Table of Contents
SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Statements of Operations (unaudited)

Three Months Ended

Nine Months Ended
(Amounts in thousands except shares and per share data)
September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022
Revenue
$
312,472

$
335,125

$
844,228

$
866,627
Cost of construction

282,943

272,715

829,550

761,549
Gross profit

29,529

62,410

14,678

105,078
Selling, general, and administrative expenses

15,247

15,606

47,266

43,395
Operating income (loss)

14,282

46,804

(32,588)

61,683
Loss on investments, net

(21)

(100)

(3)

(79)
Other income, net

2,151

2,292

23,559

936
Interest expense

(6,231)

(2,285)

(13,790)

(6,317)
Income (loss) before income taxes

10,181

46,711

(22,822)

56,223
Income tax expense (benefit)

5,390

10,588

(11,446)

13,745
Net income (loss)

4,791

36,123

(11,376)

42,478
Net income attributable to noncontrolling interests

991

924

2,314

1,474
Net income (loss) attributable to Southland Stockholders
$
3,800

$
35,199

$
(13,690)

$
41,004

Net income (loss) per share attributable to common stockholders

Basic ⁽¹⁾
$
0.08

$
(0.29)

Diluted ⁽¹⁾
$
0.08

$
(0.29)

Weighted average shares outstanding

Basic ⁽¹⁾

47,856,114

46,771,938

Diluted ⁽¹⁾

47,872,042

46,771,938

(1) The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data.
See notes to unaudited condensed consolidated financial statements

LEGATO MERGER CORP. II
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
~~(UNAUDITED)~~

For the
Three Months
Ended
September 30,
2022

For the
Nine Months
Ended
September 30,
2022

For the
Period
from July 14,
2021
(inception)
through
September 30,
2021

General and administrative costs $ (276,080 ) $ (1,025,775 ) $ (549 )
Loss from operations (276,080 ) (1,025,775 ) (549 )

Other income:
Investment income on Trust Account 1,406,789 1,785,385 -
Gain (loss) before income tax provision 1,130,709 759,610 (549 )
Provision for income taxes (279,080 ) (343,430 ) -

Net Income (Loss) $ 851,629 $ 416,180 $ (549 )

Weighted average shares outstanding of common stock, basic and diluted-Public Shares⁽¹⁾ 28,771,000 28,771,000 -
Basic and diluted net loss per share, Public Shares $ 0.02 $ 0.01 $ -
Weighted average shares outstanding of common stock, basic and diluted-Founders Shares⁽²⁾ 7,140,000 7,140,000 6,240,000
Basic and diluted net loss per share, Founders Shares $ 0.02 $ 0.01 $ (0.01 )
⁽¹⁾ Weighted average shares outstanding common stock, basic and diluted-Public Shares include all shares in the public offering, as well as the private placement units, inclusive of the full exercise of the overallotment option.
⁽²⁾ Weighted average shares outstanding of common stock, basic and diluted-Founders Shares include all Founders Shares, as well as Representative Shares, inclusive of the full exercise of the overallotment option.
~~The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.~~
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SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)

Three Months Ended

Nine Months Ended
(Amounts in thousands)
September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022
Net income (loss)
$
4,791

$
36,123

$
(11,376)

$
42,478
Foreign currency translation adjustment, net of tax

(1,972)

(4,653)

(119)

(2,380)
Comprehensive income (loss), net of tax

2,819

31,470

(11,495)

40,098
Less: Comprehensive income (loss) attributable to noncontrolling interest

646

(7,469)

2,170

760
Comprehensive income (loss) attributable to Southland Stockholders
$
2,173

$
38,939

$
(13,665)

$
39,338

See notes to unaudited condensed consolidated financial statements
LEGATO MERGER CORP. II
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
~~(UNAUDITED)~~
~~For the Three Months Ended September 30, 2022~~

Common Stock Additional
paid-in Accumulated Total Stockholders’
Shares Amount Capital Deficit Deficit
Balance at June 30, 2022 (unaudited) 8,311,000 $ 831 $              - $ (8,794,605 ) $ (8,793,774 )
Accretion - increase in redemption value of common stock subject to redemption - - - (1,087,272 ) (1,087,272 )
Net income - - - 851,629 851,629

