AUDITOR Peterson Sullivan LLP 601 Union St | Suite 2300 | Seattle, WA 98101 STOCK TRANSFER AGENT Broadridge Corporate Issuer Solutions 1717 Arch Street | Suite 1300 | Philadelphia, PA 19103COUNSEL Fox Rothschild LLP 997 Lenox Drive | Building 3 | Lawrenceville, NJ 08648 INVESTOR RELATIONS Information is available on our website at www.radiantdelivers.com. If you prefer, you may also write or call us:Carol Guzman Director of Marketing & Communications 405 114th Avenue SE, Third Floor| Bellevue, WA 98004 cguzman@radiantdelivers.com Tel: 425-462-1094 ext. 573RADIANT LOGISTICS, INC. | GLOBAL HEADQUARTERS405 114th Ave SE, Third Floor | Bellevue, WA 98004Toll Free: (800) 843-4784| Local: (425) 462-1094 | Fax: (425) 462-0768www.radiantdelivers.comCopyright 2011 RadiantRADIANT LOGISTICS, INC. 2011 ANNUAL REPORT ON FORM 10-KANNUAL REPORT ON FORM 10-K2011It’s the Network that Delivers!®A RADIANT LOGISTICS COMPANY A NETWORK OF OPPORTUNITIESTo Our Shareholders:We look back on 2011 with a great sense of achievement and appreciation for the support of our customers, operating partners, carriers, shareholders and hard-working employees that have come together to make Radiant one of the fastest growing transportation and logistics companies in North America. As we anticipated, the benefits of our scalable non-asset based business model continued to shine through over the course of 2011 as we made good on our promise to deliver profitable growth. We were also able to leverage our robust back-office platform to further expand our network and in April of 2011 on-boarded another significant network brand with the acquisition of Distribution By Air. For the fiscal year ended June 30, 2011, Radiant posted record revenues of $203.8 million and excluding non-recurring transition costs associated with our acquisition of Distribution By Air, reported $7,406,000 in adjusted EBITDA, an improvement of $3,160,000 or 74.4% over the compariable prior year period.It is also particularly rewarding to see the results of all that has been accomplished starting to be reflected in our stock price which appreciated over 750% over the last year. Persistence does pay.Today, operating under the Airgroup, Adcom Worldwide, Distribution By Air and Radiant brands from over one hundred locations across North America, we enjoy one of the largest footprints and most comprehensive service offerings in our industry. But for all that has been accomplished, there is still so much more yet to be done. Our focus and commitment remains on bringing value to the agent based forwarding community – in the right place, at the right time – with the right value proposition:• Leveraging our status as a public company to provide our partners with an opportunity to share in the value that they help create• Providing a robust platform in terms of people, process and technology which is translating into better purchasing power with our vendors and more sophisticated e-business solutions for our customers• Offering a unique opportunity in terms of succession planning and liquidity for our station owners. Our approach is proving to be a unique and compelling value proposition in the marketplace and creating a real network of opportunities for our partners here in the U.S and around the world.We are looking forward to continued success in 2012 and sharing some exciting milestones as we continue to execute our three-pronged strategy:• Providing continuous improvement to our existing network participants in terms of technology, carrier pricing, enhanced service offerings and operating performance• Building upon the success of our organic growth initiative by on-boarding additional agent stations • Opportunistically pursuing acquisition opportunities that can leverage our platformThanks again for your continued support and the opportunity to represent you at Radiant Logistics – It’s the Network that Delvers!®Sincerely,Bohn H. Crain Founder, Chairman and CEO$2.50$2.00$1.50$1.00$0.50$0.00Share Price Performance Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011$250$200$150$100$50Revenue (in millions) FY 2007 FY2008 FY2009 FY2010 FY2011 $100.2$137.0$146.7$203.8$75.5$8,000$7,000$6,000$5,000$4,000$3,000$2,000$1,000 $ -Adjusted EBITDA (in thousands) FY 2007 FY2008 FY2009 FY2010 FY2011 $1,814$1,412$4,246$7,406(1)(1) Excludes $583,000 in non-reoccurring transition costs associated with the acquisition of Distribution By Air.$3,677 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, 2011
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to ________
Commission File Number 000-50283
RADIANT LOGISTICS, INC.
(Name of Registrant as Specified in Its Charter)
Delaware 04-3625550
-------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
405 114th Avenue S.E.
Bellevue, WA 98004
-------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(425) 943-4599
-------------------------------------------------------------------
Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on which Registered
------------------- -----------------------------------
Common Stock, $.001 Par Value None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 Par Value per Share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities Act. Yes [ ] 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):
Non-accelerated filer [ ] Smaller Reporting Company [X]
Large accelerated filer [ ] Accelerated filer [ ]
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, 2010 as reported on the OTC Bulletin Board was $14,560,306. 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 October 5, 2011, 31,676,438 shares of the registrant's common stock were outstanding.
Documents Incorporated by Reference: None
TABLE OF CONTENTS
PART I
ITEM 1
BUSINESS ................................................................................................................................. 2
ITEM 1A RISK FACTORS ....................................................................................................................... 9
PROPERTIES .......................................................................................................................... 16
ITEM 2
LEGAL PROCEEDINGS ........................................................................................................ 16
ITEM 3
REMOVED AND RESERVED ............................................................................................... 16
ITEM 4
PART II
ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ................................. 17
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ................................................................................................ 18
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......................................... 31
ITEM 9A CONTROLS AND PROCEDURES ........................................................................................ 31
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ................. 32
ITEM 11 EXECUTIVE COMPENSATION ........................................................................................... 34
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS ...................................... 39
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
ITEM 14
DIRECTOR INDEPENDENCE .............................................................................................. 41
PRINCIPAL ACCOUNTANT FEES AND SERVICES ......................................................... 42
PART IV
ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES .............................................. 43
Signatures
................................................................................................................................................. 45
Financial Statements .................................................................................................................................. F-1
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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.
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PART I
ITEM 1. BUSINESS
The Company
Radiant Logistics, Inc. (the "Company," "we" or "us") is a non-asset based transportation and logistics
services company providing 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. We are executing a strategy to expand our operations through a
combination of organic growth and the strategic acquisition of best-of-breed, non-asset based
transportation and logistics providers.
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.
We continue to identify a number of additional companies as suitable acquisition candidates and have
completed three material acquisitions since our acquisition of Airgroup. In November 2007, we acquired
the 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 April of 2011, we acquired DBA Distribution Services, Inc., d/b/a Distribution by Air
("DBA"), adding an additional 25 locations across North America, further expanding our fiscal network
and service 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
our multi-brand network. RGL, through the Airgroup, Adcom and DBA 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. We
have focused our efforts on the build-out of our network of exclusive agency offices, as well as enhancing
our back-office infrastructure, transportation and accounting systems. We will continue to search for targets
which fit within our acquisition criteria.
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 which 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.
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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. 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.
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, including us, focus on heavier cargo and do not generally compete with integrated
shippers of primarily smaller parcels. In addition to the high fixed expenses associated with owning,
operating and maintaining fleets of aircraft, trucks and related equipment, integrated carriers often impose
significant restrictions on delivery schedules and shipment weight, size and type. On occasion, integrated
shippers serve as a source of cargo space to forwarders. Additionally, most freight forwarders do not
generally compete with the major commercial airlines, which, to some extent, depend on forwarders to
procure shipments and supply freight to fill cargo space on their scheduled flights.
We believe there are several factors that are increasing demand for global logistics solutions. These factors
include:
Outsourcing of non-core activities. Companies increasingly outsource freight forwarding,
warehousing and other supply chain activities to allow them to focus on their respective core
competencies. From managing purchase orders to the timely delivery of products, companies turn
to third party logistics providers to manage these functions at a lower cost and greater efficiency.
Globalization of trade. As barriers to international trade are reduced or substantially eliminated,
international trade is increasing. In addition, companies increasingly are sourcing their parts,
supplies and raw materials from the most cost competitive suppliers throughout the world.
Outsourcing of manufacturing functions to, or locating company-owned manufacturing facilities
in, low cost areas of the world also results in increased volumes of world trade.
Increased need for time-definite delivery. The need for just-in-time and other time-definite
delivery has increased as a result of the globalization of manufacturing, greater implementation of
demand-driven supply chains, the shortening of product cycles and the increasing value of
individual shipments. Many businesses recognize that increased spending on time-definite supply
chain management services can decrease overall manufacturing and distribution costs, reduce
capital requirements and allow them to manage their working capital more efficiently by reducing
inventory levels and inventory loss.
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
3
is strong pressure on national and regional freight forwarders and supply chain management
providers to become aligned with a global network. Larger freight forwarders and supply chain
management providers benefit from economies of scale which enable them to negotiate reduced
transportation rates and to allocate their overhead over a larger volume of transactions. Globally
integrated freight forwarders and supply chain management providers are better situated to provide
a full complement of services, including pick-up and delivery, shipment via air, sea and/or road
transport, warehousing and distribution, and customs brokerage.
Increasing influence of e-business and the Internet. Technology advances have allowed businesses
to connect electronically through the Internet to obtain relevant information and make purchase
and sale decisions on a real-time basis, resulting in decreased transaction times and increased
business-to-business activity. In response to their customers' expectations, companies have
recognized the benefits of being able to transact business electronically. As such, businesses
increasingly are seeking the assistance of supply chain service providers with sophisticated
information technology systems which can facilitate real-time transaction processing and web-
based shipment monitoring.
Our Growth Strategy
Our objective is to provide customers with comprehensive value-added logistics solutions. We plan to
achieve this goal through domestic and international freight forwarding services offered by us through our
Airgroup, Adcom and DBA 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 DBA, 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:
the highly fragmented composition of our market;
our strategy for creating an organization with global reach should enhance an acquired target
company’s ability to compete in its local and regional markets through an expansion of offered
services and lower operating costs;
the potential for increased profitability as a result of our centralization of certain administrative
functions, greater purchasing power and economies of scale;
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our centralized management capabilities should enable us to effectively manage our growth and
the integration of acquired companies;
our status as a public corporation may ultimately provide us with a liquid trading currency for
acquisitions; and
the ability to utilize our experienced management to identify, acquire and integrate acquisition
opportunities.
We intend to 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 operating locations across North America, 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.
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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). These systems combine to form the foundation of our supply-chain
technologies, which we call "Globalvision", and which provides us with a common set of back-office
operating, accounting and customer facing applications used across our 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.
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.
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.
Information technology resources. A primary component of our business strategy is the continued
development of advanced information systems to continually provide accurate and timely information to
our management and customers. Our customer delivery tools enable connectivity with our customers’ and
trading partners’ systems, which leads to more accurate and up-to-date information on the status of
shipments.
Diverse customer base. We have a well-diversified base of customers that includes manufacturers,
distributors and retailers. As of the date of this report, no single customer represented more than 5% of our
business and only one agency location represented more than 10% of our business, reducing risks
associated with any particular industry, geographic or customer concentration.
6
Sales and Marketing
We principally market our services through the senior management teams in place at over 100 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.
Research and Development
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
We have no customers that account for more than 5% of our revenues and one agency location which
accounts for more than 10%, but less than 12.5%, 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.
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
7
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 151 employees, of which 140 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
RISKS PARTICULAR TO OUR BUSINESS
We are largely dependent on the efforts of our exclusive agents to generate our revenue and service our
customers.
We currently sell 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 is one agency
location which accounts for more than 10% of our total gross revenues. The DBA agency agreements
generally carry a term of 1 year and automatically renew on each anniversary absent a 90-day notice of
termination from either party. 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
9
stoppages in transportation, whether caused by strike, work stoppage, lock-out, slowdown or otherwise,
could adversely impact our business, results of operations and financial condition.
Our profitability depends on our ability to effectively manage our cost structure as we grow the business.
As we continue to expand our revenues through the expansion of our network of exclusive agency
locations, we must maintain an appropriate cost structure to maintain and expand our profitability. While
we intend to continue to work on growing revenue by increasing the number of our exclusive agency
locations, by strategic acquisitions, and by continuing to work on maintaining and expanding our gross
profit margins by reducing transportation costs, our ultimate profitability will be driven by our ability to
manage our agent commissions, personnel and general and administrative costs as a function of our net
revenues. There can be no assurances that we will be able to increase revenues or maintain profitability.
We face intense competition in the freight forwarding, logistics and supply chain management industry.
