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EX-31.2 - EX-31.2 - RADIANT LOGISTICS, INCrlgt-ex312_8.htm
EX-31.1 - EX-31.1 - RADIANT LOGISTICS, INCrlgt-ex311_7.htm
EX-32.1 - EX-32.1 - RADIANT LOGISTICS, INCrlgt-ex321_6.htm

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x

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

For the quarterly period ended December 31, 2015

¨

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 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

 

 

(Registrant’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. (Check one):

 

Large accelerated filer

 

¨

  

 

Accelerated filer

 

¨

 

 

 

 

 

Non-accelerated filer

 

¨  

  

 

Smaller reporting company

 

x

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

There were 48,745,540 shares issued and outstanding of the registrant’s common stock, par value $.001 per share, as of February 11, 2016.

 

 

 

 

 


 

RADIANT LOGISTICS, INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1.

 

 

Condensed Consolidated Financial Statements - Unaudited

  

 

 

 

 

Condensed Consolidated Balance Sheets as of December 31, 2015 and June 30, 2015

  

3

 

 

 

Condensed Consolidated Statements of Operations and Other Comprehensive Income for the three and six months ended December 31, 2015 and 2014

  

4

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity for the six months ended December 31, 2015

  

5

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2015 and 2014

  

6

 

 

 

Notes to Condensed Consolidated Financial Statements

  

8

 

Item 2.

 

 

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

  

25

 

Item 4.

 

 

Controls and Procedures

  

38

 

PART II. OTHER INFORMATION

  

 

 

Item 1.

 

 

Legal Proceedings

  

39

 

Item 1A.

 

 

Risk Factors

  

39

 

Item 6.

 

 

Exhibits

  

40

 

 

 

2


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

December 31,

 

 

June 30,

 

 

 

2015

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

20,126,312

 

 

$

7,268,144

 

Accounts receivable, net of allowance of $1,819,512 and $1,551,202, respectively

 

 

107,977,722

 

 

 

127,348,546

 

Employee and other receivables

 

 

120,378

 

 

 

110,728

 

Income tax deposit

 

 

4,954,723

 

 

 

4,102,191

 

Prepaid expenses and other current assets

 

 

5,199,816

 

 

 

5,671,872

 

Deferred tax asset

 

 

1,977,433

 

 

 

1,977,433

 

Total current assets

 

 

140,356,384

 

 

 

146,478,914

 

 

 

 

 

 

 

 

 

 

Furniture and equipment, net

 

 

13,312,694

 

 

 

13,175,890

 

 

 

 

 

 

 

 

 

 

Acquired intangibles, net

 

 

76,088,477

 

 

 

82,954,682

 

Goodwill

 

 

63,119,472

 

 

 

63,089,222

 

Deposits and other assets

 

 

2,223,373

 

 

 

3,007,492

 

Total long-term assets

 

 

141,431,322

 

 

 

149,051,396

 

Total assets

 

$

295,100,400

 

 

$

308,706,200

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued transportation costs

 

$

79,819,306

 

 

$

92,025,407

 

Commissions payable

 

 

11,504,009

 

 

 

9,449,047

 

Other accrued costs

 

 

5,384,248

 

 

 

7,732,101

 

Due to former shareholders of acquired operations

 

 

 

 

 

683,593

 

Current portion of notes payable

 

 

1,537,628

 

 

 

543,086

 

Current portion of contingent consideration

 

 

3,029,000

 

 

 

1,872,000

 

Current portion of transition and lease termination liability

 

 

1,509,761

 

 

 

282,849

 

Other current liabilities

 

 

292,226

 

 

 

297,727

 

Total current liabilities

 

 

103,076,178

 

 

 

112,885,810

 

 

 

 

 

 

 

 

 

 

Notes payable, net of current portion

 

 

47,851,343

 

 

 

85,892,515

 

Contingent consideration, net of current portion

 

 

3,726,000

 

 

 

5,741,000

 

Transition and lease termination liability, net of current portion

 

 

857,112

 

 

 

923

 

Deferred rent liability

 

 

931,840

 

 

 

1,143,749

 

Deferred tax liability

 

 

15,502,503

 

 

 

17,544,417

 

Other long-term liabilities

 

 

778,938

 

 

 

1,004,812

 

Total long-term liabilities

 

 

69,647,736

 

 

 

111,327,416

 

