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

We are engaged in highly competitive businesses in which most customer contracts are awarded through bidding processes based on price and the acceptance of certain risks, along with other factors. We compete with other regional, national and international general and specialty contractors, regional, national and international, as well as small local contractors. The strong competition in our markets requires maintaining skilled personnel and investing in technology and also puts pressure on profit margins. Some of our competitors may have greater resources whichthan we do. An increase in competition from such competitors may result in a decrease in new awards, a decrease in profit margins, or both. We do not obtain contracts from all of our bids and our inability to win bids at acceptable profit margins could adversely affect our business.

Our Backlog generally consists of projects for which we have an executed contract or commitment with a customer and reflects our expected revenue from the contract or commitment, which is often subject to revision over time. WeThere cannotis no guarantee that the revenue projected in our Backlog will be realized or profitable or will not be subject to delay or suspension. Project cancellations, scope adjustments or deferrals or foreign currency fluctuations may occur with respect to contracts reflected in our Backlog, which could reduce the dollar amount of our Backlog and the revenue and profits that we actually earn or cause the rate at which we perform on our Backlog to decrease. In addition, projects may remain in our Backlog for an extended period of time. During periods of economic slowdown, the risk of projects being suspended, delayed or canceled generally increases. Finally, poor project or contract performanceexecution could also impact our Backlog and profits. Such developments could have a material adverse effect on our business and our profits.

A few customers, including the federal,federal government, certain state and local governments and governmental agencies, comprise a significant portion of our revenue. Our customers may unilaterally reduce, fail to renew, terminate their contracts with us, or revoke our ability to submit bids on new work at any time. Some of our contracts may have “termination for convenience” provisions in them. In addition, a significant reduction in government spending or a change in budgetary priorities could reduce demand for our services, cancelor result in cancellation or delay projects. The loss of business from a significant customer could have a material adverse effect on our business, financial position and results of operations.

Government contracts are subject to specific procurement regulations, contract provisions and a variety of socioeconomic requirements relating to their formation, administration, performance and accountingaccounting, and often include express or implied certifications of compliance. Claims for civil or criminal fraud may be brought for violations of regulations, requirements or statutes. We may also be subject to qui tam litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, which could include claims for up to treble damages. Further, if we fail to comply with any of the regulations, requirements or statutes or if we have a substantial number of accumulated Occupational Safety and Health Administration, Mine Safety and Health Administration or other workplace safety violations, our existing government contracts could be terminated and we could be suspended from government contracting or subcontracting, including federally funded projects at the state level. Should one or more of these events occur, it could have a material adverse effect on our financial position, results of operations, cash flows and liquidity.

The timing of new contract starts, including delays, cancellations and scopetermination alternations,of existing contracts may result in unpredictable fluctuations in our business.

Substantial portions of our revenue are derived from project-based work that is awarded through a competitive bid process. It is generally very difficult to predict the timing and geographic distribution of the projects that we will be awarded. The selection of, timing of or failure to obtain projects, delays in award of projects, the re-bidding or termination of projects due to budget overruns, cancellations of projects or delays in completion of contracts could result in the under-utilization of our assets and reduce our cash flows. Even if we are awarded contracts, we face additional risks that could affect whether, or when, work will begin. For example, some of our contracts are subject to financing, permitting and other contingencies that may delay or result in termination of projects. We may have difficulty in matching workforce size and equipment location with contract needs. In some cases, we may be required to bear the cost of a ready workforce and equipment that is larger than necessary, resulting in unpredictability in our cash flow, expenses and profitability. If any expected contract award,award or theits related work release is delayed or not received, we could incur substantial costs without guaranteed receipt of any corresponding revenue. Moreover, construction projects for which our services are contracted may require significant expenditure by us prior to receiving payments from the customer. Finally, the winding down or completion of work on significant projects could reduce our revenue and earnings if these projects have not been replaced.

The demand for our services is dependent upon the existence of projects with construction needs. Our customers’ interest in approving new projects, budgets for capital expenditures and need for our services may be adversely affected by, among other things, poor economic conditions, including an economic recession, low or volatile oil prices, political uncertainties and currency devaluations. Customers may be selective in how they allocate and expend their capital, which could result in a reduction ofin the number of projects we may bid on and win. Many of the industries that we serve are vulnerable to general downturns, which in turn could materially and adversely affect the demand for our services.

