8-K/A - CVLG - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________

FORM 8-K/A

(Amendment No. 2)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

April 26, 2023

___________________________________________________________________

COVENANT LOGISTICS GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada	000-24960	88-0320154
(State or other jurisdiction<br><br> <br>of incorporation)	(Commission<br><br> <br>File Number)	(IRS Employer<br><br> <br>Identification No.)
400 Birmingham Hwy., Chattanooga, TN	37419
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(Address of principal executive offices)	(Zip Code)

(423) 821-1212

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
$0.01 Par Value Class A common stock	CVLG	NASDAQ
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405<br> of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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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<br> with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Explanatory Note:<br><br> <br><br><br> <br>On April 26, 2023, Covenant Logistics Group, Inc., a Nevada corporation (the “Company”), completed the acquisition of Lew Thompson &<br> Son Trucking, Inc. and related entities (collectively, “Lew Thompson & Son”). This Amendment No. 2 to the Current Report on Form 8-K originally filed by the Company with the Securities and Exchange Commission on April 27, 2023<br> (the “Original Form 8-K”) and amended on August 3, 2023 (the “Amendment No. 1”), is being filed to amend Item 9.01 to present certain combined financial statements of Lew Thompson & Son and to present certain unaudited pro forma<br> consolidated financial statements of the Company in connection with the Company’s acquisition of Lew Thompson & Son. All of the other information in the Original Form 8-K, as amended by Amendment No. 1, remains unchanged.
Item 9.01	Financial Statements and Exhibits.
	(a)	Financial statements of businesses or funds acquired.
		The audited combined financial statements of Lew Thompson & Son as of and for the year ended December 31, 2022, the notes thereto,<br> and the report of Grant Thornton, LLP are filed as Exhibit 99.2 and are incorporated in their entirety herein by reference.<br><br> <br><br><br> <br>The unaudited combined financial statements for Lew Thompson & Son as of and for the three months ended March 31, 2023 and the notes<br> thereto, are filed as Exhibit 99.3 and are incorporated in their entirety herein by reference.
	(b)	Pro forma financial information.
		The unaudited pro forma consolidated financial<br> statements of the Company as of and for the three months ended March 31, 2023 and for the year ended December 31, 2022 giving effect to the acquisition of<br> Lew Thompson & Son, are filed as Exhibit 99.4 and are incorporated in their entirety herein by reference. Such unaudited pro forma consolidated financial statements are not necessarily indicative of the operating results and<br> financial position that actually would have been achieved if the acquisition had been in effect on the dates indicated or that may be achieved for future periods, and should be read in conjunction with the financial statements of<br> the Company and Lew Thompson & Son.
	(d)	Exhibits.
	EXHIBIT<br><br> <br>NUMBER	EXHIBIT DESCRIPTION
	23.1	Consent of Independent Certified Public Accountants — Grant Thornton, LLP
	99.2	Lew Thompson & Son Trucking, Inc. and Related Entities Audited Combined Financial Statements as of and for the year ended December<br> 31, 2022, the notes thereto, and the report of Grant Thornton, LLP.
	99.3	Lew Thompson & Son Trucking, Inc. and Related Entities Unaudited Combined Financial Statements as of and for the three months ended<br> March 31, 2023 and the notes thereto.
	99.4	Unaudited Pro Forma Consolidated Financial Statements of Covenant Logistics Group, Inc. as of and for the three months ended March 31,<br> 2023 and for the year ended December 31, 2022 and the notes thereto.
	104	Cover Page Interactive Data File

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 hereunto duly authorized.

	COVENANT LOGISTICS GROUP, INC.
	(Registrant)
Date: November 15, 2023	By:	/s/ James S. Grant
		James S. Grant
		Executive Vice President and Chief Financial Officer

Exhibit 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated November 15, 2023, with respect to the combined financial statements of Lew Thompson & Son Trucking, Inc., Lew Thompson & Son Dedicated, Inc., Josh Thompson Trucking, Inc., Lew Thompson & Son Dedicated Leasing, Inc., and Lew Thompson & Son Leasing, Inc. as of and for the year ended December 31, 2022 and the notes thereto, which report appears in this Form 8-K/A of Covenant Logistics Group, Inc. We consent to the incorporation by reference of said report in the Registration Statements of Covenant Logistics Group, Inc. on Forms S-8 (File No. 333-2654, File No. 033-88686, File No. 333-37356, File No. 333-134939, File No. 333-174582, File No. 333-189060, File No. 333-231390 and File No. 333-239724) and Form S-3 (File No. 333-266826).

/s/ Grant Thornton LLP

Charlotte, North Carolina

November 15, 2023

Back to Form 8-K/A

Exhibit 99.2

Lew Thompson & Son Trucking, Inc.,

Lew Thompson & Son Dedicated Inc.,

Josh Thompson Trucking, Inc.,

Lew Thompson & Son Dedicated Leasing, Inc.,

and

Lew Thompson & Son Leasing Inc.

Combined Financial Statements

For the year ended December 31, 2022 with Report of Independent Certified Public Accountants

Table of Contents

Report of Independent Certified Public Accountants		1
Combined Financial Statements
	Combined Balance Sheet	2
	Combined Statement of Operations	3
	Combined Statement of Changes in Stockholders' Equity	4
	Combined Statement of Cash Flow	5
	Notes to Combined Financial Statements	6

Report of Independent Certified Public Accountants

Board of Directors

Lew Thompson & Son Trucking, Inc.

Lew Thompson & Son Dedicated, Inc.

Josh Thompson Trucking, Inc.

Lew Thompson & Son Dedicated Leasing, Inc.

Lew Thompson & Son Leasing, Inc.

Opinion

We have audited the combined financial statements of Lew Thompson & Son Trucking, Inc., Lew Thompson & Son Dedicated, Inc., Josh Thompson Trucking, Inc., Lew Thompson & Son Dedicated Leasing, Inc., and Lew Thompson & Son Leasing, Inc. (an Arkansas corporation) which comprise the combined balance sheet as of December 31, 2022, and the related combined statement of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements.

In our opinion, the accompanying combined financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for opinion

We conducted our audits of the combined financial statements in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of management for the financial statements

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are issued.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.