The freight forwarding, logistics and supply chain management industry is intensely competitive and is
expected to remain so for the foreseeable future. We face competition from a number of companies,
including many that have significantly greater financial, technical and marketing resources. There are a
large number of companies competing in one or more segments of the industry, although the number of
firms with a global network that offer a full complement of freight forwarding and supply chain
management services is more limited. Depending on the location of the customer and the scope of services
requested, we must compete against both the niche players and larger entities. In addition, customers
increasingly are turning to competitive bidding situations soliciting bids from a number of competitors,
including competitors that are larger than us.
Our business is subject to seasonal trends.
Historically, our operating results have been subject to seasonal trends when measured on a quarterly basis.
Our first and fourth fiscal quarters are traditionally weaker compared with our second and third fiscal
quarters. This trend is dependent on numerous factors, including the markets in which we operate, holiday
seasons, climate, economic conditions and numerous other factors. A substantial portion of our revenue is
derived from clients in industries whose shipping patterns are tied closely to consumer demand which can
sometimes be difficult to predict or are based on just-in-time production schedules. Therefore, our revenue
is, to a larger degree, affected by factors that are outside of our control. There can be no assurance that our
historic operating patterns will continue in future periods as we cannot influence or forecast many of these
factors.
Our industry is consolidating and if we cannot gain sufficient market presence in our industry, we may
not be able to compete successfully against larger, global companies in our industry.
There currently is a marked trend within our industry toward consolidation of the niche players into larger
companies 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
10
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.
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
11
("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.
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:
failure to agree on the terms necessary for a transaction, such as the purchase price;
incompatibility between our operational strategies and management philosophies;
and those of the potential acquiree;
competition from other acquirers of operating companies;
lack of sufficient capital to acquire a profitable logistics company; and
unwillingness of a potential acquiree to work with our management.
12
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.
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
13
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.
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:
difficulties in integrating operations, technologies, services and personnel;
the diversion of financial and management resources from existing operations;
the risk of entering new markets;
the potential loss of key employees; and
the inability to generate sufficient revenue to offset acquisition or investment costs.
As a result, if we fail to properly evaluate and execute any acquisitions or investments, our business and
prospects may be seriously harmed.
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
14
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 not listed on any stock exchange. Instead, our common stock was quoted on the OTC
Bulletin Board and transitioned to the OTCQB in February of 2011. The OTCQB is one of three tiers
established by OTC Markets Group, Inc. Trading on the OTCQB is often characterized by low trading
volume and significant price fluctuations. Because of this limited liquidity, stockholders may be unable to
sell their shares. The trading price of our shares may from time to time fluctuate widely. The trading price
may be affected by a number of factors including events described in the risk factors set forth in this report
as well as our operating results, financial condition, announcements, general conditions in the industry, and
other events or factors. In recent years, broad stock market indices, in general, and smaller capitalization
companies, in particular, have experienced substantial price fluctuations. In a volatile market, we may
experience wide fluctuations in the market price of our common stock. These fluctuations may have a
negative effect on the market price of our common stock.
The influx of additional shares of our common stock onto the market may create downward pressure on
the trading price of our common stock.
We completed private placements of approximately 15.4 million shares of our common stock between
October 2005 and February 2006. The availability of those shares for sale to the public 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
15
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.
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. 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 $16,020 per month over the life of
the lease expiring May 31, 2021. Subsequent to year-end, we began subleasing 3,110 feet of office space
in the same building for an average of $4,067 per month over the life of the sublease expiring May 31,
2020. In addition, we lease 92,503 feet of space for our company-owned station in Somerset, NJ for an
average of $43,816 per month over the life of the lease expiring November 30, 2014. For our company-
owned station in Hawthorne, CA, we lease 140,200 of space in two neighboring buildings for an average of
$85,879 per month over the life of lease expiring February 29, 2016. We also 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.
ITEM 3. LEGAL PROCEEDINGS
From time to time, our operating subsidiaries are involved in legal matters or named as a defendant in legal
actions arising in its ordinary course of business.
ITEM 4. REMOVED AND RESERVED
16
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock currently trades on the OTCQB under the symbol "RLGT.PK." Prior to February 2011,
our common stock was quoted on the OTCBB. 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 OTCQB or OTCBB, as applicable. 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 OTCQB on October 5, 2011, was $2.18 per share.
Year Ended June 30, 2011:
Quarter ended June 30, 2011
Quarter ended March 31, 2011
Quarter ended December 31, 2010
Quarter ended September 30, 2010
Year Ended June 30, 2010:
Quarter ended June 30, 2010
Quarter ended March 31, 2010
Quarter ended December 31, 2009
Quarter ended September 30, 2009
Holders
High
Low
$
$
$
$
2.45
2.05
1.20
.39
.30
.26
.32
.32
2.00
.90
.36
.27
.23
.22
.21
.20
As of October 5, 2011, the number of stockholders of record of our common stock was 125. 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 its discretion, subject to certain limitations imposed under Delaware law. The timing,
amount and form of dividends, if any, will depend on, among other things, our results of operations,
financial condition, cash requirements and other factors deemed relevant by our Board of Directors. Our
ability to pay dividends is limited by the terms of our Bank of America, N.A. credit facility.
Transfer Agent
Broadridge Financial Solutions, Inc., 1981 Marcus Avenue, Lake Success, NY 11042, serves as our
transfer agent.
Recent Issuance of Unregistered Securities
Since June 30, 2010, we have issued the following unregistered securities:
In January 2011, we issued 732,038 shares of common stock to Robert Friedman, the former sole
shareholder of Adcom Express, Inc. (“Adcom”). The shares issued to Mr. Friedman, valued at
approximately $0.26 million, were issued in connection with an earn-out obligation derived from
our acquisition of Adcom in September 2008.
17
In June 2011, we issued an aggregate of 90,250 shares of common stock to certain select
independent agents affiliated with DBA. The shares were valued at approximately $0.18 million.
In June 2011, we issued an aggregate of 1,071,429 shares of our common stock to a group of 13
former shareholders of DBA. The shares, valued at approximately $2.4 million, were issued in
connection with the conversion of approximately $2.4 million of a multi-year promissory note in
the original principal amount of $4.8 million, issued in connection with the acquisition of DBA.
We did not utilize or engage a principal underwriter in connection with any of the above securities
transactions. The above securities were only offered and sold to “accredited investors” as that term is
defined in Rule 501 of Regulation D, promulgated under the Securities Act of 1933, as amended.
Management believes the above shares of common stock were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended.
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 & fulfillment services through a network which includes a
combination of company-owned and exclusive agent offices across North America. Operating under the
Airgroup, Adcom, DBA & Radiant 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 the Automotive Services Group in Detroit, Michigan to service the
automotive industry. In September 2008, we acquired Adcom, adding an additional 30 locations across
North America and augmenting our overall domestic and international freight forwarding capabilities. In
April of 2011, we acquired DBA Distribution Services, Inc., d/b/a Distribution by Air (“DBA”), adding an
additional 25 locations across North America further expanding our fiscal network and service 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 our acquisition criteria.
18
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. 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.
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 operating results will be affected as acquisitions occur. Since all acquisitions are made using the
purchase method of accounting for business combinations, our financial statements will only include the
results of operations and cash flows of acquired companies for periods subsequent to the date of
acquisition.
Our GAAP-based net income will be affected by non-cash charges relating to the amortization of customer
related intangible assets and other intangible assets arising from completed acquisitions. Under applicable
accounting standards, purchasers are required to allocate the total consideration in a business combination
to the identified assets acquired and liabilities assumed based on their fair values at the time of acquisition.
The excess of the consideration paid over the fair value of the identifiable net assets acquired is to be
allocated to goodwill, which is tested at least annually for impairment. Applicable accounting standards
require that we separately account for and value certain identifiable intangible assets based on the unique
facts and circumstances of each acquisition. As a result of our acquisition strategy, our net income will
include material non-cash charges relating to the amortization of customer related intangible assets and
other intangible assets acquired in our acquisitions. Although these charges may increase as we complete
more acquisitions, we believe we will actually be growing the value of our intangible assets (e.g., customer
relationships). Thus, we believe that earnings before interest, taxes, depreciation and amortization, or
EBITDA, is a useful financial measure for investors because it eliminates the effect of these non-cash costs
and provides an important metric for our business.
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
initial valuation of acquiried intangibles, 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.
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
20
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 our customers. Based upon the terms in the contract of carriage, revenues related
to shipments where we issue 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.
Results of Operations
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
DBA on our consolidated financial statements during fiscal year 2011. The pro forma information has been
presented for fiscal years ended June 30, 2011 and 2010 as if we had acquired DBA as of July 1, 2009. The
pro forma results are also adjusted to reflect a consolidation of the historical results of operations of DBA
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.
Fiscal year ended June 30, 2011, compared to fiscal year ended June 30, 2010
We generated transportation revenue of $203.8 million and net transportation revenue of $62.5 million for
the year ended June 30, 2011, as compared to transportation revenue of $146.7 million and net
transportation revenue of $45.6 million for the year ended June 30, 2010. Net income was $2.9 million for
the year ended June 30, 2011, compared to net income of $2.0 million for the year ended June 30, 2010.
We had adjusted EBITDA of $6.8 million and $4.2 million for years ended June 30, 2011 and 2010,
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 long-term 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
21
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, 2011 and June 30, 2010 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
2011
2010
Amount
Percent
Net income
Income tax expense
Net interest expense
Depreciation and amortization
$
$
2,852
2,025
207
1,325
$
1,959
1,093
135
1,598
893
932
72
(273 )
45.6%
85.3%
53.3%
(17.1 %)
EBITDA (Earnings before interest,
taxes, depreciation and amortization)
$
6,409
$
4,785
$
1,624
33.9%
Share based compensation and other
non-cash costs
Gain on extinguishment of debt
Expenses specifically attributable to
acquisition of DBA
Business & Occupancy tax refund
Loss (gain) on litigation settlement
Adjusted EBITDA
$
125
-
139
-
150
6,823
$
315
(135)
-
(364)
(355)
4,246
$
(190 )
(135 )
139
364
505
2,577
(60.3 %)
(100.0 %)
N/A
(100.0%)
(142.3%)
60.7%
The following table summarizes transportation revenue, cost of transportation and net transportation
revenue (in thousands) for the fiscal years ended June 30, 2011 and June 30, 2010:
Years ended June 30,
Change
2011
2010
Amount
Percent
Transportation revenue
Cost of transportation
Net transportation revenue
Net transportation margins
$
$
203,820
141,315
$
62,505
$
30.7%
146,716
101,086
45,630
31.1%
$
$
57,104
40,229
16,875
38.9%
39.8%
37.0%
We generated transportation revenue of $203.8 million and net transportation revenue of $62.5 million for
the year ended June 30, 2011, as compared to transportation revenue of $146.7 million and net
transportation revenue of $45.6 million for the year ended June 30, 2010. Domestic and international
transportation revenue was $113.9 million and $89.9 million, respectively, for the year ended June 30,
2011, compared with $78.6 million and $68.1 million, respectively, for the year ended June 30, 2010.
Transportation revenues and costs of transportation increased in fiscal year 2011 primarily due to the
acquisition of DBA in the fourth quarter.
Cost of transportation was 69.3% and 68.9% of transportation revenue for the years ended June 30, 2011
and 2010, respectively. Net transportation margins were 30.7% and 31.1% of transportation revenue for
the years ended June 30, 2011 and 2010, respectively. The nominal margin regression was attributed to
differing product mixes of shipments and services throughout the fiscal year with slightly lower margin
characteristics.
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, 2011 and June 30, 2010:
22
Years ended June 30,
2011
2010
Change
Amount
Percent
Amount
Percent
Amount
Percent
Net transportation revenue
$
62,505
100.0%
$
45,630
100.0% $
16,875
37.0%
Agent commissions
Personnel costs
Selling, general and administrative
Transition costs associated with
DBA acquisition
Depreciation and amortization
42,353
7,734
5,335
583
1,325
67.8%
12.4%
8.5 %
0.9 %
2.1 %
31,377
5,882
4,295
-
1,598
68.8%
12.9%
9.4 %
0.0 %
3.5 %
10,976
1,852
1,040
35.0%
31.5%
24.2%
583
(273 )
N/A
(17.1 %)
Total operating costs
57,330
91.7%
43,152
94.6%
14,178
32.9%
Income from operations
Other (expense) income
5,175
(139)
8.3 %
(0.2 %)
2,478
693
5.4 %
1.5 %
2,697
(832 )
108.8%
(120.1%)
Income before income taxes and
non-controlling interest
Income tax expense
Income before non-controlling
interest
Non-controlling interest
5,036
(2,025)
8.1 %
(3.3 %)
3,171
(1,093)
6.9 %
(2.4 %)
1,865
(932 )
58.8%
85.3%
3,011
(159)
4.8 %
(0.2 %)
2,078
(119)
4.6 %
(0.3 %)
933
(40 )
44.9%
33.6%
Net income
$
2,852
4.6 %
$
1,959
4.3 % $
893
45.6%
Agent commissions were $42.4 million for the year ended June 30, 2011, an increase of 35.0% from $31.4
million for the year ended June 30, 2010, as a result of increased revenues associated with newly-added
agent-based locations, as well as the acquisition of DBA. As a percentage of net revenues, agent
commissions decreased to 67.8% for the year ended June 30, 2011, from 68.8% for the year ended June 30,
2010. The decrease is attributed to additional company-owned locations where commissions are not
payable, principally associated with the acquisition of DBA which includes two large company-owned
locations.
