Proficient Auto Logistics, Inc. Common Stock 10Q 2024 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

001-42035

(Commission File Number)

PROFICIENT AUTO LOGISTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware		93-1869180
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12276 San Jose Blvd. Suite 426 Jacksonville, Florida		32223
(Address of principal executive offices)		(Zip Code)

(904) 506-7918

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.01 per share		PAL		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☐
		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had 27,029,781 shares of common stock outstanding at November 12, 2024.

Index

	Page
PART I - FINANCIAL INFORMATION:
Item 1. Condensed Consolidated Financial Statements (Unaudited):

Proficient Auto Logistics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) (Successor) and December 31, 2023 (Predecessor)	1
Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2024 (Successor), the period from January 1, 2024 to May 12, 2024 (Predecessor), and the three and nine months ended September 30, 2023 (Predecessor) (unaudited)	2
Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30, 2024 (Successor), the period from January 1, 2024 to May 12, 2024 (Predecessor), and the three and nine months ended September 30, 2023 (Predecessor) (unaudited)	3
Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2024 (Successor), the period from January 1, 2024 to May 12, 2024 (Predecessor), and the nine months ended September 30, 2023 (Predecessor) (unaudited)	4
Notes to Condensed Consolidated Financial Statements (unaudited)	5

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	36

PART II - OTHER INFORMATION:	37
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities	37
Item 3. Defaults Upon Senior Securities	37
Item 4. Mine Safety Disclosures	37
Item 5. Other Information	37
Item 6. Exhibits	38

EXPLANATORY NOTE

On May 13, 2024, Proficient Auto Logistics, Inc. (“Proficient”) completed the initial public offering (the “IPO”) of its common stock. Prior to the IPO, Proficient had entered into agreements (the “Combination Agreements”) to acquire in multiple, separate acquisitions (the “Combinations”) five operating businesses and their respective affiliated entities, as applicable, operating under the following names: (i) Delta Automotive Services, Inc. (which converted to Delta Automotive Services, LLC in an F-reorganization on April 29, 2024), 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”). On May 13, 2024, in connection with the closing of the IPO, Proficient also completed the acquisitions of all the Founding Companies.

For accounting and reporting purposes, Proficient has been identified as the designated accounting acquirer (“Successor”) of each of the Founding Companies and Proficient Transport has been identified as the designated accounting predecessor (“Predecessor”) to the Company (as defined below). The Successor financial information presented herein includes results of operations from the period May 13, 2024 to September 30, 2024 from the acquired businesses as well as expenses from the acquiring entity for the three and nine months ended September 30, 2024. As a result, the unaudited condensed consolidated financial statements as of, and for the three and nine months ended, September 30, 2024 for Proficient (Successor) and for the period from January 1, 2024 to May 12, 2024 and the three and nine months ended September 30, 2023 for Proficient Transport (Predecessor) are included in this Quarterly Report on Form 10-Q. The Company is not required to provide, and this Quarterly Report on Form 10-Q does not contain, pro forma financial data giving effect to the completion of the Combinations and the completion of the IPO and the use of the proceeds therefrom. However, the Company is providing summary unaudited combined financial information for the three months ended September 30, 2024. See “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Summary Unaudited Combined Financial Information.” The summary of unaudited combined financial information has been prepared by, and are the responsibility of, Proficient’s and the Founding Companies’ management. The unaudited consolidated financial statements have not been audited by the Company's independent registered public accounting firm, except that the consolidated balance sheet as of December 31, 2023 is derived from Proficient Transport's audited consolidated financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all necessary adjustments to present fairly the Company's interim financial position, results of operations and cash flows. All adjustments are of a recurring nature unless otherwise disclosed herein.

Because Proficient was formed on June 13, 2023 and had no material transactions in the period from formation through September 30, 2023, no comparative information for the three and nine month periods ended September 30, 2023 is provided in this Quarterly Report on Form 10-Q.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Proficient” refers solely to Proficient Auto Logistics, Inc. prior to the Combinations, and references to the “Company,” “we,” “us,” and “our” refer to Proficient Auto Logistics, Inc. and its subsidiaries after giving effect to the Combinations.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

	Successor			Predecessor
	September 30, 2024			December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	16,848,215		$	4,273
Accounts receivable, net		38,671,712			19,799,044
Net investment in leases, current portion		276,193			32,374
Maintenance supplies		1,479,900			822,855
Assets held for sale		506,240			—
Prepaid expenses and other current assets		11,969,671			2,769,005
Total current assets		69,751,931			23,427,551
Property and equipment, net		129,067,940			17,998,750
Operating lease right-of-use assets		10,994,666			4,457
Net investment in leases, less current portion		234,948			2,681
Deposits		4,758,223			1,033,642
Goodwill		148,092,515			—
Intangible assets, net		134,906,473			—
Other long-term assets		427,866			527,952
Total assets	$	498,234,562		$	42,995,033

Liabilities, mezzanine equity, and stockholders’ equity
Current liabilities:
Accounts payable	$	10,228,606		$	2,539,198
Book overdraft		—			891,410
Accrued liabilities		23,359,120			7,803,359
Income tax payable		1,621,689			1,174,959
Finance lease liabilities, current portion		86,544			1,306,024
Operating lease liabilities, current portion		1,711,257			4,456
Long-term debt, current portion		18,727,011			1,599,699
Total current liabilities		55,734,227			15,319,105

Long-term liabilities:
Line of credit		9,500,000			3,450,129
Finance lease liabilities, less current portion		31,653			273,096
Operating lease liabilities, less current portion		9,348,911			—
Long-term debt, less current portion		45,288,020			5,035,478
Deferred tax liability, net		39,448,334			2,283,833
Other long-term liabilities		408,748			—
Total liabilities		159,759,893			26,361,641

Commitments and contingencies (Note 16)

Mezzanine equity:
Series A convertible, redeemable, preferred stock, $0.01 par value; 10,000,000 shares authorized; 0 and 3,066,923 shares issued and outstanding as of September 30, 2024 and December 31, 2023 respectively		—			8,880,672
Stockholders’ equity:
Common stock, $0.01 par value; 50,000,000 shares authorized; 27,029,781 and 0 shares issued and outstanding as of September 30, 2024 and December 31, 2023 respectively		270,298			—
Common stock, $0.01 par value; 10,000,000 shares authorized; 392,825 shares issued and outstanding		—			3,928
Additional paid in capital		344,004,449			—
(Accumulated deficit) retained earnings		(5,800,078	)		7,748,792
Total stockholders’ equity		338,474,669			7,752,720
Total liabilities, mezzanine equity and stockholders’ equity	$	498,234,562		$	42,995,033

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Successor						Predecessor
	Three months ended September 30, 2024			Nine months ended September 30, 2024			Period from January 1, 2024 to May 12, 2024			Three months ended September 30, 2023			Nine months ended September 30, 2023
Operating revenue
Revenue, before fuel surcharge	$	84,289,892		$	136,100,637		$	38,947,787		$	31,859,444		$	93,742,606
Fuel surcharge and other reimbursements		6,017,296			9,611,959			2,073,087			1,521,759			6,846,298
Other Revenue		375,967			526,634			—			—			—
Lease Revenue		822,346			1,174,868			196,814			86,952			124,958
Total operating revenue		91,505,501			147,414,098			41,217,688			33,468,155			100,713,862

Operating Expenses
Salaries, wages and benefits		17,373,659			27,041,664			27,373,183			4,786,636			16,135,513
Stock-based compensation		1,071,160			7,746,796			—			—			—
Fuel and fuel taxes		5,956,074			9,443,137			1,119,549			864,905			3,624,233
Purchased transportation		44,995,562			73,113,996			25,995,763			21,948,239			61,091,500
Truck expenses		5,692,078			8,091,752			1,638,919			1,340,015			5,797,095
Depreciation		6,566,444			9,987,031			934,988			652,392			1,867,766
Intangible amortization		2,217,083			3,293,527			—			—			—
Gain on sale of equipment		(107,491	)		(105,183	)		(235,081	)		(64,704	)		(120,680	)
Insurance premiums and claims		5,459,075			7,212,021			954,043			814,761			2,511,803
General, selling, and other operating expenses		4,467,362			6,693,073			3,944,822			845,757			2,676,584
Total Operating Expenses		93,691,006			152,517,814			61,726,186			31,188,001			93,583,814
Operating (loss) income		(2,185,505	)		(5,103,716	)		(20,508,498	)		2,280,154			7,130,048
Other income and expense
Interest expense		(1,407,146	)		(2,046,941	)		(717,431	)		(226,650	)		(795,542	)
Acquisition Costs		(1,049,570	)		(1,049,570	)		—			—			—
Adjustment of Earn Out Contingency		3,095,114			3,095,114			—			—			—
Other income, net		(146,151	)		20,918			2,078			—			—
Total other income (expense), net		492,247			19,521			(715,353	)		(226,650	)		(795,542	)
(Loss) Income before income taxes		(1,693,258	)		(5,084,195	)		(21,223,851	)		2,053,504			6,334,506
Income tax (benefit) expense		(327,782	)		143,054			(4,615,398	)		498,055			1,536,364
Net (loss) income	$	(1,365,476	)	$	(5,227,249	)	$	(16,608,453	)	$	1,555,449		$	4,798,142

Loss Per Share
Basic & Diluted	$	(0.05	)	$	(0.35	)

Weighted Average Shares
Basic & Diluted		26,495,108			14,851,641

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(unaudited)

Successor

	Common Stock				Additional Paid in		Accumulated			Total
	Shares		Amount		Capital		Deficit			Equity
Balance, December 31, 2023		2,939,130	$	29,391	$	932,609	$	(572,829	)	$	389,171
Issuance of shares		—		—		—		—			—
Net loss		—		—		—		(309,878	)		(309,878	)
Balance, March 31, 2024		2,939,130	$	29,391	$	932,609	$	(882,707	)	$	79,293
Issuance of shares through IPO		15,768,333		157,683		212,134,166		—			212,291,849
Issuance of shares for business combinations		6,848,795		68,488		102,663,477		—			102,731,965
Stock-based compensation		404,177		4,042		6,671,594		—			6,675,636
Net loss		—		—		—		(3,551,895	)		(3,551,895	)
Balance, June 30, 2024		25,960,435	$	259,604	$	322,401,846	$	(4,434,602	)	$	318,226,848
Issuance of shares for business combinations		1,069,346		10,694		20,531,443		—			20,542,137
Stock-based compensation		—		—		1,071,160		—			1,071,160
Net loss		—		—		—		(1,365,476	)		(1,365,476	)
Balance, September 30, 2024		27,029,781	$	270,298	$	344,004,449	$	(5,800,078	)	$	338,474,669

Predecessor

	Common stock				Retained			Total
	Shares		Amount		earnings			Equity
Balance, December 31, 2022		392,825	$	3,928	$	1,540,202		$	1,544,130
Accrued and unpaid dividends on Series A preferred stock		—		—		(255,119	)		(255,119	)
Net income		—		—		1,961,621			1,961,621
Balance, March 31, 2023		392,825	$	3,928	$	3,246,704		$	3,250,632
Accrued and unpaid dividends on Series A preferred stock		—		—		(263,042	)		(263,042	)
Net income		—		—		1,281,072			1,281,072
Balance, June 30, 2023		392,825	$	3,928	$	4,264,734		$	4,268,662
Accrued and unpaid dividends on Series A preferred stock		—		—		(253,873	)		(253,873	)
Net income		—		—		1,555,449			1,555,449
Balance, September 30, 2023		392,825	$	3,928	$	5,566,310		$	5,570,238

