
            54,580
            
            $
            51,521
            
            $
            3,059
            
            
            5.9
            %Cost
                of transportation
            
            
            35,192
            
            
            29,957
            
            
            5,235
            
            
            17.5
            %Net
                transportation revenue
            
            $
            19,388
            
            $
            21,564
            
            $
            (2,176
            )
            
            -10.1
            %Net
                transportation margins
            
            
            35.5
            %
            
            41.9
            %





Transportation
      revenue was $54.5 million for the year ended June 30, 2006, an increase of
      5.9%
      over total transportation revenue of $51.5 million for the year ended June
      30
      2005. Domestic transportation revenue decreased by 15.7% to $33.2 million for
      the year ended June 30, 2006 from $38.4 million for the prior fiscal year as
      a
      result of project services work performed in 2005 that was nearly completed
      by
      June 2005, decline in customer volume, and closure of a station. International
      transportation revenue increased by 69.1% to $21.3 million for the 2006 fiscal
      year from $13.2 million for the 2005 fiscal year, due mainly to increased air
      and ocean import freight volume.




Cost
      of
      transportation increased to 64.5% of transportation revenue for the year ended
      June 30, 2006 from 58.1% of transportation revenue for the year ended June
      30,
      2005. This increase was primarily due to increased international ocean import
      freight volume which historically reflects a higher cost of transportation
      as a
      percentage of sales.




Net
      transportation margins decreased to 35.5% of transportation revenue for the
      fiscal year ended June 30, 2006 from 41.9% of transportation revenue for the
      2005 fiscal year as a result of the factors described above.




40




*The
      following table compares consolidated statement of income data as a percentage
      of our net transportation revenue (in thousands) for the certain year ended
      June
      30, 2006 and 2005 (pro forma and unaudited):*




**Year
                ended June
                30,****2006**
            
            
            **2005**
            
            
            **Change****Amount**
            
            
            **Percent**
            
            
            **Amount**
            
            
            **Percent**
            
            
            **Amount**
            
            
            **Percent**Net
                transportation revenue
            
            $
            19,388
            
            
            100.0
            %
            $
            21,564
            
            
            100.0
            %
            $
            (2,176
            )
            
            -10.1
            %Agent
                commissions
            
            
            14,341
            
            
            74.0
            %
            
            15,988
            
            
            74.1
            %
            
            (1,647
            )
            
            -10.3
            %Personnel
                costs
            
            
            2,313
            
            
            11.9
            %
            
            3,399
            
            
            15.8
            %
            
            (1,086
            )
            
            -32.0
            %Other
                selling, general and administrative
            
            
            1,728
            
            
            8.9
            %
            
            1,342
            
            
            6.2
            %
            
            386
            
            
            28.8
            %Depreciation
                and amortization
            
            
            793
            
            
            4.1
            %
            
            794
            
            
            3.7
            %
            
            (1
            )
            
            -0.1
            %Total
                operating costs
            
            
            19,175
            
            
            98.9
            %
            
            21,523
            
            
            99.8
            %
            
            (2,348
            )
            
            -10.9
            %Income
                from operations
            
            
            213
            
            
            1.1
            %
            
            41
            
            
            0.2
            %
            
            172
            
            
            419.5
            %Other
                income (expense)
            
            
            (22
            )
            
            -0.8
            %
            
            13
            
            
            0.1
            %
            
            (35
            )
            
            -269.2
            %Income
                before income taxes
            
            
            191
            
            
            1.0
            %
            
            54
            
            
            0.3
            %
            
            137
            
            
            253.7
            %Income
                tax expense
            
            
            217
            
            
            1.0
            %
            
            19
            
            
            -0.1
            %
            
            198
            
            
            NM
            %Net
                income
            
            $
            (26
            )
            
            0.0
            %
            $
            35
            
            
            0.2
            %
            $
            (61
            )
            
            NM
            %




Agent
      commissions were $14.3 million for the year ended June 30, 2006, a decrease
      of
      10.3% over $16.0 million for the year ended June 30 2005. Agent commissions
      as a
      percentage of net revenue remained relatively unchanged at approximately
      74.0%.





Personnel
      costs were $2.3 million for the year ended June 30, 2006, a decrease of 32.0%
      over $3.4 million for the twelve month period. Personnel costs as a percentage
      of net revenue decreased to 11.9% for the 2006 fiscal year from 15.8% for the
      2005 fiscal year. For the year ended June 30, 2006 compared to the prior year,
      headcount decreased by 7, to a total of 34, individuals who primarily provide
      finance and administrative services for the benefit of the agent
      offices.




Other
      selling, general and administrative costs were $1.7 million for the year ended
      June 30, 2006, an increase of 28.8% over $1.3 million for the year ended June
      30, 2005. This increase was primarily the result of increased costs associated
      with operating as a public company. As a percentage of net revenue, other
      selling, general and administrative costs increased to 8.9% for the fiscal
      year
      ended 2006 from 6.2% for the 2005 fiscal year.




Depreciation
      and amortization remained relatively unchanged at $793,000 for year ended June
      30, 2006 and $794,000 for 2005. Depreciation and amortization as a percentage
      of
      net revenue increased to 4.1% for the year ended June 30, 2006 from 3.7% for
      the
      2005 fiscal year.





Income
      from operations was $213,000 for the year ended June 30, 2006, an increase
      of
      419.5% over $41,000 for the 2005 fiscal year. Income from operations as a
      percentage of net revenue decreased to 1.1% for the 2006 fiscal year from 0.2%
      for the 2005 fiscal year.




Net
      income (loss) was a loss of $26,000 and income of $35,000 for years ended June
      30, 2006 and 2005.




41





**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 consisted of: (i) $9.5 million payable in cash at closing; (ii)
      a
      subsequent cash payment of $0.5 million in cash due 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. Through June 30, 2007, the
      former shareholders of Airgroup earned $214,000 in base earn-out
      payments.


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






**Date**
            
            **Shares
                Sold**
            
            **Gross
                Proceeds**
            
            **Price
                Per Share**●
                October 2005
            
            
            2,272,728
            
            $
            1,000,000
            
            $
            0.44●
                December 2005
            
            
            10,098,934
            
            $
            4,400,000
            
            $
            0.44●
                January 2006
            
            
            1,009,093
            
            $
            444,000
            
            $
            0.44●
                February 2006
            
            
            1,446,697
            
            $
            645,000
            
            $
            0.44





Net
      proceeds for the above was $986,222, $4,153,150 (net of $63,153 of costs arising
      in 2006), $441,637 and $640,022 respectively.





In
      February 2007, our
      $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 us
      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 our option, at the Bank’s prime rate
      minus .15% to 1.00% or LIBOR plus 1.55% to 2.25%, and can be adjusted up or
      down
      during the term of the Facility based on our performance relative to certain
      financial covenants. The Facility provides for advances of up to 80% of our
      eligible accounts receivable.





As
      of
      August 31, 2007, we had approximately $2.9 million outstanding under the
      Facility and we had eligible accounts receivable sufficient to support
      approximately $5.9 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 our consolidated EBITDA measured on a rolling
      four
      quarter basis (or a multiple of 3.25 at a reduced advance rate of 75.0%). The
      second financial covenant requires us to maintain a funded debt to EBDITA ratio
      of 3.25 to 1.0. The third financial covenant requires us 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 us 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, we are permitted to make additional acquisitions without
      the lender's consent only if certain conditions are satisfied. The conditions
      imposed by the Facility include the following: (i) the absence of an event
      of
      default under the Facility, (ii) the company to be acquired must be in the
      transportation and logistics industry, (iii) the purchase price to be paid
      must
      be consistent with the 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 we are 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.




42





Assuming
      minimum targeted earnings levels are achieved, the following table summarizes
      our contingent base earn-out payments related to the acquisition of Airgroup
      for
      the fiscal years indicated based on results of the prior year (in thousands) (1) :





**2009**
            
            **2010**
            
            **Total**Earn-out
                payments:Cash
            
            $
            —
            
            $
            —
            
            $
            —Equity
            
            
            633
            
            
            634
            
            
            1,267Total
                potential earn-out payments
            
            $
            633
            
            $
            634
            
            $
            1,267Prior
                year earnings targets (income from continuing
              operations)(2)Total
                earnings actual and targets
            
            $
            2,500
            
            $
            2,500
            
            $
            5,000Earn-outs
                as a percentage of prior year earnings
              targets:Total
            
            
            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 refers to 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 to, 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.





Net
      cash
      provided by operating activities for the twelve months ended June 30, 2007
      was
      $1,260,000 compared to net cash used by operating activities for the six months
      ended June 30, 2006 was $974,000. The change was principally driven by growth
      resulting in a reduction in working capital.





Net
      cash
      used for investing was $767,000 for twelve months ended June 30, 2007 compared
      to $7.2 million for six months ended June 30, 2006 reflecting $10.1 million
      used
      for the acquisition of Airgroup which had a cash balance of $2.8 million at
      the
      time of acquisition and is netted against cash used for purposes of the
      consolidated statement of cash flows. During 2007, we spent $524,000 for
      purposes of upgrading our SAP software and computer systems while acquiring
      other assets to further our continued growth strategy.




Net
      cash
      used by financing activity for twelve months ended June 30, 2007 was $284,000
      compared to $3.4 million in net cash provided by financing for six months ended
      June 30, 2006. The $284,000 for 2007 mostly reflects payment to our credit
      facility compared to a draw down of $2.0 million for the six months ended June
      30, 2006. For the six months ended June 30, 2006, we issued 2,475,790 shares
      of
      common stock for $1.1 million.




43




**Contractual
      Obligations**





We
      have
      entered into contracts with various third parties in the normal course of
      business that will require future payments. The following table illustrates
      our
      contractual obligations as of June 30, 2007:




**Payments
                due by period****Total**
            
            
            **Less
                than**
              **1
                year**
            
            
            **1-3
                years**
            
            
            **3-5
                years**
            
            
            **More
                than**
              **5
                years****Contractual
                Obligations**Long-Term
                Debt
            
            $
            2,774
            
            $
            800
            
            $
            1,974
            
            $
            -
            
            $
            -Capital
                Leases
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Operating
                Leases
            
            
            685
            
            
            310
            
            
            373
            
            
            2
            
            
            -Purchase
                Obligations
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Other
                Long-Term Liabilities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                Contractual Obligations
            
            $
            3,459
            
            $
            1,110
            
            $
            2,347
            
            $
            2
            
            $
            -




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





We
      have
      used a significant amount of our available capital to finance the acquisition
      of
      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 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.





During
      the early portion of fiscal 2008, however, our cash flow has been somewhat
      adversely affected as we were caused to operate our newly formed automotive
      services group without the benefit of certain customer payments; as such
      payments were withheld pending the resolution of a garnishment proceeding
      instituted by a Stonepath judgment creditor. Although the outstanding
      garnishment action has been resolved, we have incurred significant out-of-pocket
      costs operating the purchased assets under the MSA. During the intervening
      period, we made increased draws against our Facility.




44




**Off
      Balance Sheet Arrangements**




As
      of
      June 30, 2007, we did not have any relationships with unconsolidated entities
      or
      financial partners, such as entities often referred to as structured finance
      or
      special purpose entities, which had been established for the purpose of
      facilitating off-balance sheet arrangements or other contractually narrow or
      limited purposes. As such, we are not materially exposed to any financing,
      liquidity, market or credit risk that could arise if we had engaged in such
      relationships.





**Recent** **Accounting Pronouncements**





In
      February 2007 the Financial Accounting Standards Board ("FASB") issued SFAS
      159
“The Fair Value Option for Financial Assets and Financial Liabilities.” The
      statement permits entities to choose to measure many financial instruments
      and
      certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reported earnings caused by measuring related assets and liabilities differently
      without having to apply complex hedge accounting provisions. This Statement
      is
      expected to expand the use of fair value measurement, which is consistent with
      the Board’s long-term measurement objectives for accounting for financial
      instruments. This
      Statement is effective as of the beginning of an entity’s first fiscal year that
      begins after November 15, 2007. We
      are
      currently evaluating the impact this interpretation will have on our
      consolidated financial statements.





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.





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. The
      adoption of SFAS
      No.
      157 will not have any impact on the Company’s financial position, results of operations
      or cash flows.





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
      adoption of FIN 48 did not have any impact on the Company’s 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
      adoption of SFAS 155 did not have any impact on the Company’s financial
      position, results of operations or cash flows.




45





**ITEM
      7A. 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 June 30, 2007, the change in interest expense
      would have had an immaterial impact on the Company’s consolidated results of
      operations and cash flows.




**ITEM
      8. FINANCIAL STATEMENTS**





The
      consolidated financial statements of Radiant Logistics, Inc. including the
      notes
      thereto and the report of the independent accountants therein, commence at
      page
      F-1 of this Report.




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





None.




**ITEM
      9A. CONTROLS AND PROCEDURES**




An
      evaluation of the effectiveness of our "disclosure controls and procedures"
      (as
      such term is defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange
      Act of 1934, as amended (the "Exchange Act") as of June 30, 2007 was carried
      out
      by our management under the supervision and with the participation of our Chief
      Executive Officer ("CEO")/Chief Financial Officer ("CFO"). Based upon that
      evaluation, our CEO/CFO concluded that, as of the end of the period covered
      by
      this Annual Report, our disclosure controls and procedures were effective to
      provide reasonable assurance that information we are required to disclose in
      reports that we file or submit under the Exchange Act is (i) recorded,
      processed, summarized and reported within the time periods specified in the
      Securities and Exchange Commission rules and forms and (ii) accumulated and
      communicated to our management, including our CEO/CFO, as appropriate to allow
      timely decisions regarding disclosure. T here
      were no changes to our internal control over financial reporting during the
      fiscal quarter ended June 30, 2007 that materially affected, or are reasonably
      likely to materially affect, the Company's internal control over financial
      reporting.




**ITEM
      9B. OTHER INFORMATION**





None


**PART
      III**





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT**





Below
      is
      certain information regarding our directors and executive
      officers.





The
      following table sets forth information concerning our executive officers and
      directors. Each of the executive officers will serve until his or her successor
      is appointed by our Board of Directors or such executive officer’s earlier
      resignation or removal. Each of the directors will serve until the next annual
      meeting of stockholders or such director’s earlier resignation or
      removal.




46





**Name**
            
            **Age**
            
            **Position**Bohn
                H. Crain
            
            42
            
            Chief
                Executive Officer, Chief Financial Officer and ChairmanStephen
                M. Cohen
            
            51
            
            General
                Counsel, Secretary and DirectorRodney
                Eaton
            
            52
            
            Vice
                President, Chief Accounting Officer and ControllerWilliam
                H. Moultrie
            
            64
            
            President
                and Chief Operating Officer of AirgroupDaniel
                Stegemoller
            
            52
            
            Vice
                President and Chief Operating Officer of Airgroup





**Bohn
      H. Crain.** Mr.
      Crain has served as our Chief Executive Officer, Chief Financial Officer and
      Chairman of our Board of Directors since October 10, 2005. Mr. Crain brings
      over
      15 years of industry and capital markets experience in transportation and
      logistics. Since January 2005, Mr. Crain has served as the Chief Executive
      Officer of Radiant Capital Partners, LLC, an entity he formed to execute a
      consolidation strategy in the transportation/logistics sector. Prior to founding
      Radiant, Mr. Crain served as the executive vice president and the chief
      financial officer of Stonepath Group, Inc. from January 2002 until December
      2004. Stonepath is a global non-asset based provider of third party logistics
      services listed on the American Stock Exchange. In 2001, Mr. Crain served as
      the
      executive vice president and chief financial officer of Schneider Logistics,
      Inc., a third-party logistics company, and from 2000 to 2001, he served as
      the
      vice president and treasurer of Florida East Coast Industries, Inc., a public
      company engaged in railroad and real estate businesses listed on the New York
      Stock Exchange. Between 1989 and 2000, Mr. Crain held various vice president
      and
      treasury positions for CSX Corp., and several of its subsidiaries, a Fortune
      500
      transportation company listed on the New York Stock Exchange. Mr. Crain earned
      a
      Bachelor of Science in Accounting from the University of Texas.





