Freightos Ltd 6-K, filed Sep 19, 2023
Freightos Ltd (CRGO)
About this 6-K
Freightos Ltd filed this 6-K on September 19, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of September 2023
Commission File Number: 001-41604
(Translation of registrant’s name into English)
Technology Park Building 2
1 Derech Agudat Sport HaPo’el
Jerusalem, Israel 9695102
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
☒ Form 20-F | | ☐ Form 40-F |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
FREIGHTOS LIMITED
FORM 6-K
This Report of Foreign Private Issuer on Form 6-K consists of Freightos Limited’s (the “Company”): (i) Interim Unaudited Consolidated Financial Statements as of June 30, 2023, which are attached hereto as Exhibit 99.1; and (ii) Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2023, which is attached hereto as Exhibit 99.2.
Exhibit
Exhibit No. |
| Description |
99.1 | | Interim Unaudited Consolidated Financial Statements as of June 30, 2023. |
99.2 | | |
101.INS | | Inline XBRL Instance Document |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
104 | | Cover Page Interactive Data File formatted as Inline XBRL and contained in Exhibit 101 |
Incorporation by Reference
The information contained in Exhibits 99.1 and 99.2 hereto are hereby incorporated by reference into the Company’s registration statement on Form S-8 (File No. 333-270303), to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FREIGHTOS LIMITED | |
Date: September 19, 2023 |
| |
| /s/ Michael Oberlander | |
| Name: | Michael Oberlander |
| Title: | General Counsel |
Exhibit 99.1
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2023
IN U.S. DOLLARS
INDEX
| Page |
2 | |
Interim Consolidated Statements of Profit or Loss and Other Comprehensive Loss | 3 |
4 | |
5 - 6 | |
7 - 20 |
- - - - - - - - - - - - -
1
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. dollars in thousands
| | June 30, | | December 31, | ||
| | 2023 | | 2022 | ||
|
| (unaudited) |
| (audited) | ||
ASSETS | | | | | | |
CURRENT ASSETS: | | | | | | |
Cash and cash equivalents | | $ | | | $ | |
User funds | | | | | | |
Trade receivables, net | | | | | | |
Short-term bank deposit | | | | | | — |
Short-term investments | | | | | | — |
Other receivables and prepaid expenses | | | | | | |
| | | | | | |
NON-CURRENT ASSETS: | | | | | | |
Property and equipment, net | | | | | | |
Right-of-use assets, net | | | | | | |
Intangible assets, net | | | | | | |
Goodwill | | | | | | |
Deferred taxes | | | | | | |
Other long-term assets | | | | | | |
| | | | | | |
Total assets | | $ | | | $ | |
LIABILITIES AND EQUITY | | | | | | |
CURRENT LIABILITIES: | | | | | | |
Short-term bank loan and credit | | $ | — | | $ | |
Trade payables | | | | | | |
User accounts | | | | | | |
Current maturity of lease liabilities | | | | | | |
Accrued expenses and other payables | | | | | | |
| | | | | | |
LONG TERM LIABILITIES: | | | | | | |
Lease liabilities | | | | | | |
Employee benefit liabilities, net | | | | | | |
Warrants liability | | | | | | — |
Other long-term liabilities | | | | | | |
| | | | | | |
EQUITY: (Note 5) | | | | | | |
Share capital | | | | | ||
Share premium | | | | | | |
Reserve from remeasurement of defined benefit plans | | | | | | |
Accumulated deficit | | | ( | | | ( |
Total equity | | | | | | |
Total liabilities and equity | | $ | | | $ | |
(*) | Represents an amount lower than $1 |
The accompanying notes are an integral part of the interim consolidated financial statements.
2
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE LOSS
U.S. dollars in thousands, except share and per share data
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
|
| 2023 |
| 2022 | ||
| | (unaudited) | | (unaudited) | ||
Revenue | | $ | | | $ | |
Cost of revenue |
| | | | | |
Gross profit |
| | | | | |
Operating expenses: | | | | | | |
Research and development |
| | | | | |
Selling and marketing |
| | | | | |
General and administrative |
| | | | | |
Transaction-related costs (Note 1d) |
| | | | | |
Share listing expense (Note 1d) | | | | | | — |
Total operating expenses |
| | | | | |
Operating loss |
| | ( | | | ( |
Change in fair value of warrants | | | | | | — |
Finance income |
| | | | | |
Finance expenses |
| | ( | | | ( |
Financing income (expenses), net |
| | | | | ( |
Loss before income taxes |
| | ( | | | ( |
Income taxes |
| | | | | |
Loss | | $ | ( | | $ | ( |
Other comprehensive income (loss) (net of tax effect): | | | | | | |
Remeasurement gain from defined benefit plans |
| | — | | | |
Total components that will not be reclassified subsequently to profit or loss |
| | — | | | |
Total comprehensive loss |
| $ | ( | | $ | ( |
Basic and diluted loss per Ordinary share (Note 9) | | $ | ( | | $ | ( |
Weighted average number of shares outstanding used to compute basic and diluted loss per share |
| | | | | |
The accompanying notes are an integral part of the interim consolidated financial statements.
3
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
U.S. dollars in thousands
| | | | | | | | | | | | | | | |
|
| | |
| | |
| Reserve from |
| | |
| | | |
| | | | | | | | re-measurement | | | | | |
| |
| | Share | | Share | | of defined | | Accumulated | | |
| ||||
| | capital | | premium | | benefit plan | | deficit | | Total | |||||
Balance as of December 31, 2022 (audited) | | $ | | $ | | | $ | | | $ | ( | | $ | | |
Total comprehensive loss | | | — | | | — | | | — | | | ( | | | ( |
Issuance of Ordinary shares | | | | | | | | — | | | — | | | | |
Issuance of Ordinary shares, net in connection with the closing of the BCA (see Note 1d) | | | | | | | | — | | | — | | | | |
Exercise of options | | | | | | | | — | | | — | | | | |
Share-based compensation | | | — | | | | | | — | | | — | | | |
Share listing expense | | | — | | | | | | — | | | — | | | |
Balance as of June 30, 2023 (unaudited) | | $ | | $ | | | $ | | | $ | ( | | $ | | |
| | | | | | | | | | | | | | | |
|
| | |
| | |
| Reserve from |
| | |
| | | |
| | | | | | | | re-measurement | | | | | |
| |
| | Share | | Share | | of defined | | Accumulated | | |
| ||||
| | capital | | premium | | benefit plan | | deficit | | Total | |||||
Balance as of December 31, 2021 (audited) | | $ | | $ | | | $ | ( | | $ | ( | | $ | | |
Loss | | | — | | | — | | | — | | | ( | | | ( |
Total other comprehensive income | | | — | | | — | | | | | | — | | | |
Total comprehensive income (loss) | | | — | | | — | | | | | | ( | | | ( |
Issuance of Ordinary shares | | | | | | | | — | | | — | | | | |
Exercise of options | | | | | | | | — | | | — | | | | |
Share-based compensation | | | — | | | | | | — | | | — | | | |
Balance as of June 30, 2022 (unaudited) | | $ | | $ | | | $ | | | $ | ( | | $ | | |
(*)Represents an amount lower than $1.
The accompanying notes are an integral part of the interim consolidated financial statements.
4
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
| | | | | | |
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2023 | | 2022 | ||
|
| (unaudited) |
| (unaudited) | ||
Cash flows from operating activities: | | | | | | |
Loss | | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | |
Adjustments to profit or loss items: | | | | | | |
Depreciation and amortization | | | | | | |
Share listing expense | | | | | | — |
Change in fair value of warrants | | | ( | | | — |
Changes in the fair value of contingent consideration | | | ( | | | ( |
Share-based compensation | | | | | | |
Finance expenses (income), net | | | ( | | | |
Taxes on income | | | | | | |
| | | | | | |
Changes in asset and liability items: | | | | | | |
Decrease (increase) in user funds | | | ( | | | |
Increase (decrease) in user accounts | | | | | | ( |
Increase in other receivables and prepaid expenses | | | ( | | | ( |
Increase in trade receivables | | | ( | | | ( |
Increase in trade payables | | | | | | |
Increase (decrease) in accrued severance pay, net | | | ( | | | |
Increase (decrease) in accrued expenses and other payables | | | ( | | | |
| | | ( | | | |
Cash paid and received during the period for: | | | | | | |
Interest received (paid), net | | | | | | ( |
Taxes paid | | | ( | | | ( |
| | | | | | ( |
Net cash used in operating activities | | | ( | | | ( |
Cash flows from investing activities: | | | | | | |
Purchase of property and equipment | | | ( | | | ( |
Proceeds from sale of property and equipment | | | | | | — |
Acquisition of subsidiaries, net of cash acquired (a) | | | — | | | ( |
Payment of payables for previous acquisition of a subsidiary | | | ( | | | ( |
Increase in other long-term assets | | | ( | | | ( |
Purchase of short-term investments, net | | | ( | | | — |
Investment in short-term bank deposit | | | ( | | | — |
Net cash used in investing activities | | $ | ( | | $ | ( |
The accompanying notes are an integral part of the interim consolidated financial statements.
5
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
U.S. dollars in thousands
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2023 | | 2022 | ||
|
| (unaudited) | | (unaudited) | ||
Cash flows from financing activities: | | | | | | |
Proceeds from the issuance of share capital and warrants net of transaction costs | | $ | | | $ | — |
Repayment of lease liabilities | | | ( | | | ( |
Repayment of short-term bank loan and credit | | | ( | | | — |
Exercise of options | | | | | | |
Net cash provided by (used in) financing activities | | | | | | ( |
Exchange differences on balances of cash and cash equivalents | | | ( | | | ( |
Increase (decrease) in cash and cash equivalents | | | | |
| ( |
Cash and cash equivalents at the beginning of the period | | | | |
| |
Cash and cash equivalents at the end of the period | | $ | | | $ | |
(a) Acquisition of an initially consolidated subsidiary: | | | | |
|
|
Working capital (excluding cash and cash equivalents) | | $ | — | | $ | ( |
Other receivables | | | — | | | |
Property and equipment | |
| — | |
| |
Intangible assets | |
| — | |
| |
Goodwill | |
| — | |
| |
Shares issued | |
| — | |
| ( |
Contingent consideration | |
| — | |
| ( |
Acquisition of subsidiaries, net of cash acquired | | $ | — | | $ | |
(b) Significant non-cash transactions: | |
|
| |
|
|
Right-of-use asset recognized with corresponding lease liability | | $ | | | $ | |
Issuance of shares for previous acquisition of a subsidiary | | $ | | | $ | — |
The accompanying notes are an integral part of the interim consolidated financial statements.