A substantial portion of our revenue and profit is generated from construction projects, the awarding of which we do not directly control. The engineering and construction industry has historically experienced cyclical fluctuations in financial results due to economic recessions, downturns in business cycles of our customers, material shortages, price increases by subcontractors, interest rate fluctuations and other economic factors beyond our control. When the general level of economic activity deteriorates, our customers have at times in the past and may in the future delay or cancel upgrades, expansions and/or maintenance and repairs to their systems. Many factors, including the financial condition of the industry,industries we serve and potential disruptions to such industries caused by the implementation of artificial intelligence, could adversely affect our customers and their willingness to fund capital expenditures in the future. Economic, regulatory and market conditions affecting our specific end markets may adversely impact the demand for our services, resulting in the delay, reduction or cancellation of certain projects and these conditions may continue to adversely affect us in the future. We are also dependent on the amount of work our customers outsource. In a slower economy, our customers may decide to outsource less infrastructure services, reducing demand for our services. In addition, consolidation, competition or capital constraints in the industries we serve may result in reduced spending by our customers.

Our ability to generate and access cash is important for the funding of our operations, investing in ventures, the servicing of our indebtedness and making acquisitions. To the extent that existing cash balances and operating cash flow, together with borrowing capacity under our credit facilities, are insufficient to make investments or acquisitions or provide needed working capital, we may require additional financing from other sources. Our ability to obtain such additional financing will depend upon prevailing capital market conditions, including those arising due to events occurring in our industry, as well as conditions in our business and our operating results; and those factors may affect our efforts to negotiate terms that are acceptable to us. Furthermore, if global economic, industry, political or other market conditions adversely affect the financial institutions that provide credit to us, it is possible that our ability to establish or draw upon our credit facilities may be impacted. In addition, a downgrade in our credit rating could increase the cost of our borrowings or their refinancing, limit access to sources of financing or lead to other adverse consequences. If adequate funds are not available, or are not available on acceptable terms, we may be unable to make future investments, take advantage of acquisitions or other opportunities or respond to competitive challenges. In addition, adverse credit and financial market conditions also adversely affect our customers’ and our partners’ borrowing capacity, which could result in contract cancellations or suspensions, project award and execution delays, payment delays or defaults by our customers. These disruptions could materially impact our Backlog and profits. If we extend a significant portion of credit to our customers or projects in a specific geographic region or industry, we may experience higher levels of collection risk or non-payment if those customers are impacted by factors specific to their geographic industry or region.

These and other risks may result in our failure to achieve contractual cost or schedule commitments, safety performance, overall customer satisfaction or other performance criteria. As a result, we may receive lower fees or lose our ability to earn incentive fees. In other cases, our fee will not change but we will have to continue to perform work without additional fees until the performance criteria is achieved. We may also be required to pay liquidated damages if we fail to complete a project on schedule. In addition, if we, or subcontractors, suppliers or other third parties performing work or services on our behalf or supplying equipment or material on our behalf, fail to meet guaranteed performance or quality standards, we may be held responsible under the guarantee or warranty provisions of our contractcontracts for cost impact to the customer, generally in the form of contractually agreed-upon liquidated damages or an obligation to re-perform work. To the extent these events occur, the total cost to the applicable project (including any liquidated damages we become liable to pay) could be material and could, in some circumstances, equal or exceed the full value of the contract.contract for such project. In such events, our financial condition or results of operations could be materially and negatively impacted.

If we are unable to accurately estimate contract risks, revenue or costs, economic factors such as inflation,inflation and tariffs, the timing of new awards or the pace of project execution, we may incur a loss or achieve lower than anticipated profit.

Accounting for contract-related revenue and costs requires management to make significant estimates and assumptions that may change substantially throughout the project lifecycle, which could result in a material impact to our consolidated financial statements. In addition, cost overruns, including unanticipated cost increases on fixed price contracts could result in lower profits or losses. Economic factors, including inflation,inflation and tariffs, could also subject us to higher costs, which we may not be able to fully recover in future projects that we are bidding, and could also decrease profitprofits on our existing contracts, in particular with respect to fixed price contracts. Changes in laws, policies or regulations, including tariffs and taxes, could impact the prices for materials or equipment. Further, our results of operations have historically fluctuated, and may continue to fluctuate, quarterly and annually depending on when new awards occur and the commencement and progress of work on projects already awarded.

