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EX-32.1 - RADIANT LOGISTICS, INCv197466_ex32-1.htm
EX-99.1 - RADIANT LOGISTICS, INCv197466_ex99-1.htm
EX-31.1 - RADIANT LOGISTICS, INCv197466_ex31-1.htm
EX-21.1 - RADIANT LOGISTICS, INCv197466_ex21-1.htm
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended June 30, 2010

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

 For the transition period from ______ to ________

 
Commission File Number 000-50283

RADIANT LOGISTICS, INC.
(Name of Registrant as Specified in Its Charter)

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

405 114th Avenue S.E.
Bellevue, WA  98004
(Address of Principal Executive Offices)         (Zip Code)
 
(425) 943-4599
Registrant’s Telephone Number, Including Area Code)
 

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

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

Common Stock, $.001 Par Value per Share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities Act.  Yes ¨ No x

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ¨  No [* ]

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

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

 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based on the closing share price of the registrant's common stock on December 31, 2009 as reported on the OTC Bulletin Board was $3,992,793. Shares of common stock held by each current executive officer and director and by each person who is known by the registrant to own 5% or more of the outstanding common stock have been excluded from this computation in that such persons may be deemed to be affiliates of the registrant.  This determination of affiliate status is not a conclusive determination for other purposes.

 
As of September 27, 2010, 29,894,421 shares of the registrant's common stock were outstanding.
Documents Incorporated by Reference: None

 
 

 
 
TABLE OF CONTENTS
 
PART I
     
ITEM 1
BUSINESS
2
ITEM 1A
RISK FACTORS
9
ITEM 2
PROPERTIES
16
ITEM 3
LEGAL PROCEEDINGS
16
ITEM 4
REMOVED AND RESERVED
16
     
PART II
     
ITEM 5
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
16
ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
18
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
32
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
32
ITEM 9A
CONTROLS AND PROCEDURES
32
ITEM 9B
OTHER INFORMATION
33
     
PART III
     
ITEM 10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
33
ITEM 11
EXECUTIVE COMPENSATION
35
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
40
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
41
ITEM 14
PRINCIPAL ACCOUNTANT FEES AND SERVICES
42
     
PART IV
     
ITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
43
     
Signatures
45
Financial Statements
F-1
 
 
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CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
 
Cautionary Statement for Forward-Looking Statements
 
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding future operating performance, events, trends and plans. All statements other than statements of historical fact contained herein, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues and costs, and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expects," "intends," "plans," "projects," "estimates," "anticipates," or "believes" or the negative thereof or any variation thereon or similar terminology or expressions. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. While it is impossible to identify all of the factors that may cause our actual operating performance, events, trends or plans to differ materially from those set forth in such forward-looking statements, such factors include the inherent risks associated with our ability to: (i) use our current infrastructure as a "platform" upon which we can build a profitable global transportation and supply chain management company; (ii) retain and build upon the relationships we have with our exclusive agency offices; (iii) continue the development of our back office infrastructure and transportation and accounting systems in a manner sufficient to service our expanding revenues and base of exclusive agency locations; (iv) continue growing our business and maintain historical or increased gross profit margins; (v) locate suitable acquisition opportunities; (vi) secure the financing necessary to complete any acquisition opportunities we locate; (vii) assess and respond to competitive practices in the industries in which we compete; (viii) mitigate, to the best extent possible, our dependence on current management and certain of our larger exclusive agency locations; (ix) assess and respond to the impact of current and future laws and governmental regulations affecting the transportation industry in general and our operations in particular; and (x) assess and respond to such other factors which may be identified from time to time in our Securities and Exchange Commission ("SEC") filings and other public announcements including those set forth below under the caption “Risk Factors” in Part 1 Item 1A of this report. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing.  Readers are cautioned not to place undue reliance on our forward-looking statements, as they speak only as of the date made. Except as required by law, we assume no duty to update or revise our forward-looking statements.
 
 
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The Company
 
Radiant Logistics, Inc. (the "Company," "we" or "us") was incorporated in the State of Delaware on March 15, 2001. Currently, we are executing a strategy to build a global transportation and supply chain management company through organic growth and the strategic acquisition of best-of-breed, non-asset based transportation and logistics providers to offer our customers domestic and international freight forwarding and an expanding array of value added supply chain management services, including order fulfillment, inventory management and warehousing.
 
We completed the first step in our business strategy through the acquisition of Airgroup Corporation ("Airgroup") effective as of January 1, 2006. Airgroup is a Bellevue, Washington based non-asset based logistics company providing domestic and international freight forwarding services through a network which includes a combination of company-owned and exclusive agent offices across North America.  Airgroup has a diversified account base including manufacturers, distributors and retailers using a network of independent carriers and international agents positioned strategically around the world.
 
We continue to identify a number of additional companies as suitable acquisition candidates and have completed two material acquisitions since our acquisition of Airgroup.  In November 2007, we acquired Automotive Services Group in Detroit, Michigan to service the automotive industry. In September 2008, we acquired Adcom Express, Inc. d/b/a Adcom Worldwide ("Adcom"), adding an additional 30 locations across North America and augmenting our overall domestic and international freight forwarding capabilities.
 
In connection with the acquisition of Adcom, we changed the name of Airgroup Corporation to Radiant Global Logistics, Inc. ("RGL") in order to better position our centralized back-office operations to service both the Airgroup and Adcom network brands.  RGL, through the Airgroup and Adcom network brands, has a diversified account base including manufacturers, distributors and retailers using a network of independent carriers and international agents positioned strategically around the world.
 
Our growth strategy will continue to focus on both organic growth and acquisitions.  From an organic perspective, we will focus on strengthening existing and expanding new customer relationships. One of the drivers of our organic growth will be retaining existing, and securing new exclusive agency locations. Since our acquisition of Airgroup in January 2006, we have focused our efforts on the build-out of our network of exclusive agency offices, as well as enhancing our back-office infrastructure and transportation and accounting systems.  We will continue to search for targets that fit within our acquisition criteria. Our ability to secure additional financing will rely upon the sale of debt or equity securities, and the development of an active trading market for our securities.
 
As we continue to build out our network of exclusive agent locations to achieve a level of critical mass and scale, we are executing an acquisition strategy to develop additional growth opportunities. Our acquisition strategy relies upon two primary factors:  first, our ability to identify and acquire target businesses that fit within our general acquisition criteria; and second, the continued availability of capital and financing resources sufficient to complete these acquisitions.
 
Successful implementation of our growth strategy depends upon a number of factors, including our ability to: (i) continue developing new agency locations; (ii) locate acquisition opportunities; (iii) secure adequate funding to finance identified acquisition opportunities; (iv) efficiently integrate the businesses of the companies acquired; (v) generate the anticipated economies of scale from the integration; and (vi)  maintain the historic sales growth of the acquired businesses in order to generate continued organic growth.  There are a variety of risks associated with our ability to achieve our strategic objectives, including the ability to acquire and profitably manage additional businesses and the intense competition in the industry for customers and for acquisition candidates.  Certain of these business risks are identified or referred to below in Item 1A of this Report.
 
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We will continue to search for targets that fit within our acquisition criteria. Our ability to secure additional financing will rely upon the sale of debt or equity securities, and the development of an active trading market for our securities.  Although we can make no assurance as to our long term access to debt or equity securities or our ability to develop an active trading market, in March of 2010, we were successful in increasing our credit facility from $15.0 million to $20.0 million.
 
Industry Overview
 
As business requirements for efficient and cost-effective logistics services have increased, so has the importance and complexity of effectively managing freight transportation.  Businesses increasingly strive to minimize inventory levels, perform manufacturing and assembly operations in the lowest cost locations, and distribute their products in numerous global markets.  As a result, companies are increasingly looking to third-party logistics providers to help them execute their supply chain strategies.
 
Customers have two principal third-party alternatives: a freight forwarder or a fully-integrated carrier.  We operate as a freight forwarder.  Freight forwarders procure shipments from customers and arrange the transportation of cargo on a carrier.  A freight forwarder may also arrange pick-up from the shipper to the carrier and delivery of the shipment from the carrier to the recipient. Freight forwarders often tailor shipment routing to meet the customer’s price and service requirements. Fully-integrated carriers, such as FedEx Corporation, DHL Worldwide Express, Inc. and United Parcel Service ("UPS"), provide pickup and delivery service, primarily through their own captive fleets of trucks and aircraft.  Because freight forwarders select from various transportation options in routing customer shipments, they are often able to serve customers less expensively and with greater flexibility than integrated carriers.  Freight forwarders generally handle shipments of any size and offer a variety of customized shipping options.
 
Most freight forwarders, like Radiant Global Logistics, focus on heavier cargo and do not generally compete with integrated shippers of primarily smaller parcels.  In addition to the high fixed expenses associated with owning, operating and maintaining fleets of aircraft, trucks and related equipment, integrated carriers often impose significant restrictions on delivery schedules and shipment weight, size and type.  On occasion, integrated shippers serve as a source of cargo space to forwarders. Additionally, most freight forwarders do not generally compete with the major commercial airlines, which, to some extent, depend on forwarders to procure shipments and supply freight to fill cargo space on their scheduled flights.
 
We believe there are several factors that are increasing demand for global logistics solutions. These factors include:
 
 
·
Outsourcing of non-core activities. Companies increasingly outsource freight forwarding, warehousing and other supply chain activities to allow them to focus on their respective core competencies. From managing purchase orders to the timely delivery of products, companies turn to third party logistics providers to manage these functions at a lower cost and greater efficiency.
 
·
Globalization of trade. As barriers to international trade are reduced or substantially eliminated, international trade is increasing. In addition, companies increasingly are sourcing their parts, supplies and raw materials from the most cost competitive suppliers throughout the world. Outsourcing of manufacturing functions to, or locating company-owned manufacturing facilities in, low cost areas of the world also results in increased volumes of world trade.
 
·
Increased need for time-definite delivery. The need for just-in-time and other time-definite delivery has increased as a result of the globalization of manufacturing, greater implementation of demand-driven supply chains, the shortening of product cycles and the increasing value of individual shipments. Many businesses recognize that increased spending on time-definite supply chain management services can decrease overall manufacturing and distribution costs, reduce capital requirements and allow them to manage their working capital more efficiently by reducing inventory levels and inventory loss.
 
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·
Consolidation of global logistics providers. Companies are decreasing the number of freight forwarders and supply chain management providers with which they interact.  We believe companies want to transact business with a limited number of providers that are familiar with their requirements, processes and procedures, and can function as long-term partners. In addition, there is strong pressure on national and regional freight forwarders and supply chain management providers to become aligned with a global network. Larger freight forwarders and supply chain management providers benefit from economies of scale which enable them to negotiate reduced transportation rates and to allocate their overhead over a larger volume of transactions. Globally integrated freight forwarders and supply chain management providers are better situated to provide a full complement of services, including pick-up and delivery, shipment via air, sea and/or road transport, warehousing and distribution, and customs brokerage.
 
·
Increasing influence of e-business and the internet. Technology advances have allowed businesses to connect electronically through the Internet to obtain relevant information and make purchase and sale decisions on a real-time basis, resulting in decreased transaction times and increased business-to-business activity. In response to their customers' expectations, companies have recognized the benefits of being able to transact business electronically. As such, businesses increasingly are seeking the assistance of supply chain service providers with sophisticated information technology systems which can facilitate real-time transaction processing and web-based shipment monitoring.
 
Our Growth Strategy
 
Our objective is to provide customers with comprehensive value-added logistics solutions. We plan to achieve this goal through domestic and international freight forwarding services offered by us through our Airgroup and Adcom brands. We expect to grow our business organically and by completing acquisitions of other companies with complementary geographical and logistics service offerings.
 
Our organic growth strategy involves strengthening existing and expanding new customer relationships.  One of the drivers of this strategy is our ability to retain existing, and secure new exclusive agency locations. Since our acquisition of Airgroup, we have focused our efforts on the organic build-out of our network of exclusive agency locations, as well as the enhancement of our back office infrastructure and transportation and accounting systems. Through our most recent acquisition of Adcom we have made further progress in our acquisition strategy and intend to pursue further acquisition opportunities to consolidate and enhance our position in current markets and acquire operations in new markets.
 
Our growth strategy has been designed to take advantage of shifting market dynamics.  The third party logistics industry continues to grow as an increasing number of businesses outsource their logistics functions to more cost effectively manage and extract value from their supply chains.  The industry is positioned for further consolidation as it remains highly fragmented, and as customers are demanding the types of sophisticated and broad reaching service offerings that can more effectively be handled by larger more diverse organizations. We believe the highly fragmented composition of the marketplace, the industry participants' need for capital, and their owners' desire for liquidity has and will continue to produce a large number of attractive acquisition candidates.  More specifically, we believe that there are a number of participants within the agent-based forwarding community that will be seeking liquidity within the next several years as these owners approach retirement age, which creates a significant growth opportunity by supporting these logistics entrepreneurs in transition.  Our target acquisition candidates are generally expected to have earnings of $1.0 to $5.0 million per year.  Companies in this range of earnings may be receptive to our acquisition program since they are often too small to be identified as acquisition targets by larger public companies or to independently attempt their own public offerings.
 
On a longer-term basis, we believe we can successfully implement our acquisition strategy due to the following factors:
 
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·
the highly fragmented composition of our market;
 
·
our strategy for creating an organization with global reach should enhance an acquired target company’s ability to compete in its local and regional markets through an expansion of offered services and lower operating costs;
 
·
the potential for increased profitability as a result of our centralization of certain administrative functions, greater purchasing power and economies of scale;
 
·
our centralized management capabilities should enable us to effectively manage our growth and the integration of acquired companies;
 
·
our status as a public corporation may ultimately provide us with a liquid trading currency for acquisitions; and
 
·
the ability to utilize our experienced management to identify, acquire and integrate acquisition opportunities.
 
We will be opportunistic in executing our acquisition strategy with a bias towards completing transactions in key gateway locations such as Los Angeles, New York, Chicago, Seattle, Miami, Dallas, and Houston to expand our international base of operations.  We believe that our domestic and expanded international capabilities, when taken together, will provide significant competitive advantage in the marketplace.
 
Our Operating Strategy
 
Leverage the People, Process and Technology Available through a Central Platform.  A key element of our operating strategy is to maximize our operational efficiencies by integrating general and administrative functions into our back-office operations and reducing or eliminating redundant functions and facilities at acquired companies.  This is designed to enable us to quickly realize potential savings and synergies, efficiently control and monitor operations of acquired companies, and allow acquired companies to focus on growing their sales and operations.
 
Develop and Maintain Strong Customer Relationships.   We seek to develop and maintain strong interactive customer relationships by anticipating and focusing on our customers' needs.  We emphasize a relationship-oriented approach to business, rather than the transaction or assignment-oriented approach used by many of our competitors. To develop close customer relationships, we and our network of exclusive agents regularly meet with both existing and prospective clients to help design solutions for, and identify the resources needed to execute, their supply chain strategies.  We believe that this relationship-oriented approach results in greater customer satisfaction and reduced business development expense.
 
Operations
 
Through our Airgroup and Adcom stations, we offer domestic and international air, ocean and ground freight forwarding for shipments that are generally larger than shipments handled by integrated carriers of primarily small parcels such as Federal Express Corporation and United Parcel Service. Our revenues are generated from a number of diverse services, including air freight forwarding, ocean freight forwarding,  logistics and other value-added services.
 