**Stephen
      M. Cohen** .
      Mr. Cohen has served as our General Counsel, Secretary and member of our Board
      of Directors since October 10, 2005. Mr. Cohen also provides business and legal
      consulting services to third parties on corporate finance and federal securities
      matters through SMC Capital Advisors, Inc., a company he founded in 2004. Since
      July 10, 2006, Mr. Cohen has also served as the Director of Legal Affairs of
      Maverick Oil and Gas Company, Inc., an oil and gas exploration and development
      company whose shares are traded on the OTCBB. On March 26, 2007, Mr. Cohen
      assumed the additional role of interim Chief Executive Officer of Maverick. From
      2000 until 2004, Mr. Cohen served as senior vice president, general counsel
      and
      secretary of Stonepath Group, Inc., a global non-asset based provider of third
      party logistics services listed on the American Stock Exchange, where he helped
      transition that company from a venture investor in early stage technology
      businesses to a global logistics company and assisted in the acquisition of
      domestic and international logistics companies in the United States, Asia and
      South America. Prior to 2000, Mr. Cohen practiced law, including having been
      a
      shareholder of Buchanan Ingersoll P.C., from 1996 to 2000, and a partner at
      Clark, Ladner, Fortenbaugh & Young from 1990 to 1996. Mr. Cohen earned a
      Bachelor of Science in Accounting from the School of Commerce and Finance of
      Villanova University in 1977, a Juris Doctor from Temple University in 1980,
      and
      an LLM in Taxation from Villanova University School of Law. Mr. Cohen is
      licensed to practice law in Pennsylvania.





**Rodney
      Eaton** .
      Mr. Eaton has served as our Vice President and Controller since April 17, 2006
      and our Chief Accounting Officer since July 17, 2006. Before joining Radiant,
      Mr. Eaton was VP - Chief Financial Officer and Treasurer for Chemithon
      Corporation, from 2001 to 2005, which manufactures process chemical equipment.
      From 1998 until 2000, Mr. Eaton consulted in a CFO capacity to various hi-tech,
      consumer goods, and telecommunications companies with some companies traded
      on
      NASDAQ. Prior to that, from 1994 to 1997, Mr. Eaton was with Resource Group
      International (RGI) as VP of Finance, Secretary, and Treasurer and served on
      the
      board of directors for RGI and several of its subsidiaries. RGI, listed on
      the
      Oslo Stock Exchange, was a $1.4 billion conglomerate with concentrations in
      seafood, heavy industries, consumer goods, and real estate companies listed
      on
      NASDAQ. Prior to RGI, during 1991-1994, Mr. Eaton was CFO for Derby Cycle
      Corporation, an international manufacturer and distributor of Raleigh bicycles.
      From 1974 to 1991, Mr. Eaton has served in a CFO and/or Controller capacity
      for
      various companies including Baker Hughes, Philip Morris/Seven-Up, and Lockheed
      Martin all of whom are listed on NYSE. Mr. Eaton has an MBA and a Bachelor
      of
      Science in Finance and Accounting from Westminster College.




47




**William
      H. Moultrie** .
      Mr. Moultrie serves as the President of Airgroup Corporation. Mr. Moultrie
      co-founded Airgroup in March of 1987. Over the past 18 years, he built Airgroup
      into a non-asset based logistics company providing domestic and international
      freight forwarding to a diversified account base of manufacturers, distributors
      and retailers using a network of independent carriers and over 100 international
      agents positioned strategically around the world with over $50.0 million in
      annual revenues, and 40 agent offices across North America. Mr. Moultrie
      has over thirty-five years of logistics experience in the both the domestic
      and
      international markets. Mr. Moultrie received a Bachelor of Science from
      Eastern Washington University.





**Dan
      Stegemoller.** Mr.
      Stegemoller is the Chief Operating Officer of Airgroup and previously held
      the
      position of Vice President since November 2004.  He has over 34 years
      experience in the Transportation Industry.  Prior to joining Airgroup, from
      1993 until 2004, Mr. Stegemoller served as Senior Vice President Sales and
      Marketing at Forward Air, a high-service-level contractor to the air cargo
      industry.  From 1983 to 1992, Mr. Stegemoller served as Vice President of
      Customer Service managing Centralized Call Center for Puralator/Emery Air/CF
      Airfreight.  From 1973 through 1983, he served in numerous positions at
      Federal Express where his last position was Director of Operations in
      Minneapolis, Minnesota. Mr. Stegemoller has an Associated Degree in Business
      from IUPUI in Indianapolis.




**Directors’
      Term of Office**





Directors
      hold office until the next annual meeting of shareholders and the election
      and
      qualification of their successors. Officers are elected annually by our board
      of
      directors and serve at the discretion of the board of directors.





**Audit
      Committee Financial Expert**





We
      do not
      maintain a standing audit committee. Our full board of directors serves the
      functions of the audit committee.





No
      member
      of our board of directors has been designated as an “audit committee financial
      expert,” as that term is defined in Item 401(e) of Regulation S-K promulgated
      under the Securities Act. Although Bohn H. Crain, our Chief Executive Officer,
      has the requisite background and professional experience to qualify as an audit
      committee financial expert, he has not been designated as such by our Board
      of
      Directors since he does not satisfy the “independence” standards adopted by the
      American Stock Exchange.





Our
      board
      of directors consists of only two members, both of whom are executive officers
      of the Company. We conduct operations from our principal executive offices
      in
      Bellevue, Washington and have a limited number of employees whom are operating
      outside of our Bellevue office. In addition, our directors are integrally
      involved in our operations. In light of the foregoing, and upon evaluating
      the
      Company’s internal controls, our board of directors determined that our internal
      controls are adequate to insure that financial information is recorded,
      processed, summarized and reported in a timely and accurate manner in accordance
      with applicable rules and regulations of the Securities and Exchange Commission.
      Accordingly, our board of directors concluded that the benefits of retaining
      an
      individual who qualifies as an “audit committee financial expert” would be
      outweighed by the costs of retaining such a person.





**Code
      of Ethics**





We
      have
      adopted a Code of Ethics that applies to our principal executive officer,
      principal financial officer, principal accounting officer or controller, or
      persons performing similar functions. Our Code of Ethics is designed to deter
      wrongdoing and promote: (i) honest and ethical conduct, including the ethical
      handling of actual or apparent conflicts of interest between personal and
      professional relationships; (ii) full, fair, accurate, timely and understandable
      disclosure in reports and documents that we file with, or submit to, the SEC
      and
      in our other public communications; (iii) compliance with applicable
      governmental laws, rules and regulations; (iv) the prompt internal reporting
      of
      violations of the code to an appropriate person or persons identified in the
      code; and (v) accountability for adherence to the code.




48




**Section
      16 Beneficial Ownership Reporting Compliance**





Section
      16(a) of the U.S. Securities and Exchange Act of 1934, as amended (the "Exchange
      Act"), requires our officers and directors and persons who own more than ten
      percent (10%) of our common stock to file with the SEC initial reports of
      ownership and reports of changes in ownership of our common stock. Such
      officers, directors and ten percent (10%) stockholders are also required by
      applicable SEC rules to furnish copies of all forms filed with the SEC pursuant
      to Section 16(a) of the Exchange Act. Based solely on our review of copies
      of
      forms filed pursuant to Section 16(a) of the Securities Exchange Act of 1934
      as
      amended and written representations from certain reporting persons, we believe
      that during fiscal 2007, all reporting persons timely complied with all filing
      requirements applicable to them, except that Messrs. Eaton and Stegemoller
      each
      failed to file a Form 3 upon being appointed as an executive officers of the
      Company .





**ITEM
      11. EXECUTIVE COMPENSATION**





**Compensation
      Discussion and Analysis**





Our
      board
      of directors has responsibility for establishing, implementing and monitoring
      adherence with our compensation philosophy. The board approves, administers
      and
      interprets our executive compensation and benefit policies, including our 2005
      Stock Incentive Plan. The following sets forth the philosophy and objectives
      of
      the board and provides a discussion of its executive compensation policies
      and
      practices.





**Overview
      of Compensation Program**





The
      board’s goal is that the total compensation paid to our executive officers is
      fair, reasonable and competitive. The following discusses the compensation
      and
      benefits provided to our named executive officers. The “named executive
      officers” are the persons who were, as of June 30, 2007, our principal executive
      officer and principal financial officer (CEO/CFO), and the three most highly
      compensated executive officers, other than the CEO/CFO.





**Compensation
      Philosophy and Objectives**





Our
      executive compensation philosophy and objectives are to align compensation
      with
      creation of stockholder value; to provide market competitive compensation to
      attract and retain talented executives; to link incentive compensation to
      continuous improvements in strategic and operating performance; to ensure
      fairness among the executive management team by recognizing the contributions
      each executive makes to our success; and to foster a shared commitment among
      executives by coordinating their company and individual goals.





The
      board
      believes the current compensation arrangements provide our CEO and other
      executive officers incentive to perform at superior levels and in a manner
      directly aligned with the economic interests of our stockholders. The board
      approves and periodically evaluates our compensation policies applicable to
      the
      executive officers so that: (i) we maintain the ability to attract and retain
      excellent employees in key positions; and (ii) compensation provided to
      executive officers remains competitive relative to the compensation paid to
      similarly situated executives in the competitive market. To this end, the board
      believes that executive compensation should include both cash and stock based
      compensation that rewards performance as measured by Company
      performance.





**Independent
      Consultant**





The
      board
      has the authority to retain and use the services of an independent executive
      compensation consulting firm. To date, the board has not retained such a
      consultant to assist it in its duties.




49




**2007
      Executive Compensation Components**





The
      existing executive compensation program consists of a base salary, discretionary
      bonus plan, certain perquisites, and long-term incentive/stock based awards.
      Each of these compensation elements is described in detail in this discussion
      and analysis.





**Competitive
      Benchmarking**





We
      do not
      believe that it is appropriate to establish compensation levels primarily based
      on benchmarking. We believe that information regarding pay practices at other
      companies is useful in two respects, however. First, we recognize that our
      compensation practices must be competitive in the marketplace. Second, this
      marketplace information is one of the many factors that we consider in assessing
      the reasonableness of compensation.





**Base
      Salary**





We
      provide named executive officers with base salary to compensate them for
      services rendered during the fiscal year. For each position, the board
      establishes a base salary that takes into consideration the position and its
      responsibility along with information related to the Company’s marketplace.





During
      its review of base salaries for executives, the board primarily considers
      information relating to the Company’s marketplace; internal review of the
      executive’s compensation, both individually and relative to other officers;
      recommendations of the CEO; and individual performance.





Salary
      levels are typically reviewed annually as well as upon other changes in job
      responsibilities. Increases for named executive officers are reviewed and
      approved by the board based on the criteria listed above.





The
      following table sets forth the current base salary for each of our named
      executives:





**Executive**
            **Current
                Base Salary**Mr.
                Crain
            $250,000Mr.
                Eaton
            $100,000Mr.
                Moultrie
            $120,000Mr.
                Stegemoller
            $180,000





**Discretionary
      Bonus Plan**





The
      executive officers are eligible to receive annual bonus compensation at the
      discretion of the board and in accordance with the Company’s executive bonus or
      incentive compensation plan that may be in effect from time to time. To date,
      no
      cash bonus awards were paid to our executive officers other than Mr. Eaton
      who
      received a $2,500 cash bonus. In 2007, the board granted to Messrs. Eaton,
      Moultrie, and Stegemoller restricted stock awards of 30,000, 35,000 and 30,000
      shares respectively. A more detailed description of the grants is provided
      below
      under the caption **“** Long-Term
      Incentives **.”**





**Perquisites**





In
      addition to base salaries, we provide named executive officers with certain
      perquisites and personal benefits, including automobile-related expenses and
      relocation expenses. We believe that perquisites and personal benefits are
      often
      a tax-advantaged way to provide the named executive officers with additional
      annual compensation that supplements their base salaries. When determining
      each
      named executive officer’s base salary, we take the value of each such officer’s
      perquisites and personal benefits into consideration.





The
      perquisites and personal benefits paid to each named executive officer in 2007
      are reported in the “All other compensation” column of the Summary Compensation
      Table below, and are further described
      in footnotes (3) and (6) to the Summary Compensation Table.




50




**Long−Term
      Incentives**





Our
      long-term incentive program is a key element of our total compensation program.
      Long-term incentives are a large component of variable compensation and provide
      a strong tie to long-term stockholder value. Our long-term incentive
      compensation historically has consisted of awards of stock options and
      restricted stock.





Stock
      Options .
      Stock
      options reward management for increases in our stock price above the price
      at
      the time the options are granted and thus provide a direct link to creation
      of
      stockholder value. The stock option component of our long-term incentive program
      permits the participants to purchase shares of our common stock at an exercise
      price per share determined by the board that is no less than the closing price
      of our common stock on the date of grant. In 2007, we issued options to Mr.
      Eaton to purchase 100,000 shares of common stock at an exercise price of $0.74
      per share, the closing market price on the date of grant, in recognition of
      the
      additional responsibilities associated with his being appointed to serve as
      our
      Chief Accounting Officer.





Restricted
      Stock .
      Restricted stock grants build executive stock ownership and focus executives
      on
      long-term company performance. Furthermore, awards of restricted stock are
      consistent with current market practice. The restricted stock awards have
      dividend and voting rights. Awards of all restricted stock require approval
      of
      the Board. In 2007, we issued restricted stock to Messrs. Eaton, Moultrie and
      Stegemoller in payment of discretionary bonus based on the individual
      performance of each executive officer.





**Performance
      Evaluation and Role of Officers in Setting Compensation**





The
      board
      makes all final decisions regarding compensation for all executive officers.
      The
      board evaluates the performance of each of the other executive officers. For
      the
      CEO’s compensation, the board will evaluate his performance against performance
      objectives. These objectives include specific measurable financial performance
      metrics and achievement of business strategy milestones. The board will monitor
      the performance of the CEO against these goals throughout the year and determine
      the final year-end evaluation. The board will make its compensation decision
      for
      the CEO based on this evaluation.





**Other
      Benefits**





The
      Company provides a benefit plan, consisting of health insurance and life
      insurance, to its employees.





