RADIANT LOGISTICS, INC - Annual Report: 2010 (Form 10-K)
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, 2010
¨ 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)
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Delaware
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04-3625550
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(State
or other jurisdiction of
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(IRS
Employer Identification Number)
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incorporation
or organization)
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405
114th
Avenue S.E.
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Bellevue,
WA 98004
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(Address
of Principal Executive
Offices) (Zip
Code)
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(425)
943-4599
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Registrant’s
Telephone Number, Including Area
Code)
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Title
of Each Class
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Name
of Exchange on which Registered
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Common
Stock , $.001 Par Value
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None
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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 ¨ No
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. ¨
Indicate
by check mark whether the registrant (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 x No
¨
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. ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No
[* ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer ¨
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Accelerated
filer ¨
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Non-accelerated
filer ¨
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Smaller
Reporting Company x
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No
x
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant based on the closing share price of the
registrant's common stock on December 31, 2009 as reported on the OTC Bulletin
Board was $3,992,793. Shares of common stock held by each current executive
officer and director and by each person who is known by the registrant to own 5%
or more of the outstanding common stock have been excluded from this computation
in that such persons may be deemed to be affiliates of the
registrant. This determination of affiliate status is not a
conclusive determination for other purposes.
As of
September 27, 2010, 29,894,421 shares of the registrant's common stock were
outstanding.
Documents
Incorporated by Reference: None
TABLE OF
CONTENTS
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PART
I
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ITEM
1
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BUSINESS
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2
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ITEM
1A
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RISK
FACTORS
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9
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ITEM
2
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PROPERTIES
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16
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ITEM
3
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LEGAL
PROCEEDINGS
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16
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ITEM
4
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REMOVED
AND RESERVED
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16
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PART
II
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ITEM
5
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MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
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16
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ITEM
7
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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18
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ITEM
8
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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32
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ITEM
9
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
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32
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ITEM
9A
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CONTROLS
AND PROCEDURES
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32
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ITEM
9B
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OTHER
INFORMATION
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33
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PART
III
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ITEM
10
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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33
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ITEM
11
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EXECUTIVE
COMPENSATION
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35
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ITEM
12
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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40
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| ITEM 13 |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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41
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ITEM
14
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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42
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PART
IV
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ITEM
15
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EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
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43
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Signatures
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45
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Financial
Statements
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F-1
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i
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
fact contained herein, including, without limitation, statements regarding our
future financial position, business strategy, budgets, projected revenues and
costs, and plans and objectives of management for future operations, are
forward-looking statements. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expects," "intends," "plans," "projects," "estimates," "anticipates," or
"believes" or the negative thereof or any variation thereon or similar
terminology or expressions. We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements are not guarantees and are subject to known and
unknown risks, uncertainties and assumptions about us that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. While it
is impossible to identify all of the factors that may cause our actual operating
performance, events, trends or plans to differ materially from those set forth
in such forward-looking statements, such factors include the inherent risks
associated with our ability to: (i) use our current infrastructure 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 under the
caption “Risk Factors” in Part 1 Item 1A of this report. All subsequent written
and oral forward-looking statements attributable to us, or persons acting on our
behalf, are expressly qualified in their entirety by the foregoing.
Readers are cautioned not to place undue reliance on our forward-looking
statements, as they speak only as of the date made. Except as required by law,
we assume no duty to update or revise our forward-looking
statements.
1
The
Company
Radiant
Logistics, Inc. (the "Company," "we" or "us") was incorporated in the State of
Delaware on March 15, 2001. Currently, we are executing a strategy to build
a global transportation and supply chain management company through organic
growth and the strategic acquisition of best-of-breed, non-asset based
transportation and logistics providers to offer our customers domestic and
international freight forwarding and an expanding array of value added supply
chain management services, including order fulfillment, inventory management and
warehousing.
We
completed the first step in our business strategy through the acquisition of
Airgroup Corporation ("Airgroup") effective as of January 1, 2006. Airgroup is a
Bellevue, Washington based non-asset based logistics company providing domestic
and international freight forwarding services through a network which includes a
combination of company-owned and exclusive agent offices across North
America. Airgroup has a diversified account base including
manufacturers, distributors and retailers using a network of independent
carriers and international agents positioned strategically around the
world.
We
continue to identify a number of additional companies as suitable acquisition
candidates and have completed two material acquisitions since our acquisition of
Airgroup. In November 2007, we acquired Automotive Services Group in
Detroit, Michigan to service the automotive industry. In September 2008, we
acquired Adcom Express, Inc. d/b/a Adcom Worldwide ("Adcom"), adding an
additional 30 locations across North America and augmenting our overall domestic
and international freight forwarding capabilities.
In
connection with the acquisition of Adcom, we changed the name of Airgroup
Corporation to Radiant Global Logistics, Inc. ("RGL") in order to better
position our centralized back-office operations to service both the Airgroup and
Adcom network brands. RGL, through the Airgroup and Adcom network
brands, has a diversified account base including manufacturers, distributors and
retailers using a network of independent carriers and international agents
positioned strategically around the world.
Our
growth strategy will continue to 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. We will 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.
As we
continue to build out our network of exclusive agent locations to achieve a
level of critical mass and scale, we are executing an acquisition strategy to
develop additional growth opportunities. Our acquisition strategy relies 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.
Successful
implementation of our growth strategy depends upon a number of factors,
including our ability to: (i) continue developing new agency locations; (ii)
locate acquisition opportunities; (iii) secure adequate funding to finance
identified acquisition opportunities; (iv) efficiently integrate the businesses
of the companies acquired; (v) generate the anticipated economies of scale from
the integration; and (vi) maintain the historic sales growth of the
acquired businesses in order to generate continued organic
growth. There are a variety of risks associated with our ability to
achieve our strategic objectives, including the ability to acquire and
profitably manage additional businesses and the intense competition in the
industry for customers and for acquisition candidates. Certain of
these business risks are identified or referred to below in Item 1A of this
Report.
2
We will
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. Although we can make no assurance as to our long term
access to debt or equity securities or our ability to develop an active trading
market, in March of 2010, we were successful in increasing our credit facility
from $15.0 million to $20.0 million.
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. We operate as a freight
forwarder. Freight forwarders procure shipments from customers and
arrange 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 pickup 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 offer a variety of customized
shipping options.
Most
freight forwarders, like Radiant Global Logistics, 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:
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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.
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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.
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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.
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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.
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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 which can facilitate
real-time transaction processing and web-based shipment
monitoring.
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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 us through our Airgroup and Adcom brands.
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. Through
our most recent acquisition of Adcom we have made further progress in our
acquisition strategy and intend to pursue further acquisition opportunities to
consolidate and enhance our position in current markets and acquire operations
in new markets.
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. We believe the highly
fragmented composition of the marketplace, the industry participants' need for
capital, and their owners' desire for liquidity has and will continue to produce
a large number of attractive acquisition candidates. More
specifically, we believe that there are a number of participants within the
agent-based forwarding community that will be seeking liquidity within the next
several years as these owners approach retirement age, which creates a significant
growth opportunity by supporting these logistics entrepreneurs in
transition. Our target acquisition candidates are generally expected
to have earnings of $1.0 to $5.0 million per year. 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:
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the
highly fragmented composition of our
market;
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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;
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the
potential for increased profitability as a result of our centralization of
certain administrative functions, greater purchasing power and economies
of scale;
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our
centralized management capabilities should enable us to effectively manage
our growth and the integration of acquired
companies;
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our
status as a public corporation may ultimately provide us with a liquid
trading currency for acquisitions;
and
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the
ability to utilize our experienced management to identify, acquire and
integrate acquisition
opportunities.
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We will
be opportunistic in executing our acquisition strategy with a bias towards
completing transactions 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 a Central Platform. A key
element of our operating strategy is to maximize our operational efficiencies by
integrating general and administrative functions into our back-office operations
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 Airgroup and Adcom stations, 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. Our revenues are
generated from a number of diverse services, including air freight forwarding,
ocean freight forwarding, 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 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.
5
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
is 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 are
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 intention to develop a global network;
(iii) our information technology resources; and (iv) our diverse customer
base:
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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.
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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 pickup and
delivery network, ground and air networks, and logistics capabilities. Our
ground and pickup 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.
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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.
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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. Although we have no customers that account for
more than 5% of our revenues, there are two agency
locations that each account
for more than 5% of our total gross
revenues.
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6
Sales
and Marketing
We
principally market our services through the senior management teams in place at
each of our 72 company-owned and exclusive independent agent offices located
across North America. Each office is staffed with operational employees to
provide support for the sales team, develop frequent contact with the customer’s
traffic department, and maintain customer service. Our current
network is predominantly represented by exclusive agent operations that rely on
us for operating authority, technology, sales and marketing support, access to
working capital and our carrier network, and collective purchasing power.
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.
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.
During
the past two years, we have not spent any material amount on research and
development activities.
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.
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.
Principal
Customers
Although
we have no customers that account for more than 5% of our revenues, there are
two agency locations which each account for more than 5% of our total gross
revenues.
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.
7
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 U.S. 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.
Personnel
As of the
date of this report, we have approximately 82 employees, of which 80 are full
time. 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.
8
ITEM
1A. RISK FACTORS
We
are largely dependent on the efforts of our exclusive agents to generate our
revenue and service our customers.
We
currently sell our services through a network predominantly represented by
exclusive agent stations located throughout North America. Although we have
exclusive and long-term relationships with these agents, our Airgroup agency
agreements are generally terminable by either party subject to requisite notice
provisions that generally range from 10-30 days. The Adcom agency agreements
generally carry a fixed term and can range from 1 to 25 years and generally
include a first-right-of refusal to acquire the location. Although we have no
customers that account for more than 5% of our revenues, there are two agency
locations which each account for more than 5% of our total gross 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,
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 suffer a loss in our business.
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.
9
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 that 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.
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, and 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 us, assumes liability for the safe delivery of
the client’s cargo to its ultimate destination, unless due to our own errors and
omissions.
10
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.
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
contemplates 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 is limited. This may 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 ("EBITDA"). Under
this covenant, our funded debt is limited to a multiple of 4.00 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.
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 Radiant Global Logistics, 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.
11
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 effect on the trading price of our
shares and overall market capitalization.
RISKS
RELATED TO OUR ACQUISITION STRATEGY
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:
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failure
to agree on the terms necessary for a transaction, such as the purchase
price;
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incompatibility
between our operational strategies and management
philosophies
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and
those of the potential acquiree;
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competition
from other acquirers of operating
companies;
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lack
of sufficient capital to acquire a profitable logistics company;
and
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unwillingness
of a potential acquiree to work with our
management.
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Risks related to acquisition
financing.
In order
to continue to pursue our acquisition strategy in the longer term, we may be
required to obtain 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
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.
12
Our
credit facility places certain limits on the type and number of acquisitions we
may make.
In March
2010, our $15.0 million revolving credit facility, including a $0.5 million
sublimit to support letters of credit, was increased to $20.0 million, to
provide additional funding for further acquisitions and 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 are 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.
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 including 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.
Our financial statements will show that our intangible assets are diminishing in
value, when, in fact, we believe 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 EBITDA, a measure of financial performance
which does not conform to generally accepted accounting principles ("GAAP"),
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.
13
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 a limited number of
acquisitions and, therefore, our ability to complete such acquisitions and
integrate any acquired businesses into our operations 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:
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difficulties
in integrating operations, technologies, services and
personnel;
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the
diversion of financial and management resources from existing
operations;
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the
risk of entering new markets;
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the
potential loss of key employees;
and
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the
inability to generate sufficient revenue to offset acquisition or
investment costs.
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As a
result, if we fail to properly evaluate and execute any acquisitions or
investments, our business and prospects may be seriously harmed.
RISKS
RELATED TO OUR COMMON STOCK
Provisions
of our certificate of incorporation, 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 ("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.
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.
14
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 under 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 the Adcom and other potential
acquisitions may result in additional dilution to our existing
stockholders.
We have
issued, and may be required to issue, additional shares of common stock or
common stock equivalents in payment of the purchase price of companies we have
acquired. This will 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.
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 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 cannot assure that we will do so or that such application
will be approved.
15
We
are required to comply with Section 404a of the Sarbanes-Oxley Act of 2002 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 404a of the Sarbanes-Oxley Act of 2002
require annual assessment of our internal controls over financial reporting,
Starting with our fiscal year ended June 30, 2008, we became subject to the
requirements of Section 404a. Any failure to maintain adequate
controls could result in delays or inaccuracies in reporting financial
information or non-compliance with SEC reporting and other regulatory
requirements, any of which could adversely affect our business and stock
price.
ITEM
2. PROPERTIES
Our
principal executive offices are located at 405 114th Avenue
S.E., Bellevue, Washington 98004 and consist of 13,018 feet of office space
which we lease for an average of $17,160 per month over the life of the lease
expiring April 30, 2021. We also maintain approximately 8,125 feet of
office space at 19320 Des Moines Memorial Drive South, SeaTac, Washington which
we lease for approximately $5,650 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.
Team
Air Express Proceeding
On
February 21, 2007, Team Air Express, Inc. (“Team Air”) filed suit against the
Company, Texas Time Express, Inc. (the current owner of the Company’s Dallas
branch office), and the individual owners and officers of Texas Time, in the
District Court of the State of Texas, Tarrant County, claiming that collectively
the Defendants tortuously interfered with Team Air’s contract and business
relations with VRC Express, Inc. (“VRC”), the former owner of Team Air’s Chicago
branch office. Team Air seeks to recover damages based on alleged interference
with its existing contract and business relationship with VRC. More
specifically, Team Air contends Texas Time and we intentionally attempted to
subvert the business relationship with Team Air and VRC. Team Air further
contends that the Defendants’ efforts to solicit VRC were unlawful and intended
to cause harm to Team Air, thus exceeding the bounds of fair competition. The
litigation is ongoing and management believes no interference of the VRC
contract has occurred. We will continue to vigorously defend this
matter.
ITEM
4. REMOVED AND RESERVED
Market
Information
Our
common stock currently trades on the OTC Bulletin Board under the symbol
"RLGT.OB." 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 during our past
two fiscal years, 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, 2010, was $0.36 per share.
16
|
High
|
Low
|
|||||||
|
Year Ended June 30, 2010:
|
||||||||
|
Quarter
ended June 30, 2010
|
$ | .30 | $ | .23 | ||||
|
Quarter
ended March 31, 2010
|
.26 | .22 | ||||||
|
Quarter
ended December 31, 2009
|
.32 | .21 | ||||||
|
Quarter
ended September 30, 2009
|
.32 | .20 | ||||||
|
Year Ended June 30, 2009:
|
||||||||
|
Quarter
ended June 30, 2009
|
$ | .32 | $ | .12 | ||||
|
Quarter
ended March 31, 2009
|
.17 | .06 | ||||||
|
Quarter
ended December 31, 2008
|
.30 | .09 | ||||||
|
Quarter
ended September 30, 2008
|
.30 | .15 | ||||||
Holders
As of
September 24, 2010, the number of stockholders of record of our common stock was
107. 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.
Pacific
Stock Transfer Company, 500 East Warm Springs, Suite 240, Las Vegas, Nevada
89119, serves as our transfer agent.
We have a
share repurchase program that authorizes us to purchase up to 5,000,000 shares
of common stock through December 31, 2010. The share repurchases may
occur from time-to-time through open market purchases at prevailing market
prices or through privately negotiated transactions as permitted by securities
laws and other legal requirements. The following table sets forth
information regarding our repurchases or acquisitions of common stock during the
fourth quarter of Fiscal 2010:
17
|
Period
|
Total Number
of Shares
(or Units)
Purchased
|
Average
Price Paid
per Share
(or Unit)
|
Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
|
Maximum Number
(or Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
Under the Plans or
Programs (1)
|
||||
|
Repurchases
from April 1, 2010 through April 30, 2010
|
351,000
|
0.26
|
351,000
|
2,281,851
|
||||
|
Repurchases
from May 1, 2010 through May 31, 2010
|
156,000
|
0.27
|
156,000
|
2,125,851
|
||||
|
Repurchases
from June 1, 2010 through June 30, 2010
|
554,350
|
0.28
|
554,350
|
1,571,501
|
||||
|
Total
|
1,061,350
|
$
|
0.27
|
1,061,350
|
1,571,501
|
|||
|
(1)
|
In
May 2009, our Board of Directors authorized the repurchase of up to
5,000,000 shares of our common
stock.
|
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The
following discussion and analysis of our financial condition and result of
operations should be read in conjunction with the consolidated financial
statements and the related notes and other information included elsewhere in
this report.
Overview
We are a
Bellevue, Washington based non-asset based logistics company providing domestic
and international freight forwarding services through a network which includes a
combination of company-owned and exclusive agent offices across North
America. Operating under the Airgroup and Adcom brands, we service a
diversified account base including manufacturers, distributors and retailers
using a network of independent carriers and international agents positioned
strategically around the world.
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.
We
continue to identify a number of additional companies as suitable acquisition
candidates and have completed two material acquisitions since our initial
acquisition of Airgroup in January of 2006. In November 2007, we
acquired Automotive Services Group in Detroit, Michigan to service the
automotive industry. In September 2008, we acquired Adcom Express, Inc.
d/b/a Adcom Worldwide ("Adcom"), adding an additional 30 locations across North
America and augmenting our overall domestic and international freight forwarding
capabilities. We have built a global transportation and supply chain management
company offering our customers domestic and international freight forwarding
services and an expanding array of value added supply chain management services,
including order fulfillment, inventory management, and warehousing.
Our
growth strategy will continue to 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, 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. We will continue to search for targets that fit within its
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.
18
As we
continue to build out its network of exclusive agent locations to achieve a
level of critical mass and scale, we are executing an acquisition strategy to
develop additional growth opportunities. Our acquisition strategy relies 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.
Successful
implementation of our growth strategy depends upon a number of factors,
including our ability to: (i) continue developing new agency locations; (ii)
locate acquisition opportunities; (iii) secure adequate funding to finance
identified acquisition opportunities; (iv) efficiently integrate the businesses
of the companies acquired; (v) generate the anticipated economies of scale from
the integration; and (vi) maintain the historic sales growth of the
acquired businesses in order to generate continued organic
growth. There are a variety of risks associated with our ability to
achieve its strategic objectives, including the ability to acquire and
profitably manage additional businesses and the intense competition in the
industry for customers and for acquisition candidates.
