FORWARD LOOKING STATEMENTS
Statements made in this Form 10-K that are not historical or current facts are
“forward-looking statements” made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). These statements often can be identified using terms such as
“may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or
“continue,” or the negative thereof. We intend that such forward-looking
statements be subject to the safe harbors for such statements. We wish to
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. Any forward-looking statements
represent management’s best judgment as to what may occur in the future.
However, forward-looking statements are subject to risks, uncertainties and
important factors beyond our control that could cause actual results and events
to differ materially from historical results of operations and events and those
presently anticipated or projected. Factors that may affect the results of our
operations include, among others: our ability to successfully execute our
business strategies, including integration of acquisitions and the future
acquisition of other businesses to grow our Company; customers’ cancellation on
short notice of master service agreements from which we derive a significant
portion of our revenue or our failure to renew such master service agreements on
favorable terms or at all; our ability to attract and retain key personnel and
skilled labor to meet the requirements of our labor-intensive business or labor
difficulties which could have an effect on our ability to bid for and
successfully complete contracts; the ultimate geographic spread, duration and
severity of the coronavirus outbreak and the effectiveness of actions taken, or
actions that may be taken, by governmental authorities to contain the outbreak
or ameliorate its effects; our failure to compete effectively in our highly
competitive industry, which could reduce the number of new contracts awarded to
us or adversely affect our market share and harm our financial performance; our
ability to adopt and master new technologies and adjust certain fixed costs and
expenses to adapt to our industry’s and customers’ evolving demands; our history
of losses, deficiency in working capital and a stockholders’ deficit and our
inability to achieve sustained profitability; material weaknesses in our
internal control over financial reporting and our ability to maintain effective
controls over financial reporting in the future; our substantial indebtedness,
which could adversely affect our business, financial condition and results of
operations and our ability to meet our payment obligations; the impact of new or
changed laws, regulations or other industry standards that could adversely
affect our ability to conduct our business; and changes in general market,
economic, social and political conditions in
economies or financial markets, including those resulting from natural or
man-made disasters.
23
Other important factors which could cause our actual results to differ
materially from the forward-looking statements in this document include, but are
not limited to, those discussed in this “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” as well as those discussed
elsewhere in this report and as set forth from time to time in our other public
filings and public statements. You should read this report in its entirety and
with the understanding that our actual future results may be materially
different from what we expect. We may not update these forward-looking
statements, even in the event that our situation changes in the future, except
as required by law. All forward-looking statements attributable to us are
expressly qualified by these cautionary statements.
Effects of COVID-19
The COVID-19 pandemic and resulting global disruptions have affected our
businesses, as well as those of our customers and their third-party suppliers
and sellers. To serve our customers while also providing for the safety of our
employees and service providers, we have adapted numerous aspects of our
logistics and transportation processes. We continue to monitor the rapidly
evolving situation and expect to continue to adapt our operations to address
federal, state, and local standards as well as to implement standards or
processes that we determine to be in the best interests of our employees,
customers, and communities.
The impact of the pandemic and actions taken in response to it had some effects
on our results of operations. Effects of the pandemic have included increased
fulfillment costs, primarily due to investments in employee hiring, pay, and
benefits, as well as costs to maintain safe workplaces, and higher shipping
costs. We expect to continue to be affected by possible procurement and shipping
delays, supply chain interruptions, higher product demand in certain categories,
lower product demand in other categories, and increased fulfillment costs and
cost of sales as a percentage of net sales and it is not possible to determine
the duration and spread of the pandemic or such actions, the ultimate impact on
our results of operations during 2022, or whether other currently unanticipated
consequences of the pandemic are reasonably likely to materially affect our
results of operations.
Overview
incorporated under the laws of the
Company operates through its active subsidiaries as a logistics and
transportation company specializing in ecommerce fulfillment, last mile
deliveries, two-person home delivery, mid-mile, and long-haul services for
predominantly online retailers.
We are primarily an asset-based point-to-point delivery company. An asset-based
delivery company, as compared to a non-asset-based delivery company, owns its
own transportation equipment. We employ our own drivers and use the services of
independent contractors who may use their own vehicles.
Between
Jersey
conducted a last-mile business focused on deliveries to retail consumers for our
primary customer in
conducted, our long-haul and mid-mile delivery businesses.
The great bulk of Prime EFS’s business prior to
pursuant to the Delivery Service Provider program (the “Prime EFS DSP Program”)
of
2020
Prime EFS DSP Program agreement when that agreement terminated effective
renew the DSP agreement was part of a well-publicized initiative by Amazon to
restructure how it would be delivering its last-mile services and did not
reflect the quality of the services provided by Prime EFS. Prime EFS ceased
operations on
DSP Program.
agreement with
“Program Agreement”). Under that agreement,
services, including receiving, loading, storing, transporting, delivering,
unloading and related services for Amazon and its customers. On
Amazon notified
Agreement between Amazon and
“Shypdirect Termination Notice”). On
the Shypdirect Termination Notice and extend the term of the Program Agreement
to and including
consideration, a separation agreement with Amazon under which Prime EFS would
agree to cooperate in an orderly transition of its Amazon last-mile delivery
business to other service providers, Prime EFS would release any and all claims
it may have against Amazon, and Prime EFS would covenant not to sue Amazon (the
“
accepted the
to Amazon, and in
During the years ended
represented 28.5% and 96.7% of our total net revenues. Approximately 28.5% of
our revenue of
to
termination of the Prime EFS last-mile business with Amazon on
2020
the 4th fiscal quarter of 2020 and the termination of
mid-mile and long-haul business, which was effective on or about
had a material adverse impact on operations of
fiscal quarter of 2021. This impact caused Prime EFS and
insolvent and to cease operations.