Total liabilities

 

 

172,723,914

 

 

 

224,213,226

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

   outstanding, liquidation preference of $20,980,000

 

 

839

 

 

 

839

 

Common stock, $0.001 par value, 100,000,000 shares authorized; 48,743,581 and 42,563,224

   shares issued and outstanding, respectively

 

 

30,198

 

 

 

24,018

 

Additional paid-in capital

 

 

113,826,750

 

 

 

74,658,960

 

Deferred compensation

 

 

(1,976

)

 

 

(4,166

)

Retained earnings

 

 

7,446,336

 

 

 

10,146,282

 

Accumulated other comprehensive income (loss)

 

 

1,026,938

 

 

 

(394,547

)

Total Radiant Logistics, Inc. stockholders’ equity

 

 

122,329,085

 

 

 

84,431,386

 

Non-controlling interest

 

 

47,401

 

 

 

61,588

 

Total stockholders’ equity

 

 

122,376,486

 

 

 

84,492,974

 

Total liabilities and stockholders’ equity

 

$

295,100,400

 

 

$

308,706,200

 

 

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

 

 

3


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Income

(unaudited)

 

 

Three Months Ended December 31,

 

 

Six Months Ended December 31,

 

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

 

Revenues

$

206,951,043

 

 

$

105,948,104

 

 

$

425,603,615

 

 

$

204,179,492

 

Cost of transportation

 

159,354,826

 

 

 

78,355,731

 

 

 

327,294,293

 

 

 

150,262,336

 

Net revenues

 

47,596,217

 

 

 

27,592,373

 

 

 

98,309,322

 

 

 

53,917,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating partner commissions

 

21,691,079

 

 

 

14,897,910

 

 

 

43,988,958

 

 

 

28,877,261

 

Personnel costs

 

13,279,317

 

 

 

6,976,480

 

 

 

27,722,412

 

 

 

13,536,426

 

Selling, general and administrative expenses

 

6,628,468

 

 

 

2,882,218

 

 

 

13,091,902

 

 

 

5,530,284

 

Depreciation and amortization

 

3,118,854

 

 

 

1,099,713

 

 

 

6,223,853

 

 

 

2,378,794

 

Transition and lease termination costs

 

1,157,420

 

 

 

395,086

 

 

 

4,319,648

 

 

 

395,086

 

Impairment of acquired intangible assets

 

3,679,825

 

 

 

 

 

 

3,679,825

 

 

 

 

Change in contingent consideration

 

598,233

 

 

 

(170,796

)

 

 

186,233

 

 

 

(720,796

)

Total operating expenses

 

50,153,196

 

 

 

26,080,611

 

 

 

99,212,831

 

 

 

49,997,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

(2,556,979

)

 

 

1,511,762

 

 

 

(903,509

)

 

 

3,920,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

7,696

 

 

 

732

 

 

 

14,477

 

 

 

1,657

 

Interest expense

 

(1,317,546

)

 

 

(96,442

)

 

 

(2,735,475

)

 

 

(187,901

)

Foreign exchange gain

 

218,246

 

 

 

37,584

 

 

 

468,752

 

 

 

112,082

 

Other

 

23,982

 

 

 

23,149

 

 

 

118,502

 

 

 

75,473

 

Total other income (expense):

 

(1,067,622

)

 

 

(34,977

)

 

 

(2,133,744

)

 

 

1,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax expense

 

(3,624,601

)

 

 

1,476,785

 

 

 

(3,037,253

)

 

 

3,921,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit (expense)

 

1,627,233

 

 

 

(616,491

)

 

 

1,393,895

 

 

 

(1,518,417

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(1,997,368

)

 

 

860,294

 

 

 

(1,643,358

)

 

 

2,402,995

 

Less: Net income attributable to non-controlling interest

 

(18,699

)

 

 

(21,555

)

 

 

(33,813

)

 

 

(43,592

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Radiant Logistics, Inc.