Performance
Metrics
Our
principal source of income is derived from freight forwarding services. As a
freight forwarder, we arrange for the shipment of our customers’ freight from
point of origin to point of destination. Generally, we quote our customers a
turnkey 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
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.
19
Further,
the financial covenants of our credit facility adjust EBITDA to exclude costs
related to share based compensation expense, extraordinary items and other
non-cash charges.
Our
compliance with the financial covenants of our credit facility is particularly
important given the materiality of the credit facility to our day-to-day
operations and overall acquisition strategy. Our debt capacity, subject to the
requisite collateral at an advance rate of 80% of eligible domestic accounts
receivable and up to 60% of eligible foreign receivables, is limited to a
multiple of 4.00 times our consolidated EBITDA (as adjusted) as measured on a
rolling four quarter basis. If we fail to comply with the covenants in our
credit facility and are unable to secure a waiver or other relief, our financial
condition would be materiality weakened and our ability to fund day-to-day
operations would be materially and adversely affected. Accordingly,
we intend to employ EBITDA and adjusted EBITDA as management tools to measure
our historical financial performance and as a benchmark for future financial
flexibility.
Our
operating results are also subject to seasonal trends when measured on a
quarterly basis. The impact of seasonality on our business will depend on
numerous factors, including the markets in which we operate, holiday seasons,
consumer demand and economic conditions. Since our revenue is largely derived
from customers whose shipments are dependent upon consumer demand and
just-in-time production schedules, the timing of our revenue is often beyond our
control. Factors such as shifting demand for retail goods and/or manufacturing
production delays could unexpectedly affect the timing of our revenue. As we
increase the scale of our operations, seasonal trends in one area of our
business may be offset to an extent by opposite trends in another area. We
cannot accurately predict the timing of these factors, nor can we accurately
estimate the impact of any particular factor, and thus we can give no assurance
any 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. These judgments are normally based on knowledge and
experience regarding 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 (including
acquired intangibles), recoverability of goodwill, and revenue
recognition.
We
perform an annual impairment test for goodwill. The first step of the impairment
test requires us to determine the fair value of each reporting unit, and compare
the fair value to the reporting unit's carrying amount. We have only one
reporting unit. 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 typically 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.
20
During
the second quarter of fiscal 2009, in connection with the preparation of the
condensed consolidated financial statements included herein, we concluded
indicators of potential impairment were present due to the sustained decline in
our share price resulting in our market capitalization being less than its book
value. We conducted an impairment test during the second quarter of fiscal 2009
based on the facts and circumstances at that time and our business strategy in
light of existing industry and economic conditions, as well as taking into
consideration future expectations. As we have significantly grown the business
since our initial acquisition of Airgroup, we have also grown its customer
relationship intangibles as we added additional stations. Through our impairment
testing and review, we concluded our discounted cash flow analysis supports a
valuation of our identifiable intangible assets well in excess of their carrying
value. However, generally accepted accounting principles ("GAAP") do
not allow us to recognize the previously unrecognized intangible assets in
connection with these new stations. Factoring this with management’s
assessment of the fair value of other assets and liabilities resulted in no
residual implied fair value remaining to be allocated to goodwill. As a result,
for the quarter ending December 31, 2008, we recorded a non-cash goodwill
impairment charge of $11.4 million. This non-cash charge did not have any impact
on our compliance with the financial covenants in our credit
agreement.
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 five years and non-compete agreements are
amortized using the straight line method over the term of the underlying
agreements.
We review
long-lived assets to be held-and-used for impairment whenever events or changes
in circumstances indicate 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 estimate 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 its air and ocean freight revenues by purchasing transportation
services from direct (asset-based) carriers and reselling those services to its
customers. Based upon the terms in the contract of carriage, revenues related to
shipments where the Company issues a House Airway Bill ("HAWB") or a House Ocean
Bill of Lading ("HOBL") are recognized at the time the freight is tendered to
the direct carrier at origin. Costs related to the shipments are also
recognized at this same time based upon anticipated margins, contractual
arrangements with direct carriers, and other known factors. The estimates are
routinely monitored and compared to actual invoiced costs. The estimates are
adjusted as deemed necessary by us to reflect differences between the original
accruals and actual costs of purchased transportation.
This
method generally results in recognition of revenues and purchased transportation
costs earlier than the preferred methods under GAAP which do not recognize
revenue until a proof of delivery is received or which recognize revenue as
progress on the transit is made. Our method of revenue and cost recognition does
not result in a material difference from amounts that would be reported under
such other methods.
Basis
of Presentation
The
results of operations discussion which appears below has been presented
utilizing a combination of historical and, where relevant, pro forma unaudited
information to include the effects of the acquisition of Adcom on our
consolidated financial statements during fiscal year 2009. The pro forma
information has been presented for fiscal year ended June 30, 2009 as if we had
acquired Adcom as of July 1, 2008. The pro forma results are also adjusted to
reflect a consolidation of the historical results of operations of Adcom and the
Company as adjusted to reflect the amortization of acquired intangibles and are
also provided in the Financial Statements included within this
report.
The pro
forma financial data 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 which might be attained in the future.
21
We
generated transportation revenue of $146.7 million and net transportation
revenue of $45.6 million for the year ended June 30, 2010, as compared to
transportation revenue of $137.0 million and net transportation revenue of $45.6
million for the year ended June 30, 2009. Net income was $2.0 million
for the year ended June 30, 2010, compared to a net loss of $9.7 million for the
year ended June 30, 2009.
We had
adjusted EBITDA of $4.2 million and $3.7 million for years ended June 30, 2010
and 2009, 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, all amortization charges relating to leasehold improvements
and other intangible assets, and impairment charges relating to goodwill. We
then further adjust EBITDA to exclude costs related to share based compensation
expense, unusual items and other non-cash charges consistent with the financial
covenants of our credit facility. Our ability to generate adjusted EBITDA
ultimately limits the amount of debt that we may carry and is a good indicator
of our financial flexibility and capacity to complete additional acquisitions in
compliance with the credit agreement. A violation of this covenant in
the credit agreement would greatly limit our financial flexibility, reduce
available liquidity, and absent a waiver, could give rise to an event of default
under the credit agreement. For the forgoing reasons, we believe that
the credit agreement is material to our operations and that adjusted EBITDA is
important to an evaluation of our financial condition and
liquidity. 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 for the fiscal years ended June 30,
2010 and June 30, 2009 of adjusted EBITDA to net income, the most directly
comparable GAAP measure in accordance with SEC Regulation G (in
thousands):
|
Years ended June 30,
|
Change
|
|||||||||||||||
|
2010
|
2009
|
Amount
|
Percent
|
|||||||||||||
|
Net
income (loss)
|
$ | 1,959 | $ | (9,730 | ) | $ | 11,689 | (120.1 | )% | |||||||
|
Income
tax expense
|
1,093 | 44 | 1,049 | 2,384.1 | % | |||||||||||
|
Net
interest expense
|
135 | 204 | (69 | ) | (33.8 | )% | ||||||||||
|
Depreciation
and amortization
|
1,598 | 1,743 | (145 | ) | (8.3 | )% | ||||||||||
|
EBITDA
(Earnings before interest, taxes, depreciation and
amortization)
|
$ | 4,785 | $ | (7,739 | ) | $ | 12,524 | (161.8 | )% | |||||||
|
Share
based compensation and other non-cash costs
|
315 | 203 | 112 | 55.2 | % | |||||||||||
|
Goodwill
impairment
|
- | 11,403 | (11,403 | ) | (100.0 | )% | ||||||||||
|
Gain
on extinguishment of debt
|
(135 | ) | (190 | ) | 55 | (28.9 | )% | |||||||||
|
Business
& Occupancy tax refund
|
(364 | ) | - | (364 | ) | N/A | ||||||||||
|
Gain
on litigation settlement
|
(355 | ) | - | (355 | ) | N/A | ||||||||||
|
Adjusted
EBITDA
|
$ | 4,246 | $ | 3,677 | $ | 569 | 15.5 | % | ||||||||
The
following table summarizes transportation revenue, cost of transportation and
net transportation revenue (in thousands) for the fiscal years ended June 30,
2010 and June 30, 2009:
|
Years ended June 30,
|
Change
|
|||||||||||||||
|
2010
|
2009
|
Amount
|
Percent
|
|||||||||||||
|
Transportation
revenue
|
$ | 146,716 | $ | 136,996 | $ | 9,720 | 7.1 | % | ||||||||
|
Cost
of transportation
|
101,086 | 91,427 | 9,659 | 10.6 | % | |||||||||||
|
Net
transportation revenue
|
$ | 45,630 | $ | 45,569 | $ | 61 | 0.1 | % | ||||||||
|
Net
transportation margins
|
31.1 | % | 33.3 | % | ||||||||||||
22
We
generated transportation revenue of $146.7 million and net transportation
revenue of $45.6 million for the year ended June 30, 2010, as compared to
transportation revenue of $137.0 million and net transportation revenue of $45.6
million for the year ended June 30, 2009. Domestic and international
transportation revenue was $78.6 million and $68.1 million, respectively, for
the year ended June 30, 2010, compared with $73.2 million and $63.8 million,
respectively, for the year ended June 30, 2009. Transportation
revenues and costs of transportation increased in fiscal year 2010 primarily due
to the addition of new agent-based locations.
Cost of
transportation was 68.9% and 66.7% of transportation revenue for the years ended
June 30, 2010 and 2009, respectively. Net transportation margins were
31.1% and 33.3% of transportation revenue for the years ended June 30, 2010 and
2009, respectively. The decrease in net transportation margins was
due to pricing pressures in the marketplace associated with the weak economic
environment.
The
following table compares condensed consolidated statement of income data as a
percentage of our net transportation revenue (in thousands) for the fiscal years
ended June 30, 2010 and June 30, 2009:
|
Years ended June 30,
|
||||||||||||||||||||||||
|
2010
|
2009
|
Change
|
||||||||||||||||||||||
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||||||||
|
Net
transportation revenue
|
$ | 45,630 | 100.0 | % | $ | 45,569 | 100.0 | % | $ | 61 | 0.1 | % | ||||||||||||
|
Agent
commissions
|
31,377 | 68.8 | % | 30,565 | 67.1 | % | 812 | 2.7 | % | |||||||||||||||
|
Personnel
costs
|
5,882 | 12.9 | % | 6,921 | 15.2 | % | (1,039 | ) | (15.0 | )% | ||||||||||||||
|
Selling,
general and administrative
|
4,295 | 9.4 | % | 4,288 | 9.4 | % | 7 | 0.2 | % | |||||||||||||||
|
Depreciation
and amortization
|
1,598 | 3.5 | % | 1,743 | 3.8 | % | (145 | ) | (8.3 | )% | ||||||||||||||
|
Restructuring
charges
|
- | 0.0 | % | 220 | 0.5 | % | (220 | ) | N/A | |||||||||||||||
|
Goodwill
impairment charge
|
- | 0.0 | % | 11,403 | 25.0 | % | (11,403 | ) | N/A | |||||||||||||||
|
Total
operating costs
|
43,152 | 94.6 | % | 55,140 | 121.0 | % | (11,988 | ) | (21.7 | )% | ||||||||||||||
|
Income
(loss) from operations
|
2,478 | 5.4 | % | (9,571 | ) | (21.0 | )% | 12,049 | 125.9 | % | ||||||||||||||
|
Other
(expense) income
|
693 | 1.5 | % | (88 | ) | (0.2 | )% | 781 | 887.5 | % | ||||||||||||||
|
Income
(loss) before income taxes and non-controlling interest
|
3,171 | 6.9 | % | (9,659 | ) | (21.2 | )% | 12,830 | 132.8 | % | ||||||||||||||
|
Income
tax expense
|
(1,093 | ) | (2.4 | )% | (44 | ) | (0.1 | )% | (1,049 | ) | (2,384.1 | )% | ||||||||||||
|
Income
(loss) before non-controlling interest
|
2,078 | 4.6 | % | (9,703 | ) | (21.3 | )% | 11,781 | 121.4 | % | ||||||||||||||
|
Non-controlling
interest
|
(119 | ) | (0.3 | )% | (27 | ) | 0.1 | % | (92 | ) | (340.7 | )% | ||||||||||||
|
Net
income (loss)
|
$ | 1,959 | 4.3 | % | $ | (9,730 | ) | (21.4 | )% | $ | 11,689 | 120.1 | % | |||||||||||
Agent
commissions were
$31.4 million for the year ended June 30, 2010, an increase of 2.7% from $30.6
million for the year ended June 30, 2009, as a result of increased revenues
associated with newly added agent based locations. As a percentage of
net revenues, agent commissions increased to 68.8% for the year ended June 30,
2010 from 67.1% for the year ended June 30, 2009. The increase is
attributed to newly added agent-based stations which generated a higher
percentage of our total revenues in 2010 as compared to 2009 and where these new
stations earned commissions.
Personnel
costs consist of payroll, payroll taxes, benefits and stock compensation
expense. Personnel
costs were $5.9
million for the year ended June 30, 2010, a decrease of 15.0% from $6.9 million
for the year ended June 30, 2009. The decrease was primarily
attributed to a full year of savings associated with migrating the Adcom
back-office positions into RGL’s back office resulting in a significant
reduction of head count. As a percentage of net revenues, personnel costs
decreased to 12.9% for the year ended June 30, 2010 from 15.2% for the year
ended June 30, 2009.
23
Selling,
general and administrative ("SG&A") costs consist primarily of marketing,
rent, professional services, insurance and travel expenses. SG&A
costs were relatively unchanged at $4.3 million for the years ended June 30,
2010 and 2009. As a percentage of net revenues, SG&A costs
remained constant at 9.4% for the years ended June 30, 2010 and June 30,
2009.
Depreciation
and amortization costs were $1.6 million for the year ended June 30, 2010, a
decrease of 8.3% from $1.7 million for the year ended June 30,
2009. The decrease primarily related to lower amortization expenses
of intangibles associated with RGL. As a percentage of net revenues,
depreciation and amortization decreased to 3.5% for the year ended June 30, 2010
from 3.8% for the year ended June 30, 2009.
Income
from operations was $2.5 million for the year ended June 30, 2010, compared to a
loss from operations of $9.6 million for the year ended June 30,
2009. The change in earnings was primarily attributed to the goodwill
impairment charge of $11.4 million during the year ended June 30,
2009.
Net
income for the year ended June 30, 2010 was $2.0 million as compared to net loss
of $9.7 million for the year ended June 30, 2009.
Supplemental
Pro forma Information
The
following table provides a reconciliation for the fiscal years ended June 30,
2010 (audited) and June 30, 2009 (pro forma and unaudited) of adjusted EBITDA to
net income, the most directly comparable GAAP measure in accordance with SEC
Regulation G (in thousands):
|
Years ended June 30,
|
Change
|
|||||||||||||||
|
2010
|
2009
|
Amount
|
Percent
|
|||||||||||||
|
Net
income (loss)
|
$ | 1,959 | $ | (9,801 | ) | $ | 11,760 | 120.0 | % | |||||||
|
Income
tax expense
|
1,093 | - | 1,093 | N/A | ||||||||||||
|
Net
interest expense
|
135 | 278 | (143 | ) | (51.4 | )% | ||||||||||
|
Depreciation
and amortization
|
1,598 | 1,897 | (299 | ) | (15.8 | )% | ||||||||||
|
EBITDA
(Earnings before interest, taxes, depreciation and
amortization)
|
$ | 4,785 | $ | (7,626 | ) | $ | 12,411 | 162.7 | % | |||||||
|
Share
based compensation and other non-cash costs
|
315 | 202 | 113 | 55.9 | % | |||||||||||
|
Goodwill
impairment
|
- | 11,403 | (11,403 | ) | (100.0 | )% | ||||||||||
|
Gain
on extinguishment of debt
|
(135 | ) | (190 | ) | 55 | 28.9 | % | |||||||||
|
Business
& Occupancy tax refund
|
(364 | ) | - | (364 | ) | N/A | ||||||||||
|
Gain
on litigation settlement
|
(355 | ) | - | (355 | ) | N/A | ||||||||||
|
Adjusted
EBITDA
|
$ | 4,246 | $ | 3,789 | $ | 457 | 12.1 | % | ||||||||
The
following table summarizes transportation revenue, cost of transportation and
net transportation revenue (in thousands) for the fiscal years ended June 30,
2010 (audited) and June 30, 2009 (pro forma and unaudited):
|
Years
ended June 30,
|
Change
|
|||||||||||||||
|
2010
|
2009
|
Amount
|
Percent
|
|||||||||||||
|
Transportation
revenue
|
$ | 146,716 | $ | 153,835 | $ | (7,119 | ) | (4.6 | )% | |||||||
|
Cost
of transportation
|
101,086 | 102,666 | (1,580 | ) | (1.5 | )% | ||||||||||
|
Net
transportation revenue
|
$ | 45,630 | $ | 51,169 | $ | (5,539 | ) | (10.8 | )% | |||||||
|
Net
transportation margins
|
31.1 | % | 33.3 | % | ||||||||||||
24
Transportation
revenue was 146.7 million for the year ended June 30, 2010, a decrease of 4.6%
from pro forma transportation revenue of $153.8 million for the year ended June
30, 2009.
Cost of
transportation was $101.1 million for the year ended June 30, 2010, a decrease
of 1.5% from pro forma costs of transportation of $102.7 million for the year
ended June 30, 2009.
Net
transportation margins decreased to 31.1% for the year ended June 30, 2010,
compared to pro forma transportation margins of 33.3% for the year ended June
30, 2009.
