As filed with the U.S. Securities and Exchange Commission on
October 4, 2021
Registration
Statement No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE
SECURITIES
ACT OF 1933
UNIQUE LOGISTICS INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
8742 |
|
01–0721929 |
(State
or other jurisdiction of
incorporation
or organization)
|
|
(Primary
Standard Industrial
Classification
Code Number)
|
|
(I.R.S.
Employer
Identification
No.)
|
154-09
146th Ave,
Jamaica,
NY 11434
Tel: (718) 978-2000
(Address,
including zip code, and telephone number, including area code, of
registrant’s principal executive offices)
(Name,
address, including zip code, and telephone number, including area
code, of agent for service)
Copies
to:
Joseph
M. Lucosky, Esq.
Lucosky
Brookman LLP
101
Wood Avenue South, 5th Floor
Woodbridge,
New Jersey 08830
Tel.
No.: (732) 395-4400
|
|
Louis
Taubman, Esq
Ying
Li, Esq.
Guillaume
de Sampigny, Esq.
Hunter
Taubman Fischer & Li LLC
800
Third Avenue, Suite 2800
New
York, NY 10022
Tel:
917-512-0827
|
Approximate
date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes
effective.
If
any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box: ☒
If
this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If
this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer ☐ |
Accelerated
filer ☐ |
Non-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 7(a)(2)(B) of the Securities Act. ☐
CALCULATION
OF REGISTRATION FEE
Title of
Each Class of Securities To Be Registered |
|
Proposed
Maximum Aggregate Offering Price (1) |
|
|
Amount of
Registration
Fee
|
|
Common
stock, $0.001 par value per share |
|
$ |
41,000,000 |
(4) |
|
$ |
4,473.10 |
|
Representatives’
Warrant to Purchase Common Stock (2) |
|
|
N/A |
|
|
|
N/A |
|
Shares of
Common Stock issuable upon exercise of Representatives’ Warrant
(3) |
|
|
- |
|
|
|
- |
|
Total |
|
$ |
41,000,000 |
|
|
$ |
3,800.70 |
|
(1) |
Estimated
solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as
amended. Includes shares to be sold upon exercise of the
underwriters’ option to purchase additional shares. |
|
|
(2) |
In
accordance with Rule 457(g) under the Securities Act, because the
shares of the Registrant’s common stock underlying the
Representative’s warrants are registered hereby, no separate
registration fee is required with respect to the warrants
registered hereby. |
|
|
(3) |
Pursuant
to Rule 416 under the Securities Act, the securities being
registered hereunder include such indeterminate number of
additional shares of common stock as may be issued after the date
hereof as a result of stock splits, stock dividends or similar
transactions.
|
(4) |
Includes
25,000,000 shares of common stock being sold to the underwriters by
the selling stockholders based on the Company’s stock price of
$0.04 shares on September 30,2021. |
In
accordance with Rule 416(a) under the Securities Act, the
registrant is also registering hereunder an indeterminate number of
shares that may be issued and resold resulting from stock splits,
stock dividends or similar transactions.
The
registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or
until the registration statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to
said Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and may
be changed. We and the selling stockholders may not sell these
securities until the registration statement filed with the
Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS |
SUBJECT TO COMPLETION, DATED [●], 2021 |
UNIQUE
LOGISTICS INTERNATIONAL, INC.
________
Shares of Common Stock
We
are offering ___________ shares of Common Stock, par value $0.001
(“Common Stock”, and each a “Share” and collectively, the “Shares”)
of Unique Logistics International, Inc. (the “Company,” “Unique
Logistics,” “we,” “our” or “us”) at $___ per share of Common Stock.
In addition, the selling stockholders identified herein (the
“Selling Stockholders”) are offering 25,000,000 shares of common
stock, The 25,000,000 shares of common stock offered by the Selling
Stockholders is defined herein as the “Selling Stockholder Shares.”
Our Common Stock is currently traded on the OTC Capital Markets
under the symbol UNQL. On September 30, 2021, the last reported
sale of our Common Stock was $0.04. We have applied to list our
Common Stock on the Nasdaq Capital Market under the symbol “UNQL”.
No assurance can be given that our application will be approved. We
will not proceed with this offering in the event the Common Stock
is not approved for listing on Nasdaq. Quotes for shares of our
common stock on the OTC Capital Markets may not be indicative of
the market price on The Nasdaq Capital Market.
The
actual offering price per share was negotiated between EF Hutton,
division of Benchmark Investments, LLC, as representative of the
underwriters in this offering (the “Underwriters”) and us. All
share and per-share information, as well as all financial
information, contained in this prospectus has been adjusted to give
effect to the one-for-_______(1-for-__) reverse stock split (the
“Reverse Stock Split”), which was implemented on ____________ __,
2021 and effective at the commencement of trading of our Common
Stock on __________ __, 2021.
Investing
in our securities involves a high degree of risk. See “Risk
Factors” beginning on page 22 of this prospectus. You should
carefully consider these risk factors, as well as the information
contained in this prospectus, before purchasing any of the
securities offered by this prospectus.
|
|
Per
Share |
|
|
Total |
|
Offering
price |
|
$ |
|
|
|
$ |
|
|
Underwriter’s
discounts (1) |
|
$ |
|
|
|
$ |
|
|
Proceeds
to our company before expenses |
|
$ |
|
|
|
$ |
|
|
Proceeds,
before expenses, to the selling stockholders |
|
$ |
|
|
|
$ |
|
|
(1) |
See
“Underwriting” beginning on page 71 for additional information
regarding underwriting compensation. |
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
We
have granted a 45-day option to the representative of the
Underwriters, exercisable one or more times in whole or in part, to
purchase up to additional shares of Common Stock to cover
over-allotments, at the public offering price per share of Common
Stock, less, in each case, the underwriting discounts payable by
us. The securities issuable upon exercise of this overallotment
option are identical to those offered by this prospectus and have
been registered under the registration statement of which this
prospectus forms a part.
The
underwriters expect to deliver the securities against payment in
New York, New York on or about
,
2021.
Sole
Book-Running Manager
EF
HUTTON
division
of Benchmark Investments, Inc.
TABLE
OF CONTENTS
No
dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this
prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the
shares of Common Stock offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its
date.
You
should rely only on the information contained in this prospectus.
Neither we, the selling stockholders nor the Underwriters have
authorized anyone to provide any information or to make any
representations other than those contained in this prospectus we
have prepared. Neither we, the selling stockholders nor any of the
Underwriters take responsibility for, and can provide assurance as
to the reliability of, any other information that others may give
you. This prospectus is an offer to sell only the securities
offered hereby, but only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this
prospectus is current only as of its date. You should also read
this prospectus together with the additional information described
under “Additional Information.”
Neither
we nor any of the underwriters have done anything that would permit
this offering or possession or distribution of this prospectus in
any jurisdiction where action for that purpose is required, other
than the United States. You are required to inform yourself about,
and to observe any restrictions relating to, this offering and the
distribution of this prospectus.
We
also use certain trademarks, trade names, and logos that have not
been registered. We claim common law rights to these unregistered
trademarks, trade names and logos.
Unless
the context otherwise requires, we use the terms “we,” “us,” “the
Company,” “Unique,” “Unique Logistics” and “our” to refer to Unique
Logistics International, Inc. and its consolidated
subsidiaries.
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 and Section
21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). These statements relate to future events
including, without limitation, the terms, timing and closing of our
proposed acquisitions or our future financial performance. We have
attempted to identify forward-looking statements by using
terminology such as “anticipates,” “believes,” “expects,” “can,”
“continue,” “could,” “estimates,” “expects,” “intends,” “may,”
“plans,” “potential,” “predict,” “should,” “will,” or the negative
of these terms or other comparable terminology. These statements
are only predictions; uncertainties and other factors may cause our
actual results, levels of activity, performance, or achievements to
be materially different from any future results, levels or
activity, performance, or achievements expressed or implied by
these forward-looking statements. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity,
performance, or achievements. Our expectations are as of the date
of this prospectus, and we do not intend to update any of the
forward-looking statements after the date this prospectus to
confirm these statements to actual results, unless required by
law.
You
should not place undue reliance on forward looking statements. The
cautionary statements set forth in this prospectus identify
important factors which you should consider in evaluating our
forward-looking statements. These factors include, among other
things:
|
● |
changes
in the market acceptance of our products; |
|
|
|
|
● |
increased
levels of competition; |
|
|
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|
● |
changes
in political, economic or regulatory conditions generally and in
the markets in which we operate; |
|
|
|
|
● |
our
relationships with our key customers; |
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|
|
|
● |
our
ability to retain and attract senior management and other key
employees; |
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|
|
|
● |
our
ability to quickly and effectively respond to new technological
developments; |
|
|
|
|
● |
our
ability to protect our trade secrets or other proprietary rights,
operate without infringing upon the proprietary rights of others
and prevent others from infringing on the proprietary rights of the
Company; and |
|
|
|
|
● |
other
risks, including those described in the “Risk Factors” discussion
of this prospectus, including the risks in relation to the current
global Covid epidemic. |
The
foregoing list of important factors does not include all such
factors, nor necessarily present them in order of importance. In
addition, you should consult other disclosures made by the Company
(such as in our other filings with the SEC or in our press
releases) for other factors that may cause actual results to differ
materially from those projected by the Company. For additional
information regarding risk factors that could affect the Company’s
results, see “Risk Factors” beginning on page 22 of this
prospectus, and as may be included from time-to-time in our reports
filed with the SEC.
The
Company intends the forward-looking statements to speak only as of
the time of such statements and does not undertake or plan to
update or revise such forward-looking statements as more
information becomes available or to reflect changes in
expectations, assumptions or results. The Company can give no
assurance that such expectations or forward-looking statements will
prove to be correct. An occurrence of, or any material adverse
change in, one or more of the risk factors or risks and
uncertainties referred to in this prospectus, could materially and
adversely affect our results of operations, financial condition,
and liquidity, and our future performance.
Industry
Data and Forecasts
This
prospectus also contains estimates and other statistical data made
by independent parties and by us relating to market size and growth
and other industry data. This data involves a number of assumptions
and limitations, and you are cautioned not to give undue weight to
such estimates. We have not independently verified the statistical
and other industry data generated by independent parties and
contained in this prospectus. In addition, projections,
assumptions, and estimates of our future performance and the future
performance of the industries in which we operate are necessarily
subject to a high degree of uncertainty and risk due to a variety
of factors. Our actual results could differ materially from those
anticipated in the forward-looking statements for many reasons,;
that we may be unable to maintain or grow sources of revenue; that
we may be unable to maintain profitability; that we may be unable
to attract and retain key personnel; or that we may not be able to
effectively manage, or to increase, our relationships with
customers; and that we may have unexpected increases in costs and
expenses. These and other factors could cause results to differ
materially from those expressed in the estimates made by the
independent parties and by us.
Reverse
Stock Split
We
expect to effect a reverse stock split of our Common Stock at a
ratio of up to 1-for-[●]. No fractional shares will be issued in
connection with the reverse stock split and all such fractional
interests will be rounded up to the nearest whole number of shares
of common stock. The conversion or exercise prices of our issued
and outstanding convertible securities, stock options and warrants
will be adjusted accordingly. Following the effectiveness of the
reverse stock split, all information presented in this prospectus
other than in our consolidated financial statements and the notes
thereto will be adjusted to give effect to such reverse stock
split.
PROSPECTUS SUMMARY
This
summary highlights selected information contained elsewhere in this
prospectus. This summary does not contain all of the information
that you should consider before deciding to invest in our Common
Stock. You should read the entire prospectus carefully, including
the “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” and our combined
financial statements and the related notes thereto that are
included elsewhere in this prospectus, before making an investment
decision.
Overview
Unique
Logistics International, Inc. (“Unique Logistics” or “Unique” or
“the Company”) provides a full range of global logistics services
by providing to its customers a robust international network that
strategically supports the movement of its customers goods. Acting
solely as a third-party logistics provider, Unique purchases
available cargo space in volume from its network of carriers (such
as airlines, ocean shipping, and trucking lines) and resells that
space to our customers. Unique Logistics does not own any of these
ships, trucks, or aircraft and does not plan on entering the
ownership model.
Operating
via its wholly owned subsidiaries, Unique Logistics International
(BOS) Inc, a Massachusetts corporation (“UL BOS”) and Unique
Logistics International (NYC), LLC, a Delaware limited liability
company, Unique Logistics provides a range of international
logistics services that enable its customers to outsource to the
Company sections of their supply chain process. The services
provided by the Company are seamlessly managed by its network of
trained employees and integrated information systems. We enable our
customers to share data regarding their international vendors and
purchase orders with us, execute the flow of goods and information
under their operating instructions, provide visibility to the flow
of goods from factory to distribution center or store and when
required, update their inventory records.
The Company operates in a business environment where both our
customers as well as our suppliers are potentially impacted by the
Covid-19 pandemic. Our customer base includes several customers
whose business involves retail to the public through brick and
mortar stores, many of them in shopping malls. In the period
February 2020 to May 2020, many such customers faced significant
downturn in their business resulting in shut down of supply chains
and business loss for our Company. The Company’s operating
subsidiaries secured PPP loans from the government that enabled us
to maintain our operations and meet our overhead commitments in
this period. Driven initially by online retail and later by the
opening of in-person retail, by February 2021 most of our customers
saw their business recover to pre-pandemic levels. As the business
of our customers recovered, the Company’s business steadily
increased and surpassed pre-pandemic era volumes.
Company
Structure and History
Unique
Logistics International, Inc. (the “Company” or “Unique”) (formerly
Innocap, Inc.) was incorporated in Nevada on January 23, 2004.
Innocap, Inc. became a publicly traded company in 2004. In May
2011, the Company changed its business plan to researching the
location of and salvaging sunken ships. Until October 2020, the
Company had been actively negotiating several research and salvage
projects including in Indonesia and Malaysia in connection with
ships that were sunk during World War II.
On
October 8, 2020, the Company, Inno Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of the Company (the “Merger
Sub”), and Unique Logistics Holdings, Inc., a privately-held
Delaware corporation headquartered in New York (“UL HI”), entered
into an Acquisition Agreement and Plan of Merger (the “Acquisition
Agreement”) pursuant to which the Merger Sub was merged with and
into UL HI, with UL HI surviving as a wholly-owned subsidiary of
Innocap Inc. (the “Merger”). The transaction (the “Closing”) took
place on October 8, 2020 (the “Closing Date”). Innocap Inc.
acquired, through a reverse triangular merger, all of the
outstanding capital stock of UL HI in exchange for issuing UL HI’s
shareholders (the “UL HI Shareholders”), pro-rata, an aggregate of
1,000,000 million shares of preferred stock, with certain of UL HI
Shareholders receiving 130,000 shares of Innocap Inc.’s Series A
Preferred Stock par value $0.001 per share, and certain of the UL
HI Shareholders receiving of 870,000 shares of Innocap Inc.’s
Series B Preferred Stock, par value $0.001 per share. Immediately
after the Merger was consummated, and further to the Acquisition
Agreement, certain affiliates of Innocap Inc. cancelled a total of
45,606,489 shares of Innocap Inc.’s common stock, and 1,000,000
shares of Preferred Stock held by them (the “Cancellation”). In
consideration of the Cancellation of such shares of Innocap Inc.’s
common stock and preferred stock, Holdings agreed to assume certain
liabilities of Innocap Inc. As a result of the Merger and the
Cancellation, the UL HI Shareholders became the majority
shareholders of the Company. Immediately following the Closing of
the Merger, Innocap Inc. changed its business plan to that of UL
HI.
On
January 11, 2021, Innocap Inc. filed a certificate of amendment to
its articles of incorporation with the Secretary of State of the
State of Nevada, for the adoption of amended and restated articles
of incorporation of Innocap Inc. (the “Amended and Restated
Articles of Incorporation”). The adopted Amended and Restated
Articles of Incorporation: (i) increased the number of authorized
common stock from 500,000,000 shares to 800,000,000 shares; and
(ii) changed the Company’s name to Unique Logistics International,
Inc. (the “Company”).
The
Name Change was approved by the Financial Industry Regulatory
Authority (FINRA) and became effective in the market on January 14,
2021.
Unique
Logistics Holdings Management Buyout Transaction
The
Company’s wholly owned subsidiary, Unique Logistics Holdings, Inc.
(“Unique”) a Delaware corporation, was formed on October 28, 2019,
for the purpose of conducting a management buyout of three United
States subsidiaries majority owned by Unique Logistics Holdings
Ltd., a Hong Kong company (“UL HK”) (the “Management Buy Out
Transaction”).
UL HK
was incorporated in Hong Kong in 1983. UL HK commenced its business
with a focus on transpacific logistics services because of the
increasing demands of trade between Hong Kong and the United
States. The initial focus was on air freight services, but UL HK
quickly diversified into ocean freight services. In its first
fifteen years of operations, UL HK established itself as a major
international logistics service provider in Hong Kong. Driven by
the needs of its customer base, from 1997 through 2012, UL HK
established a network of offices throughout Asia and the United
States. By the end of 2012, the Unique Logistics brand was well
recognized in several Asian countries including China, India, and
Vietnam. In the United States, UL HK offices in Boston, Atlanta,
New York, Los Angeles, and Chicago had a growing United States
customer base in several sectors such as fashion, department
stores, furniture, toys, and home goods. The vast majority of
ULHK’s international business consisted of services pertaining to
United States based companies.
On
May 29, 2020 (the “Buyout Transaction Date”), Unique entered
into that certain Securities Purchase Agreement (“UL HK Purchase
Agreement”) by and between Unique and UL HK, pursuant to which the
Company purchased from UL HK (i) sixty percent (60%) of the
membership interests of Unique Logistics International (ATL) LLC, a
Georgia limited liability company (“UL ATL”); (ii) eighty percent
(80%) of the common stock of Unique Logistics International (BOS)
Inc, a Massachusetts corporation (“UL BOS”); and (iii) sixty-five
percent (65%) of Unique Logistics International (USA) Inc., a New
York corporation, a sole owner of Unique Logistics International
(NYC), Inc. (“UL NYC”), for a purchase price of: (i) US$6,000,000,
to be paid in accordance with the following (a) $1,000,000 in cash
(the “UL HK Cash Purchase Price”); (b) $5,000,000 in the form a
subordinated promissory note issued in favor of UL HK and (c)
1,500,000 shares of common stock of Unique Logistics Holdings,
representing on issuance 15% of fully paid and non-assessable
shares of common stock then outstanding on a fully diluted basis
(the “UL HK Stock Purchase Price”). Pursuant to the UL HK Purchase
Agreement, Unique has been granted an option to purchase 50% of UL
HK’s interest in Unique Logistics International (North and East
China) Company Limited and its affiliated companies (collectively
“UL China”) and has been granted an option to purchase 65% of UL
HK’s interest in Unique Logistics International India (Private)
Limited (“UL India”) within 12 months of the Buyout Transaction
Date.
In
connection with the Management Buyout Transaction, Unique also
entered into three separate securities purchase agreements with the
minority interest holders of UL ATL (the “UL ATL Transaction”), UL
BOS (the “UL BOS Transaction”) and UL NYC (the “UL NYC
Transaction”), respectively, whereby, together with the
consummation of the Management Buy Out Transaction, each such
entity became a wholly owned subsidiary of Unique Logistics
Holdings.
BUSINESS
Unique
Logistics primary services include:
|
● |
Air
Freight services |
|
● |
Ocean
Freight services |
|
● |
Customs
Brokerage and Compliance services |
|
● |
Warehousing
and Distribution services |
|
● |
Order
Management |
Air Freight Services
Operating
as an Indirect Air Carrier (IAC) or an airfreight consolidator,
Unique Logistics provides both time savings and cost-effective air
freight options to its customers. An expansive global network
enables the Company to offer door to door service allowing
customers to benefit from our expert staff for guidance with the
physical movement of cargo and documentation compliance. Unique
purchases cargo space from airlines on a volume basis and resells
that space to our customers at a lower price than they would be
able to negotiate themselves for their individual shipments. The
Company, through its integrated management system, determines the
best routing for shipments and then arrangements are made to
receive the cargo into a designated warehouse. Upon receipt, cargo
is inspected and weighed, documentation is collected and export
clearance is processed. Once cargo is cleared it is prepared for
departure. Unique Logistics offers real-time tracking visibility
for customers to view when an order is booked, departs and arrives.
Unique Logistics contracts with a worldwide network of airlines and
other service providers to provide the best airfreight service in
assisting importers to ship using the most efficient and
cost-effective method. Some of the selections we offer
include:
|
● |
Domestic,
deferred, express and charter services, which permit customers to
choose from a menu of different priority options that secure at
different price levels, greater assurance of timely
delivery |
|
● |
Port
to Port and Door to Door shipments, which provide customers the
option of managing, independently, the post arrival services such
as delivery or clearance if the Company is not providing such
services |
|
● |
Global
blocked space agreements (BSA), which guarantee the availability of
space on certain flights |
|
● |
Air
and ocean combination shipment which offer cost effective
transportation using multimodal, combination movements, by one mode
to an international hub, such as Dubai, UAE or Singapore and
converting to a different mode at the hub |
|
● |
Air
and transload dedicated truck shipment, where arriving cargo is
transferred from airline container or pallet into a truckload ready
for delivery |
|
● |
Dangerous
goods handling requiring qualified handling |
|
● |
Refrigerated
cargo |
Ocean Freight Services
Operating
as an ocean transportation intermediary (“OTI”) to provide ocean
freight service both as a non-vessel owning common carrier
(“NVOCC”) and ocean freight forwarder, Unique Logistics provides to
its customers ocean freight consolidation, direct ocean forwarding,
and order management. We are a common carrier that holds itself out
to the public to provide ocean transportation, issues its own house
bills of lading or equivalent document, but does not operate the
vessels by which ocean transportation is provided. The Company’s
roles and responsibilities in ocean freight services include the
following:
|
● |
Selecting
the most optimal ocean carriers based on both cost and service. The
Company has NVOCC contracts with multiple ocean carriers and is
thus able to offer its customers a choice in service; |
|
● |
Entering
into contract/rate agreement with clients to transport their ocean
shipments. Under such contracts the customer is assured of the
Company’s pricing and weekly capacity to carry the customer’s
cargo; |
|
● |
Consolidating
shipments at origin/deconsolidating of freight at destination. This
enables the customer to receive the economics of a consolidated
container rate rather than a higher rate for less than full
container load (“LCL”). It also makes delivery at destination more
efficient; |
|
● |
Arranging
pick-up of shipment at origin and deliver at destination, with a
factory to door service; |
|
● |
Preparing
and processing the documentation/clearance (customs/security) for
shipments during ocean transit, in advance of arrival of shipment
at destination; |
|
● |
Ocean
freight services are provided in both major and minor trade lanes
with representation in all trading nations in Americas, Asia, and
Europe; |
|
● |
Offering
a wide array of services typically performed by multiple services
providers including but not limited to, offering options to
customers on ocean carrier service choices prior to final selection
and securing such space based on customer requirement; this enables
our customers to delegate more of its logistics management to us
whereas a more limited range of service would require the customer
to deal with multiple service providers; |
|
● |
Communicating
on any regulation/compliance issues on exporting and importing
shipments; |
|
● |
Playing
intermediary role at any point of ocean transportation based on
customer’s routing preferences; and |
|
● |
Providing
space acquisition on carrier service for committed delivery during
high demand period, and providing lower price option in weak demand
season for utmost cost saving. |
Customs Brokerage and Compliance Services
Unique
Logistics is a licensed United States customs broker whose mission
is to ensure that its importing clients are in compliance with all
required regulations. Our services help importers clear cargo with
the U.S. Customs and Border Protection, including documentation
collection, valuation review, product classification, electronic
submission to customs and the collection and payment of duties,
tariffs and fees. Unique Logistics works with importers to develop
a compliant trade program including product databases, compliance
manuals and periodic internal audits. The development of product
databases has become critical in the current economic environment
due to the increasing trade tensions and various tariffs imposed as
a result. Unique Logistics also offers importers tools to improve
on efficiency such as reporting, visibility and trade consulting
including training seminars. Additional services
include:
|
● |
Preparation
of the Import Security Filing (10+2) required to be on file 24
hours prior to shipment departure; |
|
● |
Clearance
and compliance with other government agencies such as the Food and
Drug Administration, U.S. Department of Agriculture, Consumer
Product Safety Commission and U.S. Fish & Wildlife
Service; |
|
● |
Focused
assessment and internal audit to determine and eliminate weak areas
of compliance; |
|
● |
Post-entry
service to change past entries and take advantage of tariff
exclusions granted after the original entry was
processed; |
|
● |
Binding
rulings to obtain pre-entry classification; |
|
● |
Classification
& valuation; |
|
● |
Trade
agreements; |
|
● |
Warehouse
entries to defer duty; |
|
● |
Licensing
and country of origin marking requirements; |
|
● |
Free
Trade Zone (FTZ); |
|
● |
Duty
drawback to get duty back on items exported under certain
requirements; and |
|
● |
Cargo
insurance coverage |
Warehousing and Distribution Services
Unique
Logistics operates a warehousing facility in Santa Fe Springs, CA
and plans to expand such services through its own managed
facilities. Unique Logistics also provides warehousing and
distribution services through third party facilities. Our current
facility is leased to the Company and is 110,000 sq. ft. with
storage capacity for around 9,000 pallets and 10 dedicated
employees.
Warehousing
and Distribution services enable Unique Logistics to greatly expand
its involvement in our customers’ supply chain, post arrival of
international shipments into the United States. By providing
inventory management, order fulfillment, and other services, our
customers benefit from cost savings related to space, equipment and
labor due to efficiencies of scale. Our list of Warehousing and
Distribution Services include the following:
|
● |
Transloading
of cargo from incoming containers to trucks for
delivery |
|
● |
Pick
and pack services |
|
● |
Quality
control services under customer instructions |
|
● |
Kitting |
|
● |
Storage |
|
● |
Inventory
management |
|
● |
Delivery
services, including e-Commerce fulfillment services |
Order Management
Unique
Logistics offers order management services providing importers with
total visibility on every order from the time placed with the
supplier to door delivery. Importers send orders electronically
immediately upon creation giving the Company the ability to assist
in firmly holding suppliers to shipping windows. Ultimately this
results in optimizing consolidation and improved on-time delivery.
Order management also gives importers the power to control their
supply chain by monitoring key milestone events, track order status
and manage delivery to the end consumer.
Order
Management features:
|
● |
Importer
and vendor EDI integration |
|
● |
Key
milestone notifications customized per importers’
requirements |
|
● |
Vendor,
booking and document management |
|
● |
Customized
reporting including exception reporting for maximum
efficiency |
|
● |
Consolidation
management |
|
● |
Tracking
visibility in real-time |
Other
Benefits include:
|
● |
Single
Data Platform |
|
● |
Avoids
a manual booking process |
|
● |
Eliminates
unnecessary data entry |
|
● |
Document
visibility and historical recordkeeping |
|
● |
Vendor
KPI management |
|
● |
Live
milestone updates |
Seasonality
Historically,
our own operating results as well as the industry as a whole have
been subject to seasonal demand. With our financial year end of May
31, typically our first and second quarters are the strongest with
the fourth quarter being the weakest; however, there are no
guarantees that these trends will continue or that the COVID-19
pandemic will not cause any other business disruptions. It is
widely understood in the industry that these seasonal trends are
influenced by a number of factors, including weather patterns,
national holidays, economic conditions, consumer demand, major
product launches, as well as a number of other market forces. Since
many of these forces are unforeseen there is no way for us to
provide assurances that these seasonal trends will
continue.
Growth Strategy
Unique
Logistics has established plans to grow its business by focusing on
four key areas: (1) organic growth and expansion in existing
markets; (2) strategic acquisitions; (3) warehousing and
distribution; and (4) specialized services to United States
companies on their overseas logistics needs in targeted Asian
markets.
Organic
Growth and Expansion in Existing Markets:
We plan to focus on developing business domestically to drive
organic growth. Since the Management Buyout Transaction (See
“Unique Logistics Holdings Management Buyout Transaction”), we have
significantly improved our operating efficiencies in the areas of
procurement, customer service, finance and administration. We
believe this will result in much lower overhead and the ability to
build a uniform marketing strategy to build market share and
further the brand recognition of Unique Logistics throughout the
United States. Additionally, the Company will continuously assess
its Information Technology environment based on emerging trends in
logistics and customer requirements. The first step in the strategy
is already in place: a single operating platform. We will continue
to build add-on service tools that enhance our operating platform.
One key area for technology focus will be the seamless delivery of
e-Commerce services from origin to consumer with shipment
visibility for both customer and the customer’s consumer.
We
believe Unique Logistics’ business base that includes three out of
the fifty largest importers in the United States can be expanded by
building our sales organization and the support organization to
successfully deliver our brand of service. The targeted growth
areas, to secure the business of other major importers as well as
exporters, include Charlotte, NC, Dallas, TX, Houston, TX and
Seattle, WA.