Balance, December 31, 2023		392,825	$	3,928	$	7,748,792		$	7,752,720
Accrued and unpaid dividends on Series A preferred stock		—		—		(260,526	)		(260,526	)
Net loss		—		—		(16,608,453	)		(16,608,453	)
Balance, May 12, 2024		392,825	$	3,928	$	(9,120,187	)	$	(9,116,259	)

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

	Successor			Predecessor
	Nine months ended September 30, 2024			Period from January 1, 2024 to May 12, 2024			Nine Months ended September 30, 2023
Cash flows from operating activities:
Net (loss) income	$	(5,227,249	)	$	(16,608,453	)	$	4,798,142
Adjustments to reconcile net (loss) income to net cash flows provided by operating activities:
Stock-based compensation		7,746,796			—			—
Provision for credit losses		114,659			53,000			298,000
Depreciation and amortization expense		13,280,558			934,988			1,867,766
Gain on sale of equipment		(105,183	)		(235,081	)		(120,680	)
Sales-type lease revenue		—			—			(25,000	)
Interest income		(5,365	)		(273	)		(2,045	)
Amortization of debt issuance costs		35,296			4,795			9,837
Deferred income tax expense (benefit)		—			(4,999,571	)		168,134
Operating lease expense		592,869			25,404			24,472
Adjustment of Earn Out Contingency		(3,095,114	)		—			—

Change in operating assets and liabilities:
Accounts receivable		1,477,149			7,637,836			(1,879,792	)
Net investment in leases		67,327			11,515			90,107
Maintenance supplies		(99,150	)		57,745			(29,209	)
Prepaid expenses and other assets		(5,033,566	)		917,266			1,073,640
Deposits		(71,305	)		42,954			12,306
Accounts payable		(3,694,577	)		(159,661	)		(107,163	)
Book overdraft		—			(891,410	)		(482,389	)
Accrued liabilities		1,278,223			21,899,507			177,207
Income tax payable		1,034,097			(666,068	)		173,901
Operating lease liabilities		(527,365	)		(27,951	)		(24,867	)
Net cash flows provided by operating activities		7,768,100			7,996,542			6,022,367

Cash flows from investing activities:
Proceeds from sale of equipment		1,232,988			252,441			248,776
Purchases of property and equipment		(5,808,146	)		(303,534	)		(347,160	)
Business combinations, net of cash acquired		(197,254,807	)		—			—
Net cash flows used in investing activities		(201,829,965	)		(51,093	)		(98,384	)

Cash flows from financing activities:
Proceeds from line of credit		11,000,000			13,265,526			102,267,915
Proceeds from long-term debt		4,422,522			—			—
Repayments of line of credit		(4,411,720	)		(16,715,655	)		(101,123,171	)
Repayments of long-term debt		(10,694,764	)		(719,572	)		(1,145,247	)
Repayment of SBA Loan		(2,083,833	)		—			—
Repayments of finance lease obligations		(33,101	)		(1,427,821	)		(922,821	)
Payment of finance fees		(39,106	)		—			—
Dividend Paid on Series A Preferred Stock		—			—			(5,000,000	)
Common stock issued at IPO		212,291,849			—			—
Net cash flows provided by (used in) financing activities		210,451,847			(5,597,522	)		(5,923,324	)
Net change in cash		16,389,982			2,347,927			659
Cash and cash equivalents, beginning of period		458,233			4,273			3,624
Cash and cash equivalents, end of period	$	16,848,215		$	2,352,200		$	4,283

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,793,857		$	786,925		$	765,797
Cash paid for taxes	$	1,900,381		$	1,187,338		$	1,302,127

Noncash investing and financing activity:
Right of use assets obtained in exchange for lease liability	$	—		$	328,489		$	—
Equipment financed through long-term debt	$	12,236,688		$	—		$	4,522,813
Accrued and unpaid dividends	$	—		$	260,526		$	772,034
Issuance of shares for business combinations	$	123,274,102		$	—		$	—

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Nature of operations

AH Acquisition Corp. was formed on June 13, 2023, pursuant to the laws of the State of Delaware to become a holding company for the consolidation of several operating companies within the automobile transportation industry. Subsequently, on October 17, 2023, AH Acquisition Corp. legally changed its name to Proficient Auto Logistics, Inc (“Proficient,” the “Company,” or “We”).

Proficient is an industry leading specialized freight company focused on providing auto transportation and logistics services. The Company offers 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. Proficient operates an asset-based Company Drivers service (“Company Drivers”) on behalf of the manufacturers as well as various third-party logistics management companies or brokers. In addition, Proficient provides third party logistics to other transportation companies under an asset-light freight model (“Brokered”).

Note 2 — Summary of significant accounting policies

Basis of Presentation — The condensed consolidated financial statements and footnotes included in this Quarterly Report include the accounts of Proficient and should be read in conjunction with the consolidated financial statements and footnotes related to the Company’s Registration Statement on Form S-1 (333-279346). The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Proficient has been identified as the designated accounting acquirer (“Successor”) of each of the Founding Companies and Proficient Transport has been identified as the designated accounting predecessor (“Predecessor”) to the Company. As a result, the unaudited condensed consolidated financial statements as of, and for the three and nine months ended, September 30, 2024 for Proficient (which includes results of operations from the period May 13, 2024 to September 30, 2024 from the acquired businesses as well as expenses from the acquiring entity for the three and nine months ended September 30, 2024) and unaudited condensed consolidated financial statements for the period January 1, 2024 through May 12, 2024 for Proficient Transport are included in this Quarterly Report on Form 10-Q. A black-line between the Successor and Predecessor periods has been placed in the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Stockholders’ Equity (Deficit), Condensed Consolidated Statements of Cash Flows and in the tables to the notes to the condensed consolidated financial statements to highlight the lack of comparability between these two periods. Please refer to Note 3, “Business Combinations.”

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Principles of Consolidation — The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and accounts have been eliminated. The condensed consolidated financial statements in the Successor periods includes the impact of push-down accounting with acquisition related costs pushed down to the corresponding reporting entity.

Accounts Receivable — Accounts receivable represents customer obligations due under normal trade terms. The Company reviews accounts receivable on a continuing basis to determine if any receivables are potentially uncollectible. The Company writes off uncollectible receivables based on specifically identified amounts determined to be uncollectible. Based on the information available, the Company recorded an allowance for credit losses of approximately $114,659 and $634,913 at September 30, 2024 (Successor) and December 31, 2023 (Predecessor), respectively. Actual write-offs could differ from management’s estimate.

Business Combinations — The Company accounts for business combinations using the acquisition method pursuant to ASC 805, Business Combinations. For each acquisition, the Company recognizes the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. Valuations of certain assets acquired, including customer relationships, developed technology and trade names involve significant judgment and estimation. The Company uses independent valuation specialists to help determine fair value of certain assets and liabilities. Valuations utilize significant estimates, such as forecasted revenues and profits. Changes in these estimates could significantly impact on the value of certain assets and liabilities. ASC 805 establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. Measurement period adjustments are recognized in the reporting period in which the adjustments are determined and calculated as if the accounting had been completed as of the acquisition date. The Company expects to complete the final fair value determination of the assets acquired and liabilities assumed as soon as practicable within the measurement period, but not to exceed one year from the acquisition date.

Goodwill — Goodwill is recorded when the purchase price paid in a business combination exceeds the fair value of assets acquired and liabilities assumed. Goodwill is reviewed for impairment on an annual basis, or upon an occurrence of an event or changes in circumstances that indicate that the carrying value may not be recoverable. In the absence of any indications of potential impairment, the evaluation of goodwill is performed during the fourth quarter of each year.

Goodwill impairment is the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. When testing goodwill for impairment, the Company may first perform a qualitative assessment to determine whether the fair value of a reporting unit is less than its carrying amount. The Company then completes a quantitative impairment test if the qualitative assessment indicates that it is more likely than not that the reporting unit’s fair value is less than the carrying value of its assets. If the estimated fair value of the reporting unit exceeds the carrying value, goodwill is not considered impaired, and no additional steps are needed. If, however, the fair value of the reporting unit is less than its carrying value, then the amount of the impairment loss is the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

Intangible Assets, Net — The Company’s intangible assets consist of acquired customer relationships and trade names. Intangible assets with finite lives are amortized over their estimated useful lives using the straight-line method.

When determining the fair value of acquired intangible assets, management makes significant estimates and assumptions, including, but not limited to, expected long-term market growth, customer retention, future expected operating expenses, costs of capital and appropriate discount rates. Finite-lived intangible assets are amortized using the straight-line method over their respective estimated useful lives.

Stock-Based Compensation — Restricted Stock Units (“RSUs”) have been granted to eligible employees of the Company. As the requirement to remain employed for the necessary service period and the performance vesting criteria are based on the performance of the Company, the Company has pushed down the related compensation expense and has recorded the compensation within stock-based compensation within the consolidated statement of operations. In accounting for stock-based compensation awards, the Company measures and recognizes the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of those awards. Compensation expense for time-vesting awards is recognized ratably using the straight-line attribution method over the vesting period, which is considered to be the requisite service period. The estimated fair value of the RSU’s was determined using the fair value of the Company’s common stock on the grant date.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements — The Company determines fair value based upon the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, as determined by either the principal market or the most advantageous market in which it transacts. The Company applies fair value accounting for all the financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. These inputs are based on the Company’s own assumptions about current market conditions and require significant management judgment or estimation.

As of September 30, 2024 and December 31, 2023, the carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and other current assets and liabilities approximates fair value (except for current maturities of long-term debt) due to the short maturities of these instruments. Certain assets, including goodwill, intangible assets and other long-lived assets, are also subject to measurement at fair value on a nonrecurring basis if they are deemed to be impaired as a result of an impairment review. The earn-out liability is contingent consideration that is measured at the estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in the condensed consolidated statements of operations. Contingent consideration is measured at fair value using a discounted cash flow model utilizing significant unobservable inputs including the probability of achieving each of the potential milestones. The Company reassesses the actual consideration earned and the probability-weighted future earn-out payments at each balance sheet date. Any adjustment to the contingent consideration will be recorded in the condensed consolidated statements of operations. On September 30, 2024, the Company evaluated the earn-out and determined the probability of payment was remote and therefore recorded a gain of $3,095,114 in the condensed consolidated statements of operations. The contingent liability, if any, is expected to be settled at December 31, 2024.

Segment Reporting — In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise for which separate financial information is available and are regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM primarily evaluates performance based on operational results from the services provided by Company Drivers and Brokered, which represent the Company’s operating segments for the nine months ended September 30, 2024 (Successor), for the three months ended September 30, 2024 (Successor), for the period from January 1, 2024 to May 12, 2024 (Predecessor), for the three months ended September 30, 2023 (Predecessor), and for the nine months ended September 30, 2023 (Predecessor), respectively. The Company’s CODM has been identified to collectively include the Company’s Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer.

New Accounting Pronouncements — In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which would require enhanced disclosures about significant segment expenses and information used to assess segment performance. This standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact this standard will have on its disclosures and does not believe there will be a material impact from adoption.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which would require additional transparency for income tax disclosures, including the income tax rate reconciliation table and cash taxes paid both in the United States and foreign jurisdictions. This standard is effective for annual periods beginning after December 15, 2024. The Company is currently assessing the impact this standard will have on its disclosures.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 — Business combinations

Acquisition of the Founding Companies

The various agreements to acquire the Founding Companies are briefly described below:

●

The Company entered into a Membership Interest Purchase Agreement and a Contribution Agreement to acquire all of the outstanding equity of Delta for cash and shares of common stock. Delta’s main business is transporting vehicles for automobile manufacturers to their dealers from the manufacturing site, marine port or rail hub, but it also derives a non-insignificant portion of its revenue from delivering used cars from and to auction companies, leasing companies, automobile dealers, manufacturers and individuals, primarily in the Southeast and East Coast of the United States.

