10-Q 1 rlgt-10q_20140331.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: March 31, 2014

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-35392

RADIANT LOGISTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

 

04-3625550

 

 

 

(State or Other Jurisdiction of
Incorporation or Organization)

 

(IRS Employer
Identification No.)

 

 

 

405 114th Ave S.E., Bellevue, WA 98004

 

 

(Address of Principal Executive Offices)

 

 

 

 

 

(425) 943-4599

 

 

(Issuer’s Telephone Number, including Area Code)

 

 

 

 

 

N/A

 

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [  ]

Indicate by check mark whether the registrant 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 [x] No [  ]

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

 

Large accelerated filer

 

[  ]

  

Accelerated filer

 

[  ]

Non-accelerated filer

 

[  ]  

  

Smaller reporting company

 

[x]

(Do not check if a smaller reporting company)

 

 

 

 

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

There were 34,136,332 issued and outstanding shares of the registrant’s common stock, par value $.001 per share, as of May 12, 2014.

 

 

 


RADIANT LOGISTICS, INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1.

 

 

Condensed Consolidated Financial Statements - Unaudited

  

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2014 and June 30, 2013

  

3

 

 

 

Condensed Consolidated Statements of Operations for the three months and nine months ended March 31, 2014 and 2013

  

4

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended March 31, 2014

  

5

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2014 and 2013

  

6

 

 

 

Notes to Condensed Consolidated Financial Statements

  

8

 

Item 2.

 

 

Management’s Discussion and Analysis of Financial Conditions and Results of Operations

  

23

 

Item 4.

 

 

Controls and Procedures

  

35

 

PART II. OTHER INFORMATION

  

 

 

Item 1.

 

 

Legal Proceedings

  

36

 

Item 2.

 

 

Unregistered Sales of Equity Securities and Use of Proceeds

  

37

 

Item 6.

 

 

Exhibits

  

38

 

 

 

 

 

 

 

 

2


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

March 31,

 

 

June 30,

 

 

2014

 

 

2013

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

3,968,161

 

 

$

1,024,192

 

Accounts receivable, net of allowance of $916,417 and $1,445,646, respectively

 

53,280,722

 

 

 

52,131,462

 

Current portion of employee and other receivables

 

264,725

 

 

 

328,123

 

Income tax deposit

 

162,136

 

 

 

 

Prepaid expenses and other current assets

 

2,123,517

 

 

 

2,477,904

 

Deferred tax asset

 

856,926

 

 

 

908,564

 

Total current assets

 

60,656,187

 

 

 

56,870,245

 

 

 

 

 

 

 

 

 

Furniture and equipment, net

 

1,327,858

 

 

 

1,289,818

 

 

 

 

 

 

 

 

 

Acquired intangibles, net

 

16,147,139

 

 

 

9,231,163

 

Goodwill

 

28,623,045

 

 

 

15,952,544

 

Employee and other receivables, net of current portion

 

26,892

 

 

 

72,433

 

Deposits and other assets

 

609,349

 

 

 

336,613

 

Total long-term assets

 

45,406,425

 

 

 

25,592,753

 

Total assets

$

107,390,470

 

 

$

83,752,816

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued transportation costs

$

37,833,939

 

 

$

35,767,785

 

Commissions payable

 

5,447,156

 

 

 

6,086,324

 

Other accrued costs

 

2,488,639

 

 

 

2,176,567

 

Income taxes payable

 

 

 

 

361,571

 

Current portion of notes payable

 

767,091

 

 

 

767,091

 

Current portion of contingent consideration

 

1,610,000

 

 

 

305,000

 

Current portion of lease termination liability

 

324,377

 

 

 

305,496

 

Total current liabilities

 

48,471,202

 

 

 

45,769,834

 

 

 

 

 

 

 

 

 

Notes payable and other long-term debt, net of current portion and debt discount

 

5,193,580

 

 

 

17,213,424

 

Contingent consideration, net of current portion

 

10,640,000

 

 

 

3,720,000

 

Lease termination liability, net of current portion

 

294,226

 

 

 

505,353

 

Deferred rent liability

 

566,676

 

 

 

583,401

 

Deferred tax liability

 

2,874,718

 

 

 

73,433

 