Our primary business operations involve obtaining shipment or material orders from customers, creating and delivering a wide range of logistics solutions to meet customers' specific requirements for transportation and related services, and arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems. These logistics solutions include domestic and international freight forwarding and door-to-door delivery services using a wide range of transportation modes, including air, ocean and truck.  As a non-asset based provider we do not own the transportation equipment used to transport the freight. We expect to neither own nor operate any aircraft and, consequently, place no restrictions on delivery schedules or shipment size.  We arrange for transportation of our customers’ shipments via commercial airlines, air cargo carriers, and other assets and non-asset based third-party providers. We select the carrier for a shipment based on route, departure time, available cargo capacity and cost.  We charter cargo aircraft from time to time depending upon seasonality, freight volumes and other factors. We make a profit or margin on the difference between what we charge to our customers for the totality of services provided to them, and what we pay to the transportation provider to transport the freight.
 
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Information Services
 
The regular enhancement of our information systems and ultimate migration of acquired companies and additional exclusive agency locations to a common set of back-office and customer facing applications is a key component of our growth strategy. We believe that the ability to provide accurate real-time information on the status of shipments will become increasingly important and that our efforts in this area will result in competitive service advantages.  In addition, we believe that centralizing our transportation management system (rating, routing, tender and financial settlement processes) will drive significant productivity improvement across our network.
 
We utilize a web-enabled third-party freight forwarding software (Cargowise) which is integrated to our third-party accounting system (SAP) that combine to form the foundation of our supply-chain technologies which we call "Globalvision".  Globalvision provides us with a common set of back-office operating, accounting and customer facing applications used across the network. We have and will continue to assess technologies obtained through our acquisition strategy and expect to develop a "best-of-breed" solution set using a combination of owned and licensed technologies.  This strategy will require the investment of significant management and financial resources to deliver these enabling technologies.
 
Our Competitive Advantages
 
As a non-asset based third-party logistics provider, we believe that we are well-positioned to provide cost-effective and efficient solutions to address the demand in the marketplace for transportation and logistics services.  We believe that the most important competitive factors in our industry are quality of service, including reliability, responsiveness, expertise and convenience, scope of operations, geographic coverage, information technology and price.  We believe our primary competitive advantages are:  (i) our low cost; non-asset based business model; (ii) our intention to develop a global network; (iii) our information technology resources; and (iv) our diverse customer base:
 
 
·
Non-asset based business model.  With relatively no dedicated or fixed operating costs, we are able to leverage our network of exclusive agency offices and offer competitive pricing and flexible solutions to our customers.  Moreover, our balanced product offering provides us with revenue streams from multiple sources and enables us to retain customers even as they shift from priority to deferred shipments of their products.  We believe our model allows us to provide low-cost solutions to our customers while also generating revenues from multiple modes of transportation and logistics services.
 
·
Intention to develop a global network.  We intend to focus on expanding our network on a global basis.  Once accomplished, this will enable us to provide a closed-loop logistics chain to our customers worldwide.  Within North America, our capabilities consist of our pickup and delivery network, ground and air networks, and logistics capabilities. Our ground and pickup and delivery networks enable us to service the growing deferred forwarding market while providing the domestic connectivity for international shipments once they reach North America.  In addition, our heavyweight air network provides for competitive costs on shipments, as we have no dedicated charters or leases and can capitalize on available capacity in the market to move our customers’ goods.  
 
·
Information technology resources.  A primary component of our business strategy is the continued development of advanced information systems to continually provide accurate and timely information to our management and customers.  Our customer delivery tools enable connectivity with our customers’ and trading partners’ systems, which leads to more accurate and up-to-date information on the status of shipments.  
 
·
Diverse customer base.  We have a well-diversified base of customers that includes manufacturers, distributors and retailers. As of the date of this report, no single customer represented more than 5% of our business reducing risks associated with any particular industry or customer concentration.  Although we have no customers that account for more than 5% of our revenues, there are two agency locations that each account for more than 5% of our total gross revenues.
 
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Sales and Marketing
 
We principally market our services through the senior management teams in place at each of our 72 company-owned and exclusive independent agent offices located across North America. Each office is staffed with operational employees to provide support for the sales team, develop frequent contact with the customer’s traffic department, and maintain customer service.  Our current network is predominantly represented by exclusive agent operations that rely on us for operating authority, technology, sales and marketing support, access to working capital and our carrier network, and collective purchasing power. Through the agency relationship, the agent has the ability to focus on the operational and sales support aspects of the business without diverting costs or expertise to the structural aspect of its operations and provides the agent with the regional, national and global brand recognition that they would not otherwise be able to achieve by serving their local markets.
 
As we continue to grow, we expect to implement a national accounts program which is intended to increase our emphasis on obtaining high-revenue national accounts with multiple shipping locations. These accounts typically impose numerous requirements on those competing for their freight business, including electronic data interchange and proof of delivery capabilities, the ability to generate customized shipping reports and a nationwide network of terminals. These requirements often limit the competition for these accounts to a very small number of logistics providers. We believe that our anticipated future growth and development will enable us to more effectively compete for and obtain these accounts.
 
During the past two years, we have not spent any material amount on research and development activities.
 
Competition and Business Conditions
 
The logistics business is directly impacted by the volume of domestic and international trade. The volume of such trade is influenced by many factors, including economic and political conditions in the United States and abroad, major work stoppages, exchange controls, currency fluctuations, acts of war, terrorism and other armed conflicts, United States and international laws relating to tariffs, trade restrictions, foreign investments and taxation.
 
The global logistics services and transportation industries are intensively competitive and are expected to remain so for the foreseeable future. We will compete against other integrated logistics companies, as well as transportation services companies, consultants, information technology vendors and shippers' transportation departments. This competition is based primarily on rates, quality of service (such as damage-free shipments, on-time delivery and consistent transit times), reliable pickup and delivery and scope of operations. Most of our competitors will have substantially greater financial resources than we do.
 
Principal Customers
 
Although we have no customers that account for more than 5% of our revenues, there are two agency locations which each account for more than 5% of our total gross revenues.
 
Regulation
 
There are numerous transportation related regulations.  Failure to comply with the applicable regulations or to maintain required permits or licenses could result in substantial fines or revocation of operating permits or authorities. We cannot give assurance as to the degree or cost of future regulations on our business. Some of the regulations affecting our current and prospective operations are described below.
 
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Air freight forwarding businesses are subject to regulation, as an indirect air cargo carrier, under the Federal Aviation Act by the U.S. Department of Transportation and by the Department of Homeland Security and the Transportation Security Administration. However, air freight forwarders are exempted from most of the Federal Aviation Act's requirements by the Economic Aviation Regulations. The air freight forwarding industry is subject to regulatory and legislative changes that can affect the economics of the industry by requiring changes in operating practices or influencing the demand for, and the costs of providing, services to customers.
 
Surface freight forwarding operations are subject to various federal statutes and are regulated by the Surface Transportation Board. This federal agency has broad investigatory and regulatory powers, including the power to issue a certificate of authority or license to engage in the business, to approve specified mergers, consolidations and acquisitions, and to regulate the delivery of some types of domestic shipments and operations within particular geographic areas.
 
The Surface Transportation Board and U.S. Department of Transportation also have the authority to regulate interstate motor carrier operations, including the regulation of certain rates, charges and accounting systems, to require periodic financial reporting, and to regulate insurance, driver qualifications, operation of motor vehicles, parts and accessories for motor vehicle equipment, hours of service of drivers, inspection, repair, maintenance standards and other safety related matters. The federal laws governing interstate motor carriers have both direct and indirect application to the Company. The breadth and scope of the federal regulations may affect our operations and the motor carriers which are used in the provisioning of the transportation services. In certain locations, state or local permits or registrations may also be required to provide or obtain intrastate motor carrier services.
 
The Federal Maritime Commission, or FMC, regulates and licenses ocean forwarding operations. Indirect ocean carriers (non-vessel operating common carriers) are subject to FMC regulation, under the FMC tariff filing and surety bond requirements, and under the Shipping Act of 1984, particularly those terms proscribing rebating practices.
 
United States customs brokerage operations are subject to the licensing requirements of the U.S. Treasury and are regulated by the U.S. Customs Service. As we broaden our capabilities to include customs brokerage operations, we will be subject to regulation by the U.S. Customs Service. Likewise, any customs brokerage operations would also be licensed in and subject to the regulations of their respective countries.
 
In the United States, we are subject to federal, state and local provisions relating to the discharge of materials into the environment or otherwise for the protection of the environment. Similar laws apply in many foreign jurisdictions in which we may operate in the future. Although current operations have not been significantly affected by compliance with these environmental laws, governments are becoming increasingly sensitive to environmental issues, and we cannot predict what impact future environmental regulations may have on our business.  We do not anticipate making any material capital expenditures for environmental control purposes.
 
Personnel
 
As of the date of this report, we have approximately 82 employees, of which 80 are full time. None of these employees are currently covered by a collective bargaining agreement. We have experienced no work stoppages and consider our relations with our employees to be good.
 
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ITEM 1A. RISK FACTORS
 
RISKS PARTICULAR TO OUR BUSINESS
 
We are largely dependent on the efforts of our exclusive agents to generate our revenue and service our customers.
 
We currently sell our services through a network predominantly represented by exclusive agent stations located throughout North America. Although we have exclusive and long-term relationships with these agents, our Airgroup agency agreements are generally terminable by either party subject to requisite notice provisions that generally range from 10-30 days. The Adcom agency agreements generally carry a fixed term and can range from 1 to 25 years and generally include a first-right-of refusal to acquire the location. Although we have no customers that account for more than 5% of our revenues, there are two agency locations which each account for more than 5% of our total gross revenues. The loss of one or more of these exclusive agents could negatively impact our ability to retain and service our customers. We will need to expand our existing relationships and enter into new relationships in order to increase our current and future market share and revenue. We cannot be certain that we will be able to maintain and expand our existing relationships or enter into new relationships, or that any new relationships will be available on commercially reasonable terms. If we are unable to maintain and expand our existing relationships or enter into new relationships, we may lose customers, customer introductions and co-marketing benefits and our operating results may suffer.
 
If we fail to develop and integrate information technology systems or we fail to upgrade or replace our information technology systems to handle increased volumes and levels of complexity, meet the demands of our agents and customers and protect against disruptions of our operations, we may suffer a loss in our business.
 
Increasingly, we compete for business based upon the flexibility, sophistication and security of the information technology systems supporting our services. The failure of the hardware or software that supports our information technology systems, the loss of data contained in the systems, or the inability to access or interact with our web site or connect electronically, could significantly disrupt our operations, prevent clients from placing orders, or cause us to lose inventory items, orders or clients. If our information technology systems are unable to handle additional volume for our operations as our business and scope of services grow, our service levels, operating efficiency and future transaction volumes will decline. In addition, we expect our agents to continue to demand more sophisticated, fully integrated information technology systems from us as customers demand the same from their supply chain services providers. If we fail to hire qualified persons to implement, maintain and protect our information technology systems or we fail to upgrade or replace our information technology systems to handle increased volumes and levels of complexity, meet the demands of our agents and customers and protect against disruptions of our operations, we may suffer a loss in our business.
 
Because our freight forwarding and domestic ground transportation operations are dependent on commercial airfreight carriers and air charter operators, ocean freight carriers, major U.S. railroads, other transportation companies, draymen and longshoremen, changes in available cargo capacity and other changes affecting such carriers, as well as interruptions in service or work stoppages, may negatively impact our business.
 
 We rely on commercial airfreight carriers and air charter operators, ocean freight carriers, trucking companies, major U.S. railroads, other transportation companies, draymen and longshoremen for the movement of our clients’ cargo. Consequently, our ability to provide services for our clients could be adversely impacted by shortages in available cargo capacity; changes by carriers and transportation companies in policies and practices such as scheduling, pricing, payment terms and frequency of service or increases in the cost of fuel, taxes and labor; and other factors not within our control. Reductions in airfreight or ocean freight capacity could negatively impact our yields. Material interruptions in service or stoppages in transportation, whether caused by strike, work stoppage, lock-out, slowdown or otherwise, could adversely impact our business, results of operations and financial condition.
 
Our profitability depends on our ability to effectively manage our cost structure as we grow the business.
 
As we continue to expand our revenues through the expansion of our network of exclusive agency locations, we must maintain an appropriate cost structure to maintain and expand our profitability.  While we intend to continue to work on growing revenue by increasing the number of our exclusive agency locations, by strategic acquisitions, and by continuing to work on maintaining and expanding our gross profit margins by reducing transportation costs, our ultimate profitability will be driven by our ability to manage our agent commissions, personnel and general and administrative costs as a function of our net revenues. There can be no assurances that we will be able to increase revenues or maintain profitability.
 
9

 
We face intense competition in the freight forwarding, logistics and supply chain management industry.
 
The freight forwarding, logistics and supply chain management industry is intensely competitive and is expected to remain so for the foreseeable future. We face competition from a number of companies, including many that have significantly greater financial, technical and marketing resources. There are a large number of companies competing in one or more segments of the industry, although the number of firms with a global network that offer a full complement of freight forwarding and supply chain management services is more limited. Depending on the location of the customer and the scope of services requested, we must compete against both the niche players and larger entities. In addition, customers increasingly are turning to competitive bidding situations soliciting bids from a number of competitors, including competitors that are larger than us.
 
Our business is subject to seasonal trends.
 
 Historically, our operating results have been subject to seasonal trends when measured on a quarterly basis.  Our first and fourth fiscal quarters are traditionally weaker compared with our second and third fiscal quarters. This trend is dependent on numerous factors, including the markets in which we operate, holiday seasons, climate, economic conditions and numerous other factors. A substantial portion of our revenue is derived from clients in industries whose shipping patterns are tied closely to consumer demand which can sometimes be difficult to predict or are based on just-in-time production schedules. Therefore, our revenue is, to a larger degree, affected by factors that are outside of our control. There can be no assurance that our historic operating patterns will continue in future periods as we cannot influence or forecast many of these factors.
 
Our industry is consolidating and if we cannot gain sufficient market presence in our industry, we may not be able to compete successfully against larger, global companies in our industry.
 
There currently is a marked trend within our industry toward consolidation of the niche players into larger companies that are attempting to increase global operations through the acquisition of regional and local freight forwarders. If we cannot gain sufficient market presence or otherwise establish a successful strategy in our industry, we may not be able to compete successfully against larger companies in our industry with global operations.
 
Our information technology systems are subject to risks which we cannot control.
 
 Our information technology systems are dependent upon third party communications providers, web browsers, telephone systems and other aspects of the Internet infrastructure which have experienced significant system failures and electrical outages in the past. Our systems are susceptible to outages due to fire, floods, power loss, telecommunications failures, break-ins and similar events. Despite our implementation of network security measures, our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems. The occurrence of any of these events could disrupt or damage our information technology systems and inhibit our internal operations, and our ability to provide services to our customers.
 
If we are not able to limit our liability for customers’ claims through contract terms and limit our exposure through the purchase of insurance, we could be required to pay large amounts to our clients as compensation for their claims and our results of operations could be materially adversely affected.
 
 In general, we seek to limit by contract and/or International Conventions and laws our liability to our clients for loss or damage to their goods to $20 per kilogram (approximately $9.07 per pound) and $500 per carton or customary unit, for ocean freight shipments, again depending on the International Convention. For truck/land based risks there are a variety of limits ranging from a nominal amount to full value. However, because a freight forwarder’s relationship to an airline or ocean carrier is that of a shipper to a carrier, the airline or ocean carrier generally assumes the same responsibility to us as we assume to our clients. When we act in the capacity of an authorized agent for an air or ocean carrier, the carrier, rather than us, assumes liability for the safe delivery of the client’s cargo to its ultimate destination, unless due to our own errors and omissions.
 