●

The Company entered into a Stock Purchase Agreement and a Merger Agreement to acquire all of the outstanding equity of Deluxe for cash, shares of common stock and contingent consideration in the form of an earn-out provision. The earn-out provision which provides that the Company will make earn-out payments, fifty percent (50%) in cash and fifty percent (50%) in shares of common stock, to Deluxe under certain terms and conditions related to Deluxe’s EBITDA for the period commencing on January 1, 2024 and ending on December 31, 2024. Deluxe’s primary business is transporting vehicles for automobile manufacturers to their dealers from the manufacturing site, marine port or rail hub, but it also derives a non-insignificant portion of its revenue from delivering used cars from and to auction companies, leasing companies, automobile dealers, manufacturers and individuals, primarily in the West Coast and South of the United States.

●

The Company entered into a Stock Purchase Agreement and a Contribution Agreement to acquire all of the outstanding equity of Proficient Transport for cash and shares of common stock. Proficient Transport’s primary business is transporting vehicles for automobile manufacturers to their dealers from the manufacturing site, marine port or rail hub, but it also derives a non-insignificant portion of its revenue from delivering used cars from and to auction companies, leasing companies, automobile dealers, manufacturers and individuals, primarily in the South, Southeast and East Coast of the United States.

●

The Company entered into a Stock Purchase Agreement and a Merger Agreement to acquire all of the outstanding equity of Sierra for cash and shares of common stock. Sierra Mountain’s primary business is transporting vehicles for automobile manufacturers to their dealers from the manufacturing site, marine port or rail hub, but it also derives a non-insignificant portion of its revenue from delivering used cars from and to auction companies, leasing companies, automobile dealers, manufacturers and individuals, primarily in the West Coast and the Midwest of the United States.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

●

The Company entered into a Stock Purchase Agreement and a Contribution Agreement to acquire all of the outstanding equity of Tribeca for cash and shares of common stock. Tribeca’s primary business is transporting vehicles for automobile manufacturers to their dealers from the manufacturing site, marine port or rail hub, but it also derives a non-insignificant portion of its revenue from delivering used cars from and to auction companies, leasing companies, automobile dealers, manufacturers and individuals, primarily in the East Coast and Southeast of the United States.

The acquisitions were accounted for using the acquisition method of accounting, in accordance with ASC 805, Business Combinations. Proficient Auto Logistics, Inc was the accounting acquirer, and the Company elected to apply pushdown accounting. The tables below presents the consideration transferred and the allocation of the total consideration to tangible and intangible assets acquired and liabilities assumed from the acquisition of the Founding Companies based on the respective fair values as of May 13, 2024, as well as the measurement period adjustments recorded as of September 30, 2024.

Delta

	Acquisition Date Amounts Recognized			Adjustments			Acquisition Date Amounts Recognized, As Adjusted
Purchase consideration
Cash consideration paid	$	31,580,792		$	-		$	31,580,792
Stock consideration issued		32,888,947			-			32,888,947
Total purchase price	$	64,469,739		$	-		$	64,469,739

Allocation of purchase price
Cash and cash equivalents		3,928,492			300			3,928,792
Accounts receivable		3,928,804			-			3,928,804
Prepaid expenses and other current assets		1,219,052			(300	)		1,218,752
Property and equipment		24,114,360			-			24,114,360
Operating right-of-use asset		3,429,317			(2,848,030	)		581,287
Deposits		48,041			-			48,041
Intangible assets		36,000,000			-			36,000,000
Accounts payable		(1,938,014	)		-			(1,938,014	)
Insurance payable		(614,809	)		-			(614,809	)
Operating lease liabilities		(3,429,316	)		2,848,030			(581,286	)
Long-term debt		(16,854,781	)		-			(16,854,781	)
Deferred tax liability		(8,182,907	)		-			(8,182,907	)
Fair value of net assets acquired	$	41,648,239		$	-		$	41,648,239
Goodwill	$	22,821,500		$	-		$	22,821,500

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Deluxe

	Acquisition Date Amounts Recognized			Adjustments			Acquisition Date Amounts Recognized, As Adjusted
Purchase consideration
Cash consideration paid	$	40,233,554		$	(3,599,373	)¹	$	36,634,181
Stock consideration issued		20,907,990			-			20,907,990
Contingent consideration – earn-out		3,095,114			-			3,095,114	²
Total purchase price	$	64,236,658		$	(3,599,373	)	$	60,637,285

Allocation of purchase price
Cash and cash equivalents		153,838			-			153,838
Accounts receivable		9,668,217			-			9,668,217
Maintenance supplies		479,012			-			479,012
Prepaid expenses and other current assets		1,309,219			-			1,309,219
Property and equipment		24,070,980			(52,198	)		24,018,782
Operating right-of-use asset		1,455,919			-			1,455,919
Net investment in leases		63,389			-			63,389
Deposits		2,205,923			-			2,205,923
Intangible assets		19,300,000			-			19,300,000
Accounts payable		(5,313,958	)		-			(5,313,958	)
Accrued liabilities		(5,975,871	)		-			(5,975,871	)
Line of credit		(2,911,720	)		-			(2,911,720	)
Operating lease liabilities		(1,455,919	)		-			(1,455,919	)
Long-term debt		(7,301,372	)		-			(7,301,372	)
Deferred tax liability		(6,161,897	)		-			(6,161,897	)
Fair value of net assets acquired	$	29,585,760		$	(52,198	)	$	29,533,562
Goodwill	$	34,650,898		$	(3,547,175	)	$	31,103,723

As of October 9, 2024, as part of the Stock Purchase Agreement and a Merger Agreement to acquire all of the outstanding equity of Deluxe, the Company and Deluxe acknowledged and agreed to the final calculation of the tangible and intangible assets acquired and liabilities assumed of Deluxe as defined in the Stock Purchase Agreement and a Merger Agreement. As a result, the final consideration is less than the estimated closing consideration. Accordingly, the Company reduced the purchase consideration paid to Deluxe by $3,599,373 as a measurement period adjustment and recorded a receivable of $3,599,373 in prepaid expenses and other current assets on the condensed consolidated balance sheet as of September 30, 2024.

On September 30, 2024, the Company evaluated the earn-out and determined the probability of payment was remote and therefore recorded a gain of $3,095,114 in the condensed consolidated statements of operations. The contingent liability, if any, is expected to be settled at December 31, 2024.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Proficient Transport

	Acquisition Date Amounts Recognized			Adjustments			Acquisition Date Amounts Recognized, As Adjusted
Purchase consideration
Cash consideration paid	$	82,185,183		$	-		$	82,185,183
Stock consideration issued		26,575,928			-			26,575,928
Total purchase price	$	108,761,111		$	-		$	108,761,111

Allocation of purchase price
Cash and cash equivalents		2,352,200			-			2,352,200
Accounts receivable		12,108,207			-			12,108,207
Maintenance supplies		765,110			-			765,110
Assets held for sale		-			74,600			74,600
Prepaid expenses and other current assets		1,899,520			-			1,899,520
Property and equipment		21,268,990			(364,700	)		20,904,290
Operating right-of-use asset		305,163			-			305,163
Net investment in leases		23,813			-			23,813
Deposits		1,045,911			(55,224	)		990,687
Other long-term assets		480,170			-			480,170
Intangible assets		36,900,000			-			36,900,000
Accounts payable		(2,379,536	)		(50,000	)		(2,429,536	)
Accrued liabilities		(6,482,594	)		-			(6,482,594	)
Income tax payable		(508,891	)		-			(508,891	)
Finance lease liabilities		(151,298	)		-			(151,298	)
Operating lease liabilities		(305,163	)		-			(305,163	)
Long-term debt		(5,920,400	)		-			(5,920,400	)
Deferred tax liability		(7,320,667	)		-			(7,320,667	)
Fair value of net assets acquired	$	54,080,535		$	(395,324	)	$	53,685,211
Goodwill	$	54,680,576		$	395,324		$	55,075,900

Sierra

	Acquisition Date Amounts Recognized			Adjustments			Acquisition Date Amounts Recognized, As Adjusted
Purchase consideration
Cash consideration paid	$	18,763,279		$	-		$	18,763,279
Stock consideration issued		13,359,045			-			13,359,045
Total purchase price	$	32,122,324		$	-		$	32,122,324

Allocation of purchase price
Cash and cash equivalents		2,963,120			-			2,963,120
Accounts receivable		5,270,200			-			5,270,200
Assets held for sale		533,587			-			533,587
Prepaid expenses and other current assets		451,624			-			451,624
Property and equipment		26,642,670			(1,153,458	)		25,489,212
Operating right-of-use asset		805,316			-			805,316
Other long-term assets		829,489			-			829,489
Intangible assets		19,200,000			-			19,200,000
Accounts payable		(2,347,239	)		-			(2,347,239	)
Accrued liabilities		(5,358,172	)		-			(5,358,172	)
Owner operator deposits		(1,245,163	)		-			(1,245,163	)
Lease deposits		(349,126	)		-			(349,126	)
Equipment obligations		(15,113,309	)		-			(15,113,309	)
Operating lease liabilities		(805,316	)		-			(805,316	)
Deferred tax liability		(8,543,273	)		-			(8,543,273	)
Fair value of net assets acquired	$	22,934,408		$	(1,153,458	)	$	21,780,950
Goodwill	$	9,187,916		$	1,153,458		$	10,341,374

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Tribeca

	Acquisition Date Amounts Recognized			Adjustments			Acquisition Date Amounts Recognized, As Adjusted
Purchase consideration
Cash consideration paid	$	10,685,499		$	-		$	10,685,499
Stock consideration issued		9,000,055			-			9,000,055
Total purchase price	$	19,685,554		$			$	19,685,554

Allocation of purchase price
Cash and cash equivalents		1,721,106			(59,496	)		1,661,610
Accounts receivable		5,538,205			59,496			5,597,701
Prepaid expenses and other current assets		1,788,257			-			1,788,257
Property and equipment		15,770,351			-			15,770,351
Operating right-of-use asset		8,173,047			(30,247	)		8,142,800
Deposits		540,422			-			540,422
Intangible assets		3,500,000			-			3,500,000
Accounts payable		(1,988,465	)		-			(1,988,465	)
Accrued liabilities		(59,506	)		-			(59,506	)
Operating lease liabilities		(8,173,047	)		30,247			(8,142,800	)
Long-term debt		(11,101,904	)		-			(11,101,904	)
Deferred tax liability		(2,110,144	)		-			(2,110,144	)
Fair value of net assets acquired	$	13,598,322		$	-		$	13,598,322
Goodwill	$	6,087,232		$	-		$	6,087,232

Total Acquisition Date Amounts Recognized

	Delta		Deluxe		Proficient Transport		Sierra		Tribeca		Total
Purchase consideration
Cash consideration paid	$	31,580,792	$	40,233,554	$	82,185,183	$	18,763,279	$	10,685,499	$	183,448,307
Stock consideration issued		32,888,947		20,907,990		26,575,928		13,359,045		9,000,055		102,731,965
Contingent consideration – earn-out		-		3,095,114		-		-		-		3,095,114
Total purchase price	$	64,469,739	$	64,236,658	$	108,761,111	$	32,122,324	$	19,685,554	$	289,275,386

Allocation of purchase price
Fair value of net assets acquired	$	41,648,239	$	29,585,760	$	54,080,535	$	22,934,408	$	13,598,322	$	161,847,264
Goodwill	$	22,821,500	$	34,650,898	$	54,680,576	$	9,187,916	$	6,087,232	$	127,428,122

