MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the historical financial statements of the relevant entities and the pro forma financial statements and the notes thereto included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

Business Overview

We are a leading non-union, specialized freight company focused on providing auto transportation and logistics services. Formed in connection with this offering through the combination of five industry-leading operating companies, we will operate one of the largest auto transportation fleets in North America based upon information obtained from leadership of the Auto Haulers Association of America, utilizing roughly 1,130 auto transport vehicles and trailers on a daily basis, including 615 Company-owned transport vehicles and trailers, and employing 649 dedicated employees as of November 30, 2023. Prior to the completion of this offering, we have not operated as a combined company and are dependent upon this offering to complete the Combinations. From our 49 strategically located facilities across the United States, we offer a broad range of auto transportation and logistics services, primarily focused on transporting finished vehicles from automotive production facilities, marine ports of entry or regional rail yards to auto dealerships around the country. We have developed a differentiated business model due to our scale, breadth of geographic coverage and embedded customer relationships with leading auto original equipment manufacturing companies (“OEMs”). Our customers range from large, global auto companies, such as General Motors, BMW, Stellantis, and Mercedes Benz, to electric vehicle (“EV”) producers, such as Tesla and Rivian. Additional customers include auto dealers, auto auctions, rental car companies and auto leasing companies. For the year ended December 31, 2023, we had pro forma combined total operating revenue of $           million, pro forma combined net income of $           million and pro forma combined EBITDA of $           million. Our pro forma combined financial results cover periods during which we were not under common control or management and, therefore, may not be indicative of our future financial or operating results. See “Prospectus Summary — Summary Financial Data.”

Prior to this offering, Proficient entered into agreements to acquire, in multiple, separate acquisitions, five operating businesses and their respective affiliated entities, as applicable, operating under the following names: (i) Delta Automotive Services, Inc., doing business as Delta Auto Transport, Inc. (“Delta”), (ii) Deluxe Auto Carriers, Inc. (“Deluxe”), (iii) Sierra Mountain Group, Inc. (“Sierra”), (iv) Proficient Auto Transport, Inc. (“Proficient Transport”), and (v) Tribeca Automotive Inc. (“Tribeca” and, together with Delta, Deluxe, Sierra, and Proficient Transport, the “Founding Companies”). The Founding Companies will be acquired for a combination of cash and shares of our common stock. A portion of the net proceeds from this offering will be used to pay the cash portion of the consideration in the Combinations payable to the equity holders of the Founding Companies. We will not close the acquisition of any of the Founding Companies unless we close the acquisition of all of the Founding Companies. Furthermore, the closing of the Combinations and this offering are conditioned on the closing of each other. Therefore, if we fail to close the Combinations, this offering will not close. Because of this structure, we have not yet operated as a combined company and do not currently have a combined operating history. The description of our business that follows assumes that the Combinations have occurred and the operations of the Founding Companies have been combined.

We have entered into agreements with the owners of each of the Founding Companies to combine their businesses. The consideration to be paid by Proficient in the Combinations, subject to adjustment and including, among other things, amounts held in escrow, consists of approximately $180.4 million in cash and approximately              shares of common stock, assuming a public offering price of $            per share. The cash portion of the Combinations consideration is generally subject to adjustment based upon the Founding Companies’ working capital on the closing date and certain other factors. The consideration was determined by arm’s length negotiations between Proficient and representatives of each Founding Company. Each of the owners of the Founding Companies has agreed not to sell their shares of our common stock for not less than 180 days after the date of this prospectus, subject to certain exceptions. For a more detailed description of these transactions, see “Certain Relationships and Related Person Transactions — The Combinations with the Founding Companies.”

Financial Statement Components

Revenue

We generate revenue by transporting freight for our customers in our OEM contract arrangements and our contract services arrangements. Our OEM contract arrangements provide auto transportation and logistics services through movements of freight over routes across the United States. Our contract services offering devotes the use of equipment to specific customers and provides services through long-term contracts. Our business provides services that are geographically diversified but have similar economic and other relevant characteristics, as they all provide transportation and logistics of automobiles.

We are typically paid a predetermined rate per load or per mile for our truckload services. Consistent with industry practice, our typical customer contracts do not guarantee load levels or tractor availability. This gives us and our customers a certain degree of flexibility to negotiate rates up or down in response to changes in freight demand and truck capacity.

Generally, we receive fuel surcharges on the miles for which we are compensated by customers. Fuel surcharges revenue mitigates the effect of price increases over a negotiated base rate per gallon of fuel; however, these revenues may not fully protect us from all fuel price increases.

The key factors that affect our operating revenue include the average revenue per mile we receive from our customers, the number of units delivered, and in some cases, the number of hours driven. We therefore monitor as key operating metrics average revenue per mile, average revenue per unit, and average revenue per hour, as applicable to the portions of our business that contract on each of these bases.

Claims and insurance accruals

Claims and insurance accruals consist of cargo loss, physical damage, group health, liability (personal injury and property damage) and workers’ compensation claims and associated legal and other expenses within the Company’s established retention levels. Claims in excess of retention levels are generally covered by insurance in amounts the Company considers adequate. Claims accruals represent the uninsured portion of the loss and if we are the primary obligor, the insured portion of pending claims, plus an estimated liability for incurred but not reported claims and the associated expense. Accruals for cargo loss, physical damage, group health, liability and workers’ compensation claims are estimated based on the Company’s evaluation of the type and severity of individual claims and future development based on historical trends. Changes in assumptions made in actuarial studies could potentially have a material effect on the provision for workers’ compensation and liability claims. Additionally, if any claim were to exceed our coverage limits, we would have to accrue for and pay the excess amount, which could have a material adverse effect on our financial condition, results of operations and cash flows.

Property and equipment

Property and equipment are carried at cost. Depreciation of property and equipment is computed using the straight-line method for financial reporting purposes and accelerated methods for tax purposes over the estimated useful lives of the related assets (net of estimated salvage value or trade-in value). We generally use estimated useful lives of five to ten years for trucks and trailers, classified as transportation equipment. The depreciable lives of our revenue equipment represent the estimated usage period of the equipment, which is generally substantially less than the economic lives. The residual value of a substantial portion of our equipment is covered by repurchase or trade agreements between us and the equipment manufacturer.

Periodically, we evaluate the useful lives and salvage values of our revenue equipment and other long-lived assets based upon, but not limited to, our experience with similar assets including gains or losses upon dispositions of such assets, conditions in the used equipment market and prevailing industry practices. Changes in useful lives or salvage value estimates, or fluctuations in market values that are not reflected in our estimates, could have a material impact on our financial results. Further, if our equipment manufacturer does not perform under the terms of the agreements for guaranteed trade-in values, such non-performance could have a materially negative impact on financial results. We review our property and equipment whenever events or circumstances indicate the carrying amount of the asset may not be recoverable. An impairment loss equal to the excess of carrying amount over fair value would be recognized if the carrying amount of the asset is not recoverable.

Income taxes

Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

We evaluate the need for a valuation allowance on deferred tax assets based on whether we believe that it is more likely than not all deferred tax assets will be realized. A consideration of future taxable income is made as well as on-going prudent feasible tax planning strategies in assessing the need for valuation allowances. In the event it is determined all or part of a deferred tax asset would not be able to be realized, management would record an adjustment to the deferred tax asset and recognize a charge against income at that time.

Our estimates of the potential outcome of any uncertain tax issue is subject to our assessment of relevant risks, facts and circumstances existing at that time. We account for uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, and record a liability when such uncertainties meet the more likely than not recognition threshold. Potential accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.

Reportable Segments

Our business is organized into two operating segments, Truckload and Brokerage, which represent the Company’s reportable segments. The Truckload segment offers automobile transport and contract services under an asset-based model. The Company’s contract service offering devotes the use of equipment to specific customers and provides transportation services through long-term contracts. The Company’s Brokerage segment offers transportation services utilizing an asset-light model focusing on outsourcing transportation of loads to third-party carriers. With respect to historical periods, only Proficient Transport had two reportable segments.

Truckload Segment

In our Truckload Segment, we generate revenue by transporting freight for our customers under our OEM contract arrangements and our contract services arrangements. Our OEM contract arrangements provide automobile transportation services through movements of freight over routes across the United States. Our Truckload segment provides services that are geographically diversified but have similar economic and other relevant characteristics, as they all provide truckload carrier services of automobiles. The main factors that affect operating revenue in the Truckload Segment are the average revenue per mile received from customers, the percentage of miles for which we are compensated and the number of vehicles transported.

We are typically paid a predetermined rate per load or per unit for our Truckload services. Our executed contracts contain fixed terms and rates and are often used by our customers with high-service and high-priority freight. We continually strive to increase our revenues derived from contracts as a percentage of total revenue by continuing to build upon our existing relations and acquire new relations with OEMs.

Our contracts with customers in the Truckload segment generally include a fuel surcharge to account for fluctuating fuel prices. Built into our predetermined contract rates with each customer is a baseline fuel price and when fuel prices rise above this baseline price our customers compensate us for the variance in the form of additional revenue. If fuel prices drop below the baseline price, we in turn owe our customers this variance and record a discount. This additional revenue/discount is represented on the Fuel Surcharge and Other Reimbursements line in our consolidated financial statements. Fuel surcharge revenue mitigates the effect of price increases over the life of the contract; however, these revenues may not fully protect us from all fuel price increases. Conversely, any discount related to a decline in fuel prices mitigates any upside we would otherwise experience from such decline.

In our Truckload segment, our most significant operating expenses vary with miles traveled and include (i) fuel, and (ii) driver related expenses, such as wages, benefits, training and recruitment. Expenses that have both fixed and variable components include maintenance and tire expense and our total cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, fleet age, efficiency and other factors. Our main fixed costs include depreciation of long-term assets, such as trucks and trailers (to which we refer as revenue equipment) and service center facilities, the compensation of non-driver personnel and other general and administrative expenses.

Our Truckload segment requires substantial capital expenditures for purchase of new revenue equipment. We use a combination of financing leases and secured long-term debt to acquire revenue equipment. When we finance revenue equipment acquisitions with either finance leases or long-term debt, the asset and liability are recorded on our consolidated balance sheet, and we record expense under “Depreciation and amortization” and “Interest expense.” We expect our depreciation and amortization and interest expense will be impacted by changes in the percentage of our revenue equipment acquired in any given year.