Strategic
Acquisitions:
We
currently maintain an option to acquire ownership of significant
foreign subsidiaries of Unique Logistics Holdings Ltd. (“ULHK”), a
Hong Kong company that are critical to our ability to meet our
customers’ international requirements. Through the Consulting
Services Agreement between the Company and Great Eagle Freight
Limited, (“GEFD) a Hong Kong company, we will ensure that the
international brand of Unique Logistics and the seamless services
provided to customers remains in place even before the options to
acquire ULHK’s foreign subsidiaries are exercised. Additionally, it
is our intention to increase our business by seeking additional
opportunities through potential domestic acquisitions, revenue
sharing arrangements, partnerships or investments.
Warehousing
and Distribution
Unique
Logistics has successfully established a major warehousing facility
in Santa Fe Springs, CA and now has in-house the management
expertise (commercial as well as operational) in successfully
managing such facilities. Unique Logistics has also identified a
method of identifying growth opportunities by focusing on specific
areas of the United States and existing well-constructed facilities
where lease assumption is available with an existing customer
base.
Specialized
Services to US Companies in Overseas Markets
Unique
Logistics has several decades of experience in Asian markets such
as China, India, Vietnam and Indonesia. Unique Logistics is
constantly dealing with a United States customer base that seeks to
do business in these areas but requires local expertise. We have
the experience and the connections to assist United States
companies with local importation, local warehousing and
distribution and other local logistics and trade compliance
services. We plan to build on our expertise in these four specific
countries to build tailored services to US customers, including in
business consulting pertaining to logistics and related trade
services.
Government Regulations and Security
Our
industry is subject to regulation and supervision by several
governmental authorities.
Operations
The
U.S. Department of Transportation (“DOT”), the Federal Aviation
Administration (“FAA”) and the U.S. Department of Homeland
Security, through the Transportation Security Administration
(“TSA”), have regulatory authority over our air transportation
services. The Federal Aviation Act of 1958, as amended, is the
statutory basis for DOT and FAA authority and the Aviation and
Transportation Security Act of 2001, as amended, is the basis for
TSA aviation security authority.
All
United States indirect air carriers are required to maintain
prescribed security procedures and are subject to periodic audits
by the TSA. Our overseas offices and agents are licensed as
airfreight forwarders in their respective countries of operation.
Our offices are licensed as an airfreight forwarder from the
International Air Transport Association (IATA), a voluntary
association of airlines and air transport related entities that
prescribes certain operating procedures for airfreight forwarders
acting as agents for its members.
The
shipping of goods by sea is regulated by the Federal Maritime
Commission (“FMC”). Our Company is licensed by the FMC to operate
as an Ocean Transportation Intermediary (“OTI”) and as an NVOCC. As
a licensed OTI and NVOCC, we are required to comply with several
regulations, including the filing of our tariffs.
Under
Department of Homeland Security regulations, we are a qualified
participant in the Customs- Trade Partnership Against Terrorism
(“C-TPAT”) program requiring us to be compliant with relevant
security procedures in our operations.
We
are licensed as a customs broker by the U.S. Customs and Border
Protection (CBP) Agency of DHS, nationally and in each U.S. customs
district in which we do business. All United States customs brokers
are required to maintain prescribed records and are subject to
periodic audits by CBP. In other jurisdictions in which we perform
customs clearance services, we are licensed by the appropriate
governmental authority where such license is required to perform
these services.
We do
not believe that current United States and foreign governmental
regulations impose significant economic restraint upon our business
operations. However, the regulations of foreign governments can
impose barriers to our ability to provide the full range of our
business activities in a wholly or majority United States-owned
subsidiary. For example, foreign ownership of a customs brokerage
business is prohibited in some jurisdictions and, less frequently,
the ownership of the licenses required for freight forwarding
and/or freight consolidation is restricted to local entities. When
we encounter this sort of governmental restriction, we work to
establish a legal structure that meets the requirements of the
local regulations, while also providing the substantive operating
and economic advantages that would be available in the absence of
such regulation. This can be accomplished by creating a joint
venture or exclusive agency relationship with a qualified local
entity that holds the required license.
Environmental
We
are subject to federal, state and local environmental laws and
regulations across all of our business units. These laws and
regulations cover a variety of processes, including, but not
limited to: proper storage, handling and disposal of waste
materials; appropriately managing wastewater and stormwater;
monitoring and maintaining the integrity of underground storage
tanks; complying with laws regarding clean air, including those
governing emissions; protecting against and appropriately
responding to spills and releases and communicating the presence of
reportable quantities of hazardous materials to local responders.
We have established site- and activity-specific environmental
compliance and pollution prevention programs to address our
environmental responsibilities and remain compliant. In addition,
we have created several programs which seek to minimize waste and
prevent pollution within our operations.
Employees and Human Capital
As of
August 30, 2021, the Company had 108 employees. None of our
employees are represented by a union or covered by a collective
bargaining agreement. We have not experienced any work stoppages
and we consider our relationship with our employees to be
good.
Our
human capital resources objectives include, as applicable,
identifying, recruiting, retaining, incentivizing and integrating
our existing and new employees, advisors and consultants. The
principal purposes of our equity incentive plan is to attract,
retain and reward personnel through the granting of stock-based
compensation awards, in order to increase stockholder value and the
success of our company by motivating such individuals to perform to
the best of their abilities and achieve our objectives.
Properties
Our
corporate headquarters are currently located at 154-09
146th Avenue, Jamaica, NY 11434 where we occupy 2,219
square feet. Monthly rent for this space is approximately $5,000
per month and our lease expires on April 30, 2024.
A
full list of properties leased by the Company are set out
below:
LOCATION |
|
LEASE |
|
|
MONTHLY |
|
|
SQUARE |
|
|
|
CITY,
STATE |
|
EXPIRATION |
|
|
RENT |
|
|
FEET |
|
|
FUNCTION |
JAMAICA,
NY |
|
|
4/30/2024 |
|
|
$ |
4,813.75 |
|
|
|
2,219 |
|
|
OFFICE |
JAMAICA,
NY |
|
|
7/15/2022 |
|
|
$ |
4,000.00 |
|
|
|
1,440 |
|
|
WAREHOUSE |
ATLANTA,
GA |
|
|
10/31/2028 |
|
|
$ |
13,227.67 |
|
|
|
5,669 |
|
|
OFFICE |
CHELSEA,
MA |
|
|
9/30/2022 |
|
|
$ |
900.00 |
|
|
|
600 |
|
|
OFFICE |
MIDDLETON,
MA |
|
|
7/31/2025 |
|
|
$ |
10,620.75 |
|
|
|
5,202 |
|
|
OFFICE |
SANTA FE
SPRINGS, CA |
|
|
10/15/2022 |
|
|
$ |
108,410.96 |
|
|
|
110,791 |
|
|
WAREHOUSE/
OFFICE |
CHARLOTTE,
NC |
|
|
6/302025 |
|
|
$ |
3,896.06 |
|
|
|
1,889 |
|
|
OFFICE |
ITASCA,
IL |
|
|
5/31/2026 |
|
|
$ |
4,383.75 |
|
|
|
2,338 |
|
|
OFFICE |
ROANOKE,
VA |
|
|
6/1/2022 |
|
|
$ |
595.57 |
|
|
|
685 |
|
|
OFFICE |
Our
spaces are utilized for office and warehouse purposes, and it is
our belief that the spaces are adequate for our immediate needs.
Additional space may be required as we expand our business
activities. We do not foresee any significant difficulties in
obtaining additional facilities if deemed necessary.
Legal Proceedings
The
Company is not involved in any disputes and does not have any
litigation matters pending which the Company believes could have a
materially adverse effect on the Company’s financial condition or
results of operations. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or,
to the knowledge of the executive officers of our Company or any of
our subsidiaries, threatened against or affecting our Company, our
common stock, any of our subsidiaries or of our Company’s or our
Company’s subsidiaries’ officers or directors in their capacities
as such, in which an adverse decision could have a material adverse
effect.
However,
from time to time, we may become involved in various lawsuits and
legal proceedings which arise in the ordinary course of business.
Litigation is subject to inherent uncertainties, and an adverse
result in these or other matters may arise from time to time that
may harm our business.
Industry Overview and Competition
The
global logistics industry is highly competitive, and we expect it
to remain so for the foreseeable future. Although there is a large
number of companies that compete or provide services in one or more
segments of the logistics industry, Unique Logistics is part of a
much smaller group of companies that provides a full suite of
services. We provide a range of logistics services within the
spectrum of the supply chain and in each area of service we face
competition from companies operating within that service segment as
well as companies that provide a wider range of global
services.
The
industry includes specialized Non-Vessel Owning Common Carriers
(“NVOCCs”) and Indirect Air Carriers (“IACs”), freight forwarders,
trucking companies, customs brokers and warehouse operators who
operate within their specialized space and very often pose pricing
advantages within that segment. We often compete with them, just as
we compete against larger players who provide all or most of such
services.
Our
mission is to bring value to our customers over a wide range of the
supply chain through specific competitive advantages:
|
● |
Trained,
experienced staff with knowledge of those areas of the world where
customers are likely to require problem solving
abilities. |
|
● |
Trained,
experienced staff with knowledge of the various supply chain
segments: Air, Ocean, Customs, Warehousing and Information
Technology integration. |
|
● |
Responsive
customer service and the ability to meet our customer needs with
people at the front of well-established processes. |
Impact of Covid on Business
Our
customer base includes several customers whose business involves
retail to the public through brick and mortar stores, many of them
in shopping malls. In the period February 2020 to May 2020, many
such customers faced significant downturn in their business
resulting in shut down of supply chains and business loss for our
Company. The Company secured PPP loans from the government that
enabled us to maintain our operations and meet our overhead
commitments in this period. Driven initially by online retail and
later by the opening of in-person retail, by February 2021 most of
our customers saw their business recover to pre-pandemic
levels.
Our
Risks and Challenges
An
investment in our securities involves a high degree of risk. You
should carefully consider the risks summarized below. The risks are
discussed more fully in the “Risk Factors” section of this
prospectus immediately following this prospectus summary. These
risks include, but are not limited to, the following:
|
●
|
We
have customer who are retailers and thus subject to the impact of
Covid related risks and restrictions; |
|
|
|
|
● |
We
depend on operators of aircrafts, ships, trucks, ports and
airports; |
|
|
|
|
● |
Our
past acquisition, as well as any acquisitions that we may complete
in the future, may be unsuccessful or result in other risks or
developments that adversely affect our financial condition and
result; |
|
|
|
|
● |
We
derive a significant portion of our total revenues and net revenues
from our largest customers; |
|
|
|
|
● |
Due
to our dependence on a limited number of customers, we are subject
to a concentration of credit risk;
|
|
● |
We
rely on technology to operate our business; |
|
|
|
|
● |
Our
earnings may be affected by seasonal changes in the transportation
industry; |
|
|
|
|
● |
Our
business is affected by ever increasing regulations from a number
of sources in the United States and in foreign locations in which
we operate; |
|
|
|
|
● |
As
a multinational corporation, we are subject to formal or informal
investigations from governmental authorities or others in the
countries in which we do business; and |
|
|
|
|
● |
The
global economy and capital and credit markets continue to
experience uncertainty and volatility. |
Recent
Developments
Amended and Restated Promissory Note
On April 7, 2021, the Company entered into an Amended and Restated
Promissory Note (the “Amended and Restated Note”) with Trillium
Partners (“Trillium”), pursuant to which the Company and Trillium
amended and restated in its entirety that certain promissory note,
issued to Trillium on March 19, 2020 (the “Original Note”). The
Amended and Restated Note was to mature on June 15, 2021 (the
“Maturity Date”). On September 23, 2021, the Company further
amended the Amended and Restated Note pursuant to which the Company
and Trillium agreed to extend the maturity date of the Amended and
Restated Note to December 31, 2021.
TBK Facility Increase
As
previously disclosed in the Current Report on Form 8-K filed with
the Securities and Exchange Commission (the “SEC”) by the Company
on June 23, 2021, the Company, Unique Logistics Holdings, Inc., a
Delaware corporation (“Holdings”), Unique Logistics International
(NYC), LLC, a Delaware limited liability company (“New York”),
Unique Logistics International (BOS), Inc., a Massachusetts
corporation (“Boston” and, together with the Company, Holdings and
New York, collectively, “Seller”), entered into a Revolving
Purchase, Loan and Security Agreement (the “TBK Agreement”) dated
as of June 1, 2021, 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)
$30 million (“Maximum Facility”) and (ii) the Formula Amount (as
defined in the TBK Agreement) at an interest rate of the highest
prime rate (but in no event less than 3.25%) plus 3%.
On
August 4, 2021, the parties to the TBK Agreement entered into a
First Amendment Agreement (the “First Amendment”) to increase the
credit facility from $30 million to $40 million during the
Temporary Increase Period, the period commencing on August 4, 2021,
through and including December 2, 2021, with all other terms of the
original TBK Agreement remained unchanged.
On
September 17, 2021, the parties to the TBK Agreement entered into a
Second Amendment to the TBK Agreement (the “Second Amendment”)
primarily to increase the credit facility from Forty Million
Dollars ($40,000,000) to Forty Seven Million Five Hundred Thousand
Dollars ($47,500,000) for the period commencing on August 4, 2021
through and including January 31, 2022.
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.
As
collateral securing its obligations under the Financing Agreement,
the Company granted Corefund a continuing security interest in the
all of the Company’s now owned and hereafter acquired Accounts
Receivable (“Collateral”) subject to the security interest granted
pursuant to that certain Revolving Purchase, Loan and Security
Agreement, dated as of June 2, 2021. Immediately upon an Event of
Default (as defined in the Financing Agreement), all outstanding
obligations shall accrue interest at the rate of 0.1% (one-tenth of
one percent) per day. If the Company substantially ceases operating
as a going concern, and the proceeds of the Collateral created
after the occurrence of an Event of Default (the “Default”) are in
excess of the obligations at the time of Default, the Company shall
pay to Corefund a liquidation success premium of 10 percent of the
amount of such excess.
The
Financing Agreement contains ordinary and customary provisions for
agreements and documents of this nature, such as representations,
warranties, covenants, and indemnification obligations, as
applicable.
Term
Sheet
On
August 23, 2021, the Company and Unique Logistics Limited, Hong
Kong (“ULHK”) entered into a Non-Binding Term Sheet for the
Company’s purchase from ULHK of (i) 65% of the capital stock of
Unique Logistics International India (Private) Ltd.; (ii) 50% of
the capital stock of ULI (North & East China) Company Limited;
(iii) 50% of the capital stock of Unique Logistics International
(Shanghai) Co. Ltd; (iv) 50% of the capital stock of ULI
International Co. Ltd.; (v) 49.99% of TGF Unique Limited; (vi) 100%
of the capital stock of Unique Logistics International (H.K.)
Limited; (vii) 65% of the capital stock of Unique Logistics
International (Vietnam) Co. Ltd.; (viii) 70% of the capital stock
of ULI (South China) Limited; (ix) 100% of the capital stock of
Unique Logistics International (South China) Ltd.; and (x) 100 of
the capital stock of Shenzhen Unique Logistics Limited
(collectively the “ULHK Entities”). The initial purchase price,
subject to adjustment, to be paid for the ULHK Entities is
$22,000,000 payable as follows (i) $21,000,0000 payable at closing
(ii) $1,000,000 in the form of a zero interest 24 month promissory
note. Seller shall also be entitled to an additional $2,500,000
payable (the “Earn-Out Payment”) by March 31, 2023 in the event
that ULHK Entities EBITDA exceeds $5,000,000 for the calendar year
of 2022. Should ULHK Entities EBITDA be less than $5,000,000 but
more than $4,500,000 for the 2022 calendar year, the Earn-Out
Payment will be adjusted to $2,000,000. No Earn-Out will be paid if
the EBITDA of the ULHK Entities is less than $4,500,000 for the
2022 calendar year.
The
purchase of ULHK Entities is subject to, among other things, due
diligence, receipt and review of definitive agreements, receipt of
certain regulatory approvals, audited financial statements,
material third part consents and consent of minority shareholders
of ULHK Entities
Securities
Exchange Agreement
On
August 19, 2021, we entered into a securities exchange agreement
(the “Exchange Agreement”) with certain holders holding notes and
warrants of the Company (each, including its successors and
assigns, a “Holder” and collectively the “Holders”). Pursuant to
the Exchange Agreement, the Company agreed to issue, and the
Holders agreed to acquire the New Securities (as defined herein) in
exchange for the Surrendered Securities (as defined in the Exchange
Agreement). “New Securities” means a number of Exchange Shares (as
defined in the Exchange Agreement) determined by applying the
Exchange Ratio (as defined in the Exchange Agreement) upon
consummation of a registered public offering of shares of the
Company’s Common Stock (and warrants if included in such
financing), at a valuation of not less than $200,000,000.00
pre-money, pursuant to which the Company receives gross proceeds of
not less than $20,000,000 and the Company’s Trading Market is a
National Securities Exchange (the “Qualified
Financing”).
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”).
The
respective obligations of the Holders under the Exchange Agreement
in connection with the closing are subject to the following
conditions being met, including a) the accuracy in all material
respects (or, to the extent representations or warranties are
qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations
and warranties of the Company contained therein (unless as of a
specific date therein in which case they shall be accurate as of
such date); b) all obligations, covenants and agreements of the
Company required to be performed at or prior to the Closing Date
shall have been performed; c) The Company shall have closed the
Qualified Financing; d) the delivery by the Company of the items
set forth in Section 2.2(a) of the Exchange Agreement; e) there
shall have been no Material Adverse Effect with respect to the
Company since the date thereof; f) though the Closing Date, trading
in the Common Stock shall not have been suspended by the Commission
or the Company’s principal Trading Market, and, at any time prior
to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades
are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity, pandemic, wide spread national public
health emergency, of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Holder, makes it
impracticable or inadvisable to acquire the securities at the
closing.
The
Exchange Agreement can be terminated by any Holder, as to such
Holder’s obligations thereunder only and without any effect
whatsoever on the obligations between the Company and the other
Holders, by written notice to the other parties, if the Qualified
Financing was not completed by, has not been consummated on or
before the termination date or the Closing fails to occur as a
result of any action or inaction by the Company within five (5)
days after the Closing of the Qualified Financing.
Registration
Rights Agreement
In
connection with the Exchange Agreement, the Company entered into a
Registration Rights Agreement (the “Registration Rights Agreement”)
with the Holders, pursuant to which the Company agreed to register
the Registrable Securities (as defined in the Registration Rights
Agreement).
Pursuant
to the Registration Rights Agreement, the Company is required with
respect to the registration statement filed in connection with the
Qualified Financing (the “Qualified Financing Registration
Statement”), on or prior to each filing date, to prepare and file
with the SEC a Registration Statement (as defined below) covering
the resale of all of the Registrable Securities that are not then
registered on an effective Registration Statement for an offering
to be made on a continuous basis pursuant to Rule 415.
The
Qualified Financing Registration Statement shall include
Registrable Securities only on behalf of 3a Capital Establishment,
comprised of 25,000,000 shares of Common Stock currently held by 3a
Capital Establishment, which, if such 25,000,000 shares is not
equal to $1,000,000 of value valued at the lowest price at which
shares of Common Stock are issued in the Qualified Financing, shall
be increased or decreased to a number of shares of Common Stock
equal to $1,000,000 valued at the lowest price at which shares of
Common Stock are issued in the Qualified Financing. Each other
Registration Statement to be filed under the Registration Rights
Agreement shall include all Registrable Securities, except as
described above.
Leak-Out
Agreement
In
connection with the Exchange Agreement, the Company and the Holders
agreed to enter into a Leak-Out Agreement (the “Leak-Out Agreement)
with the Holders upon consummation of a closing of the Exchange
Agreement. Pursuant to the Leak-Out Agreement, the Holder would
agree that, for a period (the “Leak-Out Period”) beginning on the
date of the Leak-Out Agreement and ending on, and including, the
date that is ninety (90) days after the Closing Date of the
Exchange Agreement, the Holders will not, without the prior written
consent of EF Hutton (a) offer, sell, contract to sell, pledge,
transfer, assign or otherwise dispose of (including, without
limitation, by making any short sale, engage in any hedging,
monetization or derivative transaction) or file (or participate in
the filing of) a registration statement or prospectus with the SEC
in respect of, or establish or increase a put equivalent position
or liquidate or decrease a call equivalent position within the
meaning of Section 16 of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder with respect to (i)
any Common Stock or (ii) any other securities of the Company that
are substantially similar to Common Stock or any securities
convertible into or exchangeable or exercisable for, or any options
or warrants or other rights to purchase Common Stock (the “Related
Securities”), (b) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic
consequences of ownership of Common Stock or Related Securities,
whether any such transaction is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise, or (c)
publicly announce an intention to effect any transaction specified
in clause (a) or (b).
Notwithstanding
the foregoing, the restrictions described above shall not apply to
shares of Common Stock or Related Securities for an amount of
Common Stock and Related Securities less than 7.5% of the daily
average composite trading volume of the Common Stock as reported by
Bloomberg, LP for any trading day for the principal trading market
for the Common Stock and further provided, that the foregoing
restriction shall not apply to any actual “long” (as defined in
Regulation SHO of the Securities Exchange Act of 1934, as amended)
sales by the Undersigned or any of the Affiliates at a price
greater than 25% higher than the offering price of the lowest
priced Common Stock sold in the Offering (in each case, as adjusted
for stock splits, stock dividends, stock combinations,
recapitalizations or other similar events occurring after the date
hereof).
SPA-Letter
Agreement dated June 22, 2021
As
previously disclosed in the Current Report on Form 8-K filed with
the Securities and Exchange Commission (the “SEC”) by the Company
on April 9, 2021, the Company entered into an Amended and Restated
Promissory Note (the “Amended and Restated Note”) with an
accredited investor (the “Investor”), pursuant to which the Company
and the Investor amended and restated in its entirety that certain
promissory note, issued to the Investor on March 19, 2020 (the
“Original Note”). The Amended and Restated Note were to mature on
June 15, 2021 (the “Maturity Date”). On July 22, 2021, the Company
entered into a First Amendment to the Amended and Restated Note
(the “First Amendment”) with the Investor pursuant to which the
Company and the Investor agreed to extend the maturity date of the
Amended and Restated Note by deleting “June 15, 2021” in the first
paragraph of the Amended and Restated Note and replacing the same
with “October 31, 2021”.
Addendum
to Recourse Factoring and Security Agreement
As
previously reported, the Company, Unique Logistics Holdings, Inc.,
a Delaware corporation (“Holdings”), Unique Logistics International
(NYC), LLC, a Delaware limited liability company (“New York”),
Unique Logistics International (BOS), Inc., a Massachusetts
corporation (“Boston” and, together with the Company, Holdings and
New York, collectively, “Seller”), entered into a Revolving
Purchase, Loan and Security Agreement (the “TBK Agreement”) dated
as of June 1, 2021, 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)
$30 million (“Maximum Facility”) and (ii) the Formula Amount (as
defined in the TBK Agreement) at an interest rate of the highest
prime rate (but in no event less than 3.25%) plus 3%.
As
previously reported, the TBK Agreement replaced the Company’s prior
recourse factoring and security agreement with Corefund Capital,
LLC (“Core”) entered into on May 29, 2020 (the “Prior Agreement”),
pursuant to which Core agreed to purchase from the Company up to an
aggregate of $25,000,000 of accounts receivables (the “Core
Facility”). The Core Facility provided Core with security interests
in purchased accounts until the accounts was repurchased by the
Company or paid by the customer. As of June 1, 2021, the Core
Facility was terminated along with all security interests granted
to Core and was replaced with the TBK Agreement.
Effective
June 17, 2021, the Company and Core amended the Prior Agreement
(the “Addendum”) rescinding the Company’s termination notice of the
Prior Agreement. The Addendum provides for a credit line of
$2,000,000.00 with no term and no early termination fee which is in
addition to the facility provided under the TBK Agreement. Pursuant
to the Addendum, the Company and Core agreed that Core would refile
a UCC lien on the Company. The UCC lien will include the following
collateral: all seller’s assets now owned and hereafter acquired
accounts; chattel paper; deposit accounts; contract rights; letter
of credit rights; instruments; payment and general intangibles;
goods; inventory; insurance proceeds; equipment and fixtures;
investment property; and all books and records relating to all of
the foregoing property, including without limitation, all computer
programs; and all proceeds of the foregoing. All other terms and
conditions not amended by the Addendum will remain in full force
and effect.
Replacement
of factoring agreement with a revolving line
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) $30 million (“Maximum Facility”) and (ii) the
Formula Amount (as defined in the TBK Agreement). Upon receipt of
any advance, Seller agreed to sell and assign all of its rights in
accounts receivables and all proceeds thereof. Seller granted to
Purchaser a continuing ownership interest in the accounts purchased
under the Agreement (the “Purchased Accounts”) and, secured and as
collateral security for all Obligations (as defined below), Seller
granted to Purchaser a continuing first priority security interest
in all of Seller’s assets. The facility is for an initial term of
twenty-four (24) months (the “Term”) and may be extended or
renewed, unless terminated in accordance with the TBK Agreement.
The TBK Agreement replaces the Company’s prior agreement with
Corefund Capital, LLC (“Core”) entered into on May 29, 2020,
pursuant to which Core agreed to purchase from the Company up to an
aggregate of $25 million of accounts receivables (the “Core
Facility”). 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.
On
August 4, 2021, the parties to the TBK Agreement entered into a
First Amendment Agreement (the “First Amendment”) to increase the
credit facility from $30 million to $40 million during the
Temporary Increase Period, the period commencing on August 4, 2021,
through and including December 2, 2021, with all other terms of the
original TBK Agreement remained unchanged.
The
TBK Agreement replaced the Company’s prior recourse factoring and
security agreement with Corefund Capital, LLC (“Core”) entered into
on May 29, 2020 (the “Prior Agreement”), pursuant to which Core
agreed to purchase from the Company up to an aggregate of
$25,000,000 of accounts receivables (the “Core Facility”). The Core
Facility provided Core with security interests in purchased
accounts until the accounts was repurchased by the Company or paid
by the customer. As of June 1, 2021, the Core Facility was
terminated along with all security interests granted to Core and
was replaced with the TBK Agreement.
Effective
June 17, 2021, the Company and Core amended the Prior Agreement
(the “Addendum”) rescinding the Company’s termination notice of the
Prior Agreement. The Addendum provides for a credit line of
$2,000,000.00 with no term and no early termination fee which is in
addition to the facility provided under the TBK Agreement. Pursuant
to the Addendum, the Company and Core agreed that Core would refile
a UCC lien on the Company. The UCC lien will include the following
collateral: all seller’s assets now owned and hereafter acquired
accounts; chattel paper; deposit accounts; contract rights; letter
of credit rights; instruments; payment and general intangibles;
goods; inventory; insurance proceeds; equipment and fixtures;
investment property; and all books and records relating to all of
the foregoing property, including without limitation, all computer
programs; and all proceeds of the foregoing. All other terms and
conditions not amended by the Addendum will remain in full force
and effect. On August 30, 2021, all remaining factored accounts
receivables, approximately $1.4 million were repurchased by the
Company, the Core Facility was terminated along with all security
interests previously granted to Core.
Adoption
of Amended and Restated Articles of Incorporation
Effective
January 11, 2021, the Company amended and restated its articles of
incorporation (the “Amended and Restated Articles of
Incorporation”) with the office of the Secretary of State of Nevada
to, among other things, (i) change the Company’s name to Unique
Logistics International, Inc. (the “Name Change”) and (ii) increase
the number of shares of common stock that the Company is authorized
to issue from 500,000,000 shares to 800,000,000 shares (the
“Increase in Authorized Shares”). The adoption of the Amended and
Restated Articles of Incorporation was approved by the majority of
our stockholders on November 20, 2020.
On
January 13, 2021, the Company received notice from Financial
Industry Regulatory Authority (“FINRA”) that the Name Change had
been approved and would take 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”.
The
current organizational structure is illustrated by the
following:

Corporate
Information
Our principal executive offices are located at 154-09
146th Ave, Jamaica, NY 11434, and our telephone number
is 718-978-2000. Our website is www.unique-usa.com. Information
contained on our website does not constitute part of and is not
incorporated into this prospectus.