Total Acquisition Date Amounts Recognized, As Adjusted

	Delta		Deluxe		Proficient Transport		Sierra		Tribeca		Total
Purchase consideration
Cash consideration paid	$	31,580,792	$	36,634,181	$	82,185,183	$	18,763,279	$	10,685,499	$	179,848,934
Stock consideration issued		32,888,947		20,907,990		26,575,928		13,359,045		9,000,055		102,731,965
Contingent consideration – earn-out		-		3,095,114		-		-		-		3,095,114
Total purchase price	$	64,469,739	$	60,637,285	$	108,761,111	$	32,122,324	$	19,685,554	$	285,676,013

Allocation of purchase price
Fair value of net assets acquired	$	41,648,239	$	29,533,562	$	53,685,211	$	21,780,950	$	13,598,322	$	160,246,284
Goodwill	$	22,821,500	$	31,103,723	$	55,075,900	$	10,341,374	$	6,087,232	$	125,429,729

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized intangible assets as follows:

	Useful Life	Delta		Deluxe		Proficient Transport		Sierra		Tribeca		Total
Customer relationships	15 years	$	34,200,000	$	16,700,000	$	32,600,000	$	16,800,000	$	2,200,000	$	102,500,000
Trade names	10 years		1,800,000		2,600,000		4,300,000		2,400,000		1,300,000		12,400,000
Total		$	36,000,000	$	19,300,000	$	36,900,000	$	19,200,000	$	3,500,000	$	114,900,000

The Combinations resulted in $125,429,729 of goodwill consisting largely of the expected synergies from combining operations as well as the value of the workforce. As a result of the types of acquisitions the Company engaged in 2024, asset, stock acquisitions, and stock acquisitions with the 338(h)(10) election made, only a portion of the total goodwill reported will be tax deductible. During the measurement period, which is up to one year from the acquisition date, the Company may record adjustments to the fair value of assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Earn-out liability

As part of the Company’s acquisition of Deluxe, the purchase price consideration included an earn-out provision which provides that the Company will make earn-out payments, fifty percent (50%) in cash and fifty percent (50%) in shares of common stock, to Deluxe under certain terms and conditions related to Deluxe Auto’s EBITDA for the period commencing on January 1, 2024 and ending December 31, 2024. The earn-out liability associated with the Deluxe Business Combination has been remeasured at period ending September 30, 2024 based upon the best and most available information that exists as of the balance sheet date concluding the probability of the payment is remote and therefore the Company has recorded a gain of $3,095,114 in the condensed consolidated statements of operations.

Auto Transport Group Acquisition

On August 8, 2024, PAL Stock Acquiror, Inc. and PAL Merger Sub, LLC, subsidiaries of the Company, executed an Agreement and Plan of Merger (the “Merger Agreement”) with Auto Transport Group, LC, (“ATG”) pursuant to which the Company acquired all of the outstanding equity of ATG. ATG provides vehicle transportation and shipping services in the Mountain Western region. The transaction closed on August 15, 2024. The acquisition was accounted for using the acquisition method of accounting, in accordance with ASC 805, Business Combinations. Proficient Auto Logistics, Inc was the accounting acquirer, and the Company elected to apply pushdown accounting. The table below presents the consideration transferred and the allocation of the total consideration to tangible and intangible assets acquired and liabilities assumed from the acquisition of ATG based on the respective fair values as of August 15, 2024:

Purchase consideration	Auto Transport Group
Cash consideration paid	$	28,938,295
Stock consideration issued		20,542,136
Total purchase price		49,480,431

Allocation of purchase price
Cash and cash equivalents		472,862
Accounts receivable		3,339,052
Prepaid expenses and other current assets		704,396
Property and equipment		11,724,000
Operating right-of-use asset		297,050
Net investment in leases		521,901
Deposits		16,355
Intangible assets		23,300,000
Accounts payable		(1,134,536	)
Accrued liabilities		(296,229	)
Operating lease liabilities		(297,050	)
Long-term debt		(4,700,710	)
Deferred Tax Liability		(7,129,446	)
Fair value of net assets acquired		26,817,645
Goodwill		22,662,786

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized intangible assets as follows:

	Useful Life	Auto Transport Group
Customer relationships	15 years	$	22,200,000
Trade names	10 years		1,100,000
Total		$	23,300,000

The acquisition of ATG resulted in $22,662,786 of goodwill, consisting largely of the expected synergies from combining operations as well as the value of the workforce. As a result of this asset acquisition the Company engaged in in 2024, only a portion of the total goodwill reported will be tax deductible. During the measurement period, which is up to one year from the acquisition date, the Company may record adjustments to the fair value of assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

The amounts shown below reflect the unaudited summary combined financial results of the five Founding Companies for the full three-month and nine-month periods presented without any pro forma adjustments that would give effect to the completion of the IPO or any related transaction expenses or adjustments recognized as a result of the IPO and concurrent Combinations. The results of Proficient (acquiror entity) are included in the three and nine months ended September 30, 2024; however, they reflect only those operating expenses incurred following the closing of the IPO and concurrent Combinations (May 13 – September 30, 2024). There are no comparative expenses of Proficient during the three and nine months ended September 30, 2023.

Dollars in 000’s	Three months ended September 30,					Nine Months Ended September 30,
	2024			2023		2024		2023
Total operating revenue	$	91,506		$	104,565	$	293,669	$	305,150
Total operating (loss) income		(2,186	)		8,205		12,856		22,885

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 — Goodwill

The changes in the carrying amount of goodwill are as follows:

	September 30, 2024
Balance – December 31, 2023	$	-
Additions		148,092,515
Balance – September 30, 2024	$	148,092,515

Note 5 — Intangible assets, net

	September 30, 2024
	Gross carrying amount		Accumulated amortization			Net carrying amount
Customer relationships	$	124,700,000	$	(2,804,444	)	$	121,895,556
Trade names		13,500,000		(489,083	)		13,010,917
Total	$	138,200,000	$	(3,293,527	)	$	134,906,473

Amortization expense related to finite lived intangible assets is included in intangible amortization expenses in the condensed consolidated statement of operations and was $3,293,527 and $2,217,083 for the nine and three months ended September 30, 2024 for the Successor.

As of September 30, 2024, the expected amortization expense associated with the Company’s identifiable intangible assets with estimable useful lives over the next five years was as follows:

2024	$	4,632,917
2025		9,663,333
2026		9,663,333
2027		9,663,333
2028		9,663,333
Thereafter		91,620,224
Total	$	134,906,473

As of September 30, 2024, the weighted average amortization period for all intangible assets was 14.19 years.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 — Property and equipment

Property and equipment, at cost, consist of the following as of:

	Successor			Predecessor
	September 30, 2024			December 31, 2023
Land	$	2,220,000		$	417,909
Buildings and improvements		1,657,440			1,258,919
Furniture and equipment		430,842			180,363
Machinery and equipment		1,162,322			301,960
Software and computer equipment		606,189			788,664
Transportation equipment		133,137,242			31,262,068
		139,214,035			34,209,883
Less accumulated amortization and depreciation		(10,146,095	)		(16,211,133	)
Property and equipment, net	$	129,067,940		$	17,998,750

The Company recorded a gain on the disposal of equipment $95,124, $87,212, $235,081, $120,680 and $64,704 in the condensed consolidated statements of operations for nine months ended September 30, 2024 (Successor), for the three months ended September 30, 2024 (Successor), for the period from January 1, 2024 to May 12, 2024 (Predecessor), for the nine months ended September 30, 2023 (Predecessor), and for the three months ended September 30, 2023 (Predecessor), respectively.

Note 7 — Accrued liabilities

Accrued liabilities consist of the following as of:

	Successor		Predecessor
	September 30, 2024		December 31, 2023
Claims, insurance and litigation reserves	$	9,248,730	$	2,209,173
Accrued purchased transportation		3,875,371		2,111,527
Deferred leased to purchase payments		2,706,398		348,134
Salaries, wages and benefits		2,682,278		700,349
Owner Operator Deposits		2,043,713		—
Customer deposit		—		444,421
Other accrued expenses		2,802,630		1,989,755
Accrued liabilities	$	23,359,120	$	7,803,359

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8 — Income taxes

The income tax provision differs from the amount determined by applying the U.S. federal tax rate as follows:

	Successors						Predecessor
	Three months ended September 30, 2024			Nine months ended September 30, 2024			Period from January 1, 2024 to May 12, 2024			Three months ended September 30, 2023		Nine months ended September 30, 2023
Federal (benefit) tax at statutory rate (21%)	$	(355,584	)	$	(1,067,681	)	$	(4,457,009	)	$	431,236	$	1,330,246
State taxes, net of federal benefit		(56,185	)		57,737			(870,083	)		62,792		193,696
Permanent differences to return		9,154			1,078,165			711,694			4,027		12,422
Other Discrete		74,833			74,833			—			—		—
Total income tax (benefit) expense	$	(327,782	)	$	143,054		$	(4,615,398	)	$	498,055	$	1,536,364

The Founding Companies’ tax years 2019 and forward remain subject to examination by federal and state jurisdictions. The Founding Companies are not currently under an IRS examination as of the date these financials were available to be issued.

Note 9 — Line of credit

At December 31, 2023, Proficient Transport had an outstanding balance on the revolving line of credit of $3,450,129. The revolving line of credit for Proficient Transport was with a financial institution which provided for borrowings up to $18,000,000 subject to a borrowing base calculation of Qualified Accounts Receivable plus Qualified Rolling Stock (trucks, tractors, and trailers that transport goods in interstate commerce purchased on the line). Interest was 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 was secured by all assets of Proficient Transport. The line of credit required Proficient Transport to comply with certain restrictive covenants, including but not limited to a debt service coverage ratio, tangible net worth plus subordinated debt, and liabilities to tangible net worth plus subordinated debt ratio. Proficient Transport was in compliance with all covenants as December 31, 2023. On July 9, 2024, Proficient Transport terminated its revolving line of credit.

In June 2024, Proficient Transport entered into a revolving line of credit agreement with a financial institution which provides for borrowing up to $12,000,000 subject to a borrowing base calculation of Qualified Accounts Receivable. Interest is payable monthly at the Prime Rate but no less than 3% annum (8.00% as of September 30, 2024). Borrowings against the line of credit are secured by all of Proficient Transport’s assets and matures in June 2026, when all accrued interest and unpaid principal is due. As of September 30, 2024, Proficient Transport had an outstanding balance on this line of $9,500,000. Subsequent to September 30, 2024, this line of credit was repaid and terminated on November 8 , 2024.