 

(2,016,067

)

 

 

838,739

 

 

 

(1,677,171

)

 

 

2,359,403

 

Less: Preferred stock dividends

 

(511,387

)

 

 

(511,388

)

 

 

(1,022,775

)

 

 

(1,022,776

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders

$

(2,527,454

)

 

$

327,351

 

 

$

(2,699,946

)

 

$

1,336,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain

 

566,888

 

 

 

 

 

 

1,421,485

 

 

 

 

Comprehensive income (loss)

$

(1,960,566

)

 

$

327,351

 

 

$

(1,278,461

)

 

$

1,336,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share - basic and diluted

$

(0.05

)

 

$

0.01

 

 

$

(0.06

)

 

$

0.04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares

 

48,732,762

 

 

 

34,627,645

 

 

 

48,054,100

 

 

 

34,488,616

 

Diluted shares

 

48,732,762

 

 

 

36,184,653

 

 

 

48,054,100

 

 

 

36,005,995

 

 

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

Paid-in

 

 

Deferred

 

 

Retained

 

 

Accumulated Other

Comprehensive

 

 

Non-

Controlling

 

 

Total

Stockholders’

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Compensation

 

 

Earnings

 

 

Income (Loss)

 

 

Interest

 

 

Equity

 

Balance as of June 30, 2015

 

839,200

 

 

$

839

 

 

 

42,563,224

 

 

$

24,018

 

 

$

74,658,960

 

 

$

(4,166

)

 

$

10,146,282

 

 

$

(394,547

)

 

$

61,588

 

 

$

84,492,974

 

Issuance of common stock

   at $6.75 per share, net of

   underwriting and offering

   costs of $2,969,810

 

 

 

 

 

 

 

6,133,334

 

 

 

6,133

 

 

 

38,424,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38,430,194

 

Issuance of common stock

   to former Copper

   Logistics shareholders at

   $4.23 per share

 

 

 

 

 

 

 

7,385

 

 

 

7

 

 

 

31,243

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31,250

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

756,006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

756,006

 

Amortization of deferred

   compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,190

 

 

 

 

 

 

 

 

 

 

 

 

2,190

 

Cashless exercise of stock

   options

 

 

 

 

 

 

 

39,638

 

 

 

40

 

 

 

(103,813

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(103,773

)

Tax benefit from exercise of

   stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

60,293

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,293

 

Preferred dividends paid

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,022,775

)

 

 

 

 

 

 

 

 

(1,022,775

)

Distribution to non-

   controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48,000

)

 

 

(48,000

)

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,677,171

)

 

 

 

 

 

33,813

 

 

 

(1,643,358

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,421,485

 

 

 

 

 

 

1,421,485

 

Balance as of December 31,

   2015

 

839,200

 

 

$

839

 

 

 

48,743,581

 

 

$

30,198

 

 

$

113,826,750

 

 

$

(1,976

)

 

$

7,446,336

 

 

$

1,026,938

 

 

$

47,401

 

 

$

122,376,486

 

 

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

 

 

 

5


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Six Months Ended December 31,

 

 

 

 

2015

 

 

 

2014

 

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,643,358

)

 

$

2,402,995

 

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY

   OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

share-based compensation expense

 

 

758,196

 

 

 

451,568

 

amortization of intangibles

 

 

4,412,380

 

 

 

2,111,745

 

depreciation and leasehold amortization

 

 

1,811,473

 

 

 

267,049

 

deferred income tax benefit

 

 

(2,306,830

)

 

 

(239,959

)

amortization of loan fees

 

 

200,982

 

 

 

30,590

 

change in contingent consideration

 

 

186,233

 

 

 

(720,796

)

loss on impairment of acquired intangible assets

 

 

3,679,825

 

 

 

 

transition and lease termination costs

 

 

2,942,009

 

 

 

395,086

 

loss on disposal of fixed assets

 

 

111,398

 

 

 

 

change in (recovery of) provision for doubtful accounts

 

 

268,310

 

 

 

(142,343

)

CHANGE IN OPERATING ASSETS AND LIABILITIES:

 

 

 

 

 

 

 

 

accounts receivable

 

 

17,484,649

 

 

 

1,793,289

 

employee and other receivables

 

 

(8,316

)

 

 

(53,961

)

income tax deposit

 

 

(775,964

)

 

 

(1,085,303

)

prepaid expenses, deposits and other assets

 

 

704,380

 

 

 

(2,506,431

)

accounts payable and accrued transportation costs

 

 

(11,611,248

)

 

 

938,875

 

commissions payable

 

 

2,054,962

 

 

 

1,046,568

 

other accrued costs

 

 

(1,559,942

)

 

 

(74,535

)

other liabilities

 

 

(137,100

)

 

 