10

 
We have, from time to time, made payments to our clients for claims related to our services and may make such payments in the future. Should we experience an increase in the number or size of such claims or an increase in liability pursuant to claims or unfavorable resolutions of claims, our results could be adversely affected. There can be no assurance that our insurance coverage will provide us with adequate coverage for such claims or that the maximum amounts for which we are liable in connection with our services will not change in the future or exceed our insurance levels. As with every insurance policy, there are limits, exclusions and deductibles that apply and we could be subject to claims for which insurance coverage may be inadequate or even disputed and which claims could adversely impact our financial condition and results of operations. In addition, significant increases in insurance costs could reduce our profitability.
 
 Our failure to comply with, or the costs of complying with, government regulation could negatively affect our results of operation.
 
Our freight forwarding business as an indirect air cargo carrier is subject to regulation by the United States Department of Transportation ("DOT") under the Federal Aviation Act, and by the Department of Homeland Security and the Transportation Security Administration ("TSA"). Our overseas independent agents’ air freight forwarding operations are subject to regulation by the regulatory authorities of the respective foreign jurisdictions. The air freight forwarding industry is subject to regulatory and legislative changes which can affect the economics of the industry by requiring changes in operating practices or influencing the demand for, and the costs of providing, services to customers. We do not believe that costs of regulatory compliance have had a material adverse impact on our operations to date. However, our failure to comply with any applicable regulations could have an adverse effect. There can be no assurance that the adoption of future regulations would not have a material adverse effect on our business.
 
Our present levels of capital may limit the implementation of our business strategy.
 
The objective of our business strategy is to build a global logistics services organization. One element of this strategy is an acquisition program which contemplates the acquisition of a number of diverse companies within the logistics industry covering a variety of geographic regions and specialized service offerings.  We have a limited amount of cash resources and our ability to make additional acquisitions without securing additional financing from outside sources is limited. This may limit or slow our ability to achieve the critical mass we need to achieve our strategic objectives.
 
Our credit facility contains financial covenants that may limit its current availability.
 
The terms of our credit facility are subject to certain financial covenants which may limit the amount otherwise available under that facility. Principal among these are financial covenants that limit funded debt to a multiple of our consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA"). Under this covenant, our funded debt is limited to a multiple of 4.00 of our EBITDA measured on a rolling four quarter basis. Our ability to generate EBITDA will be critical to our ability to use the full amount of the credit facility.
 
Dependence on key personnel.
 
For the foreseeable future our success will depend largely on the continued services of our Chief Executive Officer, Bohn H. Crain, as well as certain of the other key executives of Radiant Global Logistics, because of their collective industry knowledge, marketing skills and relationships with major vendors and owners of our exclusive agent stations. We have secured employment arrangements with each of these individuals, which contain non-competition covenants which survive their actual term of employment. Nevertheless, should any of these individuals leave the Company, it could have a material adverse effect on our future results of operations.
 
11

 
Terrorist attacks and other acts of violence or war may affect any market on which our shares trade, the markets in which we operate, our operations and our profitability.
 
Terrorist acts or acts of war or armed conflict could negatively affect our operations in a number of ways. Primarily, any of these acts could result in increased volatility in or damage to the U.S. and worldwide financial markets and economy and could lead to increased regulatory requirements with respect to the security and safety of freight shipments and transportation. They could also result in a continuation of the current economic uncertainty in the United States and abroad. Acts of terrorism or armed conflict, and the uncertainty caused by such conflicts, could cause an overall reduction in worldwide sales of goods and corresponding shipments of goods. This would have a corresponding negative effect on our operations. Also, terrorist activities similar to the type experienced on September 11, 2001 could result in another halt of trading of securities, which could also have an adverse effect on the trading price of our shares and overall market capitalization.
 
RISKS RELATED TO OUR ACQUISITION STRATEGY
 
There is a scarcity of and competition for acquisition opportunities.
 
There are a limited number of operating companies available for acquisition which we deem to be desirable targets. In addition, there is a very high level of competition among companies seeking to acquire these operating companies. We are and will continue to be a very minor participant in the business of seeking acquisitions of these types of companies. A large number of established and well-financed entities are active in acquiring interests in companies which we may find to be desirable acquisition candidates. Many of these entities have significantly greater financial resources, technical expertise and managerial capabilities than us. Consequently, we will be at a competitive disadvantage in negotiating and executing possible acquisitions of these businesses. Even if we are able to successfully compete with these entities, this competition may affect the terms of completed transactions and, as a result, we may pay more than we expected for potential acquisitions. We may not be able to identify operating companies that complement our strategy, and even if we identify a company that complements our strategy, we may be unable to complete an acquisition of such a company for many reasons, including:
 
 
·
failure to agree on the terms necessary for a transaction, such as the purchase price;
 
·
incompatibility between our operational strategies and management philosophies
 
·
and those of the potential acquiree;
 
·
competition from other acquirers of operating companies;
 
·
lack of sufficient capital to acquire a profitable logistics company; and
 
·
unwillingness of a potential acquiree to work with our management.
 
Risks related to acquisition financing.
 
In order to continue to pursue our acquisition strategy in the longer term, we may be required to obtain additional financing. We intend to obtain such financing through a combination of traditional debt financing or the placement of debt and equity securities. We may finance some portion of our future acquisitions by either issuing equity or by using shares of our common stock for all or a portion of the purchase price for such businesses. In the event that our common stock does not attain or maintain a sufficient market value, or potential acquisition candidates are otherwise unwilling to accept common stock as part of the purchase price for the sale of their businesses, we may be required to utilize more of our cash resources, if available, in order to maintain our acquisition program. If we do not have sufficient cash resources, we will not be able to complete acquisitions and our growth could be limited unless we are able to obtain additional capital through debt or equity financings.
 
12

 
Our credit facility places certain limits on the type and number of acquisitions we may make.
 
In March 2010, our $15.0 million revolving credit facility, including a $0.5 million sublimit to support letters of credit, was increased to $20.0 million, to provide additional funding for further acquisitions and our on-going working capital requirements. Under the terms of the credit facility, we are subject to a number of financial and operational covenants which may limit the number of additional acquisitions we make without the lender’s consent. In the event that we are not able to satisfy the conditions of the credit facility in connection with a proposed acquisition, we would have to forego the acquisition unless we either obtained the lender’s consent or retired the credit facility. This may prevent us from completing acquisitions which we determine are desirable from a business perspective and limit or slow our ability to achieve the critical mass we need to achieve our strategic objectives.
 
To the extent we make any material acquisitions, our earnings will be adversely affected by non-cash charges relating to the amortization of intangibles which may cause our stock price to decline.
 
Under applicable accounting standards, purchasers are required to allocate the total consideration paid in a business combination to the identified acquired assets and liabilities based on their fair values at the time of acquisition. The excess of the consideration paid to acquire a business over the fair value of the identifiable tangible assets acquired must be allocated among identifiable intangible assets including goodwill. The amount allocated to goodwill is not subject to amortization. However, it is tested at least annually for impairment. The amount allocated to identifiable intangibles, such as customer relationships and the like, is amortized over the life of these intangible assets. We expect that this will subject us to periodic charges against our earnings to the extent of the amortization incurred for that period. Because our business strategy focuses on growth through acquisitions, our future earnings will be subject to greater non-cash amortization charges than a company whose earnings are derived organically. As a result, we will experience an increase in non-cash charges related to the amortization of intangible assets acquired in our acquisitions. Our financial statements will show that our intangible assets are diminishing in value, when, in fact, we believe they may be increasing because we are growing the value of our intangible assets (e.g. customer relationships). Because of this discrepancy, we believe our EBITDA, a measure of financial performance which does not conform to generally accepted accounting principles ("GAAP"), provides a meaningful measure of our financial performance. However, the investment community generally measures a public company’s performance by its net income.  Further, the financial covenants of our credit facility adjust EBITDA to exclude costs related to share based compensation and other non-cash charges.  Thus, we believe EBITDA, and adjusted EBITDA, provide a meaningful measure of our financial performance.  If the investment community elects to place more emphasis on net income, the future price of our common stock could be adversely affected.
 
We are not obligated to follow any particular criteria or standards for identifying acquisition candidates.
 
Even though we have developed general acquisition guidelines, we are not obligated to follow any particular operating, financial, geographic or other criteria in evaluating candidates for potential acquisitions or business combinations. We will target companies which we believe will provide the best potential long-term financial return for our stockholders and we will determine the purchase price and other terms and conditions of acquisitions. Our stockholders will not have the opportunity to evaluate the relevant economic, financial and other information that our management team will use and consider in deciding whether or not to enter into a particular transaction.
 
We may be required to incur a significant amount of indebtedness in order to successfully implement our acquisition strategy.
 
We may be required to incur a significant amount of indebtedness in order to complete future acquisitions. If we are not able to generate sufficient cash flow from the operations of acquired companies to make scheduled payments of principal and interest on the indebtedness, then we will be required to use our capital for such payments. This will restrict our ability to make additional acquisitions. We may also be forced to sell an acquired company in order to satisfy indebtedness. We cannot be certain that we will be able to operate profitably once we incur this indebtedness or that we will be able to generate a sufficient amount of proceeds from the ultimate disposition of such acquired companies to repay the indebtedness incurred to make these acquisitions.
 
13

 
We may experience difficulties in integrating the operations, personnel and assets of companies that we acquire which may disrupt our business, dilute stockholder value and adversely affect our operating results.
 
A core component of our business plan is to acquire businesses and assets in the transportation and logistics industry. We have only made a limited number of acquisitions and, therefore, our ability to complete such acquisitions and integrate any acquired businesses into our operations is unproven. Increased competition for acquisition candidates may develop, in which event there may be fewer acquisition opportunities available to us as well as higher acquisition prices. There can be no assurance that we will be able to identify, acquire or profitably manage businesses or successfully integrate acquired businesses into the Company without substantial costs, delays or other operational or financial problems. Such acquisitions also involve numerous operational risks, including:
 
 
·
difficulties in integrating operations, technologies, services and personnel;
 
·
the diversion of financial and management resources from existing operations;
 
·
the risk of entering new markets;
 
·
the potential loss of key employees; and
 
·
the inability to generate sufficient revenue to offset acquisition or investment costs.
 
As a result, if we fail to properly evaluate and execute any acquisitions or investments, our business and prospects may be seriously harmed.
 
RISKS RELATED TO OUR COMMON STOCK
 
Provisions of our certificate of incorporation, bylaws and Delaware law may make a contested takeover of our Company more difficult.
 
Certain provisions of our certificate of incorporation, bylaws and the General Corporation Law of the State of Delaware ("DGCL") could deter a change in our management or render more difficult an attempt to obtain control of us, even if such a proposal is favored by a majority of our stockholders. For example, we are subject to the provisions of the DGCL that prohibit a public Delaware corporation from engaging in a broad range of business combinations with a person who, together with affiliates and associates, owns 15% or more of the corporation’s outstanding voting shares (an "interested stockholder") for three years after the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Our certificate of incorporation provides that directors may only be removed for cause by the affirmative vote of 75% of our outstanding shares and that amendments to our bylaws require the affirmative vote of holders of two-thirds of our outstanding shares. Our certificate of incorporation also includes undesignated preferred stock, which may enable our Board of Directors to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise. Finally, our bylaws include an advance notice procedure for stockholders to nominate directors or submit proposals at a stockholders meeting.
 
Trading in our common stock has been limited and there is no significant trading market for our common stock.
 
Our common stock is currently eligible to be quoted on the OTC Bulletin Board, however, trading to date has been limited. Trading on the OTC Bulletin Board is often characterized by low trading volume and significant price fluctuations. Because of this limited liquidity, stockholders may be unable to sell their shares. The trading price of our shares may from time to time fluctuate widely. The trading price may be affected by a number of factors including events described in the risk factors set forth in this report as well as our operating results, financial condition, announcements, general conditions in the industry, and other events or factors. In recent years, broad stock market indices, in general, and smaller capitalization companies, in particular, have experienced substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our common stock. These fluctuations may have a negative effect on the market price of our common stock.
 
14

 
The influx of additional shares of our common stock onto the market may create downward pressure on the trading price of our common stock.
 
We completed private placements of approximately 15.4 million shares of our common stock between October 2005 and February 2006.  The availability of those shares for sale to the public under Rule 144 of the Securities Act of 1933, as amended, and sale of such shares in public markets could have an adverse effect on the market price of our common stock. Such an adverse effect on the market price would make it more difficult for us to sell our equity securities in the future at prices which we deem appropriate or to use our shares as currency for future acquisitions which will make it more difficult to execute our acquisition strategy.
 
The issuance of additional shares in connection with the Adcom and other potential acquisitions may result in additional dilution to our existing stockholders.
 
We have issued, and may be required to issue, additional shares of common stock or common stock equivalents in payment of the purchase price of companies we have acquired.  This will have the effect of further increasing the number of shares outstanding. In connection with future acquisitions, we may undertake the issuance of more shares of common stock without notice to our then existing stockholders. We may also issue additional shares in order to, among other things, compensate employees or consultants or for other valid business reasons in the discretion of our Board of Directors, and could result in diluting the interests of our existing stockholders.
 
We may issue shares of preferred stock with greater rights than our common stock.
 
Although we have no current plans or agreements to issue any preferred stock, our certificate of incorporation authorizes our board of directors to issue shares of preferred stock and to determine the price and other terms for those shares without the approval of our shareholders. Any such preferred stock we may issue in the future could rank ahead of our common stock, in terms of dividends, liquidation rights, and voting rights.
 
As we do not anticipate paying dividends, investors in our shares will not receive any dividend income.
 
We have not paid any cash dividends on our common stock since our inception and we do not anticipate paying cash dividends in the foreseeable future. Any dividends that we may pay in the future will be at the discretion of our Board of Directors and will depend on our future earnings, any applicable regulatory considerations, covenants of our debt facility, our financial requirements and other similarly unpredictable factors.  Our ability to pay dividends is further limited by the terms of our credit facility with Bank of America, N.A.  For the foreseeable future, we anticipate that we will retain any earnings which we may generate from our operations to finance and develop our growth and that we will not pay cash dividends to our stockholders. Accordingly, investors seeking dividend income should not purchase our stock.
 
We are not subject to certain corporate governance provisions of the Sarbanes-Oxley Act of 2002.
 
Since our common stock is not listed for trading on a national securities exchange, we are not subject to certain of the corporate governance requirements established by the national securities exchanges pursuant to the Sarbanes-Oxley Act of 2002. These include rules relating to independent directors, and independent director nomination, audit and compensation committees.  Unless we voluntarily elect to comply with those obligations, investors in our shares will not have the protections offered by those corporate governance provisions. As of the date of this report, we have not elected to comply with any regulations that do not apply to us. While we may make an application to have our securities listed for trading on a national securities exchange, which would require us to comply with those obligations, we cannot assure that we will do so or that such application will be approved.
 
15

 
We are required to comply with Section 404a of the Sarbanes-Oxley Act of 2002 and if we fail to comply in a timely manner, our business could be harmed and our stock price could decline.
 
Rules adopted by the SEC pursuant to Section 404a of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal controls over financial reporting, Starting with our fiscal year ended June 30, 2008, we became subject to the requirements of Section 404a.  Any failure to maintain adequate controls could result in delays or inaccuracies in reporting financial information or non-compliance with SEC reporting and other regulatory requirements, any of which could adversely affect our business and stock price.
 