On
the Benefit of Creditors in the
§2A:19-1, et seq. (the “ABC Statute”), assigning all Prime EFS and
assets to
“Assignee”) and filing for dissolution. An “Assignment for the Benefit of
Creditors,” “general assignment” or “ABC” in
voluntary, judicially-supervised corporate liquidation and unwinding similar to
the Chapter 7 bankruptcy process found in
an
the “Assignors,”execute Deeds of Assignment, assigning all of their assets to
the Assignee chosen by the Company, who acts as a fiduciary similar to a Chapter
7 trustee in bankruptcy. On
Court in the appropriate county, initiating a judicial proceeding. The Assignee
has been charged with liquidating the assets for the benefit of the Prime EFS
and
As a result of Prime EFS and
Assignment for the Benefit of Creditors on
assumed all authority to manage Prime EFS or
and
Assignee and ABC Statute to conduct any business. For these reasons, effective
Therefore, we deconsolidated Prime EFS and
of executed Deeds of Assignment for the Benefit of Creditors in
Further, on
with the Secretary of
years ended
Assignment for the Benefit of Creditors with the
24
As of
subject to the Assignment for the Benefit of Creditors have been reflected as
“Assets subject to assignment for benefit of creditors” and “Liabilities subject
to assignment for benefit of creditors” on the accompanying consolidated balance
sheets.
On
company incorporated under the laws of the
(“APA”) and closed a transaction to acquire substantially all of the assets and
certain liabilities of
logistics provider specializing in servicing Federal Express over the past 25
years (“DDTI”), including last-mile delivery services using vans and box trucks.
The purchase price was
principal assets involved in the acquisition were vehicles for cargo transport,
system equipment for vehicle tracking and navigation of vehicles, and delivery
route rights together with assumption of associated customer relationships. The
acquisition of DDTI made the Company an approved contracted service provider of
FedEx, which, the Company believes fits in well with its current geographic
coverage area and may lead to additional expansion opportunities within the
FedEx network.
On
Inc.
Acquisition”). On
and outstanding shares of capital stock of
York
and delivery services in the tri-state area (“Cougar Express”). The purchase
price was
a cash payment equal to 50% of the difference between cash and accounts
receivable acquired and accounts payable assumed, less the assumption of truck
loans and leases, and a promissory note of
Cougar Express is barred from competing with the Cougar Express business for
five years. Cougar Express was a family-owned full-service transportation
business that has been in operation for more than 30 years providing one-to-four
person deliveries and offering white glove services. It utilizes its own fleet
of trucks, warehouse/driver/office personnel and on-call subcontractors from its
convenient and secure
and deliver throughout the
diverse base of approximately 50 commercial accounts, which are freight
forwarders that work with some of the most notable retail businesses in the
country. We believe that the acquisition of Cougar Express fits our current
business plan, given Cougar Express’s demographic location, services offered,
and diversified customer base, and given that it would provide us with a
long-standing, well-run profitable operation as a step to begin replacing the
revenue it lost as a result of Amazon terminating its delivery service provider
business. Furthermore, we believe that, because Cougar Express is strategically
based in
will be available for expanding its footprint into our primary base of
operations in
leveraging
On
Inc.
CX”). Shyp CX does not engage in any revenue-generating operations.
The following discussion highlights the results of our operations and the
principal factors that have affected the Company’s consolidated financial
condition as well as its liquidity and capital resources for the periods
described and provides information that management believes is relevant for an
assessment and understanding of the consolidated financial condition and results
of operations presented herein. The following discussion and analysis are based
on the consolidated financial statements contained in this Annual Report, which
have been prepared in accordance with generally accepted accounting principles
in
such consolidated financial statements and the related notes thereto.
Critical Accounting Policies and Significant Accounting Estimates
The methods, estimates, and judgments that we use in applying our accounting
policies have a significant impact on the results that we report in our
consolidated financial statements. Some of our accounting policies require us to
make difficult and subjective judgments, often as a result of the need to make
estimates regarding matters that are inherently uncertain. Significant estimates
included in the accompanying consolidated financial statements and footnotes
include the valuation of accounts receivable, the useful life of property and
equipment, the valuation of intangible assets, the valuation of assets acquired
and liabilities assumed, the valuation of right of use assets and related
liabilities, assumptions used in assessing impairment of long-lived assets,
estimates of current and deferred income taxes and deferred tax valuation
allowances, the fair value of non-cash equity transactions, the valuation of
derivative liabilities, the valuation of beneficial conversion features, and the
value of claims against the Company.