SUMMARY
OF THE OFFERING
Issuer: |
|
Unique
Logistics International, Inc. |
|
|
|
Securities
Offered: |
|
____________
shares of Common Stock, at a public offering price of $___ per
share. |
|
|
|
Common
Stock offered by the selling stockholders |
|
25,000,000
shares of
Common Stock. |
|
|
|
Over-allotment
option |
|
We
have granted to the representative of the underwriters a 45-day
option to purchase up to ______ additional shares of our Common
Stock at a public offering price of $_____ per Share, less the
underwriting discounts payable by us, in any combination solely to
cover over-allotments, if any. |
|
|
|
Common
stock outstanding before this offering |
|
632,781,078
Shares |
|
|
|
Common
stock outstanding after the offering (1) |
|
_______
Shares. |
|
|
|
Use
of proceeds |
|
We
estimate that the net proceeds to us from this offering will be
approximately $____ million, or approximately $____ million if the
underwriters exercise their over-allotment option in full, assuming
an offering price of $____ per share, after deducting underwriting
discounts and estimated offering expenses payable by us.
We
intend to use the net proceeds of this offering primarily for
general corporate purposes, including working capital and strategic
acquisitions. See “Use of Proceeds” for additional information. We
will not receive any proceeds from the sale of shares of our common
stock by the selling stockholders.
|
|
|
|
Proposed
Nasdaq Capital Market Trading Symbol and Listing |
|
We
have applied to list our Common Stock on the Nasdaq Capital Market
under the symbol “UNQL.” We will not proceed with this offering in
the event our Common Stock is not approved for listing on
Nasdaq. |
|
|
|
Risk
Factors |
|
See
“Risk Factors” beginning on page 22 and the other information
contained in this prospectus for a discussion of factors you should
carefully consider before investing in our securities. |
|
|
|
Lock-up |
|
We,
our directors, executive officers, and shareholders who own 5% or
more of our outstanding Common Stock have agreed with the
underwriters not to offer for sale, issue, sell, contract to sell,
pledge or otherwise dispose of any of our Common Stock or
securities convertible into Common Stock for a period of 180 days,
commencing on the date of this prospectus. See “Underwriting” for
additional information. |
|
|
|
Transfer
Agent |
|
Action
Stock Transfer |
|
(1) |
The
total number of shares of Common Stock that will be outstanding
after this offering is based on 632,781,078 shares of Common Stock
outstanding as of September 30, 2021. Unless otherwise indicated,
the Shares outstanding after this offering excludes the
following: |
|
● |
1,140,956,904
shares underlying stock warrants; |
|
|
|
|
● |
1,724,757,620
shares
underlying convertible promissory notes; |
|
|
|
|
● |
40,000,000
shares of common stock reserved for issuance pursuant to the 2020
stock incentive plan (the “Stock Incentive Plan”); and |
|
|
|
|
● |
__________
shares of common stock issuable upon exercise of warrants to be
issued to the underwriters in connection with this
offering. |
|
|
|
|
● |
6,689,499,576
shares of common stock issuable upon conversion of the Company’s
outstanding Series A and Series B Convertible Preferred
Stock. |
SUMMARY CONSOLIDATED FINANCIAL
INFORMATION
The
following summary consolidated financial information for the fiscal
year ended May 31, 2021 and for the period October 28, 2019
(Inception) though May 31, 2020 have been derived from our audited
consolidated financial statements included elsewhere in this
prospectus. The historical financial data presented below is not
necessarily indicative of our financial results in future periods.
You should read the summary consolidated financial data in
conjunction with those financial statements and the accompanying
notes and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” Our consolidated financial
statements are prepared and presented in accordance with United
States generally accepted accounting principles, or U.S.
GAAP.
UNIQUE
LOGISTICS INTERNATIONAL, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
May 31, 2021 |
|
|
May 31, 2020 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
252,615 |
|
|
$ |
1,349,363 |
|
Accounts
receivable – trade, net |
|
|
20,369,747 |
|
|
|
7,932,310 |
|
Contract
assets |
|
|
23,423,314 |
|
|
|
4,837,008 |
|
Factoring
reserve |
|
|
7,593,665 |
|
|
|
970,724 |
|
Other
prepaid expenses and current assets |
|
|
761,458 |
|
|
|
91,671 |
|
Total current
assets |
|
|
52,400,799 |
|
|
|
15,181,076 |
|
|
|
|
|
|
|
|
|
|
Property and
equipment – net |
|
|
192,092 |
|
|
|
198,988 |
|
|
|
|
|
|
|
|
|
|
Other long-term assets: |
|
|
|
|
|
|
|
|
Goodwill |
|
|
4,463,129 |
|
|
|
4,773,584 |
|
Intangible assets – net |
|
|
8,044,853 |
|
|
|
8,752,000 |
|
Operating lease right-of-use assets –
net |
|
|
3,797,527 |
|
|
|
4,770,280 |
|
Deposits and
other assets |
|
|
555,362 |
|
|
|
292,404 |
|
Other long-term
assets |
|
|
16,860,871 |
|
|
|
18,588,268 |
|
Total
assets |
|
$ |
69,453,762 |
|
|
$ |
33,968,332 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable –
trade |
|
$ |
38,992,846 |
|
|
$ |
9,591,780 |
|
Accrued expenses
and other current liabilities |
|
|
2,383,915 |
|
|
|
3,619,216 |
|
Accrued
freight |
|
|
10,403,430 |
|
|
|
3,477,380 |
|
Current portion of
notes payable – net of discount |
|
|
2,285,367 |
|
|
|
1,476,642 |
|
Current portion of
long-term debt due to related parties |
|
|
397,975 |
|
|
|
6,380,975 |
|
Current portion of operating lease liability |
|
|
1,466,409 |
|
|
|
1,288,216 |
|
Total current
liabilities |
|
|
55,929,942 |
|
|
|
25,834,209 |
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
565,338 |
|
|
|
848,010 |
|
Long-term-debt due to related parties,
net of current portion |
|
|
715,948 |
|
|
|
193,328 |
|
Notes payable, net of current portion
– net of discount |
|
|
3,193,306 |
|
|
|
2,494,420 |
|
Operating lease
liability, net of current portion |
|
|
2,431,144 |
|
|
|
3,482,064 |
|
Total long-term
liabilities |
|
|
6,905,736 |
|
|
|
7,017,822 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities |
|
|
62,835,678 |
|
|
|
32,852,031 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity: |
|
|
|
|
|
|
|
|
Preferred Stock, $.001 par value: 5,000,000 shares
authorized |
|
|
|
|
|
|
|
|
Series A
Convertible Preferred stock, $0.001 par value; 130,000 issued and
outstanding as of May 31, 2021 and 2020 |
|
|
130 |
|
|
|
130 |
|
Series B
Convertible Preferred stock, $0.001 par value; 840,000 and 870,000
shares issued and outstanding as of May 31, 2021 and 2020,
respectively |
|
|
840 |
|
|
|
870 |
|
Common stock, $0.001 par value;
800,000,000 shares authorized; 393,742,663 and 0 shares issued and
outstanding as of May 31, 2021 and 2020, respectively |
|
|
393,743 |
|
|
|
- |
|
Additional paid-in capital |
|
|
4,906,384 |
|
|
|
1,523,811 |
|
Retained
earnings (accumulated deficit) |
|
|
1,316,987 |
|
|
|
(408,510 |
) |
Total
Stockholders’ Equity |
|
|
6,618,084 |
|
|
|
1,116,301 |
|
Total
Liabilities and Stockholders’ Equity |
|
$ |
69,453,762 |
|
|
$ |
33,968,332 |
|
UNIQUE
LOGISTICS INTERNATIONAL, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
For the
Year Ended
May 31, 2021 |
|
|
For the Period
October 28, 2019
(Inception) Through
May 31, 2020 |
|
Revenues: |
|
|
|
|
|
|
|
|
Airfreight services |
|
$ |
137,055,903 |
|
|
$ |
169,924 |
|
Ocean freight and
ocean services |
|
|
196,041,832 |
|
|
|
730,944 |
|
Contract
logistics |
|
|
3,093,626 |
|
|
|
18,126 |
|
Customs brokerage and other services |
|
|
35,695,911 |
|
|
|
151,330 |
|
Total
revenues |
|
|
371,887,272 |
|
|
|
1,070,324 |
|
|
|
|
|
|
|
|
|
|
Costs and operating
expenses: |
|
|
|
|
|
|
|
|
Airfreight
services |
|
|
130,564,578 |
|
|
|
158,223 |
|
Ocean freight and
ocean services |
|
|
179,759,763 |
|
|
|
628,542 |
|
Contract
logistics |
|
|
1,267,360 |
|
|
|
3,497 |
|
Customs brokerage
and other services |
|
|
33,766,727 |
|
|
|
157,800 |
|
Acquisition
expenses |
|
|
- |
|
|
|
239,350 |
|
Salaries and
related costs |
|
|
9,184,390 |
|
|
|
60,776 |
|
Professional
fees |
|
|
1,350,369 |
|
|
|
180,000 |
|
Rent and
occupancy |
|
|
1,815,194 |
|
|
|
21,086 |
|
Selling and
promotion |
|
|
4,535,373 |
|
|
|
5,720 |
|
Depreciation and
amortization |
|
|
765,532 |
|
|
|
- |
|
Fees on factoring
agreements |
|
|
4,471,540 |
|
|
|
- |
|
Other |
|
|
877,458 |
|
|
|
19,682 |
|
Total costs and
operating expenses |
|
|
368,358,284 |
|
|
|
1,474,676 |
|
|
|
|
|
|
|
|
|
|
Income (loss)
from operations |
|
|
3,528,988 |
|
|
|
(404,352 |
) |
|
|
|
|
|
|
|
|
|
Other income
(expenses) |
|
|
|
|
|
|
|
|
Interest |
|
|
(1,781,828 |
) |
|
|
(4,158 |
) |
Gain on
forgiveness of promissory notes |
|
|
1,646,062 |
|
|
|
- |
|
Loss
on extinguishment of convertible note |
|
|
(1,147,856 |
) |
|
|
- |
|
Total other
income (expenses) |
|
|
(1,283,622 |
) |
|
|
(4,158 |
) |
|
|
|
|
|
|
|
|
|
Net income
(loss) before income taxes |
|
|
2,245,366 |
|
|
|
(408,510 |
) |
|
|
|
|
|
|
|
|
|
Income tax
expense |
|
|
519,869 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
1,725,497 |
|
|
$ |
(408,510 |
) |
RISK FACTORS
An
investment in our Common Stock involves a high degree of risk.
Before deciding whether to invest in our Common Stock, you should
consider carefully the risks described below, together with all of
the other information set forth in this prospectus and the
documents incorporated by reference herein, and in any free writing
prospectus that we have authorized for use in connection with this
offering. If any of these risks actually occurs, our business,
financial condition, results of operations or cash flow could be
harmed. This could cause the trading price of our Common Stock to
decline, resulting in a loss of all or part of your investment. The
risks described below and in the documents referenced above are not
the only ones that we face. Additional risks not presently known to
us or that we currently deem immaterial may also affect our
business.
RISKS
RELATED TO THE COVID-19 PANDEMIC
THE COVID-19 PANDEMIC COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS OPERATIONS, RESULTS OF OPERATIONS, CASH FLOWS AND
FINANCIAL POSITION.
We
are closely monitoring the impact of the COVID-19 pandemic on all
aspects of our business and geographies, including how it will
impact our employees, customers and business partners. The COVID-19
pandemic has created significant volatility, uncertainty and
economic disruption, which will adversely affect our business
operations and may materially and adversely affect our results of
operations, cash flows and financial position.
We
experienced declines in demand for our services that began in the
first quarter 2020 that had a substantial impact in the period
through June 2020. From July 2020 onwards the recovery of online
retail and ultimately brick and mortar retail and a surge of
imports increased our workload significantly, despite the pandemic
conditions. We also incurred additional costs to meet the needs of
our employees including arrangements for working from home. An
extended period of remote work arrangements could strain our
business continuity plans, introduce operational risk, including
but not limited to cybersecurity risks, and impair our ability to
manage our business.
The
impacts of the COVID-19 pandemic may remain prevalent for a
significant period of time and may continue to adversely affect our
business, results of operations and financial condition even after
the COVID-19 outbreak has subsided. The extent to which the
COVID-19 pandemic impacts us will depend on numerous evolving
factors and future developments that we are not able to predict.
Due to the largely unprecedented and evolving nature of the
COVID-19 pandemic, it remains very difficult to predict the extent
of the impact on our industry generally and our business in
particular. Furthermore, the extent and pace of a recovery remains
uncertain and may differ significantly among the countries in which
we operate. As a result, the pandemic could have a material impact
on our results of operations and heighten many of our other known
risks described in this prospectus.
WE RELY ON SERVICE PROVIDERS, SUCH AS AIR, OCEAN AND GROUND FREIGHT
CARRIERS, AND IF THEY BECOME FINANCIALLY UNSTABLE OR HAVE REDUCED
CAPACITY TO PROVIDE SERVICES BECAUSE OF COVID-19, IT MAY ADVERSELY
IMPACT OUR BUSINESS AND OPERATING RESULTS.
As a
non-asset based provider of global logistics services, we depend on
a variety of asset-based service providers, including air, ocean
and ground freight carriers. The quality and profitability of our
services depend upon effective selection and oversight of our
service providers. COVID-19 places significant stress on our air,
ocean and freight ground carriers, which may continue to result in
reduced carrier capacity or availability, pricing volatility or
more limited carrier transportation schedules which could adversely
impact our operations and financial results. During the pandemic,
air carriers have been particularly affected having to cancel
flights due to travel restrictions resulting in dramatic drops in
revenues, historical losses and liquidity challenges. Uncertainty
over recovery of demand for passenger air travel, in particular
business travel, to pre-pandemic levels means air carriers’
operations and financial stability may be adversely affected long
term. Prior to 2020, ocean carriers have incurred significant
operating losses are still highly leveraged with debt.
Additionally, several ocean carriers have consolidated, with the
potential for more to occur in the future.
RISKS
RELATED TO OUR COMPANY AND OUR INDUSTRY
THE COMPANY PROVIDES SERVICES TO CUSTOMERS ENGAGED IN INTERNATIONAL
COMMERCE. EVERYTHING THAT AFFECTS INTERNATIONAL TRADE HAS THE
POTENTIAL TO EXPAND OR CONTRACT OUR PRIMARY MARKET AND ADVERSELY
IMPACT OUR OPERATING RESULTS. FOR EXAMPLE, INTERNATIONAL TRADE IS
INFLUENCED BY:
|
● |
currency
exchange rates and currency control regulations; |
|
● |
interest
rate fluctuations; |
|
● |
changes
and uncertainties in governmental policies and inter-governmental
disputes, which could result in increased tariff rates, quota
restrictions, trade barriers and other types of
restrictions; |
|
● |
changes
in and application of international and domestic customs, trade and
security regulations; |
|
● |
wars,
strikes, civil unrest, acts of terrorism, and other
conflicts; |
|
● |
changes
in labor and other costs; |
|
● |
natural
disasters and pandemics; |
|
● |
changes
in consumer attitudes regarding goods made in countries other than
their own; |
|
● |
changes
in availability of credit; |
|
● |
changes
in the price and readily available quantities of oil and other
petroleum-related products; and |
|
● |
increased
global concerns regarding working conditions and environmental
sustainability. |
WE HAVE CUSTOMERS WHO ARE RETAILERS AND THUS, SUBJECT TO THE IMPACT
OF COVID RELATED RISKS AND RESTRICTIONS.
Our
customer base includes several customers whose business involves
retail to the public through brick and mortar stores, many of them
in shopping malls. In the period from February 2020 to May 2020,
many such customers faced significant downturn in their business
resulting in shut down of supply chains and business loss for our
Company. By February 2021, most of these customers saw their
business recover to pre-pandemic levels. However, the risk of a
resurgence of infections or a permanent decline in brick and mortar
retail as a fallout of the pandemic could result in significant
shift in the business of some of our customers.
WE DEPEND ON OPERATORS OF AIRCRAFTS, SHIPS, TRUCKS, PORTS AND
AIRPORTS.
The
financial condition of asset-based service providers can have a
direct impact on our operations. For example, several ocean
carriers have consolidated, with the potential for more
consolidations to occur in the industry. The financial results
reported by ocean carriers have been an industry concern for
several years and bankruptcies such as that of Hanjin Shipping have
aggravated those concerns. The combination of reduced carrier
capacity and pricing volatility is a risk in our business and our
inability to secure shipping capacity or face costs that we cannot
pass on to our customers could materially affect our results. Our
dependence on third parties to provide equipment and services may
impact the delivery and quality of our transportation and logistics
services.
OUR PAST ACQUISITIONS, AS WELL AS ANY ACQUISITIONS THAT WE MAY
COMPLETE IN THE FUTURE, MAY BE UNSUCCESSFUL OR RESULT IN OTHER
RISKS OR DEVELOPMENTS THAT ADVERSELY AFFECT OUR FINANCIAL CONDITION
AND RESULTS.
While
we intend for our acquisitions to enhance our competitiveness and
profitability, we cannot be certain that our past or future
acquisitions will be accretive to earnings or otherwise meet our
operational or strategic expectations. Special risks, including
accounting, regulatory, compliance, information technology or human
resources issues, may arise in connection with, or as a result of,
the acquisition of an existing company, including the assumption of
unanticipated liabilities and contingencies, difficulties in
integrating acquired businesses, possible management distractions,
or the inability of the acquired business to achieve the levels of
revenue, profit, productivity or synergies we anticipate or
otherwise perform as we expect on the timeline contemplated. We are
unable to predict all of the risks that could arise as a result of
our acquisitions.
In
addition, if the performance of our reporting segments or an
acquired business varies from our projections or assumptions, or if
estimates about the future profitability of our reporting segments
or an acquired business change, our revenues, earnings or other
aspects of our financial condition could be adversely
affected.
WE DERIVE A SIGNIFICANT PORTION OF OUR TOTAL REVENUES AND NET
REVENUES FROM OUR LARGEST CUSTOMER.
Two
customers represented approximately 25% of accounts receivable as
of May 31, 2021. No customer represented greater than 10% of
accounts receivable as of May 31, 2020. Two customers accounted for
24.6% and 18.9%, respectively, for the year ended May 31, 2021. The
same two customers accounted for 28.4% and 20.8% of revenue,
respectively, for the period October 28, 2019 (inception) through
May 31, 2020.
DUE TO OUR DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS, WE ARE
SUBJECT TO A CONCENTRATION OF CREDIT RISK.
As of
May 31, 2021, eight (8) customers accounted for approximately forty
seven percent (47%) of our accounts receivable. In the case of
insolvency by one of our significant customers, accounts receivable
with respect to that customer might not be collectible, might not
be fully collectible, or might be collectible over longer than
normal terms, each of which could adversely affect our financial
position. Additionally, our 10 largest customers accounted for
approximately sixty percent (60%) of our total revenues for the
year ended May 31, 2021. This concentration of credit risk makes us
more vulnerable economically. The loss of any of these customers
could materially reduce our revenues and net income, which could
have a material adverse effect on our business.
WE RELY ON TECHNOLOGY TO OPERATE OUR BUSINESS.
Our
continued success is dependent on our systems continuing to operate
and to meet the changing needs of our customers and users. We rely
on our technology staff and vendors to successfully implement
changes to and maintain our operating systems in an efficient
manner. If we fail to maintain and enhance our operating systems,
we may be at a competitive disadvantage and lose
customers.
As
demonstrated by recent material and high-profile data security
breaches, computer malware, viruses, and computer hacking and
phishing attacks have become more prevalent, have occurred on our
systems in the past, and may occur on our systems in the future.
Previous attacks on our systems have not had a material financial
impact on our operations, but we cannot guarantee that future
attacks will have little to no impact on our business.
Though
it is difficult to determine what, if any, harm may directly result
from any specific interruption or attack, a significant impact on
the performance, reliability, security, and availability of our
systems and technical infrastructure to the satisfaction of our
users may harm our reputation, impair our ability to retain
existing customers or attract new customers, and expose us to legal
claims and government action, each of which could have a material
adverse impact on our financial condition, results of operations,
and growth prospects.
DIFFICULTY IN FORECASTING TIMING OR VOLUMES OF CUSTOMER SHIPMENTS
OR RATE CHANGE BY CARRIERS COULD ADVERSELY IMPACT OUR MARGINS AND
OPERATING RESULTS.
We
are not aware of any accurate means of forecasting short-term
customer requirements. However, long-term customer satisfaction
depends upon our ability to meet these unpredictable short-term
customer requirements. Personnel costs, our single largest expense,
are always less flexible in the very near term as we must staff to
meet uncertain demand. As a result, short-term operating results
could be disproportionately affected.
A
significant portion of our revenues is derived from customers whose
shipping patterns are tied closely to consumer demand and from
customers in industries whose shipping patterns are dependent upon
just-in-time production schedules. Therefore, the timing of our
revenues is, to a large degree, impacted by factors out of our
control, such as a sudden change in consumer demand for retail
goods, changes in trade tariffs, product launches and/or
manufacturing production delays. Additionally, many customers ship
a significant portion of their goods at or near the end of a
quarter, and therefore, we may not learn of a shortfall in revenues
until late in a quarter. To the extent that a shortfall in revenues
or earnings was not expected by securities analysts or investors,
any such shortfall from levels predicted by securities analysts or
investors could have an immediate and adverse effect on the trading
price of our stock.
Volatile
market conditions can create situations where rate increases
charged by carriers and other service providers are implemented
with little or no advance notice. We often cannot pass these rate
increases on to our customers in the same time frame, if at all. As
a result, our yields and margins can be negatively impacted, as
recently experienced.
OUR EARNINGS MAY BE AFFECTED BY SEASONAL CHANGES IN THE
TRANSPORTATION INDUSTRY.
Results
of operations for our industry generally show a seasonal pattern as
customers reduce shipments during and after the winter holiday
season. Historically, income from operations and earnings are lower
in the first quarter than in the other three quarters. We believe
this historical pattern has been the result of, or influenced by,
numerous factors, including national holidays, weather patterns,
consumer demand, economic conditions, and other similar and subtle
forces. Although seasonal changes in the transportation industry
have not had a significant impact on our cash flow or results of
operations, we expect this trend to continue and we cannot
guarantee that it will not adversely impact us in the
future.
OUR BUSINESS IS AFFECTED BY EVER INCREASING REGULATIONS FROM A
NUMBER OF SOURCES IN THE UNITED STATES AND IN FOREIGN LOCATIONS IN
WHICH WE OPERATE.
Many
of these regulations are complex and require varying degrees of
interpretation, including those related to trade compliance, data
privacy, employment, compensation and competition, and may result
in unforeseen costs.
In
reaction to the continuing global terrorist threat, governments
around the world are continuously enacting or updating security
regulations. These regulations are multi-layered, increasingly
technical in nature and characterized by a lack of harmonization of
substantive requirements among various governmental authorities.
Furthermore, the implementation of these regulations, including
deadlines and substantive requirements, can be driven by regulatory
urgencies rather than industry’s realistic ability to
comply.
Failure
to consistently and timely comply with these regulations, or the
failure, breach or compromise of our policies and procedures or
those of our service providers or agents, may result in increased
operating costs, damage to our reputation, difficulty in attracting
and retaining key personnel, restrictions on operations or fines
and penalties.
WE ARE SUBJECT TO NEGATIVE IMPACTS OF CHANGES IN POLITICAL AND
GOVERNMENTAL CONDITIONS.
Our
operations are subject to the influences of significant political,
governmental, and similar changes and our ability to respond to
them, including:
|
● |
changes
in political conditions and in governmental policies; |
|
● |
changes
in and compliance with international and domestic laws and
regulations; and |
|
● |
wars,
civil unrest, acts of terrorism, and other conflicts. |
WE MAY BE SUBJECT TO NEGATIVE IMPACTS OF CATASTROPHIC
EVENTS.
A
disruption or failure of our systems or operations in the event of
a major earthquake, weather event, cyber-attack, heightened
security measures, actual or threatened, terrorist attack, strike,
civil unrest, pandemic, or other catastrophic event could cause
delays in providing services or performing other critical
functions. A catastrophic event that results in the destruction or
disruption of any of our critical business or information systems
could harm our ability to conduct normal business operations and
adversely impact our operating results.
OUR INTERNATIONAL OPERATIONS SUBJECT US TO OPERATIONAL AND
FINANCIAL RISKS.
We
provide services within and between foreign countries on an
increasing basis. Our business outside of the United States is
subject to various risks, including:
|
● |
changes
in tariffs, trade restrictions, trade agreements, and
taxations; |
|
● |
difficulties
in managing or overseeing foreign operations and
agents; |
|
● |
limitations
on the repatriation of funds because of foreign exchange
controls; |
|
● |
different
liability standards; and |
|
● |
intellectual
property laws of countries that do not protect our rights in our
intellectual property, including, but not limited to, our
proprietary information systems, to the same extent as the laws of
the United States. |
The
occurrence or consequences of any of these factors may restrict our
ability to operate in the affected region and/or decrease the
profitability of our operations in that region.
As we
continue to expand our business internationally, we expose the
Company to increased risk of loss from foreign currency
fluctuations and exchange controls, as well as longer accounts
receivable payment cycles. Foreign currency fluctuations could
result in currency exchange gains or losses or could affect the
book value of our assets and liabilities. Furthermore, we may
experience unanticipated changes to our income tax liabilities
resulting from changes in geographical income mix and changing
international tax legislation. We have limited control over these
risks, and if we do not correctly anticipate changes in
international economic and political conditions, we may not alter
our business practices in time to avoid adverse effects.
THE COMPANY OPERATES IN A COMPETITIVE
ENVIRONMENT.
Many
of the Company’s current and potential competitors have longer
operating histories, greater name recognition, more employees, and
significantly greater financial, technical, marketing, public
relations, and distribution resources than the Company. The
competitive environment may require the Company to make changes in
the Company’s pricing or marketing to maintain and extend the
Company’s current brand and market position. Price concessions or
the emergence of other pricing or distribution strategies of
competitors may diminish the Company’s revenues, impact the
Company’s margins, or lead to a reduction in the Company’s market
share, any of which will harm the Company’s business.
AS A MULTINATIONAL CORPORATION, WE ARE SUBJECT TO FORMAL OR
INFORMAL INVESTIGATIONS FROM GOVERNMENTAL AUTHORITIES OR OTHERS IN
THE COUNTRIES IN WHICH WE DO BUSINESS.
We
may become subject to civil litigation with our customers, service
providers and other parties with whom we do business. These
investigations and litigation may require significant management
time and could cause us to incur substantial additional legal and
related costs, which may include fines, penalties or damages that
could have a materially adverse impact on our financial
results.
THE GLOBAL ECONOMY AND CAPITAL AND CREDIT MARKETS CONTINUE TO
EXPERIENCE UNCERTAINTY AND VOLATILITY.
Unfavorable
changes in economic conditions may result in lower freight volumes
and adversely affect the Company’s revenues and operating results,
as experienced in 2009 and 2012. These conditions may adversely
affect certain of our customers and service providers. Were that to
occur, our revenues and net earnings could also be adversely
affected. Should our customers’ ability to pay deteriorate,
additional bad debts may be incurred. Volatile market conditions
can create situations where rate increases charged by carriers and
other service providers are implemented with little or no advance
notice. We often times cannot pass these rate increases on to our
customers in the same time frame, if at all. As a result, our
yields and margins can be negatively impacted, as recently
experienced, particularly with ocean freight.
THE IMPLEMENTATION OF THE COMPANY’S BUSINESS STRATEGY WILL REQUIRE
SIGNIFICANT EXPENDITURE OF CAPITAL AND WILL REQUIRE ADDITIONAL
FINANCING.
The
implementation of the Company’s business strategy will require
significant expenditures of capital, and the Company will require
additional financing. Additional funds may be sought through equity
or debt financings. The Company cannot offer any assurances that
commitments for such financings will be obtained on favorable
terms, if at all. Equity financings could result in dilution to
holders and debt financing could result in the imposition of
significant financial and operational restrictions on the Company.
The Company’s inability to access adequate capital on acceptable
terms could have a material adverse effect on the Company’s
business, results of operations and financial condition.
THE COMPANY’S FAILURE TO CONTINUE TO ATTRACT, TRAIN, OR RETAIN
HIGHLY QUALIFIED PERSONNEL COULD HARM THE COMPANY’S
BUSINESS.
The
Company’s success also depends on the Company’s ability to attract,
train, and retain qualified personnel, specifically those with
management and product development skills. Competition for such
personnel is intense, particularly in high-technology centers. If
the Company does not succeed in attracting new personnel or
retaining and motivating the Company’s current personnel, the
Company’s business could be harmed.
RISKS
RELATED TO OUR COMMON STOCK
WE MAY BE SUBJECT TO PENNY STOCK RULES WHICH WILL MAKE THE SHARES
OF OUR COMMON STOCK MORE DIFFICULT TO SELL.
We
may be subject now and in the future to the SEC’s “penny stock”
rules if our shares common stock sell below $5.00 per share. Penny
stocks generally are equity securities with a price of less than
$5.00. The penny stock rules require broker-dealers to deliver a
standardized risk disclosure document prepared by the SEC which
provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer must also
provide the customer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and its
salesperson, and monthly account statements showing the market
value of each penny stock held in the customer’s account. The bid
and offer quotations, and the broker-dealer and salesperson
compensation information must be given to the customer orally or in
writing prior to completing the transaction and must be given to
the customer in writing before or with the customer’s
confirmation.
In
addition, the penny stock rules require that prior to a transaction
the broker dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and
receive the purchaser’s written agreement to the transaction. The
penny stock rules are burdensome and may reduce purchases of any
offerings and reduce the trading activity for shares of our common
stock. As long as our shares of common stock are subject to the
penny stock rules, the holders of such shares of common stock may
find it more difficult to sell their securities.
SALES OF OUR CURRENTLY ISSUED AND OUTSTANDING STOCK MAY BECOME
FREELY TRADABLE PURSUANT TO RULE 144 AND MAY DILUTE THE MARKET FOR
YOUR SHARES AND HAVE A DEPRESSIVE EFFECT ON THE PRICE OF THE SHARES
OF OUR COMMON STOCK
A
substantial majority of our outstanding shares of common stock are
“restricted securities” within the meaning of Rule 144 under the
Securities Act. As restricted shares, these shares may be resold
only pursuant to an effective registration statement or under the
requirements of Rule 144 or other applicable exemptions from
registration under the Act and as required under applicable state
securities laws. Rule 144 provides in essence that an Affiliate (as
such term is defined in Rule 144(a)(1)) of an issuer who has held
restricted securities for a period of at least six months (one year
after filing Form 10 information with the SEC for shell companies
and former shell companies) may, under certain conditions, sell
every three months, in brokerage transactions, a number of shares
that does not exceed the greater of 1% of a company’s outstanding
shares of common stock or the average weekly trading volume during
the four calendar weeks prior to the sale (the four calendar week
rule does not apply to companies quoted on the OTC Bulletin Board).
Rule 144 also permits, under certain circumstances, the sale of
securities, without any limitation, by a person who is not an
Affiliate of the Company and who has satisfied a one-year holding
period. A sale under Rule 144 or under any other exemption from the
Act, if available, or pursuant to subsequent registrations of our
shares of common stock, may have a depressive effect upon the price
of our shares of common stock in any active market that may
develop.
YOU WILL EXPERIENCE DILUTION OF YOUR OWNERSHIP INTEREST BECAUSE OF
THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK AND
OUR PREFERRED STOCK.
In
the future, we may issue our authorized but previously unissued
equity securities, resulting in the dilution of the ownership
interests of our present stockholders. We are currently authorized
to issue an aggregate of 805,000,000 shares of capital stock
consisting of 800,000,000 shares of common stock, par value $0.001
and 5,000,000 shares of preferred stock, par value
$0.001.
We
may also issue additional shares of our common stock or other
securities that are convertible into or exercisable for common
stock in connection with hiring or retaining employees or
consultants, future acquisitions, future sales of our securities
for capital raising purposes, or for other business purposes. The
future issuance of any such additional shares of our common stock
or other securities may create downward pressure on the trading
price of our common stock. There can be no assurance that we will
not be required to issue additional shares, warrants or other
convertible securities in the future in conjunction with hiring or
retaining employees or consultants, future acquisitions, future
sales of our securities for capital raising purposes or for other
business purposes, including at a price (or exercise prices) below
the price at which shares of our common stock are
trading.
WE DO NOT EXPECT TO PAY DIVIDENDS AND INVESTORS SHOULD NOT BUY OUR
COMMON STOCK EXPECTING TO RECEIVE DIVIDENDS.
We
have not paid any dividends on our common stock in the past, and do
not anticipate that we will declare or pay any dividends in the
foreseeable future. Consequently, investors will only realize an
economic gain on their investment in our common stock if the price
appreciates. Investors should not purchase our common stock
expecting to receive cash dividends. Because we do not pay
dividends, and there may be limited trading, investors may not have
any manner to liquidate or receive any payment on their investment.
Therefore, our failure to pay dividends may cause investors to not
see any return on investment even if we are successful in our
business operations. In addition, because we do not pay dividends,
we may have trouble raising additional funds, which could affect
our ability to expand our business operations.
RISKS
RELATED TO THIS OFFERING
Our executive officers, directors, and principal shareholders
maintain the ability to control substantially all matters submitted
to shareholders for approval.
As of
August 31, 2021, our executive officers, directors, and
shareholders who owned more than 5% of our outstanding Common
Stock, in the aggregate, beneficially owned 322,086,324 shares of
Common Stock representing approximately 53% of our outstanding
capital stock. As a result, if these
shareholders were to choose to act together, they would be able to
control substantially all matters submitted to our shareholders for
approval, as well as our management and affairs. For example, these
persons, if they choose to act together, would control the election
of directors and approval of any merger, consolidation or sale of
all or substantially all of our assets. This concentration of
voting power could delay or prevent an acquisition of us on terms
that other shareholders may desire.
Shares eligible for future sale may have adverse effects on our
share price.
Sales
of substantial amounts of shares or the perception that such sales
could occur may adversely affect the prevailing market price for
our shares. We may issue additional shares in subsequent public
offerings or private placements to make new investments or for
other purposes. We are not required to offer any such shares to
existing shareholders on a preemptive basis. Therefore, it may not
be possible for existing shareholders to participate in such future
share issuances, which may dilute the existing shareholders’
interests in us.
If we fail to comply with the rules and regulations under the
Sarbanes-Oxley Act, our operating results, our ability to operate
our business and investors’ views of us may be
harmed.
Section
404 of the Sarbanes-Oxley Act requires public companies to conduct
an annual review and evaluation of their internal controls.
Ensuring that we have adequate internal financial and accounting
controls and procedures in place so that we can produce accurate
financial statements on a timely basis is a costly and
time-consuming effort that will need to be evaluated frequently.
The Company’s principal executive officers have assessed the
effectiveness of the Company’s internal control over financial
reporting as of May 31, 2021. In making this assessment, the
Company’s principal executive officers were guided by the releases
issued by the SEC and to the extent applicable the criteria
established in Internal Control - Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework). The Company’s principal executive
officers have concluded that based on their assessment, as of May
31, 2021, that our disclosure controls and procedures were not
effective and require remediation in order to be effective at the
reasonable assurance level. Prior to the business combination, we
have been a private company with limited accounting personnel and
other resources necessary for effective internal controls over
financial reporting. In addition, our auditors identified material
weaknesses in our internal control over financial reporting during
the audit of the fiscal year ended May 31, 2020. A material
weakness is a deficiency, or combination of deficiencies, in
internal controls, such that there is a reasonable possibility that
a material misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis. The
material weaknesses identified relate to the fact that we did not
design, document, maintain and test an effective control
environment commensurate with our financial reporting requirements,
including lack of a sufficient number of trained professionals with
an appropriate level of accounting knowledge, training and
experience. Management’s general assessment of the above processes
in light of the company’s size, maturity and complexity, as to the
design and effectiveness of the internal controls over financial
reporting is that the key controls and procedures in each of these
processes provide reasonable assurance regarding reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles. During the fiscal year ended May 31, 2021, we actively
addressed and remediated a number of previously identified material
weaknesses in internal controls over financial reporting, improved
our accounting processes, documentation, accounting policies and
procedures, upgraded our accounting personnel and provided our
employees with tools and consultancy, but because we have not
completed a full risk assessment of the internal controls at the
activity level, including process documentation and testing, we are
not able to conclude that our internal controls over financial
reporting are operating effectively and efficiently at this time.
The Company’s principal executive officers and the board are fully
committed to achieving full compliance by the end of the fiscal
year ending May 31, 2022.
Our
failure to maintain the effectiveness of our internal controls in
accordance with the requirements of the Sarbanes-Oxley Act could
have a material adverse effect on our business. We could lose
investor confidence in the accuracy and completeness of our
financial reports, which could have an adverse effect on the price
of our Common Stock. In addition, our efforts to comply with the
rules and regulations under the Sarbanes-Oxley or new or changed
laws, regulations, and standards may differ from the activities
intended by regulatory or governing bodies due to ambiguities
related to practice. Regulatory authorities may investigate
transactions disclosed in our “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and
if legal proceedings are initiated against us, it may harm our
business.
We do not anticipate paying any cash dividends on our capital stock
in the foreseeable future.
We
currently intend to retain all of our future earnings to finance
the growth and development of our business, and therefore, we do
not anticipate paying any cash dividends on our capital stock in
the foreseeable future. We believe it is likely that our Board will
continue to conclude, that it is in the best interests of the
Company and its shareholders to retain all earnings (if any) for
the development of our business. In addition, the terms of any
future debt agreements may preclude us from paying dividends. As a
result, capital appreciation, if any, of our Common Stock will be
your sole source of gain for the foreseeable future.
Investors in this offering will experience immediate and
substantial dilution in net tangible book value.
The
public offering price per share is substantially higher than the
net tangible book value per share of our outstanding shares of
Common Stock. As a result, investors in this offering will incur
immediate dilution of $___ per share, based on the public offering
price of $____ per share. Investors in this offering will pay a
price per share that substantially exceeds the book value of our
assets after subtracting our liabilities. See “Dilution” for
a more complete description of how the value of your investment
will be diluted upon the completion of this offering.
Immediately
prior to the consummation of this offering, we expect to have
approximately ____ outstanding stock options and warrants to
purchase our Common Stock with exercise prices that are below the
assumed public offering price of our Common Stock. To the extent
that these options and warrants are exercised, there will be
further dilution.
There can be no assurances that our Common Stock once listed on the
Nasdaq Capital Market will not be subject to potential delisting if
we do not continue to maintain the listing requirements of the
Nasdaq Capital Market.
We
have applied to list the shares of our Common Stock on the Nasdaq
Capital Market, or Nasdaq, under the symbol “UNQL.” An approval of
our listing application by Nasdaq will be subject to, among other
things, our fulfilling all of the listing requirements of Nasdaq.
In addition, Nasdaq has rules for continued listing, including,
without limitation, minimum market capitalization and other
requirements. Failure to maintain our listing (i.e., being
de-listed from Nasdaq), would make it more difficult for
shareholders to sell our Common Stock and more difficult to obtain
accurate price quotations on our Common Stock. This could have an
adverse effect on the price of our Common Stock. Our ability to
issue additional securities for financing or other purposes, or
otherwise to arrange for any financing we may need in the future,
may also be materially and adversely affected if our Common Stock
is not traded on a national securities exchange.
We have broad discretion in the use of the net proceeds from this
offering and may not use them effectively.
Our
management will have broad discretion in the application of the net
proceeds from this offering, including for any of the purposes
described in the section entitled “Use of Proceeds,” and you will
not have the opportunity as part of your investment decision to
assess whether the net proceeds will be used appropriately. Because
of the number and variability of factors that will determine our
use of the net proceeds from this offering, their ultimate use may
vary substantially from their currently intended use. Our
management might not apply our net proceeds in ways that ultimately
increase the value of your investment. We currently intend to use
the net proceeds of this offering primarily for general corporate
purposes, including working capital, expanded sales and marketing
activities and strategic acquisitions.
Our
expected use of net proceeds from this offering represents our
current intentions based upon our present plans and business
condition. As of the date of this prospectus, we cannot predict
with certainty all of the particular uses for the net proceeds to
be received upon the completion of this offering, or the amounts
that we will actually spend on the uses set forth above. The
amounts and timing of our actual use of the net proceeds will vary
depending on numerous factors, including the commercial success of
our systems, as well as the amount of cash used in our operations.
As a result, our management will have broad discretion in the
application of the net proceeds, and investors will be relying on
our judgment regarding the application of the net proceeds of this
offering.
If securities or industry analysts do not publish research or
publish inaccurate or unfavorable research about our business, our
stock price and trading volume could decline.
The
trading market for our Common Stock will depend in part on the
research and reports that securities or industry analysts publish
about us or our business. Securities and industry analysts do not
currently, and may never, publish research on our company. If no
securities or industry analysts commence coverage of our company,
the trading price for our stock would likely be negatively
impacted. In the event securities or industry analysts initiate
coverage, if one or more of the analysts who covers us downgrades
our stock or publishes inaccurate or unfavorable research about our
business, our stock price may decline. If one or more of these
analysts ceases coverage of our company or fails to publish reports
on us regularly, demand for our stock could decrease, which might
cause our stock price and trading volume to decline.
If our shares of Common Stock become subject to the penny stock
rules, it would become more difficult to trade our
shares.
The
SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in penny stocks. Penny stocks are
generally equity securities with a price of less than $5.00, other
than securities registered on certain national securities exchanges
or authorized for quotation on certain automated quotation systems,
provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or
system. If we do not obtain or retain a listing on Nasdaq and if
the price of our Common Stock is less than $5.00, our Common Stock
will be deemed a penny stock. The penny stock rules require a
broker-dealer, before a transaction in a penny stock not otherwise
exempt from those rules, to deliver a standardized risk disclosure
document containing specified information. In addition, the penny
stock rules require that before effecting any transaction in a
penny stock not otherwise exempt from those rules, a broker-dealer
must make a special written determination that the penny stock is a
suitable investment for the purchaser and receive (i) the
purchaser’s written acknowledgment of the receipt of a risk
disclosure statement; (ii) a written agreement to transactions
involving penny stocks; and (iii) a signed and dated copy of a
written suitability statement. These disclosure requirements may
have the effect of reducing the trading activity in the secondary
market for our Common Stock, and therefore stockholders may have
difficulty selling their shares.
The financial and operational projections that we may make from
time to time are subject to inherent risks.
The
projections that our management may provide from time to time
reflect numerous assumptions made by management, including
assumptions with respect to our specific as well as general
business, economic, market and financial conditions and other
matters, all of which are difficult to predict and many of which
are beyond our control. Accordingly, there is a risk that the
assumptions made in preparing the projections, or the projections
themselves, will prove inaccurate. There will be differences
between actual and projected results, and actual results may be
materially different from those contained in the projections. The
inclusion of the projections in this prospectus should not be
regarded as an indication that we or our management or
representatives considered or consider the projections to be a
reliable prediction of future events, and the projections should
not be relied upon as such.
If we were to dissolve, the holders of our securities may lose all
or substantial amounts of their investments.
If we
were to dissolve as a corporation, as part of ceasing to do
business or otherwise, we may be required to pay all amounts owed
to any creditors before distributing any assets to the investors.
There is a risk that in the event of such a dissolution, there will
be insufficient funds to repay amounts owed to holders of any of
our indebtedness and insufficient assets to distribute to our other
investors, in which case investors could lose their entire
investment.
Because
the risk factors referred to above, as well as other risks not
mentioned above, could cause actual results or outcomes to differ
materially from those expressed in any forward-looking statements
made by us, you should not place undue reliance on any such
forward-looking statements. Further, any forward-looking statement
speaks only as of the date on which it is made. We undertake no
obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement is
made or reflect the occurrence of unanticipated events. New factors
emerge from time to time, and it is not possible for us to predict
which ones will arise. In addition, we cannot assess the impact of
each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking
statements.
USE OF PROCEEDS
Based
upon an assumed public offering price of
$ per share,
we estimate that we will receive net proceeds from this offering,
after deducting the underwriting discounts and the estimated
offering expenses payable by us, of approximately $35.5 million
assuming the Underwriters do not exercise their over-allotment
option. We will not receive any of the proceeds from the sale of
Common Stock in this offering by the selling stockholders
identified in this prospectus.
We
plan to use the net proceeds we receive from this offering
primarily for business development and marketing, with the
remainder of the proceeds to be used for marketing (10%), general
corporate purposes (30%), including, without limitation, investing
in or acquiring companies that are synergistic with or
complimentary to our business (60%) (including, without limitation,
the purchase of the ULHK Entities), and working
capital.
The
foregoing represents our current intentions based upon our present
plans and business conditions to use and allocate the net proceeds
of this offering. However, the nature, amounts and timing of our
actual expenditures may vary significantly depending on numerous
factors. As a result, our management has and will retain broad
discretion over the allocation of the net proceeds from this
offering. We may find it necessary or advisable to use the net
proceeds from this offering for other purposes, and we will have
broad discretion in the application of net proceeds from this
offering. To the extent that the net proceeds we receive from this
offering are not immediately used for the above purposes, we intend
to invest our net proceeds in short-term, interest-bearing bank
deposits or debt instruments.
DIVIDEND POLICY
We
have not historically declared dividends on our Common Stock, and
we do not currently intend to pay dividends on our Common Stock.
The declaration, amount, and payment of any future dividends on
shares of our Common Stock, if any, will be at the sole discretion
of our Board, out of funds legally available for dividends. As a
Nevada corporation, we are not permitted to pay dividends if, after
giving effect to such payment, we would not be able to pay our
debts as they become due in the usual course of business or our
total assets would be less than the sum of our total liabilities
plus any amounts needed to satisfy any preferential rights if we
were dissolving.
Our
ability to pay dividends to our shareholders in the future will
depend upon our liquidity and capital requirements, as well as our
earnings and financial condition, the general economic climate,
contractual restrictions, our ability to service any equity or debt
obligations senior to our Common Stock, and other factors deemed
relevant by our Board.
CAPITALIZATION
The
following table sets forth our consolidated cash and capitalization
as of May 31, 2021. Such information is set forth on the following
basis:
|
● |
actual
basis (giving effect, on a retroactive basis, to a 1-for __ reverse
stock split which was consummated on _______, 2021);
and |
|
|
|
|
● |
on a
pro forma basis, giving effect to (i) the conversion of $3,902,476
principal amount of convertible notes and warrants (assuming
interest calculated through May 31, 2021) as defined in the
Exchange Agreement into 2,327,727 shares of Common Stock and (ii)
the conversion of Series A and Series B Preferred stock into
6,592,244,134 shares of Common Stock (iii) the sale by us of shares
of Common Stock in this offering at an assumed public offering
price of $______ per share, after deducting underwriting discounts
and the non-accountable expense allowance payable to the
Underwriters and estimated offering expenses. |
The
pro forma information below is illustrative only and our
capitalization following the completion of this offering will be
adjusted based on the actual public offering price and other terms
of this offering determined at pricing. You should read this table
together with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our audited and unaudited
consolidated financial statements and the related notes appearing
elsewhere in this prospectus.
|
|
May 31,
2021 Actual (audited) |
|
|
May
31,
2021
Pro
Forma (unaudited)
|
|
Cash and
cash equivalents |
|
$ |
252,615 |
|
|
$ |
35,752,615 |
|
Total
liabilities |
|
|
62,835,678 |
|
|
|
58,933,202 |
|
Stockholders’
(deficit) equity: |
|
|
|
|
|
|
|
|
Series A
Convertible Preferred stock, $0.001 par value; 130,000 issued and
outstanding as of May 31, 2021 and 2020 |
|
|
130 |
|
|
|
- |
|
Series B
Convertible Preferred stock, $0.001 par value; 840,000 and 870,000
shares issued and outstanding as of May 31, 2021 and 2020,
respectively |
|
|
840 |
|
|
|
- |
|
Common
stock, $0.001 par value; shares authorized; 393,742,663 shares
issued and outstanding as of May 31, 2021, and _________ shares
issued and outstanding pro forma |
|
$ |
393,743 |
|
|
|
|
|
Additional
paid-in capital, common and preferred |
|
|
4,906,384 |
|
|
|
40,406,384 |
|
Retained
earnings |
|
|
1,316,987 |
|
|
|
1,316,987 |
|
Equity to
be issued |
|
|
|
|
|
|
|
|
Total
stockholders’ equity |
|
$ |
6,618,084 |
|
|
|
42,118,084 |
|
DILUTION
If
you invest in our Shares in this offering, your interest will be
diluted to the extent of the difference between the public offering
price per share of Common Stock and the as adjusted net tangible
book value per share of Common Stock immediately after this
offering.
Our
historical net tangible book value as of May 31, 2021 was
$(5,889,898), or ($0.01) per share of Common Stock. Our historical
net tangible book value is the amount of our total tangible assets
less our liabilities. Historical net tangible book value per share
of Common Stock is our historical net tangible book value divided
by the number of outstanding shares of Common Stock as of May 31,
2021.
Our
pro forma net tangible book value as of May 31, 2021 was $_____ per
share of Common Stock. Pro forma net tangible book value per share
represents our total tangible assets less our total liabilities,
divided by the number of outstanding Common Stock, after giving
effect to the pro forma adjustments referenced under
“Capitalization.”
After
giving effect to this offering, at an assumed public offering price
of $ per
share, after deducting underwriting discounts, non-accountable
expense allowance and estimated offering expenses payable by us,
our net tangible book value on a pro forma as adjusted basis as of
September 30, 2020 would have been
$ per share of
Common Stock. This amount represents an immediate increase in pro
forma as adjusted net tangible book value of
$ per share
of Common Stock to our existing shareholders and an immediate
dilution of $ per
share of Common Stock to new investors purchasing Common Stock in
this offering. We determine dilution by subtracting the pro forma
as adjusted net tangible book value per share after this offering
from the amount of cash that a new investor paid for a Common
Stock.
The
following table illustrates this dilution:
Assumed
public offering price per share |
|
$ |
|
|
Net tangible book
value per Common Stock as of May 31, 2021 |
|
$ |
|
|
Pro forma net tangible
book value per share as of May 31, 2021 |
|
|
|
|
Increase
in pro forma net tangible book value per share attributable to this
offering |
|
|
|
|
Pro forma
as adjusted net tangible book value per share, after this
offering |
|
|
|
|
Dilution
per share to new investors in this offering |
|
$ |
|
|
Sales
by the selling stockholders in this offering will cause the number
of shares held by existing stockholders to be reduced to
shares,
or % of
the total number of shares of our capital stock outstanding
following the completion of this offering, and will increase the
number of shares held by new investors to
shares,
or
%
of the total number of shares of our capital stock outstanding
following the completion of this offering.
A
$0.50 increase (decrease) in the assumed public offering price of
$
per share of Common Stock, would increase (decrease) the pro forma
as adjusted net tangible book value per share by
$
, and increase (decrease) dilution to new investors by
$
per share, in each case assuming that the number of shares offered
by us, as set forth on the cover page of this prospectus, remains
the same and after deducting underwriting discounts,
non-accountable expense allowance and estimated offering expenses
payable by us.
The
foregoing discussion and table do not take into account further
dilution to new investors that could occur upon the exercise of
outstanding warrants having a per share exercise or conversion
price less than the per share offering price to the public in this
offering.
If
the underwriters exercise in full their option to purchase
additional Common Stock in this offering, the pro forma as adjusted
net tangible book value after the offering would be
$
per share, the increase in net tangible book value to existing
shareholders would be
$
per share, and the dilution to new investors would be
$
per share, in each case assuming an public offering price of
$
per share.
The
number of shares of common stock that will be outstanding after
this offering is based on 632,781,078 shares of Common Stock
outstanding as of September 30, 2021, and excludes the following as
of that date:
|
● |
1,140,956,904
shares underlying stock warrants; |
|
|
|
|
● |
1,724,757,620
shares underlying convertible promissory notes; |
|
|
|
|
● |
40,000,000
shares of common stock reserved for issuance pursuant to the 2020
stock incentive plan (the “Stock Incentive Plan”); and |
|
|
|
|
● |
__________
shares of common stock issuable upon exercise of warrants to be
issued to the underwriters in connection with this
offering. |
|
|
|
|
● |
6,689,499,576
shares of common stock issuable upon conversion of the Company’s
outstanding Series A and Series B Convertible Preferred
Stock. |
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Note
Regarding Forward-Looking Statements
The following discussion and analysis of our financial condition
and results of operations includes a number of forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended, (the “Exchange Act”)
that reflect management’s current views with respect to future
events and financial performance. These
statements are based upon beliefs of, and information currently
available to, the Company’s management as well as estimates and
assumptions made by the Company’s management. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which are only predictions and speak only as of the date hereof.
When used herein, the words “anticipate,” “believe,” “estimate,”
“expect,” “forecast,” “future,” “intend,” “plan,” “predict,”
“project,” “target,” “potential,” “will,” “would,” “could,”
“should,” “continue” or the negative of these terms and similar
expressions as they relate to the Company or the Company’s
management identify forward-looking statements. Such statements
reflect the current view of the Company with respect to future
events and are subject to risks, uncertainties, assumptions, and
other factors, including the risks relating to the Company’s
business, industry, and the Company’s operations and results of
operations. Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect,
actual results may differ significantly from those anticipated,
believed, estimated, expected, intended, or planned.
Although
the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance, or
achievements. Except as required by applicable law, including the
securities laws of the United States, the Company does not intend
to update any of the forward-looking statements to conform these
statements to actual results.
Our
financial statements are prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”). These
accounting principles require us to make certain estimates,
judgments and assumptions. We believe that the estimates, judgments
and assumptions upon which we rely are reasonable based upon
information available to us at the time that these estimates,
judgments and assumptions are made. These estimates, judgments and
assumptions can affect the reported amounts of assets and
liabilities as of the date of the condensed consolidated financial
statements as well as the reported amounts of revenues and expenses
during the periods presented. Our condensed consolidated financial
statements would be affected to the extent there are material
differences between these estimates and actual results. The
following discussion should be read in conjunction with our
condensed consolidated financial statements and notes thereto
appearing elsewhere in this report. The forward-looking statements
made in this report are based only on events or information as of
the date on which the statements are made in this report. Except as
required by law, we undertake no obligation to update or revise
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise, after the date on which
the statements are made or to reflect the occurrence of
unanticipated events. You should read this report and the documents
we refer to in this report and have filed as exhibits to this
report completely and with the understanding that our actual future
results may be materially different from what we expect. These
risks include, by way of example and without limitation:
|
● |
The
company provides services to customers engaged in international
commerce. Everything that affects international trade has the
potential to expand or contract our primary market and adversely
impact our operating results; |
|
|
|
|
● |
We
depend on operators of aircrafts, ships, trucks, ports and
airports; |
|
|
|
|
● |
We
derive a significant portion of our total revenues and net revenues
from our largest customers; |
|
|
|
|
● |
Due
to our dependence on a limited number of customers, we are subject
to a concentration of credit risk; |
|
|
|
|
● |
Our
earnings may be affected by seasonal changes in the transportation
industry; |
|
● |
Our
business is affected by ever increasing regulations from a number
of sources in the United States and in foreign locations in which
we operate; |
|
|
|
|
● |
As
a multinational corporation, we are subject to formal or informal
investigations from governmental authorities or others in the
countries in which we do business; |
|
|
|
|
● |
The
global economy and capital and credit markets continue to
experience uncertainty and volatility; |
|
|
|
|
● |
We
are susceptible to any risk that would slow down retail or disrupt
the supply chain including but not limited to the Covid 19
pandemic |
|
|
|
|
● |
Our
business is subject to significant seasonal fluctuations driven by
market demands and each quarter is affected by seasonal trends;
and |
|
|
|
|
● |
Our
revenue and direct costs are subject to significant fluctuations
depending on supply and demand for freight
capacity. |
Although
we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity, or performance. Readers are urged to carefully
review and consider the various disclosures made by us in this
report and in our other reports filed with the Securities and
Exchange Commission (“SEC”). We undertake no obligation to update
or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes in
the future operating results over time except as required by law.
We believe that our assumptions are based upon reasonable data
derived from and known about our business and operations. No
assurances are made that actual results of operations or the
results of our future activities will not differ materially from
our assumptions.
As
used in this prospectus and unless otherwise indicated, the terms
“Company,” “we,” “us,” and “our” refer to Unique Logistics
International, Inc. (formerly known as Innocap, Inc.), and our
wholly subsidiaries, Unique Logistics International (BOS) Inc, a
Massachusetts corporation (“UL BOS”) and Unique Logistics
International (NYC) LLC, a Delaware limited liability company (“UL
NYC”).”). Unless otherwise specified, all dollar amounts are
expressed in United States dollars.
Corporate
History
The
Company was incorporated in Nevada on January 23, 2004 under the
name Innocap, Inc. In May 2011, the Company changed its business
plan to researching the location of and salvaging sunken ships.
Until October 2020, the Company had been actively negotiating
several research and salvage projects including in Indonesia and
Malaysia in connection with ships that were sunk during World War
II.
On
October 8, 2020, the Company, Inno Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of the Company (the “Merger
Sub”), and Unique Logistics Holdings, Inc., a privately-held
Delaware corporation headquartered in New York (“UL HI”), entered
into an Acquisition Agreement and Plan of Merger (the “Acquisition
Agreement”) pursuant to which the Merger Sub was merged with and
into UL HI, with UL HI surviving as a wholly-owned subsidiary of
Innocap Inc. (the “Merger”). The transaction (the “Closing”) took
place on October 8, 2020 (the “Closing Date”). Innocap Inc.
acquired, through a reverse triangular merger, all of the
outstanding capital stock of UL HI in exchange for issuing UL HI’s
shareholders (the “UL HI Shareholders”), pro-rata, an aggregate of
1,000,000 shares of preferred stock, with certain of UL HI
Shareholders receiving 130,000 shares of Innocap Inc.’s Series A
Preferred Stock par value $0.001 per share, and certain of the UL
HI Shareholders receiving of 870,000 shares of Innocap Inc.’s
Series B Preferred Stock, par value $0.001 per share. Immediately
after the Merger was consummated, and further to the Acquisition
Agreement, certain affiliates of Innocap Inc. cancelled a total of
45,606,489 shares of Innocap Inc.’s common stock, and 1,000,000
shares of Preferred Stock held by them (the “Cancellation”). In
consideration of the Cancellation of such shares of Innocap Inc.’s
common stock and preferred stock, Holdings agreed to assume certain
liabilities of Innocap Inc. As a result of the Merger and the
Cancellation, the UL HI Shareholders became the majority
shareholders of the Company. Immediately following the Closing of
the Merger, Innocap Inc. changed its business plan to that of UL
HI.