In performing an audit in accordance with US GAAS, we:

•	Exercise professional judgment and maintain professional skepticism throughout the audit.
•	Identify and assess the risks of material misstatement of the combined financial statements, whether due to fraud or error,<br> and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
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•	Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate<br> in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.
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•	Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by<br> management, as well as evaluate the overall presentation of the combined financial statements.
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•	Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial<br> doubt about the Company’s ability to continue as a going concern for a reasonable period of time.
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We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

/s/ GRANT THORNTON LLP

Charlotte, North Carolina

November 15, 2023

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC.,<br><br> <br>LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 2022
ASSETS
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Current assets:
Cash and cash equivalents	6,055,273
Accounts receivable	5,916,792
Drivers' advances and other receivables	475,696
Inventory and supplies	1,014,890
Prepaid expenses	881,571
Other short-term assets	125,097
Total current assets	14,469,319
Property and equipment, net	34,803,272
Right of use assets, net	2,104,030
Total assets	51,376,621
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	551,005
Accrued expenses	1,343,821
Current portion of operating lease obligations	442,851
Insurance and claims accrual	95,763
Total current liabilities	2,433,440
Long-term portion of operating lease obligations	1,661,179
Total liabilities	4,094,619
Commitments and contingencies	-
Stockholders' equity:
Lew Thompson & Son Trucking, Inc. Class A common stock, 1.00 par value; 100,000 shares authorized;<br> 1,000 shares issued and outstanding	1,000
Lew Thompson & Son Dedicated, Inc. Class A common stock, 1.00 par value; 100,000 shares authorized; 300<br> shares issued and outstanding	300
Josh Thompson Trucking, Inc. Class A common stock, 25.00 par value; 2,000 shares authorized; 12 shares<br> issued and outstanding	300
Lew Thompson & Son Dedicated Leasing, Inc. Class A common stock, 1.00 par value; 100,000 shares<br> authorized; 20,000 shares issued and outstanding	20,000
Lew Thompson & Son Leasing, Inc. Class A common stock, 1.00 par value; 250 shares authorized; 100<br> shares issued and outstanding	100
Additional paid-in-capital	5,094,254
Retained earnings	42,166,048
Total stockholders' equity	47,282,002
Total liabilities and stockholders' equity	51,376,621

All values are in US Dollars.

The accompanying notes are an integral part of these combined financial statements.

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC.,

LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.

COMBINED STATEMENT OF OPERATIONS

    YEAR ENDED DECEMBER 31, 2022

Revenues
Freight revenue	$	53,867,823
Fuel surcharge revenue		10,778,411
Total revenue		64,646,234
Operating expenses:
Salaries, wages, and related expenses		19,820,370
Fuel expense		16,399,600
Operations and maintenance		4,578,202
Operating taxes and licenses		896,435
Insurance and claims		1,435,079
Communications and utilities		109,425
General supplies and expenses		1,356,940
Depreciation and amortization		5,296,635
Other expenses		1,556
Gain on disposition of property and equipment, net		(1,427,650	)
Total operating expenses		48,466,592
Operating income		16,179,642
Other income		694,208
Income before income taxes		16,873,850
Income tax expense		536,990
Net income	$	16,336,860

The accompanying notes are an integral part of these combined financial statements

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC.,

LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.

COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2022

	Common Stock – Lew Thompson & Son Trucking, Inc.		Common Stock – Lew Thompson & Son Dedicated, Inc.		Common Stock – Josh Thompson Trucking, Inc.		Common Stock – Lew Thompson & Son Dedicated Leasing, Inc.		Common Stock – Lew Thompson & Son Leasing, Inc.		Additional Paid-In		Retained			Total Stockholders'
	Class A		Class A		Class A		Class A		Class A		Capital		Earnings			Equity
Balances at December 31, 2021	$	1,000	$	300	$	300	$	20,000	$	100	$	5,094,254	$	32,574,212		$	37,690,166
Contributions from stockholders		-		-		-		-		-		-		3,079,951			3,079,951
Distributions to stockholders		-		-		-		-		-		-		(9,824,975	)		(9,824,975	)
Net income		-		-		-		-		-		-		16,336,860			16,336,860
Balances at December 31, 2022	$	1,000	$	300	$	300	$	20,000	$	100	$	5,094,254	$	42,166,048		$	47,282,002

The accompanying notes are an integral part of these combined financial statements.

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC,.

LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.

COMBINED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2022

Cash flows from operating activities:
Net income	$	16,336,860
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,296,635
Gain on disposition of property and equipment		(1,424,650	)
Changes in operating assets and liabilities:
Receivables and advances		(1,532,208	)
Inventory and supplies		(998,407	)
Prepaid expenses and other assets		(512,974	)
Accounts payable and accrued expenses		904,897
Net cash flows provided by operating activities		18,070,153
Cash flows from investing activities:
Acquisition of property and equipment		(11,801,664	)
Proceeds from disposition of property and equipment		3,201,901
Net cash flows used in investing activities		(8,599,763	)
Cash flows from financing activities:
Contributions from shareholders		3,079,951
Distributions to shareholders		(9,824,975	)
Net cash flows used in financing activities		(6,745,024	)
Net change in cash and cash equivalents		2,725,366
Cash and cash equivalents at beginning of year		3,329,907
Cash and cash equivalents at end of year	$	6,055,273
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes	$	65,540

The accompanying notes are an integral part of these combined financial statements.

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC,.

LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2022

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Description and Principles of Combination

These combined financial statements include the accounts Lew Thompson & Son Trucking, Inc., an Arkansas corporation, Lew Thompson and Son Dedicated, Inc., an Arkansas corporation, Josh Thompson Trucking, Inc., an Arkansas corporation, Lew Thompson & Son Dedicated Leasing, Inc., an Arkansas corporation, and Lew Thompson & Son Leasing, Inc., an Arkansas corporation. References in this report to "we," "us," "our," the "Company," and similar expressions refer to the combined financial statements of the aforementioned companies.

All intercompany accounts and transactions have been eliminated in combination. The Company operates as a dedicated contract carrier primarily transporting poultry related feed and live haul freight within the United States.

Revenue Recognition

Revenue, drivers' wages, and other direct operating expenses are recognized proportionally as the transportation service is performed based on the percentage of miles completed as of the period end. Revenue is recognized on a gross basis at amounts charged to our customers because we control and are primarily responsible for the fulfillment of the promised service. Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make decisions based upon estimates, assumptions, and factors we consider as relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of our estimates and assumptions. Accordingly, actual results could differ from those anticipated.

Cash and Cash Equivalents

We consider all highly liquid investments with a maturity of three months or less at acquisition to be cash equivalents. Additionally, we are also subject to concentrations of credit risk related to deposits in banks in excess of the Federal Deposit Insurance Corporation limits. For the year ended December 31, 2022, we maintained cash in one bank that exceeded the FDIC limit of $250,000.

