Business context and reporting period
Filing: Annual Form 20-F for the fiscal year ended December 31, 2021, filed by Hudson Capital Inc. (then trading as HUSN). The filing is not a quarterly report. Hudson’s 2021 audited results principally reflect its legacy financial-advisory operations in China, not Freight Technologies’ logistics business.
The merger with Freight App, Inc. (Fr8App) closed on February 14, 2022, after the reporting period. Hudson subsequently sold its Hong Kong financial-services subsidiary on March 30, 2022 and describes its continuing business as a North American freight-technology platform. Accordingly, the historical 2021 figures below should not be read as Fr8App’s standalone 2021 results or as combined-company results.
Key financial metrics
Amounts below are U.S. dollars. Unless indicated otherwise, financial statement figures are reported in dollars; the filing’s selected-data tables present amounts in thousands.
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | $0 | $618 | Fell to zero; legacy operations had minimal activity. |
| Gross profit / margin | $0 / not meaningful | $618 / 100% | No material cost of revenue reported. |
| Operating expenses | $2.495 million | $4.134 million | Down 39.6%, primarily from downsizing. |
| Operating loss | $2.495 million | $4.133 million | Loss narrowed as expenses fell, despite no revenue. |
| Net loss | $2.146 million | $9.075 million | Improved largely because FY2020 included substantial impairment charges. |
| Basic and diluted loss per share | $0.33 | $1.42 | Share figures reflect the 2020 reverse split. |
| Cash and cash equivalents at year-end | $221,312 | $3.274 million | Cash-flow statement and balance sheet show $221,312 for 2021. |
| Total assets / liabilities / equity | $2.765 million / $122,352 / $2.643 million | $3.583 million / $2.952 million / $631,145 | Equity increased following 2021 share and warrant financing. |
FY2021 operating cash outflow was $4.855 million, investing cash outflow was $2.355 million, and financing cash inflow was $3.600 million. Cash declined by $3.053 million before the reported exchange-rate effect. The filing reports no off-balance-sheet arrangements and no operating lease commitment at year-end.
Net loans to third parties were $2.450 million at December 31, 2021, versus zero net in 2020. Gross direct and entrusted loans totaled about $51.432 million and were offset by a $48.982 million impairment allowance. Several disclosed legacy loans were overdue and fully impaired; the remaining net balance included a $2.450 million loan to Fr8App, which became a related-party loan after the merger.
Material changes versus the prior comparable period
- Revenue declined from $618 in 2020 to zero in 2021 as the legacy financial-advisory business contracted and the company pursued a strategic transition.
- Operating expenses fell by $1.639 million, while the net loss narrowed by $6.930 million. The comparison is affected by $5.346 million of impairment losses in 2020 and $349,023 of other income in 2021, principally attributed to writing off long-outstanding payables and liabilities.
- Operating cash use increased from $3.819 million to $4.855 million. Cash fell from $3.274 million to $221,312 despite $3.600 million of net financing proceeds.
- The company raised capital in 2021, including a $2.7 million securities purchase by ATW; some proceeds supported a loan to Fr8App. The Fr8App acquisition closed after year-end and materially changed the company’s business focus.
Outlook, commentary, risks and unusual items
- Liquidity and going concern: The audited notes state that recurring operating losses, negative operating cash flow, and limited cash raise substantial doubt about the company’s ability to continue as a going concern. Management said it may seek additional capital and improve operations; no quantified forecast or formal earnings guidance is provided.
- Fr8App strategy: Management describes plans to grow shipper and carrier adoption, expand in Mexican domestic and U.S.-Mexico cross-border freight, selectively serve U.S. and Canadian routes, invest in software, and automate operations. These are forward-looking plans, not reported 2021 combined-company performance. Fr8App’s largest customer represented 37% of its 2021 revenue, and two customers represented 35% and 15% of its year-end receivables, respectively, according to the filing.
- Business risks: The filing highlights early-stage operations, continued losses and possible need for capital, customer concentration, competition, driver and carrier capacity, fuel-price volatility, COVID-related supply-chain disruption, cross-border trade and regulatory changes, cybersecurity and data protection, and foreign-exchange exposure.
- Financing, listing and dilution: Hudson had received prior Nasdaq stockholders’ equity deficiency notices and said Nasdaq would continue monitoring compliance. The filing also discusses potential delisting risks tied to Nasdaq’s discretion and the Holding Foreign Companies Accountable Act, including the auditor’s Hong Kong location and PCAOB inspection concerns. Post-merger financings and warrants described in the filing could materially dilute shareholders.
- Contingencies and governance: Fr8App disclosed pending litigation with BG Strategic Advisors, including claims and counterclaims; the company said it believed the claims lacked merit. The filing notes a possible, described as unlikely, $475,943 claim relating to previously accrued PRC payroll. Management reported effective legacy-company disclosure controls and internal control over financial reporting at December 31, 2021; the auditor did not attest to internal-control effectiveness. Separately, the filing warns Fr8App may need to build out controls and reporting processes following the merger.
- Data inconsistency to note: A liquidity discussion states cash of $276,300 at December 31, 2021, but the audited balance sheet and cash-flow statement report $221,312. The audited statements are used in the metrics above; the filing text does not reconcile this difference.
Most important facts for investors to verify
- Obtain Fr8App’s standalone 2021 financial statements and current combined-company results; Hudson’s FY2021 revenue of zero does not measure the acquired freight business.
- Reconcile reported year-end cash, and assess subsequent cash balances, operating cash burn, financing needs and going-concern disclosures.
- Verify collectability, terms and related-party treatment of the $2.450 million Fr8App loan, as well as the status of overdue legacy loans and the impairment allowance.
- Review post-merger share count, preferred shares, warrants, conversion terms, registration rights and potential dilution; also confirm ongoing Nasdaq listing compliance.
- Check the status and potential cost of the BGSA litigation, the possible payroll claim, and the effectiveness of post-merger financial reporting controls and audit oversight.