13,662

 

deferred rent liability

 

 

(206,381

)

 

 

9,184

 

lease termination liability

 

 

(682,443

)

 

 

(504,494

)

Net cash provided by operating activities

 

 

15,683,215

 

 

 

4,132,789

 

 

 

 

 

 

 

 

 

 

CASH FLOWS USED FOR INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Acquisitions during the fiscal year, net of cash acquired

 

 

(800,000

)

 

 

(3,506,250

)

Purchase of furniture and equipment

 

 

(2,395,899

)

 

 

(1,226,880

)

Proceeds from sale of furniture and equipment

 

 

152,353

 

 

 

 

Payments to former shareholders of acquired operations

 

 

(683,593

)

 

 

 

Net cash used for investing activities

 

 

(3,727,139

)

 

 

(4,733,130

)

 

 

 

 

 

 

 

 

 

CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

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

 

 

(34,706,116

)

 

 

1,085,941

 

Proceeds from notes payable

 

 

 

 

 

547,730

 

Repayment of notes payable

 

 

(84,879

)

 

 

 

Proceeds from stock offering, net of offering costs

 

 

38,430,194

 

 

 

 

Payments of contingent consideration

 

 

(1,469,233

)

 

 

(1,205,042

)

Payment of preferred stock dividends

 

 

(1,022,775

)

 

 

(1,022,796

)

Distributions to non-controlling interest

 

 

(48,000

)

 

 

(18,000

)

Payment of employee tax withholdings related to cashless stock option exercises

 

 

(103,773

)

 

 

(388,206

)

Tax benefit from exercise of stock options

 

 

60,293

 

 

 

438,078

 

Net cash provided by (used for) financing activities

 

 

1,055,711

 

 

 

(562,295

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(153,619

)

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

12,858,168

 

 

 

(1,162,636

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

7,268,144

 

 

 

2,880,205

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

20,126,312

 

 

$

1,717,569

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Income taxes paid

 

$

2,063,857

 

 

$

2,416,933

 

Interest paid

 

$

2,621,794

 

 

$

153,936

 

 

(continued)

6


 

RADIANT LOGISTICS, INC.

Condensed Consolidated Statements of Cash Flows (continued)

(unaudited)

Supplemental disclosure of non-cash investing and financing activities:

In November 2014, the Company issued 52,452 shares of common stock at a fair value of $3.84 per share in satisfaction of $201,162 of the On Time Express, Inc. earn-out payment for the year ended June 30, 2014, resulting in a decrease to the current portion of contingent consideration, an increase to common stock of $52 and an increase to additional paid-in capital of $201,110.

In December 2014, the Company issued 43,221 shares of common stock at a fair value of $3.90 per share in satisfaction of $168,750 of the Don Cameron & Associates, Inc. purchase price, resulting in an increase to common stock of $43 and an increase to additional paid-in capital of $168,707.

In December 2015, the Company issued 7,385 shares of common stock at a fair value of $4.23 per share in satisfaction of $31,250 of the Copper Logistics, Incorporated purchase price, resulting in an increase to common stock of $7 and an increase to additional paid-in capital of $31,243.

 

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

 

 

 

7


 

RADIANT LOGISTICS, INC.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

 

NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION

The Company

Radiant Logistics, Inc. (the “Company”) operates as a third party logistics company, providing multi-modal transportation and logistics services primarily in the United States and Canada. The Company services a large and diversified account base consisting of consumer goods, food and beverage, manufacturing and retail customers which it supports from an extensive network of approximately 150 operating locations across North America. The Company provides these services through a multi-brand network comprised of Company-owned offices and locations operated by its strategic operating partners, as well as an integrated international service partner network located in other key markets around the globe. As a third party logistics company, the Company has approximately 10,000 asset-based transportation companies, including motor carriers, railroads, airlines and ocean lines, in its carrier network. The Company believes shippers value its services because it is able to objectively arrange the most efficient and cost-effective means, type and provider of transportation service without undue influence caused by the ownership of transportation assets. In addition, the Company’s minimal investment in physical assets affords it the opportunity for a higher return on invested capital and net cash flows than the Company’s asset-based competitors.

