Southland Holdings, Inc.

Previous wording

Both our Civil and Transportation segments continue to identify new opportunities to grow our business, and the future outlook of the end markets we serve remains positive. Although risk and uncertainty exist, including, but not limited to, the items addressed within our forward-looking statements and risk factors, we believe that we are well positioned to compete on new infrastructure projects in both the public and private sectors.

Current wording

Both our Civil and Transportation segments continue to identify new opportunities to grow our business, and we believe the future outlook of the end markets we serve remains positive. Although risk and uncertainty exist, including, but not limited to, the items addressed within our forward-looking statements and risk factors, we believe that we are well-positioned to compete on new infrastructure projects in both the public and private sectors.

Previous wording

In both our Transportation and Civil segments, we have competitors within the individual markets and geographic areas in which we operate, ranging from small, local companies to larger regional, national, and international companies. Although the construction business is highly competitive, there are few, if any, companies which compete in all of our market areas, both geographically and from an end market perspective. The degree and type of competition is influenced by the type and scope of construction projects within individual markets. Equipment ownership and ability to self-perform across numerous disciplines are two of our significant competitive advantages. We believe that the primary factors influencing competition in our industry are price, reputation for quality, safety, schedule certainty, relevant experience, availability of field supervision and skilled labor, machinery and equipment, financial strength, as well as knowledge of local markets and conditions.

Current wording

geographically and from an end market perspective. The degree and type of competition is influenced by the type and scope of construction projects within individual markets. Equipment ownership and ability to self-perform across numerous disciplines are two of our competitive advantages. We believe that the primary factors influencing competition in our industry are price, reputation for quality, safety, schedule certainty, relevant experience, availability of field supervision and skilled labor, machinery and equipment, financial capacity and knowledge of local markets and conditions.

Previous wording

During the first half of 2025, the U.S. government announced a variety of tariff actions in response to which many countries have announced retaliatory trade actions, including tariffs on U.S. exports. The tariffs and retaliatory trade actions have increased the cost of importing certain construction materials into the U.S. and have caused disruption and uncertainty to both international trade, supply chains and financial markets. It is unclear to what extent, when and for how long announced trade actions will be in place. To date, these trade actions have had no meaningful impact on the results of our operations or the projects currently underway as the construction materials and equipment used for our current projects have generally been sourced and/or secured upon project inception. However, we are evaluating the potential impacts of these proposed tariffs, including potential impacts to our customers, as well as our ability to mitigate their related impacts. In addition, economic experts and policy makers have expressed concerns that increased tariffs and retaliatory trade actions could increase inflation or the risk of a recession, which could also affect our customers’ use of capital and demand for our services.

Current wording

During 2025 and continuing through the first half of 2026, the U.S. government announced or imposed a variety of tariff or trade actions. In response many countries announced or imposed retaliatory tariff or trade actions, including tariffs on U.S. exports. These tariffs and trade actions have increased the cost of importing certain construction materials into the U.S. and have caused disruption and uncertainty in international trade and supply chains contributing to volatility in the financial markets. Significant uncertainty remains regarding the status of existing and newly announced tariffs, potential changes or pauses to such tariffs, the extent of tariffs, and whether further additional tariffs or other retaliatory trade actions may be imposed, modified, or suspended. Economic experts and policy makers have expressed concerns that increased tariffs and retaliatory trade actions could increase inflation or the risk of a recession, which could also affect our customers’ use of capital and demand for our services. To date, these tariff and trade actions have had no meaningful impact on the results of our operations or the projects currently underway as the construction materials and equipment used for our current projects have generally been sourced and/or secured upon project inception. However, we continue to evaluate the potential impacts of these tariffs and trade actions, including potential impacts to our customers and our ability to mitigate their related impacts.

Previous wording

The preparation of financial statements in conformity with the United States Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses earned and incurred, respectively, during the reporting period. Critical accounting estimates are fundamental to the portrayal of both our financial condition and results of operations and often require difficult, subjective, and complex estimates and judgments by management. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected in the financial statements in future periods. The following discussion addresses the items we have identified as our critical accounting estimates. There have been no material developments or changes from the policies and estimates discussed in our annual disclosures.

