Freight Technologies (FRGT) risk factors, FY2024 10-K

Risks Related to Fr8Tech’s Business

1. 01Fr8Tech’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
2. 02Fr8Tech’s early-stage operations could expose it to a high concentration of revenues in individual clients and increase the volatility of its revenues
3. 03A significant data breach or information technology system disruption could materially adversely affect Fr8Tech, including requiring Fr8Tech to increase spending on data and system security
4. 04Operational challenges associated with the use of AI technologies could disrupt our business and increase costs
5. 05The development and integration of AI technologies present risks related to data integrity, accountability, and market adoption
6. 06Our dependence on a third-party provider for the development and integration of AI technologies exposes us to operational and contractual risks
7. 07Our use of AI technology increases exposure to data privacy and cybersecurity risks
8. 08The use of AI technologies exposes us to evolving regulatory and compliance risks that could increase operational burdens and legal liability
9. 09Trade 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
10. 10Fr8Tech’s industry is rapidly evolving. It expects to continue to face significant competition, which could adversely affect Fr8Tech
11. 11Fr8Tech is directly affected by the cyclicality of the trucking industry and general economic conditions
12. 12Fr8Tech could be affected by strikes or labor unrest at any border crossing that is relied upon by its customer base
13. 13Fr8Tech could be affected by organized crime activities affecting shipment integrity at any border crossing that is relied upon by its customer base
14. 14Fr8Tech 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
15. 15Fr8Tech currently does not hold any patents or own any registered trademarks
16. 16The impact of environmental laws and regulations and their enforcement could materially and adversely affect Fr8Tech’s business
17. 17The audited consolidated financial statements for the year ended December 31, 2024 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
18. 18On January 3, 2023, the Company placed a facility with an existing investor for approximately $6.6 million and extended the facility in April, 2023 to $9.9 million, out of which $9.6 million was funded as of December 31, 2023
19. 19If 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 or discontinue some operations or divest some or all of our assets
20. 20Fr8Tech has a history of significant operating losses and expects to incur losses in the future, and Fr8Tech may never achieve or maintain profitability
21. 21Historically, Fr8Tech’s existing credit losses have been minimal, less than 0.6% of sales on average over the past three years. Strain on Fr8Tech’s financial position could result from adverse credit events including non-payment from some of Fr8Tech’s larger shipper clients
22. 22Raising additional capital may cause dilution to Fr8Tech’s existing shareholders, restrict its operations or cause it to relinquish valuable rights

Risks Related to Fr8Tech’s Operations

1. 23A number of Fr8Tech’s personnel are based outside of the United States and regularly conduct business outside of the United States. Fr8Tech is subject to economic, political, regulatory and other risks associated with international operations
2. 24Exchange rate fluctuations may materially affect Fr8Tech’s results of operations and financial condition
3. 25Fr8Tech may be subject to claims by third parties asserting that its employees or Fr8Tech has misappropriated their intellectual property, or claiming ownership of what Fr8Tech regards as its own intellectual property
4. 26Fr8Tech’s management team is relatively new and its future success will depend on its ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel
5. 27The trucking industry is highly fragmented and regulated
6. 28Increased security requirements impose substantial costs on Fr8Tech and it could be the target of an attack or have a security breach, which could materially adversely affect Fr8Tech
7. 29Fr8Tech’s growth plans may not succeed as quickly as anticipated, if at all
8. 30Fr8Tech expects to expand its organization, and as a result, it may encounter difficulties in managing its growth, which could disrupt its operations

Risks Related to our Ordinary Shares

1. 31The trading price of our ordinary shares is likely to be volatile, which could result in substantial losses to our shareholders
2. 32The number of ordinary shares we have outstanding and reported on a number of financial web-sites does not incorporate the effect from conversion of preferred shares, warrants, options or convertible debt and can lead to confusion on the Company’s valuation and hindering its stock value
3. 33We are vulnerable to predatory short selling practices
4. 34Investors in Fr8Tech must rely on the judgment of management regarding the use of Company resources, the different market segments the Company may develop, and the Company’s ability to develop certain relationships
5. 35Future sales or registrations or perceived potential sales or registrations of our ordinary shares, or other equity or equity-linked securities in the public market could cause the price of our ordinary shares to decline
6. 36If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ordinary shares and trading volume could decline
7. 37The laws of the British Virgin Islands provide limited protection for minority shareholders, so minority shareholders may have limited or no recourse if they are dissatisfied with the conduct of our affairs
8. 38British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of one avenue to protect their interests
9. 39The requirements of being a public company may strain our resources and distract our management
10. 40There could be adverse United States federal income tax consequences to United States investors if we were or were to become a passive foreign investment company (“PFIC”)
11. 41As part of the issuance of shares in the Merger, we announced in a Form 6-K filed with the SEC that we had pro forma projections showing capital for the Company in excess of $5,000,000 following the Merger
12. 42Nasdaq may apply additional and more stringent criteria for our continued listing
13. 43Material weaknesses in our internal control over financial reporting may cause us to fail to timely and accurately report our financial results or result in a material misstatement of our consolidated financial statements