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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.05pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-
Not scored
Net-tone change vs last year's 10-K.
MD&A
-0.05pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
No section text extracted for this filing. The 10-K may use a non-standard template that the parser doesn't recognize - the original doc is still linked in the Stats tab.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
decline+1
stoppage+1
cancellation+1
Positive rising
improved+2
gain+1
MD&A (Item 7)
4,235 words
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity and cash flows as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Annual Report. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report, particularly in the sections titled Item 1A. “ Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”
Select Financial Data
The following table presents the selected consolidated financial information for our Company. All numbers are presented in United States Dollars. The selected consolidated statements of comprehensive income data for the years ended December 31, 2024, and 2023, and the consolidated balance sheets data as of December 31, 2024, and 2023, have been derived from our audited consolidated financial statements and are consistent with numbers reported in our prior annual filings.
Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” below. Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP.
Year Ended
Year Ended
December 31, 2024
December 31, 2023
Revenue
Cost and expenses
Cost of revenue
Compensation and employee benefits
General and administrative
Sales and marketing
Depreciation and amortization
Total Cost and expenses
Operating Loss
Other income and (expenses)
Interest income
Interest expense
Other income
Other expense
Gain from extinguishment of debt
Change in fair value of convertible note
Total other expense
Loss before income taxes
Income tax expense
Net loss
Foreign currency translation
Comprehensive loss
Weighted average number of shares, basic and diluted*
Loss per share, basic and diluted
* - The number of shares outstanding was adjusted retroactively for all periods presented to reflect the 10-to-1 reverse stock split change which was effected on March 24, 2023, the 10-to-1 reverse split which was effected on February 5, 2024, and the 25-to-1 reverse split which was effected on September 25, 2024.
Warrants to purchase ordinary shares are not included in the diluted loss per share calculations when their effect is antidilutive.
BALANCE SHEET
Year Ended
December 31, 2024
Year Ended
December 31, 2023
Current assets
Total assets
Current liabilities
Long term liabilities
Share capital
Total stockholders’ equity (deficit)
Revenues
Fr8Tech’s revenues decreased to $13.7 million for the year ended December 31, 2024 from $17.1 million for the year ended December 31, 2023, a reduction of $3.3 million and 19.5% on year-over-year basis. The year-over-year decrease was primarily driven by: (1) our continued efforts to focus on higher margin customers and lanes in the spot market which impacted overall volume across the platform; (2) reduced spot market and dedicated service activity in the third quarter 2023 due to customer specific circumstances; and, (3) an approximate 3.5% decline in the Mexican peso relative to the US dollar year-over-year, which reduced the US dollar amount of Mexican peso based revenue on a comparative basis. Our spot market revenue declined 36% to $8.6 million in 2024, partially offset by a 42% increase in our Fr8Fleet revenue to $5.1 million and to a lesser extent the launch of Waavely, our ocean container freight brokerage service.
Year Ended
December 31,
Revenue
Change
% Change
Freight Transportation Brokerage
Dedicated Capacity
Total
Year Ended
December 31,
Volume
Change
% Change
Brokerage Shipments
Dedicated Capacity Truck Days
The Freight Transportation Brokerage service line experienced a 31% decline in the number of shipments; 35% lower for US domestic, 24% lower in Mexico domestic, and a 36% lower for cross-border shipments.
The Dedicated Capacity service line experienced a 67% increase in the number of truck days made available to our Fr8Fleet customers. One truck day means a standard 53’ dry-van trailer and truck being available to serve the customer for one full working day. The increase in truck days exceeded the increase in revenue, primarily due to the Company providing significantly more local, short-haul capacity in 2024 for its primary Fr8Fleet customer, Kimberly Clark de Mexico (KCM), which is provided at a lower daily rate than longer haul capacity.
