UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from _________ to _________
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of exchange on which registered | ||
| None | None | None |
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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As of April 25, 2025 there were shares of the registrant’s common stock outstanding.
UNIQUE LOGISTICS INTERNATIONAL, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2025
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| February 28, 2025 | May 31, 2024 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Contract assets | ||||||||
| Other current assets and prepaids | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other noncurrent assets: | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Equity-method investments | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Deferred tax asset, net | ||||||||
| Other noncurrent assets | ||||||||
| Total other noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and current liabilities | ||||||||
| Accrued freight | ||||||||
| Revolving credit facility | ||||||||
| Derivative liabilities | ||||||||
| Warrants payable | ||||||||
| Current portion of notes payable | ||||||||
| Current portion of notes payable to related parties | ||||||||
| Current portion of operating lease liability | ||||||||
| Total current liabilities | ||||||||
| Noncurrent liabilities | ||||||||
| Notes payable, net of current portion | ||||||||
| Notes payable to related parties, net of current portion | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Derivative liabilities | ||||||||
| Other noncurrent liabilities | ||||||||
| Total noncurrent liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred Stock, $ par value: shares authorized, issued and outstanding as of February 28, 2025 and May 31, 2024, respectively. | ||||||||
| Series A Convertible Preferred stock, $ par value; issued and outstanding as of February 28, 2025 and May 31, 2024, respectively. Liquidation preference $ | ||||||||
| Series B Convertible Preferred stock, $ par value; issued and outstanding as of February 28, 2025 and May 31, 2024, respectively. Liquidation preference of $ | ||||||||
| Series C Convertible Preferred stock, $ par value; , issued and outstanding as of February 28, 2025 and May 31, 2024, respectively. Liquidation preference $ | ||||||||
| Series D Convertible Preferred stock, $ par value; issued and outstanding as of February 28, 2025 and May 31, 2024, respectively. Liquidation preference $ | ||||||||
| Common stock, $ par value; shares authorized; shares issued and outstanding as of February 28, 2025 and May 31, 2024, respectively. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ( | ) | ||||||
| Retained earnings | ||||||||
| Total Stockholders’ Equity attributable to common shareholders | ||||||||
| Equity attributable to noncontrolling interests | ||||||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See notes accompanying condensed consolidated financial statements.
| F-1 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
(Unaudited)
For the Three Months Ended February 28, 2025 | For the Three Months Ended February 29, 2024 | For the Nine Months Ended February 28, 2025 | For the Nine Months Ended February 29, 2024 | |||||||||||||
| Revenues: | ||||||||||||||||
| Airfreight services | $ | $ | $ | $ | ||||||||||||
| Ocean freight and ocean services | ||||||||||||||||
| Contract logistics | ||||||||||||||||
| Customs brokerage and other services | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Equity method earnings | ||||||||||||||||
| Costs and operating expenses: | ||||||||||||||||
| Airfreight services | ||||||||||||||||
| Ocean freight and ocean services | ||||||||||||||||
| Contract logistics | ||||||||||||||||
| Customs brokerage and other services | ||||||||||||||||
| Salaries and related costs | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Rent and occupancy | ||||||||||||||||
| Selling and promotion | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Foreign exchange transactions, net | ( | ) | ||||||||||||||
| Gain on business disposal | ( | ) | ||||||||||||||
| Other | ( | ) | ||||||||||||||
| Total costs and operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Other income (expenses) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivative liabilities | ||||||||||||||||
| SPAC merger termination cost | ( | ) | ( | ) | ||||||||||||
| Uplist termination cost | ( | ) | ( | ) | ||||||||||||
| Total other income (expenses) | ( | ) | ( | ) | ||||||||||||
| Net income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Income tax expense (benefit) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Noncontrolling interest allocated loss (gain) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income (loss) attributable to for common shareholders | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) available for common shareholders per common share | ||||||||||||||||
| basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| diluted | ( | ) | ( | ) | ||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| basic | ||||||||||||||||
| diluted | ||||||||||||||||
See notes to accompanying condensed consolidated financial statements.
| F-2 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
| For the | For the | |||||||
| Three Months Ended | Three Months Ended | |||||||
| February 28, 2025 | February 29, 2024 | |||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Other comprehensive income, net of tax: | ||||||||
| Foreign currency translation adjustments | ||||||||
| OCI tax effect | ||||||||
| Total comprehensive income (loss) | ( | ) | ||||||
| Net gain attributable to noncontrolling interest | ( | ) | ( | ) | ||||
| Comprehensive income (loss) attributable to common shareholder | $ | $ | ( | ) | ||||
| For the | For the | |||||||
| Nine Months Ended | Nine Months Ended | |||||||
| February 28, 2025 | February 29, 2024 | |||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Other comprehensive income (loss), net of tax: | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| OCI tax effect | ||||||||
| Total comprehensive income (loss) | ( | ) | ||||||
| Net (gain) loss attributable to noncontrolling interest | ( | ) | ||||||
| Comprehensive income (loss) attributable to common shareholder | $ | $ | ( | ) | ||||
See notes to accompanying condensed consolidated financial statements.
| F-3 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(unaudited)
For the Three and Nine Months Ended February 28, 2025
Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Common Stock | Additional Paid in | Accumulated Comprehensive | Retained | Total Stockholders’ equity attributable to common | Non- Controlling | Total Stockholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | income | earnings | stockholders | Interest | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 1, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, August 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, November 30, 2024 | $ | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, February 28, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
For the Three and Nine Months Ended February 29, 2024
Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Common Stock | Additional Paid in | Accumulated Comprehensive | Retained | Total Stockholders’ equity attributable to common | Non- Controlling | Total Stockholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | capital | income | earnings | stockholders | Interest | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 1, 2023 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, August 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, November 30, 2023 | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, February 29, 2024 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
See notes to accompanying condensed consolidated financial statements.
| F-4 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months Ended February 28, 2025 | For the Nine Months Ended February 29, 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Credit loss (recovery) | ( | ) | ||||||
| Amortization of right of use assets | ||||||||
| Equity method earnings | ( | ) | ( | ) | ||||
| Change in net deferred tax provision | ( | ) | ||||||
| Change in fair value of derivative liabilities | ( | ) | ( | ) | ||||
| Noncash gain on business disposition | ( | ) | ||||||
| Uplist termination cost previously deferred | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Contract assets | ( | ) | ||||||
| Prepaid expenses and current assets | ( | ) | ||||||
| Deposits and other noncurrent assets | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Accrued freight | ( | ) | ( | ) | ||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Dividends received from equity method investments | ||||||||
| Capital contribution to equity method investments | ( | ) | ||||||
| Cash acquired in connection with business acquisition | ||||||||
| Net Cash Provided (Used in) by Investing Activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Borrowings on line of credit, net | ||||||||
| Repayments note payable | ( | ) | ||||||
| Borrowings note payable | ||||||||
| Repayments related parties | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| Effect of exchange rate on cash and equivalents | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents - Beginning of period | ||||||||
| Cash and cash equivalents - End of period | $ | $ | ||||||
| SUPPLEMENTARY CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the period for: | ||||||||
| Income taxes | $ | $ | ||||||
| Interest | $ | $ | ||||||
| SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | $ | ||||||
| Promissory notes issued due to related parties (Note 2) | $ | $ | ||||||
| Promissory note issued due to related party (Note 2) | $ | $ | ||||||
| Promissory notes cancelled due to related parties (Note 2) | $ | $ | ||||||
| Goodwill measurement adjustment (Note 1) | $ | $ | ||||||
| F-5 |
UNIQUE LOGISTICS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2025
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Unique Logistics International, Inc. and its subsidiaries (the “Company”) is a non-asset-based provider of global logistics and freight forwarding services operating through a worldwide network of offices and exclusive or non-exclusive agents. The Company’s customers include retailers and wholesalers, electronics, high technology, industrial and manufacturing companies around the world. The Company provides a range of international logistics services that enable its customers to outsource sections of their supply chain process. This range of services can be categorized as follows:
| ● | Air Freight | |
| ● | Ocean Freight | |
| ● | Customs Brokerage and Compliance | |
| ● | Warehousing and Distribution | |
| ● | Order Management |
Basis of Presentation
These condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include all accounts of the Company and its majority owned subsidiaries stated in U.S. dollars, the Company’s functional currency. For subsidiaries operating outside the U.S., the financial information will be accounted for on a one-month lag. Substantially all unremitted earnings of international subsidiaries are free of legal and contractual restrictions. All intercompany transactions and balances have been eliminated in the condensed consolidated financial statements.
The unaudited interim financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. The results reported in these interim condensed consolidated financial statements should not be regarded as necessary indicative of results that may be expected for an entire fiscal year. This report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended May 31, 2024. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The condensed consolidated balance sheet on May 31, 2024 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.
