| NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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”), (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 Liquidity The
accompanying condensed 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. From
the inception the Company experienced adverse cash flows from operations, primarily due to significant business growth since inception,
entering new markets and products and repayment of an acquisition related debt. As of November 30, 2021, the Company had working capital
of approximately $ 2.8 3.5 In
response to such factors, the Company’s took steps to alleviate the risk of substantial doubt by
● Repayment
of significant portion of its acquisition related debt.
● Entering
a Second Amendment to the TBK Agreement to increase the credit facility from $ 40.0
million to $ 47.5
million for the period through January 31,
2022.
● Entering
into a Purchase Money Financing Agreement on September 8, 2021, with Corefund Capital, LLC to enable the Company to finance additional
cargo charter flights for the peak shipping season.
● Entering
into an Exchange Agreement on August 4, 2021 and into the Amendment to the Exchange Agreement on December 10, 2021 to exchange
all of its Convertible debt into shares of common stock. The
Company also is preparing to raise additional funds through an uplisting on a major securities exchange in early 2022. The funds would
be used for acquisitions and partially for operating capital. Covid-19 In
January 2020, the World Health Organization has declared the outbreak of a novel coronavirus (COVID-19) as a “Public Health Emergency
of International Concern,” which continues to have an impact throughout the world and has adversely impacted global commercial
activity and contributed to significant declines and volatility in financial markets. The coronavirus outbreak and government responses
are creating disruption in global supply chains and adversely impacting many industries. The
outbreak could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown.
The extent of the impact of COVID-19 on our operational and financial performance will depend on the effect on our shippers and carriers,
all of which are uncertain and cannot be predicted. The rapid development and fluidity of this situation precludes any prediction as
to the ultimate material adverse impact of the coronavirus outbreak. Nevertheless, the outbreak presents uncertainty and risk with respect
to the Company, its performance, and its financial results. The Company has experienced increased air and ocean freight rates due to
overall cargo restraints imposed by shippers and carriers and is in a position to pass these cost increases directly to the customers
without significantly affecting its margins. Due
to impacts from the COVID-19 pandemic and the uncertain pace of recovery, seasonal variations in the availability of air and ocean carriers,
the volatility of fuel prices and other supply and demand related factors, operating results for the three and six months ended November
30, 2021 are not necessarily indicative of operating results for the entire year. 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. As
of November 30, 2021, we expect to alleviate our going concern needs for at least the next twelve months from the time these financial
statements are made available with existing cash and cash equivalents and cash flows from operations. The Company expects to meet its
long-term liquidity needs with cash flows from operations and financing arrangements. Basis
of Presentation The
condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation. The
unaudited interim financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which
in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for
the periods presented. This report should be read in conjunction with the Company’s consolidated financial statements and notes
thereto included in the Company’s Form 10-K for the year ended May 31, 2021. The Company assumes that the users of the interim
financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the
adequacy of additional disclosure needed for a fair presentation may be determined in that context. The condensed consolidated balance
sheet at May 31, 2021 was derived from audited financial statements but does not include all disclosures required by accounting principles
generally accepted in the United States of America. Use
of Estimates The
preparation of condensed 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 condensed
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 condensed 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,
estimates of valuation assumptions for long-lived assets impairment, estimates and assumptions in valuation of debt and equity instruments
and the calculation of share-based compensation. In addition, the Company makes significant judgments to recognize revenue – see
policy note “ Revenue Recognition Fair
Value Measurement The
Company follows the authoritative guidance that establishes a formal framework for measuring fair values of assets and liabilities in
the condensed 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. 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, net and current
portion of promissory loans approximate fair value due to their short-term nature as of November 30, 2021 and May 31, 2021. The carrying
