UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Amendment No. 1)
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission
file number:
| (Exact Name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Tel:
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Act: Common Stock, par value $0.001 per share
Securities registered under Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Check one:
| ☐ | Large accelerated filer | ☐ | Accelerated filer | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
The aggregate
market value of the voting and non-voting common equity held by non-affiliates of the registrant, as of the last business day of the
registrants most recently completed second fiscal quarter was $
As of September 13, 2022, there were shares of the registrant’s common stock outstanding.
EXPLANATORY NOTE
Except as otherwise expressly noted above, this 10-K/A does not amend, update or change any other disclosures in the Original Filing. Accordingly, this 10-K/A should be read in conjunction with the Original Filing and our other filings with the SEC.
Item 15. Exhibits and Financial Statement Schedules.
a. Exhibits
| (a) | Exhibits. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: September 23, 2022 | UNIQUE LOGISTICS INTERNATIONAL, INC. | |
| By: | /s/ Sunandan Ray | |
| Sunandan Ray | ||
| Chief
Executive Officer, Chairman of the Board (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Sunandan Ray | Director, Chief Executive Officer | September 23, 2022 | ||
| Sunandan Ray | Principal Executive Officer | |||
| /s/ Eli Kay | Chief Financial Officer | September 23, 2022 | ||
| Eli Kay | Principal Financial and Accounting Officer | |||
| /s/ David Briones | Director | September 23, 2022 | ||
| David Briones | ||||
| /s/ Patrick Lee | Director | September 23, 2022 | ||
| Patrick Lee |
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2022
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Unique Logistics International, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Unique Logistics International, Inc. (the “Company”) as of May 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the two years in the period ended May 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended May 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the 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 financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
| /s/
|
|
| Marcum LLP | |
| We have served as the Company’s auditor since 2021. | |
| September 13, 2022 |
| F-2 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
| May 31, 2022 | May 31, 2021 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Contract assets | ||||||||
| Factoring reserve | ||||||||
| Other prepaid expenses and current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other long-term assets: | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Deferred tax asset, net | ||||||||
| Deposits | ||||||||
| Other long-term assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Accrued freight | ||||||||
| Contract Liabilities | ||||||||
| Revolving credit facility | ||||||||
| Current portion of notes payable, net of discount | ||||||||
| Current portion of long-term debt due to related parties | ||||||||
| Current portion of operating lease liability | ||||||||
| Total current liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Long-term-debt due to related parties, net of current portion | ||||||||
| Notes payable, net of current portion, net of discount | ||||||||
| Derivative liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred Stock, $ par value: shares authorized | ||||||||
| Series A Convertible Preferred stock, $ par value; issued and outstanding as of May 31, 2022 and 2021. Liquidation preference $ | ||||||||
| Series B Convertible Preferred stock, $ par value; and shares issued and outstanding as of May 31, 2022 and 2021, respectively. Liquidation preference $ | ||||||||
| Series C Convertible Preferred stock, $par value; and ,
issued and outstanding as of May 31, 2022 and 2021, respectively. Liquidation preference $ | ||||||||
| Series D Convertible Preferred stock, $ par value; and , issued and outstanding as of May 31, 2022 and 2021, respectively. Liquidation preference $ | ||||||||
| Common stock, $par value; shares authorized; and shares issued and outstanding as of May 31, 2022 and 2021, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See notes to accompanying consolidated financial statements.
| F-3 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Year Ended May 31, 2022 |
For the Year Ended May 31, 2021 |
|||||||
| Revenues: | ||||||||
| Airfreight services | $ | $ | ||||||
| Ocean freight and ocean services | ||||||||
| Contract logistics | ||||||||
| Customs brokerage and other services | ||||||||
| Total revenues | ||||||||
| Costs and operating expenses: | ||||||||
| Airfreight services | ||||||||
| Ocean freight and ocean services | ||||||||
| Contract logistics | ||||||||
| Customs brokerage and other services | ||||||||
| Salaries and related costs | ||||||||
| Professional fees | ||||||||
| Rent and occupancy | ||||||||
| Selling and promotion | ||||||||
| Depreciation and amortization | ||||||||
| Fees on factoring agreements | ||||||||
| Bad debt expense | ||||||||
| Other | ||||||||
| Total costs and operating expenses | ||||||||
| Income from operations | ||||||||
| Other income (expenses) | ||||||||
| Interest expense | ( |
) | ( |
) | ||||
| Amortization of debt discount | ( |
) | ( |
) | ||||
| Gain on forgiveness of promissory note | ||||||||
| Change in fair value of derivative liabilities | ( |
) | ||||||
| Loss on extinguishment of convertible note | ( |
) | ( |
|||||
| Other income | ||||||||
| Total other income (expenses) | ( |
) | ( |
) | ||||
| Net income before income taxes | ||||||||
| Income tax expense | ||||||||
| Net income | ||||||||
| Deemed Dividend | ( |
) | ||||||
| Net (loss) income available for common shareholders | $ | ( |
) | $ | ||||
| Net (loss) income available for common shareholders per common share | ||||||||
| – basic | $ | $ | ||||||
| – diluted | $ | $ | ||||||
| Weighted average common shares outstanding | ||||||||
| – basic | ||||||||
| – diluted | ||||||||
See notes to accompanying consolidated financial statements.
| F-4 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the Years Ended May 31, 2022 and 2021
| Series A | Series B | Series C | Series D | Additional | Retained Earnings | |||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Common Stock | Paid-in |
(Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit) | Total | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 1, 2020 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of Common Stock for services rendered | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Preferred B to Common Stock | - | ( | ) | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Recapitalization upon acquisition - net | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Warrants issued with convertible notes | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Beneficial conversion feature of convertible notes | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for the conversion of notes and accrued interest | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, May 31 2021 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Preferred B to Common Stock | - | ( | ) | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Conversion of debt to preferred C and D | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Preferred D to Common Stock | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Common Stock for the conversion of notes and accrued interest | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed Dividend | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, May 31, 2022 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
See notes to accompanying consolidated financial statements.