Personnel costs consist of payroll, payroll taxes, benefits and stock compensation expense. Personnel costs
were $7.7 million for the year ended June 30, 2011, an increase of 31.5% from $5.9 million for the year
ended June 30, 2010. The increase was primarily attributed to the increased personnel costs associated with
acquiring DBA. As a percentage of net revenues, personnel costs decreased to 12.4% for the year ended
June 30, 2011, from 12.9% for the year ended June 30, 2010.
Selling, general and administrative ("SG&A") costs consist primarily of marketing, rent, professional
services, insurance and travel expenses. SG&A costs were $5.3 million for the year ended June 30, 2011,
an increase of 24.2% from $4.3 million for the year ended June 30, 2010. The increase was primarily
attributed to increased costs associated with the acquisition of DBA. As a percentage of net revenues,
SG&A costs decreased to 8.6% for the year ended June 30, 2011, from 9.4% for the year ended June 30,
2010.
Transition costs associated with DBA acquisition were $0.6 million for the year ended June 30, 2011.
There were no such costs during the comparable prior period. As a percentage of net transportation
revenue, non-recurring transition costs were 0.9% for the year ended June 30, 2011.
Depreciation and amortization costs were $1.3 million for the year ended June 30, 2011, a decrease of
17.1% from $1.6 million for the year ended June 30, 2010. The decrease related primarily to lower
amortization expenses of intangibles associated with the RGL and Adcom acquisitions which were slightly
offset by amortization costs associated with the intangibles of DBA. As a percentage of net revenues,
depreciation and amortization decreased to 2.1% for the year ended June 30, 2011 from 3.5% for the year
ended June 30, 2010.
23
Income from operations was $5.2 million for the year ended June 30, 2011, compared to income from
operations of $2.5 million for the year ended June 30, 2010.
Other expense was $0.1 million for the year ended June 30, 2011, as compared to other income of $0.7
million during year ended June 30, 2010. The change was primarily due to gains associated with a litigation
settlement, extinguishments of debt and foreign currency exchange during 2010 which were not replicated
in 2011. As a percentage of net revenues, other expense was 0.2% for the year ended June 30, 2011 and
other income was 1.5% for the year ended June 30, 2010.
Net income for the year ended June 30, 2011 was $2.9 million as compared to net income of $2.0 million
for the year ended June 30, 2010.
Supplemental Pro forma Information
The following table provides a reconciliation for the fiscal years ended June 30, 2011 and 2010 (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
2011
2010
Amount
Percent
Net income
Income tax expense
Net interest expense
Depreciation and amortization
$
$
3,063
1,820
261
1,466
$
1,822
1,040
205
2,276
1,241
780
56
(810 )
68.1%
75.0%
27.3%
(35.6 %)
EBITDA (Earnings before interest,
taxes, depreciation and amortization)
$
6,610
$
5,343
$
1,267
23.7%
Share based compensation and other
non-cash costs
Loss (gain) on extinguishment of debt
Expenses specifically attributable to
acquisition of DBA
Business & Occupancy tax refund
Gain on litigation settlement
Adjusted EBITDA
$
125
150
139
-
-
7,024
$
315
(135)
-
(364)
(355)
4,804
$
(190 )
285
139
364
355
2,220
(60.3 %)
(211.1 %)
N/A
(100.0%)
(100.0%)
46.2%
The following table summarizes transportation revenue, cost of transportation and net transportation
revenue (in thousands) for the fiscal years ended June 30, 2011 and 2010 (pro forma and unaudited):
Years ended June 30,
Change
2011
2010
Amount
Percent
Transportation revenue
Cost of transportation
Net transportation revenue
Net transportation margins
$
$
278,536
191,604
$
86,932
$
31.2%
234,061
159,495
74,566
31.9%
$
$
44,475
32,109
12,366
19.0%
20.1%
16.6%
Transportation revenue was $278.5 million for the year ended June 30, 2011, an increase of 19.0% from
$234.1 million for the year ended June 30, 2010.
Cost of transportation was $191.6 million for the year ended June 30, 2011, an increase of 20.1% from
$159.5 million for the year ended June 30, 2010.
Net transportation margins decreased to 31.2% for the year ended June 30, 2011, compared to 31.9% for
the year ended June 30, 2010.
24
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, 2011 and 2010 (pro forma
and unaudited):
Years ended June 30,
2011
2010
Change
Amount
Percent
Amount
Percent
Amount
Percent
Net transportation revenue
$
86,932
100.0%
$
74,566
100.0% $
12,366
16.6%
Agent commissions
Personnel costs
Selling, general and administrative
Transition costs associated with
DBA acquisition
Depreciation and amortization
58,015
13,173
8,390
583
1,466
66.7%
15.2%
9.6 %
0.7 %
1.7 %
49,076
12,880
8,087
-
2,276
65.8%
17.3%
10.8%
0.0 %
3.1 %
8,939
293
303
583
(810 )
18.2%
2.3 %
3.7 %
N/A
(35.6 %)
Total operating costs
81,627
93.9%
72,319
97.0%
9,308
12.9%
Income from operations
Other (expense) income
5,305
(263)
6.1 %
(0.3 %)
2,247
734
3.0 %
1.0 %
3,058
(997 )
136.1%
(135.8%)
Income before income taxes and
non-controlling interest
Income tax expense
Income before non-controlling
interest
Non-controlling interest
5,042
(1,820)
5.8 %
(2.1 %)
2,981
(1,040)
4.0 %
(1.4 %)
2,061
(780 )
69.1%
75.0%
3,222
(159)
3.7 %
(0.2 %)
1,941
(119)
2.6 %
(0.2 %)
1,281
(40 )
66.0%
33.6%
Net income
$
3,063
3.5 %
$
1,822
2.4 % $
1,241
68.1%
Agent commissions were $58.0 million for the year ended June 30, 2011, an increase of 18.2% from $49.1
million for the year ended June 30, 2010. Agent commissions as a percentage of net transportation revenue
increased to 66.7% of net transportation revenue the year ended June 30, 2011, compared to 65.8% for the
comparable prior year period.
Personnel costs were $13.2 million for the year ended June 30, 2011, an increase of 2.3% from $12.9
million for the year ended June 30, 2010. Personnel costs as a percentage of net transportation revenue
were 15.2% for the year ended June 30, 2011, a decrease from 17.3% for the comparable prior year period.
SG&A costs were $8.4 million for the year ended June 30, 2011, an increase of 3.7% from $8.1 million for
the year ended June 30, 2010. As a percentage of net transportation revenue, SG&A costs decreased to
9.6% for the year ended June 30, 2011, from 10.8% for the comparable prior year period.
Transition costs associated with DBA acquisition were $0.6 million for the year ended June 30, 2011.
There were no such costs during the comparable prior period. As a percentage of net transportation
revenue, non-recurring transition costs were 0.7% for the year ended June 30, 2011.
Depreciation and amortization costs were $1.5 million for the year ended June 30, 2011, a decrease of
35.6% from $2.3 million for the year ended June 30, 2010. Depreciation and amortization as a percentage
of net transportation revenue decreased to 1.7% for the year ended June 30, 2011, from 3.1% for the
comparable prior year period.
Income from operations was $5.3 million for the year ended June 30, 2011, compared to income from
operations of $2.2 million for the year ended June 30, 2010.
25
Other expense was $0.3 million for the year ended June 30, 2011, compared to other income of $0.7
million for the year ended June 30, 2010.
Net income was $3.1 million for the year ended June 30, 2011, compared to net income of $1.8 million for
the year ended June 30, 2010.
Liquidity and Capital Resources
Net cash provided by operating activities for the year ended June 30, 2011 was $2.9 million, compared to
net cash provided by operating activities for the year ended June 30, 2010 of $2.8 million. The change was
principally driven by timing differences between the collection of receivables driven by overall growth and
an increase in the our net income, offset by cash flows associated with an increase to the provision for
doubtful accounts related to the acquired DBA receivables which historically have taken longer to collect,
and the difference between the non-cash loss on litigation in fiscal 2011 as compared to the non-cash gain
on litigation settlement in fiscal 2010.
Net cash used for investing was $5.4 million for the year ended June 30, 2011, compared to net cash used
for investing activities of $1.9 million for the year ended June 30, 2010. Use of cash in 2011 consisted of
$5.4 million for the acquisition of DBA (less cash acquired of $2.0 million), an additional $0.4 million for
furniture and equipment, and $1.6 million paid to the former shareholders of subsidiaries. Use of cash in
2010 consisted of $1.4 million paid to former shareholders of subsidiaries and $0.5 million for furniture
and equipment purchases.
Net cash provided by financing activities for the year ended June 30, 2011 was $2.2 million compared to
net cash used for financing activities of $1.1 million for year ended June 30, 2010. Cash from financing
activities in 2011 consisted of proceeds from our credit facility of $2.6 million and proceeds from sales of
Company stock to DBA stations of $0.2 million, which amounts were offset by $0.5 million used to
purchase shares of our common stock and $0.1 million in non-controlling interest distributions. Use of cash
for 2010 consisted of $0.8 million used to purchase shares of our common stock, $0.2 million in payments
to reduce our credit facility, and $0.1 million in non-controlling interest distributions.
Recent Acquisitions
Below are descriptions of recent material acquisitions including a breakdown of consideration paid at
closing and future potential earn-out payments. We define "material acquisitions" as those with aggregate
potential consideration of $1.0 million or more.
Effective September 1, 2008, we acquired all of the outstanding stock of Adcom Express, Inc. The
transaction was valued at up to $11.05 million, consisting of: (i) $4.75 million in cash paid at the closing;
(ii) $0.25 million 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 $2.8 million in four "Tier-1 Earn-Out Payments" of up
to $0.7 million 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 $2.0 million, equal to 20% of the amount by which the Adcom cumulative Gross Profit
Contribution exceeds $16.56 million during the four year earn-out period; and (v) an "Integration Payment"
of $1.25 million 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, 2011, the former Adcom shareholders earned a total of $1,454,141 in base earn-out
payments. Of this amount, $578,536 was paid in cash and $258,510 was settled in stock through the year
ended June 30, 2011. The remaining amount of $617,095 is included in the amount Due to former
shareholders of subsidiaries as of June 30, 2011.
26
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):
Earn-out period:
Earn-out payments:
Cash
Equity
Total potential earn-out payments
Total gross margin targets
2013
7/1/2011 –
6/30/2012
$
$
$
350
350
700
4,320
(1) Earn-out payments are paid October 1 following each fiscal year end in a combination of cash and
Company common stock.
On April 6, 2011, we closed on an Agreement and Plan of Merger (the "Agreement") pursuant to which we
acquired all of the outstanding stock of DBA Distribution Services, Inc. ("DBA"), a privately-held New
Jersey corporation. For financial accounting purposes, the transaction was deemed to be effective as of
April 1, 2011. DBA operates under the trade name "Distribution by Air" and provides a full range of
domestic and international transportation and logistics services across North America. The shares of DBA
were acquired by us via a merger transaction pursuant to which DBA was merged into a newly-formed
subsidiary of the Company. The $12.0 million transaction consisted of cash of $5.4 million paid at closing,
the delivery of $4.8 million in seller notes payable over the next three years, and $1.8 million in connection
with the achievement of certain integration milestones to be paid within 180 days after the milestones have
been achieved; however, no later than the 18th month anniversary of the closing. In May 2011, we elected
to satisfy $2.4 million of the seller notes through the issuance of shares of the Company's common stock.