6
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 1: — GENERAL
| a. | Freightos Limited (the “Company” or “Freightos Cayman”, and together with its subsidiaries — “Freightos” or the “Group”) was incorporated on April 12, 2022 under the laws of the Cayman Islands. The Company is an exempted company limited by shares. |
On May 27, 2022, Freightos Hong Kong Limited (formerly: Freightos Limited) (“Freightos-HK”), a Hong-Kong entity, completed a series of share swap transactions with its shareholders by which the shareholders of Freightos-HK exchanged their shares in Freightos-HK for an equivalent number and class of shares of the newly-created Freightos Cayman (the “Group Restructuring”). As of that date, Freightos-HK became a wholly-owned subsidiary of the Company. On September 30, 2022 Freightos-HK distributed the shares of several of its subsidiaries to the Company. Prior to that, in August 2022, as part of the distribution of shares of its subsidiaries, Freightos-HK increased its retained earnings by reducing its share premium for the same amount.
Freightos-HK filed for, and obtained, a ruling from the Israel Tax Authority to confirm there was no current tax event for its Israeli shareholders arising out of these restructuring transactions. The ruling provides the Company, Freightos-HK and their subsidiaries certain tax benefits regarding the exchange of shares and distribution of the shares of the Group’s subsidiaries, and includes a condition according to which the Company will register for tax purposes in Israel.
The restructuring transaction was accounted for as a transaction between entities under common control under the pooling of interests method. Accordingly, the transaction was retrospectively applied to the financial statements of prior periods, such that the financial information of Freightos-HK is presented in these financial statements, except share capital that was retrospectively adjusted based on the equivalent number and class of shares of the Company. Since the number and class of the Company’s shares are similar to the number and class of Freightos-HK’s shares, per share data in these financial statements did not retrospectively change. The share capital of Freightos-HK does not have par value, and was retrospectively adjusted to reflect the Company’s share capital which has par value of $
| b. | Freightos operates a leading, vendor-neutral booking and payment platform for international freight. Freightos’ Platform supports supply chain efficiency and agility by enabling real-time procurement of ocean and air shipping across more than importers/exporters, thousands of forwarders, and dozens of airlines and ocean carriers. |
Freightos operates its business through
| c. | The Group has the following subsidiaries as of June 30, 2023: |
Freightos-HK, a wholly-owned subsidiary of the Company following the Group Restructuring (see Note 1a), was incorporated in Hong-Kong on January 10, 2012. Through September 30, 2022 Freightos-HK still served as the holding company of the rest of the group entities and on that date distributed the shares of several of its subsidiaries to the Company. Freightos-HK is principally engaged in the provision of business interface and fronting services to its Israeli affiliate.
Freightos Ltd, a wholly-owned subsidiary of Freightos-HK through September 30, 2022, and a wholly-owned subsidiary of the Company since then, was incorporated in Israel on August 8, 2012 and started its operation on that date (the “Israeli subsidiary”). Currently, the Israeli subsidiary owns the technology and intellectual property of the Group and Freightos-HK provides business interface and fronting services to the Israeli subsidiary.
Freightos Software Development and Data Services Ltd., a wholly-owned subsidiary of Freightos-HK through September 30, 2022, and a wholly-owned subsidiary of the Company since then (whose shares are partially held in trust for the Company), was registered on January 18, 2012 in Ramallah, within the Palestinian Authority (the “Palestinian subsidiary”). The Palestinian subsidiary’s main activity is the development of certain software and know-how related to the Group’s offering of software and services, and customer and technical support.
7
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 1: — GENERAL (continued)
Freightos Inc., a wholly-owned subsidiary of Freightos-HK through September 30, 2022, and a wholly-owned subsidiary of the Company since then, was incorporated in Delaware in the United States on May 28, 2015 (the “US subsidiary”). The US subsidiary is engaged in rendering billing services and holds the membership interests of 9T Technologies, LLC and the shares of Clearit Customs Services, Inc. (see below).
Web Cargo, S.L.U., a wholly-owned Spanish subsidiary of Freightos-HK through September 30, 2022, and a wholly-owned subsidiary of the Company since then, was acquired in August 2016 (“WebCargo”). WebCargo is a software company that seeks to provide a competitive edge to air freight forwarders by optimizing rate management tasks. Currently, WebCargo operates as a low-risk distributor for certain of the Group’s products and services, as well as a contracted research and development service provider for the Israeli subsidiary.
Freightos Information Technology (Shanghai) Co., Ltd., a wholly-owned subsidiary of Freightos-HK, was established on January 17, 2018, in the People’s Republic of China (the “China subsidiary”). The China subsidiary engages in providing certain customer and technical support services to the Group.
Freightos India Private Limited, a wholly-owned subsidiary of Freightos-HK, was established on March 13, 2019, in India, to act as a low-risk distributor of certain of the Group’s products and services in India.
9T Technologies LLC. (“7LFreight”), a wholly-owned subsidiary of the US subsidiary, incorporated in the US, was acquired through a business combination closed on December 30, 2021. 7LFreight is a software company that seeks to provide a competitive edge to air freight forwarders by optimizing rate management tasks.
Clearit Customs Brokers Inc. (formerly: 13096351 Canada Inc.) (“Clearit-CA”), a wholly-owned subsidiary of Freightos-HK through September 30, 2022, and a wholly-owned subsidiary of the Company since then, was established in June 2021 in Canada to acquire certain assets as part of a business combination completed on February 16, 2022 . Clearit-CA is engaged in the business of providing online customs clearance and brokerage services in Canada.
Clearit Customs Services, Inc. (“Clearit-US”), a wholly-owned subsidiary of the US subsidiary, incorporated in the US, was acquired through a business combination completed on February 16, 2022. Clearit-US is engaged in the business of providing online customs clearance and brokerage services in the US.
Freightos Merger Sub II, wholly owned subsidiary of the Company incorporated in the Cayman Islands in 2022 for the purpose of consummating the BCA entered into by the Company, Freightos Merger Sub I and Freightos Merger Sub II (see Note 1d), has no operations and is in the process of liquidation.
| d. | Business Combination Agreement |
On May 31, 2022, the Company entered into a business combination agreement (the “BCA”) with Gesher I Acquisition Corp., a Cayman Islands exempted company limited by shares (“Gesher”), Freightos Merger Sub I, a Cayman Islands exempted company limited by shares and a direct, wholly-owned subsidiary of the Company (“Merger Sub I”), and Freightos Merger Sub II, a Cayman Islands exempted company limited by shares and a direct, wholly-owned subsidiary of Freightos (“Merger Sub II”). The BCA was closed on January 25, 2023 (the “Closing Date”).
Pursuant to the BCA, on the Closing Date Merger Sub I merged with and into Gesher, with Gesher being the surviving entity. Then, Gesher merged with and into Merger Sub II with Merger Sub II surviving as a wholly-owned subsidiary of Freightos (collectively, the “Transactions”). Upon consummation of the Transactions, Freightos became a publicly traded company listed on the Nasdaq Capital Market under the symbols “CRGO” and “CRGOW” and the former equity holders of Gesher became equity holders of Freightos.
8
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 1: — GENERAL (continued)
On the Closing Date, in connection with the closing of the Transactions Freightos also consummated private placements contemplated by a forward purchase agreement and a backstop agreement, each assigned from Gesher to the Company. Pursuant to these agreements a Forward Purchaser, as defined in the forward purchase agreement, purchased
On the Closing Date, in connection with the closing of the Transactions the Company and its shareholders recapitalized the Company’s equity securities whereby each share of the Company’s Preferred shares was converted into
The Transactions were accounted for as a reverse recapitalization, in accordance with the relevant International Financial Reporting Standards (“IFRS”) and the Group was deemed to be the accounting acquirer. Gesher did not meet the definition of a business in accordance with IFRS 3 - “Business Combinations”, and the Transactions were instead accounted for within the scope of IFRS 2 - “Share based payment” (“IFRS 2”), as a share-based payment transaction in exchange for a public listing service. In accordance with IFRS 2 the Company recorded a one-time share-based Share listing expense of $
|
| |
| Number of |
| | Amount | | Shares |
| | | | |
Shares issued to Gesher shareholders |
|
|
| |
Opening price of the Company’s share on Nasdaq as of January 25, 2023 ($) |
| |
|
|
(A) Fair value of the Company’s shares issued to Gesher shareholders |
| |
|
|
Warrants issued to Gesher shareholders |
|
|
| |
Opening price of the Company’s warrants on Nasdaq as of January 25, 2023 ($) |
| |
|
|
(B) Fair value of the Company’s warrants issued to Gesher shareholders |
| |
|
|
| | | | |
Gesher’s cash in trust |
| |
|
|
Gesher’s liabilities |
| ( |
|
|
| | | | |
(C) Net assets of Gesher |
| |
|
|
| | | | |
IFRS 2 Listing expenses (A+B-C) |
| |
|
|
| e. | These interim consolidated financial statements have been prepared on a going concern basis, which contemplates that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. As of June 30, 2023, the Company had an accumulated deficit of $ |
9
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: — SIGNIFICANT ACCOUNTING POLICIES
a. | Basis of presentation of the financial statements: |
The interim consolidated financial statements have been prepared using accounting policies consistent with IFRS and in accordance with International Accounting Standard (“IAS”) 34 - “Interim Financial Reporting”.
The unaudited Company’s interim consolidated financial statements as of June 30, 2023 and for the six months then ended (“interim financial statements”) should be read in conjunction with the audited consolidated financial statements of the Company as of December 31, 2022 and for the year then ended which have been prepared in accordance with IFRS.
b. | Significant accounting policies: |
The significant accounting policies, presentation and methods of computation adopted in the preparation of these interim financial statements are consistent with those followed in the preparation of the Company’s consolidated audited financial statements for the year ended December 31, 2022, except as set forth below.
c. | Warrants |
The Company issued public warrants (the “Warrants”) as part of the closing of the BCA. Each Warrant entitles the holder to purchase
A Warrant may be exercised during the period commencing on the date that is thirty (
Not less than all of the outstanding Warrants may be redeemed, at the option of the Company, at any time during the Exercise Period at the price of $
According to IAS 32, derivatives which will be settled only by the issuer exchanging fixed amounts of cash to fixed numbers of the Company's Ordinary shares will be classified as equity. Otherwise, the instrument should be classified as a financial liability. Therefore, the Group has classified all Warrants as a financial liability. The Warrant instrument is initially recognized at fair value, and subsequently measured at fair value changes in fair value are recognized in profit or loss.
d. | Initial application of new financial reporting and accounting standards and amendments to existing financial reporting and accounting standards: |
10
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: — SIGNIFICANT ACCOUNTING POLICIES (continued)
1). | Amendment to IAS 1, “Presentation of Financial Statements”: |
In February 2021, the International Accounting Standards Board (“IASB”) issued an amendment to IAS 1 (the “IAS 1 Amendment”). Under the IAS 1 Amendment, companies are required to provide disclosure to their substantive accounting policies beyond the current requirement to provide disclosure for their substantial accounting policies. One of the main reasons for this amendment is that the term "significant" does not have a definition in IFRS, while the term "substantial" has a definition in various standards, particularly IAS 1.