Liquidity and Going Concern
The Company’s financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business. In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.
| F-6 |
The Company’s principal
sources of cash are (i) cash generated from operations, (ii) borrowings available under its revolving line of credit (through March
31, 2025) or the new factoring agreement (beginning April 1, 2025), and (iii) proceeds from debt or equity issuances. As of February
28, 2025, the Company had cash and cash equivalents of approximately $
For the nine months ended February 28, 2025, the Company
generated $
The Company is continually evaluating its liquidity requirements considering its operating needs, growth initiatives and capital resources. Based on its assessment of the Company’s projected cash flow, impact of the pending merger and expected business performance as of and subsequent to February 28, 2025, management believes that the Company’s current cash and the ability to raise cash under the Factoring Agreement as well as the opportunity to pay off certain of its debt as part of the Merger Agreement would be sufficient to support its operations for at least the next 12 months from the issuance of this report. The Company’s plan includes the items noted above as well as securing external financing, which may include raising debt or equity capital. These plans are not entirely within the Company’s control including its ability to raise sufficient capital on favorable terms, if at all, and absent an infusion of sufficient capital there is substantial doubt about its ability to continue as a going concern for 12 months after the date the condensed consolidated financial statements for the three and nine months ended February 28, 2025 are issued.
As further discussed in subsequent events note to the financial statements, on March 11, 2025, the Company entered into an agreement and plan of merger by and among the Company, DP World Logistics US Holdings, Inc. and Unique Merger Co., a Nevada corporation and wholly owned subsidiary of DP World Logistics US Holdings (the “Merger Agreement”), pursuant to which Unique Merger Co. will merge with and into the Company, with the Company surviving such merger as a wholly-owned subsidiary of DP World Logistics US Holdings. There can be no assurance that the Company will be able to complete this merger or to raise the capital it needs to continue its operations on satisfactory terms or at all. If capital is not available to the Company when, and in the amounts, needed, the Company could be required to liquidate its assets, cease or curtail operations, which could materially harm its business, financial condition and results of operations, or seek protection under applicable bankruptcy laws or similar state proceedings.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates.
| F-7 |
Significant estimates inherent in the preparation of the condensed consolidated financial statements include determinations of the useful lives and expected future cash flows of long-lived assets, including intangibles, valuation of assets and liabilities acquired in business combinations, and estimates and assumptions in valuation of debt and equity instruments, including derivative liabilities. In addition, the Company makes significant judgments to recognize revenue – see policy note “Revenue Recognition” below.
Revenue Recognition
The Company follows ASC 606, Revenue from Contracts with Customers. Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to receive in exchange for services. The Company recognizes revenue upon meeting each performance obligation based on the allocated amount of the total consideration of the contract to each specific performance obligation.
To determine revenue recognition, the Company applies the following five steps:
| 1. | Identify the contract(s) with a customer; | |
| 2. | Identify the performance obligations in the contract; | |
| 3. | Determine the transaction price; | |
| 4. | Allocate the transaction price to the performance obligations in the contract; and | |
| 5. | Recognize revenue as or when the performance obligation is satisfied. |
Revenue is recognized as follows:
| i. | Freight income - export sales | |
| Freight income from the provision of air, ocean, and land freight forwarding services are recognized over time based on a relative transit time basis through the sail or departure from origin port. The Company is the principal in these transactions and recognizes revenue on a gross basis. | ||
| ii. | Freight income - import sales | |
| Freight income from the provision of air, ocean, and land freight forwarding services are recognized over time based on a relative transit time basis through the delivery to the customer’s designated location. The Company is the principal in these transactions and recognizes revenue on a gross basis. | ||
| iii. | Customs brokerage and other service income | |
| Customs brokerage and other service income from the provision of other services are recognized at the point in time the performance obligation is met. |
| F-8 |
The Company’s business practices require, for accurate and meaningful disclosure, that it recognizes revenue over time. The “over time” policy is the period from point of origin to arrival of the shipment at the port of entry (or in the case when the customer requires delivery to a designated point, the arrival at that delivery point). This overtime policy requires the Company to make significant judgements to recognize revenue over the estimated duration of time from port of origin to arrival at port of entry. The point in the process when the Company meets its obligation in the port of entry and the subsequent transfer of the goods to the customer is when the customer has the obligation to pay, has taken physical possession, has legal title, risk and awards (ownership) and has accepted the goods. The Company has elected to not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as of the end of the period as the Company’s contracts with its customers have an expected duration of one year or less.
The Company uses independent contractors and third-party carriers in the performance of its transportation services. The Company evaluates who controls the transportation services to determine whether its performance obligation is to transfer services to the customer or to arrange for services to be provided by another party. The Company determined it acts as the principal for its transportation services performance obligation as it is in control of establishing the prices for the specified services, managing all aspects of the shipments process and assuming the risk of loss for delivery and collection.
Revenue billed prior to realization is recorded as contract liabilities on the consolidated balance sheets and contract costs incurred prior to revenue recognition are recorded as contract assets on the consolidated balance sheets.
Contract Assets
Contract assets represent amounts for which the Company has the right to consideration for the services provided while a shipment is still in-transit but for which it has not yet completed the performance obligation and has not yet invoiced the customer. Upon completion of the performance obligations, which can vary in duration based upon the method of transport and billing the customer, these amounts become classified within accounts receivable.
Contract Liabilities
Contract liabilities represent the amount of obligation to transfer goods or services to a customer for which consideration has been received.
Disaggregation of Revenue from Contracts with Customers
The following table disaggregates gross revenue from our clients by significant geographic area for the three and nine months ended February 28, 2025, and February 29, 2024, based on origin of shipment (imports) or destination of shipment (exports):
| For the | For the | |||||||
| Three Months Ended | Three Months Ended | |||||||
| February 28, 2025 | February 29, 2024 | |||||||
| China, Hong Kong & Taiwan | $ | $ | ||||||
| Southeast Asia | ||||||||
| United States | ||||||||
| India Sub-continent | ||||||||
| EMEA (Europe, Middle East, and Africa) | ||||||||
| Other | ||||||||
| Total revenue | $ | $ | ||||||
| For the | For the | |||||||
| Nine Months Ended | Nine Months Ended | |||||||
| February 28, 2025 | February 29, 2024 | |||||||
| China, Hong Kong & Taiwan | $ | $ | ||||||
| Southeast Asia | ||||||||
| United States | ||||||||
| India Sub-continent | ||||||||
| EMEA (Europe, Middle East, and Africa ) | ||||||||
| Other | ||||||||
| Total revenue | $ | $ | ||||||
| F-9 |
Foreign Currency Translation
For most of our international operations conducted by the subsidiaries operating outside the U.S, local currencies have been determined to be functional currencies. The Company translates functional currency assets and liabilities to their U.S. dollar equivalents at exchange rates in effect as of the balance sheet date and income and expense amounts at average exchange rates for the period. The U.S. dollar effects that arise from changing translation rates are recorded in Other comprehensive income/(loss). Transaction gains or losses result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated. The Company aggregates all transaction gains and losses and classify the net amount in a single caption in the income statement in operating income as foreign exchange transactions, net.
Fair Value Measurement
The Company follows the authoritative guidance that establishes a formal framework for measuring fair values of assets and liabilities in the consolidated financial statements that are already required by generally accepted accounting principles to be measured at fair value. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The transaction is based on a hypothetical transaction in the principal or most advantageous market considered from the perspective of the market participant that holds the asset or owes the liability.
The Company utilizes market data or assumptions that market participants who are independent, knowledgeable, and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company attempts to utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company is able to classify fair value balances based on the observability of those inputs. The guidance establishes a formal fair value hierarchy based on the inputs used to measure fair value. The hierarchy gives the highest priority to Level 1 measurements and the lowest priority to level 3 measurements, and accordingly, Level 1 measurement should be used whenever possible.
The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities or published net asset value for alternative investments with characteristics similar to a mutual fund.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs for the asset or liability.
The methods used may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while management believes its valuation methods are appropriate, the fair value of certain financial instruments could result in a difference fair value measurement at the reporting date. There were no changes in the Company’s valuation methodologies from the prior year.
