RADIANT LOGISTICS, INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 35 Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Radiant Logistics, Inc. Bellevue, Washington Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Radiant Logistics, Inc. (the “Company”) as of June 30, 2020, the related consolidated statements of comprehensive income, changes in equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2020, and the results of its operations and its cash flows for the year then ended , in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated September 28, 2020 expressed an adverse opinion thereon. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases in the year ended June 30, 2020 due to the adoption of the Accounting Standards Codification Topic 842, “Leases.” Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /S/ BDO USA, LLP We have served as the Company's auditor since 2019. Seattle, Washington September 28, 2020 36 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors Radiant Logistics, Inc. Bellevue, Washington Opinion on Internal Control over Financial Reporting We have audited Radiant Logistics, Inc.’s (the “Company’s”) internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of June 30, 2020, based on the COSO criteria. We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of June 30, 2020, the related consolidated statements of comprehensive income, changes in equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated September 28, 2020 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A. Controls and Procedures.” Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness regarding management’s failure to design and maintain effective controls over the goodwill and intangible asset impairment analyses has been identified and is described in management’s assessment. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and this report does not affect our report dated September 28, 2020 on those consolidated financial statements. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 37 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. /S/ BDO USA, LLP Seattle, Washington September 28, 2020 38 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders Radiant Logistics, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Radiant Logistics, Inc. and subsidiaries ("the Company") as of June 30, 2019, the related consolidated statements of comprehensive income, changes in equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2019, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. Basis for Opinion The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /S/ PETERSON SULLIVAN LLP We served as the Company's auditor since 2006 until 2019. Seattle, Washington September 12, 2019 39 RADIANT LOGISTICS, INC. Consolidated Balance Sheets June 30, (In thousands, except share and per share data) 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 34,841 $ 5,420 Accounts receivable, net of allowance of $ 1,990 and $ 1,887 , respectively 71,838 93,123 Contract assets 16,312 17,777 Income tax receivable 780 506 Prepaid expenses and other current assets 16,817 8,066 Total current assets 140,588 124,892 Property, technology, and equipment, net 18,712 20,127 Goodwill 72,199 65,389 Intangible assets, net 51,192 55,742 Operating lease right-of-use assets 12,580 — Deposits and other assets 4,769 1,560 Total other long-term assets 140,740 122,691 Total assets $ 300,040 $ 267,710 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 65,003 $ 74,097 Operating partner commissions payable 9,131 12,891 Accrued expenses 6,538 6,224 Current portion of notes payable 3,800 3,687 Current portion of operating lease liability 6,121 — Current portion of finance lease liability 688 683 Current portion of contingent consideration 2,127 375 Other current liabilities 308 465 Total current liabilities 93,716 98,422 Notes payable, net of current portion 48,091 30,047 Operating lease liability, net of current portion 7,192 — Finance lease liability, net of current portion 2,476 3,161 Contingent consideration, net of current portion 2,813 — Deferred income taxes 7,484 7,838 Deferred rent liability — 862 Other long-term liabilities 93 100 Total long-term liabilities 68,149 42,008 Total liabilities 161,865 140,430 Commitments and contingencies (Note 15) Stockholders' equity: Common stock, $ 0.001 par value, 100,000,000 shares authorized; 50,188,486 and 49,678,262 shares issued, and 49,555,639 and 49,586,464 shares outstanding, respectively 32 31 Additional paid-in capital 102,214 100,186 Treasury stock, at cost, 632,847 and 91,798 shares, respectively ( 2,749 ) ( 253 ) Retained earnings 37,424 26,883 Accumulated other comprehensive income 445 187 Total Radiant Logistics, Inc. stockholders’ equity 137,366 127,034 Non-controlling interest 809 246 Total equity 138,175 127,280 Total liabilities and equity $ 300,040 $ 267,710 The accompanying notes are an integral part of these consolidated financial statements. 40 RADIANT LOGISTICS, INC. Consolidated Statements of Comprehensive Income Year Ended June 30, (In thousands, except share and per share data) 2020 2019 Revenues $ 855,197 $ 890,517 Operating expenses: Cost of transportation and other services 645,824 660,416 Operating partner commissions 85,821 102,553 Personnel costs 57,679 60,375 Selling, general and administrative expenses 29,548 28,463 Depreciation and amortization 16,571 15,209 Transition, lease termination, and other costs 500 ( 11 ) Change in fair value of contingent consideration 1,752 ( 1,207 ) Total operating expenses 837,695 865,798 Income from operations 17,502 24,719 Other income (expense): Interest income 59 50 Interest expense ( 2,885 ) ( 3,023 ) Foreign currency transaction gain (loss) ( 125 ) 160 Change in fair value of interest rate swap contracts 600 — Other 370 274 Total other expense ( 1,981 ) ( 2,539 ) Income before income taxes 15,521 22,180 Income tax expense ( 3,157 ) ( 4,800 ) Net income 12,364 17,380 Less: net income attributable to non-controlling interest ( 1,823 ) ( 1,034 ) Net income attributable to Radiant Logistics, Inc. 10,541 16,346 Less: preferred stock dividends — ( 956 ) Less: issuance costs for preferred stock redemption — ( 1,659 ) Net income attributable to common stockholders $ 10,541 $ 13,731 Other comprehensive income: Foreign currency translation gain 258 1 Comprehensive income $ 12,622 $ 17,381 Income (loss) per share attributable to common stockholders: Basic $ 0.21 $ 0.28 Diluted $ 0.21 $ 0.27 Weighted average common shares outstanding: Basic 49,600,506 49,497,007 Diluted 51,091,799 51,082,652 The accompanying notes are an integral part of these consolidated financial statements. 41 RADIANT LOGISTICS, INC. Consolidated Statements of Changes in Equity RADIANT LOGISTICS, INC. STOCKHOLDERS' EQUITY (In thousands, except share and per share data) Preferred Stock Common Stock Additional Paid-in Treasury Retained Accumulated Other Comprehensive Total Radiant Logistics, Inc. Stockholders' Non- Controlling Total Shares Amount Shares Amount Capital Stock Earnings Income (Loss) Equity Interest Equity Balance as of June 30, 2018 839,200 $ 1 49,420,109 $ 31 $ 117,968 $ ( 253 ) $ 15,539 $ 186 $ 133,472 $ 142 $ 133,614 Cumulative effect adjustment, upon adoption of ASC 606 on July 1, 2018 — — — — — — ( 335 ) — ( 335 ) — ( 335 ) Cumulative effect adjustment, upon adoption of ASU 2016-16 on July 1, 2018 — — — — — — ( 1,705 ) — ( 1,705 ) — ( 1,705 ) Share-based compensation — — — — 1,612 — — — 1,612 — 1,612 Issuance of common stock to former shareholders of acquired businesses — — 36,806 — 203 — — — 203 — 203 Issuance of common stock upon exercise of stock options — — 129,549 — ( 277 ) — — — ( 277 ) — ( 277 ) Preferred dividends paid — — — — — — ( 1,303 ) — ( 1,303 ) — ( 1,303 ) Redemption of preferred stock ( 839,200 ) ( 1 ) — — ( 19,320 ) — ( 1,659 ) — ( 20,980 ) — ( 20,980 ) Distribution to non-controlling interest — — — — — — — — — ( 930 ) ( 930 ) Net income — — — — — — 16,346 — 16,346 1,034 17,380 Other comprehensive loss — — — — — — — 1 1 — 1 Balance as of June 30, 2019 — $ — 49,586,464 $ 31 $ 100,186 $ ( 253 ) $ 26,883 $ 187 $ 127,034 $ 246 $ 127,280 Issuance of common stock to shareholders of acquired business — — 45,086 — 250 — — — 250 — 250 Repurchase of common stock — — ( 541,049 ) — — ( 2,496 ) — — ( 2,496 ) — ( 2,496 ) Issuance of common stock upon vesting of restricted stock awards, net of taxes withheld and paid — — 176,730 — ( 326 ) — — — ( 326 ) — ( 326 ) Issuance of common stock upon exercise of stock options, net of taxes withheld and paid — — 288,408 1 441 — — — 442 — 442 Distribution to non-controlling interest — — — — — — — — — ( 1,260 ) ( 1,260 ) Share-based compensation — — — — 1,663 — — — 1,663 — 1,663 Net income — — — — — — 10,541 — 10,541 1,823 12,364 Other comprehensive income — — — — — — — 258 258 — 258 Balance as of June 30, 2020 — $ — 49,555,639 $ 32 $ 102,214 $ ( 2,749 ) $ 37,424 $ 445 $ 137,366 $ 809 $ 138,175 The accompanying notes are an integral part of these consolidated financial statements. 