**Executive
      Compensation Employment Agreements**





We
      have
      entered into written employment agreements with certain of our executive
      officers, which provide for various benefits, including severance payable under
      certain circumstances. These employment agreements are designed to promote
      stability and continuity among our senior management team. A complete
      description of these agreements is set forth below under the caption **“** Employment
      and Option Agreements. **”**





**Tax
      and Accounting Implications**





*Deductibility
      of Executive Compensation − Section 162(m) Compliance*





Section
      162(m) of the Internal Revenue Code of 1986, as amended, generally disallows
      a
      public corporation’s tax deduction for compensation paid to its chief executive
      officers and any of its four other most highly compensated officers in excess
      of
      $1,000,000 in any year. Compensation that qualifies as “performance-based
      compensation” is excluded from the $1,000,000 deductibility cap, and, therefore,
      remains fully deductible by the corporation that pays it. We intend that stock
      options granted under our stock incentive plan will qualify as performance-based
      compensation.




51




**Conclusion**




We
      strive
      to ensure that each element of compensation delivered to the named executive
      officers is reasonable and appropriate as compared to the type and levels of
      compensation and benefits provided to executives in the marketplace. We also
      believe that such compensation should properly reflect the performance and
      results achieved by each individual. We have also established **** performance
      measures that ensure that each component of compensation is aligned with
      stockholder interests. We continually monitor trends in executive pay to ensure
      that recommendations and plan design reflect best practice.





**Summary
      Compensation Table**




The
        following summary compensation table reflects total compensation for our
        chief
        executive officer/chief financial officer, and our three most highly compensated
        executive officers (each a “named executive officer”) whose compensation
        exceeded $100,000 during the fiscal year ended June 30, 2007.


Name
                and Principal
              Position
            Year
            Salary
              ($)
            Bonus
              ($)
            Stock
                Awards
              ($)(1)
            Option
              Awards
              ($)(2)
            All
                other
              compen-
              sation
              ($)
            Total
              ($)Bohn
                H. Crain, Chief
              Executive
                Officer and
              Chief
                Financial Officer
            2007
            250,000
            -
            -
            -
            54,401(3)
            304,401Rodney
                Eaton, Vice
              President,
                Chief
              Accounting
                Officer and
              Controller
            2007
            100,000
            2,500
            30,300(4)
            60,013(5)
            1,936
            194,749William
                Moultrie,
              President
                of Airgroup
              Corporation
            2007
            120,000
            -
            35,350(4)
            -
            6,973
            162,323Dan
                Stegemoller, Vice
              President,
                Chief
              Operating
                Officer of
              Airgroup
                Corporation
            2007
            180,000
            -
            30,300(4)
            -
            60,010(6)
            270,310





(1)  The
      assumptions used in calculating the value of the stock awards are located in
      note 14 of our consolidated financial statements.


(2)
      The
      assumptions used in calculating the value of the option awards are located
      in
      note 14 of our consolidated financial statements.


(3)
      Mr.
      Crain had other compensation consisting of $12,000 for automobile allowance,
      $2,085 for company provided life insurance premiums, and $40,316 for relocation
      expenses.


(4)
      Messrs. Eaton, Moultrie, and Stegemoller received 30,000, 35,000 and 30,000
      shares of restricted stock respectively, as incentive compensation, at a market
      value of $1.01 a share.


(5)
      Mr.
      Eaton was granted options to purchase 100,000 shares of common stock on August
      3, 2006 at an exercise price of $.74 a share.


(6)
      Mr.
      Stegemoller had other compensation consisting of $2,010 for company provided
      life insurance premiums and $58,000 relating to amortization of moving expenses,
      per his December 2005 relocation agreement, comprised of $40,000 for the
      principal and $18,000 for gross up for tax payments.





We
      have
      written employment agreements with certain of our named executive officers.
      These agreements, which vary in term, provide for, among other things, a base
      salary and participation in our stock incentive plan. Each of the employment
      agreements contains standard and customary confidentiality provisions and
      provides for severance payments to the executive officer in certain
      circumstances. During fiscal year 2007, we also issued stock options and
      restricted stock to certain of our named executive officers. See **“** Employment
      and Option Agreements **”** below.




**Grants
      of Plan-Based Awards**





The
      following sets forth information regarding each grant of an award made during
      the fiscal year ended June 30, 2007 to each named executive
      officer.




52





Name
            Grant
              date
            All
                other
              stock
              awards:
              number
                of
              shares
                of
              stock
                or
              units(#)
            All
                other
              option
              awards;
              number
                of
              securities
              underlying
              options
                (#)
            Exercise
              or
                base
              price
                of
              option
              awards
              ($/Sh)
            Grant
                date
              fair
                value
              of
                stock
              and
              option
              awards
              ($)Rodney
                Eaton
            August
                3, 2006
            -
            100,000(1)
            0.74
            60,013Rodney
                Eaton
            October
                3, 2006
            30,000(2)
            -
            -
            30,300William
                Moultrie
            October
                3, 2006
            35,000(2)
            -
            -
            35,350Dan
                Stegemoller
            October
                3, 2006
            30,000(2)
            -
            -
            30,300





(1)
      Options issued under the Company’s 2005 Stock Incentive Plan. The options vest
      in equal annual installments over a five year period commencing on the date
      of
      grant and terminate ten years from the date of grant.


(2)
      Messrs. Eaton, Moultrie, and Stegemoller received 30,000, 35,000 and 30,000
      shares of restricted stock, respectively, as incentive compensation at the
      market value of these shares was calculated based on $1.01 per share, the last
      reported sales price for our common stock on the date of grant.





**Outstanding
      Equity Awards at Fiscal Year-End**





The
      following table sets forth for each named executive officer, information
      regarding outstanding unexercised options, that had not vested as of June 30,
      2007. As of June 30, 2007, all outstanding stock awards had vested.





Option
                AwardsName
            Number
                of
              securities
              underlying
              unexercised
              options
              exercisable(#)
            Number
                of
              securities
              underlying
              unexercised
              options
              Unexercisable
                (#)
            Option
              exercise
                price
              ($)
            Option
              expiration
                dateBohn
                  H. Crain
            200,000
                200,000
            800,000
              800,000
            0.50
              0.75
            10/20/2015(1)
              10/20/2015(1)Rodney
                Eaton
            0
            100,000
            0.74
            8/3/2016(2)William
                Moultrie
            10,000
            40,000
            0.44
            1/11/2016(3)Dan
                Stegemoller
            60,000
            240,000
            0.44
            1/11/2016(3)




(1)
      The
      stock options were granted on October 20, 2005 and vest in equal annual
      installments over a five year period commencing on the date of
      grant.


(2)
      The
      stock options were granted on August 3, 2006 and vest in equal annual
      installments over a five year period commencing on the date of
      grant.


(3)
      The
      stock options were granted on January 11, 2006 and vest in equal annual
      installments over a five year period commencing on the date of grant.





**Option
      Exercises and Stock Vested**





The
      following table sets forth, for each named executive officer, information
      regarding options exercised or stock vested during the fiscal year ended June
      30, 2007. There were no options exercised in 2007 and the stock awards granted
      in 2007 vested upon grant.






Stock
                awardsName
            Number
                of
              shares
                acquired
              on
                vesting
              (#)
            Value
                realized
              on
                vesting
              ($)Rodney
                Eaton
            30,000
            30,300William
                Moultrie
            35,000
            35,350Dan
                Stegemoller
            30,000
            30,300




53







**Director
      Compensation**





The
      following table sets forth compensation paid to our directors during the fiscal
      year ended June 30, 2007.




Name(1)
            All
                other
              compensation
              ($)
            Total
              ($)Stephen
                M. Cohen
            79,500
            79,500(2)







(1)
      Bohn
      Crain is not listed in the above table because he does not receive any
      additional compensation for serving on our board of directors.


(2)
      Mr. Cohen has served as our General Counsel, Secretary and member of our Board
      of Directors since October 10, 2005. Mr. Cohen’s compensation consisted entirely
      of payment for legal and consulting services provided to the
      Company.





**Employment
      and Option Agreements**





Bohn
      H. Crain . **** On
      January 13, 2006, we entered into an employment agreement with Bohn H. Crain
      to
      serve as our Chief Executive Officer. The agreement has an initial employment
      term of five years and automatically renews for consecutive one-year terms
      thereafter, subject to certain notice provision. The agreement provides for
      an
      annual base salary of $250,000, a performance bonus of up to 50% of the base
      salary based upon the achievement of certain target objectives, and
      discretionary merit bonus that can be awarded at the discretion of our board
      of
      directors. Mr. Crain will also be entitled to certain severance benefits upon
      his death, disability or termination of employment, as well as fringe benefits
      including participation in pension, profit sharing and bonus plans as
      applicable, and life insurance, hospitalization, major medical, paid vacation
      and expense reimbursement. The employment agreement contains standard and
      customary non-solicitation, non-competition, work made for hire, and
      confidentiality provisions.





On
      October 20, 2005, we issued an option to Mr. Crain to purchase 2,000,000 shares
      of common stock, 1,000,000 of which are exercisable at $0.50 per share and
      the
      balance of which are exercisable at $0.75 per share. The options have a term
      of
      10 years and vest in equal annual installments over the five year period
      commencing on the date of grant.





William
      H. Moultrie .
      In
      connection with our acquisition of Airgroup, on January 11, 2006 Airgroup
      entered into an employment agreement with William H. Moultrie to serve as the
      President of Airgroup. The agreement expires on June 30, 2009, provides for
      an
      annual base salary of $120,000, and an annual performance bonus equal to up
      to
      25% of the annual base salary payable at the discretion of the board of
      directors of Airgroup. Mr. Moultrie is entitled to certain severance payments
      in
      the event he is terminated without cause and to certain fringe benefits
      including, participation in pension, profit sharing and bonus plans, as
      applicable, life insurance, hospitalization and major medical as are in effect,
      as well as paid vacation, and expense reimbursement. The agreement contains
      non
      competition and non solicitation covenants which prohibit Mr. Moultrie from
      participating in any activity that is competitive with our business or from
      soliciting any of our customers, employees or consultants until October 11,
      2011. The agreement also contains standard and customary confidentiality and
      work made for hire provisions.





On
      January 11, 2006, we issued an option to Mr. Moultrie to purchase 50,000 shares
      of common stock exercisable at $0.44 per share. The options have a term of
      10
      years, vest in equal annual installments over the five year period commencing
      on
      the date of grant, and are otherwise subject to the terms of the Radiant
      Logistics, Inc. 2005 Stock Incentive Plan, the material terms of which are
      described below.





**Change
      in Control Arrangements**





The
      options granted to Mr. Crain contain a change in control provision which is
      triggered in the event that we are acquired by merger, share exchange or
      otherwise, sell all or substantially all of our assets, or all of the stock
      of
      the Company is acquired by a third party (each, a “Fundamental Transaction”). In
      the event of a Fundamental Transaction, all of the options will vest and Mr.
      Crain shall have the full term of such Options in which to exercise any or
      all
      of them, notwithstanding any accelerated exercise period contained in any such
      Option.




54




The
      employment agreement with Mr. Crain contains a change in control provision.
      If
      his employment is terminated following a change in control (other than for
      cause), then we must pay him a termination payment equal to 2.99 times his
      base
      salary in effect on the date of termination of his employment, any bonus to
      which he would have been entitled for a period of three years following the
      date
      of termination, any unpaid expenses and benefits, and for a period of three
      years provide him with all fringe benefits he was receiving on the date of
      termination of his employment or the economic equivalent. In addition, all
      of
      his unvested stock options shall immediately vest as of the termination date
      of
      his employment due to a change in control. A change in control is generally
      defined as the occurrence of any one of the following:




·
            any
                “Person” (as the term “Person” is used in Section 13(d) and Section 14(d)
                of the Securities Exchange Act of 1934), except for our chief executive
                officer, becoming the beneficial owner, directly or indirectly, of
                our
                securities representing 50% or more of the combined voting power
                of our
                then outstanding securities;





·
            a
                contested proxy solicitation of our stockholders that results in
                the contesting party obtaining the ability to vote securities
                representing 50% or more of the combined voting power of our
                then-outstanding securities;





·
            a
                sale, exchange, transfer or other disposition of 50% or more in value
                of
                our assets to another Person or entity, except to an entity controlled
                directly or indirectly by us;





·
            a
                merger, consolidation or other reorganization involving us in which
                we are
                not the surviving entity and in which our stockholders prior to the
                transaction continue to own less than 50% of the outstanding securities
                of
                the acquirer immediately following the transaction, or a plan involving
                our liquidation or dissolution other than pursuant to bankruptcy
                or
                insolvency laws is adopted; or





·
            during
                any period of twelve consecutive months, individuals who at the beginning
                of such period constituted the board cease for any reason to constitute
                at
                least the majority thereof unless the election, or the nomination
                for
                election by our stockholders, of each new director was approved by
                a vote
                of at least a majority of the directors then still in office who were
                directors at  the beginning of the
                period.





Notwithstanding
      the foregoing, a “change in control” is not deemed to have occurred (i) in the
      event of a sale, exchange, transfer or other disposition of substantially all
      of
      our assets to, or a merger, consolidation or other reorganization involving,
      us
      and any entity in which our chief executive officer has,  directly
      or indirectly, at least a 25% equity or ownership interest; or (ii) in a
      transaction otherwise commonly referred to as a “management leveraged
      buy-out.”





**Directors’
      Compensation**





We
      do not
      have any standard arrangements regarding payment of any cash or other
      compensation to our current directors for their services as directors, as
      members of any committee of our board of directors or for any special
      assignments, other than to reimburse them for their cost of travel and other
      out-of-pocket costs incurred to attend board or committee meetings or to perform
      any special assignment on behalf of the Company.





**Stock
      Incentive Plan**




The
      Radiant Logistics, Inc. 2005 Stock Incentive Plan, (the “Stock Incentive Plan”)
      covers 5,000,000 shares of common stock. Under its terms, employees, officers
      and directors of the Company and its subsidiaries are currently eligible to
      receive non-qualified stock options, restricted stock awards and, at such time
      as the Plan is approved by our stockholders, incentive stock options within
      the
      meaning of Section 422 of the Code. In addition, advisors and consultants
      who perform services for the Company or its subsidiaries are eligible to receive
      non-qualified stock options under the Stock Incentive Plan. The Stock Incentive
      Plan is administered by the board of directors or a committee designated by
      the
      board of directors.




55




All
      stock
      options granted under the Stock Incentive Plan are exercisable for a period
      of
      up to ten years from the date of grant and are subject to vesting as determined
      by the board upon grant. We may not grant incentive stock options pursuant
      to
      the Stock Incentive Plan at exercise prices which are less than the fair market
      value of the common stock on the date of grant. The term of an incentive stock
      option granted under the Stock Incentive Plan to a stockholder owning more
      than
      10% of the issued and outstanding common stock may not exceed five years and
      the
      exercise price of an incentive stock option granted to such stockholder may
      not
      be less than 110% of the fair market value of the common stock on the date
      of
      grant. The Stock Incentive Plan contains certain limitations on the maximum
      number of shares of the common stock that may be awarded in any calendar year
      to
      any one individual for the purposes of Section 162(m) of the
      Code.




As
      of
      September 14, 2007, there are outstanding options to purchase 3,150,000 shares
      of common stock, 1,000,000 of which are exercisable at $0.50 per share,
      1,000,000 of which are exercisable at $0.75 per share, 425,000 of which are
      exercisable at $0.44 per share, 100,000 of which are exercisable at $0.74 per
      share, and 45,000 of which are exercisable at $1.01 per share, 150,000 of which
      are exercisable at $0.55 per share and 430,000 of which are exercisable at
      $.062
      per share.




