What changed in this filing

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Item 1. Business

2020-09-28 compared with 2019-09-12 · 126 added, 64 removed, 583 unchanged (25% of the section changed)

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We provide these services through a multi-brand network, which includes over 100 locations operated exclusively on our behalf by independent agents, who we also refer to as our “strategic operating partners”, as well as approximately 20 Company-owned offices.

As a third-party logistics company, we have approximately 10,000 asset-based transportation companies, including motor carriers, railroads, airlines and ocean lines in our carrier network.

As a third-party logistics company, we have a vast carrier network of asset-based transportation companies, including motor carriers, railroads, airlines and ocean lines in our carrier network.

We believe shippers value our services because we are able to objectively arrange the most efficient and cost-effective means, type and provider of transportation service without undue influence caused by the ownership of transportation assets.

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Our primary business operations involve arranging the shipment, on behalf of our customers, of materials, products, equipment and other goods that are generally larger than shipments handled by integrated carriers of primarily small parcels, such as FedEx, DHL and UPS.

Our services include arranging and monitoring all aspects of material flow act ivity utilizing advanced information technology systems.

Our services include arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems.

We also provide other value-added supply chain services, including order fulfillment, inventory management, warehouse and distribution services (collectively, “Materials Management and Distribution” or “MM&D” services), and customs brokerage services to complement our core transportation service offering.

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 will continue to focus on strengthening existing and expanding new customer relationships leveraging the benefit of our truck brokerage and intermodal service offerings, while continuing our efforts on the organic build-out of our network of strategic operating partner locations.

In addition, as we continue to grow and scale the business, we believe that we are creating density in our trade lanes which creates opportunities for us to more efficiently source and manage our transportation capacity.

In addition to our focus on organic growth, we will continue to search for acquisition candidates that bring critical mass from a geographic and purchasing power standpoint along with providing complementary service offerings to the current platform.

As we continue to grow and scale the business, we also remain focused on leveraging our back-office infrastructure and technology systems to drive productivity improvement across the organization.

The Company expects to grow its business organically and by completing acquisitions of other companies with complementary geographical and logistics service offerings.

The Company’s organic growth strategy will continue to focus on strengthening existing and expanding new customer relationships leveraging the benefit of the Company’s truck brokerage and intermodal service offerings, while continuing its efforts on the organic build-out of the Company’s network of strategic operating partner locations.

In addition, as the Company continues to grow and scale its business, the Company believes that it is creating density in its trade lanes, which creates opportunities for the Company to more efficiently source and manage its transportation capacity.

In addition to its focus on organic growth, the Company will continue to search for acquisition candidates that bring critical mass from a geographic and purchasing power standpoint, along with providing complementary service offerings to the current platform.

As the Company continues to grow and scale its business, it also remains focused on leveraging its back-office infrastructure and technology systems to drive productivity improvement across the organization.

The COVID-19 pandemic continues to have widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices.

The pandemic has created significant volatility, uncertainty and economic disruption.

We are closely monitoring the impact of the pandemic on all aspects of our business, our customers, employees and business partners.

The overall demand for transportation services have been significantly impacted.

COVID-19 has adversely affected most of our operations, financial condition, and results of operations in the fourth quarter of our fiscal year 2020.

Beginning in April of 2020, we have experienced decreased customer demands in many parts of our business while seeing improvements in the demand in certain segments of business.

We have been working hard to mitigate the negative financial impacts of COVID-19 with a number of initiatives in response to our declining revenues.

However, the relative effectiveness will depend on the severity and duration of the pandemic.

We face significant risks related to the spread of COVID-19 and the recent developments surrounding the global pandemic have had, and will continue to have, significant effects on our business, financial condition, results of operations, and cash flows.

We are facing increased operational challenges from the need to protect employee health and safety.

We expect to continue to incur additional costs as we continue to implement operational changes in response to the pandemic.

We face significant risks related to the global economic downturn and severe reduction in revenues caused by the pandemic.

These risks include materially reduced demand for our services and challenges to the ongoing viability of some of our customers.

An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business.

The effect of the COVID-19 pandemic may last for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided.