Accounts Receivable and Concentration of Credit Risk

We extend credit to our customers in the normal course of business, which are generally due within 30-45 days of the services performed. We perform ongoing credit evaluations and generally do not require collateral. Trade accounts receivable are recorded at their invoiced amounts reduced by an allowance for doubtful accounts, if necessary, which reflects management’s best estimate of the amounts that will not be collected. Receivable balances are written off when collection is deemed unlikely.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of trade accounts receivable. For the year ended December 31, 2022 three customers accounted for 10% or more of total accounts receivable at 46.4%, 27% and 11.4% and two customers accounted for 10% or more of total revenues at 45.8% and 41.1%, respectively.

The carrying amount reported in the combined balance sheet for accounts receivable approximates fair value due to the short collection period for receivables.

Inventories and Supplies

Inventories and supplies consist of parts, tires, fuel, and supplies. Tires on new revenue equipment are capitalized as a component of the related equipment cost when the tractor or trailer is placed in service and recognized through depreciation over the life of the vehicle. Replacement tires and parts on hand at year end are recorded at the lower of cost or net realizable value with cost determined using the first-in, first-out (FIFO) method. Replacement tires are expensed when placed in service.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is determined using the straight-line method over the estimated useful lives of the assets to an estimated salvage value. We annually review the reasonableness of our estimates regarding useful lives and salvage values of our revenue equipment and other long-lived assets based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. Changes in the useful life or salvage value estimates, or fluctuations in market values that are not reflected in our estimates, could have a material effect on our results of operations.

Pursuant to applicable accounting standards, revenue equipment and other long-lived assets are tested for impairment whenever an event occurs that indicates impairment may exist. Undiscounted expected future cash flows are used to analyze whether an impairment has occurred. If the sum of expected undiscounted cash flows is less than the carrying value of the long-lived asset, then an impairment loss is recognized. We measure the impairment loss by comparing the fair value of the asset to its carrying value. Fair value is determined based on a discounted cash flow analysis or the appraised value of the assets, as appropriate. There were no impairment events during the year ended December 31, 2022.

Insurance and Other Claims

Given the nature of the Company’s operating environment, the Company has, and in the future may, become subject to vehicle liability claims. The Company maintains insurance for individual vehicle claims (including related bodily injury and property damage claims) exceeding $50,000. The Company also maintains insurance coverage for health insurance claims over a certain amount per claim and is fully insured for all workers’ compensation claims.

The Company remains liable, subject to the limits discussed above, for vehicle liability claims incurred. The amount of loss reserves and loss adjustment expenses related to these claims is determined based on an estimation process that uses information obtained from Company-specific data. The estimation process requires management to continuously monitor and evaluate the life cycle of these outstanding claims and estimate the ultimate settlement costs of these claims.

Income Taxes

For federal and state income tax returns, the combined entities of the Company have elected to be taxed as an S corporation under the Internal Revenue Code. Under this election, taxable income of these entities is allocated to its shareholders and no income tax is payable by the Company, except in certain states that do not recognize this election. Some of the states allow a pass-through entity to elect to be taxed at the entity level and allow owners to exclude from their taxable income any income which is taxed directly by the pass-through entity, and the company records income tax similar to entity-level tax for ASC 740 (Income Taxes) purposes. For 2022, the Company recognized pass-through entity income tax in the amount of $536,990.

For fiscal year ended December 31, 2022, the Company determined that there were no uncertain tax positions as a result of applying the guidance in ASC 740, Income Taxes. Accordingly, there was no provision for any uncertain tax positions in the consolidated financial statements for the year ended December 31, 2022, and the Company recognized no interest or penalties during those periods. In the event that an uncertain tax position would require the Company to recognize interest and penalties, these expenses would be recognized in interest expense and operating expenses, respectively. Tax years 2018 through 2022 remain open to examination by the tax authorities under the statute of limitations.

Lease Accounting

At the commencement date of a new lease agreement with contractual terms longer than twelve months, we recognize an asset and a lease liability on the balance sheet and categorize the lease as either finance or operating. Certain lease agreements have lease and non-lease components, and we have elected to account for these components separately.

Right-of-use assets and lease liabilities are initially recorded based on the present value of lease payments over the term of the lease. When the rate implicit in the lease is readily determinable, this rate is used for calculating the present value of remaining lease payments; otherwise, our incremental borrowing rate is used. The incremental borrowing rate represents an estimate of the interest rate we would incur at the lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease. Options to extend or terminate a lease agreement are included in or excluded from the lease term, respectively, when those options are reasonably certain to be exercised. Right-of-use assets are tested for impairment in the same manner as long-lived assets.

Operating lease right-of-use assets are amortized over the lease term on a straight-line basis, and the lease liability is measured at the present value of the remaining lease payments. Operating lease costs are recognized on a straight-line basis over the term of the lease within operating expenses.

Recent Accounting Pronouncements

Accounting Standards adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, which establishes Topic 842 to replace Topic 840 regarding accounting for leases. Topic 842 requires lessees to recognize a right-of-use asset and a lease liability for most leases on the balance sheet. Leases that were previously described as capital leases are now called finance leases, and operating leases with a term of at least twelve months are now required to be recorded on the balance sheet. We adopted this standard on January 1, 2022 using the modified retrospective approach.

In July 2018, FASB issued ASU 2018-11, which provides an optional transition method allowing application of Topic 842 as of the adoption date and recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, with no restatement of comparative prior periods. We have adopted the standard using this optional transition method.

Within Topic 842, FASB has provided a number of practical expedients for applying the new lease standard in relation to leases that commenced prior to the standard's effective date. We have elected the package of practical expedients which allowed us, among other things, to carry forward the operating and finance lease classifications from Topic 840 to the new operating and finance lease classifications under Topic 842.

The adoption of this ASU resulted in the initial recognition of operating lease assets of $2,592,000 and liabilities totaling $2,592,000.

There are no other new accounting pronouncements that are expected to have a significant impact on our combined financial statements.

2.	PROPERTY AND EQUIPMENT

A summary of property and equipment, at cost, as of December 31, 2022 is as follows:

		2022
Revenue equipment	3 - 10	$	53,335,566
Communications equipment	5 - 10		50,403
Land and improvements	0 - 15		46,805
Buildings and leasehold improvements	7 - 40		7,733
Other	2 - 10		2,212,729
		$	55,653,236
Less accumulated depreciation			20,849,964
		$	34,803,272

Depreciation expense was $5,296,635 million in 2022. This depreciation expense excludes net gains on the sale of property and equipment totaling $1,427,650 million in 2022.