Increase
in Authorized Shares and Name Change
On
January 11, 2021, Innocap Inc. filed a certificate of amendment to
its articles of incorporation with the Secretary of State of the
State of Nevada, for the adoption of amended and restated articles
of incorporation of Innocap Inc. The adopted Amended and Restated
Articles of Incorporation: (i) increased the number of authorized
common stock from 500,000,000 shares to 800,000,000 shares; and
(ii) changed the Company’s name to Unique Logistics International,
Inc.
The
Name Change was approved by the Financial Industry Regulatory
Authority (FINRA) and became effective in the market on January 14,
2021.
Business
Overview
Unique
Logistics International, Inc. (hereinafter referred to as the
“Company” or “Unique”) is a global logistics and freight forwarding
company. The Company operated via its wholly owned subsidiaries,
Unique Logistics Holdings, Inc., a Delaware corporation (“UL HI”),
Unique Logistics International (BOS) Inc, a Massachusetts
corporation (“UL BOS”) and Unique Logistics International (NYC)
LLC, a Delaware limited liability company (“UL NYC”).
The
Company provides a range of international logistics services that
enable its customers to outsource to the Company sections of their
supply chain process. The services provided by the Company are
seamlessly managed by its network of trained employees and
integrated information systems. We enable our customers to share
data regarding their international vendors and purchase orders with
us, execute the flow of goods and information under their operating
instructions, provide visibility to the flow of goods from factory
to distribution center or store and when required, update their
inventory records.
Our
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 |
Results
of Operations
Revenue
The
Company’s recorded total revenue from operations for the year ended
May 31, 2021, and for the period October 28, 2019 (inception)
through May 31, 2020, in the amounts of $371.9 million and $1.1
million, respectively. This increase represents management’s
success in combining the acquired entities, achievement of
synergies, as well as significant increase in a number of
customers, shipping volumes and the market prices, for both air and
ocean freight services, during the year. Management is also
projecting strong demand for international logistics services
driven by a recovering US economy. We believe the Company is in a
strong position to deliver on its strategy, ensuring growth both
organically and through acquisitions in strategic geographic areas
of our business.
Costs
and Operating Expenses
Costs
and operating expenses were $368.4 million for the year ended May
31, 2021, compared with $1.5 million for the period October 28,
2019 (inception) through May 31, 2020.
Other
Income (Expense)
Other
income (expense) is comprised of interest expense, gain on
forgiveness of promissory notes and loss on extinguishment of
convertible debt. During the year ended May 31, 2021, interest
expense totaled approximately $1.8 million and was comprised of
$121,000 for bank interest charges, $310,000 for loan interest and
approximately $1.4 million for accretion of debt discount related
to the Company’s convertible notes. The Company recorded loss on
extinguishment of convertible note payable of approximately $1.1
million. In addition, The Company’s wholly-owned subsidiaries
previously received proceeds under the Paycheck Protection Program
(“PPP”). During the year ended May 31, 2021, the Company was
granted forgiveness of these promissory notes and recorded a gain
on forgiveness of approximately $1.6
million.
Net
Income (Loss)
Net
income was $1.7 million for the year ended May 31, 2021, compared
to a net loss of $409,000 for the period October 28, 2019
(inception) through May 31, 2020. The increase was primarily due to
the period October 28, 2019 (inception) through May 31, 2020 were
reflective of a newly formed business compared to full operations
during the year ended May 31, 2021
Adjusted EBITDA
We
define adjusted EBITDA to be earnings before interest, taxes,
depreciation and amortization, factoring fees, other income, net,
stock-based compensation and expenses, merger and acquisition
costs, restructuring, transition and acquisitions expense, net,
goodwill impairment and certain other items.
Consolidated
adjusted EBITDA for the year ended May 31, 2021 increased by
approximately $9.3 million compared to the period October 28, 2019
(inception) through May 31, 2020.
Adjusted
EBITDA is not a measurement of financial performance under GAAP and
may not be comparable to other similarly titled measures of other
companies. We present adjusted EBITDA because we believe that
adjusted EBITDA is a useful supplement to net income from
operations as an indicator of operating performance. We use
adjusted EBITDA as a financial metric to measure the financial
performance of the business because management believes it provides
additional information with respect to the performance of its
fundamental business activities. For this reason, we believe
adjusted EBITDA will also be useful to others, including our
stockholders, as a valuable financial metric.
We
believe that adjusted EBITDA is a performance measure and not a
liquidity measure, and therefore a reconciliation between net
income from continuing operations and adjusted EBITDA has been
provided in the financial results. Adjusted EBITDA should not be
considered as an alternative to income from operations or net
income from operations as an indicator of performance or as an
alternative to cash flows from operating activities as an indicator
of cash flows, in each case as determined in accordance with GAAP,
or as a measure of liquidity. In addition, adjusted EBITDA does not
take into account changes in certain assets and liabilities as well
as interest and income taxes that can affect cash flows. We do not
intend the presentation of these non-GAAP measures to be considered
in isolation or as a substitute for results prepared in accordance
with GAAP. These non-GAAP measures should be read only in
conjunction with our consolidated financial statements prepared in
accordance with GAAP.
Following
is the reconciliation of our consolidated net income to adjusted
EBITDA
|
|
For
the
Year
Ended
May 31,
2021
|
|
|
For
the
Year
Ended
May 31,
2020
|
|
Net income
(loss) |
|
$ |
1,725,497 |
|
|
$ |
(408,510 |
) |
|
|
|
|
|
|
|
|
|
Add
Back: |
|
|
|
|
|
|
|
|
Income tax
expense |
|
|
519,869 |
|
|
|
- |
|
Depreciation and
amortization |
|
|
765,532 |
|
|
|
- |
|
Stock-based
compensation |
|
|
91,666 |
|
|
|
- |
|
Gain on
forgiveness of promissory notes |
|
|
1,147,856 |
|
|
|
- |
|
Loss on
extinguishment of convertible notes |
|
|
(1,646,062 |
) |
|
|
- |
|
Factoring
fees |
|
|
4,471,540 |
|
|
|
- |
|
Interest
expense (including accretion of debt discount) |
|
|
1,781,828 |
|
|
|
- |
|
Adjusted
EBITDA |
|
$ |
8,857,726 |
|
|
$ |
(408,510 |
) |
Liquidity
and Capital Resources
The
following table summarizes total current assets, liabilities and
working capital:
|
|
May 31,
2021
|
|
|
May 31,
2020
|
|
|
Change |
|
Current Assets |
|
$ |
52,400,799 |
|
|
$ |
15,181,076 |
|
|
$ |
37,219,723 |
|
Current
Liabilities |
|
$ |
55,929,942 |
|
|
$ |
25,834,209 |
|
|
$ |
30,095,733 |
|
Working Capital
Deficit |
|
$ |
(3,529,143 |
) |
|
$ |
(10,653,133 |
) |
|
$ |
7,123,990 |
|
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 a consequence of acquisition financing at inception, the Company
experienced negative working capital and adverse cash flows from
operations. As of May 31, 2021, the Company had cash of
approximately $253,000, negative working capital of approximately
$3.5 million and cash used in operations of approximately $162,000.
This was a significant improvement from May 31, 2020, when its
negative working capital was approximately $10.7 million.
In response to our liquidity needs and to continue execution of our
strategic plan. During the year ended May 31, 2021, the Company
paid down most of its acquisition related debt (see Note 8),
received forgiveness for PPP loans (Note 7) and signed an Exchange
Agreement to exchange its Convertible debt into common stocks (Note
13). In addition, as disclosed in Note 13, Subsequent Events, on
August 4, 2021 the parties to the TBK Agreement entered into an
agreement to increase the Company’s credit facility from $30
million to $40 million during the period August 4, 2021, through
and including December 2, 2021, with all other terms of the
original TBK Agreement remaining unchanged.
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, reducing discretionary
spending and improving cash 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. Based on our evaluation and business
performance of the Company subsequent to the balance sheet date,
management has concluded that the Company’s cash and operating
capital as of May 31, 2021, would be sufficient to continue as a
going concern for at least one year from the date these
consolidated financial statements are issued.
Adoption
of Recent Accounting Standards
In
October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic
740): Intra-Entity Transfers of Assets Other than Inventory”,
which eliminates the exception that prohibits the recognition of
current and deferred income tax effects for intra-entity transfers
of assets other than inventory until the asset has been sold to an
outside party. The updated guidance is effective for annual periods
beginning after December 15, 2019, including interim periods within
those fiscal years. Early adoption of the update is permitted. The
Company adopted the new standard on June 1, 2020. The adoption of
the new standard did not have a significant impact on the Company’s
consolidated financial statements.
In
January 2017, the FASB issued ASU 2017-04, Intangibles –
Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment, that simplifies the subsequent measurement of
goodwill by eliminating Step 2 of the goodwill impairment test. The
Step 2 test requires an entity to calculate the implied fair value
of goodwill to measure a goodwill impairment charge. Instead, an
entity will record an impairment charge based on the excess of a
reporting unit’s carrying value over its fair value determined in
Step 1. This update also eliminates the qualitative assessment
requirements for a reporting unit with zero or negative carrying
value. The Company adopted the standard upon its
inception.
In
August 2018, the FASB issued ASU 2018-13, “Fair Value
Measurement (Topic 820): Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement”. This
update is to improve the effectiveness of disclosures in the notes
to the financial statements by facilitating clear communication of
the information required by U.S. GAAP that is most important to
users of each entity’s financial statements. The amendments in this
update apply to all entities that are required, under existing U.S.
GAAP, to make disclosures about recurring or nonrecurring fair
value measurements. The amendments in this update are effective for
all entities for fiscal years beginning after December 15, 2019,
and interim periods within those fiscal years. The Company adopted
this standard on June 1, 2020 and the adoption of the new standard
did not have a significant impact on the Company’s consolidated
financial statements.
Recent
Accounting Pronouncements
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments -
Credit Losses (Topic 326), Measurement of Credit Losses on
Financial Instruments, and has subsequently issued several
amendments (collectively, “ASU 2016-13”). ASU 2106-13 adds to U.S.
GAAP an impairment model (known as the current expected credit loss
model) that is based on expected losses rather than incurred
losses. Under the new guidance, an entity recognizes as an
allowance its estimate of expected credit losses. ASU 2016-13 will
be effective for smaller reporting companies for fiscal years
beginning after December 15, 2022. Earlier application is permitted
only for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. The Company is currently
evaluating the potential impact of this standard on its
consolidated financial statements.
In
December 2019, the FASB issued authoritative guidance intended to
simplify the accounting for income taxes (ASU 2019-12, “Income
Taxes (Topic 740): Simplifying the Accounting for Income
Taxes”). This guidance eliminates certain exceptions to the
general approach to the income tax accounting model and adds
new guidance to reduce the complexity in accounting for income
taxes. This guidance is effective for annual periods after December
15, 2020, including interim periods within those annual periods.
The Company is currently evaluating the potential impact of this
guidance on its consolidated financial statements.
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. The ASU will be effective for annual
reporting periods after December 15, 2021 and interim periods
within those annual periods and early adoption is permitted. The
Company is currently evaluating the impact of the new guidance on
its consolidated financial statements.
Critical
Accounting Policies
Accounting
policies, methods and estimates are an integral part of the
condensed consolidated financial statements prepared by management
and are based upon management’s current judgments. These judgments
are normally based on knowledge and experience regarding past and
current events and assumptions about future events. Certain
accounting policies, methods and estimates are particularly
sensitive because of their significance to the financial statements
and because of the possibility that future events affecting them
may differ from management’s current judgments. While there are a
number of accounting policies, methods and estimates that affect
our condensed consolidated financial statements, the areas that are
particularly significant include revenue recognition; the fair
value of acquired assets and liabilities; fair value of contingent
consideration; the assessment of the recoverability of long-lived
assets, goodwill and intangible assets; and leases.
We
perform an impairment test of goodwill for each year unless events
or circumstances indicate impairment may have occurred before that
time. We assess qualitative factors to determine whether it is
more-likely-than-not that the fair value of the reporting unit is
less than the carrying amount. After assessing qualitative factors,
if further testing is necessary, we would determine the fair value
of each reporting unit and compare the fair value to the reporting
unit’s carrying amount.
Intangible
assets consist of customer relationships, trade names and
trademarks and non-compete agreements arising from our
acquisitions. Customer relationships are amortized on a
straight-line basis over 12 to 15 years. Tradenames, trademarks and
non-compete agreements, are amortized on a straight-line basis over
3 to 10 years.
We
review long-lived assets for impairment whenever events or changes
in circumstances indicate the carrying amount of the assets may not
be recoverable. If the sum of the undiscounted expected future cash
flows over the remaining useful life of a long-lived asset is less
than its carrying amount, the asset is considered to be impaired.
Impairment losses are measured as the amount by which the carrying
amount of the asset exceeds the fair value of the asset. When fair
values are not available, we estimate fair value using the expected
future cash flows discounted at a rate commensurate with the risks
associated with the recovery of the asset. Assets to be disposed of
are reported at the lower of carrying amount or fair value less
costs to sell.
For
the year ended May 31, 2021 and the period from October 28, 2019
(inception) through May 31, 2020, the Company conducted its annual
review of impairment of goodwill and intangible assets and no
impairment was identified.
Our
significant accounting policies are summarized in Note 1 of our
condensed consolidated financial statements.
BUSINESS
Business Overview
Unique
Logistics International, Inc. provides a full range of global
logistics services by providing to its customers a robust
international network that strategically supports the movement of
its customers goods. Acting solely as a third-party logistics
provider, Unique purchases available cargo space in volume from its
network of carriers (such as airlines, ocean shipping, and trucking
lines) and resells that space to our customers. Unique Logistics
does not own any of these ships, trucks, or aircraft and does not
plan on entering the ownership model.
Operating
via its wholly owned subsidiaries, Unique Logistics International
(BOS) Inc, a Massachusetts corporation (“UL BOS”) and Unique
Logistics International (NYC), LLC, a Delaware limited liability
company, Unique Logistics provides a range of international
logistics services that enable its customers to outsource to the
Company sections of their supply chain process. The services
provided by the Company are seamlessly managed by its network of
trained employees and integrated information systems. We enable our
customers to share data regarding their international vendors and
purchase orders with us, execute the flow of goods and information
under their operating instructions, provide visibility to the flow
of goods from factory to distribution center or store and when
required, update their inventory records.
Unique
Logistics primary services include:
|
● |
Air
Freight services |
|
● |
Ocean
Freight services |
|
● |
Customs
Brokerage and Compliance services |
|
● |
Warehousing
and Distribution services |
|
● |
Order
Management |
Air Freight Services
Operating
as an Indirect Air Carrier (IAC) or an airfreight consolidator,
Unique Logistics provides both time savings and cost-effective air
freight options to its customers. An expansive global network
enables the Company to offer door to door service allowing
customers to benefit from our expert staff for guidance with the
physical movement of cargo and documentation compliance. Unique
purchases cargo space from airlines on a volume basis and resells
that space to our customers at a lower price than they would be
able to negotiate themselves for their individual shipments. The
Company, through its integrated management system, determines the
best routing for shipments and then arrangements are made to
receive the cargo into a designated warehouse. Upon receipt, cargo
is inspected and weighed, documentation is collected and export
clearance is processed. Once cargo is cleared it is prepared for
departure. Unique Logistics offers real-time tracking visibility
for customers to view when an order is booked, departs and arrives.
Unique Logistics contracts with a worldwide network of airlines and
other service providers to provide the best airfreight service in
assisting importers to ship using the most efficient and
cost-effective method. Some of the selections we offer
include:
|
● |
Domestic,
deferred, express and charter services, which permit customers to
choose from a menu of different priority options that secure at
different price levels, greater assurance of timely
delivery |
|
● |
Port
to Port and Door to Door shipments, which provide customers the
option of managing, independently, the post arrival services such
as delivery or clearance if the Company is not providing such
services |
|
● |
Global
blocked space agreements (BSA), which guarantee the availability of
space on certain flights |
|
● |
Air
and ocean combination shipment which offer cost effective
transportation using multimodal, combination movements, by one mode
to an international hub, such as Dubai, UAE or Singapore and
converting to a different mode at the hub |
|
● |
Air
and transload dedicated truck shipment, where arriving cargo is
transferred from airline container or pallet into a truckload ready
for delivery |
|
● |
Dangerous
goods handling requiring qualified handling |
|
● |
Refrigerated
cargo |
Our
Air Freight customer base is comprised mainly of importers who are
either fashion retailers or technology companies. The majority of
shipments originate in Asian manufacturing countries. Air Freight
is seasonal for fashion retailers, with the period July through
December being much stronger than the remaining six months. For
technology companies, the seasonal impact is less
pronounced.
The
Company works with its international network to ensure air freight
shipping capacity is secured and planned in advance to meet our
customers’ requirements. The capacity is then made available to our
customers at competitive pricing and with the added security of
availability, particularly during peak Air Freight shipping
periods. We supplement scheduled capacity with full charter
capacity to ensure customer capacity requirements are met
throughout the year. While capacity management is critical to
securing and maintaining Air Freight customers, the Company will
try to quickly move to the position of offering additional primary
services to our Air Freight customers.
Ocean Freight Services
Operating
as an ocean transportation intermediary (“OTI”) to provide ocean
freight service both as a non-vessel owning common carrier
(“NVOCC”) and ocean freight forwarder, Unique Logistics provides to
its customers ocean freight consolidation, direct ocean forwarding,
and order management. We are a common carrier that holds itself out
to the public to provide ocean transportation, issues its own house
bills of lading or equivalent document, but does not operate the
vessels by which ocean transportation is provided. The Company’s
roles and responsibilities in ocean freight services include the
following:
|
● |
Selecting
the most optimal ocean carriers based on both cost and service. The
Company has NVOCC contracts with multiple ocean carriers and is
thus able to offer its customers a choice in service; |
|
● |
Entering
into contract/rate agreement with clients to transport their ocean
shipments. Under such contracts the customer is assured of the
Company’s pricing and weekly capacity to carry the customer’s
cargo; |
|
● |
Consolidating
shipments at origin/deconsolidating of freight at destination. This
enables the customer to receive the economics of a consolidated
container rate rather than a higher rate for less than full
container load (“LCL”). It also makes delivery at destination more
efficient; |
|
● |
Arranging
pick-up of shipment at origin and deliver at destination, with a
factory to door service; |
|
● |
Preparing
and processing the documentation/clearance (customs/security) for
shipments during ocean transit, in advance of arrival of shipment
at destination; |
|
● |
Ocean
freight services are provided in both major and minor trade lanes
with representation in all trading nations in Americas, Asia, and
Europe; |
|
● |
Offering
a wide array of services typically performed by multiple services
provides including but not limited to, offering options to
customers on ocean carrier service choices prior to final selection
and securing such space based on customer requirement; this enables
our customers to delegate more of its logistics management to us
whereas a more limited range of service would require the customer
to deal with multiple service providers; |
|
● |
Communicating
on any regulation/compliance issues on exporting and importing
shipments; |
|
● |
Playing
intermediary role at any point of ocean transportation based on
customer’s routing preferences; and |
|
● |
Providing
space acquisition on carrier service for committed delivery during
high demand period, and providing lower price option in weak demand
season for utmost cost saving. |
The website
of Datamyne, a Descartes company (us1.datamyne.com) as of September
27, 2021 lists the Company as a top 50 NVOCC on the Transpacific
Eastbound sector. Some
of the major industry sectors we serve are Home Products and
Appliances, Furniture, Automotive, Giftware and Fashion. Our
customers are both retailers as well as wholesale importers. Our
volumes enable us to enter significant contracts with shipping
lines to lock in capacity at prices that enable us to secure and
retain customers.
Customs Brokerage and Compliance Services
Unique
Logistics is a licensed United States customs broker whose mission
is to ensure that its importing clients are in compliance with all
required regulations. Our services help importers clear cargo with
the U.S. Customs and Border Protection, including documentation
collection, valuation review, product classification, electronic
submission to customs and the collection and payment of duties,
tariffs and fees. Unique Logistics works with importers to develop
a compliant trade program including product databases, compliance
manuals and periodic internal audits. The development of product
databases has become critical in the current economic environment
due to the increasing trade tensions and various tariffs imposed as
a result. Unique Logistics also offers importers tools to improve
on efficiency such as reporting, visibility and trade consulting
including training seminars. Additional services
include:
|
● |
Preparation
of the Import Security Filing (10+2) required to be on file 24
hours prior to shipment departure; |
|
● |
Clearance
and compliance with other government agencies such as the Food and
Drug Administration, U.S. Department of Agriculture, Consumer
Product Safety Commission and U.S. Fish & Wildlife
Service; |
|
● |
Focused
assessment and internal audit to determine and eliminate weak areas
of compliance; |
|
● |
Post-entry
service to change past entries and take advantage of tariff
exclusions granted after the original entry was
processed; |
|
● |
Binding
rulings to obtain pre-entry classification; |
|
● |
Classification
& valuation; |
|
● |
Trade
agreements; |
|
● |
Warehouse
entries to defer duty; |
|
● |
Licensing
and country of origin marking requirements; |
|
● |
Free
Trade Zone (FTZ); |
|
● |
Duty
drawback to get duty back on items exported under certain
requirements; and |
|
● |
Cargo
insurance coverage |
Warehousing and Distribution Services
Unique
Logistics operates a warehousing facility in Santa Fe Springs, CA
and plans to expand such services through its own managed
facilities. Unique Logistics also provides warehousing and
distribution services through third party facilities. Our current
facility is leased to the Company and is 110,000 sq. ft. with
storage capacity for around 9,000 pallets and 10 dedicated
employees.
Warehousing
and Distribution services enable Unique Logistics to greatly expand
its involvement in our customers’ supply chain, post arrival of
international shipments into the United States. By providing
inventory management, order fulfillment, and other services, our
customers benefit from cost savings related to space, equipment and
labor due to efficiencies of scale. Our list of Warehousing and
Distribution Services include the following:
|
● |
Transloading
of cargo from incoming containers to trucks for
delivery |
|
● |
Pick
and pack services |
|
● |
Quality
control services under customer instructions |
|
● |
Kitting |
|
● |
Storage |
|
● |
Inventory
management |
|
● |
Delivery
services, including e-Commerce fulfillment services |
Warehousing
and Distribution is a higher margin business than Air Freight or
Sea Freight. In the case of freight service we are primarily
re-selling capacity while in Warehousing and Distribution we are
offering services based on fixed space cost, fixed staffing and
equipment cost and relatively smaller variable labor and equipment
cost. The customer base comprises freight customers with
Warehousing and Distribution needs as well as customers who are
exclusively Warehousing and Distribution service users. They are in
a variety of industries: foot-ware, apparel, giftware, home
appliances, etc. The customers are billed under three broad
categories: Storage, Transloading (with quick turnaround and no
storage) and Other Warehouse Services listed above. The location of
our existing warehouse, within 15 miles of the Port of Los Angeles/
Long Beach and 20 miles from Los Angeles Airport is an important
factor for our customers. Racking as well as bulk storage space
availability enables us to handle a variety of customer
requirements. In recent years, severe congestion at the terminals
serving the Port of Los Angeles/ Long Beach has increased the
demand for Transloading as well as short-term storage services at
warehouses such as ours that are within a 50 mile radius of the
Port.
The
current facility is the first and only facility of its type
operated by us. Warehousing and Distribution is an important
opportunity for our business expansion.
Order Management
Unique
Logistics offers order management services providing importers with
total visibility on every order from the time placed with the
supplier to door delivery. Importers send orders electronically
immediately upon creation giving the Company the ability to assist
in firmly holding suppliers to shipping windows. Ultimately this
results in optimizing consolidation and improved on-time delivery.
Order management also gives importers the power to control their
supply chain by monitoring key milestone events, track order status
and manage delivery to the end consumer.
Order
Management features:
|
● |
Importer
and vendor EDI integration |
|
● |
Key
milestone notifications customized per importers’
requirements |
|
● |
Vendor,
booking and document management |
|
● |
Customized
reporting including exception reporting for maximum
efficiency |
|
● |
Consolidation
management |
|
● |
Tracking
visibility in real-time |
Other
Benefits include:
|
● |
Single
Data Platform |
|
● |
Avoids
a manual booking process |
|
● |
Eliminates
unnecessary data entry |
|
● |
Document
visibility and historical recordkeeping |
|
● |
Vendor
KPI management |
|
● |
Live
milestone updates |
Industry Overview and Competition
The
global logistics industry is highly competitive, and we expect it
to remain so for the foreseeable future. Although there is a large
number of companies that compete or provide services in one or more
segments of the logistics industry, Unique Logistics is part of a
much smaller group of companies that provides a full suite of
services. In each area of service, we face competition from
companies operating within that service segment as well as
companies that provide a wider range of global services.
The
industry includes (i) specialized Non-Vessel Owning Common Carriers
(“NVOCCs”), an ocean carrier that
transports goods under its own House Bill of Lading, or equivalent
documentation, without operating ocean transportation
vessels and (ii) Indirect Air Carriers (“IACs”) which are persons or
entities within the United States, not in possession of an FAA air
carrier operating certificate, which undertake to engage indirectly
in air transportation of property and uses for all or any part of
such transportation the services of an air carrier, freight
forwarders, trucking companies, customs brokers and warehouse
operators who operate within their specialized space and very often
pose pricing advantages within that segment.
Our
mission is to bring value to our customers through specific
competitive advantages:
|
● |
Trained,
experienced staff with knowledge of those areas of the world where
customers are likely to require problem solving
abilities. |
|
● |
Trained,
experienced staff with knowledge of the various supply chain
segments: Air, Ocean, Customs, Warehousing and Information
Technology integration. |
|
● |
Responsive
customer service and the ability to meet our customer needs with
people at the front of well-established processes. |
Our
customer base includes companies in a wide range of industries.
Some of the major industry sectors we serve are Home Products and
Appliances, Furniture, Fashion Retail and Technology. We aim to
provide a wide range of services to each customer and cross sell
all of our primary services.
Ocean
Freight services and Air Freight services are the most significant
revenue drivers for the Company. To distinguish our service
offerings from our competitors our primary focus is on capacity
management for these services. Our volumes enable us to enter
significant contracts with shipping lines to lock in capacity at
prices that enable us to secure and retain customers. Similarly,
our Air Freight capacity strategy includes rate/ space agreements
with scheduled airlines as well as a full air cargo charter program
under which we are able to lock in capacity for our customers at
contracted rates.
While
capacity management is critical to establishing relations with new
customers and securing existing ones, it is essential for the
Company to expand its range of services to each customer. Our
customer support teams will work with each customer to identify the
areas such as Customs Brokerage, Warehousing & Distribution and
Order Management where our service offerings may create additional
opportunities within the customer’s supply chain.
Seasonality
Historically,
our own operating results as well as the industry as a whole have
been subject to seasonal demand. With our financial year end of May
31, typically our first and second quarters are the strongest with
the fourth quarter being the weakest; however, there are no
guarantees that these trends will continue or that the COVID-19
pandemic will not cause any other business disruptions. It is
widely understood in the industry that these seasonal trends are
influenced by a number of factors, including weather patterns,
national holidays, economic conditions, consumer demand, major
product launches, as well as a number of other market forces. Since
many of these forces are unforeseen there is no way for us to
provide assurances that these seasonal trends will
continue.
Growth
Strategy
Unique
Logistics has established plans to grow its business by focusing on
four key areas: (1) organic growth and expansion in existing
markets; (2) strategic acquisitions; (3) warehousing and
distribution; and (4) specialized services to United States
companies on their overseas logistics needs in targeted Asian
markets.
Organic
Growth and Expansion in Existing Markets:
We
plan to focus on developing business domestically to drive organic
growth. Since the Management Buyout Transaction, we have
significantly improved our operating efficiencies in the areas of
procurement, customer service, finance and administration. We
believe this will result in much lower overhead and the ability to
build a uniform marketing strategy to build market share and
further the brand recognition of Unique Logistics throughout the
United States. Additionally, the Company will continuously assess
its Information Technology environment based on emerging trends in
logistics and customer requirements. The first step in the strategy
is already in place: a single operating platform. We will continue
to build add-on service tools that enhance our operating platform.