We have identified the accounting policies below as critical to our business
operation:
Accounts receivable
Accounts receivable are presented net of an allowance for doubtful accounts. The
Company maintains allowances for doubtful accounts for estimated losses. The
Company reviews the accounts receivable on a periodic basis and makes general
and specific allowances when there is doubt as to the collectability of
individual balances. In evaluating the collectability of individual receivable
balances, the Company considers many factors, including the age of the balance,
a customer’s historical payment history, its current credit worthiness, and
current economic trends. Accounts are written off after exhaustive efforts at
collection.
Impairment of long-lived assets
In accordance with ASC Topic 360, we review long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be fully recoverable, or at least annually. We recognize an
impairment loss when the sum of expected undiscounted future cash flows is less
than the carrying amount of the asset. The amount of impairment is measured as
the difference between the asset’s estimated fair value and its book value.
Derivative financial instruments
We have certain financial instruments that are embedded derivatives associated
with capital raises. We evaluate all our financial instruments to determine if
those contracts or any potential embedded components of those contracts qualify
as derivatives to be separately accounted for in accordance with ASC 810-10-05-4
and 815-40. This accounting treatment requires that the carrying amount of any
embedded derivatives be recorded at fair value at issuance and marked-to-market
at each balance sheet date. In the event that the fair value is recorded as a
liability, as is the case with the Company, the change in the fair value during
the period is recorded as either other income or expense. Upon conversion,
exercise or repayment, the respective derivative liability is marked to fair
value at the conversion, repayment, or exercise date and then the related fair
value amount is reclassified to other income or expense as part of gain or loss
on extinguishment.
25
In
Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging
(Topic 815): (Part I) Accounting for Certain Financial Instruments with Down
Round Features. These amendments simplify the accounting for certain financial
instruments with down-round features. The amendments require companies to
disregard the down-round feature when assessing whether the instrument is
indexed to its own stock, for purposes of determining liability or equity
classification.
Leases
On
practical expedients to leases that commenced before the effective date whereby
the Company elected to not reassess the following: (i) whether any expired or
existing contracts contain leases and (ii) initial direct costs for any existing
leases. For contracts entered into on or after the effective date, at the
inception of a contract the Company assessed whether the contract is, or
contains, a lease. The Company’s assessment is based on: (1) whether the
contract involves the use of a distinct identified asset, (2) whether we obtain
the right to substantially all the economic benefit from the use of the asset
throughout the period, and (3) whether it has the right to direct the use of the
asset. We will allocate the consideration in the contract to each lease
component based on its relative stand-alone price to determine the lease
payments. We have elected not to recognize right-of-use assets and lease
liabilities for short-term leases that have a term of 12 months or less.
Operating lease ROU assets represents the right to use the leased asset for the
lease term and operating lease liabilities are recognized based on the present
value of the future minimum lease payments over the lease term at the
commencement date. As most leases do not provide an implicit rate, we use an
incremental borrowing rate based on the information available at the adoption
date in determining the present value of future payments. Lease expense for
minimum lease payments is amortized on a straight-line basis over the lease term
and is included in general and administrative expenses in the consolidated
statements of operations.
Revenue recognition and cost of revenue
We adopted ASC 606, Revenue from Contracts with Customers (Topic 606), which
supersedes the revenue recognition requirements in ASC Topic 605, Revenue
Recognition. This ASC is based on the principle that revenue is recognized to
depict the transfer of goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for
those goods or services. This ASC also requires additional disclosure about the
nature, amount, timing, and uncertainty of revenue and cash flows arising from
customer service orders, including significant judgments.
We recognize revenues and the related direct costs of such revenue which
generally include compensation and related benefits, gas costs, insurance,
parking and tolls, truck rental fees, and maintenance fees as of the date the
freight is delivered which is when the performance obligation is satisfied. In
accordance with ASC Topic 606, we recognize revenue on a gross basis. Our
payment terms are net seven days from acceptance of delivery. We do not incur
incremental costs obtaining service orders from our customers, however, if we
did, because all of our customer contracts are less than a year in duration, any
contract costs incurred would be expensed rather than capitalized. The revenue
that we recognize arises from deliveries of packages on behalf of the Company’s
customers. Primarily, our performance obligations under these service orders
correspond to each delivery of packages that we make under the service
agreements. Control of the delivery transfers to the recipient upon delivery.
Once this occurs, we have satisfied our performance obligation and we recognize
revenue.
Management has reviewed the revenue disaggregation disclosure requirements
pursuant to ASC 606 and determined that no further disaggregation disclosure is
required to be presented.
Stock-based compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 –
“Compensation -Stock Compensation”, which requires recognition in the financial
statements of the cost of employee, director, and non-employee services received
in exchange for an award of equity instruments over the period the employee,
director, or non-employee is required to perform the services in exchange for
the award (presumptively, the vesting period). The ASC also requires measurement
of the cost of employee, director, and non-employee services received in
exchange for an award based on the grant-date fair value of the award. We have
elected to recognize forfeitures as they occur as permitted under ASU 2016-09
Improvements to Employee Share-Based Payment.