42 RADIANT LOGISTICS, INC. Consolidated Statements of Cash Flows Year Ended June 30, (In thousands, except share and per share data) 2020 2019 OPERATING ACTIVITIES: Net income $ 12,364 $ 17,380 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Share-based compensation 1,663 1,612 Amortization of intangible assets 10,259 10,009 Depreciation and amortization of property, technology, and equipment 6,312 5,200 Deferred income tax benefit ( 411 ) ( 674 ) Amortization of debt issuance costs 305 226 Change in fair value of contingent consideration 1,752 ( 1,207 ) Transition, lease termination, and other costs 500 ( 11 ) Gain on disposal of property, technology, and equipment ( 103 ) ( 11 ) Change in allowance for doubtful accounts 102 184 CHANGES IN OPERATING ASSETS AND LIABILITIES NET OF BUSINESS ACQUISITIONS: Accounts receivable 20,605 11,627 Contract assets 1,428 16,236 Income tax receivable ( 266 ) 1,598 Prepaid expenses, deposits and other assets ( 2,983 ) ( 1,787 ) Accounts payable ( 9,618 ) ( 12,090 ) Operating partner commissions payable ( 3,768 ) ( 472 ) Accrued and other liabilities ( 7,981 ) ( 7,381 ) Payment of contingent consideration ( 280 ) ( 626 ) Net cash provided by operating activities 29,880 39,813 INVESTING ACTIVITIES: Payments to acquire businesses ( 9,150 ) — Payments to acquire intangible assets — ( 262 ) Purchases of property, technology, and equipment ( 5,175 ) ( 6,413 ) Proceeds from sale of property, technology, and equipment 182 474 Net cash used for investing activities ( 14,143 ) ( 6,201 ) FINANCING ACTIVITIES: Proceeds from revolving credit facility 586,316 859,193 Repayment of revolving credit facility ( 570,105 ) ( 866,949 ) Proceeds from notes payable 5,925 — Payments of debt issuance costs ( 1,878 ) — Repayments of notes payable and finance lease liability ( 4,281 ) ( 3,673 ) Repurchases of common stock ( 2,496 ) — Payments of contingent consideration ( 47 ) ( 164 ) Payments of preferred stock dividends — ( 1,303 ) Payment for preferred stock redemption — ( 20,980 ) Distribution to non-controlling interest ( 1,260 ) ( 930 ) Proceeds from exercise of stock options 625 — Payments of employee tax withholdings related to vesting of restricted stock awards ( 326 ) — Payments of employee tax withholdings related to cashless exercise of stock options ( 184 ) ( 277 ) Net cash provided by (used for) financing activities 12,289 ( 35,083 ) Effect of exchange rate changes on cash and cash equivalents 1,395 ( 101 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 29,421 ( 1,572 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,420 6,992 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 34,841 $ 5,420 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Income taxes paid $ 3,852 $ 4,373 Interest paid $ 2,626 $ 2,804 The accompanying notes are an integral part of these consolidated financial statements. 43 RADIANT LOGISTICS, INC. Consolidated Statements of Cash Flows (continued) Supplemental disclosure of non-cash investing and financing activities: In January 2019, the Company issued 36,806 shares of common stock at a fair value of $ 5.51 per share in satisfaction of $ 203 of earn-out payments related to Highways and Skyways, Inc., resulting in a decrease to the current portion of contingent consideration, and an increase to common stock and additional paid-in capital of $ 203 . In June 2019, $ 224 was recorded as an increase to accrued expenses and intangible assets for the purchase of a customer list for which the purchase price was not paid before year-end. In February 2020, the Company issued 45,086 shares of common stock at fair value in satisfaction of $ 250 of consideration towards the acquisition of Friedway Enterprises, Inc. and CIC2, Inc. The accompanying notes are an integral part of these consolidated financial statements. 44 RADIANT LOGISTICS, INC. Notes to the Consolidated Financial Statements (Dollars in thousands, except share and per share data) NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS Radiant Logistics, Inc. and its consolidated subsidiaries (the “Company”) operates as a third-party logistics company, providing multi-modal transportation and logistics services primarily to customers based in the United States and Canada. The Company services a large and diversified account base, which it supports from an extensive multi-brand network of over 100 operating locations (including 20 Company-owned offices) across North America as well as an integrated international service partner network located in other key markets around the globe. As a third-party logistics company, the Company has a vast carrier network asset-based transportation companies, including motor carriers, railroads, airlines and ocean lines. Through its operating locations across North America, the Company offers domestic and international air and ocean freight forwarding services and freight brokerage services including truckload services, less than truckload services; and intermodal services, which is the movement of freight in trailers or containers by combination of truck and rail. The Company’s primary transportation services involve arranging shipments, on behalf of its customers, of materials, products, equipment and other goods that are generally larger than shipments handled by integrated carriers of primarily small parcels, such as FedEx, DHL and UPS, including arranging and monitoring all aspects of material flow activity utilizing advanced information technology systems. The Company also provides other value-added supply chain services, including order fulfillment, inventory management, and warehouse and distribution services (collectively, “MM&D” services), and customs brokerage services to complement its core transportation service offering. 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. Due to the unprecedented and evolving nature of the COVID-19 pandemic , many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods. NOTE 2 - RECENT ACCOUNTING GUIDANCE Recent Accounting Guidance Not Yet Adopted In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) , which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments are effective as of March 12, 2020 and applies to contract modifications made before December 31, 2022. Company is assessing the impact of this guidance on its consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-15 (Subtopic 350-40), Intangibles - Goodwill and Other - Internal-Use Software - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract . This ASU aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for the Company in the first quarter of fiscal year 2021, and early adoption is permitted. The adoption of ASU 2018-15 is not expected to have a material impact on the Company's future consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement , which modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for the Company in the first quarter of fiscal year 2021, and earlier adoption is permitted. The Company is assessing the impact of this guidance on its consolidated financial statements and disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance: ASU 2018-19, 2019-04, 2019-05, and 2020-03 (collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. Topic 326 is effective for the Company in the first quarter of fiscal year 2024. The Company is currently evaluating the impact of the standard on its consolidated financial statements and disclosures. 45 Recently Adopted Accounting Guidance ASC 842 - Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20, and ASU 2019-01 (collectively, Topic 842). Topic 842 requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use (“ROU”) assets. Companies are required to use a modified retrospective approach on adoption, with the option of applying the requirements of the standard either (1) retrospectively to each prior comparative reporting period presented or (2) retrospectively at the beginning of the period of adoption, through a cumulative-effect adjustment to retained earnings. The Company adopted the standard on July 1, 2019. The Company transitioned using the modified retrospective approach at the beginning of the period of adoption. Consequently, periods before July 1, 2019 will continue to be reported in accordance with the prior accounting guidance in ASC 840. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical lease classification for leases that commenced before July 1, 2019. The disclosure requirements of ASC 842 are included within Note 5. Adoption of the standard had no impact on our consolidated statements of comprehensive income and consolidated statements of cash flows. Adoption of Topic 842 resulted in increases in assets and liabilities in the Company’s consolidated balance sheets as follows: (In thousands) Balance as of June 30, 2019 Transition Adjustment Balance as of July 1, 2019 Assets Operating lease right-of-use assets $ — $ 16,637 $ 16,637 Liabilities Current portion of operating lease liability — 6,711 6,711 Current portion of finance lease liability 683 — 683 Operating lease liability, net of current portion — 10,788 10,788 Finance lease liability, net of current portion 3,161 — 3,161 Deferred rent liability 862 ( 862 ) — NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) Principles of Consolidation The consolidated financial statements include the accounts of Radiant Logistics, Inc. and its wholly-owned subsidiaries as well as a single variable interest entity, Radiant Logistics Partners, LLC (“RLP”), which is 40 % owned by Radiant Global Logistics, Inc. (“RGL”) and 60 % owned by Radiant Capital Partners, LLC (“RCP”, see Note 11), an entity owned by the Company’s Chief Executive Officer. All significant intercompany balances and transactions have been eliminated. Non-controlling interest in the consolidated balance sheets represents RCP’s proportionate share of equity in RLP. Net income (loss) of non-wholly owned consolidated subsidiaries or variable interest entities is allocated to the Company and the holder(s) of the non-controlling interest in proportion to their percentage ownership. b) Use of Estimates The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results reported in future periods may be based upon amounts that could differ from these estimates due to the inherent uncertainty involved in making estimates and risks and uncertainties, including uncertainty in the current economic environment due to the recent outbreak of COVID-19. c) Cash and Cash Equivalents The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Cash equivalents consist of highly liquid investments with original maturities of three months or less. 46 d) Accounts Receivable The Company’s receivables are recorded when billed and represent amounts owed by third-party customers, as well as amounts owed by strategic operating partners. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. The Company evaluates the collectability of accounts receivable on a customer-by-customer basis. The Company records an allowance for doubtful accounts to reduce the net recognized receivable to an amount the Company believes will be reasonably collected. The allowance for doubtful accounts is determined from the analysis of the aging of the accounts receivable, historical experience and knowledge of specific customers. The Company derives a substantial portion of its revenue through independently owned strategic operating partner locations operating under various Company brands. Each strategic operating partner is responsible for some or all of the collection of the accounts related to the underlying customers being serviced by such strategic operating partner. To facilitate this arrangement, based on contractual agreements, certain strategic operating partners are required to maintain a bad debt reserve in the form of a security deposit with the Company. The Company charges each strategic operating partner’s bad debt reserve account for any accounts receivable aged beyond 90 days along with any other amounts owed to the Company by strategic operating partners. However, the bad debt reserve account may carry a deficit balance when amounts charged to this reserve account exceed amounts otherwise available. In these circumstances, a deficit bad debt reserve account is recognized as a receivable in the Company’s financial statements. Some strategic operating partners are not required to establish a bad debt reserve; however, they are still responsible to make up for any deficits and the Company may withhold all or a portion of future commissions payable to the strategic operating partner to satisfy any deficit balance. Currently, a number of the Company’s strategic operating partners have a deficit balance in their bad debt reserve accounts. The Company expects to replenish these funds through the future business operations of these strategic operating partners or as their customers satisfy the amounts payable to the Company. However, to the extent any of these strategic operating partners were to cease operations or otherwise be unable to replenish these deficit accounts, the Company would be at risk of loss for any such amounts and generally would reserve for them. e) Property, Technology, and Equipment Property, technology, and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets. Upon retirement or other disposition of these assets, the cost and related accumulated depreciation or amortization are removed from the accounts and the resulting gain or loss, if any, is reflected in other income or expense. Expenditures for maintenance, repairs and renewals of minor items are expensed as incurred. Major renewals and improvements are capitalized. f) Goodwill Goodwill represents the excess acquisition cost of an acquired entity over the estimated fair values assigned to the net tangible and identifiable intangible assets acquired. The Company performs its annual goodwill impairment test as of April 1 of each year or more frequently if facts or circumstances indicate that the carrying amount may not be recoverable. An entity has the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount prior to performing a quantitative impairment test. The qualitative assessment evaluates various factors, such as macro-economic conditions, industry and market conditions, cost factors, relevant events and financial trends that may impact the fair value of the reporting unit. If it is determined that the estimated fair value of the reporting unit is more-likely-than-not less than its carrying amount, including goodwill, a quantitative assessment is required. Otherwise, no further analysis is required. If a quantitative assessment is performed, a reporting unit’s fair value is compared to its carrying value. A reporting unit’s fair value is determined based upon consideration of various valuation methodologies, including the income approach, which utilizes projected future cash flows discounted at rates commensurate with the risks involved, and multiples of current and future earnings. If the fair value of a reporting unit is less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. During the fourth quarter of fiscal year 2020, as a result of the significant turmoil related to COVID-19, the Company concluded that sufficient indicators existed to require it to perform an impairment assessment as of June 30, 2020, see Note 7. 47 g) Long-Lived Assets Long-lived assets, such as property, technology, and equipment, and definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company compares the undiscounted expected future cash flows to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent the carrying amount of the asset or asset group exceeds the fair value. Fair values of long-lived assets are determined through various techniques, such as applying probability weighted, expected present value calculations to the estimated future cash flows using assumptions a market participant would utilize, or through the use of a third-party independent appraiser or valuation specialist. No impairment losses of long-lived assets were recorded during the years ended June 30, 2020 and 2019. Intangible assets consist of customer related intangible assets, trade names and trademarks, and non-compete agreements arising from the Company’s acquisitions. Customer related intangible assets are amortized using the straight-line method over a period of up to ten years , trademarks and trade names are amortized using the straight-line method over 15 years, and non-compete agreements are amortized using the straight-line method over the term of the underlying agreements. h) Business Combinations The Company accounts for business acquisitions using the acquisition method as required by FASB ASC Topic 805, Business Combinations . The assets acquired and liabilities assumed in business combinations, including identifiable intangible assets, are recorded based upon their estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired is recorded as goodwill. Acquisition expenses are expensed as incurred. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed as of the acquisition date, the estimates are inherently uncertain and subject to refinement. The fair values of intangible assets are generally estimated using a discounted cash flow approach with Level 3 inputs. The estimate of fair value of an intangible asset is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To estimate fair value, the Company generally uses risk-adjusted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes the level and timing of cash flows appropriately reflects market participant assumptions. For acquisitions that involve contingent consideration, the Company records a liability equal to the fair value of the contingent consideration obligation as of the acquisition date. The Company determines the acquisition date fair value of the contingent consideration based on the likelihood of paying the additional consideration. The fair value is generally estimated using projected future operating results and the corresponding future earn-out payments that can be earned upon the achievement of specified operating objectives and financial results by acquired companies using Level 3 inputs and the amounts are then discounted to present value. These liabilities are measured quarterly at fair value, and any change in the fair value of the contingent consideration liability is recognized in the consolidated statements of comprehensive income. Amounts are generally due annually on November 1 st , and 90 days following the quarter of the final earn-out period of each respective acquisition. During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recognized in the consolidated statements of comprehensive income. i) Revenue Recognition The Company’s revenues are primarily from transportation services, which includes providing for the arrangement of freight, both domestically and internationally, through modes of transportations such as air freight, ocean freight, truckload, less than truckload and intermodal. The Company generates its transportation services revenue by purchasing transportation from direct carriers and reselling those services to its customers. 