Brokerage Segment

In our Brokerage segment, we retain the customer relationship, including billing and collection, and we outsource the transportation of the loads to third-party carriers. For this segment, we rely on brokerage employees to procure spot buy arrangement contracts, as well as information systems to match loads and carriers. This segment also includes revenue generated by our owner-operators and some third-party carriers who haul freight for our OEM and contract customers.

Our Brokerage segment revenue is mainly derived from our customers requiring additional transportation needs to haul freight as their current carriers cannot meet their demands. The main factors that affect operating revenue in our Brokerage segment are our customers’ excess inventory needs, the rates we obtain from customers, the freight volumes we ship through our third-party carriers and our ability to secure third-party carriers to transport customer freight. We generally do not have contracted long-term rates for the cost of third-party carriers, and we cannot assure that our results of operations will not be adversely impacted in the future if our ability to obtain third-party carriers changes or the rates of such providers increase.

The most significant expense of our Brokerage segment, which is primarily variable, is the cost of purchased transportation that we pay to third-party carriers and is included in the “Purchased transportation” line item. This expense generally varies depending upon truckload capacity, availability of third-party carriers, rates charged to customers and current freight demand and customer shipping needs. Other operating expenses are generally fixed and primarily include the compensation and benefits of non-driver personnel (which are recorded in the “Salaries, wages and benefits” line item).

The primary performance indicator in our Brokerage segment is operating margin (brokerage operating revenue, less brokerage operating expenses, as a percentage of brokerage operating revenue). Operating margin can be impacted by the rates charged to customers and the costs of securing third-party carriers.

Our Brokerage segment does not require significant capital expenditures and is not asset-intensive like our Truckload segment.

Non-GAAP Financial Measure

We report our financial results in accordance with accounting principles generally accepted in the United States (“GAAP”). However, management believes that EBITDA provides useful information in measuring our operating performance, generating future operating plans and making strategic decisions regarding allocation of capital. Management believes this information presents helpful comparisons of financial performance between periods by excluding the effect of certain non-recurring items.

EBITDA does not have a standardized meaning prescribed by GAAP and therefore it may not be comparable to similarly titled measures presented by other companies, and it should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

EBITDA is defined as net income (loss) for the period adjusted for interest expense, net, income tax expense (benefit) and depreciation and amortization expense.

The following tables provides a reconciliation of net income, the most closely comparable GAAP financial measure, to EBITDA:

Pro forma Results of Operations for Proficient for the Year Ended December 31, 2023 Compared to the Combined Results of Operations of the Founding Companies for December 31, 2022

Please refer to the Unaudited Pro Forma Financial Statements included in this prospectus and to Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Founding Companies below.

Description of Proficient and the Founding Companies

For accounting and reporting purposes, Proficient has been identified as the accounting acquirer of each of the Founding Companies. Proficient Transport has been identified as the accounting predecessor to the Company. The historical operating results, liquidity and capital resource considerations of Proficient and each of the Founding Companies are described below.

Proficient Auto Logistics, Inc.

Overview

Proficient was founded in June 2023 for the purpose of effecting the Combinations. Proficient has no operations at this time and has two officers. During 2023, Proficient incurred various legal, accounting and administrative costs in preparation for this offering, the Combinations and assuring Proficient’s continued viability upon consummation of this offering.

Results of Operations for the Period from June 13, 2023 (Inception) through December 31, 2023

Results of Operations

Revenue — Proficient did not generate any revenue for the period from June 13, 2023 through December 31, 2023.

Operating Expenses — Proficient’s general and administrative expenses for the period from June 13, 2023 through December 31, 2023 totaled $0.6 million. The expenses were incurred for various legal and accounting services in preparation of this offering and the Combinations.

Net Loss — Proficient’s net loss was $0.6 million for the period from June 13, 2023 through December 31, 2023.

Proficient Auto Transport, Inc.

Overview

Proficient Transport was founded in 1993 and its primary business is transporting vehicles for automobile manufacturers to their dealers from the manufacturing site, marine port or rail hub. In addition, a portion of Proficient Transport’s revenue is derived from delivering used cars from and to auction companies, leasing companies, automobile dealers, manufacturers, and individuals.

Proficient Transport’s business is primarily conducted in the 48 contiguous states of the United States and is serviced from its nine facilities in five states. Proficient Transport offers its customers a wide range of transportation services by utilizing a diverse fleet of tractors and trailing equipment provided by Proficient Transport, its owner-operators and sub-haulers. Proficient Transport has approximately 140 employees and 26 owner-operators operating 112 company-owned vehicles. Additionally, there are 13 owner-operators utilizing their own equipment and over 500 sub-haulers. Its owner-operators are independent contractors who earn a fee calculated as a percentage of the revenue they generate for Proficient Transport and who bring an entrepreneurial spirit to its business. Proficient Transport’s transportation services are provided through a network of non-union employee drivers, owner-operators, and third-party transportation companies.

Reportable Segments

Proficient Transport’s business is organized into two operating segments, Truckload and Brokerage, which also represent Proficient Transport’s reportable segments. The Truckload segment offers automobile transport and contract services under an asset-based model. Proficient Transport’s contract service offering devotes the use of equipment to specific customers and provides transportation services through long-term contracts. Proficient Transport’s Brokerage segment offers transportation services utilizing an asset-light model focused on outsourcing the transportation of loads to third-party carriers.

Truckload Segment

Proficient Transport’s Truckload segment generates revenue by transporting freight for its customers under its OEM contract arrangements and its contract services arrangements. Proficient Transport’s OEM contract arrangements provide automobile transportation services through movements of freight over routes across the United States. Proficient Transport’s Truckload segment provides services that are geographically diversified but have similar economic and other relevant characteristics, as they all provide truckload carrier services of automobiles. Beginning in 2023, this segment also includes revenue generated by its owner-operators who haul freight for its OEM and contract customers. Though Proficient Transport does not own these vehicles, it does have contracts with the owner-operators in which they lease their vehicles to it, which limits them to hauling only Proficient Transport’s freight under its DOT license.

Proficient Transport is typically paid a predetermined rate per load or per unit for its Truckload services. Proficient Transport’s contract service offering, comprised of approximately 56% and 61% of its Truckload operating revenue, and of approximately 57% and 62% of its Truckload revenue, before fuel surcharge and other reimbursements, for the years ended December 31, 2023, and 2022, respectively. Executed contracts contain fixed terms and rates and are often used by Proficient Transport’s customers with high-service and high-priority freight. Proficient Transport continually strives to increase its revenues derived from contracts as a percentage of total revenue by continuing to build upon its existing relations and acquire new relationships with OEMs.

Proficient Transport’s contracts with customers in the Truckload segment generally include a fuel surcharge to account for fluctuating fuel prices. Built into Proficient Transport’s predetermined contract rates with each customer is a baseline fuel price, and when fuel prices rise above this baseline price, Proficient Transport’s customers compensate it for the variance in the form of additional revenue. If fuel prices drop below the baseline price, Proficient Transport in turn owes its customers this variance and records a discount. This additional revenue/discount is represented on the Fuel Surcharge and Other Reimbursements line in Proficient Transport’s consolidated financial statements. Fuel surcharge revenue mitigates the effect of price increases over the life of the contract; however, these revenues may not fully protect Proficient Transport from all fuel price increases. Conversely, any discount related to a decline in fuel prices mitigates any upside Proficient Transport would otherwise experience from such decline.

The main factors that affect operating revenue in Proficient Transport’s Truckload segment are the average revenue per mile received from Proficient Transport’s customers, the percentage of miles for which Proficient Transport is compensated and the number of vehicles it transports. Proficient Transport’s primary revenue metrics for its Truckload segment are average revenue per loaded mile and average revenue miles per truck per period, in each case excluding fuel surcharge revenue.

In Proficient Transport’s Truckload segment, its most significant operating expenses vary with miles traveled and include (i) fuel, (ii) driver related expenses, such as wages, benefits, training, and recruitment and (iii) owner-operator pay. Expenses that have both fixed and variable components include maintenance and tire expense and Proficient Transport’s total cost of insurance and claims. These expenses generally vary with the miles Proficient Transport’s vehicles travel, but also have a controllable component based on safety, fleet age, efficiency, and other factors. Proficient Transport’s main fixed costs include depreciation of long-term assets, such as trucks and trailers (to which Proficient Transport refers as revenue equipment) and service center facilities, the compensation of non-driver personnel and other general and administrative expenses.

Proficient Transport’s Truckload segment requires substantial capital expenditures for purchase of new revenue equipment. Proficient Transport uses a combination of financing leases and secured long-term debt to acquire revenue equipment. When Proficient Transport finances revenue equipment acquisitions with either finance leases or long-term debt, the assets and liabilities are recorded on its consolidated balance sheet, and it records expenses under “Depreciation and amortization” and “Interest expense.” Proficient Transport’s expects its depreciation and amortization and interest expense will be impacted by changes in the percentage of its revenue equipment acquired in any given year.

Brokerage Segment

In the Brokerage segment, Proficient Transport retains the customer relationship, including billing and collection, and Proficient Transport outsources the transportation of the loads to third-party carriers. For this segment, Proficient Transport relies on brokerage employees to procure spot buy arrangement contracts, as well as information systems to match loads and carriers. This segment also includes revenue generated by certain third-party carriers who haul freight for Proficient Transport’s OEM and contract customers. Through 2022, the segment also included revenue generated by owner-operators who haul freight for Proficient Transport’s OEM and contract customers.

Proficient Transport’s Brokerage segment revenue is mainly derived from its customers requiring additional transportation needs to haul freight as their current carriers cannot meet customer demands. The main factors that affect operating revenue in Proficient Transport’s Brokerage segment are its customers’ excess inventory needs, the rates obtained from customers, the freight volumes Proficient Transport’s ships through its third-party carriers and its ability to secure third-party carriers to transport customer freight. Proficient Transport’s Brokerage segment generally does not have contracted long-term rates for the cost of third-party carriers, and Proficient Transport cannot assure that its results of operations will not be adversely impacted in the future if its ability to obtain third-party carriers changes or the rates of such providers increase.