The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including:

the severity and duration of the outbreak;

governmental, business and other actions;

the impact of the pandemic on economic activity;

the effect on consumer confidence and spending, customer demand and buying patterns;

the health of and the effect on our workforce and our ability to meet staffing needs;

any impairment in value of our tangible or intangible assets that could be recorded as a result of weaker economic conditions;

and the potential effects on our internal controls including those over financial reporting as a result of changes in working environments.

P rovisions for bad debt expense may increase given the financial difficulty faced by our customers , which could impact our ability to borrow under our revolving credit facility.

Due to the unprecedented and evolving nature of the COVID-19 pandemic, it remains very difficult to predict the extent of the impact on our industry generally and our business in particular.

While we anticipate that our results of operations will continue to be impacted by this pandemic in fiscal year 2021, we are unable to reasonably estimate the extent of the impact on our full-year results of operations, our liquidity or our overall financial position.

We may face similar risks in connection with any future public health crises.

Competitive Strengths

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We service a large and diversified account base of over 12,000 accounts consisting of consumer goods, food and beverage, manufacturing and retail customers.

From the date of this report, no single customer and no strategic operating partner represented more than 10% of our consolidated net revenues, reducing risks associated with any particular industry, geographic or customer concentration.

For the annual period up to the date of this report, no single customer and no strategic operating partner represented more than 15% of our consolidated revenue, reducing risks associated with any particular industry, geographic or customer concentration.

For the year ended June 30, 2020, revenue from one customer of our US operating segment represents approximately $127 million, or 14.8%, of the Company’s consolidated revenues.

Information technology resources

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We operate principally as a non-asset based third-party logistics provider focused on freight forwarding, truck brokerage and intermodal transportation services along with associated value-added services.

According to Armstrong and Associates, the market for third-party logistics services in the United States and Canada is estimated at approximately $199.6 billion.

Because non-asset based companies select from various transportation options in routing cust omer shipments, they are often able to serve customers less expensively and with greater flexibility than their asset based competitors, who are typically focused on maximizing the utilization of their own captive fleets of trucks, aircraft and ships rathe r than the specific needs of the customer.

According to Armstrong and Associates, the market for third-party logistics services in the United States and Canada is estimated at approximately $229.5 billion annually.

Because non-asset based companies select from various transportation options in routing customer shipments, they are often able to serve customers less expensively and with greater flexibility than their asset based competitors, who are typically focused on maximizing the utilization of their own captive fleets of trucks, aircraft and ships rather than the specific needs of the customer.

We believe there are several factors that are increasing demand for global logistics solutions.

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Copper Logistics, Incorporated (“Copper”), a Minneapolis, Minnesota based privately held company that provides a full range of domestic and international transportation and logistics services across North America, in 2015;

Lo mas Logistics (“Lomas”), a division of L.V.

Lomas Logistics (“Lomas”), a division of L.V.

Lomas Limited, a Canada based third-party logistics provider that operates in Ontario and British Columbia, in 2017;

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(“SVT”), a privately held company providing a full range of domestic and international cross-border services with Mexico, in 2017;

Alexandria, Virginia based Friedway Enterprises, Inc.

(“Friedway”) and Pittsburgh, Pennsylvania based CIC2, Inc.

(“CIC2”), historically operated the Company’s Adcom agency locations, in 2020.

We expect to grow our business organically and by completing acquisitions of other companies with complementary geographical and logistics service offerings.

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Freight forwarding .

As a freight forwarder, we operate as a non-asset based carrier providing domestic and intern ational air and ocean freight forwarding services.

Our freight forwarding operations involve obtaining shipment or material orders from customers, creating and delivering a wide range of logistics solutions to meet customers' specific requirements for tran sportation and related services, and arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems.

We arrange for transportation of our customers’ shipments via trucking companies, commercial airlines, ai r cargo carriers, ocean carriers and other asset and non-asset based third-party providers.

As a freight forwarder, we operate as a non-asset-based carrier providing domestic and international air and ocean freight forwarding services.

Our freight forwarding 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.