ITEM 2. PROPERTIES
 
Our principal executive offices are located at 405 114th Avenue S.E., Bellevue, Washington 98004 and consist of 13,018 feet of office space which we lease for an average of $17,160 per month over the life of the lease expiring April 30, 2021.  We also maintain approximately 8,125 feet of office space at 19320 Des Moines Memorial Drive South, SeaTac, Washington which we lease for approximately $5,650 per month pursuant to lease that expires December 31, 2010.   In addition, we own a small parcel of undeveloped acreage located at Grays Harbor, Washington, which is not material to our business.  We believe our current offices are adequately covered by insurance and are sufficient to support our operations for the foreseeable future.
 
 
 
Team Air Express Proceeding
 
On February 21, 2007, Team Air Express, Inc. (“Team Air”) filed suit against the Company, Texas Time Express, Inc. (the current owner of the Company’s Dallas branch office), and the individual owners and officers of Texas Time, in the District Court of the State of Texas, Tarrant County, claiming that collectively the Defendants tortuously interfered with Team Air’s contract and business relations with VRC Express, Inc. (“VRC”), the former owner of Team Air’s Chicago branch office. Team Air seeks to recover damages based on alleged interference with its existing contract and business relationship with VRC. More specifically, Team Air contends Texas Time and we intentionally attempted to subvert the business relationship with Team Air and VRC. Team Air further contends that the Defendants’ efforts to solicit VRC were unlawful and intended to cause harm to Team Air, thus exceeding the bounds of fair competition. The litigation is ongoing and management believes no interference of the VRC contract has occurred.  We will continue to vigorously defend this matter.
 
ITEM 4. REMOVED AND RESERVED
 
 
 
Market Information
 
Our common stock currently trades on the OTC Bulletin Board under the symbol "RLGT.OB." The following table states the range of the high and low bid-prices per share of our common stock for each of the calendar quarters during our past two fiscal years, as reported by the OTC Bulletin Board. These quotations represent inter-dealer prices, without retail mark-up, markdown, or commission, and may not represent actual transactions. The last price of our common stock as reported on the OTC Bulletin Board on September 24, 2010, was $0.36 per share.
 
16

 
   
High
   
Low
 
Year Ended June 30, 2010:
           
Quarter ended June 30, 2010
  $ .30     $ .23  
Quarter ended March 31, 2010
    .26       .22  
Quarter ended December 31, 2009
    .32       .21  
Quarter ended September 30, 2009
    .32       .20  
                 
Year Ended June 30, 2009:
               
Quarter ended June 30, 2009
  $ .32     $ .12  
Quarter ended March 31, 2009
    .17       .06  
Quarter ended December 31, 2008
    .30       .09  
Quarter ended September 30, 2008
    .30       .15  
 
Holders
 
 
Dividend Policy
 
We have not paid any cash dividends on our common stock to date, and we have no intention of paying cash dividends in the foreseeable future. Whether we declare and pay dividends will be determined by our board of directors at their discretion, subject to certain limitations imposed under Delaware law. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors. Our ability to pay dividends is limited by the terms of our Bank of America, N.A. credit facility.
 
 
Pacific Stock Transfer Company, 500 East Warm Springs, Suite 240, Las Vegas, Nevada 89119, serves as our transfer agent.
 
 
We have a share repurchase program that authorizes us to purchase up to 5,000,000 shares of common stock through December 31, 2010.  The share repurchases may occur from time-to-time through open market purchases at prevailing market prices or through privately negotiated transactions as permitted by securities laws and other legal requirements.  The following table sets forth information regarding our repurchases or acquisitions of common stock during the fourth quarter of Fiscal 2010:
 
17

 
Period
Total Number
of Shares
(or Units)
Purchased
 
Average
Price Paid
per Share
(or Unit)
 
Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs
 
Maximum Number
(or Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
Under the Plans or
Programs (1)
                 
Repurchases from April 1, 2010 through April 30, 2010
351,000
   
0.26
 
351,000
 
2,281,851
Repurchases from May 1, 2010 through May 31, 2010
156,000
   
0.27
 
156,000
 
2,125,851
Repurchases from June 1, 2010 through June 30, 2010
554,350
   
0.28
 
554,350
 
1,571,501
Total
1,061,350
 
$
0.27
 
1,061,350
 
1,571,501
 
(1)
In May 2009, our Board of Directors authorized the repurchase of up to 5,000,000 shares of our common stock.
 
ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis of our financial condition and result of operations should be read in conjunction with the consolidated financial statements and the related notes and other information included elsewhere in this report.
 
Overview
 
We are a Bellevue, Washington based non-asset based logistics company providing domestic and international freight forwarding services through a network which includes a combination of company-owned and exclusive agent offices across North America.  Operating under the Airgroup and Adcom brands, we service a diversified account base including manufacturers, distributors and retailers using a network of independent carriers and international agents positioned strategically around the world.
 
As a non-asset based provider of third-party logistics services, we seek to limit our investment in equipment, facilities and working capital through contracts and preferred provider arrangements with various transportation providers who generally provide us with favorable rates, minimum service levels, capacity assurances and priority handling status. Our non-asset based approach allows us to maintain a high level of operating flexibility and leverage a cost structure that is highly variable in nature while the volume of our flow of freight enables us to negotiate attractive pricing with our transportation providers.
 
We continue to identify a number of additional companies as suitable acquisition candidates and have completed two material acquisitions since our initial acquisition of Airgroup in January of 2006.  In November 2007, we acquired Automotive Services Group in Detroit, Michigan to service the automotive industry. In September 2008, we acquired Adcom Express, Inc. d/b/a Adcom Worldwide ("Adcom"), adding an additional 30 locations across North America and augmenting our overall domestic and international freight forwarding capabilities. We have built a global transportation and supply chain management company offering our customers domestic and international freight forwarding services and an expanding array of value added supply chain management services, including order fulfillment, inventory management, and warehousing.
 
Our growth strategy will continue to focus on both organic growth and acquisitions.  From an organic perspective, we will focus on strengthening existing and expanding new customer relationships. One of the drivers of our organic growth will be retaining existing, and securing new exclusive agency locations. Since our acquisition of Airgroup, we have focused our efforts on the build-out of our network of exclusive agency offices, as well as enhancing our back-office infrastructure and transportation and accounting systems.  We will continue to search for targets that fit within its acquisition criteria. Our ability to secure additional financing will rely upon the sale of debt or equity securities, and the development of an active trading market for our securities.
 
18

 
As we continue to build out its network of exclusive agent locations to achieve a level of critical mass and scale, we are executing an acquisition strategy to develop additional growth opportunities. Our acquisition strategy relies upon two primary factors:  first, our ability to identify and acquire target businesses that fit within our general acquisition criteria; and second, the continued availability of capital and financing resources sufficient to complete these acquisitions.
 
Successful implementation of our growth strategy depends upon a number of factors, including our ability to: (i) continue developing new agency locations; (ii) locate acquisition opportunities; (iii) secure adequate funding to finance identified acquisition opportunities; (iv) efficiently integrate the businesses of the companies acquired; (v) generate the anticipated economies of scale from the integration; and (vi)  maintain the historic sales growth of the acquired businesses in order to generate continued organic growth.  There are a variety of risks associated with our ability to achieve its strategic objectives, including the ability to acquire and profitably manage additional businesses and the intense competition in the industry for customers and for acquisition candidates.
 
Performance Metrics
 
Our principal source of income is derived from freight forwarding services. As a freight forwarder, we arrange for the shipment of our customers’ freight from point of origin to point of destination. Generally, we quote our customers a turnkey cost for the movement of their freight. Our price quote will often depend upon the customer’s time-definite needs (first day through fifth day delivery), special handling needs (heavy equipment, delicate items, environmentally sensitive goods, electronic components, etc.), and the means of transport (truck, air, ocean or rail). In turn, we assume the responsibility for arranging and paying for the underlying means of transportation.
 
Our transportation revenue represents the total dollar value of services we sell to our customers. Our cost of transportation includes direct costs of transportation, including motor carrier, air, ocean and rail services. We act principally as the service provider to add value in the execution and procurement of these services to our customers. Our net transportation revenue (gross transportation revenue less the direct cost of transportation) is the primary indicator of our ability to source, add value and resell services provided by third parties, and is considered by management to be a key performance measure. In addition, management believes measuring its operating costs as a function of net transportation revenue provides a useful metric, as our ability to control costs as a function of net transportation revenue directly impacts operating earnings.
 
 
Our GAAP-based net income will be affected by non-cash charges relating to the amortization of customer related intangible assets and other intangible assets arising from completed acquisitions. Under applicable accounting standards, purchasers are required to allocate the total consideration in a business combination to the identified assets acquired and liabilities assumed based on their fair values at the time of acquisition. The excess of the consideration paid over the fair value of the identifiable net assets acquired is to be allocated to goodwill, which is tested at least annually for impairment. Applicable accounting standards require that we separately account for and value certain identifiable intangible assets based on the unique facts and circumstances of each acquisition. As a result of our acquisition strategy, our net income will include material non-cash charges relating to the amortization of customer related intangible assets and other intangible assets acquired in our acquisitions. Although these charges may increase as we complete more acquisitions, we believe we will actually be growing the value of our intangible assets (e.g., customer relationships). Thus, we believe that earnings before interest, taxes, depreciation and amortization, or EBITDA, is a useful financial measure for investors because it eliminates the effect of these non-cash costs and provides an important metric for our business.
 
19

 
Further, the financial covenants of our credit facility adjust EBITDA to exclude costs related to share based compensation expense, extraordinary items and other non-cash charges.
 
Our compliance with the financial covenants of our credit facility is particularly important given the materiality of the credit facility to our day-to-day operations and overall acquisition strategy. Our debt capacity, subject to the requisite collateral at an advance rate of 80% of eligible domestic accounts receivable and up to 60% of eligible foreign receivables, is limited to a multiple of 4.00 times our consolidated EBITDA (as adjusted) as measured on a rolling four quarter basis. If we fail to comply with the covenants in our credit facility and are unable to secure a waiver or other relief, our financial condition would be materiality weakened and our ability to fund day-to-day operations would be materially and adversely affected.  Accordingly, we intend to employ EBITDA and adjusted EBITDA as management tools to measure our historical financial performance and as a benchmark for future financial flexibility.
 
Our operating results are also subject to seasonal trends when measured on a quarterly basis. The impact of seasonality on our business will depend on numerous factors, including the markets in which we operate, holiday seasons, consumer demand and economic conditions. Since our revenue is largely derived from customers whose shipments are dependent upon consumer demand and just-in-time production schedules, the timing of our revenue is often beyond our control. Factors such as shifting demand for retail goods and/or manufacturing production delays could unexpectedly affect the timing of our revenue. As we increase the scale of our operations, seasonal trends in one area of our business may be offset to an extent by opposite trends in another area. We cannot accurately predict the timing of these factors, nor can we accurately estimate the impact of any particular factor, and thus we can give no assurance any historical seasonal patterns will continue in future periods.
 
Critical Accounting Policies
 
Accounting policies, methods and estimates are an integral part of the consolidated financial statements prepared by management and are based upon management’s current judgments. These judgments are normally based on knowledge and experience regarding to past and current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management’s current judgments. While there are a number of accounting policies, methods and estimates that affect our financial statements, the areas that are particularly significant include the assessment of the recoverability of long-lived assets (including acquired intangibles), recoverability of goodwill, and revenue recognition.
 
We perform an annual impairment test for goodwill. The first step of the impairment test requires us to determine the fair value of each reporting unit, and compare the fair value to the reporting unit's carrying amount. We have only one reporting unit.  To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and we must perform a second more detailed impairment assessment. The second impairment assessment involves allocating the reporting unit’s fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of the reporting unit’s goodwill as of the assessment date. The implied fair value of the reporting unit’s goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date. We typically perform our annual impairment test effective as of April 1 of each year, unless events or circumstances indicate, an impairment may have occurred before that time.
 
20

 
During the second quarter of fiscal 2009, in connection with the preparation of the condensed consolidated financial statements included herein, we concluded indicators of potential impairment were present due to the sustained decline in our share price resulting in our market capitalization being less than its book value. We conducted an impairment test during the second quarter of fiscal 2009 based on the facts and circumstances at that time and our business strategy in light of existing industry and economic conditions, as well as taking into consideration future expectations. As we have significantly grown the business since our initial acquisition of Airgroup, we have also grown its customer relationship intangibles as we added additional stations. Through our impairment testing and review, we concluded our discounted cash flow analysis supports a valuation of our identifiable intangible assets well in excess of their carrying value.  However, generally accepted accounting principles ("GAAP") do not allow us to recognize the previously unrecognized intangible assets in connection with these new stations.  Factoring this with management’s assessment of the fair value of other assets and liabilities resulted in no residual implied fair value remaining to be allocated to goodwill. As a result, for the quarter ending December 31, 2008, we recorded a non-cash goodwill impairment charge of $11.4 million. This non-cash charge did not have any impact on our compliance with the financial covenants in our credit agreement.
 
Acquired intangibles consist of customer related intangibles and non-compete agreements arising from our acquisitions. Customer related intangibles are amortized using accelerated methods over approximately five years and non-compete agreements are amortized using the straight line method over the term of the underlying agreements.
 
We review long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired.  Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not available, we estimate fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset.  Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
 
As a non-asset based carrier we do not own transportation assets. We generate the major portion of its air and ocean freight revenues by purchasing transportation services from direct (asset-based) carriers and reselling those services to its customers. Based upon the terms in the contract of carriage, revenues related to shipments where the Company issues a House Airway Bill ("HAWB") or a House Ocean Bill of Lading ("HOBL") are recognized at the time the freight is tendered to the direct carrier at origin. Costs related to the shipments are also recognized at this same time based upon anticipated margins, contractual arrangements with direct carriers, and other known factors. The estimates are routinely monitored and compared to actual invoiced costs. The estimates are adjusted as deemed necessary by us to reflect differences between the original accruals and actual costs of purchased transportation.
 
This method generally results in recognition of revenues and purchased transportation costs earlier than the preferred methods under GAAP which do not recognize revenue until a proof of delivery is received or which recognize revenue as progress on the transit is made. Our method of revenue and cost recognition does not result in a material difference from amounts that would be reported under such other methods.
 
 
Basis of Presentation
 
The results of operations discussion which appears below has been presented utilizing a combination of historical and, where relevant, pro forma unaudited information to include the effects of the acquisition of Adcom on our consolidated financial statements during fiscal year 2009. The pro forma information has been presented for fiscal year ended June 30, 2009 as if we had acquired Adcom as of July 1, 2008. The pro forma results are also adjusted to reflect a consolidation of the historical results of operations of Adcom and the Company as adjusted to reflect the amortization of acquired intangibles and are also provided in the Financial Statements included within this report.
 
The pro forma financial data is not necessarily indicative of results of operations that would have occurred had this acquisition been consummated at the beginning of the periods presented or which might be attained in the future.
 
21

 
 
We generated transportation revenue of $146.7 million and net transportation revenue of $45.6 million for the year ended June 30, 2010, as compared to transportation revenue of $137.0 million and net transportation revenue of $45.6 million for the year ended June 30, 2009.  Net income was $2.0 million for the year ended June 30, 2010, compared to a net loss of $9.7 million for the year ended June 30, 2009.
 