3.	LEASES

Our operating lease obligations do not typically include residual value guarantees or material restrictive covenants.

A summary of our lease obligations for the twelve months ended December 31, 2022 are as follows:

	Twelve Months Ended
	December 31, 2022
Operating lease cost	$	648,000
Total lease cost	$	648,000
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	397,950
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-
Weighted-average remaining lease term—operating leases	4.0 years
Weighted-average discount rate—operating leases		11.2	%

At December 31, 2022, we had right-of-use assets of $2,104,030 for operating leases in our combined balance sheet. Operating lease right-of-use asset amortization is included in general supplies and expenses in the combined statement of operations.

Our future minimum lease payments as of December 31, 2022, are as follows:

	Operating
2023	$	648,000
2024		648,000
2025		648,000
2026		648,000
Total minimum lease payments	$	2,592,000
Less: amount representing interest		(487,970	)
Present value of minimum lease payments	$	2,104,030
Less: current portion		(442,851	)
Lease obligations, long-term	$	1,661,179
4.	EMPLOYEE BENEFIT PLANS
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401k Deferral Plan

We have a deferred 401k plan under which all of our employees with at least 90 days of service are eligible to participate. Employees may contribute a percentage of their annual compensation up to the maximum amount allowed by the Internal Revenue Code. We may make discretionary contributions as determined by the owners. No discretionary contributions were made in 2022. We made contributions of $53,414 in 2022 to the 401k deferral plan.

5.	RELATED PARTY TRANSACTIONS

Summary of Related Party Transactions

During the year ended December 31, 2022, the Company. engaged in the following related party transactions:

•	The Company leases certain properties from Lew Thompson and Son Real Estate, Inc., Josh Thompson Properties, LLC and Lew Thompson and Son<br> Trucking, Inc. The Company’s leasing activities resulted in the initial recognition of operating lease assets of $2,592,000 and liabilities totaling $2,592,000, comprised of $442,851 of current operating lease obligations and $1,661,179<br> million of long-term operating lease obligations.
•	Thompson QOZB Ozark, LLC is owned by the major shareholders and has property leased by the Company for $0 which the Company uses to park excess<br> equipment in Arkansas.
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•	Lew Thompson & Son Petroleum, Inc. is owned by the major shareholders and Office Manager and has property leased by the Company for $0<br> which the Company uses to park excess equipment in Arkansas.
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•	Thompson Poultry Bedding, LLC is owned by the major shareholders and paid the Company approximately $86,420 for maintenance services provided<br> by the Company during 2022.
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•	Thompson Ready Mix, Inc. is owned by the major shareholder’s and paid the Company approximately $89,315 for maintenance services provided by<br> the Company during 2023.
---	---
6.	COMMITMENTS AND CONTINGENT LIABILITIES
---	---

From time-to-time, we are a party to ordinary, routine litigation arising in the ordinary course of business, most of which involves claims for personal injury and/or property damage incurred in connection with the transportation of freight. The Company’s insurance coverage for individual vehicle claims (including related bodily injury and property damage claims) provides for insurance levels with primary and excess coverage which management believes to be sufficient to adequately protect the Company from catastrophic claims. The Company maintains insurance for individual vehicle claims (including related bodily injury and property damage claims) exceeding $50,000, and has a casualty reserve in the amount of $40,000 accrued for payment of estimated claims, along with a $45,000 reserve for group health insurance claims at December 31, 2022.

In the normal course of business, the Company is also involved in various additional lawsuits, claims and other legal matters. The Company is of the opinion that the outcome of such lawsuits, claims and other legal matters will not have a material impact on the Company’s future financial position, results of operations, or cash flows.

7.	SUBSEQUENT EVENT

On April 26, 2023, the Company completed the sale of Lew Thompson & Son Trucking, Inc., Lew Thompson & Son Dedicated, Inc., Josh Thompson Trucking, Inc., Lew Thompson & Son Dedicated Leasing, Inc., and Lew Thompson & Son Leasing Inc. to Covenant Logistics Group, Inc., a Nevada Corporation. Under the terms of the agreement, the Company sold 100% of the outstanding stock of the aforementioned companies in exchange for a closing enterprise value of approximately $100 million plus an earnout of up to $30 million depending on the results achieved by the business over the three following calendar years. The Company’s tax status changed as a result of the acquisition, however, this change did not have a material impact to the financial statements of the Company.

Subsequent events were evaluated through the date the financial statements were issued on November 15, 2023.

Back to Form 8-K/Aform8ka.htm

Exhibit 99.3

Lew Thompson & Son Trucking, Inc.,

Lew Thompson & Son Dedicated Inc.,

Josh Thompson Trucking, Inc.,

Lew Thompson & Son Dedicated Leasing, Inc.,

and

Lew Thompson & Son Leasing Inc.

Combined Financial Statements

For the period ended March 31, 2023

Table of Contents

Combined Financial Statements
	Combined Balance Sheet	1
	Combined Statement of Operations	2
	Combined Statement of Changes in Stockholders' Equity	3
	Combined Statement of Cash Flow	4
	Notes to Combined Financial Statements	5

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC.,<br><br> <br>LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.
COMBINED BALANCE SHEET
MARCH 31, 2023

---	---
ASSETS
Current assets:
Cash and cash equivalents	6,710,074
Accounts receivable, net of allowance of 12,000	4,765,583
Drivers' advances and other receivables	487,194
Inventory and supplies	1,014,890
Prepaid expenses	810,621
Income taxes receivable	132,305
Other short-term assets	120,299
Total current assets	14,040,966
Property and equipment, net	34,573,865
Right of use assets, net	1,997,072
Total assets	50,611,903
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	253,989
Accrued expenses	1,679,432
Current portion of operating lease obligations	454,459
Insurance and claims accrual	95,763
Total current liabilities	2,483,643
Long-term portion of operating lease obligations	1,542,613
Total liabilities	4,026,256
Commitments and contingencies	-
Stockholders' equity:
Lew Thompson & Son Trucking, Inc. Class A common stock, 1.00 par value; 100,000 shares authorized;<br> 1,000 shares issued and outstanding	1,000
Lew Thompson & Son Dedicated, Inc Class A common stock, 1.00 par value; 100,000 shares authorized; 300<br> shares issued and outstanding	300
Josh Thompson Trucking, Inc Class A common stock, 25.00 par value; 2,000 shares authorized; 12 shares<br> issued and outstanding	300
Lew Thompson & Son Dedicated Leasing, Inc Class A common stock, 1.00 par value; 100,000 shares<br> authorized; 20,000 shares issued and outstanding	20,000
Lew Thompson & Son Leasing, Inc Class A common stock, 1.00 par value; 250 shares authorized; 100 shares<br> issued and outstanding	100
Additional paid-in-capital	5,094,254
Retained earnings	41,469,693
Total stockholders' equity	46,585,647
Total liabilities and stockholders' equity	50,611,903

All values are in US Dollars.