Other long-term liabilities

 

2,610

 

 

 

2,610

 

Total long-term liabilities

 

19,571,810

 

 

 

22,098,221

 

Total liabilities

 

68,043,012

 

 

 

67,868,055

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized; 839,200 and 0 shares issued and

   outstanding, respectively, liquidation preference of $20,980,000

 

839

 

 

 

 

Common stock, $0.001 par value, 100,000,000 shares authorized; 34,116,244 and 33,348,166

   shares and outstanding, respectively

 

15,571

 

 

 

14,803

 

Additional paid-in capital

 

34,337,719

 

 

 

13,873,157

 

Deferred compensation

 

(10,469

)

 

 

(14,252

)

Retained earnings

 

4,946,954

 

 

 

1,943,530

 

Total Radiant Logistics, Inc. stockholders’ equity

 

39,290,614

 

 

 

15,817,238

 

Non-controlling interest

 

56,844

 

 

 

67,523

 

Total stockholders’ equity

 

39,347,458

 

 

 

15,884,761

 

Total liabilities and stockholders’ equity

$

107,390,470

 

 

$

83,752,816

 

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

 

 

 

3


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Operations

(unaudited)

 

 

THREE MONTHS ENDED

 

 

NINE MONTHS ENDED

 

 

MARCH 31,

 

 

MARCH 31,

 

 

 

2014

 

 

 

2013

 

 

 

2014

 

 

 

2013

 

Revenues

$

86,032,714

 

 

$

72,790,313

 

 

$

246,878,094

 

 

$

230,116,528

 

Cost of transportation

 

62,043,074

 

 

 

51,183,245

 

 

 

175,302,070

 

 

 

164,745,770

 

Net revenues

 

23,989,640

 

 

 

21,607,068

 

 

 

71,576,024

 

 

 

65,370,758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agent commissions

 

12,867,599

 

 

 

12,478,403

 

 

 

39,408,451

 

 

 

38,957,449

 

Personnel costs

 

5,396,347

 

 

 

4,511,174

 

 

 

15,284,150

 

 

 

12,813,670

 

Selling, general and administrative expenses

 

2,815,653

 

 

 

1,819,987

 

 

 

7,766,698

 

 

 

6,547,208

 

Depreciation and amortization

 

1,232,603

 

 

 

931,974

 

 

 

3,304,357

 

 

 

3,067,145

 

Transition and lease termination costs

 

 

 

 

 

 

 

 

 

 

1,544,454

 

Change in contingent consideration

 

(1,145,000

)

 

 

(675,000

)

 

 

(1,357,567

)

 

 

(950,000

)

Total operating expenses

 

21,167,202

 

 

 

19,066,538

 

 

 

64,406,089

 

 

 

61,979,926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

2,822,438

 

 

 

2,540,530

 

 

 

7,169,935

 

 

 

3,390,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

1,965

 

 

 

3,547

 

 

 

6,593

 

 

 

12,679

 

Interest expense

 

(88,887

)

 

 

(492,414

)

 

 

(1,105,343

)

 

 

(1,500,435

)

Loss on write-off of debt discount

 

 

 

 

 

 

 

(1,238,409

)

 

 

 

Gain on litigation settlement, net

 

 

 

 

 

 

 

 

 

 

368,162

 

Other

 

16,482

 

 

 

26,292

 

 

 

109,228

 

 

 

238,030

 

Total other expense

 

(70,440

)

 

 

(462,575

)

 

 

(2,227,931

)

 

 

(881,564

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

 

2,751,998

 

 

 

2,077,955

 

 

 

4,942,004

 

 

 

2,509,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(1,087,343

)

 

 

(1,166,927

)

 

 

(1,889,259

)

 

 

(1,109,275

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

1,664,655

 

 

 

911,028

 

 

 

3,052,745

 

 

 

1,399,993

 

Less: Net income attributable to non-controlling interest

 

(16,541

)

 

 

(29,218

)

 

 

(49,321

)

 

 

(94,250

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Radiant Logistics, Inc.