| F-5 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended | For
the Year Ended | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of debt discount | ||||||||
| Amortization of right of use assets | ||||||||
| Share-based compensation | ||||||||
| Bad debt expense | ||||||||
| Gain on forgiveness of notes payable | ( | ) | ( | ) | ||||
| Loss on extinguishment of notes payable | ||||||||
| Change in deferred tax asset | ( | ) | ( | ) | ||||
| Change in fair value of derivative liabilities | ||||||||
| Accretion of consulting agreement | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Contract assets | ( | ) | ( | ) | ||||
| Factoring reserve | ( | ) | ||||||
| Other prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Deposits and other assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Accrued freight | ( | ) | ||||||
| Contract liabilities | ||||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from notes payable | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Repayments of long-term debt due to related parties | ( | ) | ( | ) | ||||
| Cash paid for debt issuance costs | ( | ) | ||||||
| Borrowings on line of credit, net | ||||||||
| Net Cash Provided by (Used in) Financing Activities | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents - Beginning of year | ||||||||
| Cash and cash equivalents - End of year | $ | $ | ||||||
| SUPPLEMENTARY CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the year for: | ||||||||
| Income taxes | $ | $ | ||||||
| Interest | $ | $ | ||||||
| SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Operating lease asset and liability additions | $ | $ | ||||||
| Non-cash note forgiveness due to UL HK | $ | $ | ||||||
| Fair value of warrants issued with convertible notes | $ | $ | ||||||
| Beneficial conversion feature of convertible notes | $ | $ | ||||||
| Issuance of Common Stock - Conversions and Awards | $ | $ | ||||||
| Conversion of Preferred Stock Series B preferred to common | $ | $ | ||||||
| Conversion of Preferred Stock Series D preferred to common | $ | $ | ||||||
| Issuance of common stock for the conversion of principal net of accrued interest capitalized to principal to Notes Payable | $ | $ | ||||||
| Reduction of debt due to exchange of Convertible Notes for Preferred Stock Series C & D | $ | $ | ||||||
| Derivative liability recognized related to exchange of Convertible Notes for Preferred Stock Series C and D | $ | $ | ||||||
See notes to accompanying consolidated financial statements.
| F-6 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2022
| 1. | NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of Business
Unique Logistics International, Inc. (the “Company” or “Unique”) is a global logistics and freight forwarding company. The Company currently operates via its wholly owned subsidiaries, Unique Logistics International (NYC), LLC, a Delaware limited liability company (“UL NYC”) and Unique Logistics International (BOS) Inc, a Massachusetts corporation (“UL BOS”) and (collectively the “UL US Entities”). The Company provides a range of international logistics services that enable its customers to outsource sections of their supply chain process. This range of services can be categorized as follows:
| ● | Air Freight services | |
| ● | Ocean Freight services | |
| ● | Customs Brokerage and Compliance services | |
| ● | Warehousing and Distribution services | |
| ● | Order Management |
On May 29, 2020, Unique Logistics Holdings, Inc., a privately held Delaware corporation headquartered in New York (“ULHI”), entered into a Securities Purchase Agreement with Unique Logistics Holdings Ltd, (“UL HK”), a Hong Kong company, (the “UL HK Transaction”).
On October 8, 2020, Unique Logistics Holdings, Inc., Innocap, Inc., and Inno Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Innocap Inc. (“Merger Sub”), entered into an Acquisition Agreement and Plan of Merger pursuant to which the Merger Sub was merged with and into ULHI, with ULHI surviving as a wholly owned subsidiary of Innocap, Inc. (the “Merger”). The transaction took place on October 8, 2020 (the “Closing”). Innocap, Inc. was incorporated under the laws of the State of Nevada on January 23, 2004.
Effective January 11, 2021, the Company amended and restated its articles of incorporation with the office of the Secretary of State of Nevada to, among other things, change the Company’s name to Unique Logistics International, Inc. and increase the number of shares of common stock that the Company is authorized to issue from shares to shares.
On January 13, 2021, the Company received notice from the Financial Industry Regulation Authority (“FINRA”) that the above name change had been approved and took effect at the opening of trading on January 14, 2021. In connection with the name change, the Company changed its ticker symbol from “INNO” to “UNQL”.
Liquidity
The accompanying consolidated financial statements have been prepared on a going concern basis. Substantial doubt about an entity’s ability to continue as a going concern exists when conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued.
As
of May 31, 2022, the Company reported working capital of approximately $
The Company took the following steps to improve liquidity year over year:
| ● | Strong
operational performance resulted in increase in EBITDA from $ | |
| ● | The
Company entered into Fourth Amendment to the TBK Loan Agreement to increase its credit facility from $ | |
| ● | The Company exchanged all of its Convertible Notes and associated Warrants into shares of Convertible Preferred Shares Series C and D |
| F-7 |
Since
its inception, the Company has experienced significant business growth. To fund such growth operating capital was initially provided
by third party investors through Convertible Notes and on December 10, 2021 exchanged into Convertible Preferred Shares Series A, C and
D with fixed ownership percentage of the company. Preferred shares are more beneficial to the company because they don’t require
cash repayments. Due to the antidilution provision imbedded in the Convertible Preferred Shares, these provisions resulted in an embedded
derivative and the company recorded a current liability during the quarter ended on February 28, 2022 in the amount of $
The Company is also in process of potentially raising additional capital through the planned underwritten offering of securities that would provide funds for planned acquisitions and operating capital. While we continue to execute our strategic plan, we will be tightly managing our cash and monitoring our liquidity position. We have implemented a number of initiatives to conserve our liquidity position including activities such as raising additional capital, increasing credit facilities, reducing cost of debt, controlling general and administrative expenditures and improving collection processes. Many of the aspects of the plan involve management’s judgments and estimates that include factors that could be beyond our control and actual results could differ from our estimates. These and other factors could cause the strategic plan to be unsuccessful which could have a material adverse effect on our operating results, financial condition, and liquidity. Use of operating cash is an indicator that there could be a going concern issue, but based on our evaluation of the Company’s projected cash flows and business performance subsequent to the balance sheet date, management has concluded that the Company’s current cash and cash availability under the line of credit as of May 31, 2022, would be sufficient to alleviate a going concern issue for at least one year from the date these consolidated financial statements are issued.
COVID-19
Covid-19 remains a threat and certain countries, such as China, are still subject to restrictions related to Covid-19. While the threat level has declined to a significant extent in the USA and globally, any resurgence could have a material adverse effect on our business operations, results of operations, cash flows and financial position.
While we continue to execute our strategic plan, the Company is also in a process of evaluating several other liquidity-oriented options such as raising additional capital, increasing credit limits of the revolving credit facilities, reducing cost of debt, controlling expenditures, and improving its cash collection processes. While many of the aspects of the Company’s plan involve management’s judgments and estimates that include factors that could be beyond our control and actual results could differ from our estimates. These and other factors could cause the strategic plan to be unsuccessful which could have a material adverse effect on our operating results, financial condition, and liquidity.
Basis of Presentation
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with the accounting principles generally accepted in the United States of America (“GAAP”).
| F-8 |
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries stated in U.S. dollars, the Company’s functional currency. All intercompany transactions and balances have been eliminated in the consolidated financial statements.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates.
Significant estimates inherent in the preparation of the consolidated financial statements include determinations of the useful lives and expected future cash flows of long-lived assets, including intangibles, valuation of assets and liabilities acquired in business combinations, and estimates and assumptions in valuation of debt and equity instruments, including derivative liabilities. In addition, the Company makes significant judgments to recognize revenue – see policy note “Revenue Recognition” below.
Fair Value Measurement
The Company follows the authoritative guidance that establishes a formal framework for measuring fair values of assets and liabilities in the consolidated financial statements that are already required by generally accepted accounting principles to be measured at fair value. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The transaction is based on a hypothetical transaction in the principal or most advantageous market considered from the perspective of the market participant that holds the asset or owes the liability.