Balance at September 30, 2022 (unaudited) 8,311,000 $ 831 $ - $ (9,030,248 ) $ (9,029,417 )
~~For the Nine Months Ended September 30, 2022~~
Common Stock Additional
paid-in Accumulated Total Stockholders’
Shares Amount Capital Deficit Deficit
Balance at December 31, 2021 8,311,000 $ 831 $         - $ (8,203,926 ) $ (8,203,095 )
Accretion - increase in redemption value of common stock subject to redemption - - - (1,242,502 ) (1,242,502 )
Net income - - - 416,180 416,180

Balance at September 30, 2022 (unaudited) 8,311,000 $ 831 $ - $ (9,030,248 ) $ (9,029,417 )
~~For the Period from July 14, 2021 (inception) through September 30, 2021~~
Common Stock Additional
paid-in Accumulated Total Stockholders’
Shares Amount Capital Deficit Equity
Balance at July 14, 2021 (inception) (unaudited) - $ - $ - $ - $ -
Common shares issued to initial stockholders 6,900,000 690 24,310 - 25,000
Issuance of Representative Shares 240,000 24 846 - 870
Net loss - - - (549 ) (549 )
Balance at September 30, 2021 (unaudited) 7,140,000 $ 714 $ 25,156 $ (549 ) $ 25,321
~~The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.~~
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SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Statements of Equity (unaudited)

Nine Months Ended September 30, 2023

Preferred

Common



Additional

Accumulated

Members

Noncontrolling

Total
(Amounts in thousands)
Stock

Stock

AOCI

Paid-In Capital

Deficit

Capital

Interest

Equity
Balance as of December 31, 2022
$
24,400

$
—

$
(2,576)

$
—

$
—

$
327,614

$
10,446

$
359,884
Recapitalization

—

4

—

284,569

—

(327,614)

—

(43,041)
Balance as of December 31, 2022

24,400

4

(2,576)

284,569

—

—

10,446

316,843
Preferred stock repurchase and dividends

(24,400)

—

—

(50,129)

—

—

(24)

(74,553)
Issuance of post-merger earnout shares

—

4

—

34,996

—

—

—

35,000
Distributions to joint venture partner

—

—

—

—

—

—

(110)

(110)
Net income (loss)

—

—

—

—

(4,664)

—

398

(4,266)
Other comprehensive income

—

—

504

—

—

—

2

506
Balance as of March 31, 2023
$
—

$
8

$
(2,072)

$
269,436

$
(4,664)

$
—

$
10,712

$
273,420
Net income (loss)

—

—

—

—

(12,826)

—

925

(11,901)
Other comprehensive income

—

—

1,149

—

—

—

198

1,347
Balance as of June 30, 2023
$
—

$
8

$
(923)

$
269,436

$
(17,490)

$
—

$
11,835

$
262,866
Share based compensation

—

—

—

484

—

—

—

484
Net income

—

—

—

—

3,800

—

991

4,791
Other comprehensive loss

—

—

(1,628)

—

—

—

(344)

(1,972)
Balance as of September 30, 2023
$
—

$
8

$
(2,551)

$
269,920

$
(13,690)

$
—

$
12,482

$
266,169

See notes to unaudited condensed consolidated financial statements
LEGATO MERGER CORP. II
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
~~(UNAUDITED)~~

For the
Nine Months
Ended
September 30,
2022
For the Period
from July 14,
2021 (inception)
through
September 30,
2021
Cash flow from operating activities
Net income (Loss) $ 416,180 $ (549 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Investment income on Trust Account (1,785,385 ) -
Changes in operating assets and liabilities:
Prepaid expense 170,177 -
Accounts payable 27,640 -
Franchise tax payable 25,818 -
Income tax payable 24,730 -
Net cash used in operating activities (1,120,840 ) (549 )

Cash flow from investing activities
Cash withdrawn from trust account 442,882 -
Net cash provided by investing activities 442,882 -

Cash flows from financing activities
Proceeds from sale of shares of common stock to initial stockholder - 12,500
Offering costs paid - (67,337 )
Proceeds from stockholder note - 65,000
Net cash provided by financing activities - 10,163

Net change in cash and cash equivalents (677,958 ) 9,614
Cash at beginning of period 1,100,031 -
Cash at end of period $ 422,073 $ 9,614

Supplemental disclosure of non-cash financing activities:
Deferred offering costs paid by the initial stockholder in exchange for common stock $ - $ 12,500
Issuance of Representative Shares (see Note 8) $ - $ 870
~~The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.~~
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SOUTHLAND HOLDINGS, INC.
Condensed Consolidated Statements of Equity (unaudited)