**Compensation
      Committee Interlocks and Insider Participation**





We
      do not
      maintain a separately designated compensation committee. Our full board of
      directors makes decisions relating to compensation of our executive officers.
      Mr. Crain is an executive officer of the Company. None of our executive officers
      currently serves, or served during 2007, on the compensation committee or board
      of directors of any other entity that has one or more executive officers serving
      as a member of our board of directors or compensation committee. ****





**Compensation
      Committee Report**





We
      do not
      maintain a separately designated compensation committee. As a result, our full
      board of directors serves as our compensation committee. Our board reviewed
      and
      discussed the Compensation Discussion and Analysis appearing elsewhere in this
      Item 11 with our management and based on such review and discussions, the board
      has recommended that the Compensation Discussion and Analysis be included in
      this Annual Report on Form 10−K.


Board
        of
        Directors
 Bohn
        H.
        Crain
 Stephen
        M. Cohen





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





The
      following table indicates how many shares of our common stock were beneficially
      owned as of September 24, 2007, by (1) each person known by us to be the
      owner of more than 5% of our outstanding shares of common stock, (2) our
      directors, (3) our executive officers, and (4) all of our directors
      and executive officers as a group. The address of each of the directors and
      executive officers listed below is c/o Airgroup, 1227 120th Avenue N.E.,
      Bellevue, Washington 98005.




56




**Name
                of Beneficial Owner**
            
            **Amount****(1)**
            
            **Percent
                of**
              **Class**Bohn
                H. Crain
            
            7,900,000(2)
            
            23.0%Stephen
                M. Cohen
            
            2,500,000(3)
            
            7.4%Rodney
                Eaton
            
            30,000(4)
            
            *William
                H. Moultrie
            
            139,589(5)
            
            *Dan
                Stegemoller
            
            158,182(6)
            
            *Millennium
                Global High Yield Fund Limited
              64
                St. James Street
              London,
                U.K. SQ1A 1NF
            
            2,875,000
            
            8.5%Michael
                Garnick
              1528
                Walnut Street
              Philadelphia,
                PA 19102
            
            1,800,000
            
            5.3%SPH
                Investments, Inc.
              111
                Presidential Blvd., Suite 165
              Bala
                Cynwyd, PA 19004
            
            1,734,849
            
            5.1%All
                officers and directors as a group
              (5
                persons)
            
            10,727,771
            
            31.2%









(*)
            Less
              than one percent  (1)
            The
                securities “beneficially owned” by a person are determined in accordance
                with the definition of “beneficial ownership” set forth in the rules and
                regulations promulgated under the Securities Exchange Act of 1934,
                and
                accordingly, may include securities owned by and for, among others,
                the
                spouse and/or minor children of an individual and any other relative
                who
                has the same home as such individual, as well as other securities
                as to
                which the individual has or shares voting or investment power or
                which
                such person has the right to acquire within 60 days of September
                24, 2007
                pursuant to the exercise of options, or otherwise. Beneficial ownership
                may be disclaimed as to certain of the securities. This table has
                been
                prepared based on 33,961,639 shares****of
                common stock outstanding as of September 24, 2007.




(2)
            Consists
                of 7,500,000 shares held by Radiant Capital Partners, LLC over which
                Mr.
                Crain has sole voting and dispositive power and 400,000 shares issuable
                upon exercise of options. Does not include 1,600,000 shares issuable
                upon
                exercise of options which are subject to vesting.




(3)
            Consists
                of shares held of record by Mr. Cohen’s wife over which he shares voting
                and dispositive power.




(4)
            Does
                not include 100,000 shares issuable upon exercise of options subject
                to
                vesting.




(5)
            Includes
                10,000 shares issuable upon exercise of options. Does not include
                50,000
                shares issuable upon exercise of options which are subject to vesting.




(6)
            Includes
                60,000 shares issuable upon exercise of options. Does not include
                240,000
                shares issuable upon exercise of options which are subject to vesting.




**ITEM
      13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS****AND DIRECTOR INDEPENDENCE**





**Review,
      Approval or Ratification of Transactions with Related
      Persons**





Our
      board
      is responsible for reviewing and approving all related party transactions.
      Before approving such a transaction, the board takes into account all relevant
      factors that it deems appropriate, including whether the related party
      transaction is on terms no less favorable to us than terms generally available
      from an unaffiliated third party. **** Any
      request for us to enter into a transaction with an executive officer, director,
      principal stockholder or any of such persons' immediate family members or
      affiliates in which the amount involved exceeds $120,000 must first be presented
      to our board for review, consideration and approval.  All of our directors,
      executive officers and employees are required to report to our board any such
      related party transaction.  In approving or rejecting the proposed
      agreement, our board considers the facts and circumstances available and deemed
      relevant to the board, including, but not limited to the risks, costs and
      benefits to us, the terms of the transaction, the availability of other sources
      for comparable services or products and, if applicable, the impact on a
      director's independence.  Our board approves only those agreements that, in
      light of known circumstances, are in, or are not inconsistent with, our best
      interests, as our board determines in the good faith exercise of its
      discretion.  Although the policies and procedures described above are not
      written, the board applies the foregoing criteria in evaluating and approving
      all such transactions. Each of the transactions described below were approved
      by
      our board of directors in accordance with the foregoing.




57




**Transactions**





SMC
      Capital Advisors, Inc., a legal and financial advisory firm owned by Stephen
      Cohen, our Secretary, General Counsel and Director, provided approximately
      $79,000 of outside legal services to the Company during the year ended June
      30,
      2007.





On
      June
      28, 2006, we joined Radiant Capital, an affiliate of Bohn H. Crain to form
      Radiant Logistics Partners, LLC (“RLP”). Radiant Capital and the Company
      contributed $12,000 and $8,000, respectively, for their respective 60% and
      40%
      interests in RLP. RLP has been certified as a minority business enterprise
      by
      the Northwest Minority Business Council. 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 commenced in February
      of
      2007 and are intended to provide certain benefits to us, including expanding
      the
      scope of services offered by us and participating in supplier diversity programs
      not otherwise available to us. As the RLP operations mature, we will evaluate
      and approve all related service agreements between us and RLP, including the
      scope of the services to be provided by us to RLP and the fees payable to us
      by
      RLP, in accordance with our 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.





**Director
      Independence**




Our
      board
      of directors currently consists of Bohn H. Crain and Stephen M. Cohen. As
      of the date of this report, we do not maintain a separately designated audit,
      compensation or nominating committees. Our full board serves the functions
      of
      these committees.





Pursuant
      to Item 407(a) of SEC Regulation S-K under the Securities Exchange Act of 1934,

      the board has adopted the definition of “independent director” as set forth in
      the American Stock Exchange, or AMEX, Company Guide. In applying this
      definition, the board has determined that neither Mr. Crain nor Mr. Cohen
      qualifies as an “independent director” pursuant to AMEX Company Guide Section
      121, neither is independent for purposes of Section 10A(m)(3) of the Securities
      Exchange Act of 1934 or Section 803 of the AMEX Company Guide, applicable to
      audit committee members, and neither is independent for
      purposes of Section 803 of the AMEX Company Guide, applicable to compensation
      and nominating committee members.




58




**ITEM
      14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES**





The
      following table presents fees for professional audit services performed by
      for
      the audit of our annual financial statements for the twelve months ended June
      30, 2007, six months ended June 30, 2006, and year ended December 31, 2005
      and
      fees billed and unbilled for other services rendered by it during those
      periods.





******2007**
            
            ******2006**
            
            ******2005**Audit
                Fees:
            
            $
            70,000
            
            $
            80,000
            
            $
            32,266Audit
                Related Fees:
            
            
            1,412
            
            
            4,767
            
            
            0Tax
                Fees:
            
            
            7,632
            
            
            0
            
            
            0All
                Other Fees:
            
            
            -
            
            
            0
            
            
            0Total:
            
            $
            _79,044
            
            $
            84,767
            
            $
            _32,266




**Audit
      Fees**





Audit
      Fees consist of fees billed and unbilled for professional services rendered
      for
      the audit of our consolidated financial statements and review of the interim
      financial statements included in quarterly reports and services that are
      normally provided by our independent registered public accountants in connection
      with statutory and regulatory filings or engagements.





**Audit
      Related Fees**





Audit-Related
      Fees consist of fees billed for assurance and related services that are
      reasonably related to the performance of the audit or review of the Company's
      consolidated financial statements and are not reported under "Audit Fees."





**Tax
      Fees**





Tax
      Fees
      consists of fees billed for professional services for tax compliance, tax advice
      and tax planning. These services include assistance regarding federal and state
      tax compliance, tax audit defense, customs and duties, and mergers and
      acquisitions.





**Other
      Fees**





All
      Other
      Fees consist of fees billed for products and services provided not described
      above.





**Audit
      Committee Pre-Approval Policies and Procedures**




Our
      Board
      of Directors serves as our audit committee. Our Board of Directors approves
      the
      engagement of our independent auditors, and meets with our independent auditors
      to approve the annual scope of accounting services to be performed and the
      related fee estimates. It also meets with our independent auditors, on a
      quarterly basis, following completion of their quarterly reviews and annual
      audit and prior to our earnings announcements, if any, to review the results
      of
      their work. During the course of the year, our chairman has the authority to
      pre-approve requests for services that were not approved in the annual
      pre-approval process. The chairman reports any interim pre-approvals at the
      following quarterly meeting. At each of the meetings, management and our
      independent auditors update the Board of Directors with material changes to
      any
      service engagement and related fee estimates as compared to amounts previously
      approved. During 2005, 2006 and 2007, all audit and non-audit services performed
      by our independent registered public accountants were pre-approved by the Board
      of Directors in accordance with the foregoing procedures.




59


**ITEM
      15. EXHIBITS**





Exhibit
                No.
            
            Description2.1
            
            Stock
                Purchase Agreement by and among Radiant Logistics, Inc., the Shareholders
                of Airgroup Corporation and William H. Moultrie (as Shareholders’ Agent)
                dated January 11, 2006, effective as of January 1, 2006. (incorporated
                by
                reference to the Registrant’s Current Report on Form 8-K filed on January
                18, 2006).2.2
            
            Registration
                Rights Agreement by and among Radiant Logistics, Inc. and the Shareholders
                of Airgroup Corporation dated January 11, 2006, effective as of January
                1,
                2006. (incorporated by reference to the Registrant’s Current Report on
                Form 8-K filed on January 18, 2006).2.3
            
            First
                Amendment to Stock Purchase Agreement (incorporated by reference
                to the
                Registrant’s Current Report on Form 8-K filed on January 30,
                2007).3.1
            
            Certificate
                of Incorporation (incorporated by reference to Exhibit 3.1 to the
                Registrant’s Registration Statement on Form SB-2 filed on September 20,
                2002).3.2
            
            Amendment
                to Registrant’s Certificate of Incorporation (Certificate of Ownership and
                Merger Merging Radiant Logistics, Inc. into Golf Two, Inc. dated
                October
                18, 2005) (incorporated by reference to Exhibit 3.1 to the Registrant’s
                Current Report on Form 8-K dated October 18, 2005).3.3
            
            Bylaws
                (incorporated by reference to Exhibit 3.2 to the Registrant's Registration
                Statement on Form SB-2 filed on September 20, 2002)10.1
            
            Form
                of Securities Purchase Agreement (representing the private placement
                of
                shares of common stock in October 2005) (incorporated by reference
                to
                Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated
                October
                18, 2005).10.2
            
            Radiant
                Logistics, Inc. 2005 Stock Incentive Plan (incorporated by reference
                to
                Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-QSB
                filed
                November 14, 2005).10.3
            
            Confidential
                Private Placement Memorandum dated November 1, 2005 (including Form
                of
                Registration Rights Provisions and Subscription Agreement) (incorporated
                by reference to Exhibit 10.1 to the Registrant's Current Report on
                Form
                8-K dated December 21, 2005).10.4
            
            Executive
                Employment Agreement dated January 11, 2006 by and between Airgroup
                Corporation and William H. Moultrie. (incorporated by reference to
                the
                Registrant’s Current Report on Form 8-K filed on January 18,
                2006).10.5
            
            Form
                of Securities Purchase Agreement dated January 11, 2006 for the sale
                of
                1,009,093 shares of common stock (incorporated by reference to the
                Registrant’s Current Report on Form 8-K filed on January 18,
                2006).10.6
            
            Loan
                Agreement by and among Radiant Logistics, Inc., Airgroup Corporation
                and
                Bank of America, N.A. dated as of January 10, 2006 (incorporated
                by
                reference to the Registrant’s Current Report on Form 8-K filed on January
                18, 2006).10.7
            
            Executive
                Employment Agreement dated January 13, 2006 by and between Radiant
                Logistics, Inc. and Bohn H. Crain (incorporated by reference to the
                Registrant’s Current Report on Form 8-K filed on January 18,
                2006).10.8
            
            Option
                Agreement dated January 11, 2006 by and between Radiant Logistics,
                Inc.
                and William H. Moultrie (incorporated by reference to the Registrant’s
                Current Report on Form 8-K filed on January 18, 2006).10.9
            
            Option
                Agreement dated October 20, 2005 by and between Radiant Logistics,
                Inc.
                and Bohn H. Crain (incorporated by reference to the Registrant’s Current
                Report on Form 8-K filed on January 18, 2006).10.10
            
            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 (incorporated
                by
                reference to the Registrant’s Quarterly Report on Form 10-Q filed on
                February 14, 2007).






60




10.11
            
            Asset
                Purchase Agreement by and between Radiant Logistics Global Services,
                Inc.
                and Mass Financial Corp. (incorporated by reference to the Registrant’s
                Current Report on Form 8-K filed on May 24, 2007)10.12
            
            Management
                Services Agreement by and between Radiant Logistics Global Services,
                Inc.
                and Mass Financial Corp. (incorporated by reference to the Registrant’s
                Current Report on Form 8-K filed on May 24, 2007)10.13
            
            Lease
                Agreement for Bellevue, WA office space dated April 11, 2007 by and
                between Radiant Logistics, Inc. and Pine Forest Properties, Inc.
                (Filed
                herewith)




14.1
            
            Code
                of Business Conduct and Ethics (incorporated by reference to the
                Registrant’s Annual Report on Form 10-KSB filed on March 17,
                2006).21.1
            
            Subsidiaries
                of the Registrant (Filed Herewith)31.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                Section
                302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be
                deemed
                “filed” for purposes of Section 18 of the Securities Exchange Act of 1934,
                as amended, or otherwise subject to the liability of that section.
                Further, this exhibit shall not be deemed to be incorporated by reference
                into any filing under the Securities Act of 1933, as amended, or
                the
                Securities Exchange Act of 1934, as amended.) (Filed
                herewith)99.1
            
            Press
                release dated October 1, 2007






**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange
      Act of 1934, the registrant has duly caused this report to be signed on its
      behalf by the undersigned, thereunto duly authorized.