Deconsolidation of subsidiaries
The Company accounts for a gain or loss on deconsolidation of a subsidiary or
derecognition of a group of assets in accordance with ASC 810-10-40-5. The
Company measures the gain or loss as the difference between (a) the aggregate of
fair value of any consideration received, the fair value of any retained
noncontrolling investment and the carrying amount of any noncontrolling interest
in the former subsidiary at the date the subsidiary is deconsolidated and (b)
the carrying amount of the former subsidiary’s assets and liabilities or the
carrying amount of the group of assets.
RESULTS OF OPERATIONS
Our consolidated financial statements have been prepared assuming that we will
continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should we be unable to continue our
operation.
We expect we will require additional capital to meet our long-term operating
requirements. We expect to raise additional capital through, among other things,
the sale of equity or debt securities.
26
For the year ended
2020
The following table sets forth our revenues, expenses and net loss for the years
ended
from our consolidated financial statements included in this Annual Report.
For the Year Ended
December 31,
2021 2020
Revenues $ 5,495,146 $ 25,826,632
Cost of revenues 5,408,143 23,284,240
Gross profit 87,003 2,542,392
Operating expenses 6,532,027 10,757,943
Loss from operations (6,445,024 ) (8,215,551 )
Other income (expenses), net 12,699,814 (34,566,407 )
Net income (loss) 6,254,790 (42,781,958 )
Deemed dividend related to ratchet adjustment
and beneficial conversion features (2,650,217 ) (19,223,242 )
Net income (loss) attributable to common
shareholders $ 3,604,573 $ (62,005,200 )
Results of Operations
Revenues
For the year ended
to
or 78.7%. This decrease was primarily a result of a decrease in revenue
attributable to Prime EFS’s last-mile DSP business of
revenue from
decreases were offset from revenues generated from our newly acquired companies,
DDTI and Cougar Express, of
During the year ended
represented 28.5% and 96.7% of the Company’s total net revenues. As discussed
above, approximately 28.5% of our aggregate revenue of
ended
and long-haul business with Amazon. The termination of the Prime EFS last-mile
business with Amazon on
operations of Prime EFS beginning in the 4th fiscal quarter of 2020 and the
termination of
effective on or about
of
caused Prime EFS and
We continue to: (i) seek to replace the lost Amazon business with other,
non-Amazon, customers; (ii) explore other strategic relationships; and (iii)
identify potential acquisition opportunities, while continuing to execute our
restructuring plan. In
elsewhere.
Cost of Revenues
For the year ended
compared to
insurance, gas, maintenance, parking and tolls, and compensation and related
benefits. In the first quarter of 2021, Prime EFS received a bill for
approximately
its last-mile DSP business that terminated in
in cost of sales. The decrease in cost of sales was consistent with the decrease
in revenues.
Gross Profit
For the year ended
of revenues, as compared to gross profit of
the year ended
decrease in gross profit for the year ended
year ended
a decrease in operational efficiencies in Prime EFS and
termination of the Amazon last-mile business and decrease in revenues from our
mid-mile and long-haul business. Additionally, as discussed above, during the
year ended
DSP business that terminated in
Operating Expenses
For the year ended
decrease of
2020, operating expenses consisted of the following:
For the Year Ended
December 31,
2021 2020
Compensation and related benefits
Legal and professional fees
2,160,081 3,920,606 Rent 599,820 651,806 General and administrative expenses 1,115,187 814,306 Contingency loss 30,000 3,035,837 Loss on lease abandonment 1,223,628 - Total Operating Expenses$ 6,532,027 $ 10,757,943
Compensation and related benefits
For the year ended
to
decrease of
overall decrease in compensation and related benefits as compared to the year
ended
significant employees and the reduction of staff due to the significant decrease
in revenues and operations.
27
Legal and professional fees
For the year ended
decrease of
had a decrease in legal fees of
ongoing legal matters, a decrease in consulting fees of
in stock-based consulting fees of
and not in the 2021. These decreases were offset by an increase in accounting
fees of
shareholder information.
Rent expense
For the year ended
This decrease was attributable to the abandonment of our leased properties which
were vacated due to the cessation of the operations of Prime EFS and
offset by an increase in rental space due to the acquisition of Cougar Express.
As of
the Cougar Express premises. The lease of our subsidiary, Cougar Express,
expired on
while it attempts to negotiate a lease renewal with its landlord. The holdover
rent is 200% of the base rental rate Cougar Express paid in 2021. Alternatively,
Cougar Express is exploring options to move its operations to another facility.
We expect that, whether Cougar Express renegotiates with its existing landlord
or finds new space, it will pay materially higher rent in 2022 and future years.
General and administrative expenses
For the year ended
increase of
the acquisition of
decreases in general and administrative expenses due to cost-cutting measures
taken. We expect general and administrative expenses to decrease in 2022 due to
these cost cutting measures.
Contingency loss
For the year ended
compared to
amounted to
settlement. For the year ended
the write off of securities deposits of
contingent liability of
leases for non-payment of monthly lease payments and the lessors demand for
payment of lease termination fees.