Current wording

The preparation of financial statements in conformity with the United States Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses earned and incurred, respectively, during the reporting period. Critical accounting estimates are fundamental to the portrayal of both our financial condition and results of operations and often require difficult, subjective, and complex estimates and judgments by management. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected in the financial statements in future periods. The following discussion addresses the items we have identified as our critical accounting

Previous wording

For the three months ended March 31, 2026, M&P contributed $11.0 million to revenue and $13.1 million to gross loss. There is additional information on the M&P gross loss in the Transportation portion of the Segment Results section of this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This compares to $18.1 million to revenue and $9.1 million to gross loss for the three months ended March 31, 2025. As of March 31, 2026, approximately 3.8% of Southland’s backlog was in M&P and Southland estimates most of this work to be substantially completed in 2026.

Current wording

For the three months ended June 30, 2026, M&P contributed $11.7 million to revenue and $16.3 million to gross loss. There is additional information on the M&P gross loss in the Transportation portion of the Segment Results section of this Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This compares to $21.7 million to revenue and $3.8 million in gross loss for the three months ended June 30, 2025. For the six months ended June 30, 2026, M&P contributed $22.7 million to revenue and $29.4 million to gross loss. This compares to $39.8 million to revenue and $12.9 million to gross loss for the six months ended June 30, 2025. As of June 30, 2026, approximately 2.7% of Southland’s backlog was in M&P and Southland estimates most of this work to be substantially completed in 2026.

Previous wording

Cost of construction for the three months ended March 31, 2026, was $177.2 million, a decrease of $40.8 million, or 18.7%, compared to the three months ended March 31, 2025. The decrease was attributable to a $49.7 million decrease in our Transportation segment primarily due to projects approaching completion, offset by an $8.9 million increase in our Civil segment primarily due to new projects substantially started after March 31, 2025.

Current wording

Cost of construction for the three months ended June 30, 2026, was $184.5 million, a decrease of $17.9 million, or 8.8%, compared to the three months ended June 30, 2025. The decrease was attributable to a $18.7 million decrease in our Transportation segment primarily due to projects approaching completion, offset by a $0.8 million increase in our Civil segment primarily due to new projects substantially started after June 30, 2025.

Previous wording

Interest expense for the three months ended March 31, 2026, was $8.7 million, a decrease of $0.2 million, or 2.2%, compared to the three months ended March 31, 2025. The decrease was primarily driven by the decrease of total debt compared to the same period in 2025.

Current wording

Interest expense for the three months ended June 30, 2026, was $7.3 million, a decrease of $2.6 million, or 26.5%, compared to the three months ended June 30, 2025. The decrease was primarily driven by the decrease of total debt compared to the same period in 2025.

Previous wording

The Company is in a net deferred tax asset position for both U.S. federal and state income tax as of March 31, 2026. The Company assesses available positive and negative evidence to estimate whether sufficient taxable income will be generated to permit use of existing deferred income tax assets. The Company has incurred three years of cumulative losses in various jurisdictions including the U.S. Such objective evidence and recent changes in forecasts resulted in the Company establishing a valuation allowance against the net deferred tax assets related to U.S. federal and state income tax as of September 30, 2025, with the exception of the net deferred tax assets related to separate state filings for certain subsidiaries. As of March 31, 2026, the Company has recorded a valuation allowance of approximately $123.8 million, inclusive of current year, related to its US federal and state net deferred tax assets, inclusive of current year activity, as they are determined to be more-likely-than-not to not be utilized

Current wording

The Company is in a net deferred tax asset position for both U.S. federal and state income tax as of June 30, 2026. The Company assesses available positive and negative evidence to estimate whether sufficient taxable income will be generated to permit use of existing deferred income tax assets. The Company has incurred three years of cumulative losses in various jurisdictions including the U.S. Such objective evidence and recent changes in forecasts resulted in the Company establishing a valuation allowance against the net deferred tax assets related to U.S. federal and state income tax as of September 30, 2025, with the exception of the net deferred tax assets related to separate state filings for certain subsidiaries. As of June 30, 2026, the Company has recorded a valuation allowance of approximately $146.7 million, inclusive of current year, related to its US federal and state net deferred tax assets, as they are determined to be more-likely-than-not to not be utilized.