48 In general, each shipment transaction or service order constitutes a separate contract with the customer. A performance obligation is created once a customer agreement with an agreed upon transaction price exists. The transaction price is typically fixed and not contingent upon the occurrence or non-occurrence of any other event. The transaction price is generally due 30 to 45 days from the date of invoice. The Company’s transportation transactions provide for the arrangement of the movement of freight to a customer’s destination. The transportation services, including certain ancillary services, such as loading/unloading, freight insurance and customs clearance, that are provided to the customer represent a single performance obligation as these promises aren’t distinct in the context of the contract. This performance obligation is satisfied over time and recognized in revenue upon the transfer of control of the services over the requisite transit period as the customer’s goods move from origin to destination. The Company determines the period to recognize revenue in transit based upon the departure date and the delivery date, which may be estimated if delivery has not occurred as of the reporting date. Determination of the transit period and the percentage of completion of the shipment as of the reporting date requires management to make judgments that affect the timing of revenue recognition. The Company has determined that revenue recognition over the transit period provides a reasonable estimate of the transfer of services to its customers as it depicts the pattern of the Company’s performance under the contracts with its customers. The Company also provides warehouse and distribution logistics services for its customers under contracts generally ranging from a few months to five years and include renewal provisions. These warehouse and distribution logistics services contracts provide for inventory management, order fulfilment and warehousing of the Customer’s product and arrangement of transportation of the customer’s product. The Company’s performance obligations are satisfied over time as the customers simultaneously receive and consume the services provided by the Company as they are performed. The transaction price is based on the consideration specified in the contract with the customer and contains fixed and variable consideration. In general, the fixed consideration component of a contract represents reimbursement for facility and equipment costs incurred to satisfy the performance obligation and is recognized on a straight-line basis over the term of the contract. The variable consideration component is comprised of cost reimbursement per unit pricing for time and pricing for materials used and is determined based on cost plus a mark-up for hours of services provided and materials used and is recognized over time based on the level of activity volume. Other services include primarily customs clearance services sold on a standalone basis as a single performance obligation. The Company recognizes revenue from this performance obligation at a point in time, which is the completion of the services. Duties and taxes collected from the customer and paid to the customs agent on behalf of the customers are excluded from revenue. The Company uses independent contractors and third-party carriers in the performance of its transportation services. The Company evaluates who controls the transportation services to determine whether its performance obligation is to transfer services to the customer or to arrange for services to be provided by another party. The Company determined it acts as the principal for its transportation services performance obligation since it is in control of establishing the prices for the specified services, managing all aspects of the shipments process and assuming the risk of loss for delivery and collection. Such transportation services revenue is presented on a gross basis in the consolidated statements of comprehensive income. The Company had certain major customers. For the year ended June 30, 2020, r evenue from one customer of our US operating segment represents $ 126,913 , or 14.8 %, of the Company’s consolidated revenues. For the year ended June 30, 2019, there were no customer whose revenue individually represented 10 % or more of consolidated revenues. A summary of the Company’s gross revenues disaggregated by major service lines and geographic markets (reportable segments), and timing of revenue recognition for the year ended June 30, 2020 and 2019, respectively, are as follows: Year Ended June 30, 2020 (In thousands) United States Canada Corporate/ Eliminations Total Major Service Lines: Transportation services $ 745,097 $ 80,090 $ ( 671 ) $ 824,516 Value-added services (1) 14,142 16,539 — 30,681 Total $ 759,239 $ 96,629 $ ( 671 ) $ 855,197 Timing of Revenue Recognition: Services transferred over time $ 756,521 $ 96,629 $ ( 671 ) $ 852,479 Services transferred at a point in time 2,718 — — 2,718 Total $ 759,239 $ 96,629 $ ( 671 ) $ 855,197 49 Year Ended June 30, 2019 (In thousands) United States Canada Corporate/ Eliminations Total Major Service Lines: Transportation services $ 766,286 $ 91,710 $ ( 434 ) $ 857,562 Value-added services (1) 13,385 19,570 — 32,955 Total $ 779,671 $ 111,280 $ ( 434 ) $ 890,517 Timing of Revenue Recognition: Services transferred over time $ 776,333 $ 111,280 $ ( 434 ) $ 887,179 Services transferred at a point in time 3,338 — — 3,338 Total $ 779,671 $ 111,280 $ ( 434 ) $ 890,517 (1) Value added services include warehouse, distribution services, and other services. Practical Expedients The Company has elected to not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of the end of the period as the Company’s contracts with its transportation customers have an expected duration of one year or less. For the performance obligation to transfer warehouse and distribution services in contracts with customers, revenue is recognized in the amount for which the Company has the right to invoice the customer, as this amount corresponds directly with the value provided to the customer for the Company’s performance completed to date. The Company also applies the practical expedient that permits the recognition of employee sales commissions related to transportation services as an expense when incurred since the amortization period of such costs is less than one year. These costs are included in the consolidated statements of comprehensive income. Contract Assets Contract assets represent amounts for which the Company has the right to consideration for the services provided while a shipment is still in-transit but for which it has not yet completed the performance obligation and has not yet invoiced the customer. Upon completion of the performance obligations, which can vary in duration based upon the method of transport and billing the customer, these amounts become classified within accounts receivable. Operating Partner Commissions The Company enters into contractual arrangements with independent agents that operate, on behalf of the Company, an office in a specific location that engages primarily in arranging, domestic and international, transportation services. In return, the independent agent is compensated through the payment of sales commissions, which are based on individual shipments. The Company accrues the independent agent’s commission obligation ratably as the goods are transferred to the customer. j) Defined Contribution Savings Plans The Company has an employee savings plan under which the Company provides safe harbor matching contributions. For the years ended June 30, 2020 and 2019, the Company’s contributions under the plan were $ 1,302 and $ 1,327 , respectively. k) Income Taxes Income taxes are accounted for using the asset and liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company records a liability for unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Interest and penalties, if any, are recorded as a component of interest expense or other expense, respectively. 50 l) Share-Based Compensation The Company grants restricted stock awards, restricted stock units and stock options to certain directors, officers and employees. The Company accounts for share-based compensation as equity awards such that compensation cost is measured at the grant date based on the fair value of the award and is expensed ratably over the vesting period. The fair value of restricted stock is the market price as of the grant date, and the fair value of each stock option grant is estimated as of the grant date using the Black-Scholes option pricing model. Determining the fair value of share-based awards at the grant date requires judgment about, among other things, stock volatility, the expected life of the award, and other inputs. The Company accounts for forfeitures as they occur. The Company issues new shares of common stock to satisfy exercises and vesting of awards granted under its stock plans. Share-based compensation expense is reflected in the consolidated statements of comprehensive income as part of personnel costs. m) Basic and Diluted Income per Share Allocable to Common Stockholders Basic income per common share is computed by dividing net income allocable to common stockholders by the weighted average number of common shares outstanding. Diluted income per common share is computed by dividing net income allocable to common stockholders by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if the potential common shares, such as restricted stock awards and stock options, had been issued and were considered dilutive. Net income allocable to common stockholders is after consideration for preferred stock dividends, whether or not declared, and preferred stock redemption. n) Foreign Currency Translation For the Company’s foreign subsidiaries that prepare financial statements in currencies other than U.S. dollars, the local currency is the functional currency. All assets and liabilities are translated at year-end exchange rates and all income statement amounts are translated at the weighted average rates for the period. Translation adjustments are recorded in accumulated other comprehensive (loss) income. Gains and losses on transactions of monetary items denominated in a foreign currency are recognized in other income (expense) in the consolidated statements of comprehensive income. o) Reclassifications of Previously Issued Financial Statements Certain amounts for prior periods have been reclassified in the consolidated financial statements to conform to the current year presentation. There has been no impact on previously reported net income or shareholders’ equity from such reclassifications. p) Leases (Effective July 1, 2019) The Company determines if an arrangement is a lease at inception. Assets and obligations related to operating leases are included in operating lease right-of-use (“ROU”) assets; current portion of operating lease liability; and operating lease liability, net of current portion in our consolidated balance sheets. Assets and obligations related to finance leases are included in property, technology, and equipment, net; current portion of finance lease liability; and finance lease liability, net of current portion in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Annually, we perform an impairment analysis on ROU assets, and as of June 30, 2020, there is no material impairment to ROU assets. The Company’s agreements with lease and non-lease components, are all each accounted for as a single lease component. For leases with an initial term of twelve months or less, the Company elected the exemption from recording right of use assets and lease liabilities for all leases that qualify and records rent expense on a straight-line basis over the lease term. Expenses for these short-term leases for the fiscal year ended June 30, 2020 are de minimus. Certain of our leases include variable payments, which may vary based upon changes in facts or circumstances after the start of the lease. We exclude variable payments from lease ROU assets and lease liabilities, to the extent not considered fixed, and instead expense as incurred. Variable lease costs for the fiscal year ended June 30, 2020 are immaterial. 