We had adjusted EBITDA of $4.2 million and $3.7 million for years ended June 30, 2010 and 2009, respectively. EBITDA is a non-GAAP measure of income and does not include the effects of interest and taxes, and excludes the "non-cash" effects of depreciation and amortization on current assets. Companies have some discretion as to which elements of depreciation and amortization are excluded in the EBITDA calculation. We exclude all depreciation charges related to property, plant and equipment, all amortization charges relating to leasehold improvements and other intangible assets, and impairment charges relating to goodwill. We then further adjust EBITDA to exclude costs related to share based compensation expense, unusual items and other non-cash charges consistent with the financial covenants of our credit facility. Our ability to generate adjusted EBITDA ultimately limits the amount of debt that we may carry and is a good indicator of our financial flexibility and capacity to complete additional acquisitions in compliance with the credit agreement.  A violation of this covenant in the credit agreement would greatly limit our financial flexibility, reduce available liquidity, and absent a waiver, could give rise to an event of default under the credit agreement.  For the forgoing reasons, we believe that the credit agreement is material to our operations and that adjusted EBITDA is important to an evaluation of our financial condition and liquidity.  While management considers EBITDA and adjusted EBITDA useful in analyzing our results, it is not intended to replace any presentation included in our consolidated financial statements.
 
The following table provides a reconciliation for the fiscal years ended June 30, 2010 and June 30, 2009 of adjusted EBITDA to net income, the most directly comparable GAAP measure in accordance with SEC Regulation G (in thousands):
 
   
Years ended June 30,
   
Change
 
   
2010
   
2009
   
Amount
   
Percent
 
                         
Net income (loss)
  $ 1,959     $ (9,730 )   $ 11,689       (120.1 )%
Income tax expense
    1,093       44       1,049       2,384.1 %
Net interest expense
    135       204       (69 )     (33.8 )%
Depreciation and amortization
    1,598       1,743       (145 )     (8.3 )%
                                 
EBITDA (Earnings before interest, taxes, depreciation and amortization)
  $ 4,785     $ (7,739 )   $ 12,524       (161.8 )%
                                 
Share based compensation and other non-cash costs
    315       203       112       55.2 %
Goodwill impairment
    -       11,403       (11,403 )     (100.0 )%
Gain on extinguishment of debt
    (135 )     (190 )     55       (28.9 )%
Business & Occupancy tax refund
    (364 )     -       (364 )     N/A  
Gain on litigation settlement
    (355 )     -       (355 )     N/A  
Adjusted EBITDA
  $ 4,246     $ 3,677     $ 569       15.5 %
 
The following table summarizes transportation revenue, cost of transportation and net transportation revenue (in thousands) for the fiscal years ended June 30, 2010 and June 30, 2009:
 
   
Years ended June 30,
   
Change
 
   
2010
   
2009
   
Amount
   
Percent
 
                         
Transportation revenue
  $ 146,716     $ 136,996     $ 9,720       7.1 %
Cost of transportation
    101,086       91,427       9,659       10.6 %
                                 
 Net transportation revenue
  $ 45,630     $ 45,569     $ 61       0.1 %
Net transportation margins
    31.1 %     33.3 %                
22

 
We generated transportation revenue of $146.7 million and net transportation revenue of $45.6 million for the year ended June 30, 2010, as compared to transportation revenue of $137.0 million and net transportation revenue of $45.6 million for the year ended June 30, 2009.  Domestic and international transportation revenue was $78.6 million and $68.1 million, respectively, for the year ended June 30, 2010, compared with $73.2 million and $63.8 million, respectively, for the year ended June 30, 2009.  Transportation revenues and costs of transportation increased in fiscal year 2010 primarily due to the addition of new agent-based locations.
 
Cost of transportation was 68.9% and 66.7% of transportation revenue for the years ended June 30, 2010 and 2009, respectively.  Net transportation margins were 31.1% and 33.3% of transportation revenue for the years ended June 30, 2010 and 2009, respectively.  The decrease in net transportation margins was due to pricing pressures in the marketplace associated with the weak economic environment.  
 
The following table compares condensed consolidated statement of income data as a percentage of our net transportation revenue (in thousands) for the fiscal years ended June 30, 2010 and June 30, 2009:
 
   
Years ended June 30,
             
   
2010
   
2009
   
Change
 
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
                                     
Net transportation revenue
  $ 45,630       100.0 %   $ 45,569       100.0 %   $ 61       0.1 %
                                                 
Agent commissions
    31,377       68.8 %     30,565       67.1 %     812       2.7 %
Personnel costs
    5,882       12.9 %     6,921       15.2 %     (1,039 )     (15.0 )%
Selling, general and administrative
    4,295       9.4 %     4,288       9.4 %     7       0.2 %
Depreciation and amortization
    1,598       3.5 %     1,743       3.8 %     (145 )     (8.3 )%
Restructuring charges
    -       0.0 %     220       0.5 %     (220 )     N/A  
Goodwill impairment charge
    -       0.0 %     11,403       25.0 %     (11,403 )     N/A  
                                                 
Total operating costs
    43,152       94.6 %     55,140       121.0 %     (11,988 )     (21.7 )%
                                                 
Income (loss) from operations
    2,478       5.4 %     (9,571 )     (21.0 )%     12,049       125.9 %
Other (expense) income
    693       1.5 %     (88 )     (0.2 )%     781       887.5 %
                                                 
Income (loss) before income taxes and non-controlling interest
    3,171       6.9 %     (9,659 )     (21.2 )%     12,830       132.8 %
Income tax expense
    (1,093 )     (2.4 )%     (44 )     (0.1 )%     (1,049 )     (2,384.1 )%
                                                 
Income (loss) before non-controlling interest
    2,078       4.6 %     (9,703 )     (21.3 )%     11,781       121.4 %
Non-controlling interest
    (119 )     (0.3 )%     (27 )     0.1 %     (92 )     (340.7 )%
                                                 
Net income (loss)
  $ 1,959       4.3 %   $ (9,730 )     (21.4 )%   $ 11,689       120.1 %
 
Agent commissions were $31.4 million for the year ended June 30, 2010, an increase of 2.7% from $30.6 million for the year ended June 30, 2009, as a result of increased revenues associated with newly added agent based locations.  As a percentage of net revenues, agent commissions increased to 68.8% for the year ended June 30, 2010 from 67.1% for the year ended June 30, 2009.  The increase is attributed to newly added agent-based stations which generated a higher percentage of our total revenues in 2010 as compared to 2009 and where these new stations earned commissions.
 
Personnel costs consist of payroll, payroll taxes, benefits and stock compensation expense. Personnel costs were $5.9 million for the year ended June 30, 2010, a decrease of 15.0% from $6.9 million for the year ended June 30, 2009.  The decrease was primarily attributed to a full year of savings associated with migrating the Adcom back-office positions into RGL’s back office resulting in a significant reduction of head count. As a percentage of net revenues, personnel costs decreased to 12.9% for the year ended June 30, 2010 from 15.2% for the year ended June 30, 2009.
 
23

 
Selling, general and administrative ("SG&A") costs consist primarily of marketing, rent, professional services, insurance and travel expenses.  SG&A costs were relatively unchanged at $4.3 million for the years ended June 30, 2010 and 2009.  As a percentage of net revenues, SG&A costs remained constant at 9.4% for the years ended June 30, 2010 and June 30, 2009.
 
Depreciation and amortization costs were $1.6 million for the year ended June 30, 2010, a decrease of 8.3% from $1.7 million for the year ended June 30, 2009.  The decrease primarily related to lower amortization expenses of intangibles associated with RGL.  As a percentage of net revenues, depreciation and amortization decreased to 3.5% for the year ended June 30, 2010 from 3.8% for the year ended June 30, 2009.
 
Income from operations was $2.5 million for the year ended June 30, 2010, compared to a loss from operations of $9.6 million for the year ended June 30, 2009.  The change in earnings was primarily attributed to the goodwill impairment charge of $11.4 million during the year ended June 30, 2009.
 
 
Net income for the year ended June 30, 2010 was $2.0 million as compared to net loss of $9.7 million for the year ended June 30, 2009.
 
Supplemental Pro forma Information
 
The following table provides a reconciliation for the fiscal years ended June 30, 2010 (audited) and June 30, 2009 (pro forma and unaudited) of adjusted EBITDA to net income, the most directly comparable GAAP measure in accordance with SEC Regulation G (in thousands):
 
   
Years ended June 30,
   
Change
 
   
2010
   
2009
   
Amount
   
Percent
 
                         
Net income (loss)
  $ 1,959     $ (9,801 )   $ 11,760       120.0 %
Income tax expense
    1,093       -       1,093       N/A  
Net interest expense
    135       278       (143 )     (51.4 )%
Depreciation and amortization
    1,598       1,897       (299 )     (15.8 )%
                                 
EBITDA (Earnings before interest, taxes, depreciation and amortization)
  $ 4,785     $ (7,626 )   $ 12,411       162.7 %
                                 
Share based compensation and other non-cash costs
    315       202       113       55.9 %
Goodwill impairment
    -       11,403       (11,403 )     (100.0 )%
Gain on extinguishment of debt
    (135 )     (190 )     55       28.9 %
Business & Occupancy tax refund
    (364 )     -       (364 )     N/A  
Gain on litigation settlement
    (355 )     -       (355 )     N/A  
Adjusted EBITDA
  $ 4,246     $ 3,789     $ 457       12.1 %
 
The following table summarizes transportation revenue, cost of transportation and net transportation revenue (in thousands) for the fiscal years ended June 30, 2010 (audited) and June 30, 2009 (pro forma and unaudited):
 
 
Years ended June 30,
 
Change
 
 
2010
 
2009
 
Amount
 
Percent
 
                 
Transportation revenue
  $ 146,716     $ 153,835     $ (7,119 )     (4.6 )%
Cost of transportation
    101,086       102,666       (1,580 )     (1.5 )%
                                 
 Net transportation revenue
  $ 45,630     $ 51,169     $ (5,539 )     (10.8 )%
Net transportation margins
    31.1 %     33.3 %                
 
24

 
Transportation revenue was 146.7 million for the year ended June 30, 2010, a decrease of 4.6% from pro forma transportation revenue of $153.8 million for the year ended June 30, 2009.
 
Cost of transportation was $101.1 million for the year ended June 30, 2010, a decrease of 1.5% from pro forma costs of transportation of $102.7 million for the year ended June 30, 2009.
 
Net transportation margins decreased to 31.1% for the year ended June 30, 2010, compared to pro forma transportation margins of 33.3% for the year ended June 30, 2009.
 
The following table compares certain condensed consolidated statement of income data as a percentage of our net transportation revenue (in thousands) for the fiscal years ended June 30, 2010 (audited) and June 30, 2009 (pro forma and unaudited):
  
   
Years ended June 30,
       
   
2010
   
2009
   
Change
 
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
                                     
Net transportation revenue
  $ 45,630       100.0 %   $ 51,169       100.0 %   $ (5,539 )     (10.8 )%
                                                 
Agent commissions
    31,377       68.8 %     34,925       68.3 %     (3,548 )     (10.2 )%
Personnel costs
    5,882       12.9 %     7,566       14.8 %     (1,684 )     (22.3 )%
Selling, general and administrative
    4,295       9.4 %     4,654       9.1 %     (359 )     (7.7 )%
Depreciation and amortization
    1,598       3.5 %     1,897       3.7 %     (299 )     (15.8 )%
Restructuring charge
    -       0.0 %     220       0.4 %     (220 )     (100.0 )%
Goodwill impairment charge
    -       0.0 %     11,403       22.3 %     (11,403 )     (100.0 )%
                                                 
Total operating costs
    43,152       94.6 %     60,665       118.6 %     (17,513 )     (28.9 )%
                                                 
Income (loss) from operations
    2,478       5.4 %     (9,496 )     (18.6 )%     11,974       126.1 %
Other (expense) income
    693       1.5 %     (278 )     (0.5 )%     971       349.3 %
                                                 
Income (loss) before income taxes and non-controlling interest
    3,171       6.9 %     (9,774 )     (19.1 )%     12,945       132.4 %
Income tax expense
    (1,093 )     (2.4 )%     -       0.0 %     (1,093 )     N/A  
                                                 
Income (loss) before non-controlling interest
    2,078       4.5 %     (9,774 )     (19.1 )%     11,852       121.3 %
Non-controlling interest
    (119 )     (0.3 )%     (27 )     (0.1 )%     (92 )     (340.7 )%
                                                 
Net income (loss)
  $ 1,959       4.3 %   $ (9,801 )     (19.2 )%   $ 11,760       120.0 %
 
Agent commissions were $31.3 million for the year ended June 30, 2010, a decrease of 10.2% from pro forma agent commissions of $34.9 million for the year ended June 30, 2009. Agent commissions as a percentage of net transportation revenue increased to 68.8% of net transportation revenue the for year ended June 30, 2010, compared to 68.3% for the comparable prior year period pro forma amount.
 
Personnel costs were $5.9 million for the year ended June 30, 2010, a decrease of 22.3% from $7.6 million for the year ended June 30, 2009. Personnel costs as a percentage of net transportation revenue were 12.9% for the year ended June 30, 2010, a decrease from 14.8% for the comparable prior year period pro forma amount.
 
SG&A costs were $4.3 million for the year ended June 30, 2010, a decrease of 7.7% from pro forma selling, general and administrative costs of $4.7 million for the year ended June 30, 2009. As a percentage of net transportation revenue, SG&A costs increased to 9.4% for the year ended June 30, 2010, from 9.1% for the comparable prior year period pro forma amount.
 
25

 
Depreciation and amortization costs were $1.6 million for the year ended June 30, 2010, a decrease of 15.8% from pro forma depreciation and amortization of $1.9 million for the year ended June 30, 2009.  Depreciation and amortization as a percentage of net transportation revenue decreased to3.5% for the year ended June 30, 2010, from 3.7% for the comparable prior year period pro forma amount.
 
Pro forma restructuring costs incurred in the year ended June 30, 2009, were $0.2 million as a result of the Adcom acquisition and relate to the elimination of redundant international personnel and facilities costs. These restructuring charges were paid out over a one year period. There were no similar costs for the comparable current year.
 
For the year ended June 30, 2009, an impairment charge to goodwill in the amount of $11.4 million was recorded. There was no similar charge for the comparable current year.
 
Income from operations was $3.2 million for the year ended June 30, 2010, compared to pro forma loss from operations of $9.5 million for the year ended June 30, 2009.
 
Other income was $0.7 million for the year ended June 30, 2010, compared to pro forma other expense of $0.3 million for the year ended June 30, 2009.
 
Net income was $2.0 million for the year ended June 30, 2010, compared to pro forma net loss of $9.8 million for the year ended June 30, 2009.
 
Liquidity and Capital Resources
 
Net cash provided by operating activities for the year ended June 30, 2010 was $2.8 million, compared to net cash provided by operating activities for the year ended June 30, 2009 of $3.8 million. The change was principally driven by timing differences between the collection of receivables and payments of commissions driven by overall growth and an increase in working capital, offset by cash flows associated with the usage of tax-related items previously recorded.
 
Net cash used for investing was $1.9 million for the year ended June 30, 2010, compared to net cash used for investing activities of $6.7 million for the year ended June 30, 2009.  Use of cash in 2010 consisted of $1.4 million paid to the former shareholder of Adcom and $0.6 million for furniture and equipment purchases.  Use of cash in 2009 consisted of $5.5 million for the acquisition of Adcom, an additional $0.2 million for furniture and equipment, and $1.0 million paid to former shareholders of Airgroup and Adcom.
 