Previous wording

Income tax expense for the three months ended March 31, 2026, had an effective rate of (0.1%). The primary differences between the federal statutory tax rate of 21% and the effective rate were valuation allowance adjustments against subsidiaries’ net deferred tax assets and state income taxes.

Current wording

The effective tax rate for the three months ended June 30, 2026 was 1.8%. The primary differences between the federal statutory tax rate of 21% and the effective rate were valuation allowance adjustments against subsidiaries’ net deferred tax assets and state income taxes.

Previous wording

Income tax benefit for the three months ended March 31, 2025, had an effective rate of 10.1%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, the recording of a valuation allowance against certain subsidiaries’ net deferred tax assets, federal tax credits, the income earned in foreign jurisdictions with a zero tax rate; however, that foreign income is included within U.S. taxable income through global intangible low taxed income (“GILTI”), and the impact of worldwide forecast on the interim calculations under ASC 740.

Current wording

The effective tax rate for the three months ended June 30, 2025 was 0.6%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, the recording of valuation allowances against certain subsidiaries’ separate company deferred tax assets, federal tax credits, the income earned in foreign jurisdictions with different tax rates than the domestic rate; however, that foreign income is included within U.S. taxable income through Section 951A

Previous wording

Selling, general, and administrative expenses for the three months ended March 31, 2026, were $14.9 million, a decrease of $1.5 million, or 9.2%, compared to the three months ended March 31, 2025. The decrease was primarily due to a $2.4 million decrease in compensation expense, a $0.6 million decrease in professional fees and a $0.5 million decrease in real estate and personal property taxes, offset by a $2.1 million increase in business transformation expenses, compared to the same period in 2025.

Current wording

Selling, general, and administrative expenses for the six months ended June 30, 2026, were $31.6 million, an increase of $1.6 million, or 5.4%, compared to the six months ended June 30, 2025. The increase was primarily due to a $3.3 million increase in business transformation expenses, a $3.2 million increase in bad debt expense, offset by a $4.2 million decrease in compensation expense and a $0.8 million decrease in professional fees, compared to the same period in 2025.

Previous wording

Gross profit for the three months ended March 31, 2026, was $14.7 million, or 14.1% of segment revenue, compared to gross profit of $22.6 million, or 22.0%, of segment revenue, for the three months ended March 31, 2025. The primary driver to the decrease in gross profit of $8.0 million for the three months ended March 31, 2026 versus the same period in 2025 was primarily due to decreases in gross profit contributions of $3.1 million from a water facility project in the Northwest, $2.9 million from a water pipeline project in the Southwest and $2.7 million from a water treatment plant project in the Southwest, all of which decreased due to higher-than-expected project costs.

Current wording

Gross loss for the three months ended June 30, 2026, was $27.1 million, or (66.1)% of segment revenue, compared to gross profit of $14.3 million, or 17.5%, of segment revenue, for the three months ended June 30, 2025. The primary drivers to the decrease in gross profit of $41.3 million for the three months ended June 30, 2026 versus the same period in 2025 were primarily due to decreases in gross profit contributions of $12.5 million from a water project in the Northeast, $9.4 million from a water drainage project in the South, $8.7 million from a water facility project in the Southwest and $6.1 million from a water facility project in the Northwest, due to management’s comprehensive reassessment of expected recoverability of claims. The decrease in gross profit was also attributable to a decrease in gross profit contributions of $5.4 million from a wastewater treatment plant project in Canada due to higher-than-expected project costs.

Previous wording

Gross loss for the three months ended March 31, 2026, was $19.4 million, or (28.3)% of segment revenue, compared to gross loss of $1.2 million, or (0.8)% of segment revenue, for the three months ended March 31, 2025. The primary driver to the increase in gross loss of $18.3 million was primarily due to decreases in profit contributions of $13.0 million from a canal widening project in the South and $6.4 million from a M&P project in the Southeast, both due to unfavorable adjustments related to dispute resolutions.

Current wording

Gross loss for the three months ended June 30, 2026, was $44.2 million, or (61.1)% of segment revenue, compared to gross loss of $1.3 million, or (1.0)% of segment revenue, for the three months ended June 30, 2025. The primary drivers to the increase in gross loss of $42.9 million were primarily due to decreases in profit contributions of $31.9 million from a project in the Southeast and $13.3 million from two M&P projects in the Southwest, due to management’s comprehensive reassessment of expected recoverability of claims.

