| 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. and its subsidiaries (the “Company” or “Unique”) is a non-asset-based provider
of global logistics and freight forwarding services operating through a worldwide network of offices and exclusive or non-exclusive agents.
The Company’s customers include retailers and wholesalers, electronics, high technology, industrial and manufacturing companies
around the world. 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
● Ocean
Freight
● Customs
Brokerage and Compliance
● Warehousing
and Distribution
● Order
Management Basis
of Presentation These
condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States
of America (“GAAP”) and include all accounts of the Company and its majority owned subsidiaries stated in U.S. dollars, the
Company’s functional currency. For subsidiaries operating outside the U.S., the financial information will be accounted for on
a one-month lag. Substantially all unremitted earnings of international subsidiaries are free of legal and contractual restrictions.
All intercompany transactions and balances have been eliminated in the condensed consolidated financial statements. 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. The results reported in these interim condensed consolidated financial statements should not be regarded as necessary
indicative of results that may be expected for an entire fiscal year. 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, 2023. 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 on May 31, 2023 was derived from audited financial statements but does not include all disclosures
required by accounting principles generally accepted in the United States of America. 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. The
Company’s working capital was $ 6.3 7.9 25.0 While
the Company continues to execute its strategic plan and grow its customer base, management is focused on managing cash and monitoring
liquidity position. Many of the aspects of the liquidity 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. Based
on our evaluation of the Company’s projected cash flows and business performance as of and subsequent to November 30, 2023, management
has concluded that the Company’s current cash and cash availability under the TBK Facility would be sufficient to fund its planned
operations for at least one year from the date the consolidated financial statements were issued. 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 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,
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 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 through 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 through 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 the Port of entry (or in the case when the customer
requires delivery to a designated point, the arrival at that delivery point). This overtime 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 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 consider 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. 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, 2023: SCHEDULE
OF CHANGES IN CONTRACT ASSET AND CONTRACT LIABILITY
Contract Contract
Assets Liabilities
Increase (Increase)
(Decrease) 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 - -
Reclassification of the beginning contract assets to receivables, as the result of rights to consideration becoming unconditional (3,140,423 ) -
Contract assets recognized 1,173,360 -
Net Change $ (1,967,063 ) $ - Disaggregation
of Revenue from Contracts with Customers The
following table disaggregates gross revenue from our clients by significant geographic area for the three and six months ended
November 30, 2023 and 2022, based on origin of shipment (imports) or destination of shipment (exports): SCHEDULE
OF DISAGGREGATION OF REVENUE
For the For the
China, Hong Kong & Taiwan $ 14,375,941 $ 42,491,614
Southeast Asia 12,062,505 21,132,687
United States 13,622,472 11,277,753
India Sub-continent 16,288,777 10,519,966
Other 5,492,558 3,415,213
Total revenue $ 61,842,253 $ 88,837,233
For the For the
November 30, 2023 November 30, 2022
China, Hong Kong & Taiwan $ 28,737,587 $ 106,549,769
Southeast Asia 22,357,449 63,114,120
United States 20,337,485 21,677,175
India Sub-continent 34,925,534 29,316,674
Other 18,352,482 4,688,367
Total revenue $ 124,710,537 $ 225,346,105 Foreign
Currency For
most of our international operations conducted by the subsidiaries operating outside the U.S, local currencies have been determined to
be functional currencies. We translate functional currency assets and liabilities to their U.S. dollar equivalents at exchange rates
in effect as of the balance sheet date and income and expense amounts at average exchange rates for the period. The U.S. dollar affects
that arise from changing translation rates are recorded in Other comprehensive income/(loss). Transaction gains or losses result from a change in exchange rates between
the functional currency and the currency in which a foreign currency transaction is denominated. We aggregate all transaction gains and
losses and classify the net amount in a single caption in the income statement in operating income as Foreign exchange transactions, net. 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. 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 November 30, 2023, and May 31, 2023. 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 November 30, 2023, and May 31, 2023. There were no
transfers between levels during the reporting period. Accounts
Receivable Accounts
receivable 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, 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 receivable recorded, net of allowance for doubtful accounts. As of November 30,
2023, and May 31, 2023 the Company recorded an allowance for doubtful accounts of approximately $ 0.7 1.7 Concentrations As
of November 30, 2023, three major customers represented approximately 26.0 16 21.0 Revenue