 

1,648,114

 

 

 

881,810

 

 

 

3,003,424

 

 

 

1,305,743

 

Less: Preferred stock dividends

 

(511,388

)

 

 

 

 

 

(579,887

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

1,136,726

 

 

$

881,810

 

 

$

2,423,537

 

 

$

1,305,743

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share - basic and diluted

$

0.03

 

 

$

0.03

 

 

$

0.07

 

 

$

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares

 

33,713,462

 

 

 

33,091,774

 

 

 

33,549,740

 

 

 

33,048,832

 

Diluted shares

 

35,335,320

 

 

 

35,098,612

 

 

 

35,497,675

 

 

 

35,121,335

 

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

 

 

 

4


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Statement of Stockholders’ Equity

(unaudited)

 

 

RADIANT LOGISTICS, INC. STOCKHOLDERS' EQUITY

 

 

 

 

 

 

PREFERRED STOCK

 

 

COMMON STOCK

 

 

ADDITIONAL

 

 

 

 

 

 

 

 

 

 

NON-

 

 

TOTAL

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

PAID-IN

CAPITAL

 

 

DEFERRED

COMPENSATION

 

 

RETAINED EARNINGS

 

 

CONTROLLING INTEREST

 

 

STOCKHOLDERS’

EQUITY

 

Balance as of June 30, 2013

 

 

 

$

 

 

 

33,348,166

 

 

$

14,803

 

 

$

13,873,157

 

 

$

(14,252

)

 

$

1,943,530

 

 

$

67,523

 

 

$

15,884,761

 

Issuance of 9.75% Series A

   Cumulative Redeemable

   Perpetual Preferred Stock

   at $25.00 per share, net of

   underwriting and offering

   costs of $1,659,341

 

839,200

 

 

 

839

 

 

 

 

 

 

 

 

 

19,319,820

 

 

 

 

 

 

 

 

 

 

 

 

19,320,659

 

Issuance of common stock

   to former On Time

   shareholders at $2.11 per

   share

 

 

 

 

 

 

 

237,320

 

 

 

237

 

 

 

499,763

 

 

 

 

 

 

 

 

 

 

 

 

500,000

 

Issuance of common stock

   to former ISLA shareholders

   at $2.21 per share

 

 

 

 

 

 

 

26,188

 

 

 

26

 

 

 

57,812

 

 

 

 

 

 

 

 

 

 

 

 

57,838

 

Issuance of common stock

   to former Phoenix Cartage

   shareholders at $2.93 per

   share

 

 

 

 

 

 

 

17,083

 

 

 

17

 

 

 

49,983

 

 

 

 

 

 

 

 

 

 

 

 

50,000

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

473,145

 

 

 

 

 

 

 

 

 

 

 

 

473,145

 

Amortization of deferred

   compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,783

 

 

 

 

 

 

 

 

 

3,783

 

Cashless exercise of stock

   options

 

 

 

 

 

 

 

487,487

 

 

 

488

 

 

 

(626,831

)

 

 

 

 

 

 

 

 

 

 

 

(626,343

)

Tax benefit from exercise of

   stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

690,870

 

 

 

 

 

 

 

 

 

 

 

 

690,870

 

Distribution to non-

   controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(60,000

)

 

 

(60,000

)

Net income for the nine

   months ended March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,003,424

 

 

 

49,321

 

 

 

3,052,745

 

Balance as of March 31, 2014

 

839,200

 

 

$

839

 

 

 

34,116,244

 

 

$

15,571

 

 

$

34,337,719

 

 

$

(10,469

)

 

$

4,946,954

 

 

$

56,844

 

 

$

39,347,458

 

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

 

 

 

5


RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

NINE MONTHS ENDED

 

 

 

MARCH 31,

 

 

 

 

2014

 

 

 

2013

 

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

3,052,745

 

 

$

1,399,993

 

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH

   PROVIDED BY OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

share-based compensation expense

 

 

476,928

 

 

 

305,758

 

amortization of intangibles

 

 

2,908,024

 

 

 

2,587,512

 

depreciation and leasehold amortization

 

 

396,333

 

 

 

479,633

 

deferred income tax benefit

 

 

(271,477

)

 

 

(650,412

)

amortization of loan fees and original issue discount

 

 

187,707

 

 

 

206,289

 

loss on write-off of debt discount

 

 

1,238,409

 

 

 

 

change in contingent consideration

 

 