The IAS 1 Amendment is effective for annual periods beginning on or after January 1, 2023. The application of the IAS 1 Amendment did not have an impact on the Company’s interim consolidated financial statements, but the IAS 1 Amendment is expected to affect the accounting policy disclosures in the Company's consolidated annual financial statements.
2). | Amendment to IAS 8, “Accounting Policies, Changes to Accounting Estimates and Errors”: |
In February 2021, the IASB issued an amendment to IAS 8 (the “IAS 8 Amendment”), in which it introduces a new definition of accounting estimates. Accounting estimates are defined as monetary amounts in financial statements that are subject to measurement uncertainty. The IAS 8 Amendment clarifies the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors.
The IAS 8 Amendment is to be applied prospectively for annual reporting periods beginning on or after January 1, 2023 and is applicable to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. IAS 8 Amendment did not have a material impact on the Company’s interim consolidated financial statements.
NOTE 3: — SIGNIFICANT EVENTS IN THE REPORTING PERIOD
In February 2023, the Israeli subsidiary terminated a loan facility established with an Israeli bank in April 2022. The Israeli subsidiary did not make any borrowings under this loan facility. The pledges for the benefit of the bank in respect of this facility were removed.
NOTE 4: — FAIR VALUE MEASUREMENT
The carrying amounts of cash and cash equivalents, user funds, trade receivables, short-term bank deposits and investments, other receivables, other long-term assets, trade payables, user accounts and other payables approximate their fair values due to the short-term maturities of such instruments.
The fair value of the contingent payments recorded as part of the acquisition of the Clearit business closed in February 2022, was estimated using a valuation method based mainly on certain management estimations of current and forecasted financial results of operations of the acquired business.
The fair value of contingent payments recorded as part of the acquisition of 7LFreight closed in December 2021, was estimated using a valuation method based mainly on the current fair value and standard deviation of the Company’s Ordinary share, as well as on certain other management estimations of the probability of meeting certain performance indicators.
The fair value of the Warrants liability was valued using the market price of the instrument, which is listed on the Nasdaq Capital Market under the symbol CRGOW.
11
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 4: — FAIR VALUE MEASUREMENT (continued)
The following table presents the fair value measurement hierarchy for the Group’s financial instruments assets and liabilities carried at fair value:
| | Fair value hierarchy (unaudited) | ||||||||||
As of June 30, 2023: |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets measured at fair value: |
| |
|
| |
|
| |
|
| |
|
Other current receivables - hedge instrument | | $ | | | $ | — | | $ | — | | $ | |
Liabilities measured at fair value: | |
|
| |
| | |
|
| |
|
|
Other current liabilities - contingent payments for business combinations | |
| — | |
| — | |
| ( | |
| ( |
Other current liabilities - hedge instruments | |
| ( | |
| — | |
| — | |
| ( |
Other long-term liabilities - contingent payments for business combinations | | | — | | | — | | | ( | | | ( |
Warrants liability | | $ | ( | | $ | — | | $ | — | | $ | ( |
| | Fair value hierarchy (audited) | ||||||||||
As of December 31, 2022: |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets measured at fair value: |
| |
|
| |
|
| |
|
| |
|
Other current receivables - hedge instrument | | $ | | | $ | — | | $ | — | | $ | |
Liabilities measured at fair value: | |
|
| |
|
| |
|
| |
|
|
Other current liabilities - contingent payments for business combinations | | | — | | | — | | | ( | | | ( |
Other current liabilities - hedge instruments | | | ( | | | — | | | — | | | ( |
Other long-term liabilities - contingent payments for business combinations | | $ | — | | $ | — | | $ | ( | | $ | ( |
There were no transfers from Level 1 to Level 2 during the reporting periods.
The changes in Level 3 in the period of six months ended June 30, 2023 were as follows:
| | | | | | | | | |
|
| Accrued |
| | |
| | | |
| | expenses and | | Other long- | | |
| ||
|
| other payables |
| term liabilities |
| Total | |||
| | | | | | | | | |
Fair value as of December 31, 2022 | | $ | | | $ | |
| $ | |
Change in fair value | |
| ( | |
| ( |
| | ( |
Payment | | | ( | | | — | | | ( |
Classification of current maturity | |
| | |
| ( |
| | — |
| | | | | | | | | |
| | $ | | | $ | |
| $ | |
12
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 5: — EQUITY
| a. | Composition of share capital: |
| |
| | |
| | | | Issued and |
| | Authorized | | outstanding |
| | June 30, 2023 | ||
Ordinary shares of $ |
| |
| |
Preferred shares of $ |
| |
| — |
| | | | Issued and |
|
| Authorized (*) |
| outstanding |
| | December 31, 2022 | ||
Ordinary shares of $ | | | | |
Series Seed Preferred shares of $ | | | | |
Series A1 Preferred shares of $ | | | | |
Series A2 Preferred shares of $ | | | | |
Series B Preferred shares of $ | | | | |
Series C Preferred shares of $ | | | | |
| | | | |
(*)In January 2023 the authorized Ordinary share capital was increased to
Authorized shares amounts were not adjusted retrospectively to reflect the effect of the Share Split (see Note 1d). All other Ordinary shares and Preferred shares amounts were adjusted retrospectively for all periods presented in these consolidated financial statements to reflect the Share Split.
|
| Number of shares |
Balance as of January 1, 2023 | | |
Issuance of Ordinary shares | | |
Issuance of Ordinary shares in connection with the closing of the BCA | | |
Exercise of employees’ options into Ordinary shares | | |
Balance as of June 30, 2023 | | |
13
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 5: — EQUITY (continued)
| c. | Issuance of Preferred and Ordinary shares: |
| 1. | In February 2022, as part of a business combination to acquire Clearit Freightos-HK issued |
| 2. | In December 2021, Freightos launched the Digital Air Cargo Council (“DACC”) with three founding airline group members. |
In December 2022, the Company issued to each of two of the airline groups an additional amount of
| 3. | In January 2023 the Company issued Ordinary shares and converted the Preferred shares to Ordinary shares as part of the Transactions - see Note 1d. |
| 4. | In March 2023 the Company issued |
| d. | Rights attached to shares: |
The holders of Ordinary shares are entitled to receive dividends only when, as and if declared by the Board of Directors and are entitled to
| e. | Capital management: |
Capital comprises share capital and reserves as stated in the statement of financial position. The Company’s objective when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for the shareholders.
NOTE 6: — SHARE-BASED PAYMENT
In May 2022 as part of the Group Restructuring, the Company established the Freightos 2022 Long-term Incentive Plan (the “2022 Plan”), which is intended to be a successor to the Company’s 2012 Global Incentive Option Scheme (the “2012 Plan”), such that no additional stock awards will be granted under the 2012 Plan. Any shares that otherwise remained available for future grants under the 2012 Plan ceased to be available under the 2012 Plan and will not be available for grants under the 2022 Plan. In addition, Freightos-HK assigned to the Company all rights, obligations and liabilities under the 2012 Plan and all options to purchase Freightos-HK Ordinary shares that were granted under the 2012 Plan, whether vested or unvested, have been converted into and became options to purchase an identical number of Ordinary shares of the Company under the 2022 Plan.
As of June 30, 2023, the Company’s Board of Directors approved an aggregated amount of
14
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 6: — SHARE-BASED PAYMENT (continued)
The fair value of share-based awards, granted in the periods of six months ended June 30, 2023 and 2022, was estimated using the Black & Scholes option-pricing model with the following assumptions:
| | For the period of | | ||
| | six months ended | | ||
| | June 30, | | ||
| | 2023 | | 2022 | |
|
| (unaudited) |
| (unaudited) |
|
Weighted average expected term (years) | | | | ||
Interest rate | | % | % | ||
Volatility | | % | % | ||
Dividend yield | | — | | — | |
The expected life of the share options is based on the midpoints between the available exercise dates (the end of the vesting periods) and the last available exercise date (the contracted expiry date), as adequate historical experience is still not available to provide a reasonable estimate.
The share-based compensation expense was recorded in the statement of profit or loss and other comprehensive loss as follows:
| | For the period of | |||||
| | six months ended | | ||||
| | June 30, | | ||||
| | 2023 | | 2022 | | ||
|
| (unaudited) |
| (unaudited) |
| ||
Cost of revenue | | $ | | | $ | | |
Research and development | | | | | | | |
Selling and marketing | | | | | | | |
General and administrative | | | | | | | |
| | $ | | | $ | | |
The changes in outstanding share options were as follows:
| | For the period of six months | ||||||
| | ended June 30, | ||||||
| | 2023 (unaudited) | | 2022 (unaudited) | ||||
| | | | Weighted | | | | Weighted |
| | Number | | average | | Number | | average |
|
| of options |
| exercise price |
| of options |
| exercise price |
| | | | $ | | | | $ |
Options at beginning of the period | | | | | | | | |
Granted | | | | | | | | |
Exercised | | ( | | | | ( | | |
Forfeited | | ( | | | | ( | | |
Options outstanding at end of the period | | | | | | | | |
Options exercisable at end of the period | | | | | | | | |
15
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 6: — SHARE-BASED PAYMENT (continued)
Based on the above inputs, the weighted average fair value of the options granted in the periods of six months ended June 30, 2023 and 2022, was determined at $
The weighted average remaining contractual life for the share options outstanding as of June 30, 2023 was
The range of exercise prices for share options outstanding as of June 30, 2023 was $
NOTE 7: — COMMITMENTS AND CONTINGENT LIABILITIES
As of June 30, 2023 the Company issued
Certain long-term investments in the amount of $
NOTE 8: — OPERATING SEGMENTS
| a. | General: |
The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated and assess their performance. Accordingly, for management purposes, the Group is organized into
| 1. | Solutions segment. Freightos provides software tools and data to help the freight industry participants automate their pricing, sales, and procurement processes. Revenue includes recurring subscriptions for SaaS or data and certain non-recurring revenue from professional services that enable a user to implement and use the SaaS solution. |
| 2. | Platform segment. Freightos provides digitized price quoting, booking and payments while considering actual capacity among global freight participants (the users). The transactional platforms enable freight forwarding companies to procure capacity from carriers, and enable importers and exporters to procure services from freight forwarders, or occasionally, directly from carriers. Revenue is transactional type fees generated from specific freight-service transactions booked between buyers and sellers on Freightos’ Platform. |
Each segment’s performance is determined based on operating loss reported in the financial statements. The results of a segment reported to the CODM include items attributed directly to a segment, as well as other items, which are indirectly attributed using reasonable assumptions and exclude share-based compensation charges as they are not considered in the internal operating plans and measurement of the segment’s financial performance.