For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amounts for financial assets and liabilities such as cash and cash equivalents, accounts receivable - trade, contract assets, factoring reserve, other prepaid expenses and current assets, accounts payable – trade and other current liabilities, including contract liabilities, convertible notes, promissory notes, all approximate fair value due to their short-term nature as of February 28, 2025, and May 31, 2024. The carrying amount of the long-term debt approximates fair value because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company. Lease liabilities approximate fair value based on the incremental borrowing rate used to discount future cash flows. The Company had Level 3 liabilities (See Derivative Liability note) as of February 28, 2025 and May 31, 2024. There were no transfers between levels during the reporting period.
| F-10 |
Accounts Receivable
Accounts receivable from revenue transactions are based on invoiced prices which the Company expects to collect. In the normal course of business, the Company extends credit to customers that satisfy pre-defined credit criteria. The Company generally does not require collateral to support customer receivables. Accounts receivable, as shown on the consolidated balance sheets, is net of allowances when applicable. Management estimates that allowance for credit losses is based on ongoing review of existing economic conditions, the financial conditions of the customers, historical trends in credit losses, and the amount and age of past due accounts. The Company’s trade accounts receivable present similar credit risk characteristics and the allowance for credit loss is estimated on a collective basis, using a credit loss-rate method that uses historical credit loss information and considers the current economic environment.
As of February 28, 2025, and May 31,
2024, the allowance for credit losses was approximately $
| February 28, 2025 | May 31, 2024 | |||||||
| Allowance for credit losses: | ||||||||
| Beginning of period | $ | $ | ||||||
| Net provision for credit losses | ||||||||
| Recoveries and write-offs | ( | ) | ( | ) | ||||
| End of period | $ | $ | ||||||
Concentrations
As of February 28, 2025 and May 31, 2024, one
major customer (Customer A) represented approximately
Revenue from one major customer
(Customer B) was
Revenue from two major customers
(Customers A and B) was
Goodwill and Intangible Assets
The Company accounts for business acquisitions in accordance with GAAP. Goodwill in such acquisitions is determined as the excess of fair value over amounts attributable to specific tangible and intangible assets. GAAP specifies criteria to be used in determining whether intangible assets acquired in a business combination must be recognized and reported separately from goodwill. Amounts assigned to goodwill and other identifiable intangible assets are based on independent appraisals or internal estimates.
In accordance with GAAP, the Company does not amortize
goodwill or indefinite-lived intangible assets. Management evaluates the remaining useful life of an intangible asset that is not being
amortized each reporting period to determine whether events and circumstances continue to support an indefinite useful life. If an intangible
asset that is not being amortized is subsequently determined to have a finite useful life, it is amortized prospectively over its estimated
remaining useful life. Amortizable intangible assets, including tradenames and non-compete agreements, are amortized on a straight-line
basis over
The Company tests goodwill for impairment annually as of May 31 or if an event occurs or circumstances change that indicate that the fair value of the entity, or the reporting unit, may be below its carrying amount.
On August 1, 2024, the Company closed the acquisition of all of the share capital owned by Unique Logistics Holdings Limited, a Hong Kong corporation (“ULHK”), in Unique Logistics International (Sin) Pte Ltd. (“Unique Singapore”) and recorded additional goodwill and recognized additional intangible assets. Subsequently, goodwill was adjusted for the impact of deferred tax assets and accounted for as a measurement period adjustment as part of Unique Singapore acquisition and Unique Logistics International (Vietnam) Co., Ltd (“Unique Vietnam”) deconsolidation.
On January 14, 2025, the Company and ULHK entered into an agreement to terminate the share sale and purchase between the Company and ULHK dated September 13, 2022, as amended (the “Unique Vietnam Purchase Agreement”), pursuant to which the Company agreed to purchase from ULHK interests representing 65% of the charter capital of Unique Vietnam, resulting in a removal of all Unique Vietnam’s assets and liabilities from the consolidated financial statements effective November 30, 2024, and a removal of goodwill and acquisition related intangible assets from the Company’s consolidated financial statements as follows:
The changes in Goodwill for the nine months ended February 28, 2025 were as follows:
| Beginning balance June 1, 2024 | $ | |||
| Acquisition of Unique Singapore | ||||
| Disposition of Unique Vietnam | ( | ) | ||
| Measurement period adjustment | ||||
| Ending balance February 28, 2025 | $ |
The changes in Intangible assets for the nine months ended February 28, 2025 were as follows:
| Beginning balance June 1, 2024 | $ | |||
| Acquisition of Unique Singapore | ||||
| Disposition of Unique Vietnam | ( | ) | ||
| Ending balance February 28, 2025 | ||||
| Less: Accumulated amortization | ( | ) | ||
| Ending balance February 28, 2025, net of accumulated amortization | $ |
| F-11 |
Derivative Liability
Convertible Preferred Stock Series A, C and D feature anti-dilution provision that expires on a specified date. Management has determined the anti-dilution provision embedded in preferred stock Series A, C and D is required to be accounted for separately from the preferred stock as a derivative liability and recorded at fair value. Separation of the anti-dilution option as a derivative liability is required because its economic characteristics are considered more akin to an equity instrument and therefore the anti-dilution option is not considered to be clearly and closely related to the economic characteristics of the preferred stock.
The Company has identified and recorded derivative instruments arising from an anti-dilution provision. An embedded derivative liability is representing the rights of holders of Convertible Preferred Stock Series A, C and D to receive additional common stock of the Company upon issuance of any additional common stock by the Company prior to qualified financing event as defined in the agreement. Each reporting period, the embedded derivative liability, if material, would be adjusted to reflect fair value at each period end with changes in fair value recorded in the “Change in fair value of embedded derivative liability” financial statement line item of the company’s statements of operations.
| Level 1 | Level 2 | Level 3 | ||||||||||
| Derivative liabilities as of June 1, 2024 | $ | $ | $ | |||||||||
| Addition | ||||||||||||
| Change in fair value | ( | ) | ||||||||||
| Derivative liabilities as of February 28, 2025 | $ | $ | $ | |||||||||
The underlying value of the anti-dilution provision is calculated from estimating the probability and value of the provision assuming a near term financing event. For the period ended May 31, 2024, based on the assumption of how antidilutive shares of Convertible Preferred Series A, C and D would be exchanged in the near future for common stock, and the fact that the antidilution provision of these shares is effective through December 31, 2025, the assumptions included probability of the financing event, estimated value of common stock at the exchange point and estimated time to financing event.
The key inputs into the model were as follows:
| February 28, 2025 | May 31, 2024 | |||||||
| Risk-free interest rate | * | % | ||||||
| Probability of capital raise (financing event) | * | % | ||||||
| Probability of sale (financing event) | * | % | ||||||
| Estimated value of common stock capital raise per share | * | $ | ||||||
| Estimated value of common stock upon sale per share | * | $ | ||||||
| Estimated time to financing event | * | |||||||
*After the period ended February 28, 2025, as further discussed in the subsequent events note, on March 11, 2025, the Company entered into the Merger Agreement, which includes a sale agreement via a merger with a predetermined purchase price for the Company. Accordingly, antidilution provision was adjusted to reflect the fixed price allocated to this feature for the period ended February 28, 2025, resulting in a gain from the change in fair value. The balance of the liability was reclassified as current to reflect the short-term nature of the payout.
Income Taxes
Income taxes are accounted for under the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, the tax effect of loss carry forwards and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
The Company uses a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating its tax positions and estimating our tax benefits, which may require periodic adjustments, and that may not match the ultimate future outcome.
Segment Reporting
Based on the guidance provided by the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting, management has determined that the Company currently operates in one primary geographical segment, the United States of America, where most of its customers are located, and consists of a single reporting unit given the similarities in economic characteristics between its operations and the common nature of its products, services, and customers.
Comprehensive Income
Comprehensive income consists of net earnings and other gains and losses affecting equity that, under GAAP, are excluded from net earnings. For the Company, these consist of foreign currency translation gains and losses, net of related income tax effects and comprehensive income or loss attributable to the noncontrolling interests. Accumulated other comprehensive income or loss consisted entirely of foreign currency translation adjustments, net of related income tax effects for the periods ended February 28, 2025 and February 29, 2024.