The most significant expense of Proficient Transport’s Brokerage segment, which is primarily variable, is the cost of purchased transportation that Proficient Transport pays to third-party carriers and is included in the “Purchased transportation” line item. This expense generally varies depending upon truckload capacity, availability of third-party carriers, rates charged to customers and current freight demand and customer shipping needs. Other operating expenses are generally fixed and primarily include the compensation and benefits of non-driver personnel (which are recorded in the “Salaries, wages and benefits” line item).

The primary performance indicator in Proficient Transport’s Brokerage segment is its operating margin (brokerage operating revenue, less brokerage operating expenses, as a percentage of brokerage operating revenue). Operating margin can be impacted by the rates charged to customers and the costs of securing third-party carriers. Proficient Transport’s Brokerage segment does not require significant capital expenditures and is not asset-intensive like its Truckload segment.

Fiscal year 2023 compared to Fiscal year 2022

Operating Revenue — Proficient Transport generates revenue from two primary sources: transporting freight for its customers (including related fuel surcharge revenue and other reimbursements) and arranging for the transportation of customer freight by third-party carriers. Proficient Transport has two reportable segments: its Truckload segment and its Brokerage segment. Truckload revenue, before fuel surcharges and other reimbursements, is primarily generated through trucking services provided by Proficient Transport’s two Truckload service offerings: OEM transports and contract. Brokerage revenue before fuel surcharges and other reimbursements is primarily generated through brokering freight to third-party carriers. Fuel surcharges and other reimbursements represent additional revenue Proficient Transport earns based on mileage driven and other reimbursable costs incurred for which it is compensated by its customers.

Proficient Transport’s total operating revenue is affected by, among other things, the general level of economic activity in the United States, customer inventory levels, specific customer demand, the level of capacity in the truckload and brokerage industry, the success of our marketing and sales efforts and the availability of drivers and third-party carriers.

Proficient Transport disaggregates revenue from contracts with its customers for Truckload and Brokerage operations between (1) revenue, before fuel surcharges and reimbursements and (2) fuel surcharges and reimbursements. A summary of Proficient Transport’s revenue generated by type for the periods indicated is as follows:

The increases in total operating revenue and revenue before fuel surcharge, were primarily due to the increases in volume of activity (in the Truckload Segment) and secondarily due to increases in Proficient Transport’s contract pricing. In 2023, Proficient Transport delivered 296,352 units (174,434 Truckload Segment) compared to 297,204 units (168,938 in the Truckload Segment) in 2022. The increases in volume in the Truckload Segment were primarily driven by the reduction in backlog of undelivered cars that had built up over 2021 and 2022. In 2021, Proficient Transport’s OEMs experienced significant microchip supply shortages which resulted in new automobiles being only partially manufactured and not ready for shipment. This shortage continued, albeit to a lesser extent, into 2022. Once the microchip supply shortages were resolved, OEMs completed the production of unfinished cars, creating a need to deliver the excess automobile inventory. Proficient Transport serviced the OEMs’ excess inventory through company-owned vehicles as well as Proficient Transport’s Brokerage segment.

In 2023, approximately 81.5% of Proficient Transport’s operating revenue was derived from its four largest customers, General Motors, Glovis (the logistics arm of Hyundai and Kia), Ford and Mercedes Benz.

A summary of Proficient Transport’s revenue generated by segment for the periods indicated is as follows:

In the Truckload segment, operating revenues increased by $3.8 million, or 9.7%, to $43.4 million in 2023 compared to $39.6 million in 2022. Average revenue per unit increased to $220 from $197 in 2022. The increase in the Truckload segment’s revenue was driven by a $5.2 million increase in truckload services and a $1.4 million decrease in fuel surcharges and other reimbursements. The $5.2 million increase in truckload services was comprised of contractual increases in revenue per unit hauled and the utilization of additional owner operators. The decrease in Proficient Transport’s Truckload fuel surcharge and other reimbursements primarily related to the decrease in fuel prices, which resulted in lower fuel surcharge compensation from Proficient Transport’s customers, as well as fewer reimbursements Proficient Transport earned from the contracts that expired mid-year.

In the Brokerage segment, operating revenues increased by $1.7 million, or 1.9%, to $92.4 million in 2023 compared to $90.6 million in 2022. The increase in the Brokerage segment’s revenue was driven by a $5.1 million increase in brokerage services offset by a $3.4 million decrease in fuel surcharges and other reimbursements. The primary factors driving the increase in brokerage services revenue was Proficient Transport’s ability to expand services under its contract service arrangements to third-party carriers as well as the need for timely transportation of the excess inventory of Proficient Transport’s OEMs.

Salaries, wages and benefits — Salaries, wages, and benefits consist primarily of compensation for all employees. Salaries, wages, and benefits are primarily affected by the amount paid to company drivers, which is a function of the amount of freight hauled and includes units delivered. Salaries, wages and benefits are also affected by employee benefits such as health care and workers’ compensation, and to a lesser extent by the number of, and compensation and benefits paid to, non-driver employees.

Salaries, wages and benefits decreased by $2.5 million, or 10.7%, to $20.4 million in 2023 compared to $22.9 million in 2022. The decrease is primarily related to Proficient Transport’s smallest contract expiring in June of 2023, which resulted in the termination of approximately 30 drivers. Additionally, approximately 20 drivers transitioned from company drivers to owner-operators during 2023.

Fuel and fuel taxes — Fuel and fuel taxes consist primarily of diesel fuel expense and fuel taxes for Proficient Transport’s company-owned equipment. The primary factors affecting Proficient Transport’s fuel and fuel taxes expense are the cost of fuel per mile and the number of miles driven by company drivers.

Fuel and fuel taxes decreased by $2.7 million, or 38.2%, to $4.5 million in 2023 compared to $7.2 million in 2022. The decrease in fuel and fuel taxes was driven primarily by the decrease in price per gallon for diesel fuel, which declined from an annual average of $4.99 per gallon in 2022 to $4.21 per gallon in 2023, according to the Department of Energy. For 2023, the average cost of fuel per mile was $0.79 compared to $1.11 in 2022 and the total number of miles driven in 2023 was 10 million compared to 9.2 million in 2022. Additionally, the expiration of Proficient Transport’s smallest fleet contract mid-year resulted in less fuel being purchased in 2023.

Purchased transportation — Purchased transportation consists of the payments Proficient Transport makes to owner-operators and third-party carriers.

Purchased transportation increased by $13.5 million, or 19.2%, to $83.8 million in 2023 compared to $70.3 million in 2022. The increase in purchased transportation was driven by two factors: Proficient Transport had approximately 20 company drivers become owner-operators during 2023 and Proficient Transport added third-party carriers to its contract service arrangement.

Truck Expenses — Truck expenses consist of operating expenses and supplies incurred for ordinary vehicle repairs and maintenance costs, driver on-the-road expenses and tolls.

Operating expenses and supplies are primarily affected by the age of Proficient Transport’s company-owned and leased fleet of trucks and trailers, the number of miles driven in a period and driver turnover. Truck expenses decreased 0.4% to $7.0 million in 2023 compared to $7.1 million in 2022. Truck expenses as a percentage of operating revenue decreased from 5.4% in 2022 to 5.2% in 2023 due to the disproportional increase in Brokerage segment activity, which operates under an asset-light model and does not incur truck expenses.

Depreciation and amortization — Depreciation and amortization consist primarily of depreciation for owned trucks and trailers and to a lesser extent computer software amortization. The primary factors affecting these expense items include the size and age of Proficient Transport’s truck and trailer fleets, the cost of new equipment and the relative percentage of owned revenue equipment and equipment acquired through debt or finance leases.

Depreciation and amortization and the gain on sale of equipment increased by $0.1 million, or 4.9%, to $2.3 million in 2023 compared to $2.2 million in 2022. The increase in depreciation and amortization and the gain on sale of equipment was driven by an increase in the average depreciation offset by gains recognized on sold equipment.

Insurance premiums and claims — Insurance premiums and claims consist primarily of retained amounts for liability (personal injury and property damage), physical damage and cargo damage, as well as insurance premiums. The primary factors affecting Proficient Transport’s insurance premiums and claims are the frequency and severity of accidents, trends in the development factors used in Proficient Transport’s actuarial accruals and developments in large, prior year claims. The number of accidents tends to increase with the miles we travel. With our significant retained amounts, insurance claims expense may fluctuate significantly and impact the cost of insurance premiums and claims from period-to-period, and any increase in frequency or severity of claims or adverse loss development of prior period claims would adversely affect Proficient Transport’s financial condition and results of operations.

Insurance premiums and claims increased by $0.6 million, or 23.8%, to $3.2 million in 2023 compared to $2.6 million in 2022. The increase in insurance premiums and claims was driven by an increase in Proficient Transport’s premiums.

Operating taxes and licenses — Operating taxes and licenses consist of property and use taxes. Operating taxes and licenses increased by $114,599 or 83.5%, to $251,789 in 2023 compared to $137,190 in 2022. The increase in operating taxes and licenses was driven by the increase in operating revenue.

General, selling, and other operating expenses — General, selling, and other operating expenses consist primarily of legal and professional services fees, general and administrative expenses, and other costs. General, selling, and other operating expenses increased by $0.8 million, or 27.6%, to $3.9 million in 2023 compared to $3.0 million in 2022. The increase in general, selling, and other operating expenses was primarily due to increased legal fees, as well as the overall increase in general expenses such as repairs and maintenance at our owned facility, operations, and utilities.

Interest expense, net — Interest expense, net consists of cash interest, amortization of deferred financing fees, net of any interest income received from financial institutions. Interest expense, net decreased by $0.2 million, or 18.0%, to $1.0 million in 2023 compared to $1.2 million in 2022. The decrease was primarily due to the interest income earned from the Lease to Purchase program with our owner-operators.

Operating ratio — Operating ratio is calculated as total operating expenses as a percentage of operating revenue. Proficient Transport’s operating ratio increased by 3.7% to 92.4% in 2023 as compared to 88.7% in 2022. The increase in costs was primarily due to the increase in purchase transportation activity in Proficient Transport’s Brokerage segment.