We arrange for transportation of our customers’ shipments via trucking companies, commercial airlines, air cargo carriers, ocean carriers and other asset 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 s easonality, freight volumes and other factors.

We charter cargo aircraft from time to time depending upon seasonality, freight volumes and other factors.

Freight brokerage .

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These systems are connected to Epicor and JD Edwards for accounting and financial reporting.

All brokerage systems are integrated with our online customer facing applications.

We continue to make gradual progress in migrating these various operating and financial reporting systems to a singular SAP-based platform.

We are taking a phased approach to these migrations and are currently working to transition our domestic and international freight forwarding services to our new SAP-based transportation management system.

Future phases will include the transition of our international freight forwarding services and our legacy brokerage transportation management and financial reporting systems to SAP.

We are taking a phased approach to these migrations and currently we continue to transition our domestic and international freight forwarding services to our new SAP-based transportation management system.

Future phases will include the transition of our legacy brokerage transportation management and financial reporting systems to SAP.

Sales and Marketing

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Through this collaboration, our strategic operating partners have the ability to focus on the operational and sales support aspects of the business without diverting costs or expertise to the structural aspect of their operations, providing our partners with the regional, national and global brand recognition that they would not otherwise be able to achieve by solely serving their local market.

We have no customers or strategic operating partners that separately account for more than 10% of our consolidated net revenues, although we do have a number of significant customers and strategic operating partner locations with volume and stature, the loss of one or more of which could negatively impact our ability to retain and service our customers.

We have no customers or strategic operating partners that separately account for more than 15% of our consolidated revenue, although we do have a number of significant customers and strategic operating partner locations with volume and stature, the loss of one or more of which could negatively impact our ability to retain and service our customers.

For the year ended June 30, 2020, revenue from one customer of our US operating segment represents approximately $127 million, or 14.8%, of the Company’s consolidated revenues.

Competition and Business Conditions

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The global transportation and logistics services industry is intensively competitive and is expected to remain so for the foreseeable future.

We will compete against asset based and other non-asset based third-party logistics companies, consultants, information technology vendors and shippers’ transportation departments.

We compete against asset based and other non-asset based third-party logistics 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.

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As of June 30, 2020, we have 603 employees, of which 579 are full time.

This headcount excludes furloughed employees.

None of these employees are covered by a collective bargaining agreement.

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Risks Related to our Business

COVID-19 or other health crises may adversely affect our business.

The COVID-19 pandemic continues to have widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices.

The pandemic has created significant volatility, uncertainty and economic disruption.

We are closely monitoring the impact of the pandemic on all aspects of our business, our customers, employees and business partners.

The overall demand for transportation services have been significantly impacted.

COVID-19 has adversely affected most of our operations, financial condition, and results of operations in the fourth quarter of our fiscal year 2020.

Beginning in April of 2020, we have experienced decreased customer demands in many parts of our business while seeing improvements in the demand in certain segments of business.

We have been working hard to mitigate the negative financial impacts of COVID-19 with a number of initiatives in response our declining revenues.

However, the relative effectiveness will depend on the severity and duration of the pandemic.

We are facing increased operational challenges from the need to protect employee health and safety.

We expect to continue to incur additional costs as we continue to implement operational changes in response to the pandemic.

We face significant risks related to the global economic downturn and severe reduction in revenues caused by the pandemic.

These risks include materially reduced demand for our services and challenges to the ongoing viability of some of our customers.

The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including:

the severity and duration of the outbreak;

governmental, business and other actions;

the impact of the pandemic on economic activity;

the effect on consumer confidence and spending, customer demand and buying patterns;

the health of and the effect on our workforce and our ability to meet staffing needs;

any impairment in value of our tangible or intangible assets that could be recorded as a result of weaker economic conditions;

and the potential effects on our internal controls including those over financial reporting as a result of changes in working environments.

Provisions for bad debt expense may increase given the financial difficulty faced by our customers, which could impact our ability to borrow under our revolving credit facility.

Due to the unprecedented and evolving nature of the COVID-19 pandemic, it remains very difficult to predict the extent of the impact on our industry generally and our business in particular.

We may face similar risks in connection with any future public health crises.

