DLHC 10-K & 10-Q changes, risk factors and insider trading

At present, we derive 98%99% of our revenue from agencies of the Federal government, primarily as a prime contractor but also as a subcontractor to other Federal prime contractors. In addition, substantially all accounts receivable, including unbilled accounts receivable, are from agencies of the U.S. Government as of September 30, 20242025 and 2023.2024. However, in 2025, the U.S. administration began efforts to reduce federal spending and the size of the federal workforce. In addition, the General Services Administration ("GSA") has instructed all federal agencies to review their contracts with consulting firms and technology product resellers contracting with the U.S. federal government. These and similar spending reductions and contract reviews have resulted in and are likely to continue to result in contract terminations, delays and cancellations of new procurements, and reductions in price and contract scope, which have had an adverse effect on our results, and could in the future have a material impact on our results of operations or financial condition. We expect that Federal government contracts will continue to be our primary source of revenue for the foreseeable future. We believe that the credit risk associated with our receivables is limited due to the creditworthiness of these customers. In general, if we were suspended or debarred from contracting with the federal government or if the government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our business, financial condition and operating results would be materially and adversely affected.

A significant portion of our revenue is concentrated in contracts with the VA and HHS. There can be no assurance as to the actual amount of services that we will ultimately provide to VA and HHS under our current contracts, or that we will be successful in recompete efforts. As described in greater detail above in "Item 1 - Business - Major Contracts", our contracts with the VA for the provision of services to its CMOP operations is currently subject to renewal solicitations which have been published as a set aside for a service-disabled veteran owned small business (“SDVOSB”) to perform as the prime contractor. DLH submitted revised proposals with its SDVOSB partner as prime contractor on certain of the opportunities. During thethis fiscalsolicitation year ended September 30, 2024,process, the VA has awarded one of thethree task orders to a SDVOSB that isSDVOSBs unaffiliated with DLH. While the acquisition process is being conducted, DLH continues to operate as the prime contractor for the sevenremaining CMOP locations that it currently manages. In addition, our performance under a contract with HHS in support of its Head Start program was completed as of October 31, 2025 and the customer transitioned services to a new small business prime contractor unaffiliated with us. In light of the decisions by these customers to award contracts to new prime contractors on a set-aside basis, our results of operations, cash flows and financial condition have been be adversely affected. Our results of operations, cash flows and financial condition wouldwill be materiallyfurther adversely affected if we were unable to continue our relationship with either of these customers, if we were to lose any more of our material current contracts, or if the amount of services we provide to them is materiallyfurther reduced.

As a result of the Small Business Administration ("SBA") set-aside program, the U.S. government may decide to restrict certain procurement activity only to bidders that qualify as veteran owned, minority-owned, small, or small disadvantaged businesses. In such cases, we would not be eligible to perform as a prime contractor on those programs and would be limited to work as a subcontractor on those programs. As previously reported,reported and described elsewhere herein in further detail, various agencies within the federal government have policies that support small business goals, including the adoption of the “Rule of Two” by the VA, which provides that the agency shall award contracts by restricting competition for the contract to service-disabled or other veteran owned businesses. To restrict competition pursuant to this rule, the contracting officer must reasonably expect that at least two of these businesses, which are capable of delivering the services, will submit offers and that the award can be made at a fair and reasonable price that offers the best value to the U.S. The effect of these set-aside provisions may limit our ability to compete for prime contractor positions on programs that we have targeted for growth and to maintain our prime contractor position as current contracts are subject to renewal.

Loss of our GSA schedule contracts or other contracting vehicles could impair our ability to win new business and perform under existing contracts.

We currently hold multiple GSAcontracting schedulevehicles, contracts,which includingour acustomers Federalutilize supplyto scheduleaward contract for professional and allied healthcare services and the logistics worldwide services contract.contracts. If we were to lose one or more of these contracts or other contracting vehicles, we could lose a significant revenue source and our operating results and financial condition could be materially and adversely affected.