Loss from lease abandonment
Due to a reduction in our revenues and the loss of its Amazon revenues, during
the second and third quarter of 2021, we abandoned our leased premises related
to the ceased operations of Prime EFS and
year ended
of use assets and recorded a loss on lease abandonment of
Loss from operations
For the year ended
decrease of
Other expenses (income)
Total other income (expenses) includes interest expense, derivative expense,
warrant exercise inducement expense, gain on debt extinguishment, settlement
expense, gain on deconsolidation of subsidiaries, and other income. For the
years ended
following:
For the Year Ended
December 31,
2021 2020
Interest expense $ (349,544 ) $ (7,377,164 )
Interest expense - related parties (74,959 ) (174,947 )
Warrant exercise inducement expense (4,431,853 ) -
Gain on debt extinguishment 1,564,941 7,847,073
Gain on debt extinguishment - related party 148,651 -
Settlement expense - (545,616 )
Other income 194,823 376,750
Gain on deconsolidation of subsidiaries 12,363,449 -
Derivative income (expense), net 3,284,306 (34,692,503 )
Total Other Income (Expenses), net $ 12,699,814 $ (34,566,407 )
28
For the year ended
During the year ended
penalty of
this expense during the 2021 periods. Additionally, the decrease in interest
expense was attributable to a decrease in interest-bearing loans due to the
conversion of debt to equity, and a decrease in the amortization of original
issue discount.
During the year ended
Agreements with certain of the holders of its existing Series E preferred
warrants (“Exercising Warrant Holders”). Pursuant to the Securities Purchase
Agreements, the Exercising Warrant Holders and we agreed that the Exercising
Warrant Holders would cash exercise their existing warrants, into shares of
common stock underlying such existing warrants Shares. In order to induce the
Exercising Warrant Holders to cash exercise their existing Warrants, the
Securities Purchase Agreements provided for the issuance of new warrants (“New
Warrants”) with such New Warrants to be issued in an amount equal to 50% of the
number of shares acquired by the Existing Warrant Holder through the exercise of
existing warrants for cash. The New Warrants are exercisable upon issuance and
terminate five years following the initial exercise date. The New Warrants have
an exercise price per share of
existing warrants for cash, the Company issued an aggregate of 205,626,862 New
Warrants. The New Warrants issued in connection with the Securities Purchase
Agreements were considered inducement warrants and are classified in equity.
During the year ended
issued was
on the accompanying consolidated statement of operations.
For the year ended
extinguishment of debt was
of
the settlement of convertible debt and warrants, the settlement of secured
merchant loans, the conversion of convertible debt, the settlement of a note
payable – related party, and the settlement of other payables.
On
equity and debt purchasers as settlement related to the difference between
connection with these shares, we recorded settlement expense of
During the year ended
rental income from the sublease of excess office, warehouse, and parking spaces.
As of
properties and will no longer receive sublease income in the future.
For the year ended
subsidiaries of
period.
For the year ended
year ended
related to the calculated initial derivative fair value of conversion options
and warrants. Additionally, we adjusted our derivative liabilities to fair value
and recorded derivative expense or income.
Net Income (Loss)
Due to factors discussed above, for the year ended
net income (loss) amounted to
the year ended
common shareholders, which included a deemed dividend related to price
protection, beneficial conversion features on preferred stock, and the dividends
accrued on Series E and Series G preferred stock of
amounted to
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of a company to generate funds to support its current
and future operations, satisfy its obligations, and otherwise operate on an
ongoing basis. On
result of net cash proceeds received from the sale of Series E preferred stock
units of
preferred stock units of
warrants of
payable – related party of
We believe that our existing working capital and our future cash flows from
operating activities will provide sufficient cash to enable us to meet our
operating needs and debt requirements for the next twelve months.
Additionally, we are seeking to raise capital through additional debt and/or
equity financings to fund our operations in the future. Although we have
historically raised capital from sales of shares of common stock, the sale of
Series E and Series G preferred stock, and from the issuance of convertible
promissory notes and notes payable, there is no assurance that we will be able
to continue to do so. If we are unable to raise additional capital or secure
additional lending in the future, management expects that we will need to
curtail our operations.
Recent Financing Activities
Q1/Q2 2020 convertible debt and related warrants
During the year ended
convertible promissory notes in the aggregate principal amount of
(the “Q1/Q2 2020 Notes”) and warrants to purchase up to 827,200 shares of the
Company’s common stock (the “Q1/Q2 2020 Warrants”). We received net proceeds of
Q1/Q2 2020 Notes initially bore interest at 6% per annum and became due and
payable on the date that is the 24-month anniversary of the original issue date
of the respective Q1/Q2 2020 Note. During the existence of an Event of Default
(as defined in the Q1/Q2 2020 Notes), which included, amongst other events, any
default in the payment of principal and interest payments (including Q1/Q2 2020
Note Amortization Payments) under any Q1/Q2 2020 Note or any other Indebtedness
(as defined in the Q1/Q2 2020 Notes), interest accrued at the lesser of (i) the
rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing
on the thirteenth month anniversary of the issuance of each Q1/Q2 2020 Note,
monthly payments of interest and monthly principal payments, based on a 12-month
amortization schedule (each, a “Q1/Q2 2020 Note Amortization Payment”), was due
and payable, until the Maturity Date (as defined in the applicable Q1/Q2 2020
Note), at which time all outstanding principal, accrued and unpaid interest and
all other amounts due and payable on such Q1/Q2 2020 Note was immediately due
and payable.