We use certain commodity products that are subject to significant price fluctuations. We are exposed to various commodity price risks, including, but not limited to, diesel fuel, natural gas, propane, steel, cement and liquid asphalt arising from transactions that are entered into in the normal course of business. We use petroleum basedpetroleum-based products, such as fuels, lubricants and liquid asphalt, to power or lubricate our equipment, and as a significant ingredient in the asphaltic concrete we manufacture for sale to third parties and use in our asphalt paving construction projects. We also use steel and other commodities in our construction projects that can be subject to significant price fluctuations.fluctuations as a result of economic factors such as inflation and tariffs. Fluctuations in commodity prices, whether resulting from fluctuations in market supply or demand, geopolitical conditions (including supply chain disruptions, sanctions on Russian exports as a result of Russia’s invasion of Ukraine, armed conflict between Israel and Iran or between the United States and Iran or Venezuela, and shipping lane disruptions following maritime attacks in the Gulf of Aden and the Red Sea), an increase in trade protection measures such as tariffs, or the disruption, modification, or cancellation of multilateral trade agreements, may impact the our prices and adversely affect our results of operations, cash flows, and reputation with our customers. In order to manage or reduce commodity price risk, we monitor the costs of these commodities at the time of bid and price them into our contracts accordingly. Additionally, some of our contracts may include commodity price escalation clauses that partially protect us from increasing prices. We may enter into supply agreements or pre-purchase commodities to secure pricing and may use financial contracts to further manage price risk. Significant price fluctuations could have a material adverse effect on financial position, results of operations, cash flows and liquidityliquidity.

Climate change related events, such as increased frequency and severity of storms, floods, wildfires, droughts, hurricanes, freezing conditions and other natural disasters, may have ashort-term, intermediate-term and long-term impactimpacts on our business, financial condition and results of operation. While we seek to mitigate our business risks associated with climate change, we recognize that there are inherent climate related risks regardless of where we conduct our businesses. For example, a catastrophic natural disaster could negatively impact any of our office locations and the locations of our customers or projects, has the potential to disrupt our and our customers’ businesses and may cause us to experience work stoppages, supply chain disruptions, project delays, financial losses and additional costs to resume operations, including increased insurance costs or loss of coverage, legal liability and reputational losses. Further, the risks caused by climate change span across the full spectrum of the industriesmarkets we serve. The direct physical risks that climate change poses through chronic environmental changes, such as rising sea levels and temperatures, and acute events, such as hurricanes, droughts and wildfires, is common to each of these industries.markets. Our customers could face increased costs to maintain their assets, which could result in reduced profitability and fewer resources for strategic investment. These types of physical risks could in turn lead to transitional risks (i.e., the degree to which society responds to the threat of climate change). For example, growing concerns about climate change may result in legislation, international protocols or treaties, regulationregulations or other restrictions on greenhouse gas emissions or thatother otherwiseclimate-related seek to address climate changerisks that could affect our customers, including those who (a) are involved in the exploration, production or refining of fossil fuels, (b) emit greenhouse gases through the combustion of fossil fuels or (c) emit greenhouse gases through the mining, manufacture, utilization or production of materials or goods. Such legislation or restrictions could increase the costs of projects for us and our customers or, in some cases, prevent a project from going forward, thereby potentially reducing the need for our services, which would in turn have a material adverse impact on us. We cannot predict when or whether any of these legislative proposals may become law or what effect willthey bemay have on us andor our customers.

We often work on complex projects, frequently in geographically remote or high-risk locations that are subject to political, social or economic risks or civil unrest. In those locations where we have employees or operations, we may expend significant efforts and incur substantial security costs to maintain safety. In addition, our project sites can place our employees and others near large equipment, dangerous processes or substances or highly regulated materials and in challenging environments. Safety is a primary focus of our business and is critical to our reputation and performance. Many of our customers require that we meet certain safety criteria to be eligible to bid on contracts, and some of our contract fees or profits are subject to satisfying safety criteria. Unsafe work conditions also have the potential of increasing employee turnover, increasing project costs and raising our operating costs. If we fail to implement appropriate safety procedures and/or if our procedures fail, our employees or others may suffer injuries or loss of life, the completion of a project could be delayed and we could experiencebe subject to investigations or litigation. Although we have a safety function to implement effective health, safety and environmental procedures throughout our company, the failure to comply with such procedures, customer contracts or applicable regulations could subject us to losses and liability. Despite these activitiesprocedures we cannot guarantee the safety of our personnel, nor can we guarantee our work, equipment or supplies will be free from damage.