Previous wording

Revenue for the three months ended March 31, 2026, was $103.8 million, an increase of $0.9 million, or 0.9%, compared to the three months ended March 31, 2025. The increase was primarily attributable to increased revenues of $14.3 million from a data center project in the West due to the project being substantially started after March 31, 2025, offset by a $6.4 million decrease from a tunnel project in the West due to the project approaching completion and a $6.2 million decrease from a water facility project in the Northwest due to the project approaching completion.

Current wording

Revenue for the six months ended June 30, 2026, was $144.8 million, a decrease of $39.7 million, or 21.5%, compared to the six months ended June 30, 2025. The decrease was primarily attributable to decreased revenues of $18.9 million from a water drainage project in the South, $16.0 million from a water facility project in the Northwest, $13.2 million from a water facility project in the Southwest and $13.0 million from a water project in the Northeast, due to management’s comprehensive reassessment of expected recoverability of claims. The decrease was also attributable to decreased revenues of $12.6 million from a wastewater treatment plant project in Canada due to the project approaching completion and higher-than-expected project costs, offset by a $33.3 million increased revenue from a data center project in the West due to the project being substantially started after June 30, 2025.

Previous wording

Revenue for the three months ended March 31, 2026, was $68.6 million, a decrease of $68.0 million, or 49.8%, compared to the three months ended March 31, 2025. The decrease was primarily attributable to decreased revenues of $23.6 million from an elevated roadway and bridge project in the Southeast, $9.0 million from a project in the Bahamas, $5.0 million from a Bridge project in the Southeast and $4.7 million from a bridge repair project in the West, all of which decreased due to the projects approaching completion. The decrease was also primarily related to decreased revenues of $13.0 million from a canal widening project in the South due to an unfavorable adjustment related to dispute resolutions and $7.1 million from the M&P business line.

Current wording

Revenue for the six months ended June 30, 2026, was $140.9 million, a decrease of $129.5 million, or 47.9%, compared to the six months ended June 30, 2025. The decrease was primarily attributable to decreased revenues of $32.8 million from an elevated roadway and bridge project in the Southeast, $18.7 million from a project in the Bahamas, $10.9 million from a M&P project in the Southwest, $9.8 million from a bridge repair project in the West, and $8.5 million from a bridge project in the Southeast, all of which decreased due to the projects approaching completion. The decrease was also primarily related to decreased revenues of $30.8 million from a project in the Southeast, $13.1 million from a canal widening project in the South due to an unfavorable adjustment related to dispute resolutions and $6.7 million from an M&P project in the Southwest due to management’s comprehensive reassessment of expected recoverability of claims.

Previous wording

We will receive the proceeds from the exercise of Warrants for cash. We believe the likelihood that Warrant holders will exercise their Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. On May 1, 2026, the closing price of our common stock was $1.18 per share. To the extent the market price of our common stock remains below the exercise price of $11.50 per share, we believe that Warrant holders will be unlikely to exercise their Warrants for cash, resulting in little or no cash proceeds to us for any such exercise. To the extent we receive any cash proceeds, we expect to use such proceeds for general corporate and working capital purposes, which would increase our liquidity. However, we do not expect to rely materially on the cash exercise of Warrants to fund our operations.

Current wording

We will receive the proceeds from the exercise of Warrants for cash. We believe the likelihood that Warrant holders will exercise their Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. On August 4, 2026, the closing price of our common stock was $0.60 per share. To the extent the market price of our common stock remains below the exercise price of $11.50 per share, we believe that Warrant holders will be unlikely to exercise their Warrants for cash, resulting in little or no cash proceeds to us for any such exercise. To the extent we receive any cash proceeds, we expect to use such proceeds for general corporate and working capital purposes, which would increase our liquidity. However, we do not expect to rely materially on the cash exercise of Warrants to fund our operations.

Previous wording

Additionally, under existing GIAs, certain sureties advanced funds to support bonded project obligations and ongoing project performance. As of March 31, 2026 and December 31, 2025, the sureties had advanced $139.2 million and $14.1 million, respectively. These amounts are included in surety payable on our unaudited condensed consolidated balance sheets. Repayment of these amounts is not required prior to at least May 13, 2027.