U.S. Government programs are subject to annual congressional budget authorization and appropriation processes. For many programs, Congress appropriates funds on a fiscal year basis even though the program performance period may extend over several years. Consequently, programs are often partially funded initially and additional funds are committed only as Congress makes further appropriations. In recent years, we have seen frequent debates regarding the scope of funding of our customers, thereby leading to budgetary uncertainty for our Federal customers. Changes in federal government budgetary priorities or actions taken to address government budget deficits, the national debt, and/or prevailing economic conditions, including government closures or shutdowns, could result in projects being reduced in scope or price, or being terminated, and may directly affect our financial performance. Further, congressionalpolitical and economic factors, such as pending elections, the outcome of recent elections, changes in leadership among key executive or legislative decision makers, and revisions to governmental tax or other policies can affect the quantity and terms of new government contracts signed or the speed at which new contracts are signed, decrease future levels of spending and authorizations for programs that we bid, shift spending priorities to programs in areas for which we do not provide services and/or lead to changes in enforcement or how compliance with relevant rules or laws is assessed. Congressional seats may change during election years, and the balance of spending priorities may change along with them. Historically, our customers’ missions have received bipartisan support from the legislative and executive branches of the federal government. However, we anticipate that the President-Electcurrent administration and new Congress will seek to implement their budget priorities, which may impact our customers’ projects and budgets.

The funding of U.S. government programs is subject to an annual congressional budget authorization and appropriations process. In years when the U.S. government does not complete its appropriations before the beginning of the new fiscal year on October 1, government operations are typically funded pursuant to a "continuing resolution," which allows federal government agencies to operate at spending levels approved in the previous appropriations cycle but does not authorize new spending initiatives. Currently, theThe U.S. government ishad been operating under a continuing resolution (CR) which expiresexpired on DecemberSeptember 20,30, 2024. When the U.S. government operates under a CR, delays can occur in the procurement of the services and solutions that we provide and may result in new initiatives being canceled. When a CR expires, unless appropriations bills have been passed by Congress and signed by the President, or a new CR is passed and signed into law, the government must cease operations, or shutdown, except in certain emergency situations or when the law authorizes continued activity. We continuously review our operations in an attempt to identify programs potentially at risk from CRs so that we can consider appropriate contingency plans. A federal government shutdown could, however, result in our incurrence of substantial labor or other costs without reimbursement under customer contracts, the delay or cancellation of programs or the delay of contract payments, which could have a negative effect on our cash flows and adversely affect our future results of operations.2025.

Additionally, a number of projects require us to receive, maintain and transmit protected health information or other types of confidential personal information. That information may be regulated by the Health Insurance Portability and Accountability Act ("HIPAA"), the Health Information Technology for Economic and Clinical Health Act of 2009, Internal Revenue Service regulations and other laws. The loss, theft or improper disclosure of that information could subject us to sanctions under these laws, breach of contract claims, lawsuits from affected individuals, negative press articles and a loss of confidence from our government customers, all of which could adversely affect our existing business, future opportunities and financial condition.

One of our potential paths to growth is to selectively pursue acquisitions. Through acquisitions, we may be able to expand our base of customers, increase the range of solutions we offer to our customers and deepen our penetration of existing markets and customers. We may notbe unable to identify or complete attractive strategic transactions for many reasons, including competition from other acquirers, and executehigh valuations of potential targets. Even when we identify suitable acquisitions.candidates and reach agreement on terms, regulatory approvals, antitrust reviews, and other legal or contractual restrictions may delay or prevent completion. To the extent that management is involved in identifying acquisition opportunities or integrating new acquisitions into our business, our management may be diverted from operating our core business. Without acquisitions, we may not grow as rapidly otherwise, which could cause our actual results to differ materially and adversely from those anticipated.

With respect to our acquisition of DLH, LLC (formerly, Grove Resource Solutions, LLC) in December 2022, the benefits of the acquisition will depend, in part, on our ability to successfully combine our businesses and realize the anticipated benefits, including business opportunities and growth prospects from combining our businesses. We may not achieve these objectives within the anticipated time frame or may never realize these benefits and the value of our common stock may be harmed. The acquisition involves the integration of the acquired business with our existing business, which was a costly and time-consuming process. If we are ultimately unable to successfully or efficiently integrate our operations with those of the acquired business, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies, and other anticipated benefits resulting from the acquisition, and our business, results of operations, and financial condition could be materially adversely affected.