(1,357,567

)

 

 

(950,000

)

gain on litigation settlement

 

 

 

 

 

(698,623

)

lease termination costs

 

 

 

 

 

1,439,018

 

change in (recovery of) provision for doubtful accounts

 

 

(546,249

)

 

 

171,969

 

CHANGE IN OPERATING ASSETS AND LIABILITIES:

 

 

 

 

 

 

 

 

accounts receivable

 

 

2,541,114

 

 

 

4,750,122

 

employee and other receivables

 

 

133,939

 

 

 

(70,119

)

income tax deposit and income taxes payable

 

 

(472,775

)

 

 

126,779

 

prepaid expenses, deposits and other assets

 

 

505,768

 

 

 

656,123

 

accounts payable and accrued transportation costs

 

 

470,850

 

 

 

(6,825,396

)

commissions payable

 

 

(639,168

)

 

 

1,005,452

 

other accrued costs

 

 

64,759

 

 

 

119,414

 

other liabilities

 

 

(857

)

 

 

(29,135

)

deferred rent liability

 

 

(16,725

)

 

 

2,020

 

lease termination liability

 

 

(192,246

)

 

 

(469,218

)

Net cash provided by operating activities

 

 

8,479,512

 

 

 

3,557,179

 

 

 

 

 

 

 

 

 

 

CASH FLOWS USED FOR INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Acquisition of On Time Express, Inc., net of acquired cash

 

 

(6,952,056

)

 

 

 

Other acquisitions, net of acquired cash

 

 

(500,000

)

 

 

(596,722

)

Purchase of furniture and equipment

 

 

(153,899

)

 

 

(290,648

)

Payments to former shareholders of acquired operations

 

 

(1,311,775

)

 

 

(1,583,489

)

Net cash used for investing activities

 

 

(8,917,730

)

 

 

(2,470,859

)

 

 

 

 

 

 

 

 

 

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from (repayments to) credit facility, net of credit fees

 

 

(3,683,403

)

 

 

216,642

 

Proceeds from preferred stock, net of offering costs

 

 

19,320,659

 

 

 

 

Repayment of notes payable

 

 

(12,000,000

)

 

 

 

Payments of contingent consideration

 

 

(259,596

)

 

 

 

Distributions to non-controlling interest

 

 

(60,000

)

 

 

(114,000

)

Proceeds from exercise of stock options

 

 

 

 

 

4,800

 

Payment of employee tax withholdings related to cashless stock option exercises

 

 

(626,343

)

 

 

 

Tax benefit from exercise of stock options

 

 

690,870

 

 

 

48,977

 

Net cash provided by financing activities

 

 

3,382,187

 

 

 

156,419

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

2,943,969

 

 

 

1,242,739

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

1,024,192

 

 

 

66,888

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

3,968,161

 

 

$

1,309,627

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Income taxes paid

 

$

1,982,676

 

 

$

1,635,645

 

Interest paid

 

$

1,176,983

 

 

$

1,294,353

 

(continued)

 

 

 

6


RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows (continued)

(unaudited)

Supplemental disclosure of non-cash investing and financing activities:

In November 2012, the Company transferred accounts receivable of $400,260 to the shareholders of Marvir Logistics, Inc. as part of the purchase price consideration.

In December 2012, an arbitrator awarded damages, net of interest, of $698,623 from the former shareholders of DBA. The award has been off-set against amounts due to former shareholders of acquired operations.

In March 2013, the Company issued 252,362 shares of common stock at a fair value of $1.71 in satisfaction of the $432,112 Adcom earn-out payment for the year ended June 30, 2012, resulting in a decrease to the amount due to former shareholders of acquired operations, an increase to common stock of $252 and an increase to additional paid-in capital of $431,860.

In October 2013, the Company issued 237,320 shares of common stock at a fair value of $2.11 per share in satisfaction of $500,000 of the On Time Express, Inc. purchase price, resulting in a decrease to the amount due to former shareholders of acquired operations, an increase to common stock of $237 and an increase to additional paid-in capital of $499,763.

In March 2014, the Company issued 26,188 shares of common stock at a fair value of $2.21 per share in satisfaction of $57,838 of the ISLA International, Ltd. earn-out payment for the year ended June 30, 2013, resulting in a decrease to the amount due to former shareholders of acquired operations, an increase to common stock of $26 and an increase to additional paid-in capital of $57,812.

