Freight Technologies, Inc.FRGTEarnings & Financial Report
Nasdaq · logistics
A freight forwarder or forwarding agent is a person or a company who co-ordinates and organizes the movement of shipments on behalf of a shipper by liaising with carriers. The carriers may use a variety of shipping modes, including ships, airplanes, trucks, and railroads, and often use multiple modes for a single shipment. A freight forwarder does not move the goods but acts as an agent in the logistics network and will carry out freight consolidation, rate negotiations, shipment tracking, cu...
What changed in Freight Technologies, Inc.'s 10-K — 2023 vs 2024
Top changes in Freight Technologies, Inc.'s 2024 10-K
100 paragraphs added · 703 removed · 0 edited across 4 sections
- Item 5. Market for Registrant's Common Equity+19 / −236
- Item 3. Legal Proceedings+2 / −246
- Item 4. Mine Safety Disclosures+2 / −217
- Item 7. Management's Discussion & Analysis+77 / −4
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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2023 filing
2024 filing
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Item 3. Key Information A. Select Financial Data The following table presents the selected consolidated financial information for our Company. For financial accounting and reporting purposes under U.S. GAAP, the Merger was accounted for as a reverse acquisition and recapitalization, with no goodwill or other intangible assets recorded.
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ITEM 3. LEGAL PROCEEDINGS. From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
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Consequently, the consolidated assets, liabilities and results of operations of the Company are the historical financial statements of Fr8App and Hudson Capital’s assets, liabilities and results of operations are consolidated with the assets, liabilities and results of operations of Fr8App beginning on the Merger date.
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We are not currently aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results. ITEM 4. MINE SAFETY DISCLOSURES. Not applicable. PART II
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Shares and earnings per share information prior to the Merger have been retroactively restated to reflect the exchange ratio established in the recapitalization. All numbers except share and per share numbers are in thousands of United States Dollars ($’000’s).
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The selected consolidated statements of comprehensive income data for the years ended December 31, 2023, 2022 and 2021, and the consolidated balance sheets data as of December 31, 2023, 2022 and 2021, have been derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1 and are consistent with numbers reported in our prior 20F Filings.
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Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” below.
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Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP.
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Year Ended Year Ended Year Ended All $ Numbers (US$’000’s) December 31 2023 December 31 2022 December 31 2021 Revenue $ 17,061 $ 25,888 $ 21,474 Cost and expenses Cost of revenue (exclusive of depreciation and amortization shown separately below) 15,710 23,625 19,559 Compensation and employee benefits 5,964 4,963 3,712 General and administrative 3,163 3,561 2,618 Sales and marketing 80 557 92 Depreciation and amortization 405 243 302 Total Cost and expenses 25,322 32,949 26,283 Operating Loss (8,261 ) (7,061 ) (4,809 ) Other income and (expenses) Interest income 9 25 34 Interest expense (817 ) (932 ) (1,170 ) Other income) - - 116 Other expense (499 ) - - Loss on initial issuance of private warrants - - (2,829 ) Change in fair value of warrant liabilities - (128 ) 498 Change in fair value of convertible notes 345 - - Total other expense (962 ) (1,035 ) (3,351 ) Loss before income taxes (9,223 ) (8,096 ) (8,160 ) Income tax expense 105 91 40 Net loss (9,328 ) (8,187 ) (8,200 ) Foreign currency translation 453 89 (51 ) Comprehensive loss (8,875 ) (8,098 ) (8,251 ) Weighted average number of shares, basic and diluted* 1,196,668 390,563 77,844 Loss per share, basic and diluted $ (7.79 ) $ (20.96 ) (105.35 ) 4 * - The number of shares outstanding was adjusted retroactively for all periods presented to reflect the 2.2-to-1 reverse stock split change which was effected on February 15, 2022, a 10-to-1 reverse stock split change which was effected on March 24, 2023, and a 10-to-1 reverse split which was effected on February 5, 2024.
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Warrants to purchase ordinary shares are not included in the diluted loss per share calculations when their effect is antidilutive.
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BALANCE SHEET 2023 2022 2021 (Audited) (Audited) (Audited) Current assets ($’000’s) $ 9,766 $ 9,459 $ 8,521 Total assets 10,679 10,416 9,289 Current liabilities 7,810 7,284 18,260 Long term liabilities 242 - - Share capital 2,427 183 - Total stockholders’ equity (deficit) $ 2,627 $ 3,132 $ (8,971 ) B. Capitalization and indebtedness Not applicable. C.
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Reasons for the offer and use of proceeds Not applicable. D. Risk Factors COVID-19 Pandemic A global pandemic or spread of disease, real or perceived, as well as natural disasters in any country in which Fr8Tech operates could materially and adversely affect the demand for its services, its operations and financial conditions.
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The coronavirus (COVID-19) pandemic, or any other similar pandemics, may have an unexpected effects on Fr8Tech’s business, financial condition, and results of operations. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world implemented measures to reduce the spread of COVID-19.
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These measures adversely affected workforces, customers, supply chains, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending, have led to an economic downturn across numerous markets. COVID-19 has also caused widespread unemployment and border closings.
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COVID-19 caused Fr8Tech and many other companies to experience significant volatility in their global and domestic supply chains and caused widespread disruptions and eventual displacements of industries, including the recent “near-shoring” phenomenon.
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The extent to which COVID-19 ultimately impacts the 3PL industry, Fr8Tech’s businesses, results of operations and financial condition will depend on future developments, which are highly uncertain and unpredictable, such as the severity and duration of another COVID-19 outbreak, related virus strains or other viruses and the effectiveness of government actions and social measures taken to mitigate their impact.
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Additionally, the extent to which any further outbreaks or pandemics ultimately impact Fr8Tech’s operations will depend on a number of factors, many of which will be outside of its control.
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The spread of COVID-19 continues to evolve, and accordingly, the ultimate consequences of it, and other potential outbreaks cannot be predicted with certainty. 5 Severe weather conditions and other natural or manmade disasters, including storms, floods, fires, earthquakes, epidemics, pandemics, conflicts, unrest, or terrorist attacks, may disrupt Fr8Tech’s businesses and result in decreased revenues.
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Customers may reduce shipments, or Fr8Tech’s costs to operate its business may increase, either of which could have a material adverse effect on Fr8Tech. Any such event affecting one of the countries in which Fr8Tech operates could result in a significant interruption in its business.
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Natural disasters such as major fires in Canada and the United States and other major weather or geological events around the globe could adversely affect the demand for its services, its operations and financial condition.
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Risks Related to Fr8Tech ’s Business Fr8Tech’s limited operating history may make it difficult for you to evaluate the success of its business to date and to assess its future viability.
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Fr8Tech’s wholly owned subsidiary Fr8App was founded in 2015 with a purpose to develop and offer solutions to the US-Mexico cross-border commercial freight market, and by extension, the US-Canada border. The first commercial version of Fr8App’s platform was launched in 2017.
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Through ongoing product development efforts, in 2019 we enhanced our initial solution by adding business intelligence and analytics as well as active freight brokerage support services. In 2020, management renewed focus on promoting freight services to Shippers and Carriers (each as defined below) to increase traffic on its freight matching platform.
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In December 2021, Fr8Tech launched its fixed fleet product under the Fr8Fleet brand name, and introduced a LTL product, under the Fr8Now brand name in 2023. Accordingly, consideration should be taken toward Fr8Tech’s prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development.
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Any predictions made about its future success or viability may not be as accurate if Fr8Tech had a longer operating history or a longer history of successfully developing and marketing its product offerings. Fr8Tech’s relatively limited operating history may make it difficult for to evaluate the success of its business and assess its future viability.
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Fr8Tech may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving its business objectives. Fr8Tech’s transition from a company with a development focus to a company successfully marketing and monetizing its product offerings may take longer than anticipated, or may not be successful at all.
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Fr8Tech’s early-stage operations could expose it to a high concentration of revenues in individual clients and increase the volatility of its revenues. Fr8Tech works with a number of large corporate entities, primarily Shippers, in helping to fulfill their logistics needs. Many of these clients use Fr8Tech for a small portion of their overall logistics requirements.
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Shippers tend to be repeat customers, whose demand for Fr8Tech services can grow in an accelerated manner relative to the overall size Fr8Tech’s book of business. Fr8Tech’s largest single client in 2023, 2022 and 2021, was different each year and represented approximately 33%, 17% and 37% of total 2023, 2022 and 2021 annual revenues, respectively.
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Changes in Fr8Tech’s customer base or in the demands from some of the larger customers may add volatility to results while the Company remains in its early growth stages. A significant data breach or information technology system disruption could materially adversely affect Fr8Tech, including requiring Fr8Tech to increase spending on data and system security.
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Fr8Tech relies heavily on information technology networks and systems, including the Internet and a number of internally-developed systems and applications, to manage or support a wide variety of important business processes and activities throughout its operations.
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For example, Fr8Tech relies on information technology to analyze its customer loads and input their information into its databases, identify different routes and their costs, track ongoing shipments, confirm receipts, transfer documents, and a number of other functions that are integral to the ongoing operation of Fr8Tech’s business.
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In addition, the provision of service to Fr8Tech’s customers and the operation of its networks and systems involve the collection, storage and transmission of significant amounts of information and potentially sensitive or confidential data.
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Fr8Tech is subject to a variety of continuously evolving and developing laws and regulations in the United States and abroad regarding privacy, data protection and data security.
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The scope of the laws that may be applicable to us is often uncertain and may be conflicting, particularly with respect to foreign laws. 6 Fr8Tech’s information technology systems are susceptible to damage, disruptions or shutdowns due to programming errors, defects or other vulnerabilities, power outages, hardware failures, computer viruses, cyber-attacks, ransomware attacks, malware attacks, theft, misconduct by employees or other insiders, telecommunications failures, misuse, human errors or other catastrophic events.
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Hackers acting individually or in coordinated groups, may launch distributed denial of service attacks or other coordinated attacks that may cause service outages, gain inappropriate or block legitimate access to systems or information, or result in other interruptions in Fr8Tech’s business.
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In addition, the foregoing breaches in security could expose Fr8Tech and its customers to a risk of loss, disclosure or misuse of proprietary information and sensitive or confidential data. Fr8Tech protects its software, web portal and platform solutions from third-party attacks and implements what it believes to be state-of-the art prophylactic controls around and throughout its software environment.