The accompanying notes are an integral part of these combined financial statements.

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC.,

LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.

COMBINED STATEMENT OF OPERATIONS

    PERIOD ENDED MARCH 31, 2023

	2023
Revenues
Freight revenue	$	14,584,113
Fuel surcharge revenue		2,823,170
Total revenue	$	17,407,283
Operating expenses:
Salaries, wages, and related expenses		5,937,648
Fuel expense		3,308,707
Operations and maintenance		2,106,668
Operating taxes and licenses		54,983
Insurance and claims		322,072
Communications and utilities		75,266
General supplies and expenses		294,328
Depreciation and amortization		1,373,079
Other expenses		5,345
Gain on disposition of property and equipment, net		(141,500	)
Total operating expenses		13,336,596
Operating income		4,070,687
Other income		116,415
Income before income taxes		4,187,102
Income tax expense		123,550
Net income	$	4,063,552

The accompanying notes are an integral part of these combined financial statements

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC.,

LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.

COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD ENDED MARCH 31, 2023

	Common Stock – Lew Thompson & Son Trucking, Inc.		Common Stock – Lew Thompson & Son Dedicated, Inc.		Common Stock – Josh Thompson Trucking, Inc.		Common Stock – Lew Thompson & Son Dedicated Leasing, Inc.		Common Stock – Lew Thompson & Son Leasing, Inc.		Additional Paid-In		Retained			Total Stockholders'
	Class A		Class A		Class A		Class A		Class A		Capital		Earnings			Equity
Balances at December 31, 2022	$	1,000	$	300	$	300	$	20,000	$	100	$	5,094,254	$	42,166,048		$	47,282,002
Distributions to stockholders		-		-		-		-		-		-		(4,759,907	)		(4,759,907	)
Net income		-		-		-		-		-		-		4,063,552			4,063,552
Balances at March 31, 2023	$	1,000	$	300	$	300	$	20,000	$	100	$	5,094,254	$	41,469,693		$	46,585,647

The accompanying notes are an integral part of these combined financial statements.

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC,.

LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.

COMBINED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED MARCH 31, 2023

	2023
Cash flows from operating activities:
Net income	$	4,063,552
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,373,079
Gain on disposition of property and equipment		(141,500	)
Changes in operating assets and liabilities:
Receivables and advances		1,442,946
Inventory and supplies		191,195
Prepaid expenses and other assets		(56,556	)
Accounts payable and accrued expenses		(221,662	)
Net cash flows provided by operating activities		6,651,054
Cash flows from investing activities:
Acquisition of property and equipment		(1,377,846	)
Proceeds from disposition of property and equipment		141,500
Net cash flows used in investing activities		(1,236,346	)
Cash flows from financing activities:
Distributions to shareholders		(4,759,907	)
Net cash flows used in financing activities		(4,759,907	)
Net change in cash and cash equivalents		654,801
Cash and cash equivalents at beginning of period		6,055,273
Cash and cash equivalents at end of period	$	6,710,074
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	33,458

The accompanying notes are an integral part of these combined financial statements.

LEW THOMPSON & SON TRUCKING, INC., LEW THOMPSON & SON DEDICATED, INC., JOSH THOMPSON TRUCKING, INC,.

LEW THOMPSON & SON DEDICATED LEASING, INC., AND LEW THOMPSON & SON LEASING, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

MARCH 31, 2023

1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Description and Principles of Combination

Revenue Recognition

Estimates

Cash and Cash Equivalents

We consider all highly liquid investments with a maturity of three months or less at acquisition to be cash equivalents. Additionally, we are also subject to concentrations of credit risk related to deposits in banks in excess of the Federal Deposit Insurance Corporation limits. For the period ended March 31, 2023, we maintained cash in one bank that exceeded the FDIC limit of $250,000.

Accounts Receivable and Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of trade accounts receivable. For the period ended March 31, 2023 three customers accounted for 10% or more of total accounts receivable at 46.4%, 27% and 11.4% and two customers accounted for 10% or more of total revenues at 45.8% and 41.1%, respectively.

The carrying amount reported in the combined balance sheet for accounts receivable approximates fair value due to the short collection period for receivables.

Inventories and Supplies

Inventories and supplies consist of parts, tires, fuel, and supplies. Tires on new revenue equipment are capitalized as a component of the related equipment cost when the tractor or trailer is placed in service and recognized through depreciation over the life of the vehicle. Replacement tires and parts on hand at period end are recorded at the lower of cost or net realizable value with cost determined using the first-in, first-out (FIFO) method. Replacement tires are expensed when placed in service.

Property and Equipment

Insurance and Other Claims

Income Taxes

For federal and state income tax returns, Lew Thompson & Son Trucking, Inc. (the Company), an Arkansas corporation, including the accounts of the Company, Lew Thompson & Son Dedicated, Inc., Josh Thompson Trucking, Inc., Lew Thompson & Son Dedicated Leasing, Inc., and Lew Thompson & Son Leasing Inc. have elected to be taxed as an S corporation under the Internal Revenue Code. Under this election, taxable income of these entities is allocated to its shareholders and no income tax is payable by the Company, except in certain states that do not recognize this election. Some of the states allow a pass-through entity to elect to be taxed at the entity level and allow owners to exclude from their taxable income any income which is taxed directly by the pass-through entity, and the company records income tax similar to entity-level tax for ASC 740 (Income Taxes) purposes. For the first quarter 2023, the company recognized pass-through entity income tax in the amount of $123,550.

For fiscal period ended March 31, 2023, the Company determined that there were no uncertain tax positions as a result of applying the guidance in ASC 740, Income Taxes. Accordingly, there was no provision for any uncertain tax positions in the consolidated financial statements for the period ended March 31, 2023, and the Company recognized no interest or penalties during those periods. In the event that an uncertain tax position would require the Company to recognize interest and penalties, these expenses would be recognized in interest expense and operating expenses, respectively. Tax years 2018 through 2023 remain open to examination by the tax authorities under the statute of limitations.