The Company utilizes market data or assumptions that market participants who are independent, knowledgeable, and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company attempts to utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company is able to classify fair value balances based on the observability of those inputs. The guidance establishes a formal fair value hierarchy based on the inputs used to measure fair value. The hierarchy gives the highest priority to Level 1 measurements and the lowest priority to level 3 measurements, and accordingly, Level 1 measurement should be used whenever possible.
The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities or published net asset value for alternative investments with characteristics similar to a mutual fund.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs for the asset or liability.
| F-9 |
The methods used may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while management believes its valuation methods are appropriate, the fair value of certain financial instruments could result in a difference fair value measurement at the reporting date. There were no changes in the Company’s valuation methodologies from the prior year.
For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amounts for financial assets and liabilities such as cash and cash equivalents, accounts receivable - trade, contract assets, factoring reserve, other prepaid expenses and current assets, accounts payable – trade and other current liabilities, including contract liabilities, convertible notes, promissory notes, all approximate fair value due to their short-term nature as of May 31, 2022 and 2021. The carrying amount of the long-term debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company. Lease liabilities approximate fair value based on the incremental borrowing rate used to discount future cash flows. The Company had Level 3 liabilities (See Derivative Liabilities note) as of May 31, 2022. On May 31, 2021 Level 3 derivative liability balances were insignificant. There were no transfers between levels during the reporting period.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. No loss had been experienced, and management believes it is not exposed to any significant risk on credit.
Accounts Receivable – Trade
Accounts
receivable - trade from revenue transactions are based on invoiced prices which the Company expects to collect. In the normal course
of business, the Company extends credit to customers that satisfy pre-defined credit criteria. The Company generally does not require
collateral to support customer receivables. Accounts receivable - trade, as shown on the consolidated balance sheets, is net of allowances
when applicable. An allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the date of
the consolidated financial statements, assessments of collectability based on an evaluation of historic and anticipated trends, the financial
condition of the Company’s customers, and an evaluation of the impact of economic conditions. The maximum accounting loss from
the credit risk associated with accounts receivable is the amount of the receivable recorded, net of allowance for doubtful accounts.
As of May 31, 2022 and 2021, the Company recorded an allowance for doubtful accounts of approximately $
Concentrations
Revenue
by three customers as a percentage of the Company’s total revenue was
Two
customers accounted for
| F-10 |
Off Balance Sheet Arrangements
On
August 30, 2021, the Company terminated its agreement with an unrelated third party (the “Factor”) for factoring of specific
accounts receivable. The factoring under this agreement was treated as a sale in accordance with FASB ASC 860, Transfers and Servicing,
and is accounted for as an off-balance sheet arrangement. Proceeds from the transfers reflected the face value of the account less a
fee, which is presented in costs and operating expenses on the Company’s consolidated statements of operations in the period the
sale occurs. Net funds received are recorded as an increase to cash and a reduction to accounts receivable outstanding in the consolidated
balance sheets. The Company reported the cash flows attributable to the sale of receivables to third parties and the cash receipts from
collections made on behalf of and paid to third parties, on a net basis as trade accounts receivables in cash flows from operating activities
in the Company’s consolidated statements of cash flows. The net principal balance of trade accounts receivable outstanding in the
books of the factor under the factoring agreement was $
During the factoring agreement in place, the Company acted as the agent on behalf of the Factor for the arrangements and had no significant retained interests or servicing liabilities related to the accounts receivable sold. The agreement provided the Factor with security interests in purchased accounts until the accounts have been repurchased by the Company or paid by the customer. In order to mitigate credit risk related to the Company’s factoring of accounts receivable, the Company may purchase credit insurance, from time to time, for certain factored accounts receivable, resulting in risk of loss being limited to the factored accounts receivable not covered by credit insurance, which the Company does not believe to be significant.
During
the years ended May 31, 2022 and 2021, the Company factored accounts receivable invoices totaling approximately and $
Factoring Reserve
When an invoice is sold to Factor, the amount received from the Factor is credited to accounts receivable – trade and a reserve is retained, less a fee, by Factor which is debited to “factoring reserve” on the consolidated balance sheets.
Factor Recovery
In certain instances, the Company receives payment for a factored reserve directly from the customer. In these cases, until the funds are paid to the factor, the Company records the payment as “factor recovery” which is in accrued expenses and other current liabilities on the consolidated balance sheets.
Recourse Liability
Company policy is to do a collectability review of uncollected factored receivables in conjunction with the Factor at each reporting date and assess the need to provide for risk of potential non-collection and resulting recourse.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is provided for by the straight-line method over the estimated useful lives of the related assets.
Estimated useful lives of property and equipment are as follows:
| Software | |||
| Computer equipment | |||
| Furniture and fixtures | |||
| Leasehold improvements |
Both the useful life of an asset and its residual value, if any, are reviewed annually.
Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period. The Company did not record any impairment for the year ended May 21, 2022 or May 31, 2021.
| F-11 |
Goodwill and Other Intangibles
The Company accounts for business acquisitions in accordance with GAAP. Goodwill in such acquisitions is determined as the excess of fair value over amounts attributable to specific tangible and intangible assets. GAAP specifies criteria to be used in determining whether intangible assets acquired in a business combination must be recognized and reported separately from goodwill. Amounts assigned to goodwill and other identifiable intangible assets are based on independent appraisals or internal estimates.
In
accordance with GAAP, the Company does not amortize goodwill or indefinite-lived intangible assets. Management evaluates the remaining
useful life of an intangible asset that is not being amortized each reporting period to determine whether events and circumstances continue
to support an indefinite useful life. If an intangible asset that is not being amortized is subsequently determined to have a finite
useful life, it is amortized prospectively over its estimated remaining useful life. Amortizable intangible assets, including tradenames
and non-compete agreements, are amortized on a straight-line basis over
The Company tests goodwill for impairment annually as of May 31 or if an event occurs or circumstances change that indicate that the fair value of the entity, or the reporting unit, may be below its carrying amount (a “triggering event”). Whenever events or circumstances change, entities have the option to first make a qualitative evaluation about the likelihood of goodwill impairment. If impairment is deemed more likely than not, management would perform the two-step goodwill impairment test. Otherwise, the two-step impairment test is not required. In assessing the qualitative factors, the Company assessed relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of the relevant events and circumstances and how these may impact a reporting unit’s fair value or carrying amount involve significant judgements and assumptions. The judgement and assumptions include the identification of macroeconomic conditions, industry and market considerations, overall financial performance, Company specific events and share price trends, an assessment of whether each relevant factor will impact the impairment test positively or negatively, and the magnitude of such impact.
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.
We test goodwill for impairment annually in the fiscal fourth quarter or whenever events or circumstances indicate the carrying value may not be recoverable. For the year ended May 31, 2022 and 2021 the Company conducted its annual review of impairment of goodwill and intangible assets and no impairment was identified.