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However, there is no assurance that Fr8Tech’s web portal and platform solution will not sometimes malfunction or be subject to malicious attacks. Any unexpected malfunction of Fr8Tech’s system could cause major interruptions to its daily operations, including its ability to deliver its 3PL services to customers, to collect payments from its customers or pay its key suppliers.
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To date Fr8Tech is unaware of any data breach or system disruption that has had a material adverse effect on the Company.
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However, Fr8Tech cannot provide any assurances that such events and impacts will not be material in the future, and its efforts to deter, identify, mitigate and/or eliminate future breaches may require significant additional effort and expense and ultimately may not be successful.
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Trade tensions or adverse regulatory or political changes in any country in which Fr8Tech operates could materially and adversely affect the demand for its services, its operations and financial conditions. Fr8Tech has business operations in the U.S., Mexico and Canada.
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These three countries currently have a free trade agreement which directly impacts the amount of international trade across the US-Mexico and the US-Canada borders. The first such trade agreement, the North America Free Trade Agreement (“NAFTA”), went into effect in 1994 and was followed by tremendous increase in trade amongst all three countries.
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The United States-Mexico-Canada Agreement (“USMCA”), substituted NAFTA and entered into force on July 1, 2020. Unanticipated changes in trade agreements or sudden political changes in any of these three countries in which Fr8Tech operates could have a material adverse effect on customers’ demand for its services.
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Fr8Tech’s business can be greatly impacted by the laws, regulations and policies that affect trade among these three countries, including tariff and trade policies, export requirements and other restrictions and general political instability or unrest.
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Factors that result in general economic changes are also beyond Fr8Tech’s control, and it may be difficult for Fr8Tech to adjust its business model to mitigate the impact of any of these factors, if at all.
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In particular, Fr8Tech’s business could be affected by levels of political unrest, especially if it affects border traffic, industrial production, consumer spending and retail activity. Fr8Tech could be materially and adversely affected by adverse developments in these and other aspects of the economies in which Fr8Tech operates.
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If Fr8Tech is unable to implement its business strategies successfully or properly react to changes in market conditions as a result of trade wars or political changes in these countries, its financial condition, results of operations and cash flows could be materially and adversely affected. Fr8Tech’s industry is rapidly evolving.
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It expects to continue to face significant competition, which could adversely affect Fr8Tech. The 3PL and logistics industries are rapidly evolving, including demand for greater efficiency, increasing usage of artificial intelligence (“AI”) and increased visibility into logistics processes. Fr8Tech expects continued significant competition on a national and international level.
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Fr8Tech’s competitors include, among others, the postal services of the U.S. and other nations, various large and small motor carriers, express companies, freight forwarders, air couriers, large transportation and e-commerce companies that are making significant investments in their capabilities, and start-ups and other companies that combine technologies with crowdsourcing to focus on local market needs, some of whom may currently be its customers.
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Competition may also come from other sources in the future as new technologies are developed and new methods of transportation are made widely available. Innovations in transportation technology, including driverless trucks, AI and logistics could adversely affect the demand for Fr8Tech’s 3PL and services.
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If Fr8Tech is unable to adapt to these changes, its business could be adversely affected. 7 Fr8Tech is directly affected by the cyclicality of the trucking industry and general economic conditions.
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The trucking industry has historically been highly cyclical and especially susceptible to trends in economic activity, and has historically fluctuated in response to factors that are beyond Fr8Tech’s control, such as general economic conditions, interest rates, federal and state regulations, consumer spending and fuel costs.
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The industry is particularly sensitive to the consumer, industrial and manufacturing sectors of the economy, which generate a significant portion of the freight tonnage hauled by heavy-duty trucks. More recently, the USMCA region has been affected by the recent near-shoring phenomenon affecting international commerce.
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Since truck fleet owners and professional truck drivers are some of the key carriers Fr8Tech serves, Fr8Tech’s business activities are directly tied to the production and purchase of goods and other key macro-economic measurements. When individuals and companies purchase and produce fewer goods, Fr8Tech’s customers transport fewer goods.
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Downturns in consumer business cycles, such as the home construction, automobile, and manufactured goods sectors, can create excess capacity in the trucking industry and may have a material adverse effect on Fr8Tech’s business and operating results. Fr8Tech could be affected by strikes or labor unrest at any border crossing that is relied upon by its customer base.
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The cross-border and domestic trucking industries rely on many government-provided services. The cross-border sector relies on agencies such as the U.S. Customs and Border Protection that may be unionized and is subject to strikes or labor unrest that could be disruptive to cross-border freight on a short-term basis.
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Lower or inefficient cross-border crossings due to labor unrest or strikes could adversely affect Fr8Tech’s customers and Fr8Tech’s operating results and financial condition. Labor unrest in any of the USMCA countries could adversely affect Fr8Tech’s customers and Fr8Tech’s operating results and financial condition.
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Fr8Tech could be affected by organized crime activities affecting shipment integrity at any border crossing that is relied upon by its customer base. The cross-border trucking industry relies on carriers and freight intermediaries to provide safe passage where the integrity of shipments between destination points is essentially assured.
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Organized crime has a history of either outright theft of shipments or of using carrier capacity for transportation of goods that are not legitimate or that are illegal. Having any shipments in which Fr8Tech is involved be the target of organized crime activity could adversely affect Fr8Tech’s customers and Fr8Tech’s operating results and financial condition.
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Fr8Tech is exposed to the effects of changing fuel and energy prices, including gasoline, jet fuel and diesel, and what interruptions in supplies of these commodities can bring to the demand for the shipping and commercial freight industry. Changing fuel and energy costs have a significant impact on the expenses incurred by the shipping and commercial freight industry.
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On April 20, 2020, the price for oil traded at negative prices for the first time in modern history. In the event that this short-term distortion in fuel prices were to last, air freight costs would continue to drop, making it an attractive alternative to trucking.
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If air freight or some other form of freight became increasingly attractive to shippers in general, there could be a switch from truck freight to air freight, or some other, more economic means of freight. During July 2022, diesel prices in the United States were reaching historic highs with significant day to day volatility.
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Higher fuel charges may affect Carriers results and performance when they are unable to pass on their higher costs to Shippers. Changes in fuel prices, disruption in energy supplies as a result of war, actions by oil producers or other factors beyond Fr8Tech’s control, could in turn have a material adverse effect on Fr8Tech’s business.
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Truck driver or other supply shortages within the transportation value chain could have material adverse effect on Fr8Tech’s business and operating results. Fr8Tech’s freight brokerage support and customer services rely on Fr8Tech being able to assist with securing carrier services for Shippers at commercially feasible rates.
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Truck driver or other supply shortages within the transportation value chain could adversely affect Fr8Tech’s ability to secure carrier services at commercially favorable rates, which could, in turn, have a material adverse effect on Fr8Tech’s business and operating results 8 Fr8Tech currently does not hold any patents or own any registered trademarks.
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Fr8Tech currently does not hold any patents or own any registered trademarks. Although Fr8Tech believes that the success of its business depends on the quality of its proprietary software solutions, technology, processes, and domain expertise, and has taken appropriate steps to protect its intellectual property, the measures taken may not be inadequate. On September 6, 2018, Hub Group, Inc.
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(“Hub Group”) filed a Notice of Opposition with the Trademark Trial and Appeal Board (“TTAB”) against Fr8Tech’s U.S. Trademark Application Serial No. 87102800 (the “Trademark Application”) for its “Fr8HUB” unitary design mark (the “Mark”). On August 27, 2021 Fr8Tech and Hub Group entered into a binding Settlement Agreement and Release (the “Settlement”) fully resolving the TTAB proceeding.
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Under the terms of the Settlement, Fr8Tech agreed to irrevocably abandon the Trademark Application and permanently cease further commercial use of the terms “FreightHub,” “Fr8Hub” and “Hub,” as well as any confusingly similar marks (together the “Source Identifiers”), including abandoning any and all commercial and intellectual property rights to the Source Identifiers, refraining from filing additional trademark applications involving the Source Identifiers, and refraining from otherwise seeking to secure or enforce its rights to the Source Identifiers.
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There are no damages, penalties or payments arising under the Settlement. However, consumer or market confusion could result from Fr8Tech’s adoption of the identifiers “Freight App” and “Fr8Tech” and its abandonment of the terms “FreightHub” and “Fr8Hub” going forward. The duration or impact of such confusion, if any, is difficult to estimate.
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Hub Group has fully released any further legal claims concerning Fr8Tech’s use of the Source Identifiers through the date of the Settlement. The impact of environmental laws and regulations and their enforcement could materially and adversely affect Fr8Tech’s business.
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Motor carrier deregulation in the U.S. began in 1970 - 1971 with initiatives in the Nixon Administration and continued into the 1980s through the Carter administration. They were part of a sweeping reduction in price controls, entry controls, and collective vendor price setting in U.S. transportation.
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While these deregulations by and large had a positive impact on the transportation volumes over the years, changes of regulations in the trucking industry could adversely affect Fr8Tech’s business. Routes and pricing for commercial freight could be regulated. Controlled margins or prices for certain goods could be put into effect.
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Fr8Tech cannot predict the impact of any new regulations on the 3PL and transportation industries. The effect these potential regulations could have on the commercial freight business, and in turn, its business and operating results may be long-lasting.
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Risks Related to Fr8Tech’s Financial Position and Need for Additional Capital The audited consolidated financial statements for the year ended December 31, 2023 include an explanatory paragraph in our independent registered public accounting firm’s audit report stating that there are conditions that raise substantial doubt about our ability to continue as a going concern.
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As of December 31, 2023, we had an accumulated deficit of $39.3 million, shareholder’s equity of $2.6 million and a working capital of $2.0 million. As of December 31, 2023, we had $2.8 million of short-term debt and $1.6 million of unrestricted cash on hand.
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For the year ended December 31, 2023, we recognized a net loss of $9.3 million and negative cash flows from operations of $5.8 million.
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Since inception, we have met our cash needs through proceeds from issuing convertible notes, debt, and issuance of preferred and ordinary shares, and we expect that we will need to meet future cash needs by raising debt and issuing ordinary and preferred shares and/or warrants. The Company has a revolving line of credit facility of up to $5 million.
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We currently project that we will need to draw on additional funds on our existing facilities and need additional capital to fund our current operations and capital investment requirements until the Company scales to a revenue level that permits cash self-sufficiency.
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As a result, we may need to raise additional capital or secure debt funding to support on-going operations until such time.