The seller notes may be subject to acceleration upon occurrence of a “Corporate Transaction” (as defined in
the Form of Note), which includes a future sale of DBA or Radiant, or certain changes in corporate control.
The cash component of the transaction was financed through a combination of our existing funds and funds
available under an existing revolving credit facility provided by Bank of America, N.A.
Founded in 1981, DBA services a diversified account base including manufacturers, distributors and
retailers through a combination of company-owned logistics centers located in Somerset, New Jersey and
Los Angeles, California and twenty-three agency offices across North America.
Credit Facility
In April 2011, in connection with the acquisition of DBA, the Company’s $20.0 million revolving credit
facility, including a $0.5 million sublimit to support letters of credit (collectively, the "Facility"), was
extended to a maturity date of March 31, 2013. The Facility is collateralized by accounts receivable and
other assets of the Company and its subsidiaries. Advances under the Facility are available to fund future
acquisitions, capital expenditures or for other corporate purposes Borrowings under the facility accrue
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 our consolidated EBITDA (as adjusted) measured on a rolling four quarter basis. The second
27
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.
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 $10.0 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), Adcom
Express, Inc. (d/b/a Adcom Worldwide), DBA (d/b/a Distribution by Air), Radiant Transportation Services
("RTS", f/k/a Radiant Logistics Global Services, Inc.), and RLP. 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, 2011, 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, 2011, we have approximately $14.5 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.
28
Financial Outlook
For our fiscal year ending June 30, 2012, we are forecasting $9.3 million of adjusted EBITDA on total
revenue of $285.0 million and expect net earnings of $3.8 million, compared to $6.8 million of adjusted
EBITDA on total revenue of $203.8 million and net earnings of $2.9 million for our fiscal year ended June
30, 2011. Our guidance for fiscal year ending June 30, 2012, includes approximately $0.1 million in
severance costs associated with the DBA transaction. The projected adjusted EBITDA for fiscal year ended
June 30, 2012 is burdened by an estimated $0.7 in non-recurring transition costs associated with our
acquisition of DBA which are anticipated through December 31, 2011. Excluding these costs, adjusted
EBITDA for the fiscal year ended June 30, 2012 is projected to be $10.0 million. This guidance does not
include the benefit of any further acquisitions we may complete over the course of fiscal 2012.
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, 2011 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, 2011 amounts to net income, the most directly comparable
GAAP measure, is as follows:
(Amounts in 000’s)
Outlook
Fiscal Year
Ended June 30,
2012
Actual
Fiscal Year
Ended June 30,
2011
Net income
$
3,798 $
Interest expense - net
Income tax expense
Depreciation and amortization
EBITDA
Stock-based compensation and other non-cash charges
Expenses specifically attributable to acquisition of
DBA
Severance costs
Loss on litigation settlement
Adjusted EBITDA
$
Off Balance Sheet Arrangements
802
2,327
2,048
8,975
150
-
125
-
9,250 $
2,852
207
2,025
1,325
6,409
125
139
-
150
6,823
As of June 30, 2011, we did not have any relationships with unconsolidated entities or financial partners,
such as entities often referred to as structured finance or special purpose entities, which had been
established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk
that could arise if we had engaged in such relationships.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update
("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
29
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 December 2010, the FASB issued ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of
Supplementary Pro Forma Information for Business Combinations. The guidance in ASU 2010-29 provides
amendments to clarify the acquisition date which should be used for reporting the pro forma financial
information disclosures in Topic 805 when comparative financial statements are presented. The
amendments also improve the usefulness of the pro forma revenue and earnings disclosures by requiring a
description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable
to the business combination(s). The amendments in this update are effective prospectively for business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after December 15, 2010. Early adoption is permitted. The adoption of this guidance is not
expected to have a material impact on the Company’s financial position or results of operations.
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The
guidance in ASU 2011-04 changes the wording used to describe the requirements in U.S. GAAP for
measuring fair value and for disclosing information about fair value measurements, including clarification
of the FASB's intent about the application of existing fair value and disclosure requirements and changing a
particular principle or requirement for measuring fair value or for disclosing information about fair value
measurements. The amendments in this ASU should be applied prospectively and are effective for interim
and annual periods beginning after December 15, 2011. Early adoption by public entities is not permitted.
The adoption of this guidance is not expected to have a material impact on the Company’s financial
position or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of
Comprehensive Income. The guidance in ASU 2011-05 applies to both annual and interim financial
statements and eliminates the option for reporting entities to present the components of other
comprehensive income as part of the statement of changes in stockholders' equity. This ASU also requires
consecutive presentation of the statement of net income and other comprehensive income. Finally, this
ASU requires an entity to present reclassification adjustments on the face of the financial statements from
other comprehensive income to net income. The amendments in this ASU should be applied retrospectively
and are effective for fiscal year, and interim periods within those years, beginning after December 15,
2011. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact
on the Company’s financial position or results of operations.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles – Goodwill and Other (Topic 350):
Testing Goodwill for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and
costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill
impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also
improve previous guidance by expanding upon the examples of events and circumstances that an entity
should consider between annual impairment tests in determining whether it is more likely than not that the
fair value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples
of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount
should consider in determining whether to measure an impairment loss, if any, under the second step of the
goodwill impairment test. The amendments in this ASU are effective for annual and interim goodwill
impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is
permitted, including for annual and interim goodwill impairment tests performed as of a date before
September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not
yet been issued. The adoption of this guidance is not expected to have a material impact on the Company’s
financial position or results of operations.
30
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, 2011, was carried out by our management
under the supervision and with the participation of our Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO"). Based upon that evaluation, our CEO and CFO concluded that, as of June 30,
2011, 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 and 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 Exchange Act. Under the supervision and with the
participation of our management, including our principal executive officer and principal financial officer,
we conducted an assessment of the effectiveness of our internal control over financial reporting. In making
this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”) in Internal Control — Integrated Framework. Based on management’s
assessment based on the criteria of the COSO, we concluded that, as of June 30, 2011, our internal control
over financial reporting is effective at the reasonable assurance level.
Our internal control system was designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles in the U.S. Our internal control over financial reporting includes
those policies and procedures which:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with accounting principles generally accepted in the U.S., and
that receipts and expenditures of the Company are being made only in accordance with
authorization of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of our assets that could have a material effect on our consolidated financial
statements.
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.
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-
31
15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2011
that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
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
47
Chief Executive Officer and Chairman of the Board of
Directors
Stephen P. Harrington
53
Director
Daniel Stegemoller
56
Vice President and Chief Operating Officer of Radiant Global
Logistics f/k/a Airgroup
Todd E. Macomber
47
Senior Vice President & Chief Financial Officer
Board of Directors
We believe that our Board should be composed of individuals with sophistication and experience in many
substantive areas that impact our business. We believe that experience, qualifications, or skills in the
following areas are most important: accounting and finance; strategic planning; logistics and operations,
human resources and development practices; and board practices of other corporations. These areas are in
addition to the personal qualifications described in this section. We believe that all of our current Board
members possess the professional and personal qualifications necessary for board service, and have
highlighted particularly noteworthy attributes for each Board member in the individual biographies below.
The principal occupation and business experience, for at least the past five years, of each current director is
as follows:
Bohn H. Crain. Mr. Crain has served as our Chief Executive Officer and Chairman of our Board of
Directors since October 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 Managing Member 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. As a result of these and other professional experiences, Mr. Crain possesses particular
knowledge and experience in logistics management, industry trends, business operations and accounting
that strengthen the Board’s collective qualifications, skills, and experience.
Stephen P. Harrington. Mr. Harrington was appointed as a director in October 2007. Mr. Harrington
served as the Chairman, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary of Zone
Mining Limited, a publicly-traded Nevada corporation, from August 2006 until January 2007 Previously,
32
from March 2004 to August 2005, he served as Chairman, Chief Executive Officer, Treasurer and
Secretary of Touchstone Resources USA, Inc., a publicly-traded 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.
As a result of these and other professional experiences, Mr. Harrington possesses particular knowledge and
experience in corporate governance and financial management that strengthen the Board’s collective
qualifications, skills, and experience.
Executive Officers
Dan Stegemoller. Mr. Stegemoller has served as our Chief Operating Officer since August 2007, 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 the Company, 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 Associate Degree in Business from IUPUI in Indianapolis.
Todd E. Macomber. Mr. Macomber has served as our Senior Vice President and Chief Financial Officer
since March 2011, as our Senior Vice President and Chief Accounting Officer since August 2009, and as
our Vice President and Corporate Controller 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 listed 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.
Audit Committee
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."
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
33
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 2011, all reporting persons timely complied
with all filing requirements applicable to them, except that Messrs. Crain, Macomber and Stegemoller
failed to timely file Form 4s and Douglas Tabor failed to timely file a Form 3.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table reflects total compensation for our chief executive officer,
chief financial officer, and our most highly compensated executive officer (a "named executive officer")
whose compensation exceeded $100,000 during the fiscal year ended June 30, 2011 and June 30, 2010.
Name and Principal Position
Bohn H. Crain, Chief Executive
Officer
Dan Stegemoller, Vice President
and Chief Operating Officer of
Radiant Global Logistics
Todd Macomber, Senior Vice
President and Chief Financial
Officer of Radiant Logistics, Inc.
Year
2011
2010
2011
2010
2011
2010
Salary
($)
253,125(2)
250,000
195,833
190,000
Bonus
($)
40,929
250
22,224
250
Option
Awards
($)(1)
6,286(3)
-
2,914(6)
-
All other
compensation
($)
155,290(4)
75,921(5)
14,282(7)
67,156(8)
158,833(9)
150,000
19,457
250
76,259(10)
15,000(12)
15,076(11)
12,436(13)
Total
($)
455,630
326,171
235,253
257,406
269,625
177,686
(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.
(2) Mr. Crain received a pay increase as part of his modification of employment agreement, effective June
16, 2011 to an annual salary of $325,000.
(3) Mr. Crain was granted options to purchase 7,389 shares on November 22, 2010 at an exercise price
$.60 per share. The grant date fair market value of these options was $0.287 per share. Mr. Crain was
granted options to purchase 2,815 shares on March 1, 2011 at an exercise price $1.30 per share. The
grant date fair market value of these options was $0.737 per share. Mr. Crain was granted options to
purchase 1,640 shares on June 7, 2011 at an exercise price $2.30 per share. The grant date fair market
value of these options was $1.275 per share. All options vest in equal annual installments over a five
year period commencing on the date of the grant.
34
(4) Consists of $12,000 for automobile allowance, $730 for Company-provided life & disability insurance
premiums, and $10,560 for Company 401k match. Also includes $132,000 representing the
distributable share of earnings attributed to Radiant Capital Partners. For more information, see "ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE".
(5) Consists of $12,000 for automobile allowance, $730 for Company-provided life & disability insurance
premiums, and $9,191 for Company 401k match. Also includes $54,000 representing the distributable
share of earnings attributed to Radiant Capital Partners. For more information, see "ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE".
(6) Mr. Stegemoller was granted options to purchase 3,369 shares on November 22, 2010 at an exercise
price $.60 per share. The grant date fair market value of these options was $0.287 per share. Mr.
Stegemoller was granted options to purchase 1,368 shares on March 1, 2011 at an exercise price $1.30
per share. The grant date fair market value of these options was $0.737 per share. Mr. Stegemoller was
granted options to purchase 736 shares on June 7, 2011 at an exercise price $2.30 per share. The grant
date fair market value of these options was $1.275 per share. All options vest in equal annual
installments over a five year period commencing on the date of the grant.
(7) Consists of $9,000 for automobile allowance, $730 for Company-provided life & disability insurance
premiums, $4,552 for Company 401k match.
(8) 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 accrued interest, and for a gross up to pay for the taxes relating
to the note forgiveness.
(9) Mr. Macomber received an increase in base pay to $175,000 per annum as part of his promotion to the
Company’s Chief Financial Officer – effective March 1, 2011.
(10) Mr. Macomber was granted options to purchase 2,660 shares on November 22, 2010 at an exercise
price $.60 per share. The grant date fair market value of these options was $0.287 per share. Mr.
Macomber was granted options to purchase 101,155 shares on March 1, 2011 at an exercise price
$1.30 per share. The grant date fair market value of these options was $0.737 per share. Mr.
Macomber was granted options to purchase 741 shares on June 7, 2011 at an exercise price $2.30 per
share. The grant date fair market value of these options was $1.275 per share. All options vest in equal
annual installments over a five year period commencing on the date of the grant.