Nine Months Ended September 30, 2022

Preferred

Common



Additional

Members

Noncontrolling

Total
(Amounts in thousands)
Stock

Stock

AOCI

Paid-In Capital

Capital

Interest

Equity
Balance as of December 31, 2021
$
24,400

$
—

$
(937)

$
—

$
267,831

$
11,057

$
302,351
Recapitalization

—

4

—

224,786

(267,831)

—

(43,041)
Balance as of December 31, 2021

24,400

4

(937)

224,786

—

11,057

259,310
Preferred stock repurchase and dividends

—

—

—

(172)

—

(31)

(203)
Distributions to members

—

—

—

316

—

(1,539)

(1,223)
Net income (loss)

—

—

—

(13,601)

—

628

(12,973)
Other comprehensive loss

—

—

(1,562)

—

—

(145)

(1,707)
Balance as of March 31, 2022
$
24,400

$
4

$
(2,499)

$
211,329

$
—

$
9,970

$
243,204
Preferred stock repurchase and dividends

—

—

—

(211)

—

(38)

(249)
Other

—

—

(1)

—

—

—

(1)
Distributions to members

—

—

—

(48)

—

—

(48)
Net income (loss)

—

—

—

19,406

—

(78)

19,328
Other comprehensive income (loss)

—

—

3,987

—

—

(7)

3,980
Balance as of June 30, 2022
$
24,400

$
4

$
1,487

$
230,476

$
—

$
9,847

$
266,214
Preferred stock repurchase and dividends

—

—

—

(298)

—

(53)

(351)
Net income

—

—

—

35,199

—

924

36,123
Other comprehensive loss

—

—

(4,090)

—

—

(563)

(4,653)
Balance as of September 30, 2022
$
24,400

$
4

$
(2,603)

$
265,377

$
—

$
10,155

$
297,333

See notes to unaudited condensed consolidated financial statements

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SOUTHLAND HOLDINGS, INC.
~~LEGATO MERGER CORP. II~~Condensed Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended
(Amounts in thousands)
September 30, 2023

September 30, 2022
Cash flows from operating activities:




Net income (loss)
$
(11,376)

$
42,478
Adjustments to reconcile net income (loss) to net cash used in operating activities




Depreciation and amortization

24,704

35,163
Deferred taxes

(22,148)

(440)
Change in fair value of earnout liability

(20,689)

—
Share based compensation

484

—
Gain on sale of assets

(118)

(1,343)
Foreign currency remeasurement (gain) loss

(37)

746
Earnings from equity method investments

(5,102)

(7,346)
TZC investment present value accretion

(1,828)

(1,758)
Loss (gain) on trading securities, net

3

(257)
Changes in assets and liabilities:

Accounts receivable

(69,471)

(24,167)
Contract assets

(4,376)

(72,703)
Prepaid expenses and other current assets

1,564

(1,001)
ROU assets

4,034

930
Accounts payable and accrued expenses

20,584

(6,997)
Contract liabilities

53,048

(29,591)
Operating lease liabilities

(3,991)

(1,206)
Other

(1,873)

(3,444)
Net cash used in operating activities

(36,588)

(70,936)

Cash flows from investing activities:




Purchase of fixed assets

(7,475)

(4,384)
Proceeds from sale of fixed assets

7,461

3,897
Loss on investment in limited liability company

—

336
Proceeds from the sale of trading securities

47

840
Capital contribution to unconsolidated investments

(540)

(1,000)
Net cash used in investing activities

(507)

(311)

Cash flows from financing activities:




Borrowings on line of credit

3,000

55,000
Payments on line of credit

(8,000)

—
Borrowings on notes payable

115,355

115
Payments on notes payable

(111,908)

(31,161)
Payments of deferred financing costs

(578)

—
Advances from related parties

425

—
Payments to related parties

(4)

(405)
Payments on finance lease

(3,538)

(6,298)
Distributions

(110)

(1,556)
Proceeds from merger of Legato II and Southland Holdings, LLC

17,088

—
Net cash provided by financing activities

11,730

15,695

Effect of exchange rate on cash

126

1,834

Net decrease in cash and cash equivalents and restricted cash

(25,239)

(53,718)
Beginning of period

71,991

111,242
End of period
$
46,752

$
57,524

Supplemental cash flow information




Cash paid for income taxes
$
3,033

$
6,153
Cash paid for interest
$
12,704

$
6,464
Non-cash investing and financing activities:




Lease assets obtained in exchange for new leases
$
8,529

$
12,537
Assets obtained in exchange for notes payable
$
8,626

$
3,397
Issuance of post-merger earn out shares
$
35,000

$
—
Dividend financed with notes payable
$
50,000

$
—

See notes to unaudited condensed consolidated financial statements
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Table of Contents

SOUTHLAND HOLDINGS, INC.
~~NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~Notes to Condensed Consolidated Financial Statements
(Unaudited)
~~SEPTEMBER 30, 2022~~
~~(Unaudited)~~

Note ~~1 —~~ ~~Organization~~1.Description of Business
Overview
Southland Holdings, Inc. (“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 ~~Plan~~construct projects in the bridges, tunnels, communications, 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 ~~Business~~Johnson Bros. Corporation, American Bridge Holding Company (“American Bridge”), Oscar Renda Contracting, Southland Contracting, Mole Constructors, Heritage Materials and other affiliates. With the combined capabilities of these six primary subsidiaries and their affiliates, Southland has become a diversified industry leader with both public and private customers. The majority of our customers are located in the United States.

In the second quarter of 2023, Southland decided to discontinue certain types of projects in its Materials & Paving business line (“M&P”) and sold assets related to producing large scale concrete and asphalt. M&P is reported in the Transportation segment. The Company will not be pursuing production of concrete and asphalt products for use on self-performed paving projects where the majority of the scope of work contains large-scale concrete and asphalt production or sale of asphalt and concrete products to third parties. This operational shift will allow the Company to better focus its resources on more profitable lines of business. The Company has concluded this action with M&P does not qualify for Discontinued Operations treatment and presentation under ASC 205-20 as it does not represent a strategic shift in the Company’s business.

Merger

As previously announced, on May 25, 2022, Legato Merger Corp. II, a Delaware corporation (“Legato II”), entered into an Agreement and Plan of Merger (the ~~“Company”~~“Merger Agreement”) was incorporated in Delaware on July 14, 2021 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities (a “Business Combination”).

The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, although it has focused its search on target businesses in the infrastructure, engineering and construction, industrial and renewables industries. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with ~~early stage and emerging growth companies.~~

~~On May 25, 2022, the Company,~~ Legato Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of ~~the Company~~Legato II (“Merger Sub”), and Southland Holdings LLC, a Texas limited liability company (“~~Southland”~~Southland LLC”).

On February 14, 2023 (the “Closing Date”), ~~entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to~~as contemplated by the Merger Agreement, ~~upon~~Merger Sub merged with and into Southland LLC, with Southland LLC surviving the ~~closing (“Closing”)~~merger as a wholly owned subsidiary of ~~the~~Legato II (the “Merger”). The transactions contemplated by the Merger Agreement ~~(the “Transactions”), Merger Sub will merge with and into Southland (the “Merger”), with Southland being~~are referred to herein collectively as the surviving entity of the Merger (“Surviving Company”) and becoming a wholly owned subsidiary of the Company. In connection therewith, the members of Southland (“Southland Members”) will receive shares of common stock, par value $~~0.0001~~ per share, of the Company, cash and the right to receive certain contingent consideration in exchange for all the outstanding limited liability company membership interests of Southland (“Southland Membership Interests”). See Note 10 – Merger Agreement.

At September 30, 2022, the Company had not yet commenced any operations. All activity through September 30, 2022 relates to the Company’s formation, the public offering described below, the search for a target business with which to consummate a Business Combination and entering into the Merger Agreement with Southland. The registration statement for the Company’s Initial Public Offering was declared effective on November 22, 2021. On November 24, 2021, the Company consummated the offering of ~~24,000,000~~ ~~units at $10.00~~ ~~per Unit, generating gross proceeds of $240,000,000~~ ~~which is described in Note 3 (“Initial Public Offering”). Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of~~ ~~1,045,500~~ ~~units, at a price of $10.00~~ per unit in a private placement (“Private Placement”) to certain holders of the Company’s founder shares (“Initial Stockholders”) and EarlyBirdCapital, Inc., the representative of the underwriters in the Initial Public Offering (“EBC”), generating gross proceeds of $~~10,450,000~~ ~~(“Private Units”), which is described in Note 4. Transaction costs amounted to $13,680,526, consisting of $4,800,000~~ ~~in underwriting fees, $8,400,000~~ ~~of deferred underwriting fees and $480,526~~ ~~of other offering costs. On November 29, 2021, the underwriters exercised their over-allotment option in full to purchase an additional~~ ~~3,600,000~~ ~~Units. As a result, on December 1, 2021, the Company sold an additional~~ ~~3,600,000~~ ~~Units at $10.00~~ ~~per Unit for an aggregate amount of $36,000,000~~.“Business Combination.” In connection with the ~~underwriters’ exercise of their over-allotment option,~~Business Combination, Legato II changed its name to “Southland Holdings, Inc.”