One key area for technology focus will be the seamless delivery of
e-Commerce services from origin to consumer with shipment
visibility for both customer and the customer’s
consumer.
We
believe Unique Logistics’ business base that includes three out of
the fifty largest importers in the United States can be expanded by
building our sales organization and the support organization to
successfully deliver our brand of service. The targeted growth
areas include Charlotte, NC, Dallas, TX, Houston, TX and Seattle,
WA.
Strategic
Acquisitions:
We
currently maintain an option to acquire ownership of significant
Unique Logistics Holdings Limited, Hong Kong (“ULHK”)
foreign subsidiaries that are critical to our ability
to meet our customers’ international requirements. Through the
Consulting Services Agreement between the Company and Great Eagle
Freight Limited (“GEFD”), a Hong Kong company, we will ensure that
the international brand of Unique Logistics and the seamless
services provided to customers remains in place even before the
options to acquire ULHK’s foreign subsidiaries are exercised.
Additionally, it is our intention to increase our business by
seeking additional opportunities through potential domestic
acquisitions, revenue sharing arrangements, partnerships or
investments.
Warehousing
and Distribution
Unique
Logistics has successfully established a major warehousing facility
in Santa Fe Springs, CA and now has in-house the management
expertise (commercial as well as operational) in successfully
managing such facilities. Unique Logistics has also identified a
method of identifying growth opportunities by focusing on specific
areas of the United States and existing well-constructed facilities
where lease assumption is available with an existing customer
base.
Specialized
Services to US Companies in Overseas Markets
Unique
Logistics has several decades of experience in Asian markets such
as China, India, Vietnam and Indonesia. Unique Logistics is
constantly dealing with a United States customer base that seeks to
do business in these areas but requires local expertise. We have
the experience and the connections to assist United States
companies with local importation, local warehousing and
distribution and other local logistics and trade compliance
services. We plan to build on our expertise in these four specific
countries to build tailored services to US customers, including in
business consulting pertaining to logistics and related trade
services.
Government Regulations and Security
Our
industry is subject to regulation and supervision by several
governmental authorities.
Operations
The
U.S. Department of Transportation (“DOT”), the Federal Aviation
Administration (“FAA”) and the U.S. Department of Homeland
Security, through the Transportation Security Administration
(“TSA”), have regulatory authority over our air transportation
services. The Federal Aviation Act of 1958, as amended, is the
statutory basis for DOT and FAA authority and the Aviation and
Transportation Security Act of 2001, as amended, is the basis for
TSA aviation security authority.
All
United States indirect air carriers are required to maintain
prescribed security procedures and are subject to periodic audits
by the TSA. Our overseas offices and agents are licensed as
airfreight forwarders in their respective countries of operation.
Our offices are licensed as an airfreight forwarder from the
International Air Transport Association (IATA), a voluntary
association of airlines and air transport related entities that
prescribes certain operating procedures for airfreight forwarders
acting as agents for its members.
The
shipping of goods by sea is regulated by the Federal Maritime
Commission (“FMC”). Our Company is licensed by the FMC to operate
as an Ocean Transportation Intermediary (“OTI”) and as a NVOCC. As
a licensed OTI and NVOCC, we are required to comply with several
regulations, including the filing of our tariffs.
Under
Department of Homeland Security regulations, we are a qualified
participant in the Customs- Trade Partnership Against Terrorism
(“C-TPAT”) program requiring us to be compliant with relevant
security procedures in our operations.
We
are licensed as a customs broker by the U.S. Customs and Border
Protection (CBP) Agency of DHS, nationally and in each U.S. customs
district in which we do business. All United States customs brokers
are required to maintain prescribed records and are subject to
periodic audits by CBP. In other jurisdictions in which we perform
customs clearance services, we are licensed by the appropriate
governmental authority where such license is required to perform
these services.
We do
not believe that current United States and foreign governmental
regulations impose significant economic restraint upon our business
operations. However, the regulations of foreign governments can
impose barriers to our ability to provide the full range of our
business activities in a wholly or majority United States-owned
subsidiary. For example, foreign ownership of a customs brokerage
business is prohibited in some jurisdictions and, less frequently,
the ownership of the licenses required for freight forwarding
and/or freight consolidation is restricted to local entities. When
we encounter this sort of governmental restriction, we work to
establish a legal structure that meets the requirements of the
local regulations, while also providing the substantive operating
and economic advantages that would be available in the absence of
such regulation. This can be accomplished by creating a joint
venture or exclusive agency relationship with a qualified local
entity that holds the required license.
Environmental
We
are subject to federal, state and local environmental laws and
regulations across all of our business units. These laws and
regulations cover a variety of processes, including, but not
limited to: proper storage, handling and disposal of waste
materials; appropriately managing wastewater and stormwater;
monitoring and maintaining the integrity of underground storage
tanks; complying with laws regarding clean air, including those
governing emissions; protecting against and appropriately
responding to spills and releases and communicating the presence of
reportable quantities of hazardous materials to local responders.
We have established site- and activity-specific environmental
compliance and pollution prevention programs to address our
environmental responsibilities and remain compliant. In addition,
we have created several programs which seek to minimize waste and
prevent pollution within our operations.
Employees
and Human Capital
As of
August 30, 2021, the Company had 108 employees. None of our
employees are represented by a union or covered by a collective
bargaining agreement. We have not experienced any work stoppages
and we consider our relationship with our employees to be
good.
Our
human capital resources objectives include, as applicable,
identifying, recruiting, retaining, incentivizing and integrating
our existing and new employees, advisors and consultants. The
principal purposes of our equity incentive plan is to attract,
retain and reward personnel through the granting of stock-based
compensation awards, in order to increase stockholder value and the
success of our company by motivating such individuals to perform to
the best of their abilities and achieve our objectives.
Properties
Our
corporate headquarters is currently located at 154-09
146th Avenue, Jamaica, NY 11434 where we occupy 2,219
square feet. Monthly rent for this space is approximately $5,000
per month and our lease expires on April 30, 2024.
A
full list of properties leased by the Company are set out
below:
LOCATION |
|
LEASE |
|
MONTHLY |
|
|
SQUARE |
|
|
CITY,
STATE |
|
EXPIRATION |
|
RENT |
|
|
FEET |
|
FUNCTION |
JAMAICA,
NY |
|
4/30/2024 |
|
$ |
4,813.75 |
|
|
2,219 |
|
OFFICE |
JAMAICA,
NY |
|
7/15/2022 |
|
$ |
4,000.00 |
|
|
1,440 |
|
WAREHOUSE |
ATLANTA,
GA |
|
10/31/2028 |
|
$ |
13,227.67 |
|
|
5,669 |
|
OFFICE |
CHELSEA,
MA |
|
9/30/2022 |
|
$ |
900.00 |
|
|
600 |
|
OFFICE |
MIDDLETON,
MA |
|
7/31/2025 |
|
$ |
10,620.75 |
|
|
5,202 |
|
OFFICE |
SANTA FE
SPRINGS, CA |
|
10/15/2022 |
|
$ |
108,410.96 |
|
|
110,791 |
|
WAREHOUSE/
OFFICE |
CHARLOTTE,
NC |
|
6/302025 |
|
$ |
3,896.06 |
|
|
1,889 |
|
OFFICE |
ITASCA,
IL |
|
5/31/2026 |
|
$ |
4,383.75 |
|
|
2,338 |
|
OFFICE |
ROANOKE,
VA |
|
6/1/2022 |
|
$ |
595.57 |
|
|
685 |
|
OFFICE |
Our
spaces are utilized for office and warehouse purposes, and it is
our belief that the spaces are adequate for our immediate needs.
Additional space may be required as we expand our business
activities. We do not foresee any significant difficulties in
obtaining additional facilities if deemed necessary.
Insurance
The
Company effectively maintains all industry specific and business in
general insurance policies and believes it has appropriately
addressed potential risk of material losses. We currently have the
following policies in place:
|
● |
US
Customs Bonds |
|
● |
Federal
Maritime Commission License Bonds |
|
● |
Business
Insurance |
|
○ |
General
Liability |
|
○ |
Commercial
Property (including Business Personal Property and Business Income
with Extra Expense) |
|
○ |
Business
Auto |
|
○ |
Commercial
Umbrella |
|
○ |
Worker’s
Compensation and Employer’s Liability |
|
○ |
Employment
Practices Liability Insurance |
|
○ |
Trade
Credit Insurance |
|
● |
Combined
Transit Liability |
|
○ |
Errors
and Omissions |
|
○ |
Warehouse
Legal Liability |
|
● |
Marine
Open Cargo Insurance |
From
time to time, the Company may also purchase credit insurance for
certain customers, resulting in risk of loss being limited to the
accounts receivable not covered by credit insurance, which the
Company does not believe to be significant.
Legal Proceedings
The
Company is not involved in any disputes and does not have any
litigation matters pending which the Company believes could have a
materially adverse effect on the Company’s financial condition or
results of operations. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or,
to the knowledge of the executive officers of our Company or any of
our subsidiaries, threatened against or affecting our Company, our
common stock, any of our subsidiaries or of our Company’s or our
Company’s subsidiaries’ officers or directors in their capacities
as such, in which an adverse decision could have a material adverse
effect.
However,
from time to time, we may become involved in various lawsuits and
legal proceedings which arise in the ordinary course of business.
Litigation is subject to inherent uncertainties, and an adverse
result in these or other matters may arise from time to time that
may harm our business.
MANAGEMENT
Directors
and Executive Officers
The
following table sets forth information about our directors and
executive officers. We intend to appoint 3 independent directors
upon the consummation of this offering.

The
following noteworthy experience, qualifications, attributes and
skills for each Board member, led to our conclusion that each
person should serve as a director in light of our business and
structure:
Sunandan Ray, 63, Chief Executive Officer and
Director.
Mr.
Ray has close to 30 years of experience in the logistics industry.
He established and managed over 15 of ULHK’s offices in the US and
India with over $400 million in revenue. Prior to working with
ULHK, Mr. Ray established and managed operating companies on behalf
of MSAS Cargo International (now part of DHL/ Deutsche Post) in
USA, India, Sri Lanka, Bangladesh, Mauritius and Turkey from 1989
to 1997. In 1997, Sunandan successfully negotiated with MSAS Cargo,
a management buyout of the companies under his management and after
building the group from 1997 to 2005 into a US $50 million
enterprise, it was bought by French transportation company, Group
Bollore. After the sale to Group Bollore in 2005, Mr. Ray continued
as a Senior Vice President in Group Bollore with responsibility for
the Group’s business on the Transpacific sector as well as in the
Indian subcontinent before joining the ULHK’s New York based
operating subsidiary in 2010. From 1992 through 1996, Mr. Ray built
and sold to a strategic investor a group of software companies,
Sunrise Group, which had over US$ 10 million in revenue at the time
of sale. Mr. Ray is a qualified Chartered Accountant (London, UK)
who worked for 10 years with Price Waterhouse (now PWC) in London,
UK, The Hague, Netherlands and New York, NY from 1979 to 1989. He
also holds a Masters in Science (Technology) in Computer Science
from the Birla Institute of Technology & Science, in Pilani,
India.
Eli Kay, 54, Chief Financial Officer
Mr.
Kay combines over 25 years of experience in finance and accounting.
Mr. Kay joined Unique Logistics International Inc. in February 2021
as an Assistant Chief Financial Officer. Eli Kay was appointed
Chief Financial Officer of the Company on April 22, 2021. He is
responsible for all aspects of financial management of the company,
including required SEC reporting and compliance. Prior to joining
Unique, from October 2019 to November 2020, Eli served as a CFO for
Transit Wireless LLC, an exclusive provider of wireless
infrastructure in the New York City Subway. Prior to that, from
December 2016 to October 2019, he served as a CFO at JFKIAT, a
joint venture between Delta Airlines and Royal Schiphol Group
created with purpose of building and managing Terminal 4 at JF
Kennedy International Airport. His previous experiences included
oversight of complex private and municipal budgets serving as CFO
and Treasurer for San Mateo County Transit District from January
2016 to December 2016 as well as a private equity CFO for the
Chicago Skyway and the Indiana Toll Road Concession Companies in
Chicago, IL, from November 2013 to January 2016. Prior to that Mr.
Kay held various senior management positions in finance and
accounting with several publicly traded companies from 2006 to
2013. From 1997 through 2006, Mr. Kay worked in public accounting,
primarily with PricewaterhouseCoopers LLP.
Mr.
Kay holds a Bachelor of Science degree in Accounting and a Master
of Business Administration, from the University of Oregon. He is
also a Certified Public Accountant.
David Briones, 45, Director
Since
October 2020, Mr. Briones has served as a member of the board of
directors of Unique Logistics International Inc. Mr. Briones is the
founder and managing member of the Brio Financial Group (“Brio”), a
financial consulting firm that brings experienced finance and
accounting expertise to both public and private companies. Since
2010, Brio has served over 75 companies as well as numerous banks,
hedge funds, venture capital funds and private equity firms. Mr.
Briones has provided several public companies in financial
reporting, internal control development and evaluation, budgeting
and forecasting services. He has developed a specialty representing
private companies as the outsourced CFO/Financial reporting
specialist as a private company navigates toward becoming a public
company through a self-filing, a reverse merger or through a
traditional initial public offering. In addition, since March 2021,
Mr. Briones is the Chief Financial Officer of Larkspur Health
Acquisition Corp. Mr. Briones has served as the Chief Financial
Officer of Hoth Therapeutics, Inc. From August 2013 to January
2020, Mr. Briones served as Chief Financial Officer of Petro River
Oil Corp., an independent energy company focused on the exploration
and development of conventional oil and gas assets. Mr. Briones
also served as interim Chief Financial Officer of AdiTx
Therapeutics, Inc. (Nasdaq: ADTX), a pre-clinical stage, life
sciences company with a mission to prolong life and enhance life
quality of transplanted patients from January 2018 to July 2020
(until the Company’s initial public offering). From October 2017 to
May 2018, Mr. Briones served as the Chief Financial Officer of
Bitzumi, Inc., a Bitcoin exchange and marketplace. Prior to
founding Brio Financial Group, LLC, Mr. Briones was an auditor with
Bartolomei Pucciarelli, LLC in Lawrenceville, New Jersey and
PricewaterhouseCoopers LLP in New York, New York. Since May 2020,
Mr. Briones has served as a member of the board of directors of
Unique Logistics International Inc (OTC Pink: UNQL). Mr. Briones
received a Bachelor of Science degree in accounting from Fairfield
University.
Patrick Lee, 44, Director
Mr.
Lee combines over 15 years of experience in freight
forwarding/warehousing senior management. From 1999 to 2001 Mr. Lee
served as a Management Trainee at Tibbett & Britten Group, PLC
a London Stock Exchange listed company. Mr. Lee then moved to LSE
listed Excel PLC where he served as a Business Development and
Logistics Operations Coordinator between 2002 through 2004. From
2005 through 2012, Mr. Lee was the Business Development Director
for Unique Logistics Holdings Limited, a freight forwarding company
based in Hong Kong. From 2012 to 2017, Mr. Lee served Unique
Logistics Holdings Limited in his capacity as Executive Vice
President. Mr. Lee has taken up the position of Group COO since
2017 and has become a Board Member. He has Bachelor of Commerce
from the University of British Columbia (Canada), and an MSc Supply
Chain Management from Cranfield University (England).
Family
Relationships
There
are no family relationships between any of our directors or
executive officers.
Corporate
Governance Overview
Director
Independence
As of
the effectiveness of the registration statement of which this
prospectus is a part, the Board will have reviewed the independence
of our directors based on the listing standards of Nasdaq. Based on
this review, the Board shall have determined that none of the
current Board is independent within the meaning of the Nasdaq and
SEC rules. In making this determination, our Board shall consider
the relationships that each of these non-employee directors has
with us and all other facts and circumstances our Board deem
relevant in determining their independence. As required under
applicable Nasdaq and SEC rules, we anticipate that our independent
directors will meet in regularly scheduled executive sessions at
which only independent directors are present.
Board
Committees
We
currently do not have any committees in place.
As of
the effectiveness of the registration statement of which this
prospectus is a part, our Board will have established the following
three standing committees: audit committee; compensation committee;
and nominating and governance committee, or nominating committee.
Each of our independent directors, __________, ______ and ________
will serve on each committee. Our Board will adopt written charters
for each of these committees. Upon effectiveness of the
registration statement of which this prospectus is a part, copies
of the charters will be available on our website. Our Board may
establish other committees as it deems necessary or appropriate
from time to time.
Audit Committee
The
audit committee will be responsible for, among other
matters:
|
● |
appointing,
compensating, retaining, evaluating, terminating, and overseeing
our independent registered public accounting firm; |
|
|
|
|
● |
discussing
with our independent registered public accounting firm the
independence of its members from its management; |
|
|
|
|
● |
reviewing
with our independent registered public accounting firm the scope
and results of their audit; |
|
|
|
|
● |
approving
all audit and permissible non-audit services to be performed by our
independent registered public accounting firm; |
|
|
|
|
● |
overseeing
the financial reporting process and discussing with management and
our independent registered public accounting firm the interim and
annual financial statements that we file with the SEC; |
|
|
|
|
● |
reviewing
and monitoring our accounting principles, accounting policies,
financial and accounting controls, and compliance with legal and
regulatory requirements; |
|
|
|
|
● |
coordinating
the oversight by our Board of our code of business conduct and our
disclosure controls and procedures |
|
|
|
|
● |
establishing
procedures for the confidential and/or anonymous submission of
concerns regarding accounting, internal controls or auditing
matters; and |
|
|
|
|
● |
reviewing
and approving related-person transactions. |
Mr.
Briones will serve as chairman of our audit committee. As of the
effectiveness of the registration statement of which this
prospectus is a part, the Board will have reviewed the independence
of our directors based on the listing standards of Nasdaq. Based on
this review, the Board shall have determined that that each of
__________, [●] and [●] meet the definition of “independent
director” for purposes of serving on an audit committee under Rule
10A-3 and NASDAQ rules. Our board of directors will determine that
David Briones qualifies as an “audit committee financial expert,”
as such term is defined in Item 407(d)(5) of Regulation
S-K.
Compensation Committee
The
compensation committee will be responsible for, among other
matters:
|
● |
reviewing
key employee compensation goals, policies, plans and
programs; |
|
|
|
|
● |
reviewing
and approving the compensation of our directors and executive
officers; |
|
|
|
|
● |
reviewing
and approving employment agreements and other similar arrangements
between us and our executive officers; and |
|
|
|
|
● |
appointing
and overseeing any compensation consultants or
advisors. |
|
|
|
________
will serve as chairman of our compensation committee.
Nominating Committee
The
purpose of the nominating committee is to assist the board in
identifying qualified individuals to become board members, in
determining the composition of the board and in monitoring the
process to assess board effectiveness. _________ will serve as
chairman of our nominating committee.
Board
Leadership Structure
Currently,
Mr. Ray is our principal executive officer and chairman of the
board.
Risk
Oversight
Our
Board will oversee a company-wide approach to risk management. Our
Board will determine the appropriate risk level for us generally,
assess the specific risks faced by us and review the steps taken by
management to manage those risks. While our Board will have
ultimate oversight responsibility for the risk management process,
its committees will oversee risk in certain specified
areas.
Specifically,
our compensation committee will be responsible for overseeing the
management of risks relating to our executive compensation plans
and arrangements, and the incentives created by the compensation
awards it administers. Our audit committee will oversee management
of enterprise risks and financial risks, as well as potential
conflicts of interests. Our board of directors will be responsible
for overseeing the management of risks associated with the
independence of our Board.
Code
of Business Conduct and Ethics
The
Company is currently in the process of adopting a code of ethics
that applies to our officers, employees and directors, including
our Chief Executive Officer and senior executives.
Our
Board adopted a code of business conduct and ethics that applies to
our directors, officers and employees. Upon the effectiveness of
the registration statement of which this prospectus is a part, a
copy of this code will be available on our website. We intend to
disclose on our website any amendments to the Code of Business
Conduct and Ethics and any waivers of the Code of Business Conduct
and Ethics that apply to our principal executive officer, principal
financial officer, principal accounting officer, controller, or
persons performing similar functions.
Legal
Proceedings
To
the best of our knowledge, none of our directors or executive
officers has, during the past ten years:
|
● |
been
convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses); |
|
|
|
|
● |
had
any bankruptcy petition filed by or against the business or
property of the person, or of any partnership, corporation or
business association of which he was a general partner or executive
officer, either at the time of the bankruptcy filing or within two
years prior to that time; |
|
|
|
|
● |
been
subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction or federal or state authority, permanently or
temporarily enjoining, barring, suspending or otherwise limiting,
his involvement in any type of business, securities, futures,
commodities, investment, banking, savings and loan, or insurance
activities, or to be associated with persons engaged in any such
activity; |
|
|
|
|
● |
been
found by a court of competent jurisdiction in a civil action or by
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities
or commodities law, and the judgment has not been reversed,
suspended, or vacated; |
|
● |
been
the subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated (not including any
settlement of a civil proceeding among private litigants), relating
to an alleged violation of any federal or state securities or
commodities law or regulation, any law or regulation respecting
financial institutions or insurance companies including, but not
limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order,
or any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or |
|
|
|
|
● |
been
the subject of, or a party to, any sanction or order, not
subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act),
any registered entity (as defined in Section 1(a)(29) of the
Commodity Exchange Act), or any equivalent exchange, association,
entity or organization that has disciplinary authority over its
members or persons associated with a member. |
None
of our directors, officers or affiliates, or any beneficial owner
of 5% or more of our common stock, or any associate of such
persons, is an adverse party in any material proceeding to, or has
a material interest adverse to, us or any of our
subsidiaries.
Insider
Trading Policy and Policy on Trading Blackout Periods, Benefit
Plans and Section 16 Reporting
Our
Insider Trading Policy and policy on Trading Blackout Periods,
Benefit Plans and Section 16 Reporting applies to all of our
officers, directors, and employees and provides strict guidelines
as to restrictions on trading activity in the Company’s stock.
These policies are posted at our website:
EXECUTIVE COMPENSATION
Summary
Compensation Table
The
Summary Compensation Table shows certain compensation information
for services rendered in all capacities for the fiscal years ended
May 31, 2021 and 2020. The following information includes the
dollar value of base salaries, bonus awards, the number of stock
options granted and certain other compensation, if any, whether
paid or deferred.
EXECUTIVE
OFFICER COMPENSATION TABLE
Name and
Principal Position |
|
Year |
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
D |
|
|
All
Other
Compensation
($)
|
|
|
Totals
($) |
|
Sunandan
Ray, Chief Executive Officer(1) |
|
2021 |
|
|
|
225,000 |
|
|
|
316,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2020 |
|
|
|
225,000 |
|
|
|
65,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Eli
Kay, Chief Financial Officer(2) |
|
2021 |
|
|
|
60,000 |
|
|
|
9,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
1. |
Mr.
Ray became the Company’s Chief Executive Officer and director on
October 28, 2019. Prior to that date, Mr. Ray was the minority
owner and Chief Executive Officer of UL NYC and salary reflected in
the table represent compensation for his services in such
capacity. |
|
2. |
Mr.
Kay joined the company on February 9, 2021. He became Chief
Financial Officer on April 22, 2021. Prior to that he served the
Company in his capacity as Assistant Chief Financial Officer from
February 9, 2021, to April 22, 2021. |
Outstanding
Equity Awards at Fiscal Year-End
Effective
November 20, 2020, the Board approved, authorized and adopted the
Unique Logistics International, Inc. 2020 Equity and Incentive Plan
(the “2020 Plan”) and certain forms of ancillary agreements to be
used in connection with the issuance of stock and/or options
pursuant to the 2020 Plan (the “Plan Agreements”). The 2020 Plan
provides for the issuance of up to 40,000,000 shares of Common
Stock through the grant of non-qualified options (the
“Non-qualified Options”), incentive options (the “Incentive
Options” and together with the Non-qualified Options, the
“Options”) and restricted stock (the “Restricted Stock”) to
directors, officers, consultants, attorneys, advisors and
employees.
There
were no equity awards as of May 31, 2020 or 2021.
Employment
Agreements
On
May 29, 2020, Unique Logistics and Sunandan Ray, the Company’s CEO,
entered into an employment agreement pursuant to which Mr. Ray has
been employed by Unique Logistics to serve as President and Chief
Executive Officer. The employment agreement has an initial term of
three years, and automatically renews for successive consecutive
one-year period terms, unless either party provides notice to the
other party not more than 270 days and not less than 180 days
before the end of the then existing term. Mr. Ray will receive a
base salary of $250,000 per year with annual increases at the rate
of 3% with such increases applied on January 1 of each year. The
employment agreement includes a performance-based bonus of up to
125% of the base salary upon Unique Logistics achieving certain
performance targets as defined in the Ray Employment Agreement. The
employment agreement also provides for employment benefits and
reimbursement provisions that are typical of such
agreements.
On
August 11, 2021, the Company and Mr. Kay, the Company’s CFO,
entered into an employment agreement which will continue until it
is otherwise terminated pursuant to terms therein. Under the
employment agreement, Mr. Kay will be paid an annual salary of
$180,000, subject to annual review and adjustment. Mr. Kay is also
entitled to receive certain benefits such as health insurance,
vacation, and other benefits consistent with the Company’s benefit
plans extended to other executive employees of the Company. In
addition, for the fiscal year ended May 31, 2021, and in each
subsequent fiscal year, Mr. Kay will be eligible to receive an
annual bonus at the discretion of the board of directors of the
Company.
Director
Compensation
The
Company’s directors are not currently compensated for their service
in such capacity.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The
following is a summary of transactions since October 28, 2019
(Inception) to which we have been or will be a party in which the
amount involved exceeded or will exceed $ $500,000 (one percent of
the average of our total assets at year-end for our last two
completed fiscal years) and in which any of our directors,
executive officers or beneficial holders of more than 5% of any
class of our capital stock, or any immediate family member of, or
person sharing a household with, any of these individuals, had or
will have a direct or indirect material interest, other than
compensation arrangements that are described under the section
captioned “Executive compensation.”
Other
than as disclosed below, there have been no transactions involving
the Company since the beginning of the last fiscal year, or any
currently proposed transactions, in which the Company was or is to
be a participant and the amount involved exceeds $120,000 or one
percent of the average of the Company’s total assets at year-end
for the last two completed fiscal years, and in which any related
person had or will have a direct or indirect material
interest.
On
May 29, 2020 (“Acquisition Date”), UL HI entered into a Securities
Purchase Agreement (SPA) with Unique Logistics Holdings Ltd, (“UL
HK”), a Hong Kong company, (the “UL HK Transaction”), pursuant to
which the Company purchased from UL HK (i) sixty percent (60%) of
the membership interests (“UL ATL Membership Interests”) of Unique
Logistics International (ATL) LLC, a Georgia limited liability
company (“UL ATL”); (ii) eighty percent (80%) of the issued and
outstanding common stock of Unique Logistics International (BOS)
Inc., a Massachusetts corporation (“UL BOS”); and (iii) sixty-five
percent (65%) of the issued and outstanding common stock of Unique
Logistics International (USA) Inc., a New York corporation (“UL
NYC”), for the aggregate consideration of $6,000,000, to be
paid:(a) $1,000,000 in cash; (b) $5,000,000 in the form of a
subordinated promissory note (zero percent interest rate with a
maturity date of three years) issued to UL HK and (c) 1,500,000
shares of common stock of UL HI, representing 15% of the shares of
common stock outstanding. In connection with the UL HK Transaction,
UL HI also entered into a Consulting Services Agreement for a term
of three years with Great Eagle Freight Limited (“GEFL”), a wholly
owned subsidiary of UL HK.
As
part of the UL HK Transaction and related transactions, the Company
assumed the following debt due to related parties:
|
|
May 31, 2021 |
|
|
May 31, 2020 |
|
|
|
|
|
|
|
|
Due to Frangipani Trade Services
(1) |
|
$ |
903,927 |
|
|
$ |
959,303 |
|
Due to Unique Logistics Hong Kong (“UL HK”)
(2) |
|
|
- |
|
|
|
325,000 |
|
Note Payable UL HK(3) |
|
|
- |
|
|
|
5,000,000 |
|
Due to employee (4) |
|
|
60,000 |
|
|
|
90,000 |
|
Due to employee
(5) |
|
|
149,996 |
|
|
|
200,000 |
|
|
|
|
1,113,923 |
|
|
|
6,574,303 |
|
Less:
current portion |
|
|
(397,975 |
) |
|
|
(6,380,975 |
) |
|
|
$ |
715,948 |
|
|
$ |
193,328 |
|
(1)
Due to Frangipani Trade Services (“FTS”), an entity owned by the
Company’s CEO, is due on demand and is non-interest bearing. The
principal amount of this promissory note bears no interest;
provided that any amount due under this promissory note which is
not paid when due shall bear interest at an interest rate equal to
six percent (6%) per annum. The principal amount is due and payable
in six payments of $150,655 the first payment due on November 30,
2021, with each succeeding payment to be made six months after the
preceding payment.