The
following table compares certain condensed consolidated statement of income data
as a percentage of our net transportation revenue (in thousands) for the fiscal
years ended June 30, 2010 (audited) and June 30, 2009 (pro forma and
unaudited):
|
Years ended June 30,
|
||||||||||||||||||||||||
|
2010
|
2009
|
Change
|
||||||||||||||||||||||
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||||||||
|
Net
transportation revenue
|
$ | 45,630 | 100.0 | % | $ | 51,169 | 100.0 | % | $ | (5,539 | ) | (10.8 | )% | |||||||||||
|
Agent
commissions
|
31,377 | 68.8 | % | 34,925 | 68.3 | % | (3,548 | ) | (10.2 | )% | ||||||||||||||
|
Personnel
costs
|
5,882 | 12.9 | % | 7,566 | 14.8 | % | (1,684 | ) | (22.3 | )% | ||||||||||||||
|
Selling,
general and administrative
|
4,295 | 9.4 | % | 4,654 | 9.1 | % | (359 | ) | (7.7 | )% | ||||||||||||||
|
Depreciation
and amortization
|
1,598 | 3.5 | % | 1,897 | 3.7 | % | (299 | ) | (15.8 | )% | ||||||||||||||
|
Restructuring
charge
|
- | 0.0 | % | 220 | 0.4 | % | (220 | ) | (100.0 | )% | ||||||||||||||
|
Goodwill
impairment charge
|
- | 0.0 | % | 11,403 | 22.3 | % | (11,403 | ) | (100.0 | )% | ||||||||||||||
|
Total
operating costs
|
43,152 | 94.6 | % | 60,665 | 118.6 | % | (17,513 | ) | (28.9 | )% | ||||||||||||||
|
Income
(loss) from operations
|
2,478 | 5.4 | % | (9,496 | ) | (18.6 | )% | 11,974 | 126.1 | % | ||||||||||||||
|
Other
(expense) income
|
693 | 1.5 | % | (278 | ) | (0.5 | )% | 971 | 349.3 | % | ||||||||||||||
|
Income
(loss) before income taxes and non-controlling
interest
|
3,171 | 6.9 | % | (9,774 | ) | (19.1 | )% | 12,945 | 132.4 | % | ||||||||||||||
|
Income
tax expense
|
(1,093 | ) | (2.4 | )% | - | 0.0 | % | (1,093 | ) | N/A | ||||||||||||||
|
Income
(loss) before non-controlling interest
|
2,078 | 4.5 | % | (9,774 | ) | (19.1 | )% | 11,852 | 121.3 | % | ||||||||||||||
|
Non-controlling interest
|
(119 | ) | (0.3 | )% | (27 | ) | (0.1 | )% | (92 | ) | (340.7 | )% | ||||||||||||
|
Net
income (loss)
|
$ | 1,959 | 4.3 | % | $ | (9,801 | ) | (19.2 | )% | $ | 11,760 | 120.0 | % | |||||||||||
Agent
commissions were $31.3 million for the year ended June 30, 2010, a decrease of
10.2% from pro forma agent commissions of $34.9 million for the year ended June
30, 2009. Agent commissions as a percentage of net transportation revenue
increased to 68.8% of net transportation revenue the for year ended June 30,
2010, compared to 68.3% for the comparable prior year period pro forma
amount.
Personnel
costs were $5.9 million for the year ended June 30, 2010, a decrease of 22.3%
from $7.6 million for the year ended June 30, 2009. Personnel costs as a
percentage of net transportation revenue were 12.9% for the year ended June 30,
2010, a decrease from 14.8% for the comparable prior year period pro forma
amount.
SG&A
costs were $4.3 million for the year ended June 30, 2010, a decrease of 7.7%
from pro forma selling, general and administrative costs of $4.7 million for the
year ended June 30, 2009. As a percentage of net transportation revenue,
SG&A costs increased to 9.4% for the year ended June 30, 2010, from 9.1% for
the comparable prior year period pro forma amount.
25
Depreciation
and amortization costs were $1.6 million for the year ended June 30, 2010, a
decrease of 15.8% from pro forma depreciation and amortization of $1.9 million
for the year ended June 30, 2009. Depreciation and amortization as a
percentage of net transportation revenue decreased to3.5% for the year ended
June 30, 2010, from 3.7% for the comparable prior year period pro forma
amount.
Pro forma
restructuring costs incurred in the year ended June 30, 2009, were $0.2 million
as a result of the Adcom acquisition and relate to the elimination of redundant
international personnel and facilities costs. These restructuring charges were
paid out over a one year period. There were no similar costs for the comparable
current year.
For the
year ended June 30, 2009, an impairment charge to goodwill in the amount of
$11.4 million was recorded. There was no similar charge for the comparable
current year.
Income
from operations was $3.2 million for the year ended June 30, 2010, compared to
pro forma loss from operations of $9.5 million for the year ended June 30,
2009.
Other
income was $0.7 million for the year ended June 30, 2010, compared to pro forma
other expense of $0.3 million for the year ended June 30, 2009.
Net
income was $2.0 million for the year ended June 30, 2010, compared to pro forma
net loss of $9.8 million for the year ended June 30, 2009.
Liquidity
and Capital Resources
Net cash
provided by operating activities for the year ended June 30, 2010 was $2.8
million, compared to net cash provided by operating activities for the year
ended June 30, 2009 of $3.8 million. The change was principally driven by timing
differences between the collection of receivables and payments of commissions
driven by overall growth and an increase in working capital, offset by cash
flows associated with the usage of tax-related items previously
recorded.
Net cash
used for investing was $1.9 million for the year ended June 30, 2010, compared
to net cash used for investing activities of $6.7 million for the year ended
June 30, 2009. Use of cash in 2010 consisted of $1.4 million paid to
the former shareholder of Adcom and $0.6 million for furniture and equipment
purchases. Use of cash in 2009 consisted of $5.5 million for the
acquisition of Adcom, an additional $0.2 million for furniture and equipment,
and $1.0 million paid to former shareholders of Airgroup and Adcom.
Net cash
used by financing activities for the year ended June 30, 2010 was $1.1 million
compared to net cash provided by financing activities of $3.5 million for year
ended June 30, 2009. Use of cash for 2010 consisted of $0.8 million
used to purchase treasury stock, $0.2 million in payments to reduce our credit
facility, and $0.1 million in non-controlling interest
distributions. Cash from financing activities in 2009 consisted of
proceeds from our credit facility of $3.6 million netted against $0.1 million
used to purchase treasury stock.
Acquisitions
Below are
descriptions of material acquisitions made since 2006 including a breakdown of
consideration paid at closing and future potential earn-out
payments. We define "material acquisitions" as those with aggregate
potential consideration of $1.0 million or more.
26
Effective
January 1, 2006, we acquired all 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 which was paid on December 31, 2007; (iii) as amended, an additional
base payment of $0.6 million payable in cash, $0.3 million of which was paid on
June 30, 2008 and $0.3 million was paid 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 were entitled to receive 50% of the cumulative income
from continuing operations in excess of $15.0 million generated during the
five-year earn-out period up to a maximum of $1.5 million. With
respect to the base earn-out payment of $1.9 million, in the event there is a
shortfall in income from continuing operations, the earn-out payment will be
reduced on a dollar-for-dollar basis to the extent of the
shortfall. Shortfalls may be carried over or carried back to the
extent that income from continuing operations in any other payout year exceeds
the $2.5 million level. For the years ended June 30, 2009 and 2008, the former
shareholders of Airgroup earned $633,000 and $417,000 in base earn-out payments,
respectively.
During
the quarter ended December 31, 2007, we adjusted the estimate of accrued
transportation costs assumed in the acquisition of Airgroup which resulted in
the recognition of approximately $1.4 million in non-recurring
income. Pursuant to the acquisition agreement, the former
shareholders of Airgroup have indemnified us for taxes of $0.5 million
associated the income recognized in connection with this change in estimate
which has been reflected as a reduction of the additional base payment otherwise
payable to the former shareholders of Airgroup.
In
November 2008, we amended the Airgroup Stock Purchase Agreement and agreed to
unconditionally pay the former Airgroup shareholders an earn-out payment of
$633,333 for the earn-out period ended June 30, 2009 to be paid on or about
October 1, 2009 by delivery of shares of common stock of the Company. In
consideration for the certainty of the earn-out payment, the former Airgroup
shareholders agreed (i) to waive and release us from any and all further
obligations to pay any earn-outs payments on account of shortfall amounts, if
any, which may have accumulated prior to June 30, 2009; (ii) to waive and
release us from any and all further obligation to account for and pay the Tier-2
earn-out payment; and (iii) that the earn-out payment to be paid for the
earn-out period ended June 30, 2009 would constitute a full and final payment to
the former Airgroup shareholders of any and all amounts due to the former
Airgroup shareholders under the Airgroup Stock Purchase Agreement. In March of
2009, Airgroup shareholders agreed to receive $0.4 million in cash on an
accelerated basis rather than the $0.6 million in Company shares due in October
of 2009. No further payments of purchase price are due in connection
with this acquisition.
In
November 2007, the purchase price was reduced to $1.6 million, consisting of
cash of $0.6 million and a $1.0 million credit in satisfaction of indemnity
claims asserted by us arising from our interim operation of the Purchased Assets
since May 22, 2007. Of the cash component, $0.1 million was paid in May of 2007,
$0.3 million was paid at closing, and a final payment of $0.2 million was to be
paid in November of 2008, subject to off-set of up to $0.1 million for certain
qualifying expenses incurred by us. Net of qualifying expenses and a discount
for accelerated payment, the final payment was reduced to $0.1 million and paid
in June of 2008. No further payments of purchase price are due in
connection with this acquisition.
27
Effective
September 1, 2008, we acquired all of the outstanding stock of Adcom Express,
Inc. The transaction was valued at up to $11,050,000, consisting of:
(i) $4,750,000 in cash paid at the closing; (ii) $250,000 in cash payable
shortly after the closing, subject to adjustment, based upon the working capital
of Adcom as of August 31, 2008; (iii) up to $2,800,000 in four "Tier-1 Earn-Out
Payments" of up to $700,000 each, covering the four year earn-out period through
2012, based upon Adcom achieving certain levels of "Gross Profit Contribution"
(as defined in the agreement), payable 50% in cash and 50% in shares of our
common stock (valued at delivery date); (iv) a "Tier-2 Earn-Out Payment" of up
to a maximum of $2,000,000, equal to 20% of the amount by which the Adcom
cumulative Gross Profit Contribution exceeds $16,560,000 during the four year
earn-out period; and (v) an "Integration Payment" of $1,250,000 payable on the
earlier of the date certain integration targets are achieved or 18 months after
the closing, payable 50% in cash and 50% in our shares of our common stock
(valued at delivery date).
Through
June 30, 2010, the former Airgroup shareholders earned a total of $808,524 in
base earn-out payments. Of this amount, $320,027 was paid in cash during the
year ended June 30, 2010. The remaining amount of $488,497 is included in the
amount due to former Adcom shareholder as of June 30, 2010.
Assuming
minimum targeted earnings levels are achieved, the following table summarizes
our contingent base earn-out payments related to the acquisition of Adcom, for
the fiscal years indicated based on results of the prior year (in
thousands):
|
Estimated
payment anticipated for fiscal year(1):
|
2012
|
2013
|
||||||
|
Earn-out
period:
|
7/1/2010–
6/30/2011
|
7/1/2011
–
6/30/2012
|
||||||
|
Earn-out
payments:
|
||||||||
|
Cash
|
$ | 350 | $ | 350 | ||||
|
Equity
|
350 | 350 | ||||||
|
Total
potential earn-out payments
|
$ | 700 | $ | 700 | ||||
|
Total
gross margin targets
|
$ | 4,320 | $ | 4,320 | ||||
(1)
Earn-out payments are paid October 1 following each fiscal year end in a
combination of cash and Company common stock.
Credit
Facility
In March
2010, our $15.0 million revolving credit facility, including a $0.5 million
sublimit to support letters of credit (collectively, the "Facility"), was
increased to $20.0 million with a maturity date of March 31, 2012. The Facility
is collateralized by accounts receivable and other assets of the Company and its
subsidiaries. Advances under the Facility are available to fund future
acquisitions, capital expenditures or for other corporate purposes, including
the repurchase of the Company’s stock. Borrowings under the facility bear
interest, at our option, at the bank’s prime rate minus 0.75% to plus 0.50% or
LIBOR plus 1.75% to 3.00%, 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 is collateralized by accounts receivable and other
assets of the Company and its subsidiaries and provides for advances of up to
80% of eligible domestic accounts receivable and for advances of up to 60% of
eligible foreign 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 4.00 times our consolidated EBITDA (as
adjusted) measured on a rolling four quarter basis. The second financial
covenant requires that we maintain a basic fixed charge coverage ratio of at
least 1.1 to 1.0. The third financial covenant is a minimum profitability
standard that requires us not to incur a net loss before taxes, amortization of
acquired intangibles and extraordinary items in any two consecutive quarterly
accounting periods.
28
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 we are not able to satisfy the conditions of the Facility in connection
with a proposed acquisition, we must either forego the acquisition, obtain the
lender's consent, or retire the Facility. This may limit or slow our ability to
achieve the critical mass it may need to achieve its strategic
objectives.
The
co-borrowers of the Facility include Radiant Logistics, Inc., RGL (f/k/a
Airgroup Corporation), Radiant Logistics Global Services, Inc. ("RLGS"), RLP,
and Adcom Express, Inc. (d/b/a Adcom Worldwide). RLP is owned 40% by RGL and 60%
by RCP, an affiliate of the Company’s Chief Executive Officer. RLP has been
certified as a minority business enterprise, and focuses on corporate and
government accounts with diversity initiatives. As a co-borrower under the
Facility, the accounts receivable of RLP 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, 2010, we were in compliance with
all of its covenants.
Given our continued focus on
the build-out of our network of exclusive agency locations, we believe that our
current working capital and anticipated cash flow from operations are adequate
to fund existing operations. However, continued growth through strategic
acquisitions, will require additional sources of financing as our existing
working capital is not sufficient to finance our operations and an acquisition
program. Thus, our ability to finance future acquisitions will be limited by the
availability of additional capital. We may, however, finance acquisitions using
our common stock as all or some portion of the consideration. In the event that
our common stock does not attain or maintain a sufficient market value or
potential acquisition candidates are otherwise unwilling to accept our
securities as part of the purchase price for the sale of their businesses, we
may be required to utilize more of our cash resources, if available, in order to
continue our acquisition program. If we do not have sufficient cash resources
through either operations or from debt facilities, our growth could be limited
unless we are able to obtain such additional capital.
As of
August 31, 2010, we have approximately $5.7 million in remaining availability
under the Facility to support future acquisitions and our on-going working
capital requirements. We expect to structure acquisitions with
certain amounts paid at closing, and the balance paid over a number of years in
the form of earn-out installments which are payable based upon the future
earnings of the acquired businesses payable in cash, stock or some combination
thereof. As we continue to execute our acquisition strategy, we will
be required to make significant payments in the future if the earn-out
installments under our various acquisitions become due. While we believe that a
portion of any required cash payments will be generated by the acquired
businesses, we may have to secure additional sources of capital to fund the
remainder of any cash-based earn-out payments as they become due. This presents
us with certain business risks relative to the availability of capacity under
our Facility, the availability and pricing of future fund raising, as well as
the potential dilution to our stockholders to the extent the earn-outs are
satisfied directly, or indirectly, from the sale of equity.
Financial
Outlook
For our
fiscal year ended June 30, 2011, we are forecasting $4.5 million of adjusted
EBITDA on total revenue of $158.0 million and expect net earnings of $1.9
million, compared to $4.2 million of adjusted EBITDA on total revenue of $146.7
million and net earnings of $2.0 million for our fiscal year ended June 30,
2010. This guidance does not include the benefit of any further
acquisitions we may complete over the course of fiscal 2011.
29
Our
estimate of future revenues and profits is based on the assumption that the
cumulative historical financial results of operations of the Company for the
most recent 12 months ended June 30, 2010 are indicative of the future financial
performance and excludes the impact of further acquisitions, new agent stations
or further improvement in the economic climate. A reconciliation of estimated
annual adjusted EBITDA for the fiscal year ended June 30, 2010 amounts to net
income, the most directly comparable GAAP measure, is as follows:
(Amounts in
000’s)
|
Outlook
Fiscal Year
Ended June 30,
2011
|
Actual
Fiscal Year
Ended June 30,
2010
|
|||||||
|
Net
income
|
$ | 1,890 | $ | 1,959 | ||||
|
Interest
expense - net
|
200 | 135 | ||||||
|
Income
tax expense
|
1,159 | 1,093 | ||||||
|
Depreciation
and amortization
|
1,379 | 1,598 | ||||||
|
EBITDA
|
4,368 | 4,785 | ||||||
|
Stock-based
compensation and other non-cash charges
|
132 | 315 | ||||||
|
Gain
on extinguishment of debt
|
- | (135 | ) | |||||
|
Business
& Occupancy tax refund
|
- | (364 | ) | |||||
|
Gain
on litigation settlement
|
- | (355 | ) | |||||
|
Adjusted
EBITDA
|
$ | 4,500 | $ | 4,246 | ||||
Contractual
Obligations
We have
entered into contracts with various third parties in the normal course of
business which will require future payments. The following table sets forth our
contractual obligations (in thousands) as of June 30, 2010:
|
Payments due during fiscal years ending June 30
|
||||||||||||||||||||||||||||
|
Amounts in 000's
|
Total
|
2011
|
2012
|
2013
|
2014
|
2015
|
Thereafter
|
|||||||||||||||||||||
|
Long-Term
Debt
|
$ | 7,641 | $ | - | $ | 7,641 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||
|
Capital
Leases
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Operating
Leases
|
2,900 | 339 | 230 | 221 | 231 | 240 | 1,639 | |||||||||||||||||||||
|
Total
Contractual Obligations
|
$ | 10,541 | $ | 339 | $ | 7,871 | $ | 221 | $ | 231 | $ | 240 | $ | 1,639 | ||||||||||||||
As of
June 30, 2010, 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.
30
Recent
Accounting Pronouncements
In
June 2009, the FASB issued SFAS No. 167 ("SFAS 167"), "Amendments to
FASB Interpretation No. 46R". SFAS 167 amends certain requirements of
FIN 46R to improve
the financial reporting by enterprises involved with variable interest entities
and to provide more relevant and reliable information to users of financial
statements. SFAS 167 is effective for the Company in the fiscal year beginning
July 1, 2010. The adoption of SFAS 167 did not have a material
impact on the Company’s consolidated financial position, results of operations
and cash flows.
In June
2009, the FASB issued guidance now codified in FASB Accounting Standards
Codification ("ASC") Topic 105, Generally Accepted Accounting Principles, as the
single source of authoritative nongovernmental GAAP. FASB ASC Topic 105 does not
change current GAAP, but is intended to simplify user access to all
authoritative GAAP by providing all authoritative literature related to a
particular topic in one place. All existing accounting standard documents have
been superseded and all other accounting literature not included in the FASB
Codification is now considered non-authoritative. These provisions of FASB ASC
Topic 105 are effective for interim and annual periods ending after September
15, 2009 and, accordingly, are effective for the Company for the current fiscal
reporting period. The adoption of this guidance did not have an impact on the
Company’s financial condition or results of operations, but impacted its
financial reporting process by eliminating all references to pre-codification
standards. On the effective date of this guidance, the Codification superseded
all then-existing non-SEC accounting and reporting standards, and all other
non-grandfathered, non-SEC accounting literature not included in the
Codification became non-authoritative.