| F-12 |
| For the Three Months Ended | ||||||||
| February 28, 2025 | February 29, 2024 | |||||||
| Numerator: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Effect of dilutive securities: | ||||||||
| Diluted net income (loss) | $ | $ | ( | ) | ||||
| Denominator: | ||||||||
| Weighted average common shares outstanding – basic | ||||||||
| Dilutive securities:* | ||||||||
| Series A Preferred | ||||||||
| Series B Preferred | ||||||||
| Series C Preferred | ||||||||
| Series D Preferred | ||||||||
| - | ||||||||
| Weighted average common shares outstanding and assumed conversion – diluted | ||||||||
| Net income (loss) per common share | ||||||||
| Basic | $ | $ | ) | |||||
| Diluted | $ | $ | ) | |||||
| For the Nine Months Ended | ||||||||
| February 28, 2025 | February 29, 2024 | |||||||
| Numerator: | ||||||||
| Net Income (Loss) | $ | $ | ( | ) | ||||
| Effect of dilutive securities: | ||||||||
| Diluted net income (loss) | $ | $ | ( | ) | ||||
| Denominator: | ||||||||
| Weighted average common shares outstanding – basic | ||||||||
| Dilutive securities*: | ||||||||
| Series A Preferred | ||||||||
| Series B Preferred | ||||||||
| Series C Preferred | ||||||||
| Series D Preferred | ||||||||
| Weighted average common shares outstanding and assumed conversion – diluted | ||||||||
| Net income (loss) per common share | ||||||||
| Basic | $ | $ | ) | |||||
| Diluted | $ | $ | ) |
| * |
| February 29, 2024 | ||||
| Weighted average common shares outstanding – basic | ||||
| Series A Preferred | ||||
| Series B Preferred | ||||
| Series C Preferred | ||||
| Series D Preferred | ||||
| Weighted average common shares outstanding and assumed conversion – diluted | ||||
| F-13 |
Recent Accounting Pronouncements
Improvements to Reportable Segment Disclosures
In November 2023, the Financial Accounting Standards Board (FASB) issued an Accounting Standard Update (ASU) which makes improvements to reportable segment disclosures, by requiring, among other things, the disclosure in interim periods about a reportable segment’s profit or loss and assets that are currently required annually, and disclosures of significant segment expenses and profit and loss measures provided to the chief operating decision maker. The ASU does not change how the Company identifies its operating segments and will have no impact its segment disclosures and no impact on its consolidated financial statements, cash flows and financial condition.
Improvements to Income Tax Disclosures
In December 2023, the FASB issued an ASU which expands income tax disclosures by requiring the disclosure, on an annual basis, of a tabular rate reconciliation using both percentages and currency amounts, broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, disclosure is required of income taxes paid, net of refunds received, disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. This standard will become effective for the Company on June 1, 2025. The Company expects this ASU to only impact its disclosures with no impact on its consolidated financial statements, cash flows and financial condition.
2. ACQUISITIONS AND DIVESTURES
Acquisitions
On August 1, 2024, the Company closed the acquisition of all of the share capital owned by Unique Logistics Holdings Limited, a Hong Kong corporation (“ULHK”), in Unique Logistics International (Sin) Pte Ltd. (“Unique Singapore”) pursuant to a Share Sale and Purchase Agreement, as amended, between the Company and ULHK.
The total consideration for the purchased shares was
calculated at an estimated fair value of $
Purchase Price Allocation
The Company obtained full control of Unique Singapore and consolidated this entity as of the acquisition date. GAAP requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity at the acquisition date, measured at their fair values as of that date. The acquisition method of accounting requires extensive use of estimates and judgments to allocate the considerations transferred to the identifiable tangible and intangible assets acquired and liabilities assumed.
The following summarizes preliminary estimates of fair values of the assets acquired and liabilities assumed at the acquisition:
| At Fair Value | ||||
| Assets Acquired: | ||||
| Current assets | $ | |||
| Identifiable intangible assets | ||||
| Fixed Assets and other non-current assets | ||||
| Goodwill | ||||
| Liabilities Assumed: | ||||
| Current liabilities | ( | ) | ||
| Purchase Price | $ | |||
The goodwill acquired is primarily attributable to the workforce retained of the acquired business and synergies expected to arise after the Company’s acquisition of the above operating subsidiary. It is also anticipated that the goodwill will be deductible for tax purposes.
The Company paid approximately $
Identifiable intangible assets and their amortization periods are estimated as follows:
| Cost Basis | Useful Life | |||||||
| Customer relationships | $ | |||||||
Expense for amortization of identifiable intangible
assets related to this acquisition for the three and nine months ended February 28, 2025 was $
| For the Twelve Months Ending February 28 | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
| F-14 |
Pro Forma Information (Unaudited)
The Company is reporting the results of operations of its subsidiaries on a one-month lag basis.
The results of operations of Unique Singapore from May 1, 2024 through July 31, 2024 have not been included in the Company’s condensed consolidated financial statements because the Company only acquired this entity on August 1, 2024. The results of Unique Singapore are included in the results of operations from the date of acquisition, which is August 1, 2024 on a one-month lag basis, which would be the second fiscal quarter for the Company.
The following unaudited pro forma financial information represents a summary of the consolidated results of operations of the Company for the three months ended February 29, 2024, assuming the acquisition had been completed as of April 30, 2023, first day of the period for consolidating subsidiaries on a one-month lag basis. The proforma adjustments include the elimination of intercompany revenue and expense transactions.
Three Months Ended February 29, 2024 | ||||
| Revenue, net | $ | |||
| Net loss attributable to registrant | ( | ) | ||
| Weighted average shares of common stock outstanding, basic and diluted | ||||
| Net loss per share, basic and diluted | $ | ) | ||
The following unaudited pro forma financial information represents a summary of the consolidated results of operations of the Company for the nine months ended February 28, 2025 and February 29, 2024, assuming the acquisition had been completed as of April 30, 2023, first day of the period for consolidating subsidiaries on a one-month lag basis. The proforma adjustments include the elimination of intercompany revenue and expense transactions.
Nine Months Ended February 28, 2025 | Nine Months Ended February 29, 2024 | |||||||
| Revenue, net | $ | $ | ||||||
| Net income (loss) attributable to registrant | ( | ) | ||||||
| Weighted average shares of common stock outstanding, basic and diluted | ||||||||
| Net income (loss) per share, basic and diluted | $ | $ | ) | |||||
The pro forma financial information is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had been effective as of these dates, or of future results.
Divestitures
Per the termination agreement dated as of January
14, 2025 and effective as of November 30, 2024, by and between the Company and ULHK, the parties agreed to terminate the share sale and
purchase agreement between the Company and ULHK dated September 13, 2022, as amended (the “Unique Vietnam Purchase Agreement”),
pursuant to which the Company agreed to purchase from ULHK interests representing
3. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following on February 28, 2025 and May 31, 2024:
| February 28, 2025 | May 31, 2024 | |||||||
| Accrued professional fees | $ | $ | ||||||
| Accrued salaries and related expenses | ||||||||
| Accrued interest | ||||||||
| Accrued refunds | ||||||||
| Accrued sales and marketing expense | ||||||||
| Accrued income tax | ||||||||
| Other accrued expenses and current liabilities | ||||||||
| $ | $ | |||||||
| F-15 |
4. FINANCING ARRANGEMENTS
Financing arrangements on the condensed consolidated balance sheets consists of:
| February 28, 2025 | May 31, 2024 | |||||||
| Revolving credit facility | $ | $ | ||||||
| Notes payable (current and noncurrent) | ||||||||
| Less: current portion | ||||||||
| $ | $ | |||||||
Revolving Credit Facility
The TBK Facility provides for the Company to have
access to the lesser of (i) $
On September 12, 2024, the Company entered into an
amendment to the security and loan agreement for a temporary increase in the available credit limit from $
The Company is subject to certain financial covenants as part of the TBK Agreement. As of February 28, 2025 the Company was in violation of the specified fixed coverage ratio financial covenant. On April 1, 2025, the Company entered into a waiver to the TBK Agreement with TBK Bank whereby TBK Bank agreed to waive the fixed coverage ratio event of default for the quarter ended February 28, 2025.
On March 31, 2025, the Company and TBK terminated
TBK Agreement and replaced it with the Factoring Agreement with a maximum advance amount of $
Notes Payable
On March 10, 2023, the Company entered into a financing
agreement (the “Financing Agreement”) and related fee letter as a borrower with certain of its subsidiaries party thereto
as guarantors (collectively with the Company, the “Borrowers”), the lenders party thereto (collectively, the “Lenders”),
CB Agent Services LLC, as origination agent, and Alter Domus (US) LLC, as collateral agent and administrative agent (together with CB
Agents, the “Agents”) (collectively, the “Parties”). The Financing Agreement provides for an initial senior secured
term loan in a principal amount of $
Including a waiver fee in the amount of $
The Company is subject to certain financial covenants as part of the Financing Agreement. As of February 28, 2025 the Company was in violation of the EBITDA leverage ratio financial covenant set forth in Section 7.03(c) of the Financing Agreement. On March 28, 2025, the Company entered into a waiver agreement with the Agents whereby the Agents waived the requirements of, among other requirements, Section 7.03(c) of the Financing Agreement for the quarter ended February 28, 2025.
| F-16 |
5. RELATED PARTY TRANSACTIONS
The Company has the following notes payable to related parties:
| February 28, 2025 | May 31, 2024 | |||||||
| Due to FTS (1) | $ | $ | ||||||
| Due to ULHK(2) | ||||||||
| Less: current portion | ( | ) | ||||||
| $ | $ | |||||||
| (1) | |
| (2) |
Transactions listed below are between the Company
and ULHK and its operating subsidiaries. These are considered related party transactions due to ULHK being an entity with a more than
Accounts Receivable and Payable
Transactions with related parties account for $
Revenue and Expenses
Revenue from related party transactions is for export
services from related parties or for delivery at place imports nominated by such related parties. For the three months ended February
28, 2025, and February 29, 2024, these transactions represented $
Direct costs are services billed to the Company by
related parties for shipping activities. For the three months ended February 28, 2025 and February 29, 2024, these transactions represented
approximately $
| F-17 |
6. OTHER LONG-TERM LIABILITIES
Merger Termination
On December 18, 2022, the Company entered into an Agreement and Plan of Merger by and among Edify Acquisition Corp., a Delaware corporation (“Buyer”), Edify Merger Sub, Inc., a Nevada corporation (“Merger Sub”), and the Company, as amended and supplemented (the “Edify Merger Agreement”). On March 1, 2024, the Company, Buyer and Merger Sub entered into a mutual termination agreement, pursuant to which they mutually agreed to terminate the Edify Merger Agreement effective as of such date.