Fr8Tech’s revenues decreased to $17.1 million for the year ended December 31, 2023 from $25.9 million for the year ended December 31, 2022, a reduction of $8.8 million and 34.1% on year-over-year basis. The year-over-year decrease was primarily driven by: (1) our decision to limit activity with low-margin, but high-volume customers; (2) the loss of one customer due to non-recurring issue with a particular Carrier; and, (3) reduced spot market activity across several accounts driven by challenges in securing sufficient carrier capacity in the first half of 2023 and US market rates that were significantly lower than in 2022. This was partially offset by a 67% increase in our Fr8Fleet revenue and the addition of more than 30 new customers in our spot market FTL and LTL businesses.
Costs of Revenue
The Company’s cost of revenue for both freight brokerage and dedicated services is entirely comprised of the costs our carriers incur and invoice us to perform the service. In the case of freight brokerage services, this reflects their total costs for hauling the customers freight from origin to destination. In the case of dedicated capacity services, this reflects having the trucks available to haul freight for the customer and costs related to any freight movements. For both services, these costs include any accessorial charges carriers may incur such as loading or unloading, drayage, stoppage, fuel surcharges, border-crossing, packing materials, etc.
Fr8Tech’s cost of revenue decreased to $12.4 million for the year ended December 31, 2024 from $15.7 million for the year ended December 31, 2023, a reduction of $3.3 million and 21.1% on a year-over-year basis. Year-over-year cost of revenue decreased primarily due to the decline in revenue. The improved contribution from lower cost of revenue was primarily due to change in product mix, variation in specific customer and carrier rates on certain lanes and in the traffic mix itself over the year. The Fr8Fleet business, which grew 42% in 2024, improved its contribution primarily due to providing additional capacity for Kimberly Clark de Mexico and expanding service to several additional large enterprise end-customers.
Fr8Tech’s cost of revenue decreased to $15.7 million for the year ended December 31, 2023 from $23.6 million for the year ended December 31, 2022, a reduction of $7.9 million and 33.5% on a year-over-year basis. This year-over-year decrease moved in similar fashion and magnitude with our revenue, with some differences due to varying margins in the traffic and in the traffic mix itself from quarter-to-quarter and year-to-year. The contribution improved in 2023 primarily due to product mix. The Fr8Fleet business, which grew 67% in 2023, incurred a slightly lower contribution than our spot market services due to higher initial service costs to develop that offering over the year.
Compensation and Employee Benefits
Fr8Tech’s compensation and employee benefits expenses were $5.3 million for the year ended December 31, 2024 compared to $6.0 million for the year ended December 31, 2023, which was a $0.6 million or 10.3% decrease on a year-over-year basis. The decrease was primarily due lower executive compensation and bonuses, lower stock based compensation, and a weaker Mexican peso relative to the US dollar, partially offset by some additional hiring. Total employees and FTE contractors, who are included in our compensation costs, at December 31, 2024 and 2023 were 100 and 89, respectively. The increase in the number of employees in 2024 was primarily within sales, technology and operations.
In January and February 2025, the Company undertook a cost cutting initiative to optimize resources for operational performance and shifting sales focus to emphasize sales of the Company’s TMS software offering, Fleet Rocket, and to lower ongoing operating expenses. The Company reduced its workforce by approximately 20%. As a result of these measures, the Company anticipates that its compensation and employee benefit expenses will be lower in 2025 than in 2024.
Fr8Tech’s compensation and employee benefits expenses were $6.0 million for the year ended December 31, 2023 compared to $5.0 million for the year ended December 31, 2022, which was a $1.0 million or 20.2% increase on a year-over-year basis. The increase was primarily due to stock compensation costs related to new grants issued during 2022 and 2023 and hiring new employees in dedicated services, business intelligence and carrier procurement. As noted above, the total number of employees and FTE contractors was 89 at December 31, 2023, at which time the company was making several personnel changes, mostly on the sales team.
General and Administrative
General and administrative expenses were $2.0 million for the year ended December 31, 2024 compared to $3.2 million for the year ended December 31, 2023, which was a decrease of $1.2 million or 37.7%, primarily due to a favorable change in the exchange valuation of working capital balances and to a lesser extent lower outside legal expenses and insurance costs, partially offset by higher spend on software, audit services, and recruiting.
General and administrative expenses were $3.2 million for the year ended December 31, 2023 compared to $3.6 million for the year ended December 31, 2022, which was a decrease of $0.4 million or 11.2%, primarily due to lower outside legal counsel and public company costs.