(2)
Due to Unique Logistics Holding Limited (“ULHK”) is non-interest
bearing promissory note and due within 12 months from the date of
acquisition. On February 19, 2021, the Company and UL HK agreed to
reduce an existing $325,000 note assumed by the Company in the May
29, 2020 acquisition. The settlement amount of $310,452 was
accounted for as a measurement period adjustment and resulted in a
reduction to goodwill. See Footnote 4 below.
(3)
On May 29, 2020, the Company entered into a $5,000,000 note payable
with UL HK as part of the ULHK Transaction The loan bears a zero
percent interest rate and has a maturity of 180 days from the date
of the note. On November 12, 2020, the Company amended the note
with UL HK in order to (i) extend the maturity date from November
25, 2020 to May 18, 2021, (ii) begin monthly payments of $833,333
commencing on December 18, 2020, (iii) change the interest rate to
one-half percent (0.5%) per month and (iv) provide the Company the
right to prepay the outstanding liability in whole or in part.
Pursuant to the amendment, if the Company should default on the
note, UL HK has the option to convert the outstanding principal and
interest into shares of common stock of the Company. Upon the
earlier of (i) a default in the monthly payment of principal or
interest due and owing under the loan or, (ii) in the event that
any outstanding balance of the loan remains outstanding as of May
31, 2021, UL HK at its option may convert the principal and
interest then outstanding into an amount of shares of common stock
of the Company equal to 0.2125% of the then outstanding common
stock of the Company on a fully diluted basis for every $25,000 of
the outstanding principal balance plus accrued but unpaid interest
of this loan outstanding on the date of such conversion, provided,
however, that the UL HK shall not be permitted to convert the loan
in the event that such conversion would provide the UL HK more than
34% of the Company’s issued and outstanding common stock when
including and aggregating all prior conversions of the loan. As of
May 31, 2021, the note was paid in full.
(4)
On May 29, 2020, the Company entered into a $90,000 promissory note
with an employee for the acquisition of UL BOS common
stock from a previous owner. The payment terms consist of
thirty-six monthly non-interest bearing payments of $2,500 from the
date of closing. As of May 31, 2021, the balance of the note is
$60,000
(5)
On May 29, 2020, the Company entered into a $200,000 promissory
note with an employee for the acquisition of UL BOS common stock
from a previous owner. The payment terms consist of thirty-six
monthly non-interest bearing payments of $5,556 from the date of
closing.
Consulting
Agreements
On
May 29, 2020, in connection with the Management Buyout Transaction,
Unique entered into a Consulting Services Agreement for a term of
three years with Great Eagle Freight Limited (“Great Eagle” or
“GEFD”), a Hong Kong Company (the “Consulting Services Agreement”).
Pursuant to the Consulting Services Agreement, GEFD will provide
Unique with logistics services, agents management services, support
services, accounting and financial controls support, software, and
IT support.as well as with strategic introductions and negotiations
with new customers. The Company shall pay to GEFD $500,000 per year
until the expiration of the Consulting Services Agreement on May
28, 2023. The fair value of the services was determined to be less
than the cash payments and the difference was recorded as
contingent liability on the consolidated balance sheets and
amortized over the life of the Consulting Services Agreement.
Unique paid $250,000 during the year ended May 31, 2021, and
amortized balances were $565,338 and $848,010 as of May 31, 2021,
and 2020, respectively.
The
Company utilizes a financial reporting firm owned and controlled by
David Briones, a member of our Board of Directors. The service fees
are $5,000 per month and the agreement can be renewed annually and
was renewed in May 2021. Total fees were $60,000 and none for years
ended May 31, 2021 and 2020, respectively.
Security
Deposit
FTS,
an entity owned by the Company’s CEO, provides Importer of Record
(“IOR”) services to the Company’s customers on behalf of the
Company. Pursuant to the IOR agreement with the Company, FTS
requires a security deposit which will be utilized by FTS to settle
any charges, penalties or tax assessments incurred when performing
IOR services for the Company. As of May 31, 2021 and 2020, the
security deposit was $175,000.
PRINCIPAL STOCKHOLDERS
The
following table sets forth, as of September 30, 2021, the number of
shares of our Common Stock owned by (i) each person who is known by
us to own of record or beneficially five percent (5%) or more of
our outstanding shares, (ii) each of our directors, (iii) each of
our executive officers and (iv) all of our directors and executive
officers as a group. Unless otherwise indicated, each of the
persons listed below has sole voting and investment power with
respect to the shares of our common stock beneficially owned. The
address of our directors and officers is c/o Unique Logistics
Holdings, Inc. at 154-09 146th Ave, Jamaica, NY 11434.
Name
and Address of Beneficial Owner(1) |
|
Outstanding
Common Stock (2) |
|
|
Percentage
of Ownership of Common Stock (3) |
|
5%
Beneficial Shareholders |
|
|
|
|
|
|
|
% |
3A
Capital Establishment (8) |
|
|
40,000,000- |
|
|
|
25.9 |
% |
Trillium
Partners LP (8) |
|
|
58,948,138- |
|
|
|
28.3 |
% |
Great
Eagle Freight Limited (6) |
|
|
- |
|
|
|
20.9 |
% |
|
|
|
|
|
|
|
|
|
5%
Beneficial Shareholders as a Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officers
and Directors |
|
|
|
|
|
|
|
|
Sunandan
Ray (4) |
|
|
322,086,324 |
|
|
|
61.2 |
% |
David
Briones (5) |
|
|
- |
|
|
|
25.3 |
% |
Patrick
Lee (7) |
|
|
- |
|
|
|
* |
% |
Eli
Kay |
|
|
- |
|
|
|
* |
% |
|
|
|
|
|
|
|
|
|
Officers
and Directors as a Group (3 persons) |
|
|
|
|
|
|
86.6 |
% |
*Denotes
less than 1%
(1)
Beneficial ownership is determined in accordance with Rule 13D-3(a)
of the Exchange Act and generally includes voting or investment
power with respect to securities.
(2)
The shares in the table have been listed in accordance with 13-G
filings made by the individual stockholders.
(3)
The percentages in the table have been calculated based on treating
as outstanding for a particular person, all shares of our Common
Stock outstanding on that date and all shares of our Common Stock
issuable to that holder in the event of exercise of outstanding
options, warrants, rights or conversion privileges owned by that
person at that date which are exercisable within 60 days of that
date. Except as otherwise indicated, the persons listed in this
table have sole voting and investment power with respect to all
shares of our Common Stock owned by them, except to the extent that
power may be shared with a spouse.
(4)
Mr. Sunandan Ray owns 322,086,324 shares of the Company’s Common
Stock. In addition, Mr. Ray owns 667,738 shares of Series B
Preferred Stock which convert at a rate of 6,646.47 shares of
common stock for every 1 share of Series B Preferred Stock. The
Company is limited to 800,000,000 authorized shares of Common
Stock. The Beneficial ownership percentage only considers the
shares of Common Stock that can be converted up to the authorized
number of shares of Common Stock.
(5)
Mr. David Briones does not own any shares of the Company’s Common
Stock. However, Mr. Briones owns 20,000 shares of Series A
Preferred Stock which convert at a rate of 6,646.47 shares of
Common Stock for every 1 share of Series A Preferred Stock. The
Company is limited to 800,000,000 authorized shares of Common
Stock. The Beneficial ownership percentage only considers the
shares of Common Stock that can be converted up to the authorized
number of shares of Common Stock.
(6)
Great Freight Limited does not beneficially own any shares of the
Company’s Common Stock. In addition, Great Freight Limited
beneficially owns 153,062 shares of Series B Preferred Stock owned
by Great Eagle Freight Limited which convert at a rate of 6,646.47
shares of Common Stock for every 1 share of Series B Preferred
Stock. The Company is limited to 800,000,000 authorized shares of
Common Stock. The Beneficial ownership percentage only considers
the shares of Common Stock that can be converted up to the
authorized number of shares of Common Stock.
(7)
Mr. Patrick Lee does not beneficially own any shares of the
Company’s Common Stock. However, Mr. Lee beneficially owns 6% of
the 153,062 shares of Series B Preferred Stock owned by Great Eagle
Freight Limited which convert at a rate of 6,646.47 shares of
Common Stock for every 1 share of Series B Preferred Stock. The
Company is limited to 800,000,000 authorized shares of Common
Stock. The Beneficial ownership percentage only considers the
shares of Common Stock that can be converted up to the authorized
number of shares of Common Stock.
(8)
Assumes that the Selling Stockholder buys or sells no additional
shares of Common Stock prior to the completion of this
offering.
SELLING
STOCKHOLDERS
Selling
Stockholder Sales
This
prospectus covers the possible resale by the Selling Stockholder
identified in the table below of up to 25,000,000 shares of our
common stock. The Selling Stockholder acquired such shares through
the partial conversion of a convertible note. See “Recent
Developments” for a more detailed description.
The
Selling Stockholder may sell some, all or none of their Selling
Stockholder Shares. We currently have no agreements, arrangements
or understandings with the Selling Stockholder regarding the sale
of any of the Selling Stockholder Shares. Unless otherwise
indicated in the footnotes below, the Selling Stockholder has not
had any material relationship with us or any of our affiliates
within the past three years other than as a security
holder.
We
have prepared the following table based on written representations
and information furnished to us by or on behalf of the Selling
Stockholder. Unless otherwise indicated in the footnotes below, we
believe that: (i) the Selling Stockholder is not a broker-dealer or
affiliate of a broker-dealer, and (ii) the Selling Stockholder has
does not have direct or indirect agreements or understandings with
any person to distribute their Selling Stockholder Shares. To the
extent the Selling Stockholder identified below is, or is
affiliated with, a broker-dealer, it could be deemed, to be an
“underwriter” within the meaning of the Securities Act. Information
about the Selling Stockholder may change over time.
The
following table presents information regarding the Selling
Stockholder and the Selling Stockholder Shares that they may offer
and sell from time to time under this prospectus. The table is
prepared based on information supplied to us by the Selling
Stockholder, and reflects their respective holdings as of September
27, 2021, unless otherwise noted in the footnotes to the table.
Beneficial ownership is determined in accordance with the rules of
the SEC, and thus represents voting or investment power with
respect to our securities. Under such rules, beneficial ownership
includes any shares over which the individual has sole or shared
voting power or investment power as well as any shares that the
individual has the right to acquire within 60 days after the date
of this table, to our knowledge and subject to applicable community
property rules, the persons and entities named in the table have
sole voting and sole investment power with respect to all equity
interests beneficially owned. The percentage of shares beneficially
owned before and after the offering is based on 632,781,078
shares of our common stock issued and outstanding on September 30,
2021.
Selling Stockholder(2) |
|
Shares
Beneficially
Owned Before
this Offering(4) |
|
|
Percentage of
Outstanding
Shares
Beneficially
Owned
Before
this Offering(3) |
|
|
Shares to be
Sold in
this
Offering |
|
|
Shares
Beneficially
After
this
Offering |
|
|
Percentage of Outstanding Shares
Beneficially Owned After this
Offering(1)(3) |
|
3A
Capital Establishment |
|
|
63,214,829 |
|
|
|
9.99 |
% |
|
|
25,000,000 |
|
|
|
38,214,829 |
|
|
|
9.9 |
% |
(1)
Assumes all shares offered by the Selling Stockholder hereby are
sold and that the Selling Stockholder buys or sells no additional
shares of Common Stock prior to the completion of this offering.
The registration of these shares does not necessarily mean that the
Selling Stockholder will sell all or any portion of the shares
covered by this prospectus.
(2)
3a Capital Establishment is a Liechtenstein anstalt and maintains
an address at Austrasse 40, FL-9490 Vaduz, Liechtenstein. Dr.
Nicola Feuerstein exercises voting and investment power over
securities held by 3a Capital Establishment.
(3)
As reported on Schedule 13G filed with the SEC on October 22, 2020,
3a Capital Establishment holds shares of our common stock plus
other securities that are convertible or exercisable for shares of
our common stock only if such conversion or exercise does not
result in 3a Capital Establishment (together with its affiliates)
holding more than 9.99% of our outstanding shares of common stock.
The full conversion or exercise of such securities of the Company
held by 3a Capital Establishment would exceed such beneficial
ownership limitation. This represents the maximum number of shares
of common stock that 3a Capital Establishment could beneficially
own as of September 30, 2021.
(4)
Calculated based on the maximum number of shares of common stock
that 3a Capital Establishment could have beneficially owned on
September 30, 2021 following conversion or exercise of securities
held by 3a Capital Establishment, subject to the beneficial
ownership limitation described in note (3) above.”
DESCRIPTION OF
SECURITIES
The
following is a description of our capital stock and the material
provisions of our Amended and Restated Articles of Incorporation,
corporate bylaws and other agreements to which we and our
stockholders are parties, in each case upon the effectiveness of
the registration statement of which this prospectus forms a part.
The following is only a summary and is qualified by applicable law
and by the text of the actual documents, copies of which are
available as set forth under “Where You Can Find More
Information.”
General
As of
September 30th we have 632,781,078 shares of Common Stock, 130,000
shares of Series A Preferred Stock and 820,800 shares Series B
Preferred Stock issued and outstanding, respectively.
Common
Stock
The
Company is authorized to issue 800,000,000 shares of Common Stock,
$0.001 par value per share.
Each
share of Common Stock shall have one (1) vote per share for all
purpose. Our Common Stock does not provide preemptive, subscription
or conversion rights and there are no redemption or sinking fund
provisions or rights. Our common stockholders are not entitled to
cumulative voting for purposes of electing members to our board of
directors.
Preferred
Stock
The
Company is authorized to issue 5,000,000 shares of preferred stock,
$0.001 par value per share.
Series
A Preferred Stock
The
Company has designated 130,000 shares of preferred stock as Series
A Preferred Stock, $0.001 par value per share (the “Series A
Preferred”). 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 the Series A 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. $0.001 par value per share and other junior
securities, a liquidation preference equal to the stated value per
share. Each share of Series A Preferred shall have a stated value
equal to $0.001.
Holders
of Series A Preferred will vote together with the holders of the
Company’s Common Stock on an as converted basis on each matter
submitted to a vote of holders of Common Stock. In addition, a
majority of holders of Series A Preferred shares must provide an
affirmative vote to (i) amend the Company’s Articles of
Incorporation or bylaws in a way that would be adverse to the
holders of the Company’s Series A Preferred, (ii) redeem or
repurchase any capital stock of the Company , (iii) declare or pay
dividends on any class of capital stock of the Company, or (iv)
issue any securities in parity with (other than shares of Series B
Preferred)_or senior to the rights of the Series A Preferred with
respect to distributions of assets upon liquidation, dissolution or
winding up of the Company.
Each
share of the Series A Preferred shall be convertible into fully
paid and non-assessable shares of Common Stock at any time or from
time to time at each Holder’s option, and each share of Series A
Preferred shall be convertible into 6,546.47 shares of the
Company’s common stock. Each holder of Series A Preferred shares
shall be subject to limitations on conversions, with such
limitations providing that no conversion shall be effected which
would result in the converting holder beneficially owning in excess
of 4.99% of the shares of the Company’s common stock outstanding
immediately after giving effect to such conversion (the “Beneficial
Ownership Limitation”). By written notice to the Company, a holder
of Series A Preferred may from time to time increase or decrease
the Beneficial Ownership Limitation upon 60-day written notice to
the Company. The Beneficial Ownership Limitation shall be
calculated in accordance with Section 13(d) of the Exchange
Act.
If
and whenever on or after the date on which the holder received
shares of Series A Preferred Stock (“the Series A Issuance Date”)
through the twelve month anniversary date of the Series A Issuance
Date (the “Anti-Dilution Termination Date”), the Company issues or
sells, or in accordance with the terms herein is deemed to have
issued or sold, any shares of Common Stock or common stock
equivalents (a “Dilutive Issuance”), the number of shares of common
stock issuable upon conversion will be adjusted to entitle the
holder to acquire such number of shares of common stock (the
“Adjustment Shares”) necessary to maintain the holders Fully-Diluted Ownership Percentage
at the time of the Series A Issuance Date. “Fully-Diluted Ownership Percentage”
shall mean the percentage ownership calculated by dividing (i) the
aggregate number of shares issuable upon conversion as of the
Series A Issuance Date by (ii) the aggregate number of all issued
and outstanding shares of common stock or common stock equivalents
of the Company (including any shares of common stock or common
stock equivalents which are issuable upon exercise or conversion of
options, warrants or other securities or rights within 60 days of
the date on which such calculation is being
made).
Series
B Preferred Stock
The
Company has designated 870,000 shares of preferred stock as Series
B Preferred Stock, $0.001 par value per share (the “Series B
Preferred”). 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. $0.001 par value per share and other junior
securities, a liquidation preference equal to the stated value per
share. Each share of Series B Preferred shall have a stated value
equal to $0.001.
Holders
of Series B Preferred will vote together with the holders of the
Company’s Common Stock on an as converted basis on each matter
submitted to a vote of holders of Common Stock. In addition, a
majority of holders of Series B Preferred shares must provide an
affirmative vote to (i) amend the Company’s Articles of
Incorporation or bylaws in a way that would be adverse to the
holders of the Company’s Series B Preferred, (ii) redeem or
repurchase any capital stock of the Company, (iii) declare or pay
dividends on any class of capital stock of the Company, or (iv)
issue any securities in parity with (other than shares of Series B
Preferred) or senior to the rights of the Series B Preferred with
respect to distributions of assets upon liquidation, dissolution or
winding up of the Company.
Each
share of the Series B Preferred shall be convertible into fully
paid and non-assessable shares of Common Stock at any time or from
time to time at each Holder’s option, and each share of Series B
Preferred shall be convertible into 6,546.47 shares of the
Company’s common stock.
Dividends
We
have not paid any cash dividends to our shareholders. The
declaration of any future cash dividends is at the discretion of
our board of directors and depends upon our earnings, if any, our
capital requirements and financial position, our general economic
conditions, and other pertinent conditions. It is our present
intention not to pay any cash dividends in the foreseeable future,
but rather to reinvest earnings, if any, in our business
operations.
Transfer
Agent and Registrar
Our
transfer agent is Action Stock Transfer, 2469 E. Fort Union Blvd,
Suite 214 Salt Lake City, UT 84121
Warrants
As of
September 30, 2021, there are
warrants to purchase up to 1,140,956,904 shares of our Common Stock at an exercise price
of $0.001946, subject to adjustment and subject to securities
exchange agreement entered into by the Company on August 19,
2021,
Underwriters’ Warrants
See “Underwriting” on page 71 for a description of the
Underwriters’ Warrants being issued to the underwriters in this
offering.
Options
There are no outstanding options to purchase our
securities.
Incentive
Plans
Effective
November 20, 2020, the Board approved, authorized and adopted the
Unique Logistics International, Inc. 2020 Equity and Incentive Plan
(the “2020 Plan”) and certain forms of ancillary agreements to be
used in connection with the issuance of stock and/or options
pursuant to the 2020 Plan (the “Plan Agreements”). The 2020 Plan
provides for the issuance of up to 40,000,000 shares of Common
Stock through the grant of non-qualified options (the
“Non-qualified Options”), incentive options (the “Incentive
Options” and together with the Non-qualified Options, the
“Options”) and restricted stock (the “Restricted Stock”) to
directors, officers, consultants, attorneys, advisors and
employees. There were no outstanding equity awards as of May 31,
2020 or 2021.
Listing
While
there is no established public trading market for our Common Stock,
our Common Stock is quoted on the OTC Pink, under the symbol
“UNQL”. We have applied to have our Common Stock listed on the
NASDAQ Capital Market under the symbol “UNQL.” We will not proceed
with this offering in the event our Common Stock is not approved
for listing on NASDAQ.
Holders
As of
September 14, 2021, there were 72 stockholders of record. Because
shares of our Common Stock are held by depositaries, brokers and
other nominees, the number of beneficial holders of our shares is
substantially larger than the number of stockholders of
record.
Limitation
of Liability and Indemnification of Directors and
Officers
Our
bylaws implement the indemnification provisions permitted by
Chapter 78 of the NRS by providing that we shall indemnify our
directors and officers to the fullest extent permitted by the NRS
against expense, liability, and loss reasonably incurred or
suffered by them in connection with their service as an officer or
director. Our bylaws provide shall advance costs and expenses
incurred with respect to any proceeding to which a person is made a
party as a result of being a director or officer in advance of
final disposition of such proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if
it is ultimately determined that such person is not entitled to
indemnification. We may purchase and maintain liability insurance,
or make other arrangements for such obligations or otherwise, to
the extent permitted by the NRS.
At
the present time, there is no pending litigation or proceeding
involving a director, officer, employee, or other agent of ours in
which indemnification would be required or permitted. We are not
aware of any threatened litigation or proceeding that may result in
a claim for such indemnification. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has
been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
Anti-takeover
Effects of Our Articles of Incorporation and By-laws
The
holders of our Common Stock do not have cumulative voting rights in
the election of our directors, which makes it more difficult for
minority stockholders to be represented on the Board. Our articles
of incorporation allow our Board to issue additional shares of our
Common Stock and new series of preferred stock without further
approval of our stockholders. The existence of authorized but
unissued shares of Common Stock and preferred stock could render
more difficult or discourage an attempt to obtain control of our
company by means of a proxy contest, tender offer, merger, or
otherwise.
Anti-takeover
Effects of Nevada Law
Business
Combinations
The
“business combination” provisions of Sections 78.411 to 78.444,
inclusive, of the Nevada Revised Statutes, or NRS, generally
prohibit a Nevada corporation with at least 200 stockholders of
record, a “resident domestic corporation,” from engaging in various
“combination” transactions with any “interested stockholder” unless
certain conditions are met or the corporation has elected in its
articles of incorporation to not be subject to these provisions. We
have not elected to opt out of these provisions and if we meet the
definition of resident domestic corporation, now or in the future,
our company will be subject to these provisions.
A
“combination” is generally defined to include (a) a merger or
consolidation of the resident domestic corporation or any
subsidiary of the resident domestic corporation with the interested
stockholder or affiliate or associate of the interested
stockholder; (b) any sale, lease, exchange, mortgage, pledge,
transfer, or other disposition, in one transaction or a series of
transactions, by the resident domestic corporation or any
subsidiary of the resident domestic corporation to or with the
interested stockholder or affiliate or associate of the interested
stockholder having: (i) an aggregate market value equal to 5% or
more of the aggregate market value of the assets of the resident
domestic corporation, (ii) an aggregate market value equal to 5% or
more of the aggregate market value of all outstanding shares of the
resident domestic corporation, or (iii) 10% or more of the earning
power or net income of the resident domestic corporation; (c) the
issuance or transfer in one transaction or series of transactions
of shares of the resident domestic corporation or any subsidiary of
the resident domestic corporation having an aggregate market value
equal to 5% or more of the resident domestic corporation to the
interested stockholder or affiliate or associate of the interested
stockholder; and (d) certain other transactions with an interested
stockholder or affiliate or associate of the interested
stockholder.
An
“interested stockholder” is generally defined as a person who,
together with affiliates and associates, owns (or within two years,
did own) 10% or more of a corporation’s voting stock. An
“affiliate” of the interested stockholder is any person that
directly or indirectly through one or more intermediaries is
controlled by or is under common control with the interested
stockholder. An “associate” of an interested stockholder is any (a)
corporation or organization of which the interested stockholder is
an officer or partner or is directly or indirectly the beneficial
owner of 10% or more of any class of voting shares of such
corporation or organization; (b) trust or other estate in which the
interested stockholder has a substantial beneficial interest or as
to which the interested stockholder serves as trustee or in a
similar fiduciary capacity; or (c) relative or spouse of the
interested stockholder, or any relative of the spouse of the
interested stockholder, who has the same home as the interested
stockholder.
If
applicable, the prohibition is for a period of two years after the
date of the transaction in which the person became an interested
stockholder, unless such transaction is approved by the board of
directors prior to the date the interested stockholder obtained
such status; or the combination is approved by the board of
directors and thereafter is approved at a meeting of the
stockholders by the affirmative vote of stockholders representing
at least 60% of the outstanding voting power held by disinterested
stockholders; and extends beyond the expiration of the two-year
period, unless (a) the combination was approved by the board of
directors prior to the person becoming an interested stockholder;
(b) the transaction by which the person first became an interested
stockholder was approved by the board of directors before the
person became an interested stockholder; (c) the transaction is
approved by the affirmative vote of a majority of the voting power
held by disinterested stockholders at a meeting called for that
purpose no earlier than two years after the date the person first
became an interested stockholder; or (d) if the consideration to be
paid to all stockholders other than the interested stockholder is,
generally, at least equal to the highest of: (i) the highest price
per share paid by the interested stockholder within the three years
immediately preceding the date of the announcement of the
combination or in the transaction in which it became an interested
stockholder, whichever is higher, plus compounded interest and less
dividends paid, (ii) the market value per share of common shares on
the date of announcement of the combination and the date the
interested stockholder acquired the shares, whichever is higher,
plus compounded interest and less dividends paid, or (iii) for
holders of preferred stock, the highest liquidation value of the
preferred stock, plus accrued dividends, if not included in the
liquidation value. With respect to (i) and (ii) above, the interest
is compounded at the rate for one-year United States Treasury
obligations from time to time in effect.
Applicability
of the Nevada business combination statute would discourage parties
interested in taking control of our company if they cannot obtain
the approval of our Board. These provisions could prohibit or delay
a merger or other takeover or change in control attempt and,
accordingly, may discourage attempts to acquire our company even
though such a transaction may offer our stockholders the
opportunity to sell their stock at a price above the prevailing
market price.
Control
Share Acquisitions
The
“control share” provisions of Sections 78.378 to 78.3793,
inclusive, of the NRS, apply to “issuing corporations” that are
Nevada corporations with at least 200 stockholders of record,
including at least 100 stockholders of record who are Nevada
residents, and that conduct business directly or indirectly in
Nevada, unless the corporation has elected to not be subject to
these provisions.
The
control share statute prohibits an acquirer of shares of an issuing
corporation, under certain circumstances, from voting its shares of
a corporation’s stock after crossing certain ownership threshold
percentages, unless the acquirer obtains approval of the target
corporation’s disinterested stockholders. The statute specifies
three thresholds: (a) one-fifth or more but less than one-third,
(b) one-third but less than a majority, and (c) a majority or more,
of the outstanding voting power. Generally, once a person acquires
shares in excess of any of the thresholds, those shares and any
additional shares acquired within 90 days thereof become “control
shares” and such control shares are deprived of the right to vote
until disinterested stockholders restore the right. These
provisions also provide that if control shares are accorded full
voting rights and the acquiring person has acquired a majority or
more of all voting power, all other stockholders who do not vote in
favor of authorizing voting rights to the control shares are
entitled to demand payment for the fair value of their shares in
accordance with statutory procedures established for dissenters’
rights.
A
corporation may elect to not be governed by, or “opt out” of, the
control shares provisions by making an election in its articles of
incorporation or bylaws, provided that the opt-out election must be
in place on the 10th day following the date an acquiring person has
acquired a controlling interest, that is, crossing any of the three
thresholds described above. We have not opted out of these
provisions and will be subject to the control share provisions of
the NRS if we meet the definition of an issuing corporation upon an
acquiring person acquiring a controlling interest unless we later
opt out of these provisions and the opt out is in effect on the
10th day following such occurrence.
The
effect of the Nevada control share statute is that the acquiring
person, and those acting in association with the acquiring person,
will obtain only such voting rights in the control shares as are
conferred by a resolution of the stockholders at an annual or
special meeting. The Nevada control share law, if applicable, could
have the effect of discouraging takeovers of our
company.
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, we have been informed that in
the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable.
SHARES
ELIGIBLE FOR FUTURE SALE
Prior
to this offering, our Common Stock was quoted on the OTC Capital
Markets under the symbol “UNQL.” Future sales of substantial
amounts of our Common Stock in the public market, including shares
issued upon the exercise of outstanding options or warrants, or
upon debt conversion, or the anticipation of these sales, could
adversely affect market prices prevailing from time to time and
could impair our ability to raise capital through sales of equity
securities.
Upon
completion of this offering we estimate that we will have
_______outstanding shares of our Common Stock, calculated as of
_______, 2021, assuming no exercise of outstanding options or
warrants, and no sale of shares reserved for the underwriter for
over-allotment allocation, if any.