**RADIANT
              LOGISTICS, INC.**Date:
                October 1, 2007By:
            /s/
                Bohn H. CrainBohn
                H. Crain
                Chief
                  Executive Officer




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







**Signature**
            
            **Title**
            
            **Date**/s/
                Stephen M.
                Cohen
              Stephen
                M. Crain
            
            
            Director
                , General Counsel and
              Secretary
            
            October
                1,
                2007/s/
                Bohn H.
                Crain
              Bohn
                H. Crain
            
            
            Chairman
                and
              Chief
                Executive Officer
            
            October
                1,
                2007/s/
                Rodney
                Eaton
              Rodney
                Eaton
            
            
            Vice
                President, Chief Accounting
              Officer
                & Controller
            
            October
                1,
                2007





61


**FINANCIAL
      STATEMENTS**


**INDEX
      TO THE CONSOLIDATED FINANCIAL STATEMENTS**








**RADIANT
      LOGISTICS, INC.**


**(f/k/a
      GOLF TWO, INC.)**





Report
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheets as of June 30, 2007 and 2006
              F-3ConsolidatedStatements
                  of Income (Operations)
                  for the year ended June 30, 2007 and six months ended June 30,
                  2006 and
                  2005, and the years ended December 31, 2005 and 2004
              F-4ConsolidatedStatements
                  of Stockholders’ Equityfor the year ended June 30, 2007, six months ended June 30, 2006
                  and 2005,
                  and the years ended December 31, 2005 and 2004
              F-5ConsolidatedStatements
                  of Cash flowsfor the year ended June 30, 2007, six months ended June 30, 2006
                  and 2005,
                  and the years ended December 31, 2005 and 2004
              F-6-7Notes
                  to Consolidated Financial Statements
              F-8


F-1




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








To
      the
      Audit Committee of the Board of Directors


Radiant
      Logistics, Inc.


Bellevue,
      Washington








We
      have
      audited the accompanying consolidated balance sheet of Radiant Logistics, Inc.
      ("the Company") as of June 30, 2007, and the related statements of income
      (operations), stockholders' equity, and cash flows for the year then ended.
      These consolidated financial statements are the responsibility of the Company's
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. The Company
      has determined that it is not required to have, nor were we engaged to perform,
      an audit of its internal control over financial reporting. Our audit included
      consideration of internal control over financial reporting as a basis for
      designing audit procedures that are appropriate in the circumstances, but not
      for the purpose of expressing an opinion on the effectiveness of the Company's
      internal control over financial reporting. Accordingly, we express no such
      opinion. An audit includes examining, on a test basis, evidence supporting
      the
      amounts and disclosures in the consolidated financial statements. An audit
      also
      includes assessing the accounting principles used and significant estimates
      made
      by management, as well as evaluating the overall consolidated financial
      statement presentation. We believe that our audit provides a reasonable basis
      for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Radiant Logistics, Inc.
      as
      of June 30, 2007, and the results of its operations and its cash flows for
      the year then ended, in conformity with accounting principles generally accepted
      in the United States.








/S/
      PETERSON SULLIVAN PLLC








September
      25, 2007


Seattle,
      Washington




F-2





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**












To
      the
      Board of Directors and Stockholders


of
      Radiant Logistics, Inc.




We
      have
      audited the accompanying consolidated balance sheet of Radiant Logistics, Inc.
      (the “Company,” formerly Golf Two, Inc.) as of June 30, 2006, and the related
      consolidated statements of income (operations), stockholders' equity, and cash
      flows for the six month period ended June 30, 2006, and years ended December
      31,
      2005, and 2004. These consolidated financial statements are the responsibility
      of the Company's management. Our responsibility is to express an opinion on
      these consolidated financial statements based on our audit.





We
      conducted our audit in accordance with generally accepted auditing standards
      as
      established by the Auditing Standards Board (United States) and in accordance
      with the auditing standards of the Public Company Accounting Oversight Board
      (United States). Those standards require that we plan and perform the audit
      to
      obtain reasonable assurance about whether the consolidated financial statements
      are free of material misstatement. The Company is not required to, nor were
      we
      engaged to perform, an audit of its internal control over financial
      reporting. Our audit included consideration of internal control over financial
      reporting as a basis for designing audit procedures that are appropriate in
      the
      circumstances, but not for the purpose of expressing an opinion on the
      effectiveness of the Company's internal control over financial reporting.
      Accordingly, we express no such opinion. An audit includes examining, on a
      test
      basis, evidence supporting the amounts and disclosures in the consolidated
      financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall consolidated financial statement presentation. We believe
      that our audit provides a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Radiant
      Logistics, Inc. as of June 30, 2006, and the consolidated results of its
      operations and its cash flows for the six month period ended June 30, 2006,
      and
      years ended December 31, 2005, and 2004, in conformity with accounting
      principles generally accepted in the United States of America.






/S/
      Stonefield Josephson, Inc.







Los
      Angeles, California


September
      20, 2006




F-3





**RADIANT
      LOGISTICS, INC.**


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


**Consolidated
      Balance Sheets**




June
                30,
            
            
            June
                30,2007
            
            
            2006ASSETSCurrent
                assets -Cash
                and cash equivalents
            
            $
            719,575
            
            $
            510,970Accounts
                receivable, net of allowanceJune
                30, 2007 - $259,960; June, 30 2006 - $202,830
            
            
            15,062,910
            
            
            8,487,899Current
                portion of employee loan receivables and other receivables
            
            
            42,800
            
            
            40,329Prepaid
                expenses and other current assets
            
            
            59,328
            
            
            93,087Deferred
                tax asset
            
            
            234,656
            
            
            277,417Total
                current assets
            
            
            16,119,269
            
            
            9,409,702Furniture
                and equipment, net
            
            
            844,919
            
            
            258,119Acquired
                intangibles, net
            
            
            1,789,773
            
            
            2,401,600Goodwill
            
            
            5,532,223
            
            
            4,712,062Employee
                loan receivable
            
            
            80,000
            
            
            120,000Investment
                in real estate
            
            
            40,000
            
            
            40,000Deposits
                and other assets
            
            
            618,153
            
            
            103,376Total
                long term assets
            
            
            8,060,149
            
            
            7,377,038$
            25,024,337
            
            $
            17,044,859LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)Current
                liabilities -Notes
                payable - current portion of long term debt
            
            $
            800,000
            
            $
            -Accounts
                payable
            
            
            11,619,579
            
            
            4,096,538Accrued
                transportation costs
            
            
            1,651,177
            
            
            1,501,374Commissions
                payable
            
            
            700,020
            
            
            429,312Other
                accrued costs
            
            
            344,305
            
            
            303,323Income
                taxes payable
            
            
            224,696
            
            
            1,093,996Total
                current liabilities
            
            
            15,339,777
            
            
            7,424,543Long
                term debt
            
            
            1,974,214
            
            
            2,469,936Deferred
                tax liability
            
            
            608,523
            
            
            816,544Total
                long term liabilities
            
            
            2,582,737
            
            
            3,286,480Total
                liabilities
            
            
            17,922,514
            
            
            10,711,023Commitments
                & contingencies
            
            
            -
            
            
            -Minority
                interest
            
            
            57,482
            
            
            -Stockholders'
                equity (deficit):Preferred
                stock, $0.001 par value, 5,000,000 shares authorized; no shares issued
                or
                outstanding
            
            
            -
            
            
            -Common
                stock, $0.001 par value, 50,000,000 shares authorized. Issued
              and
                outstanding: June 30, 2007 - 33,961,639; June 30, 2006 -
              33,611,639
            
            
            15,417
            
            
            15,067Additional
                paid-in capital
            
            
            7,137,774
            
            
            6,590,355Accumulated
                deficit
            
            
            (108,850
            )
            
            (271,586
            )Total
                stockholders’ equity (deficit)
            
            
            7,044,341
            
            
            6,333,836$
            25,024,337
            
            $
            17,044,859


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




F-4








**RADIANT
      LOGISTICS, INC.**


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


**Consolidated
      Statements of Income (Operations)**




YEAR
                ENDED
              JUNE
                30,
            
            
            SIX MONTHS
                ENDED
                  JUNE 30,
            
            
            SIX
                MONTHS
              ENDED
                JUNE 30,
            
            
            YEAR
                ENDED
              DECEMBER
                31
            
            
            YEAR
                ENDED
              DECEMBER
              31,2007
            
            
            2006
            
            
            2005
            
            
            2005
            
            
            2004(unaudited)Revenues
            
            $
            75,526,788
            
            $
            26,469,049
            
            $
            -
            
            $
            -
            
            $
            -Cost
                of transportation
            
            
            48,812,662
            
            
            16,965,966
            
            
            -
            
            
            -
            
            
            -Net
                revenues
            
            
            26,714,126
            
            
            9,503,083
            
            
            -
            
            
            -
            
            
            -Agent
                Commissions
            
            
            20,047,536
            
            
            7,037,363
            
            
            -
            
            
            -
            
            
            -Personnel
                costs
            
            
            2,916,073
            
            
            1,154,449
            
            
            -
            
            
            -
            
            
            -Selling,
                general and administrative expenses
            
            
            2,507,317
            
            
            842,391
            
            
            21,881
            
            
            161,967
            
            
            23,293Depreciation
                and amortization
            
            
            830,486
            
            
            423,465
            
            
            -
            
            
            -
            
            
            -Total operating expenses
            
            
            26,301,412
            
            
            9,457,668
            
            
            21,881
            
            
            161,967
            
            
            23,293Income
                (loss) from operations
            
            
            412,714
            
            
            45,415
            
            
            (21,881
            )
            
            (161,967
            )
            
            (23,293
            )Other
                income (expense):Interest
                income
            
            
            16,272
            
            
            14,800
            
            
            -
            
            
            14,433
            
            
            -Interest
                expense
            
            
            (22,215
            )
            
            (25,851
            )
            
            (1,000)
            )
            
            (1,500
            )
            
            (2,000
            )Other
            
            
            (42,686
            )
            
            (2,773
            )
            
            -
            
            
            -
            
            
            -Total
                other income (expense)
            
            
            (48,629
            )
            
            (13,824
            )
            
            (1,000
            )
            
            12,933
            
            
            (2,000
            )Income
                (loss) before income tax expense (benefit)
            
            
            364,085
            
            
            31,591
            
            
            (22,811
            )
            
            (149,034
            )
            
            (25,293
            )Income
                tax expense (benefit)
            
            
            155,867
            
            
            (39,095
            )
            
            -
            
            
            -
            
            
            -Income
                (loss) before minority interest
            
            
            208,218
            
            
            70,686
            
            
            (22,811
            )
            
            (149,034
            )
            
            (25,293
            )Minority
                interest
            
            
            45,482
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income (loss)
            
            $
            162,736
            
            $
            70,686
            
            $
            (22,811
            )
            $
            (149,034
            )
            $
            (25,293
            )Net
                income (loss) per common share - basic and diluted
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            (0.01
            )
            $
            -Weighted
                average shares outstanding:Basic
                shares
            
            
            33,882,872
            
            
            33,185,665
            
            
            25,964,176
            
            
            26,490,427
            
            
            25,964,179Diluted
                shares
            
            
            34,324,736
            
            
            34,584,836
            
            
            25,964,176
            
            
            26,490,427
            
            
            25,964,179







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





F-5




**RADIANT
      LOGISTICS, INC.**


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


**Consolidated
      Statements of Stockholders’ Equity**




COMMON
                STOCK
            
            ADDITIONAL
            
            
            
            TOTAL
                STOCKHOLDERS'SHARES
            
            AMOUNT
            
            PAID-IN
                CAPITAL
            
            ACCUMULATED
                DEFICIT
            
            EQUITY
              (DEFICIT)Balance
                at December 31, 2003
            
            
            25,964,179
            
            $
            7,418
            
            $
            152,107
            
            $
            (167,945
            )
            $
            (8,420
            )Capital
                contribution for office space
            
            
            -
            
            
            -
            
            
            1,200
            
            
            -
            
            
            1,200Net
                loss for the year ended December 31, 2004
            
            
            -
            
            
            -
            
            
            -
            
            
            (25,293
            )
            
            (25,293
            )Balance
                at December 31, 2004
            
            
            25,964,179
            
            
            7,418
            
            
            153,307
            
            
            (193,238
            )
            
            (32,513
            )Issuance
                of common stock for cash at $0.44 per share (October 2005), net of
                issuance costs
            
            
            2,272,728
            
            
            2,273
            
            
            983,949
            
            
            -
            
            
            986,222Issuance
                of common stock for cash at $0.44 per share (December 2005), net
                of
                issuance costs
            
            
            10,098,943
            
            
            10,100
            
            
            4,206,203
            
            
            -
            
            
            4,216,303Issuance
                of common stock for cash at $0.44 per share (December 2005), net
                of
                issuance costs
            
            
            500,000
            
            
            500
            
            
            29,000
            
            
            -
            
            
            29,500Surrender
                of common stock (Note 12)
              (December
                2005)
            
            
            (7,700,001
            )
            
            (7,701
            )
            
            7,701
            
            
            -
            
            
            -Forgiveness
                of debt and related interest in connection with change of control
                (Note
                12) (October 2005)
            
            
            -
            
            
            -
            
            
            78,409
            
            
            -
            
            
            78,409Capital
                contribution for office space
            
            
            -
            
            
            -
            
            
            900
            
            
            -
            
            
            900Stock
                based compensation
            
            
            -
            
            
            -
            
            
            29,238
            
            
            -
            
            
            29,238Net
                loss for the year ended December 31, 2005
            
            
            -
            
            
            -
            
            
            -
            
            
            (149,034
            )
            
            (149,034
            )Balance
                at December 31, 2005
            
            
            31,135,849
            
            
            12,590
            
            
            5,488,707
            
            
            (342,272
            )
            
            5,159,025Issuance
                of common stock for cash at $0.44 pershare
                (January 2006), net of issuance costs
            
            
            1,009,093
            
            
            1,010
            
            
            440,627
            
            
            -
            
            
            441,637Issuance
                of common stock for cash at $0.44 pershare
                (February 2006), net of issuance costs
            
            
            1,466,697
            
            
            1,467
            
            
            638,555
            
            
            -
            
            
            640,022Costs
                incurred for issuance of prior year shares
            
            
            
            
            
            
            
            
            (63,153
            )
            
            
            
            
            (63,153
            )Stock
                based compensation
            
            
            -
            
            
            -
            
            
            85,619
            
            
            -
            
            
            85,619Net
                income for the six months ended June 30, 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            70,686
            
            
            70,686Balance
                at June 30, 2006
            
            
            33,611,639
            
            $
            15,067
            
            $
            6,590,355
            
            $
            (271,586
            )
            $
            6,333,836Issuance
                of common stock for training materialsat
                $1.01 per share (September 2006)
            
            
            250,000
            
            
            250
            
            
            252,250
            
            
            -
            
            
            252,500Issuance
                of common stock for bonus compensationat
                $1.01 per share (October 2006)
            
            
            100,000
            
            
            100
            
            
            100,900
            
            
            -
            
            
            101,000Stock
                based compensation
            
            
            -
            
            
            -
            
            
            194,269
            
            
            -
            
            
            194,269Net
                income for the year ended June 30, 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            162,736
            
            
            162,736Balance
                at June 30, 2007
            
            
            33,961,639
            
            $
            15,417
            
            $
            7,137,774
            
            $
            (108,850
            )
            $
            7,044,341




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




F-6


**RADIANT
      LOGISTICS, INC.**


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


**Consolidated
      Statements of Cash Flows**




CASH
                    FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
                
                YEAR
                  ENDED
                  JUNE
                    30,
                  2007
                
                SIX
                  MONTHS
                  ENDED
                  JUNE
                    30, 2006
                
                SIX
                  MONTHS
                  ENDED
                  JUNE
                    30, 2005
                
                YEAR
                    ENDED DECEMBER 31, 2005
                
                YEARENDED
                    DECEMBER 31, 2004(unaudited)Net
                    income (loss)
                
