RLGT

Radiant Logistics, Inc. (10-Q) Summary

Business Context and Reporting Period

This is a Quarterly Report (Form 10-Q) for Radiant Logistics, Inc. (formerly Golf Two, Inc.) for the period ended March 31, 2007. The Company is a non-asset based global transportation and supply chain management firm. Following a change of control in October 2005, the Company pivoted from retail golf to logistics, acquiring Airgroup Corporation in January 2006 to serve as its operational platform. The Company operates through a network of exclusive agent offices providing domestic and international freight forwarding services.

Key Financial Metrics

Note: Total Debt includes $500,000 in current notes payable and $1,810,489 in long-term debt.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 63.8% for the three months ended March 31, 2007, compared to the same period in 2006. For the nine-month period, revenue grew significantly as the 2006 period included only three months of Airgroup operations post-acquisition.
• Profitability: The Company turned a net loss of $27,110 in the prior year's quarter into a net income of $23,506. For the nine-month period, the Company reported a net income of $248,336 compared to a net loss of $153,263 in the prior year.
• Operating Expenses: Agent commissions increased 69.5% year-over-year for the quarter, reflecting volume growth. Personnel costs remained relatively flat in absolute terms but decreased as a percentage of net revenue due to revenue growth.
• Cash Flow: Net cash provided by operating activities improved to $756,932 for the nine months ended March 31, 2007, compared to a use of $195,661 in the prior year period.

Outlook, Risks, and Contingencies

• Acquisition Strategy: Management intends to pursue organic growth and further acquisitions. The Company expects to pursue an additional equity offering within the next twelve months to fund growth.
• Debt Covenants: The Company operates under a $10 million revolving credit facility with Bank of America. Covenants include limits on funded debt to EBITDA ratios and a requirement to avoid net losses in two consecutive quarters. The Company was in compliance as of March 31, 2007.
• Contingent Payments: The acquisition of Airgroup includes earn-out provisions. A base earn-out of $1.9 million in stock is payable over three years if income targets are met. An additional Tier-2 earn-out of up to $1.5 million is possible over five years. A $600,000 cash payment to former Airgroup shareholders is scheduled in two installments (June 2008 and Jan 2009).
• Legal Proceedings: Team Air Express, Inc. filed a lawsuit in February 2007 alleging tortious interference with a contract involving a former agent (VRC Express). The Company intends to vigorously defend the matter, noting the contract was terminable at will. No liability amount can be estimated at this stage.
• Seasonality: The business is subject to seasonal trends, with the third quarter typically being slower.

Investor Verification Checklist

• Debt Compliance: Verify continued compliance with the Bank of America credit facility covenants, specifically the funded debt to EBITDA ratio and the prohibition on consecutive quarterly net losses.
• Legal Exposure: Monitor the status of the Team Air Express litigation to assess potential liability or distraction from operations.
• Earn-Out Performance: Track Airgroup's income from continuing operations to determine if the $2.5 million annual targets for the stock-based earn-out are being met.
• Capital Needs: Assess the Company's ability to raise additional equity capital as planned to fund future acquisitions, given the limitations on debt availability.
• Agent Network Stability: Review the retention rates of exclusive agent offices, as the business model relies heavily on this network.