(11) Consists of $9,000 for automobile allowance, $678 for Company-provided life & disability insurance
premiums and $5,398 for Company 401k match.
(12) 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.
(13) Consists of $6,750 for automobile allowance, $652 for Company-provided life & disability insurance
premiums, and $5,034 for Company 401k match.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth officer information regarding outstanding unexercised options for each
named executive officer outstanding as of June 30, 2011.
Option Awards
Number of
securities
underlying
unexercised
options
exercisable(#)
1,000,000
1,000,000
0
Number of
securities
underlying
unexercised
options
Unexercisable (#)
0
0
7,389
Name
Bohn H. Crain
Option exercise
price
($)
0.50
0.75
0.60
Option
expiration date
10/19/2015(1)
10/19/2015(1)
35
Dan Stegemoller
Todd Macomber
0
0
300,000
60,000
0
0
0
60,000
60,000
20,000
0
0
0
2,815
1,640
0
40,000
3,369
1,368
736
40,000
40,000
80,000
2,660
101,155
741
1.30
2.30
0.44
0.18
0.60
1.30
2.30
0.48
0.18
0.28
0.60
1.30
2.30
11/21/2020(2)
2/28/2021(3)
6/6/2021(4)
1/10/2016(5)
6/23/2018(6)
11/21/2020(2)
2/28/2021(3)
6/6/2021(4)
12/10/2017(7)
6/23/2018(6)
8/6/2019(6)
11/21/2020(2)
2/28/2021(3)
6/6/2021(4)
(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 November 22, 2010 and vest in equal annual installments over a
five year period commencing on the date of the grant.
(3) The stock options were granted on March 1, 2011 and vest in equal annual installments over a five
year period commencing on the date of the grant.
(4) The stock options were granted on June 7, 2011 and vest in equal annual installments over a five year
period commencing on the date of the grant.
(5) 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.
(6) 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.
(7) 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.
Director Compensation
The following table sets forth compensation paid to our directors during the fiscal years ended June 30,
2011 & 2010.
Name(1)
Stephen P. Harrington
Stephen P. Harrington
Year
2011
2010
Fees earned or
paid in cash
($)
36,000(2)
36,000(2)
Total
($)
36,000
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 Agreement
On January 13, 2006, we entered into an employment agreement (the "Employment Agreement") with
Bohn H. Crain to serve as our Chief Executive Officer. On June 11, 2011, we and Bohn Crain, entered into
a Letter Agreement (the "Letter Agreement") for the purpose of amending the Employment Agreement to
36
(1) extend Mr. Crain’s Employment Agreement through December 31, 2016, (2) increase the renewal
periods of the Employment Agreement from one to three years, and (3) increased Mr. Crain’s base salary.
The Employment Agreement (as amended) provides for an annual base salary of $325,000, 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 Employment Agreement at any time for cause. If we terminate the Employment Agreement
due to Mr. Crain’s disability, Mr. Crain’s unvested options shall immediately vest and we must continue to
pay Mr. Crain for an additional one year period 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. If Mr. Crain terminates the
Employment Agreement for good reason or we terminate for any reason other than for cause, Mr. Crain’s
unvested options shall immediately vest and we must continue to pay Mr. Crain for the remaining term of
the Employment Agreement his base salary and bonuses as well as fringe benefits. 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 options 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 vest in equal annual installments over the five year period commencing on the date of
grant and terminate ten years from the date of grant.
On January 11, 2006, we issued to Mr. Stegemoller options to purchase 300,000 shares of our common
stock at an exercise price of $0.44 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 December 11, 2007, we issued to Mr. Macomber options to purchase 100,000 shares of our common
stock at an exercise price of $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 options to purchase 100,000
shares of our common stock. Each option has an exercise price of $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 options to purchase 100,000 shares of our common stock
at an exercise price of $0.28 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 November 22, 2010, we issued to Mr. Crain options to purchase 7,389 shares of our common stock, Mr.
Stegemoller options to purchase 3,369 shares of our common stock and Mr. Macomber options to purchase
2,660 shares of common stock. Each of the foregoing options has an exercise price of $0.60 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 March 1, 2011, we issued to Mr. Crain options to purchase 2,815 shares of our common stock, Mr.
Stegemoller options to purchase 1,368 shares of our common stock and Mr. Macomber options to purchase
101,155 shares of common stock. Each of the foregoing options has an exercise price of $1.30 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.
37
On June 7, 2011, we issued to Mr. Crain options to purchase 1,640 shares of our common stock, Mr.
Stegemoller options to purchase 736 shares of our common stock and Mr. Macomber options to purchase
741 shares of common stock. Each of the foregoing options has an exercise price of $2.30 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.
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 also contains a change in control provision. If his
employment is terminated following a change in control (other than for cause), then we must pay him a
termination payment equal to 2.99 times his base salary in effect on the date of termination of his
employment, any bonus to which he would have been entitled for a period of three years following the date
of termination, any unpaid expenses and benefits, and for a period of three years provide him with all fringe
benefits he was receiving on the date of termination of his employment or the economic equivalent. In
addition, all of his unvested stock options shall immediately vest as of the termination date of his
employment due to a change in control. A change in control is generally defined as the occurrence of any
one of the following:
any "Person" (as the term "Person" is used in Section 13(d) and Section 14(d) of the Securities
Exchange Act of 1934), except for our chief executive officer, becoming the beneficial owner,
directly or indirectly, of our securities representing 50% or more of the combined voting power of
our then outstanding securities;
a contested proxy solicitation of our stockholders that results in the contesting party obtaining the
ability to vote securities representing 50% or more of the combined voting power of our then-
outstanding securities;
a sale, exchange, transfer or other disposition of 50% or more in value of our assets to another
Person or entity, except to an entity controlled directly or indirectly by us;
a merger, consolidation or other reorganization involving us in which we are not the surviving
entity and in which our stockholders prior to the transaction continue to own less than 50% of the
outstanding securities of the acquirer immediately following the transaction, or a plan involving
our liquidation or dissolution other than pursuant to bankruptcy or insolvency laws is adopted; or
during any period of twelve consecutive months, individuals who at the beginning of such period
constituted the board cease for any reason to constitute at least the majority thereof unless the
election, or the nomination for election by our stockholders, of each new director was approved by
a vote of at least a majority of the directors then still in office who were directors at the beginning
of the period.
Notwithstanding the foregoing, a "change in control" is not deemed to have occurred (i) in the event of a
sale, exchange, transfer or other disposition of substantially all of our assets to, or a merger, consolidation
or other reorganization involving, us and any entity in which our chief executive officer has, directly or
indirectly, at least a 25% equity or ownership interest; or (ii) in a transaction otherwise commonly referred
to as a "management leveraged buy-out."
Directors’ Compensation
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
38
cash or other compensation to our current directors for their services as directors, other than to reimburse
them for their cost of travel and other out-of-pocket costs incurred to attend board 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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table indicates how many shares of our common stock were beneficially owned as of
September 27, 2011, 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
39
the persons listed below is c/o Radiant Logistics, Inc., 405 114th Avenue S.E., Bellevue, Washington
98004.
Name of Beneficial Owner
Bohn H. Crain
Dan Stegemoller
Todd E. Macomber
Stephen P. Harrington
Stephen M. Cohen
Douglas Tabor
All officers and directors as a group (4 persons)
(*) Less than one percent
Amount(1)
11,877,278(2)
461,551 (3)
160,532(4)
1,568,182(5)
2,500,000(6)
3,235,952(7)
14,067,543
Percent of
Class
37.3%
1.4%
*
5.0%
7.9%
10.2%
41.1%
(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, 2011 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
31,676,438 shares of common stock outstanding as of September 27, 2011.
(2) Consists of 9,085,000 shares held by Radiant Capital Partners, LLC over which Mr. Crain has sole voting and
dispositive power, 790,801 shares directly held by Mr. Crain, and 2,001,477 shares issuable upon exercise of
options. Does not include 10,367 shares issuable upon exercise of options which are subject to vesting.
(3) Includes 363,369 shares issuable upon exercise of options. Does not include 42,104 shares issuable upon
exercise of options which are subject to vesting.
(4) Includes 160,532 shares issuable upon exercise of options. Does not include 244,024 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 Form 3 filed with the SEC on October 7, 2010 reporting that Douglas Tabor
has sole voting power with respect to 3,235,952 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, 2011.
Number of securities to
be issued upon exercise
of outstanding warrants
and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
(a)
0
(b)
--
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
0
3,865,242
$0.576
1,134,758
Plan Category
Equity Compensation
Plans approved by
security holders
Equity compensation
plans not approved by
40
security holders
Total
3,865,242
$0.576
1,134,758
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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
Review, Approval or Ratification of Transactions with Related Persons
Our board is responsible for reviewing and approving all related party transactions. Before approving such
a transaction, the board takes into account all relevant factors that it deems appropriate, including whether
the related party transaction is on terms no less favorable to us than terms generally available from an
unaffiliated third party. Any request for us to enter into a transaction with an executive officer, director,
principal stockholder or any of such persons' immediate family members or affiliates 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 its good faith
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.
Minority Business Enterprise jointly-owned and operated with CEO
On June 28, 2006, we joined Radiant Capital Partners, LLC ("RCP"), an affiliate of Mr. Crain, our Chief
Executive Officer, to form Radiant Logistics Partners, LLC ("RLP"). RLP commenced operations in 2007
as a minority business enterprise for the purpose of enabling us to expand the scope of our service offerings
to include participation in certain supplier diversity programs which would have otherwise not been
available to us. RLP is owned 60% by Mr. Crain and 40% by the Company.
In the course of evaluating and approving the ownership structure, operations and economics emanating
from RLP, a committee consisting of the independent Board member of the Company, considered, among
other factors, the significant benefits provided to the Company through association with a minority business
enterprises, particularly as many of the Company’s largest current and potential customers have a need for
diversity offerings. In addition, the Committee concluded the economic relationship with RLP was on
terms no less favorable to the Company than terms generally available from unaffiliated third parties.
For the fiscal year ended June 30, 2011, RLP recorded $331,808 in revenues including $296,699 in
commission revenues earned from members of the affiliated group, and paid management service fees
totaling $4,070 to members of the affiliated group and reported a profit of $265,350. 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. 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
41
"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.
ITEM 14. PRINCIPAL ACCOUNTANTS FEE AND SERVICES
The following table presents fees for professional audit services performed for the audit of our annual
financial statements for the years ended June 30, 2011 and 2010 and fees billed and unbilled for other
services rendered by it during those periods.
Audit Fees:
Audit Related Fees:
Tax Fees:
All Other Fees:
Total:
2011
$ 115,000
3,000
60,000
4,000
$ 182,000
2010
$ 121,500
2,500
55,800
1,000
$ 180,800
Audit Fees
Audit Fees consist of fees billed and unbilled for professional services rendered for the audit of our
consolidated financial statements and review of the interim financial statements included in quarterly
reports and services that are normally provided by our independent registered public accountants in
connection with statutory and regulatory filings or engagements.
Audit Related Fees
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to
the performance of the audit or review of the Company's consolidated financial statements and are not
reported under "Audit Fees."
Tax Fees
Tax Fees consists of fees billed for professional services for tax compliance, tax advice and tax planning.
These services include assistance regarding federal and state tax compliance, tax audit defense, customs
and duties, and mergers and acquisitions.
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, 2011 and June 30, 2010, 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.
42
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No.