Impairment of Long-Lived Assets
Long-lived assets are comprised of intangible assets and property and equipment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. An estimate of undiscounted future cash flows produced by the asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether an impairment exists, pursuant to the provisions of FASB ASC 360-10 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”. If an asset is determined to be impaired, the loss is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including a discounted value of estimated future cash flows and fundamental analysis. The Company reports an asset to be disposed of at the lower of its carrying value or its estimated net realizable value. The Company did not record any impairment for the years ended May 31, 2022 and 2021, as there were no triggering events or changes in circumstances that indicate that the carrying amount of an asset may not be recoverable.
| F-12 |
Derivative Liability
On December 10, 2021, the Company entered into an amended securities exchange agreement with the holders of convertible notes to exchange all Convertible Notes of the Company into shares of the newly created Convertible Preferred Stock Series C and D. For additional information on the exchange agreement see Note 5, Financing Arrangements.
Similar to the existing Convertible Preferred Stock Series A, these preferred stocks featured anti-dilution provision that expire on a certain date. Management has determined the anti-dilution provision embedded in preferred stock Series A, C and D is required to be accounted for separately from the preferred stock as a derivative liability and recorded at fair value. Separation of the anti-dilution option as a derivative liability is required because its economic characteristics are considered more akin to an equity instrument and therefore the anti-dilution option is not considered to be clearly and closely related to the economic characteristics of the preferred stock.
The
Company has identified and recorded derivative instruments arising from an anti-dilution provision in the Company’s Series A,
Series C, and Series D Preferred Stock during the quarter ended February 28, 2022. The Company recorded $
An
embedded derivative liability is representing the rights of holders of Convertible Preferred Stock Series A, C and D to receive
additional common stock of the Company upon issuance of any additional common stock by the Company prior to qualified financing
event as defined in the agreement. Each reporting period, the embedded derivative liability, if material, would be adjusted to
reflect fair value at each period end with changes in fair value recorded in the “Change in fair value of embedded derivative
liability” financial statement line item of the company’s statements of operations. The Company recorded change in fair
value of $
| Level 1 | Level 2 | Level 3 | ||||||||||
| Derivative liabilities as June 1, 2021 | $ | $ | $ | |||||||||
| Addition | ||||||||||||
| Changes in fair value | ||||||||||||
| Derivative liabilities as May 31, 2022 | $ | $ | $ | |||||||||
The underlying value of the anti-dilution provision is calculated from estimating the probability and value of a potential raise. The model used estimates the potential that the company completes a capital raise prior to the expiration of the anti-dilution feature and determines the value of the anti-dilution feature given these assumptions. The model requires the use of certain assumptions. These assumptions include probability a raise is completed, probability certain anti-dilution features are extended, estimated raise amount, term to a raise, and an appropriate risk-free interest rate.
The key inputs into the model were as follows:
| May 31, 2022 | May 31, 2021 | |||||||
| Risk-free interest rate | % | % | ||||||
| Probability of capital raise | % | % | ||||||
| Estimated capital raise amount | $ | $ | ||||||
| Estimated time to capital raise | ||||||||
Income Taxes
The Company files a consolidated income tax return for federal and most state purposes.
Management has determined that there are no uncertain tax positions that would require recognition in the consolidated financial statements. If the Company were to incur an income tax liability in the future, interest and penalties on any income tax liability would be reported as interest expense. Management’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based on ongoing analysis of tax laws, regulations, and interpretations thereof as well as other factors.
The Company uses the assets and liability method of accounting for deferred income taxes. Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the balance sheet carrying amounts of existing assets and liabilities and their respective tax basis. The Company regularly evaluates the need for a valuation allowance related to the deferred tax asset.
| F-13 |
Revenue Recognition
The Company adopted ASC 606, Revenue from Contracts with Customers. Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to receive in exchange for services. The Company recognizes revenue upon meeting each performance obligation based on the allocated amount of the total consideration of the contract to each specific performance obligation.
To determine revenue recognition, the Company applies the following five steps:
| 1. | Identify the contract(s) with a customer; | |
| 2. | Identify the performance obligations in the contract; | |
| 3. | Determine the transaction price; | |
| 4. | Allocate the transaction price to the performance obligations in the contract; and | |
| 5. | Recognize revenue as or when the performance obligation is satisfied. |
Revenue is recognized as follows:
| i. | Freight income - export sales | |
| Freight income from the provision of air, ocean, and land freight forwarding services are recognized over time based on a relative transit time basis thru the sail or departure from origin port. The Company is the principal in these transactions and recognizes revenue on a gross basis. | ||
| ii. | Freight income - import sales | |
| Freight income from the provision of air, ocean, and land freight forwarding services are recognized over time based on a relative transit time basis thru the delivery to the customer’s designated location. The Company is the principal in these transactions and recognizes revenue on a gross basis. | ||
| iii. | Customs brokerage and other service income | |
| Customs brokerage and other service income from the provision of other services are recognized at the point in time the performance obligation is met. |
The Company’s business practices require, for accurate and meaningful disclosure, that it recognizes revenue over time. The “over time” policy is the period from point of origin to arrival of the shipment at US Port of entry (or in the case when the customer requires delivery to a designated point, the arrival at that delivery point). This over time policy requires the Company to make significant judgements to recognize revenue over the estimated duration of time from port of origin to arrival at port of entry. The point in the process when the Company meets its obligation in the port of entry and the subsequent transfer of the goods to the customer is when the customer has the obligation to pay, has taken physical possession, has legal title, risk and awards (ownership) and has accepted the goods. 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 customers have an expected duration of one year or less.
| F-14 |
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.
Revenue billed prior to realization is recorded as contract liabilities on the consolidated balance sheets and contract costs incurred prior to revenue recognition are recorded as contract assets on the consolidated balance sheets.
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 - trade.
Contract Liabilities
Contract liabilities represent the amount of obligation to transfer goods or services to a customer for which consideration has been received.
Significant Changes in Contract Asset and Contract Liability Balances for the year ended May 31, 2022:
Contract Assets Increase | Contract (Increase) | |||||||
| Reclassification of the beginning contract liabilities to revenue, as the result of performance obligation satisfied | $ | $ | ||||||
| Cash Received in advance and not recognized as revenue | ||||||||
| Reclassification of the beginning contract assets to receivables, as the result of rights to consideration becoming unconditional | ( | ) | ||||||
| Contract assets recognized | ||||||||
| Net Change | $ | $ | ||||||
There were no changes in contract assets or liabilities as of May 31, 2021.
| F-15 |
Disaggregation of Revenue from Contracts with Customers
The following table disaggregates gross revenue from our clients (all US based) by significant geographic area for the years ended May 31, 2022 and 2021, based on origin of shipment (imports) or destination of shipment (exports):
| For the Year Ended May 31, 2022 | For the Year Ended | |||||||
| China, Hong Kong & Taiwan | $ | $ | ||||||
| Southeast Asia | ||||||||
| United States | ||||||||
| India Sub-continent | ||||||||
| Other | ||||||||
| Total revenue | $ | $ | ||||||
Segment Reporting
Based on the guidance provided by ASC Topic 280, Segment Reporting, management has determined that the Company currently operates in one geographical segment and consists of a single reporting unit given the similarities in economic characteristics between its operations and the common nature of its products, services and customers.
