Correspondence 0001493152-23-000286 from Unique Logistics International, Inc. (UNQL) (CIK 0001281845)
Unique Logistics International, Inc. (UNQL) (CIK 0001281845)
Date: Jan. 4, 2023 · CIK: 0001281845 · Accession: 0001493152-23-000286
AI Filing Summary & Sentiment
File numbers found in text: 000-50612
Referenced dates: December 9, 2022
Letter
Re: Unique Logistics International, Inc. Form 10-K for Fiscal Year ended May 31, 2022 Filed September 13, 2022 File No. 000-50612
Dear Mr. Cannarella:
Unique Logistics International, Inc. (the “Company,” “we,” “us” or “our”) is in receipt of the letter dated December 9, 2022, from the staff (the “Staff,” “you” or “your”) of the U.S. Securities and Exchange Commission (the “Commission”) setting forth its comments on the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2022, filed on September 13, 2022.For ease of reference, the Staff’s comments are set forth below, followed by the Company’s responses in bold.
Form 10-K for the Fiscal Year ended May 31, 2022
Management’s Discussion and Analysis of Financial Condition and Results of Operations Results of Operations, page 24
1. We note your disclosure attributing the 173% increase in revenues for 2022 to “...management’s success in combining the acquired entities, achievement of synergies, as well as significant increase in the number of customers, shipping volumes and the impact of market prices,” although you also explain that gross profit decreased from 7.1% to 4.2% “...due to a very challenging year in terms of increase in customer demand, capacity congestion, record high shipping costs and logistics industry challenges with both Air Freight and Ocean Freight.” You state that you anticipate growing revenue “...by adding strategic corporate accounts and margin normalization” during the next fiscal year. Please modify or expand your disclosures as necessary to address the following points:
● Identify and quantify your key performance indicators, including non-financial metrics, such as shipping volumes or weights that are correlated with your results of operations for each period, consistent with our Commission Guidance on Management’s Discussion and Analysis of Financial Condition and Results of Operations, which was published in SEC Release No. 34-88094.
● Provide a more detailed and comprehensive discussion and analysis of the business drivers, significant costs, and decisions by management impacting your results of operations, and describe the particular matters associated with your references to the “achievement of synergies,” “capacity congestion,” “logistics industry challenges,” “strategic corporate accounts,” and “margin normalization.” If there are multiple reasons for the changes in revenues, expenses, or margins, please quantify the effect associated with each material factor, including offsetting factors.
● Address the indicative value of your reported financial information as necessary to clarify the extent to which you regard the level of activity reported for the more recent fiscal year as recurring or non-recurring, and whether the changes in comparison to the preceding fiscal year are representative of a trend, i.e. clarify the extent to which you are expecting further increases in revenues that are comparable in magnitude, consistent levels of revenues, or decreases in revenues.
● Given your disclosure on page four, which explains that you purchase cargo space in volume from your network of carriers (airlines, ocean shipping, and trucking lines), and resell that space to your customers, which in turn indicates that a significant component of your cost structure is known prior to establishing terms with your customers, please describe more clearly how gross profit decreased amidst the large increase in revenues for this timeframe. For example, describe any obstacles or limitations encountered in passing along costs to your customers, or the nature of any incremental costs that were unknown when negotiating your contracts.
Response: In response to the Staff’s comment, we note that the Company will, in its future filings, modify and expand its disclosures on the Management’s Discussion and Analysis of Financial Condition and Results of Operations discussions to address the foregoing Staff comment. Please see Exhibit A as an example of the Company’s contemplated disclosure in response to this comment.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, page 34
2. We note that you have limited quantification of beneficial interests for various persons due to the limited number of available authorized common shares, as expressed in the footnotes to your tabulation. However, Item 403 of Regulation S-K and the associated guidance in Rule 13d-3 of Regulation 13D-G, require disclosures of beneficial ownership based on existing rights to acquire securities, pursuant to the exercise of any option, warrant or rights, or through conversions of a security, within sixty days.
Therefore, it appears that you should specify the total number of shares beneficially owned and the percentage of the class so owned, considering such rights, notwithstanding your ability or inability to satisfy your obligations as the issuer of those instruments, as may be attributed to having an insufficient number of authorized shares.