                $
                162,736
                
                $
                70,686
                
                $
                (22,881
                )
                $
                (149,034
                )
                $
                (25,293
                )ADJUSTMENTS
                    TO RECONCILE NET INCOME (LOSS) TO NET CASHPROVIDED
                    BY (USED FOR) OPERATING ACTIVITIES:non-cash
                    issuance of common stock (services)
                
                
                -
                
                
                -
                
                
                -
                
                
                29,500
                
                
                -non-cash
                    contribution to capital (rent)
                
                
                -
                
                
                -
                
                
                600
                
                
                900
                
                
                1,200non-cash
                    compensation expense (stock options)
                
                
                194,269
                
                
                85,619
                
                
                -
                
                
                29,238
                
                
                -non-cash
                    contribution to capital (interest)
                
                
                -
                
                
                -
                
                
                -
                
                
                3,500
                
                
                -provision
                    for doubtful accounts
                
                
                57,130
                
                
                -
                
                
                -
                
                
                -
                
                
                -amortization
                    of intangibles
                
                
                611,827
                
                
                340,400
                
                
                -
                
                
                -
                
                
                -depreciation
                    and amortization
                
                
                230,046
                
                
                (32,670
                )
                
                -
                
                
                -
                
                
                -deferred
                    income tax benefit
                
                
                (165,260
                )
                
                -
                
                
                -
                
                
                -
                
                
                -minority
                    interest in income of subsidiaries
                
                
                (5,482
                )
                
                -
                
                
                -
                
                
                -
                
                
                -change
                    in fair value of accounts receivable
                
                
                (6,127
                )
                
                225,271
                
                
                -
                
                
                -
                
                
                -CHANGE
                    IN OPERATING ASSETS AND LIABILITIES:accounts
                    receivable
                
                
                (6,632,141
                )
                
                1,739
                
                
                -
                
                
                -
                
                
                -employee
                    receivable and other receivables
                
                
                (2,471
                )
                
                12,230
                
                
                -
                
                
                (25,054
                )
                
                -prepaid
                    expenses and other assets
                
                
                (238,128
                )
                
                (116,446
                )
                
                -
                
                
                -
                
                
                -accounts
                    payable
                
                
                7,309,007
                
                
                (2,590,831
                )
                
                -
                
                
                -
                
                
                -accrued
                    transportation costs
                
                
                149,803
                
                
                1,501,374
                
                
                -
                
                
                -
                
                
                -commissions
                    payable
                
                
                270,708
                
                
                9,280
                
                
                -
                
                
                -
                
                
                -other
                    accrued costs
                
                
                141,982
                
                
                (182,677
                )
                
                -
                
                
                -
                
                
                -income
                    taxes payable
                
                
                (869,300
                )
                
                (298,388
                )
                
                1,000
                
                
                146,387
                
                
                (7,150
                )Net
                    cash provided by (used for)operating
                    activities
                
                
                1,259,563
                
                
                (974,413
                )
                
                (21,281
                )
                
                35,437
                
                
                (31,243
                )CASH
                    FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES:Acquisition
                    of Airgroup, net of acquired cash (See Note 4)
                
                
                
                
                
                (7,358,588
                )
                
                -
                
                
                (15,907
                )
                
                -Purchase
                    of United American Assets (see Note 6)
                
                
                (242,890
                )
                
                -
                
                
                -
                
                
                -
                
                
                -Proceeds
                    from sale of investments
                
                
                -
                
                
                241,455
                
                
                -
                
                
                -
                
                
                -Purchase
                    of technology and equipment
                
                
                (524,346
                )
                
                (95,153
                )
                
                -
                
                
                -
                
                
                -Net
                    cash used for investing activities
                
                
                (767,236
                )
                
                (7,212,286
                )
                
                -
                
                
                (15,907
                )
                
                -CASH
                    FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:Proceeds
                    from notes payable, stockholders
                
                
                -
                
                
                -
                
                
                24,909
                
                
                24,909
                
                
                -Contribution
                    from minority interest of subsidiary
                
                
                12,000
                
                
                -
                
                
                -
                
                
                -
                
                
                -Proceeds
                    from issuance of common stock net of
                  issuance
                    costs
                
                
                -
                
                
                1,018,506
                
                
                -
                
                
                5,202,525
                
                
                -Proceeds
                    from (payments) to credit facility net of credit
                  fees
                
                
                (295,722
                )
                
                1,969,936
                
                
                -
                
                
                -
                
                
                -Payment
                    of credit facility fees
                
                
                -
                
                
                (57,224
                )
                
                -
                
                
                -
                
                
                -Long
                    term debt for acquisition (see Note 4)
                
                
                -
                
                
                500,000
                
                
                -
                
                
                -
                
                
                -Net
                    cash provided by (used for) financing
                  activities
                
                
                (283,722
                )
                
                3,431,218
                
                
                24,909
                
                
                5,227,434
                
                
                -NET
                    INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                208,605
                
                
                (4,755,481
                )
                
                3,628
                
                
                5,246,964
                
                
                (31,243
                )CASH
                    AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
                
                
                510,970
                
                
                5,266,451
                
                
                19,487
                
                
                19,487
                
                
                50,730CASH
                    AND CASH EQUIVALENTS AT END OF YEAR
                
                $
                719,575
                
                $
                510,970
                
                $
                23,115
                
                $
                $5,266,451
                
                $
                19,487SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW INFORMATION:Income
                    taxes paid
                
                $
                1,136,784
                
                $
                656,813
                
                $
                800
                
                $
                800
                
                $
                -Interest
                    paid
                
                $
                22,215
                
                $
                25,851
                
                $
                25,851
                
                $
                -
                
                $
                -SUPPLEMENTAL
                    DISCLOSURE OF NON-CASH INVESTING ACTIVITIESAcquisition
                    of Airgroup (see Note 4):Fair
                    value of assets acquired
                
                $
                -
                
                $
                19,885,892
                
                $
                -
                
                $
                15,907
                
                $
                -Liabilities
                    assumed
                
                
                -
                
                
                (9,797,019
                )
                
                -
                
                
                -
                
                
                -Cash
                    paid
                
                
                -
                
                
                10,088,873
                
                
                -
                
                
                15,907
                
                
                -Less
                    cash acquired
                
                
                -
                
                
                (2,730,285
                )
                
                -
                
                
                -
                
                
                -Net
                    cash paid for Airgroup
                
                $
                -
                
                $
                7,358,588
                
                $
                -
                
                $
                15,907
                
                $
                -


F-7








**RADIANT
      LOGISTICS, INC.**


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


**Consolidated
      Statements of Cash Flows**





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





**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.





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 resulting
      in
      an increase to goodwill of $600,000.




In
      June
      2007, and based on the operating income for twelve months ended June 30, 2007,
      $214,034 was recorded as an accrued payable and increase to goodwill, for the
      first annual earn-out for the former Airgroup shareholders for the Company’s
      acquisition of Airgroup. See Note 4.




F-8




**RADIANT
      LOGISTICS, INC.**


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


**Notes
      to the Consolidated Financial Statements**





**NOTE
      1 - THE COMPANY AND BASIS OF PRESENTATION**




**The
      Company**





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
      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, the Company: (i) elected to discontinue the Company’s former
      business model; (ii) repositioned itself as a global transportation and supply
      chain management company; and (iii) changed its name to “Radiant Logistics,
      Inc.” to, among other things, better align the name with the Company’s new
      business focus.





By
      implementing a growth strategy, management 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 accomplished the first step in its growth strategy by completing the
      acquisition of Airgroup Corporation (“Airgroup”) effective as of January 1,
      2006; see Note 4. Airgroup is a Seattle, Washington based non-asset based
      logistics company that provides domestic and international freight forwarding
      services through a network of exclusive agent offices across North America.
      Airgroup services a diversified account base including manufacturers,
      distributors and retailers using a network of independent carriers and
      international agents positioned strategically around the world.




***Basis
      of Presentation***




Historically,
      the Company had a fiscal year that ended December 31. After acquiring Airgroup
      in January 2006, the Company changed its fiscal year to June 30 **.** As
      of January 1, 2006, the Company was no longer considered to be a development
      stage company due to the acquisition of Airgroup. Airgroup is a wholly owned
      subsidiary of the Company and its results are consolidated within the Company’s
      consolidated financial statements.





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





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**a)**  **Use
      of Estimates**





The
      preparation of consolidated 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 stock options, 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**




F-9




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**





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)
      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 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 effective as of April 1
      of
      each year, unless events or circumstances indicate an impairment may have
      occurred before that time. As of June 30, 2007 there are no indications of
      an
      impairment.





**g)**  **Long-Lived
      Assets**




F-10




Acquired
      intangibles consist of customer related intangibles and non-compete agreements
      arising from our 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 approximately 5 years. See Note
      4
      and 5.





The
      Company accounts for long-lived assets in accordance with the provisions of
      Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for
      the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
      Of.” This statement establishes financial accounting and reporting standards for
      the impairment or disposal of long-lived assets. The statement requires that
      long-lived assets be reviewed for impairment whenever events or changes in
      circumstances indicate that its carrying amount may be not be recoverable and
      is
      measured by a comparison of the carrying amount of an asset to undiscounted
      future net cash flows expected to be generated by the asset. If the carrying
      amount of an asset exceeds its estimated future undiscounted cash flows, an
      impairment charge is recognized for the amount by which the carrying amount
      of
      the asset exceeds the fair value of the asset. SFAS No. 144 requires companies
      to separately report discontinued operations and extends that reporting to
      a
      component of an entity that either has been disposed of (by sales, abandonment
      or in a distribution to owners) or is classified as held for sale. Assets to
      be
      disposed are reported at the lower of the 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 June 30, 2007.





**h)**  **Commitments**





The
      Company has operating lease commitments for office and warehouse space and
      equipment rentals and are under non-cancelable operating leases expiring at
      various dates through December 2012. Future annual commitments for years ending
      June 30, 2008 through 2012, respectively, are **** $309,961,
      $255,741, $81,518, $35,310, and $2,432. Lease and rent expense for the year
      ended June 30, 2007, six months ended June 30, 2006 and for years ended December
      31, 2005 and 2004 approximated $344,757 and $118,366 as there was no rent
      expense for the years ended December 31, 2005 and 2004.





**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 EITF 99-19,
        "Reporting Revenue Gross versus Net", as a result of the following: The
        Company’s 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. The Company, at its sole
        discretion, set 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 the Company 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 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.
      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.




F-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 Statement No. 123 ("SFAS 123R").
      This statement requires that the cost resulting from all share-based payment
      transactions be recognized in the Company’s consolidated financial statements.
      In addition, 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
      year ended June 30, 2007, the Company recorded a share based compensation
      expense of $194,269, which, net of income taxes, resulted in a $128,218 net
      reduction of net income. For the six months ended June 30, 2006, the Company
      recorded a share based compensation expense of $85,619, which, net of income
      taxes, resulted in a $56,509 net reduction of net income. Prior to October
      2005,
      the Company did not have a stock option plan therefore no expense was recorded.
      For year ended December 31, 2005 the Company recorded a share based compensation
      expense of $29,238 which increased the net loss.





**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 per share except that the denominator is
      increased to include the number of additional common shares that would have
      been
      outstanding if the potential common shares, such as stock options, had been
      issued and if the additional common shares were dilutive. For the year ended
      June 30, 2007, the weighted average outstanding number of potentially dilutive
      common shares totaled 34,324,736 shares of common stock, including options
      to
      purchase 3,150,000 shares of common stock at June 30, 2007, of which only
      1,575,000 were excluded as their effect would have been antidilutive. The
      following table reconciles the numerator and denominator of the basic and
      diluted per share computations for earnings per share as follows.




Twelve
                months
              ended
              June
                30, 2007
            
            
            Six
                months
              ended
              June
                30, 2006
            
            
            Year
                ended
              December
                31,
              2005Weighted
                average basic shares outstanding
            
            
            33,882,872
            
            
            33,185,665
            
            
            26,490,427Options
            
            
            441,864
            
            
            1,399,171
            
            
            -Weighted
                average dilutive shares outstanding
            
            
            34,324,736
            
            
            34,584,836
            
            
            26,490,427





**m)**  **Fair
      Value of Financial Instruments**




The
      carrying value of the Company's receivables, accounts payable, other accrued
      liabilities, notes payable and long term debt approximate their estimated fair
      values due to the relatively short maturities of those instruments.




**n)        Comprehensive
      Loss**




The
      Company has no components of Other Comprehensive Income (Loss) and, accordingly,
      no Statement of Comprehensive Income (Loss) has been included in the
      accompanying consolidated financial statements.




**NOTE
      3 - RECENT ACCOUNTING PRONOUNCEMENTS**





In
      February 2007 the Financial Accounting Standards Board ("FASB") issued SFAS
      159
“The Fair Value Option for Financial Assets and Financial Liabilities.” The
      statement permits entities to choose to measure many financial instruments
      and
      certain other items at fair value. The objective is to improve financial
      reporting by providing entities with the opportunity to mitigate volatility
      in
      reported earnings caused by measuring related assets and liabilities differently
      without having to apply complex hedge accounting provisions. This Statement
      is
      expected to expand the use of fair value measurement, which is consistent with
      the Board’s long-term measurement objectives for accounting for financial
      instruments. This
      Statement is effective as of the beginning of an entity’s first fiscal year that
      begins after November 15, 2007. The Company is currently
      evaluating the impact this standard will have on its consolidated financial
      statements.




F-12




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.





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. The
      adoption of SFAS
      No.
      157 will not have any impact on the Company’s financial position, results of operations
      or cash flows.





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
      adoption of FIN 48 did not have any impact on the Company’s 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
      adoption of SFAS 155 did not have any impact on the Company’s financial
      position, results of operations or cash flows.





**NOTE
      4 - ACQUISITION OF AIRGROUP**





In
      January of 2006, the Company acquired 100 percent of the outstanding stock
      of
      Airgroup. Airgroup is a Seattle, Washington based non-asset based logistics
      company that provides domestic and international freight forwarding services
      through a network of 34 exclusive agent offices across North America. Airgroup
      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. This consists of: (i) $9.5
      million payable in cash at closing (before giving effect for $2.8 million in
      acquired cash); (ii) a subsequent cash payment of $.5 million in cash due on
      the
      two year anniversary; (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, in the event there is a shortfall
      in income from continuing operations, the earn-out payment will be reduced
      on a
      dollar-for-dollar basis to the extent of the shortfall. Shortfalls may be
      carried over or carried back to the extent that income from continuing
      operations in any other payout year exceeds the $2.5 million level. Through
      June
      30, 2007, the former Airgroup shareholders earned a total of $214,000 in base
      earn-out payments.




F-13





**NOTE
      5 - 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 twelve months ended June 30,
      2007
      and six months ended June 30, 2006. Prior to the Company’s acquisition of
      Airgroup, there were no intangible assets for prior years as this was the
      Company’s first acquisition.