The Company adopted ASC 260, Earnings per share, guidance from the inception. Earnings per share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. Basic EPS is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding, including warrants exercisable for less than a penny, (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the consolidated statements of operations) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income attributable to common stockholders per common share.
| F-16 |
| For the Year Ended | ||||||||
| May 31, 2022 | May 31, 2021 | |||||||
| Numerator: | ||||||||
| Net income (loss) available for common shareholders | $ | ( | ) | |||||
| Effect of dilutive securities: | ||||||||
| Diluted net (loss) income available for common shareholders | $ | ( | ) | $ | ||||
| Denominator: | ||||||||
| Weighted average common shares outstanding – basic | ||||||||
| Dilutive securities: | ||||||||
| Series A Preferred | ||||||||
| Series B Preferred | ||||||||
| Convertible notes | ||||||||
| Warrants | ||||||||
| Series C Preferred | ||||||||
| Series D Preferred | ||||||||
| Weighted average common shares outstanding and assumed conversion – diluted | ||||||||
| Basic net (loss) income available for common shareholders per common share | $ | ( | ) | $ | ||||
| - | ||||||||
| Diluted net (loss)income available for common shareholders per common share | $ | ( | ) | $ | ||||
| May 31, 2022 | ||||
| Weighted average common shares outstanding – basic | ||||
| Series A Preferred | ||||
| Series B Preferred | ||||
| Series C Preferred | ||||
| Series D Preferred | ||||
| Weighted average common shares outstanding and assumed conversion – diluted | ||||
Leases
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02 “Leases” (Topic 842) which amended guidance for lease arrangements to increase transparency and comparability by providing additional information to users of financial statements regarding an entity’s leasing activities. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of lease guidance is referred to as ASC 842. The revised guidance seeks to achieve this objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements.
| F-17 |
During
the period ended May 31, 2020, the Company adopted ASC 842 upon inception and recognized a right of use (“ROU”) asset and
liability in the consolidated balance sheet in the amount of $
For leases in which the acquiree is a lessee, the Company shall measure the lease liability at the present value of the remaining lease payments, as if the acquired lease were a new lease of the Company at the acquisition date. The Company shall measure the right-of-use asset at the same amount as the lease liability as adjusted to reflect favorable and unfavorable terms of the lease when compared with market terms. The values of the leases acquired in the business acquisition discussed in Note 2 were representative of fair value at the acquisition date and no favorable or unfavorable terms were noted.
The Company adopted the package of practical expedients that allows it to (i) not reassess whether an arrangement contains a lease, (ii) carry forward its lease classification as operating or capital leases, (iii) not to apply the recognition requirements in ASC 842 to short-term leases, (iv) not record a right of use asset or right of use liability for leases with an asset or liability balance that would be considered immaterial. and (v) not reassess its previously recorded initial direct costs. In addition, the Company elected the practical expedient to not separate lease and non-lease components, and therefore both components are accounted for and recognized as lease components.
The Company determines if an arrangement is a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. All ROU assets and lease liabilities are recognized at the commencement date at the present value of lease payments over the lease term. ROU assets are adjusted for lease incentives and initial direct costs. The lease term includes renewal options exercisable at the Company’s sole discretion when the Company is reasonably certain to exercise that option. As the Company’s leases generally do not have an implicit rate, the Company uses an estimated incremental borrowing rate based on borrowing rates available to them at the commencement date to determine the present value. Certain of our leases include variable payments, which may vary based upon changes in facts or circumstances after the start of the lease. The Company excludes variable payments from ROU assets and lease liabilities, to the extent not considered fixed, and instead expenses variable payments as incurred. Lease expense is recognized on a straight-line basis over the lease term and is included in rent and occupancy expenses in the consolidated statements of operations.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”), which establishes financial accounting and reporting standards for stock-based employee compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. The Company accounts for compensation cost for stock option plans in accordance with ASC 718.
The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.
Share-based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock-based compensation expenses are included in costs and operating expenses depending on the nature of the services provided in the consolidated statements of operations.
For the year ended May 31, 2022 and May 2021, share-based compensation amounted to $ and $ for services provided.
| F-18 |
Advertising and Marketing
All costs associated with advertising and marketing of the Company products are expensed during the period when the activities take place and are included in selling and promotion on the consolidated statements of operations.
Convertible Debt
The Company accounts for Convertible Debt based on the guidance in ASC 470, “Debt with Conversion and Other Options” (“ASC 470”). As such all convertible debt instruments that separated into debt and an equity component based on the beneficial conversion feature (“BCF”) amount determined on the in-the-money amount of the conversion option. BCF is recorded in additional paid -in – capital with corresponding discount on the debt liability amortized to interest expense over the life of the debt instrument. There is no subsequent remeasurement of the amount recorded in equity while discount is amortized in the same manner as nonconvertible debt. See Note 7, Financing Arrangements for Convertible Notes outstanding and the associated unamortized discounts.
Sequencing Policy
Under ASC 815-40-35, “Derivatives and Hedging – Contracts in Entity’s Own Equity” (“ASC 815”), the Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current year’s presentation.
| F-19 |
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—”Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. ASU 2020-06 is effective for public business entities, other than smaller reporting companies as defined by the SEC starting January 1, 2022. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.
| 2. | PROPERTY AND EQUIPMENT |
Major classifications of property and equipment are summarized below as of May 31, 2022 and 2021.
| May 31, 2022 | May 31, 2021 | |||||||
| Furniture and fixtures | $ | $ | ||||||
| Computer equipment | ||||||||
| Software | ||||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| F-20 |
Depreciation
expense charged to income for the years ended May 31, 2022 and May 31, 2021 amounted to $
| 4. | GOODWILL |
The
carrying amount of goodwill was $
| Beginning balance June 1, 2020 | $ | |||
| Measurement Period Adjustment | ( | ) | ||
| Ending balance May 31, 2021 and 2022 | $ |
| 5. | INTANGIBLE ASSETS |
Intangible assets consist of the following at May 31, 2022 and 2021:
| May 31, 2022 | May 31, 2021 | |||||||
| Trade names / trademarks | $ | $ | ||||||
| Customer relationships | ||||||||
| Non-compete agreements | ||||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortizable
intangible assets, including tradenames and non-compete agreements, are amortized on a straight-line basis over
Estimated amortization expense for the next five years and thereafter is as follows:
| Twelve Months Ending May 31, | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| $ | ||||
| F-21 |
| 6. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities consisted of the following at May 31, 2022 and 2021:
| May 31, 2022 | May 31, 2021 | |||||||
| Accrued salaries and related expenses | $ | $ | ||||||
| Accrued sales and marketing expense | ||||||||
| Accrued professional fees | ||||||||
| Accrued income tax | ||||||||
| Accrued overdraft liabilities | ||||||||
| Other accrued expenses and current liabilities | ||||||||
| $ | $ | |||||||
| 7. | FINANCING ARRANGEMENTS |
Financing arrangements on the consolidated balance sheets consists of:
| May 31, 2022 | May 31, 2021 | |||||||
| Revolving Credit Facility | $ | $ | ||||||
| Promissory note (PPP) | ||||||||
| Promissory notes (EIDL) | ||||||||
| Notes payable | ||||||||
| Convertible notes – net of discount | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Revolving Credit Facility
On
June 1, 2021, the Company entered into a Revolving Purchase, Loan and Security Agreement (the “TBK Agreement”) with TBK BANK,
SSB, a Texas State Savings Bank (“Purchaser”), for a facility under which Purchaser will, from time to time, buy approved
receivables from the Seller. The TBK Agreement provides for Seller to have access to the lesser of (i) $
The
Core Facility provided Core with security interests in purchased accounts until the accounts have been repurchased by the Company or
paid by the customer. As of June 1, 2021, the Core Facility has been terminated along with all security interests granted to Core and
replaced with the TBK Agreement. This facility temporarily renewed on June 17, 2021, under the same terms and conditions as the original
agreement and the credit line was set at $
On
August 4, 2021, the parties to the TBK Agreement entered into a First Amendment Agreement to increase the credit facility from $
| F-22 |
On
September 17, 2021, the parties to the TBK Agreement entered into a Second Amendment to the TBK Agreement to temporarily increase the
credit facility from $
On
January 31, 2022, the parties to the TBK Agreement entered into a Third Amendment to the TBK Agreement to permanently increase the credit
facility from $
On
April 14, 2022, the parties to the TBK Loan Agreement entered into a Forth Amendment to temporarily increase the credit facility from
$
Purchase Money Financing
On September 8, 2021 (the “Effective Date”), the Company entered into a Purchase Money Financing Agreement (the “Financing Agreement”) with Corefund Capital, LLC (“Corefund”) in order to enable the Company to finance additional cargo charter flights for the peak shipping season.