Some of the work performed under our contracts is performed by third-party subcontractors. We also rely on third-party suppliers to provide certain equipment and materials used for projects. If we are unable to hire qualified subcontractors or find qualified suppliers, our ability to successfully or timely complete a project could be impaired. If the amount we are required to pay for subcontractors or equipment and supplies exceeds what we have estimated, we may suffer losses on these contracts. If a supplier or subcontractor fails to provide supplies, technology, equipment or services as required under a contract to us, our joint venture partner, our customer or any other party involved in the project, or provides supplies, technology, equipment or services that are not an acceptable quality, we may be required to source those supplies, technology, equipment or services on a delayed basis or at a higher price than anticipated, which could impact our profitability. In addition, faulty workmanship, equipment or materials could impact the project, resulting in claims against us for failure to meet required project specifications. These risks may be intensified during an economic downturn if these suppliers or subcontractors experience financial difficulties or find it difficult to obtain sufficient financing to fund their operations or access to bonding and are not able to provide the services or supplies necessary for our business. In addition, in instances where we rely on a limited number of suppliers or subcontractors, there may be no available replacement technology, equipment, materials or services that can be sourced on a timely basis or at the costs we had anticipated. A failure by a third-party subcontractor or supplier to comply with applicable laws, rules or regulations could negatively impact our business and reputation and could result in fines, penalties or suspension.

We are subject to laws and regulations enacted by national, regional and local governments. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consumingtime-consuming and costly. Those laws and regulations and their interpretation and application may also change from time to timetime, and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could result in fines, revocation of operating licenses or permits, injunctive relief or similar remedies, as well as give rise to termination or cancellation rights under our contracts or disqualify us from future bidding opportunities, which could be costly to us or limit our ability to operate.

The U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to officials or others for the purpose of obtaining or retaining business. While our policies mandate compliance with these anti-bribery laws, we operate in many parts of the world that have experienced corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We train our personnel concerning anti-bribery laws and issues, and we also inform our partners, subcontractors, suppliers, agents and others who work for us or on our behalf that they must comply with anti-bribery law requirements. We also have procedures and controls in place to monitor compliance. However, there is no assurance that our internal controls will always protect us from the possible reckless or criminal acts committed by our employees or agents. If we are found to be liable for anti-bribery law violations (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others including our partners, agents, subcontractors or suppliers), we could suffer from criminal or civil penalties or other sanctions, including contract cancellations or debarment, and damaged reputation, any of which could have a material adverse effect on our business. Litigation or investigations relating to alleged or suspected violations of anti-bribery laws, even if ultimately such litigation or investigations ultimately demonstrate that we did not violate anti-bribery laws, could be costly and could distract management.

We rely on computer, information and communication technology and other related systems, some of which are hosted by third party providers, for various business processes and activities, including project management, accounting, financial reporting and business development. These systems have been and may, in the future,may be subject to interruptions or damage by a variety of factors including, but not limited to, cyber-attacks and ransomware, natural disasters, power loss, telecommunications failures, acts of war, computer viruses, email phishing, corporate espionage, obsolescence and physical damage. Such interruptions can result in a loss of critical data, a delay in operations, damage to our reputation or an unintentional disclosure of customer confidential or personally identifiable information, any of which could have a material adverse impact on us and our operating results. Cybersecurity risks include potential attacks on both our information technology infrastructure and those of third parties (both on premises and in the cloud) attempting to gain unauthorized access to our confidential or other proprietary information, classified information or information relating to our employees, customers and other third parties. We dedicate considerable attention and resources to the safeguarding of our information technology systems. Nevertheless, due to the evolving nature, persistence, sophistication and volume of cyber-attacks, we may not be successful in defending our systems against all such attacks. Consequently, we have employed, and may need to continue to employ, significant resources to remediate the impact of, or further mitigate the risk of, such an attack. Any successful cyber-attack can result in the criminal, or otherwise illegitimate use of, confidential data, including our data or third-party data for which we have the responsibility for safekeeping. Additionally, such an attack could have a material adverse impact on our operations, reputation and financial results. In addition, various privacy and security laws and regulations requiring us to protect sensitive and confidential information from disclosure continue to evolve and pose increasingly complex compliance challenges. Compliance with evolving data privacy laws and regulations may cause us to incur additional costs, and any violation could result in damage to our reputation and/or subject us to fines, payment of damages, lawsuits and restrictions on our use of data, which could have a material adverse impact on our results of operations.