In May 2024, Deluxe entered into a line of credit agreement with a bank. Under this agreement, Deluxe, or any of its subsidiaries or affiliates, may request the issuance of letters of credit by the bank or any bank affiliate, subject to the bank’s approval and the terms of the agreement. The agreement also establishes a credit facility (the “Facility”) with a maximum borrowing base of $6,000,000, calculated as the lesser of the maximum principal amount or 80% of qualified accounts, plus an applicable percentage of qualified inventory, subject to adjustments and reserves as deemed necessary by the bank. In May 2024, the agreement was amended and extended to August 2024. The line of credit was paid off and terminated on August 8, 2024.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 10 — Long-term debt

Long-term debt consists of the following as of:

Predecessor

	December 31, 2023
Equipment notes payable to financial institutions, requiring monthly principal and interest payments totaling $43,359. The notes bear interest ranging from 4.99% to 9.32%, mature between November 2024 November 2026 and are secured by the Company’s transportation equipment.	$	991,676

Note payable to a financial institution requiring monthly principal and interest payment of $6,751 and a balloon payment at maturity, bears interest at 6%, maturing December 2025. The note is secured by a mortgage on real property.		693,836

Equipment notes payable to a financial institution, requiring monthly principal and interest payments totaling $128,733. One note payable was used to refinance existing capital lease obligations in 2022. The notes bear interest ranging from 3.95% to 6.80%, mature between June 2024 and December 2028, and are secured by transportation equipment.		4,966,298
		6,651,810
Less: unamortized debt issuance costs		(16,633	)
Less: current maturities		(1,599,699	)
Total long-term debt	$	5,035,478

Successor

	September 30, 2024
Equipment and vehicle notes payable to financial institutions, requiring monthly principal and interest payments totaling $2,256,283. The notes bear interest ranging from 1.9% to 13.0%, mature between November 2024 to September 2030 and are secured by the Company’s transportation equipment and vehicles.	$	64,075,963
Less: unamortized debt issuance costs		(60,932	)
Less: current maturities		(18,727,011	)
Total long-term debt	$	45,288,020

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Future maturities of long-term debt are as follows:

For the year ending December 31:
2024	$	5,286,346
2025		17,815,678
2026		13,042,312
2027		10,870,437
2028 and thereafter		17,000,258
Total	$	64,015,031

The Company capitalized debt issuance costs of $39,106 during the period ended September 30, 2024 (Successor) and none in the period December 31, 2023 (Predecessor), respectively. Amortization expense related to the debt issuance costs totaled $35,296, $27,344, $4,795, $9,837, and $3,279 for nine months ended September 30, 2024 (Successor), for the three months ended September 30, 2024 (Successor), for the period from January 1, 2024 to May 12, 2024 (Predecessor), for the nine months ended September 30, 2023 (Predecessor), and for the three months ended September 30, 2023 (Predecessor), respectively, and was recorded within interest expense on the condensed consolidated statements of operations.

Note 11 — Leases

Lessee — The following table presents certain information related to lease costs for finance and operating leases as of:

	Successor				Predecessor
	Three months ended September 30, 2024		Nine months ended September 30, 2024		Period from January 1, 2024 to May 12, 2024		Three months ended September 30, 2023		Nine months ended September 30, 2023
Operating lease cost	$	416,463	$	527,365	$	27,951	$	4,438	$	24,867
Finance lease costs:
Amortization of finance lease assets		17,170		26,328		160,032		120,933		362,798
Interest on lease liabilities		3,975		6,955		132,062		57,118		191,718
Short-term lease costs		145,001		334,519		99,533		35,173		121,388
Total lease costs	$	582,609	$	895,167	$	419,578	$	217,662	$	700,771

As of September 30, 2024 (Successor) and December 31, 2023 (Predecessor), the weighted-average discount rate for operating leases was 6.87% and 0.86%, respectively. The weighted-average remaining lease term as of September 30, 2024 (Successor) and December 31, 2023 (Predecessor), was 8.2 and less than a year, respectively. As of September 30, 2024 (Successor) and December 31, 2023 (Predecessor), the weighted-average discount rate for finance leases was 12.08% and 9.26%, respectively and the weighted-average remaining lease term was 1.31 years and 1.07 years, respectively.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2024 (Successor), future maturities of the lease liabilities were as follows:

	Operating leases			Finance leases
For the year ending December 31:
2024	$	595,696		$	24,033
2025		2,416,523			96,134
2026		1,781,733			8,011
2027		1,409,437			—
2028		1,460,741			—
Thereafter		6,694,472			—
Total undiscounted cash flows		14,358,602			128,178
Less: present value factor		(3,298,434	)		(9,981	)
Total lease liabilities		11,060,168			118,197
Less: current portion –		(1,711,257	)		(86,544	)
Total long-term lease liabilities	$	9,348,911		$	31,653

Lessor — The Company finances various types of transportation-related equipment to independent third parties under lease contracts which are generally for a term of one to eight years and contain an option for the lessee to return or purchase the equipment at a bargain purchase price. The Company classifies these leases as a sales-type lease. The Company assesses a third party’s ability to pay based on the financial capacity and intention to pay, considering all relevant facts and circumstances, including past experiences with that third party or similar third parties. For those leases classified as sales-type leases where collectability is not probable at lease commencement, the Company does not derecognize the underlying asset, and the payments received for these leases are recorded as deposit liabilities. Deposit liabilities of $2,706,398 and $348,134 were reported in accrued liabilities on the condensed consolidated balance sheet as of September 30, 2024 (Successor) and December 31, 2023 (Predecessor), respectively. The determination of collectability is an ongoing assessment, at the time that collectability is determined probable, the liability and assets will be derecognized with a corresponding earnings recognition.

Lease receivables are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased assets and any initial direct costs incurred to originate these leases, less unearned income, which is accreted to interest income over the lease term using the interest method. Lease receivables of $511,141 and $35,055 are reported as net investment in leases on the condensed consolidated balance sheet as of September 30, 2024 (Successor) and December 31, 2023 (Predecessor), respectively.

For the three and nine months ended September 30, 2024 (Successor), for the period from January 1, 2024 to May 12, 2024 (Predecessor), for the nine months ended September 30, 2023 (Predecessor), and for the three months ended September 30, 2023 (Predecessor), the Company recorded sales-type lease revenue of $0, $0, $0, $25,000 and $0, respectively, within operating revenue on the condensed consolidated statement of operations.

For the three and nine months ended September 30, 2024 (Successor), for the period from January 1, 2024 to May 12, 2024 (Predecessor), for the nine months ended September 30, 2023 (Predecessor), and for the three months ended September 30, 2023 (Predecessor),the Company recorded interest income of $5,365, $5,261, $273, $2,045, and $635, respectively, within interest expense, net on the condensed consolidated statements of operations.

As of September 30, 2024 (Successor), future minimum lease payments expected to be collected were as follows:

For the year ending December 31:
2024	$	88,632
2025		298,647
2026		157,755
2027		29,880
Total undiscounted cash payments		574,914
Less: present value factor		(63,773	)
Total net investment in lease		511,141
Less: current portion		(276,193	)
Total net investment in lease, less current portion	$	234,948

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 12 — Stockholders’ Equity (Deficit) and Preferred Stock

Series A preferred stock (Predecessor)

Proficient Transport was authorized to issue 10,000,000 shares of Series A preferred stock, with a par value of $0.01 per share. The holders of Series A preferred stock were entitled to vote as common shareholders and had certain liquidation preferences to every other class or series of stock. The Series A preferred stock was redeemable at the option of the Series A preferred stockholders at the greater of the fair market value of the Series A preferred stock at the date of redemption or a value determined using a discounted cash flow model, as defined. The Series A preferred stock was eliminated in connection with the business combinations (Note 3) on May 13, 2024.

The Series A preferred stock earned a cumulative preferred return equal to 8% per annum on the sum of $1.00 per share invested plus accrued and unpaid Series A returns. The Series A returns accrue on a quarterly basis and will be fully cumulative, whether or not declared by Proficient Transport’s Board of Directors.

Since the holder of the Series A preferred stock has the option to redeem their shares at any time, the Series A preferred stock is considered contingently redeemable, and accordingly, is classified as mezzanine equity on the condensed consolidated balance sheet as of December 31, 2023.

The Series A preferred stock is recorded at its redemption of $8,880,672 as of December 31, 2023, respectively. The accumulated but undistributed preferred returns were approximately $5,813,749 as of December 31, 2023, respectively.

Activity related to the Series A preferred stock for the quarterly periods included from January 1, 2024 to May 12, 2024 and year ended December 31, 2023 is as follows:

Balance as of December 31, 2022	$	12,933,092
Accrued and unpaid dividend		947,580
Dividend Paid		(5,000,000	)
Balance as of December 31, 2023	$	8,880,672
Accrued and unpaid dividend		177,752
Balance as of March 31, 2024		9,058,424
Accrued and unpaid dividend		82,774
Balance as of May 12, 2024	$	9,141,198

Stockholders’ Equity (Successor)

The Company is authorized to issue 50,000,000 shares of common stock, which has a par value of $0.01 per share.

In May 2024, the Company issued 404,177 shares of common stock for vested RSU’s.

In May 2024, the Company completed its IPO of its common stock and issued 14,333,333 shares of its common stock at a price of $15.00 per share for total gross proceeds of $215,000,000 and net proceeds of $ 192,273,599 after underwriting fees and transaction costs.

The Company issued 6,848,795 shares of its common stock to the Founding Companies in connection with the Combinations and 1,069,346, commons shares to the ATG Sellers. Please see Note 3 for additional information.

In connection with its IPO, the Company granted the underwriters of its IPO a customary 30-day over-allotment option to buy up to an additional 2,149,999 shares of common stock from the Company at the IPO price, less underwriting discounts and commissions. In June 2024, the Company issued 1,435,000 shares of its common stock pursuant to the partial exercise of the over-allotment option. The shares were sold at the initial public offering price of $15.00 per share for total gross proceeds of $21,500,000 and net proceeds of $20,018,250 after underwriting fees and transaction costs. All of the shares of common stock were sold by the Company.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 13 — Stock-based compensation

In May 2024, the Company adopted its 2024 Long-Term Incentive Plan (“the 2024 Plan”). The 2024 Plan provides for the grant of incentive stock options (“ISOs”) to employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees and directors, including employees of our affiliates. After taking into account restricted stock units granted in connection with the IPO in concurrent business combinations (Note 3), the maximum number of shares of our common stock that may be issued under our 2024 Plan is 3,260,000 shares.

The awards under the 2024 Plan vest over periods ranging between one (1) and five (5) years after the grant date. The Company uses straight line vesting to record compensation expense. All awards granted are settled in common stock.

If an employee terminates employment with the Company prior to awards vesting, the unvested awards are forfeited and the historical compensation expense is reversed in the period of termination.

Shares subject to stock awards granted under the 2024 Plan that expire or terminate do not reduce the number of shares available for issuance under the 2024 Plan. Additionally, shares become available for future grants under the 2024 Plan if they were stock awards issued under the 2024 Plan and we repurchase them or they are forfeited. This includes shares used to pay the exercise price of a stock award or to satisfy the tax withholding obligations related to a stock award.

Restricted Stock Units (Successor)

The following summarizes grants made of restricted stock awards under the 2024 Plan, as amended, on the dates indicated:

●

On May 12, 2024, the Company’s CEO, was awarded 1,212,532 restricted stock units, 1/3 of these units vested immediately with the remaining shares to vest in equal installments over the next five (5) years beginning on May 13, 2025.

●

On May 13, 2024, in the connection with the Company’s IPO, the Company awarded restricted stock awards for 129,397 shares to key employees from one of the Founding Companies. The awards vest over 38 months beginning on May 13, 2025.

●

On May 13, 2024, in the connection with the Company’s IPO, the Company awarded restricted stock awards for 307,933 shares to key employees from one of the Founding Companies. These awards vest in equal installments over three (3) years beginning on May 13, 2025.

●

On May 13, 2024, the compensation committee awarded 5,000 restricted stock awards to each independent Board Member, totaling 20,000 units. These awards vest one year from the grant date.

●

On June 3, 2024, as part of an employee agreement the Company awarded 9,824 shares of restricted stock awards. These awards vest in equal installments over three (3) years beginning on June 3, 2025.

	●	On August 16, 2024, in the connection with the Company’s acquisition of ATG, the Company awarded restricted stock awards for 18,210 shares to key employees of ATG. These awards vest in equal installments over four (4) years beginning on August 16, 2025

	●	On August 14, 2024, as part of an employee agreement the Company awarded 64,666 shares of restricted stock awards. These awards vest in equal installments over three (3) years beginning on August 14, 2025.

●

On September 30, 2024, as part of employee agreements the Company awarded 7,697 shares of restricted stock awards. These awards vest in equal installments over three (3) years beginning on September 30, 2025.