Following our acquisition of DLH, LLC (formerly, Grove Resource Solutions, LLC) in December 2022, we amended and restated our credit agreement with First National Bank of Pennsylvania and certain other lenders and incurred additional indebtedness. We amended our credit agreement (as amended, the “Credit Agreement”) in November 2024 to modify the financial covenants and incurredadjust additionalthe indebtedness.borrowing capacity of the revolving credit facility. The Credit Agreement requires compliance with a number of financial covenants and contains restrictions on our ability to engage in certain transactions, including limitations on: granting liens; incurring other indebtedness; disposing assets; making investments in other entities; and completing other mergers and consolidations. Also, the Credit Agreement requires us to comply with certain financial covenants including a minimum fixed charge coverage ratio and a maximum total leverage ratio. In addition, the Credit Agreement also requires prepayments of a percentage of excess cash flow. Accordingly, a portion of our cash flow from operations was dedicated to the repayment of our indebtedness and we expect future cash flow to be used to reduce our indebtedness. The Credit Agreement provides for customary events of default, including, among other things, a payment default, covenant default or defaults on other indebtedness or judgments in excess of a stipulated amount, change of control events, suspension or disbarment from contracting with the federal government and the material inaccuracy of our representations and warranties. If we are unable to make the scheduled principal and interest payments on the Credit Agreement or maintain compliance with other debt covenants, we may be in default under the Credit Agreement, which if not waived, could cause our debt to become immediately due and payable and enable the lenders to enforce their rights under the Credit Agreement. Such an event would likely have a material adverse effect on our business, financial condition and results of operations.

In addition, personsa person associated with Wynnefield Capital, Inc. currently serveserves on our Board of Directors. As a result of this share ownership and relationships on our Board of Directors, our largest stockholder will be able to influence all affairs and actions of our company, including matters requiring stockholder approval such as the election of directors and approval of significant corporate transactions. The interests of our principal stockholders may differ from the interests of the other stockholders.

Our success to date has resulted in part from the significant contributions of our executive officers.officers, who have been instrumental in shaping the strategic direction of the Company. Our executive officers are expected to continue to make important contributions to our success. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, potentially disrupting our business. As of September 30, 2024,2025, certain of our officers are under employment contracts. However, we do not maintain "key personnel" life insurance on any of our executive officers. Loss for any reason of the services of our key personnel could materially affect our operations.

Changes in tax rates or exposure to additional tax liabilities or assessments could affect our profitability, and audits by tax authorities could lead to additional tax payments. Determining our tax provisions requires significant judgment, and many transactions and calculations involve the application of tax laws whose interpretation is uncertain. The accounting treatment of these tax law changes is complex, and some of the changes may affect both current and future periods. Consistent with guidanceSEC from the SEC,guidance, our consolidated financial statements reflect our estimates of the tax effects of the current tax laws and regulations.

We face various risks related to health epidemics, pandemics, and similar outbreak. The COVID-19occurrence of a pandemic and the mitigation efforts to control its spread createdwould be expected to create significant volatility, uncertainty and economic disruption and adversely impactedimpact the U.S. and global economies. The extent to which future health epidemics or pandemics impacts our business, operations and financial results will depend on numerous factors that we may not be able to accurately predict or control, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have may be taken in response to such events, including our ability to fully perform on our contracts as a result of government actions; the impact on economic activity and actions taken in response; the effect on our customers and customer demand for our services and solutions; our ability to sell and provide our services and solutions; and any closures of our and our customers’ offices and facilities. Furthermore, the significant increase in remote working of our employees may exacerbate certain risks to our business, including an increased demand for information technology resources and the increased risk of malicious technology-related events, such as cyberattacks and phishing attacks. Any of these events could materially adversely affect our business, financial condition, results of operations and the market price of our common stock.