Our inability to recover on contract modifications against project owners or subcontractors for payment or performance could negatively affect our business.financial condition, results of operations and cash flows.

In certain circumstances, we assert affirmative claims to which we believe the Company is entitled against project owners, engineers, consultants, subcontractors or others involved in a project for additional costs exceeding the contract price or for amounts not included in the original contract price. These types of affirmative claims occur due to matters such as, but not limited to, delays or changes from the initial project scope, or differing site conditions, or incomplete or inaccurate plans and drawings, all of which may result in additional costs. Often, these affirmative claims can be the subject of lengthy arbitration or litigation proceedings, and it is difficult to accurately predict when and on what terms they will be fully resolved. The potential gross profit impact of recoveries for affirmative claims may be material in future periods when they, or a portion of them, become probable and estimable or are settled. When these types of events occur, we use working capital to cover cost overruns pending the resolution of the relevant affirmative claims and may incur additional costs when pursuing such potential recoveries. A failure to recover on these types of affirmative claims promptly and fully could have a negative impact on our financial position, results of operations, cash flows and liquidity. In addition, while customers and subcontractors may be obligated to indemnify us against certain liabilities, such third parties may refuse or be unable to pay us.

We use subcontractors and material suppliers for portions of certain work, and our customers pay us for those related services. If we pay our suppliers and subcontractors for materials purchased and work performed for customers who fail to pay us, or such customers delay paying us for the related work or materials, we could experience a material adverse effect on our business and financial performance. In addition, if customers fail to pay us for work we perform, our ability to timely pay our subcontractors could be impacted and we could experience a material adverse effect on our business and profitability.

ThePublic health crises, such as the COVID-19 pandemicpandemic, hashave adversely impacted, and could continuein tothe future adversely impact, our business, financial condition and results of operations.

ThePandemics, COVID-19epidemics pandemicor hadother createdpublic volatility,health uncertaintycrises andcan economicadversely disruptionimpact forour business or the Company,business of our customers, subcontractors and suppliers and the markets in which we do business. TheFor scopeexample, and impact of the COVID-19 pandemic continues to evolve, and new strains of the COVID-19 virus have emerged. Asas a result of the COVID-19 pandemic, we have experienced delays in certain bidding activities and contract awards and also in legal proceedings and settlement discussions where we have claims against project owners or customers. Consequently, our ability to resolve and recover on these types of claims has been and may continue to be delayed, which may adversely affect our liquidity and financial results. It remains difficult to assessWhile the fulladverse impacteffects that theof COVID-19 pandemic may have onlargely our business, including the impact of actions that may continue to be taken in response to the pandemic and the impacts that the pandemic will have on our employees, our operating segments and practices, our customers, subcontractors and suppliers and the regions that we serve, or on our financial condition and results of operations as a whole. The full impact depends on many factors that remain uncertain and subject to ongoing volatility, or that are not yet identifiable, and in many cases are out of our control. The COVID-19 pandemic and the volatile economic conditions stemming from the pandemic, as well as reactions to future pandemics or resurgences of COVID-19, could also aggravate or heighten the risks posed by other risk factors that we have identified herein, which in turn could materially and adversely affectsubsided, our business, financial condition and results of operations.operation Therecould be similarly impacted by any future public health crises. In addition, public health crises may beresult otherin adverse consequences to our business, financial condition and results of operations fromnot seen during the spreadCOVID-19 ofpandemic COVID-19and that are not presently known or that have not yet become apparent. As a result, we cannot provide any assurance that the COVID-19 pandemic would not have a further adverse impact on our business, financial condition and results of operations.

In preparing our consolidated financial statements in conformity with generally accepted accounting principles, many estimates and assumptions are used in determining the reported revenue, costs and expenses recognized during the periods presented and disclosures of contingent assets and liabilities known to exist as of the date of the financial statements. These estimates and assumptions must be made because certain information that is used in the preparation of our financial statements cannot be calculated with a high degree of precision from data available, is dependent on future events or is not capable of being readily calculated based on generally accepted accounting principles. Often times, these estimates and assumptions are particularly difficult to determine, and we must exercise significant judgment. Estimates and assumptions may be used in estimated contract values and estimated costs at completion, our assessments of the allowance for doubtful accounts, useful lives of property and equipment, fair value assumptions in analyzing goodwill and long-lived asset impairments, self-insured claims liabilities, accounting for revenue recognized over time and provisions for income taxes. Actual results could differ materially from the estimates and assumptions that we use.