In March 2014, the Company issued 17,083 shares of common stock at a fair value of $2.93 per share in satisfaction of $50,000 of the Phoenix Cartage and Air Freight, LLC purchase price, resulting in a decrease to the amount due to former shareholders of acquired operations, an increase to common stock of $17 and an increase to additional paid-in capital of $49,983.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

7


 

RADIANT LOGISTICS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION

The Company

Radiant Logistics, Inc. (the “Company”) is a non-asset based transportation and logistics services company providing customers domestic and international freight forwarding services through a network of company-owned and independent agent offices operating under the Radiant, Airgroup, Adcom, DBA and On Time network brands. The Company also offers an expanding array of value-added supply chain management services, including customs and property brokerage, order fulfillment, inventory management and warehousing.

Through the Company’s operating locations across North America, the Company offers domestic and international air, ocean and ground freight forwarding to a large and diversified account base consisting of manufacturers, distributors and retailers. The Company’s primary business operations involve arranging the shipment, on behalf of their customers, of materials, products, equipment and other goods that are generally larger than shipments handled by integrated carriers of primarily small parcels, such as FedEx, DHL and UPS. The Company provides a wide range of value-added logistics solutions to meet customers’ specific requirements for transportation and related services, including arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems.

The Company’s value-added logistics solutions are provided through their multi-brand network of company-owned and independent agent offices, using a network of independent air, ground and ocean carriers and international operating partners strategically positioned around the world. The Company creates value for their customers and independent agents through, among other things, customized logistics solutions, global reach, brand awareness, purchasing power, and infrastructure benefits, such as centralized back-office operations, and advanced transportation and accounting systems.

The Company’s growth strategy will continue to focus on a combination of both organic and acquisition initiatives. For organic growth, the Company will focus on strengthening and retaining existing, and expanding new customer and agency relationships. In addition to its focus on organic growth, the Company will continue to search for acquisition candidates that bring critical mass from a geographic standpoint, purchasing power and/or complementary service offerings to the current platform. As the Company continues to grow and scale the business, the Company remains focused on leveraging its back-office infrastructure to drive productivity improvement across the organization. In addition, the Company is also developing density with in certain trade lanes which creates opportunities to more efficiently source and manage transportation capacity for existing freight volumes.

Interim Disclosure

The condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The Company’s management believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2013.

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

Basis of Presentation

The condensed 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 RGL, and 60% owned by Radiant Capital Partners, LLC (“RCP”, see Note 8), an affiliate of Bohn H. Crain, the Company’s Chief Executive Officer, whose accounts are included in the condensed consolidated financial statements. All significant intercompany balances and transactions have been eliminated.

 

8


 

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 (“GAAP”) 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, changes in contingent consideration, accounting for the issuance of shares and share-based compensation, the assessment of the recoverability of long-lived assets and goodwill, and the establishment of an allowance for doubtful accounts. 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 and amounts due to former shareholders of acquired operations approximate the carrying values due to the relatively short maturities of these instruments. The fair value of the Company’s credit facility and other long-term liabilities would not differ significantly from the recorded amount if recalculated based on current interest rates. Contingent consideration attributable to the Company’s acquisitions are reported at fair value using Level 3 inputs.

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 that are not securing any corporate obligations. Checks issued by the Company that have not yet been presented to the bank for payment are reported as accounts payable and commissions payable in the accompanying consolidated balance sheets. Accounts payable and commissions payable includes outstanding payments which had not yet been presented to the bank for payment in the amounts of $4,548,674 and $4,775,189 as of March 31, 2014 and June 30, 2013, respectively.

e)

Concentrations

The Company maintains its cash in bank deposit accounts that, 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.