We derive 98%99% of our revenue from agencies of the Federal government, providing services to several agencies including the HHS, VA, DoD, and DHS.DoD. The following table summarizes the revenues by customer for the years ended September 30, 20242025 and 2023,2024, respectively (in thousands and percent):

Our mission is to expand our position as a trusted provider of technology-enabled healthcare and public health services, medical logistics, and readiness enhancement services to active duty personnel, veterans, and civilian populations and communities. Through our acquisition program, we have built a platform of technology-powered solutions to enable us to provide an array of innovative, high-value solutions in information technology, public health and digital transformation. We are focused on increasing organic growth across our addressable market and delivering robust cash flow. Our primary focus within the defense agency markets includes cyber security, militarydigital servicetransformation, members'Artificial Intelligence/Machine Learning (AI/ML) and veterans'data requirementsanalytics, forC5ISR telehealth(Command, services,Control, Communications, Computers, Cyber, Intelligence, Surveillance & Reconnaissance), cloud enablement and migration, telehealth, behavioral healthcare,health, medication therapy management, process management,and clinical systems support,support for military service members and healthcareveterans delivery. Our primary focus withinWithin the civilian agency marketsmarket, includeswe digitalfocus transformation, IT modernization,on healthcare and social programsprogram deliverydelivery, IT modernization, systems engineering and readiness.integration, These include compliance monitoring on large scale programs, technology-enableddata-driven program management, consulting, and digital communicationstechnology solutions ensuring that education,improve health,outcomes and social standards are being achieved withinfor underserved and at-risk populations. We believe these business development priorities will position the Company to expand within topkey national priority programs and fundedmission-critical areas.areas of health and national security.

The Company believes that its past performance in this market and track record of success provide a competitive advantage. However, the effect of set-aside provisions may limit our ability to compete for prime contractor positions on programs that we recompete or that we have targeted for growth. In these cases, the Company may elect to join a team with an eligible contractor as prime for specific pursuits that align with our core markets and corporate growth strategy.

For the year ended September 30, 20242025 revenue was $395.9$344.5 million, ana increasedecrease of $20.1$51.4 million or 5.3% over the prior year period. The increasedecrease in revenue is principallywas due primarily to the Decemberconversion 2022of acquisition.certain contracts in our HHS, VA and DOD portfolios to small business contractors. The revenue decrease from small business conversion was partially offset by contributions from new contract awards.

Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. For the year ended September 30, 2024,2025, the contract costs increaseddecreased as compared to the prior fiscal year by $21.0$39.1 million to approximately $317.0 millionmillion, primarily due to the increasedecrease in revenue volume.volume, Non-labormost costs,notably whichnon-labor consist primarily of subcontract and other direct costs and inherently carry a lower margin, increased as a percentage of revenue in fiscal 2024 as compared to the prior fiscal year.costs.

General and administrative costs are for employees and third parties not directly providing services to our customers, including but not limited to executive management, bid and proposal, accounting, and human resources. These costs decreased as compared to the prior fiscal year by $0.8$4.3 millionmillion, primarily due to approximatelya $37.0reduction millionin assupport costs proportionally with the companychange achievedin operatingrevenue leverage following the December 2022 acquisition.volume.

For the year ended September 30, 2024,2025, depreciation and amortization costs were $0.6$0.7 million and $16.5 million, respectively, as compared to $0.8$0.6 million and $14.8$16.5 million for the year ended September 30, 2023,2024, respectively, an aggregate increase of $1.5 million which is primary due to the December 2022 acquisition.respectively.

Interest expense includes items such as interest expense and amortization of deferred financing costs on debt obligations. ForInterest expense decreased $2.1 million for the year ended September 30, 2024, interest expense was $17.2 million2025 compared to interest expense of $16.3 million in the prior year,fiscal an increase of approximately $0.9 million over the prior year period.year. The increasedecrease in interest expense was primarily due to the increaseprepayment of debt and a decrease in debt associated with the Decemberinterest 2022 acquisition.rate.

Provision for Incomeincome taxes for the fiscal year ended September 30, 20242025 was a tax expense of $0.4 million, an increase ofincreased approximately $1.0$43.0 millionthousand from the prior fiscal year. The increase was primarily due to the impairment of real estate assets in fiscal 2023 that did not impact fiscal 2024. The effective tax rate was a21.3% positivefor the fiscal year ending September 30, 2025 and 4.5% for the fiscal year ending September 30, 20242024. andThe atax negativeprovision 72.2% forfrom the fiscalprior year endingperiod Septemberwas 30,positively 2023.impacted by the exercise of non-qualifying stock options.