Twelve
                months eded
              June
                30, 2007
            
            Six
                months ended
              June
                30, 2006Gross
              carrying
              amount
            
            Accumulated
                Amortization
            
            Gross
              carrying
              amount
            
            AccumulatedAmortizationAmortizable
                intangible assets:Customer
                related
            
            $
            2,652,000
            
            $
            925,227
            
            $
            2,652,000
            
            $
            331,400Covenants
                not to compete
            
            
            90,000
            
            
            27,000
            
            
            90,000
            
            
            9,000Total
            
            $
            2,742,000
            
            $
            952,227
            
            $
            2,742,000
            
            $
            340,400Aggregate
                amortization expense:For
                twelve months ended June 30, 2007
            
            
            
            
            $
            611,827For
                six months ended June 30, 2006
            
            
            
            
            $
            340,400Aggregate
                amortization expense for the year ended June 30:2008
            
            
            
            
            
            547,3592009
            
            
            
            
            
            597,0902010
            
            
            
            
            
            483,1242011
            
            
            
            
            
            162,200Total
            
            
            
            
            $
            1,789,773




For
      the
      twelve months ended June 30, 2007, the Company recorded an expense of $611,827
      from amortization of intangibles and an income tax benefit of $208,021 from
      amortization of the long term deferred tax liability; both arising from the
      acquisition of Airgroup. For the six months ended June 30, 2006, the Company
      recorded an expense of $340,400 from amortization of intangibles and an income
      tax benefit of $115,736 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 $361,257 in 2008, $394,079 in
      2009, $318,862 in 2010, and $107,052 in 2011.





**NOTE
      6 - PENDING TRANSACTION IN CONJUNCTION WITH EXPANSION INTO THE AUTOMOTIVE SECTOR**





In
      May 2007 **,** the
      Company launched a new logistics service offering focused on the automotive
      industry through its wholly-owned subsidiary, Radiant Logistics Global Services,
      Inc. (“RLGS”).




In
      connection with the launch of the Company’s automotive services group it entered
      into an Asset Purchase Agreement (the “APA”) with Mass Financial Corporation
      (“Mass”) to acquire certain assets formerly used in the operation of the
      automotive division of Stonepath Group, Inc. (the “Purchased Assets”). In its
      capacity as a senior secured creditor, Mass agreed to sell RLGS the Purchased
      Assets in connection with a foreclosure and disposition process that began
      in
      April 2007. The purchase price consists of a $100,000 refundable deposit,
      $150,000 to be paid at closing, and up to an additional $2.5 million in
      cumulative earn-out payments equal to 25% of the annual earnings before
      interest, taxes, depreciation and amortization, as defined in the APA generated
      from the automotive group in future periods. The APA contains negotiated
      representations, warranties, covenants and indemnities by each
      party.




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




F-14




Shortly
      after commencing operation of the Purchased Assets pursuant to the MSA, a
      judgment creditor of Stonepath (the “Stonepath Creditor”) issued garnishment
      notices to the automotive customers being serviced by the Company disputing
      the
      priority and superiority of the underlying security interest of Mass in the
      Purchased Assets and asserting that the Company was in possession of certain
      accounts receivable or other assets covered by the garnishment notice. This
      resulted in a significant disruption to the automotive business, including
      a
      delay in the payment of outstanding RLGS invoices as the garnishment notices
      required that all such amounts be directed to a court sponsored escrow
      arrangement. Although Mass recently posted a letter of credit that resolved
      the
      outstanding garnishment action, the Company has incurred significant
      out-of-pocket costs while operating the Purchased Assets under the MSA. The
      Company expects to recover a significant amount of its costs as customers begin
      to remit payment for outstanding invoices, or through indemnification claims
      under the MSA. Based upon these circumstances, it is uncertain as to whether
      all
      closing conditions under the APA can be satisfied. If a closing under the APA
      does not occur, the outlook for the Company’s continued development of an
      automotive services group is also uncertain.




The
      issue
      of the priority of Mass’s security interest in the former Stonepath assets will
      be determined by the Court after discovery and a possible hearing. If the Court
      determines that the Mass security interest in the former assets of Stonepath
      is
      not superior to the judgment of the Stonepath judgment creditor, such creditor,
      may be entitled to draw upon and satisfy his judgment from the letter of credit
      posted by Mass. If Mass is successful in establishing the superiority of its
      security interest in the subject assets, the Stonepath judgment creditor would
      not be able to draw upon the letter of credit and may or may not pursue other
      enforcement actions, including an action against the Company to recover the
      value of the garnished assets. The Company views any such action as without
      merit, would vigorously defend any such action, and seek all available remedies
      including an indemnification claim against Mass.




On
      or
      about September 28, 2007, Mass Financial Corp. (“Mass”) commenced an action
      against the Company and Radiant Logistics Global Services, Inc. in the Federal
      District Court for the Western District of the State of Washington at Seattle.
      In its complaint, Mass has sought specific performance, injunctive relief and
      damages against the Company and RLGS, seeking to compel a closing under an
      unexecuted draft amendment to the Asset Purchase Agreement between the parties.
      The Company has only recently become aware of this action and believes the
      claims are without merit, will vigorously defend the claims, and bring all
      available counterclaims against Mass.




Below,
      for the twelve months ended June 30, 2007 is a summary of costs and expenses
      associated with the APA and MSA agreements.





Asset
                Purchase:Initial
                down payment
            
            $
            100,000Acquisition
                expenses
            
            
            128,310Vendor
                invoices paid on behalf of Mass
            
            
            14,580242,890Mass
                expenses covered by MSA
            
            $
            195,844Total
            
            $
            438,734





Under
      the
      APA and MSA agreements with Mass, the Company paid $14,580 of vendor invoices,
      and $195,844 in expenses, respectively, which the Company will either offset
      against future payments to be made by the Company for the Purchased Assets
      or
      seek reimbursement as an indemnity claim pursuant to the MSA. The total $438,734
      appears on the balance sheet as a long term other asset.





**NOTE
      7 - VARIABLE INTEREST ENTITY**





In
      January 2003, the FASB issued FIN46, and revised it in December 2003 FIN46(R),
      which clarified the application of Accounting Research Bulletin No. 51
“Consolidated Financial Statements,” to certain entities in which equity
      investors do not have the characteristics of a controlling financial interest
      or
      do not have the sufficient equity at risk for the entity to finance its
      activities without additional subordinated financial support from other parties
      (“variable interest entities”). Radiant Logistics Partners LLC (“RLP”) is 40%
      owned by Airgroup Corporation and qualifies under FIN46(R) as a variable
      interest entity and is included in the Company’s consolidated financial
      statements. Minority interest recorded on the income statement for the twelve
      months ending June 30, 2007 was $45,482. RLP did not commence operations until
      February 2007 and therefore no minority interest was recorded in prior fiscal
      years.





**NOTE
      8 - RELATED PARTY**





RLP
      is
      owned 40% by Airgroup and 60% by an affiliate of the Chief Executive Officer
      of
      the Company, Radiant Capital Partners (RCP). RLP is a certified minority
      business enterprise which was formed for the purpose of providing the Company
      with a national accounts strategy to pursue corporate and government accounts
      with diversity initiatives. As currently structured, RCP’s ownership interest
      entitles it to a majority of the profits and distributable cash, if any,
      generated by RLP. The operations of RLP are intended to provide certain benefits
      to the Company, including expanding the scope of services offered by the Company
      and participating in supplier diversity programs not otherwise available to
      the
      Company. As the RLP operations mature, the Company will evaluate and approve
      all
      related service agreements between the Company and RLP, including the scope
      of
      the services to be provided by the Company to RLP and the fees payable to the
      Company by RLP, in accordance with the Company’s corporate governance principles
      and applicable Delaware corporation law. This process may include seeking the
      opinion of a qualified third party concerning the fairness of any such agreement
      or the approval of the Company’s shareholders. Under FIN46(R), RLP is
      consolidated in the financial statements of the Company (see Note
      7).




F-15




**NOTE
      9 - FURNITURE AND EQUIPMENT**





The
      Company, prior to acquiring Airgroup, has never carried any fixed assets since
      its inception. Property and equipment consists of the following:




June
                30,
              2007
            
            
            June
                30,
              2006Vehicles
            
            $
            3,500
            
            $
            3,500Communication
                equipment
            
            
            1,353
            
            
            1,353Office
                equipment
            
            
            261,633
            
            
            6,023Furniture
                and fixtures
            
            
            23,379
            
            
            10,212Computer
                equipment
            
            
            232,667
            
            
            96,653Computer
                software
            
            
            570,494
            
            
            198,438Leasehold
                improvements
            
            
            10,699
            
            
            10,6991,103,725
            
            
            326,878Less:
                Accumulated depreciation and amortization
            
            
            (258,806
            )
            
            (68,759
            )Furniture
                and equipment - net
            
            $
            844,919
            
            $
            258,119




Depreciation
      and amortization expense related to furniture and equipment for the twelve
      months ended June 30, 2007 was $190,046 and for six months ended June 30, 2006
      was $68,759.





**NOTE
      10 - LONG TERM DEBT**





The
      Company entered into a $10 million two year revolving credit facility with
      Bank
      of America, N.A. (the “Facility”) effective February 13, 2007 and expires
      January 30, 2009. This replaces a January 2006 Facility with Bank of America,
      N.A. The Facility is collateralized by 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 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 EBITDA 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. This may limit or slow
      the
      Company’s ability to achieve the critical mass management believes it may need
      to achieve the Company’s strategic objectives.




F-16




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 the Chief
      Executive Officer of the Company, Radiant Capital Partners. RLP has been
      certified as a minority business enterprise, and intends to focus on corporate
      and government accounts with diversity initiatives. As a co-borrower under
      the
      Facility, the accounts receivable of RLP and RLGS are eligible for inclusion
      within the overall borrowing base of the Company and all borrowers will be
      responsible for repayment of the debt associated with advances under the
      Facility, including those advanced to RLP. At June 30, 2007, the Company was
      in
      compliance with all of its covenants.





As
      of
      June 30, 2007, the Company had no advances under the Facility and $1,674,214
      in
      outstanding checks, which had not yet been presented to the bank for payment.
      The outstanding checks have been reclassed from cash as they will be advanced
      from, or against, the Facility when presented for payment to the bank. The
      $1,674,214, in addition to a $300,000
      payable to the former shareholders of Airgroup, totals
      long term debt of $1,974,214 .





As
      of
      June 30, 2006, the Company had $941,560 in advances under the Facility along
      with $1,028,376 in outstanding checks which had not yet been presented to the
      bank for payment. The outstanding checks have been reclassed from cash, as
      they
      will be advanced from, or against, the facility when presented for payment
      to
      the bank. These amounts, in addition to $500,000 payable to the former
      shareholders of Airgroup, total long term debt of $2,469,936.





At June
      30,
      2007 ,
      based on available collateral and $315,000 in outstanding letter of credit
      commitments, there was $6,567,708 available for borrowing under the
      Facility. At June
      30, 2006, based on available collateral and $205,000 in outstanding letter
      of
      credit commitments, there was $3,189,615 available for borrowing under the
      Facility.





**NOTE
      11 - PROVISION FOR INCOME TAXES**





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




June
                  30, 2007
            
            
            June
                  30, 2006Deferred
                tax assets:Allowance
                for doubtful accounts
            
            $
            88,386
            
            $
            72,708Accruals
            
            
            862,767
            
            
            532,585Net
                operating loss carryforwards
            
            
            -
            
            
            162,088Stock
                based compensation
            
            
            66,051
            
            
            -Valuation
                allowance for loss carryforwards
            
            
            -
            
            
            (116,372
            )Other
                accrued income
            
            
            -
            
            
            33,631Total
                deferred tax assets
            
            $
            1,017,204
            
            $
            684,640Deferred
                tax liabilities:Accruals
            
            
            782,548
            
            
            368,340Stock
                options
            
            
            -
            
            
            38,883Total
                deferred tax liability
            
            $
            782,548
            
            $
            407,223Net
                deferred tax asset - current
            
            $
            234,656
            
            $
            277,417Long
                term deferred tax liability - intangibles - Note 4
            
            $
            608,523
            
            $
            816,544





The
      acquisition of Airgroup resulted in $932,280 of long term deferred tax liability
      resulting from the acquisition of certain amortizable intangibles, identified
      during the Company’s purchase price allocation, which is not deductible for tax
      purposes. The long term deferred tax liability will be reduced as the
      non-deductible amortization of the intangibles is recognized. See Note 4.




F-17




From
      inception through the year ended December 31, 2005, the Company experienced
      net
      losses and as a result did not incur any income tax expense or deferred taxes.
      Income tax expense attributable to operations is as follows.




Twelve
                months
              ended
                June 30,
            
            Six
                months
              ended
                June 30,
            
            YearEndedDecember31,2007
            
            2006
            
            2005Current:Federal
            
            $
            313,627
            
            $
            109,216
            
            $
            -State
            
            
            7,500
            
            
            -
            
            
            -Deferred:Federal
            
            
            (165,260
            )
            
            (148,311
            )
            
            -State
            
            
            -
            
            
            -
            
            
            -Net
                income tax expense (benefit)
            
            $
            155,867
            
            $
            (39,095
            )
            $
            -





The
      following table reconciles income taxes based on the U.S. statutory tax rate
      to
      the Company’s income tax expense.







Twelve
                months
              ended
                June 30,
            
            
            Six
                months
              ended
                June 30,
            
            
            Year
                Ended 

                December
                  31,2007
            
            
            2006
            
            
            2005Tax
                at statutory rate
            
            $
            108,325
            
            $
            10,741
            
            $
            -Net
                operating loss carryforward net of valuation allowance
            
            
            -
            
            
            (45,716
            )
            
            -Net
                tax payment for amended Airgroup 2005 return
            
            
            26,342
            
            
            -
            
            
            -State
                income taxes
            
            
            7,500
            
            
            -
            
            
            -Other
            
            
            13,700
            
            
            (4,120
            )
            
            -Net
                income tax expense (benefit)
            
            $
            155,867
            
            $
            (39,095
            )
            $
            -








**NOTE
      12 - CONTINGENCIES**





The
      Company’s acquisition agreement of Airgroup contains future contingent
      consideration provisions that provide for the selling shareholders to receive
      additional consideration if minimum pre-tax income levels are made in future
      periods. Pursuant to SFAS No. 141, *“Business
      Combinations,”* contingent consideration is accounted for as additional goodwill when
      earned.





Effective
      January 1, 2006, the Company acquired 100% of the outstanding stock of Airgroup.
      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) a subsequent cash payment of $0.5 million in
      cash on the two-year anniversary; (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. Through June 30, 2007, the
      former Airgroup shareholders earned a total of $214,000 in base earn-out
      payments which will be paid in fiscal year 2008.





Assuming
      minimum targeted earnings levels are achieved, the following table summarizes
      the Company’s contingent base earn-out payments related to the acquisition of
      Airgroup that will be paid in the fiscal years indicated based on results of
      the
      prior year (in thousands) (1) :




F-18




**2009**
            
            
            **2010**
            
            
            **Total**Earn-out
              paymentsCash
            
            $
            —
            
            $
            —
            
            $
            —Equity
            
            
            633
            
            
            634
            
            
            1,267Total
                potential earn-out payments
            
            $
            633
            
            $
            634
            
            $
            1,267Prior
                year earnings targets (income from continuing operations)(2)Total
                earnings actual and targets
            
            $
            2,500
            
            $
            2,500
            
            $
            5,000Earn-outs
                as a percentage of prior year earnings targets:Total
            
            
            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 refers to 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 to, 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
      fiscal
      year 2007, 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. For the twelve
      months ended June 30, 2007 there was $45,824 recorded as an accrued liability
      and other services expense and $49,000 of acquisition costs recorded as a long
      term other asset.