EBITDA — EBITDA decreased by $4.1 million, or 24.2%, to $12.9 million in 2023 compared to $17.0 million in 2022. The decrease was primarily due to the $3.2 million decrease in net income as well as the $0.9 million decrease in income taxes, which is an add back for the EBITDA calculation. See “Non-GAAP Financial Measure” section below for Proficient Transport’s calculation of EBITDA.

Non-GAAP Financial Measure

EBITDA

EBITDA is a supplemental non-GAAP financial measure used by management of Proficient Transport. Proficient Transport defines EBITDA as net income (loss) before (i) interest expense, net, (ii) tax expense (benefit), and (iii) depreciation and amortization expense. Proficient Transport believes that EBITDA is useful because it provides a more effective evaluation of Proficient Transport’s operating performance and allows comparison of Proficient Transport’s results of operations from period to period without regard to Proficient Transport’s financing methods or other items that impact comparability of financial results from period to period such as fluctuations in interest expense or effective tax rates, levels of depreciation and amortization, or any unusual items. EBITDA should not be considered as an alternative to, or more meaningful than, net income, operating ratio, or any other measure as determined in accordance with GAAP. Proficient Transport’s computation of EBITDA may not be comparable to EBITDA of other companies. Proficient Transport presents EBITDA because management believes these metrics provide useful information regarding the factors affecting Proficient Transport’s operations.

The following table presents a reconciliation of EBITDA to the GAAP financial measure of net income for each of the periods indicated.

The increases in total operating revenue and revenue, before fuel surcharge and other reimbursements, were primarily due to the increases in volume of activity and secondarily due to increases in Proficient Transport’s contract pricing. In 2022, Proficient Transport delivered 297,204 units compared to 194,247 in 2021. In particular, in early 2021, Proficient Transport’s OEMs experienced significant microchip supply shortages, which resulted in new automobiles being only partially manufactured and not ready for shipment. The lower levels of shipping resulted in lower operating revenue in early 2021. Later in 2021, and continuing into 2022, the microchip shortages were resolved. Once the microchip supply shortages were resolved, OEMs completed the production of unfinished cars and ended up with excess inventory of automobiles that needed to be delivered. Proficient Transport serviced the OEMs’ excess inventory through company-owned vehicles as well as the Brokerage segment.

In 2022, approximately 79% of Proficient Transport’s operating revenue was derived from its four largest customers: General Motors, Mercedes Benz, Glovis (the logistics arm of Hyundai and Kia) and Ford.

A summary of Proficient Transport’s revenue generated by segment for the periods indicated is as follows:

In the Truckload segment, operating revenues increased by $5.7 million, or 16.7%, to $39.6 million in 2022 compared to $33.9 million in 2021. Average revenue per unit in 2022 increased slightly to $197 from $196 in 2021. The increase in the Truckload segment’s revenue was driven by a $3.6 million increase in truckload services and a $2.1 million increase in fuel surcharges and other reimbursements. The primary factors affecting the increase in truckload services were Proficient Transport’s ability to secure price increases in its predetermined contract rates as well as a full year of servicing a new contract service arrangement it obtained in 2021. The increase in Truckload fuel surcharge and other reimbursements primarily related to the rise in fuel prices which resulted in higher fuel surcharge compensation from Proficient Transport’s customers.

In the Brokerage segment, operating revenues increased by $61.4 million, or 210.8%, to $90.6 million in 2022 compared to $29.1 million in 2021. The increase in the Brokerage segment’s revenue was driven by a $55.3 million increase in brokerage services and a $6.2 million increase in fuel surcharges and other reimbursements. The primary factors driving the increase in Brokerage revenue were Proficient Transport’s ability to expand its services under its contract service arrangements to third-party carriers as well as the need for timely transportation of excess inventory of Proficient Transport’s OEMs. Proficient Transport also at times receives fuel surcharge and other reimbursements on freight hauled by third-party carriers, which increased in 2022 compared to 2021 due to a rise in fuel prices resulting in higher fuel surcharge compensation from customers.

Salaries, wages and benefits — Salaries, wages and benefits increased by $4.9 million, or 26.9%, to $22.9 million in 2022 compared to $18.0 million in 2021. The increase was due primarily to (i) higher driver wages, which was the result of increased company driver miles, with an increase in driver pay per mile, and an increase in office wages to support the increased activity and revenue and (ii) an increase in the number of employees due to growth. In addition, group health and workers’ compensation expense increased due to increased group health claims expense combined with an increase in workers’ compensation premiums.

Fuel and fuel taxes — Fuel and fuel taxes increased by $2.4 million, or 51.2%, to $7.2 million in 2022 compared to $4.8 million in 2021. The increase in fuel and fuel taxes was driven primarily by the increase in price per gallon for diesel fuel, which increased from an annual average of $3.29 per gallon in 2021 to $4.99 per gallon in 2022, according to the Department of Energy. For 2022, the average cost of fuel per mile was $1.11 compared to $0.58 in 2021 and the total number of miles driven in 2022 was 9.2 million compared to 10.7 million in 2021.

Purchased transportation — Purchased transportation increased by $46.5 million, or 195.1%, to $70.3 million in 2022 compared to $23.8 million in 2021. The increase in purchased transportation was driven by the addition of third-party carriers used in the expansion of Proficient Transport’s contract service arrangements and an increase in demand from customers whose current carriers could not fulfill their freight requirements.

Truck Expenses — Truck expenses increased by $0.7 million, or 10.9%, to $7.1 million in 2022 compared to $6.4 million in 2021. The increase in truck expenses was primarily driven by increased maintenance services on existing and new trucks. However, truck expenses as a percentage of operating revenue decreased from 10.1% in 2021 to 5.4% in 2022 due to the disproportional increase in Brokerage segment activity, which operates under an asset-light model and does not incur truck expenses.

Depreciation and amortization, net of gain on sale of equipment — Depreciation and amortization, net of gain on sale of equipment increased by $0.1 million, or 0.6%, to $2.3 million in 2022 compared to $2.3 million in 2021. The increase in depreciation and amortization was driven by an increase in the average depreciation offset by lower gains recognized on sold equipment.

Insurance premiums and claims — Insurance premiums and claims decreased by $0.2 million or 5.2%, to $2.6 million in 2022 compared to $2.7 million in 2021. The decrease in insurance premiums and claims was driven by a reduction in the number of auto liability claims filed and enhancement made to our training and safety programs, partially offset by an increase in insurance premiums.

Operating taxes and licenses — Operating taxes and licenses consists of property and use taxes. Operating taxes and licenses increased by $19,913, or 17.0%, to $137,190 in 2022 compared to $117,277 in 2021. The increase in operating taxes and licenses was driven by the increase in operation revenue.

General, selling, and other operating expenses — General, selling, and other operating expenses increased by $0.5 million, or 20.2%, to $3.0 million in 2022 compared to $2.5 million in 2021. The increase in general, selling, and other operating expenses was primarily due to increased legal fees, as well as the overall increase in general expenses such as repairs and maintenance at our owned facility, operations, and utilities.

Gain on forgiveness of Paycheck Protection Program loan — Gain on forgiveness of the Paycheck Protection Program loan decreased by $2.1 million, or 100.0% to $0 in 2022 compared to $2.1 million in 2021. The decrease was due to Proficient Transport receiving a one-time loan forgiveness permitted by the Small Business Administration in 2021.

Interest expense, net — Interest expense, net increased by $38,212, or 3.4%, to $1.2 million in 2022 compared to $1.1 million in 2021. The increase was primarily due to the increase in borrowings in 2022 as well as increasing interest rates on Proficient Transport’s line of credit.

EBITDA — EBITDA increased by $10.1 million, or 145.5%, to $17.0 million in 2022 compared to $6.9 million in 2021. The increase was primarily due to the $7.2 million increase in net income as well as the $2.8 million increase in income taxes, which is an add back for the EBITDA calculation. The following table presents a reconciliation of EBITDA to the GAAP financial measure of net income for each of the periods indicated.

Operating ratio — Operating ratio is calculated as total operating expenses as a percentage of operating revenue. Our operating ratio decreased by 7.3% to 88.7% in 2022 as compared to 96.0% in 2021. The decrease in operating ratio year-over-year is attributable to the operating leverage of fixed expenses in combination with a material increase in operating revenue for this segment.

Liquidity and Capital Resources

Overview

Proficient Transport’s business requires substantial amounts of cash to cover operating expenses as well as to fund capital expenditures, working capital changes, principal and interest payments on Proficient Transport’s obligations, lease payments and tax payments when Proficient Transport generates taxable income. Recently, Proficient Transport has financed its capital requirements with borrowings under its credit facility, cash flows from operating activities, direct equipment financing, and proceeds from equipment sales. Proficient Transport intends to purchase approximately ten tractors and trailers in the coming year and plans to finance the purchases through a combination of operating cash flows and direct equipment financing.

Proficient Transport believes it can fund its expected cash needs in the short-term, including debt repayment and the capital purchases described above, with projected cash flows from operating activities, borrowings under its credit facility and direct debt and lease financing it believes to be available for at least the next 12 months. Over the long-term, Proficient Transport expects that it will continue to have significant capital requirements, which may require Proficient Transport to seek additional borrowings or lease financing. The availability of financing will depend upon Proficient Transport’s financial condition and results of operations as well as prevailing market conditions.

Sources of liquidity

Proficient Transport has a revolving line of credit with a financial institution that allows Proficient Transport to borrow up to $18.0 million, subject to a borrowing base calculation of qualified accounts receivable plus qualified rolling stock, as defined in the revolving line of credit agreement. As of December 31, 2023 and December 31, 2022, Proficient Transport had an outstanding balance on a revolving line of credit of $3.5 million and $6.3 million, respectively. Interest is payable monthly at the Prime Rate plus 0.75% per annum, but no less than 4% per annum (9.25% as of December 31, 2023). Borrowings against the line of credit are secured by all of Proficient Transport’s assets. In February 2024, Proficient Transport amended the revolving line of credit, extending the maturity date to March 30, 2025. The line of credit requires Proficient Transport to comply with certain restrictive covenants, including but not limited to a debt service coverage ratio, a minimum tangible net worth plus subordinated debt, and a liabilities to tangible net worth plus subordinated debt ratio. The February 2024 amendment to the revolving line of credit includes a $3.0 million advance to fund the litigation settlement described in Footnote 17 of the notes to Proficient Transport’s consolidated financial statements included elsewhere in this prospectus. Additionally, the amendment waived the covenant default for judgments in excess of $25,000 and waived the reporting default by extending the due date for the audited consolidated financial statements.