In August
2009, the FASB issued Accounting Standards Update ("ASU") No. 2009-05, Fair
Value Measurements and Disclosures. The guidance in ASU 2009-05 provides
clarification that in circumstances in which a quoted price in an active market
for the identical liability is not available, an entity is required to measure
fair value using certain prescribed valuation techniques. The amendments in ASU
2009-05 were effective for the Company’s first quarter of fiscal 2010. The
adoption of this guidance did not have a material impact on the Company’s
financial position or results of operations.
In August
2009, the FASB issued ASU No. 2009-06, Implementation Guidance on Accounting for
Uncertainty in Income Taxes and Disclosure Amendment for Nonpublic Entities. The
guidance in ASU 2009-06 improves current accounting by helping achieve
consistent application of accounting for uncertainty in income taxes and is not
intended to change existing practice. ASU 2009-06 also eliminates disclosures
previously required for nonpublic entities. ASU 2009-06 is effective for interim
and annual periods ending after September 15, 2009. The adoption of this
guidance did not have a material impact on the Company’s financial position or
results of operations.
In
January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair
Value Measurements. The guidance in ASU 2010-06 provides amendments to
literature on fair value measurements and disclosures currently within the ASC
by clarifying certain existing disclosures and requiring new disclosures for the
various classes of fair value measurements. ASU 2010-06 is effective for interim
and annual periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements, which are effective for fiscal
years beginning after December 15, 2010, and for interim periods within those
fiscal years. The adoption of this guidance is not expected to have a material
impact on the Company’s financial position or results of
operations.
In
February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855):
Amendments to Certain Recognition and Disclosure Requirements. The guidance in
ASU 2010-09 addresses both the interaction of the requirements of Topic 855,
Subsequent Events, with the SEC’s reporting requirements and the intended
breadth of the reissuance disclosures provision related to subsequent events,
potentially changing reporting by both private and public entities depending on
the facts and circumstances surrounding the nature of the change. All of the
amendments in ASU 2010-09 are effective upon issuance of the final update,
except for the use of the issued date for conduit debt obligors which is
effective for interim and annual periods ending after June 15, 2010. The
adoption of this guidance is not expected to have a material impact on the
Company’s financial position or results of operations.
31
In April
2010, the FASB issued ASU No. 2010-13, Compensation – Stock Compensation (Topic
718): Effect of Denominating the Exercise Price of a Share-Based Payment Award
in the Currency of the Market in Which the Underlying Equity Security
Trades. The guidance in ASU 2010-13 provides amendments to clarify
that an employee share-based payment award with an exercise price denominated in
the currency of a market in which a substantial portion of the entity’s equity
securities trades should not be considered to contain a condition that is not a
market, performance, or service condition. Therefore, an entity would not
classify such an award as a liability if it otherwise qualifies as the adoption
of this guidance is not expected to have a material impact on the Company’s
financial position or results of operations.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
consolidated financial statements of Radiant Logistics, Inc. including the notes
thereto and the report of our independent accountants are included in this
report, commencing at page F-1.
ITEM
9A. CONTROLS AND
PROCEDURES
Disclosure 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 Exchange Act as of
June 30, 2010 was carried out by our management under the supervision and with
the participation of our Chief Executive Officer ("CEO") who also serves as our
Chief Financial Officer ("CFO"). Based upon that evaluation, our CEO/CFO
concluded that, as of June 30, 2010, 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.
Management’s Report on
Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) of the Securities
Exchange Act of 1934 (the "Exchange Act"). Our internal control
system was designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial reporting and the
preparation of financial statements for external purposes, in accordance with
GAAP. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.
Our
management, including our CEO/CFO, conducted an evaluation of the effectiveness
of internal control over financial reporting using the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control – Integrated Framework. Based on its evaluation, our
management concluded that our internal control over financial reporting was
effective as of June 30, 2010.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our
registered public accounting firm pursuant to rules of the SEC that permit us to
provide only management’s report in this annual report.
32
Changes in Internal Control
Over Financial Reporting
There
have not been any changes in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during the fiscal quarter ended June 30, 2010 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.
ITEM
9B. OTHER INFORMATION
PART
III
ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
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.
|
Name
|
Age
|
Position
|
||
|
Bohn
H. Crain
|
46
|
Chief
Executive Officer, Chief Financial Officer and Chairman of the Board of
Directors
|
||
|
Stephen
P. Harrington
|
52
|
Director
|
||
|
Daniel
Stegemoller
|
55
|
Vice
President and Chief Operating Officer of Radiant Global Logistics f/k/a
Airgroup
|
||
|
Robert
F. Friedman
|
66
|
President
– Adcom Express, Inc.
|
||
|
Todd
E. Macomber
|
46
|
Senior
Vice President & Chief Accounting
Officer
|
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 nearly 20 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. 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 P. Harrington.
Mr. Harrington was appointed as a director on October 26,
2007. Mr. Harrington served as the Chairman, Chief Executive Officer,
Chief Financial Officer, Treasurer and Secretary of Zone Mining Limited, a
Nevada corporation, from August 2006 until January 2007 and as Chairman, Chief
Executive Officer, Treasurer and Secretary of Touchstone Resources USA, Inc., a
Delaware corporation from March 2004 to August 2005. From October 2001 to
February 2004, Mr. Harrington served as the Chairman and Chief Executive Officer
of Endeavour International Corporation (f/k/a Continental Southern Resources,
Inc.), a publicly-traded oil and gas exploration company that merged with NSNV
Inc., a Texas corporation. Mr. Harrington has served as the President
of SPH Investments, Inc. and SPH Equities, Inc., each a private investment
company, since 1992. Mr. Harrington has served as an officer and director of
several publicly-held corporations, including BPK Resources, Inc., an oil and
gas exploration company, and Astralis Ltd. (f/k/a Hercules Development Group).
Mr. Harrington graduated with a B.S. from Yale University in 1980.
33
Dan
Stegemoller. Mr. Stegemoller is the Chief Operating Officer of
Radiant Global Logistics, Inc., and previously held the position of Vice
President since November 2004. He has over 35 years of 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.
Todd E. Macomber.
Mr. Macomber has served as our Senior Vice President and
Chief Accounting Officer since August 7, 2009 and as our Vice President and
Corporate Controller for Radiant Global Logistics, Inc. f/k/a Airgroup Inc.
since December 2007. Prior to joining Radiant Global Logistics, Inc.,
from September 2003 to November 2007 Mr. Macomber served as Senior Vice
President and Chief Financial Officer of Biotrace International, Inc. a
subsidiary of Biotrace International PLC an industrial microbiology company
traded on the London Stock Exchange. From January 1993 to September
2003 Mr. Macomber held a variety of positions and most recently served as Senior
Vice President and Chief Financial Officer for International BioProducts,
Inc. Mr. Macomber earned a Bachelor of Science in Accounting from
Seattle University.
Robert F.
Friedman. Mr. Friedman has served as President of Adcom
Express, Inc. since September 5, 2008. Mr. Friedman founded Adcom in
1978 and over the past 30 years, has overseen the evolution of Adcom from a
provider of small package courier services to a full-service third party
logistics company that derives over 50% of its revenues from international
transportation services. Mr. Friedman has served as a Board Member of
the XLA Express Delivery and Logistics Association for the past 10 years and is
a 15-year member of the Airforwarders Association. He received a
Bachelor of Arts degree from the University of Minnesota.
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
Our board
of directors has not created a separately-designated standing audit committee or
a committee performing similar functions. Accordingly, our full board
of directors acts as our audit committee.
Although
Bohn H. Crain, our CEO, 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.
We
currently have a small number of employees and centralized
operations. In light of the foregoing, our board of directors
concluded that the benefits of retaining an individual who qualifies as an
"audit committee financial expert," as that term is defined in Item
407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act, would be
outweighed by the costs of retaining such a person. As a result, no
member of our board of directors is an "audit committee financial
expert."
34
Code
of Ethics
We have
adopted a Code of Ethics that applies to all employees including 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. Our Code of Ethics has been filed as an exhibit hereto or may
be obtained without charge upon written request directed to Attn: Human
Resources, Radiant Logistics, Inc., 405 114th Avenue
S.E., Bellevue, Washington 98004.
Section
16 Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act, as amended, 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 2010, all reporting persons
timely complied with all filing requirements applicable to them.
Summary
Compensation Table
The
following summary compensation table reflects total compensation for our chief
executive officer/chief financial officer, and our two most highly compensated
executive officers (each a "named executive officer") whose compensation
exceeded $100,000 during the fiscal year ended June 30, 2010 and June 30,
2009.
|
Name and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards
($)(1)
|
All other
compensation
($)
|
Total
($)
|
||||||||||||||||
|
Bohn
H. Crain, Chief Executive
|
2010
|
250,000 | 250 | - | 21,921 |
(2)
|
272,171 | |||||||||||||||
|
Officer
and Chief Financial Officer
|
2009
|
250,000 | 250 | - | 22,528 |
(3)
|
272,778 | |||||||||||||||
|
Dan
Stegemoller, Vice President
|
2010
|
190,000 | 250 | - | 67,156 |
(4)
|
257,406 | |||||||||||||||
|
and Chief
Operating Officer of Radiant Global Logistics
|
2009
|
180,000 | 250 | - | 69,834 |
(5)
|
250,084 | |||||||||||||||
|
Todd
Macomber, Senior Vice
|
2010
|
150,000 | 250 | 15,000 |
(6)
|
12,436 |
(7)
|
177,686 | ||||||||||||||
|
President
and Chief Accounting Officer of Radiant Logistics, Inc.
|
2009
|
134,000 | 250 | - | 10,795 |
(8)
|
145,045 | |||||||||||||||
|
(1)
|
Represents
the grant date fair value of the award, calculated in accordance with FASB
Accounting Standard Codification 718, “Compensation — Stock Compensation,”
or ASC 718. A summary of the assumptions made in the valuation of these
awards is provided under Note 13 of our consolidated financial
statements.
|
35
|
(2)
|
Consists
of $12,000 for automobile allowance, $730 for company provided life &
disability insurance premiums, and $9,191 for Company 401k
match.
|
|
(3)
|
Consists
of $12,000 for automobile allowance, $873 for company provided life &
disability insurance premiums, and $9,655 for Company 401k
match.
|
|
(4)
|
Consists
of $6,750 for automobile allowance, $730 for company provided life &
disability insurance premiums, $5,047 for Company 401k match, and $54,629
relating to amortization of moving expenses, per his December 2005
relocation agreement. Mr. Stegemoller was issued a note
receivable for $200,000 in December 2005 to pay for his relocation
expenses and to provide an incentive to accept the Company’s offer of
employment. The agreement provided for the note to be forgiven
in equal installments over five years, along with the accrued interest,
and for a gross up to pay for the taxes relating to the note
forgiveness.
|
|
(5)
|
Consists
of $6,000 for automobile allowance, $873 for company provided life &
disability insurance premiums, $7,964 for Company 401k match, and $54,997
relating to amortization of moving expenses, per his December 2005
relocation agreement. See note 4 above for a description of the
relocation agreement.
|
|
(6)
|
Mr.
Macomber was granted options to purchase 100,000 shares on August 7, 2009
at an exercise price $.28 per share. The grant date fair market
value of these options was $0.15 per share. The options vest in
equal annual installments over a five year period commencing on the date
of the grant.
|
|
(7)
|
Consists
of $6,750 for automobile allowance, $652 for company provided life &
disability insurance premiums, and $5,034 for Company 401k
match.
|
|
(8)
|
Consists
of $6,000 for automobile allowance, $782 for company provided life &
disability insurance premiums, and $4,013 for Company 401k
match.
|
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth officer information regarding outstanding unexercised
options for each named executive officer outstanding as of June 30,
2010.
|
Option Awards
|
|||||||||||||
|
Name
|
Number of
securities
underlying
unexercised
options
exercisable(#)
|
Number of
securities
underlying
unexercised
options
Unexercisable (#)
|
Option exercise
price
($)
|
Option
expiration date
|
|||||||||
|
Bohn
H. Crain
|
800,000 | 200,000 | 0.50 |
10/19/2015(1)
|
|||||||||
| 800,000 | 200,000 | 0.75 |
10/19/2015(1)
|
||||||||||
|
Dan
Stegemoller
|
240,000 | 60,000 | 0.44 |
1/10/2016(2)
|
|||||||||
| 40,000 | 60,000 | 0.18 |
6/23/2018(3)
|
||||||||||
|
Todd
Macomber
|
40,000 | 60,000 | 0.48 |
12/10/2017(4)
|
|||||||||
| 40,000 | 60,000 | 0.18 |
6/23/2018(5)
|
||||||||||
| 0 | 100,000 | 0.28 |
8/6/2019(6)
|
||||||||||
|
(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 January 11, 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 June 24, 2008 and vest in equal annual
installments over a five year period commencing on the date of
grant.
|
|
(4)
|
The
stock options were granted on December 11, 2007 and vest in equal annual
installments over a five year period commencing on the date of
grant.
|
|
(5)
|
The
stock options were granted on June 24, 2008 and vest in equal annual
installments over a five year period commencing on the date of
grant.
|
|
(6)
|
The
stock options were granted on August 7, 2009 and vest in equal annual
installments over a five year period commencing on the date of
grant.
|
36
Director
Compensation
The
following table sets forth compensation paid to our directors during the fiscal
year ended June 30, 2010.
|
Name(1)
|
Year
|
Fees earned or
paid in cash
($)
|
Total
($)
|
|||||||
|
Stephen
P. Harrington
|
2010
|
36,000 |
(2)
|
36,000 | ||||||
(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) Consists
of a payment of $3,000 per month.
Narrative
Disclosure of Executive Compensation
Employment
Agreements
Bohn H. Crain. On January 13, 2006, we
entered into an employment agreement with Bohn H. Crain to serve as our
CEO. On December 31, 2008, we and Bohn Crain, entered into a Letter
Agreement for the purpose of amending Mr. Crain’s Employment Agreement. The
Letter Agreement was approved by the Company’s Board of Directors.
The
amendments evidenced by the Letter Agreement (1) extended Mr. Crain’s Employment
Agreement through December 31, 2013 and (2) brought Mr. Crain’s Employment
Agreement into compliance with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended (the "Code”) by, among other things, providing
for a six month delay in the payment of any amounts to be received by Mr. Crain
upon a separation of service if the payment, absent such delay, would have
triggered the imposition of excise taxes or other penalties under Section 409A
of the Code.
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. We may terminate the agreement at any time
for cause. If we terminate the agreement due to Mr. Crain’s disability, Mr.
Crain’s options shall immediately vest and we must continue to pay Mr. Crain his
base salary and bonuses 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 for an
additional one year period. If Mr. Crain terminates the agreement for good
reason or we terminate for any reason other than for cause, Mr. Crain’s options
shall immediately vest and we must continue to pay Mr. Crain his base salary and
bonuses as well as fringe benefits for the remaining term of the
agreement. The employment agreement contains standard and customary
non-solicitation, non-competition, work made for hire, and confidentiality
provisions.
Option
Agreements
On
October 20, 2005, we issued to Mr. Crain an option 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.
On
January 11, 2006, we issued to Mr. Stegemoller an option to purchase 300,000
shares of our common stock, which are exercisable at $0.44 per share, the last
sales price on the date of grant. The option vests in equal annual
installments over a five year period commencing on the date of grant and
terminates ten years from the date of grant.
37
On
December 11, 2007, we issued to Mr. Macomber an option to purchase 100,000
shares of our common stock, which are exercisable at $0.48 per share, the last
sales price on the date of grant. 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.
On June
24, 2008, we granted to each of Messrs. Stegemoller and Macomber an option to
purchase 100,000 shares of our common stock. Each option is
exercisable at $0.18, the last sales price on the date of grant. 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.
On August
7, 2009, we issued to Mr. Macomber an option to purchase 100,000 shares of our
common stock, which are exercisable at $0.28 per share, the last sales price on
the date of grant. The option vests in equal annual installments over
a five year period commencing on the date of grant and terminates ten years from
the date of grant.
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.
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."
38
Directors’
Compensation
In
January 2009, we began compensating Mr. Harrington $3,000 per month for his
services. Mr. Crain does not receive any additional compensation for
serving our board of directors. Other than our arrangement with Mr.
Harrington, 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
On
October 20, 2005, we adopted the Radiant Logistics, Inc. 2005 Stock Incentive
Plan (the "Plan"). Awards may be made under the Plan for up to
5,000,000 shares of our common stock in the form of stock options or restricted
stock awards. Awards may be made to our employees, officers or
directors as well as our consultants or advisors. The Plan is
administered by our Board of Directors which has full and final authority to
interpret the Plan, select the persons to whom awards may be granted, and
determine the amount, vesting and all other terms of any awards. To
the extent permitted by applicable law, our Board may delegate any or all of its
powers under the Plan to one or more committees or subcommittees of the
Board. The Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended, and is not a "qualified
plan" under Section 401(a) of the Internal Revenue Code ("IRC) of 1986, as
amended. The Plan has not been approved by our
shareholders. As a result, "incentive stock options" as defined under
Section 422 of the IRC may not be granted under the Plan until our shareholders
approve the Plan.
All stock
options granted under the Plan are exercisable for a period of up to ten years
from the date of grant, are subject to vesting as determined by the Board upon
grant, and have an exercise price equal to not less than the fair market value
of our common stock on the date of grant. Unless otherwise determined
by the Board, awards may not be transferred except by will or the laws of
descent and distribution. The Board has discretion to determine the
effect on any award granted under the Plan of the death, disability, retirement,
resignation, termination or other change in employment or other status of any
participant in the Plan. The maximum number of shares of common stock
for which awards may be granted to a participant under the Plan in any calendar
year is 2,500,000.
The Plan
states that a "Change of Control" occurs when (i) any "person" (as such term is
used in Section 13(d) and 14(d) of the Exchange Act) acquires "beneficial
ownership" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the voting power of the then outstanding securities of the Company
except where the acquisition is approved by the Board; or (ii) if the Company is
to be consolidated with or acquired by another entity in a merger or other
reorganization in which the holders of the outstanding voting stock of the
Company immediately preceding the consummation of such event, shall, immediately
following such event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity or in the event of a sale of all
or substantially all of the Company's assets or otherwise.