Risks related to our receipt of PPP funding.

In response to the COVID-19 pandemic and the resulting impact on our current and future operations we applied for funds under the Paycheck Protection Program (the “PPP”).

In April of 2020 we were approved for the amount of $5.9 million, which we received in May 2020.

The PPP loan application required us to certify, among other things, that the current economic uncertainty made the PPP loan request necessary to support our ongoing operations.

While we made this certification in good faith, the certification does not contain any objective criteria and is subject to interpretation.

In early 2020, the Small Business Administration provided guidance that it would be unlikely that a public company with substantial market value and access to capital markets would be able to make the required certification in good faith, and such company should be prepared to demonstrate to the Small Business Administration, upon request, the basis for its certification.

Further, the Secretary of the Treasury and the Small Business Administration Administrator announced that the government will conduct a full audit of all PPP loans of more than $2 million for which the borrower applies for forgiveness.

While we believe we have satisfied all eligibility requirements for the PPP loans, there is a risk that we may be deemed to ineligible to receive the PPP loans or in violation of any of the laws or governmental regulations that apply to us in connection with the PPP loans;

we may be required to repay the PPP loans in their entirety and we could be subject to additional penalties.

We need to maintain and expand our existing strategic operating partner network to increase revenues.

We sell our services through Company-owned locations operating under the Radiant and Wheels brands and through a network of independently-owned strategic operating partners throughout North America operating under the Airgroup, Adcom, DBA and Service by Air brands.

For the years ended June 30, 2019 and 2018, approximately 56% and 59% of our consolidated net revenues were derived through our strategic operating partners.

We sell our services through Company-owned locations operating under the Radiant brands and through a network of independently owned strategic operating partners throughout North America operating under the Airgroup, Adcom, DBA and Service by Air brands.

For the years ended June 30, 2020 and 2019, approximately 55% and 56% of our consolidated net revenues (this is a non-GAAP measure, see further discussion and reconciliation to a GAAP measure in Item 7) was derived through our strategic operating partners.

We believe our strategic operating partners will remain a critical component to our success for the foreseeable future.

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This risk is often accentuated upon the acquisition of a new agency-based network.

We have a number of customers and strategic operating partner locations with significant volume and stature, however, no single customer or strategic operating partner location represents more than 10% of our consolidated net revenues.

We have a number of customers and strategic operating partner locations with significant volume and stature;

however, no single customer or strategic operating partner location represents more than 15% of our consolidated revenue.

We cannot be certain that we will be able to maintain and expand our existing strategic operating partner relationships or enter into new strategic operating partner relationships, or that new or renewed strategic operating partner relationships will be available on commercially reasonable terms.

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Based on legacy contracts assumed upon acquisition, some strategic operating partners are not required to maintain a security deposit, however, they are still responsible for deficits and their strategic operating partner agreements provide that we may withhold all or a portion of future commissions payable to the strategic operating partner in satisfaction of any deficit.

As of June 30, 2019, approximately $2.4 million was owed to us by our strategic operating partners, of which, $1.4 million was owed to us by our former British Columbia operating partner and from whom we have secured a Judgment of Confession and are in the process of collection proceedings.

The unpaid amounts represented by the Judgement of Confession are included in accounts receivable in the condensed consolidated balance sheet as of June 30, 2019, net of an allowance for doubtful accounts of approximately $700.

However, to the extent any of these strategic operating partners cease operations or are otherwise unable to replenish these deficit accounts, we would be at risk of loss for any such amount.

As of June 30, 2020, approximately $0.9 million was owed to us by our strategic operating partners.

To the extent any of these strategic operating partners cease operations or are otherwise unable to replenish these deficit accounts, we would be at risk of loss for any such amount.

We include such amounts in the allowance for doubtful accounts when it is probable the amounts owed will not be collected.

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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, increases in the cost of fuel, taxes and labor, changes in the financial stability or operating capabilities of carriers, and other

factors not within our control.

Reductions in airfreight or ocean freight capacity could negatively impact our yields.

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In addition, we have other primarily variable expenses that are fixed for a period of time, and we may not be able to adequately adjust them in a period of rapid change in market demand.