9


 

The Company derives a substantial portion of its revenue through independently-owned agent offices operating under the various Company brands. Each individual agent office is responsible for some or all of the bad debt expense related to the underlying customers being serviced by the office. To facilitate this arrangement, each office is required to maintain a security deposit with the Company that is recognized as a liability in the Company’s financial statements. The Company charges each individual office’s bad debt reserve account for any accounts receivable aged beyond 90 days. The bad debt reserve account is continually replenished with a portion (typically 5% - 10%) of the office’s weekly commission check being directed to fund this account. However, the bad debt reserve account may carry a deficit balance when amounts charged to this reserve exceed amounts otherwise available in the bad debt reserve account. In these circumstances, deficit bad debt reserve accounts are recognized as a receivable in the Company’s financial statements. Further, the agency agreements provide that the Company may withhold all or a portion of future commission checks payable to the individual office in satisfaction of any deficit balance. Currently, a number of the Company’s agency offices have a deficit balance in their bad debt reserve account. The Company expects to replenish these funds through the future business operations of these offices. However, to the extent any of these offices were to cease operations or otherwise be unable to replenish these deficit accounts, the Company would be at risk of loss for any such amount.

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 using the straight line method of depreciation. 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

Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of a business acquired. The Company typically performs its annual goodwill impairment test effective as of April 1 of each year, unless events or circumstances indicate impairment may have occurred before that time. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. After assessing qualitative factors, the Company determined that no further testing was necessary. If further testing was necessary, the Company would have performed a two-step impairment test for goodwill. The first step 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. As of March 31, 2014, management believes there are no indications of impairment.

i)

Long-Lived Assets

Acquired intangibles consist of customer related intangibles and non-compete agreements arising from the Company’s acquisitions. Customer related intangibles are amortized using accelerated methods over approximately five years and non-compete agreements are amortized using the straight line method over the term of the underlying agreements.

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 March 31, 2014.

10


 

j)

Business Combinations

The Company accounts for business combinations using the purchase method of accounting and allocates the purchase price to the tangible and intangible assets acquired and the liabilities assumed based upon their estimated fair values at the acquisition date. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, the estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations.

The fair values of intangible assets acquired are 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 uses 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 reflects market participant assumptions.

The Company determines the acquisition date fair value of the contingent consideration payable based on the likelihood of paying the contingent consideration as part of the consideration transferred. The fair value is estimated using projected future operating results and the corresponding future earn-out payments that can be earned upon the achievement of specified operating objectives and financial results by our acquired companies using Level 3 inputs and the amounts are then discounted to present value. These liabilities are measured quarterly at fair value, and any change in the contingent liability is included in the consolidated statements of operations.

k)

Commitments

The Company has operating lease commitments for equipment rentals, office space, and warehouse space under non-cancelable operating leases expiring at various dates through May 2021. Rent expense is recognized straight line over the term of the lease. Minimum future lease payments (excluding the lease termination liability) under these non-cancelable operating leases for the next five fiscal years ending June 30 and thereafter are as follows:

 

2014 (remaining portion)

 

$

492,920

 

2015

 

 

1,556,389

 

2016

 

 

936,968

 

2017

 

 

568,323

 

2018

 

 

565,239

 

Thereafter

 

 

1,037,017

 

 

 

 

 

 

Total minimum lease payments

 

$

5,156,856

 

 

Rent expense amounted to $489,526 and $1,335,486 for the three and nine months ended March 31, 2014, respectively. Rent expense amounted to $365,738 and $1,521,983 for the three and nine months ended March 31, 2013, respectively.

l)

Lease Termination Costs

Lease termination costs consist of expenses related to future rent payments for which we no longer intend to receive any economic benefit. A liability is recorded when we cease to use leased space. Lease termination costs are calculated as the present value of lease payments, net of expected sublease income, and the loss on disposition of assets. During the three and nine months ended March 31, 2014, the Company paid $50,127 and $192,246 of the liability, respectively. During the three and nine months ended March 31, 2013, the Company paid $469,218 of the liability.

m)

401(k) Savings Plan

The Company has employee savings plans under which the Company provides safe harbor matching contributions. The Company’s contributions under the plans were $96,729 and $250,136 for the three and nine months ended March 31, 2014, respectively, and were $72,130 and $190,287 for the three and nine months ended March 31, 2013, respectively.

11


 

n)

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.

o)

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 freight forwarding 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 or a House Ocean Bill of Lading are recognized at the time the freight is tendered to the direct carrier at origin net of duties and taxes. 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 does not recognize revenue until a proof of delivery is received or which recognizes 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.