Pursuant to the Financing Agreement, the Company may, from time to time, request financing from Corefund to enable the Company to engage Company’s suppliers to provide chartered cargo flights for the Company’s clients. The Company may also request that Corefund tender payments directly to a supplier. Corefund requires payments from a buyer to be made to a Deposit Account Control Agreement account at an agreed upon bank where Corefund is the sole director and accessor to the account for the term of the relationship.
The
fees and interest related to CoreFund purchase money financing are included in the interest expense on the statement of operations. The
fee paid to CoreFund for the year ended May 31, 2022 were approximately $
Promissory Note (PPP)
The Company’s wholly-owned subsidiaries received proceeds under the Paycheck Protection Program (“PPP”). The PPP, established as part of the CARES Act, provided for loans to qualifying business for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business. The PPP Loan (“Note”) and accrued interest are forgivable after twenty-four weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities and maintains its payroll levels. The amount of forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period.
During
April and May 2020, the UL US Entities received aggregate proceeds of $
The
interest rate on the above PPP notes is
As noted above, the principal and accrued interest under the Note evidencing the PPP Loans are forgivable after twenty-four weeks as long the Company has used the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the Company terminates employees or reduces salaries during the twenty-four-week period. The Company used the proceeds for purposes consistent with the PPP. In order to obtain full or partial forgiveness of the PPP Loan, the Company must request forgiveness and must provide satisfactory documentation in accordance with applicable Small Business Administration (“SBA”) guidelines. Interest payable on the Note may be forgiven only if the SBA agrees to pay such interest on the forgiven principal amount of the Note. The Company will be obligated to repay any portion of the principal amount of the Note that is not forgiven, together with interest accrued and accruing thereon at the rate set forth above, until such unforgiven portion is paid in full.
| F-23 |
Beginning one month following expiration of the Deferral Period and continuing monthly until 24 months from the date of the Note (the “Maturity Date”), the Company is obligated to make monthly payments of principal and interest to the Lender with respect to any unforgiven portion of the Note, in such equal amounts required to fully amortize the principal amount outstanding on the Note as of the last day of the Deferral Period by the Maturity Date. The Company is permitted to prepay the Note at any time without payment of any premium.
During
January 2021, the PPP notes, which were assumed without recourse in the May 2020 acquisition (see Note 2) were utilized for eligible
purposes under the terms of the agreements and were forgiven after the expiration of the twenty four week period discussed above. The
total amount forgiven was $
On
March 9, 2021, the Company was granted an SBA loan (the “Loan”) by Century Bank in the aggregate amount of $
Promissory Note (EIDL)
Pursuant
to a certain Loan Authorization and Agreement (the “SBA Loan Agreement”) in June 2020, the Company securing a loan (the “EIDL
Loan”) with a principal amount of the EIDL Loan of $
Notes Payable
On
May 29, 2020, the Company entered into a $
On
May 29, 2020, the Company entered into a non-compete, non-solicitation and non-disclosure agreement with a former owner of ATL. The amount
payable under the agreement is $
| F-24 |
Promissory Note
On
March 19, 2021 (the “Effective Date”), Unique Logistics International, Inc. (the “Company”) issued to an accredited
investor (the “Investor”) a
As
of May 31, 2021, the outstanding balance due under the agreement was $
Convertible Notes Payable
Trillium SPA
On
October 8, 2020, the Company entered into a Securities Purchase Agreement (the “Trillium SPA”) with Trillium Partners (“Trillium”)
pursuant to which the Company sold to Trillium (i) a
The Company initially determined the fair value of the warrant and the beneficial conversion feature of the note using the Black-Scholes model and recorded an adjustment to the carrying value of the note liability with an equal and offsetting adjustment to Stockholders’ Equity.
The
note was amended on October 14, 2020, to adjust the conversion price to $
On
June 1, 2021, this Note maturity was extended to
On August 19, 2021, Trillium entered into a Securities Exchange Agreement and on December 10, 2021 into an amended Securities Exchange Agreement, as discussed below. Upon effectiveness of these agreements, Trillium Note was exchanged for Preferred Stock Series D.
During
the year ended May 31, 2022, a noteholder converted $
3a SPA
On
October 14, 2020, the Company entered into a Securities Purchase Agreement (the “3a SPA”) with 3a Capital Establishment (“3a”)
pursuant to which the Company sold to 3a (i) a
| F-25 |
The
Company determined the fair value of the warrant using the Black-Scholes model and recorded an adjustment to the carrying value of the
note liability with an equal and offsetting adjustment to Stockholders Equity. The warrant had a grant date fair value of $
On
June 1, 2021, this Note maturity was extended to
On August 19, 2021, 3A entered into a Securities Exchange Agreement and on December 10, 2021 into an amended Securities Exchange Agreement, as discussed below. Upon effectiveness of these agreements, 3A Note was exchanged for Preferred Stock Series C.
As
of May 31, 2022 and 2021 the total unamortized debt discount related to the 3a SPA was $
During
the year ended May 31, 2022, the noteholder converted $
Trillium and 3a January Convertible Notes
On
January 28, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Trillium Partners
LP (“Trillium”) and 3a Capital Establishment (“3a” together with Trillium, the “Investors”) pursuant
to which the Company sold to each of the Investors (i) a
The
Notes mature on January 28, 2022 (the “Maturity Date”) and are convertible at any time. The conversion price of the Note
is $
| F-26 |
On
June 1, 2021, maturity of these Notes was extended to
As
of May 312021, the outstanding balance on these convertible notes was $
On August 19, 2021, Investors entered into a Securities Exchange Agreement and on December 10, 2021 into an amended Securities Exchange Agreement, as discussed below. Upon effectiveness of these agreements, Trillium and 3a January Convertible Notes were exchanged for Preferred Stocks Series C and D.