Higher carrier prices may result in decreased net revenue margin.

Higher carrier prices may result in decreased net revenues.

Carriers can be expected to charge higher prices if market conditions warrant, or to cover higher operating expenses.

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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 connecti on with our services will not change in the future or exceed our insurance levels.

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 such claims could adversely impact our financial condition and results of operations.

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However, not all claims are covered, and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute.

For example, we are currently defending an employment-based claim with a wage and hour component that would not be covered by our insurance (description included in this report).

We are unable to determine the likelihood of a successful defense or the ultimate amount of any damages that would be awarded.

To the extent we experience claims that are uninsured, exceed our coverage limits, or involve significant aggregate use of our self-insured retention amounts, the expenses could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the quarter in which the amounts are accrued.

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Whether internally developed or purchased, it is possible that the user of these technologies could be claimed to infringe upon or violate the intellectual property rights of third parties.

In the event that a claim is made against us by a third-party for the infringement of intellectual property rights, any settlement

or advers e judgment against us either in the form of increased costs of licensing or a cease and desist order in using the technology could have an adverse effect on us and our results of operations.

In the event that a claim is made against us by a third-party for the infringement of intellectual property rights, any settlement or adverse judgment against us either in the form of increased costs of licensing or a cease and desist order in using the technology could have an adverse effect on us and our results of operations.

We also rely on a combination of intellectual property rights, including copyrights, trademarks, domain names, trade secrets, intellectual property licenses and other contractual rights, to establish and protect our intellectual property and technology.

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Our loans and credit facilities contain financial covenants that may limit current availability and impose ongoing operational limitations and risk of compliance.

We currently maintain (i) a USD$75.0 million revolving credit facility (the “Senior Credit Facility”) with Bank of America, N.A., on its own behalf and as agent to the other lenders named therein, currently consisting of the Bank of Montreal (as the initial member of the syndicate under such loan), pursuant to an Amended and Restated Loan and Security Agreement, as amended, (ii) a CAD$29.0 million senior secured Canadian term loan from Integrated Private Debt Fund IV LP (“IPD IV”) pursuant to a CAD$29,000,000 Credit Facilities Loan Agreement (the “IPD IV Loan Agreement”), and (iii) a CAD$10.0 million senior secured Canadian term loan from Integrated Private Debt Fund V LP (“IPD V”) pursuant to a CAD$10,000,000 Credit Facilities Loan Agreement (the “IPD V Loan Agreement” and, together with the IPD IV Loan Agreement, the “IPD Loan Agreements”).

We currently maintain (i) a USD$150.0 million revolving credit facility (the “Revolving Credit Facility”) with Bank of America Securities, Inc.

as sole book runner and sole lead arranger, Bank of Montreal Chicago Branch, as lender and syndication agent, MUFG Union Bank, N.A as lender and documentation agent and Bank of America, N.

A., KeyBank National Association and Washington Federal Bank, National Association as lenders (such named lenders are collectively referred to herein as “Lenders”) , pursuant to a Credit Agreement dated as of March 13, 2020 , (ii) a CAD$29.0 million senior secured Canadian term loan from Fiera Private Debt Fund IV LP (“FPD IV” formerly, Integrated Private Debt Fund IV LP) pursuant to a CAD$29,000,000 Credit Facilities Loan Agreement (the “FPD IV Loan Agreement”), and (iii) a CAD$10.0 million senior secured Canadian term loan from Fiera Private Debt Fund V LP (“FPD V” formerly, Integrated Private Debt Fund V LP) pursuant to a CAD$10,000,000 Credit Facilities Loan Agreement (the “FPD V Loan Agreement” and, together with the FPD IV Loan Agreement, the “FPD Loan Agreements”).

Repayment of the foregoing credit facilities is secured by our assets and the assets of our subsidiaries, including, without limitation, all of the capital stock of our subsidiaries.

Under the terms of the foregoing credit facilities, we are required to comply with certain financial covenants, depending on the type of loan facility and whether certain conditions are triggered.