51 Leases (Until June 30, 2019) For operating leases, rent expense was recognized on a straight-line basis over the term of the lease. Assets and obligations related to finance leases are included in property, technology, and equipment, net; current portion of notes payable; and notes payable, net of current portion in our consolidated balance sheets. q) Derivatives Derivative instruments are recognized as either assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated as cash flow hedges, gains and losses are initially reported as a component of other comprehensive income and subsequently recognized in earnings with the corresponding hedged item. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in earnings. As of June 30, 2020, the Company does not have any derivatives designated as hedges. For derivative instruments that are no t designated as hedges, gains and losses from changes in fair values are recognized in other income (expense). NOTE 4 – EARNINGS PER SHARE The computations of the numerator and denominator of basic and diluted income per share are as follows: Year Ended June 30, (In thousands, except share data) 2020 2019 Numerator: Net income attributable to Radiant Logistics, Inc. $ 10,541 $ 16,346 Less: preferred stock dividends — ( 956 ) Less: issuance costs for preferred stock redemption — ( 1,659 ) Net income attributable to common stockholders $ 10,541 $ 13,731 Denominator: Weighted average common shares outstanding, basic 49,600,506 49,497,007 Dilutive effect of share-based awards 1,491,293 1,585,645 Weighted average common shares outstanding, diluted 51,091,799 51,082,652 Potentially dilutive common shares excluded 475,743 454,199 NOTE 5 – LEASES The Company has operating and finance leases for office space, warehouse space, trailers and other equipment. Lease terms expire at various dates through November 2027 with options to renew for varying terms at the Company’s sole discretion. The Company has not included these options to extend or terminate in its calculation of right-or-use assets or lease liabilities as it is not reasonably certain to exercise these options. The components of lease expense were as follows: (In thousands) Year Ended June 30, 2020 Operating: Operating lease cost $ 7,012 Financing: Reduction of right-of-use assets 619 Interest on lease liabilities 170 Total finance lease cost $ 789 52 Under ASC 840, Rent expense amounted to $ 9,799 for the fiscal year ended June 30, 2019. Supplemental cash flow information related to leases was as follows: (In thousands) Year Ended June 30, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows arising from operating leases $ 7,393 Operating cash flows arising from finance leases 169 Financing cash flows arising from finance leases 675 Right-of-use assets obtained in exchange for new lease liabilities: Operating leases 3,341 Finance leases 28 Supplemental balance sheet information related to leases was as follows: June 30, (In thousands) 2020 Operating lease: Operating lease right-of-use assets $ 12,580 Current portion of operating lease liability 6,121 Operating lease liability, net of current portion 7,192 Total operating lease liabilities $ 13,313 Finance lease: Property, technology, and equipment, net $ 3,254 Current portion of finance lease liability 688 Finance lease liability, net of current portion 2,476 Total finance lease liabilities $ 3,164 Weighted average remaining lease term: Operating leases 2.9 years Finance leases 5.0 years Weighted average discount rate: Operating leases 3.22 % Finance leases 4.52 % As of June 30, 2020, maturities of lease liabilities for each of the next five fiscal years ending June 30 and thereafter are as follows: (In thousands) Operating Finance 2021 $ 6,449 $ 823 2022 4,301 807 2023 1,408 629 2024 674 559 2025 609 532 Thereafter 514 176 Total lease payments 13,955 3,526 Less imputed interest ( 642 ) ( 362 ) Total lease liability $ 13,313 $ 3,164 53 Under ASC 840, minimum future lease commitments as of June 30, 2019 under operating leases for each of the next five fiscal years ending June 30 and thereafter were as follows: (In thousands) 2020 $ 7,176 2021 5,753 2022 3,691 2023 1,003 2024 392 Thereafter 314 Total minimum lease payments $ 18,329 NOTE 6 – PROPERTY, TECHNOLOGY, AND EQUIPMENT June 30, (In thousands) Useful Life 2020 2019 Computer software 3 - 5 years $ 21,884 $ 18,013 Trailers and related equipment 3 - 15 years 6,733 6,941 Office and warehouse equipment 3 - 15 years 3,980 4,082 Leasehold improvements (1) 3,799 3,672 Computer equipment 3 - 5 years 3,054 2,529 Furniture and fixtures 3 - 15 years 1,017 973 40,467 36,210 Less: accumulated depreciation and amortization ( 21,755 ) ( 16,083 ) $ 18,712 $ 20,127 (1) The cost is amortized over the shorter of the lease term or useful life. Depreciation and amortization expenses related to property, technology, and equipment were $ 6,312 and $ 5,200 for the years ended June 30, 2020 and 2019, respectively. Computer software includes approximately $ 174 and $ 722 of software in development as of June 30, 2020 and 2019, respectively. NOTE 7 – GOODWILL AND INTANGIBLE ASSETS Goodwill The table below reflects the changes in the carrying amounts of goodwill for the years ending June 30, 2020 and 2019: June 30, (In thousands) 2020 2019 Balance as of June 30, 2019 $ 65,389 $ 65,389 Acquisition 6,810 — Balance as of June 30, 2020 $ 72,199 $ 65,389 At June 30, 2020 , the Company had $ 72,199 of goodwill; $ 50,801 is attributable to US, while $ 21,398 is attributable to Canada. The Company assesses goodwill for impairment annually as of April 1, or more frequently, if events and circumstances indicate impairment may have occurred. During the fourth quarter of 2020, as a result of the significant turmoil related to COVID-19, the Company concluded that sufficient indicators existed to require an impairment assessment as of June 30, 2020. The Company performed quantitative assessments for its US and Canada reporting units as of June 30, 2020, and results indicated that the estimated fair values of the US and Canada reporting units exceed their respective carrying values. Thus, goodwill was not impaired as of June 30, 2020. 54 Intangible Assets Intangible assets consisted of the following as of June 30, 2020 and 2019: June 30, 2020 (In thousands) Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer related 5.1 years $ 102,153 $ ( 61,227 ) $ 40,926 Trade names and trademarks 9.6 years 14,977 ( 5,268 ) 9,709 Covenants not to compete 4.3 years 1,433 ( 876 ) 557 $ 118,563 $ ( 67,371 ) $ 51,192 June 30, 2019 (In thousands) Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer related 5.5 years $ 97,002 $ ( 52,076 ) $ 44,926 Trade names and trademarks 10.6 years 14,977 ( 4,252 ) 10,725 Covenants not to compete 2.7 years 875 ( 784 ) 91 $ 112,854 $ ( 57,112 ) $ 55,742 Intangible assets were acquired during the year ended June 30, 2020 as disclosed in Note 17 – Business Combination. Amortization expense amounted to $ 10,259 and $ 10,009 for the years ended June 30, 2020 and 2019, respectively. Future amortization expense for each of the next five fiscal years ending June 30 are as follows: (In thousands) 2021 $ 10,119 2022 9,555 2023 9,077 2024 8,701 2025 6,711 NOTE 8 – NOTES PAYABLE Notes payable consist of the following: June 30, (In thousands) 2020 2019 Revolving Credit Facility $ 30,000 $ 13,781 Senior Secured Loans 16,302 20,591 Other debt 5,925 — Unamortized debt issuance costs ( 336 ) ( 638 ) Total notes payable 51,891 33,734 Less: current portion ( 3,800 ) ( 3,687 ) Total notes payable, net of current portion $ 48,091 $ 30,047 55 Future maturities of notes payable for each of the next five fiscal years ending June 30 are as follows: (In thousands) 2021 $ 3,800 2022 4,061 2023 10,263 2024 4,103 2025 30,000 $ 52,227 Revolving Credit Facility The Company entered into a $ 150,000 syndicated, revolving credit facility (the “Revolving Credit Facility”) pursuant to a Credit Agreement dated on March 13, 2020. The Revolving Credit Facility was entered into 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”). This replaces the Company’s $ 75,000 credit facility agreement dated June 14, 2017, and from an accounting standpoint, represents a modification of the previous credit facility. The Revolving Credit Facility has a term of five years , matures on March 13, 2025 , and is collateralized by a first-priority security interest in the accounts receivable and other assets of the Company. Borrowings under the Revolving Credit Facility accrue interest (at the Company’s option), at the Lenders’ base rate plus 1.00 % or LIBOR plus 2.00 % and can be subsequently adjusted based on the Company’s consolidated leverage ratio under the facility at the Lenders’ base rate plus 1.00 % to 1.75 % or LIBOR plus 2.00 % to 2.75 %. As of June 30, 2020, this interest rate used was 2.19 %. The Revolving Credit Facility includes a $ 50,000 accordion feature to support future acquisition opportunities. 