amount of the 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 no Level 3 assets or liabilities as of November 30, 2021, and May 31, 2021. 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 has 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 condensed 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 condensed 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 November 30, 2021 and May 31, 2021, the Company recorded an
allowance for doubtful accounts of approximately $ 1,010,000 240,000 Concentrations Three
major customers represented approximately 62%
SCHEDULE OF CONCENTRATION OF RISK
Customer For the Three Months Ended November 30, 2021 For the Three Months Ended November 30, 2020
A 54 % 37 %
B 10 % 16 %
C 8 % -
Total: 72 % 53 %
Customer For the Six Months Ended November 30, 2021 For the Six Months Ended November 30, 2020
A 40 % 33 %
B 9 % 16 %
C 7 % -
Total: 56 % 49 % 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 31,747,702 31,596,215 1,415,445 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 three months ended November 30, 2020, the Company factored accounts receivable invoices totaling approximately $ 73.8 4.3 111.7 1,410,000 27,000 1,884,000 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. Generally, federal, state,
and local authorities may examine the Company’s tax returns for three
to four
years from the filing date and the current and
prior three to four years remain subject to examination as of December 31, 2020 for the UL US Entities, January 31, 2020 for the Company
and May 31, 2020 for The
Company uses the assets and liability method of accounting for deferred taxes. Deferred 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. As of November 30, 2021 and May 31, 2021, the Company recognized a deferred tax asset of $ 568,000 264,000 Revenue
Recognition The
Company adopted ASC 606, Revenue from Contracts with Customers 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. 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 condensed consolidated balance sheets and contract costs incurred
prior to revenue recognition are recorded as contract assets on the condensed 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 six months ended November 30, 2021: CSCHEDULE
OF CHANGES IN CONTRACT ASSET AND CONTRACT LIABILITY
Contract Assets Increase (Decrease) Contract Liabilities (Increase) Decrease
Reclassification of the beginning contract liabilities to revenue, as the result of performance obligation satisfied $ - $ -
Cash Received in advance and not recognized as revenue - (20,331,879 )
Reclassification of the beginning contract assets to receivables, as the result of rights to consideration becoming unconditional (11,003,081 ) -
Contract assets recognized, net reclassification to receivables 37,584,026 -
Net Change $ 26,580,945 $ (20,331,879 ) Disaggregation
of Revenue from Contracts with Customers The
following table disaggregates gross revenue by significant geographic area for the three and six months ended November 30, 2021 and 2020
based on origin of shipment (imports) or destination of shipment (exports): SCHEDULE OF DISAGGREGATION OF REVENUE
For the Three Months Ended November 30, 2021 For the Three Months Ended November 30, 2020
China, Hong Kong & Taiwan $ 125,312,137 $ 58,742,573
Southeast Asia 164,883,397 40,546,168
United States 16,212,165 14,946,011
India Sub-continent 78,801,261 6,370,739
Other 20,221,729 4,033,929
Total revenue $ 405,430,689 $ 124,639,420
For
the Six Months
Ended November
30, 2021 For
the Six Months Ended November 30, 2020
China, Hong Kong & Taiwan $ 203,417,446 $ 95,051,241
Southeast Asia 240,260,018 49,678,000
United States 23,204,268 20,223,652
India Sub-continent 99,449,575 10,386,329
Other 28,871,242 6,715,465
Total revenue $ 595,202,549 $ 182,054,687 Segment
Reporting Based
on the guidance provided by ASC Topic 280, Segment Reporting Earnings
per Share The
Company adopted ASC 260, Earnings per share, 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. SCHEDULE OF EARNING PER SHARE
November 30, 2021 November 30, 2020
For the Three Months Ended
November 30, 2021 November 30, 2020
Numerator:
Net income attributable to common stockholders $ 4,488,225 1,397,183
Effect of dilutive securities: 391,035 175,356
Diluted net income $ 4,879,260 $ 1,572,539
Denominator:
Weighted average common shares outstanding – basic 1,764,049,961 1,393,560,488
Dilutive securities (a):
Series A Preferred 1,316,157,000 1,177,041,100
Series B Preferred 5,499,034,800 5,499,034,800
Convertible notes 2,320,223,646 1,236,932,052
Warrants - -
Weighted average common shares outstanding and assumed conversion – diluted 10,899,465,407 9,306,568,440
Basic net income per common share $ 0.00 $ 0.00
Diluted net income per common share $ 0.00 $ 0.00
(a) - Anti-dilutive securities excluded: - -
November 30, 2021 November 30, 2020
For the Six Months Ended
November 30, 2021 November 30, 2020
Numerator:
Net income attributable to common stockholders $ 6,511,641 823,046
Effect of dilutive securities: 776,515 175,356
Diluted net income $ 7,288,156 $ 998,402
Denominator:
Weighted average common shares outstanding – basic 1,687,489,133 1,308,705,539
Dilutive securities (a):
Series A Preferred 1,316,157,000 1,177,041,100
Series B Preferred 5,499,034,800 5,499,034,800
Convertible notes 2,320,223,646 1,236,932,052
Warrants - -
Weighted average common shares outstanding and assumed conversion – diluted 10,822,904,579 9,221,713,491
Basic net income per common share $ 0.00 $ 0.00
Diluted net income per common share $ 0.00 $ 0.00
(a) - Anti-dilutive securities excluded: - - |