from three customers in the aggregate as a percentage of the Company’s total revenue was 34.0 25.0 19 20.0 21.0 13 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 3 10 12 15 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. Derivative
Liability Convertible
Preferred Stock Series A, C and D feature anti-dilution provision that expires on a specified 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. 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 change in fair value of the derivative instrument recorded for the
three and six months ended November 30, 2023 was an increase of $ 160,075 181,863 SCHEDULE
OF DERIVATIVE LIABILITIES
Level 1 Level 2 Level 3
Derivative liabilities as of June 1, 2023 $ - $ - $ 11,558,261
Addition - - -
Change in fair value - - 181,863
Derivative liabilities as of November 30, 2023 $ - $ - $ 11,740,124 The
underlying value of the anti-dilution provision is calculated from estimating the probability and value of the provision assuming a near
term financing event. For the period ended November 30, 2023, based on the assumption of how antidilutive shares of Convertible Preferred
Series A, C and D would be exchanged in the near future for common stock, and the fact that the antidilution provision of these shares
is effective through January 15, 2024, the assumptions include probability of the financing event, estimated value of common stock at
the exchange point and estimated time to financing event. The
key inputs into the model were as follows: SCHEDULE OF FAIR VALUE ASSUMPTION
November 30, 2023 May 31, 2023
Risk-free interest rate 5.5 % 5.5 %
Probability of financing event or capital raise 90 % 90 %
Estimated value of common stock $ 10.00 $ 10.00
Estimated time to financing event 0.13 0.42 Income
Taxes Our
tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in
the applicable quarter. In each quarter, the estimated annual effective tax rate is updated and a year-to-date adjustment to the
provision is made. The estimated annual effective tax rate is subject to significant volatility due to several factors, including
the mix of pretax income or loss across multiple jurisdictions and certain book-tax differences. Income taxes are accounted for under the asset and
liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences
attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases, the tax effect of loss carryforwards and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The Company uses a two-step
approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position
for recognition by determining if the weight of available evidence indicates it is more likely than not the position will be sustained
on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest
amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating its
tax positions and estimating our tax benefits, which may require periodic adjustments, and which may not match the ultimate future outcome. Segment
Reporting Based
on the guidance provided by ASC Topic 280, Segment Reporting Earnings
per Share Basic
Earnings Per Share (“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 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, preferred
stock, stock options or warrants. The
following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income (loss) attributable
to common stockholders per common share. SCHEDULE
OF EARNING PER SHARE
For the Three Months Ended
November 30, 2023 November 30, 2022
Numerator:
Net (loss) income $ (2,870,683 ) 3,271,697
Effect of dilutive securities: -
Diluted net income (loss) $ (2,870,683 ) 3,271,697
Denominator:
Weighted average common shares outstanding – basic 799,141,770 799,141,770
Dilutive securities*:
Series A Preferred * - 1,168,177,320
Series B Preferred * - 5,373,342,576
Series C Preferred * - 1,206,351,359
Series D Preferred * - 1,130,954,399
Weighted average common shares outstanding and assumed conversion – diluted 799,141,770 9,677,967,424
Basic net income (loss) per common share $ (0.00 ) $ 0.00
Diluted net income (loss) per common share $ (0.00 ) $ 0.00
For the Six Months Ended
November 30, 2023 November 30, 2022
Numerator:
Net (loss) income $ (5,181,811 ) $ 6,593,038
Effect of dilutive securities: -
Diluted net income $ (5,181,811 ) $ 6,593,038
Denominator:
Weighted average common shares outstanding – basic 799,141,770 771,683,232
Dilutive securities*:
Series A Preferred * - 1,168,177,320
Series B Preferred * - 5,373,342,576
Series C Preferred * - 1,206,351,359
Series D Preferred * - 1,130,954,399
Weighted average common shares outstanding and assumed conversion – diluted 799,141,770 9,650,508,886
Basic net income per common share $ (0.01 ) $ 0.01
Diluted net income per common share $ (0.01 ) $ 0.00
* Due to a net loss for the three and six months ended November
30, 2023, only weighted average common shares are used in calculations. In case of net income for these periods, the Company’s
dilution of all outstanding securities would be as follows: SCHEDULE OF ANTI-DILUTIVE SHARES
November 30, 2023
Weighted average common shares outstanding – basic 799,141,770
Series A Preferred 1,168,177,320
Series B Preferred 5,373,342,576
Series C Preferred 1,206,351,359
Series D Preferred 1,130,954,399
Weighted average common shares outstanding and assumed conversion – diluted 9,677,967,424 Pro
Forma Information (Unaudited) The
results of operations of eight entities which the Company acquired on February 21, 2023, have not been included in our November 30th,
2022, condensed consolidated financial statements but are included in the November 30 th SCHEDULE
OF PRO FORMA INFORMATION
Three Months Ended Six Months Ended
Revenue, net $ 132,615,083 $ 319,418,469
Net Income attributable to registrant 5,742,487 12,493,462
Weighted average shares of common stock outstanding, basic (as previously reported) 799,141,770 771,683,232
Weighted average shares of common stock outstanding, diluted (as previously reported) 9,677,967,424 9,650,508,886
Net income per share, basic $ 0.01 $ 0.02
Net income per share, diluted $ - $ - Reclassifications Certain
prior period amounts have been reclassified to conform to the current year’s presentation. |