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Our independent registered public accounting firm, UHY LLP, has included an explanatory paragraph in its audit report that accompanies our audited consolidated financial statements as of and for the year ended December 31, 2023, stating that there are conditions that raise substantial doubt about our ability to continue as a going concern.
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Management continues to evaluate funding alternatives and currently seeks to raise additional funds through the issuance of equity or debt securities, from our existing or new investors or through obtaining credit from financial institutions. As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all.
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Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
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Item 4. Mine Safety Disclosures
Mine Safety Disclosures — required of mining issuers
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2023 filing
2024 filing
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Item 4. Information on the Company A. History and development of the Company. Our History and Corporate Structure History Freight App, Inc. (formerly known as “Freight Hub, Inc.” and hereinafter referred to as “Fr8App”) was incorporated in 2015 as a Delaware corporation.
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Item 4. Mine Safety Disclosures. 42 PART II Item 5. Market for Registrant’s Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 42 Item 6. [Reserved] 44 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 44 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 50 Item 8.
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It was founded with a view to develop and bring solutions to the relatively unorganized cross-border commercial freight market on the U.S.-Mexico border, and by extension, the U.S.-Canada border. In January 2019, Freight Hub México, S.A De C.V., a wholly-owned subsidiary of Fr8App was formed.
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Financial Statements and Supplementary Data. 50 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 50 Item 9A. Controls and Procedures. 51 Item 9B. Other Information. 53
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In December 2021, Freight Hub Mexico, S.A De C.V. changed its name to Freight App de Mexico, S.A De C.V. (“Freight App Mexico”). Freight logistics operations and our Fr8App marketplace solution, begins with parties connecting their transportation needs (“Shippers”) with those offering freight transportation services (“Carriers”).
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Within the demand and supply equation, Shippers seeking suitable means of transportation for their goods or products represent demand and Carriers with freight transportation capabilities represent supply. The Fr8App marketplace was designed to facilitate matching the two: demand with supply. The first commercial version of Fr8App’s products was launched in 2017.
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Fr8App’s initial commercial efforts focused on promoting the Fr8App marketplace to freight brokers in the logistics industry. Fr8App continued its product development efforts throughout 2018 and added business intelligence and analytics to supplement its platform in 2019.
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Subsequently the firm offered a revised products package with active freight brokerage support, customer service and other enhanced features and functionality, which were fully launched during the second quarter of 2020. During the third quarter of 2020, a new management team renewed focus on promoting freight services to Shippers and Carriers and de-emphasize marketing to brokers in the logistics industry.
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The Merger Hudson Capital Inc. (“Hudson Capital”) was initially established as “China Internet Nationwide Financial Services Inc.”, a holding company incorporated under the laws of British Virgin Islands on September 28, 2015.
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On July 28, 2017, Hudson Capital announced the pricing and closing of its initial public offering (“IPO”) and its shares began trading on NASDAQ Global Market on August 8, 2017 under the symbol “CIFS.” In keeping with the board’s plan to diversity its operations, rebrand itself and seek new strategic options, Hudson Capital board members and management were completely changed and the corporate name was changed to “Hudson Capital, Inc.” on April 23, 2020 and the company began to trade under the new symbol, “HUSN” on May 8, 2020.
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The securities were also transferred to the Nasdaq Capital Market at the opening of business on July 16, 2020. The Hudson Capital board considered multiple potential merger candidates before identifying Fr8App as the most able to complete a merger and offer the best potential value for its stockholders.
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Pursuant to such determination, Hudson Capital and Fr8App entered into an Agreement and Plan of Merger (as amended from time to time, the “Merger Agreement”) on October 10, 2020 with Hudson Capital Merger Sub I, Inc., its Delaware wholly-owned subsidiary (“Merger Sub I”), Hudson Capital Merger Sub II, Inc., a Delaware subsidiary of Merger Sub I (“Merger Sub II”), Fr8Tech and ATW Master Fund II, L.P., as the representative of the stockholders of Fr8App (the “Stockholders’ Representative”).
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This Merger Agreement was terminated on December 13, 2021 and on December 29, 2021, a new merger agreement was entered into between, Hudson Capital, Merger Sub I, Fr8App and the Stockholders’ Representative (the “New Merger Agreement”).
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On February 14, 2022, a Certificate of Merger was filed with the Secretary of State of the State of Delaware, in accordance with the relevant provisions of Delaware law, whereby in accordance with the New Merger Agreement, Merger Sub I merged with and into Fr8App, with Fr8App surviving the Merger and continuing as a direct wholly-owned subsidiary of the Company (the “Merger”).
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The Merger closed on February 14, 2022. On February 14, 2022, we effected another 2.2:1 reverse split of our ordinary shares and our ordinary shares began trading on a split adjusted basis on February 15, 2022. Following the Merger, on March 25, 2022, we dissolved Merger Sub II and Hudson Capital Holding Co., Ltd.
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On March 30, 2022, we sold Hongkong Internet Financial Services Limited (“HKIFS”) in its entirety to a private investor. The divestment of HKIFS was effected through the sale of the entirety of the equity interest in HKIFS.
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As of the divestment date, there are no remaining or contingent obligations or benefits from HKIFS. 21 In connection with the Merger, the following unregistered, restricted securities were issued by Hudson Capital to shareholders of Fr8App, subject to customary adjustments for stock splits, dividends, rights offerings, pro rata distributions and fundamental transactions (the “Merger Consideration”): Securities Issued in Merger Issued at Merger* Underlying Ordinary Shares** Ordinary Shares 2,577,655 25,777 A2 Preferred Shares 1,264,360 28,195 A1A Preferred Shares 4,473,547 66,656 Series Seed Preferred Shares 7,020 70 Series B Preferred Shares 7,389,850 348,062 Series A4 Preferred Shares 568,930 8,534 Ordinary Shares Warrant 5,218 52 Series Seed Warrant 4,165 4,165 Equity Awards for Ordinary Shares 1,958,287 19,583 Total Issued in Merger 18,249,032 501,094 * Issued at Merger is not adjusted for the March 24, 2023 reverse stock split or the February 5, 2024 reverse stock split. ** The amount of underlying ordinary shares are adjusted for the March 24, 2023 reverse stock split or the February 5, 2024 reverse stock split.
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Also, in connection with the Merger, the Company’s Board accepted the resignations from the Hudson Capital board of directors, namely Warren Wang, Hon Man Yun, Ming Yi (Martin), Hong Chen and Xiaoyue Zhang, and from the positions of Chief Executive Officer and Chief Financial Officer of Warren Wang and Hon Man Yun, respectively, effective upon closing of the Merger.
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Javier Selgas, Nicholas H. Adler, William Samuels, and Marc Urbach were appointed new directors of the board.
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Each of the following executives was appointed to the respective office set opposite to his/her name: Javier Selgas – Chief Executive Officer Mike Flinker - President Luisa Irene Lopez Reyes – Chief Operating Officer Paul Freudenthaler – Secretary and Chief Financial Officer Hudson Capital continued as a British Virgin Islands (“BVI”) business company and on May 26, 2022 changed its name to Freight Technologies, Inc. and its symbol on the Nasdaq Capital Market to “FRGT”.
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Fr8App continues as a corporation incorporated in the State of Delaware and as a wholly-owned subsidiary of Freight Technologies, Inc. With the divestment of HKIFS mentioned earlier, we are no longer involved in any of the businesses originally started by Hudson Capital. We are now, through Fr8Tech, a BVI business company, operating under three brands, Fr8App, Fr8Fleet and Fr8Now.
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Reverse Stock Splits On February 14, 2022, the Company effected a 2.2:1 reverse split and its ordinary shares begin trading on a split adjusted basis on February 15, 2022. On March 24, 2023, the Company effected a 10:1 reverse stock split and its ordinary shares begin trading on a split adjusted basis.
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On February 5, 2024, the Company effected a 10:1 reverse split and its ordinary shares begin trading on a split adjusted basis. 22 B. Business overview. Freight App, Inc. (formerly known as “Freight Hub, Inc.” and hereinafter referred to as “Fr8App”) was incorporated in 2015 as a Delaware corporation.
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It was founded with a view to develop and bring solutions to the relatively unorganized cross-border commercial freight market on the U.S.-Mexico border, and by extension, the U.S.-Canada border. In January 2019, Freight Hub México, S.A De C.V., a wholly-owned subsidiary of Fr8App was formed.
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In December 2021, Freight Hub Mexico, S.A De C.V. changed its name to Freight App de México, S.A De C.V. (“Freight App Mexico”). As a result of the Merger, on February 14, 2022, Fr8App became our wholly-owned subsidiary. The first commercial version of Fr8App’s products was launched in 2017.
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Fr8App’s initial commercial efforts focused on promoting the Fr8App marketplace to freight brokers in the logistics industry. Fr8App continued its product development efforts throughout 2018 and added business intelligence and analytics to supplement its platform in 2019.
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Subsequently the firm offered a revised products package with active freight brokerage support, customer service and other enhanced features and functionality, which were fully launched during the second quarter of 2020. During the third quarter of 2020, a new management team renewed focus on promoting freight services to Shippers and Carriers and de-emphasize marketing to brokers in the logistics industry.
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Fr8Data and Fr8Radar are product features that are further described below and that play an integral role in Fr8App’s product offerings. During 2021, Fr8App launched the broker portal, an electronic feature to address reporting obligations to Mexican authorities called “Carta Porte”, an internal pricing tool, automated onboarding and a number of EDI Integrations with Shippers and API integrations with third-parties.
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Towards the end of 2021, Fr8App introduced its private fleet product, Fr8Fleet. In addition to being the legal entity in the US, we consider Fr8App to be the brand name of a B2B freight-matching platform powered by Artificial Intelligence (“AI”) and Machine Learning.
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It is the evolution of our traditional North American transportation logistics technology platform, focusing on full truckload freight (“FTL”) for domestic and cross-border markets in Mexico, the US and Canada.
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Fr8App uses its proprietary technology platform to connect Carriers and Shippers and significantly improve matching and operation efficiency via innovative technologies such as freight-matching technology based on bidding, digital broker services, real-time tracking, transportation management, fleet management, and committed capacity solutions. Fr8App is a platform built to match individual loads in the FTL segment.