As a result of terminating the Edify
Merger Agreement, besides the merger termination costs of approximately $
Amendment to the financing agreement and a waiver
As previously disclosed, on March 10, 2023, the Company
entered into the Financing Agreement as borrower with certain of its subsidiaries party thereto as guarantors, the Lenders, and the Agents,
for an initial senior secured term loan in a principal amount of $
Effective March 1, 2024, the Parties entered into a waiver and amendment no. 2 to the Financing Agreement (the “Second Waiver”), whereby the Agents and the Lenders agreed to waive: (i) (a) that certain Event of Default (as defined in Section 9.01 of the Financing Agreement) that has occurred or may occur due to the Borrowers’ noncompliance with Section 7.03(a) of the Financing Agreement for each of the fiscal quarters in the fiscal year ending May 31, 2024 and for the fiscal quarter ending August 31, 2024 (the “FCCR Event of Default”), (b) that certain Event of Default that has occurred or may occur due to the Borrowers’ noncompliance with Section 7.03(b) of the Financing Agreement for each of the fiscal quarters in the fiscal year ending May 31, 2024 and for the fiscal quarter ending August 31, 2024 (the “Liquidity Event of Default”) and (c) that certain Event of Default that has occurred or may occur due to the Borrowers’ noncompliance with Section 7.03(c) of the Financing Agreement for each of the fiscal quarters in the fiscal year ending May 31, 2024 and for the fiscal quarter ending August 31, 2024 (together with the FCCR Event of Default and the Liquidity Event of Default, the “Specified Events of Default”); and (ii) interest at the post-default rate with respect to the Specified Events of Default from the date such event occurred through the Second Waiver effective date. As noted above, the Company is still non-compliant with Section 7.03(c) of the Financing Agreement in the second quarter ended February 28, 2025, as discussed in Note 4.
In addition, pursuant to the Second Waiver, the Borrowers
agreed to (i) pay the administrative agent a non-refundable Waiver Fee in an aggregate amount of $
The anti-dilution provisions applicable to the warrants shall at no time be less favorable to the holder thereof than those accorded by the parent to any other person on or after the effective date. The warrants shall be exercisable for a period of 7.5 years unless otherwise agreed within the warrant agreement, which is currently being drafted. This contract did not meet qualification requirements to be classified as equity because there is no explicit limit on the number of shares to be delivered in a share settlement. Accordingly, the warrants were classified as a liability as the issuer is obligated to settle the warrant by issuing a variable number of shares and the monetary value of the obligation based on a predetermined fixed amount, variation in something other than the issuers stock price, in this case the amount is the enterprise value of the Company at the time of the future financing event.
As the warrants were not yet issued on the balance
sheet date, these expected warrants were recorded as other long-term liability with an estimated fair market value of $
| F-18 |
The key inputs into the model were as follows:
| February 28, 2025 | May 31, 2024 | |||||||
| Risk-free interest rate | ** | % | ||||||
| Discount rate | ** | % | ||||||
| Probability of financing event next 2 years | ** | % | ||||||
| Probability of financing event years 2 through 7.5 | ** | % | ||||||
| Term | ** | |||||||
| ** | On March 11, 2025, the Company entered into the Merger Agreement, as further described in the
subsequent events note, and as a result, the redemption price of the warrants was specifically negotiated to include fixed and
variable components, and the fair value of these was estimated at $ |
The Company has identified and previously recorded these expected warrants (prior to issuance) due to the contractual nature of this liability as a long-term liability and as noted above as a current liability as of February 29, 2025. Once issued, these warrants will be reclassified into derivative liability as representing the rights of holders of these warrants to receive certain shares of common stock upon qualified financing event. Accordingly, the Company is treating this long-term liability as derivative liability and adjusting it to reflect fair value at each period end with changes in fair value recorded in the “Change in fair value of derivative liabilities” financial statement line item of the Company’s statements of operations. As of February 28, 2025, the warrants were recorded as current liability on the condensed consolidated balance sheet due to the imminent nature of the payout.
| Level 1 | Level 2 | Level 3 | ||||||||||
| Other long-term liabilities as June 1, 2024 | $ | $ | $ | |||||||||
| Addition | ||||||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||||||
| Current liabilities as February 28, 2025 | $ | $ | $ | |||||||||
7. STOCKHOLDERS’ EQUITY
Common Stock
The Company is authorized to issue shares of common stock, par value of $ per share.
Preferred Shares
The Company is authorized to issue shares of preferred stock, $ par value per share.
Series A Convertible Preferred
The shares of the Company’s Series A Preferred Stock contain an anti-dilution provision that provides for an adjustment necessary to maintain the stockholders’ fully diluted ownership percentage as of the date of issuance of the shares of Series A Preferred Stock.
Subject to the rights of holders of shares of the Company’s Series B Preferred Stock, which shares rank pari passu with shares of the Company’s Series A Preferred Stock in terms of liquidation preference, in the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the stockholders of record of shares of the Company’s Series A Preferred Stock shall be entitled to receive, at their option, immediately prior and in preference to any distribution to the holders of the Company’s common stock and other junior securities, a liquidation preference equal to their stated value per share.
Series B Convertible Preferred
Subject to the rights of holders of shares of the Company’s Series A Preferred Stock, which shares rank pari passu with shares of the Company’s Series B Preferred Stock in terms of liquidation preference, in the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the stockholders of record of shares of Series B Preferred Stock shall be entitled to receive, at their option, immediately prior and in preference to any distribution to the holders of the Company’s common stock and other junior securities, a liquidation preference equal to their stated value per share.
Series C & D Convertible Preferred
The holders of the Company’s Series C and Series D Preferred Stock shall be entitled to receive, upon liquidation, dissolution or winding up of the Company, the amount of cash, securities, or other property to which such holder would be entitled to receive with respect to such shares of Preferred Stock if such shares had been converted to shares of common stock immediately prior to such liquidation, dissolution or winding up.
8. COMMITMENTS AND CONTINGENCIES
Litigation
From time to time, the Company may become involved in litigation relating to claims arising in the ordinary course of the business. There are no claims or actions pending or threatened against the Company that, if adversely determined, would in the Company’s management’s judgment have a material adverse effect on the Company.
| F-19 |
Leases
The Company leases office space, warehouse facilities and equipment under non-cancellable lease agreements expiring on various dates through October 2028. Office leases contain provisions for future rent increases. The Company adopted ASC 842 from inception, requiring the Company to recognize an asset and liability on the consolidated balance sheets for lease arrangements with terms longer than 12 months. The Company has elected the practical expedient to not apply the recognition requirement to leases with a term of less than one year (short term leases). The Company uses its incremental borrowing rate to discount lease payments to present value. The incremental borrowing rate is based on the estimated interest rate the Company could obtain for borrowing over a similar term of the lease at commencement date. Rental escalations, renewal options and termination options, when applicable, have been factored into the Company’s determination of lease payments when appropriate. The Company does not separate lease and non-lease components of contracts. Variable payments related to pass-through costs for maintenance, taxes and insurance or adjustments based on an index such as Consumer Price Index are not included in the measurement of the lease liability or asset and are expensed as incurred.