Lease Accounting

2.	PROPERTY AND EQUIPMENT

A summary of property and equipment, at cost, as of March 31, 2023 is as follows:

		2023
Revenue equipment	3 - 10	$	53,556,376
Communications equipment	5 - 10		50,403
Land and improvements	0 - 15		46,805
Buildings and leasehold improvements	7 - 40		7,733
Other	2 - 10		2,212,729
			55,874,046
Less accumulated depreciation			21,300,181
		$	34,573,865

Depreciation expense was $1,373,079 million in 2023. This depreciation expense excludes net gains on the sale of property and equipment totaling $141,500 million in 2023.

3.	LEASES

Our operating lease obligations do not typically include residual value guarantees or material restrictive covenants.

A summary of our lease obligations for the three months ended March 31, 2023 are as follows:

	Three Months Ended
	March 31, 2023
Operating lease cost	$	162,000
Total lease cost	$	162,000
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	106,958
Right-of-use assets obtained in exchange for new operating lease liabilities	$	-
Weighted-average remaining lease term—operating leases	3.8 years
Weighted-average discount rate—operating leases		11.2	%

At March 31, 2023, we had right-of-use assets of $1,997,072 for operating leases in our combined balance sheet. Operating lease right-of-use asset amortization is included in general supplies and expenses in the combined statement of operations.

Our future minimum lease payments as of March 31, 2023, are as follows:

	Operating
2023	$	486,000
2024		648,000
2025		648,000
2026		648,000
Total minimum lease payments	$	2,430,000
Less: amount representing interest		(432,928	)
Present value of minimum lease payments	$	1,997,072
Less: current portion		(454,459	)
Lease obligations, long-term	$	1,542,613
4.	EMPLOYEE BENEFIT PLANS
---	---

401k Deferral Plan

We have a deferred 401k plan under which all of our employees with at least 90 days of service are eligible to participate. Employees may contribute a percentage of their annual compensation up to the maximum amount allowed by the Internal Revenue Code. We may make discretionary contributions as determined by the owners. No discretionary contributions were made in 2023. We made contributions of $10,995 in 2023 to the 401k deferral plan.

5.	RELATED PARTY TRANSACTIONS

Summary of Related Party Transactions

During the period ended March 31, 2023, Lew Thompson & Son Trucking, Inc. engaged in the following related party transactions:

•	The Company leases certain properties from Lew Thompson and Son Real Estate, Inc., Josh Thompson Properties, LLC and Lew Thompson and Son<br> Trucking, Inc.
•	Thompson QOZB Ozark, LLC is owned by the major shareholder’s and has property leased by the Company for $0 which the Company uses to park<br> excess equipment in Arkansas.
---	---
•	Lew Thompson & Son Petroleum, Inc. is owned by the major shareholder’s and Office Manager and has property leased by the Company for $0<br> which the Company uses to park excess equipment in Arkansas.
---	---
•	Thompson Poultry Bedding, LLC is owned by the major shareholder’s and paid the Company approximately $28,072 for maintenance services<br> provided by the Company during the first quarter of 2023.
---	---
•	Thompson Ready Mix, Inc. is owned by the major shareholder’s and paid the Company approximately $20,839 for maintenance services provided by<br> the Company during the first quarter of 2023.
---	---
6.	COMMITMENTS AND CONTINGENT LIABILITIES
---	---

7.	SUBSEQUENT EVENT

On April 26, 2023, the Company completed the sale of Lew Thompson & Son Trucking, Inc., Lew Thompson & Son Dedicated, Inc., Josh Thompson Trucking, Inc., Lew Thompson & Son Dedicated Leasing, Inc., and Lew Thompson & Son Leasing Inc. to Covenant Logistics Group, Inc., a Nevada Corporation. Under the terms of the agreement, the Company sold 100% of the outstanding stock of Lew Thompson & Son in exchange for a closing enterprise value of approximately $100 million plus an earnout of up to $30 million depending on the results achieved by the business over the three following calendar years. The Company’s tax status changed as a result of the acquisition, however, this change did not have a material impact to the financial statements of the Company.

Subsequent events were evaluated through the date the financial statements were issued on November 15, 2023.

Back to Form 8-K/Aform8ka.htm

Exhibit 99.4

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On April 26, Covenant Logistics Group, Inc., a Nevada corporation (the "Company”), acquired 100% of the outstanding stock of Lew Thompson & Son Trucking, Inc. and related entities (collectively, “LTST”). The acquisition date fair value of the consideration transferred was $109.9 million. The Stock Purchase Agreement includes an earnout component of up to an aggregate of $30.0 million based on LTST's adjusted earnings before interest, taxes, depreciation, and amortization reported for the first, second, and third calendar years following closing. The total purchase, including any earnout achieved, is expected to range from $109.9 million to $129.9 million depending on the results achieved by LTST. The purchase price is subject to further adjustments, including finalization of the gross up payment to the sellers related to the Internal Revenue Code Section 338(h)(10) election. The Stock Purchase Agreement provided the Company the option to make an Internal Revenue Code Section 338(h)(10) election, which the Company plans to make within the next 30 days. The Stock Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions.

The unaudited pro forma condensed consolidated financial information is based on the assumptions set forth in the notes to such information. These adjustments are provisional and subject to further adjustment as additional information becomes available, additional analyses are performed, and as warranted by changes in current conditions and future expectations. The unaudited pro forma adjustments made in the compilation of the unaudited pro forma financial information are based upon available information and assumptions that the Company considers to be reasonable, and have been made solely for purposes of developing such unaudited pro forma financial information for illustrative purposes in compliance with the disclosure requirements of the Securities and Exchange Commission (“SEC”).

The pro forma adjustments have been made solely for informational purposes. The actual results reported by the consolidated company in periods following the acquisition may differ significantly from that reflected in these unaudited pro forma condensed consolidated financial statements for a number of reasons, including but not limited to cost savings from operating efficiencies, synergies and the impact of the incremental costs incurred in integrating the two companies. As a result, the unaudited pro forma consolidated information is not intended to represent and does not purport to be indicative of what the combined company’s financial condition or results of operations would have been had the acquisition been completed on the applicable dates of this unaudited pro forma condensed consolidated financial information. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial condition and results of operations of the consolidated company.