Through its operating locations across North America, the Company offers domestic and international air and ocean freight forwarding services and freight brokerage services including truckload services, less than truckload services and intermodal services, which is the movement of freight in trailers or containers by combination of truck and rail. The Company’s primary business operations involve arranging the shipment, on behalf of its 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, including arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems. The Company also provides other value-added logistics services, including customs brokerage, order fulfillment, inventory management and warehousing services to complement its core transportation service offering.

The Company expects to grow its business organically and by completing acquisitions of other companies with complementary geographic and logistics service offerings. The Company’s organic growth strategy will continue to focus on strengthening existing and expanding new customer relationships leveraging the benefit of the Company’s new truck brokerage and intermodal service offerings, while continuing its efforts on the organic build-out of the Company’s network of strategic operating partner locations. In addition, as the Company continues to grow and scale the business, the Company is creating density in its trade lanes which creates opportunities for the Company to more efficiently source and manage our transportation capacity.

In addition to its focus on organic growth, it 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, it remains focused on leveraging its back-office infrastructure to drive productivity improvement across the organization.

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, 2015.

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 Radiant Global Logistics, Inc. (“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 carrying values of the Company’s receivables, accounts payable and accrued transportation costs, commissions payable, other accrued costs, and the income tax deposit approximate the fair values due to the relatively short maturities of these instruments. The carrying value of the Company’s credit facility and other long-term liabilities would not differ significantly from fair value (based on Level 2 inputs) 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. Cash balances may at times exceed federally insured limits. 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 $7,344,905 and $3,137,103 as of December 31, 2015 and June 30, 2015, 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 strategic operating partner locations operating under the various Company brands. Each individual strategic operating partner 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, certain strategic operating partners are 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 strategic operating partner’s bad debt reserve account for any accounts receivable aged beyond 90 days. 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, as well as other deficit balances owed to us by our strategic operating partners, are recognized as a receivable in the Company’s financial statements. Other strategic operating partners are not responsible to establish a bad debt reserve, however, they are still responsible for deficits and their strategic operating partner agreements provide that the Company may withhold all or a portion of future commission checks payable to the individual operating partner in satisfaction of any deficit balance. Currently, a number of the Company’s operating partners have a deficit balance in their bad debt reserve account. The Company expects to replenish these funds through the future business operations of these operating partners. However, to the extent any of these operating partners 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), vehicles, furniture, and equipment are stated at cost, less accumulated depreciation over the estimated useful lives of the respective assets. Depreciation is computed using three to fifteen 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. 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 December 31, 2015, management believes there are no indications of impairment.

i)

Long-Lived Assets

Acquired intangibles consist of customer related intangibles, trade names and trademarks, and non-compete agreements arising from the Company’s acquisitions. Customer related intangibles are amortized using the straight-line method over a period of up to 10 years, trademarks and trade names are amortized using the straight line method over 15 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. As of December 31, 2015, the Company concluded it had a triggering event requiring assessment of customer related intangibles associated with the On Time Express, Inc. (“OTE”) acquisition due to a loss of customers. As a result, the Company reviewed the customer related intangibles and recorded an impairment loss of $3,679,825. The impairment was measured using future discounted cash flows using Level 3 inputs in the fair value hierarchy.

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 income.

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 income.

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 payments included in the lease termination liability) under these non-cancelable operating leases for the next five fiscal years ending June 30 and thereafter are as follows:

 

2016 (remaining portion)

$

2,797,523

 

2017

 

4,953,643

 

2018

 

3,384,768

 

2019

 

2,640,941

 

2020

 

1,666,244

 

Thereafter

 

975,485

 

 

 

 

 

Total minimum lease payments

$

16,418,604

 

 

Rent expense amounted to $1,402,522 and $2,878,909 for the three and six months ended December 31, 2015, respectively, and $451,662 and $975,278 for the three and six months ended December 31, 2014.

l)

Lease Termination and Transition 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. Transition costs consist of nonrecurring personnel costs that will be eliminated in connection with the winding-down of the historical back-office of SBA and other operating locations     as well as the periodic expense of retention bonuses, estimated to be $735,000, which is being expensed over the requisite service period.

The transition and lease termination liability consists of the following:

 

 

Lease Termination Costs

 

 

Severance Costs

 

 

Non-recurring Personnel Costs

 

 

Total

 

Balance as of June 30, 2015

 

255,272

 

 

 

28,500

 

 

 

 

 

 

283,772

 

Lease termination and transition costs

 

2,107,343

 

 

 

834,666

 

 

 

1,377,639