FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q 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.
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.
28
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
For the three months ended
the Company’s total net revenues (22.2%, 20.2%, 18.1% and 11.2%, respectively).
For the three months ended
Express, represented 77.5% and 16.3% of the Company’s total net revenues,
respectively. During the years ended
Amazon, represented 28.5% and 96.7% of our total net revenues. Approximately
28.5% of our revenue of
attributable to
Amazon. The termination of the Prime EFS last-mile business with Amazon on
beginning in the 4th fiscal quarter of 2020 and the termination of
Amazon mid-mile and long-haul business, which was effective on or about
2021
2nd fiscal quarter of 2021. This impact caused Prime EFS and
become 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
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
servicing Federal Express routes in northern
asset purchase agreement (“APA”) to sell substantially all of its assets in an
all-cash transaction expected to generate net proceeds of approximately
consummating the transaction. The Company had concluded that the operations of
Shyp FX no longer fit into its long-term growth plans. Under the terms of the
APA, gross proceeds shall be approximately
adjustments payable in cash at closing, adjusted for a broker’s commission of
awaiting final setup processing within the Federal Express system to enable the
transaction to close. The transaction is expected to close during the third week
of
On
Inc.
Acquisition”). On
outstanding shares of capital stock of
full-service logistics provider specializing in pickup, warehousing, and
delivery services in the tri-state area (“Cougar Express”). The purchase price
was
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
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
deliver throughout the
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
available for expanding its footprint into our primary base of operations in
Jersey
operational capabilities.
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 unaudited condensed consolidated financial statements contained in this
Quarterly Report, which have been prepared in accordance with generally accepted
accounting principles in
analysis together with such unaudited condensed consolidated financial
statements and the related notes thereto.
29
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
unaudited condensed 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 unaudited
condensed 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.
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 unaudited
condensed 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.
30
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 unaudited condensed 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.
For the three months ended
The following table sets forth our revenues, expenses and net loss for the three months endedMarch 31, 2022 and 2021. The financial information below is derived from our unaudited condensed consolidated financial statements included in this Quarterly Report. For the Three Month Ended March 31, 2022 2021 Revenues$ 1,259,333 $ 1,491,699 Cost of revenues 971,002 1,898,778 Gross profit (loss) 288,331 (407,079 ) Operating expenses 2,089,184 1,229,305 Loss from operations (1,800,853 ) (1,636,384 ) Other income (expenses), net (236,378 ) (632,796 ) Net loss (2,037,231 ) (2,269,180 ) Deemed dividends related to beneficial conversion features and accrued dividends (109,051 ) (829,836 )
Net loss attributable to common shareholders
Results of Operations Revenues
For the three months ended
compared to
revenue attributable to
of
decreases were offset from increases in revenues generated from our acquired
companies, DDTI and Cougar Express, of
During the three months ended
77.5% of the Company’s total net revenues which was attributable to
now terminated mid-mile and long-haul business with Amazon.
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 three months 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.
Gross Profit
For the three months ended
22.9% of revenues, as compared to a gross loss of
months ended
above, during the three months ended
for approximately
for its last-mile DSP business that terminated in
during the three months ended
from a decrease in revenues and a decrease in operational efficiencies in Prime
EFS and
decrease in revenues from our mid-mile and long-haul business.
31 Operating Expenses
For the three months ended
an increase of
2021, operating expenses consisted of the following:
For the Three Months Ended March 31,
2022 2021
Compensation and related benefits
Legal and professional fees
349,494 530,538 Rent 101,337 133,955 General and administrative expenses 281,943 196,203 Total Operating Expenses$ 2,089,184 $ 1,229,305
Compensation and related benefits
For the three months ended
amounted to
31, 2021
officers and directors, we recorded stock-based compensation of
Additionally, compensation and related benefits increased by
primarily attributable to the hiring of our chief executive officer and chief
financial officer in
Legal and professional fees
For the three months ended
decrease of
had a decrease in accounting fees of
were offset by an increase in legal fees of
Rent expense
For the three months ended
to
24.4%. 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
properties, except for the Cougar Express premises. The lease of our subsidiary,
Cougar Express, expired on
the facility 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 three months ended
were
an 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.
Loss from Operations
For the three months ended
an increase of
Other Expenses (Income) Total other income (expenses) includes interest expense, derivative expense, gain on debt extinguishment, settlement expense, and other income. For the three months endedMarch 31, 2022 and 2021, other (expenses) income consisted of the following: For the Three Months Ended March 31, 2022 2021 Interest expense$ (7,867 ) $ (83,509 ) Interest expense - related parties - (22,192 ) Gain on debt extinguishment - 59,853 Settlement expense (228,511 ) - Other income - 108,035 Derivative expense, net - (694,983 )
Total Other (Expenses) Income, net
For the three months ended
was
decrease in interest expense was attributable to a decrease in interest-bearing
loans due to the conversion of debt to equity and repayment of debt, and a
decrease in the amortization of original issue discount.
32
For the three months ended
extinguishment of debt was
or 100.0%. The gains on debt extinguishment in 2021 were attributable to the
settlement of convertible debt and warrants, the conversion of convertible debt,
and the settlement of other payables.
During the three months ended
During the three months ended
of
rental income from the sublease of excess office, warehouse, and parking spaces.
We no longer receive sublease income.
For the three months ended
During the three months ended
related to the adjustment to derivative liabilities to fair value.
Net Loss
Due to factors discussed above, for the three months ended
2021, net loss amounted to
three months ended
shareholders, which included a deemed dividend related to beneficial conversion
features on preferred stock and the dividends accrued on Series E and Series G
preferred stock of
basic and diluted common share, and
diluted common share, respectively.
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
of net cash proceeds received from the sale of Series G preferred stock units of
the use of net cash for the repayment of notes payable of
used in operations 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
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
On
with investors pursuant to which the Investors agreed to purchase units,
severally and not jointly, which consisted of an aggregate of (i) 70,000 shares
of Series G and (ii) Warrants to purchase 70,000,000 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
of
entered into a Securities Purchase Agreement with an investor pursuant to which
the Investor agreed to purchase units, severally and not jointly, which
consisted of an aggregate of (i) 25,000 shares of Series G and (ii) Warrants to
purchase 25,000,000 shares of the Company’s common stock which are equal to
1,000 warrants for each for each share of Series G purchased (the “
Series G Offering”). The gross proceeds to the Company were
per unit. The Company paid placement agent fees of
proceeds of
adjustment. Additionally, the Company paid the placement agent was issued
19,000,000 warrants to the placement agent at an initial exercise price of
per share. The aggregate cash fees of
of the offering in additional paid-in capital and there is no effect on equity
for the placement agent warrants.
On
an investor pursuant to which the Investor agreed to purchase units, severally
and not jointly, which consisted of an aggregate of (i) 25,000 shares of Series
G and (ii) Warrants to purchase 25,000,000 shares of the Company’s common stock
which are equal to 1,000 warrants for each for each share of Series G purchased
(the “
and received net proceeds of
Warrants related to the
per share, subject to adjustment. Additionally, the Company issued 19,000,000
warrants to the placement agent at an initial exercise price of
The aggregate cash fees of
offering in additional paid-in capital and there is no effect on equity for the
placement agent warrants.
33 Cash Flows Operating activities
Net cash flows used in operating activities for the three months ended
2022
cash used in operating activities was primarily attributable to net loss of
depreciation and amortization expense of
of
in accounts receivable of
current assets of
increase in accounts payable and accrued expenses of
insurance payable of
benefits of
Net cash flows used in operating activities for the three months ended
2021
cash used in operating activities was primarily attributable to a net loss of
depreciation and amortization expense of
extinguishment of
as a decrease in accounts receivable of
and other current assets of
an increase in accounts payable and accrued expenses of
insurance payable of
related benefits of
Investing activities
Net cash used in investing activities for the three months ended
amounted to
DDTI and Cougar Express. We did not have any investment activities during the
comparable 2022 period.
Financing activities
For the three months ended
activities totaled
received proceeds from the sale of Series G preferred shares of
cash proceeds of
of notes payable of
For the three months ended
activities totaled
received proceeds from the sale of Series E preferred shares of
offset by the repayment of notes payable of
related party advances of
Risks and Uncertainties
The accompanying unaudited condensed 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 net loss of
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.
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. Additionally, during the three months ended
preferred stock for net proceeds of
from the exercise of stock warrants. As such, we expect that our cash as of
the next twelve months from the date of the issuance of the financial
statements.
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 believe that our existing working capital and future cash flow from operating
activities will provide sufficient cash to enable us to meet our operating needs
and debt requirements for the next twelve months. 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 common
and preferred shares 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
near future, management expects that we will need to curtail our operations.
34 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 unaudited condensed consolidated financial statements
filed with this Quarterly Report.
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