If you supplement the required disclosures with information about interests that could be satisfied based on the number of authorized shares, please clearly differentiate this information from the required information and describe your basis for any hypothetical allocation of the available shares among those persons listed in your table.
Response: The Company will, in its future filings, specify the total number of shares beneficially owned and the percentage of the class so owned in accordance with the Staff’s comment and pursuant to the requirements of Item 403 of Regulation S-K and the associated guidance in Rule 13d-3 of Regulation 13D-G, notwithstanding its ability or inability to satisfy its obligations as the issuer of those instruments based on it having an insufficient number of authorized shares. Our disclosure of beneficial ownership will be based on existing rights to acquire securities, pursuant to the exercise of any option, warrant or rights, or through conversions of a security, within 60 days. Please see Exhibit B as an example of our future form of disclosure pursuant to Item 403 of Regulation S-K (please note that this disclosure is based on beneficial ownership as of May 31, 2022).
Note 10 Stockholders’ Equity, page F-29
3. Please disclose all of the information prescribed by FASB ASC 505-10-50-3, individually for each series of preferred stock, and any additional information as may be necessary to encompass and reflect the following details:
● descriptions of the conversion terms,
● percentages that such shares would represent of the number of fully diluted shares,
● any changes to the number of shares that would be issuable upon conversion that occurred during each period,
● descriptions of any events precipitating such changes,
● the aggregate number of shares issuable for each series pursuant to the conversion features at each balance sheet date,
● the number of fully diluted shares, and
● the deficiency between the aggregate number of issuable shares and the number of authorized shares available for issuance at the balance sheet date.
Response: The Company will, in its future filings, include the information required pursuant to FASB ASC 505-10-50-3 for each series of preferred stock, as detailed in the Staff’s comment. An example of our future disclosure related to our preferred stock pursuant to FASB ASC 505-10-50-3 is included herein as Exhibit C.
Thank you for your assistance in reviewing this filing.
Very
Truly Yours,
Sunandan
Ray
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CORRESP
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filename1.htm
UNIQUE
LOGISTICS INTERNATIONAL, INC.
154-09
146th Avenue
Jamaica,
NY 11434
January
4, 2023
John
Cannarella
U.S.
Securities & Exchange Commission
100
F Street, N.E.
Washington,
D.C. 20549
Re:
Unique
Logistics International, Inc.
Form
10-K for Fiscal Year ended May 31, 2022
Filed
September 13, 2022
File
No. 000-50612
Dear
Mr. Cannarella:
Unique
Logistics International, Inc. (the “Company,” “we,” “us” or “our”)
is in receipt of the letter dated December 9, 2022, from the staff (the “Staff,” “you” or “your”)
of the U.S. Securities and Exchange Commission (the “Commission”) setting forth its comments on the Company’s
Annual Report on Form 10-K for the fiscal year ended May 31, 2022, filed on September 13, 2022.For ease of reference, the Staff’s
comments are set forth below, followed by the Company’s responses in bold.
Form
10-K for the Fiscal Year ended May 31, 2022
Management’s
Discussion and Analysis of Financial Condition and Results of Operations Results of Operations, page 24
1. We
note your disclosure attributing the 173% increase in revenues for 2022 to “...management’s
success in combining the acquired entities, achievement of synergies, as well as significant
increase in the number of customers, shipping volumes and the impact of market prices,”
although you also explain that gross profit decreased from 7.1% to 4.2% “...due to
a very challenging year in terms of increase in customer demand, capacity congestion, record
high shipping costs and logistics industry challenges with both Air Freight and Ocean Freight.”
You state that you anticipate growing revenue “...by adding strategic corporate accounts
and margin normalization” during the next fiscal year. Please modify or expand your
disclosures as necessary to address the following points:
● Identify
and quantify your key performance indicators, including non-financial metrics, such as shipping
volumes or weights that are correlated with your results of operations for each period, consistent
with our Commission Guidance on Management’s Discussion and Analysis of Financial Condition
and Results of Operations, which was published in SEC Release No. 34-88094.
1
● Provide
a more detailed and comprehensive discussion and analysis of the business drivers, significant
costs, and decisions by management impacting your results of operations, and describe the
particular matters associated with your references to the “achievement of synergies,”
“capacity congestion,” “logistics industry challenges,” “strategic
corporate accounts,” and “margin normalization.” If there are multiple
reasons for the changes in revenues, expenses, or margins, please quantify the effect associated
with each material factor, including offsetting factors.