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Fr8Fleet is our technology-driven solution for large corporate enterprise customers with a demand for regular and ongoing shipping and logistics. In contrast to Fr8App which is based on booking individual loads, Fr8Fleet is a dedicated capacity service, providing exclusive use of an entire truck to an enterprise, to ensure on-time delivery and reduced handling for pristine condition of goods.
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Real-time tracking offers complete transparency and assists users by providing regular updates on their shipments, and our platform allows for easy booking, tracking, and management. Fr8Now is our newest brand and is our first foray into the less-than-truckload (“LTL”) business.
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Fr8Now was developed to be a trusted LTL shipping partner for businesses of all sizes with a focus on businesses in the country of Mexico. Our innovative technology provides an easy booking process, flexible options, and affordable pricing that are designed to make us the go-to choice for LTL shipping needs in Mexico.
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Fr8Now started its first LTL operations in the first quarter of 2023.
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Fr8App’s technology product offerings include: (i) a computerized platform (the “Platform”) that maintains an online portal (the “Portal”) and a mobile application solution (the “App”) to provide 3PL services to companies actively involved in the freight transportation market; (ii) a Transport Management Solution (“TMS “) for customers to manage their own fleet; and, (iii) freight brokerage support and customer service based on the Platform.
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Fr8App believes it is the first digital commercial freight-matching broker to offer 3PL while targeting the domestic Mexican and the cross-border Mexico-U.S.-Canada markets (“Target Markets”). Fr8App serves cross-border traffic across the Mexico-U.S. border, the U.S.-Canada border, and domestic shipments within each of these three countries, with a primary focus on full truck-load freight.
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Its cutting-edge cloud-based Platform was designed to connect in real-time parties with commercial transportation needs. The freight transportation supply chain begins with Shippers, whose transportations needs are addressed by Carriers. Shippers seeking suitable means of transportation for their supplies represent demand and Carriers with freight transportation capability represent supply.
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The digital freight matching technology on Fr8App’s Platform streamlines and simplifies cross-border shipping logistics by facilitating the matching of demand with supply. Shippers that use Fr8App’s Platform can connect with a wide network of reliable Carriers who can fulfill their logistics needs across North America.
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Use of Fr8App’s Platform brings the additional benefit of providing transparency on all shipment characteristics to allow for the identification of available and qualified freight capacity. 23 Fr8App’s Portal is the system’s front-end, a tool that Fr8App’s customers and providers use to summarize data on the Fr8App Platform such that it is in a usable and actionable format for business.
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This data is accessed online on a computer via a browser, or through a mobile application on a smart device.
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Once customers and providers (Shippers and Carriers, respectively) gain access to the Platform they can enter into transactions such as booking a shipment, administering the manner in which this load will be managed, and reviewing summary information on display within the Platform. Fr8App’s Platform Fr8App’s Platform contains the primary operating system.
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It is a digital marketplace that facilitates booking of freight transactions at the Shipper and Carrier levels. The matching of Shipper requirements and Carrier capacities can occur on the Platform automatically, without the need for human intervention.
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A Fr8App Platform user can be very involved in the process and actively control its shipment activities by inputting Shipper requirements and matching those with Carrier offerings and tracking shipments as they leave their point of origin and arrive at their ultimate destination. In short, managing his or her company’s logistics.
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Among other things, Fr8App’s Platform can provide a system user with a summary of all its freight activities through a combination of reports or visual displays on its screen.
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A system user can track the status of a given delivery on a visual display of the map with status updates on the load location and status from the moment the shipment leaves its origin through to its final destination.
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A system user can also set up routes that are physically different from one that the Platform might recommend if that system user has a preference for a given route over another, perhaps because of altitude or temperature differences on competing routes.
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Shippers can use Fr8App’s Platform to post their freight needs, find available Carriers, enter into a freight contract with them, and monitor the transported goods while their shipment is in transit.
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Carriers can use Fr8App’s Platform (through the Portal or mobile App), to accept shipment requests, assign transportation jobs to available truck drivers instantaneously, or make themselves available on routes or route segments to avoid driving empty trucks from one location to another.
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Carriers can receive notifications every time a load or job request is entered by a Shipper that matches the criteria they are looking for on a given shipment type and shipment lane.
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Every time there is a match and a Carrier completes a shipment, the Platform’s algorithm takes this into account and creates a history that can be referred to when attempting to fulfill future Shipper requests.
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Fr8App’s mobile App is used by Carriers to give them visibility on Shipper needs, gives Carriers full visibility on all of their shipping options and helps them eliminate empty miles on the road, leading to a reduction in operating costs.
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Its specialized technology is designed to enhance supply chain visibility and operations, helping reduce Carrier’s carbon footprint and improving profitability and environmental sustainability.
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Fr8App’s API Fr8App’s Platform has a public application programming interface (“API”), that is accessible free of charge and has the ability to integrate with both Shippers’ and Carriers’ systems to automate the process of booking shipments and bringing visibility to the process.
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An API is an interface consisting of a series of computer instructions that allow one type of system to interact with another separate system by taking information from one system and making it legible and usable by another.
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It can be compared to something like a translator that takes instructions in English and translates them into Spanish so that users on both sides of the translation can work with the underlying instructions.
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In Fr8App’s service offering context, an API allows one of our customer’s freight tracking systems to provide information to Fr8App’s Platform and for our Platform to provide information to our customer’s system using a data structure or language that is legible by that customer’s computer system.
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An API is a tool allowing Fr8App to have a number of different customers and providers, each with different operating systems, to interact with and use Fr8App’s Platform and automate all the stages of any given shipment.
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Fr8App’s Mobile App, FMS, TMS Users can access the Platform through an internet browser on a computer or through the mobile application in a smartphone, using the same credentials. 24 Fr8App also offers a cloud-based TMS solution to maximize the efficiency of a company’s transportation operations.
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TMS can be used by a Shipper as its primary logistics tool, independent of using Fr8App’s Platform or Portal solutions. TMS can help Shippers manage their fleet as well as post requests for freight services on its Platform. The cloud-based TMS solution is available to Shippers wanting to actively manage their supporting Carriers or their own fleet of trucks.
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Fr8App also gives a TMS solution user the option to source additional freight capacity or offer its over-capacity on the Fr8App Platform. Fr8FMS is Fr8App’s Fleet Management System, or “FMS”. It allows transportation companies and owner operators to handle their own fleet reducing their operational costs, and enables them to haul loads from Shippers in the platform´s marketplace.
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Fr8Radar Fr8Radar is a product feature that provides Shippers and Carriers track and trace visibility, via Fr8App´s mobile solution, or through the integrations with other third-party GPS providers or other technology companies providing track and trace solutions for the industry.
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Track and trace visibility through Fr8Radar allows Shippers to follow their freight operations in real time, using just one system, and not one for each GPS provider. Fr8Radar also enables low tech Carriers to provide real time position of each load to their customers.
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Fr8Data Fr8Data is the group of tools and reports developed to show Shippers and Carriers real time dashboards with all the detailed information of their shipments in real time, to increase control and make better business decisions.
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Fr8Data enables the analysis of historical data to find better matching between Shippers and Carriers and better pricing calculations based on real data saved in Fr8App´s platform. Fr8Data tools and analytics enable continual logistics and operational improvement to all system users: Shippers, Carriers and Fr8App itself.
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Fr8App’s Brokerage Support and Customer Service Finally, Fr8App offers customers freight brokerage support and customer service to assist with end-to-end fulfillment on the Platform. The brokerage and customer services offered are based on using the Platform to book freight to meet a Shipper’s needs and fulfills those needs with qualified Carriers on-boarded on the Platform.
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It facilitates and promotes comprehensive usage of the Platform’s utility, aided by experienced users and Fr8App’s in-house team of experts. In late 2021, we introduced Fr8Fleet, a private fleet management product whereby large corporate shippers are allowed to purchase fleet capacity over a period of time, in exchange for a fixed fee.
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Fr8App’s customer service group works with such clients to secure carrier capacity to fulfill their freight needs over their timeframe. Industry Overview and Market Trends According to the 34th Annual State of Logistics Report authored by Kearney, the U.S. domestic truck freight transportation market was estimated at $896 billion in 2022.
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Per Mordor Intelligence, the Mexican domestic freight market was estimated at approximately $43.1 billion, and the North American cross-border freight transportation market is estimated at $236 billion and expected to exceed $308 billion by 2030. Additionally, Mexico’s overall trade with the U.S. is estimated to grow at an CAGR of approximately 2.7% between 2021 and 2025.
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Fr8Tech expects the market to continue growing at rates at least equal to historic rates and likely higher than that rate given the recent near-shoring phenomenon. A primary contributor to the growth in the North American cross-border freight transportation markets has been the increased level of trade between the U.S., Mexico and Canada.
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Effective July 1, 2020, the three countries signed a new free trade deal called the United States, Mexico, Canada Agreement (“USMCA”), replacing the North American Free Trade Agreement (“NAFTA”), which was enacted on January 1, 1994. As of 2019, Mexico became the U.S.’s largest single trading partner, surpassing China.
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According to the United Nations, Mexico exported an extra $3.5 billion of goods into the U.S., in the first half of 2019, since the summer of 2018 when the trade war between the U.S. and China began.
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Fr8App believes the replacement of NAFTA with the USMCA creates a stable environment attractive to multi-national companies considering Mexico as a market from which to export to both the United States and Canada. 25 In early 2020, U.S. President Donald Trump used trade policy in a manner that displaced global supply chains across industries and around the world.
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Mexico has become a preferred destination for U.S. and multinational companies to location to diversify their sources of supply and production away from the geopolitical risks associated with the ongoing U.S.-China trade tension.
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The approval of the USMCA in combination with new perspectives as related to national security implications of foreign-based supply chains may bring about changes in Mexico’s freight market, in terms of globalization or regionalization and logistics integration, as well as, the role of 3PL operators.
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Fr8Tech believes the recent supply chain volatility is driving an increase in demand for large and small freight brokers to secure more abundant freight capacity, in real-time, which is readily available on Fr8Tech’s freight-matching platform and facilitated by its Fr8App Platform solution and Fr8Radar.
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Fr8Tech believes that the supply chain volatility was aggravated by a shortage of drivers thereby creating further demand for a more comprehensive approach to logistics management to meet supply chain requirements while minimizing increases in the related freight costs.
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Fr8Tech acts as an intermediary between the total system’s freight requirements and the related freight demand in a more efficient manner than if various of the parties requiring freight contracted these services on their own or managed their own proprietary fleets.