Description
2.1
3.1
3.2
3.3
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Agreement and Plan of Merger by and among Radiant Logistics, Inc., and DBA
Acquisition Corp. and the Principal Shareholders of DBA Distribution Services, Inc., and
EBCP I, LLC, as Shareholders’ Agent (incorporated by reference to Exhibit 2.1 of the
Registrant’s Current Report on Form 8-K filed on March 31, 2011)
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)
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)
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the
Registrant's Current Report on Form 8-K filed on July 19, 2011)
Executive Employment Agreement dated January 13, 2006 by and between Radiant
Logistics, Inc. and Bohn H. Crain (incorporated by reference to Exhibit 10.7 to the
Registrant’s Current Report on Form 8-K filed on January 18, 2006)
Option Agreement dated October 20, 2005 by and between Radiant Logistics, Inc. and
Bohn H. Crain (incorporated by reference to Exhibit 10.8 to the Registrant’s Current
Report on Form 8-K filed on January 18, 2006)
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 Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q filed on February 14, 2007)
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
Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K filed on October 1, 2007)
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
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on February 14,
2008)
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. (incorporated by reference to Exhibit
10.11 to the Registrant’s Annual Report on Form 10-K filed on September 29, 2008)
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 Exhibit 10.2 to the Registrant’s Current Report on Form 8-K
filed on September 11, 2008)
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 Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on
March 29, 2010)
10.9
Letter Agreement dated December 31, 2008; Amendment to the Employment Agreement
43
between Radiant Logistics, Inc. and Bohn H. Crain (incorporated by reference to Exhibit
10.1 to the Registrant’s Current Report on Form 8-K filed on January 9, 2009)
Sixth Amendment to Loan Documents dated as of April 21, 2011, by and among Bank of
America, N.A. and Radiant Logistics, Inc., Radiant Global Logistics, Inc. (f/k/a Airgroup
Corporation), Radiant Logistics Global Services, Inc., and Radiant Logistics Partners,
LLC, Adcom Express, Inc. and DBA Distribution Services, Inc. (incorporated by reference
to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 27, 2011)
Letter Agreement dated June 10, 2011; 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 June 10, 2011)
Promissory Note (delivered to the Shareholders' Agent on behalf of the DBA
Shareholders) (incorporated by reference to Exhibit 2.2 of the Registrant’s Current Report
on Form 8-K filed on April 12, 2011)
Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the
Registrant’s Annual Report on Form 10-KSB filed on March 17, 2006)
Subsidiaries of the Registrant (filed herewith)
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith)
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 (filed herewith)
Certification of Chief Executive Officer and Chief Financial officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
10.10
10.11
10.12
14.1
21.1
31.1
31.2
32.1
44
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.
SIGNATURES
Date: October 7, 2011
RADIANT LOGISTICS, INC.
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
Stephen P. Harrington
Director
October 7, 2011
/s/ Bohn H. Crain
Bohn H. Crain
Chairman and
Chief Executive Officer
October 7, 2011
/s/ Todd E. Macomber
Todd E. Macomber
Senior Vice President and Chief
Financial Officer
October 7, 2011
45
FINANCIAL STATEMENTS
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
RADIANT LOGISTICS, INC.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2011 and 2010
Consolidated Statements of Income (Operations) for the years ended June 30, 2011 and 2010
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended June 30, 2011 and
2010
Consolidated Statements of Cash Flows for the years ended June 30, 2011 and 2010
Notes to Consolidated Financial Statements
F-2
F-3
F-4
F-5
F-6 – F-7
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, 2011 and 2010, 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, 2011 and 2010, 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
October 7, 2011
F-2
RADIANT LOGISTICS, INC.
Consolidated Balance Sheets
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net of allowance
June 30, 2011 - $1,592,235; June 30, 2010 - $626,401
Current portion of employee loan receivable
Current portion of station and other receivables
Prepaid expenses and other current assets
Deferred tax asset
Total current assets
October 7, 2011
June 30,
2011
June 30,
2010
$
434,185
$
682,108
41,577,053
21,401
141,372
1,761,273
1,142,077
45,077,361
21,442,023
13,100
195,289
1,104,211
402,428
23,839,159
Furniture and equipment, net
1,428,063
881,416
Acquired intangibles, net
Goodwill
Employee loan receivable, net of current portion
Station and other receivables, net of current portion
Investment in real estate
Deposits and other assets
Deferred tax asset – long term
Total long term assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued transportation costs
Commissions payable
Other accrued costs
Income taxes payable
Due to former shareholders of subsidiaries
Current portion of notes payable to former shareholders of DBA
Other current liabilities
Total current liabilities
Other long term debt
Notes payable to former shareholders of DBA, net of current portion
Deferred rent liability
Deferred tax liability
Other long-term liabilities
Total long term liabilities
Total liabilities
Stockholders' equity
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued or
outstanding
Common stock, $0.001 par value, 50,000,000 shares authorized. Issued and outstanding:
June 30, 2011 – 31,676,438; June 30, 2010 – 31,273,461
Additional paid-in capital
Treasury stock, at cost, 4,919,239 and 3,428,499 shares, respectively
Retained deficit
Total Radiant Logistics, Inc. stockholders’ equity
Non-controlling interest
Total stockholders’ equity
Total liabilities and stockholders’ equity
F-3
2,879,846
6,650,008
64,494
116,965
40,000
363,815
-
10,115,128
56,620,552
27,872,185
3,570,858
1,992,694
333,999
2,657,781
800,000
135,927
37,363,444
10,269,268
1,600,000
631,630
485,907
120,571
13,107,376
50,470,820
-
18,051
11,060,701
(1,407,455 )
(3,615,322 )
6,055,975
93,757
6,149,732
56,620,552
$
$
$
2,019,757
982,788
38,000
151,160
40,000
153,116
106,023
3,490,844
28,211,419
16,004,814
2,119,503
538,854
76,309
603,205
-
-
19,342,685
7,641,021
-
439,905
-
-
8,080,926
27,423,611
-
16,157
8,108,239
(936,190)
(6,466,946)
721,260
66,548
787,808
28,211,419
$
$
$
The accompanying notes form an integral part of these consolidated financial statements.
RADIANT LOGISTICS, INC.
Consolidated Statements of Income (Operations)
Revenues
Cost of transportation
Net revenues
Agent commissions
Personnel costs
Selling, general and administrative expenses
Transition costs associated with DBA acquisition
Depreciation and amortization
Total operating expenses
Income from operations
Other income (expense)
Interest income
Interest expense
Gain on extinguishment of debt
Gain (loss) on litigation settlement
Other
Total other income (expense)
Income before income tax expense
Income tax expense
Net income
YEAR ENDED
JUNE 30, 2011
YEAR ENDED
JUNE 30, 2010
$
203,820,175
141,315,637
62,504,538
$
146,715,556
101,085,752
45,629,804
42,352,576
7,733,701
5,335,354
582,762
1,325,289
57,329,682
31,376,580
5,882,251
4,295,188
-
1,598,195
43,152,214
5,174,856
2,477,590
21,607
(228,749 )
-
(150,000 )
218,611
(138,531 )
44,181
(178,837 )
135,012
354,670
338,724
693,750
5,036,325
3,171,340
(2,025,492 )
(1,094,154 )
3,010,833
2,077,186
Less: Net income attributable to non-controlling interest
(159,209 )
(118,641 )
Net income attributable to Radiant Logistics, Inc.
Net income per common share – basic and diluted
Weighted average shares outstanding
Basic shares
Diluted shares
$
$
2,851,624
0.09
$
$
1,958,545
0.06
30,424,020
32,021,404
32,548,492
32,720,019
The accompanying notes form an integral part of these consolidated financial statements.
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F
RADIANT LOGISTICS, INC.
Consolidated Statements of Cash Flows
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net income
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
YEAR ENDED
JUNE 30, 2011
YEAR ENDED
JUNE 30, 2010
$
2,851,624
$
1,958,545
OPERATING ACTIVITIES
non-cash compensation expense (stock options)
amortization of intangibles
deferred income tax benefit
depreciation and leasehold amortization
gain on extinguishment of debt
loss (gain) on litigation settlement
loss on disposal of fixed assets
amortization of bank fees
change in non-controlling interest
change in provision for doubtful accounts
CHANGE IN OPERATING ASSETS AND LIABILITIES
accounts receivable
employee loan receivable
station and other receivables
prepaid expenses, deposits and other assets
accounts payable and accrued transportation costs
commissions payable
other accrued costs
deferred rent liability
other liabilities
income taxes payable
income tax deposit
due to former shareholders of subsidiaries
Net cash provided by operating activities
CASH FLOWS USED FOR INVESTING ACTIVITIES
Acquisition of DBA, net of acquired cash of $1,971,472
Purchase of furniture and equipment
Payments to former shareholders of subsidiaries
Net cash used for investing activities
CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES
Proceeds from (payments on) other long term debt, net of credit fees
Distribution to non-controlling interest
Proceeds from sales of common stock to DBA stations
Purchases of treasury stock
Net cash provided by (used for) financing activities
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid
Interest paid
115,346
941,473
(108,647 )
383,816
-
150,000
11,931
6,050
159,209
(87,669 )
(5,372,281 )
(34,795 )
135,407
(297,298 )
2,481,020
1,233,466
(16,229 )
173,172
(89,712 )
263,849
32,022
-
2,931,754
(3,428,528 )
(380,137 )
(1,576,494 )
(5,385,159 )
2,628,247
(132,000 )
180,500
(471,265 )
2,205,482
(247,923 )
682,108
218,781
1,159,286
(433,125)
438,909
(135,012)
(354,670)
-
40,748
118,641
(54,988)
(4,038,459)
42,600
224,371
(736,705)
2,750,911
796,499
(212,836)
439,905
76,309
535,074
(20,834)
2,813,950
-
(559,818)
(1,382,567)
(1,942,385)
(228,089)
(54,000)
-
(797,940)
(1,080,029)
(208,464)
890,572
$
$
$
434,185
$
682,108
1,876,742
120,266
$
$
970,246
172,930
The accompanying notes form an integral part of these consolidated financial statements.
F-6
Supplemental disclosure of non-cash investing and financing activities:
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 former shareholders of subsidiaries of $42,361.
In June 2010, $488,497 was recorded as due to former shareholders of subsidiaries and an increase to goodwill for
the second annual earn-out from the Company’s acquisition of Adcom based on the gross profit contribution for year
ended June 30, 2010.
In September 2010, the Company revised its estimate of the "Tier-One Earn-Out Payment" (see Note 4) relating to
the acquisition of Adcom for the year ended June 30, 2010, resulting in an increase to goodwill and the amount due
to the former shareholders of subsidiaries of $28,522.
In December 2010, the Company issued 732,038 shares of common stock at a fair value of $0.35 per share in
satisfaction of the $258,510 Adcom earn-out payment for the year ended June 30, 2010, resulting in a decrease to
the amount due to former shareholders of subsidiaries, an increase in common stock issuable of $732 and an
increase in additional paid-in capital of $257,778.
In May 2011, the Company exercised its right to convert $2.4 million worth of notes payable into 1,071,429 shares
of Company stock, resulting in a decrease to other current and long term liabilities totaling $2.4 million, an increase
in common stock of $1,071 and an increase in additional paid-in capital of $2,398,929.
In June 2011, $617,095 was recorded as due to former shareholders of subsidiaries and an increase to goodwill for
the third annual earn-out from the Company’s acquisition of Adcom based on the gross profit contribution for year
ended June 30, 2011.
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") is a non-asset based transportation and logistics services company
providing 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. The
Company is executing a strategy to expand its operations through a combination of organic growth and the strategic
acquisition of best-of-breed, non-asset based transportation and logistics providers.
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.
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
the 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 April 2011, the Company acquired DBA Distribution Services, Inc., d/b/a Distribution by Air
("DBA"), adding an additional 25 locations across North America further expanding its fiscal network and service
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 a multi-
brand network. RGL, through the Airgroup, Adcom and DBA 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,
transportation and accounting systems. The Company will continue to search for targets that fit within its acquisition
criteria.
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.
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. Although the Company can make no assurance as to its long term access to debt or
equity securities or its ability to develop an active trading market, in March of 2010, the Company was successful in
increasing its credit facility from $15.0 million to $20.0 million.
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 shareholders of subsidiaries
approximate the carrying values due to the relatively short maturities of these instruments. The fair value of the
Company’s long-term debt (including the credit facility, notes payable and other long-term liabilities), 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, 2011,
management believes there are no indications of impairment.
The table below reflects changes in goodwill for the years ending June 30:
Goodwill – beginning of year
Adcom acquisition (see Note 4)
DBA acquisition (see Note 5)
Adcom earn-out (see Note 12)
Goodwill – end of year
i)
Long-Lived Assets
2011
2010
$
$
982,788
-
5,021,603
645,617
337,000
157,291
-
488,497
$
6,650,008
$
982,788
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.
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, 2011.
j)
Commitments
F-10
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:
2012
2013
2014
2015
2016
Thereafter
Total minimum lease payments
$
1,860,279
1,876,224
1,844,665
1,578,521
1,011,221
1,611,368
$
9,782,278
Rent expense amounted to $907,677 and $472,267 for the years ended June 30, 2011 and 2010.
k)
401(k) Savings Plan
The Company has employee savings plans under which the Company provides a discretionary matching
contribution. During the years ended June 30, 2011 and 2010, the Company’s contributions under the plans were
$110,309 and $100,284, respectively.
l)
Income Taxes
Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible
temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.
The Company 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.
m)
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.