16
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: — OPERATING SEGMENTS (continued)
|
| Solutions |
| Platform |
| Unallocated |
| Total | ||||
For the period of six months ended June 30, 2023 (unaudited) | | | | | | | | | | | | |
Subscriptions | | $ | | | $ | — | | $ | — | | $ | |
SaaS-related professional services | | | | | | — | | | — | | | |
Transactional Platforms fees | | | — | | | | | | — | | | |
Total revenue | | | | | | | | | — | | | |
Operating income (loss) | | $ | | | $ | ( | | $ | ( | | $ | ( |
For the period of six months ended June 30, 2022 (unaudited) |
| | |
| | |
| | |
| | |
Subscriptions |
| $ | | | $ | — | | $ | — | | $ | |
SaaS-related professional services |
|
| | |
| — | |
| — | |
| |
Transactional Platforms fees |
|
| — | |
| | |
| — | |
| |
Total revenue |
|
| | |
| | |
| — | |
| |
Operating income (loss) |
| $ | | | $ | ( | | $ | ( | | $ | ( |
Unallocated includes corporate expenses and share-based compensation.
For the periods of six months ended June 30, 2023 and 2022, no single Solutions customer or Platform user accounted for 10% or more of the Company’s consolidated income.
c.The Company’s geographic information on revenue is as follows:
|
| Solutions |
| Platform |
| Total | |||
For the period of six months ended June 30, 2023 (unaudited) |
| | |
| |
|
| |
|
Europe |
| $ | | | $ | — | | $ | |
Hong Kong |
|
| | |
| | |
| |
United States |
|
| | |
| | |
| |
Other |
|
| | |
| | |
| |
|
| $ | | | $ | | | $ | |
|
| Solutions |
| Platform |
| Total | |||
For the period of six months ended June 30, 2022 (unaudited) |
| | |
| | |
| | |
Europe |
| $ | | | $ | — | | $ | |
Hong Kong |
|
| | |
| | |
| |
United States |
|
| | |
| — | |
| |
Other |
|
| | |
| — | |
| |
|
| $ | | | $ | | | $ | |
17
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: — OPERATING SEGMENTS (continued)
The Company’s revenue from its Solutions segment is classified based on the location of the customers.
The Company’s revenue from its Platform segment is classified to its business in Hong Kong except for revenue earned by Clearit or 7LFreight which is classified based on the location of the billing entity. This classification is independent of where the user resides or where the user is physically located while using the Company’s services.
As of June 30, 2023, the carrying amounts of non-current assets (property and equipment, right-of-use assets, and intangible assets) are mainly in Canada due to the purchase of digital customs brokerage business assets and in the US, Hong Kong, Israel, and Spain. As of December 31, 2022, the carrying amounts of non-current assets (property and equipment, right-of-use assets, and intangible assets) are mainly in Canada and US due to acquisitions (see note 1) and also in Israel, Hong Kong and Spain.
NOTE 9: — LOSS PER ORDINARY SHARE
Details of the number of shares and loss used in the computation of basic and diluted loss per share:
| | Number of shares | ||
| | For the period of | ||
| | six months ended | ||
| | June 30, | ||
| | 2023 | | 2022 |
|
| (unaudited) | | (unaudited) |
Weighted number of Ordinary shares(*) |
| | | |
| | | | | | |
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2023 | | 2022 | ||
|
| (unaudited) |
| (unaudited) | ||
Loss | | $ | | | $ | |
Preferred shares dividend (see Note 5) | |
| | |
| |
For the computation of basic and diluted loss per share | | $ | | | $ | |
(*) | The computation of diluted loss per share did not take into account potential Ordinary shares (detailed below) due to their anti-dilutive effect: |
| a. |
| b. |
| c. |
| d. |
18
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 10: — RELATED PARTIES
| a. | For the six months ended June 30, 2023, related parties consisted of |
| b. | Related party transactions: |
The Company entered into a number of commercial agreements with a subsidiary of one of its investors in connection with a number of ocean cargo indexes. The investor’s subsidiary serves as a benchmark administrator for the indexes and the Company serves as the calculating agent of these indexes. In addition, the parties share the revenue from licensing certain data used in calculating the indexes. The total expense accrued by the Company during the six month periods ended June 30, 2023 and 2022 was $
Certain of the Company’s investors also conduct business on the Company’s transactional platforms through other of the investors’ respective group members. Fees charged for these users are no more favorable than terms generally available to third parties under the same or similar circumstances.
| c. | Benefits to directors: |
|
| For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2023 | | 2022 | ||
|
| (unaudited) |
| (unaudited) | ||
| | | | | | |
Compensation to directors not employed by the Company or on its behalf | | $ | | | $ | — |
Number of directors entitled to receive the above compensation by the Company | |
| | |
| — |
| d. | Compensation of key management personnel of the Group recognized as an expense during the reporting period: |
| | For the period of | ||||
| | six months ended | ||||
| | June 30, | ||||
| | 2023 | | 2022 | ||
|
| (unaudited) |
| (unaudited) | ||
Short-term employee benefits | | $ | | | $ | |
Share-based payments | |
| | |
| |
Post-employment benefits | |
| — | |
| |
| | $ | | | $ | |
Number of key officers | |
| | |
| |
19
FREIGHTOS LIMITED AND ITS SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 11: — EVENTS AFTER THE REPORTING DATE
| a. | In July 2023 the Company announced and implemented an operational efficiency and cost reduction restructuring plan. These cost-savings initiatives and efficiencies included reducing headcount by approximately |
| b. | During August 2023 the Company issued |
- - - - - - - - - - - - - -
20
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On May 27, 2022, Freightos HK completed a reorganization pursuant to which shareholders of Freightos HK exchanged shares in Freightos HK for shares in Freightos Limited, and Freightos HK became a subsidiary of Freightos Limited. Unless the context otherwise requires, all references in this section to the “Company,” “Freightos,” “we,” “us,” or “our” refer to the business which belonged to Freightos HK, including its subsidiaries, through May 27, 2022, and to Freightos Limited, including its subsidiaries, after May 27, 2022.
You should read the following discussion and analysis of our financial condition and results of operations together with our interim unaudited consolidated financial statements for the six months ended June 30, 2023, included as Exhibit 99.1 to this Report on Form 6-K (this “Report”) and our audited consolidated financial statements and the related notes for the year ended December 31, 2022 appearing in our Annual Report on Form 20-F for the year ended December 31, 2022 (our “Annual Report”) and “Item 5 – Operating and Financial Review and Prospects” of that Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs that involve risks and uncertainties. As a result of many factors, such as those set forth under the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections of our Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
Our mission is to expand trade among the people of the world by digitalizing the international shipping industry, reducing the friction that plagues global supply chains.
We operate a leading, vendor-neutral booking and payment platform for international freight. Our global freight booking and payments platforms, Freightos.com and WebCargo eBooking (collectively, the “Platform”) supports supply chain efficiency and agility by enabling real-time procurement of ocean and air shipping across more than ten thousand importers and exporters, thousands of freight forwarders, and dozens of airlines and ocean carriers. According to the United Nations Conference on Trade and Development, the value of goods traded internationally reached a record level of $24.9 trillion in 2022, representing nearly one quarter of the world’s gross domestic product. International trade is facilitated by the third-party logistics market, which, according to Astute Analytica, a research and data firm, was valued at $1.1 trillion in 2022 and is expected to reach $2.3 trillion by 2031, at a compounded annual growth rate of 8.7% between 2023 and 2031.
Despite its size and importance, global freight has not yet undergone a comprehensive digital transformation. Unlike passenger travel, hotels and retail, cross-border freight services remain largely offline, opaque and inefficient. Most international air and ocean shipments involve multiple intermediaries, often with as many as 30 actors and 100 people, communicating across time zones. These manual processes, replicated hundreds of thousands of times each day, typically result in delays, extra expenses, non-binding and inconsistent pricing, and uncertain transit times. Even on major trade lanes, such as Asia to the United States, our research shows that it is common for importers and exporters to wait several days for a spot price quote, and prices often vary by tens of percentage points. Actual prices and transit times are not guaranteed and are unpredictable, impairing supply chain planning and execution.
The consequences of this dysfunction reach international freight, supply chains and, ultimately, businesses and consumers everywhere. As a result, consumers pay more for goods, businesses experience reduced margins, and goods remain under or overstocked. The environment also suffers from this lack of efficiency; according to the International Air Transport Association (“IATA”), air cargo holds, for example, are typically about 50% unutilized, doubling greenhouse gas emissions per unit weight.
These challenges are exacerbated by ongoing and persistent supply chain problems, making global freight pricing more volatile than most stock and commodity markets. Without digitalization, supply chains are unable to respond to stressors in an agile and cost-effective manner. As a result, supply chains have struggled to adjust in an agile and cost-effective manner to stresses, such as wars, pandemics, weather problems, strikes, obstructions and other restrictions in key trade bottlenecks, such as the Suez Canal and Panama Canal, and trade wars.
We believe that the key metric for the size of our marketplace is the number of transactions on our Platform (“#Transactions”) and secondarily our gross bookings value (“GBV”), which represents the value of transactions consummated between the purchasers of logistics services, such as freight forwarders and importers/exporters (“Buyers”) and the sellers of logistics, services such as carriers and freight forwarders (“Sellers”) on our Platform, plus related fees charged to Buyers and Sellers, and pass-through payments such as duties. We also believe this metric to be a bellwether of marketplace liquidity and growth, correlated to the potential for Platform revenue. #Transactions on our Platform started growing rapidly in 2020 as carriers increasingly adopted digital cargo sales and bookings. GBV started growing rapidly too, however, GBV is directly influenced by industry price levels, which can fluctuate dramatically, which is why we believe #Transactions provides a more stable indicator of our Platform’s traction and liquidity.