Unless
otherwise provided in option or employment agreements, if the Plan is terminated
as a result of or following a "Change of Control", all vested awards may be
exercised for 30 days from the date of notice of the termination. All
participants will be credited with an additional six months of service for the
purpose of unvested awards. If the Plan is assumed or not terminated
upon the occurrence of a "Change of Control", all participants will be credited
with an additional six months of service if, during the remaining term of such
participant’s awards, any participant is terminated without cause.
39
As of
September 24, 2010, the following options to purchase shares of common stock
were outstanding:
|
Options
|
Exercise Price
Per Share
|
|||
|
1,000,000
|
$ | 0.50 | ||
|
1,000,000
|
0.75 | |||
|
375,000
|
0.44 | |||
|
360,000
|
0.18 | |||
|
300,000
|
0.28 | |||
|
190,000
|
0.62 | |||
|
175,000
|
0.48 | |||
|
100,000
|
0.16 | |||
|
100,000
|
0.20 | |||
|
20,000
|
1.01 | |||
|
3,620,000
|
$ | 0.50 | ||
The
following table indicates how many shares of our common stock were beneficially
owned as of September 24, 2010, 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. Unless otherwise indicated, each person named
below has sole voting and investment power with respect to all common stock
beneficially owned by that person or entity, subject to the matters set forth in
the footnotes to the table below. Unless otherwise provided, the
address of each of the persons listed below is c/o Radiant Logistics, Inc., 405
114th Avenue
S.E., Bellevue, Washington 98004.
|
Name
of Beneficial Owner
|
Amount(1)
|
Percent of
Class
|
||||||
|
Bohn
H. Crain
|
11,724,301 |
(2)
|
36.8 | % | ||||
|
Dan
Stegemoller
|
378,182 |
(3)
|
1.3 | % | ||||
|
Todd
E. Macomber
|
100,000 |
(4)
|
* | |||||
|
Robert
F. Friedman
|
— | — | ||||||
|
Stephen
P. Harrington
|
1,568,182 |
(5)
|
5.2 | % | ||||
|
Stephen
M. Cohen
|
2,500,000 |
(6)
|
8.4 | % | ||||
|
Douglas
Tabor
|
2,940,974 |
(7)
|
9.8 | % | ||||
|
All
officers and directors as a group (5 persons)
|
13,770,665 | 42.7 | % | |||||
|
|
(*) 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, 2010
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 29,894,421
shares of
common stock outstanding as of September 24,
2010.
|
|
(2)
|
Consists
of 8,955,000 shares held by Radiant Capital Partners, LLC over which Mr.
Crain has sole voting and dispositive power, 769,301 shares directly held
by Mr. Crain, and 2,000,000 shares issuable upon exercise of
options.
|
40
|
(3)
|
Includes 280,000 shares issuable
upon exercise of options. Does not include 120,000 shares
issuable upon exercise of options which are subject to
vesting.
|
|
(4)
|
Includes 100,000 shares issuable
upon exercise of options. Does not include 200,000 shares
issuable upon exercise of options which are subject to
vesting.
|
|
(5)
|
Consists of shares held by SPH
Investments, Inc. over which Mr. Harrington has sole voting and
dispositive power.
|
|
(6)
|
Consists of shares held of record
by Mr. Cohen’s wife over which he shares voting and dispositive
power.
|
|
(7)
|
This information is based on a
schedule 13G dated and filed with the SEC on January 26, 2010 reporting
that Douglas Tabor has sold voting power with respect to 2,940,974 shares
of common stock.
|
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,
2010.
|
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 | — | 0 | |||||||||
|
Equity
compensation plans not approved by security holders
|
3,620,000 | $ | 0.504 | 1,380,000 | ||||||||
|
Total
|
3,620,000 | $ | 0.504 | 1,380,000 | ||||||||
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.
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.
41
Transactions
On June
28, 2006, we joined Radiant Capital Partners, LLC ("RCP"), an affiliate of Bohn
H. Crain to form Radiant Logistics Partners, LLC ("RLP"). RCP 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. 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.
For the
fiscal year ended June 30, 2010, RLP recorded $246,533 in revenues including
$160,071 in commission revenues earned from members of the affiliated group, and
paid management service fees totaling $5,671 to members of the affiliated group
and reported a profit of $197,734. For the fiscal year ended June 30,
2009, RLP recorded $362,008 in revenues including $110,335 in commission
revenues earned from members of the affiliated group, and paid management
service fees totaling $22,598 to members of the affiliated group and reported a
profit of $44,000. The profits and losses of RLP are split 40% to the
Company and 60% to RCP.
Director
Independence
Mr.
Harrington satisfies the definition of "independent" established by the
NYSE-AMEX as set forth in Section 803 of the NYSE-AMEX Company
Guide. Mr. Crain does not satisfy the definition of "independent"
established by the NYSE-AMEX as set forth in Section 803 of the NYSE-AMEX
Company Guide. As of the date of the report, we do not maintain a
separately designated audit, compensation or nominating committee.
The
following table presents fees for professional audit services performed for the
audit of our annual financial statements for the years ended June 30, 2010 and
2009 and fees billed and unbilled for other services rendered by it during those
periods.
|
2010
|
2009
|
|||||||
|
Audit
Fees:
|
$ | 121,500 | $ | 96,000 | ||||
|
Audit
Related Fees:
|
2,500 | 5,000 | ||||||
|
Tax
Fees:
|
55,800 | 43,200 | ||||||
|
All
Other Fees:
|
1,000 | - | ||||||
|
Total:
|
$ | 180,800 | $ | 144,200 | ||||
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.
42
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.
All
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 the fiscal years ended June 30, 2010 and June 30, 2009, 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.
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Exhibit
No.
|
Description
|
|
2.1
|
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)
|
|
2.4
|
Stock
Purchase Agreement by and between Radiant Logistics, Inc. and Robert F.
Friedman dated September 5, 2008 (incorporated by reference to the
Registrant’s Current Report on Form 8-K filed on September 11,
2008)
|
|
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)
|
43
|
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
|
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)
|
|
10.2
|
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)
|
|
10.3
|
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)
|
|
10.4
|
Asset
Purchase Agreement dated May 21, 2007 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)
|
|
10.5
|
Management
Services Agreement dated May 21, 2007 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)
|
|
10.6
|
Lease
Agreement for Bellevue, WA office space dated April 11, 2007 by and
between Radiant Logistics, Inc. and Pine Forest Properties, Inc.
(incorporated by reference to the Registrant’s Annual Report on Form 10-K
filed on October 1, 2007)
|
|
10.7
|
Amendment
to Asset Purchase Agreement dated as of November 1, 2007 by and between
Radiant Logistics Global Services, Inc. and Mass Financial Corp.
(incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q filed on November 14, 2007)
|
|
10.8
|
Amendment
No. 1 to Loan Agreement dated as of February 12, 2008 by and among Radiant
Logistics, Inc., Airgroup Corporation, Radiant Logistics Global Services,
Inc., Radiant Logistics Partners, LLC and Bank of America, N.A.
(incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q filed on February 14, 2008)
|
|
10.9
|
Amendment
No. 2 to Loan Agreement dated as of June 28, 2008 by and among Radiant
Logistics, Inc., Airgroup Corporation, Radiant Logistics Global Services,
Inc., Radiant Logistics Partners, LLC and Bank of America, N.A. (filed
herewith)
|
|
10.10
|
Third
Amendment to Loan Documents dated as of September 2, 2008 by and among
Radiant Logistics, Inc., Airgroup Corporation, Radiant Logistics Global
Services, Inc., Radiant Logistics Partners, LLC, Adcom Express, Inc. and
Bank of America, N.A. (incorporated by reference to the Registrant’s
Current Report on Form 8-K filed on September 11, 2008)
|
|
10.11
|
Fifth
Loan Modification Agreement, dated as of March 25, 2010, by and among
Radiant Logistics, Inc., Airgroup Corporation, Radiant Logistics Global
Services, Inc., Radiant Logistics Partners, LLC, Adcom Express, Inc. and
Bank of America, N.A. (incorporated by reference to the Registrant’s
Current Report on Form 8-K filed on March 29, 2010)
|
|
10.12
|
Executive
Employment Agreement dated September 5, 2008 by and between Radiant
Logistics, Inc. and Robert F. Friedman (incorporated by reference to the
Registrant’s Current Report on Form 8-K filed on September 11,
2008)
|
|
10.13
|
Letter
Agreement dated December 31, 2008; Amendment to the Employment Agreement
between Radiant Logistics, Inc. and Bohn H. Crain (incorporated by
reference to the Registrant’s Current Report on Form 8-K filed on January
9, 2009)
|
|
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)
|
44
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:
September 27, 2010
|
By:
|
/s/
Bohn H. Crain
|
||
|
Bohn
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 P. Harrington
|
Director
|
September
27, 2010
|
||
|
Stephen
P. Harrington
|
||||
|
/s/ Bohn H. Crain
|
Chairman
and
|
September
27, 2010
|
||
|
Bohn
H. Crain
|
Chief
Executive Officer
|
|
||
|
/s/ Todd E.
Macomber
|
Senior
Vice President and Chief
|
September
27, 2010
|
||
|
Todd
E. Macomber
|
Accounting
Officer
|
45
RADIANT
LOGISTICS, INC.
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Consolidated
Balance Sheets as of June 30, 2010 and 2009
|
F-3
|
|
Consolidated
Statements of Income (Operations) for the years ended June 30, 2010 and
2009
|
F-4
|
|
Consolidated
Statements of Stockholders’ Equity (Deficit) for the years ended June 30,
2010 and 2009
|
F-5
|
|
Consolidated
Statements of Cash Flows for the years ended June 30, 2010 and
2009
|
F-6
– F-7
|
|
Notes
to Consolidated Financial Statements
|
F-8
– F-23
|
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 sheets of Radiant Logistics, Inc.
("the Company") as of June 30, 2010 and 2009, and the related
consolidated statements of income (operations), stockholders' equity (deficit),
and cash flows for the years 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 audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the 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 audits 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 audits provide a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Radiant Logistics, Inc. as
of June 30, 2010 and 2009, and the results of its operations and its cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States.
/S/
PETERSON SULLIVAN LLP
September
27, 2010
F-2
Consolidated
Balance Sheets
|
June 30,
|
June 30,
|
|||||||
|
2010
|
2009
|
|||||||
|
ASSETS
|
||||||||
|
Current
assets
|
||||||||
|
Cash
and cash equivalents
|
$ | 682,108 | $ | 890,572 | ||||
|
Accounts
receivable, net of allowance
|
||||||||
|
June
30, 2010 - $626,401; June 30, 2009 - $754,578
|
21,442,023 | 17,275,387 | ||||||
|
Current
portion of employee loan receivable
|
13,100 | 53,700 | ||||||
|
Current
portion of station and other receivables
|
195,289 | 522,088 | ||||||
|
Income
tax deposit
|
- | 535,074 | ||||||
|
Prepaid
expenses and other current assets
|
1,104,211 | 305,643 | ||||||
|
Deferred
tax asset
|
402,428 | 427,713 | ||||||
|
Total
current assets
|
23,839,159 | 20,010,177 | ||||||
|
Furniture
and equipment, net
|
881,416 | 760,507 | ||||||
|
Acquired
intangibles, net
|
2,019,757 | 3,179,043 | ||||||
|
Goodwill
|
982,788 | 337,000 | ||||||
|
Employee
loan receivable, net of current portion
|
38,000 | 40,000 | ||||||
|
Station
and other receivables, net of current portion
|
151,160 | 37,500 | ||||||
|
Investment
in real estate
|
40,000 | 40,000 | ||||||
|
Deposits
and other assets
|
153,116 | 359,606 | ||||||
|
Deferred
tax asset – long term
|
106,023 | - | ||||||
|
Total
long term assets
|
3,490,844 | 3,993,149 | ||||||
|
Total
assets
|
$ | 28,211,419 | $ | 24,763,833 | ||||
|
Current
liabilities
|
||||||||
|
Accounts
payable and accrued transportation costs
|
$ | 16,004,814 | $ | 13,249,628 | ||||
|
Commissions
payable
|
2,119,503 | 1,323,004 | ||||||
|
Other
accrued costs
|
538,854 | 472,202 | ||||||
|
Income
taxes payable
|
76,309 | - | ||||||
|
Due
to former Adcom shareholder
|
603,205 | 2,153,721 | ||||||
|
Total
current liabilities
|
19,342,685 | 17,198,555 | ||||||
|
Long
term debt
|
7,641,021 | 7,869,110 | ||||||
|
Other
long term liabilities
|
439,905 | - | ||||||
|
Deferred
tax liability
|
- | 352,387 | ||||||
|
Total
long term liabilities
|
8,080,926 | 8,221,497 | ||||||
|
Total
liabilities
|
27,423,611 | 25,420,052 | ||||||
|
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, 2010 – 31,273,461; June 30, 2009 –
34,106,960
|
16,157 | 16,157 | ||||||
|
Additional
paid-in capital
|
8,108,239 | 7,889,458 | ||||||
|
Treasury
stock, at cost, 3,428,499 and 595,000 shares, respectively
|
(936,190 | ) | (138,250 | ) | ||||
|
Retained
deficit
|
(6,466,946 | ) | (8,425,491 | ) | ||||
|
Total
Radiant Logistics, Inc. stockholders’ equity (deficit)
|
721,260 | (658,126 | ) | |||||
|
Non-controlling
interest
|
66,548 | 1,907 | ||||||
|
Total
stockholders’ equity (deficit)
|
787,808 | (656,219 | ) | |||||
|
Total
liabilities and stockholders’ equity (deficit)
|
$ | 28,211,419 | $ | 24,763,833 | ||||
The
accompanying notes form an integral part of these consolidated financial
statements.
F-3
RADIANT
LOGISTICS, INC.
Consolidated
Statements of Income (Operations)
|
YEAR ENDED
JUNE 30, 2010
|
YEAR ENDED
JUNE 30, 2009
|
|||||||
|
Revenues
|
$ | 146,715,556 | $ | 136,996,319 | ||||
|
Cost
of transportation
|
101,085,752 | 91,427,781 | ||||||
|
Net
revenues
|
45,629,804 | 45,568,538 | ||||||
|
Agent
commissions
|
31,376,580 | 30,565,136 | ||||||
|
Personnel
costs
|
5,882,251 | 6,920,914 | ||||||
|
Selling,
general and administrative expenses
|
4,295,188 | 4,286,572 | ||||||
|
Depreciation
and amortization
|
1,598,195 | 1,743,159 | ||||||
|
Restructuring
charges
|
- | 220,000 | ||||||
|
Goodwill
impairment
|
- | 11,403,342 | ||||||
|
Total
operating expenses
|
43,152,214 | 55,139,123 | ||||||
|
Income
(loss) from operations
|
2,477,590 | (9,570,585 | ) | |||||
|
Other
income (expense)
|
||||||||
|
Interest
income
|
44,181 | 13,540 | ||||||
|
Interest
expense
|
(178,837 | ) | (216,893 | ) | ||||
|
Gain
on extinguishment of debt
|
135,012 | 190,000 | ||||||
|
Gain
on litigation settlement
|
354,670 | - | ||||||
|
Other
|
338,724 | (75,005 | ) | |||||
|
Total
other income (expense)
|
693,750 | (88,358 | ) | |||||
|
Income
(loss) before income tax expense
|
3,171,340 | (9,658,943 | ) | |||||
|
Income
tax expense
|
(1,094,154 | ) | (43,912 | ) | ||||
|
Net
income (loss)
|
2,077,186 | (9,702,855 | ) | |||||
|
Less:
Net income attributable to non-controlling interest
|
(118,641 | ) | (26,691 | ) | ||||
|
Net
income (loss) attributable to Radiant Logistics, Inc.
|
$ | 1,958,545 | $ | (9,729,546 | ) | |||
|
Net
income (loss) per common share – basic and diluted
|
$ | .06 | $ | (0.28 | ) | |||
|
Weighted
average shares outstanding
|
||||||||
|
Basic
shares
|
32,548,492 | 34,678,755 | ||||||
|
Diluted
shares
|
32,720,019 | 34,678,755 | ||||||
The
accompanying notes form an integral part of these consolidated financial
statements.
F-4
Consolidated
Statements of Stockholders’ Equity (Deficit)
|
RADIANT LOGISTICS, INC. STOCKHOLDERS
|
||||||||||||||||||||||||||||
|
COMMON STOCK
|
ADDITIONAL
PAID-IN
|
TREASURY
|
RETAINED
EARNINGS
|
NON-CONTROLLING
|
TOTAL
STOCKHOLDERS’
|
|||||||||||||||||||||||
|
SHARES
|
AMOUNT
|
CAPITAL
|
STOCK
|
(DEFICIT)
|
INTEREST
|
EQUITY (DEFICIT)
|
||||||||||||||||||||||
|
Balance
at June
30, 2008
|
34,660,293 | $ | 16,116 | $ | 7,703,658 | $ | - | $ | 1,304,055 | $ | (24,784 | ) | $ | 8,999,045 | ||||||||||||||
|
Issuance
of common stock for investor relations
|
41,667 | 41 | 12,041 | - | - | - | 12,082 | |||||||||||||||||||||
|
Repurchase
of common stock
|
(595,000 | ) | - | - | (138,250 | ) | - | - | (138,250 | ) | ||||||||||||||||||
|
Share-based
compensation
|
- | - | 173,759 | - | - | - | 173,759 | |||||||||||||||||||||
|
Net
income (loss) for the year ended June 30, 2010
|
- | - | - | - | (9,729,546 | ) | 26,691 | (9,702,855 | ) | |||||||||||||||||||
|
Balance
at June 30, 2009
|
34,106,960 | $ | 16,157 | $ | 7,889,458 | $ | (138,250 | ) | $ | (8,425,491 | ) | $ | 1,907 | $ | (656,219 | ) | ||||||||||||
|
Repurchase
of common stock
|
(2,833,499 | ) | - | - | (797,940 | ) | - | - | (797,940 | ) | ||||||||||||||||||
|
Share-based
compensation
|
- | - | 218,781 | - | - | - | 218,781 | |||||||||||||||||||||
|
Distribution
to non-controlling interest
|
- | - | - | - | - | (54,000 | ) | (54,000 | ) | |||||||||||||||||||
|
Net
income for the year ended June 30, 2010
|
- | - | - | - | 1,958,545 | 118,641 | 2,077,186 | |||||||||||||||||||||
|
Balance
at June 30, 2010
|
31,273,461 | $ | 16,157 | $ | 8,108,239 | $ | (936,190 | ) | $ | (6,466,946 | ) | $ | 66,548 | $ | 787,808 | |||||||||||||
The
accompanying notes form an integral part of these consolidated financial
statements.