The unaudited pro forma condensed consolidated financial statements are based on various assumptions, including assumptions relating to the consideration paid and the allocation thereof to the assets acquired and liabilities assumed from LTST based on preliminary estimates of fair value. The pro forma assumptions and adjustments are described in the accompanying notes presented on the following pages. Pro forma adjustments are those that are directly attributable to the transaction, are factually supportable and, with respect to the unaudited pro forma condensed consolidated statements of operations, are expected to have a continuing impact on the consolidated results. The final purchase price and the allocation thereof and other purchase accounting items may differ materially from that reflected in the pro forma condensed consolidated financial statements after final purchase accounting adjustments.

The unaudited pro forma consolidated statements of operations included herein do not reflect any potential cost savings or other operating efficiencies that may result from the integration of the companies.

These unaudited pro forma condensed consolidated financial information and the accompanying notes should be read together with (1) the Company’s audited consolidated financial statements and accompanying notes, as of and for the fiscal year ended December 31, 2022, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 28, 2023 and (2) the Company’s unaudited consolidated financial statements and accompanying notes as of and for the three months ended March 31, 2023 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, which was filed with the SEC on May 5, 2023, (3) LTST’s audited combined financial statements for the year ended December 31, 2022, included as Exhibit 99.2 to this Form 8-K/A, and (4) LTST’s unaudited combined financial statements for the three months ended March 31, 2023, included as Exhibit 99.3 to this Form 8-K/A.

The actual operating results for LTST will be consolidated with the Company’s operating results for all periods subsequent to the closing of the acquisition on April 26, 2023.

The unaudited pro forma consolidated statement of operations of the Company and LTST for the year ended December 31, 2022 gives effect to the acquisition of LTST by the Company as if it had occurred effective January 1, 2022, the beginning of the Company’s 2022 fiscal year.

The unaudited pro forma consolidated statement of operations of the Company and LTST for the three months ended March 31 2023 gives effect to the acquisition of LTST by the Company as if it had occurred effective January 1, 2023, the beginning of the Company’s 2023 fiscal year.

The unaudited pro forma consolidated balance sheet of the Company and LTST as of March 31, 2023 gives effect to the acquisition of LTST by the Company as if it had occurred effective March 31, 2023.

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES<br><br> <br>UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET<br><br> <br>(In thousands, except share data)
	March 31, 2023
ASSETS	Covenant Logistics<br><br> <br>Group			LTST		Pro Forma Adjustments			Notes	Pro Forma Consolidated
Current assets:
Cash and cash equivalents	$	54,584		$	6,710		(45,726	)	(A)		15,568
Accounts receivable, net of allowance		122,153			4,765		-				126,918
Drivers' advances and other receivables, net of allowance		3,496			487		-				3,983
Inventory and supplies		3,308			1,015		-				4,323
Prepaid expenses		13,264			811		-				14,075
Assets held for sale		7,748			-		-				7,748
Income taxes receivable		-			132		-				132
Other short-term assets		436			121		-				557
Total current assets		204,989			14,041		(45,726	)			173,304
Property and equipment, net of accumulated depreciation		388,524			36,571		(9,459	)	(B)		415,636
Goodwill		58,217			-		10,729		(C)		68,946
Other intangibles, net		47,049			-		52,870		(D)		99,919
Other assets, net		65,101			-		-				65,101
Noncurrent assets of discontinued operations		975									975
Total assets	$	764,855			50,612		8,414				823,881
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		28,290			254		-				28,544
Accrued expenses		53,277			1,679		-				54,956
Current maturities of long-term debt		21,369			-		-				21,369
Current portion of finance lease obligations		1,972			-		-				1,972
Current portion of operating lease obligations		13,431			454						13,885
Current portion of insurance and claims accrual		20,701			96		-				20,797
Other short-term liabilities		-			-		-				-
Total current liabilities		139,040			2,483		-				141,523
Long-term debt		95,788			-		55,000		(A)		150,788
Long-term portion of finance lease obligations		429			-		-				429
Long-term portion of operating lease obligations		39,844			1,543						41,387
Insurance and claims accrual		15,894			-		-				15,894
Deferred income taxes		96,753			-		-				96,753
Other long-term liabilities		2,045			-		-				2,045
Long-term liabilities of discontinued operations		3,900									3,900
Total liabilities		393,693			4,026		55,000				452,719
Stockholders' equity:
Class A common stock		161			22		(22	)	(E)		161
Class B common stock		24			-		-				24
Additional paid-in-capital		152,921			5,094		(5,094	)	(E)		152,921
Treasury Stock at cost		(127,267	)		-						(127,267	)
Accumulated other comprehensive income		683			-		-				683
Retained earnings		344,640			41,470		(41,470	)	(E)		344,640
Total stockholders' equity		371,162			46,586		(46,586	)			371,162
Total liabilities and stockholders' equity	$	764,855			50,612		8,414				823,881

See the accompanying notes to unaudited pro forma condensed consolidated financial statements.

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES<br><br> <br>UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS<br><br> <br>(In thousands, except share data)
	Three Months Ended March 31, 2023
	Covenant Logistics<br><br> <br>Group			LTST			Pro Forma Adjustments			Notes	Pro Forma Consolidated
Revenue:
Freight revenue	$	233,422		$	14,584			-				248,006
Fuel surcharge revenue		33,429			2,823							36,252
Total revenue	$	266,851			17,407			-				284,258
Operating expenses:
Salaries, wages, and related expenses		99,159			5,938			-				105,097
Fuel expense		34,091			3,309			-				37,400
Operations and maintenance		17,109			2,107			-				19,216
Revenue equipment rentals and purchased transportation		63,016			-			-				63,016
Operating taxes and licenses		3,463			55			-				3,518
Insurance and claims		12,693			322			-				13,015
Communications and utilities		1,284			75			-				1,359
General supplies and expenses		13,620			294			-				13,914
Depreciation and amortization		14,575			1,373			1,023		(F)		16,971
Gain on disposition of property and equipment, net		(9,791	)		(142	)		-				(9,933	)
Other expenses		-			5			-				5
Total operating expenses		249,219			13,336			1,023				263,578
Operating income		17,632			4,071			(1,023	)			20,680
Other income		-			(116	)						(116	)
Interest expense, net		769			-			-				769
Income from equity method investment		(5,943	)		-			-				(5,943	)
Income before income taxes		22,806			4,187			(1,023	)			25,970
Income tax (benefit) expense		6,321			124			(271	)	(I)		6,174
Income from continuing operations, net of tax		16,485			4,063			(752	)			19,796
Income from discontinued operations, net of tax		150			-			-				150
Net income	$	16,635			4,063			(752	)			19,946
Income per share:
Basic net income per share
Income from continuing operations	$	1.23									$	1.08
Income from discontinued operations		0.01										0.01
Net income	$	1.25									$	1.09
Diluted net income per share
Income from continuing operations	$	1.19									$	1.07
Income from discontinued operations		0.01										0.01
Net income	$	1.20									$	1.08
Basic weighted average shares outstanding		13,361										18,334
Diluted weighted average shares outstanding		13,877										18,424

See the accompanying notes to unaudited pro forma condensed consolidated financial statements.