We are focused on growing #Transactions and the resulting GBV. Alongside this growth, we are gradually increasing value to Platform users, which, in turn, allows us to increasingly monetize transactions and generate increased revenue. #Transactions in the first half of 2023 reached 468.6 thousand, up 77% from the first half of 2022, with 265.1 thousand on a pro forma basis. GBV in the first half of 2023 reached $323.5 million, up 15% from the first half of 2022 when GBV on a pro forma basis was $281.6 million.
The pro forma numbers include subsequent acquisitions. In particular, our 7LFreight business is primarily part of our Solutions segment (as defined below); but it also generates GBV from trucking bookings, which we started counting in our #Transactions and GBV key performance indicators (“KPIs”) in June 2022.
Our Business Model
Our Platform is a three-sided marketplace, digitally connecting freight carriers (primarily airlines, and also ocean liners and trucking companies), freight forwarders and importers/exporters. We also provide solutions including software as a service (“SaaS”) and industry data to help market participants automate and optimize their buying, pricing and selling processes (our “Solutions segment”). As more market participants use our Platform, we are able to drive increased efficiencies throughout the highly-fragmented international freight industry.
We derive most of our revenue from (1) transaction fees and service fees in our Platform segment and (1) subscriptions and professional service fees in our Solutions segment, which includes SaaS solutions as well as data offerings such as price indexes and other data feeds in our Freightos Terminal product, which is our market intelligence product designed to improve supply chain decision-making, planning, and pricing transparency. As of the date of this Report, the majority of our revenue is generated from our Solutions segment, but we anticipate that, driven by marketplace growth dynamics and increased monetization across a growing suite of features, our Platform segment will continue to grow more quickly than our Solutions segment and become our main source of revenue.
Platform Growth Dynamic
Currently, our primary business objective is scaling booking Transactions on our Platform. As our Platform grows and matures, expanding across more regions, carriers and modes, and as we increase value to users, we expect Buyers and Sellers will be willing to pay higher fees for our services, so that revenue growth will follow GBV growth after some time lag.
Key processes which we use to grow our Platform are:
| ● | Attracting and retaining Buyers and Sellers, thereby increasing supply and demand, respectively. |
| ● | Enabling online payments that are reconciled automatically with actual shipment bookings. |
| ● | Providing benchmark data to increase transparency and optimize pricing for market participants. |
| ● | Delivering SaaS tools to help Sellers automate price quotes, which increases the supply that is available online, and tools to help Buyers organize and expand their online procurement. |
Significant Events and Transactions
Business Combination and Public Company Costs
On May 31, 2022, we entered into a Business Combination Agreement with Gesher I Acquisition Corp., a Cayman Islands exempted company limited by shares (“Gesher”), Freightos Merger Sub I, a Cayman Islands exempted company limited by shares (“Merger Sub I”) and Freightos Merger Sub II, a Cayman Islands exempted company limited by shares (“Merger Sub II”), pursuant to which, on the terms and subject to the conditions set forth therein, (i) Merger Sub I merged with and into Gesher, with Gesher surviving as a wholly owned subsidiary of Freightos (the “First Merger”), and (ii) Gesher merged with and into Merger Sub II, with
Merger Sub II surviving as a wholly owned subsidiary of Freightos (the “Second Merger”, and together with the First Merger, the “Business Combination”). Those transactions closed (the “Closing”) on January 25, 2023 (the “Closing Date”).
Immediately prior to the First Merger, Freightos and its shareholders engaged in a recapitalization so that the only outstanding equity securities of Freightos were the ordinary share of Freightos, par value $0.00001 per share (the “Freightos Ordinary Shares”) and certain options to acquire Freightos Ordinary Shares that remained outstanding following the Business Combination. To effect this recapitalization, (1) each preferred share of Freightos automatically converted into Freightos Ordinary Shares in accordance with the Freightos organizational documents, and (2) immediately following such conversion, each then issued and outstanding Freightos Ordinary Share automatically converted into 3.51806 Freightos Ordinary Shares.
The Business Combination is accounted for as an acquisition of an entity which does not constitute a business. Freightos is treated as the acquirer and Gesher is treated as the acquired company for financial statement reporting purposes. The Business Combination is not within the scope of the International Financial Reporting Standards, or IFRS 3 (Business Combinations) because Gesher does not meet the definition of a business and is accounted for within the scope of IFRS 2 (Share-based Payment) as issuing shares by Freightos at the Closing in exchange for stock exchange listing services provided by Gesher. Any difference between the fair value of the shares and warrants issued to Gesher’s shareholders and warrant holders and the fair value of Gesher’s net assets as of the Closing Date is recorded as a listing service expense. The net assets of Freightos and Gesher were stated at historical cost, with no goodwill or other intangible assets recorded.
As a consequence of the Business Combination, Freightos Ordinary Shares and warrants to purchase Freightos Ordinary Shares (the “Freightos Warrants”) are registered under the Securities Exchange Act of 1934, as amended, and listed on The Nasdaq Stock Market LLC (“Nasdaq”), which will require Freightos to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Freightos expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
Cayman Reorganization
On May 27, 2022, Freightos Limited, a limited company incorporated and existing under the laws of Hong Kong (“Freightos HK”) completed a reorganization pursuant to which shareholders of Freightos HK exchanged shares in Freightos HK for shares in Freightos Limited, and Freightos HK became a subsidiary of Freightos Limited.
Recent Acquisitions
In December 2021, we acquired the interlining technology and other related assets of a major airline group. Upon the closing of the acquisition, we issued 158,327 Series C preferred shares to the seller. The seller may also earn up to 316,658 Freightos Ordinary Shares, subject to us achieving certain commercial milestones using the acquired interlining platform. The seller agreed to use the interlining platform exclusively for a period of time and will be entitled to a revenue share in connection with the commercialization of the interlining technology.
In December 2021, we acquired all of the membership interests of 7LFreight, a U.S. company engaged in freight rate management SaaS. Upon closing of the acquisition, we paid $4.7 million in cash and issued 359,968 Freightos Ordinary Shares to the sellers. In addition, at closing we agreed to pay the sellers up to an additional $0.6 million in cash and 143,988 Freightos Ordinary Shares, subject to the 7LFreight business achieving certain operating and financial milestones over the two years following closing, of which $0.1 million has been paid and 32,739 Freightos Ordinary Shares have been issued as of the date of this Report, and $0.2 million and 35,997 Freightos Ordinary Shares can still be earned based on the performance of 7LFreight in 2023.
In February 2022, we acquired Clearit Customs Services, Inc. and certain assets from its Canadian affiliate, which collectively operated an online customs clearance business known as Clearit (“Clearit”). Upon closing of the acquisition, we paid $5.0 million in cash and issued 959,907 Freightos Ordinary Shares to the sellers. In addition, at closing we agreed to pay up to an additional $3.5 million in cash, subject to the Clearit business achieving certain operating and financial milestones over the three years following the acquisition, none of which has been paid as of the date of this Report, and of which $2.3 million can still be earned.
Segment Reporting
We operate under two segments, Platform and Solutions.
Platform Segment
In our Platform segment, we generate revenue from facilitating transactions between Buyers and Sellers on our Platform based on flat fees per transaction and/or fees that are a percentage of transaction value (GBV). In addition to freight services, certain ancillary services offered by Sellers, such as insurance and customs brokerage, generate additional revenue. These services often have higher
margins than freight services allowing us to generate a higher fee for introducing Buyers. In certain Platform transactions, with respect to U.S. and Canadian customs brokerage services only, a Freightos company is the Seller, while in all other cases the Seller is a third party. Buyers typically pay for access to, and the ability to compare, prices, shipping options and historical performance across multiple Sellers. Our services save Buyers time and money with instant freight quoting, convenient online payments through our payment processing partners, and online booking and management tools.
Our Platform revenue has evolved as our Platform grows and matures. In certain cases, Sellers may utilize our Platform without charge for a limited period of time or benefit from other special arrangements. Overall, our operational Platform revenue take rate ranges from zero to approximately 10% of booking value, with an average of approximately 1.1% during the six months ended June 30, 2023.
Solutions Segment
In our Solutions segment, we generate revenue through our software-as-a-service offerings, which are typically recurring subscriptions priced per user per month or per site per month, depending on the type of product or based on a negotiated global license. This segment also includes subscriptions to our data products, such as Freightos Baltic Index (“FBX”), Freightos Air Index (“FAX”) and custom market pricing data reports, often delivered through our Freightos Terminal product, which are priced per unit of time based on the number of users, granularity of data, number of data points and permitted data usage. We also generate some non-recurring revenue, including revenue from professional services such as data ingestion, engineering, customization and setup. SaaS and data subscription fees are typically collected on a monthly, quarterly or annual basis.
Go-to-Market Strategy
Our go-to-market strategy focuses on:
| ● | Carriers: Direct sales. |
| ● | Multinational freight forwarding companies: Direct sales. Depending how centralized the freight forwarder is, this includes either direct sales to headquarters for global rollouts, or “land-and- expand” starting at a country or office level and often supported by marketing efforts. |
| ● | Small/midsize freight forwarding companies: Primarily digital advertising and brand marketing. Many small or midsize forwarders start by using our booking portal, which does not require a subscription fee, and then upgrade to paid SaaS. |
| ● | Enterprise shippers: Direct sales, augmented by significant brand marketing, including the marketing benefits of some free data we publish such as the weekly version of the FBX container shipping pricing index. |
| ● | Small/midsize shippers: Inbound marketing, including content marketing, search engine optimization and limited digital advertising. |
We believe that our Platform compares favorably to the majority of marketplaces in other industries due to large transaction sizes and high retention of our business-to-business customers.
Geography
Given the global nature of international shipping, we operate in numerous geographies. Our Solutions revenue is strongest in Europe and North America. Importer/exporter bookings on our Platform are strongest in the United States, where we also have a customs brokerage solution. Our airline bookings on our Platform, which are strongest in Europe and the Middle East air hubs, are now growing fast in the United States. While Asian airlines have been slower to digitize than airlines in Europe, the Middle East and North America, we are working to expand both our business segments on a global basis. In many cases, Platform growth significantly outperforms market trends. For example, while IATA data shows that European air cargo exports dropped 6.5% between June 2022 and June 2023, Platform transactions on the same lane grew approximately 40%.