● Address
the indicative value of your reported financial information as necessary to clarify the extent
to which you regard the level of activity reported for the more recent fiscal year as recurring
or non-recurring, and whether the changes in comparison to the preceding fiscal year are
representative of a trend, i.e. clarify the extent to which you are expecting further increases
in revenues that are comparable in magnitude, consistent levels of revenues, or decreases
in revenues.
● Given
your disclosure on page four, which explains that you purchase cargo space in volume from
your network of carriers (airlines, ocean shipping, and trucking lines), and resell that
space to your customers, which in turn indicates that a significant component of your cost
structure is known prior to establishing terms with your customers, please describe more
clearly how gross profit decreased amidst the large increase in revenues for this timeframe.
For example, describe any obstacles or limitations encountered in passing along costs to
your customers, or the nature of any incremental costs that were unknown when negotiating
your contracts.
Response:
In response to the Staff’s comment, we note that the Company will, in its future filings, modify and expand its disclosures
on the Management’s Discussion and Analysis of Financial Condition and Results of Operations discussions to address the foregoing
Staff comment. Please see Exhibit A as an example of the Company’s contemplated disclosure in response to this comment.
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, page 34
2. We
note that you have limited quantification of beneficial interests for various persons due
to the limited number of available authorized common shares, as expressed in the footnotes
to your tabulation. However, Item 403 of Regulation S-K and the associated guidance in Rule
13d-3 of Regulation 13D-G, require disclosures of beneficial ownership based on existing
rights to acquire securities, pursuant to the exercise of any option, warrant or rights,
or through conversions of a security, within sixty days.
Therefore,
it appears that you should specify the total number of shares beneficially owned and the percentage of the class so owned, considering
such rights, notwithstanding your ability or inability to satisfy your obligations as the issuer of those instruments, as may be attributed
to having an insufficient number of authorized shares.
2
If
you supplement the required disclosures with information about interests that could be satisfied based on the number of authorized shares,
please clearly differentiate this information from the required information and describe your basis for any hypothetical allocation of
the available shares among those persons listed in your table.
Response:
The Company will, in its future filings, specify the total number of shares beneficially owned and the percentage of the class so
owned in accordance with the Staff’s comment and pursuant to the requirements of Item 403 of Regulation S-K and the associated
guidance in Rule 13d-3 of Regulation 13D-G, notwithstanding its ability or inability to satisfy its obligations as the issuer of those
instruments based on it having an insufficient number of authorized shares. Our disclosure of beneficial ownership will be based on existing
rights to acquire securities, pursuant to the exercise of any option, warrant or rights, or through conversions of a security, within
60 days. Please see Exhibit B as an example of our future form of disclosure pursuant to Item 403 of Regulation S-K (please note that
this disclosure is based on beneficial ownership as of May 31, 2022).
Note
10 Stockholders’ Equity, page F-29
3. Please
disclose all of the information prescribed by FASB ASC 505-10-50-3, individually for each
series of preferred stock, and any additional information as may be necessary to encompass
and reflect the following details:
● descriptions
of the conversion terms,
● percentages
that such shares would represent of the number of fully diluted shares,
● any
changes to the number of shares that would be issuable upon conversion that occurred during
each period,
● descriptions
of any events precipitating such changes,
● the
aggregate number of shares issuable for each series pursuant to the conversion features at
each balance sheet date,
● the
number of fully diluted shares, and
● the
deficiency between the aggregate number of issuable shares and the number of authorized shares
available for issuance at the balance sheet date.
Response:
The Company will, in its future filings, include the information required pursuant to FASB ASC 505-10-50-3 for each series of preferred
stock, as detailed in the Staff’s comment. An example of our future disclosure related to our preferred stock pursuant to FASB
ASC 505-10-50-3 is included herein as Exhibit C.
Thank
you for your assistance in reviewing this filing.
Very
Truly Yours,
Sunandan
Ray
Chief
Executive Officer
Unique
Logistics International, Inc.