Our level of exposure to these risks may vary with each project, depending on the location of the project and its stage of completion. To the extent that our international business is affected by unexpected and adverse foreign economic and political conditions and risks, we may experience project disruptions and losses. Net assets of foreign operations for the yearsyear ended December 31, 2025 are $107.1 million compared to our negative total net assets of $37.0 million. Net assets of foreign operations for the year ended December 31, 2024, and December 31, 2023, are approximately 62% and 47%, respectively, of our total net assets.

An active trading market for our securities may not be sustained. Additionally, as described further below, if our securities become delisted from NYSE American for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities not listed on a national exchange, the liquidity and price of our securities may be more limited than if we were listed on NYSE American or another national exchange. You may be unable to sell your securities unless a market can be established and sustained.

NYSE American may delist Southland’s securities from trading on its exchange, which could limit investors’ ability to make transactions in its securities and subject Southland to additional trading restrictions.

Currently, our Common Stock and Warrants are publicly traded on NYSE.NYSE American. We may be unable to maintain the listing of our securities in the future. In order to continue listing our securities on NYSE,NYSE American, we will be required to maintain certain financial, distribution and stock price levels.

If NYSE American delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, our securities may be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

The National Securities Markets Improvement Act of 1996 (the “NSMIA”), which is a federal statute that prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Common Stock and Warrants are listed on NYSE,NYSE American, they are covered securities. Although the states are preempted from regulating the sale of covered securities, the NSMIA does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if our securities were no longer listed on NYSE,NYSE American, they would not be covered securities and would be subject to regulation in each state in which they are offered.

We are a “controlled company” that could take advantage of exemptions to certain corporate governance requirements under NYSE American rules in the future.

We are a “controlled company” within the meaning of the NYSE American listing standards. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements of the NYSE,NYSE American, including that (i) the requirement that a majority of the board of directors consist of independent directors, (ii) the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and (iii) the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. Although we meet the definition of a “controlled company,” we have determined at this time not to take advantage of this designation and comply with all the corporate governance rules applicable to listed companies that are not controlled companies. We may, however, determine to take advantage of these exemptions in the future. If we did, you would not have the same protections afforded to stockholders of companies subject to all of the corporate governance requirements of the NYSE.NYSE American.

Southland is a diverse leader in specialty infrastructure construction with roots dating back to 1900. The end markets for which we provide services cover a broad spectrum of specialty services within infrastructure construction. We design and construct projects in the bridges, tunnels, communications, data centers, transportation and facilities, marine, steel structures, water and wastewater treatment, and water pipelines end markets.

Southland is based in Grapevine, Texas. It is the parent company of Johnson Bros. Corporation, American Bridge Company, Oscar Renda Contracting, Southland Contracting, MoleHeritage Constructors,Materials and HeritageMole Materials.Constructors. With the combined capabilities of these six primary subsidiaries, Southland has become a diversified industry leader with projects spanning North America in various end markets.

In December 2024, the Company agreed to issue an aggregate of 5,830,899 shares of common stock (the “Shares”), par value $0.0001 per share, in exchange for the full satisfaction and discharge of an aggregate of $20.0 million in outstanding amounts under certain promissory notes held by Frank Renda, Rudy Renda and Tim Winn (the “Transaction”) with a price per share of $3.43, calculated using the greater of (a) the volume-weighted average price per share of Common Stock, rounded to the nearest hundredth of a cent, on NYSE American for the thirty consecutive trading days immediately preceding and ending on December 27, 2024 and (b) the closing price of Common Stock on NYSE American on December 27, 2024. The $20.0 million conversion to shares of common stock was comprised of $13.2 million of secured notes and accrued interest thereupon along with $6.8 million of certain promissory notes and accrued interest thereupon. The Transaction was approved by the Company’s Audit Committee and Board of Directors.

For the year ended December 31, 2024,2025, M&P contributed $100.6$52.1 million to revenue and $83.1$42.8 million in gross loss. See the Transportation portion of the Segment Results section of this Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information. This compares to the $188.3$100.6 million to revenue and $86.6$83.1 million to gross loss for the year ended December 31, 2023.2024. As of December 31, 2024,2025, approximately 6.3%3.7% of Southland’s Backlog was in M&P, and Southland estimateswith most of the active scope of this work to bebeing substantially completedcomplete inand thethree nextprojects twelveextending months.into 2026.