Key financial and operating metrics Platform Segment
For our Platform segment, which is effectively a marketplace, we believe that certain KPIs are important to help understand our business. We monitor the KPIs listed in the table below to evaluate our Platform business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Certain numbers in the following table are presented on a pro forma basis to reflect the acquisitions of Clearit and 7LFreight, which were acquired during or after the periods presented.
|
| Q1 2021 PE |
| Q2 2021 PE |
| Q3 2021 PE |
| Q4 2021 PE |
| Q1 2022 PE |
| Q2 2022 |
| Q3 2022 |
| Q4 2022 |
| Q1 2023 |
| Q2 2023 | ||||||||||
| | (dollars in thousands) | ||||||||||||||||||||||||||||
#Transactions | | | 32,674 | | | 57,094 | | | 76,141 | | | 96,863 | | | 114,846 | | | 150,244 | | | 192,330 | | | 210,765 | | | 229,211 | | | 239,427 |
GBV | | $ | 40,399 | | $ | 65,674 | | $ | 84,038 | | $ | 112,584 | | $ | 126,225 | | $ | 155,343 | | $ | 159,230 | | $ | 169,967 | | $ | 168,701 | | $ | 154,810 |
#Unique Buyer Users | | | 7,582 | | | 9,580 | | | 10,053 | | | 11,412 | | | 12,601 | | | 14,936 | | | 14,938 | | | 15,646 | | | 16,226 | | | 16,438 |
#Carriers | | | 22 | | | 27 | | | 28 | | | 28 | | | 31 | | | 31 | | | 32 | | | 35 | | | 37 | | | 37 |
#Transactions
#Transactions represents the number of bookings for freight services and related services placed by Buyers across our Platform with both third-party Sellers and Clearit. Beginning in the third quarter of 2022, #Transactions include trucking eBookings, which were added to the Platform following the acquisition of 7LFreight. The number of #Transactions booked on the Platform in any given time period is net of transactions canceled during the same time period.
Gross Bookings Value
GBV represents the total value of #Transactions, which is the monetary value of freight and related services contracted between Buyers and Sellers on our Platform, plus related fees charged to Buyers and Sellers, and pass-through payments such as duties. In other words, it is the revenue earned by Sellers via our Platform. GBV is converted to U.S. dollars at the time of each transaction on our Platform. This metric may be similar to what others call gross merchandise value (GMV) or gross services volume. We believe that this metric reflects the scale of our Platform and our opportunities to generate Platform revenue.
#Unique Buyer Users
#Unique Buyer Users represents the number of individual users placing bookings, typically counted based on unique email logins. The number of Buyers, which counts unique customer businesses, does not reflect the fact that some Buyers are large multinational organizations while others are small or midsize businesses. Therefore, we find it more useful to monitor #Unique Buyer Users than the number of Buyer businesses. In some cases, this number may be slightly higher than reported as in some organizations a number of users at a business may be using one user profile.
#Carriers
#Carriers represents the number of unique air and ocean carriers who have been sellers of #Transactions. For airlines, we count the booking carrier, which includes separate airlines within the same carrier group. We do not count dozens of other airlines that operate individual segments of air cargo #Transactions as we do not have a direct booking relationship with them. Carriers include ocean less-than-container-load or “LCL” consolidators, but excludes trucking carriers. Carriers are only counted when five bookings or more were conducted with them on the Platform in a quarter.
Solutions Segment
We do not currently utilize supplemental KPIs for our Solutions segment, as we believe revenue provides a good indication of this segment’s performance.
Key Factors Affecting Our Performance
We believe our performance and future success depend on several factors, including those discussed below and in the section of our Annual Report titled “Risk Factors.”
World Trade and Industry Trends
International freight shipping helps to enable world trade, specifically the exchange of goods between countries. We believe that the size of the total addressable market for our Platform is positively correlated with world trade in goods. Since the early 1940s, world trade has increased dramatically in most decades, but the size of our addressable market could contract if world trade is reduced by recession, trade wars, reshoring/ nearshoring and other factors. Historical trends indicate that even following major stressors, such as the 2008 financial crisis, global trade has continued to steadily expand, as presented in the following illustration of the global trade of goods by value, which we created from information available from The World Bank.
Our business is seasonal and as a result, our KPIs, revenues and profitability fluctuate from quarter to quarter. For example, the third and fourth calendar quarters are typically strong in our industry in the ramp up to the Western peak shopping season, while the first quarter is typically weakest.
Smaller importers/exporters tend to adopt our Platform more readily than larger enterprises. Therefore, our Platform may benefit if niche e-commerce vendors and other small- and medium-sized business (“SMB”) importers/exporters continue to flourish, as they have over the past few years, and could potentially be impacted negatively if the industry becomes more consolidated.
We have also observed a trend of more short-term, or spot, bookings for freight services, compared to long-term fixed-price contracts. Our Platform, which focuses on matching Buyers and Sellers for spot transactions, has benefited from this trend.
Shipping Costs
Our GBV is impacted by market rates of air and ocean shipping. Some of our Platform revenue is generated as a percentage of GBV and directly impacted when price levels change, whereas some of our revenue is generated from flat per-transaction fees and not directly impacted by shipping costs, although it’s still impacted by shipping volumes.
The following graphic of our FBX01 index illustrates the volatility of an indicative price for shipping a 40-foot container from East Asia to North American West Coast. We view the FBX01 index as a bellwether trade lane.
Carrier Digitalization
Our Platform is highly dependent on the availability of direct digital connections, known as application programming interfaces (“APIs”), to carriers, which enable instant binding price quotes and bookings. To our knowledge, prior to 2018, no air or ocean carriers had APIs for instant quoting and booking against actual capacity, and price quotes were rarely binding. This is now changing rapidly, first in air cargo transportation and, more recently, in ocean freight transportation.
To some extent, we are able to digitalize freight bookings even when carriers are offline by offering services from freight forwarding companies, without specifying the voyage, but our Platform provides better service and will grow faster if the digitalization of carriers continues. The following graphic shows the carriers who have provided APIs for connection to our Platform to date.
GBV Growth Strategy
We believe that our market opportunity is immense, and we will continue to invest significantly in scaling across all organizational functions in order to enhance our growth prospects. Our growth depends, in part, on our users’ experience, and we continue to invest heavily in research and development to create a modern, stable, fast-performing, user-friendly Platform. We have successfully introduced new features and capabilities on our Platform and plan to continue to do so. We intend to continue to invest in sales and marketing. We have also leveraged complementary acquisitions to expand our user base and improve our offerings.
We believe that investments in growth will have a strong positive impact on our long-term financial results. We intend to implement a responsible expenditure strategy, limiting our spending and therefore our negative free cash flow, while maintaining high gross profit margins and a goal to achieve positive free cash flow with the cash reserves on hand.
The success of our efforts to enhance our long-term growth potential may be impacted by our competition. For additional information, see the section titled “Business — Competition” in our Annual Report.
COVID-19
The COVID-19 pandemic affected the global freight industry in a variety of ways. In 2020, initial lockdowns dramatically reduced shipping volumes for several months. Air cargo was particularly impacted, given the cessation of many passenger flights and the fact that, according to the International Air Transport Association Knowledge Hub, those flights accounted for approximately 50% of global cargo capacity. In 2021, consumer spending on goods, particularly imported goods, recovered strongly and set new records.
The international freight industry achieved record volumes and prices, while encountering significant operational issues as demand for imported goods outstripped the capacity of the global shipping network at every level: ships, port throughput, trucks and storage.
High shipping prices affect our business in a mixed way. While increasing GBV per transaction, higher prices likely decreased #Transactions, as some importers/exporters, especially SMBs, are price sensitive.
Operational issues adversely impact the overall Buyer experience and tend to negatively impact our business. Periodic lockdowns, especially in parts of China, disrupted the manufacturing of goods and the operation of ports and the trucks that supply them.
The COVID-19 pandemic was a positive driver for digitalization in our industry because schedules and rates became more volatile, requiring digital tools that respond quickly. We expected and are observing that this trend toward digitalization is continuing, even as the COVID-19 pandemic abates.
During the spring of 2020, as part of the measures taken to cope with the first wave of the COVID-19 global crisis and the uncertainty at that time, we decided to reorganize our business units, including a workforce reduction. As a result, we recorded reorganization expenses in the amount of $0.9 million, which mostly comprised severance payments, during 2020. As the economy and industry recovered we again expanded our team.
Components of Our Results of Operations
Revenue
Platform Revenue
Platform revenue reflects fees charged to Buyers and Sellers in relation to transactions executed on our Platform. For bookings conducted by importers/exporters, our fees are typically structured as a percentage of booking value, depending on the mode and nature of the service. When freight forwarders book with carriers, the Sellers often pay a pre-negotiated flat fee per transaction. When Sellers transact with a Buyer who is a new customer to the Seller, we may charge a percentage of the booking value as a fee. When we handle payments for transactions on our Platform, Buyer and Sellers will typically pay a percentage fee for the payment handling.
Clearit customs brokerage fees are reported in our Platform segment. We charge flat fees for customs brokerage through Clearit, depending on the mode and complexity, and may charge additional fees for ancillary services.
Solutions Revenue
Solutions revenue is primarily subscription-based SaaS and data. It is typically priced per user or per site, per time period, with larger customers such as multinational freight forwarders often negotiating flat all- inclusive subscriptions. Revenue from our Solutions segment includes certain non-recurring revenue from services ancillary to our SaaS products, such as engineering, customization, configuration and go-live fees, and data services for digitizing offline data. We also recognize revenue from data subscriptions, including subscriptions to our data reports within our Freightos Terminal, including FBX, FAX and more.
Cost of Revenue
Cost of revenue consists primarily of customer service costs, which include salaries of team members directly involved in supporting our Platform and Solutions service delivery, cloud hosting costs, and direct financial costs, such as credit card processing fees and collection costs.
Research and Development Expenses
Research and development expenses consist primarily of personnel-related costs, third-party hosting costs and third-party software expenses related to development. Research and development costs are expensed as incurred, except to the extent that such costs are associated with internal-use software and platform development that qualifies for capitalization. We make significant investments in research and development to create new product features and launch new products. We believe continued investments in research and development are important to achieve our strategic goals. As a result, we expect research and development expenses to increase in future periods.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of expenses related to personnel-related costs, including sales commissions and travel, which we expense as incurred, and advertising and marketing activities, including external public relations, content and search engine optimization service providers. We make significant investments in sales and marketing to grow our business, including finding and acquiring new clients and driving brand awareness.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related expenses attributable to our finance, legal, human resources and operations functions. General and administrative expenses also include costs related to outside consulting, legal and accounting services, rent and insurance. We expect to continue to invest in our corporate infrastructure and to incur additional expenses associated with operating as a public company, including increased legal and accounting costs, investor relations costs, insurance premiums and compliance costs.
Reorganization Expenses
Reorganization expenses consist primarily of expenses related to workforce reduction carried out during the year ended December 31, 2020 as a result of the COVID-19 pandemic, such as severance payments to employees.