154-09
146th Avenue
Jamaica,
NY 11434
3
Exhibit
A
Results
of Operations
Revenue
The
Company’s total revenue from operations for the years ended May 31, 2022, and May 31, 2021, was approximately $1.0 billion and
$371.9 million, respectively. Revenue by product line was as follows:
For
the Year Ended
For
the Year Ended
May 31,
2022
May 31,
2021
$
change
%
change
Revenues
Air
freight
$ 499,024,643
$ 137,055,903
361,968,740
264 %
Ocean
freight
446,977,162
196,041,832
250,935,330
128 %
Contract
logistics
3,491,489
3,093,626
397,863
13 %
Customs
brokerage and other services
64,993,386
35,695,911
29,297,475
82 %
Total
revenues
$ 1,014,486,680
$ 371,887,272
642,599,408
173 %
The
year over year 173% revenue increase represents management’s success in combining the acquired entities, achievement of synergies,
as well as significant increase in the number of customers, shipping volumes and the impact of market prices, for both Air Freight and
Ocean
Our
main product lines, air freight and ocean freight product lines, increased revenue by 264% and 128%, respectively.
Year
over year, total shipping volumes increased 5% for ocean freight and 196% for air freight. Revenue from new customers added during the
year constituted approximately 17% of total revenue during the year ended May 31, 2022. Volume from new customers for air freight and
ocean freight shipments constituted 16% and 20%, respectively, of total volume during the year ended May 31, 2022.
Selling
rates increased by 69% on average for air freight and 128% for ocean freight. We purchase cargo space in volume from a network of carriers.
However, prices are not fixed and are subject to increases based on market conditions.
Certain
synergies achieved during the year ended May 31, 2021, related primarily to improving our organizational structure, integrating acquired
entities and growing the Company’s revenue base, including the securing of additional accounts by a focused and dedicated sales
team.
4
During
the year ended May 31, 2022, the Company continued finding additional synergies by implementing an effective procurement strategy across
all business units, capitalizing on improved liquidity and cash availability and adding qualified employees to its workforce. As a result,
the Company was able to increase its customer base year over year by approximately 68%.
The
Company’s management anticipates growing revenue and profitability by continuing to add new customers in order to increase volume,
in addition to focusing on margin improvement during the next fiscal year.
Cost
of Product Revenue and Gross Profit
The
overall cost of product revenue increased $626.2 million, or 64%, to $971.6 million for the year ended May 31, 2022, compared to $345.4
million for the year ended May 31, 2021. This increase was primarily attributable to the increase in the shipping rates charged by the
airlines and shipping lines. Gross profit, as a percentage of revenue, actually decreased from 7.1% for the year ended May 31, 2021 to
4.2% for the year ended May 31 2022, due to challenges to pass these cost increases to the end customer.
Below,
we discuss revenues and cost of product revenue for each product line, other than for contact logistics, which is not a significant contributor
to our revenues or costs and did not experience material changes during the year ended May 31, 2022, below.
Air
Freight
In
calendar 2020 and 2021, air freight services experienced unprecedented events in response to the Covid-19 pandemic. As a result of travel
restrictions and lower passenger demand, airlines significantly reduced flight schedules starting in March 2020, which limited available
belly space for cargo at a time when global demand for air freight shipping remained high. Demand for air freight services started growing
in the second quarter of calendar 2020 and remained high compared to pre-Covid levels throughout calendar 2021 and the first half of
calendar 2022, amplified by a strong economy and customers shipping more of their products by air due to disruptions in ocean transportation,
creating additional competition for the limited available capacity. These conditions have caused extreme imbalances between carrier capacity
and demand. In order to execute and meet the transportation needs of our customers we significantly increased utilization of chartered
flights during the year ended May 31, 2022, while still routinely purchasing capacity on the spot market. This resulted in sustained
high average buy and sell rates. Airfreight revenues and costs increased 265% and 280%, respectively, for year ended May 31, 2022, as
compared with the year ended May 31, 2021, primarily due to an approximately 196% increase in tonnage year over year, where approximately
38% of tonnage increase was mainly due to heavy use of charter flights and approximately 69% and 84% increases in average sell and buy
rates, respectively. Freighters, charters, and gateway infrastructure were operating at near maximum capacity during fiscal 2022,
which continued the pressure on buy rates and limited our ability to pass all of our cost increases on to our customers, resulting in
a decrease in the profit margin in our air freight product line from 4.7% for the year ended May 31, 2021, to 0.5% for the year ended
May 31, 2022.
5
As
international passenger flights are expected to return t