Sales and Marketing
Sales and marketing expenses were $66 thousand for the year ended December 31, 2024 compared to $80 thousand for the year ended December 31, 2023, which was a decrease of $14 thousand or 17.5%. The decrease in sales and marketing expenses in 2024 was primarily to lower direct advertising expenses, which is focused on online industry media and platforms. We continue to use direct and online advertising and social media platforms for promotion and attracting new Shippers and Carriers to our Platform. We expect these costs to increase modestly to support growth of our business across our brands and new software offering.
Sales and marketing expenses were $80 thousand for the year ended December 31, 2023 compared to $557 thousand for the year ended December 31, 2022, which was a decrease of $477 thousand or 85.6%. The decrease in marketing expenses in 2023 was mostly due to a strategic alliance during 2022 with a US-based counterparty that was working with us to originate and manage US domestic business and that was paid for with the issuance of Ordinary shares in 2022.
Depreciation and Amortization
Depreciation and amortization expenses represent the amortization of previously capitalized software development costs, as appropriate, and depreciation expenses related to Fr8App’s fixed assets. This expense increased $25 thousand to $430 thousand for the year ended December 31, 2024, from $405 thousand for the year ended December 31, 2023. The increase was primarily due to additional software development of Fr8Tech platform in 2023 and 2024, as well as software development efforts in 2024 to build Fleet Rocket, our TMS software platform that was launched in February 2025.
Depreciation and amortization increased to $405 thousand for the year ended December 31, 2023, from $243 thousand for the year ended December 31, 2022, an increase of $161 thousand or 66.7% on a year-over-year basis, due to the completion of the application development stage of Fr8Tech platform which resulted in an increase of capitalized software amortization.
Other income and expenses
Interest expense for the year ended December 31, 2024 decreased to $674 thousand from $808 thousand for the year ended December 31, 2023, or by $134 thousand primarily due lower interest incurred on the convertible note that was issued in 2023, partially offset by higher interest expense incurred on the company’s revolving credit facility and promissory notes issued in 2024.
During the year ended December 31, 2024, other income and expense included a gain of $1.6 million from the extinguishment of the convertible notes issued in 2023 and the promissory notes issued in 2024, as well as a gain of $22 thousand from a change in fair value of convertible note.
Components of gain from debt extinguishment ($)
Principal of Promissory Term Notes
Promissory Note Accrued Interest
Book Value of Convertible Note
Convertible Note Accrued Interest
Total
There were no other related considerations or contingencies. The debt cancellation agreement did not require the Company to issue any additional ordinary shares, preferred shares or warrants to either entity.
Interest expenses for the year ended December 31, 2023 decreased to $808 thousand from $907 thousand for the year ended December 31, 2022 due to a debt discount amortization for the year ended December 31, 2022, which was higher than interest expenses incurred in 2023 related to the convertible note that was issued in 2023.
During the year ended December 31, 2023, other income and expense also included expensing the fair value of warrants issued as an inducement for convertible note conversion and as an additional consideration for an increase in convertible note funding, in the total amount of $499 and a gain of $345 from a change in fair value of convertible note. The convertible note issued during 2023 and warrants and related accounting treatment are more fully described in Notes 11 and 15, respectively, of our consolidated financial statements.
Net Loss
Fr8Tech’s net loss for the year ended December 31, 2024 decreased to $5.6 million from $9.3 million for the year ended December 31, 2023 or by $3.7 million or 40% on a year-over-year basis, as a result of the items described above.
Fr8Tech’s net loss for the year ended December 31, 2023 increased to $9.3 million from $8.2 million for the year ended December 31, 2022 or by $1.1 million or 13.9% on a year-over-year basis, as a result of the items described above.