29
From the original issue date of a Q1/Q2 2020 Note until such Q1/Q2 2020 Note is
no longer outstanding, such Q1/Q2 2020 Note was convertible, in whole or in
part, at any time, and from time to time, into shares of Common Stock at the
option of the holder. The “Conversion Price” in effect on any Conversion Date
(as defined in the Q1/Q2 2020 Notes) means, as of any date of determination,
If an Event of Default (as defined in the Q1/Q2 2020 Notes) has occurred,
regardless of whether it has been cured or remains ongoing, the Q1/Q2 2020 Notes
are convertible at the lower of: (i)
closing price of the common stock as reported on the Trading Market (as defined
in the Q1/Q2 2020 Notes) during the 20 consecutive Trading Day (as defined in
the Q1/Q2 2020 Notes) period ending and including the Trading Day immediately
preceding the delivery or deemed delivery of the applicable notice of
conversion. All such Conversion Price determinations are to be appropriately
adjusted for any stock dividend, stock split, stock combination,
reclassification or similar transaction that proportionately decreases or
increases the number of shares of Common Stock outstanding.
In the third fiscal quarter of 2020, the great majority of principal amount of
Q1/Q2 2020 Notes were exchanged for Common Stock at the conversion price that
applied if an Event of Default occurred. It is the Company’s position (and it
was the Company’s intent at issuance) that, to the extent the Q1/Q2 2020 Notes
were converted for Common Stock at the advantageous conversion price applicable
to post-Events of Default, the Q1/Q2 Notes are not also entitled to receive the
Mandatory Default Payment (as defined in the Q1/Q2 2020 Notes) of 130% of
principal amount. However, since a note holder could conceivably disagree with
the Company’s position in this regard, the Company has decided, out of an
abundance of caution and despite its confidence that its construction of the
Q1/Q2 2020 Notes is the only correct one, to accrue a reserve as if a note
holder were entitled both to convert its Q1/Q2 Notes at the advantageous
conversion price applicable to post-Events of Default and to receive the
Mandatory Default Payment of 130% on the entire original principal amount of
Q1/Q2 2020 Notes. Accordingly. as of
and default interest due related to the Q1/Q2 2020 Notes amounted to
which consists of
net of unamortized debt discount of
During the three months ended
entered into a letter agreement whereby the investor waived its right to any
Mandatory Default Payment. Accordingly, during the three months ended
2021
recorded a gain on debt extinguishment of
three months ended
stock upon the conversion of all remaining principal and interest balances due
aggregating
As of
related to the Q1/Q2 2020 Notes amounted to
same construction of the Q1/Q2 Notes, convertible notes payable and default
interest due related to the Q1/Q2 2020 Notes amounted to
consists of
unamortized debt discount of
On
principal amount of
a 10% original issue discount amounting to
because the investor converted previous notes and accrued interest due to him in
the amount of
of notes payable to the
extinguishment of
becomes due and payable on
During the existence of an Event of Default (as defined in the
which includes, amongst other events, any default in the payment of principal
and interest payment (including any
any note or any other indebtedness, interest accrues at the lesser of (i) the
rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing
on the thirteenth month anniversary of the
interest and monthly principal payments, based on a 12-month amortization
schedule, will be due and payable (each, an “
Payment”), until the
principal, accrued and unpaid interest and all other amounts due and payable
under the
Amortization Payments will be made in cash unless the investor requests payment
in the Company’s common stock in lieu of a cash payment (each, an “
Stock Payment”). If the investor requests an
number of shares of common stock issued will be based on the amount of the
applicable
(as defined in the
Payment.
Until the
or in part, at any time, and from time to time, into shares of common stock at
the option of the investor. The “Conversion Price” in effect on any Conversion
Date (as defined in the
date of determination, the lower of: (i)
closing price of the common stock as reported on the Trading Market (as defined
in the
the delivery or deemed delivery of the applicable notice of conversion. All such
Conversion Price determinations are to be appropriately adjusted for any stock
dividend, stock split, stock combination, reclassification or similar
transaction that proportionately decreases or increases the common stock.
During the three months ended
common stock upon the conversion of all remaining principal and interest
balances due aggregating
notes payable and default interest due related to the
amounted to
Sale of Series E Preferred Stock
On
investors party thereto (collectively the “Investors”) pursuant to which the
Investors agreed to purchase units, severally and not jointly, which consisted
of an aggregate of (i) 47,977 shares of Series E Convertible Preferred Stock
(the “Series E”) and (ii) warrants (the “Warrants”) to purchase 23,988,500
shares of the Company’s common stock which are equal to 50% of the shares of
common stock issuable upon conversion of the Series E if the Series E were
converted on
proceeds to the Company were
value of each Series E share. We paid fees of
of
2020
down-round provisions in the Warrants, the number of warrants was increased from
23,988,500 warrants to 95,954,000 warrants, and the exercise price was reduced
to
On
Agreements with investors pursuant to which the Investors agreed to purchase
units, severally and not jointly, which consisted of an aggregate of (i) 57,400
shares of Series E and (ii) Warrants to purchase 76,571,429 shares of the
Company’s common stock which are equal to 1,334 warrants for each share of
Series E purchased (the “
to the Company were
received net proceeds of
related to the
adjustment.