Net cash used by financing activities for the year ended June 30, 2010 was $1.1 million compared to net cash provided by financing activities of $3.5 million for year ended June 30, 2009.  Use of cash for 2010 consisted of $0.8 million used to purchase treasury stock, $0.2 million in payments to reduce our credit facility, and $0.1 million in non-controlling interest distributions.  Cash from financing activities in 2009 consisted of proceeds from our credit facility of $3.6 million netted against $0.1 million used to purchase treasury stock.
 
Acquisitions
 
Below are descriptions of material acquisitions made since 2006 including a breakdown of consideration paid at closing and future potential earn-out payments.  We define "material acquisitions" as those with aggregate potential consideration of $1.0 million or more.
 
26

 
Effective January 1, 2006, we acquired all of the outstanding stock of Airgroup. The transaction was valued at up to $14.0 million. This consisted of:  (i) $9.5 million payable in cash at closing; (ii) a subsequent cash payment of $0.5 million which was paid on December 31, 2007; (iii) as amended, an additional base payment of $0.6 million payable in cash, $0.3 million of which was paid on June 30, 2008 and $0.3 million was paid on January 1, 2009; (iv) a base earn-out payment of $1.9 million payable in Company common stock over a three-year earn-out period based upon Airgroup achieving income from continuing operations of not less than $2.5 million per year and (v) as additional incentive to achieve future earnings growth, an opportunity to earn up to an additional $1.5 million payable in Company common stock at the end of a five-year earn-out period (the "Tier-2 Earn-Out"). Under Airgroup’s Tier-2 Earn-Out, the former shareholders of Airgroup were entitled to receive 50% of the cumulative income from continuing operations in excess of $15.0 million generated during the five-year earn-out period up to a maximum of $1.5 million.  With respect to the base earn-out payment of $1.9 million, in the event there is a shortfall in income from continuing operations, the earn-out payment will be reduced on a dollar-for-dollar basis to the extent of the shortfall.  Shortfalls may be carried over or carried back to the extent that income from continuing operations in any other payout year exceeds the $2.5 million level. For the years ended June 30, 2009 and 2008, the former shareholders of Airgroup earned $633,000 and $417,000 in base earn-out payments, respectively.
 
During the quarter ended December 31, 2007, we adjusted the estimate of accrued transportation costs assumed in the acquisition of Airgroup which resulted in the recognition of approximately $1.4 million in non-recurring income.  Pursuant to the acquisition agreement, the former shareholders of Airgroup have indemnified us for taxes of $0.5 million associated the income recognized in connection with this change in estimate which has been reflected as a reduction of the additional base payment otherwise payable to the former shareholders of Airgroup.
 
In November 2008, we amended the Airgroup Stock Purchase Agreement and agreed to unconditionally pay the former Airgroup shareholders an earn-out payment of $633,333 for the earn-out period ended June 30, 2009 to be paid on or about October 1, 2009 by delivery of shares of common stock of the Company. In consideration for the certainty of the earn-out payment, the former Airgroup shareholders agreed (i) to waive and release us from any and all further obligations to pay any earn-outs payments on account of shortfall amounts, if any, which may have accumulated prior to June 30, 2009; (ii) to waive and release us from any and all further obligation to account for and pay the Tier-2 earn-out payment; and (iii) that the earn-out payment to be paid for the earn-out period ended June 30, 2009 would constitute a full and final payment to the former Airgroup shareholders of any and all amounts due to the former Airgroup shareholders under the Airgroup Stock Purchase Agreement. In March of 2009, Airgroup shareholders agreed to receive $0.4 million in cash on an accelerated basis rather than the $0.6 million in Company shares due in October of 2009.  No further payments of purchase price are due in connection with this acquisition.
 
 
In November 2007, the purchase price was reduced to $1.6 million, consisting of cash of $0.6 million and a $1.0 million credit in satisfaction of indemnity claims asserted by us arising from our interim operation of the Purchased Assets since May 22, 2007. Of the cash component, $0.1 million was paid in May of 2007, $0.3 million was paid at closing, and a final payment of $0.2 million was to be paid in November of 2008, subject to off-set of up to $0.1 million for certain qualifying expenses incurred by us. Net of qualifying expenses and a discount for accelerated payment, the final payment was reduced to $0.1 million and paid in June of 2008.  No further payments of purchase price are due in connection with this acquisition.
 
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Effective September 1, 2008, we acquired all of the outstanding stock of Adcom Express, Inc.  The transaction was valued at up to $11,050,000, consisting of: (i) $4,750,000 in cash paid at the closing; (ii) $250,000 in cash payable shortly after the closing, subject to adjustment, based upon the working capital of Adcom as of August 31, 2008; (iii) up to $2,800,000 in four "Tier-1 Earn-Out Payments" of up to $700,000 each, covering the four year earn-out period through 2012, based upon Adcom achieving certain levels of "Gross Profit Contribution" (as defined in the agreement), payable 50% in cash and 50% in shares of our common stock (valued at delivery date); (iv) a "Tier-2 Earn-Out Payment" of up to a maximum of $2,000,000, equal to 20% of the amount by which the Adcom cumulative Gross Profit Contribution exceeds $16,560,000 during the four year earn-out period; and (v) an "Integration Payment" of $1,250,000 payable on the earlier of the date certain integration targets are achieved or 18 months after the closing, payable 50% in cash and 50% in our shares of our common stock (valued at delivery date).
 
Through June 30, 2010, the former Airgroup shareholders earned a total of $808,524 in base earn-out payments. Of this amount, $320,027 was paid in cash during the year ended June 30, 2010. The remaining amount of $488,497 is included in the amount due to former Adcom shareholder as of June 30, 2010.
 
Assuming minimum targeted earnings levels are achieved, the following table summarizes our contingent base earn-out payments related to the acquisition of Adcom, for the fiscal years indicated based on results of the prior year (in thousands):
 
Estimated payment anticipated for fiscal year(1):
2012
 
2013
 
Earn-out period:
7/1/2010–
6/30/2011
 
7/1/2011 –
6/30/2012
 
Earn-out payments:
       
Cash
  $ 350     $ 350  
Equity
    350       350  
    Total potential earn-out payments
  $ 700     $ 700  
                 
Total gross margin targets
  $ 4,320     $ 4,320  
 
(1) Earn-out payments are paid October 1 following each fiscal year end in a combination of cash and Company common stock.
 
Credit Facility
 
In March 2010, our $15.0 million revolving credit facility, including a $0.5 million sublimit to support letters of credit (collectively, the "Facility"), was increased to $20.0 million with a maturity date of March 31, 2012. The Facility is collateralized by accounts receivable and other assets of the Company and its subsidiaries. Advances under the Facility are available to fund future acquisitions, capital expenditures or for other corporate purposes, including the repurchase of the Company’s stock. Borrowings under the facility bear interest, at our option, at the bank’s prime rate minus 0.75% to plus 0.50% or LIBOR plus 1.75% to 3.00%, and can be adjusted up or down during the term of the Facility based on the Company’s performance relative to certain financial covenants. The Facility is collateralized by accounts receivable and other assets of the Company and its subsidiaries and provides for advances of up to 80% of eligible domestic accounts receivable and for advances of up to 60% of eligible foreign accounts receivable.
 
The terms of the Facility are subject to certain financial and operational covenants which may limit the amount otherwise available under the Facility. The first covenant limits funded debt to a multiple of 4.00 times our consolidated EBITDA (as adjusted) measured on a rolling four quarter basis. The second financial covenant requires that we maintain a basic fixed charge coverage ratio of at least 1.1 to 1.0. The third financial covenant is a minimum profitability standard that requires us not to incur a net loss before taxes, amortization of acquired intangibles and extraordinary items in any two consecutive quarterly accounting periods.
 
28

 
Under the terms of the Facility, we are permitted to make additional acquisitions without the lender's consent only if certain conditions are satisfied. The conditions imposed by the Facility include the following: (i) the absence of an event of default under the Facility; (ii) the company to be acquired must be in the transportation and logistics industry; (iii) the purchase price to be paid must be consistent with the Company’s historical business and acquisition model; (iv) after giving effect for the funding of the acquisition, the Company must have undrawn availability of at least $1.0 million under the Facility; (v) the lender must be reasonably satisfied with projected financial statements the Company provides covering a 12 month period following the acquisition; (vi) the acquisition documents must be provided to the lender and must be consistent with the description of the transaction provided to the lender; and (vii) the number of permitted acquisitions is limited to three per calendar year and shall not exceed $7.5 million in aggregate purchase price financed by funded debt. In the event we are not able to satisfy the conditions of the Facility in connection with a proposed acquisition, we must either forego the acquisition, obtain the lender's consent, or retire the Facility. This may limit or slow our ability to achieve the critical mass it may need to achieve its strategic objectives.
 
The co-borrowers of the Facility include Radiant Logistics, Inc., RGL (f/k/a Airgroup Corporation), Radiant Logistics Global Services, Inc. ("RLGS"), RLP, and Adcom Express, Inc. (d/b/a Adcom Worldwide). RLP is owned 40% by RGL and 60% by RCP, an affiliate of the Company’s Chief Executive Officer. RLP has been certified as a minority business enterprise, and focuses on corporate and government accounts with diversity initiatives. As a co-borrower under the Facility, the accounts receivable of RLP are eligible for inclusion within the overall borrowing base of the Company and all borrowers will be responsible for repayment of the debt associated with advances under the Facility, including those advanced to RLP.  At June 30, 2010, we were in compliance with all of its covenants.
 
Given our continued focus on the build-out of our network of exclusive agency locations, we believe that our current working capital and anticipated cash flow from operations are adequate to fund existing operations. However, continued growth through strategic acquisitions, will require additional sources of financing as our existing working capital is not sufficient to finance our operations and an acquisition program. Thus, our ability to finance future acquisitions will be limited by the availability of additional capital. We may, however, finance acquisitions using our common stock as all or some portion of the consideration. In the event that our common stock does not attain or maintain a sufficient market value or potential acquisition candidates are otherwise unwilling to accept our securities as part of the purchase price for the sale of their businesses, we may be required to utilize more of our cash resources, if available, in order to continue our acquisition program. If we do not have sufficient cash resources through either operations or from debt facilities, our growth could be limited unless we are able to obtain such additional capital.
 
As of August 31, 2010, we have approximately $5.7 million in remaining availability under the Facility to support future acquisitions and our on-going working capital requirements.  We expect to structure acquisitions with certain amounts paid at closing, and the balance paid over a number of years in the form of earn-out installments which are payable based upon the future earnings of the acquired businesses payable in cash, stock or some combination thereof.  As we continue to execute our acquisition strategy, we will be required to make significant payments in the future if the earn-out installments under our various acquisitions become due. While we believe that a portion of any required cash payments will be generated by the acquired businesses, we may have to secure additional sources of capital to fund the remainder of any cash-based earn-out payments as they become due. This presents us with certain business risks relative to the availability of capacity under our Facility, the availability and pricing of future fund raising, as well as the potential dilution to our stockholders to the extent the earn-outs are satisfied directly, or indirectly, from the sale of equity.
 
Financial Outlook
 
For our fiscal year ended June 30, 2011, we are forecasting $4.5 million of adjusted EBITDA on total revenue of $158.0 million and expect net earnings of $1.9 million, compared to $4.2 million of adjusted EBITDA on total revenue of $146.7 million and net earnings of $2.0 million for our fiscal year ended June 30, 2010.  This guidance does not include the benefit of any further acquisitions we may complete over the course of fiscal 2011.
 
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Our estimate of future revenues and profits is based on the assumption that the cumulative historical financial results of operations of the Company for the most recent 12 months ended June 30, 2010 are indicative of the future financial performance and excludes the impact of further acquisitions, new agent stations or further improvement in the economic climate. A reconciliation of estimated annual adjusted EBITDA for the fiscal year ended June 30, 2010 amounts to net income, the most directly comparable GAAP measure, is as follows:
 
 (Amounts in 000’s)
 
   
Outlook 
Fiscal Year
Ended June 30,
2011
   
Actual 
Fiscal Year
Ended June 30,
2010
 
Net income
  $ 1,890     $ 1,959  
                 
Interest expense - net
    200       135  
Income tax expense
    1,159       1,093  
Depreciation and amortization
    1,379       1,598  
                 
EBITDA
    4,368       4,785  
                 
Stock-based compensation and other non-cash charges
    132       315  
Gain on extinguishment of debt
    -       (135 )
Business & Occupancy tax refund
    -       (364 )
Gain on litigation settlement
    -       (355 )
                 
Adjusted EBITDA
  $ 4,500     $ 4,246  
 
Contractual Obligations
 
We have entered into contracts with various third parties in the normal course of business which will require future payments. The following table sets forth our contractual obligations (in thousands) as of June 30, 2010:
 
         
Payments due during fiscal years ending June 30
 
Amounts in 000's
 
Total
   
2011
   
2012
   
2013
   
2014
   
2015
   
Thereafter
 
                                           
Long-Term Debt
  $ 7,641     $ -     $ 7,641     $ -     $ -     $ -     $ -  
Capital Leases
    -       -       -       -       -       -       -  
Operating Leases
    2,900       339       230       221       231       240       1,639  
Total Contractual Obligations
  $ 10,541     $ 339     $ 7,871     $ 221     $ 231     $ 240     $ 1,639  
 
 
As of June 30, 2010, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which had been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
 
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Recent Accounting Pronouncements
 
In June 2009, the FASB issued SFAS No. 167 ("SFAS 167"), "Amendments to FASB Interpretation No. 46R". SFAS 167 amends certain requirements of FIN 46R to improve the financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. SFAS 167 is effective for the Company in the fiscal year beginning July 1, 2010.  The adoption of SFAS 167 did not have a material impact on the Company’s consolidated financial position, results of operations and cash flows.
 
In June 2009, the FASB issued guidance now codified in FASB Accounting Standards Codification ("ASC") Topic 105, Generally Accepted Accounting Principles, as the single source of authoritative nongovernmental GAAP. FASB ASC Topic 105 does not change current GAAP, but is intended to simplify user access to all authoritative GAAP by providing all authoritative literature related to a particular topic in one place. All existing accounting standard documents have been superseded and all other accounting literature not included in the FASB Codification is now considered non-authoritative. These provisions of FASB ASC Topic 105 are effective for interim and annual periods ending after September 15, 2009 and, accordingly, are effective for the Company for the current fiscal reporting period. The adoption of this guidance did not have an impact on the Company’s financial condition or results of operations, but impacted its financial reporting process by eliminating all references to pre-codification standards. On the effective date of this guidance, the Codification superseded all then-existing non-SEC accounting and reporting standards, and all other non-grandfathered, non-SEC accounting literature not included in the Codification became non-authoritative.
 
In August 2009, the FASB issued Accounting Standards Update ("ASU") No. 2009-05, Fair Value Measurements and Disclosures. The guidance in ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, an entity is required to measure fair value using certain prescribed valuation techniques. The amendments in ASU 2009-05 were effective for the Company’s first quarter of fiscal 2010. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.
 
In August 2009, the FASB issued ASU No. 2009-06, Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendment for Nonpublic Entities. The guidance in ASU 2009-06 improves current accounting by helping achieve consistent application of accounting for uncertainty in income taxes and is not intended to change existing practice. ASU 2009-06 also eliminates disclosures previously required for nonpublic entities. ASU 2009-06 is effective for interim and annual periods ending after September 15, 2009. The adoption of this guidance did not have a material impact on the Company’s financial position or results of operations.
 
In January 2010, the FASB issued ASU No. 2010-06, Improving Disclosures about Fair Value Measurements. The guidance in ASU 2010-06 provides amendments to literature on fair value measurements and disclosures currently within the ASC by clarifying certain existing disclosures and requiring new disclosures for the various classes of fair value measurements. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.
 