Liquidity and Financial Position
Fr8Tech has historically met its cash needs through a combination of cash flows from operating activities, term loans, promissory notes, bonds, convertible notes, private placement offerings and sales of equity. Fr8Tech’s cash requirements are generally for operating activities and debt repayments. Fr8Tech funded its early operations with a combination of debt and equity and we continue to work to position the Company to operate on a go-forward basis with a minimal amount of long-term debt and other borrowings. On January 3, 2023, Fr8Tech closed on a $6.6 million convertible note facility with a private investor, which was increased to $9.9 million in April 2023. The convertible note was mostly converted to equity during 2023. The balance of the convertible note of $219 thousand as of June 30, 2024, was extinguished in September 2024. The Company entered into a $750 thousand 1-year term note purchase agreement with Freight Opportunities, LLC on March 11, 2024, and an additional term note for $125 thousand with Freight Opportunities, LLC on June 4, 2024. Both promissory notes were also extinguished in September 2024.
Our combined accounts receivable and unbilled receivable balance of $4.1 million at December 31, 2024, declined by declined by $2.3 million or 35.9% from $6.3 million at December 31, 2023, which was primarily due to lower revenue and collections to reduce our outstanding AR balance over the year.
Fr8Tech’s accounts payable, short-term borrowings and accrued expenses decreased by $867 thousand or 12.5% on a year-over-year comparative basis to $6.1 million, due mostly to lower accrued expenses on lower costs of revenue and accounts payable. At December 31, 2024, Fr8Tech has an accumulated net capital deficient of -$33 thousand, and net working capital of -$1.2 million.
In March 2019, we secured a revolving line of credit that is used to assist with managing our working capital needs. The maximum principal amount that may be drawn under the line of credit was increased since then to $5 million, which remains in place. As of December 31, 2024 and 2023 the amount drawn under this facility was $3.3 million $2.8 million, respectively. We continue to incur short-term debt with this facility, which is collateralized by our accounts receivable, and we expect to maintain this debt facility to support ongoing operations.
As shown in the accompanying consolidated financial statements as of December 31, 2024, we had an accumulated deficit of approximately $44.9 million, short-term debt of $3.3 million, unrestricted cash of approximately $0.2 million and a working capital of approximately -$1.3 million. In addition, for the years ended December 31, 2024 and 2023, we reported operating losses and negative cash flows from operations.
Most of cash resources of the Company fund operating activities. Through December 31, 2024, we have financed our operations primarily with the proceeds from the sale and issuance of our ordinary and preferred shares, convertible promissory notes, promissory notes and debt.
If we are unable to raise additional capital moving forward, our ability to operate in the normal course and continue to invest in our business may be materially and adversely impacted and we may be forced to scale back operations or divest some or all of our assets.
As a result of the above, in connection with our assessment of going concern considerations in accordance with FASB Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” management has determined that our liquidity condition raises substantial doubt about our ability to continue as a going concern through twelve months from the date these consolidated financial statements are available to be issued. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
Cash flows
Comparison of the Years ended December 31, 2024, and December 31, 2023
The following table summarizes our sources and uses of cash for the years ended December 31, 2024, and December 31, 2023.
Year Ended
December 31,
Year Ended
December 31,
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net effect of exchange rates on cash
Net increase / (decrease) in cash and cash equivalents
Cash flows used in Operating Activities
Net cash used in operating activities represent the cash receipts and disbursements related to our activities other than investing and financing activities. We expect cash provided by operating activities to be our primary use of funds for the foreseeable future as the Company continues to fund its growing operations
Net cash flows used in operating activities is derived by adjusting our net loss for:
non-cash operating items such as depreciation and amortization, stock-based compensation and other non-cash income or expenses;
changes in operating assets and liabilities reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations as well as any gains from extinguishment of debt or changes in value of preferred stock.
For the year ended December 31, 2024, net cash used in operating activities was $4.2 million which consisted of a net loss of $5.6 million adjusted for non-cash charges of -$0.2 million and net positive changes in our net operating assets and liabilities of $1.6 million. The non-cash charges primarily consisted of gain on extinguishment of debt of -$1.6 million and a change in the fair value of convertible note of $23 thousand, offset by share-based compensation costs of $1.0 million and depreciation and amortization of $0.4 million. The change in our net operating assets and liabilities was primarily due to net decreases in accounts receivable and unbilled receivables of $1.5 million, prepaid assets and deposits of $0.4 million, and income and VAT tax balances $0.2 million, partially offset by a decrease of accounts payable and accrued expenses of $0.5 million. The changes in our accounts receivable and accounts payable balances are primarily the result of the overall decrease in business activities and higher collections relative to the prior year.