Because of these limitations, non-GAAPNon-GAAP financial measures should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP financial measures on a supplemental basis. The reconciliation of net loss to non-GAAP financial measures below should be reviewed, and no single financial measure should be relied upon to evaluate our business. Below is a reconciliation of net loss to these non-GAAP financial measures.

Our Transportation segment primarily operates throughout North America and specializes in services that include the design and construction of bridges, roadways, marine, dredging, ship terminals and piers, and specialty structures and facilities. Our Transportation segment is responsible for the construction of bridges and structuresstructures, including many of the most recognizable bridges, convention centers, sports stadiums, marine facilities, and Ferris wheels in the world.

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 positionedwell-positioned to compete on new infrastructure projects in both the public and private sectors.

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,capacity as well asand knowledge of local markets and conditions.

During 2025 and continuing through the first half of 2025,2026, the U.S. government announced or imposed a variety of tariff actionsor intrade actions. In response to which many countries have announced or imposed retaliatory tariff or trade actions, including tariffs on U.S. exports. TheThese 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 bothin international trade,trade and supply chains andcontributing to volatility in the financial markets. ItSignificant isuncertainty unclearremains regarding the status of existing and newly announced tariffs, potential changes or pauses to whatsuch extent,tariffs, whenthe extent of tariffs, and forwhether howfurther longadditional announcedtariffs or other retaliatory trade actions willmay be inimposed, place.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 arecontinue evaluatingto evaluate the potential impacts of these proposedtariffs tariffs,and trade actions, including potential impacts to our customers,customers as well asand 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.

For the three months ended MarchJune 31,30, 2026, M&P contributed $11.0$11.7 million to revenue and $13.1$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 $18.1$21.7 million to revenue and $9.1$3.8 million toin gross loss for the three months ended MarchJune 31,30, 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 MarchJune 31,30, 2026, approximately 3.8%2.7% of Southland’s backlog was in M&P and Southland estimates most of this work to be substantially completed in 2026.

The following table sets forth summary financial information for the three months ended MarchJune 31,30, 2026 and 2025:

Cost of construction for the three months ended MarchJune 31,30, 2026, was $177.2$184.5 million, a decrease of $40.8$17.9 million, or 18.7%,8.8%, compared to the three months ended MarchJune 31,30, 2025. The decrease was attributable to a $49.7$18.7 million decrease in our Transportation segment primarily due to projects approaching completion, offset by ana $8.9$0.8 million increase in our Civil segment primarily due to new projects substantially started after MarchJune 31,30, 2025.

InterestSelling, expensegeneral, and administrative expenses for the three months ended MarchJune 31,30, 2026, waswere $8.7$16.7 million, aan decreaseincrease of $0.2$3.1 million, or 2.2%,23.1%, compared to the three months ended MarchJune 31,30, 2025. The decreaseincrease was primarily drivendue byto thea decrease$3.2 ofmillion totalincrease in bad debt expense, compared to the same period in 2025.

The Company is in a net deferred tax asset position for both U.S. federal and state income tax as of MarchJune 31,30, 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 MarchJune 31,30, 2026, the Company has recorded a valuation allowance of approximately $123.8$146.7 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 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.utilized.

IncomeThe effective tax benefitrate for the three months ended MarchJune 31,30, 2025,2026 hadwas an effective rate of 10.1%.1.8%. 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 adjustments against certain subsidiaries’ net deferred tax assets,assets federaland tax credits, thestate 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.taxes.

The following table sets forth segment information for the three months ended MarchJune 31,30, 2026 and 2025:

Revenue for the three months ended MarchJune 31,30, 2026, was $68.6$41.0 million, a decrease of $68.0$40.5 million, or 49.8%,49.7%, compared to the three months ended MarchJune 31,30, 2025. The decrease was primarily attributable to decreased revenues of $23.6$18.7 million from ana elevatedwater roadway and bridgedrainage project in the Southeast,South, $9.0$12.4 million from a water project in the Bahamas,Northeast $5.0and $12.3 million from a Bridgewater facility project in the Southeast and $4.7 million from a bridge repair project in the West, all of which decreasedSouthwest, due to themanagement’s projectscomprehensive approaching completion. The decrease was also primarily related to decreased revenuesreassessment of $13.0expected millionrecoverability fromof 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.claims.