We have prepared these additionalThis non-GAAP measures to eliminate the impactmeasure of items that we do not consider indicative of ongoing operatingour performance due to their inherently unusual or extraordinary nature. These non-GAAP measures of performance areis used by management to conduct and evaluate its business during its regular review of operating results for the periods presented. Management and the Company'sour Board utilize thesethis non-GAAP measuresmeasure to make decisions about the use of the Company'sour resources, analyze performance between periods, develop internal projections and measure managementmanagement's performance. We believe that thesethis non-GAAP measuresmeasure areis useful to investors in evaluating the Company'sour ongoing operating and financial results and understanding how such results compare with the Company'sour historical performance. By providing this non-GAAP measure as a supplement to GAAP information, we believe this enhances investors understanding of our business and results of operations. EBITDA is not a recognized measurement under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance investors should (i) evaluate adjustments in our reconciliation to the nearest GAAP financial measures and (ii) use non-GAAP measures in addition to, and not as an alternative to, measures of our operating results as defined under GAAP.

Cash iswas approximately $0.3$0.1 million and $0.2$0.3 million for the periodyears ended September 30, 20242025 and 20232024, respectively.

Credit facility availability was approximately $32.5$23.6 million and $32.0$32.5 million foras the period endedof September 30, 20242025 and 2023,2024, respectively.

Cash flowsprovided fromby operations totaled approximately $27.4$23.2 million and $31.0$27.4 million for the years ended September 30, 20242025 and 2023,2024, respectively. The decrease in cash fromprovided operationsby wasoperating principallyactivities is primarily due to a decrease in currentrevenue liabilities,volume specificallyas leasecompared liabilities.to the prior year.

WeCash used $0.8 million and $181.2 million of cash in investing activities duringtotaled fiscal$0.2 million and $0.8 million for the years 2024ended September 30, 2025 and 2023,2024, respectively. The cash utilized was predominantly duefor capital expenditures and the December 2022 acquisition in fiscal years 20242025 and 2023,2024, respectively.

Cash used in financing activities during the fiscal yearyears ended September 30, 2025 and September 30, 2024 waswere approximately $26.4$23.2 million and cash provided by financing activities during the fiscal year ended September 30, 2023 was $150.2$26.4 million, respectively. The cash used in financialfinancing activities during the fiscal year ended September 30, 2024, was primarily due to the early repaymentprepayment of principal on our secured term loan. The activity in the fiscal year ended September 30, 2023 was primarily due to finance the December 2022 acquisition.debt.

We advance scientific knowledge and understanding through our extensive research portfolio and domain expertise. We primarily provide large-scale data analytics, testing and evaluation, clinical trials research services, and epidemiology studies to support multiple operating divisions within HHS, including NIH and the CenterCenters for Disease Control and Prevention ("CDC"), as well as the Military Health System.

SystemSystems Engineering and Integration

•CMOP pharmacy and logistic services represent approximately $19.7$6.3 million and $28.7$27.0 million of revenues for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $46.6$52.9 million and $62.8$89.8 million of revenues for the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively.

As previously reported, the VA has been soliciting proposals for new contracts covering this work with a requirement for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor. At the start of the secondthird quarter, DLH performed services at threetwo CMOP locations.locations, Duringboth theof quarter, one sitewhich transitioned to anew SDVOSBcontractors prime contractor atduring the end of February 2026. Regarding the remaining two locations, one transitioned at the end of April and the other is expected to transition at the end of May 2026.quarter.

At MarchJune 31,30, 2026, our backlog was approximately $442.4$408.5 million of which $75.0$66.7 million was funded backlog. At September 30, 2025, our backlog was approximately $514.3 million, of which $114.1 million was funded backlog.