F-5
Consolidated
Statements of Cash Flows
|
YEAR
ENDED
JUNE
30, 2010
|
YEAR
ENDED
JUNE
30, 2009
|
|||||||
|
CASH
FLOWS PROVIDED BY OPERATING ACTIVITIES
|
||||||||
|
Net
income (loss)
|
$ | 1,958,545 | $ | (9,729,546 | ) | |||
|
ADJUSTMENTS
TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
|
||||||||
|
non-cash
compensation expense (stock options)
|
218,781 | 173,759 | ||||||
|
non-cash
issuance of common stock (services)
|
- | 12,082 | ||||||
|
amortization
of intangibles
|
1,159,286 | 1,263,370 | ||||||
|
deferred
income tax benefit
|
(433,125 | ) | (1,421,657 | ) | ||||
|
depreciation
and leasehold amortization
|
438,909 | 479,789 | ||||||
|
gain
on extinguishment of debt
|
(135,012 | ) | (190,000 | ) | ||||
|
gain
on litigation settlement
|
(354,670 | ) | - | |||||
|
goodwill
impairment
|
- | 11,403,342 | ||||||
|
amortization
of bank fees
|
40,748 | 16,534 | ||||||
|
change
in non-controlling interest
|
118,641 | 26,691 | ||||||
|
change
in provision for doubtful accounts
|
(54,988 | ) | (90,766 | ) | ||||
|
CHANGE
IN OPERATING ASSETS AND LIABILITIES
|
||||||||
|
accounts
receivable
|
(4,038,459 | ) | 7,669,229 | |||||
|
employee
loan receivable
|
42,600 | (10,333 | ) | |||||
|
station
and other receivables
|
224,371 | (103,551 | ) | |||||
|
prepaid
expenses, deposits and other assets
|
(736,705 | ) | 259,356 | |||||
|
accounts
payable and accrued transportation costs
|
2,750,911 | (5,210,752 | ) | |||||
|
commissions
payable
|
796,499 | 186,145 | ||||||
|
other
accrued costs
|
(212,836 | ) | (16,368 | ) | ||||
|
other
long-term liabilities
|
439,905 | - | ||||||
|
income
taxes payable
|
76,309 | (498,142 | ) | |||||
|
income
tax deposit
|
535,074 | (450,046 | ) | |||||
|
due
to former Adcom shareholder
|
(20,834 | ) | - | |||||
|
Net
cash provided by operating activities
|
2,813,950 | 3,769,136 | ||||||
|
CASH
FLOWS USED FOR INVESTING ACTIVITIES
|
||||||||
|
Acquisition
of Adcom Express, Inc., net of acquired cash, including an additional
$62,246 of costs incurred post-closing
|
- | (5,493,799 | ) | |||||
|
Purchase
of furniture and equipment
|
(559,818 | ) | (230,892 | ) | ||||
|
Payments
to former Airgroup shareholders
|
- | (889,915 | ) | |||||
|
Payments
to former Adcom shareholder
|
(1,382,567 | ) | (115,009 | ) | ||||
|
Net
cash used for investing activities
|
(1,942,385 | ) | (6,729,615 | ) | ||||
|
CASH
FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES
|
||||||||
|
Proceeds
from (payments on) credit facility, net of credit fees
|
(228,089 | ) | 3,597,078 | |||||
|
Distribution
to non-controlling interest
|
(54,000 | ) | - | |||||
|
Purchases
of treasury stock
|
(797,940 | ) | (138,250 | ) | ||||
|
Net
cash provided by (used for) financing activities
|
(1,080,029 | ) | 3,458,828 | |||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(208,464 | ) | 498,349 | |||||
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
890,572 | 392,223 | ||||||
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 682,108 | $ | 890,572 | ||||
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||
|
Income
taxes paid
|
$ | 970,246 | $ | 2,369,845 | ||||
|
Interest
paid
|
$ | 172,930 | $ | 216,893 | ||||
The
accompanying notes form an integral part of these consolidated financial
statements.
F-6
In
November 2008, the Company recorded $633,333 as an accrued payable and an
increase to goodwill for the final annual earn-out payment due to the former
Airgroup shareholders for the Company’s acquisition of Airgroup.
In
November 2008, the Company finalized its purchase price allocation for the
Automotive Services Group resulting in a decrease of net assets acquired by
$62,694 due to unutilized transaction costs. The effect of this transaction was
a decrease to goodwill and a decrease to accounts payable.
In
December 2008, the Company completed its quarterly analysis of allowance for
doubtful accounts. Included in the analysis of doubtful accounts was $205,462
relating to receivables acquired in the Adcom transaction. Pursuant to the
purchase agreement for the Adcom transaction, the $205,462 was offset against
amounts otherwise due to the former Adcom shareholder.
In
December 2008, the Company paid $333,276 to the former Airgroup shareholders for
the earn-out payment recorded on the books for the year ending June 30, 2008.
The earn-out payment was recorded at June 30, 2008 in the amount of $416,596,
and payable in shares of the Company common stock. The payment was discounted by
$83,320 as the former Airgroup shareholders agreed to receive cash rather than
Company shares. The effect of this reduction in the earn-out was a decrease to
goodwill and to the amount owed to the former Airgroup
shareholders.
In June
2009, and based on the operating income for year ended June 30, 2009, $337,000
was recorded as due to former Adcom shareholder and an increase to goodwill for
the first annual earn-out from the Company’s acquisition of Adcom.
In
September 2009, the Company finalized its purchase price allocation relating to
the acquisition of Adcom, resulting in an increase of net assets acquired by
$151,550 due to increased transaction costs and other adjustments to the fair
value of the acquired assets. The effect of this transaction was an increase to
goodwill of $157,291 with offsetting changes to other balance sheet amounts as
follows: a decrease to the allowance for doubtful accounts of $72,280, an
increase in other receivables of $11,831, an increase in accounts payable of
$4,275, an increase of other accrued costs of $279,488, and a decrease in the
amount due to the former Adcom shareholder of $42,361.
In June
2010, and based on the operating income for year ended June 30, 2010, $488,497
was recorded as due to former Adcom shareholder and an increase to goodwill for
the second annual earn-out from the Company’s acquisition of Adcom.
F-7
RADIANT
LOGISTICS, INC.
Notes
to the Consolidated Financial Statements
NOTE
1 - THE COMPANY AND BASIS OF
PRESENTATION
The
Company
Radiant
Logistics, Inc. (the "Company") was incorporated in the State of Delaware on
March 15, 2001. Currently, the Company is executing a strategy to build a
global transportation and supply chain management company through organic growth
and the strategic acquisition of best-of-breed non-asset based transportation
and logistics providers to offer its customers domestic and international
freight forwarding and an expanding array of value added supply chain management
services, including order fulfillment, inventory management and
warehousing.
The
Company completed the first step in its business strategy through the
acquisition of Airgroup Corporation ("Airgroup") effective as of January 1,
2006. Airgroup is a Bellevue, Washington based non-asset based logistics company
providing domestic and international freight forwarding services through a
network which includes a combination of company-owned and exclusive agent
offices across North America. Airgroup has a diversified account base
including manufacturers, distributors and retailers using a network of
independent carriers and international agents positioned strategically around
the world.
The
Company continues to identify a number of additional companies as suitable
acquisition candidates and has completed two material acquisitions since its
acquisition of Airgroup. In November 2007, the Company acquired
Automotive Services Group in Detroit, Michigan to service the automotive
industry. In September 2008, the Company acquired Adcom Express, Inc. d/b/a
Adcom Worldwide ("Adcom"), adding an additional 30 locations across North
America and augmenting the Company’s overall domestic and international freight
forwarding capabilities.
In
connection with the acquisition of Adcom, the Company changed the name of
Airgroup Corporation to Radiant Global Logistics, Inc. ("RGL") in order to
better position its centralized back-office operations to service both the
Airgroup and Adcom network brands. RGL, through the Airgroup and
Adcom network brands, has a diversified account base including manufacturers,
distributors and retailers using a network of independent carriers and
international agents positioned strategically around the world.
The
Company’s growth strategy will continue to focus on both organic growth and
acquisitions. From an organic perspective, the Company will focus on
strengthening existing and expanding new customer relationships. One of the
drivers of the Company’s organic growth will be retaining existing, and securing
new exclusive agency locations. Since the Company’s acquisition of Airgroup in
January 2006, the Company has focused its efforts on the build-out of its
network of exclusive agency offices, as well as enhancing its back-office
infrastructure and transportation and accounting systems. The Company
will continue to search for targets that fit within its acquisition criteria.
The Company’s ability to secure additional financing will rely upon the sale of
debt or equity securities, and the development of an active trading market for
its securities.
As the
Company continues to build out its network of exclusive agent locations to
achieve a level of critical mass and scale, it is executing an acquisition
strategy to develop additional growth opportunities. The Company’s acquisition
strategy relies upon two primary factors: first, the Company’s
ability to identify and acquire target businesses that fit within its general
acquisition criteria; and second, the continued availability of capital and
financing resources sufficient to complete these acquisitions.
Successful
implementation of the Company’s growth strategy depends upon a number of
factors, including its ability to: (i) continue developing new agency locations;
(ii) locate acquisition opportunities; (iii) secure adequate funding to finance
identified acquisition opportunities; (iv) efficiently integrate the businesses
of the companies acquired; (v) generate the anticipated economies of scale from
the integration; and (vi) maintain the historic sales growth of the
acquired businesses in order to generate continued organic
growth. There are a variety of risks associated with the Company’s
ability to achieve its strategic objectives, including the ability to acquire
and profitably manage additional businesses and the intense competition in the
industry for customers and for acquisition candidates.
F-8
Basis
of Presentation
The
consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries as well as a single variable
interest entity, Radiant Logistics Partners LLC ("RLP"), which is 40% owned by
Radiant Global Logistics (f/k/a Airgroup Corporation), a wholly-owned subsidiary
of the Company, and whose accounts are included in the consolidated financial
statements. All significant intercompany balances and
transactions have been eliminated.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
a)
|
Use
of Estimates
|
The
preparation of financial statements and related disclosures in accordance with
accounting principles generally accepted in the United States 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, the fair value
of acquired assets and liabilities, accounting for the issuance of shares and
share based compensation, the assessment of the recoverability of long-lived
assets and goodwill, 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)
|
Fair
Value Measurements
|
In
general, fair values determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or liabilities. Fair values
determined by Level 2 inputs utilize observable inputs other than
Level 1 prices, such as quoted prices for similar assets or liabilities,
quoted prices in markets that are not active or other inputs that are observable
or can be corroborated by observable market data for substantially the full term
of the related assets or liabilities. Fair values determined by Level 3
inputs are unobservable data points for the asset or liability, and include
situations where there is little, if any, market activity for the asset or
liability.
|
c)
|
Fair
Value of Financial Instruments
|
The fair
values of the Company’s receivables, accounts payable and accrued transportation
costs, commissions payable, other accrued costs, income taxes payable and
amounts due to former Adcom shareholder approximate the carrying values due to
the relatively short maturities of these instruments. The fair value
of the Company’s long-term debt, if recalculated based on current interest
rates, would not differ significantly from the recorded amount.
|
d)
|
Cash
and Cash Equivalents
|
For
purposes of the statements of cash flows, cash equivalents include all
highly-liquid investments with original maturities of three months or less which
are not securing any corporate obligations.
|
e)
|
Concentrations
|
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.
|
f)
|
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.
On
occasion the Company extends credit to agent-based
stations.
F-9
|
g)
|
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.
|
h)
|
Goodwill
|
The
Company performs an annual impairment test for goodwill. The first step of the
impairment test requires the Company to determine the fair value of each
reporting unit, and compare the fair value to the reporting unit's carrying
amount. The Company has only one reporting unit. To the extent a
reporting unit's carrying amount exceeds its fair value, an indication exists
that the reporting unit's goodwill may be impaired and the Company must perform
a second more detailed impairment assessment. The second impairment assessment
involves allocating the reporting unit’s fair value to all of its recognized and
unrecognized assets and liabilities in order to determine the implied fair value
of the reporting unit’s goodwill as of the assessment date. The implied fair
value of the reporting unit’s goodwill is then compared to the carrying amount
of goodwill to quantify an impairment charge as of the assessment date. The
Company typically performs its annual impairment test effective as of April 1 of
each year, unless events or circumstances indicate, an impairment may have
occurred before that time. As of June 30, 2010, management believes
there are no indications of impairment.
During
the second quarter of fiscal 2009, in connection with the preparation of the
condensed consolidated financial statements included herein, the Company
concluded indicators of potential impairment were present due to the sustained
decline in the Company’s share price resulting in the market capitalization of
the Company being less than its book value. The Company conducted an impairment
test during the second quarter of fiscal 2009 based on the facts and
circumstances at that time and its business strategy in light of existing
industry and economic conditions, as well as taking into consideration future
expectations. As the Company has significantly grown the business since its
initial acquisition of Airgroup, it has also grown its customer relationship
intangibles as the Company added additional stations. Through its impairment
testing and review, the Company concluded its discounted cash flow analysis
supports a valuation of its identifiable intangible assets well in excess of
their carrying value. However, generally accepted accounting
principles ("GAAP") do not allow the Company to recognize the previously
unrecognized intangible assets in connection with these new
stations. Factoring this with management’s assessment of the fair
value of other assets and liabilities resulted in no residual implied fair value
remaining to be allocated to goodwill. As a result, for the quarter ending
December 31, 2008, the Company recorded a non-cash goodwill impairment charge of
$11.4 million. This non-cash charge did not have any impact on the Company’s
compliance with the financial covenants in its credit agreement.
The table
below reflects changes in goodwill for the years ending June 30:
|
2010
|
2009
|
|||||||
|
Goodwill
– beginning of year
|
$ | 337,000 | $ | 7,824,654 | ||||
|
Airgroup
earn-out and adjustment (see Note 11)
|
- | 550,013 | ||||||
|
Automotive
Services Group acquisition and adjustments
|
- | (62,694 | ) | |||||
|
Adcom
acquisition (see Note 4)
|
157,291 | 3,091,369 | ||||||
|
Adcom
earn-out (see Note 11)
|
488,497 | 337,000 | ||||||
|
Impairment
charge
|
- | (11,403,342 | ) | |||||
|
Goodwill
– end of year
|
$ | 982,788 | $ | 337,000 | ||||
|
i)
|
Long-Lived
Assets
|
Acquired
intangibles consist of customer related intangibles and non-compete agreements
arising from the Company’s acquisitions. Customer related intangibles are
amortized using accelerated methods over approximately 5 years and non-compete
agreements are amortized using the straight line method over the term of the
underlying agreements. See Notes 4 and 5.
F-10
The
Company reviews long-lived assets to be held-and-used for impairment whenever
events or changes in circumstances indicate the carrying amount of the assets
may not be recoverable. If the sum of the undiscounted expected future cash
flows over the remaining useful life of a long-lived asset is less than its
carrying amount, the asset is considered to be impaired. Impairment
losses are measured as the amount by which the carrying amount of the asset
exceeds the fair value of the asset. When fair values are not available, the
Company estimates fair value using the expected future cash flows discounted at
a rate commensurate with the risks associated with the recovery of the
asset. Assets to be disposed of are reported at the lower of carrying
amount or fair value less costs to sell. Management has performed a
review of all long-lived assets and has determined no impairment of the
respective carrying value has occurred as of June 30, 2010.
|
j)
|
Commitments
|
The
Company has operating lease commitments for equipment rentals, office space, and
warehouse space under non-cancelable operating leases expiring at various dates
through April 2021. Minimum future lease payments under these
non-cancelable operating leases for the next five fiscal years ending June 30
and thereafter are as follows:
|
2011
|
$ | 338,759 | ||
|
2012
|
229,567 | |||
|
2013
|
221,158 | |||
|
2014
|
230,921 | |||
|
2015
|
240,223 | |||
|
Thereafter
|
1,639,454 | |||
|
Total
minimum lease payments
|
$ | 2,900,082 |
Rent
expense amounted to $472,267 and $607,416 for the years ended June 30, 2010 and
2009.
|
k)
|
Income
Taxes
|
Deferred
income tax assets and liabilities are recognized for the expected future tax
consequences of events that have been reflected in the consolidated financial
statements. Deferred tax assets and liabilities are determined based on the
differences between the book values and the tax bases of particular assets and
liabilities. Deferred tax assets and liabilities are measured using tax rates in
effect for the years in which the differences are expected to reverse. A
valuation allowance is provided to offset the net deferred tax assets if, based
upon the available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.
The
Company reports a liability for unrecognized tax benefits resulting from
uncertain income tax positions taken or expected to be taken in an income tax
return. Estimated interest and penalties are recorded as a component
of interest expense or other expense, respectively.
|
l)
|
Revenue
Recognition and Purchased Transportation
Costs
|
The
Company is the primary obligor responsible for providing the service desired by
the customer and is responsible for fulfillment, including the acceptability of
the service(s) ordered or purchased by the customer. At the Company’s sole
discretion, it sets the prices charged to its customers, and is not required to
obtain approval or consent from any other party in establishing its
prices. The Company has multiple suppliers for the services it sells
to its customers, and has the absolute and complete discretion and right to
select the supplier that will provide the product(s) or service(s) ordered by a
customer, including changing the supplier on a shipment-by-shipment basis. In
most cases, the Company determines the nature, type, characteristics, and
specifications of the service(s) ordered by the customer. The Company also
assumes credit risk for the amount billed to the customer.
As a
non-asset based carrier, the Company does not own transportation assets. The
Company generates the major portion of its air and ocean freight revenues by
purchasing transportation services from direct (asset-based) carriers and
reselling those services to its customers. Based upon the terms in the contract
of carriage, revenues related to shipments where the Company issues a House
Airway Bill ("HAWB") or a House Ocean Bill of Lading ("HOBL") are recognized at
the time the freight is tendered to the direct carrier at origin. Costs
related to the shipments are also recognized at this same time based upon
anticipated margins, contractual arrangements with direct carriers, and other
known factors. The estimates are routinely monitored and compared to actual
invoiced costs. The estimates are adjusted as deemed necessary by the Company to
reflect differences between the original accruals and actual costs of purchased
transportation.