30
During the three months ended
Purchase Agreements with investors pursuant to which the Investors agreed to
purchase units, severally and not jointly, which consisted of an aggregate of
(i) 310,992 shares of Series E and (ii) Warrants to purchase 414,857,146 shares
of the Company’s common stock which are equal to 1,334 warrants for each for
each share of Series E purchased (the “Q1 2021 Series E Offering”). The gross
proceeds to the Company were
the Warrants related to the Q1 2021 Series E Offering is
subject to adjustment. Additionally, we issued 82,971,429 warrants to the
placement agent at an initial exercise price of
During
investors pursuant to which the Investors agreed to purchase units, severally
and not jointly, which consisted of an aggregate of (i) 32,127 shares of Series
E and (ii) Warrants to purchase 42,857,143 shares of the Company’s common stock
which are equal to 1,334 warrants for each for each share of Series E purchased
(the “
of
2021
the Company issued 8,571,4293 warrants to the placement agent at an initial
exercise price of
During the three months ended
shares of its common stock in connection with the conversion of 340,346 shares
of Series E. The conversion ratio was based on the Series E certificate of
designation, as amended.
During the three months ended
shares of its common stock in connection with the conversion of 17,135 shares of
Series E. The conversion ratio was based on the Series E certificate of
designation, as amended.
During the three months ended
shares of its common stock in connection with the conversion of 39,410 shares of
Series E. The conversion ratio was based on the Series E certificate of
designation, as amended.
Sale of Series G Preferred Stock
On
with investors pursuant to which the Investors agreed to purchase units,
severally and not jointly, which consisted of an aggregate of (i) 615,000 shares
of Series G and (ii) Warrants to purchase 615,000,000 shares of the Company’s
common stock which are equal to 1,000 warrants for each for each share of Series
G purchased (the “
Company were
paid cash of
E, and received net proceeds of
Warrants related to the
subject to adjustment. Additionally, the Company issued 123,000,000 warrants to
the placement agent at an initial exercise price of
Conversions of Convertible Notes, Warrants and Convertible Preferred Stock
The Company’s trading price quoted on the OTC Pink market fell from
share on
with anti-dilution protection features contained in the
beginning in
outstanding notes and the exercise price of many of the Company’s outstanding
warrants, to fall to
converting the outstanding principal of their notes into substantial quantities
of shares of the Company’s common stock.
During the period from
1,013,408,088 shares of our common stock in connection with the conversion of
convertible notes payable and default interest of
of
our common stock upon the conversion of 1,000,000 shares of Series B preferred
shares. Additionally, in 2020, we issued 155,914,308 shares of its common stock
upon the cashless exercise of 157,297,448 warrants. Also, we issued 522,726,000
shares of common stock upon the conversion of 522,726 shares of series D
preferred stock and issued other shares of common stock during fiscal 2020.
On
connection with the conversion of a convertible note payable of
conversion price was based on contractual terms of the related debt.
During the three months ended
common stock upon the conversion of all remaining Q1/Q2 2020 Note principal and
interest balances due aggregating
During the three months ended
common stock upon the conversion of all remaining
interest balances due aggregating
During the year ended
common stock in connection with the conversion of 396,891 shares of Series E.
The conversion ratio was based on the Series E certificate of designation, as
amended.
During the three months ended
common stock in connection with the cashless exercise of 98,557,429 warrants.
The exercise price was based on contractual terms of the related warrant.
In May and
received proceeds of
per share.
During the three months ended
of our common stock and received proceeds of
325,539,430 warrants at
During the three months ended
our common stock and received proceeds of
28,571,429 warrants at
31
Consequently, the total number of shares of common stock outstanding has
increased from 11,832,603 on
2021
To enable the Company to meet these commitments, the Company’s Board of
Directors unanimously adopted a resolution seeking stockholder approval to
authorize the Board of Directors to amend the Amended and Restated Articles of
Incorporation to increase the number of authorized shares of common stock from
500,000,000 shares to 4,000,000,000 shares (the “Authorized Share Increase
Amendment”). Stockholder approval for the Authorized Share Increase Amendment
was obtained on
voting power of the stock of the Company entitled to vote thereon, as of the
record date of
votes to approve the Authorized Share Increase Amendment under the Company’s
Amended and Restated Articles of Incorporation, bylaws and
to applicable securities laws and Section 78.390 of the Nevada Revised Statutes,
the Company prepared and mailed an Information Statement to its stockholders of
record on the record date beginning on
14(c)-2(b) of the Securities Exchange Act of 1934, as amended, the Authorized
Share Increase Amendment became effective on
twenty calendar days after the Information Statement was first sent to
stockholders.
Additionally, on
voting power of the stock of the Company entitled to vote thereon consented, in
writing, to amend the Company’s Amended and Restated Articles of Incorporation,
by adoption of the Certificate of Amendment to the Amended and Restated Articles
of Incorporation of the Company to authorize an increase of the number of shares
of common stock that the Company may issue to 10,000,000,000 shares, par value
statement on Schedule 14C regarding the stockholders’ consent to the Authorized
Share Increase Amendment with the
sufficient to approve the 2021 Amendment under
definitive information statement on Schedule 14C on
mailed that information statement to stockholders on
Amendment became effective in
after the Information Statement was first sent to stockholders.