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Fr8Tech believes that its ability to secure available freight capacity, using the Fr8App Platform solution, amongst available truck drivers offers customers an organized, efficient solution to transporting goods domestically and internationally in favorable or unfavorable market environments.
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Additionally, Fr8Tech believes it is well positioned to benefit from the increasing trade across both the U.S.-Mexico and the U.S.-Canada borders caused by supply chain volatility and magnified by the COVID-19 pandemic as well as the increasing needs for reliable freight service within the country of Mexico.
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Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
0 edited+19 added−236 removed0 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
0 edited+19 added−236 removed0 unchanged
2023 filing
2024 filing
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Item 5. Operating and Financial Review and Prospects The following discussion of our financial condition and results of operations is based upon, and should be read in conjunction with, our audited consolidated financial statements and the related notes included in this annual report on Form 20-F. This annual report (this “Report”) contains forward-looking statements.
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ITEM 5. MARKET FOR REGISTRANT’S EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our ordinary share is listed and began trading on the Nasdaq Capital Market tier of Nasdaq on May 26, 2022, under the symbol “FRGT”. Prior to the listing, there was no public market for our ordinary shares.
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See “Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3 Key Information — D. Risk Factors” in this annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks, changes and uncertainties. A.
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Number of Holders of Our Ordinary Shares As of March 31, 2025, there were approximately 35 holders of record of ordinary shares, which does not include holders whose shares are held in nominee or “street name” accounts through banks, brokers or other financial institutions. 42 Use of Proceeds from Registered Securities On May 22, 2024, the Company, entered into a Sales Agent Agreement (the “Agreement”) with Alliance Global Partners AGP, as sales agent.
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Operating Results Overview After February 14, 2022, when we consummated the Merger and after March 30, 2022, when we sold our wholly-owned Hong Kong subsidiary, HKIFS, which held and operated our financial advisory business, in its entirety to a private investor, we are no longer in the financial advisory business and no longer have any presence or holdings outside of North America.
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Under the Agreement, the Company may offer and sell the Company’s ordinary shares, no par value per share, from time to time during the term of the Agreement through AGP, acting as sales agent.
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The sale was for a nominal amount of $1. We are now, through our wholly-owned subsidiary, Fr8App, and Fr8App’s wholly-owned Mexico subsidiary, Freight App de México, S.A De C.V. (“Freight App Mexico”) solely involved in the freight management business.
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The Company filed a prospectus supplement relating to the offer and sale, from time to time, of its shares of ordinary shares having an aggregate offering price of up to $2.3 million (the “Shares”) pursuant to the Agreement.
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On May 26, 2022, we changed our name and ticker symbol from “Hudson Capital, Inc.” and “HUSN”, respectively, to “Freight Technologies, Inc.”, and “FRGT”, respectively.
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On June 21, 2024, the Company filed a second prospectus supplement relating to the offer and sale, from time to time, of its shares of ordinary shares having an aggregate offering price of up to $4.75 million (the “Shares”) pursuant to the Agreement.
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Prior to February 14, 2022, Hudson was mainly in the business of providing financial services in the People’s Republic of China to meet the financial and capital needs of our clients, which comprise largely of small-to-medium sized enterprises (“SMEs”).
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Under the offer, as of December 31, 2024, the Company sold 528,576 ordinary shares (adjusted for the September 25, 2024 one to twenty-five reverse stock split) at a total price of $6.07 (adjusted for the September 25, 2024 one to twenty-five reverse stock split).
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Through wholly-owned subsidiaries, Hongkong Internet Financial Services Limited and CIFS (Xiamen) Financial Leasing Co., Ltd, the contractually controlled and managed company, Hongkong Shengqi Technology Limited, its wholly-owned subsidiary, Beijing Yingxin Yijia Network Technology Co., Ltd and its contractually controlled and managed company, Sheng Ying Xin (Beijing) Management Consulting Co., Ltd (“SYX” or “Sheng Ying Xin”), and SYX’s wholly-owned subsidiaries, Kashgar Sheng Yingxin Enterprise Consulting Co., Ltd.
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The company raised gross proceeds of $3,210,075 and net proceeds of $3,079,016 after deducting commissions and offering expenses of $131,059. There has not been, and we do not expect, any material change in the planned use of proceeds from the IPO as described in the IPO Registration Statement.
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(“Kashgar SYX”), Fu Hui (Shenzhen) Commercial Factoring Co., Ltd (“FuhuiSZ”), Yingda Xincheng (Beijing) Insurance Broker Co., Ltd (“Yin Da Xin Cheng”), Fuhui (Xiamen) Commercial Factoring Co., Ltd (“FuhuiXM”), Zhizhen Investment & Research (Beijing) Information Consulting Co., Ltd. and Hangzhou Yuchuang Investment Partnership.
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The following is our reasonable estimate of the uses of the proceeds from the Company’s at the market offering from May 22, 2024 until December 31, 2024 : ● $2.9 million was used for ongoing operations and working capital; ● None was used for the repayment of indebtedness; and ● None was used for temporary investments.
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Hudson primarily offered commercial payment advisory services, international corporate financing advisory services, intermediary bank loan advisory services and supply chain financing services . Key Factors Affecting Our Results of Operations The demand for our platform and our related services is dependent upon overall economic conditions in North America.
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On September 4, 2024, the Company entered into a Cancellation Agreement with Freight Opportunities, LLC to cancel the remaining balance of the Convertible Promissory Note, which was issued on January 3, 2023, for an original principal amount of $6,593,407 and with a remaining fair value balance of $219,840 on the Company’s balance sheet at June 30, 2024, and the outstanding balances of two promissory notes issued earlier this year totaling $875,000.
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General economic factors, including the amount of international trade across North America may affect our Shipper clients’ needs for our services. A slowdown in economic activity, an increase rise unemployment, a decline in real personal income, among other economic conditions, may affect individuals’ level of disposable income and the consequent effect on international trade.
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A promissory note for $750,000 was issued to Freight Opportunities, LLC on March 11, 2024, and a second promissory note for $125,000 was issued to Freight Opportunities, LLC on June 4, 2024. Accrued interest on the Convertible Promissory Note and on both promissory notes, which were $482,103 and $32,956 at the time of the Cancellation Agreement, were also canceled.
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This may reduce Shippers’ needs to transport goods and their need to use our platform. 36 Trends Fr8Tech believes the growing interest in digital freight matching platforms shows that traditional 3PL providers recognize the sweeping technological shifts in the industry. We are offering solutions that significantly improve end-to-end freight procurement transactions to market participants.
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All proceeds from the Convertible Promissory Note issued in 20233 and the two promissory notes issued in 2024 were used to fund ongoing operations and working capital needs of the Company.
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During the last three years, the industry experienced significant swings in supply, demand and costs due to distortions in both domestic and global markets resulting from the global pandemic caused by the virus known as COVID-19 and its follow-on effects.
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As of December 31, 2024, none of the proceeds from the at the market offering, convertible notes or promissory notes were used to make direct or indirect payments to any of our directors or officers, any of their associates, any persons owning 10% or more of any class of our equity securities, or any of our affiliates, or direct or indirect payments to any others other than for the direct costs of the offering.
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This substantial supply chain volatility has led large and small freight brokers to, among other tactics, pivot toward more abundant and secure sources of freight capacity available in a digital marketplace and facilitated by software portals and platforms. Fr8Tech believes supply chain management will continue to evolve into increasingly digital forms and interactive marketplace platforms.
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Securities Authorized for Issuance Under Equity Compensation Plans See Part III. Item 12. “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Securities Authorized for Issuance Under Equity Compensation Plans ”.
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As it does, Fr8Tech believes digital brokers, will play an increasingly integral role in easing capacity constraints, opening up new lanes, and providing a benchmarking tool for shippers. In the short-term, Fr8Tech believes the COVID-19 pandemic has changed the current nature of global commerce and shipping.
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Dividend Policy Our board of directors has discretion on whether to distribute dividends, subject to certain restrictions under British Virgin Islands law, namely that our company may only pay dividends if the value of the company’s assets exceed its liabilities and the company is able pay its debts as they fall due in the ordinary course of business.
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Cross-border travel and trade restrictions were put into effect and could return, even though economies and trade have fully reopened around the globe. Trucking capacity is not steadily available across borders. Contract carriers can still only go to certain pre-specified locations and companies continue to need to determine where specific available freight capacity is and how much it costs.
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In addition, our shareholders may declare a dividend by ordinary resolution, but no dividend may exceed the amount recommended by our board of directors.
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The near-shoring phenomenon continues to point towards more freight crossing over the U.S. border with Mexico and a lesser extent, Canada. Fr8Tech believes that these conditions are creating a market opportunity for digital brokers to facilitate and improve the connections necessary that enable cross-border commerce .
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Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
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Results of Operations Comparison of the Years Ended December 31, 2023, December 31, 2022, and December 31, 2021 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME ($’000’s) Dec 31 2023 Dec 31 2022 Dec 31 2021 Revenue Revenue 17,061 25,888 21,474 Cost and Expenses Cost of revenue (exclusive of depreciation shown separately below) 15,710 23,625 19,559 Compensation and employee benefits 5,964 4,963 3,712 General and administrative 3,163 3,561 2,618 Sales and marketing 80 557 92 Depreciation and amortization 405 243 302 Total cost and expenses 25,322 32,949 26,283 Operating loss (8,261 ) (7,061 ) (4,809 ) Other income and (expenses) Interest expense, net (808 ) (907 ) (1,136 ) Other income and (expenses) (154 ) (128 ) (2,215 ) Total other income (expense) (962 ) (1,035 ) (3,351 ) Loss before income taxes (9,223 ) (8,096 ) (8,160 ) Income tax expense 105 91 40 Net loss attributable to ordinary shareholders (9,328 ) (8,187 ) (8,200 ) Foreign translation adjustment 453 89 (51 ) Comprehensive loss (8,875 ) (8,098 ) (8,251 ) 37 Revenues Fr8Tech’s revenues decreased to $17,061 for the year ended December 31, 2023 from $25,888 for the year ended December 31, 2022, a reduction of $8,827 and 34.1% on year-over-year basis.
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We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future after this offering. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. See also “Item 1A.
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The year-over-year decrease was primarily driven by: 1) our decision to limit activity with low-margin, but high-volume customers; 2) the loss of one customer due to non-recurring issue with a particular Carrier; and, 3) reduced spot market activity across several accounts driven by challenges in securing sufficient carrier capacity in the first half of 2023 and US market rates that were significantly lower than in 2022.