Sale
of Restricted Securities
The
shares of our Common Stock sold pursuant to this offering will be
registered under the Securities Act or 1933, as amended, and
therefore freely transferable, except for our affiliates. Our
affiliates will be deemed to own “control” securities that are not
registered for resale under the registration statement covering
this prospectus. Individuals who may be considered our affiliates
after this offering include individuals who control, are controlled
by or are under common control with us, as those terms generally
are interpreted for federal securities law purposes. These
individuals may include some or all of our directors and executive
officers. Individuals who are our affiliates are not permitted to
resell their shares of our Common Stock unless such shares are
separately registered under an effective registration statement
under the Securities Act or an exemption from the registration
requirements of the Securities Act is available, such as Rule
144.
Rule
144
In
general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated), including an affiliate, who
beneficially owns “restricted securities” (i.e. securities that are
not registered by an effective registration statement) of a
“reporting company” may not sell these securities until the person
has beneficially owned them for at least six months. Thereafter,
affiliates may not sell within any three-month period a number of
shares in excess of the greater of: (i) 1% of the then outstanding
shares of Common Stock as shown by the most recent report or
statement published by the issuer; and (ii) the average weekly
reported trading volume in such securities during the four
preceding calendar weeks.
Sales
under Rule 144 by our affiliates will also be subject to
restrictions relating to manner of sale, notice and the
availability of current public information about us and may be
affected only through unsolicited brokers’ transactions.
Persons
not deemed to be affiliates who have beneficially owned “restricted
securities” for at least six months but for less than one year may
sell these securities, provided that current public information
about the Company is “available,” which means that, on the date of
sale, we have been subject to the reporting requirements of the
Exchange Act for at least 90 days and are current in our Exchange
Act filings. After beneficially owning “restricted securities” for
one year, our non-affiliates may engage in unlimited re-sales of
such securities.
Shares
received by our affiliates in this offering or upon exercise of
stock options or upon vesting of other equity-linked awards may be
“control securities” rather than “restricted securities.” “Control
securities” are subject to the same volume limitations as
“restricted securities” but are not subject to holding period
requirements.
Rule
701
Rule
701 generally allows a stockholder who purchased shares of the
Company’s Common Stock pursuant to a written compensatory plan or
contract and who is not deemed to have been an affiliate of the
Company during the immediately preceding 90 days to sell these
shares in reliance upon Rule 144, but without being required to
comply with the public information, holding period, volume
limitation, or notice provisions of Rule 144. Rule 701 also permits
affiliates of the Company to sell their Rule 701 shares under Rule
144 without complying with the holding period requirements of Rule
144. All holders of Rule 701 shares, however, are required to wait
until 90 days after the date of this prospectus before selling such
shares pursuant to Rule 701 and until expiration of the lock-up
period described below.
Lock-Up
Agreements
The
Company, each of our directors and executive officers, and our 5%
and greater stockholders, have agreed not to, for a period of 180
days after the date of this prospectus, without the prior written
consent of the underwriter. subject to certain limited exceptions,
offer, pledge, sell, contract to sell, grant any option to
purchase, or otherwise dispose of our common stock or any
securities convertible into or exchangeable or exercisable for
common stock, or to enter into any hedge or other arrangement or
any transaction that transfers, directly or indirectly, the
economic consequence of ownership of the shares of our common
stock. See “Underwriting—Lock-up Agreements.”
In
connection with the Exchange Agreement, the Company and the Holders
agreed to enter into a Leak-Out Agreement (the “Leak-Out Agreement)
with the Holders upon consummation of a closing of the Exchange
Agreement.
Pursuant
to the Leak-Out Agreement, the Holder would agree that, for a
period (the “Leak-Out Period”) beginning on the date of the
Leak-Out Agreement and ending on, and including, the date that is
ninety (90) days after the Closing Date of the Exchange Agreement,
the Holders will not, without the prior written consent of EF
Hutton (a) offer, sell, contract to sell, pledge, transfer, assign
or otherwise dispose of (including, without limitation, by making
any short sale, engage in any hedging, monetization or derivative
transaction) or file (or participate in the filing of) a
registration statement or prospectus with the SEC in respect of, or
establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section
16 of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder with respect to (i) any Common Stock or (ii)
any other securities of the Company that are substantially similar
to Common Stock or any securities convertible into or exchangeable
or exercisable for, or any options or warrants or other rights to
purchase Common Stock (the “Related Securities”), (b) enter into
any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of Common
Stock or Related Securities, whether any such transaction is to be
settled by delivery of Common Stock or such other securities, in
cash or otherwise, or (c) publicly announce an intention to effect
any transaction specified in clause (a) or (b).
Notwithstanding
the foregoing, the restrictions described above shall not apply to
shares of Common Stock or Related Securities for an amount of
Common Stock and Related Securities less than 7.5% of the daily
average composite trading volume of the Common Stock as reported by
Bloomberg, LP for any trading day for the principal trading market
for the Common Stock and further provided, that the foregoing
restriction shall not apply to any actual “long” (as defined in
Regulation SHO of the Securities Exchange Act of 1934, as amended)
sales by the Holder or its affiliates at a price greater than 25%
higher than the offering price of the lowest priced Common Stock
sold in the Offering (in each case, as adjusted for stock splits,
stock dividends, stock combinations, recapitalizations or other
similar events occurring after the date hereof).
MATERIAL U.S. FEDERAL INCOME TAX
CONSIDERATIONS
The
following is a summary of the material U.S. federal income tax
considerations relating to the purchase, ownership and disposition
of our Common Stock purchased in this offering, which we refer to
collectively as our securities, but is for general information
purposes only and does not purport to be a complete analysis of all
the potential tax considerations. This summary is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the
“Code”), final, temporary and proposed Treasury regulations
promulgated thereunder, administrative rulings and pronouncements
and judicial decisions, all as of the date hereof. These
authorities may change, possibly retroactively, resulting in U.S.
federal income and estate tax consequences different from those set
forth below. There can be no assurance that the Internal Revenue
Service (the “IRS”) will not challenge one or more of the tax
consequences described herein, and we have not obtained, and do not
intend to obtain, an opinion of counsel or ruling from the IRS with
respect to the U.S. federal income tax considerations relating to
the purchase, ownership or disposition of our
securities.
This
summary does not address any alternative minimum tax
considerations, any considerations regarding the Medicare tax, any
considerations regarding the tax on net investment income, or the
tax considerations arising under the laws of any state, local or
non-U.S. jurisdiction, or under any non-income tax laws, including
U.S. federal gift and estate tax laws, except to the limited extent
set forth below. In addition, this summary does not address all of
the tax consequences that may be relevant to investors, nor does it
address tax considerations applicable to an investor’s particular
circumstances or to investors that may be subject to special tax
rules, including, without limitation:
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banks,
insurance companies or other financial institutions; |
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tax-exempt
entities or governmental organizations, including agencies or
instrumentalities thereof; |
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regulated
investment companies and real estate investment trusts; |
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controlled
foreign corporations, passive foreign investment companies and
corporations that accumulate earnings to avoid U.S. federal income
tax; |
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brokers
or dealers in securities or currencies; |
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traders
in securities that elect to use a mark-to-market method of
accounting for their securities holdings; |
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persons
that own, or are deemed to own, more than five percent of our
capital stock (except to the extent specifically set forth
below); |
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tax-qualified
retirement plans; |
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certain
former citizens or long-term residents of the United
States; |
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partnerships
or entities or arrangements classified as partnerships for U.S.
federal income tax purposes and other pass-through entities
including S corporations and trusts (and any investors
therein); |
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persons
who hold our securities as a position in a hedging transaction,
“straddle,” “conversion transaction” or other risk reduction
transaction or integrated investment; |
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persons
who do not hold our securities as a capital asset within the
meaning of Section 1221 of the Code; or |
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persons
deemed to sell our securities under the constructive sale
provisions of the Code, or persons holding the securities as part
of a “straddle,” hedge, conversion transaction, integrated
transaction or other similar transaction. |
In
addition, if a partnership (or entity or arrangement classified as
a partnership for U.S. federal income tax purposes) holds our
securities, the tax treatment of a partner generally will depend on
the status of the partner and upon the activities of the
partnership. Accordingly, partnerships that hold our securities,
and partners in such partnerships, should consult their tax
advisors.
You
are urged to consult your own tax advisors with respect to the
application of the U.S. federal income tax laws to your particular
situation, as well as any tax consequences of the purchase,
ownership and disposition of our securities arising under the U.S.
federal estate or gift tax laws or under the laws of any state,
local, non-U.S., or other taxing jurisdiction or under any
applicable tax treaty.
Consequences
to U.S. Holders
The
following is a summary of the U.S. federal income tax consequences
that will apply to a U.S. holder of our securities. For purposes of
this discussion, you are a U.S. holder if, for U.S. federal income
tax purposes, you are a beneficial owner of our securities, other
than a partnership, that is:
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individual citizen or resident of the United States; |
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a
corporation or other entity taxable as a corporation created or
organized in the United States or under the laws of the United
States, any State thereof or the District of Columbia; |
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an
estate trust whose income is subject to U.S. federal income tax
regardless of its source; or |
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a
trust (x) whose administration is subject to the primary
supervision of a U.S. court and which has one or more “United
States persons” (within the meaning of Section 7701(a)(30) of the
Code) who have the authority to control all substantial decisions
of the trust or (y) which has made a valid election to be treated
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Distributions
As
described in the section titled “Market for Our Common Stock -
Dividend Policy,” we have never declared or paid cash dividends on
our Common Stock and do not anticipate paying any dividends on our
Common Stock in the foreseeable future. However, if we do make
distributions in cash or other property on our Common Stock, those
payments will constitute dividends for U.S. tax purposes to the
extent paid from our current or accumulated earnings and profits,
as determined under U.S. federal income tax principles. To the
extent our distributions exceed both our current and our
accumulated earnings and profits, the excess will constitute a
return of capital that will first reduce your basis in our Common
Stock, but not below zero, and then will be treated as gain from
the sale or other disposition of stock as described below under
“—Sale, Exchange or Other Taxable Disposition of Common
Stock.”
Dividend
income may be taxed to an individual U.S. holder at rates
applicable to long-term capital gains, provided that a minimum
holding period and other limitations and requirements are satisfied
with certain exemptions. Any dividends that we pay to a U.S. holder
that is a corporation will qualify for the dividends received
deduction if the requisite holding period is satisfied, subject to
certain limitations. U.S. holders should consult their own tax
advisors regarding the holding period and other requirements that
must be satisfied in order to qualify for the reduced tax rate on
dividends or the dividends-received deduction.
Sale,
Exchange or Other Taxable Disposition of Common
Stock
A
U.S. holder will generally recognize capital gain or loss on the
sale, exchange or other taxable disposition of our Common Stock.
The amount of gain or loss will equal the difference between the
amount realized on the sale and such U.S. holder’s adjusted tax
basis in such Common Stock. The amount realized will include the
amount of any cash and the fair market value of any other property
received in exchange for such Common Stock. . A U.S. holder’s
adjusted tax basis in its Common Stock will generally equal the
U.S. holder’s acquisition cost or purchase price, less any prior
distributions treated as a return of capital. Gain or loss will be
long-term capital gain or loss if the U.S. holder has held the
Common Stock for more than one year. Long-term capital gains of
non-corporate U.S. holders are generally taxed at preferential
rates. The deductibility of capital losses is subject to certain
limitations.
Information
Reporting and Backup Withholding
In
general, information reporting requirements may apply to dividends
paid to a U.S. holder and to the proceeds of the sale or other
disposition of our Common Stock, unless the U.S. holder is an
exempt recipient. Backup withholding may apply to such payments if
the U.S. holder fails to provide a taxpayer identification number,
a certification of exempt status or has been notified by the IRS
that it is subject to backup withholding (and such notification has
not been withdrawn).
Any
amounts withheld under the backup withholding rules will be allowed
as a refund or a credit against a U.S. holder’s U.S. federal income
tax liability provided the required information is timely furnished
to the IRS.
Unearned
Income Medicare Tax
A
3.8% Medicare contribution tax will generally apply to all or some
portion of the net investment income of a U.S. holder that is an
individual with adjusted gross income that exceeds a threshold
amount ($200,000, or $250,000 if married filing
jointly).
Consequences
to Non-U.S. Holders
The
following is a summary of the U.S. federal income tax consequences
that will apply to a non-U.S. holder of our securities. A “non-U.S.
holder” is a beneficial owner of our securities (other than a
partnership or an entity or arrangement treated as a partnership
for U.S. federal income tax purposes) that, for U.S. federal income
tax purposes, is not a U.S. holder. The term “non-U.S. holder”
includes:
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a
non-resident alien individual (other than certain former citizens
and residents of the U.S. subject to U.S. tax as
expatriates); |
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a
foreign corporation; |
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an
estate or trust that is not a U.S. holder; or |
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any
other Person that is not a U.S. holder |
but
generally does not include an individual who is present in the U.S.
for 183 days or more or who is otherwise treated as a U.S. resident
in the taxable year. If you are such an individual, you should
consult your tax advisor regarding the U.S. federal income tax
consequences of the acquisition, ownership or sale or other
disposition of our securities.
Distributions
Subject
to the discussion below regarding effectively connected income, any
distribution paid to a non-U.S. holder, to the extent paid out of
our current or accumulated earnings and profits (as determined
under U.S. federal income tax principles) generally will constitute
a dividend for U.S. federal income tax purposes and, provided such
dividends are not effectively connected with the non-U.S. holder’s
conduct of a trade or business within the U.S., will be subject to
U.S. withholding tax either at a rate of 30% of the gross amount of
the dividend or such lower rate as may be specified by an
applicable income tax treaty. In order to receive a reduced treaty
rate, a non-U.S. holder must provide us with an IRS Form W-8BEN,
IRS Form W-8BEN-E or other applicable IRS Form W-8 properly
certifying qualification for the reduced rate. These forms must be
provided prior to the payment of dividends and must be updated
periodically. A non-U.S. holder eligible for a reduced rate of U.S.
withholding tax pursuant to an income tax treaty should consult
with its individual tax advisor to determine if you may obtain a
refund of any excess amounts withheld by timely filing an
appropriate claim for refund with the IRS. If a non-U.S. holder
holds our securities through a financial institution or other agent
acting on the non-U.S. holder’s behalf, the non-U.S. holder will be
required to provide appropriate documentation to the agent, which
then may be required to provide certification to us or our paying
agent, either directly or through other intermediaries.
Dividends
received by a non-U.S. holder that are effectively connected with
its conduct of a U.S. trade or business (and, if required by an
applicable income tax treaty, attributable to a permanent
establishment or fixed base maintained by the non-U.S. holder in
the United States) are generally exempt from such withholding tax
if the non-U.S. holder satisfies certain certification and
disclosure requirements. In order to obtain this exemption, the
non-U.S. holder must provide us with an IRS Form W-8ECI or other
applicable IRS Form W-8 properly certifying such exemption. Such
effectively connected dividends, although not subject to
withholding tax, are taxed at the same graduated U.S. federal
income tax rates applicable to U.S. holders, net of certain
deductions and credits. In addition, dividends received by a
corporate non-U.S. holder that are effectively connected with its
conduct of a U.S. trade or business may also be subject to a branch
profits tax at a rate of 30% or such lower rate as may be specified
by an applicable income tax treaty. Non-U.S. holders should consult
their own tax advisors regarding any applicable tax treaties that
may provide for different rules.
Any
distribution not constituting a dividend will be treated first as
reducing (but not below zero) the Non-U.S. holder’s adjusted tax
basis in its Common Stock and, to the extent such distribution
exceeds the Non-U.S. holder’s adjusted tax basis, as gain realized
from the sale or other disposition of the Common Stock, which will
be treated as described under “Non-U.S. Holders — Gain on Sale,
Exchange or Other Taxable Disposition of Common Stock”
below.
Gain
on Sale, Exchange or Other Taxable Disposition of Common
Stock
Subject
to the discussion below regarding backup withholding and foreign
accounts, a non-U.S. holder generally will not be required to pay
U.S. federal income tax on any gain realized upon the sale,
exchange or other taxable disposition of our Common Stock
unless:
|
● |
the
gain is effectively connected with the non-U.S. holder’s conduct of
a U.S. trade or business (and, if required by an applicable income
tax treaty, the gain is attributable to a permanent establishment
or fixed base maintained by the non-U.S. holder in the United
States); |
|
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|
|
● |
the
non-U.S. holder is a non-resident alien individual who is present
in the United States for a period or periods aggregating 183 days
or more during the calendar year in which the sale or disposition
occurs and certain other conditions are met; or |
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shares
of our Common Stock constitute U.S. real property interests by
reason of our status as a “United States real property holding
corporation” (a USRPHC) for U.S. federal income tax purposes at any
time within the shorter of the five-year period preceding the
non-U.S. holder’s disposition of, or the non- U.S. holder’s holding
period for, our Common Stock (provided that an exception does not
apply), and, in the case where shares of our Common Stock are
regularly traded on an established securities market, the Non-U.S.
holder has owned, directly or constructively, more than 5% of our
Common Stock at any time within the shorter of the five-year period
preceding the disposition or such Non-U.S. holder’s holding period
for the shares of our Common Stock. |
We
believe that we are not currently and will not become a USRPHC for
U.S. federal income tax purposes, and the remainder of this
discussion so assumes. However, because the determination of
whether we are a USRPHC depends on the fair market value of our
U.S. real property relative to the fair market value of our other
business assets, there can be no assurance that we will not become
a USRPHC in the future. Even if we become a USRPHC, however, as
long as our Common Stock is regularly traded on an established
securities market, such Common Stock will be treated as U.S. real
property interests only if the non-U.S. holder actually or
constructively hold more than five percent of such regularly traded
Common Stock at any time during the shorter of the five-year period
preceding the non-U.S. holder’s disposition of, or the non-U.S.
holder’s holding period for, our Common Stock.
If
the non-U.S. holder is described in the first bullet above, it will
be required to pay tax on the net gain derived from the sale,
exchange or other taxable disposition under regular graduated U.S.
federal income tax rates, and a corporate non-U.S. holder described
in the first bullet above also may be subject to the branch profits
tax at a rate of 30%, or (in each case) such lower rate as may be
specified by an applicable income tax treaty. An individual
non-U.S. holder described in the second bullet above will be
required to pay a flat 30% tax (or such lower rate specified by an
applicable income tax treaty) on the gain derived from the sale,
exchange or other taxable disposition, which gain may be offset by
U.S. source capital losses for the year (provided the non-U.S.
holder has timely filed U.S. federal income tax returns with
respect to such losses). Non-U.S. holders should consult their own
tax advisors regarding any applicable income tax or other treaties
that may apply.
Federal
Estate Tax
Common
stock beneficially owned by an individual who is not a citizen or
resident of the United States (as defined for U.S. federal estate
tax purposes) at the time of their death will generally be
includable in the decedent’s gross estate for U.S. federal estate
tax purposes. Such shares, therefore, may be subject to U.S.
federal estate tax, unless an applicable estate tax treaty provides
otherwise.
Backup
Withholding and Information Reporting
Generally,
we must report annually to the IRS the amount of dividends paid to
you, your name and address and the amount of tax withheld, if any.
A similar report will be sent to you. Pursuant to applicable income
tax treaties or other agreements, the IRS may make these reports
available to tax authorities in your country of
residence.
A
Non-U.S. holder may have to comply with certification procedures to
establish that it is not a United States person in order to avoid
information reporting and backup withholding requirements. The
certification procedures required to claim a reduced rate of
withholding under a treaty generally will satisfy the certification
requirements necessary to avoid the backup withholding as well for
example, by properly certifying your non-U.S. status on an IRS Form
W-8BEN or IRS Form W-8BEN-E or other applicable IRS Form
W-8.Notwithstanding the foregoing, backup withholding and
information reporting may apply if either we or our paying agent
has actual knowledge, or reason to know, that you are a U.S.
person.
Backup
withholding is not an additional tax; rather, the U.S. federal
income tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in
an overpayment of taxes, a refund or credit may generally be
obtained from the IRS, provided that the required information is
furnished to the IRS in a timely manner.
Foreign
Account Tax Compliance
The
Foreign Account Tax Compliance Act (“FATCA”) generally imposes
withholding tax at a rate of 30% on dividends on and gross proceeds
from the sale or other disposition of our securities paid to a
“foreign financial institution” (as specially defined under these
rules), unless any such institution (1) enters into, and complies
with, an agreement with the IRS to report, on an annual basis,
information with respect to interests in, and accounts maintained
by, the institution that are owned by certain U.S. persons and by
certain non-U.S. entities that are wholly or partially owned by
U.S. persons and to withhold on certain payments, or (2) if
required under an intergovernmental agreement between the United
States and an applicable foreign country, reports such information
to its local tax authority, which will exchange such information
with the U.S. authorities. An intergovernmental agreement between
the United States and an applicable foreign country may modify
these requirements. Accordingly, the entity through which our
securities are held will affect the determination of whether such
withholding is required. Similarly, dividends in respect of our
securities held by an investor that is a non-financial non-U.S.
entity that does not qualify under certain exceptions will
generally be subject to withholding at a rate of 30%, unless such
entity either (1) certifies to us or the applicable withholding
agent that such entity does not have any “substantial United States
owners” or (2) provides certain information regarding the entity’s
“substantial United States owners,” which will in turn be provided
to the U.S. Department of Treasury. Non-U.S. holders should consult
their own tax advisors regarding the possible implications of this
legislation on their investment in our securities.
Each
prospective investor should consult its own tax advisor regarding
the particular U.S. federal, state and local and non-U.S. tax
consequences of purchasing, owning and disposing of our securities,
including the consequences of any proposed changes in applicable
laws.
UNDERWRITING
We
are offering our shares of Common Stock described in this
prospectus through the underwriters named below. EF Hutton,
division of Benchmark Investments, LLC (“EF Hutton”) is acting as
the representative of the underwriters. We and the selling
stockholders have entered into an underwriting agreement with the
underwriters. Subject to the terms and conditions of the
underwriting agreement, each of the underwriters has severally
agreed to purchase, and we have agreed to sell to the underwriters,
the number of shares of Common Stock listed next to its name in the
following table.
Underwriters |
Number
of
Shares
|
EF
Hutton, division of Benchmark Investments, LLC. |
|
Total |
|
The
underwriting agreement provides that the underwriters must buy all
of the shares of Common Stock if they buy any of them. However, the
underwriters are not required to take or pay for the shares covered
by the underwriters’ option to purchase additional shares as
described below. Our shares of Common Stock are offered subject to
a number of conditions, including:
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● |
receipt
and acceptance of our shares of Common Stock by the underwriters;
and |
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● |
the
underwriters’ right to reject orders in whole or in
part. |
We
have been advised by EF Hutton that the underwriters intend to make
a market in our shares of Common Stock but that they are not
obligated to do so and may discontinue making a market at any time
without notice.
In
connection with this offering, certain of the underwriters or
securities dealers may distribute prospectuses
electronically.
Option
to Purchase Additional Shares
We
have granted the underwriters an option to buy up to an aggregate
of ________ additional shares of Common Stock. The underwriters
have 45 days after the closing of the offering to exercise this
option. If the underwriters exercise this option, they will each
purchase additional shares of Common Stock approximately in
proportion to the amounts specified in the table above.
Underwriting
Discount
Shares
sold by the underwriters to the public will initially be offered at
the initial offering price set forth on the cover of this
prospectus. Any shares sold by the underwriters to securities
dealers may be sold at a discount of up to
$ per share
from the public offering price. The underwriters may offer the
shares through one or more of their affiliates or selling agents.
If all the shares are not sold at the public offering price, EF
Hutton may change the offering price and the other selling terms.
Upon execution of the underwriting agreement, the underwriters will
be obligated to purchase the shares at the prices and upon the
terms stated therein.
The
underwriting discount is equal to the public offering price per
share, less the amount paid by the underwriters to us per share.
The underwriting discount was determined through an arms’ length
negotiation between us and the underwriters. We have agreed to sell
the shares of Common Stock to the underwriters at the offering
price of $[___] per share, which represents the public offering
price of our shares set forth on the cover page of this prospectus
less a 7% underwriting discount.
The
following table shows the per share and total underwriting discount
we will pay to the underwriters assuming both no exercise and full
exercise of the underwriters’ option to purchase up to additional
shares.
|
|
No
Exercise
|
|
|
Full
Exercise
|
|
Per
share |
|
$ |
|
|
|
$ |
|
|
Total |
|
$ |
|
|
|
$ |
|
|
We
have agreed to pay EF Hutton’s out-of-pocket accountable expenses,
including EF Hutton’s legal fees, up to a maximum amount of
$150,000, irrespective of whether the offering is consummated. We
have paid $25,000 to EF Hutton as an advance against the maximum
amount to be applied towards EF Hutton’s anticipated out-of-pocket
expenses. Any portion of the Advance shall be returned back to us
to the extent not actually incurred in accordance with FINRA Rule
5110(g). We have also agreed to pay a non-accountable expense
allowance to the underwriters of 1.0% of the gross proceeds of the
offering (including proceeds from the sale of over-allotment
shares, if any).
Except as
disclosed in this prospectus, the underwriters have not received
and will not receive from us any other item of compensation or
expense in connection with this offering considered by FINRA to be
underwriting compensation under FINRA Rule 5110.We estimate that
the total expenses of the offering payable by us, not including the
underwriting discount, will be approximately $_______.
Warrants
We
have agreed to grant the underwriters non-redeemable warrants to
purchase an amount equal to five percent (5%) of the share of
Common Stock sold in the offering (including any shares sold upon
exercise of the over-allotment option), which warrants will be
exercisable at any time after the six month anniversary of
effective date of the registration statement, have five (5) year
terms and cashless exercise option. Such warrants are exercisable
at a price of one hundred (100%) of the public offering price of
the Common Stock offered pursuant to this offering. We will
register the shares of Common Stock underlying the underwriter’s
warrants and will file all necessary undertakings in connection
therewith. The underwriter’s warrants and shares of Common Stock
underlying the underwriter’s warrants may not be sold, transferred,
assigned, pledged or hypothecated, or be the subject of any
hedging, short sale, derivative, put, or call transaction that
would result in the effective economic disposition of the
securities by any person for a period of 180 days beginning on the
date of commencement of sales of the offering, except as provided
in FINRA Rule 5110(e)(2). The underwriter’s warrants may be
exercised as to all or a lesser number of shares of Common Stock
and will provide for cashless exercise. The underwriter’s warrants
contain a provision for one demand registration, at the expense of
the holder of the underwriter’s warrants. The demand registration
right may be exercised at any time following issuance of the
warrants but no later than five years following the effectiveness
of the registration statement in compliance with FINRA rule
5110(g)(8)(C). The underwriter warrants also contain unlimited
“piggyback” registration rights at our expense. The piggyback
registration rights may be exercised at any time following issuance
of the warrants but no later than five years following the
effectiveness of the registration statement in compliance with
FINRA rule 5110(g)(8)(D).
Right
of First Refusal
We
have also granted EF Hutton an irrevocable right of first refusal
for a period of twelve (12) months after closing date of this
offering, to act as sole investment banker, sole book-runner,
and/or sole placement agent, at EF Hutton’s sole discretion, for
each and every future public and private equity and debt offering,
including all equity linked financings, during such twelve (12)
month period, of the Company, or any successor to or subsidiary of
the Company, on terms and conditions customary to EF Hutton for
such transactions.
Lock-up
Agreements
The
Company, each of our directors and executive officers, and our 5%
and greater stockholders, have agreed not to, for a period of 180
days after the date of this prospectus, without the prior written
consent of EF Hutton, subject to certain limited exceptions, (i)
offer, pledge, sell, contract to sell, grant any option to
purchase, or otherwise dispose of our Common Stock or any
securities convertible into or exchangeable or exercisable for
common stock; (ii) file or caused to be filed any registration
statement with the SEC relating to the offering of any shares of
Common Stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of Common Stock of the
Company; (iii) complete any offering of debt securities of the
Company, other than entering into a line of credit with a
traditional bank (iv) or enter into any hedge or other arrangement
or any transaction that transfers, directly or indirectly, the
economic consequence of ownership of the shares of our Common
Stock, whether any such transaction described in clause (i), (ii),
(iii) or (iv) is to be settled by delivery of shares of Common
Stock of the Company or such other securities, in cash or
otherwise..
Indemnification
We
and the selling stockholders have agreed to indemnify the several
underwriters against certain liabilities, including certain
liabilities under the Securities Act. If we are unable to provide
this indemnification, we have agreed to contribute to payments the
underwriters may be required to make in respect of those
liabilities.
Other
Relationships
Some
of the underwriters and their affiliates have engaged in, and may
in the future engage in, investment banking and other commercial
dealings in the ordinary course of business with us or our
affiliates. They have received, or may in the future receive,
customary fees and commissions for these transactions.
Stock
Exchange
We
have applied to have our shares of Common Stock approved for
listing on the NASDAQ Capital Market under the symbol “GBOX.” We
will not proceed with this offering in the event our Common Stock
is not approved for listing on Nasdaq.
Price
Stabilization, Short Positions
The
underwriters may engage in stabilizing transactions for the purpose
of pegging, fixing or maintainin