Supplemental balance sheet information related to leases was as follows:
| February 28, 2025 | May 31, 2024 | |||||||
| Operating leases: | ||||||||
| Operating lease ROU assets, net | $ | $ | ||||||
| Current operating lease liabilities | ||||||||
| Noncurrent operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
The components of lease expense were as follows:
For the Three Months Ended | For the Three Months Ended | |||||||
| February 28, 2025 | February 29, 2024 | |||||||
| Operating lease cost – Right of Use Asset Amortization | $ | $ | ||||||
| Interest on lease liabilities | ||||||||
| Total net lease cost | $ | $ | ||||||
For the Nine Months Ended | For the Nine Months Ended | |||||||
| February 28, 2025 | February 29, 2024 | |||||||
| Operating lease cost – Right of Use Asset Amortization | $ | $ | ||||||
| Interest on lease liabilities | ||||||||
| Total net lease cost | $ | $ | ||||||
Supplemental cash flow and other information related to leases were as follows:
| For Nine Months Ended | For Nine Months Ended | |||||||
| February 28, 2025 | February 29, 2024 | |||||||
| ROU assets obtained in exchange for lease liabilities: | ||||||||
| Operating leases | $ | $ | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating leases | $ | $ | ||||||
| Weighted average remaining lease term (in years): | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate: | ||||||||
| Operating leases | % | % | ||||||
Future Minimum Payments for the Twelve Months Ended February 28 were as follows:
| February 28, 2025 | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ||||
| Total lease obligations | $ | |||
| F-20 |
9. INCOME TAX PROVISION
The breakout of foreign and domestic pretax income (loss) is as follows:
For the Three Months Ended February 28, 2025 | For the Three Months Ended February 29, 2024 | |||||||
| Domestic | $ | $ | ( | ) | ||||
| Foreign | ||||||||
| Pretax income (loss) | $ | $ | ( | ) | ||||
| For the Nine Months Ended February 28, 2025 |
Nine Months Ended February 29, 2024 | ||||||
| $ | $ | ( | ) | |||||
| $ | $ | ( | ) | |||||
The quarterly tax provision is determined using an
estimated annual effective tax rate, adjusted for discrete items arising in the applicable quarter. The Company recorded a provision for
income tax expense of $
For the three months ended February
28, 2025 the Company recorded $
The Company has filed its income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various international jurisdictions. Tax years 2020 and forward generally remain open for examination for federal and state tax purposes. Tax years 2017 and forward generally remain open for examination for foreign tax purposes. To the extent utilized in future years’ tax returns, net operating losses as of May 31, 2024 and 2023 will remain subject to examination until the respective tax year is closed. In connection with the termination of the Unique Vietnam acquisition (discussed in Note 2), the Company is no longer legally responsible for the related uncertain tax positions of Unique Vietnam. Such amounts have been removed from the balance sheet and any impacts recorded as part of the gain on the termination and not a component of income tax expense.
10. SUBSEQUENT EVENTS
Material Definitive Agreement
On March 11, 2025, Unique Logistics International, Inc. entered into the Merger Agreement, pursuant to which Unique Merger Co. will merge with and into the Company, with the Company surviving such merger as a wholly-owned subsidiary of DP World. The Company is working towards closing of such merger.
Line of Credit
On March 31, 2025, the Company and TBK Bank agreed to terminate the
TBK Agreement and to replace it with a factoring facility through TBK Bank affiliate Triumph Financial Services, LLC (the
“Factor”), both of which are wholly owned subsidiaries of Triumph Financial Inc. Under this agreement, the Company is
factoring specific accounts receivable to the Factor. On March 31, 2025, the Company factored approximately $
On April 1, 2025, the Company and TBK Bank entered into a waiver to the TBK Agreement whereby TBK Bank agreed to waive a specified event of default as of February 28, 2025. All other terms and conditions of the original TBK Agreement remained the same until March 31, 2025.
Term Debt
On March 28, 2025, the Company entered into a waiver agreement with the Agents whereby the Agents waived the requirements of, among other requirements, Section 7.03(c) of the Financing Agreement for the quarter ended February 28, 2025.
| F-21 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended 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.
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, judgements and assumptions. We believe that the estimates, judgements and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgements and assumptions are made. These estimates, judgements 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. 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. 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
| 3 |
● 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 corporation transacting business in multiple countries, we are subject to formal or informal investigations from government 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
● Our business is subject to significant seasonal fluctuations driven by market demands and each quarter is affected by seasonal trends
● Our revenue and direct costs are subject to significant fluctuations depending on supply and demand for freight capacity
● Rising international political tensions, including changes in U.S. and European international trade policies and other cross-border investment regulations, particularly with regard to China, may adversely impact our business and operating results.
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 our actual results of operations or the results of our future activities will not differ materially from our assumptions.
Business Overview and Recent Developments
The Company is a global logistics and freight forwarding 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. Our global network of trained employees and integrated information systems seamlessly manage the services that we provide. 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 |
| 4 |
Industry Trends, Trade Conditions and Competition
We specialize in shipping by air and sea from Asia to the United States. Our business is thus intricately linked to the economic, political and other market factors that impact trade and shipping in this sector. Geopolitical factors have resulted in United States’ importers moving production from China to other countries in the region. This trend poses challenges to ensure that we meet the changing logistics requirements of our customers and secure the capacity necessary by air or sea to successfully ship products for our customers from other parts of Asia.
The disruption of shipping through the Suez Canal due to continuing attacks on vessels in the Red Sea has had a significant impact on shipping logistics as a number of shipping companies have diverted their ships around the Cape of Good Hope instead of traveling through the Canal, increasing shipping times and costs. This diluted the impact of increased capacity that was expected from the deployment of new vessels. The increased transit around southern Africa tied up vessel capacity and resulted in higher shipping costs and some conversion to air freight.
Increasing air shipping volumes and reduced airfreight capacity for commercial imports has increased airfreight costs. Delays in the delivery of new aircraft have restricted capacity growth. As new aircraft deliveries get back on track and ocean shipping capacity is possibly boosted by the resumption of Suez Canal sailing, there may be a downward movement in airfreight costs.
At the moment, the global shipping industry is navigating another wave of uncertainty as new tariffs reroute trade flows, raise concerns about rates volatility and stir uncertainty regarding transport demand.
Results of Operations for the Three Months Ended February 28, 2025 and February 29, 2024
Revenue
For the three months ended February 28, 2025 and February 29, 2024, Unique Logistics’ revenue by product line was as follows:
For the Three Months Ended February 28, 2025 | For the Three Months Ended February 29, 2024 | $ change | % change | |||||||||||||
| Airfreight services | $ | 50,979,522 | $ | 31,672,402 | $ | 19,307,120 | 61.0 | % | ||||||||
| Ocean freight and ocean services | 29,436,467 | 27,543,642 | 1,892,825 | 6.9 | % | |||||||||||
| Contract logistics | 389,127 | 579,675 | (190,548 | ) | (32.9 | )% | ||||||||||
| Customs brokerage and other services | 8,150,893 | 8,034,666 | 116,227 | 1.4 | % | |||||||||||
| Total revenues | $ | 88,956,009 | $ | 67,830,385 | $ | 21,125,624 | 31.1 | % | ||||||||
The increase in total revenues for the three months ended February 28, 2025, compared to the three months ended February 29, 2024, is primarily due to increases in airfreight services revenue.
The increase in airfreight services revenue was due to increases of approximately 18.6% in spot market pricing, which was responsible for a 41.3% increase in airfreight services revenue, and approximately 35.8% in volume, which contributed to an increase of 58.7% in airfreight services revenue. The increase in pricing was mainly due to an increase in demand for airfreight services due to the continuing disruption of shipping through the Suez Canal, as discussed above, which has led to reduced airfreight space availability and price increases, while the increase in volume related to shifting demand from ocean to air as a result of geopolitical global turbulence, which has resulted in a greater disruption in ocean shipping routes than in air shipping routes.
An increase in ocean freight and ocean services revenue also contributed to the increase in total revenues. The increase in ocean freight and ocean services revenue was due to increases in pricing (that is, the rates that we charge customers), partially offset by a drop in volumes period-over period. An approximately 18.3% price increase for such services resulted in a 240.0% increase in ocean freight and ocean services revenue period-over period while an approximately 9.6% decrease in volume of such services resulted in a 140.0% decline in ocean freight and ocean services revenue.
| 5 |
Costs and Operating Expenses
For the three months ended February 28, 2025, and February 29, 2024, Unique Logistics’ costs and operating expenses were as follows:
For the Three Months ended February 28, 2025 | For the Three Months ended February 29, 2024 | $ change | % change | |||||||||||||
| Costs and operating expenses: | ||||||||||||||||
| Airfreight services | $ | 47,858,940 | $ | 29,076,358 | $ | 18,782,582 | 64.6 | % | ||||||||
| Ocean freight and ocean services | 24,951,920 | 23,999,410 | 952,510 | 4.0 | % | |||||||||||
| Contract logistics | 258,739 | 126,523 | 132,216 | 104.5 | % | |||||||||||
| Customs brokerage and other services | 7,107,885 | 6,346,786 | 761,099 | 12.0 | % | |||||||||||
| Salaries and related costs | 6,563,018 | 5,529,773 | 1,033,245 | 18.7 | % | |||||||||||
| Professional fees | 481,023 | 666,850 | (185,827 | ) | (27.9 | )% | ||||||||||
| Rent and occupancy | 1,179,371 | 1,176,612 | 2,759 | 0.2 | % | |||||||||||
| Selling and promotion | 582,140 | 609,751 | (27,611 | ) | (4.5 | )% | ||||||||||
| Depreciation and amortization | 501,638 | 752,750 | (251,112 | ) | (33.4 | )% | ||||||||||
| Foreign exchange (gains) and losses | 22,794 | 26,858 | (4,064 | ) | (15.1 | )% | ||||||||||
| Other expense | (631,036 | ) | 282,871 | (913,907 | ) | (323.0 | )% | |||||||||
| Total costs and operating expenses | $ | 88,876,432 | $ | 68,594,542 | $ | 20,281,890 | 29.6 | % | ||||||||
The 29.6% increase in total costs and operating expenses was primarily due to a 64.6% increase in the direct product costs of airfreight services during the three months ended February 28, 2025, compared to the three months ended February 29, 2024. The increase in direct product costs was primarily attributable to the increased purchase prices and additional volumes for the airfreight processed during the three months ended February 28, 2025, compared to the three months ended February 29, 2024, which correlates with the sales revenue increases in the airfreight category.