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Risk Factors – Risks Related to our Ordinary Shares – We pay no dividends. ” 43 Recent Sales of Unregistered Securities During 2024, the Company did not sell any equity securities that were not registered under the Securities Act and that were not previously disclosed in a Quarterly Report on Form 10-Q or Current Report on Form 8-K where required.
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This was partially offset by a 67% increase in our Fr8Fleet revenue and the addition of more than 30 new customers in our spot market FTL and LTL businesses. Fr8Tech’s revenues grew to $25,888 for the year ended December 31, 2022 from $21,474 for the year ended December 31, 2021, an increase of $4,414 and 20.6% on year-over-year basis.
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Purchases of Equity Securities No repurchases of our ordinary shares were made during the fourth quarter of 2024.
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This year-over-year increase in the year ended December 31, 2022 shows the impact of Fr8Tech’s new offerings under the Fr8Fleet brand on its revenue.
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Revenues from Fr8Fleet were approximately $3,685 higher during the twelve months ended December 31, 2022 relative to the prior year’s results, while the Company’s Fr8App brand did not grow at rates as high as it has in past years due to the decrease in a single important client’s business volume beginning in the fall months of 2022.
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The Company has worked to repair this relationship and anticipates for the cross-border piece to resume by mid-2023. Costs of Revenue Fr8Tech’s cost of revenue, exclusive of depreciation and amortization, decreased to $15,710 for the year ended December 31, 2023 from $23,625 for the year ended December 31, 2022, a reduction of $7,916 and 33.5% on a year-over-year basis.
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This year-over-year decrease moved in similar fashion and magnitude with our revenue, with some differences due to varying margins in the traffic and in the traffic mix itself from quarter-to-quarter and year-to-year. Our gross margin decreased 0.8% to 7.9% in 2023 from 8.7% in 2022 primarily due to product mix.
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Fr8Fleet business, which grew 48% in 2023, incurred slightly lower margins than our spot market services due to higher initial service costs to develop that offering over the year.
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Fr8Tech’s cost of revenue, exclusive of depreciation and amortization, grew to $23,625 for the year ended December 31, 2022 from $19,559 for the year ended December 31, 2021, an increase of $4,066 and 20.8% on a year-over-year basis.
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This year-over-year increase moved in similar fashion and magnitude with our revenue, with some differences due to varying margins in the traffic and in the traffic mix itself from quarter-to-quarter and year-to-year.
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Our margins improved in the second half of 2022 over the first half of 2022 as capacity on the carrier side started to return to a more normal level during the second half of 2022.
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Our brand mix also varied in 2022 versus 2021 as our Fr8Fleet brand represented nearly 15% of revenues during the year ended December 31, 2022 versus 0.3% during the year ended December 31, 2021.
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Compensation and Employee Benefits Fr8Tech’s compensation and employee benefits expenses were $5,964 for the year ended December 31, 2023 compared to $4,963 for the year ended December 31, 2022, which was a $1,001 or 20.2% increase on a year-over-year basis.
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The increase is due to stock compensation costs related to new grants issued during 2022 and 2023 and hiring of new employees, mostly in dedicated services, business intelligence and procurement.
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We anticipate that our compensation and employee benefits expenses will continue to increase on a year-over-year basis as we continue to invest in the expansion of our sales force to attract new users, in operations staff to support our Shipper and Carrier clients, and in IT and product development to continue to innovate and enhance our suite of solutions and services, albeit at a lesser rate than our expected increase in revenues.
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Total employees at December 31, 2023 and 2022 were 78 and 88, respectively. The reduction in the number of employees in 2023 took place towards the end of the year as a result of personnel changes management made, mostly on the sales team, and normal employee turnover. By March 2024, the Company had 93 employees globally.
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Fr8Tech’s compensation and employee benefits expenses were $4,963 for the year ended December 31, 2022 compared to $3,712 for the year ended December 31, 2021, which was a $1,251 or 33.7% increase on a year-over-year basis.
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Fr8Tech anticipates that its compensation and employee benefits expenses will continue to increase on a year-over-year basis as we continue to invest in the expansion of our sales force (both shipper and carrier) and in the support staff required for the company to operate as a publicly-traded company, albeit at a lesser rate than our expected increase in revenues.
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We also incorporated some variable compensation plans during early 2021 to incentivize management and staff efforts in a manner consistent with our growth plans. These continued in place through 2022.
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Total employees at December 31, 2022 and 2021 were 88 and 82, respectively. 38 General and Administrative General and administrative expenses were $3,163 for the year ended December 31, 2023 compared to $3,561 for the year ended December 31, 2022, which was a decrease of $398 or 11.2%, primarily due to lower outside legal counsel and public company costs.
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General and administrative expenses were $3,561 for the year ended December 31, 2022 compared to $2,618 for the year ended December 31, 2021, which was an increase of $943 or 36.0%.
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The increase in expenses for the year ended December 31, 2022 is due to the incurrence of legal fees, higher insurance costs and other additional costs of being a public company that were not necessary during the year ended December 31, 2021.
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Sales and Marketing Sales and marketing expenses were $80 for the year ended December 31, 2023 compared to $557 for the year ended December 31, 2022, which was a decrease of $477 or 85.6%.
Removed
The decrease in marketing expenses in 2023 was almost entirely due to a strategic alliance during 2022 with a US-based counterparty that was working with us to originate and manage US domestic business and that was paid for with the issuance of ordinary shares in 2022.
Removed
We continue to use direct and online advertising and social media platforms for promotion and attracting new Shippers and Carriers to our Platform. We expect these costs increase support growth of our business across our three primary brands and potential new offerings.
Removed
Sales and marketing expenses were $557 for the year ended December 31, 2022 compared to $92 for the year ended December 31, 2021, which was an increase of $465 or a 505% increase.
Removed
The increase in marketing expenses in 2022 was almost entirely due in large part to a strategic alliance with a US-based counterparty that worked with us to originate and manage US domestic business and that was paid for with the issuance of ordinary shares.
Removed
Depreciation and Amortization Depreciation and amortization expenses represent the amortization of previously capitalized software development costs, as appropriate, and depreciation expenses related to Fr8App’s fixed assets.
Removed
This expense increased to $405 for the year ended December 31, 2023, from $243 for the year ended December 31, 2022, an increase of $162 or 66.7% on a year-over-year basis, due to the completion of the application development stage of Fr8Tech platform which resulted in an increase of capitalized software amortization.
Removed
Depreciation and amortization expenses decreased to $243 for the year ended December 31, 2022, from $302 for the year ended December 31, 2021, a decrease of $59 or 19.5% on a year-over-year basis consistent with the levels of investment in Fr8App’s software and fixed assets as these decreased by nearly 22.7% on a year-over-year basis during 2022.
Removed
Other income and expenses Interest expenses for the year ended December 31, 2023 decreased to $808 from $907 for the year ended December 31, 2022 due to a debt discount amortization for the year ended December 31, 2022, which was higher than interest expenses incurred in 2023 related to the convertible note that was issued in 2023.
Removed
During the year ended December 31, 2023, other income and expense also included expensing the fair value of warrants issued as an inducement for convertible note conversion and as an additional consideration for an increase in convertible note funding, in the total amount of $499 and a gain of $345 from a change in fair value of convertible note.
Removed
During the year ended December 31, 2022, other income and expense included a $128 loss from the change in fair value of warrant liabilities. The convertible note issued during 2023 and warrants and related accounting treatment are more fully described in Notes 11 and 15, respectively, of our consolidated financial statements.
Removed
Interest expenses for the year ended December 31, 2022 decreased to $907 from $1,136 for the year ended December 31, 2021 due to the conversion of the notes payables at the Merger in February 2022, partially offset by interest expenses related to the increase in the short-term borrowing facility.
Removed
During the year ended December 31, 2022, other income and expense included a $128 loss from change in fair value of warrant liabilities. 39 Net Loss Fr8Tech’s net loss for the year ended December 31, 2023 increased to $9,328 from $8,187 for the year ended December 31, 2022 or by $1,141 or 13.94% on a year-over-year basis, as a result of the items described above.
Removed
Fr8Tech’s net loss for the year ended December 31, 2022 decreased to $8,187 from $8,200 for the year ended December 31, 2021 or by $13 or 0.2% on a year-over-year basis, as a result of the items described above. B.
Removed
Liquidity and Financial Position Fr8Tech has historically met its cash needs through a combination of cash flows from operating activities, term loans, promissory notes, bonds, convertible notes, private placement offerings and sales of equity. Fr8Tech’s cash requirements are generally for operating activities and debt repayments.
Removed
Fr8Tech funded its early operations with a combination of debt and equity and we continue to work to position the Company to operate on a go-forward basis with a minimal amount of long-term debt and other borrowings.
Removed
On January 3, 2023, Fr8Tech closed on a $6.6 million convertible note facility with a private investor, which was increased to $9.9 million in April 2023. The convertible note was mostly converted to equity during 2023. As of December 31, 2023 the fair value of remaining balance of the convertible debt was $242.
Removed
We continue to incur short-term debt over the near-term that is collateralized by our accounts receivable. We expect to maintain our short-term debt facility of $5 million with a third party to continue to support ongoing operations.
Removed
To further support investment in growth opportunities and ongoing operating, on March 11, 2024, the Company entered into a $750 1-year term note purchase agreement with Freight Opportunities, LLC bearing an 8% annual interest rate.
Removed
Our combined accounts receivable and unbilled receivable balance of $6,322 at December 31, 2023 declined by 8% on a year-over-year comparative basis, which was primarily due to lower unbilled receivables at year-end. Fr8Tech’s accounts payable, short-term borrowings and accrued expenses increased 5.9% on a year-over-year comparative basis, due mostly to interest accrued on the convertible note.
Removed
At December 31, 2023, Fr8Tech has an accumulated net capital surplus of $2,627, $242 of long-term debt, and net working capital of $1,957. In March 2019, we secured a revolving line of credit that is used to assist with managing our working capital needs.
Removed
The maximum principal amount that may be drawn under the line of credit was increased since then to $5 million. The initial maturity date on this facility was March 7, 2020 and it has since been extended by mutual written consent of the lender and Fr8Tech to a maturity date of January 31, 2025.