F-11
This
method generally results in recognition of revenues and purchased transportation
costs earlier than the preferred methods under GAAP which do not recognize
revenue until a proof of delivery is received or which recognize revenue as
progress on the transit is made. The Company’s method of revenue and cost
recognition does not result in a material difference from amounts that would be
reported under such other methods.
|
m)
|
Share
Based Compensation
|
The
Company accounts for share-based compensation under the fair value recognition
provisions such that compensation cost is measured at the grant date based on
the value of the award and is expensed ratably over the vesting period.
Determining the fair value of share-based awards at the grant date requires
judgment, including estimating the percentage of awards which will be forfeited,
stock volatility, the expected life of the award, and other inputs. If actual
forfeitures differ significantly from the estimates, share-based compensation
expense and the Company's results of operations could be materially
impacted.
|
n)
|
Basic
and Diluted Income Per Share
|
Basic
income 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, 2010, the weighted average outstanding
number of potentially dilutive common shares totaled 32,720,019 shares of common
stock, including options to purchase 3,620,000 shares of common stock at June
30, 2010, of which 3,060,000 were excluded as their effect would have been
antidilutive. For the year ended June 30, 2009, options to purchase
3,370,000 shares of common stock were excluded from the computation of diluted
weighted average shares outstanding as they are anti-dilutive due to the
Company’s net loss for the year. The following table reconciles the
numerator and denominator of the basic and diluted per share computations for
earnings per share as follows.
|
Year ended
June 30, 2010
|
Year ended
June 30, 2009
|
||||
|
Weighted
average basic shares outstanding
|
32,548,492
|
34,678,755
|
|||
|
Options
|
171,527
|
-
|
|||
|
Weighted
average dilutive shares outstanding
|
32,720,019
|
34,678,755
|
|||
|
o)
|
Comprehensive
Income
|
The
Company has no components of Other Comprehensive Income and, accordingly, no
Statement of Comprehensive Income has been included in the accompanying
consolidated financial statements.
|
p)
|
Reclassifications
|
Certain
amounts for prior periods have been reclassified in the consolidated financial
statements to conform to the classification used in fiscal 2010.
NOTE
3 - RECENT ACCOUNTING PRONOUNCEMENTS
In
June 2009, the FASB issued SFAS No. 167 ("SFAS 167"), "Amendments to
FASB Interpretation No. 46R". SFAS 167 amends certain requirements of
FIN 46R to improve
the financial reporting by enterprises involved with variable interest entities
and to provide more relevant and reliable information to users of financial
statements. SFAS 167 is effective for the Company in the fiscal year beginning
July 1, 2010. The adoption of SFAS 167 is not expected to have a
material impact on the Company’s consolidated financial position, results of
operations or cash flows.
F-12
In June
2009, the FASB issued guidance now codified in FASB Accounting Standards
Codification ("ASC") Topic 105, Generally Accepted Accounting Principles, as the
single source of authoritative nongovernmental GAAP. FASB ASC Topic 105 does not
change current GAAP, but is intended to simplify user access to all
authoritative GAAP by providing all authoritative literature related to a
particular topic in one place. All existing accounting standard documents have
been superseded and all other accounting literature not included in the FASB
Codification is now considered non-authoritative. These provisions of FASB ASC
Topic 105 are effective for interim and annual periods ending after September
15, 2009 and, accordingly, are effective for the Company for the current fiscal
reporting period. The adoption of this guidance did not have an impact on the
Company’s financial condition or results of operations, but impacted its
financial reporting process by eliminating all references to pre-codification
standards. On the effective date of this guidance, the Codification superseded
all then-existing non-SEC accounting and reporting standards, and all other
non-grandfathered, non-SEC accounting literature not included in the
Codification became non-authoritative.
In August
2009, the FASB issued Accounting Standards Update ("ASU") No. 2009-05, Fair
Value Measurements and Disclosures. The guidance in ASU 2009-05 provides
clarification that in circumstances in which a quoted price in an active market
for the identical liability is not available, an entity is required to measure
fair value using certain prescribed valuation techniques. The amendments in ASU
2009-05 were effective for the Company’s first quarter of fiscal 2010. The
adoption of this guidance did not have a material impact on the Company’s
financial position or results of operations.
In August
2009, the FASB issued ASU No. 2009-06, Implementation Guidance on Accounting for
Uncertainty in Income Taxes and Disclosure Amendment for Nonpublic Entities. The
guidance in ASU 2009-06 improves current accounting by helping achieve
consistent application of accounting for uncertainty in income taxes and is not
intended to change existing practice. ASU 2009-06 also eliminates disclosures
previously required for nonpublic entities. ASU 2009-06 is effective for interim
and annual periods ending after September 15, 2009. The adoption of this
guidance did not have a material impact on the Company’s financial position or
results of operations.
In
January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair
Value Measurements. The guidance in ASU 2010-06 provides amendments to
literature on fair value measurements and disclosures currently within the ASC
by clarifying certain existing disclosures and requiring new disclosures for the
various classes of fair value measurements. ASU 2010-06 is effective for interim
and annual periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements, which are effective for fiscal
years beginning after December 15, 2010, and for interim periods within those
fiscal years. The adoption of this guidance is not expected to have a material
impact on the Company’s financial position or results of
operations.
In
February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855):
Amendments to Certain Recognition and Disclosure Requirements. The guidance in
ASU 2010-09 addresses both the interaction of the requirements of Topic 855,
Subsequent Events, with the SEC’s reporting requirements and the intended
breadth of the reissuance disclosures provision related to subsequent events,
potentially changing reporting by both private and public entities depending on
the facts and circumstances surrounding the nature of the change. All of the
amendments in ASU 2010-09 are effective upon issuance of the final update,
except for the use of the issued date for conduit debt obligors which is
effective for interim and annual periods ending after June 15, 2010. The
adoption of this guidance is not expected to have a material impact on the
Company’s financial position or results of operations.
In April
2010, the FASB issued ASU No. 2010-13, Compensation – Stock Compensation (Topic
718): Effect of Denominating the Exercise Price of a Share-Based Payment Award
in the Currency of the Market in Which the Underlying Equity Security
Trades. The guidance in ASU 2010-13 provides amendments to clarify
that an employee share-based payment award with an exercise price denominated in
the currency of a market in which a substantial portion of the entity’s equity
securities trades should not be considered to contain a condition that is not a
market, performance, or service condition. Therefore, an entity would not
classify such an award as a liability if it otherwise qualifies as the adoption
of this guidance is not expected to have a material impact on the Company’s
financial position or results of operations.
NOTE
4 - ACQUISITION OF ADCOM EXPRESS, INC.
On
September 5, 2008, the Company entered into and closed a Stock Purchase
Agreement (the "Agreement") pursuant to which it acquired 100% of the issued and
outstanding stock of Adcom Express, Inc., d/b/a Adcom Worldwide ("Adcom"), a
privately-held Minnesota corporation. For financial accounting purposes, the
transaction was deemed to be effective as of September 1, 2008. The stock was
acquired from Robert F. Friedman, the sole shareholder of Adcom. The total value
of the transaction was $11,050,000, consisting of: (i) $4,750,000 in cash paid
at the closing; (ii) $250,000 in cash payable shortly after the closing, subject
to adjustment, based upon the working capital of Adcom as of August 31, 2008;
(iii) up to $2,800,000 in four "Tier-1 Earn-Out Payments" of up to $700,000
each, covering the four year earn-out period through June 30, 2012, based upon
Adcom achieving certain levels of "Gross Profit Contribution" (as defined in the
Agreement), payable 50% in cash and 50% in shares of Company common stock
(valued at delivery date); (iv) a "Tier-2 Earn-Out Payment" of up to $2,000,000,
equal to 20% of the amount by which the Adcom cumulative Gross Profit
Contribution exceeds $16,560,000 during the four year earn-out period; and (v)
an "Integration Payment" of $1,250,000 payable on the earlier of the date
certain integration targets are achieved or 18 months after the closing, payable
50% in cash and 50% in shares of Company common stock (valued at delivery date).
The Integration Payment, the Tier-1 Earn-Out Payments and certain amounts of the
Tier-2 Payments may be subject to acceleration upon occurrence of a "Corporate
Transaction" (as defined in the Agreement), which includes a sale of Adcom or
the Company, or certain changes in corporate control. The cash component of the
transaction was financed through a combination of existing funds and the
proceeds from the Company’s revolving credit facility.
F-13
Founded
in 1978, Adcom provides a full range of domestic and international freight
forwarding solutions to a diversified account base including manufacturers,
distributors and retailers through a combination of three company-owned and
twenty-seven independent agency locations across North America.
The total
purchase price consisted of an initial payment of $4,750,000 and acquisition
expenses of $288,346. Also included in the acquisition is $1,250,000
in future integration payments and $319,845 in working capital and other
adjustments. The total net assets acquired were $6.61 million, and
there were also $220,000 in restructuring charges associated with the
acquisition. The following table summarizes the final allocation of the
purchase price based on the estimated fair value of the acquired assets at
September 5, 2008.
|
Current
assets
|
$ | 11,948,619 | ||
|
Furniture
& equipment
|
291,862 | |||
|
Notes
receivable
|
343,602 | |||
|
Intangibles
|
3,200,000 | |||
|
Goodwill
|
3,248,660 | |||
|
Other
assets
|
325,296 | |||
|
Total
assets acquired
|
19,358,039 | |||
|
Current
liabilities assumed
|
11,533,848 | |||
|
Long-term
deferred tax liability
|
1,216,000 | |||
|
Total
liabilities acquired
|
12,749,848 | |||
|
Net
assets acquired
|
$ | 6,608,191 |
None of
the goodwill is expected to be deductible for income tax purposes.
The
former shareholder of Adcom filed an arbitration claim against the Company
regarding, among other things, the final purchase price based upon the closing
date working capital, as adjusted, of Adcom. On January 22, 2010, the
arbitrator issued his ruling which reduced Mr. Friedman’s closing date working
capital calculation by $1,443,914. After giving effect for other
ancillary issues addressed in the arbitration results and the reserves otherwise
maintained in connection with the Friedman liability, the Company reported a
gain of $354,670 in connection with arbitration ruling.
Through June 30, 2010, the
former Adcom shareholders earned a total of $808,524 in base earn-out payments.
Of this amount, $320,027 was paid in cash during the year ended June 30, 2010.
The remaining amount of $488,497 is included in the amount due to former Adcom
shareholder as of June 30, 2010, and is expected to be paid out in October 2010
(See Note 11).
In June
of 2010, the Company recognized a gain of $135,012 related to payments made to
the former shareholder of Adcom in satisfaction of integration and earn-out
obligations payable in Company stock that were ultimately paid in cash at a
discount.
F-14
The
following information is based on estimated results for the year ending June 30,
2009 as if the acquisition of the Adcom assets had occurred as of the beginning
of fiscal year 2009 (in thousands, except earnings per share):
|
UNAUDITED
|
Fiscal
Year
Ended
|
|||
|
2009
|
||||
|
Total
revenue
|
$ | 153,835 | ||
|
Net
income (loss)
|
$ | (9,801 | ) | |
|
Income
(loss) per share:
|
||||
|
Basic
|
$ | (.28 | ) | |
|
Diluted
|
$ | (.28 | ) | |
NOTE
5 - ACQUIRED INTANGIBLE ASSETS
The table
below reflects acquired intangible assets related to the acquisition of
Airgroup, Automotive Services Group and Adcom:
|
Year ended
June 30, 2010
|
Year ended
June 30, 2009
|
|||||||||||||||
|
Gross
carrying
amount
|
Accumulated
Amortization
|
Gross
carrying
amount
|
Accumulated
Amortization
|
|||||||||||||
|
Amortizable
intangible assets:
|
||||||||||||||||
|
Customer
related
|
$ | 5,752,000 | $ | 3,796,340 | $ | 5,752,000 | $ | 2,679,547 | ||||||||
|
Covenants
not to compete
|
190,000 | 125,903 | 190,000 | 83,410 | ||||||||||||
|
Total
|
$ | 5,942,000 | $ | 3,922,243 | $ | 5,942,000 | $ | 2,762,957 | ||||||||
|
Aggregate
amortization expense:
|
||||||||||||||||
|
For
twelve months ended June 30, 2010
|
$ | 1,159,286 | ||||||||||||||
|
For
twelve months ended June 30, 2009
|
$ | 1,263,370 | ||||||||||||||
|
Aggregate
amortization expense for the years ended June 30:
|
||||||||||||||||
|
2011
|
827,762 | |||||||||||||||
|
2012
|
769,772 | |||||||||||||||
|
2013
|
374,344 | |||||||||||||||
|
2014
|
47,879 | |||||||||||||||
|
Total
|
$ | 2,019,757 | ||||||||||||||
For the
year ended June 30, 2010, the Company recorded an expense of $1,159,286 from
amortization of intangibles and an income tax benefit of $421,206 from
amortization of the long term deferred tax liability; arising from the
acquisitions of Airgroup and Adcom. For the year ended June 30, 2009,
the Company recorded an expense of $1,263,370 from amortization of intangibles
and an income tax benefit of $456,199 from amortization of the long term
deferred tax liability; arising from the acquisitions of Airgroup and
Adcom. The Company expects the net reduction in income from the
combination of amortization of intangibles and long term deferred tax liability
will be $519,703 in 2011, $477,259 in 2012, $232,093 in 2013, and $29,688 in
2014.
NOTE
6 - VARIABLE INTEREST ENTITY
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 are considered "variable interest
entities". RLP is 40% owned by Radiant Global Logistics ("RGL"),
qualifies as a variable interest entity and is included in the Company’s
consolidated financial statements (see Note 7). RLP commenced
operations in February 2007. Non-controlling interest recorded
as an expense on the statements of income was $118,641 and $26,691 for the years
ended June 30, 2010 and 2009, respectively.
F-15
The
following table summarizes the balance sheets of RLP as of June 30:
|
2010
|
2009
|
|||||||
|
ASSETS
|
||||||||
|
Accounts
receivable
|
$ | 15,910 | $ | - | ||||
|
Accounts
receivable – Radiant Logistics
|
110,336 | 6,656 | ||||||
|
Prepaid
expenses and other current assets
|
950 | 2,165 | ||||||
|
Total
assets
|
$ | 127,196 | $ | 8,821 | ||||
|
LIABILITIES
AND PARTNERS' CAPITAL
|
||||||||
|
Checks
issued in excess of bank balance
|
$ | - | $ | 212 | ||||
|
Other
accrued costs
|
16,284 | 5,431 | ||||||
|
Total
liabilities
|
16,284 | 5,643 | ||||||
|
Partners'
capital
|
110,912 | 3,178 | ||||||
|
Total
liabilities and partners' capital
|
$ | 127,196 | $ | 8,821 | ||||
NOTE
7 - RELATED PARTY
RLP is
owned 40% by RGL and 60% by Radiant Capital Partners, LLC ("RCP"), a company for
which the Chief Executive Officer of the Company is the sole
member. 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. 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. RGL currently provides administrative services necessary to
operate RLP while RLP continues to develop. 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. RLP is consolidated in the
financial statements of the Company (see Note 6).
NOTE
8 - FURNITURE AND EQUIPMENT
|
June 30,
|
June 30,
|
|||||||
|
2010
|
2009
|
|||||||
|
Vehicles
|
$ | 33,788 | $ | 33,788 | ||||
|
Communication
equipment
|
31,359 | 1,353 | ||||||
|
Office
equipment
|
311,191 | 309,156 | ||||||
|
Furniture
and fixtures
|
149,504 | 66,036 | ||||||
|
Computer
equipment
|
606,405 | 554,337 | ||||||
|
Computer
software
|
884,352 | 884,384 | ||||||
|
Leasehold
improvements
|
439,197 | 44,002 | ||||||
| 2,455,796 | 1,893,056 | |||||||
|
Less: Accumulated
depreciation and amortization
|
(1,574,380 | ) | (1,132,549 | ) | ||||
|
Furniture
and equipment – net
|
$ | 881,416 | $ | 760,507 | ||||
Depreciation
and amortization expense related to furniture and equipment was $438,909 and
$479,789 for the years ended June 30, 2010 and 2009, respectively.
As a
condition of signing a new lease for the Company’s new corporate office, the
Company was reimbursed approximately $391,000 for leasehold improvement
purchases related to the new office.
F-16
NOTE
9 - LONG TERM DEBT
In March
2010, the Company’s $15.0 million revolving credit facility, including a $0.5
million sublimit to support letters of credit (collectively, the "Facility"),
was increased to $20.0 million with a maturity date of March 31, 2012. The
Facility is collateralized by accounts receivable and other assets of the
Company and its subsidiaries. Advances under the Facility are available to fund
future acquisitions, capital expenditures or for other corporate purposes,
including the repurchase of the Company’s stock. Borrowings under the facility
bear interest, at the Company’s option, at the bank’s prime rate minus 0.75% to
plus 0.50% or LIBOR plus 1.75% to 3.00%, 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 is collateralized by accounts receivable and
other assets of the Company and its subsidiaries and provides for advances of up
to 80% of eligible domestic accounts receivable and for advances of up to 60% of
eligible foreign 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 4.00 times the Company’s consolidated
earnings before interest, taxes, depreciation and amortization ("EBITDA"), as
adjusted, measured on a rolling four quarter basis. The second financial
covenant requires the Company to maintain a basic fixed charge coverage ratio of
at least 1.1 to 1.0. The third financial covenant is a minimum profitability
standard that requires the Company not to incur a net loss before taxes,
amortization of acquired intangibles and extraordinary items in any two
consecutive quarterly accounting periods.
Under the
terms of the Facility, the Company is permitted to make additional acquisitions
without the lender's consent only if certain conditions are satisfied. The
conditions imposed by the Facility include the following: (i) the absence of an
event of default under the Facility; (ii) the company to be acquired must be in
the transportation and logistics industry; (iii) the purchase price to be paid
must be consistent with the Company’s historical business and acquisition model;
(iv) after giving effect for the funding of the acquisition, the Company must
have undrawn availability of at least $1.0 million under the Facility; (v) the
lender must be reasonably satisfied with projected financial statements the
Company provides covering a 12 month period following the acquisition; (vi) the
acquisition documents must be provided to the lender and must be consistent with
the description of the transaction provided to the lender; and (vii) the number
of permitted acquisitions is limited to three per calendar year and shall not
exceed $7.5 million in aggregate purchase price financed by funded debt. In the
event that the Company is not able to satisfy the conditions of the Facility in
connection with a proposed acquisition, it must either forego the acquisition,
obtain the lender's consent, or retire the Facility. This may limit or slow the
Company’s ability to achieve the critical mass it may need to achieve its
strategic objectives.