In addition, under the IPD Loan Agreements, we are required to maintain (i) a fixed charge coverage ratio of 1.1 to 1.0, (ii) a debt service coverage ratio of at least 1.2 to 1.0 and (iii) a senior debt to EBITDA ratio of at least 3.0 to 1.0.

For general borrowings under the Revolving Credit Facility, the Company is subject to the maximum consolidated leverage ratio of 3.00 and minimum consolidated fixed charge coverage ratio of 1.25.

Additional minimum availability requirements and financial covenants apply in the event the Company seeks to use advances under the Revolving Credit Facility to pursue acquisitions or repurchase its common stock.

Our compliance with the financial covenants of our credit facilities is particularly important given the materiality of such facilities to our day-to-day operations and overall acquisition strategy.

If we fail to comply with these covenants and are unable to secure a waiver or other relief, our financial condition would be materially 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.

Under our credit facilities, we are prohibited from declaring and paying dividends unless:

(i) there are no existing events of default under the credit facility or an event of default would not be caused by the declaration or payment of such dividend, and (ii) upon giving pro forma effect to the dividend, (1) the amount available under the credit facility after the pro forma effect of such dividend is equal to the greater of 15% of the U.S.

borrowing base under the Senior Credit Facility or $15.0 million, and (2) U.S.

availability is at least $10.0 million.

We opera te with a significant amount of indebtedness, which is secured by substantially all of our assets and subject to variable interest rates and restrictive covenants.

Accordingly, we employ EBITDA and adjusted EBITDA as management tools to measure our historical financial performance and as a benchmark for future financial flexibility.

We operate with a significant amount of indebtedness, which is secured by substantially all of our assets and subject to variable interest rates and restrictive covenants.

Our substantial indebtedness could have adverse consequences, such as:

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We provide services to customers engaged in international commerce and intend to grow our international business in the coming years.

For the years ended June 30, 2019 and 2018, international transportation revenue accounted for 38% and 36% of our net revenue, respectively.

International transportation revenue is defined as any shipment with an initiation or destination point outside of

the United States.

For the years ended June 30, 2020 and 2019, international transportation revenue accounted for 40% and 38% of our net revenues, respectively.

International transportation revenue is defined as any shipment with an initiation or destination point outside of the United States.

All factors that affect international trade have the potential to expand or contract our international business and impact our operating results.

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We have grown rapidly and face additional challenges of disparate systems and geographically dispersed management.

Our internal controls over financial reporting and disclosure are strained at times due to acquisitions and other corporate development activities.

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of contr ols, or fraud.

Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

If we fail to maintain the adequacy of our internal controls, including any failure to impl ement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, and we could fail to meet our financial reporting obligations.

Our internal controls over financial reporting and disclosure are strained at times due to COVID-19, acquisitions, and other corporate development activities.

Effective internal controls are necessary for us to provide reliable and accurate financial statements and to effectively prevent fraud.

As further described in Part II Item 9A “Controls and Procedures” of this Annual Report, management has concluded that, because of a material weakness in internal control over financial reporting related to ineffective assessment of impairment of goodwill and intangibles, our disclosure controls and procedures were not effective as of June 30, 2020.

We are currently working on the remediation of this material weakness.

We cannot be certain that we will be able to prevent future significant deficiencies or material weaknesses.

Any remediation efforts additionally may require us to incur unanticipated costs for various professional fees and services.

If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, and we could fail to meet our financial reporting obligations.

Material inaccuracies in our financial statements would decrease the reliability of our financial reporting, which could adversely affect our business and reduce our stock price.

Risks Related to our Acquisition Strategy

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These conditions include the following:

(i) the absence of an event of default under the Senior Credit Facility, (ii) the acquisition must be consensual;

(iii) the company to be acquired must be in the transportation and logistics industry, located in the United States, Canada or certain other approved jurisdictions, and have a positive EBITDA for the 12 month period most recently ended prior to such acquisition, (iv) no debt or liens may be incurred, assumed or result from the acquisition, subject to limited exceptions, (v), the pro forma fixed charge coverage ratio is greater than or equal to 1.1 to 1.0, and (vi) after giving effect for the funding of the acquisition, we must have availability under the Senior Credit Facility of at least the greater of 15% of the U.S.-based borrowing base and Canadian-based borrowing base or $15.0 million, and U.S.

availability of at least $10.0 million.