Removed
We plan to extend this facility on similar terms prior to its maturity. As of December 31, 2023 and 2022 the amount drawn under this facility was $2,820 and $3,347, respectively.
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
0 edited+77 added−4 removed0 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
0 edited+77 added−4 removed0 unchanged
2023 filing
2024 filing
Removed
Item 7. Major Shareholders and Related Party Transaction A. Major Shareholders. Please refer to “Item 6.E. Directors, Senior Management and Employees—Share Ownership.” B. Related party transactions. Transaction and balances from related parties: The Company has provided freight services to a customer owned by a shareholder prior to the year ended December 31, 2022.
Added
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below.
Removed
The accounts receivable from this certain customer as of December 31, 2023 was $0. The revenue of these services for the year ended December 31, 2023, 2022 and 2021 was $0, $0 and $99,000, respectively.
Added
The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Annual Report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management.
Removed
Related parties of the Company represented entities that are directly or indirectly owned by directors and officers of the Company or in which the directors and officers of the Company has significant influence. Review, approval or ratification of transactions with related persons.
Added
Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report, particularly in the sections titled Item 1A.
Removed
Our Audit Committee, consisting of independent directors, is charged with reviewing and approving all agreements and transactions which had been entered into with related parties, as well as reviewing and approving all future related party transactions. C. Interests of experts and counsel. No disclosure is required in response to this Item.
Added
“ Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Select Financial Data The following table presents the selected consolidated financial information for our Company. All numbers are presented in United States Dollars.
Added
The selected consolidated statements of comprehensive income data for the years ended December 31, 2024, and 2023, and the consolidated balance sheets data as of December 31, 2024, and 2023, have been derived from our audited consolidated financial statements, which are included in this annual report beginning on page [*] and are consistent with numbers reported in our prior annual filings.
Added
Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” below.
Added
Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP.
Added
Year Ended Year Ended (US$) December 31 2024 December 31, 2023 Revenue $ 13,728,922 $ 17,060,753 Cost and expenses Cost of revenue (exclusive of depreciation and amortization shown separately below) 12,389,520 15,709,673 Compensation and employee benefits 5,349,764 5,963,713 General and administrative 1,983,901 3,163,639 Sales and marketing 65,574 80,328 Depreciation and amortization 430,414 404,598 Total Cost and expenses 20,219,173 25,321,951 Operating Loss (6,490,251 ) (8,261,198 ) Other income and (expenses) Interest income 1,770 8,880 Interest expense (675,628 ) (816,819 ) Other income - 342 Other expense - (499,259 ) Gain from extinguishment of debt 1,607,766 - Change in fair value of convertible note 22,602 345,396 Total other expense (956,510 ) (9,222,658 ) Loss before income taxes (5,533,741 ) (9,222,658 ) Income tax expense 67,486 104,948 Net loss (5,601,227 ) (9,327,606 ) Foreign currency translation (1,740,552 ) 452,917 Comprehensive loss (7,341,779 ) (8,874,689 ) Weighted average number of shares, basic and diluted* 912,837 47,867 Loss per share, basic and diluted $ (6.41 ) $ (194.87 ) * - The number of shares outstanding was adjusted retroactively for all periods presented to reflect the 10-to-1 reverse stock split change which was effected on March 24, 2023, the 10-to-1 reverse split which was effected on February 5, 2024, and the 25-to-1 reverse split which was effected on September 25, 2024. 44 Warrants to purchase ordinary shares are not included in the diluted loss per share calculations when their effect is antidilutive.
Added
BALANCE SHEET Year Ended December 31, 2024 Year Ended December 31, 2023 Current assets $ 5,049,546 $ 9,153,089 Total assets 5,690,245 10,037,312 Current liabilities 6,345,005 7,167,889 Long term liabilities - 242,442 Share capital 308 2,427,518 Total stockholders’ equity (deficit) $ (654,760 ) $ 2,626,981 Revenues Fr8Tech’s revenues decreased to $13.7 million for the year ended December 31, 2024 from $17.1 million for the year ended December 31, 2023, a reduction of $3.3 million and 19.5% on year-over-year basis.
Added
The year-over-year decrease was primarily driven by: (1) our continued efforts to focus on higher margin customers and lanes in the spot market which impacted overall volume across the platform; (2) reduced spot market and dedicated service activity in the third quarter 2023 due to customer specific circumstances; and, (3) an approximate 3.5% decline in the Mexican peso relative to the US dollar year-over-year, which reduced the US dollar amount of Mexican peso based revenue on a comparative basis.
Added
Our spot market revenue declined 36% to $8.6 million in 2024, partially offset by a 42% increase in our Fr8Fleet revenue to $5.1 million and to a lesser extent the launch of Waavely, our ocean container freight brokerage service.
Added
Fr8Tech’s revenues decreased to $17.1 million for the year ended December 31, 2023 from $25.9 million for the year ended December 31, 2022, a reduction of $8.8 million and 34.1% on year-over-year basis.
Added
The year-over-year decrease was primarily driven by: (1) our decision to limit activity with low-margin, but high-volume customers; (2) the loss of one customer due to non-recurring issue with a particular Carrier; and, (3) reduced spot market activity across several accounts driven by challenges in securing sufficient carrier capacity in the first half of 2023 and US market rates that were significantly lower than in 2022.
Added
This was partially offset by a 67% increase in our Fr8Fleet revenue and the addition of more than 30 new customers in our spot market FTL and LTL businesses.
Added
Costs of Revenue Fr8Tech’s cost of revenue, exclusive of depreciation and amortization, decreased to $12.4 million for the year ended December 31, 2024 from $15.7 million for the year ended December 31, 2023, a reduction of $3.3 million and 21.1% on a year-over-year basis. Year-over-year cost of revenue decreased primarily due to the decline in revenue.
Added
Our gross margin percentage increased 1.8% to 9.8% in 2024 from 7.9% in 2023 primarily due to change in product mix, variation in rates on certain lanes and in the traffic mix itself over the year.
Added
Fr8Fleet business, which grew 42% in 2024 with improved margins primarily due to providing additional capacity for Kimberly Clark de Mexico and expanding service to several additional large enterprise end-customers. 45 Fr8Tech’s cost of revenue, exclusive of depreciation and amortization, decreased to $15,710 for the year ended December 31, 2023 from $23,625 for the year ended December 31, 2022, a reduction of $7,916 and 33.5% on a year-over-year basis.
Added
This year-over-year decrease moved in similar fashion and magnitude with our revenue, with some differences due to varying margins in the traffic and in the traffic mix itself from quarter-to-quarter and year-to-year. Our gross margin decreased 0.8% to 7.9% in 2023 from 8.7% in 2022 primarily due to product mix.
Added
Fr8Fleet business, which grew 67% in 2023, incurred slightly lower margins than our spot market services due to higher initial service costs to develop that offering over the year.
Added
Compensation and Employee Benefits Fr8Tech’s compensation and employee benefits expenses were $5.3 million for the year ended December 31, 2024 compared to $6.0 million for the year ended December 31, 2023, which was a $0.6 million or 10.3% decrease on a year-over-year basis.
Added
The decrease was primarily due lower executive compensation and bonuses, lower stock based compensation, and a weaker Mexican peso relative to the US dollar, partially offset by some additional hiring. Total employees and FTE contractors, who are included in our compensation costs, at December 31, 2024 and 2023 were 100 and 89, respectively.
Added
The increase in the number of employees in 2024 was primarily within sales, technology and operations. In January and February 2025, the Company undertook a cost cutting initiative to optimize resources for operational performance and shifting sales focus to emphasize sales of the Company’s TMS software offering, Fleet Rocket, and to lower ongoing operating expenses.
Added
The Company reduced its workforce by approximately 20%. As a result of these measures, the Company anticipates that its compensation and employee benefit expenses will be lower in 2025 than in 2024.
Added
Fr8Tech’s compensation and employee benefits expenses were $6.0 million for the year ended December 31, 2023 compared to $5.0 million for the year ended December 31, 2022, which was a $1.0 million or 20.2% increase on a year-over-year basis.
Added
The increase was primarily due to stock compensation costs related to new grants issued during 2022 and 2023 and hiring new employees in dedicated services, business intelligence and carrier procurement.
Added
As noted above, the total number of employees and FTE contractors was 89 at December 31, 2023, at which time the company was making several personnel changes, mostly on the sales team.
Added
General and Administrative General and administrative expenses were $2.0 million for the year ended December 31, 2024 compared to $3.2 million for the year ended December 31, 2023, which was a decrease of $1.2 million or 37.7%, primarily due to a favorable change in the exchange valuation of working capital balances and to a lesser extent lower outside legal expenses and insurance costs, partially offset by higher spend on software, audit services, and recruiting.
Added
General and administrative expenses were $3.2 million for the year ended December 31, 2023 compared to $3.6 million for the year ended December 31, 2022, which was a decrease of $0.4 million or 11.2%, primarily due to lower outside legal counsel and public company costs.
Added
Sales and Marketing Sales and marketing expenses were $66 thousand for the year ended December 31, 2024 compared to $80 thousand for the year ended December 31, 2023, which was a decrease of $14 thousand or 17.5%.
Added
The decrease in sales and marketing expenses in 2024 was primarily to lower direct advertising expenses, which is focused on online industry media and platforms. We continue to use direct and online advertising and social media platforms for promotion and attracting new Shippers and Carriers to our Platform.
Added
We expect these costs to increase modestly to support growth of our business across our brands and new software offering. Sales and marketing expenses were $80 thousand for the year ended December 31, 2023 compared to $557 thousand for the year ended December 31, 2022, which was a decrease of $477 thousand or 85.6%.
Added
The decrease in marketing expenses in 2023 was mostly due to a strategic alliance during 2022 with a US-based counterparty that was working with us to originate and manage US domestic business and that was paid for with the issuance of Ordinary shares in 2022. 46 Depreciation and Amortization Depreciation and amortization expenses represent the amortization of previously capitalized software development costs, as appropriate, and depreciation expenses related to Fr8App’s fixed assets.
Added
This expense increased $25 thousand to $430 thousand for the year ended December 31, 2024, from $405 thousand for the year ended December 31, 2023.
Added
The increase was primarily due to additional software development of Fr8Tech platform in 2023 and 2024, as well as software development efforts in 2024 to build Fleet Rocket, our TMS software platform that was launched in February 2025.