In addition, salaries and related costs increased period-over-period primarily due to severance payouts as the Company completed its global integration and reorganization related to 2023 and 2024 acquisitions. Professional fees decreased period-over-period because during the three months ended February 29, 2024, the Company was heavily relying on the outside legal advisors in connection with the merger contemplated by the Edify Merger Agreement. Depreciation and amortization during the three months ended February 29, 2024 included amortization of the right of use asset for foreign subsidiaries, which in the current year was reclassified to rental expense, resulting in a decrease in depreciation and amortization expense for the three months ended February 28, 2025 compared with the prior period. Other operating expenses include expenses related to bad debt provision changes, insurance expenses and IT costs and during the most recent period, these expenses were offset by miscellaneous income, primarily from foreign entities, and related to the administrative and technology fees collected from the affiliated companies and a reduction in certain loss provisions.
Other Income (Expenses)
During the quarter ended February 28, 2025, total other income was $4.7 million and consisted of a $6.6 million gain in fair value of derivative liabilities offset by $1.9 million of interest expense. The gain in derivative liabilities was primarily due to changes in estimates of warrants payable and antidilution derivative liabilities embedded in preferred shares and the amounts due were determined based on the allocation of the purchase price to these instruments pursuant to the Merger Agreement. These instruments would have been settled in common shares and the price of the common shares was specifically defined in the Merger Agreement. During the quarter ended February 29, 2024, total other expenses of $10.6 million consisted of $10.4 million in SPAC termination costs, $3.1 million in uplist termination costs and interest expense of $1.4 million, offset by an increase of $4.3 million in the fair value of derivative liabilities that were reported at fair value on the balance sheet date.
| 6 |
Results of Operations for the Nine Months Ended February 28, 2025 and February 29, 2024
Revenue
For the nine months ended February 28, 2025 and February 29, 2024, Unique Logistics’ revenue by product line was as follows:
For the Nine Months ended February 28, 2025 | For the Nine Months ended February 29, 2024 | $ change | % change | |||||||||||||
| Airfreight services | $ | 153,979,527 | $ | 87,102,162 | $ | 66,877,365 | 76.8 | % | ||||||||
| Ocean freight and ocean services | 132,261,130 | 74,933,392 | 57,327,738 | 76.5 | % | |||||||||||
| Contract logistics | 2,196,061 | 1,892,954 | 303,107 | 16.0 | % | |||||||||||
| Customs brokerage and other services | 27,944,245 | 28,612,414 | (668,169 | ) | (2.3 | )% | ||||||||||
| Total revenues | $ | 316,380,963 | $ | 192,540,922 | $ | 123,840,041 | 64.3 | % | ||||||||
The increase in total revenues for the nine months ended February 28, 2025, compared to the nine months ended February 29, 2024, is due almost entirely to increases in airfreight and ocean freight and ocean services revenues.
The 76.8% increase in airfreight revenue was due to a 30.2% increase in volume, which contributed 39.4% of the increase in total revenues, and a 35.8% increase in pricing, which contributed 60.6% of the increase in total revenues. The increase in pricing was mainly due to an increase in demand for airfreight services due to the disruption of shipping through the Suez Canal and the resulting reductions in airfreight space availability and cost increases, as discussed above. The increase in volume mostly related to shifting demand from ocean to air as a result of geopolitical global turbulence, which has resulted in a greater disruption in ocean shipping routes than in air shipping routes and, to a lesser degree, higher demand from the existing customers.
The 76.5% increase in ocean freight and ocean services revenue was mostly due to an 82.5% increase in spot market pricing, which resulted in a 104.3% increase in such revenue. This increase was offset by an approximately 3.3% decrease in volume period-over-period due to demand shifting to airfreight shipping as a result of the geopolitical global pressures discussed above, which resulted in a 4.3% reduction in ocean freight and ocean services revenue.
Costs and Operating Expenses
For the nine months ended February 28, 2025 and February 29, 2024, Unique Logistics’ costs and operating expenses were as follows:
For the Nine Months ended February 28, 2025 | For the Nine Months ended February 29, 2024 | $ change | % change | |||||||||||||
| Costs and operating expenses: | ||||||||||||||||
| Airfreight services | $ | 144,738,588 | $ | 81,374,442 | $ | 63,364,146 | 77.9 | % | ||||||||
| Ocean freight and ocean services | 115,950,311 | 62,964,504 | 52,985,807 | 84.2 | % | |||||||||||
| Contract logistics | 767,964 | 507,326 | 260,638 | 51.4 | % | |||||||||||
| Customs brokerage and other services | 24,923,948 | 24,263,573 | 660,375 | 2.7 | % | |||||||||||
| Salaries and related costs | 18,113,257 | 17,293,553 | 819,704 | 4.7 | % | |||||||||||
| Professional fees | 1,955,697 | 2,299,312 | (343,615 | ) | (14.9 | )% | ||||||||||
| Rent and occupancy | 3,740,183 | 3,382,602 | 357,581 | 10.6 | % | |||||||||||
| Selling and promotion | 1,800,521 | 1,888,439 | (87,918 | ) | (4.7 | )% | ||||||||||
| Depreciation and amortization | 1,507,931 | 2,203,093 | (695,162 | ) | (31.6 | )% | ||||||||||
| Foreign exchange transactions, net | 70,103 | (267,209 | ) | 337,312 | (126.2 | )% | ||||||||||
| Gain on business disposal | (527,033 | ) | - | (527,033 | ) | 100.0 | % | |||||||||
| Other expense | 1,257,511 | 948,402 | 309,109 | 32.6 | % | |||||||||||
| Total costs and operating expenses | $ | 314,298,981 | $ | 196,858,037 | $ | 117,440,944 | 59.7 | % | ||||||||
The increase in total costs and operating expenses was primarily due to a 69.3% increase in the direct product costs combined (airfreight, ocean freight, custom brokerage and contract logistics costs) during the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024. Total direct product cost was $286.4 million for the nine months ended February 28, 2025, compared to $169.1 million for the nine months ended February 29, 2024, an increase mostly related to an increase in spot market purchasing prices in both airfreight and ocean freight.
The decrease in professional fees period-over-period is related to a lesser reliance on outside legal services during the 2025 period, as discussed above. Reclassification during the 2025 period of right of use asset amortization by our foreign subsidiaries is the primary reason for the increase in rent expense and the decrease in depreciation and amortization expenses period-over period. The deconsolidation of Unique Vietnam effective November 30, 2024, led to a decrease in rent expense that offset part of the impact of the reclassification.
Other operating expenses include expenses related to bad debt provision changes, insurance expenses and IT costs. The increase in other operating expenses during the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024, relate primarily to an increase in the Company’s bad debt reserve and IT expenses associated with enhancements to EDI connections of new customers as part of onboarding.