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. As of June 30, 2020, the borrowings outstanding on the Revolving Credit Facility was $ 30,000 and the Company was in compliance with all of its covenants. Senior Secured Loans In connection with the Company’s acquisition of Radiant Canada (formerly, Wheels International Inc.), Radiant Canada obtained a CAD$ 29,000 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 Credit Facilities Loan Agreement. The Company and its U.S. and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures on April 1, 2024 and accrues interest at a rate of 6.65 % per annum. The Company is required to maintain five months interest in a debt service reserve account to be controlled by FPD IV. The amount of approximately $ 600 is recorded as deposits and other assets in the accompanying consolidated financial statements. The Company made interest-only payments for the first 12 months followed by monthly principal and interest payments of CAD$ 390 that will be paid through maturity. As of June 30, 2020, $ 11,647 was outstanding under this term loan. In connection with the Company’s acquisition of Lomas, Radiant Canada obtained a CAD$ 10,000 senior secured Canadian term loan from Fiera Private Debt Fund V LP (formerly, Integrated Private Debt Fund V LP) pursuant to a CAD$10,000 Credit Facilities Loan Agreement. The Company and its U.S. and Canadian subsidiaries are guarantors of the Radiant Canada obligations thereunder. The loan matures on June 1, 2024 and accrues interest at a fixed rate of 6.65 % per annum. The loan repayment consists of monthly principal and interest payments of CAD$ 149 . As of June 30, 2020, $ 4,655 was outstanding under this term loan. The loans may be prepaid in whole at any time providing the Company gives at least 30 days prior written notice and pays the difference between (i) the present value of the loan interest and the principal payments foregone discounted at the Government of Canada Bond Yield for the term from the date of prepayment to the maturity date, and (ii) the face value of the principal amount being prepaid. Concurrently with entering into the new Revolving Credit Facility, the Company amended and restated the FPD IV and FPD V term loans to make the financial and other covenants in such term loans consistent with those contained in the new Revolving Credit Facility. In addition, the security interest securing such term loans were changed to be on a parity basis with those securing the new Revolving Credit Facility. As of June 30, 2020, the Company was in compliance with all of its covenants. 56 Paycheck Protection Program Loans On May 4, 2020, the Company received loan proceeds of $ 5,925 pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The application for these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. On April 28, 2020, the Secretary of the U.S. Department of the Treasury stated that the Small Business Administration will perform a full review of any PPP loan over $ 2,000 before forgiving the loan. The certification made by the Company did not contain any objective criteria and is subject to interpretation. Despite the good-faith belief that given the Company’s circumstances all eligibility requirements for the PPP Loans were satisfied, if it is later determined that the Company had violated any applicable laws or regulations or it is otherwise determined the Company was ineligible to receive the PPP Loans, it may be required to repay the PPP Loans in its entirety and/or be subject to additional penalties. The term of the Company’s PPP Loans is two years . The annual interest rate on the PPP Loans is 1 % and no payments of principal or interest are due during the six-month period beginning on the date of the PPP Loans. Under the terms of the PPP, all or a portion of the principal may be forgiven if the Loan proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, benefits, rent, and utilities. No assurance is provided that the Company will obtain forgiveness of the Loan in whole or in part. With respect to any portion of the PPP Loans that is not forgiven, the PPP Loans will be repayable on the terms set forth above. The PPP Loans are recognized on the Company’s June 30, 2020 consolidated balance sheet as notes payable and will be derecognized if and when forgiven. NOTE 9 – DERIVATIVES All derivatives are recognized on the Company’s consolidated balance sheets at their fair values and consist of interest rate swap contracts at June 30, 2020 ( none at June 30, 2019). On March 20, 2020 , and effective April 17, 2020, Radiant entered into an interest rate swap contract with Bank of America to trade variable interest cash inflows at one-month LIBOR for a $ 20,000 notional amount, for fixed interest cash outflows at 0.635 %. On April 1, 2020 , and effective April 2, 2020, Radiant entered into an interest rate swap contract with Bank of America to trade the variable interest cash inflows at one-month LIBOR for a $ 10,000 notional amount, for fixed interest cash outflows at 0.5865 %. Both interest rate swap contracts mature and terminate on March 13, 2025 . The Company uses an interest rate swap for the management of interest rate risk exposure, as the interest rate swap effectively converts a portion of the Company’s Revolving Credit Facility from a floating to a fixed rate. The interest rate swap is an agreement between the Company and Bank of America to pay, in the future, a fixed-rate payment in exchange for Bank of America paying the Company a variable payment. The net payment obligation is based on the notional amount of the swap contract and the prevailing market interest rates. The Company may terminate the swap contract prior to its expiration date, at which point a realized gain or loss would be recognized. The value of the Company’s commitment would increase or decrease based primarily on the extent to which interest rates move against the rate fixed for each swap. As of June 30, 2020 , the derivative instruments had a total notional amount of $ 30,000 and fair value of $ 600 recognized in deposits and other assets in the consolidated balance sheets. Both interest rate swap contracts are not designated as hedges; gains and losses from changes in fair value are recognized in other income (expense). NOTE 10 – STOCKHOLDERS’ EQUITY The Company is authorized to issue 5,000,000 shares of preferred stock, par value at $ 0.001 per share and 100,000,000 shares of common stock, $ 0.001 per share. Series A Preferred Stock At June 30, 2018, the Company had 839,200 shares of 9.75 % Series A Cumulative Redeemable Perpetual Preferred Stock (“Series A Preferred Shares”) outstanding with a liquidation preference of $ 25.00 per share that were issued on December 20, 2013. Net proceeds received from the Series A Preferred Shares issuance totaled approximately $ 19,320 . Dividends on the Series A Preferred Shares were cumulative from the date of original issue and were payable on January 31, April 30, July 31 and October 31, as and if declared by the Company’s board of directors. Commencing on December 20, 2018, the Series A Preferred Shares were redeemable at the Company’s option, in whole or in part, at a cash redemption price of $ 25.00 per share plus accrued and unpaid dividends (whether declared). On December 21, 2018, the Company redeemed all its Series A Preferred Shares for an aggregated price of $ 20,980 and charged to retained earnings $ 1,659 for the excess of consideration paid over carrying value of preferred stock on redemption. As a result, during the fiscal year ended June 30, 2020, no dividend was paid. Dividends paid to prior holders of Series A Preferred Shares for the year ended June 30, 2019 was $ 1.5536 per share, totaling $ 1,303 . 57 Common Stock In March 2018, the Company’s board of directors authorized the repurchase of up to 5,000,000 shares of the Company’s common stock through December 31, 2019 . On February 4, 2020, the Company announced that its board of directors has approved the renewal of the repurchase program through December 31, 2021. Under the stock repurchase program, the Company is authorized to repurchase, from time-to-time, shares of its outstanding common stock in the open market at prevailing market prices or through privately negotiated transactions as permitted by securities laws and other legal requirements. The program does not obligate the Company to repurchase any specific number of shares and could be suspended or terminated at any time without prior notice. Under this repurchase program, the Company purchased 541,049 shares of its common stock at an average cost of $ 4.61 per share for an aggregate cost of $ 2,496 during the fiscal year ended June 30, 2020. We have temporarily suspended our share repurchases under our stock repurchase program as we continue to assess the impacts of COVID-19. NOTE 11 – VARIABLE INTEREST ENTITY AND RELATED PARTY TRANSACTIONS RLP is owned 40 % by RGL and 60 % by RCP, a company for which the Chief Executive Officer of the Company is the sole member. RLP is a certified minority business enterprise that was formed for the purpose of providing the Company with a national accounts strategy to pursue corporate and government accounts with diversity initiatives. RCP’s ownership interest entitles it to a majority of the profits and distributable cash, if any, generated by RLP. The operations of RLP are intended to provide certain benefits to the