Operating Activities

In 2023, Proficient Transport generated cash flows from operating activities of $10.7 million, a $4.8 million increase compared to 2022. The increase was primarily due to a decrease in accounts receivable of $6.7 million as well as the deferral of the $3.0 million settlement liability to 2024. The increase in cash flow from operating activities was offset by a decrease in net income of $3.2 million.

Investing Activities

In 2023, Proficient Transport generated cash flows from investing activities of $0.2 million, an increase of $0.6 million compared to 2022. The increase was primarily due to the increase in proceeds from the sale of equipment of $0.5 million compared to 2022.

Financing Activities

In 2023, Proficient Transport used $10.9 million in cash flows from financing activities, an increase of $5.4 million compared to 2022. The increase was primarily due to Proficient Transport paying a $5.0 million dividend to Series A Preferred Stockholders in 2023. Additionally, Proficient Transport had repayments of long-term debt and finance lease obligations of $3.1 million and $2.0 million for the years ended December 31, 2023, and 2022, respectively. These payments were offset by proceeds from the line of credit increasing by $15.8 million while repayments only increased by $15.1 million.

Working Capital

As of December 31, 2023, Proficient Transport had working capital of $8.1 million, a decrease of $1.0 million compared to $9.1 million in 2022. The decrease in working capital was largely due to a $1.5 million increase in accrued liabilities to $7.8 million in 2023 compared to $6.3 million in 2022, as well as an increase in the current portion of long-term debt of $0.7 million to $1.6 million in 2023 compared to $0.9 million in 2022. The decrease was offset by a $1.3 million increase in accounts receivable to $19.8 million in 2023 compared to $18.5 million in 2022.

Contractual obligations

The table below summarizes Proficient Transport’s contractual obligations as of December 31, 2023:

(1)      Includes interest obligation on finance lease obligations.

(2)      Proficient Transport leases certain buildings under long-term, non-cancelable operating lease agreements expiring at various dates through 2024.

Inflation and Fuel Cost

Most of Proficient Transport’s operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. Historically, Proficient Transport has limited the effects of inflation on its business through increases in freight rates and certain cost controls. The most relevant items impacted by inflation to Proficient Transport are the cost to insure and maintain the fleet. Significant inflation has been experienced in insurance and claims costs related to health insurance and claims as well as auto liability insurance and claims. Significant price increases in revenue equipment have impacted the cost for Proficient Transport to acquire new equipment, while there has been a corresponding inflationary impact to prices offered on the sale of its used equipment. The cost increases have also impacted the cost of parts for equipment repairs and maintenance, inclusive of tires. Despite the increased cost to insure and maintain the fleet, the expense to Proficient Transport was unchanged as a percentage of total revenue from the fiscal year ended December 31, 2022 to December 31, 2023; thus, the impact on Proficient Transport’s operating ratio (operating income divided by operating revenue) and net profit has been immaterial. Over the long term, general economic growth and industry supply and demand conditions have allowed rate increases, although these rate increases have significantly lagged the increases in tractor prices and related depreciation expense.

In addition to inflation, significant fluctuations in fuel prices can adversely affect Proficient Transport’s operating results and profitability. Proficient Transport has attempted to limit the effects of increases in fuel prices through certain cost control efforts and its fuel surcharge program. Proficient Transport receives fuel surcharges on all Truckload accounts. Although Proficient Transport historically has been able to pass through most long-term increases in fuel prices and operating taxes to customers in the form of surcharges and higher rates, these arrangements generally do not fully protect Proficient Transport from short-term fuel price increases or continued rising price environments like Proficient Transport experienced throughout 2022 and 2023. These arrangements may also prevent Proficient Transport from receiving the full benefit of any fuel price decreases. Additionally, Proficient Transport generally does not receive fuel surcharge on empty miles.

Insurance claims and accruals

Proficient Transport retains high deductibles on a significant portion of its claims exposure and related expenses associated with third party bodily injury and property damage, employee medical expenses and workers’ compensation, physical damage to its equipment and cargo loss. Proficient Transport currently carries the following material types of insurance, which generally have maximum benefits per claim and other limitations as noted below:

•        Commercial auto liability coverage; approximately $1.0 million of coverage per occurrence with deductible of $50,000 per occurrence.

•        Employer’s excess auto liability coverage; we had a $9.0 million in aggregate coverage.

•        Cargo damage coverage; coverage ranging from $350,000 to $2.0 million of coverage per occurrence with deductibles ranging from $5,000 to $10,000 per occurrence.

•        General liability and physical damage liability; coverage ranges from $195,000 to $1.0 million per occurrence.

•        Worker’s compensation liability; deductible of $500,000 with statutory coverage limits equal to $1.0 million.

•        Employee healthcare; deductible of $125,000 per individual with a stop loss insurance of $1.0 million.

Critical Accounting Policies and Estimates

In the ordinary course of business, Proficient Transport has made a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of its financial statements in conformity with generally accepted accounting principles (“GAAP”). Actual results could differ significantly from those estimates under different assumptions and conditions. Proficient Transport believes that the following discussion addresses its most critical accounting policies, which are those that are most important to the portrayal of its financial condition and results of operations and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. See Note 2 of the accompanying consolidated financial statements for additional information about its critical accounting policies and estimates.

Accounts Receivable

Accounts receivable represents customer obligations due under normal trade terms. Proficient Transport reviews accounts receivable on a continuing basis to determine if any receivables are potentially uncollectible. Proficient Transport writes off uncollectible receivables based on specifically identified amounts determined to be uncollectible. Based on the information available, Proficient Transport recorded an allowance for credit losses of approximately $634,913 and $342,576 at December 31, 2023 and 2022, respectively. Actual write-offs could differ from management’s estimate.

Property and equipment

Property and equipment are carried at cost. Depreciation of property and equipment is computed using the straight-line method for financial reporting purposes and accelerated methods for tax purposes over the estimated useful lives of the related assets (net of estimated salvage value or trade-in value). Proficient Transport generally uses estimated useful lives of five to ten years for trucks and trailers, classified as transportation equipment. The depreciable lives of its revenue generating equipment represent the estimated usage period of the equipment, which is generally substantially less than the economic lives. The residual value of a substantial portion of its equipment is covered by repurchase or trade agreements between Proficient Transport and the equipment manufacturer.

Periodically, Proficient Transport evaluates the useful lives and salvage values of its revenue generating equipment and other long-lived assets based upon, but not limited to, its experience with similar assets, including gains or losses upon dispositions of such assets, conditions in the used equipment market and prevailing industry practices. Changes in the useful lives or salvage value estimates, or fluctuations in market values that are not reflected in its estimates, could have a material impact on its financial results. Further, if its equipment manufacturer does not perform under

the terms of the agreements for guaranteed trade-in values, such non-performance could have a materially negative impact on financial results. Proficient Transport reviews its property and equipment whenever events or circumstances indicate the carrying amount of the asset may not be recoverable. An impairment loss equal to the excess of carrying amount over fair value would be recognized if the carrying amount of the asset is not recoverable.

Income taxes

Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

Proficient Transport evaluates the need for a valuation allowance on deferred tax assets based on whether it believes that it is more likely than not all deferred tax assets will be realized. A consideration of future taxable income is made as well as on-going prudent feasible tax planning strategies in assessing the need for valuation allowances. In the event it is determined all or part of a deferred tax asset would not be able to be realized, management would record an adjustment to the deferred tax asset and recognize a charge against income at that time.

Proficient Transport’s estimate of the potential outcome of any uncertain tax issue is subject to its assessment of relevant risks, facts and circumstances existing at that time. Proficient Transport accounts for uncertain tax positions in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes, and records a liability when such uncertainties meet the more likely than not recognition threshold. Potential accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.

New Accounting Pronouncements

See Note 1 of the consolidated financial statements for a full description of recent accounting pronouncements and the respective dates of adoption and effects on results of operations and financial position.

Delta Automotive Services, Inc.

Results of Operations for the years ended December 31, 2023 to 2022

Operating Revenue — Total operating revenue for the year ended December 31, 2023 increased by $10.5 million, or 23.5%, to $55.1 million as compared to the year ended December 31, 2022. The increase was primarily a result of a $5.6 million increase in Truckload revenue and a $4.9 million increase in Brokerage revenue. In 2023, revenue from fuel surcharge was $2.0 million, which accounts for 4% of total revenue.

The revenue mix between Delta’s company-owned trucks (Truckload) versus sub-haulers (Brokerage) shifted by 2% in 2023 as a percentage of total revenue. Brokerage revenue was $16.0 million for the year ended December 31, 2022, but grew to $21.0 million for the year ended December 31, 2023.

In 2023, nine customers accounted for 81.4% of Delta’s revenue, including BMW (22.8%), VW (12.5%), Mercedes Benz (13.2%), Jaguar/Land Rover (11.9%) and Stellantis (new customer) (19.1%). Delta moved approximately 164,000 units in 2023 as compared to approximately 151,000 units in 2022, for a volume gain of 8.5%.

Salaries, wages and benefits — Salaries, wages and benefits increased by $2.3 million, or 19.6%, to $14.1 million in 2023 compared to $11.8 million in 2022.

Driver wages for the years ended December 31, 2023 and 2022 were $10.3 million and $7.6 million, respectively, inclusive of seniority and performance bonuses for drivers. This cost represented 30% of truck revenues for the year ended December 31, 2023 and 28% in 2022.

Fuel and fuel taxes — Fuel and fuel taxes improved to 17% of truck revenue in 2023 as compared to 20% in 2022. This reduction was primarily caused by the stabilization of fuel prices in 2023 as compared to 2022.

Purchased Transportation — Purchased transportation increased by $4.9 million, or 47.6%, to $15.3 million in 2023 compared to $10.4 million in 2022. The increase was primarily caused by the increased activity from sub-haulers in 2023 as compared to 2022. The increase in purchased transportation aligns with the increase in revenue from sub-haulers in 2023, as compared to 2022.