Gross loss for the three months ended MarchJune 31,30, 2026, was $19.4$27.1 million, or (28.366.1)% of segment revenue, compared to gross lossprofit of $1.2$14.3 million, or (0.8)%17.5%, of segment revenue, for the three months ended MarchJune 31,30, 2025. The primary driverdrivers to the increasedecrease in gross lossprofit of $18.3$41.3 million wasfor the three months ended June 30, 2026 versus the same period in 2025 were primarily due to decreases in gross profit contributions of $13.0$12.5 million from a canal wideningwater project in the SouthNortheast, and $6.4$9.4 million from a M&Pwater drainage project in the Southeast,South, both$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 unfavorablemanagement’s adjustmentscomprehensive relatedreassessment of expected recoverability of claims. The decrease in gross profit was also attributable to disputea resolutions.decrease in gross profit contributions of $5.4 million from a wastewater treatment plant project in Canada due to higher-than-expected project costs.

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 MayAugust 1,4, 2026, the closing price of our common stock was $1.18$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.

Additionally, under existing GIAs, certain sureties advanced funds to support bonded project obligations and ongoing project performance. As of MarchJune 31,30, 2026 and December 31, 2025, the sureties had advanced $139.2$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 MayAugust 13, 2027.

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 judgementjudgment 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 MayAugust 13, 2027. The $89.1 million judgment is included in surety payable on our unaudited condensed consolidated balance sheets as of MarchJune 31,30, 2026 and December 31, 2025.

The following table sets forth summary change in cash, cash equivalent and restricted cash for the threesix months ended MarchJune 31,30, 2026 and 2025:

Net cash used in operating activities was $133.9$171.9 million during the threesix months ended MarchJune 31,30, 2026. During the threesix months ended MarchJune 31,30, 2026, the primary drivers in cash used in operating activities were a decrease of $104.1$171.0 million in accounts payable, retainage payable and accrued liabilitiesliabilities, and $28.2$115.3 million in net loss.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 $6.4$1.0 million during the threesix months ended MarchJune 31,30, 2025. During the threesix months ended MarchJune 31,30, 2025, the primary drivers in cash provided by operating activities were ana increasedecrease of $10.4$49.1 million in accounts payable and accruedretainage liabilities, a decrease of $8.6 million in accounts receivable, and an increase of $6.9 million in contract liabilities,receivables offset by an increase of $10.7$46.6 million in contract assets and an increase of $7.5 million in other current assets.

Net cash provided by investing activities was $1.3$7.6 million during the threesix months ended MarchJune 31,30, 2026. During the threesix months ended MarchJune 31,30, 2026, the primary driversdriver in cash provided by investing activities werewas $1.0$7.6 million in proceeds from sale of property and equipment and by $0.3 million in distributions from other investments.equipment. Net cash provided by investing activities was $1.1$0.8 million during the threesix months ended MarchJune 31,30, 2025. During the threesix months ended MarchJune 31,30, 2025, the primary drivers in cash provided by investing activities were $2.9$3.4 million in proceeds from sale of property and equipmentequipment, offset by $1.8$2.9 million in purchases of property and equipment.

Net cash provided by financing activities was $97.0$142.5 million for the threesix months ended MarchJune 31,30, 2026. During the threesix months ended MarchJune 31,30, 2026, the primary drivers in cash provided by financing activities were $125.1$195.7 million in proceeds from advancement of surety funds, offset by $27.4$51.8 million in payments on notes payable. Net cash used in financing activities was $14.0$26.1 million for the threesix months ended MarchJune 31,30, 2025. During the threesix months ended MarchJune 31,30, 2025, the primary drivers in cash used in financing activities were $13.6$25.2 million in payments on notes payable and $0.3$0.5 million in payments of finance lease and financing obligations.

As of MarchJune 31,30, 2026, we had total debt of $230.8$206.8 million, of which $56.1$58.0 million is due within the next twelve months.

We enter into secured notes in order to finance growth within our business. As of MarchJune 31,30, 2026, we had outstanding secured notes expiring between March 2027 and March 2033. Interest rates on the secured notes range between 0.00% and 12.90%. The secured notes are collateralized by certain assets of Southland’s fleet of equipment.

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”) and a $20.0 million committed delayed draw term loan (the “Delayed Draw”). The Credit Facility has a maturity date of September 30, 2028.

Any principal prepayments in the first three years, other than mandatory prepayments pursuant to the Credit Agreement, will beare subject to additional fees. In the first year, any prepayments will incurincurred fees of 3% or the make-whole premium, whichever iswas higher. The make-whole premium iswas 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 arewill be no fees for any prepayments made in the fourth year.

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 beare 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.

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.

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.