Total compensation expense related to these restricted stock awards was $7.7 million and $1.1 for the nine and three months ended September 30, 2024, respectively. As of September 30, 2024, there was a total of $17,439,949 of unrecognized compensation expense related to these restricted stock awards, which is expected to be recognized over the next four years.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of all restricted stock/units outstanding as of December 31, 2023 and activity during the nine months ended September 30, 2024 is presented below:

	Number of Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (years)
Outstanding, December 31, 2023		-		$	0.00		-
Granted		2,317,966		$	15.19		-
Vested		(951,885	)	$	15.00		-
Canceled/Forfeited		(120,000	)	$	15.00		-
Outstanding, September 30, 2024		1,246,081		$	15.35		3.93

Phantom Stock Plan (Predecessor) — In June 2018, Proficient Transport granted a phantom stock award of 565,463 units (the “Units”), of which 188,488 Units vested immediately, to a member of the Board of Directors of Proficient Transport. The remaining 376,975 Units vested in connection with the business combination (Note 3) on May 13, 2024.

Note 14 — Segment reporting

The Company’s business is organized into two operating segments, which represent the Company’s reportable segments. The Company Drivers 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 Brokered segment offers transportation services utilizing an asset-light model focusing on outsourcing transportation of loads to third-party carriers.

The following table summarizes information about our reportable segments:

	Successor						Predecessor
	Three months ended			Nine months ended			For the period from January 1 to May 12,			Three months ended			Nine months ended
	September 30, 2024						2024			September 30, 2023
Revenues
Company Drivers, excluding fuel surcharge and other reimbursements	$	35,468,009		$	52,693,225		$	12,673,594		$	8,824,151		$	29,279,009
Company Drivers fuel surcharge and other reimbursements		2,465,277			3,589,523			826,414			684,583			3,923,274
Other Revenue		318,534			318,534			-			-			-
Lease Revenue		5,645			5,645			196,814			86,952			124,958
Total Company Drivers		38,257,465			56,606,927			13,696,822			9,595,686			33,327,241

Brokered, excluding fuel surcharge and other reimbursements		48,821,883			83,407,412			26,274,193			23,035,294			64,463,598
Brokered fuel surcharge and other reimbursements		3,552,019			6,022,436			1,246,673			837,176			2,923,024
Other Revenue		57,433			208,100			-			-			-
Lease Revenue		816,701			1,169,223			-			-			-
Total Brokered		53,248,036			90,807,171			27,520,866			23,872,470			67,386,622
Total Operating Revenue		91,505,501			147,414,098			41,217,688			33,468,156			100,713,863

Operating Income
Company Drivers		(327,281	)		887,958			(3,756,133	)		(208,630	)		183,913
Brokered		5,428,651			9,477,822			(16,752,365	)		2,488,784			6,946,135
Corporate		(7,286,875	)		(15,466,324	)		-			-			-
Total Operating (Loss) Income	$	(2,185,505	)	$	(5,100,544	)	$	(20,508,498	)	$	2,280,154		$	7,130,048

Depreciation and Intangible Amortization
Company Drivers	$	6,337,669		$	8,030,318		$	872,783		$	603,508		$	1,737,432
Brokered		227,998			1,955,575			62,205			48,883			130,333
Corporate		2,217,858			3,294,665			-			-			-
Total Depreciation and Amortization	$	8,783,525		$	13,280,558		$	934,988		$	652,391		$	1,867,765

Assets and other balance sheet information are not disclosed by reportable segment as the Company does not track assets by reportable segment and certain assets are not specific to any reportable segment.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 15 – Loss per share

Basic loss per share is based upon the weighted average common shares outstanding during each year. Diluted loss per share is based on the basic weighted earnings per share with additional weighted common shares for common stock equivalents. During the nine and three months ended September 30, 2024, the Company had outstanding restricted shares of common stock to certain of our employees and directors, under the Company’s restricted stock award plans. The diluted shares include the dilutive effect of restricted stock units based on the treasury stock method.

A reconciliation of the numerator (net loss) and denominator (weighted average number of shares outstanding of the basic loss per share) for the nine and three months ended September 30, 2024 and is as follows:

	Three months ended September 30, 2024			Nine months ended September 30, 2024
Numerator:
Net Loss	$	(1,365,476	)	$	(5,227,249	)

Denominator:
Weighted-Average Number of Shares of Common Stock		26,495,108			14,851,641
Basic Loss per Share	$	(0.05	)	$	(0.35	)

The Company excluded 1,250,341 and 1,252,348 of RSU’s from the computation of weighted-average number of shares of common stock in computing the diluted loss per share for the periods presented because including them would have had an anti-dilutive effect for the nine and three months ended September 30, 2024, respectively.

Note 16 — Commitments and contingencies

The Company is involved in certain claims and pending litigation primarily arising in the normal course of business. The majority of these claims relate to workers compensation, auto collision and liability, and physical and cargo damage. The Company expenses legal fees as incurred and accrues for the uninsured portion of contingent losses from these and other pending claims when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

Independent Contractors Misclassification Class Action

In May 2020, a Brokered employee filed claim against Sierra Mountain Group, Inc. and an officer of the Company in Sacramento County Superior Court in California. The putative class alleges that Sierra misclassified owner/operators as independent contractors, not as employees, in violation of the California Labor Code applicable to employees (meal and rest breaks, minimum wage, etc.). Sierra denies liability and filed a counterclaim against the Plaintiff for costs and attorneys’ fees.

In August 2023, all parties reached an agreement on material settlement terms and signed a Memorandum of Understanding pursuant to which the defined class would be paid approximately $4,000,000 pending approval of a long-term settlement agreement currently in process. The $4,000,000 was recorded as an expense in the fiscal year ending December 31, 2022 and a contingent liability has been recorded within accrued liabilities on the condensed consolidated balance sheet as of September 30, 2024. We believe we are entitled to indemnification from the sellers of Sierra for a portion of this contingent liability.

Former Employee Class Action

In May 2024, a former employee filed claim against Deluxe Auto Carriers, Inc., in Riverside County Superior Court in California. The putative class alleges that Deluxe failed to pay for meal and rest periods for time worked, off the clock work, overtime, business expenses, itemized wage statements, among other things. The Company is still evaluating this contingency and has included its best estimate of potential liability within accrued liabilities on the condensed consolidated balance sheet as of September 30, 2024. We believe we are entitled to indemnification from the sellers of Deluxe for a portion of the potential liability relating to this contingency.

Delinquent Filings with Department of Labor

Deluxe Auto Carriers, Inc. was delinquent in its filings with the Department of Labor (DOL) with respect to its Retirement Plan Information Returns for plan years 2019 through 2022. As of September 30, 2024, all delinquent filings had been made. These delinquencies could result in penalties and interest from the DOL and the Internal Revenue Service (IRS). We have not received any notices from the DOL or the IRS regarding the delinquent filings, therefore, the Company does not have a reasonable estimate for any additional potential penalties or interest. We believe we are entitled to indemnification from the sellers of Deluxe for the potential liability relating to this contingency.

PROFICIENT AUTO LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 17 — Subsequent events

On November 8, 2024, Proficient entered into a credit facility with a commercial bank that includes up to $25 million in term debt and up to another $20 million in a revolving line of credit. The term debt portion bears interest at SOFR, plus 2.50%, with interest only payments for the first six months and the balance at the end of six months with principal amortizing over the ensuing five years with 60 monthly payments. Drawn balances from the revolving line of credit bear interest at SOFR, plus 2.20%, with all principal and interest to be repaid at the end of five years. The amount available to be drawn from the line of credit at any point in time is based on a percentage of consolidated accounts receivable and inventory reported by PAL and its subsidiaries. The term debt includes financial covenants that include maximum leverage (debt / adjusted EBITDA) and debt service coverage ratio (total principal and interest / adjusted EBITDA), both measured quarterly. Upon closing, the Company drew $16.0 million from the available term debt, a portion of which was used to repay and terminate the Proficient Transport line of credit (see below).

On November 1, 2024, PAL Stock Acquiror, Inc. purchased Utah Truck & Trailer Repair, LLC, (“UTT”), a repair facility located at the ATG headquarters terminal in Ogden, Utah. The Company purchased UTT for $4.5 million in an all-cash transaction.

On November 8, 2024, Proficient Transport terminated its line of credit that was entered into in June 2024. At the time of termination, the revolving line of credit had an outstanding balance of $9,514,907 including interest.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024

Special Note Regarding Forward-Looking Statements

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the related notes of Proficient and Proficient Transport included elsewhere in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2024 (the “Quarterly Report”) and the consolidated financial statements and related notes of Proficient and Proficient Transport for the year ended December 31, 2023 included in Proficient’s Registration Statement on Form S-1 (333-278629) (the “Registration Statement”).

Unless otherwise indicated, the terms the “Company,” “we,” “us” and “our” refer to Proficient Auto Logistics, Inc. and its subsidiaries as a whole, after giving effect to the Combinations.

This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to possible or assume future results of our business, financial condition, results of operations, liquidity, plans and objectives. You can generally identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions that concern our expectations, strategy, plans or intentions. We have based these forward-looking statements largely on our current expectations and projections regarding future events and trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section entitled “Risk Factors” in this Quarterly Report and Registration Statement, and elsewhere in this Quarterly Report and the Registration Statement. Accordingly, you should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those projected in the forward-looking statements. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements regarding:

●

the economic conditions in the global markets in which we operate;

●

our ability to successfully implement our business strategy, effectively respond to changes in market dynamics and customer preferences, and achieve the anticipated benefits and associated cost savings of such strategies and actions;

●

our ability to recruit and retain qualified driving associates, independent contractors and third-party auto transportation and logistics companies;

●

our expectations regarding the successful implementation of the Combinations and other acquisitions;

●

geopolitical developments and additional changes in international trade policies and relations;

●

the effect of any international conflicts or terrorist activities, including the current conflict between Russia and Ukraine, on the United States and global economies in general, the transportation industry, or us in particular, and what effects these events will have on our costs and the demand for our services;

●

our ability to manage our network capacity and cost structure for capital expenditures and operating expenses, and match it to shifting and future customer volume levels;

●

our ability to compete effectively against current and future competitors;

●

our dependence on the automotive industry, which is directly affected by such external factors as general economic conditions in the United States, Canada and Mexico, unemployment rates, labor shortages or strikes, consumer confidence, government policies, continuing activities of war, terrorist activities and the availability of affordable new car financing;

●

our ability to maintain our profitability despite quarterly fluctuations in our results, whether due to seasonality, large cyclical events, or other causes; and our future financial and operating results;

●

our expectations regarding the period during which we will qualify as an emerging growth company under the JOBS Act; and

●

our use of the net proceeds from the IPO and the sufficiency of our existing cash to fund our future operating expenses and capital expenditure requirements.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report. In addition, in light of certain risks and uncertainties, the matters referred to in the forward-looking statements contained in this Quarterly Report may not occur. The forward-looking statements made in this document relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Business Overview

We are a leading specialized freight company focused on providing auto transportation and logistics services. Formed in connection with the IPO through the combination of five industry-leading operating companies, we 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 1,050 auto transport vehicles and trailers on a daily basis, including approximately 858 Company-owned transport vehicles and trailers, and employing 710 dedicated employees as of October 31, 2024. Prior to the completion of the IPO, we had not operated as a combined company. 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.