The
co-borrowers of the Facility include Radiant Logistics, Inc., RGL (f/k/a
Airgroup Corporation), Radiant Logistics Global Services, Inc. ("RLGS"), RLP,
and Adcom Express, Inc. (d/b/a Adcom Worldwide). RLP is owned 40% by RGL and 60%
by RCP, an affiliate of the Company’s Chief Executive Officer. RLP has been
certified as a minority business enterprise, and focuses on corporate and
government accounts with diversity initiatives. As a co-borrower under the
Facility, the accounts receivable of RLP 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, 2010, the Company was in
compliance with all of its covenants.
As of
June 30, 2010, the Company had $5,279,095 in advances under the Facility and
$2,361,926 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 total long term debt of
$7,641,021.
As of
June 30, 2009, the Company had $6,435,211 in advances under the Facility and
$1,433,899 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 total long term debt of
$7,869,110.
At June
30, 2010, based on available collateral and $205,000 in outstanding letter of
credit commitments, there was $5,036,462 available for borrowing under the
Facility based on advances outstanding.
NOTE
10 - 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.
F-17
|
June
30,
|
June
30,
|
|||||||
|
2010
|
2009
|
|||||||
|
Current
deferred tax assets:
|
||||||||
|
Allowance
for doubtful accounts
|
$ | 303,976 | $ | 286,740 | ||||
|
Accruals
|
98,452 | 140,973 | ||||||
|
Total
current deferred tax assets
|
$ | 402,428 | $ | 427,713 | ||||
|
Long-term
deferred tax assets (liabilities):
|
||||||||
|
Stock-based
compensation
|
$ | 300,531 | $ | 217,394 | ||||
|
Goodwill
deductible for tax purposes
|
566,506 | 612,439 | ||||||
|
Intangibles
not deductible for tax purposes
|
(761,014 | ) | (1,182,220 | ) | ||||
|
Net
long-term deferred tax assets (liabilities)
|
$ | 106,023 | $ | (352,387 | ) | |||
The
acquisitions of Airgroup and Adcom resulted in $2,148,280 of long term deferred
tax liability resulting from certain amortizable intangibles identified during
the Company’s purchase price allocation which are 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 5.
Income
tax expense attributable to operations is as follows.
|
Year ended
June 30,
|
Year ended
June 30,
|
|||||||
|
2010
|
2009
|
|||||||
|
Current:
|
||||||||
|
Federal
|
$ | 1,328,967 | $ | 1,311,299 | ||||
|
State
|
198,312 | 154,270 | ||||||
|
Deferred:
|
||||||||
|
Federal
|
(387,132 | ) | (1,272,009 | ) | ||||
|
State
|
(45,993 | ) | (149,648 | ) | ||||
|
Net
income tax expense
|
$ | 1,094,154 | $ | 43,912 | ||||
The
following table reconciles income taxes based on the U.S. statutory tax rate to
the Company’s income tax expense.
|
Year ended
June 30,
|
Year ended
June 30,
|
|||||||
|
2010
|
2009
|
|||||||
|
Tax
(benefit) expense at statutory rate
|
$ | 1,037,918 | $ | (3,293,116 | ) | |||
|
Permanent
differences
|
(151,192 | ) | 3,260,668 | |||||
|
Change
in income taxes due to IRS audit
|
146,175 | - | ||||||
|
State
income taxes
|
152,320 | 76,360 | ||||||
|
Other
|
(91,067 | ) | - | |||||
|
Net
income tax expense
|
$ | 1,094,154 | $ | 43,912 | ||||
Tax years
which remain subject to examination by federal and state authorities are the
years ended June 30, 2007 through June 30, 2010.
The
Company’s agreements with respect to the acquisitions of Airgroup and Adcom
contain future contingent consideration provisions which provide for the selling
shareholders to receive additional consideration if minimum pre-tax income
levels are made in future periods. Contingent consideration is accounted for as
additional goodwill when earned.
F-18
Airgroup Purchase
Contingencies
Effective
January 1, 2006, the Company acquired all 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 which was paid on December 31, 2007; (iii)
as amended, an additional base payment of $0.6 million payable in cash, $0.3
million of which was paid on June 30, 2008 and $0.3 million was paid 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 $15.0 million
generated during the five-year earn-out period up to a maximum of $1.5
million. With respect to the base earn-out payment of $1.9 million,
in the event there is a shortfall in income from continuing operations, the
earn-out payment will be reduced on a dollar-for-dollar basis to the extent of
the shortfall. Shortfalls may be carried over or carried back to the
extent that income from continuing operations in any other payout year exceeds
the $2.5 million level. For the year ending June 30, 2008, the former
shareholders of Airgroup earned $416,596 in base earn-out
payments. In October 2008, the former shareholders of Airgroup agreed
to a 20% discount on this amount to receive the full amount in cash, resulting
in a reduction in the payout of $83,320.
In
November 2008, the Company amended the Airgroup Stock Purchase Agreement and
agreed to unconditionally pay the former Airgroup shareholders an earn-out
payment of $633,333 for the earn-out period ending June 30, 2009 to be paid on
or about October 1, 2009 by delivery of shares of common stock of the Company.
In consideration for the certainty of the earn-out payment, the former Airgroup
shareholders agreed (i) to waive and release us from any and all further
obligations to pay any earn-outs payments on account of shortfall amounts, if
any, that may have accumulated prior to June 30, 2009; (ii) to waive and release
the Company from any and all further obligation to account for and pay the
Tier-2 earn-out payment; and (iii) that the earn-out payment to be paid for the
earn-out period ending June 30, 2009 would constitute a full and final payment
to the former Airgroup shareholders of any and all amounts due to the former
Airgroup shareholders under the Airgroup Stock Purchase Agreement. In March of
2009, Airgroup shareholders agreed to receive $443,333 in cash on an accelerated
basis rather than the $633,333 in Company shares due in October of 2009,
resulting in a gain on extinguishment of debt of $190,000.
Adcom Purchase
Contingencies
Effective
September 5, 2008, the Company acquired all of the outstanding stock of Adcom
Express (See Note 4). Through June 30, 2010 the former Adcom
shareholder earned a total of $808,524 as part of the Tier 1 Earn-Out
arrangement. Of this amount, $320,027 was paid in cash at a discount
(see Note 4) during the year ended June 30, 2010. The remaining amount of
$488,497 is included in Due to former Adcom shareholder and is payable on
October 1, 2010.
|
Estimated payment anticipated for fiscal
year(1):
|
2012
|
2013
|
||||||
|
Earn-out
period:
|
7/1/2010–
6/30/2011
|
7/1/2011
–
6/30/2012
|
||||||
|
Earn-out
payments:
|
||||||||
|
Cash
|
$ | 350 | $ | 350 | ||||
|
Equity
|
350 | 350 | ||||||
|
Total
potential earn-out payments
|
$ | 700 | $ | 700 | ||||
|
Total
gross margin targets
|
$ | 4,320 | $ | 4,320 | ||||
(1)
Earn-out payments are paid October 1 following each fiscal year
end.
Finder's Fee
Arrangements
In fiscal
year 2007, the Company entered into finder’s 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 are conditioned
payable upon, among other things, the retention of any newly acquired operations
for a period of not less than 12 months. Payment of the finder’s fee
may be paid in cash, Company shares, or a combination of cash and
shares. For the year ended June 30, 2010, the Company accrued
$110,331 in satisfaction of the finder’s fee obligations, payable half in shares
of Company stock and half in cash. For the year ended June 30, 2009, the Company
paid $30,000 in satisfaction of finder’s fee obligations.
F-19
NOTE
12 - STOCKHOLDERS’ EQUITY
Preferred
Stock
The
Company is authorized to issue 5,000,000 shares of preferred stock, par value at
$.001 per share. As of June 30, 2010 and 2009, none of the shares were issued or
outstanding.
Common
Stock Repurchase Program
During
2009, the Company's Board of Directors approved a stock repurchase program,
pursuant to which up to 5,000,000 shares of its common stock could be
repurchased under the program through December 31, 2010. Under this
repurchase program, the Company purchased 2,833,499 shares of its common stock
at a cost of $797,940 and 595,000 shares of its common stock at a cost of
$138,250 during the years ended June 30, 2010 and 2009,
respectively. Subsequent to year end, the Company purchased an
additional 1,304,040 shares of its common stock under this repurchase program at
a cost of $393,184.
NOTE
13 - SHARE-BASED COMPENSATION
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.
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, 300,000 stock options were
granted to employees at a weighted average exercise price of $0.28 per share
during the year ended June 30, 2010. During the year ended June 30,
2009, 200,000 stock options were granted to employees at a weighted average
exercise price of $0.18 per share. The Company recorded share-based compensation
expense of $218,781 for the year ended June 30, 2010, and $173,759 for the year
ended June 30, 2009.
F-20
The
following table reflects activity under the plan for years ended June 30, 2010
and 2009:
|
Year ended
June 30, 2010
|
Year ended
June 30, 2009
|
|||||||||||||||
|
Granted
Shares
|
Weighted
Average
Exercise Price
|
Granted
Shares
|
Weighted
Average
Exercise Price
|
|||||||||||||
|
Outstanding
at beginning of year
|
3,320,000 | $ | 0.523 | 3,410,000 | $ | 0.539 | ||||||||||
|
Granted
|
300,000 | 0.280 | 200,000 | 0.180 | ||||||||||||
|
Forfeited
|
- | - | (290,000 | ) | 0.472 | |||||||||||
|
Outstanding
at end of year
|
3,620,000 | $ | 0.503 | 3,320,000 | $ | 0.523 | ||||||||||
|
Exercisable
at end of year
|
2,280,000 | $ | 0.562 | 1,616,000 | $ | 0.578 | ||||||||||
|
Non-vested
at end of year
|
1,340,000 | $ | 0.403 | 1,704,000 | $ | 0.472 | ||||||||||
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:
|
Year ended
June 30, 2010
|
Year ended
June 30, 2009
|
|||||||
|
Risk-Free
Interest Rates
|
1.57 | % | 1.29% - 2.67 | % | ||||
|
Expected
Term
|
6.5yrs
|
5 –
6.5yrs
|
||||||
|
Expected
Volatility
|
64.3 | % | 63.9% - 64.7 | % | ||||
|
Expected
Dividend Yields
|
0.00 | % | 0.00 | % | ||||
|
Forfeiture
Rate
|
0.00 | % | 0.00 | % | ||||
As of
June 30, 2010, the Company had approximately $193,000 of total unrecognized
share-based compensation costs relating to unvested stock options which is
expected to be recognized over a weighted average period of 2.19
years. The following table summarizes the Company’s unvested stock
options and changes for the years ended June 30, 2010 and 2009.
|
Shares
|
Weighted
Average
Grant
Date Fair
Value
|
|||||||
|
Outstanding
at June 30, 2008
|
2,383,000 | $ | 0.319 | |||||
|
Granted
during the year ended June 30, 2009
|
200,000 | 0.104 | ||||||
|
Less
options vested during the year ended June 30, 2009
|
(624,000 | ) | (0.331 | ) | ||||
|
Less
options forfeited during the year ended June 30, 2009
|
(255,000 | ) | (0.333 | ) | ||||
|
Outstanding
at June 30, 2009
|
1,704,000 | $ | 0.287 | |||||
|
Granted
during the year ended June 30, 2010
|
300,000 | 0.154 | ||||||
|
Less
options vested during the year ended June 30, 2010
|
(664,000 | ) | (0.317 | ) | ||||
|
Less
options forfeited during the year ended June 30, 2010
|
- | - | ||||||
|
Outstanding
at June 30, 2010
|
1,340,000 | $ | 0.243 | |||||
The
following table summarizes outstanding and exercisable options by price range as
of June 30, 2010:
|
Exercisable Options
|
||||||||||||||||||||||||||||||||
|
Exercise
Prices
|
Number
Outstanding
at June 30,
2010
|
Weighted
Average
Remaining
Contractual
Life-Years
|
Weighted
Average
Exercise Price
|
Aggregate
Intrinsic Value
at June 30,
2010
|
Number
Exercisable
at June 30,
2010
|
Weighted
Average
Remaining
Contractual
Life-Years
|
Weighted
Average
Exercise Price
|
Aggregate
Intrinsic Value
at June 30,
2010
|
||||||||||||||||||||||||
|
$0.00
- $0.19
|
460,000 | 8.18 | $ | 0.176 | $ | 43,400 | 164,000 | 8.09 | $ | 0.178 | $ | 15,160 | ||||||||||||||||||||
|
$0.20
- $0.39
|
400,000 | 8.90 | 0.260 | 7,000 | 20,000 | 8.29 | 0.200 | 1,400 | ||||||||||||||||||||||||
|
$0.40
- $0.59
|
1,550,000 | 5.60 | 0.483 | - | 1,170,000 | 5.49 | 0.483 | - | ||||||||||||||||||||||||
|
$0.60
- $0.79
|
1,190,000 | 5.57 | 0.729 | - | 914,000 | 5.51 | 0.734 | - | ||||||||||||||||||||||||
|
$1.00
- $1.19
|
20,000 | 6.22 | 1.010 | - | 12,000 | 6.23 | 1.010 | - | ||||||||||||||||||||||||
|
Total
|
3,620,000 | 6.29 | $ | 0.503 | $ | 50,400 | 2,280,000 | 5.72 | $ | 0.562 | $ | 16,560 | ||||||||||||||||||||
F-21
NOTE
14 - OPERATING AND GEOGRAPHIC SEGMENT INFORMATION
Operating
segments are identified as components of an enterprise about which separate
discrete financial information is available for evaluation by the chief
operating decision-maker, or decision-making group, in making decisions
regarding allocation of resources and assessing performance. The Company's chief
decision-maker is the Chief Executive Officer. The Company continues to operate
in a single operating segment.
The
Company’s geographic operations outside the United States include shipments to
and from Canada, Central America, Europe, Africa, Asia and Australia. The
following data presents the Company’s revenue generated from shipments to and
from these locations for the United States and all other countries, which is
determined based upon the geographic location of a shipment's initiation and
destination points (in thousands):
|
United States
|
Other Countries
|
Total
|
||||||||||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||||||||
|
Year
ended June 30:
|
||||||||||||||||||||||||
|
Revenue
|
$
|
78,594
|
$
|
73,203
|
$
|
68,122
|
$
|
63,793
|
$
|
146,716
|
$
|
136,996
|
||||||||||||
|
Cost
of transportation
|
46,887
|
41,932
|
54,199
|
49,495
|
101,086
|
91,427
|
||||||||||||||||||
|
Net
revenue
|
$
|
31,707
|
$
|
31,271
|
$
|
13,923
|
$
|
14,298
|
$
|
45,630
|
$
|
45,569
|
||||||||||||
NOTE
15 - QUARTERLY FINANCIAL DATA SCHEDULE (Unaudited)
|
Fiscal Year 2010 – Quarter Ended
|
||||||||||||||||
|
June 30
|
March 31
|
December 31
|
September 30
|
|||||||||||||
|
Revenue
|
$ | 40,707,751 | $ | 32,863,624 | $ | 39,115,845 | $ | 34,028,336 | ||||||||
|
Cost
of transportation
|
27,472,232 | 22,522,506 | 27,611,567 | 23,479,447 | ||||||||||||
|
Net
revenues
|
13,235,519 | 10,341,118 | 11,504,278 | 10,548,889 | ||||||||||||
|
Total
operating expenses
|
12,369,093 | 9,490,541 | 10,908,923 | 10,383,657 | ||||||||||||
|
Income
from operations
|
866,426 | 850,577 | 595,355 | 165,232 | ||||||||||||
|
Total
other income
|
188,702 | 134,132 | 327,931 | 42,985 | ||||||||||||
|
Income
before income tax expense
|
1,055,128 | 984,709 | 923,286 | 208,217 | ||||||||||||
|
Income
tax expense
|
(175,438 | ) | (511,050 | ) | (336,539 | ) | (71,127 | ) | ||||||||
|
Net
income
|
879,690 | 473,659 | 586,747 | 137,090 | ||||||||||||
|
Net
income attributable to non-controlling interest
|
(35,412 | ) | (24,551 | ) | (37,638 | ) | (21,040 | ) | ||||||||
|
Net
income attributable to Radiant Logistics, Inc.
|
$ | 844,278 | $ | 449,108 | $ | 549,109 | $ | 116,050 | ||||||||
|
Net
income per common share – basic and diluted
|
$ | .03 | $ | .01 | $ | .02 | $ | .02 | ||||||||
F-22
|
Fiscal
Year 2009 – Quarter Ended
|
||||||||||||||||
|
June
30
|
March
31
|
December
31
|
September
30
|
|||||||||||||
|
Revenue
|
$ | 32,360,984 | $ | 29,718,852 | $ | 42,513,263 | $ | 32,403,220 | ||||||||
|
Cost
of transportation
|
22,212,677 | 18,971,855 | 29,023,751 | 21,219,498 | ||||||||||||
|
Net
revenues
|
10,148,307 | 10,746,997 | 13,489,512 | 11,183,722 | ||||||||||||
|
Total
operating expenses
|
9,831,607 | 10,475,060 | 24,013,215 | 10,819,241 | ||||||||||||
|
Income
(loss) from operations
|
316,700 | 271,937 | (10,523,703 | ) | 364,481 | |||||||||||
|
Total
other income (expense)
|
(155,890 | ) | 106,001 | (66,844 | ) | 28,375 | ||||||||||
|
Income
(loss) before income tax (expense) benefit
|
160,810 | 377,938 | (10,590,547 | ) | 392,856 | |||||||||||
|
Income
tax (expense) benefit
|
(210,793 | ) | (63,150 | ) | 382,690 | (152,659 | ) | |||||||||
|
Net
income (loss)
|
(49,983 | ) | 314,788 | (10,207,857 | ) | 240,197 | ||||||||||
|
Net
(income) loss attributable to non-controlling interest
|
(7,088 | ) | (21,750 | ) | (7,843 | ) | 9,990 | |||||||||
|
Net
income (loss) attributable to Radiant Logistics, Inc.
|
$ | (57,071 | ) | $ | 293,038 | $ | (10,215,700 | ) | $ | 250,187 | ||||||
|
Net
income (loss) per common share – basic and diluted
|
$ | (.00 | ) | $ | .01 | $ | (.29 | ) | $ | .01 | ||||||
F-23
EXHIBIT
INDEX
|
Exhibit No.
|
Exhibit
|
|
|
21.1
|
Subsidiaries
of the Registrant
|
|
|
31.1
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
|
|
|
32.1
|
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|