Current wording

Additionally, under existing GIAs, certain sureties advanced funds to support bonded project obligations and ongoing project performance. As of June 30, 2026 and December 31, 2025, the sureties had advanced $209.8 million and $14.1 million, respectively. These amounts are included in surety payable on our unaudited condensed consolidated balance sheets. Repayment of these amounts is not required prior to at least August 13, 2027.

Previous wording

On March 27, 2026, the Company entered into a settlement agreement on the WSCC Project. Certain sureties of the Company previously paid a portion of the judgement against the Company and are required to pay an additional amount under the settlement agreement. The Company and the sureties are negotiating repayment terms for the amounts paid by the sureties on behalf of the Company under a long-term financing agreement. The sureties have agreed to forbear on seeking repayment for these amounts until at least May 13, 2027. The $89.1 million judgment is included in surety payable on our unaudited condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025.

Current wording

On March 27, 2026, the Company entered into a settlement agreement on the WSCC Project. Certain sureties of the Company previously paid a portion of the judgment against the Company and are required to pay an additional amount under the settlement agreement. The sureties have agreed to forbear on seeking repayment for these amounts until at least August 13, 2027. The $89.1 million judgment is included in surety payable on our unaudited condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025.

Previous wording

The following table sets forth summary change in cash, cash equivalent and restricted cash for the three months ended March 31, 2026 and 2025:

Current wording

The following table sets forth summary change in cash, cash equivalent and restricted cash for the six months ended June 30, 2026 and 2025:

Previous wording

Net cash used in operating activities was $133.9 million during the three months ended March 31, 2026. During the three months ended March 31, 2026, the primary drivers in cash used in operating activities were a decrease of $104.1 million in accounts payable, retainage payable and accrued liabilities and $28.2 million in net loss. Net cash provided by operating activities was $6.4 million during the three months ended March 31, 2025. During the three months ended March 31, 2025, the primary drivers in cash provided by operating activities were an increase of $10.4 million in accounts payable and accrued liabilities, a decrease of $8.6 million in accounts receivable, and an increase of $6.9 million in contract liabilities, offset by an increase of $10.7 million in contract assets and an increase of $7.5 million in other current assets.

Current wording

Net cash used in operating activities was $171.9 million during the six months ended June 30, 2026. During the six months ended June 30, 2026, the primary drivers in cash used in operating activities were a decrease of $171.0 million in accounts payable, retainage payable and accrued liabilities, $115.3 million in net loss and a decrease of $58.1 million in contract liabilities, offset by a decrease of $94.3 million in contract assets, a decrease of $64.5 million in accounts and retainage receivables and $11.1 million in depreciation and amortization. Net cash provided by operating activities was $1.0 million during the six months ended June 30, 2025. During the six months ended June 30, 2025, the primary drivers in cash provided by operating activities were a decrease of $49.1 million in accounts and retainage receivables offset by an increase of $46.6 million in contract assets.

Previous wording

Net cash provided by investing activities was $1.3 million during the three months ended March 31, 2026. During the three months ended March 31, 2026, the primary drivers in cash provided by investing activities were $1.0 million in proceeds from sale of property and equipment and by $0.3 million in distributions from other investments. Net cash provided by investing activities was $1.1 million during the three months ended March 31, 2025. During the three months ended March 31, 2025, the primary drivers in cash provided by investing activities were $2.9 million in proceeds from sale of property and equipment offset by $1.8 million in purchases of property and equipment.

Current wording

Net cash provided by investing activities was $7.6 million during the six months ended June 30, 2026. During the six months ended June 30, 2026, the primary driver in cash provided by investing activities was $7.6 million in proceeds from sale of property and equipment. Net cash provided by investing activities was $0.8 million during the six months ended June 30, 2025. During the six months ended June 30, 2025, the primary drivers in cash provided by investing activities were $3.4 million in proceeds from sale of property and equipment, offset by $2.9 million in purchases of property and equipment.

Previous wording

Net cash provided by financing activities was $97.0 million for the three months ended March 31, 2026. During the three months ended March 31, 2026, the primary drivers in cash provided by financing activities were $125.1 million in proceeds from advancement of surety funds, offset by $27.4 million in payments on notes payable. Net cash used in financing activities was $14.0 million for the three months ended March 31, 2025. During the three months ended March 31, 2025, the primary drivers in cash used in financing activities were $13.6 million in payments on notes payable and $0.3 million in payments of finance lease and financing obligations.