**NOTE
      13 - 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 June 30, 2007, none of the shares were issued or
      outstanding.





**Common
      Stock**





In
      September 2005, the Company’s Board of Directors approved a 3.5 for 1 split of
      its issued and outstanding common stock which was effectuated through a dividend
      of 2.5 shares for each share of common stock outstanding as of the record date.
      The dividend was payable on October 21, 2005 to shareholders of record on
      October 20, 2005. The stock split has been reflected in the Company’s
      consolidated financial statements for all periods presented. The common stock
      will continue to have a par value of $0.001 per share. Fractional shares were
      rounded upward.





In
      October 2005, the Company completed a private placement and issued 2,272,728
      shares of its common stock at a purchase price of $0.44 per share for aggregate
      gross proceeds of $1,000,000. This placement yielded net proceeds of $986,222
      for the Company, after the payment of out-of-pocket costs associated with the

      placement.




In
      December, 2005, the Company completed a private placement and issued 10,098,943
      shares of its common stock at a purchase price of $0.44 per share for aggregate
      gross proceeds of $4,400,000. This placement yielded net proceeds of $4,216,303
      for the Company, after the payment of placement agent fees and other
      out-of-pocket costs associated with the placement.




F-19




In
      December, 2005, a total of 7,700,001 shares of common stock were surrendered
      to
      the Company for cancellation, including 5,712,500 shares surrendered by Bohn
      H.
      Crain the
      Company’s Chief Executive Officer and Chairman of the Board of Directors and 1,904,166
      shares surrendered by Stephen M. Cohen, the
      Company’s Secretary General Counsel and a Director and other non-related investors
      surrendered 83,335 shares.





In
      December, 2005, the Company issued 500,000 shares of its common stock at a
      price
      of $0.44 per share in exchange for financial advisory and investment banking
      services provided in connection with, among other things, the
      Company’s transition to a third-party logistics.





In
      January 2006, the Company issued 1,009,093 shares of common stock to certain
      Airgroup shareholders and employees who are accredited investors for gross
      proceeds of $444,000. In February 2006, the Company issued 1,466,697 shares
      of
      common stock to a limited number of accredited investors for gross cash proceeds
      of $645,000. Each of these private placements was completed at a purchase price
      of $0.44 per share. Net of issuance costs, net proceeds were $441,637 and
      $640,022 respectively.





In
      September 2006, the Company issued 250,000 shares of the Company’s 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.





Pursuant
      to an agreement dated May 15, 2007, the Company agreed to issue to up to 200,000
      shares of common stock to a consultant in connection with his agreement to
      assist the Company establish an automotive services segment, with issuance
      of
      the shares to be subject to certain benchmarks. In connection with an agreement
      the Company signed with Mass on May 23, 2007, 50,000 of the shares has vested
      and are yet to be issued. An accrued current liability has been recorded in
      other accrued costs for the 50,000 shares with the offset to other assets.
      Vesting and issuance of the balance of the shares remains subject to
      uncertainty.





**NOTE
      14 - STOCK OPTION PLAN**





On
      October 20, 2005, the Company’s shareholders approved the Company’s 2005 Stock
      Incentive Plan (“2005 Plan). The 2005 Plan authorizes the granting of awards,
      the exercise of which would allow up to an aggregate of 5,000,000 shares of
      the
      Company’s common stock to be acquired by the holders of said awards. For the
      2005 Plan the awards can take the form of incentive stock options (“ISOs”) or
      nonqualified stock options (“NSOs”) and may be granted to key employees,
      directors and consultants. Options shall be exercisable at such time or times,
      or upon such event, or events, and subject to such terms, conditions,
      performance criteria, and restrictions as shall be determined by the Plan
      Administrator and set forth in the Option Agreement evidencing such Option;
      provided, however, that (i) no Option shall be exercisable after the expiration
      of ten (10) years after the date of grant of such Option, (ii) no Incentive
      Stock Option granted to a participant who owns more than 10% of the combined
      voting power of all classes of stock of the Company (or any parent or subsidiary
      of the Company) shall be exercisable after the expiration of five (5) years
      after the date of grant of such Option, and (iii) no Option granted to a
      prospective employee, prospective consultant or prospective director may become
      exercisable prior to the date on which such person commences Service with the
      Participating Company. Subject to the foregoing, unless otherwise specified
      by
      the Option Agreement evidencing the Option, any Option granted hereunder shall
      have a term of ten (10) years from the effective date of grant of the
      Option.





The
      price
      at which each share covered by an Option may be purchased shall be determined
      in
      each case by the Plan Administrator; provided, however, that such price shall
      not, in the case of an Incentive Stock Option, be less than the Fair Market
      Value of the underlying Stock at the time the Option is granted. If a
      participant owns (or is deemed to own under applicable provisions of the Code
      and rules and regulations promulgated hereunder) more than ten
      percent (10%) of the combined voting power of all classes of the stock of
      the Company and an Option granted to such participant is intended to qualify
      as
      an Incentive Stock Option, the Option price shall be no less than 110% of the
      Fair Market Value of the Stock covered by the Option on the date the Option
      is
      granted.





Fair
      market value of the Stock on any given date means (i) if the Stock is listed
      on
      any established stock exchange or a national market system, including without
      limitation the National Market or Small Cap Market of The NASDAQ Stock Market,
      its Fair Market Value shall be the closing sales price for such stock (or the
      closing bid, if no sales were reported) as quoted on such exchange or system
      for
      the last market trading day prior to the time of determination, as reported
      in
      The Wall Street Journal or such other source as the Administrator deems
      reliable; (ii) if the Stock is regularly traded on the NASDAQ OTC Bulletin
      Board
      Service, or a comparable automated quotation system, its Fair Market Value
      shall
      be the mean between the high bid and low asked prices for the Stock on the
      last
      market trading day prior to the day of determination; or (iii) in the absence
      of
      an established market for the Stock, the Fair Market Value thereof shall be
      determined in good faith by the Plan Administrator.




F-20




Under
      the
      2005 Plan, stock options were granted to employees up to 10 years at and are
      exercisable in whole or in part at stated times from the date of grant up to
      ten
      years from the date of grant. Under the 2005 Plan, during the twelve months
      ended June 30. 2007, 725,000 stock options were granted to employees at a
      weighted average exercise price of $.646 per share. During the six months ended
      June 30, 2006, 425,000 stock options granted to employees at a weighted average
      exercise price of $.44 per share under the 2005 Plan with 2,000,000 options
      granted at the end of December 31, 2005 with a weighted average exercise price
      of $.625 a share. There were no options granted prior to October 2005 as no
      option plan existed prior to October 2005. The Company adopted SFAS 123 (R)
      at
      the time of implementing its 2005 Plan and recorded a compensation expense
      of
      $194,269 for the twelve months ended June 30, 2007, $85,619 for the six months
      ended June 30, 2006, and $29,238 for the year ended December 31,
      2005.





The
      following table reflects activity under the plan for twelve months ended June
      30, 2007, six months ended June 30, 2006, and year ended December 31, 2005.
      There were no shares vested as a result of the recent inception of the stock
      options plan:




Twelve
                months ended
              June
                30, 2007
            
            Six
                months ended
              June
                30, 2006
            
            Year
                ended
              December
                31, 2005Granted
              Shares
            
            Weighted
              Average
              Exercise
              Price
            
            Granted
              Shares
            
            Weighted
              Average
              Exercise
              Price
            
            Granted
                Shares
            
            Weighted
              Average
              Exercise
                PriceOutstanding
                at beginning of year
            
            
            2,425,000
            
            $
            0.593
            
            
            2,000,000
            
            $
            0.625
            
            
            -
            
            $
            -Granted
            
            
            725,000
            
            $
            0.646
            
            
            425,000
            
            
            0.440
            
            
            2,000,000
            
            
            0.625Exercised
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Forfeited
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Cancelled
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Outstanding
                at end of year
            
            
            3,150,000
            
            $
            0.605
            
            
            2,425,000
            
            $
            0.593
            
            
            2,000,000
            
            $
            0.625Exercisable
                at end of year
            
            
            485,000
            
            $
            0.593
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -Non-vested
                at end of year
            
            
            2,665,000
            
            $
            0.607
            
            
            2,425,000
            
            $
            0.593
            
            
            2,000,000
            
            $
            0.625





No
      options were exercised or forfeited during the twelve months ending June 30,
      2007, the six months ended June 30, 2006, year ended December 31, 2005 or prior
      years. Non vested options are the net of total options outstanding at the end
      of
      the year less exercisable. For the six months ended June 30, 2006, year ended
      December 31, 2005 or prior years, all outstanding options were
      non-vested.





The
      fair
      value of each stock option grant is estimated as of the date of grant using
      the
      Black-Scholes option pricing model with the following weighted average
      assumptions:




Twelve
                months ended
              June
                30, 2007
            
            Six
                months ended
              June
                30, 2006
            
            
            Year
                ended
              December
                31, 2005Risk-Free
                Interest Rates
            5.05%
            
            3.73%
            
            
            3.73%Expected
                Lives
            5
                yrs
            
            5
                yrs
            
            
            5
                yrsExpected
                Volatility
            102.5%
            
            116.9%
            
            
            117.8%Expected
                Dividend Yields
            0.00%
            
            0.00%
            
            
            0.00%Forfeiture
                Rate
            0.00%
            
            0.00%
            
            
            0.00%





No
      stock
      options were granted prior to October 2005 as the stock incentive plan did
      not
      exist, so the Black-Scholes information has not been presented.





As
      of
      June 30, 2007, the Company had $916,000 of total unrecognized stock compensation
      costs relating to unvested stock options which is expected to be recognized
      over
      a weighted average period of 3.74 years. The following table summarizes the
      Company’s unvested stock options and changes for the year ended June 30, 2007,
      six months ended June 30, 2006, and year ended December 31, 2005.




F-21




Shares
            
            
            Weighted
              Average
              Grant
              Date
                Fair
              ValueGranted
                during the year ended December 31, 2005
            
            
            2,000,000
            
            $
            0.351Outstanding
                at December 31, 2005
            
            
            2,000,000
            
            
            0.351Granted
                during the six months ended June 30, 2006
            
            
            425,000
            
            
            0.363Outstanding
                at June 30, 2006
            
            
            2,425,000
            
            
            0.353Granted
                during the year ended June 30, 2007
            
            
            725,000
            
            
            0.509Less
                options vested during 2007
            
            
            (485,000
            )
            
            (0.353
            )Outstanding
                at June 30, 2007
            
            
            2,665,000
            
            $
            0.395





The
      following table summarizes outstanding and exercisable options by price range
      as
      of June 30, 2007:




Exercisable
                OptionsExercise
                Prices
            
            Number
              Outstanding
              at
              June
                30,
              2007
            
            Weighte
              Average
              Remaining
              Contractual
                Life-Years
            
            Weighted
              Average
              Exercise
              Price
            
            Aggregate
              Intrinsic
              Value
              at
                June 30,
              2007
            
            Number
              Exercisable
            
            Weighted
              Average
              Exercise
              Price$0.40
                - $0.59
            
            
            1,575,000
            
            
            8.54
            
            $
            0.489
            
            $
            175,500
            
            
            285,000
            
            $
            0.482$0.60
                - $0.79
            
            
            1,530,000
            
            
            8.93
            
            $
            0.713
            
            $
            -
            
            
            200,000
            
            $
            0.750$1.00
                - $1.19
            
            
            45,000
            
            
            9.25
            
            $
            1.010
            
            $
            -
            
            
            -
            
            
            -Total
            
            
            3,150,000
            
            
            8.75
            
            $
            0.605
            
            $
            175,500
            
            
            485,000
            
            $
            0.593





**NOTE
      15 - QUARTERLY FINANCIAL DATA SCHEDULE (Unaudited)**





**2007
                Quarter
                Ended**June
                30
            
            March
                31
            
            December
                31
            
            September
                30Revenue
            
            $
            23,371,733
            
            $
            19,394,026
            
            $
            18,343,928
            
            $
            14,417,101Cost
                of transportation
            
            
            15,455,623
            
            
            12,278,178
            
            
            11,655,542
            
            
            9,423,319Net
                revenues
            
            
            7,916,110
            
            
            7,115,848
            
            
            6,688,386
            
            
            4,993,782Total
                operating expenses
            
            
            7,803,590
            
            
            7,030,185
            
            
            6,641,277
            
            
            4,826,360Income
                from operations
            
            
            112,520
            
            
            85,663
            
            
            47,109
            
            
            167,422Total
                other income (expense)
            
            
            (15,114
            )
            
            (24,690
            )
            
            (2,737
            )
            
            (6,088
            )Income
                before income tax and minority interest
            
            
            97,406
            
            
            60,973
            
            
            44,372
            
            
            161,334Income
                tax (benefit)
            
            
            137,542
            
            
            37,449
            
            
            (20,932
            )
            
            1,808Income
                before minority interest
            
            
            (40,136
            )
            
            23,524
            
            
            65,304
            
            
            159,526Minority
                interest
            
            
            45,464
            
            
            18
            
            
            -
            
            
            -Net
                income (loss)
            
            $
            (85,600
            )
            $
            23,506
            
            $
            65,304
            
            $
            159,526Net
                income (loss) per common share - basic and diluted
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -




F-22




**2006
                Quarter****Ended**June
                30
            
            March
                31
            
            December
                31
            
            September
                30Revenue
            
            $
            14,626,332
            
            $
            11,842,717
            
            $
            -
            
            $
            -Cost
                of transportation
            
            
            9,486,259
            
            
            7,479,707
            
            
            -
            
            
            -Net
                revenues
            
            
            5,140,073
            
            
            4,363,010
            
            
            -
            
            
            -Total
                operating expenses
            
            
            4,967,761
            
            
            4,489,907
            
            
            126,011
            
            
            14,075Income
                (loss) from operations
            
            
            172,312
            
            
            (126,897
            )
            
            (126,011
            )
            
            (14,075
            )Total
                other income (expense)
            
            
            (11,966
            )
            
            (1,858
            )
            
            14,433
            
            
            (500
            )Income
                (loss) before income tax expense (benefit)
            
            
            160,346
            
            
            (128,755
            )
            
            (111,578
            )
            
            (14,575
            )Income
                tax (benefit)
            
            
            62,550
            
            
            (101,645
            )
            
            -
            
            
            -Income
                before minority interest
            
            
            97,796
            
            
            (27,110
            )
            
            (111,578
            )
            
            (14,575
            )Minority
                interest
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income (loss)
            
            $
            97,796
            
            $
            (27,110
            )
            $
            (111,578
            )
            $
            (14,575
            )Net
                income (loss) per common share - basic and diluted
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -





**NOTE
      16 - VALUATION ALLOWANCE AND QUALIFYING ACCOUNTS**




Balance
                at
              beginning
                of
              year
            
            
            Write
                off to
              expense
            
            
            Increase
                in
              reserve
            
            
            Balance
                at end of yearAllowance
                for Doubtful Accounts:Year
                ended December 31, 2004
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Year
                ended December 31, 2004
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Six
                months ended June 30, 2006
            $
            218,000
            
            $
            (15,170
            )
            $
            -
            
            $
            202,830Twelve
                months ended June 30, 2007
            $
            202,830
            
            $
            (1,148
            )
            $
            58,278
            
            $
            259,960





F-23