Description of the Combinations

On December 21, 2023, Proficient Auto Logistics, Inc. entered into agreements to acquire in multiple, separate acquisitions five operating businesses and their respective affiliated entities, as applicable: (i) Delta, (ii) Deluxe, (iii) Sierra, (iv) Proficient Transport, and (v) Tribeca. On May 13, 2024, the Company completed its IPO of its common stock, and in connection with the closing of the IPO, the Company also completed the acquisitions of all of the Founding Companies. The Founding Companies were acquired for approximately $183.4 million in cash and 6,848,794 shares of our common stock (provided, that 601,866 of these shares of common stock were held back and were not be issued at the closing of the Combinations to satisfy the indemnification obligations of certain of the Founding Companies for a period of 12 months following the closing of this offering), using an initial public offering price of $15.00 per share. The Combinations are accounted for as business combinations under ASC 805. Under this method of accounting, Proficient Auto Logistics, Inc. is treated as the “accounting acquirer.”

Proficient Auto Logistics, Inc. has been identified as the designated accounting acquirer (“Successor”) of each of the Founding Companies and Proficient Transport has been identified as the designated accounting predecessor (“Predecessor”) to the Company. As a result, Management’s Discussion And Analysis Of Results Of Operations And Financial Condition For The Nine And Three Months Ended September 30, 2024 for each of Proficient and Proficient Transport are included in this Quarterly Report on Form 10-Q. A black-line between the Successor and Predecessor periods has been placed in the financial tables below to highlight the lack of comparability between these two periods. Please refer to Note 3, “Business Combinations.”

Financial Statement Components

Revenue

We generate revenue by transporting autos 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 autos 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 mile for our Company Drivers 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 auto 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.

We monitor as key operating metrics average revenue per unit and average revenue per hour, as applicable to the portions of our business that contract on each of these bases.

Operating Expenses

Our most significant operating expenses vary with miles traveled and include (i) fuel and fuel taxes, (ii) driver related expenses, such as salaries, wages, benefits, training and recruitment, (iii) the cost of purchased transportation that we pay to third-party carriers and (iv) maintenance of our fleet. 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 revenue equipment and service center facilities, the compensation of non-driver personnel and other general and administrative expenses.

Critical Accounting Policies and Estimates

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most 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 condensed consolidated financial statements of the Company for additional information about our critical accounting policies and estimates.

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 developments based on historical trends. Changes in assumptions 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 may be less than the economic lives.

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. 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 statement 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, Company Drivers and Brokered, which represent the Company’s reportable segments. The Company Drivers 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 Brokered segment offers transportation services utilizing an asset-light model focusing on outsourcing transportation of loads to third-party carriers.

Company Drivers Segment

In our Company Drivers Segment, we generate revenue by transporting autos for our customers under our OEM contract arrangements and our contract services arrangements. Our OEM contract arrangements provide automobile transportation services through movements of autos over routes across the United States. Our Company Drivers segment provides services that are geographically diversified but have similar economic and other relevant characteristics, as they all provide Company Drivers carrier services of automobiles. The main factors that affect operating revenue in the Company Drivers 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 unit for our Company Drivers 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 Company Drivers 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 condensed 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 Company Drivers 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 Company Drivers 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 “Interest expense.” We expect our depreciation and interest expense will be impacted by changes in the percentage of our revenue equipment acquired in any given year.

Brokered Segment

In our Brokered 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 the company’s brokerage department to procure spot buy arrangement contracts, and to match loads and carriers via the Company’s information systems. This segment also includes revenue generated by our owner-operators and some third-party carriers who haul autos for our OEM and contract customers.

Our Brokered segment revenue is mainly derived from our customers requiring additional transportation needs to haul autos as their current carriers cannot meet their demands. The main factors that affect operating revenue in our Brokered segment are our customers’ excess inventory needs, the rates we obtain from customers, the auto volumes we ship through our third-party carriers and our ability to secure third-party carriers to transport customer autos. 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 Brokered 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 directly with the amount of Brokered revenue, rates charged by third party carriers and current 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 Brokered segment is operating margin (brokered operating revenue, less brokered operating expenses, as a percentage of brokered operating revenue). Operating margin can be impacted by the rates charged to customers and the rates charged by third-party carriers.

Our Brokered segment does not require significant capital expenditures and is not asset-intensive like our Company Drivers segment.

Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles GAAP. However, management believes that EBITDA and Operating Ratio provide 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 and Operating Ratio do not have a standardized meaning prescribed by GAAP and therefore they 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, income tax expense (benefit) and depreciation expense and intangible amortization expense.

Adjusted EBITDA represents net income (loss) plus interest expense, income tax expense (benefit), depreciation expense, intangible amortization expense, and share-based compensation expenses.

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

	Successor						Predecessor
	Three months ended September 30, 2024			Nine months ended September 30, 2024			Period from January 1, 2024 to May 12, 2024			Three months ended September 30, 2023			Nine months ended September 30, 2023
Total operating revenue	$	91,505,501		$	147,414,098		$	41,217,688		$	33,468,155		$	100,713,862
Net (loss) income	$	(1,365,476	)	$	(5,227,249	)	$	(16,608,453	)	$	1,555,449		$	4,798,142
Add Back:
Interest expense		1,407,146			2,046,941			717,431			226,650			795,542
Income tax expense (benefit)		(327,782	)		143,054			(4,615,398	)		498,055			1,536,364
Depreciation		6,566,444			9,987,031			934,988			652,392			1,867,766
Intangible amortization		2,217,083			3,293,527			—			—			—
EBITDA	$	8,497,415		$	10,243,304		$	(19,571,432	)	$	2,932,546		$	8,997,814
EBITDA Margin		9.3	%		6.9	%		(47.5	)%		8.8	%		8.9	%

Add Back:
Stock-based compensation		1,071,160			7,746,796			—			—			—
Adjusted EBITDA	$	9,568,575		$	17,990,100		$	(19,571,432	)	$	2,932,546		$	8,997,814
Adjusted EBITDA Margin		10.5	%		12.2	%		(47.5	)%		8.8	%		8.9	%

Operating ratio is calculated as total operating expenses as a percentage of operating revenue.

Adjusted operating ratio is calculated as total operating expenses reduced for share-based compensation expense and amortization of intangibles as a percentage of operating revenue.

The following table provides a reconciliation of total operating revenue and operating (loss) income, to operating margin and adjusted operating margin:

	Successor						Predecessor
	Three months ended September 30, 2024			Nine months ended September 30, 2024			Period from January 1, 2024 to May 12, 2024			Three months ended September 30, 2023			Nine months ended September 30, 2023
Total operating revenue	$	91,505,501		$	147,414,098		$	41,217,688		$	33,468,155		$	100,713,862
Total operating expenses		93,691,006			152,517,814			61,726,186			31,188,001			93,583,814
Operating (loss) income		(2,185,505	)		(5,103,716	)		(20,508,498	)		2,280,154			7,130,048
Operating Ratio		102.4	%		103.5	%		149.8	%		93.2	%		92.9	%

Add Back:
Stock-based compensation		1,071,160			7,746,796			—			—			—
Intangible amortization		2,217,083			3,293,527			—			—			—
Adjusted Total Operating Expenses	$	90,402,763		$	141,477,491		$	(20,508,498	)	$	2,280,154		$	7,130,048
Adjusted Operating Ratio		98.8	%		96.0	%		149.8	%		93.2	%		92.9	%

Comparison of Results of Operations

Comparison of Results of Operations for nine- and three-months periods ended September 30, 2024 (Successor) are not comparable to the same period in 2023 (Predecessor) due to the business combinations executed on May 13, 2024. The Successor financial information presented below includes results of operations from the period May 13, 2024 to September 30, 2024 from the acquired businesses as well as expenses from the acquiring entity for the nine and three months ended September 30, 2024. The Predecessor financial information presented below shows only the results of operations for Proficient Auto Transport for the period January 1, 2024 to May 12, 2024 and the nine and three months ended September 30, 2023. The following discussion takes into consideration the lack of comparability. See Note 3 —Business Combinations for more information.

	Successor						Predecessor
	Proficient Auto Logistics, Inc.						Proficient Auto Transport, Inc.
	Three months ended September 30, 2024			Nine months ended September 30, 2024			Period from January 1, 2024 to May 12, 2024			Three months ended September 30, 2023			Nine months ended September 30, 2023
Operating revenue
Revenue, before fuel surcharge	$	84,289,892		$	136,100,637		$	38,947,787		$	31,859,444		$	93,742,606
Fuel surcharge and other reimbursements		6,017,296			9,611,959			2,073,087			1,521,759			6,846,298
Other revenue		375,967			526,634			—			—			—
Lease revenue		822,346			1,174,868			196,814			86,952			124,958
Total operating revenue		91,505,501			147,414,098			41,217,688			33,468,155			100,713,862

Operating Expenses
Salaries, wages and benefits		17,373,659			27,041,664			27,373,183			4,786,636			16,135,513
Stock-based compensation		1,071,160			7,746,796			—			—			—
Fuel and fuel taxes		5,956,074			9,443,137			1,119,549			864,905			3,624,233
Purchased transportation		44,995,562			73,113,996			25,995,763			21,948,239			61,091,500
Truck expenses		5,692,078			8,091,752			1,638,919			1,340,015			5,797,095
Depreciation		6,566,444			9,987,031			934,988			652,392			1,867,766
Intangible amortization		2,217,083			3,293,527			—			—			—
Loss (Gain) on sale of equipment		(107,491	)		(105,183	)		(235,081	)		(64,704	)		(120,680	)
Insurance premiums and claims		5,459,075			7,212,021			954,043			814,761			2,511,803
General, selling, and other operating expenses		4,467,362			6,693,073			3,944,822			845,757			2,676,584
Total Operating Expenses		93,691,006			152,517,814			61,726,186			31,188,001			93,583,814
Operating (loss) income		(2,185,505	)		(5,103,716	)		(20,508,498	)		2,280,154			7,130,048
Other income and expense
Interest expense		(1,407,146	)		(2,046,941	)		(717,431	)		(226,650	)		(795,542	)
Acquisition Costs		(1,049,570	)		(1,049,570	)		—			—			—
Earn Out Contingency Gain		3,095,114			3,095,114			—			—			—
Other income (expense), net		(146,151	)		20,918			2,078			—			—
Total other income (expense)		492,247			19,521			(715,353	)		(226,650	)		(795,542	)
(Loss) Income before income taxes		(1,693,258	)		(5,084,195	)		(21,223,851	)		2,053,504			6,334,506
Income tax expense (benefit)		(327,782	)		143,054			(4,615,398	)		498,055			1,536,364
Net (loss) income	$	(1,365,476	)	$	(5,227,249	)	$	(16,608,453	)	$	1,555,449		$	4,798,142

Adjusted Operating Ratio		98.8	%		96.0	%		149.8	%		93.2	%		92.9	%

Adjusted EBITDA	$	9,568,575		$	17,990,100		$	(19,571,432	)	$	2,932,546		$	8,997,814

Operating Revenue — We generate revenue from two primary sources: transporting autos for its customers (including related fuel surcharge revenue and other reimbursements) and arranging for the transportation of customer autos by third-party carriers. We have two reportable segments: Company Drivers segment and Brokered segment. Company Drivers revenue, before fuel surcharges and other reimbursements, is primarily generated through trucking services provided by our two Company Drivers service offerings: OEM transports and contract. Brokered revenue before fuel surcharges and other reimbursements is primarily generated through brokering autos to third-party carriers. Fuel surcharges and other reimbursements represent additional revenue we earn based on mileage driven and other reimbursable costs incurred for which it is compensated by its customers.

Our 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 Company Drivers and Brokered industry, the success of our marketing and sales efforts and the availability of drivers and third-party carriers.

We disaggregate revenue from contracts with customers for Company Drivers and Brokered operations between (1) revenue, before fuel surcharges and reimbursements (2) fuel surcharges and reimbursements (3) lease revenue and (4) other revenue.