Current wording

Net cash provided by financing activities was $142.5 million for the six months ended June 30, 2026. During the six months ended June 30, 2026, the primary drivers in cash provided by financing activities were $195.7 million in proceeds from advancement of surety funds, offset by $51.8 million in payments on notes payable. Net cash used in financing activities was $26.1 million for the six months ended June 30, 2025. During the six months ended June 30, 2025, the primary drivers in cash used in financing activities were $25.2 million in payments on notes payable and $0.5 million in payments of finance lease and financing obligations.

Previous wording

As of March 31, 2026, we had total debt of $230.8 million, of which $56.1 million is due within the next twelve months.

Current wording

As of June 30, 2026, we had total debt of $206.8 million, of which $58.0 million is due within the next twelve months.

Previous wording

On September 30, 2024, the Company entered into a term loan and security agreement (the “Credit Agreement”) with Callodine Commercial Finance, LLC as administrative agent and lender. The Credit Agreement provides for a four-year secured $160.0 million term loan facility (the “Credit Facility”), consisting of a $140.0 million initial draw term loan (the “Term Loan”).

Current wording

On September 30, 2024, the Company entered into a term loan and security agreement (the “Credit Agreement”) with Callodine Commercial Finance, LLC as administrative agent and lender. The Credit Agreement provides for a four-year secured

Previous wording

Any principal prepayments in the first three years, other than mandatory prepayments pursuant to the Credit Agreement, will be subject to additional fees. In the first year, any prepayments will incur fees of 3% or the make-whole premium, whichever is higher. The make-whole premium is the interest and fees that would have been earned for the full year less interest and fees paid to date during the year. In the second and third years, any prepayments will incur fees of 2% and 1%, respectively. There are no fees for prepayments made in the fourth year.

Current wording

Any principal prepayments in the first three years, other than mandatory prepayments pursuant to the Credit Agreement, are subject to additional fees. In the first year, any prepayments incurred fees of 3% or the make-whole premium, whichever was higher. The make-whole premium was the interest and fees that would have been earned for the full year less interest and fees paid to date during the year. In the second and third years, any prepayments incur fees of 2% and 1%, respectively. There will be no fees for any prepayments made in the fourth year.

Previous wording

The Credit Agreement contains customary restrictive covenants and events of default, including financial covenants based on the Company’s Liquidity, as defined in the Credit Agreement, and trailing twelve-month earnings before interest expense, income taxes, depreciation and amortization (the “TTM EBITDA Covenants”). The TTM EBITDA Covenants will be tested and the Company must comply with the TTM EBITDA Covenants during any period where the Company’s Liquidity falls below $30.0 million until the Company’s Liquidity exceeds $30.0 million for a period of at least 30 days. The Credit Agreement requires the Company to maintain Liquidity of at least $20.0 million at all times. The Credit Agreement also stipulates that the outstanding principal cannot be greater than the specified advance rates against eligible collateral.

Current wording

The Credit Agreement contains customary restrictive covenants and events of default, including financial covenants based on the Company’s Liquidity, as defined in the Credit Agreement, and trailing twelve-month earnings before interest expense, income taxes, depreciation and amortization (the “TTM EBITDA Covenants”). The TTM EBITDA Covenants are tested and the Company must comply with the TTM EBITDA Covenants during any period where the Company’s Liquidity falls below $30.0 million until the Company’s Liquidity exceeds $30.0 million for a period of at least 30 days. The Credit Agreement requires the Company to maintain Liquidity of at least $20.0 million at all times. The Credit Agreement also stipulates that the outstanding principal cannot be greater than the specified advance rates against eligible collateral.