As we continue to align the Company’s capabilities with well-funded budget priorities and the current budgetary environment, we believe we are well positioned to win new business in our large addressable market. We are focused on increasing organic growth across our addressable market and delivering robust cash flow. We believe these priorities position the Company to expand within key national programs and mission-critical areas of health and national security. However, additional factors that could affect federal government spending in our addressable market include changes in set-asides for small businesses, changes in budgetary priorities associated with the newcurrent administration, and the effect of initiatives suchaimed asat theimproving Departmentgovernmental of Government Efficiency ("DOGE"),efficiency, on limiting or reducing federal government spending in general. Further, the changing priorities of the new administration may have an adverse impact on our results and, as such new priorities are implemented, it may be difficult for us to accurately predict the effect they will have on our results.

The following table summarizes results of operations for the three months ended MarchJune 31,30, 2026 and 2025 (in thousands except for per share amounts, and percentage of revenue):

Revenue decreased $29.9$39.1 million for the three months ended MarchJune 31,30, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors across our customer base.

Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. Contract costs decreased $24.1$30.8 million for the three months ended MarchJune 31,30, 2026 over 2025; the decrease was primarily due to the decrease in revenue volume.

General and administrative costs are for those employees not directly providing services to our customers, to include but not limited to executive management, business development, accounting, and human resources. These costs decreased $0.7$0.3 million for the three months ended MarchJune 31,30, 2026 as compared to 2025. As a percentage of revenue, general and administrative costs increased to 12.7%16.6% from 9.2%, primarily due to the decrease in revenue volume. During the quarter, we made additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.

For the three months ended MarchJune 31,30, 2026, depreciation and amortization expense were approximately $0.2 million and $4.1$3.8 million, respectively, as compared to approximately $0.2 million and $4.1 million for the three months ended MarchJune 31,30, 2025, respectively.

Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. Interest expense decreased $0.7$0.5 million for the three months ended MarchJune 31,30, 2026 over 2025, primarily due to the prepayment of debt and a decrease in the floating interest rate.

The following table summarizes results of operations for the sixnine months ended MarchJune 31,30, 2026 and 2025 (in thousands except for per share amounts, and percentage of revenue):

Revenue decreased $51.8$91.0 million for the sixnine months ended MarchJune 31,30, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors.

Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. Contract costs decreased $41.5$71.8 million for the sixnine months ended MarchJune 31,30, 2026 andover 2025. The decrease was primarily due to the decrease in revenue volume.

General and administrative costs are for those employees not directly providing services to our customers, to include but not limited to executive management, business development, accounting, and human resources. These costs decreased $1.0$1.8 million for the sixnine months ended MarchJune 31,30, 2026 over 2025. As a percentage of revenue, general and administrative costs increased to 11.9%12.8% from 9.1%, with the increase being primarily due to the change in revenue volume. During the quarter,quarter ended June 30, 2026, we made additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.

For the sixnine months ended MarchJune 31,30, 2026, depreciation and amortization expense were approximately $0.4$0.6 million and $8.2$12.0 million, respectively, as compared to approximately $0.3$0.5 million and $8.2$12.3 million for the sixnine months ended MarchJune 31,30, 2025, respectively.

Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. Interest expense decreased $1.5$1.9 million for sixnine months ended MarchJune 31,30, 2026 over 2025, primarily due to the prepayment of debt and a decrease in the floating interest rate.

On a non-GAAP basis, EBITDA for the sixnine months ended MarchJune 31,30, 2026 and 2025 was approximately $10.0$10.1 million and $19.3$27.4 million, and Adjusted EBITDA for such periods was $11.9$15.2 million and $19.3$27.4 million, respectively. On a non-GAAP basis, Adjusted Income from Operations for the sixnine months ended MarchJune 31,30, 2026 and 2025 was approximately $3.3$2.6 million and $10.8$14.5 million, respectively. The year over year decrease in the foregoing measures was primarily due toreflects the decrease in revenue volume driven by conversion of certain VAcontracts andin HHSour contractscontract portfolio to small business contractors.contractors across our customer base.

“Adjusted Income from Operations” represents income from operations before the costs associated with scaling indirect expenses within contract and general and administrative costs to revenue volume, referred to below as “Cost scaling initiatives”.

“Adjusted EBITDA” represents net income before income taxes, interest, depreciation and amortizationamortization, and the costs associated with scaling general and administrative costs to revenue volume.