Added
Depreciation and amortization increased to $405 thousand for the year ended December 31, 2023, from $243 thousand for the year ended December 31, 2022, an increase of $161 thousand or 66.7% on a year-over-year basis, due to the completion of the application development stage of Fr8Tech platform which resulted in an increase of capitalized software amortization.
Added
Other income and expenses Interest expense for the year ended December 31, 2024 decreased to $674 thousand from $808 thousand for the year ended December 31, 2023, or by $134 thousand primarily due lower interest incurred on the convertible note that was issued in 2023, partially offset by higher interest expense incurred on the company’s revolving credit facility and promissory notes issued in 2024.
Added
During the year ended December 31, 2024, other income and expense included a gain of $1.6 million from the extinguishment of the convertible notes issued in 2023 and the promissory notes issued in 2024, as well as a gain of $22 thousand from a change in fair value of convertible note.
Added
Interest expenses for the year ended December 31, 2023 decreased to $808 thousand from $907 thousand for the year ended December 31, 2022 due to a debt discount amortization for the year ended December 31, 2022, which was higher than interest expenses incurred in 2023 related to the convertible note that was issued in 2023.
Added
During the year ended December 31, 2023, other income and expense also included expensing the fair value of warrants issued as an inducement for convertible note conversion and as an additional consideration for an increase in convertible note funding, in the total amount of $499 and a gain of $345 from a change in fair value of convertible note.
Added
The convertible note issued during 2023 and warrants and related accounting treatment are more fully described in Notes 11 and 15, respectively, of our consolidated financial statements.
Added
Net Loss Fr8Tech’s net loss for the year ended December 31, 2024 decreased to $5.6 million from $9.3 million for the year ended December 31, 2023 or by $3.7 million or 40% on a year-over-year basis, as a result of the items described above.
Added
Fr8Tech’s net loss for the year ended December 31, 2023 increased to $9.3 million from $8.2 million for the year ended December 31, 2022 or by $1.1 million or 13.9% on a year-over-year basis, as a result of the items described above.
Added
Liquidity and Financial Position Fr8Tech has historically met its cash needs through a combination of cash flows from operating activities, term loans, promissory notes, bonds, convertible notes, private placement offerings and sales of equity. Fr8Tech’s cash requirements are generally for operating activities and debt repayments.
Added
Fr8Tech funded its early operations with a combination of debt and equity and we continue to work to position the Company to operate on a go-forward basis with a minimal amount of long-term debt and other borrowings.
Added
On January 3, 2023, Fr8Tech closed on a $6.6 million convertible note facility with a private investor, which was increased to $9.9 million in April 2023. The convertible note was mostly converted to equity during 2023. The balance of the convertible note of $219 thousand as of June 30, 2024, was extinguished in September 2024.
Added
The Company entered into a $750 thousand 1-year term note purchase agreement with Freight Opportunities, LLC on March 11, 2024, and an additional term note for $125 thousand with Freight Opportunities, LLC on June 4, 2024.
Added
Both promissory notes were also extinguished in September 2024. 47 Our combined accounts receivable and unbilled receivable balance of $4.1 million at December 31, 2024, declined by declined by $2.3 million or 35.9% from $6.3 million at December 31, 2023, which was primarily due to lower revenue and collections to reduce our outstanding AR balance over the year.
Added
Fr8Tech’s accounts payable, short-term borrowings and accrued expenses decreased by $867 thousand or 12.5% on a year-over-year comparative basis to $6.1 million, due mostly to lower accrued expenses on lower costs of revenue and accounts payable. At December 31, 2024, Fr8Tech has an accumulated net capital deficient of -$33 thousand, and net working capital of -$1.2 million.
Added
In March 2019, we secured a revolving line of credit that is used to assist with managing our working capital needs. The maximum principal amount that may be drawn under the line of credit was increased since then to $5 million, which remains in place.
Added
As of December 31, 2024 and 2023 the amount drawn under this facility was $3.3 million $2.8 million, respectively. We continue to incur short-term debt with this facility, which is collateralized by our accounts receivable, and we expect to maintain this debt facility to support ongoing operations.
Added
As shown in the accompanying consolidated financial statements as of December 31, 2024, we had an accumulated deficit of approximately $44.9 million, short-term debt of $3.3 million, unrestricted cash of approximately $0.2 million and a working capital of approximately -$1.3 million.
Added
In addition, for the years ended December 31, 2024 and 2023, we reported operating losses and negative cash flows from operations. Most of cash resources of the Company fund operating activities.
Added
Through December 31, 2024, we have financed our operations primarily with the proceeds from the sale and issuance of our ordinary and preferred shares, convertible promissory notes, promissory notes and debt.
Added
If we are unable to raise additional capital moving forward, our ability to operate in the normal course and continue to invest in our business may be materially and adversely impacted and we may be forced to scale back operations or divest some or all of our assets.
Added
As a result of the above, in connection with our assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that our liquidity condition raises substantial doubt about our ability to continue as a going concern through twelve months from the date these consolidated financial statements are available to be issued.
Added
These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
Added
Cash flows Comparison of the Years ended December 31, 2024, and December 31, 2023 The following table summarizes our sources and uses of cash for the years ended December 31, 2024, and December 31, 2023.
Added
(US$) Year Ended December 31, 2024 Year Ended December 31, 2023 Net cash used in operating activities (4,206,168 ) (5,790,684 ) Net cash used in investing activities (345,723 ) (363,369 ) Net cash provided by financing activities 4,242,023 6,800,722 Net effect of exchange rates on cash (1,046,205 ) (99,564 ) Net increase / (decrease) in cash and cash equivalents (309,868 ) 646,669 48 Cash flows used in Operating Activities Net cash used in operating activities represent the cash receipts and disbursements related to our activities other than investing and financing activities.
Added
We expect cash provided by operating activities to be our primary use of funds for the foreseeable future as the Company continues to fund its growing operations Net cash flows used in operating activities is derived by adjusting our net loss for: ● non-cash operating items such as depreciation and amortization, stock-based compensation and other non-cash income or expenses; ● changes in operating assets and liabilities reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations as well as any gains from extinguishment of debt or changes in value of preferred stock.
Added
For the year ended December 31, 2024, net cash used in operating activities was $4.2 million which consisted of a net loss of $5.6 million adjusted for non-cash charges of -$0.2 million and net positive changes in our net operating assets and liabilities of $1.6 million.
Added
The non-cash charges primarily consisted of gain on extinguishment of debt of -$1.6 million and a change in the fair value of convertible note of $23 thousand, offset by share-based compensation costs of $1.0 million and depreciation and amortization of $0.4 million.
Added
The change in our net operating assets and liabilities was primarily due to net decreases in accounts receivable and unbilled receivables of $1.5 million, prepaid assets and deposits of $0.4 million, and income and VAT tax balances $0.2 million, partially offset by a decrease of accounts payable and accrued expenses of $0.5 million.
Added
The changes in our accounts receivable and accounts payable balances are primarily the result of the overall decrease in business activities and higher collections relative to the prior year.
Added
For the year ended December 31, 2023, net cash used in operating activities was $5.8 million which consisted of a net loss of $9.3 million, adjusted for non-cash charges of $1.8 million and net changes in our net operating assets and liabilities amounting to $1.7 million.
Added
The non-cash charges primarily consisted of share-based compensation costs of $1.2 million, interest accruals on convertible notes of $0.4 million, depreciation and amortization of $0.4 million, and conversion inducement expense of $0.1 million, partially offset by a change in fair value of convertible note of $0.3 million.
Added
The change in our net operating assets and liabilities was primarily due to net decreases in accounts receivable and unbilled receivables of $1.1 million, prepaid assets and deposits of $0.3 million, and accounts payable of $0.2 million, partially offset by an increase of accrued expenses and income tax payable of $0.5 million.
Added
The changes in our accounts payable and accounts receivable balances are primarily the result of the overall decrease in business activities relative to the prior year.
Added
Cash flows used in Investing Activities For the year ended December 31, 2024, net cash used in investing activities was $346 thousand, mostly for software development efforts for additional functionalities and capabilities of the Fr8App platform and related offerings, as well as building out Fleet Rocket.
Added
For the year ended December 31, 2023, net cash used in investing activities was $336 thousand, mostly for software development efforts for additional functionalities and capabilities of the Fr8App platform and related offerings. Cash flows provided by Financing Activities For the year ended December 31, 2024, net cash provided by financing activities was $4.2 million.
Added
The cash flow provided was from proceeds from the issuance of ordinary equity through our ATM program for $3.1 million, promissory notes of $0.9 million, and net borrowing revolving credit facility $0.5 million, partially offset by repayment of insurance financing for $0.2 million. For the year ended December 31, 2023, net cash provided by financing activities was $6.8 million.
Added
The cash flow provided was primarily from net proceeds from the issuance of convertible note of $7.7 million, partially offset by a net repayment on borrowing facilities of $0.5 million, and repayment of insurance financing of $0.3 million. Research and development, patents and licenses The first commercial version of Fr8Tech’s products was launched in 2017.
Added
Fr8Tech continued its product development efforts throughout 2018, by adding initial business intelligence and analytics to supplement its basic products in 2019 and offered its revised products package with active freight brokerage support and customer service by year-end 2019.
Added
The second generation of Fr8Tech products were brought to market during the second quarter of 2020 and consisted of the online portal, mobile application, TMS functionality, and Fr8App’s platform supplemented with freight brokerage support and customer service integrations.
Added
In 2022, the Company began offering to the Mexican domestic market dedicated capacity under the Fr8Fleet brand and in 2023 LTL services under the Fr8Now brand, both powered and managed by the Fr8App platform and bringing much of the same capabilities and intelligence to both services. 49 The Company has continued to bring additional functionality and enhancements to its core Fr8App platform over the past several years, as well as launch new technology-based offerings, including Fr8Radar, Waavely, and most recently Fleet Rocket, the TMS software solution launched in February 2025.
Added
Fr8Tech’s principal assets consist of its software, in which it invests continuously through development work by employees and externally contracted parties. Fr8Tech invested more than $0.3 million per year in software during the years ended December 31, 2024 and 2023. Fr8Tech expects to continue investing in its software in line with the expansion of its product offerings.
Added
On January 7, 2021, Fr8App filed a trademark application with the U.S. Patent and Trademark Office for the Fr8Technologies design mark. Fr8App currently does not hold any patents or own any registered trademarks. Fr8App believes that the success of its business depends on the quality of its proprietary software solutions, technology, processes, and domain expertise.
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