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
F-11
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.
n)
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.
o)
Basic and Diluted Income Per Share
Basic income per share is computed by dividing net income attributable to common stockholders by the weighted
average number of common shares outstanding. Diluted income per share is computed similar to basic income per
share except that the denominator is increased to include the number of additional common shares that would have
been outstanding if the potential common shares, such as stock options, had been issued and if the additional
common shares were dilutive. For the year ended June 30, 2011, the weighted average outstanding number of
potentially dilutive common shares totaled 32,021,404 shares of common stock, including options to purchase
3,865,242 shares of common stock at June 30, 2011, of which 106,900 were excluded as their effect would have
been antidilutive. 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.
The following table reconciles the numerator and denominator of the basic and diluted per share computations for
earnings per share as follows.
Weighted average basic shares outstanding
Options
Weighted average dilutive shares outstanding
30,424,020
1,597,384
32,021,404
32,548,492
171,527
32,720,019
Year ended
June 30, 2011
Year ended
June 30, 2010
p)
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.
q)
Reclassifications
Certain amounts for prior periods have been reclassified in the consolidated financial statements to conform to the
classification used in fiscal 2011.
r)
Subesequent Events
In September 2011, the Company signed an agreement to sublease an additional 3,110 feet of office space in the
building where the Company's corporate headquarters are located beginning October 1, 2011, for an average of
$4,067 per month over the life of the sublease expiring May 31, 2020.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update
("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
F-12
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 December 2010, the FASB issued ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of
Supplementary Pro Forma Information for Business Combinations. The guidance in ASU 2010-29 provides
amendments to clarify the acquisition date which should be used for reporting the pro forma financial information
disclosures in Topic 805 when comparative financial statements are presented. The amendments also improve the
usefulness of the pro forma revenue and earnings disclosures by requiring a description of the nature and amount of
material, nonrecurring pro forma adjustments directly attributable to the business combination(s). The amendments
in this update are effective prospectively for business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted.
The adoption of this guidance is not expected to have a material impact on the Company’s financial position or
results of operations.
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The guidance in ASU
2011-04 changes the wording used to describe the requirements in U.S. GAAP for measuring fair value and for
disclosing information about fair value measurements, including clarification of the FASB's intent about the
application of existing fair value and disclosure requirements and changing a particular principle or requirement for
measuring fair value or for disclosing information about fair value measurements. The amendments in this ASU
should be applied prospectively and are effective for interim and annual periods beginning after December 15, 2011.
Early adoption by public entities is not permitted. The adoption of this guidance is not expected to have a material
impact on the Company’s financial position or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of
Comprehensive Income. The guidance in ASU 2011-05 applies to both annual and interim financial statements and
eliminates the option for reporting entities to present the components of other comprehensive income as part of the
statement of changes in stockholders' equity. This ASU also requires consecutive presentation of the statement of
net income and other comprehensive income. Finally, this ASU requires an entity to present reclassification
adjustments on the face of the financial statements from other comprehensive income to net income. The
amendments in this ASU should be applied retrospectively and are effective for fiscal year, and interim periods
within those years, beginning after December 15, 2011. Early adoption is permitted. The adoption of this guidance is
not expected to have a material impact on the Company’s financial position or results of operations.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing
Goodwill for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an
entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether
it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding
upon the examples of events and circumstances that an entity should consider between annual impairment tests in
determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with
a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any,
under the second step of the goodwill impairment test. The amendments in this ASU are effective for annual and
interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is
permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15,
2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. 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 "SPA") 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 SPA), 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
F-13
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 SPA),
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.
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 and liabilities at September 5, 2008.
Current assets
Furniture and equipment
Notes receivable
Intangibles
Goodwill
Other assets
Total assets acquired
Current liabilities
Long-term deferred tax liability
Total liabilities acquired
$
11,948,619
291,862
343,602
3,200,000
3,248,660
325,296
19,358,039
11,533,848
1,216,000
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, 2011, the former Adcom shareholders earned a total of $1,454,141 in base earn-out payments. Of
this amount, $578,536 was paid in cash and $258,510 was settled in stock through the year ended June 30, 2011.
The remaining amount of $617,095 is included in the amount due to former shareholders of subsidiaries as of June
30, 2011, and is expected to be paid out 50% in cash and 50% in Company stock in October 2011 (See Note 12).
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.
NOTE 5 - ACQUISITION OF DBA DISTRIBUTION SERVICES, INC.
On April 6, 2011, the Company closed on an Agreement and Plan of Merger (the "Agreement") pursuant to which
the Company acquired DBA Distribution Services, Inc. ("DBA"), a privately-held New Jersey corporation. For
financial accounting purposes, the transaction was deemed to be effective as of April 1, 2011. The shares of DBA
were acquired by the Company via a merger transaction pursuant to which DBA was merged into a newly-formed
F-14
subsidiary of the Company. The $12.0 million transaction consisted of cash of $5.4 million paid at closing, the
delivery of $4.8 million in seller notes payable over the next three years and $1.8 million in connection with the
achievement of certain integration milestones to be paid within 180 days after the milestones have been achieved;
however, no later than the 18th month anniversary of the closing. The remaining seller notes may be subject to
acceleration upon occurrence of a "Corporate Transaction", which includes a future sale of DBA or Radiant, or
certain changes in corporate control. The cash component of the transaction was financed through a combination of
the Company's existing funds and funds available under an existing revolving credit facility provided by Bank of
America, N.A.
The seller notes payable are due annually on March 31 in three equal payments. The note also accrues interest at
6.5%, with payments of that interest due on a quarterly basis. In May 2011, the Company elected to satisfy $2.4
million of the seller notes through the issuance of shares of the Company's common stock. Of the remaining $2.4
million outstanding as of June 30, 2011, $0.8 million is payable during each of the years ending June 30, 2012, 2013
and 2014.
Founded in 1981, DBA services a diversified account base including manufacturers, distributors and retailers
through a combination of company-owned logistics centers located in Somerset, New Jersey and Los Angeles,
California and twenty-four agency offices located across North America.
The total net assets acquired were $12.0 million. The following table summarizes the allocation of the purchase
price based on the estimated fair value of the acquired assets and liabilities at April 6, 2011:
Current assets
Furniture and equipment
Deferred tax asset
Intangibles
Goodwill
Other assets
Total assets acquired
Current liabilities
Long-term deferred tax liability
Other long-term liabilities
Total liabilities acquired
$
16,909,820
562,257
723,666
1,801,562
5,021,603
392,562
25,411,470
12,572,203
684,594
154,673
13,411,470
Net assets acquired
$
12,000,000
The fair value of the intangible assets were estimated using a discounted cash flow approach with Level 3 inputs.
Under this method, an intangible asset's fair value is equal to the present value of the incremental after-tax cash
flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair
value, the Company used risk-adjusted cash flows discounted at rates considered appropriate given the inherent risks
associated with each type of asset. The Company believes the level and timing of cash flows appropriately reflect
market participant assumptions.
The goodwill recognized is attributable primarily to the expected cost synergies associated with eliminating
redundancies and migrating back office operations of DBA to the Company, in addition to an expectation of better
buy rates from some carriers due to increased volumes associated with the acquisition of DBA. The
goodwill recorded is not expected to be deductible for income tax purposes.
Associated with the acquisition of DBA, the Company incurred $582,762 of non-recurring transition costs
consisting principally of personnel, general and administrative costs which are being eliminated in connection with
the winding down of DBA's historical back-office operations and transitioning them to the corporate headquarters.
These costs are reported as a separate line item on the face of the Company's statement of income for the year ended
June 30, 2011.
Since acquisition, DBA produced revenue of $19.0 million and a net loss of $0.3 million, including other purchase
accounting charges resulting from the acquisition.
F-15
If the acquisition had taken place effective July 1, 2009, the result would have produced combined revenue of
$278.5 million and $234.1 million and combined net income of $3.1 million and $1.8 million for the years ended
June 30, 2011 and 2010, respectively. The unaudited pro forma financial information presented is for informational
purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions and
any borrowings undertaken to finance the acquisition had taken place at the beginning of fiscal 2010.
NOTE 6 - ACQUIRED INTANGIBLE ASSETS
The table below reflects acquired intangible assets related to the acquisitions of Airgroup, Automotive Services
Group, Adcom and DBA:
Year ended
June 30, 2011
Year ended
June 30, 2010
Gross
carrying
amount
Accumulated
Amortization
Gross
carrying
amount
Accumulated
Amortization
Amortizable intangible assets:
Customer related
Covenants not to compete
Total
$
$
7,533,562
120,000
7,653,562
Aggregate amortization expense:
For twelve months ended June 30, 2011
For twelve months ended June 30, 2010
Aggregate amortization expense for the years
ended June 30:
2012
2013
2014
2015
2016
Total
$
$
$
$
$
$
4,702,100 $ 5,752,000
190,000
4,773,716 $ 5,942,000
71,616
$ 3,796,340
125,903
$ 3,922,243
941,473
1,159,286
1,196,103
696,466
282,579
281,997
422,701
2,879,846
For the year ended June 30, 2011, the Company recorded an expense of $941,473 from amortization of intangibles
and an income tax benefit of $351,273 from amortization of the long term deferred tax liability; arising from the
acquisitions of Airgroup, Adcom and DBA. 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. The Company expects the net
reduction in income from the combination of amortization of intangibles and long term deferred tax liability will be
$741,584 in 2012, $431,809 in 2013, $175,199 in 2014, $174,838 in 2015 and $262,075 in 2016.
NOTE 7 - 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 8). RLP commenced operations in February 2007. Non-controlling interest recorded as an
expense on the statements of income was $159,209 and $118,641 for the years ended June 30, 2011 and 2010,
respectively.
The following table summarizes the balance sheets of RLP as of June 30:
2011
2010
F-16
ASSETS
Accounts receivable
Accounts receivable – Radiant Logistics
Prepaid expenses and other current assets
Total assets
LIABILITIES AND PARTNERS' CAPITAL
Other accrued costs
Total liabilities
Partners' capital
Total liabilities and partners' capital
NOTE 8 - RELATED PARTY
$
$
$
$
2,012
170,030
1,191
173,233
16,971
16,971
156,262
173,233
$
$
$
$
15,910
110,336
950
127,196
16,284
16,284
110,912
127,196
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. In the course of evaluating and approving the ownership
structure, operations and economics emanating from RLP, a committee consisting of the independent Board member
of the Company, considered, among other factors, the significant benefits provided to the Company through
association with a minority business enterprises, particularly as many of the Company’s largest current and potential
customers have a need for diversity offerings. In addition, the Committee concluded that the economic relationship
with RLP was on terms no less favorable to the Company than terms generally available from unaffiliated third
parties. RLP is consolidated in the financial statements of the Company (see Note 7).
NOTE 9 - FURNITURE AND EQUIPMENT
Vehicles
Communication equipment
Office equipment
Furniture and fixtures
Computer equipment
Computer software
Leasehold improvements
Less: Accumulated depreciation and amortization
Furniture and equipment, net
June 30,
2011
33,788 $
31,359
511,872
122,488
733,819
1,283,581
641,188
3,358,095
(1,930,032)
1,428,063 $
$
$
June 30,
2010
33,788
31,359
311,191
149,504
606,405
884,352
439,197
2,455,796
(1,574,380 )
881,416
Depreciation and amortization expense related to furniture and equipment was $383,816 and $438,909 for the years
ended June 30, 2011 and 2010, 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. This lease incentive is
included in other long-term liabilities on the balance sheet and is being amortized on a straight-line basis over the
remaining life of the lease.
NOTE 10 - OTHER LONG TERM DEBT
In April 2011, in connection with the acquisition of DBA, the Company’s $20.0 million revolving credit facility,
including a $0.5 million sublimit to support letters of credit (collectively, the "Facility"), was extended to a maturity
F-17
date of March 31, 2013. Advances under the Facility are available to fund future acquisitions, capital expenditures
or for other corporate purposes. Borrowings under the facility bear interest, at the Company’s option, at the bank’s
prime rate minus 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 $10.0 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), Adcom
Express, Inc. (d/b/a Adcom Worldwide), DBA (d/b/a Distribution by Air), Radiant Transportation Services ("RTS",
f/k/a Radiant Logistics Global Services, Inc.), and RLP. 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, 2011, the Company was in compliance with all of its covenants.
As of June 30, 2011, the Company had $7,777,017 in advances under the Facility and $2,492,251 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 the balance of other long term debt in the balance sheet of $10,269,268.