Cash Flows Operating activities
Net cash flows used in operating activities for the year ended
amounted to
in operating activities was primarily attributable to net income of
adjusted for the add back (reduction) of non-cash items such as depreciation and
amortization expense of
of debt discount of
non-cash gain on extinguishment of debt – related party of
exercise inducement expense of
deconsolidation of subsidiaries of
in accounts receivable of
current assets of
increase in accounts payable and accrued expenses of
insurance payable of
related benefits of
Net cash flows used in operating activities for the year ended
amounted to
in operating activities was primarily attributable to a net loss of
adjusted for the add back (reduction) of non-cash items such as depreciation and
amortization expense of
amortization of debt discount of
compensation of
non-cash gain on debt extinguishment of
assets and liabilities such as a decrease in accounts receivable of
increase in prepaid expenses and other current assets of
security deposit of
expenses of
increase in accrued compensation and related benefits of
Investing activities
Net cash used in investing activities for the year ended
amounted to
DDTI and Cougar Express of
transportation equipment offset by cash proceeds from the sale of property and
equipment of
Net cash used in investing activities for the year ended
amounted to
trucks of
Financing activities
For the year ended
totaled
proceeds from the sale of Series E preferred shares of
the sale of Series G preferred shares of
payable of
and the net repayment of related party advances of
For the year ended
totaled
from convertible debt of
and proceeds from the sale of Series E preferred shares of
the repayment of convertible notes of
advances of
Risks and Uncertainties
The accompanying consolidated financial statements have been prepared on the
basis of continuity of operations, realization of assets and the satisfaction of
liabilities and commitments in the ordinary course of business.
Historically, we have primarily funded our operations with proceeds from sales
of convertible debt and convertible preferred stock. Since our inception, we
have incurred recurring losses, including a loss from operations of
and
Until such time that we implement our growth through acquisition strategy, we
expect to continue to generate operating losses in the foreseeable future,
mostly due to corporate overhead and costs of being a public company.
32
During the year ended
shares of our Series E preferred stock for net proceeds of
an aggregate of 615,000 shares of our Series G preferred stock for net proceeds
of
DDTI, the repayment of debt, and for working capital purposes. Additionally,
during the year ended
the exercise of stock warrants. As such, we expect that our cash as of
31, 2021
next twelve months from the date of the issuance of the financial statements.
Notwithstanding the foregoing, subsequent to
additional net proceeds of
and
Company’s financial condition.
The COVID-19 pandemic and resulting global disruptions have affected the
Company’s businesses, as well as those of the Company’s customers and their
third-party suppliers and sellers. To serve the Company’s customers while also
providing for the safety of the Company’s employees and service providers, the
Company has adapted numerous aspects of its logistics and transportation
processes. The Company continues to monitor the rapidly evolving situation and
expect to continue to adapt its operations to address federal, state, and local
standards as well as to implement standards or processes that the Company
determines to be in the best interests of its employees, customers, and
communities. The impact of the pandemic and actions taken in response to it had
some effects on the Company’s results of operations. Effects include increased
fulfilment costs and cost of sales, primarily due to investments in employee
hiring, pay, and benefits, as well as costs to maintain safe workplaces, and
higher shipping costs. The Company continues to be affected by possible
procurement and shipping delays, supply chain interruptions, higher product
demand in certain categories, lower product demand in other categories, and
increased fulfilment costs and cost of sales as a percentage of net sales and it
is not possible to determine the duration and spread of the pandemic or such
actions, the ultimate impact on the Company’s results of operations during 2022,
or whether other currently unanticipated consequences of the pandemic are
reasonably likely to materially affect the Company’s results of operations.
We will continue to: (i) seek to replace its last-mile DSP Amazon business and
supplement its mid-mile and long-haul Amazon business with other, non-Amazon,
customers; (ii) explore other strategic relationships; and (iii) identify
potential acquisition opportunities, while continuing to execute its
restructuring plan. We are seeking to raise capital through additional debt
and/or equity financings to fund its operations in the future. Although we have
historically raised capital from sales of common and preferred shares and from
the issuance of convertible promissory notes and notes payable, there is no
assurance that it will be able to continue to do so. If we are unable to replace
its Amazon business, to raise additional capital or secure additional lending in
the near future, management expects that we will need to curtail our operations.
The consolidated financial statements do not include any adjustments related to
the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should we be unable to
continue as a going concern.
Contractual Obligations
We have certain fixed contractual obligations and commitments that include
future estimated payments. Changes in our business needs, cancellation
provisions, changing interest rates, and other factors may result in actual
payments differing from the estimates. We cannot provide certainty regarding the
timing and amounts of payments.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors.
Effects of Inflation
We do not believe that inflation has had a material impact on our business,
revenues, or operating results during the periods presented.
Recently Enacted Accounting Standards
For a description of accounting changes and recent accounting standards,
including the expected dates of adoption and estimated effects, if any, on our
consolidated financial statements, see “Note 2: Recent Accounting
Pronouncements” in the consolidated financial statements filed with this Annual
Report.
© Edgar Online, source
link