Company, including expanding the scope of services offered by the Company and participating in supplier diversity programs not otherwise available to the Company. In the course of evaluating and approving the ownership structure, operations and economics emanating from RLP, a committee consisting of the independent Board member of the Company, considered, among other factors, the significant benefits provided to the Company through association with a minority business enterprise, particularly as many of the Company’s largest current and potential customers have a need for diversity offerings. In addition, the committee concluded that the economic relationship with RLP was on terms no less favorable to the Company than terms generally available from unaffiliated third parties. Certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have the sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties are considered variable interest entities. The Company has power over significant activities of RLP including the fulfillment of its contracts and financing its operations. Additionally, the Company also pays expenses and collects receivables on behalf of RLP. Thus, the Company is the primary beneficiary, RLP qualifies as a variable interest entity, and RLP is consolidated in these consolidated financial statements. RLP recorded profits of $ 3,039 and $ 1,722 for the years ended June 30, 2020 and 2019, respectively. RCP’s distributable share was $ 1,823 and $ 1,034 for the years ended June 30, 2020 and 2019, respectively. The non-controlling interest recorded as a reduction of net income available to common stockholders in the consolidated statements of comprehensive income represents RCP’s distributive share. The following table summarizes the balance sheets of RLP: (In thousands) June 30, 2020 2019 ASSETS Accounts receivable - Radiant Global Logistics, Inc. $ 1,392 $ 412 Prepaid expenses and other current assets 1 1 $ 1,393 $ 413 LIABILITIES AND PARTNERS’ CAPITAL Accrued expenses $ 45 $ 4 Partners’ capital 1,348 409 $ 1,393 $ 413 58 NOTE 1 2 – FAIR VALUE MEASUREMENT The accounting guidance for fair value, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The framework for measuring fair value consists of a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The fair value measurement level within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques: • Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities; • Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost); and • Income approach: Techniques to convert future amounts to a single present amount based upon market expectations, including present value techniques, option-pricing and excess earning models. Items Measured at Fair Value on a Recurring Basis The following table sets forth the Company’s financial assets (liabilities) measured at fair value on a recurring basis: (In thousands) Fair Value Measurements as of June 30, 2020 Level 3 Total Contingent consideration $ ( 4,940 ) $ ( 4,940 ) Interest rate swap contracts (derivatives) 600 600 Fair Value Measurements as of June 30, 2019 Level 3 Total Contingent consideration $ ( 375 ) $ ( 375 ) The following table provides a reconciliation of the financial assets (liabilities) measured at fair value using significant unobservable inputs (Level 3): (In thousands) Contingent Consideration Interest rate swap contracts (derivatives) Balance as of June 30, 2018 $ ( 2,575 ) $ — Contingent consideration paid 993 — Change in fair value 1,207 — Balance as of June 30, 2019 $ ( 375 ) $ — Increase related to accounting for acquisitions ( 3,140 ) — Contingent consideration paid 327 — Change in fair value ( 1,752 ) 600 Balance as of June 30, 2020 $ ( 4,940 ) $ 600 59 The Company has contingent obligations to transfer cash payments and equity shares to former shareholders of acquired operations in conjunction with certain acquisitions if specified operating results and financial objectives are met over the next four fiscal years. Contingent consideration is measured quarterly at fair value, and any change in the fair value of the contingent liability is included in the consolidated statements of comprehensive income. The change in the current period fair value is principally attributable to a net increase in management’s estimates of future earn-out payments through the remainder of the earn-out periods. The Company uses projected future financial results based on recent and historical data to value the anticipated future earn-out payments. To calculate fair value, the future earn-out payments were then discounted using Level 3 inputs. The Company has classified the contingent consideration as Level 3 due to the lack of relevant observable market data over fair value inputs. The Company believes the discount rate used to discount the earn-out payments reflects market participant assumptions. Changes in assumptions and operating results could have a significant impact on the earn-out amount, up to a maximum of $ 10,500 through earn-out periods measured through January 2023, although there are no maximums on certain earn-out payments. For contingent consideration the following table provides quantitative information about the significant unobservable inputs used in fair value measurement: (In thousands) Fair Value Valuation Methodology Unobservable Inputs Targets Contingent consideration $ ( 4,940 ) Discounted cash flows Actual and projected EBITDA over three-year earnout period $ 8,600 Risk adjusted discount rate 18 % Derivative instruments are carried at fair value on the consolidated balance sheets. Interest rate swap contracts are included in deposits and other assets. Fair Value of Financial Instruments The carrying values of the Company’s cash equivalents, receivables, contract assets, accounts payable, commissions payable, accrued expenses, and the income tax receivable and payable approximate the fair values due to the relatively short maturities of these instruments. The carrying value of the Company’s Revolving Credit Facility and notes payable would not differ significantly from fair value (based on Level 2 inputs) if recalculated based on current interest rates. NOTE 13 – INCOME TAXES The significant components of income tax expense (benefit) are as follows: Year ended June 30, (In thousands) 2020 2019 Current: Federal $ 1,587 $ 3,244 State 614 1,115 Foreign 1,367 1,115 Total current 3,568 5,474 Deferred: Federal ( 893 ) ( 1,282 ) State ( 87 ) ( 289 ) Foreign 569 897 Total deferred ( 411 ) ( 674 ) Total income tax expense $ 3,157 $ 4,800 60 The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax expense: Year ended June 30, (In thousands) 2020 2019 Income tax expense at U.S. statutory rate ( 21 %) $ 2,238 $ 4,086 Permanent differences 69 85 State income taxes, net of federal benefit 416 652 Foreign tax rate differential 291 — Other, net 143 ( 23 ) Total income tax expense $ 3,157 $ 4,800 Significant components of deferred tax assets and liabilities are as follows: June 30, (In thousands) 2020 2019 Deferred tax assets (liabilities): Allowance for doubtful accounts $ 308 $ 388 Accruals 509 420 Share-based compensation 1,321 1,250 Operating lease liabilities 1,779 — Operating lease ROU asset ( 1,660 ) — Property, technology, and equipment basis differences ( 4,536 ) ( 2,948 ) Goodwill deductible for tax purposes ( 781 ) ( 595 ) Intangible assets ( 4,819 ) ( 7,551 ) Deferred rent 65 223 Net operating loss carry-forward 305 626 Other, net 25 349 Net deferred tax liabilities $ ( 7,484 ) $ ( 7,838 ) The Company’s effective tax rate for the year ended June 30, 2020 is higher than the U.S. federal statutory rate primarily due to state and foreign income taxes. The Company’s effective tax rate for the year ended June 30, 2019 is higher than the U.S. federal statutory rate primarily due to state and foreign income taxes. The Company does not have any uncertain tax positions. The Company and its wholly-owned U.S. subsidiaries file a consolidated Federal income tax return. The Company also files unitary or separate returns in various state, local and non-U.S. jurisdictions based on state, local and non-U.S. filing requirements. The Company is currently under examination by the U.S. Internal Revenue Service (the "IRS") for the tax year ending June 30, 2018. At this time, the Company is not able to estimate the potential impact that the examination may have on income tax expense. If the examination is resolved unfavorably, it may have a negative impact on the Company’s results of operations. Tax years that remain subject to examination by the IRS are the years ended June 30, 2017 , June 30, 2019 , and June 30, 2020 . Tax years that remain subject to examination by state authorities are the years ended June 30, 2016 through June 30, 2020 . Tax years that remain subject to examination by non-U.S. authorities are the periods ended December 31, 2014 through June 30, 2019 . Occasionally acquired entities have tax years that differ from the Company and are still open under the relevant statute of limitations and therefore are subject to potential adjustment. The Company’s Canadian Subsidiary, Radiant Canada (formerly, “Wheels International, Inc.”), is no longer under examination by the Canada Revenue Agency ("CRA") for the tax year ended March 31, 2015. During the quarter ended December 31, 2019, the audit with the CRA was finalized and the settlement was de minimus. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP).  The Company received funds under the Paycheck Protection Program of the CARES Act in May of 2020 – see Note 8. The CARES Act does not have a material impact on the Company’s income tax provision for the fiscal year ended June 30, 2020. 