Total Operating Revenues — Due to the Successor period including revenues from the acquired entities from May 13, 2024 to September 30, 2024 we are showing an increase in three and nine month period ended September 30, 2024. In the Successor three months period ended September 2024, our year over year volumes remain relatively flat but revenue earned per unit decreased resulting in a reduction in revenues when compared to the previous year’s pro forma revenues of the acquired entities.

Total Operating Expenses — Due to the Successor period including expenses from the acquired entities from May 13, 2024, to September 30, 2024, and the Successor’s expenses for the full 2024 period presented we are showing an increase in in both the three and nine month period ended September 30, 2024. Included in our three and nine months September 30, 2024 operating expenses is stock-based compensation of $1,071,160 and $7,746,796, respectively. The stock-based compensation is a result of the issuance of restricted stock awards under our 2024 Long-Term Incentive Plan to retain key employees at the Founding Companies.

Adjusted Operating Ratio — We noted higher adjusted operating ratios between the three and nine month periods ending September 30, 2024 and 2023 due to the drop in revenue and higher operating expenses. See “Non-GAAP Financial Measure” section above for our calculation of Adjusted Operating Ratio.

At the lower level of revenue, the operating leverage to cover fixed costs declined as reflected in the higher adjusted operating ratio.

Adjusted EBITDA — As previously mentioned, due to the Successor periods only including financial results for the period May 13, 2024 to September 30, 2024 for the acquired entities this has skewed our comparisons for the three and nine months ended September 30, 2024. Our Adjusted EBITDA for the three and nine month periods ended September 30, 2024 increased for both comparable periods. See “Non-GAAP Financial Measure” section above for our calculation of Adjusted EBITDA.

Liquidity and Capital Resources

Overview

Our 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 our debt obligations, lease payments and tax payments when we generate taxable income. Recently, we have financed our capital requirements with cash flows from operating activities, direct equipment financing, and proceeds from our IPO that closed in May 2024. We intend to purchase approximately twenty-five tractors and trailers in the fourth quarter and plan to finance the purchases through a combination of operating cash flows and direct equipment financing.

We believe we can fund our 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 our credit facility and direct debt and lease financing we believe to be available for at least the next 12 months. Over the long-term, we expect that we will continue to have significant capital requirements, which may require us to seek additional borrowings or lease financing. The availability of financing will depend upon our financial condition and results of operations as well as prevailing market conditions.

Sources of liquidity

In May 2024, we raised money in the capital markets through an IPO and then subsequently in June sold additional shares through an over-allotment option. The approximately $30 million remaining after acquiring the Founding Companies is being used to support operations for 2024 and to partially fund strategic acquisitions. We anticipate that our cash flows from operations will provide adequate liquidity for our planned capital expenditures during the remainder of 2024. For any new capital expenditures in 2024 and beyond that exceed our cash flow from operations, we have negotiated credit agreements with financial institutions in amounts sufficient to fund planned purchases. While we control the timing and extent of our capital expenditures, there is no assurance can obtain financing arrangements.

Pinnacle LOC

On November 8, 2024, the Company and certain of its subsidiaries, as borrowers, entered into a Loan and Security Agreement (the “Loan Agreement”) with Pinnacle Bank, as lender (the “Lender”). The Loan Agreement provides for (i) a delayed draw term loan facility of up to an aggregate principal amount of $25 million (the “Term Loan Facility”) and (ii) a revolving credit facility of up to an aggregate principal amount of $20 million at any time outstanding (the “Revolving Credit Facility”), in each case, subject to the terms of the Loan Agreement. Proceeds of the Term Loan Facility may be used to refinance existing indebtedness of the Company, to finance certain permitted acquisitions and fees and expenses related thereto, and to pay fees and transaction expenses associated with the Loan Agreement. Proceeds of the Revolving Credit Facility may be used for general working capital, to pay the fees and transaction expenses associated with the Loan Agreement, and to pay any of the Company’s obligations thereunder. The loans under the Loan Agreement may be voluntarily prepaid at any time, in whole or in part, without premium or penalty. The maturity date of the maturity date of the Term Loan Facility is May 8, 2031, and the maturity date of the Revolving Credit Facility is November 8, 2029.

Borrowings under the Loan Agreement bear interest at a rate per annum equal to Term SOFR for an interest period equal to one month plus a margin of (x) 2.50% per annum with respect to any loan under the Term Loan Facility and (y) 2.20% per annum with respect to any loan under the Revolving Credit Facility. In addition, the Company is required to pay an unused line fee on the unutilized commitments with respect to the Revolving Credit Facility at the rate of 0.15% per annum.

The Loan Agreement contains customary affirmative and negative covenants, including covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur debt, grant liens on their respective assets, engage in mergers and other fundamental changes, make investments, enter into transactions with affiliates, pay dividends and make other restricted payments, prepay other indebtedness and sell assets, in each case subject to certain exceptions set forth in the Loan Agreement. The Loan Agreement also requires the Company to maintain (i) a Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of greater than or equal to 1.25 to 1.00 and (ii) a Funded Debt to Adjusted EBITDA Ratio (as defined in the Loan Agreement) of less than or equal to 3.00 to 1.00, in each case, as of the end of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2025.

All obligations under the Loan Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a security interest on substantially all of the property of the Company and its subsidiaries.

Upon closing, the Company drew $16.0 million from the available term debt, a portion of which was used to repay and terminate the Proficient Transport line of credit.

Cash Flows

For the nine months ended September 30, 2024, cash flows from operating activities of $7,768,100, a $1,745,733 increase compared to the nine months ended September 30, 2023. The increase was primarily due to increased earnings before non-cash charges including depreciation, intangible amortization and stock compensation, net of the adjustment of earnout contingency which was partly offset by an increase in prepaid expenses and other assets and a decrease in accounts payable.

For the nine months ended September 30, 2024, cash flows used in investing activities was $201,829,965. This increase of $201,731,581 compared to September 30, 2023 is mainly due to the cash paid to acquire the Founding Companies and ATG as discussed above in Note 3 — Business Combinations.

For the nine months ended September 30, 2024, cash flows provided by financing activities was $210,451,847, which was an increase of $216,375,171 compared to the nine months ended September 30, 2023. This increase is due to our issuance of common stock in the Company’s IPO plus proceeds from debt.

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) reduced disclosure about our executive compensation arrangements; (ii) not being required to hold advisory votes on executive compensation or to obtain stockholder approval of any golden parachute arrangements not previously approved; (iii) 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 (iv) 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 the IPO; (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 Quarterly Report. 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

None.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on this evaluation of our disclosure controls and procedures as of September 30, 2024, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective.

Notwithstanding the material weakness in our internal control over financial reporting, our Chief Executive Officer and Chief Financial Officer have concluded that our Condensed Consolidated Financial Statements present fairly, in all material respects, our financial position, results of operations and cash flows in accordance with GAAP.

In connection with the preparation of the financial statements, a material weakness in Proficient Transport’s internal controls over financial reporting was identified and, if our remediation is not effective, or if we fail to maintain an effective system of internal controls over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence and profitability.

We have identified a material weakness in Proficient Transport’s internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified was related to IT general controls in Proficient Transport’s financial systems.

Remediation steps are being taken designed to improve Proficient Transport’s internal controls over financial reporting to address the underlying causes, including: designing and implementing increased controls, increased oversight and review of technical systems and engaging third-parties. We continue to work on other remediation initiatives.

While we believe that these efforts will improve Proficient Transport’s internal controls over financial reporting, the implementation of these measures is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. If the steps we take do not remediate the material weaknesses in a timely manner, there could continue to be a reasonable possibility that these control deficiencies or others could result in a material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis. If we are unable to successfully remediate our existing or any future material weakness, the accuracy of our financial reporting may be adversely affected, which could cause investors to lose confidence in our financial reporting and our share price and profitability may decline as a result.

Changes in Internal Control Over Financial Reporting

Except for the enhancements to controls to address the material weakness discussed above, there were no changes to our internal control over financial reporting during the three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

The Company is involved from time to time in various legal proceedings and governmental and regulatory proceedings that arise in the ordinary course of business. The Company does not believe that such litigation, claims, and administrative proceedings will have a material adverse impact on the Company’s financial position or results of operations.

Item 1A. Risk Factors

Our business is subject to various risks and uncertainties. You should review and consider carefully the risks and uncertainties described in more detail in Item 1A of Part II of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities

We did not sell any unregistered equity securities during the three-month period ended September 30, 2024.

We did not repurchase any shares of our common stock during the three-month period ended September 30, 2024.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a) On November 8, 2024, Proficient Auto Logistics, Inc. (the “Company”) and certain of its subsidiaries, as borrowers, entered into a Loan and Security Agreement (the “Loan Agreement”) with Pinnacle Bank, as lender (the “Lender”). The Loan Agreement provides for (i) a delayed draw term loan facility of up to an aggregate principal amount of $25 million (the “Term Loan Facility”) and (ii) a revolving credit facility of up to an aggregate principal amount of $20 million at any time outstanding (the “Revolving Credit Facility”), in each case, subject to the terms of the Loan Agreement. Proceeds of the Term Loan Facility may be used to refinance existing indebtedness of the Company, to finance certain permitted acquisitions and fees and expenses related thereto, and to pay fees and transaction expenses associated with the Loan Agreement. Proceeds of the Revolving Credit Facility may be used for lawful corporate purposes and general working capital, to pay the fees and transaction expenses associated with the Loan Agreement, and to pay any of the Company’s obligations thereunder. The loans under the Loan Agreement may be voluntarily prepaid at any time, in whole or in part, without premium or penalty. The maturity date of the maturity date of the Term Loan Facility is April 8, 2031, and the maturity date of the Revolving Credit Facility is November 8, 2029.

The Loan Agreement contains certain customary affirmative and negative covenants, including covenants that restrict the ability of the Company and its subsidiaries to, among other things, incur debt, grant liens on their respective assets, engage in mergers and other fundamental changes, make investments, enter into transactions with affiliates, pay dividends and make other restricted payments, prepay other indebtedness and sell assets, in each case subject to certain exceptions set forth in the Loan Agreement. The Loan Agreement also requires the Company to maintain (i) a Fixed Charge Coverage Ratio (as defined in the Loan Agreement) of greater than or equal to 1.25 to 1.00 and (ii) a Funded Debt to Adjusted EBITDA Ratio (as defined in the Loan Agreement) of less than or equal to 3.00 to 1.00, in each case, as of the end of each fiscal quarter, commencing with the fiscal quarter ending March 31, 2025.

The Loan Agreement includes customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross-default to other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of security interests or invalidity of loan documents, certain ERISA events, unsatisfied or unstayed judgments and change of control.

The description of the Loan Agreement set forth under this Item 5(a) is qualified in its entirety by reference to the complete terms and conditions of the Credit Agreement, which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-K and incorporated herein by reference.

(c) None of our officers or directors, as defined in Rule 16a-1(f), adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, during the three months ended September 30, 2024.

Item 6. Exhibits

Exhibit Number

10.1		Loan Agreement, dated November 8, 2024, by and among Proficient Auto Logistics, Inc. and certain of its subsidiaries, as the borrower, and Pinnacle Bank, as lender
31.1		Certification by principal executive officer pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by principal financial officer pursuant to Rule 13A-14(a) or 15D-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by principal executive officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification by principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Proficient Auto Logistics, Inc.

Date: November 14, 2024	By:	/s/ Richard O’Dell
		Richard O’Dell
		Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Brad Wright
		Brad Wright
		Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)

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Proficient Auto Logistics, Inc. Common Stock (PAL) 10-Q2024 Q3 Quarterly report

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