During
the year ended May 31, 2022, the Company recorded amortization of debt discount totaling $
Covenants
As of May 31, 2022 the Company was in full compliance with all covenants and debt agreements. As of May 31, 2021, the Company was in compliance with all covenants and debt agreements, except for Trillium and 3a where the Company was deemed to be in default due to a violation of several covenants. On January 29, 2021, the Company and the investors (Trillium and 3a) entered into a waiver agreement which waived any and all defaults underlying the 3a, Trillium and 3a SPA’s and the Trillium and 3a Notes for a period of six months. Subsequently, the Company signed the Securities Exchange Agreement extending this waiver as described below.
Securities Exchange Agreements
On
August 19, 2021, the Company entered into a securities exchange agreement (the “Exchange Agreement”) with the investors (Trillium
and 3a) holding the above listed notes and warrants of
In the event the number of Exchange Shares would result in the Holder beneficially owning more than the Beneficial Ownership Limitation (as defined in the Exchange Agreement), all such Exchange Shares in excess of the Beneficial Ownership Limitation shall be issued as a number of shares of newly created Series C Convertible Preferred Stock
The closing will occur on the Trading Day on which all of the Transaction Documents (as defined in Exchange Agreement) have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Holders’ obligations to tender the Surrendered Securities at such Closing, and (ii) the Company’s obligations to deliver the New Securities, in each case, have been satisfied or waived (the “Closing Date”).
| F-27 |
Amended Securities Exchange Agreement
On
December 10, 2021, the Company entered into an amended securities exchange agreement Trillium and 3A (the “Holders”) holding
convertible notes, issued by the Company, in the aggregate remaining principal amount of $
In
connection with the Amended Exchange Agreement, each of the Holders received that certain number of Preferred Stock equal to one share
of Preferred Stock for every $
Upon effectiveness of the Amended Exchange Agreement, the Company no longer has any outstanding convertible notes or warrants.
Future
maturities related to the above promissory notes, notes payable and convertible notes are $
| 8. | RELATED PARTY TRANSACTIONS |
As part of the UL HK Transaction and related transactions, the Company assumed the following debt due to related parties:
| May 31, 2022 | May 31, 2021 | |||||||
| Due to Frangipani Trade Services (1) | $ | $ | ||||||
| Due to employee (2) | ||||||||
| Due to employee (3) | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| (1) | ||
| (2) | ||
| (3) |
| F-28 |
Consulting Agreements
Unique
entered into a Consulting Services Agreement on May 29, 2020 for a term of three years with Great Eagle Freight Limited (“Great
Eagle” or “GEFD”), a Hong Kong Company (the “Consulting Services Agreement”) where the Company pays $
Accounts Receivable - trade and Accounts Payable - trade
Transactions
with related parties account for $
Revenue and Expenses
Revenue
from related party transactions is for export services from related parties or for delivery at place imports nominated by such related
parties. For the year ended May 31, 2022, these transactions represented approximately $
Revenue
from related party transactions is for export services from related parties or for delivery at place imports nominated by such related
parties. For the year ended May 31, 2021, these transactions represented $
Direct
costs are services billed to the Company by related parties for shipping activities. For the year May 31, 2022, these transactions represented
approximately $
Direct
costs are services billed to the Company by related parties for shipping activities. For the year May 31, 2021, these transactions represented
$
| 9. | RETIREMENT PLAN |
We
have two savings plans that qualify under Section 401(k) of the Internal Revenue Code legacy of the predecessor companies. Eligible employees
may contribute a portion of their salary into the savings plans, subject to certain limitations.
| 10. | STOCKHOLDERS’ EQUITY |
Common Stock
The Company is authorized to issue shares of stock, a par value of $ per share.
During the year ended May 31, 2021
| - |
shares of the Company’s common stock were issued to a consultant. The shares have an
aggregated fair value of $ |
| - | On October 9, 2020, the Company’s Chief Executive Officer converted shares of Series B Preferred Stock into an aggregate of shares of the Company’s common stock. |
| - | On
April 12, 2021, a noteholder converted $ |
| F-29 |
During the year ended May 31, 2022:
On
August 13, 2021 the Company issued shares of the Company’s common stock pursuant to the conversion of shares
of Series B Convertible Preferred Stock held by Frangipani Trade Services Inc, an entity
On April 5, 2022, a shareholder converted shares of Series D Convertible Preferred Stock into shares of the Company’s common stock.
On
June 23, 2021, a noteholder converted $
On
June 28, 2021, a noteholder converted $
On
July 8, 2021, a noteholder converted $
On
August 3, 2021, a noteholder converted $
On
August 9, 2021, a noteholder converted $
On
September 28, 2021, a noteholder converted $
On
October 27, 2021, a noteholder converted $
As of May 31, 2022 and 2021, there were and shares of Common Stock issued and outstanding, respectively.
Preferred Shares
The Company authorized to issue shares of preferred stock, $ par value per share.
Series A Convertible Preferred
The Company has designated shares of Series A Convertible Preferred stock and has shares issued and outstanding as of May 31, 2022 and 2021, respectively. The holders of Series A Preferred. subject to the rights of holders of shares of the Company’s Series B Preferred stock which shares will be pari passu with Series B Preferred in terms of liquidation preference and dividend rights and are subject to an anti-dilution provision, making the holders subject to an adjustment necessary to maintain their agreed upon fully diluted ownership percentage.
Series B Convertible Preferred
The Company has designated shares of Series B Convertible Preferred stock and has and shares issued and outstanding as of May 31, 2022 and 2021, respectively. The holders of Series B Preferred, subject to the rights of holders of shares of the Company’s Series A Preferred Stock which shares will be pari passu with the Series B Preferred in terms of liquidation preference and dividend rights, shall be entitled to receive, at their option, immediately prior an in preference to any distribution to the holders of the Company’s common stock.