Transaction-Related Costs
Transaction-related costs consist primarily of consulting and professional expenses related to the Business Combination that was signed in May 2022 and closed in January 2023.
Share listing expense
Share listing expense represents non-recurring, non-cash share-based listing expense incurred in connection with the Business Combination.
Change in fair value of warrants
Change in fair value of warrants represents the change in fair value of the Freightos Warrants, which are listed on Nasdaq under the symbol CRGOW.
Finance Income
Finance income consists primarily of changes in the fair value of contingent consideration and of interest income on short-term deposits.
Finance Expenses
Finance expenses consist primarily of bank charges, foreign exchange rate differences, net, and interest expense in respect of our lease liabilities.
Income Taxes
Income taxes consist primarily of income taxes attributable to our subsidiaries in Spain and the Palestinian Authority, which have been profitable in recent years, and, to a limited extent, certain other jurisdictions. Our subsidiaries in Hong Kong and Israel have accumulated significant carry-forward losses for tax purposes in past years, for which we do not recognize deferred tax assets because the utilization of such assets in the foreseeable future is not probable. As we expand our international business activities, any changes in the tax regime of the jurisdictions in which we operate may increase our overall provision for income taxes in the future.
Pursuant to a ruling received by us from the Israel Tax Authority, we are required to register for tax purposes in Israel and, accordingly, will be treated as an Israeli resident company for Israeli tax purposes. The current corporate tax rate in Israel is 23%. However, the corporate tax rate applicable to a company’s income that is eligible for certain tax benefits under Israeli government programs may be considerably lower.
Six months ended June 30, 2023, compared with the six months ended June 30, 2022
Results of Operations
The following tables summarizes Freightos’ historical results of operations for the six months ended June 30 2023 and 2022:
| | Six months ended June 30, | ||||
(dollars in thousands) |
| 2023 |
| 2022 | ||
Revenue | | $ | 9,916 | | $ | 9,548 |
Cost of revenue | |
| 4,188 | |
| 3,768 |
Gross profit | |
| 5,728 | |
| 5,780 |
Operating expenses: Research and development | |
| 6,014 | |
| 5,119 |
Selling and marketing | |
| 7,081 | |
| 4,901 |
General and administrative | |
| 6,079 | |
| 4,997 |
Transaction-related costs | |
| 3,703 | |
| 812 |
Share listing expense | |
| 46,717 | |
| — |
Total operating expenses | |
| 69,594 | |
| 15,829 |
Operating loss | |
| (63,866) | |
| (10,049) |
Change in fair value of warrants | |
| 7,404 | |
| — |
Finance income | |
| 1,690 | |
| 171 |
Finance expenses | |
| (223) | |
| (306) |
Financing income (expenses), net | |
| 1,467 | |
| (135) |
Loss before taxes on income | |
| (54,995) | |
| (10,184) |
Income taxes | |
| 3 | |
| 38 |
Loss | | $ | (54,998) | | $ | (10,222) |
Revenue
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentages) |
| 2023 |
| 2022 |
| Change $ |
| Change % |
| |||
Platform | | $ | 3,465 | | $ | 3,069 | | $ | 396 | | 13 | % |
percentage of total revenue | | | 35 | % | | 32 | % | |
| |
|
|
Solutions | | $ | 6,451 | | $ | 6,479 | | $ | (28) |
| 0 | % |
percentage of total revenue | |
| 65 | % |
| 68 | % |
|
|
|
| |
Total revenue | | $ | 9,916 | | $ | 9,548 | | $ | 368 |
| 4 | % |
Comparison of the Six Months Ended June 30 2023 and 2022
Revenue increased by $0.4 million, or 4%, to $9.9 million for the six months ended June 30, 2023, compared to $9.5 million for the six months ended June 30, 2022.
Platform revenue increased by $0.4 million, or 13%, to $3.5 million for the six months ended June 30, 2023, compared to $3.1 million for the six months ended June 30, 2022. The increase was primarily a result of an increase in the number of transactions associated with a fee per transaction (revenue).
Solutions revenue was essentially flat at $6.5 million for the six months ended June 30, 2023, compared to $6.5 million for the six months ended June 30, 2022.
Cost of Revenue
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentages) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
Cost of revenue | | $ | 4,188 | | $ | 3,768 | | $ | 420 |
| 11 | % |
Total gross margins | |
| 58 | % |
| 61 | % |
|
|
|
| |
Comparison of the Six Months Ended June 30, 2023 and 2022
Cost of revenue increased by $0.4 million, or 11%, to $4.2 million for the six months ended June 30, 2023, compared to $3.8 million for the six months ended June 30, 2022. The increase was primarily due to an increase of $0.2 million in labor costs, an increase of $0.1 million in server expense and an increase of $0.1 million in depreciation and amortization.
Research and Development
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
Research and development | | $ | 6,014 | | $ | 5,119 | | $ | 895 | | 17 | % |
Comparison of the Six Months Ended June 30, 2023 and 2022
Research and development expenses increased by $0.9 million, or 17%, to $6.0 million for the six months ended June 30, 2023, compared to $5.1 million for the six months ended June 30, 2022. The increase was primarily due to an increase of $0.6 million in labor costs and an increase of $0.2 million in share-based compensation.
Selling and Marketing
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
Selling and marketing | | $ | 7,081 | | $ | 4,901 | | $ | 2,180 | | 44 | % |
Comparison of the Six Months Ended June 30, 2023 and 2022
Selling and marketing expenses increased by $2.2 million, or 44%, to $7.1 million for the six months ended June 30, 2023, compared to $4.9 million for the six months ended June 30, 2022. The increase was primarily due to an increase in labor expenses of $1.3 million, an increase in digital advertising of $0.2 million and an increase of $0.2 million in travel expenses.
General and Administrative
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentage) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
General and administrative | | $ | 6,079 | | $ | 4,997 | | $ | 1,082 |
| 22 | % |
Comparison of the Six Months Ended June 30, 2023 and 2022
General and administrative expenses increased by $1.1 million, or 22%, to $6.1 million for the six months ended June 30, 2023, compared to $5.0 million for the six months ended June 30, 2022. The increase was primarily due to an increase in directors and officers’ insurance premiums of $0.8 million, an increase in labor expenses of $0.4 million, mainly one time bonuses associated with the Business Combination, and an increase in consulting expenses of $0.3 million, partially offset by a change in fair value of contingent consideration of $0.6 million.
Transaction-Related costs
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
Transaction-related costs | | $ | 3,703 | | $ | 812 | | $ | 2,891 | | 356 | % |
Comparison of the Six Months Ended June 30, 2023 and 2022
Transaction-related costs increased by $2.9 million, or 356%, to $3.7 million for the six months ended June 30, 2023, compared to $0.8 million for the six months ended June 30, 2022 due to the costs incurred in connection with the Business Combination that was completed in January 2023.
Share-Listing Expenses
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentage) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
Share listing expense | | $ | 46,717 | | $ | — | | $ | 46,717 |
| 100 | % |
Comparison of the Six Months Ended June 30, 2023 and 2022
Share listing expense was $46.7 million for the six months ended June 30, 2023 related to non-recurring, non-cash, share-based listing expense incurred in connection with the Business Combination. There was no corresponding expense in the six months ended June 30, 2022.
Change in Fair Value of Warrants
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
Change in fair value of warrants | | $ | 7,404 | | $ | — | | $ | 7,404 | | 100 | % |
Comparison of the Six Months Ended June 30, 2023 and 2022
Change in fair value of warrants was $7.4 million for the six months ended June 30, 2023 related to the change in fair value of the Freightos Warrants and there was no corresponding change in the six months ended June 30, 2022.
Finance Income
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentage) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
Finance income | | $ | 1,690 | | $ | 171 | | $ | 1,519 |
| 888 | % |
Comparison of the Six Months Ended June 30, 2023 and 2022
Finance income increased by $ 1.5 million, or 888%, to $1.7 million for the six months ended June 30, 2023, compared to $0.2 million for the six months ended June 30, 2022. The increase was primarily due to an increase in interest on bank deposits of $1.4 million.
Finance Expenses
| | Six months ended June 30, |
| |
|
|
|
| ||||
(in thousands, except for percentage) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
Finance expenses | | $ | (223) | | $ | (306) | | $ | 83 | | (27) | % |
Comparison of the Six Months Ended June 30, 2023 and 2022
Finance expenses decreased by $0.1 million, or 27%, to $0.2 million for the six months ended June 30, 2023, compared to $0.3 million for the six months ended June 30, 2022. The decrease was primarily due to a decrease in hedging expenses of $0.1 million.
Income Taxes
| | Six months ended June 30, | |
| |
|
|
| ||||
(in thousands, except for percentage) |
| 2023 |
| 2022 |
| Change $ |
| Change % | | |||
Income taxes | | $ | 3 | | $ | 38 | | $ | (35) |
| (92) | % |
Comparison of the Six Months Ended June 30, 2023 and 2022
Income taxes were essentially even for the six months ended June 30, 2023 with income taxes for the six months ended June 30, 2022.
Non-IFRS Financial Measures
Our management team uses net loss before income taxes, finance income, finance expense, share-based payment expense, depreciation & amortization, operating expense settled by issuance of shares and transaction related costs (“EBITDA”), a non-IFRS financial measure, to evaluate our operating performance and make strategic decisions. We believe that EBITDA provides useful information to investors and others in understanding and evaluating our operating results because it provides a supplemental measure of our core operating performance and offers consistency and comparability with both past financial performance and with financial information of peer companies.
However, EBITDA is presented for supplemental information purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with IFRS.
The following table provides a reconciliation of net loss to Adjusted EBITDA for the time periods presented:
| | Six Months Ended | ||||
| | June 30, | ||||
(dollars in thousands) |
| 2023 |
| 2022 | ||
Loss | | $ | (54,998) | | $ | (10,222) |
Income taxes | |
| 3 | |
| 38 |
Finance income | |
| (1,690) | |
| (171) |
Finance expenses | |
| 223 | |
| 306 |
Change in fair value of warrants | |
| (7,404) | |
| — |
Operating loss | | | (63,866) | | | (10,049) |
Share-based payment expense | |
| 1,128 | |
| 732 |
Depreciation and amortization | |
| 1,362 | |
| 1,129 |
Share listing expense | |
| 46,717 | |
| — |
Non-recurring expenses | |
| 499 | |
| — |
Redomicile costs | |
| — | |
| 516 |
Transaction-related costs | |
| 3,703 | |
| 812 |
Changes in the fair value of contingent consideration | |
| (642) | |
| — |
Reorganization expenses | |
| — | |
| — |
Operating expense settled by issuance of shares . | | | — | | | — |
Adjusted EBITDA | | $ | (11,099) | | $ | (6,860) |
Comparison of the Six Months Ended June 30, 2023 and 2022
Adjusted EBITDA decreased by $4.2 million, or 62%, to $(11.1) million for the six months ended June 30, 2023, compared to $(6.9) million for the six months ended June 30, 2022. The decrease was primarily due to an increase in loss, an increase in change in fair value of warrants and an increase in finance income offset by an increase in share listing expenses and transaction related costs.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through equity financing.