In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. The guidance in ASU 2010-09 addresses both the interaction of the requirements of Topic 855, Subsequent Events, with the SEC’s reporting requirements and the intended breadth of the reissuance disclosures provision related to subsequent events, potentially changing reporting by both private and public entities depending on the facts and circumstances surrounding the nature of the change. All of the amendments in ASU 2010-09 are effective upon issuance of the final update, except for the use of the issued date for conduit debt obligors which is effective for interim and annual periods ending after June 15, 2010. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.
 
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In April 2010, the FASB issued ASU No. 2010-13, Compensation – Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades.  The guidance in ASU 2010-13 provides amendments to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as the adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The consolidated financial statements of Radiant Logistics, Inc. including the notes thereto and the report of our independent accountants are included in this report, commencing at page F-1.
 
 
None.
 
ITEM 9A.  CONTROLS AND PROCEDURES                                                                                     
 
Disclosure Controls and Procedures
 
An evaluation of the effectiveness of our "disclosure controls and procedures" (as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act as of June 30, 2010 was carried out by our management under the supervision and with the participation of our Chief Executive Officer ("CEO") who also serves as our Chief Financial Officer ("CFO"). Based upon that evaluation, our CEO/CFO concluded that, as of June 30, 2010, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our CEO/CFO, as appropriate to allow timely decisions regarding disclosure.
 
Management’s Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934 (the "Exchange Act").  Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial reporting and the preparation of financial statements for external purposes, in accordance with GAAP.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Our management, including our CEO/CFO, conducted an evaluation of the effectiveness of internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework.  Based on its evaluation, our management concluded that our internal control over financial reporting was effective as of June 30, 2010.
 
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.
 
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Changes in Internal Control Over Financial Reporting
 
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 9B. OTHER INFORMATION
 
 
PART III
 
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
 
The following table sets forth information concerning our executive officers and directors. Each of the executive officers will serve until his or her successor is appointed by our Board of Directors or such executive officer’s earlier resignation or removal. Each of the directors will serve until the next annual meeting of stockholders or such director’s earlier resignation or removal.
 
Name
 
Age
 
Position
         
Bohn H. Crain
 
46
 
Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors
         
Stephen P. Harrington
 
52
 
Director
         
Daniel Stegemoller
 
55
 
Vice President and Chief Operating Officer of Radiant Global Logistics f/k/a Airgroup
         
Robert F. Friedman
 
66
 
President – Adcom Express, Inc.
         
Todd E. Macomber
 
46
 
Senior Vice President & Chief Accounting Officer
 
Bohn H. Crain.   Mr. Crain has served as our Chief Executive Officer, Chief Financial Officer and Chairman of our Board of Directors since October 10, 2005.  Mr. Crain brings nearly 20 years of industry and capital markets experience in transportation and logistics.  Since January 2005, Mr. Crain has served as the Chief Executive Officer of Radiant Capital Partners, LLC, an entity he formed to execute a consolidation strategy in the transportation/logistics sector.  Prior to founding Radiant, Mr. Crain served as the executive vice president and the chief financial officer of Stonepath Group, Inc. from January 2002 until December 2004.  In 2001, Mr. Crain served as the executive vice president and Chief Financial Officer of Schneider Logistics, Inc., a third-party logistics company, and from 2000 to 2001, he served as the Vice President and Treasurer of Florida East Coast Industries, Inc., a public company engaged in railroad and real estate businesses listed on the New York Stock Exchange.  Between 1989 and 2000, Mr. Crain held various vice president and treasury positions for CSX Corp., and several of its subsidiaries, a Fortune 500 transportation company listed on the New York Stock Exchange.  Mr. Crain earned a Bachelor of Science in Accounting from the University of Texas.
 
Stephen P. Harrington.   Mr. Harrington was appointed as a director on October 26, 2007.  Mr. Harrington served as the Chairman, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary of Zone Mining Limited, a Nevada corporation, from August 2006 until January 2007 and as Chairman, Chief Executive Officer, Treasurer and Secretary of Touchstone Resources USA, Inc., a Delaware corporation from March 2004 to August 2005. From October 2001 to February 2004, Mr. Harrington served as the Chairman and Chief Executive Officer of Endeavour International Corporation (f/k/a Continental Southern Resources, Inc.), a publicly-traded oil and gas exploration company that merged with NSNV Inc., a Texas corporation.  Mr. Harrington has served as the President of SPH Investments, Inc. and SPH Equities, Inc., each a private investment company, since 1992. Mr. Harrington has served as an officer and director of several publicly-held corporations, including BPK Resources, Inc., an oil and gas exploration company, and Astralis Ltd. (f/k/a Hercules Development Group). Mr. Harrington graduated with a B.S. from Yale University in 1980.
 
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Dan Stegemoller.  Mr. Stegemoller is the Chief Operating Officer of Radiant Global Logistics, Inc., and previously held the position of Vice President since November 2004.  He has over 35 years of experience in the Transportation Industry.  Prior to joining Airgroup, from 1993 until 2004, Mr. Stegemoller served as Senior Vice President Sales and Marketing at Forward Air, a high-service-level contractor to the air cargo industry.  From 1983 to 1992, Mr. Stegemoller served as Vice President of Customer Service managing Centralized Call Center for Puralator/Emery Air/CF Airfreight.  From 1973 through 1983, he served in numerous positions at Federal Express where his last position was Director of Operations in Minneapolis, Minnesota.  Mr. Stegemoller has an Associated Degree in Business from IUPUI in Indianapolis.
 
Todd E. Macomber.   Mr. Macomber has served as our Senior Vice President and Chief Accounting Officer since August 7, 2009 and as our Vice President and Corporate Controller for Radiant Global Logistics, Inc. f/k/a Airgroup Inc. since December 2007.  Prior to joining Radiant Global Logistics, Inc., from September 2003 to November 2007 Mr. Macomber served as Senior Vice President and Chief Financial Officer of Biotrace International, Inc. a subsidiary of Biotrace International PLC an industrial microbiology company traded on the London Stock Exchange.  From January 1993 to September 2003 Mr. Macomber held a variety of positions and most recently served as Senior Vice President and Chief Financial Officer for International BioProducts, Inc.  Mr. Macomber earned a Bachelor of Science in Accounting from Seattle University.
 
Robert F. Friedman.  Mr. Friedman has served as President of Adcom Express, Inc. since September 5, 2008.  Mr. Friedman founded Adcom in 1978 and over the past 30 years, has overseen the evolution of Adcom from a provider of small package courier services to a full-service third party logistics company that derives over 50% of its revenues from international transportation services.  Mr. Friedman has served as a Board Member of the XLA Express Delivery and Logistics Association for the past 10 years and is a 15-year member of the Airforwarders Association.  He received a Bachelor of Arts degree from the University of Minnesota.
 
 
Directors hold office until the next annual meeting of shareholders and the election and qualification of their successors. Officers are elected annually by our board of directors and serve at the discretion of the board of directors.
 
Audit Committee Financial Expert
 
Our board of directors has not created a separately-designated standing audit committee or a committee performing similar functions.  Accordingly, our full board of directors acts as our audit committee.
 
Although Bohn H. Crain, our CEO, has the requisite background and professional experience to qualify as an audit committee financial expert, he has not been designated as such by our Board of Directors since he does not satisfy the "independence" standards adopted by the American Stock Exchange.
 
We currently have a small number of employees and centralized operations.  In light of the foregoing, our board of directors concluded that the benefits of retaining an individual who qualifies as an "audit committee financial expert," as that term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act, would be outweighed by the costs of retaining such a person.  As a result, no member of our board of directors is an "audit committee financial expert."
 
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Code of Ethics
 
We have adopted a Code of Ethics that applies to all employees including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Ethics is designed to deter wrongdoing and promote: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules and regulations; (iv) the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and (v) accountability for adherence to the code.  Our Code of Ethics has been filed as an exhibit hereto or may be obtained without charge upon written request directed to Attn: Human Resources, Radiant Logistics, Inc., 405 114th Avenue S.E., Bellevue, Washington 98004.
 
Section 16 Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Exchange Act, as amended, requires our officers and directors and persons who own more than ten percent (10%) of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Such officers, directors and ten percent (10%) stockholders are also required by applicable SEC rules to furnish copies of all forms filed with the SEC pursuant to Section 16(a) of the Exchange Act. Based solely on our review of copies of forms filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 as amended and written representations from certain reporting persons, we believe that during fiscal 2010, all reporting persons timely complied with all filing requirements applicable to them.
 
 
Summary Compensation Table
 
The following summary compensation table reflects total compensation for our chief executive officer/chief financial officer, and our two most highly compensated executive officers (each a "named executive officer") whose compensation exceeded $100,000 during the fiscal year ended June 30, 2010 and June 30, 2009.
 
 
Name and Principal
Position
 
 
 
Year
 
 
Salary
($)
   
 
Bonus
($)
   
Option
Awards
 ($)(1)
   
All other
compensation
($)
   
 
Total
($)
 
Bohn H. Crain, Chief Executive
 
2010
    250,000       250       -       21,921
(2)
    272,171  
Officer and Chief Financial Officer
 
2009
    250,000       250       -       22,528
(3)
    272,778  
Dan Stegemoller, Vice President
 
2010
    190,000       250       -       67,156
(4)
    257,406  
and  Chief Operating Officer of Radiant Global Logistics
 
2009
    180,000       250       -       69,834
(5)
    250,084  
Todd Macomber, Senior Vice
 
2010
    150,000       250       15,000
(6)
    12,436
(7)
    177,686  
President and Chief Accounting Officer of Radiant Logistics, Inc.
 
2009
    134,000       250       -       10,795
(8)
    145,045  
 
(1)
Represents the grant date fair value of the award, calculated in accordance with FASB Accounting Standard Codification 718, “Compensation — Stock Compensation,” or ASC 718. A summary of the assumptions made in the valuation of these awards is provided under Note 13 of our consolidated financial statements.
 
35

 
(2)
Consists of $12,000 for automobile allowance, $730 for company provided life & disability insurance premiums, and $9,191 for Company 401k match.
(3)
Consists of $12,000 for automobile allowance, $873 for company provided life & disability insurance premiums, and $9,655 for Company 401k match.
(4)
Consists of $6,750 for automobile allowance, $730 for company provided life & disability insurance premiums, $5,047 for Company 401k match, and $54,629 relating to amortization of moving expenses, per his December 2005 relocation agreement.  Mr. Stegemoller was issued a note receivable for $200,000 in December 2005 to pay for his relocation expenses and to provide an incentive to accept the Company’s offer of employment.  The agreement provided for the note to be forgiven in equal installments over five years, along with the accrued interest, and for a gross up to pay for the taxes relating to the note forgiveness.
(5)
Consists of $6,000 for automobile allowance, $873 for company provided life & disability insurance premiums, $7,964 for Company 401k match, and $54,997 relating to amortization of moving expenses, per his December 2005 relocation agreement.  See note 4 above for a description of the relocation agreement.
(6)
Mr. Macomber was granted options to purchase 100,000 shares on August 7, 2009 at an exercise price $.28 per share.  The grant date fair market value of these options was $0.15 per share.  The options vest in equal annual installments over a five year period commencing on the date of the grant.
(7)
Consists of $6,750 for automobile allowance, $652 for company provided life & disability insurance premiums, and $5,034 for Company 401k match.
(8)
Consists of $6,000 for automobile allowance, $782 for company provided life & disability insurance premiums, and $4,013 for Company 401k match.
 
Outstanding Equity Awards at Fiscal Year-End
 
The following table sets forth officer information regarding outstanding unexercised options for each named executive officer outstanding as of June 30, 2010.
 
   
Option Awards
Name
 
Number of
securities
underlying
unexercised
options
exercisable(#)
   
Number of
securities
underlying
unexercised
options
Unexercisable (#)
   
Option exercise
price
($)
 
Option
expiration date
Bohn H. Crain
    800,000       200,000       0.50  
10/19/2015(1)
      800,000       200,000       0.75  
10/19/2015(1)
Dan Stegemoller
    240,000       60,000       0.44  
1/10/2016(2)
      40,000       60,000       0.18  
6/23/2018(3)
Todd Macomber
    40,000       60,000       0.48  
12/10/2017(4)
      40,000       60,000       0.18  
6/23/2018(5)
      0       100,000       0.28  
8/6/2019(6)

(1)
The stock options were granted on October 20, 2005 and vest in equal annual installments over a five year period commencing on the date of grant.
(2)
The stock options were granted on January 11, 2006 and vest in equal annual installments over a five year period commencing on the date of grant.
(3)
The stock options were granted on June 24, 2008 and vest in equal annual installments over a five year period commencing on the date of grant.
(4)
The stock options were granted on December 11, 2007 and vest in equal annual installments over a five year period commencing on the date of grant.
(5)
The stock options were granted on June 24, 2008 and vest in equal annual installments over a five year period commencing on the date of grant.
(6)
The stock options were granted on August 7, 2009 and vest in equal annual installments over a five year period commencing on the date of grant.
 
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Director Compensation
 
The following table sets forth compensation paid to our directors during the fiscal year ended June 30, 2010.
 
 
Name(1) 
 
                     
Year
 
Fees earned or
paid in cash
($)
   
Total
($)
 
Stephen P. Harrington
 
2010
    36,000
(2)
    36,000  
 
(1)  Bohn Crain is not listed in the above table because he does not receive any additional compensation for serving on our board of directors.
 
(2)  Consists of a payment of $3,000 per month.
 
Narrative Disclosure of Executive Compensation
 
Employment Agreements
 
Bohn H. Crain. On January 13, 2006, we entered into an employment agreement with Bohn H. Crain to serve as our CEO.  On December 31, 2008, we and Bohn Crain, entered into a Letter Agreement for the purpose of amending Mr. Crain’s Employment Agreement. The Letter Agreement was approved by the Company’s Board of Directors.
 
The amendments evidenced by the Letter Agreement (1) extended Mr. Crain’s Employment Agreement through December 31, 2013 and (2) brought Mr. Crain’s Employment Agreement into compliance with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code”) by, among other things, providing for a six month delay in the payment of any amounts to be received by Mr. Crain upon a separation of service if the payment, absent such delay, would have triggered the imposition of excise taxes or other penalties under Section 409A of the Code.
 
The agreement provides for an annual base salary of $250,000, a performance bonus of up to 50% of the base salary based upon the achievement of certain target objectives, and discretionary merit bonus that can be awarded at the discretion of our board of directors.  We may terminate the agreement at any time for cause. If we terminate the agreement due to Mr. Crain’s disability, Mr. Crain’s options shall immediately vest and we must continue to pay Mr. Crain his base salary and bonuses as well as fringe benefits including participation in pension, profit sharing and bonus plans as applicable, and life insurance, hospitalization, major medical, paid vacation and expense reimbursement for an additional one year period. If Mr. Crain terminates the agreement for good reason or we terminate for any reason other than for cause, Mr. Crain’s options shall immediately vest and we must continue to pay Mr. Crain his base salary and bonuses as well as fringe benefits for the remaining term of the agreement.  The employment agreement contains standard and customary non-solicitation, non-competition, work made for hire, and confidentiality provisions.
 
Option Agreements
 
On October 20, 2005, we issued to Mr. Crain an option to purchase 2,000,000 shares of common stock, 1,000,000 of which are exercisable at $0.50 per share and the balance of which are exercisable at $0.75 per share.  The options have a term of 10 years and vest in equal annual installments over the five year period commencing on the date of grant.
 