Previous wording

On March 17, 2026, the Company entered into an assignment and assumption (the “Assignment and Assumption Agreement”) with Callodine Commercial Finance, LLC (the “Resigning Agent”), solely in its capacity as “Agent” under the Credit Agreement, lenders party to the Credit Agreement (individually, an “Assignor,” and collectively, the “Assignors”), the assignees parties thereto (individually, an “Assignee,” and collectively, the “Assignees”), and Alana Porrazzo, in her capacity as Trustee of the Southland Collateral Trust, as successor agent. The Assignees include the surety providers of the Company, Berkshire Hathaway Specialty Insurance Company (“Berkshire”), Markel Insurance Company (“Markel”) and Zurich American Insurance Company (“Zurich”), Western Surety Company, Euler Hermes North America Insurance Company, Federal Insurance Company, and Hartford Fire Insurance Company.

Current wording

On March 17, 2026, the Company entered into an assignment and assumption (the “Assignment and Assumption Agreement”) with Callodine Commercial Finance, LLC (the “Resigning Agent”), solely in its capacity as “Agent” under the Credit Agreement, lenders party to the Credit Agreement (individually, an “Assignor,” and collectively, the “Assignors”), the assignees parties thereto (individually, an “Assignee,” and collectively, the “Assignees”), and Alana Porrazzo, in her capacity as Trustee of the Southland Collateral Trust, as successor agent. The Assignees include the surety providers of the Company, Berkshire Hathaway Specialty Insurance Company (“Berkshire”), Markel Insurance Company (“Markel”), Zurich American Insurance Company (“Zurich”), Western Surety Company, Euler Hermes North America Insurance Company, Federal Insurance Company, and Hartford Fire Insurance Company.

Previous wording

Pursuant to the Assignment and Assumption Agreement, the Company paid the Resigning Agent, for the benefit of the Resigning Agent and the Assignors, approximately $15.4 million with respect to the loans of which approximately $14.4 million consisted of principal and approximately $1.0 million consisted of accrued interest and fees. Also, each Assignor sold and assigned to the Assignees, and each Assignee purchased and assumed from the Assignors, all of each such Assignor’s (i) right, title and interest to loans under the Credit Agreement, and (ii) rights and obligations, solely as a lender, under the Credit Agreement and related loan documents (including the Assignor’s right, title and interest in any collateral securing obligations under the Credit Agreement) (the “Assigned Interest”). The aggregate principal amount of loans comprising the Assigned Interest is approximately $110.0 million, and the Assignees agreed to pay an aggregate purchase price of approximately $110.0 million to the Resigning Agent for the ratable benefit of the Assignors.

Current wording

Pursuant to the Assignment and Assumption Agreement, the Company paid the Resigning Agent, for the benefit of the Resigning Agent and the Assignors, approximately $15.4 million with respect to the loans of which approximately $14.4 million consisted of principal and approximately $1.0 million consisted of accrued interest and fees. Also, each Assignor sold and assigned to the Assignees, and each Assignee purchased and assumed from the Assignors, all of each such Assignor’s (i) right, title and interest to loans under the Credit Agreement, and (ii) rights and obligations, solely as a lender, under the Credit Agreement and related loan documents (including the Assignor’s right, title and interest in any collateral securing obligations under the Credit Agreement) (the “Assigned Interest”). The aggregate principal amount of loans comprising the Assigned Interest is approximately $110.0 million, and the Assignees agreed to pay an aggregate purchase price of approximately $110.0 million to the Resigning Agent for the ratable benefit of the Assignors. In addition, concurrently with the assignment of the Assigned Interests, the Delayed Draw was terminated and of no further force or effect.

Previous wording

Additionally, pursuant to side letters executed after the Assignment and Assumption Agreement, the Assignees have agreed to waive quarterly principal and monthly interest payments for all periods until maturity. In addition, the Assignees have agreed to waive any and all defaults and potential defaults and covenant violations under the Credit Agreement, including any violations that existed as of March 31, 2026 or December 31, 2025. As consideration for the foregoing, the Company has agreed to dispose of idle equipment and other assets and pursue claim collections to use the proceeds from the aforementioned transactions to make payments towards the principal balance of the loan prior to maturity.

Current wording

Pursuant to side letters executed after the Assignment and Assumption Agreement, the Assignees have agreed to waive quarterly principal and monthly interest payments for all periods until maturity. In addition, the Assignees have agreed to waive any and all defaults and potential defaults and covenant violations under the Credit Agreement, including any violations that existed as of June 30, 2026 or December 31, 2025. As consideration for the foregoing, the Company has agreed to dispose of