Our cash, cash equivalents, bank deposits and short-term investments were $60.9 million as of June 30, 2023, an increase of $54.4 million, compared to $6.5 million as of December 31, 2022 as a result of the proceeds we received in connection with the Business Combination. In addition, we had restricted deposits to secure payments to airlines, to support currency hedging activity, a bank guarantee and credit cards, that amounted to $1.6 million in the aggregate as of June 30, 2023, an increase of $0.6 million from $1.0 million as of December 31, 2022.
The development and commercialization of our Platform and Solutions segments will continue to require substantial expenditures and we are reliant upon continued investments from existing and new shareholders to fund operations.
In April 2022, we, through our Israeli subsidiary, entered into a loan agreement and related agreements with Bank Hapoalim, pursuant to which we were able to borrow up to $6.0 million based on our monthly recurring revenue generated by our SaaS business at an interest rate of Term SOFR plus 3.55% per annum. In connection with this loan, we pledged the following: (1) a first ranking floating charge, unlimited in amount, over all the assets of our Israeli subsidiary and a fixed charge over our Israeli subsidiary’s registered and unissued share capital; (2) a first ranking fixed charge, unlimited in amount, over our Israeli subsidiary’s intellectual property rights; (3) a first ranking fixed charge, unlimited in amount, over contractual rights to amounts owed to our Israeli subsidiary by our U.S. subsidiary, our Hong Kong subsidiary and WebCargo. The Israeli subsidiary did not make any borrowings under this facility, and the loan facility was terminated in February 2023.
In October 2022, we, through our Israeli subsidiary, entered into a term loan agreement with Bank Hapoalim, pursuant to which we borrowed $2.5 million through the end of October 2022, to be repaid no later than March 31, 2023. The term loan bore interest at the Term SOFR rate plus 6.0% per annum payable monthly. The term loan was repaid in full in January 2023. Refer to Note 15 of our consolidated financial statements included elsewhere in this Report.
Our primary requirements for liquidity and capital resources are to finance research and development and selling and marketing expenses that drive growth, as well as working capital, capital expenditures and general corporate purposes.
Our capital expenditures consist primarily of computers, peripheral equipment and leasehold improvements from time to time on our leased offices. Capital expenditures were $0.1 million for the six months ended June 30, 2023, compared to $0.2 for the six months ended June 30, 2022.
In March 2021, we issued 4,178,094 Series C preferred shares for an aggregate amount of $26.4 million. In January 2023, we raised approximately $82.4 million in connection with the Closing, after expenses. We will not receive any proceeds from the sale of the Freightos Warrants (each of which is generally exercisable for $11.50 per share) or Freightos Ordinary Shares by certain of our securityholders (the “Selling Securityholders”) except with respect to amounts received by us due to the exercise of warrants. However, given the recent price volatility of Freightos Ordinary Shares and relative lack of liquidity in our stock, there is no certainty that warrant holders will exercise their warrants and, accordingly, we may not receive any proceeds in relation to our outstanding warrants. We believe that the likelihood that warrant holders determine to exercise their warrants, and therefore the amount of cash proceeds that we would receive is dependent upon the market price of Freightos Ordinary Shares. If the market price for our Freightos Ordinary Shares is lower than the exercise price of the warrants (on a per share basis), we believe that warrant holders will be very unlikely to exercise any of their warrants, and accordingly, we will not receive any such proceeds. There is no assurance that the warrants will be “in the money” prior to their expiration or that the warrant holders will exercise their warrants. As a result, we do not expect to rely on the cash exercise of Freightos Warrants to fund our operations and cannot depend on such proceeds to support working capital and capital expenditure requirements for the next twelve months. We will continue to evaluate the probability of Freightos Warrant exercises and the merit of including potential cash proceeds from the exercise of the Freightos Warrants in future liquidity projections. We currently expect to rely on the sources of funding described in this Report, and any future financings, if available on reasonable terms or at all. As of September 8, 2023, the closing price of our Freightos Ordinary Shares was $2.63 per share.
Despite the possibility that Freightos Warrant holders may choose not to exercise their Freightos Warrants for so long as the Freightos Warrants remain out-of-the money, we believe that our sources of liquidity and capital resources will be sufficient to meet our business needs for at least the next 12 months.
The Freightos Ordinary Shares being offered for resale by the Selling Securityholders pursuant to a registration statement on Form F-1 (the “Resale Registration Statement”) represent approximately 65.0% of the outstanding Freightos Ordinary Shares as of the date of this Report, assuming the exercise of all Freightos Warrants. Given the substantial number of Freightos Ordinary Shares being registered for potential resale by Selling Securityholders pursuant to Resale Registration Statement, the sale of shares by the Selling Securityholders, or the perception in the market that the Selling Securityholders of a large number of shares intend to sell shares, could increase the volatility of the market price of the Freightos Ordinary Shares or result in a significant decline in it. Additionally, while the Selling Securityholders may experience a positive rate of return on their investment in the Freightos Ordinary Shares, the public securityholders may not experience a similar rate of return on the securities they purchased due to differences in their purchase prices and the trading price.
The sale of Freightos Ordinary Shares in the public market or otherwise, or the perception that such sales could occur, could harm the prevailing market price of the Freightos Ordinary Shares. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that it deems appropriate. Resales of the Freightos Ordinary Shares may cause the market price of our securities to drop significantly, even if our business is doing well.
Our ability to raise additional capital through the sale of equity or convertible debt securities could be significantly impacted by the resale of Freightos Ordinary Shares by Selling Securityholders, which could result in a significant decline in the trading price of the Freightos Ordinary Shares and potentially hinder our ability to raise capital at terms that are acceptable to us or at all. In addition, debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, or substantially reduce our operations. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section titled “Risk Factors” included in our Annual Report.
Cash Flows
The following table summarizes our cash flows for the periods presented:
| | Six Months Ended June 30, | ||||
(in thousands) |
| 2023 |
| 2022 | ||
Net cash used in operating activities | | $ | (18,809) | | $ | (7,003) |
Net cash provided by (used in) investing activities | |
| (51,470) | |
| (4,989) |
Net cash provided by (used in) financing activities | |
| 73,272 | |
| (281) |
Exchange differences on balances of cash and cash equivalents | | | (191) | |
| (371) |
Increase (decrease) in cash and cash equivalents | | $ | 2,802 | | $ | (12,644) |
Net Cash Used In Operating Activities
Six months ended June 30, 2023, compared with June 30, 2022
Net cash used in operating activities was $18.8 million for the six months ended June 30, 2023, an increase of $11.8 million, compared to the net cash used in operating activities of $7.0 million for the six months ended June 30, 2022. The increase primarily resulted from an increase in loss of $44.8 million, a decrease in fair value of warrants of $7.4 million, a change in finance expense (income), net of $1.5 million and a change in the aggregated amount of changes in asset and liability items of $5.3 million, offset by an increase in share listing expense of $46.7 million.
Net Cash Provided By (Used In) Investing Activities
Six months ended June 30, 2023, compared with June 30, 2022
Net cash used in investing activities was $51.5 million for the six months ended June 30, 2023, an increase of $46.5 million, compared to the net cash used in investing activities of $5.0 million for the six months ended June 30, 2022. The increase primarily resulted from an increase in short-term investments of $30.9 million and an increase in short-term bank deposits of $20.0 million offset by a decrease of $4.2 million related to our acquisition of Clearit in February 2022.
Net Cash Provided By (Used In) Financing Activities
Six months ended June 30, 2023, compared with June 30, 2022
Net cash provided from financing activities was $73.3 million for the six months ended June 30, 2023, an increase of $73.6 million, compared to the net cash used in financing activities of $0.3 million for the six months ended June 30, 2022. The increase primarily resulted from an increase in proceeds from the issuance of share capital and warrants of $76.0 million offset by a repayment of short-term bank loan and credit of $2.5 million.
Contractual Obligations and Other Commitments
We have various contractual obligations and commercial commitments that are recorded as liabilities in our financial statements. In addition, we have contingent contractual obligations to issue shares as part of certain arrangements, subject to meeting certain business and financial performance indicators in the next few years. These arrangements include contingent obligations to issue up to 316,658 Freightos Ordinary Shares as part of the acquisition of certain interlining technology assets and up to 261,216 Freightos Ordinary Shares to each of the two airline groups and up to 201,849 Freightos Ordinary Shares to the third airline group member of the Digital Air Cargo Council. In addition, we paid the seller of 7Lfreight $0.1 million in cash and issued 32,739 Freightos Ordinary Shares as a result of 7Lfreight achieving certain operating and financial milestones during the year 2022. We may pay up to an additional $0.2 million in cash and issue up to an additional 35,997 Freightos Ordinary Shares to the seller of 7Lfreight, subject to the 7Lfreight business achieving certain operating and financial milestones for the three-month period ending September 30, 2023. As of June 30, 2023 and December 31, 2022, the fair value of this contingent consideration was recorded as a liability in our financial statements. In addition, we may pay the sellers of Clearit up to $2.3 million, subject to the Clearit business achieving certain operating and financial milestones in 2023 and 2024. As of June 30, 2023 and December 31, 2022, the fair value of this contingent consideration was recorded as a liability in the financial statements.
As of June 30, 2023 Freightos has contractual, undiscounted lease liabilities of:
|
| (dollars in thousands) | |
Remainder of 2023 |
| | 370 |
2024 |
| | 456 |
2025 |
| | 63 |
2026 |
| | 20 |
Total | | $ | 909 |
Off-Balance Sheet Arrangements
As of June 30, 2023, we had outstanding unfulfilled orders placed with our Platform Sellers of approximately $0.5 million (compared to $0.6 million as of December 31, 2022) for which Buyers’ funds were not yet collected and, therefore, no liability was recorded in our financial statements. These amounts will be recorded as liabilities once the shipments are delivered, at which time we will also record receivables from the respective Buyers.
Recently Issued Accounting Pronouncements
For information on recently issued accounting pronouncements, refer to Note 3 to our audited consolidated financial statements in our Annual Report and Note 2d to our interim unaudited consolidated financial statements, included in Exhibit 99.1 to this Report.