All other revenue, including revenue from other value added services including customs brokerage, warehousing and fulfillment services, is recognized upon completion of the service.

p)

Share-Based Compensation

The Company has issued restricted stock awards and stock options to certain directors, officers and employees. 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 that 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. The Company issues new shares of common stock to satisfy exercises and vesting of awards granted under our stock plan.

The Company recorded share-based compensation expense of $199,741 and $476,928 for the three and nine months ended March 31, 2014, respectively. The Company recorded share-based compensation expense of $101,014 and $305,758 for the three and nine months ended March 31, 2013, respectively.

12


 

q)

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. Net income attributable to common stockholders is calculated after earned but undeclared preferred stock dividends.

For the three months ended March 31, 2014, the weighted average outstanding number of potentially dilutive common shares totaled 35,335,320, including options to purchase 5,965,710 shares of common stock as of March 31, 2014, of which 124,659 were excluded as their effect would have been anti-dilutive. For the three months ended March 31, 2013, the weighted average outstanding number of potentially dilutive common shares totaled 35,098,612, including options to purchase 5,074,547 shares of common stock as of March 31, 2013, of which 1,189,807 were excluded as their effect would have been anti-dilutive.

For the nine months ended March 31, 2014, the weighted average outstanding number of potentially dilutive common shares totaled 35,497,675, including options to purchase 5,495,369 shares of common stock as of March 31, 2014, of which 960,560 were excluded as their effect would have been anti-dilutive. For the nine months ended March 31, 2013, the weighted average outstanding number of potentially dilutive common shares totaled 35,121,335, including options to purchase 5,074,547 shares as of March 31, 2013, of which 1,245,041 were excluded as their effect would have been anti-dilutive.

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

 

 

 

Three months ended

March 31,

 

 

Nine months ended

March 31,

 

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Weighted average basic shares outstanding

 

 

33,713,462

 

 

 

33,091,774

 

 

 

33,549,740

 

 

 

33,048,832

 

Dilutive effect of share-based awards

 

 

1,621,858

 

 

 

2,006,838

 

 

 

1,947,935

 

 

 

2,072,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average dilutive shares outstanding

 

 

35,335,320

 

 

 

35,098,612

 

 

 

35,497,675

 

 

 

35,121,335

 

 

r)

Other Comprehensive Income

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

s)

Reclassifications

Certain amounts for prior periods have been reclassified in the accompanying condensed consolidated financial statements to conform to the classification used in fiscal year 2014.

 

NOTE 3 – BUSINESS ACQUISITIONS

Acquisition of On Time Express, Inc.

On October 1, 2013, through a wholly-owned subsidiary, Radiant Transportation Services, Inc., the Company acquired the stock of On Time Express, Inc. (“On Time”), a privately-held Arizona corporation founded in 1982. On Time has an extensive, dedicated line-haul network that it leverages in delivering customized time critical domestic and international logistics solutions to an account base that includes customers in the aviation, aerospace, plastic injection molding, medical device, furniture and automotive industries. The base purchase price is valued at up to approximately $20.0 million, consisting of: $7.0 million paid in cash at closing, $0.5 million paid through the issuance of the Company’s common stock, $0.5 million payable as a working capital holdback plus a dollar-for-dollar payment of any working capital in excess of $750,000, $2.0 million in notes payable, and up to $10.0 million in aggregate Tier-1 earn-out payments following the four-year earn-out period immediately following closing. In addition, the transaction also provides for a Tier-2 earn-out payment calculated as 50% of the excess over a base target amount of $16,000,000 in cumulative earnings during the four-year Tier-1 earn-out period. The earn-out payments shall be made in a combination of cash and common stock, as the Company may elect to satisfy up to 25% of each Tier-1 earn-out payments and 50% of the Tier-2 earn-out payment through the issuance of its common stock valued based upon a 25-day volume weighted average price to be calculated preceding the delivery of the shares.