Below is a reconciliation of Adjusted Income from Operations, EBITDA, and Adjusted EBITDA reported for the three months ended MarchJune 31,30, 2026 and 2025 to its most directly comparable financial measure calculated and presented in accordance with GAAP as follows (in thousands):

(1) Cost scaling initiatives consist ofrepresent expenses incurred by the Company inhas scalingincurred as it scales its businessoperations to align with its current contract volumevolume, resultingdriven fromby the previously disclosed conversiontransition of programs for whichfrom the CompanyCompany's previously servedrole as prime contractor to small business contractors. These costs are reported within the contract costs and general and administrative line items.

Cash was approximately $0.1$0.2 million and $0.1 million as of MarchJune 31,30, 2026 and September 30, 2025, respectively.

Available borrowings under our revolving credit facility waswere approximately $9.7$5.0 million and $23.6 million for the periods ended MarchJune 31,30, 2026 and September 30, 2025, respectively. The decrease is primarily due to a lower outstanding receivables balance at MarchJune 31,30, 2026.

Cash flows provided by (used in) operating activities totaled approximately $(1.0)$3.2 million and $3.0$12.5 million for the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease in cash provided by operating activities is primarily due to a decrease in revenue volume as compared to the prior year.

Cash used in investing activities totaled $39.0 thousand and $1.0$213.1 thousand for the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively. The cash utilized was predominantly due to capital expenditures in the sixnine months ended MarchJune 31,30, 2026 and 2025, respectively.

Cash provided by (used in) financing activities during the sixnine months ended MarchJune 31,30, 2026 and 2025 were approximately $1.0$3.1 million and $(3.1)$12.5 million, respectively. The cash providedused byin financing activities was primarily drivendue byto netprepayment borrowings on the revolving credit facility, partially offset byof term debt prepayment.debt.

As of MarchJune 31,30, 2026, our immediate sources of liquidity include cash, accounts receivable, and access to our secured revolving line of credit facility. This credit facility provides us with access of up to $50.0 million, subject to certain conditions including eligible accounts receivable. As of MarchJune 31,30, 2026, we had unused borrowing capacity of $9.7$5.0 million, which is net of outstanding letters of credit. The Company's present operating liabilities are largely predictable and consist of vendor and payroll related obligations. We believe that our current investment and financing obligations are adequately covered by cash generated from profitable operations and that planned operating cash flow should be sufficient to support our operations for twelve months from the date of issuance of these consolidated financial statements.

A summary of our credit facilities for the period ended MarchJune 31,30, 2026 is as follows (in millions):

1Secured Overnight Financing Rate ("SOFR") as of MarchJune 31,30, 2026 was 3.8%.3.7%.

On January 31, 2023, we executed a floating-to-fixed interest rate swap with FNB which had a notional amount of $74.0 million, and a fixed interest rate of 4.10%. The swap matured on January 31, 2026. As of MarchJune 31,30, 2026, no interest rate swaps were outstanding and all debt is subject to floating interest rates.

(b) As amended, the secured revolving line of credit has a ceiling of up to $50.0 million and a maturity date of December 8, 2027. The Company has accessed funds from the revolving credit facility during the quarter and has a balance outstanding at MarchJune 31,30, 2026 of $10.7$13.7 million.

Contractual obligations as of MarchJune 31,30, 2026 are as follows (in thousands):

The qualitative assessment of goodwill at MarchJune 31,30, 2026 determined a triggering event occurred requiring that we conduct additional quantitative analyses. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization. Management's assessment was that the market capitalization at the end of the 2ndthird quarter was not indicative of the Company's fair value.

For the market-based methods, the Company used the average market capitalization over the current quarter with the inclusion of a control premium as one estimation of fair value. The other market-based method used publicly available market multiples of relevant publicly traded companies applied to our expected EBITDA and revenue for fiscal 2026 to estimate the Company's fair value. For the income-based method, the Company calculated its expected future cash flows. Those cash flows were then discounted to present value using a weighted average cost of capital. The weighted average of the three assessments indicated that the Company's fair value was greater than its book equity value.