Freight Technologies Exchanges Senior Convertible Notes for Series A4 Preferred Shares under the $20 Million Facility

Rhea-AI Summary

Freight Technologies (NASDAQ: FRGT) has announced an Amendment and Exchange Agreement with an accredited investor under their $20 million facility from April 29, 2025. The agreement involves exchanging senior convertible notes for Series A4 preferred shares. The investor is converting $1.5 million of previously issued senior convertible notes into 387,305 New Preferred Shares. These preferred shares can be converted into ordinary shares, with a restriction that the total conversion cannot exceed 19.9% of outstanding ordinary shares without stockholder approval per Nasdaq rules. The net proceeds from the $20 million facility are designated for purchasing OFFICIAL TRUMP coins.

Positive

• Conversion of debt to preferred shares potentially improves balance sheet structure
• Maintains compliance with Nasdaq regulations by limiting share conversion to 19.9%

Negative

• Potential future dilution for shareholders when preferred shares are converted to ordinary shares
• Use of proceeds for purchasing OFFICIAL TRUMP coins may raise concerns about capital allocation
• Complex financial restructuring suggests potential financial challenges

Insights

Financial Restructuring Specialist

Freight Technologies is restructuring debt by converting $1.5M of notes to preferred shares under a $20M facility with unusual cryptocurrency allocation.

Freight Technologies has entered into an Amendment and Exchange Agreement with an accredited investor to exchange previously issued senior convertible notes for Series A4 preferred shares. This restructuring action represents a significant modification to the company's capital structure.

The most noteworthy aspect of this transaction is that the investor is converting $1.5 million of senior convertible notes into 387,305 New Preferred Shares. These preferred shares are convertible into ordinary shares of the company, though with limitations—the conversion cannot exceed 19.9% of outstanding ordinary shares without stockholder approval per Nasdaq regulations.

What raises serious questions is the stated purpose of the $20 million facility. According to the release, net proceeds are designated for purchasing "OFFICIAL TRUMP coins"—an unusual allocation of capital that diverges dramatically from typical logistics technology investments. This suggests either a radical shift in business strategy or potentially problematic reporting in the press release itself.

The conversion mechanism includes Nasdaq-compliant safeguards against excessive dilution, requiring shareholder approval for conversions exceeding 19.9% of outstanding shares. This structure provides some protection for existing shareholders while allowing the company to reduce its debt obligations.

This financial restructuring appears to be transforming debt obligations into equity instruments, which could either strengthen the balance sheet by reducing debt or signal cash flow concerns requiring debt restructuring. Without additional context regarding the company's overall debt profile and operational performance, it's difficult to determine whether this represents financial strengthening or distress management.

Notes now convertible into series A4 preferred shares | $1.5 million of notes converted

HOUSTON, May 27, 2025 (GLOBE NEWSWIRE) -- Freight Technologies, Inc. (Nasdaq: FRGT; “Fr8Tech” or the “Company”), a logistics management innovation company, offering a diverse portfolio of technology-driven solutions, today announced it has entered into an Amendment and Exchange Agreement (the “Exchange Agreement”) with one of its accredited investors, under the Securities Purchase Agreement, dated April 29, 2025, (the “Facility”). Net proceeds from the $20 million Facility are designated for the purchase of OFFICIAL TRUMP coins. Under the terms of the Exchange Agreement, the investor will exchange certain previously issued senior convertible notes for Series A4 preferred shares (the “New Preferred Shares”) of the Company.

Concurrently, the accredited investor is converting $1.5 million of previously issued senior convertible notes into 387,305 New Preferred Shares. The New Preferred Shares are convertible, in whole or in part, into ordinary shares of the Company with no par value per share (the “Ordinary Shares”) in accordance with the terms of the Amended and Restated Memorandum and Articles of Association. The Company is required to reserve a sufficient number of Ordinary Shares to permit the conversion of the New Preferred Shares.

The Exchange Agreement provides that the aggregate number of Ordinary Shares issued upon conversion of New Preferred Shares shall not exceed 19.9% of the outstanding Ordinary Shares as of the date of the Exchange Agreement, unless and until stockholder approval is obtained in accordance with the rules and regulations of the Nasdaq Capital Market.

The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the Company’s current report on Form 8-K dated May 27, 2025, announcing the execution of the Agreement.

About Freight Technologies Inc. 

Freight Technologies (Nasdaq: FRGT) (“Fr8Tech") is a technology company offering a diverse portfolio of proprietary platform solutions powered by AI and machine learning to optimize and automate the supply chain process. Focused on addressing the distinct challenges within the supply chain ecosystem, the Company’s portfolio of solutions includes the Fr8App platform for seamless Over-the-Road (OTR) B2B cross-border shipping across the USMCA region; Fr8Now, a specialized service for less-than-truckload (LTL) shipping; Fr8Fleet, a dedicated capacity service for enterprise clients in Mexico; Waavely, a digital platform for efficient ocean freight booking and management of container shipments between North America and ports worldwide and Fleet Rocket a nimble, scalable and cost-effective Transportation Management System (TMS) for brokers, shippers, and other logistics operator Together, each product is interconnected within a unified platform to connect carriers and shippers and significantly improve matching and operation efficiency via innovative technologies such as live pricing and real-time tracking, digital freight marketplace, brokerage support, transportation management, fleet management, and committed capacity solutions. The company is headquartered in Houston, Texas. For more information, please visit fr8technologies.com.

Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Fr8Tech’s and Fr8App Inc.’s actual results may differ from their expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue” and similar expressions (or the negative versions of such words or expressions) are intended to identify such forward-looking statements.

These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from those discussed in the forward-looking statements. Most of these factors are outside Fr8Tech’s and Fr8App Inc.’s control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) the inability to obtain or maintain the listing of Fr8Tech’s ordinary shares on Nasdaq; (2) changes in applicable laws or regulations; (3) the possibility that Fr8Tech or Fr8App Inc. may be adversely affected by other economic, business and/or competitive factors; (4) risks relating to the uncertainty of the projected financial information with respect to Fr8App Inc.; (5) risks related to the organic and inorganic growth of Fr8App Inc.’s business and the timing of expected business milestones; and (6) other risks and uncertainties identified, including those under “Risk Factors,” to be filed in Fr8Tech other filings with the Securities Exchange Commission.

Fr8Tech cautions that the foregoing list of factors is not exclusive. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Fr8Tech and Fr8App Inc. caution readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Fr8Tech and Fr8App Inc. do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in their expectations or any change in events, conditions or circumstances on which any such statement is based.

Fr8Tech Contact:
Jason Finkelstein
IGNITION Investor Relations
investors@fr8technologies.com

FAQ

What is the purpose of FRGT's Amendment and Exchange Agreement announced on May 27, 2025?

The agreement allows an accredited investor to exchange senior convertible notes for Series A4 preferred shares, with $1.5 million being converted into 387,305 New Preferred Shares.

How much of FRGT's ordinary shares can be issued through preferred share conversion?

The conversion is limited to 19.9% of outstanding ordinary shares without stockholder approval, in compliance with Nasdaq Capital Market rules.

What is the size of FRGT's financing facility announced on April 29, 2025?

The financing facility is $20 million, with net proceeds designated for purchasing OFFICIAL TRUMP coins.

How many new preferred shares will be issued in FRGT's note conversion?

The investor is converting $1.5 million of senior convertible notes into 387,305 New Preferred Shares.

What are the conversion rights of FRGT's Series A4 preferred shares?

The Series A4 preferred shares can be converted into ordinary shares, in whole or in part, according to the terms of the Amended and Restated Memorandum and Articles of Association.