8. RELATED PARTY TRANSACTIONS
|9 Months Ended|
Feb. 28, 2021
|8. RELATED PARTY TRANSACTIONS||
8. RELATED PARTY TRANSACTIONS
As part of the UL HK Transaction and related transactions, the Company assumed the following debt due to related parties:
(1)Due to Frangipani Trade Services (FTS), an entity owned by the Companys CEO, is due on demand and is non-interest bearing. The principal amount of this Promissory Note bears no interest; provided that any amount due under this Note which is not paid when due shall bear interest at an interest rate equal to six percent (6%) per annum. The principal amount is due and payable in six payments of $150,655 the first payment due on November 30, 2021, with each succeeding payment to be made six months after the preceding payment.
(2)Due to Unique Logistics Holding Limited (UL HK) is non-interest bearing and due within 12 months from the date of acquisition. See Note 4.
(3)On May 29, 2020, the Company entered into a $5,000,000 note payable with UL HK as part of the UL US acquisition. The loan bears a zero percent interest rate and has a maturity of 180 days from the date of the note. On November 12, 2020, the Company amended the note with UL HK in order to (i) extend the maturity date from November 25, 2020 to May 18, 2021, (ii) begin monthly payments of $833,333 commencing on December 18, 2020, (iii) change the interest rate to one-half percent (0.5%) per month and (iv) provide the Company the right to prepay the outstanding liability in whole or in part. Pursuant to the amendment, if the Company should default on the note, UL HK has the option to convert the outstanding principal and interest into shares of common stock of the Company. Upon the earlier of (i) a default in the monthly payment of principal or interest due and owing under the loan or, (ii) in the event that any outstanding balance of the loan remains outstanding as of May 31, 2021, UL HK at its option may convert the principal and interest then outstanding into an amount of shares of common stock of the Company equal to 0.2125% of the then outstanding common stock of the Company on a fully diluted basis for every $25,000 of the outstanding principal balance plus accrued but unpaid interest of this loan outstanding on the date of such conversion, provided, however, that the UL HK shall not be permitted to convert the loan in the event that such conversion would provide the UL HK more than 34% of the Companys issued and outstanding common stock when including and aggregating all prior conversions of the loan.
(4)On May 29, 2020, the Company entered into a $90,000 payable with an employee for the acquisition of UL BOS common stock from a previous owner. The payment terms consist of thirty-six monthly non-interest bearing payments of $2,500 from the date of closing.
(5)On May 29, 2020, the Company entered into a $200,000 payable with an employee for the acquisition of UL BOS common stock from a previous owner. The payment terms consist of thirty-six monthly non-interest bearing payments of $5,556 from the date of closing.
On May 29, 2020, the Company entered into a consulting agreement with UL HK for logistics services as well as assisting the Company with strategic introductions and negotiations with new customers. The Company shall pay to UL HK $500,000 per year until the expiration of the agreement on May 28, 2023. This agreement was fair valued as of the date of the UL HK transaction and recorded on the balance sheet under other long-term liabilities.
FTS provides Importer of Record (IOR) services to the Companys customers on behalf of the Company. Pursuant to the IOR agreement with the Company, FTS maintains a Customs Bond in order to continue the agreed upon IOR services. In addition, FTS requires a security deposit which will be utilized by FTS to settle any charges, penalties or tax assessments incurred when performing IOR services for the Company. As of February 28, 2021 and May 31, 2020, the security deposit was $175,000.
Accounts Receivable -trade and Accounts Payable - trade
Transactions with related parties account for $3,887,529 and $11,167,971 of accounts receivable - trade and accounts payable trade as of February 28, 2021, respectively, and $1,321,473 and $4,171,839 of accounts receivable trade and accounts payable trade as of May 31, 2020, respectively.
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 and nine months ended February 28, 2021, these transactions represented $700,978 and $1,916,491 of revenue, respectively.
Direct costs are services billed to the Company by related parties for shipping activities. For the three and nine months ended February 28, 2021, these transactions represented $15,070,460 and $42,676,327 of total direct costs, respectively.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef