Item 1A. Risk Factors.

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties, such as statements of our objectives, expectations, and intentions. The cautionary statements made in this Annual Report on Form 10-K should be read as applicable to all forward-looking statements wherever they appear in this report. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere in this Annual Report on Form 10-K.

Risks Related to Unique Logistics’ Industry and Business Environment

Unique Logistics’ dependence on third-party service providers may adversely impact the delivery and quality of its services, and as a result its business and operating results.

As a non-asset based provider of global logistics services, Unique Logistics depends on a variety of asset-based service providers, including air, ocean and ground freight carriers, to provide equipment and services necessary to operate its business. The quality and profitability of Unique Logistics’ services depend upon effective selection and oversight of its service providers, and therefore its dependence on third parties may impact the delivery and quality of its transportation and logistics services. Such third parties may not fulfill their obligations to Unique Logistics, or Unique Logistics’ relationship with these parties may change, which may prevent it from meeting its commitments to its customers. In addition, if Unique Logistics is unable to secure sufficient equipment or other transportation services from third parties to meet its commitments to its customers, its operating results could be materially and adversely affected, and its customers could switch to using its competitors, either temporarily or permanently, for their transportation logistics needs. Many of these risks are beyond Unique Logistics’ control, including:

In addition, any determination that Unique Logistics’ third-party carriers have violated laws and regulations could seriously damage its reputation and brand, resulting in diminished revenue and profit and increased operating costs.

Further, when market demand significantly exceeds available capacity in a given market, which was, for example, the case for various services and markets in 2021 during the post-COVID market recovery, Unique Logistics may not always be able to find acceptable transportation or other service solutions to meet its customers’ needs or the routing and delivery of freight may be subject to delays that are outside of its control.

If any of these risks occur, it could have a material adverse effect on Unique Logistics’ business, results of operations and financial condition.

Economic recessions and other factors that reduce freight volumes could have a material adverse impact on Unique Logistics’ business.

The transportation industry historically has experienced cyclical fluctuations in financial results due to economic recessions, downturns in business cycles of customers, interest rate fluctuations, currency fluctuations, inflation pressures, and other economic factors beyond Unique Logistics’ control. Deterioration in the economic environment subjects Unique Logistics’ business to various risks that may have a material impact on its operating results and cause it to not reach its long-term growth goals, including the following:

In addition, volatile market conditions can create situations where rate increases charged by carriers and other service providers are implemented with little or no advance notice. Unique Logistics often cannot pass these rate increases on to its customers in the same timeframe, if at all, which could negatively impact Unique Logistics’ yields and margins.

Higher carrier prices may result in decreased gross profit margin and increases in working capital.

Carriers can be expected to charge higher prices if market conditions warrant, including increased costs of fuel, labor shortages, increased shipping times due to supply chain disruption or in order to cover higher operating costs. Unique Logistics’ gross profits and income from operations may decrease if it is unable to pass these cost increases on to its customers. In some instances where Unique Logistics has entered into contract freight rates with customers, if market conditions change and those contracted rates are below market rates, it may be required to provide transportation services at a loss.

Climate change, including measures to address climate change, could adversely impact Unique Logistics’ business and financial results.

The long-term effects of climate change are difficult to predict and may be widespread. The potential impacts of climate change may subject Unique Logistics and its business to various risks, including physical risks (such as rising sea levels, which could affect port operations or frequency and severity of extreme weather conditions, which could disrupt its operations and damage cargo and its facilities), compliance costs and transition risks (such as increased regulation and taxation to support carbon emissions reduction investments), reputational and strategic risks due to shifts in customer demands (such as customers requiring more fuel-efficient transportation modes or transparency to carbon emissions in their supply chains), customer contractual requirements around environmental initiatives, and other adverse effects. While Unique Logistics’ non-asset-based model gives it some flexibility and ability to change locations, modes, and carriers based on evolving operating conditions, such impacts may disrupt its operations by adversely affecting its ability to procure services that meet regulatory or customer requirements, depending on the availability of sufficient appropriate logistics solutions, and may negatively affect its results of operations, cash flows and financial condition. Further, there is no assurance that alternative locations, modes, and carriers that are not so affected will be available or have adequate capacity.

In addition, the increasing public and political concern over climate change has resulted and may continue to result in more legal or regulatory requirements relating to climate change, including regulating greenhouse gas emissions, restrictions on modes of transportation, alternative energy policies, and sustainability initiatives. If legislation or regulations are enacted or promulgated in any jurisdictions in which Unique Logistics operates, that impose more stringent restrictions and requirements than its current legal or regulatory obligations, Unique Logistics may experience disruptions in, or increases in the costs associated with delivering, its services, which may negatively affect its operations, operating results, cash flows, and financial condition.

Unique Logistics operates in a competitive environment.

Competition in the transportation services industry is intense and Unique Logistics expects it to remain so for the foreseeable future. Many of Unique Logistics’ competitors have longer operating histories, greater name recognition, more employees, and significantly greater financial, technical, marketing, public relations and distribution resources than Unique Logistics does. The competitive environment may reduce Unique Logistics’ market opportunity and require it to make changes in its pricing or marketing to maintain and extend its current brand and market position. Price concessions or the emergence of other pricing or distribution strategies of competitors may diminish Unique Logistics’ revenues, impact its margins, or lead to a reduction in its market share, any of which will harm Unique Logistics’ business, prospects, and results of operations.

Unique Logistics’ earnings may be affected by seasonal changes in the transportation industry.

Results of operations for Unique Logistics’ industry generally show a seasonal pattern as customers reduce shipments during and after the winter holiday season. Historically, income from operations and earnings are lower in the first calendar quarter (which, based on its fiscal year-end of May 31, occurs during Unique Logistics’ third and fourth fiscal quarters) than in the other three quarters. Historically, income from operations and earnings are lower in the first calendar quarter than in the other three quarters. Unique Logistics believes that this historical pattern has been the result of, or influenced by, numerous factors, including national holidays, weather patterns, consumer demand, economic conditions, and other similar and subtle forces. Although seasonal changes in the transportation industry have not had a significant impact on Unique Logistics’ cash flow or results of operations, Unique Logistics expects this trend to continue and it cannot guarantee that the seasonal changes will not adversely impact it in the future. The transportation industry may also be significantly impacted by disruptions such as port congestion and the availability of transportation equipment, as well as factors such as labor shortages, fuel prices, shifts in consumer demand toward more locally sourced products, and regulatory changes. These disruptions may impact the growth rates within the global logistics industry and Unique Logistics’ ability to provide transportation services for its customers, each of which may adversely impact its results of operations and operating cash flows.

Risks Related to Unique Logistics and its Operations

Unique Logistics relies on technology to operate its business.

Unique Logistics’ continued success is dependent on its systems continuing to operate and to meet the changing needs of its customers and users. The continued automation of existing processes and usage of third-party technology and cloud network capacity will require adaptation and adjustments that may increase Unique Logistics’ exposure to cybersecurity risks and system availability reliance. Unique Logistics relies on its technology staff and vendors to successfully implement changes to and maintain its operating systems in an efficient manner. If it fails to maintain, protect, update, and enhance its operating systems, Unique Logistics may be at a competitive disadvantage and lose customers.

As demonstrated by recent material and high-profile data security breaches, computer malware, viruses, and computer hacking and phishing attacks have become more prevalent, have occurred on Unique Logistics’ systems in the past, and may occur on Unique Logistics’ systems in the future. Previous attacks on Unique Logistics’ systems have not had a material financial impact on its operations, but Unique Logistics cannot guarantee that future attacks will have little to no impact on its business.

Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, a significant impact on the performance, reliability, security, and availability of Unique Logistics’ systems and technical infrastructure to the satisfaction of its users may harm Unique Logistics’ reputation, impair its ability to retain existing customers or attract new customers, and expose it to legal claims and government action, each of which could have a material adverse impact on Unique Logistics’ financial condition, results of operations, and growth prospects.

Difficulty in forecasting timing or volumes of customer shipments or rate changes by carriers could adversely impact Unique Logistics’ margins and operating results.

Unique Logistics is not aware of any accurate means of forecasting short-term customer requirements. Long-term customer satisfaction, however, depends upon Unique Logistics’ ability to meet these unpredictable short-term customer requirements. Personnel costs, Unique Logistics’ single largest expense, are always less flexible in the very near term as Unique Logistics must staff to meet uncertain demand. As a result, its short-term operating results could be disproportionately affected.

A significant portion of Unique Logistics’ revenues is derived from customers whose shipping patterns are tied closely to consumer demand and from customers in industries whose shipping patterns are dependent upon just-in-time shipping schedules. Therefore, the timing of Unique Logistics’ revenues is, to a large degree, impacted by factors out of its control, such as a sudden change in consumer demand for retail goods, changes in trade tariffs, labor disruptions at ports, airports, terminals and rail, product launches and/or manufacturing production delays. Additionally, many customers ship a significant portion of their goods at or near the end of a quarter and, therefore, Unique Logistics may not learn of a shortfall in revenues until late in a quarter. To the extent that Unique Logistics’ did not expect a shortfall in revenues or earnings, any such shortfall could have an immediate and adverse effect on the trading price of Unique Logistics Shares.

Volatile market conditions, such as those following the onset of the COVID-19 pandemic, can create situations where carriers and other service providers implement rate increases with little or no advance notice. Unique Logistics often cannot pass these rate increases on to its customers in the same time frame, if at all. As a result, Unique Logistics’ yields and margins have been and may in the future be negatively impacted by the effects of volatile market conditions.

Any reduction in international commerce or disruption in global trade may adversely impact Unique Logistics’ business and operating results.

Unique Logistics provides services primarily to customers engaged in international commerce. As a result, everything that affects international trade has the potential to impact Unique Logistics’ business and adversely impact its operating results. Factors that influence international trade, which are outside of Unique Logistics’ control, include the following:

The implementation of Unique Logistics’ business strategy will require significant capital expenditures and additional financing.

The implementation of Unique Logistics’ business strategy, including with respect to growth, will require significant expenditures of capital as well as additional financing and risks associated with interest rates. Unique Logistics may seek additional funds through equity or debt financings. Unique Logistics cannot offer any assurances that any such financings will be obtained on favorable terms, or at all. Equity financings could result in dilution to existing stockholders and debt financing could result in the imposition of significant financial and operational restrictions on Unique Logistics. Unique Logistics’ inability to access adequate capital on acceptable terms could have a material adverse effect on its business, prospects, results of operations, and financial condition.

Unique Logistics derives a significant portion of its revenues from a small number of customers.

Revenue from three major customers as a percentage of the Company’s total revenue was 25.0% and 19.0%, respectively, for the years ended May 31, 2024 and 2023. One customer represented 11% of 2024 revenues and no single customer represented more than 10.0% of total 2023 revenues.

The loss of one or more of these customers would reduce Unique Logistics’ revenue and net income to the extent where this loss would have a material adverse effect on its business and operating results.

Unique Logistics may not successfully manage its growth.

Unique Logistics intends to continue to grow rapidly and substantially, including by organic growth and expansion in existing markets, by making strategic acquisitions and by entering new markets. Unique Logistics may experience difficulties and higher-than-expected expenses in executing this strategy as a result of, among other things, unfamiliarity with new markets and changes in revenue and business models.

Unique Logistics’ growth will place a significant strain on its management as well as its operational and financial resources. Unique Logistics will need to continually improve existing procedures and controls as well as implement new transaction processing, operational and financial systems, and procedures and controls to expand, train and manage its employee base. Unique Logistics’ working capital needs will increase substantially as its operations grow. Failure to manage growth effectively, or obtain necessary working capital, could have a material adverse effect on Unique Logistics’ business, results of operations, cash flows, stock price, and financial condition.

Governmental, Regulatory, and Legal Risks

Unique Logistics is subject to a complex regulatory environment, and failure to comply with and adapt to these regulations could result in penalties or otherwise adversely impact its business.

Unique Logistics’ business is affected by ever-increasing regulations from a number of sources in the United States and in foreign locations in which it operates. Many of these regulations are complex and require varying degrees of interpretation, including those related to trade compliance, data privacy, employment, compensation and competition, and may require changes in Unique Logistics’ operating practices, influence the demand for, and the cost of providing, transportation services, and result in other unforeseen costs.

For example, in response to ongoing security threats, governments around the world are continuously enacting or updating security regulations. These regulations are multi-layered, increasingly technical in nature and characterized by a lack of harmonization of substantive requirements among various governmental authorities. Furthermore, the implementation of these regulations, including deadlines and substantive requirements, can be driven by regulatory urgencies rather than an industry’s realistic ability to comply.

Failure to consistently and timely comply with any applicable regulations, or the failure, breach or compromise of Unique Logistics’ policies and procedures or those of Unique Logistics’ service providers or agents, may result in increased operating costs, damage to Unique Logistics’ reputation, difficulty in attracting and retaining key personnel, restrictions on Unique Logistics’ operations, and/or fines and penalties. Further, Unique Logistics cannot predict the impact that future regulations may have on its business, and there can be no assurance that it will be able to pass on any increased costs resulting from new or changing regulations on to its customers in the form of rate increases or surcharges, and therefore its operations, revenues, and profitability may be materially and adversely affected as a result.

Unique Logistics’ contracted transportation providers are subject to increasingly stringent laws protecting the environment, including transitional risks relating to climate change, which could directly or indirectly have a material adverse effect on Unique Logistics’ business.

Future and existing environmental regulatory requirements, including evolving transportation technology, in the United States and abroad could adversely affect operations and increase operating expenses, which in turn could increase Unique Logistics’ purchased transportation costs. Unique Logistics may also incur expenses as a result of regulators requiring additional climate-related disclosures regarding its contracted transportation providers that may be labor-intensive to report on. Until the timing, scope, and extent of such possible regulation becomes known, Unique Logistics cannot predict its effect on its business, but if Unique Logistics is unable to pass such costs along to its customers, its business could be materially and adversely affected. Even without any new legislation or regulation, increased public concern regarding greenhouse gas emissions by transportation carriers could harm the reputations of companies operating in the transportation and logistics industries and shift consumer demand toward more locally-sourced products and away from the services that Unique Logistics provides.

Unique Logistics’ international operations subject it to operational, financial, and data privacy risks.

Unique Logistics provides services within and between foreign countries on an increasing basis. Unique Logistics’ business outside of the United States is subject to various risks, including:

The occurrence or consequences of any of these risks may restrict Unique Logistics’ ability to operate in the affected region and/or decrease the profitability of its operations in that region.

As Unique Logistics continues to expand its business internationally, it is exposed to increased risk of loss from foreign currency fluctuations and exchange controls, as well as longer accounts receivable payment cycles. Foreign currency fluctuations could result in currency exchange gains or losses or could affect the book value of Unique Logistics’ assets and liabilities. Furthermore, Unique Logistics may experience unanticipated changes to its income tax liabilities resulting from changes in geographical income mix and changing international tax legislation. Unique Logistics has limited control over these risks, and if it does not correctly anticipate changes in international economic and political conditions, it may not alter its business practices in time to avoid adverse effects.

We use, and may continue to expand our use of, machine learning and artificial intelligence technologies to deliver our services and operate our business.

If we fail to successfully integrate artificial intelligence (“AI”) technologies into our platform and business processes, or if we fail to keep pace with rapidly evolving AI technological developments, including attracting and retaining talented AI developers and programmers, we may face a competitive disadvantage. At the same time, the use or offering of AI technologies may result in new or expanded risks and liabilities, including enhanced government or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality, reputational harm, and security risks. It is not possible to predict all of the risks related to the use of AI and changes in laws, rules, directives, and regulations governing the use of AI may adversely affect our ability to develop and use AI or subject us to legal liability. 17 Governmental, Regulatory, and Legal Risks Unique Logistics is subject to a complex regulatory environment, and failure to comply with and adapt to these regulations could result in penalties or otherwise adversely impact its business. The cost of complying with laws and regulations governing AI could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations. Further, market demand and acceptance of AI technologies are uncertain, and we may be unsuccessful in efforts to further incorporate AI into our processes.

Investigations and litigation could require management time and or incur substantial legal costs or fines, penalties or damages, any of which could adversely impact on Unique Logistics’ financial results.

As a multinational corporation, Unique Logistics is subject to formal or informal investigations from governmental authorities or others in the countries in which it does business. In addition, Unique Logistics may become subject to civil litigation with its customers, service providers and other parties with whom it does business. These investigations and litigation may require significant management time and could cause Unique Logistics to incur substantial additional legal and related costs, which may include fines, penalties or damages that could have a materially adverse impact on its financial results.

Risks Related to Unique Logistics’ Acquisition Strategy

Unique Logistics’ past acquisitions, as well as any acquisitions that Unique Logistics may complete in the future, may be unsuccessful or result in other risks or developments that adversely affect Unique Logistics’ financial condition and results.

While it intends for its acquisitions to enhance its competitiveness and profitability, Unique Logistics cannot be certain that its past or future acquisitions will be accretive to earnings or otherwise meet its operational or strategic expectations. Special risks, including accounting, regulatory, compliance, information technology or human resources issues, may arise in connection with, or as a result of, the acquisition of an existing company, including the assumption of unanticipated liabilities and contingencies, difficulties integrating acquired businesses, possible management distractions, or the inability of the acquired business to achieve the levels of revenue, profit, productivity or synergies Unique Logistics anticipates or otherwise perform as Unique Logistics expects on the timeline contemplated. Special risks, including accounting, regulatory, compliance, information technology or human resources issues, may arise in connection with, or as a result of, the acquisition of an existing company, including the assumption of unanticipated liabilities and contingencies, difficulties in integrating acquired businesses, possible management distractions, or the inability of the acquired business to achieve the levels of revenue, profit, productivity or synergies Unique Logistics anticipates or otherwise perform as Unique Logistics expects on the timeline contemplated. Unique Logistics is unable to predict all of the risks that could arise as a result of its acquisitions.

In addition, if the performance of Unique Logistics’ reporting segments or an acquired business varies from Unique Logistics’ projections or assumptions, or if estimates about the future profitability of Unique Logistics’ reporting segments or an acquired business change, Unique Logistics’ revenues, earnings or other aspects of its financial condition could be adversely affected.

Unique Logistics may incur risks related to acquisition financing.

Unique Logistics has a limited amount of financial resources and its ability to make additional acquisitions without securing additional financing from outside sources is limited. In order to continue to pursue its acquisition strategy, Unique Logistics may be required to obtain additional financing. Unique Logistics may obtain such financing through a combination of traditional debt financing, the placement of debt and equity securities, or financing in exchange for accounts receivable, as under Unique Logistics’ current revolving credit facility. Unique Logistics may finance some portion of its future acquisitions by either issuing equity or by using shares of Common Stock for all or a portion of the purchase price for such businesses. In the event that the Common Stock does not attain or maintain a sufficient market value, or potential acquisition candidates are otherwise unwilling to accept shares of Common Stock as part of the purchase price for the sale of their businesses, Unique Logistics may be required to use more of its cash resources, if available, in order to fund its acquisitions. If Unique Logistics does not have sufficient cash resources, it will not be able to complete acquisitions and its growth could be limited unless it is able to obtain additional capital through debt or equity financing. The terms of the Financing Agreement require that the Company obtain the consent of its lenders prior to securing additional debt financing. The terms of the Financing Agreement require that the Company obtain the consent of its lenders prior to securing additional debt financing. As a result, Unique Logistics’ ability to obtain additional debt financing could be constrained if it is unable to secure such consent.

Unique Logistics may be required to incur a significant amount of indebtedness in order to successfully implement its acquisition strategy.

Subject to the restrictions contained under the Financing Agreement, Unique Logistics may be required to incur a significant amount of indebtedness in order to complete future acquisitions. If it is not able to generate sufficient cash flow from the operations of acquired businesses to make scheduled payments of principal and interest on any such indebtedness, then Unique Logistics will be required to use its capital for such payments. This will restrict Unique Logistics’ ability to make additional acquisitions. Unique Logistics may also be forced to sell an acquired business in order to satisfy indebtedness. Unique Logistics cannot be certain that it will be able to operate profitably once it incurs any such indebtedness or that it will be able to generate a sufficient amount of proceeds from the ultimate disposition of such acquired businesses to repay any indebtedness that it incurred to make such acquisitions.

Unique Logistics may experience difficulties integrating the operations, personnel, and assets of acquired businesses that may disrupt its business, dilute stockholder value, and adversely affect its operating results.

A core component of Unique Logistics’ business plan is to continue to acquire businesses in the transportation and logistics industry. There can be no assurance that Unique Logistics will be able to identify, acquire or profitably manage businesses or successfully integrate acquired businesses into its existing business without substantial costs, delays, or other operational or financial problems. Such acquisitions also involve numerous operational risks, including:

As a result, if Unique Logistics fails to properly evaluate and execute any acquisitions or investments, its business and prospects may be seriously harmed.

In certain acquisitions, Unique Logistics may recognize non-cash gains or losses on changes in fair value of contingent consideration. Unique Logistics may include contingent consideration based on future financial performance as a portion of the purchase price of certain acquisitions. To the extent that an acquired operation underperforms relative to anticipated earnings levels, Unique Logistics will be able to set-off certain levels of future unpaid purchase price for such acquired operations. This will result in the recognition of a non-cash gain on the change in fair value of contingent consideration. In the alternative, to the extent that an acquired operation outperforms anticipated earnings levels, Unique Logistics will recognize a non-cash expense on the change in fair value of contingent consideration. These non-cash gains and expenses may have a material impact on Unique Logistics’ financial results, and the impact could be inverse to the underlying results of the acquired operation.

Claims against Unique Logistics or other liabilities it incurs relating to any acquisition or business combination may require it to seek claims against the seller for which the seller may not indemnify it or that may exceed the seller’s indemnification obligations.

There may be liabilities that Unique Logistics assumes in any acquisition or business combination that it did not discover or underestimated in the course of performing its due diligence investigation. A seller will normally have indemnification obligations to Unique Logistics under an acquisition or merger agreement, but these obligations will be subject to financial limitations, such as general deductibles and a cap, as well as time limitations. There can be no assurance that Unique Logistics’ right to indemnification from any seller will be enforceable, collectible or sufficient in amount, scope, or duration to fully offset the amount of any undiscovered or underestimated liabilities. Any such liabilities, individually or in the aggregate, could have a material adverse effect on Unique Logistics’ business, results of operations, and financial condition.

Unique Logistics may face competition from parties who sell it their businesses and from professionals who cease working for it.

In connection with its acquisitions, Unique Logistics generally obtains non-solicitation agreements from the professionals it hires, as well as non-competition agreements from senior managers and professionals. The agreements prohibit such individuals from competing with Unique Logistics during the term of their employment and for a fixed period afterwards and seeking to solicit Unique Logistics’ employees or clients. In some cases, but not all, Unique Logistics may obtain non-competition or non-solicitation agreements from parties who sell it their business or assets. Certain activities may be carved out of or otherwise may not be prohibited by these arrangements. Unique Logistics cannot be sure that one or more of the parties from whom it acquires assets or a business or who do not join Unique Logistics or leave its employment will not compete with it or solicit its employees or clients in the future. Even if ultimately resolved in Unique Logistics’ favor, any litigation associated with the non-competition or non-solicitation agreements could be time consuming, costly and distract management’s focus from locating suitable acquisition candidates and operating Unique Logistics’ business. Moreover, states and foreign jurisdictions may interpret restrictions on competition narrowly and in favor of employees.

Therefore, certain restrictions on competition or solicitation may be unenforceable. In addition, Unique Logistics may not pursue legal remedies if it determines that preserving cooperation and a professional relationship with the former employee or his or her clients, or other concerns, outweigh the benefits of any possible legal recourse or the likelihood of success does not justify the costs of pursuing a legal remedy. Such persons, because they have worked for Unique Logistics or a business that it acquires, may be able to compete more effectively with Unique Logistics, or be more successful in soliciting its employees and clients, than unaffiliated third parties.

General Risk Factors

Unique Logistics’ failure to continue to attract, train, or retain highly qualified personnel could harm its business.

Unique Logistics’ success depends on its ability to attract, train, and retain qualified personnel, specifically those with management, customer development and general logistics industry skills. Competition for such personnel is intense. If Unique Logistics does not succeed in attracting new personnel or retaining and motivating its current personnel, its business could be harmed.

Unique Logistics’ indebtedness could adversely impact its financial condition and results of operations.

Significant adverse economic and industry conditions could negatively affect Unique Logistics’ ability to pay principal and interest on its debt and limit its ability to fund working capital, capital expenditures, possible acquisitions, dividends, share repurchases, or other investments. If Unique Logistics is unable to generate sufficient cash flows to satisfy its debt obligations or refinance these debt obligations with commercially acceptable terms, it may adversely impact Unique Logistics’ financial position and results of operations. Further, Unique Logistics may be unable to comply with the various restrictions and covenants under its indebtedness, which may result in default and its outstanding indebtedness may become immediately due and payable and adversely impact its financial position or, as with the Second Waiver, may require us to make payments and issue securities in connection with obtaining a waiver of any such default. Further, Unique Logistics may be unable to comply with the various restrictions and covenants under its indebtedness, which may result in default and its outstanding indebtedness may become immediately due and payable and adversely impact its financial position.

Unique Logistics may be adversely impacted by changing interest rates.

We are exposed to changes in interest rates as all of our debt, except the promissory notes that we issued to ULHK in the ULHK Entities Acquisition and for the acquisition of its shares in Unique Singapore, includes variable interest rates. Interest rates are highly sensitive to many factors, including governmental monetary policies, economic conditions, and other factors beyond our control. A significant increase in interest rates could adversely impact Unique Logistics’ financial position and results of operations.

Unique Logistics may be subject to negative impacts of changes in political and governmental conditions, particularly with respect to its operations in China.

Unique Logistics’ operations may be subject to the influences of significant political, governmental, and similar changes and Unique Logistics’ ability to respond to them, including:

Unique Logistics has a customer base in the United States that is significantly dependent on trade and commerce with China (including Hong Kong). Moreover, as a result of the ULHK Entities Acquisitions Unique Logistics has majority owned subsidiaries in China and Hong Kong. Geopolitical factors may compel United States companies to shift their purchases and sales from China to other parts of the world. Such transition may be disruptive to the business of Unique Logistics. While its diverse network of subsidiaries and independent agents mitigates the risk, somewhat, of losing business in the long term, there is a significant risk that production may shift to areas of the globe where Unique Logistics cannot effectively service its customers.

Should relations between China and United States deteriorate significantly, Unique Logistics faces the following additional risks:

Unique Logistics may be subject to negative impacts of catastrophic events.

A disruption or failure of Unique Logistics’ systems or operations in the event of a major earthquake, weather event, cyber-attack, heightened security measures, actual or threatened, terrorist attack, strike, civil unrest, pandemic, or other catastrophic event could cause delays in providing services or performing other critical functions. A catastrophic event that results in the destruction or disruption of any of Unique Logistics’ critical business or information systems could harm Unique Logistics’ ability to conduct normal business operations and adversely impact its operating results.

Item 1B. Unresolved Staff Comments.

None.

Item 1C. Cybersecurity.

From time to time, the Company is subject to attempted cyber-attacks and other cybersecurity risks. The nature of our business requires that we store and exchange electronically with appropriate parties and systems personally identifiable information that may be targeted in an attempted cybersecurity breach. In addition, our business is heavily reliant on various information technology and application systems that may be impacted by a malicious cyber-attack. These cyber incidents may cause lost revenues or increased expenses stemming from reputational damage and fines related to breach of personally identifiable information, inability to use certain systems for a period of time, loss of financial assets, remediation and litigation costs and increased cybersecurity protection costs. We have developed and continue to invest in a variety of controls to prevent, detect and appropriately react to such cyber-attacks including periodically testing our systems’ security and access controls. However, cybersecurity risks continue to become more complex and broad ranging, and our internal controls provide only a reasonable, not absolute, assurance that we will be able to protect ourselves from significant cyber-attack incidents. By outsourcing certain business and administrative functions to third parties, we may be exposed to an enhanced risk of data security breaches. Any breach of data security could damage our reputation and/or result in monetary damages, which, in turn, could have a material adverse effect on the Company’s results of operations, liquidity and financial condition.

The Company maintains an Enterprise Risk Management (“ERM”) program, which includes processes for key risk identification, mitigation efforts, and day-to-day management of risks, including cybersecurity risks. The ERM program is administered by our risk management committee, consisting of the Company’s Chief Executive Officer, Chief Financial Officer, and Vice President, Compliance & Risk Management, and involves our outsourced global cybersecurity team, which possesses significant knowledge and expertise in cybersecurity risks.

Our global cybersecurity team ensures that the cybersecurity risks identified through the ERM program are incorporated into our overall cybersecurity program. We have put into place programs to address key cybersecurity risks including layered coverage with focus areas and practices designed to address network and endpoint security, application security, and security operations. We have processes in place to oversee and identify risks from cybersecurity threats associated with the use of third-party technology including third-party risk management, process and partner intake risk assessments, and dedicated procurement functions. These processes help mitigate the risks associated with utilizing external technology platforms and help prevent disruptions to our business operations.

We consistently involve our external cybersecurity experts to assess our cybersecurity program, risk management, and relevant internal controls. Although we have not experienced a material cyber-attack, we maintain insurance coverage to specifically address cybersecurity risks. The coverage provides protection up to $1 million above a deductible of $50,000 for various cybersecurity risks including liability, business interruptions, cybercrimes and privacy breach related incidents.

Our business continuity program follows industry standards for disaster recovery practices. Our program includes multiple components that act as an additional line of defense among them are regular functional recovery and tabletop exercises; cybersecurity exercises; protected backups for critical data; recovery time objectives; and recovery point objectives including achievability metrics, application criticality, program audit and maintenance, awareness and training, business impact analysis, and risk evaluation and controls.

Cybersecurity Governance

The Board of Directors is tasked with oversight of the Company’s cybersecurity, information governance, and privacy programs.

All tasks related to assessing and managing the Company’s material risks from cybersecurity threats are delegated to the risk management committee that oversees our ERM program, which includes cyber-related risk items. In addition, our risk management committee receives quarterly reports on cybersecurity from our global cybersecurity team that has experience and expertise supporting mitigation of the potential cybersecurity threats facing our organization and vulnerabilities facing our technology infrastructure and potential cybersecurity threats.

All members of our management team have been provided sufficient training to obtain an understanding of cybersecurity risks and exposures. The management team is actively promoting the Company’s cybersecurity policies and procedures, and leading discussions and mitigations of cybersecurity risks in the areas of their responsibilities.