Truck expenses — Truck expenses decreased by $0.1 million to $2.2 million in 2023 compared to $2.3 million in 2022 despite the increased activity in 2023. The decrease was primarily caused by Delta’s rigid maintenance program at its truck repair facility to limit the amount of truck repairs cost.

Depreciation and amortization — Depreciation and amortization increased by $0.5 million, or 9.7%, to $6.0 million in 2023 compared to $5.5 million in 2022. The increase was primarily caused by the deprecation on newly acquired assets.

Insurance claims and premium — Insurance claims and premium increased by $0.7 million, or 27% to $3.4 million in 2023 compared to $2.7 million in 2022. The increase was primarily due to the increase in activity and the increased number of new units. Delta had 106 truck/tractors in 2023 while it had 85 in 2022.

Operating taxes and licenses — Operating taxes and licenses increased by $0.5 million, or 24.4%, to $2.3 million in 2023 as compared to $1.8 million in 2022. The higher expenditures were brought about by increased operating activities.

General, selling, and other operating expenses — General, selling, and other operating expenses increased by $1.1 million to $2.0 million in the year ended December 31, 2023 compared to 2022. The increase was primarily caused by increased support for the revenue generating activities in 2023 as compared to 2022. One-time professional charges incurred by Delta related to the Combinations of $0.8 million contributed to this increase.

Interest expenses, net — Interest expenses, increased by $0.3 million, or 32.6%, to $1.1 million in 2023 compared to $0.9 million in 2022. The increase was primarily caused by the new truck additions in 2023 as well as increased financing cost.

EBITDA — EBITDA increased by $1.1 million, or 10.4% to $11.4 million in 2023 compared to $10.3 million in 2022.

Results of Operations for the years ended December 31, 2022 to 2021

Operating Revenue — Total operating revenue for the year ended December 31, 2022 increased by $11.1 million, or 33.5%, to $44.6 million as compared to the year ended December 31, 2021. The increase was primarily a result of a $4.5 million increase in Truckload revenue and a $6.6 million increase in Brokerage revenue. In 2022, revenue from fuel surcharge was $3.6 million, which accounts for 8.1% of total revenue.

In 2022, the automobile industry continued to stabilize following the COVID-19 pandemic and the supply chain challenges in 2020 and 2021. Price increases from OEMs in the latter half of 2022 drove revenue increases and increased gross margin.

The revenue mix between company-owned trucks (Truckload) versus sub-haulers (Brokerage) dramatically shifted in 2022. Brokerage revenue was $9.5 million for the year ended December 31, 2021, but grew to $16.1 million for the year ended December 31, 2022.

In 2022, 5 customers accounted for 72.3% of Delta’s revenue, including BMW (24.3%), VW (18.6%), Mercedes Benz (12.2%), Jaguar/Land Rover (11.2%) and Stellantis (6.0%). Delta moved roughly 151,000 units in 2022 as compared to 145,000 units in 2021, for a volume gain of 4%.

Salaries, wages and benefits — Salaries, wages and benefits increased by $0.7 million or 6%, to $11.7 million in 2022 compared to $11.0 million in 2021. Driver wages for the years ended December 31, 2022 and 2021 were $7.6 million and $6.6 million, respectively, inclusive of seniority and performance bonuses for drivers. This cost was 27% of truck revenues for each of the years ended December 31, 2022 and 2021.

Fuel and fuel taxes — Fuel and fuel taxes increased by $2.1 million, or 54.8%, to $6.0 million in 2022 compared to $3.9 million in 2021. The increase in fuel and fuel taxes was primarily caused by the increase in diesel fuel costs throughout 2022 as compared to 2021.

Purchased transportation — Purchased transportation increased by $2.5 million, or 32.1%, to $10.4 million in 2022 compared to $7.9 million in 2021. The increase was primarily caused by the increased activity from sub-haulers in 2022 as compared to 2021. The increase in purchased transportation aligns with the increase in revenue from sub-haulers in 2022, as compared to 2021.

Truck expenses — Truck expenses increased by $0.2 million, or 9.7%, to $2.3 million in 2022 compared to $2.1 million in 2021. The increase in truck expenses was primarily caused by increased truck repair and maintenance costs as a result of the increase in activity. We maintain a rigid maintenance program at our truck repair facility to limit the amount of truck repairs cost.

Depreciation and amortization, net of gain on sale of equipment — Depreciation and amortization, net of gain on sale of equipment decreased by $1.4 million, or 27.0%, to $3.7 million in 2022 compared to $5.1 million in 2021. The decrease was primarily caused by the periodical sales of older equipment at the end of their useful lives.

Insurance claims and premiums — Insurance claims and premiums increased by $0.1 million, or 4.3%, to $2.8 million in 2022 compared to $2.7 million in 2021. The increase was primarily due to the increase in activity, offset by our negotiations with our brokers for more economical premiums.

Operating taxes and licenses — Operating taxes and licenses decreased by $34,935, or 10.4%, to $302,539 in 2022 as compared to $0.3 million in 2021.

General, selling, and other operating expenses — General, selling, and other operating expenses increased by $0.4 million, or 16.5%, to $2.6 million in 2022 compared to $2.2 million in 2021. The increase was primarily caused by increased support for the revenue generating activities in 2022 as compared to 2021.

Interest expenses, net — Interest expenses, net decreased by $0.3 million, or 25.7%, to $0.9 million in 2022 compared to $1.2 million in 2021. The decrease was primarily caused by the reduction in new truck additions in 2022 as compared to 2021, requiring less debt financing.

EBITDA — EBITDA increased by $4.4 million, or 74.8%, to $10.3 million in 2022 compared to $5.9 million in 2021. The increase was primarily caused by the $4.7 million increase in net income.

Liquidity and Capital Resources

Delta added 32 units to its truck fleet in 2023 at an aggregate cost of $11.5 million, while it disposed of ten older units and lost one through theft. Total truck count in 2023 was 106 units, an increase of 21 units as compared to 2022.

As of December 31, 2023 and 2022, Delta had total debt related to truck purchases of $21.4 million and $18.5 million, respectively. Delta’s loans had an average interest rate of 6.75% as of December 31, 2023 as compared to 6.5% in 2022.

For the year ended December 31, 2023, Delta generated cash from operating activities of $7.8 million, a $0.2 million increase as compared to the year ended December 31, 2022. The increase was primarily due to an increase in net income in 2023.

Cash flow from investing activities decreased cash by $2.0 million for the year ended December 31, 2023, primarily attributable to the cash purchase of six units, taking advantage of available cash and to avoid high interest costs.

Cash flow used in financing activities was $6.1 million for the year ended December 31, 2023 as compared to $7.2 million the year ended December 31, 2022. For the year ended December 31, 2023, substantially all of the amount was due to principal payments of long-term debt obligations. For the year ended December 31, 2022, $6.3 million was used for the principal payments of long-term debt obligations.

Deluxe Auto Carriers, Inc.

Results of Operations for the years ended December 31, 2023 to 2022

Operating revenue — Total transportation revenue for the year ended December 31, 2023 increased by $18.2 million to $94.7 million as compared to 2022. The increase was primarily a result of new contract wins, increased auto deliveries from existing contracts and price increases. In 2023, a substantial portion of Deluxe’s net revenue was derived from three customers, General Motors, BMW and VW, which collectively were 65% of Deluxe’s total net revenue.

A summary of Deluxe’ s revenue generated for the periods indicated is as follows:

Operating income for the year ended December 31, 2023 was $2.2 million as compared to operating income of $2.0 million for the same period in 2022. The primary factors driving the increase were increased revenue from operations and price increases, primarily offset by increases in purchased transportation related to an increase in the number of company trucks and drivers compared to sub-haulers.

Truck sale revenue in the year ended December 31, 2023 fell to a de minimis amount compared to 2022 and was related to the sale of older trucks.

Operating Expense

Salaries, wages, and benefits and general, selling, and other operating expenses — Salaries, wages, and benefits and general, selling, and other operating expenses for the year ended December 31, 2023 were $22.0 million as compared to $20.0 million for 2022. The increase in compensation and general, selling and other operating expenses were purely a function of increased staff to service the increased revenue.

Depreciation and amortization — Depreciation and amortization for the year ended December 31, 2023 was $5.6 million as compared to $6.2 million for 2022. The decrease was primarily a result of truck sales, while waiting for the new trucks on order to be delivered.

Interest expense — Interest expense for the year ended December 31, 2023 was $0.7 million as compared to $0.9 million for 2022. In 2023, interest expense declined due to reduction in Deluxe’ s loan balances as a result of loan payments and decreased purchases of new fleet units.

Net Income — Net Income for the year ended December 31, 2023 was $1.4 million as compared to net income of $5.9 million in 2022. The decrease was primarily attributable to a combination of having no truck sales in 2023 and no Employee Retention Credit income as compared to 2022.

Results of Operations for the years ended December 31, 2022 to 2021

Operating revenue — Operating Revenue increased by $16.7 million, or 28.1%, to $76.5 million for the year ended December 31, 2022 as compared to $59.7 million in 2021.

Truckload revenue increased by $19.4 million, or 32.9%, to $74.9 million for the year ended December 31, 2022 as compared to $58.7 million for the year ended December 31, 2021. The increase was primarily a result of new contract wins, increased vehicle deliveries from existing contracts, price increases and fuel surcharge increases.

Purchased Transportation — Purchased transportation increased by $10.0 million, or 45.5%, to $32.0 million for the year ended December 31, 2022 as compared to $22.0 million in 2021. The increase was primarily caused by the increase in volume of activity that was serviced through the use of sub-haulers in 2022 compared to 2021.

Salaries, wages and benefits — Salaries, wages and benefits increased by $2.5 million, or 16.6%, to $17.5 million for the year ended December 31, 2022 as compared to $15.0 million in 2021. The increase was primarily due to an increase in driver wages as well as an increase in administrative salaries to assist with the increase in activity.

Fuel and fuel taxes — Fuel and fuel taxes increased by $2.0 million, or 27.3%, to $9.3 million for the year ended December 31, 2022 as compared to $7.3 million in 2021. The increase was primarily due to an increase in operating activity exacerbated by an increase in diesel fuel costs in 2022 as compared to 2021.