On January 11, 2006, we issued to Mr. Stegemoller an option to purchase 300,000 shares of our common stock, which are exercisable at $0.44 per share, the last sales price on the date of grant.  The option vests in equal annual installments over a five year period commencing on the date of grant and terminates ten years from the date of grant.
 
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On December 11, 2007, we issued to Mr. Macomber an option to purchase 100,000 shares of our common stock, which are exercisable at $0.48 per share, the last sales price on the date of grant.  The options vest in equal annual installments over a five year period commencing on the date of grant and terminate ten years from the date of grant.
 
On June 24, 2008, we granted to each of Messrs. Stegemoller and Macomber an option to purchase 100,000 shares of our common stock.  Each option is exercisable at $0.18, the last sales price on the date of grant.  The options vest in equal annual installments over a five year period commencing on the date of grant and terminate ten years from the date of grant.
 
On August 7, 2009, we issued to Mr. Macomber an option to purchase 100,000 shares of our common stock, which are exercisable at $0.28 per share, the last sales price on the date of grant.  The option vests in equal annual installments over a five year period commencing on the date of grant and terminates ten years from the date of grant.
 
Change in Control Arrangements
 
The options granted to Mr. Crain contain a change in control provision which is triggered in the event that we are acquired by merger, share exchange or otherwise, sell all or substantially all of our assets, or all of the stock of the Company is acquired by a third party (each, a "Fundamental Transaction").  In the event of a Fundamental Transaction, all of the options will vest and Mr. Crain shall have the full term of such Options in which to exercise any or all of them, notwithstanding any accelerated exercise period contained in any such Option.
 
The employment agreement with Mr. Crain contains a change in control provision.  If his employment is terminated following a change in control (other than for cause), then we must pay him a termination payment equal to 2.99 times his base salary in effect on the date of termination of his employment, any bonus to which he would have been entitled for a period of three years following the date of termination, any unpaid expenses and benefits, and for a period of three years provide him with all fringe benefits he was receiving on the date of termination of his employment or the economic equivalent.   In addition, all of his unvested stock options shall immediately vest as of the termination date of his employment due to a change in control.  A change in control is generally defined as the occurrence of any one of the following:
 
 
·
any "Person" (as the term "Person" is used in Section 13(d) and Section 14(d) of the Securities Exchange Act of 1934), except for our chief executive officer, becoming the beneficial owner, directly or indirectly, of our securities representing 50% or more of the combined voting power of our  then outstanding securities;
 
·
a contested proxy solicitation of our stockholders that results in the contesting party obtaining the ability to vote securities representing 50% or more of the combined voting power of our then-outstanding securities;
 
·
a sale, exchange, transfer or other disposition of 50% or more in value of our assets to another Person or entity, except to an entity controlled directly or indirectly by us;
 
·
a merger, consolidation or other reorganization involving us in which we are not the surviving entity and in which our stockholders prior to the transaction continue to own less than 50% of the outstanding securities of the acquirer immediately following the transaction, or a plan involving our liquidation or dissolution other than pursuant to bankruptcy or insolvency laws is adopted; or
 
·
during any period of twelve consecutive months, individuals who at the beginning of such period constituted the board cease for any reason to constitute at least the majority thereof unless the election, or the nomination for election by our stockholders, of each new director was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of the period.
 
Notwithstanding the foregoing, a "change in control" is not deemed to have occurred (i) in the event of a sale, exchange, transfer or other disposition of substantially all of our assets to, or a merger, consolidation or other reorganization involving, us and any entity in which our chief executive officer has, directly or indirectly, at least a 25% equity or ownership interest; or (ii) in a transaction otherwise commonly referred to as a "management leveraged buy-out."
 
38

 
Directors’ Compensation
 
In January 2009, we began compensating Mr. Harrington $3,000 per month for his services.  Mr. Crain does not receive any additional compensation for serving our board of directors.  Other than our arrangement with Mr. Harrington, we do not have any standard arrangements regarding payment of any cash or other compensation to our current directors for their services as directors, as members of any committee of our board of directors or for any special assignments, other than to reimburse them for their cost of travel and other out-of-pocket costs incurred to attend board or committee meetings or to perform any special assignment on behalf of the Company.
 
Stock Incentive Plan
 
On October 20, 2005, we adopted the Radiant Logistics, Inc. 2005 Stock Incentive Plan (the "Plan").  Awards may be made under the Plan for up to 5,000,000 shares of our common stock in the form of stock options or restricted stock awards.  Awards may be made to our employees, officers or directors as well as our consultants or advisors.  The Plan is administered by our Board of Directors which has full and final authority to interpret the Plan, select the persons to whom awards may be granted, and determine the amount, vesting and all other terms of any awards.  To the extent permitted by applicable law, our Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board.  The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, and is not a "qualified plan" under Section 401(a) of the Internal Revenue Code ("IRC) of 1986, as amended.  The Plan has not been approved by our shareholders.  As a result, "incentive stock options" as defined under Section 422 of the IRC may not be granted under the Plan until our shareholders approve the Plan.
 
All stock options granted under the Plan are exercisable for a period of up to ten years from the date of grant, are subject to vesting as determined by the Board upon grant, and have an exercise price equal to not less than the fair market value of our common stock on the date of grant.  Unless otherwise determined by the Board, awards may not be transferred except by will or the laws of descent and distribution.  The Board has discretion to determine the effect on any award granted under the Plan of the death, disability, retirement, resignation, termination or other change in employment or other status of any participant in the Plan.  The maximum number of shares of common stock for which awards may be granted to a participant under the Plan in any calendar year is 2,500,000.
 
The Plan states that a "Change of Control" occurs when (i) any "person" (as such term is used in Section 13(d) and 14(d) of the Exchange Act) acquires "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the voting power of the then outstanding securities of the Company except where the acquisition is approved by the Board; or (ii) if the Company is to be consolidated with or acquired by another entity in a merger or other reorganization in which the holders of the outstanding voting stock of the Company immediately preceding the consummation of such event, shall, immediately following such event, hold, as a group, less than a majority of the voting securities of the surviving or successor entity or in the event of a sale of all or substantially all of the Company's assets or otherwise.
 
Unless otherwise provided in option or employment agreements, if the Plan is terminated as a result of or following a "Change of Control", all vested awards may be exercised for 30 days from the date of notice of the termination.  All participants will be credited with an additional six months of service for the purpose of unvested awards.  If the Plan is assumed or not terminated upon the occurrence of a "Change of Control", all participants will be credited with an additional six months of service if, during the remaining term of such participant’s awards, any participant is terminated without cause.
 
39

 
As of September 24, 2010, the following options to purchase shares of common stock were outstanding:
 
Options
 
Exercise Price
Per Share
 
1,000,000
  $ 0.50  
1,000,000
    0.75  
375,000
    0.44  
360,000
    0.18  
300,000
    0.28  
190,000
    0.62  
175,000
    0.48  
100,000
    0.16  
100,000
    0.20  
20,000
    1.01  
3,620,000
  $ 0.50  

 
The following table indicates how many shares of our common stock were beneficially owned as of September 24, 2010, by (1) each person known by us to be the owner of more than 5% of our outstanding shares of common stock, (2) our directors, (3) our executive officers, and (4) all of our directors and executive officers as a group. Unless otherwise indicated, each person named below has sole voting and investment power with respect to all common stock beneficially owned by that person or entity, subject to the matters set forth in the footnotes to the table below.  Unless otherwise provided, the address of each of the persons listed below is c/o Radiant Logistics, Inc., 405 114th Avenue S.E., Bellevue, Washington 98004.
 
Name of Beneficial Owner
 
Amount(1)
   
Percent of
Class
 
             
Bohn H. Crain
    11,724,301
(2)
    36.8 %
Dan Stegemoller
    378,182
(3)
    1.3 %
Todd E. Macomber
    100,000
(4)
    *  
Robert F. Friedman
           
Stephen P. Harrington
    1,568,182
(5)
    5.2 %
                 
Stephen M. Cohen
    2,500,000
(6)
    8.4 %
Douglas Tabor
    2,940,974
(7)
    9.8 %
All officers and directors as a group (5 persons)
    13,770,665       42.7 %
 

 
(*)   Less than one percent
(1)
The securities "beneficially owned" by a person are determined in accordance with the definition of "beneficial ownership" set forth in the rules and regulations promulgated under the Securities Exchange Act of 1934, and accordingly, may include securities owned by and for, among others, the spouse and/or minor children of an individual and any other relative who has the same home as such individual, as well as other securities as to which the individual has or shares voting or investment power or which such person has the right to acquire within 60 days of September 24, 2010 pursuant to the exercise of options, or otherwise.  Beneficial ownership may be disclaimed as to certain of the securities.  This table has been prepared based on 29,894,421 shares of common stock outstanding as of September 24, 2010.
(2)
Consists of 8,955,000 shares held by Radiant Capital Partners, LLC over which Mr. Crain has sole voting and dispositive power, 769,301 shares directly held by Mr. Crain, and 2,000,000 shares issuable upon exercise of options.
 
40

 
(3)
Includes 280,000 shares issuable upon exercise of options.  Does not include 120,000 shares issuable upon exercise of options which are subject to vesting.
(4)
Includes 100,000 shares issuable upon exercise of options.  Does not include 200,000 shares issuable upon exercise of options which are subject to vesting.
(5)
Consists of shares held by SPH Investments, Inc. over which Mr. Harrington has sole voting and dispositive power.
(6)
Consists of shares held of record by Mr. Cohen’s wife over which he shares voting and dispositive power.
(7)
This information is based on a schedule 13G dated and filed with the SEC on January 26, 2010 reporting that Douglas Tabor has sold voting power with respect to 2,940,974 shares of common stock.
 
Equity Compensation Plan Information
 
The following table sets forth certain information regarding compensation plans under which our equity securities are authorized for issuance as of June 30, 2010.
 
 
 
Plan Category
 
Number of securities to
be issued upon exercise
of outstanding warrants
and rights
(a)
   
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
   
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
 
Equity Compensation Plans approved by security holders
    0             0  
Equity compensation plans not approved by security holders
    3,620,000     $ 0.504       1,380,000  
Total
    3,620,000     $ 0.504       1,380,000  
 
A description of the material terms of The Radiant Logistics, Inc. 2005 Stock Incentive Plan is set forth in Item 11. EXECUTIVE COMPENSATION - Stock Incentive Plan.
 
 
Review, Approval or Ratification of Transactions with Related Persons
 
Our board is responsible for reviewing and approving all related party transactions. Before approving such a transaction, the board takes into account all relevant factors that it deems appropriate, including whether the related party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third party. Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons' immediate family members or affiliates in which the amount involved exceeds $120,000 must first be presented to our board for review, consideration and approval.  All of our directors, executive officers and employees are required to report to our board any such related party transaction.  In approving or rejecting the proposed agreement, our board considers the facts and circumstances available and deemed relevant to the board, including, but not limited to the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products and, if applicable, the impact on a director's independence.  Our board approves only those agreements that, in light of known circumstances, are in, or are not inconsistent with, our best interests, as our board determines in the good faith exercise of its discretion.  Although the policies and procedures described above are not written, the board applies the foregoing criteria in evaluating and approving all such transactions.  Each of the transactions described below were approved by our board of directors in accordance with the foregoing.
 
41

 
Transactions
 
On June 28, 2006, we joined Radiant Capital Partners, LLC ("RCP"), an affiliate of Bohn H. Crain to form Radiant Logistics Partners, LLC ("RLP").  RCP and the Company contributed $12,000 and $8,000, respectively, for their respective 60% and 40% interests in RLP.  RLP has been certified as a minority business enterprise by the Northwest Minority Business Council.  Mr. Crain’s ownership interest entitles him to a majority of the profits and distributable cash, if any, generated by RLP. The operations of RLP commenced in February of 2007 and are intended to provide certain benefits to us, including expanding the scope of services offered by us and participating in supplier diversity programs not otherwise available to us.  As the RLP operations mature, we will evaluate and approve all related service agreements between us and RLP, including the scope of the services to be provided by us to RLP and the fees payable to us by RLP, in accordance with our corporate governance principles and applicable Delaware corporation law. This process may include seeking the opinion of a qualified third party concerning the fairness of any such agreement.
 
For the fiscal year ended June 30, 2010, RLP recorded $246,533 in revenues including $160,071 in commission revenues earned from members of the affiliated group, and paid management service fees totaling $5,671 to members of the affiliated group and reported a profit of $197,734.  For the fiscal year ended June 30, 2009, RLP recorded $362,008 in revenues including $110,335 in commission revenues earned from members of the affiliated group, and paid management service fees totaling $22,598 to members of the affiliated group and reported a profit of $44,000.  The profits and losses of RLP are split 40% to the Company and 60% to RCP.
 
Director Independence
 
Mr. Harrington satisfies the definition of "independent" established by the NYSE-AMEX as set forth in Section 803 of the NYSE-AMEX Company Guide.  Mr. Crain does not satisfy the definition of "independent" established by the NYSE-AMEX as set forth in Section 803 of the NYSE-AMEX Company Guide.  As of the date of the report, we do not maintain a separately designated audit, compensation or nominating committee.
 
 
The following table presents fees for professional audit services performed for the audit of our annual financial statements for the years ended June 30, 2010 and 2009 and fees billed and unbilled for other services rendered by it during those periods.
 
   
2010
   
2009
 
Audit Fees:
  $ 121,500     $ 96,000  
Audit Related Fees:
    2,500       5,000  
Tax Fees:
    55,800       43,200  
All Other Fees:
    1,000       -  
Total:
  $ 180,800     $ 144,200  
Audit Fees
 
Audit Fees consist of fees billed and unbilled for professional services rendered for the audit of our consolidated financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by our independent registered public accountants in connection with statutory and regulatory filings or engagements.
 
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Audit Related Fees
 
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company's consolidated financial statements and are not reported under "Audit Fees."
 
Tax Fees
 
Tax Fees consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance, tax audit defense, customs and duties, and mergers and acquisitions.
 
All Other Fees
 
All Other Fees consist of fees billed for products and services provided not described above.
 
Audit Committee Pre-Approval Policies and Procedures
 
Our Board of Directors serves as our audit committee. Our Board of Directors approves the engagement of our independent auditors, and meets with our independent auditors to approve the annual scope of accounting services to be performed and the related fee estimates. It also meets with our independent auditors, on a quarterly basis, following completion of their quarterly reviews and annual audit and prior to our earnings announcements, if any, to review the results of their work. During the course of the year, our chairman has the authority to pre-approve requests for services that were not approved in the annual pre-approval process. The chairman reports any interim pre-approvals at the following quarterly meeting. At each of the meetings, management and our independent auditors update the Board of Directors with material changes to any service engagement and related fee estimates as compared to amounts previously approved. During the fiscal years ended June 30, 2010 and June 30, 2009, all audit and non-audit services performed by our independent registered public accountants were pre-approved by the Board of Directors in accordance with the foregoing procedures.
 
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
Exhibit No.
Description
   
2.1
Stock Purchase Agreement by and among Radiant Logistics, Inc., the Shareholders of Airgroup Corporation and William H. Moultrie (as Shareholders’ Agent) dated January 11, 2006, effective as of January 1, 2006. (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 18, 2006)
   
2.2
Registration Rights Agreement by and among Radiant Logistics, Inc. and the Shareholders of Airgroup Corporation dated January 11, 2006, effective as of January 1, 2006. (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 18, 2006)
   
2.3
First Amendment to Stock Purchase Agreement (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 30, 2007)