13


 

The transaction was financed with proceeds from the senior credit facility. The acquisition date fair value of the consideration transferred consisted of the following:

 

Fair value of consideration transferred:

 

 

 

 

Cash, net of cash acquired

 

$

6,952,056

 

Notes payable

 

 

2,000,000

 

Stock payable

 

 

500,000

 

Working capital holdback

 

 

1,311,776

 

Contingent Consideration

 

 

7,000,000

 

 

 

 

 

 

 

 

$

17,763,832

 

 

The fair value of the financial assets acquired included receivables with a fair value of $3,067,057. The gross amount due under the receivables was $3,084,077, of which $17,020 is expected to be uncollectible. The fair values 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 fair value of the contingent consideration was estimated using future projected gross margins of On Time and the corresponding future earn-out payments. To calculate fair value, the future earn-out payments were then discounted using Level 3 inputs. The Company believes the discount rate used to discount the earn-out payments reflect market participant assumptions.

The goodwill recognized is attributable primarily to its dedicated line-haul network and is not deductible for tax purposes.

Since acquisition, On Time produced revenue of approximately $13.7 million and income from operations of approximately $0.3 million, including amortization of intangibles resulting from the acquisition of approximately $1.0 million.

If the acquisition had taken place effective July 1, 2012, the result would have produced combined revenue of $253.6 million and $249.9 million and combined net income of $3.2 million and $1.4 million for the nine months ended March 31, 2014 and 2013, 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 2013.

The preliminary purchase price allocation for the On Time acquisition is as follows:

 

Current assets

 

$

3,320,231

 

Furniture and equipment

 

 

280,474

 

Deferred tax asset

 

 

146,000

 

Other assets

 

 

86,500

 

Intangibles

 

 

8,176,000

 

Goodwill

 

 

10,868,501

 

 

 

 

 

 

Total assets acquired

 

 

22,877,706

 

 

 

 

 

 

Current liabilities

 

 

1,843,474

 

Long-term deferred tax liability

 

 

3,270,400

 

 

 

 

 

 

Total liabilities assumed

 

 

5,113,874

 

 

 

 

 

 

Net assets acquired

 

$

17,763,832

 

 

14


 

Acquisition of Phoenix Cartage and Air Freight, LLC

On March 1, 2014, through a wholly-owned subsidiary, the Company acquired select customer relationships of Phoenix Cartage and Air Freight, LLC (“PCA”), a privately-held company based in Philadelphia, Pennsylvania. The transaction was financed with proceeds from the senior credit facility. The transaction was structured as an asset purchase using cash, stock, and earn-out payments.  

The results of operations for the businesses acquired are included in our financial statements as of the date of purchase. The preliminary fair value estimates for the assets acquired and liabilities assumed are based upon preliminary calculations and valuations and our estimates and assumptions are subject to change as we obtain additional information for our estimates during the respective measurement periods (up to one year from the acquisition date). The primary areas of the preliminary estimates not yet finalized relates to certain tangible assets and liabilities acquired, identifiable intangible assets, and income and non-income based taxes.

 

NOTE 4 – FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

 

 

 

March 31,

2014

 

 

June 30,

2013

 

Vehicles

 

$

53,325

 

 

$

30,288

 

Communication equipment

 

 

45,499

 

 

 

36,341

 

Office and warehouse equipment

 

 

319,721

 

 

 

313,721

 

Furniture and fixtures

 

 

214,628

 

 

 

197,710

 

Computer equipment

 

 

775,173

 

 

 

621,511

 

Computer software

 

 

1,858,543

 

 

 

1,816,332

 

Leasehold improvements

 

 

936,110

 

 

 

752,723

 

 

 

 

 

 

 

 

 

 

 

 

 

4,202,999

 

 

 

3,768,626

 

Less: Accumulated depreciation and amortization

 

 

(2,875,141

)

 

 

(2,478,808

)

 

 

 

 

 

 

 

 

 

 

 

$

1,327,858

 

 

$

1,289,818

 

 

Depreciation and amortization expense related to furniture and equipment was $132,396 and $396,333 for the three and nine months ended March 31, 2014, respectively, and $147,352 and $479,633 for the three and nine months ended March 31, 2013, respectively.

 

NOTE 5 – ACQUIRED INTANGIBLE ASSETS

The table below reflects acquired intangible assets related to all previous acquisitions including the fiscal year 2014 acquisitions of On Time and PCA:

 

 

 

March 31, 2014

 

 

June 30, 2013

 

 

 

Gross Carrying Amount