Depreciation and amortization — Depreciation and amortization decreased by $1.6 million, or 20.4%, to $6.2 million as compared to $7.8 million for the year ended December 31, 2021. The decrease was primarily caused by the sale of older trucks purchased during 2016 and 2017 reaching the end of their useful lives and a reduction in new truck acquisitions in 2022.

Insurance premiums and claims — Insurance premiums and claims decreased by $0.7 million, or 16.8%, to $3.3 million for the year ended December 31, 2022 as compared to $4.0 million in 2021.

Truck expenses — Truck expenses increased by $0.7 million, or 33.8%, to $2.8 million for the year ended December 31, 2022 as compared to $2.1 million in 2021. The increase was primarily caused by increased truck maintenance and repairs incurred due to an increase in activity in 2022 as compared to 2021.

General, selling, and other operating expenses — General, selling, and other operating expenses increased by $0.1 million, or 4.9%, to $2.5 million for the year ended December 31, 2022 as compared to $2.4 million in 2021.

Operating taxes and licenses — Operating taxes and licenses decreased by $0.3 million, or 27.9%, to $0.7 million for the year ended December 31, 2022 as compared to $1.0 million in 2021.

Interest expense — Interest expense decreased by $0.3 million, or 24.2%, to $0.9 million for the year ended December 31, 2022 as compared to $1.1 million in 2021. The decrease was primarily caused by a reduction in truck loan balances as a result of loan payments and decreased purchases of new trucks.

EBITDA — EBITDA increased by $4.9 million, or 59.7%, to $13.0 million for the year ended December 31, 2022 as compared to $8.1 million in 2021. The increase was primarily due to an increase in operating revenues, which was offset by an increase in operating expenses.

For the year ended December 31, 2023, Deluxe generated cash flows from operating activities of $8.5 million, a $1.9 million increase compared to 2022. The increase was primarily due to an improvement in accounts receivables collections. For 2023, net cash flows used in investing activities were down primarily through a lack of truck sales in 2023. For 2023, the net cash flows used in financing activities was lower by $3.5 million compared to 2022, which was due to fewer truck sales and the subsequent reduction in debt associated with the trucks sold.

As of December 31, 2023, Deluxe had working capital of $3.4 million, representing a $0.2 million decrease compared to the working capital total of $3.2 million as of December 31, 2022. This decrease was largely due to increases in trade payables attributable to increases in revenue.

Sierra Mountain Group, Inc.

Results of Operations for the years ended December 31, 2023 and 2022

Operating revenues — Operating revenues increased by $0.8 million, or 1.1%, to $74.6 million for the year ended December 31, 2023 as compared to $73.8 million in 2022.

Truckload revenue increased by $0.9 million, or 1.3%, to $72.5 million for the year ended December 31, 2023 as compared to $71.6 million in 2022. The increase was primarily a result of price increases. For the year ended December 31, 2023, a substantial portion of Sierra’s total revenue was derived from five customers (Toyota, Stellantis, General Motors, Ford and Mercedes Benz), which comprised 78.8% of total revenue. Lease revenue decreased by $0.1 million, or 4.5%, to $2.1 million for the year ended December 31, 2023 as compared to $2.2 million in 2022.

Operating Expenses

Salaries, wages and benefits — Salaries, wages, and benefits decreased by $0.9 million, or 13.4%, to $5.8 million for the year ended December 31, 2023 as compared to $6.7 million in 2022. The decline in compensation was the result of consolidation of job duties and responsibilities offset by wage and salary increases.

Fuel and fuel taxes — Fuel and fuel taxes increased by $0.3 million, or 54.0%, to $0.8 million for the year ended December 31, 2023 as compared to $0.5 million in 2022. The increase was primarily caused by adding more employee drivers to the fleet in the second half of 2023.

Purchased transportation — Purchased transportation increased by $1.2 million, or 2.1%, to $57.7 million for the year ended December 31, 2023 as compared to $56.5 million in 2022. The increase was the result of increased fuel service charges.

Truck expenses — decreased by $66,000, or 9.0%, to $665,000 for the year ended December 31, 2023 as compared to $731,000 in 2022.

Depreciation and amortization — Depreciation and amortization increased by $0.2 million, or 40.8%, to $0.8 million for the year ended December 31, 2023 as compared to $0.7 million in 2022. The increase was primarily the result of adding employee drivers and equipment to the fleet in the second half of 2023.

Insurance premiums and claims — Insurance premiums and claims increased by $0.3 million, or 42.9%, to $1.0 million for the year ended December 31, 2023 as compared to $0.7 million in 2022.

Operating taxes and licenses — Operating taxes and licenses decreased by $10,000, or 33.3%, to $20,000 for the year ended December 31, 2023 as compared to $30,000 in 2022.

General, selling, and other operating expenses — General, selling and other operating expenses decreased by $2.5 million, or 42.4%, to $3.4 million for the year ended December 31, 2023 as compared to $5.9 million in 2022. The decrease was primarily caused by the 2022 settlement of a class action lawsuit for $3.1 million. This was offset by legal and consulting costs associated with the sale of the company of $0.4 million.

Interest expense, net — Interest expense, net for the year ended December 31, 2023 did not change from the 2022 costs of $0.8 million.

EBITDA — EBITDA increased by $2.1 million, or 70.0%, to $5.4 million for the year ended December 31, 2023 as compared to $3.0 million in 2022. The increase was primarily caused by the 2022 legal settlement charge of $3.1 million.

Results of Operations for the years ended December 31, 2022 to 2021

Operating revenues — Operating revenues increased by $4.5 million, or 6.4%, to $73.8 million for the year ended December 31, 2022 as compared to $69.3 million in 2021.

Truckload revenue increased by $5.1 million, or 7.7%, to $71.6 million for the year ended December 31, 2022 as compared to $66.5 million in 2021. The increase was primarily a result of a $2.0 million increase in new revenue and a $3.0 million increase from increased volume, price and fuel service charges. Fuel surcharge revenue increased by $4.4 million, or 366.7%, to $5.6 million for the year ended December 31, 2022 as compared to $1.2 million in 2021.

For the year ended December 31, 2022, a substantial portion of Sierra’s total revenue was derived from four customers (Toyota, Stellantis, Mercedes Benz and General Motors), which comprised 63% of total transportation revenue. Lease revenue decreased by $0.7 million, or 24.1%, to $2.2 million for the year ended December 31, 2022 as compared to $2.9 million in 2021. The decrease was primarily due to a decline in purchases of new trucks in conjunction with the sale of existing trucks during the years ended December 31, 2021 and 2020, respectively, which resulted in a lower quantity of units that could be leased in 2022.

Operating Expenses

Salaries, wages and benefits — Salaries, wages, and benefits decreased by $119,000, or 1.7%, to $6.7 million for the year ended December 31, 2022 as compared to $6.8 million in 2021. The decline in compensation was the result of consolidation of job duties and responsibilities offset by wage and salary increases.

Fuel and fuel taxes — Fuel and fuel taxes increased by $0.1 million, or 33.5%, to $0.5 million for the year ended December 31, 2022 as compared to $0.4 million in 2021. The increase was primarily caused by the increase in fuel prices in 2022 as compared to 2021.

Purchased transportation — Purchased transportation increased by $5.3 million, or 10.4%, to $56.6 million for the year ended December 31, 2022 as compared to $51.1 million in 2021. The increase was the result of increased volume and increased fuel service charges.

Truck expenses — Truck expenses increased by $79,000, or 12.1%, to $731,000 for the year ended December 31, 2022 as compared to $652,000 in 2021.

Depreciation and amortization — Depreciation and amortization decreased by $0.1 million, or 13.7%, to $0.6 million for the year ended December 31, 2022 as compared to $0.7 million in 2021. The decrease was primarily the result of a decrease in purchases of new trucks and existing trucks nearing the end of their useful lives.

Insurance premiums and claims — Insurance premiums and claims decreased by $0.1 million, or 12.5%, to $0.7 million for the year ended December 31, 2022 as compared to $0.8 million in 2021.

Operating taxes and licenses — Operating taxes and licenses decreased by $2,000, or 6.3%, to $30,000 for the year ended December 31, 2022 as compared to $32,000 in 2021.

General, selling, and other operating expenses — General, selling and other operating expenses increased by $2.9 million, or 93.1%, to $5.9 million for the year ended December 31, 2022 as compared to $3.0 million in 2021. The increase was primarily caused by the settlement of a class action lawsuit for $3.1 million in 2022.

Interest expense, net — Interest expense, net decreased by $0.2 million, or 19.9%, to $0.8 million for the year ended December 31, 2022 as compared to $1.0 million in 2021. The decrease was primarily caused by a reduction in our loan balances as a result of decreased purchases of new trucks for lease in the prior years and continuing throughout 2022.

EBITDA — EBITDA decreased by $3.8 million, or 55.3%, to $3.0 million for the year ended December 31, 2022 as compared to $6.8 million in 2021. The decrease was attributed to an overall 12.7% increase in our operating expenses as opposed to only a 6.4% increase in total operating revenue for the year ended December 31, 2022 as compared to 2021. Sierra recognized the cost of a legal settlement in 2022 in the amount of $3.1 million, which is included in operating expenses. This unusual expense had a material adverse effect on operating income and EBITDA reported for that year.

Liquidity and Capital Resources

As of December 31, 2023 and 2022, Sierra had total debt related to truck purchases of $13.4 million and $11.9 million, respectively. Sierra’s loans have an average interest rate of 5.65%.

For the year ended December 31, 2023, Sierra’s cash flows from operating activities increased by $3.5 million, or 56.5%, to $9.7 million compared to $6.2 million in 2022. The increase was primarily due to the improvement of collection of trade receivables from two of Sierra’s major customers in 2023.

Cash flows used by investing activities increased by $6.5 million, or 209.7%, to 3.4 million for the year ended December 31, 2023 as compared to cash flows provided of $3.1 million in 2022. The change in cash flow was primarily due to the capital expenditures related to the increase in company drivers and trucks in the second half of 2023 as well as the proceeds from the bulk sale of vehicles in 2022.

Cash flows used in financing activities decreased by $5.5 million, or 56.1%, to $4.3 million for the year ended December 31, 2023, primarily due to the increase in new equipment financing and a decline in shareholder distributions.

Tribeca Automotive Inc.