In addition, under the IPD Loan

Agreements, the aggregate cash consideration shall not exceed $10.0 million for any single transaction and $25.0 million in the aggregate in any fiscal year.

(i) no default shall have occurred or would result from such acquisition, (ii) the property acquired is used or useful in the same or a similar line of business as Radiant's, (iii) in the case of an acquisition of the equity interests, the board of directors of the target business shall have duly approved such Acquisition, (iv) we shall be in compliance with the financial covenants after giving effect to such acquisition and the consolidated leverage ratio shall be less than 3.25 to 1.00 for acquisitions valued above $25 million and 2.75 to 1.00 for any other acquisitions, (v) the representations and warranties made by Radiant in each loan document shall be true and correct, (vi) if such transaction involves the purchase of an interest in a partnership between Radiant as a general partner and entities unaffiliated with the borrower as the other partners, such transaction shall be effected by having such equity interest acquired by a corporate holding company directly or indirectly wholly owned by Radiant newly formed for the sole purpose of effecting such transaction, and (vii) immediately after giving effect to such acquisition, there shall be at least $25 million of availability under the Revolving Credit Facility.

In the event we are not able to satisfy the conditions of our credit facilities in connection with a proposed acquisition, we must either forego the acquisition, obtain the consent of the lenders, or retire the credit facility.

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These fluctuations are often unrelated to the operating performance of a particular company.

These broad market fluctuations may cause decline s in the market price of our common stock.

These broad market fluctuations may cause declines in the market price of our common stock.

Volatility in the market price of our common stock may make it difficult for you to resell shares of our common stock when you want or at attractive prices.

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Trading in our common stock has been limited.

Although our common stock is traded on the NYSE American, it remains relatively illiquid, or “thinly traded”, as compared to the volume of trading activity associated with larger companies whose shares trade on the larger national exchanges.

Although our common stock is traded on the NYSE American, it is traded not as frequently as compared to the volume of trading activity associated with larger companies whose shares trade on the larger national exchanges.

Because of this limited liquidity, stockholders may be unable to sell their shares at the prices or volumes they desire.

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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 have completed many acquisitions which often include the issuance of additional shares pursuant to the purchase agreements.

During the fiscal year ended June 30, 2019, we issued approximately 37,000 unregistered shares of our common stock as part of the purchase price, or associated with the financing of a transaction.

We have completed many acquisitions that often include the issuance of additional shares pursuant to the purchase agreements.

During the fiscal year ended June 30, 2020, we issued approximately 45,000 unregistered shares of our common stock as part of the purchase price or associated with the financing of an acquisition.

In addition, we may issue additional shares in connection with such acquisitions upon the achievement of certain earn-out thresholds or in connection with future acquisitions as part of the purchase consideration.

The availability of additional shares for sale to the public under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”) 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 we

deem appropriate or to use our shares as currency for future acquisitions which will make it more difficult to execute our acquisition strategy.

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 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 may result in additional dilution to our existing stockholders.

4 unchanged sentences

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, which could result in diluting the interests of our existing stockholders.

The exercise or conversion of our outstanding options, warrants or other convertible securities or any derivative securities we issue in the future will result in the dilution of the ownership interests of our existing stockholders and may create downward pressure on the trading price of our common stock.

The exercise or conversion of our outstanding options, or other convertible securities or any derivative securities we issue in the future will result in the dilution of the ownership interests of our existing stockholders and may create downward pressure on the trading price of our common stock.

We are currently authorized to issue 100 million shares of common stock.

As of August 30, 2019, we had 49,669,091 outstanding shares of common stock.

We may in the future issue up to 2,330,163 additional shares of our common stock upon exercise of existing options.

As of September 1, 2020 , we had 49,560,429 outstanding shares of common stock.

As of September 1, 2020, w e may in the future issue up to 1,924,861 additional shares of our common stock upon exercise of existing stock options.

We may issue shares of preferred stock with greater rights than our common stock.

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business