For the year ended December 31, 2023, net cash used in operating activities was $5.8 million which consisted of a net loss of $9.3 million, adjusted for non-cash charges of $1.8 million and net changes in our net operating assets and liabilities amounting to $1.7 million. The non-cash charges primarily consisted of share-based compensation costs of $1.2 million, interest accruals on convertible notes of $0.4 million, depreciation and amortization of $0.4 million, and conversion inducement expense of $0.1 million, partially offset by a change in fair value of convertible note of $0.3 million. The change in our net operating assets and liabilities was primarily due to net decreases in accounts receivable and unbilled receivables of $1.1 million, prepaid assets and deposits of $0.3 million, and accounts payable of $0.2 million, partially offset by an increase of accrued expenses and income tax payable of $0.5 million. The changes in our accounts payable and accounts receivable balances are primarily the result of the overall decrease in business activities relative to the prior year.
Cash flows used in Investing Activities
For the year ended December 31, 2024, net cash used in investing activities was $346 thousand, mostly for software development efforts for additional functionalities and capabilities of the Fr8App platform and related offerings, as well as building out Fleet Rocket.
For the year ended December 31, 2023, net cash used in investing activities was $336 thousand, mostly for software development efforts for additional functionalities and capabilities of the Fr8App platform and related offerings.
Cash flows provided by Financing Activities
For the year ended December 31, 2024, net cash provided by financing activities was $4.2 million. The cash flow provided was from proceeds from the issuance of ordinary equity through our ATM program for $3.1 million, promissory notes of $0.9 million, and net borrowing revolving credit facility $0.5 million, partially offset by repayment of insurance financing for $0.2 million.
For the year ended December 31, 2023, net cash provided by financing activities was $6.8 million. The cash flow provided was primarily from net proceeds from the issuance of convertible note of $7.7 million, partially offset by a net repayment on borrowing facilities of $0.5 million, and repayment of insurance financing of $0.3 million.
Research and development, patents and licenses
The first commercial version of Fr8Tech’s products was launched in 2017. Fr8Tech continued its product development efforts throughout 2018, by adding initial business intelligence and analytics to supplement its basic products in 2019 and offered its revised products package with active freight brokerage support and customer service by year-end 2019. The second generation of Fr8Tech products were brought to market during the second quarter of 2020 and consisted of the online portal, mobile application, TMS functionality, and Fr8App’s platform supplemented with freight brokerage support and customer service integrations. In 2022, the Company began offering to the Mexican domestic market dedicated capacity under the Fr8Fleet brand and in 2023 LTL services under the Fr8Now brand, both powered and managed by the Fr8App platform and bringing much of the same capabilities and intelligence to both services.
The Company has continued to bring additional functionality and enhancements to its core Fr8App platform over the past several years, as well as launch new technology-based offerings, including Fr8Radar, Waavely, and most recently Fleet Rocket, the TMS software solution launched in February 2025.
Fr8Tech’s principal assets consist of its software, in which it invests continuously through development work by employees and externally contracted parties. Fr8Tech invested more than $0.3 million per year in software during the years ended December 31, 2024 and 2023. Fr8Tech expects to continue investing in its software in line with the expansion of its product offerings.
On January 7, 2021, Fr8App filed a trademark application with the U.S. Patent and Trademark Office for the Fr8Technologies design mark. Fr8App currently does not hold any patents or own any registered trademarks. Fr8App believes that the success of its business depends on the quality of its proprietary software solutions, technology, processes, and domain expertise. While it considers its intellectual property rights to be valuable, Fr8App believes that its competitive position depends primarily on its ability to increase and eventually to maintain a leadership position by developing innovative proprietary solutions, technology, information, processes, insights and business intelligence to satisfy both Shippers and Carriers’ needs through its Platform.