Results of Operations for the years ended December 31, 2023 and 2022

Operating Revenue — Total operating revenue for the year ended December 31, 2023 increased by $4.7 million, or 9.3%, to $54.8 million as compared to $50.1 million the year ended December 31, 2022. The increase was primarily a result of a mix of higher volumes from existing customers, new customers and higher prices. In 2023, revenue from fuel surcharge was $4.4 million, accounting for 8.0% of total revenue, which is consistent as a percentage over the prior year.

The revenue mix between company-owned trucks (Truckload) versus sub-haulers (Brokerage) increased from 6.6% of revenue in 2022 to 9.7% in 2023 due mainly to an overall increase in business.

In 2023, 10 customers accounted for 99.3% of Tribeca’s revenue, including Toyota (9.6%), Glovis (23%), Tesla (11.4%), Stellantis (12.6%), Mercedes (10.0%), Mazda (6.5%) and Nissan (8.5%). Tribeca moved approximately 300,100 units in 2023 as compared to approximately 261,000 units in 2022 for a volume gain of 15%.

Salaries, wages and benefits — Driver salaries, wages and benefits increased by $0.1 million, or 2.5%, to $5.5 million for the year ended December 31, 2023 as compared to $5.4 million in 2022 but decreased by 0.6% of revenue for the year ended December 31, 2023 as compared to 2022. This cost was roughly 10.7% of truck revenues for the year ended December 31, 2022 and 10.1% for the year ended December 31, 2023. The decrease was due to a strategic shift to lump drivers into smaller regions and share more routes to eliminate empty miles and improve efficiency.

Fuel and fuel taxes — Fuel and fuel taxes decreased by $1.5 million, or 16%, to $7.9 million for the year ended December 31, 2023 as compared to $9.4 million in 2022. The decrease in fuel and fuel taxes was primarily caused by the price stabilization of diesel fuel costs throughout 2023 as compared to 2022.

Purchased Transportation — Purchased transportation increased by $1.4 million, or 8.7%, to $16.7 million for the year ended December 31, 2023 as compared to $15.3 million in 2022. The increase in purchased transportation was primarily caused by the increase in sub-haulers revenue; however, purchased transportation did not increase at the same rate as revenue because customers were serviced using company-owned trucks rather than sub-haulers.

Truck repair and maintenance expenses — Truck expenses decreased by $0.01 million, or 0.4%, to $2.61 million for the year ended December 31, 2023 as compared to $2.62 million in 2022. Tribeca maintains a rigid maintenance program at Tribeca’s truck repair facility to limit the amount of truck repairs costs.

Depreciation and amortization, net of gain on sale of equipment — Depreciation and amortization, net of gain on sale of equipment increased by $1.4 million, or 66.1%, to $3.2 million in 2023 compared to $1.8 million in 2022. The increase was primarily caused by less gains on the sale of equipment. Eight trucks were disposed/sold in 2023 as compared to 17 trucks in 2022.

Insurance claims and premium — Insurance claims and premiums decreased by $0.6 million to $6.5 million for the year ended December 31, 2023 as compared to $7.1 million in 2022. The decrease was primarily due to the realignment of drivers into tighter geographic regions, which improved truck utilization and allowed Tribeca to haul more automobiles with fewer trucks and remove the trucks that were deemed for sale from the policy. This decrease was slightly offset by the continued minor increase of the insurance cost per truck.

Operating taxes, tolls and licenses — Operating taxes and licenses was $3.3 million for the year ended December 31, 2023, which was slightly higher from $3.0 million in 2022. The increase was relative to the increase in revenue.

General, selling, and other operating expenses — General, selling, and other operating expenses increased by $1.2 million, to $3.8 million for the year ended December 31, 2023 as compared to $2.6 million in 2022. The increase was due to the rent paid for the lease signed in June 2023 for a new location and a relative increase in revenue.

Interest expense, net — Interest expenses, net decreased by $1.2 million, to $0.8 million for the year ended December 31, 2023 as compared to $2.0 million in 2022. The decrease was brought about by the non-deferral and non-refinance of various loans in 2022. Likewise, there were fewer new loans for the purchase of trucks in 2023 while some of the remaining loans were fully amortized in 2023.

EBITDA — EBITDA increased by $2.0 million to $8.9 million for the year ended December 31, 2023 as compared to $6.9 million in 2022. The increase was primarily caused by an increase in operating profit due to higher volumes of sales and lower costs combined.

Results of Operations for the years ended December 31, 2022 and 2021

Operating Revenue — Total operating revenue for the year ended December 31, 2022 increased by $5.5 million, or 12.2%, to $50.1 million as compared to the year ended December 31, 2021. The increase was primarily a result of a mix of higher volumes from existing customers, new customers and higher prices. In 2022, revenue from fuel surcharge was $4.0 million, which accounts for 7.9% of total revenue.

In 2022, the automobile industry continued to stabilize after coming out of (1) the COVID-19 pandemic and (2) supply chain challenges in 2020 and 2021. Price increases from OEMs in the latter half of 2022 drove revenue increases and increased gross margin.

The revenue mix between company-owned trucks (Truckload) versus sub-haulers (Brokerage) increased from 49% of revenue in 2021 to 57% in 2022 due to utilizing more of the company-owned truck fleet.

In 2022, 10 customers accounted for 95.2% of its revenue, including Toyota (19.4%), Glovis (the logistics arm of Hyundai and Kia combined) (16.9%), Stellantis (11.9%), Mercedes (11.6%) and Nissan (8.5%). Tribeca moved roughly 261,000 units in 2022 as compared to 251,500 units in 2021, for a volume gain of 4%.

Salaries, wages and benefits — Driver salaries, wages and benefits decreased by $0.5 million, or 7.9%, to $5.4 million in 2022 compared to $5.9 million in 2021. This cost was roughly 10.8% of truck revenues for the year ended December 31, 2022 and 13.1% for the year ended December 31, 2021. The decrease is because of a strategic shift to lump drivers into smaller regions and share more routes to eliminate empty miles and improve efficiency. Further, there was an extra week of pay in 2021 to drivers to cover COVID time off, in addition to the normal sick days, which made driver pay and benefits look elevated for 2021.

Fuel and fuel taxes — Fuel and fuel taxes increased by $1.9 million, or 24.7%, to $9.4 million in 2022 compared to $7.5 million in 2021. The increase in fuel and fuel taxes was primarily caused by the increase in diesel fuel costs throughout 2022 as compared to 2021.

Purchased Transportation — Purchased transportation increased by $0.1 million, or 1.1%, to $15.3 million in 2022 compared to $15.2 million in 2021. The increase in purchased transportation was primarily caused by the increase in revenue; however, purchased transportation did not increase at the same rate as revenue because customers were serviced using company-owned trucks rather than sub-haulers.

Truck repair and maintenance expenses — Truck expenses increased by $0.3 million, or 13.5%, to $2.6 million in 2022 compared to $2.3 million in 2021. The increase in truck expenses was primarily caused by increased truck repair and maintenance costs as a result of using additional older company trucks in 2022. We maintain a rigid maintenance program at our truck repair facility to limit the amount truck repairs costs.

Depreciation and amortization, net of gain on sale of equipment — Depreciation and amortization, net of gain on sale of equipment decreased by $1.6 million, or 45.5%, to $1.8 million in 2022 compared to $3.4 million in 2021. The decrease was primarily caused by assets nearing the end of their useful life, as well as an increase in gains on the sale of trucks as compared to 2021.

Insurance claims and premium — Insurance claims and premiums decreased by $3.0 million, or 30% to $7.1 million in 2022 compared to $10.1 million in 2021. The decrease was primarily due to the realignment of drivers into tighter geographic regions, which improved truck utilization and allowed us to haul more with fewer trucks and removing the trucks that were deemed for sale from the policy. A slight offset is the continued increase, albeit small, of the insurance cost per truck.

Operating taxes, tolls and licenses — Operating taxes, tolls and licenses was $3.0 million in 2022, which was consistent with the $3.0 million in 2021.

General, selling, and other operating expenses — General, selling, and other operating expenses decreased by $42,168, or 1.6%, to $2.6 million in 2022 compared to $2.7 million in 2021. The decrease was primarily caused by a focus on being more efficient with fewer resources.

Interest expense, net — Interest expenses, net increased by $0.3 million, or 18.3%, to $2.0 million in 2022 compared to $1.7 million in 2021. The increase was primarily caused by higher interest rates on new loans.

EBITDA — EBITDA increased by $5.7 million to $6.9 million in 2022 compared to $1.2 million in 2021. The increase was primarily caused by an increase in operating profit due to higher volumes of sales and lower costs combined with the effect of a write-off of assets in 2021, which led to a large net income loss, and selling older trucks in 2022 for a gain.

Liquidity and Capital Resources

In 2023, as anticipated, Tribeca significantly increased revenue from new contracts and executed on its strategic initiatives by making additions to its fleet and hiring new drivers in anticipation of an increase in business. This executed initiative led to a significant increase in profit as compared to 2022. Current ratio of current assets to current liabilities in 2023 was 1.09 as opposed to 0.78 in 2022, a significant turnaround of 40%.

Total debt related to truck purchases significantly decreased by $6.3 million for the year ended December 31, 2023 to $10.8 million as compared to $17.1 million for the year ended December 31, 2022. Tribeca’s cash flow from operating activities increased by $4.6 million for the year ended December 31, 2023 to $8.9 million as compared to $4.3 million in 2022. The increase was generally due to increased profit. Cash from investing activities produced a positive cash flow of $1.1 million for the year ended December 31, 2023 primarily related to the sale of transportation equipment. Cash flow used in financing activities decreased by $1.2 million for the year ended December 31, 2023 to $8.3 million as compared to $9.5 million in 2022. The decrease was related to fewer payments made on various outstanding loans in 2023.

Emerging Growth Company Status

We qualify as an “emerging growth company,” as defined in the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include: (i) being permitted to present only two years of audited financial statements in this prospectus, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this prospectus; (ii) reduced disclosure about our executive compensation arrangements; (iii) not being required to hold advisory votes on executive compensation or to obtain stockholder approval of any golden parachute arrangements not previously approved; (iv) an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; and (v) an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on the financial statements.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. Additionally, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, while we are an emerging growth company, we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies. As a result of this election, our financial statements may not be comparable to those of other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.