61 NOTE 14 – SHARE-BASED COMPENSATION The Company has two stock-based plans: the 2005 Stock Incentive Plan and the 2012 Stock Option and Performance Award Plan. Each plan authorizes the granting of up to 5,000,000 shares of the Company’s common stock. The plans provide for the grant of stock options, stock appreciation rights, shares of restricted stock, restricted stock units, performance shares and performance units. Restricted stock awards and units are equivalent to one share of common stock and generally vest after three years . The Company does not plan to make additional grants under the 2005 Stock Incentive Plan. Restricted Stock Awards During the years ended June 30, 2020 and 2019, the Company recognized share-based compensation expense related to stock awards of $ 1,168 and $ 807 , respectively. As of June 30, 2020, the Company had approximately $ 1,814 of total unrecognized share-based compensation cost. Such costs are expected to be recognized over a weighted average period of approximately 1.92 years. The following table summarizes restricted stock award activity under the plans: Number of Units Weighted Average Grant Date Fair Value Unvested balance as of June 30, 2019 687,920 $ 4.08 Vested ( 235,379 ) 2.88 Granted 331,966 5.56 Forfeited ( 28,635 ) 4.97 Unvested balance as of June 30, 2020 755,872 $ 5.07 Stock Options Stock options are granted at exercise prices equal to the fair value of the common stock at the date of the grant and have a term of 10 years. Generally, grants under each plan vest 20 % annually over a five-year period from the date of grant. For the years ended June 30, 2020 and 2019, the Company recognized share-based compensation expense related to stock options of $ 495 and $ 805 , respectively. The aggregate intrinsic value of options exercised was $ 812 and $ 1,037 , respectively for the years ended June 30, 2020 and 2019. As of June 30, 2020, the Company had approximately $ 123 of total unrecognized share-based compensation cost. Such costs are expected to be recognized over a weighted average period of approximately 0.92 years. The following table summarizes stock option activity under the plans: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (In thousands) Outstanding as of June 30, 2019 2,458,093 $ 3.30 4.69 $ 6,995 Exercised ( 404,871 ) 2.26 — 812 Forfeited ( 57,854 ) 5.03 — — Outstanding as of June 30, 2020 1,995,368 $ 3.46 3.75 $ 1,653 Exercisable as of June 30, 2020 1,860,368 $ 3.43 3.60 $ 1,591 62 The following table summarizes outstanding and exercisable options by exercise price range as of June 30, 2020: Outstanding Options Exercisable Options Exercise Prices Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (In thousands) Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (In thousands) $0.50 - $0.99 11,265 $ 0.60 0.40 $ 37 11,265 $ 0.60 0.40 $ 37 $1.00 - $1.49 104,448 1.30 0.67 275 104,448 1.30 0.67 275 $1.50 - $1.99 211,309 1.87 2.93 435 211,309 1.87 2.93 435 $2.00 - $2.49 355,294 2.31 1.52 576 355,294 2.31 1.52 576 $2.50 - $2.99 50,000 2.75 3.67 59 50,000 2.75 3.67 59 $3.00 - $3.49 336,908 3.18 4.77 252 246,908 3.15 4.41 194 $3.50 - $3.99 195,000 3.85 4.96 19 175,000 3.86 4.92 15 $4.00 - $4.49 179,717 4.15 4.62 — 169,717 4.14 4.58 — $4.50 - $4.99 259,064 4.58 4.64 — 259,064 4.58 4.64 — $5.00 - $5.49 57,363 5.20 4.84 — 57,363 5.20 4.84 — $5.50 - $5.99 200,000 5.63 4.76 — 200,000 5.63 4.76 — $6.00 - $6.49 25,000 6.18 6.86 — 15,000 6.18 6.86 — $6.50 - $6.99 10,000 6.77 5.08 — 5,000 6.77 5.08 — 1,995,368 $ 3.46 3.75 $ 1,653 1,860,368 $ 3.43 3.60 $ 1,591 NOTE 15 – COMMITMENTS AND CONTINGENCIES Legal Proceedings The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company records accruals for estimated losses relating to claims and lawsuits when available information indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. Legal expenses are expensed as incurred. There are no potentially material legal proceedings as of June 30, 2020. Contingent Consideration and Earn-out Payments The Company’s agreements with respect to previous acquisitions contain future consideration provisions, which provide for the selling equity owners to receive additional consideration if specified operating objectives and financial results are achieved in future periods. Earn-out payments are generally due annually on November 1 st , and 90 days following the quarter of the final earn-out period for each respective acquisition. The following table represents the discounted earn-out payments to be paid during the fiscal years ended June 30: (In thousands) 2021 2022 2023 2024 Total Earn-out payments: Cash $ 2,127 $ 1,633 $ 789 $ 391 $ 4,940 Total estimated earn-out payments $ 2,127 $ 1,633 $ 789 $ 391 $ 4,940 63 NOTE 16 – OPERATING AND GEOGRAPHIC SEGMENT INFORMATION Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, or decision-making group, in making decisions regarding allocation of resources and assessing performance. The Company’s chief operating decision-maker is the Chief Executive Officer. The Company has two operating and reportable segments: United States and Canada. The Company evaluates the performance of the segments primarily based on their respective revenues and income from operations. In addition, the Company includes the costs of the Company’s executives, board of directors, professional services such as legal and consulting, amortization of intangible assets and certain other corporate costs associated with operating as a public company as Corporate. As of and for Year Ended June 30, 2020 (In thousands) United States Canada Corporate/ Eliminations Total Revenues $ 759,239 $ 96,629 $ ( 671 ) $ 855,197 Income (loss) from operations 28,505 8,459 ( 19,462 ) 17,502 Other income (expense) 215 30 ( 2,226 ) ( 1,981 ) Income (loss) before income taxes 28,720 8,489 ( 21,688 ) 15,521 Depreciation and amortization 4,300 2,001 10,270 16,571 Property, technology, and equipment, net 12,994 5,718 — 18,712 Goodwill 50,801 21,398 — 72,199 As of and for Year Ended June 30, 2019 (In thousands) Revenues $ 779,671 $ 111,280 $ ( 434 ) $ 890,517 Income (loss) from operations 30,682 9,715 ( 15,678 ) 24,719 Other income (expense) 521 ( 87 ) ( 2,973 ) ( 2,539 ) Income (loss) before income taxes 31,203 9,628 ( 18,651 ) 22,180 Depreciation and amortization 3,623 1,560 10,026 15,209 Property, technology, and equipment, net 14,886 5,241 — 20,127 Goodwill 43,991 21,398 — 65,389 NOTE 17 – BUSINESS COMBINATION On February 7, 2020 the Company acquired the assets and operations of two of its Adcom agency locations: Alexandria, Virginia based Friedway Enterprises, Inc. (“Friedway”) and Pittsburgh, Pennsylvania based CIC2, Inc. (“CIC2”) through its wholly-owned subsidiary, Radiant Global Logistics, Inc. Friedway and CIC2 are expected to transition to the Radiant brand and will continue to provide a full range of domestic and international services from the mid-Atlantic region. The acquired agencies are expected to strengthen and diversify Radiant’s network of Company-owned operations and will continue to provide a full range of hyper-care domestic and international transportation and logistics service to customers in medical device, high-tech and trade-show industries. The goodwill recognized is attributable to expanded service lines and geographic footprint. The acquisitions of Friedway and CIC2 were accounted for as purchases of a business under ASC 805 Business Combinations . As consideration for the acquisition, the Company paid $ 9,150 in cash upon closing and issued 45,086 shares of common stock recorded at fair value, and the seller is entitled to additional contingent consideration payable in subsequent periods based on future performance of the acquired operation. The maximum contingent consideration payable is $ 10,000 . The Company has engaged valuation specialists to assist the Company with its estimate of the fair value of the contingent consideration using future projected earnings relative to the corresponding future earn-out payments. To calculate fair value, the future earn-out payments were then discounted using Level 3 inputs. The Company believes the rate used to discount the earn-out payments reflect market participant assumptions . The fair values of the intangible assets were estimated by the Company with the assistance of valuation specialists. The fair value was estimated using a discounted cash flow approach with Level 3 inputs. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company used risk-adjusted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes the level and timing of cash flows appropriately reflect market participant assumptions. The goodwill is recorded in the US operating segment and is expected to be deductible for income tax purposes over a period of 15 years . 64 The acquisition date fair value of the consideration transferred for the acquisitions consisted of the following: (In thousands) Cash $ 9,150 Common stock ( 45,086 common shares) 250 Contingent consideration, at fair value 3,140 $ 12,540 The purchase price allocation for the acquisitions is as follows: (In thousands) Prepaid expenses and other current assets $ 16 Intangible assets 5,709 Deposits and other assets 8 Liabilities assumed ( 3 ) Total identifiable net assets 5,730 Goodwill 6,810 $ 12,540 Intangible assets that were acquired and their respective useful lives are as follows: (In thousands) Amount Useful Life Customer related $ 5,150 8.5 years Covenants not to compete 559 5 years $ 5,709 The results of operations for these acquired entities subsequent to the date of acquisition for the fiscal year ended June 30, 2020, were immaterial and thus not presented. The proforma results of operations as if the acquisition had occurred on the first day of each reporting period have not been presented because the operations of these above-mentioned acquisitions would not have been material to the consolidated financial statements. 65 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.