Other Income (Expenses)
For the nine months ended February 28, 2025, total other income was $1.2 million and consisted of a $6.7 million increase in the fair value of derivative liabilities offset by $5.6 million of interest expense. For the nine months ended February 29, 2024, total other expenses of $13.2 million consisted of interest expense of $3.8 million, SPAC merger termination costs of $10.4 million and uplist termination costs of $3.8 million, offset by a $4.1 million increase in the fair value of derivative liabilities. The increase in interest expense period-over-period was due to higher debt balances during the nine months ended February 28, 2025, as borrowings under our line of credit with TBK Bank increased due to higher sales and payments made to the shipping lines. Interest expense also increased due to the Company’s restructuring of promissory notes due to related parties during calendar year 2024, which resulted in the Company issuing new notes that accrue interest to replace previously-issued interest free notes.
| 7 |
Liquidity and Capital Resources
The Company’s principal sources of cash are (i) cash generated from operations, (ii) borrowings available under its revolving line of credit (through March 31, 2025) or the new factoring agreement (beginning April 1, 2025), and (iii) proceeds from debt or equity issuances. As of February 28, 2025, the Company had cash and cash equivalents of approximately $4.2 million, negative working capital of $23.0 million, and $10.0 million available to draw under its operating line of credit with TBK Bank, SSB (the “TBK Facility”) based on the amount of its accounts receivable on February 28, 2025. On September 12, 2024, the Company entered into an agreement with TBK Bank to temporarily increase the credit limit under the TBK Facility from $25.0 million to $30.0 million for a period of six months through March 12, 2025. Effective March 31, 2025, the Company and the TBK Bank terminated TBK Facility and entered into a new factoring agreement effective April 1, 2025, for a period of 90 days and with an option to extend for 12 more months with a maximum advance limit of $30.0 million (the “Factoring Agreement”).
For the nine months ended February 28, 2025, the Company generated $3.5 million in operating income and used cash for its operations in the amount of $6.0 million, primarily due to the ramp up of accounts receivable and accounts payable due to an increase in sales compared to the nine months ended February 29, 2024. The negative working capital and cash used in operations are both indicators of substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements appearing elsewhere in this report are issued.
The Company is continually evaluating its liquidity requirements considering its operating needs, growth initiatives and capital resources. Based on its assessment of the Company’s projected cash flow, impact of the pending merger and expected business performance as of and subsequent to February 28, 2025, management believes that the Company’s current cash and the ability to raise cash under the Factoring Agreement as well as the opportunity to pay off certain of its debt as part of the Merger Agreement would be sufficient to support its operations for at least the next 12 months from the issuance of this report. The Company’s plan includes the items noted above as well as securing external financing, which may include raising debt or equity capital. These plans are not entirely within the Company’s control including its ability to raise sufficient capital on favorable terms, if at all, and absent an infusion of sufficient capital there is substantial doubt about its ability to continue as a going concern for 12 months after the date the condensed consolidated financial statements for the three and nine months ended February 28, 2025 are issued.
As further discussed in subsequent events note to the financial statements, on March 11, 2025, the Company entered into an agreement and plan of merger (the “Merger Agreement”) by and among the Company, DP World Logistics US Holdings, Inc. and Unique Merger Co., a Nevada corporation and wholly owned subsidiary of DP World Logistics US Holdings, pursuant to which Unique Merger Co. will merge with and into the Company, with the Company surviving such merger as a wholly-owned subsidiary of DP World Logistics US Holdings. There can be no assurance that the Company will be able to complete this merger or to raise the capital it needs to continue its operations on satisfactory terms or at all. If capital is not available to the Company when, and in the amounts, needed, the Company could be required to liquidate its assets, cease or curtail operations, which could materially harm its business, financial condition and results of operations, or seek protection under applicable bankruptcy laws or similar state proceedings.
Critical Accounting Estimates
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Management has discussed the development and selection of these critical accounting estimates with our board of directors. In addition, there are other items within our financial statements that require estimation but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.
Our critical accounting estimates are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our annual report on Form 10-K for the year ended May 31, 2024.
Adjusted EBITDA
We define adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, transaction gains and losses, other income, merger and acquisition costs, impairment charges and certain other non-recurring items.
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 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 that it provides additional information with respect to the performance of our fundamental business activities. For this reason, we believe that adjusted EBITDA will also be useful to others, including our stockholders, as a valuable financial metric.
Adjusted EBITDA should not be considered as an alternative to net income, 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 this non-GAAP financial measure to be considered in isolation or as a substitute for results prepared in accordance with GAAP. This non-GAAP financial measure should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP.
| 8 |
Following is the reconciliation of our consolidated net income to adjusted EBITDA for the three and nine months ended February 28, 2025 and February 29, 2024.
For the three months Ended February 28, 2025 | For the three months ended February 29, 2024 | |||||||
| Net income (loss) | $ | 5,194,068 | $ | (5,847,860 | ) | |||
| Add back: | ||||||||
| Income tax expense (benefit) | (23,536 | ) | (5,268,793 | ) | ||||
| Depreciation and amortization* | 501,638 | 524,375 | ||||||
| (Gain)/loss on foreign exchange | 22,794 | 26,858 | ||||||
| Change in fair value of derivative liabilities | (6,577,666 | ) | (4,300,429 | ) | ||||
| Uplist deferred cost release | - | 3,054,514 | ||||||
| SPAC Merger termination cost | - | 10,415,816 | ||||||
| Interest expense | 1,874,795 | 1,407,449 | ||||||
| Adjusted EBITDA | $ | 992,093 | $ | 11,930 | ||||
For the Nine Months Ended February 28, 2025 | For the Nine Months Ended February 29, 2024 | |||||||
| Net income (loss) | $ | 748,361 | $ | (11,029,671 | ) | |||
| Add Back: | ||||||||
| Income tax expense (benefit) | 3,861,588 | (5,787,424 | ) | |||||
| Depreciation and amortization* | 1,507,931 | 1,548,468 | ||||||
| (Gain)/loss on foreign exchange | 70,103 | (267,209 | ) | |||||
| Change in fair value of derivative liability | (6,718,336 | ) | (4,118,566 | ) | ||||
| Uplist deferred cost release | - | 3,054,514 | ||||||
| SPAC Merger termination cost | - | 10,415,816 | ||||||
| Interest expense | 5,559,560 | 3,823,822 | ||||||
| Adjusted EBITDA | $ | 5,029,207 | $ | (2,360,250 | ) | |||
* Previously reported balances were reclassified to conform with the current period presentation. Specifically, the nine months ended February 29, 2024 depreciation and amortization expense was reduced by $654,625_due to reclassification needed between right of use asset amortization (part of rent expense) and amortization of intangibles. The three months ended February 29, 2024 was also reduced by $228,375 compared to the previously reported amount.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our principal executive officer to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, the Company recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives, and we are required to apply our judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.
As of February 28, 2025, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our Chief Executive Officer and Chief Financial Officer have concluded, based upon the evaluation described above, that as of February 28, 2025, our disclosure controls and procedures were not effective and require remediation in order to be effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting during the quarter ended February 28, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any disputes and does not have any litigation matters pending that it believes could have a material adverse effect on its 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 Company’s executive officers or any of its subsidiaries, threatened against or affecting the Company, its common stock, any of its subsidiaries or of the Company’s or the Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
From time to time, however, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of our business. Litigation is subject to inherent uncertainties, and an adverse result in any such matters may arise from time to time that may harm our business.
ITEM 1A. RISK FACTORS
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K and in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results. There have been no material changes to the Risk Factors previously disclosed in our Annual Report on Form 10-K and our other filings with the SEC.
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K and in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results. Other than as set forth below, there have been no material changes to the Risk Factors previously disclosed in our Annual Report on Form 10-K and our other filings with the SEC.
Rising international political tensions, including changes in U.S. and European international trade policies and other cross-border investment regulations, particularly with regard to China, may adversely impact our business and operating results.
The U.S. government has made statements and taken certain actions that may lead to changes in U.S. and international trade policies towards China. It remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the United States, tax policy related to international commerce, or other trade matters.
We are closely monitoring potential changes in international trade policy and assessing the potential impact of these and other trade policy changes on our business operations and financial performance. In February and March 2025, the U.S. administration imposed an additional 20 percent duty on Chinese imports. Subsequently, authorities in China announced tariffs over selected U.S. products and regulatory investigation against U.S. companies in response to the tariff imposed by the U.S. Furthermore, on April 2, 2025, the U.S. administration announced that the United States would impose a 10% tariff on all countries, effective on April 5, 2025, and an individualized reciprocal higher tariff on countries with which the United States has the largest trade deficits, including a 34% additional reciprocal tariff on goods imported from China that brings the total tariff rate to 54%. On April 4, 2025, the Foreign Ministry of China announced that China would impose a retaliatory 34% tariff on goods imported from the United States starting on April 10, 2025. Any unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for our products and services, impact on the competitive position of our products or prevent us from selling products in certain countries. If any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government takes retaliatory trade actions due to the recent U.S.-China trade tension, such changes could have an adverse effect on our business, financial condition and results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no unregistered sales or purchases by the Company of the Company’s equity securities during the quarter ended February 28, 2025.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| UNIQUE LOGISTICS INTERNATIONAL, INC. | ||
| By: | /s/ Sunandan Ray | |
| Sunandan Ray | ||
| Chief Executive Officer (Principal Executive Officer) | ||
April 25, 2025 |
||
| By: | /s/ Eli Kay | |
| Eli Kay | ||
| Chief Financial Officer (Principal Financial Officer) | ||
April 25, 2025 |
||
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