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 the balance of other long term debt in the balance sheet of $7,641,021.
At June 30, 2011, based on available collateral and $205,000 in outstanding letter of credit commitments, there was
$11,671,392 available for borrowing under the Facility based on advances outstanding.
NOTE 11 - PROVISION FOR INCOME TAXES
Current deferred tax assets:
Allowance for doubtful accounts
Accruals
Total current deferred tax assets
Long-term deferred tax assets (liabilities):
Stock-based compensation
June 30,
2011
June 30,
2010
$
$
605,049 $
537,028
1,142,077 $
303,976
98,452
402,428
$
346,884 $
300,531
F-18
Fixed asset basis differences
Goodwill deductible for tax purposes
Intangibles not deductible for tax purposes
Net long-term deferred tax assets (liabilities)
$
(259,023)
520,572
(1,094,340)
(485,907) $
566,506
(761,014 )
106,023
The acquisitions of Airgroup, Adcom and DBA 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 Notes 4 and 5.
Income tax expense attributable to operations is as follows.
Current:
Federal
State
Deferred:
Federal
State
Year ended
June 30,
2011
Year ended
June 30,
2010
$ 1,909,493
224,646
$
1,328,967
198,312
(97,210)
(11,437)
(387,132 )
(45,993 )
Net income tax expense
$ 2,025,492
$
1,094,154
The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax
expense.
Tax expense at statutory rate
Permanent differences
Change in income taxes due to IRS audit
State income taxes
Other
Year ended
June 30,
2011
$ 1,658,219 $
15,144
-
213,209
138,920
Year ended
June 30,
2010
1,037,918
(151,192 )
146,175
152,320
(91,067 )
Net income tax expense
$ 2,025,492
$
1,094,154
Tax years which remain subject to examination by federal and state authorities are the years ended June 30, 2008
through June 30, 2011.
NOTE 12 - CONTINGENCIES
Legal Proceedings
In December 2010, the Company recorded a charge of $150,000 in connection with the settlement of a dispute with
one of its competitors related to the 2007 departure of the competitor’s then Chicago operation. By agreement
among the parties, without admission of any wrong doing on the part of the Company and with affirmation of the
parties’ right to freely compete in the marketplace, the Company agreed to make a $150,000 donation to a mutually
agreeable IRC 503(c) charitable organization. Neither the Company nor its competitor received any payment in
connection with the settlement. Of this amout, $75,000 was paid during the year ending June 30, 2011, and the
remaining $75,000 is included in current portion of notes payable and other liabilities on the balance sheet.
Adcom Purchase Contingencies
F-19
Effective September 5, 2008, the Company acquired all of the outstanding stock of Adcom Express (See Note 4).
The Company’s agreement with respect to the acquisition of Adcom contains future contingent consideration
provisions which provide for the selling shareholder 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
based on the accounting principles in effect at the time of the acquisition.
Through June 30, 2011, the former Adcom shareholder earned a total of $1,454,141 as part of the Tier 1 Earn-Out
arrangement. Of this amount, $617,095 is unpaid as of June 30, 2011. This balance is included in due to former
shareholders of subsidiaries and is payable on or before October 1, 2011.
Estimated payment anticipated for fiscal
year(1):
Earn-out period:
Earn-out payments (in thousands):
Cash
Equity
Total potential earn-out payments
Total gross margin targets
2013
7/1/2011 –
6/30/2012
$
$
$
350
350
700
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 years ended June 30, 2011 and 2010, the
Company paid $10,445 and $110,331, respectively, in satisfaction of finder’s fee obligations.
NOTE 13 - STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock, par value at $.001 per share. As of June 30,
2011 and 2010, 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 1,490,740 shares of its common stock at a cost of $471,265 and
2,833,499 shares of its common stock at a cost of $797,940 during the years ended June 30, 2011 and 2010,
respectively.
NOTE 14 - 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
F-20
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 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, 245,242 stock options were
granted to employees at a weighted average exercise price of $1.66 per share during the year ended June 30, 2011.
During the year ended June 30, 2010, 300,000 stock options were granted to employees at a weighted average
exercise price of $0.28 per share. The Company recorded share-based compensation expense of $115,346 for the
year ended June 30, 2011, and $218,781 for the year ended June 30, 2010.
The following table reflects activity under the plan for years ended June 30, 2011 and 2010:
Year ended
June 30, 2011
Year ended
June 30, 2010
Granted
Shares
Weighted Average
Exercise Price
Granted
Shares
Weighted Average
Exercise Price
Outstanding at beginning of year
Granted
Forfeited
Outstanding at end of year
Exercisable at end of year
Non-vested at end of year
3,620,000 $
245,242
-
3,865,242 $
3,004,000 $
861,242 $
0.50
1.66
-
0.58
0.55
0.68
3,320,000 $
300,000
-
3,620,000 $
2,280,000 $
1,340,000 $
0.52
0.28
-
0.50
0.56
0.40
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, 2011
Year ended
June 30, 2010
Risk-Free Interest Rates
Expected Term
Expected Volatility
0.16%-0.57%
6.5yrs
59.5%-61.2%
F-21
1.57%
6.5yrs
64.3%
Expected Dividend Yields
Forfeiture Rate
0.00%
0.00%
0.00%
0.00%
As of June 30, 2011, the Company had approximately $304,000 of total unrecognized share-based compensation
costs relating to unvested stock options which is expected to be recognized over a weighted average period of 2.53
years. The following table summarizes the Company’s unvested stock options and changes for the years ended June
30, 2011 and 2010.
Outstanding at June 30, 2009
Granted during the year ended June 30, 2010
Less options vested during the year ended June 30, 2010
Less options forfeited during the year ended June 30, 2010
Outstanding at June 30, 2010
Granted during the year ended June 30, 2011
Less options vested during the year ended June 30, 2011
Less options forfeited during the year ended June 30, 2011
Outstanding at June 30, 2011
Weighted
Average Grant
Date Fair Value
0.29
0.15
(0.32)
-
0.24
0.92
(0.30)
-
0.38
$
$
$
Shares
1,704,000
300,000
(664,000)
-
1,340,000
245,242
(724,000)
-
861,242
The following table summarizes outstanding and exercisable options by price range as of June 30, 2011:
Number
Outstanding
at June 30,
2011
Weighted
Average
Remaining
Contractual
Life-Years
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value at June
30, 2011
Number
Exercisable
at June 30,
2011
7.18 $
0.18
$
1,023,040
460,000
400,000
1,550,000
1,217,779
20,000
110,503
106,960
7.90
4.60
4.68
5.22
9.67
9.94
0.26
0.48
0.73
1.01
1.30
2.30
856,000
256,000
100,000
2,971,350
1,480,000
2,038,562
1,152,000
27,800
121,553
10,696
16,000
-
-
Exercise Prices
$0.00 - $0.19
$0.20 - $0.39
$0.40 - $0.59
$0.60 - $0.79
$1.00 - $1.19
$1.20 - $1.39
$2.20 - $2.39
Exercisable Options
Weighted
Average
Remaining
Contractual
Life-Years
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value at June
30, 2011
7.12 $
0.18 $
569,088
7.78
4.51
4.52
5.23
-
-
0.25
215,200
0.48
2,837,160
0.73
1,920,384
1.01
22,240
-
-
-
-
Total
3,865,242
5.57 $
0.58
$
7,049,001
3,004,000
4.85 $
0.55 $
5,564,072
NOTE 15 - 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):
Year ended June 30:
Revenue
$
113,911 $
78,594
$
89,909
$
68,122
$
203,820 $
146,716
United States
Other Countries
Total
2011
2010
2011
2010
2011
2010
F-22
Cost of transportation
71,551
46,887
69,794
54,199
141,315
101,086
Net revenue
$
42,360 $
31,707
$
20,145
$
13,923
$
62,505 $
45,630
NOTE 16 - QUARTERLY FINANCIAL DATA SCHEDULE (Unaudited)
Revenue
Cost of transportation
Net revenues
Fiscal Year 2011 – Quarter Ended
June 30
March 31
December 31
September 30
$
70,932,008 $
49,753,382
42,030,290
29,005,131
$
44,496,820 $
30,314,763
46,361,057
32,242,361
21,178,626
13,025,159
14,182,057
14,118,696
Total operating expenses
19,895,963
11,777,157
12,878,402
12,778,160
Income from operations
1,282,663
1,248,002
1,303,655
1,340,536
Total other income (expense)
(26,433 )
21,191
(123,142 )
(10,147)
Income before income tax expense
1,256,230
1,269,193
1,180,513
1,330,389
Income tax expense
Net income
(634,251 )
(472,379)
(413,319 )
(505,543)
621,979
796,814
767,194
824,846
Net income attributable to non-controlling interest
(40,282 )
(26,095)
(50,929 )
(41,903)
Net income attributable to Radiant Logistics, Inc.
$
581,697 $
770,719
$
716,265 $
782,943
Net income per common share – basic
Net income per common share – diluted
$
$
0.02 $
0.02 $
0.03
0.02
$
$
0.02 $
0.02 $
0.03
0.03
Fiscal Year 2010 – Quarter Ended
June 30
March 31
December 31
September 30
Revenue
Cost of transportation
Net revenues
$
$
40,707,751
27,472,232
13,235,519
$
32,863,624
22,522,506
10,341,118
$
39,115,845
27,611,567
11,504,278
34,028,336
23,479,447
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.
Net income per common share – basic and diluted
$
$
844,278
.03
$
$
449,108
.01
$
$
549,109
.02
$
$
116,050
.02
F-23
Exhibit No.
Exhibit
EXHIBIT INDEX
21.1
31.1
31.2
32.1
Subsidiaries of the Registrant
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
LV1 989807v3 09/25/08
4
Exhibit 21.1
Subsidiaries of
Radiant Logistics, Inc.
Name of Subsidiary
State of Incorporation or Organization
Airgroup Corporation
Radiant Logistics Global Services, Inc.
Radiant Logistics Partners LLC
(40% owned by Radiant Global Logistics)
Adcom Express, Inc.
Distribution by Air
Washington
Delaware
Delaware
Minnesota
New Jersey
LV1 989807v3 09/25/08
Exhibit 31.1
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Bohn H. Crain, certify that:
1.
I have reviewed this annual report on Form 10-K of Radiant Logistics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. As a certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the
5.
registrant's auditors and the audit committee of the registrant's board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Date: October 7, 2011
By: /s/ Bohn H. Crain
Chief Executive Officer
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Exhibit 31.2
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Todd E. Macomber, certify that:
1.
I have reviewed this annual report on Form 10-K of Radiant Logistics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. As a certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this
report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the
5.
registrant's auditors and the audit committee of the registrant's board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant's internal control over financial reporting.
Date: October 7, 2011
By: /s/ Todd E. Macomber
Chief Financial Officer
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Certifications Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
Exhibit 32.1
Pursuant to 18 U.S.C. Section 1350, each of the undersigned officers of Radiant Logistics, Inc. (the "Company")
hereby certifies that, to his knowledge, the Company's Annual Report on Form 10-K for the period ended June 30,
2011 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: October 7, 2011
By: /s/ Bohn H. Crain
Bohn H. Crain
Chief Executive Officer
By: /s/ Todd E. Macomber
Todd E. Macomber
Chief Financial Officer
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AUDITOR Peterson Sullivan LLP 601 Union St | Suite 2300 | Seattle, WA 98101 STOCK TRANSFER AGENT Broadridge Corporate Issuer Solutions 1717 Arch Street | Suite 1300 | Philadelphia, PA 19103COUNSEL Fox Rothschild LLP 997 Lenox Drive | Building 3 | Lawrenceville, NJ 08648 INVESTOR RELATIONS Information is available on our website at www.radiantdelivers.com. If you prefer, you may also write or call us:Carol Guzman Director of Marketing & Communications 405 114th Avenue SE, Third Floor| Bellevue, WA 98004 cguzman@radiantdelivers.com Tel: 425-462-1094 ext. 573RADIANT LOGISTICS, INC. | GLOBAL HEADQUARTERS405 114th Ave SE, Third Floor | Bellevue, WA 98004Toll Free: (800) 843-4784| Local: (425) 462-1094 | Fax: (425) 462-0768www.radiantdelivers.comCopyright 2011 RadiantRADIANT LOGISTICS, INC. 2011 ANNUAL REPORT ON FORM 10-KANNUAL REPORT ON FORM 10-K2011It’s the Network that Delivers!®A RADIANT LOGISTICS COMPANY