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES<br><br> <br>UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS<br><br> <br>(In thousands, except share data)
	Year Ended December 31, 2022
	Covenant Logistics<br><br> <br>Group			LTST			Pro Forma Adjustments			Notes	Pro Forma Consolidated
Revenue:
Freight revenue	$	1,046,396		$	53,868			-				1,100,264
Fuel surcharge revenue		170,462			10,778			-				181,240
Total revenue	$	1,216,858		$	64,646			-				1,281,504
Operating expenses:
Salaries, wages, and related expenses		402,276			19,820			-				422,096
Fuel expense		166,410			16,400			-				182,810
Operations and maintenance		79,051			4,578			-				83,629
Revenue equipment rentals and purchased transportation		325,624			-			-				325,624
Operating taxes and licenses		11,931			896			-				12,827
Insurance and claims		50,547			1,435			-				51,982
Communications and utilities		5,385			109			-				5,494
General supplies and expenses		37,762			1,357			-				39,119
Depreciation and amortization		57,512			5,297			4,092		(F)		66,901
Gains and losses on disposition of property and equipment		(40,322	)		(1,428	)						(41,750	)
Other expenses		-			2							2
Total operating expenses		1,096,176			48,466			4,092				1,148,734
Operating income		120,682			16,180			(4,092	)			132,770
Other income		-			(694	)						(694	)
Interest expense, net		3,083			-			853		(G)		3,936
Income from equity method investment		(25,193	)		-			-				(25,193	)
Income before income taxes		142,792			16,874			(4,945	)			154,721
Income tax (benefit) expense		34,860			537			(1,310	)	(H)		34,087
Income from continuing operations, net of tax		107,932			16,337			(3,635	)			120,634
Income from discontinued operations, net of tax		750										750
Net income	$	108,682			16,337			(3,635	)			121,384
Income per share:
Basic net income per share
Income from continuing operations	$	7.19									$	8.04
Income from discontinued operations		0.05										0.05
Net income	$	7.24									$	8.09
Diluted net income per share
Income from continuing operations	$	6.95									$	7.77
Income from discontinued operations		0.05										0.05
Net income	$	7.00									$	7.82
Basic weighted average shares outstanding		15,006										15,006
Diluted weighted average shares outstanding		15,524										15,524

See the accompanying notes to unaudited pro forma condensed consolidated financial statements.

COVENANT LOGISTICS GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Transaction

LTST is a dedicated contract carrier specializing in poultry feed and live haul transportation in Northwest Arkansas and surrounding areas and was acquired to expand the Dedicated reportable segment into this niche market.

Note 2 - Estimate of Assets Acquired and Liabilities Assumed

The acquisition date cash consideration paid by the Company was $100.7 million, not considering approximately $0.8 million of cash balances acquired. A summary of the preliminary purchase price allocation with the acquisition of LTST, as if the transaction occurred on April 26, 2023, is as follows:

	(in thousands)
Cash paid				$	100,726
Contingent consideration					10,016
Allocated to:
Historical book value of LTST’s assets and liabilities	$	8,789
Adjustments to recognize assets and liabilities at acquisition-date fair value:
Property, plant, and equipment		39,009
Other assets		(655	)
Fair value of tangible net assets acquired					47,143
Identifiable intangibles at acquisition-date fair value					52,870
Excess of consideration transferred over the net amount of assets and liabilities recognized				$	10,729
Cash paid pursuant to Stock Purchase Agreement				$	100,726
Cash acquired included in historical book value of LTST assets and liabilities					(839	)
Contingent consideration					10,016
Net purchase price				$	109,903

Deferred income taxes arising from the acquisition are estimated to be immaterial because of the expected election under the Internal Revenue Code Section 338(h)(10).

Note 3 - Intangible Assets

Based on the preliminary allocation of the purchase price, the following amounts have been allocated to identifiable intangible assets along with the respective amortization periods:

	(in thousands)
Trade name	$	2,100	120
Non-Compete agreement		4,670	48
Customer relationships		46,100	204
	$	52,870

These preliminary estimates of fair value and useful life could be different from the final acquisition accounting, and the difference could have a material impact on the accompanying pro forma financial statements. The combined effect of any such changes could then also result in a significant increase or decrease to the Company's estimate of associated amortization expense.

Note 4 - Pro Forma Adjustments

The pro forma adjustments in the unaudited pro forma condensed consolidated financial information are as follows:

(A) To reflect acquisition date cash consideration

    paid by the Company of $100.7 million in connection with the acquisition of LTST, not considering $0.8 million cash acquired.

(B) To reflect the adjustment of property and equipment values of LTST to acquisition date fair value based on preliminary appraisals performed.

(C) To reflect the excess of the total consideration transferred over the fair value of tangible and intangible net assets acquired (See Note 2).

(D) To reflect the estimated fair values of identifiable intangibles, $52.9 million, based on preliminary allocation of the purchase price (See Note 3).

(E) To reflect the elimination of the stockholders' equity accounts of LTST.

(F) To reflect the change in depreciation and amortization expense due to the amortization of identifiable intangibles with a finite life using the straight-line method over the assigned life of each intangible as detailed in Note 3, partially offset by a reduction in depreciation expense as a result of the reduction in fair value of property and equipment based on preliminary appraisals performed.

(G) To reflect the net increase in interest expense as the result of the financing obtained by the Company to fund the acquisition.

(H) To reflect the income tax effect of each of the pro forma adjustments and depreciation expense associated with LTST at an effective tax rate of 26.5%. The previous stockholders of LTST had elected to file federal income taxes using S corporation status. Under tax regulations for S corporations, LTST elected to have net income or losses reported on the tax returns of the individual stockholders. Accordingly, there was no provision for federal income taxes. After the acquisition, LTST is a C corporation and will be subject to federal and state income taxes.

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