| F-30 |
Series C & D Convertible Preferred
The
Company has designated shares of preferred stock each for Series C and D Convertible Preferred Stock. The Company had shares
of Series C and shares of Series D Preferred shares issued and outstanding as of May 31, 2022 and as of May 31, 2021. The holders
of the Preferred Stock shall be entitled to receive, upon liquidation, dissolution or winding up of the Company, the amount of cash,
securities or other property to which such holder would be entitled to receive with respect to such shares of Preferred Stock if such
shares had been converted to common stock immediately prior to such liquidation. In the aggregate, each of the Series C Preferred and
Series D Preferred may be converted up to an amount of common stock equal to
Since
the anti-dilution provisions exist in the Preferred Stock Series A, C and D, derivative liabilities were recorded on the balance sheet
as of May 31, 2022, at fair value (see Note 1, Derivative Liability). As a result of the Company exchanging $
Warrants
The following is a summary of the Company’s warrant activity:
| Weighted Average | ||||||||
| Warrants | Exercise Price | |||||||
| Outstanding – May 31, 2021 | $ | |||||||
| Exercisable – May 31, 2021 | $ | |||||||
| Cancelled | ( | ) | $ | |||||
| Outstanding – May 31, 2022 | $ | |||||||
| Exercisable – May 31, 2022 | $ | |||||||
On December 10, 2021, the Company entered into an amended securities exchange with two investors holding convertible notes and warrants for Convertible Preferred Stock Series C and D. For additional information on the exchange agreement see Note 5, Financing Arrangements. Upon effectiveness of the amended exchange agreement, as of May 31, 2022 the Company no longer has any outstanding warrants.
| F-31 |
| 11. | COMMITMENTS AND CONTINGENCIES |
Pending acquisitions
On
April 28, 2022, Unique Logistics International, Inc. (the “Company”) entered into a stock purchase agreement (the “Purchase
Agreement”), by and between the Company and Unique Logistics Holdings Limited, a Hong Kong corporation (the “Seller”),
whereby the Company acquired from the Seller all of Seller’s share capital (the “Purchased Shares”) in nine (9) of
Seller’s subsidiaries (collectively the “Subsidiaries”) as listed in Schedule I of the Purchase Agreement. As consideration
for the Purchased Shares, the Company agreed to (i) pay the Seller $
In
addition to the Purchase Price,
The transactions contemplated by the Purchase Agreement shall be contingent upon and subject to successful completion of the Company’s anticipated public offering of securities (the “Financing”). If the Company is unable to obtain the Financing, the Company may provide written notice to Seller stating that the Company has been unable to obtain the Financing and notify Seller that the Company has elected to either (i) waive the condition of the Financing , in which event the Purchase Agreement will continue as if the Financing had been obtained or (ii) terminate the Purchase Agreement.
Litigation
From time to time, the Company may become involved in litigation relating to claims arising in the ordinary course of the business. There are no claims or actions pending or threatened against the Company that, if adversely determined, would in the Company’s management’s judgment have a material adverse effect on the Company.
Leases
The Company leases office space, warehouse facilities and equipment under non-cancellable lease agreements expiring on various dates through October 2028. Office leases contain provisions for future rent increases. The Company adopted ASC 842 from inception, requiring the Company to recognize an asset and liability on the consolidated balance sheets for lease arrangements with terms longer than 12 months. The Company has elected the practical expedient to not apply the recognition requirement to leases with a term of less than one year (short term leases). The Company uses its incremental borrowing rate to discount lease payments to present value. The incremental borrowing rate is based on the estimated interest rate the Company could obtain for borrowing over a similar term of the lease at commencement date. Rental escalations, renewal options and termination options, when applicable, have been factored into the Company’s determination of lease payments when appropriate. The Company does not separate lease and non-lease components of contracts. Variable payments related to pass-through costs for maintenance, taxes and insurance or adjustments based on an index such as Consumer Price Index are not included in the measurement of the lease liability or asset and are expensed as incurred.
The components of lease expense were as follows:
For the Year Ended | For the Year Ended | |||||||
| May 31, 2022 | May 31, 2021 | |||||||
| Operating lease | $ | $ | ||||||
| Interest on operating lease liabilities | ||||||||
| Total net lease cost | $ | $ | ||||||
Supplemental balance sheet information related to leases was as follows:
| May 31, 2022 | May 31, 2021 | |||||||
| Operating leases: | ||||||||
| Operating lease ROU assets – net | $ | $ | ||||||
| Current operating lease liabilities, included in current liabilities | $ | $ | ||||||
| Noncurrent operating lease liabilities, included in long-term liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| F-32 |
Supplemental cash flow and other information related to leases was as follows:
For the Year Ended May 31, 2022 | For the Year Ended May 31, 2021 | |||||||
| ROU assets obtained in exchange for lease liabilities: | ||||||||
| Operating leases | $ | $ | ||||||
| Weighted average remaining lease term (in years): | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate: | ||||||||
| Operating leases | % | % | ||||||
As of May 31, 2022, future minimum lease payments under noncancelable operating leases are as follows:
| Future Minimum Payments for the Twelve Months Ending May 31, | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total lease obligations | $ | |||
| F-33 |
| 12. | INCOME TAX PROVISION |
The income tax provision consists of the following:
| May 31, 2022 | May 31, 2021 | |||||||
| Federal | ||||||||
| Current | $ | $ | ||||||
| Deferred | ( | ) | ( | ) | ||||
| State and Local | ||||||||
| Current | ||||||||
| Deferred | ( | ) | ( | ) | ||||
| Income tax expense | $ | $ | ||||||
The
Company has U.S. federal net operating loss carryovers (NOLs) of approximately none, and $
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation for
taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this
assessment. For the year ended May 31, 2022, there was
The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the Company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.
If applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as “Other expenses – Interest” in the statement of operations. Penalties would be recognized as a component of “General and administrative.”
| F-34 |
The Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:
| Deferred Tax Assets | For
the Year Ended May 31, 2022 | For the Year Ended May 31, 2021 | ||||||
| Debt discount liability | $ | $ | ||||||
| Allowance for doubtful accounts | ||||||||
| Contract liability | ||||||||
| Lease liability | ||||||||
| Other | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ||||||||
| Deferred tax asset, net of valuation allowance | ||||||||
| Deferred Tax Liabilities | ||||||||
| Operating lease right-of-use assets | ( | ) | ||||||
| Goodwill and intangibles | ( | ) | ||||||
| Fixed assets | ( | ) | ( | ) | ||||
| Net deferred tax asset (liability) | $ | $ | ||||||
The expected tax expense (benefit) based on the statutory rate is reconciled with actual tax expense benefit as follows:
| For the Year Ended May 31, 2022 | For the Year Ended May 31, 2021 | |||||||
| US Federal statutory rate (%) | ||||||||
| State income tax, net of federal benefit | ||||||||
| Impact of debt exchange | ||||||||
| FDII deduction | ( | ) | ||||||
| PPP Loan Forgiveness | ( | ) | ||||||
| Change in valuation allowance | ( | ) | ||||||
| Other permanent differences, net | ( | ) | ( | ) | ||||
| Income tax provision (benefit) (%) | ||||||||
| 13. | SUBSEQUENT EVENTS |
The Company has evaluated subsequent events through the date the consolidated financial statements were available to be issued. Based on this evaluation, the Company has identified the following reportable subsequent events other than those disclosed elsewhere in these consolidated financial statements.
Preferred Stock Conversions
On June 21, 2022, a shareholder converted shares of Series D Convertible Preferred Stock into shares of the Company’s common stock.
On June 28, 2022, a shareholder converted shares of Series D Convertible Preferred Stock into shares of the Company’s common stock.
On July 29, 2022, a shareholder converted shares of Series A Convertible Preferred Stock into shares of the Company’s common stock.
| F-35 |