The Merger was accounted for as a reverse recapitalization with Southland as the ~~Company also consummated~~accounting acquirer and Legato II as the ~~sale of an additional~~ ~~126,000~~ ~~Private Units at $10.00~~ ~~per unit, generating total proceeds of $1,260,000. Transaction costs associated with the underwriters’ full exercise of their over-allotment option amounted to $15,660,526, consisting of $5,520,000~~ ~~in cash underwriting fees and $9,660,000~~ ~~of deferred underwriting fees.~~

~~Following the closing of the~~ ~~Initial Public Offering, the over-allotment and the Private Placement, $280,140,000 ($10.15 per Unit) from the net proceeds of the sale of the Units~~acquired company for accounting purposes. Accordingly, all historical financial information presented in the ~~Initial Public Offering~~unaudited condensed consolidated financial statements represents the accounts of Southland and its subsidiaries as if Southland had been the ~~sale~~predecessor Company. The structure of ~~the Private Units~~Southland’s historical common equity structure was placed in a trust account (the “Trust Account”) and will be invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of (i) the consummation of a Business Combination; (ii) the redemption of any shares sold in the ~~Initial Public Offering (“Public Shares”) in connection with a stockholder vote to amend the Company’s Amended~~form of membership percentages and Restated Certificate of Incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if it does not complete an initial Business Combination within 18 months from the closing of the Initial Public Offering (the “Combination Period”); or (iii) the distribution of the Trust Account, as described below, except that interest earned on the Trust Account can be released to pay the Company’s tax obligations, if the Company is unable to complete an initial Business Combination within the Combination Period or upon any earlier liquidation of the Company. The Company’s management has broad discretion with respect to the specific application of the net proceeds of its Initial Public Offering and Private Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ rules provide that the Company’s initial Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (less taxes payable) at the time of the signing a definitive agreement in connection with a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no ~~assurance that the Company will be able to successfully effect a Business Combination.~~

The Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then on deposit in the Trust Account (initially $10.15 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

~~The Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001~~ ~~either immediately prior to or upon~~shares were issued. As such, consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or other legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s officers, directors and initial stockholders (the “Insiders”) have agreed to vote their Founder Shares (as defined in Note 5), the shares of common stock included in the Private Units (the “Private Shares”) and any Public Shares held by them in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction.

The Company will also provide its stockholders with the opportunity to redeem all or a portion of their Public Shares in connection with any stockholder vote to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation that would affect the substance or timing of the Company’s obligation to redeem 100% of Public Shares if it does not complete an initial Business Combination within the Combination Period. The stockholders will be entitled to redeem their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially $10.15 per share, plus any pro rata interest earned on the funds held in the Trust Account, net of taxes payable). There will be no redemption rights with respect to the Company’s warrants in connection with such a stockholder vote to approve such an amendment to the Company’s Amended and Restated Certificate of Incorporation.

The Company will have until the expiration of the Combination Period to consummate its initial Business Combination. If the Company is unable to consummate a Business Combination within the Combination Period and stockholders do not otherwise extend the Combination Period by approving an amendment to the Company’s Amended and Restated Certificate of Incorporation, the Company will (i) cease all operations except for the purposes of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including any interest earned on the Trust Account not previously released to the Company to pay its tax obligations and up to $~~100,000~~ of interest to pay dissolution expenses, divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and; (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in the case of clauses (ii) and (iii) to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

The Insiders have agreed to waive their redemption rights with respect to any Founder Shares and Private Shares, as applicable, (i) in connection with the consummation of a Business Combination, (ii) in connection with a stockholder vote to amend the Company’s Amended and Restated Certificate of Incorporation to modify the substance or timing of the Company’s obligation to allow redemption as provided in its charter, and (iii) if the Company fails to consummate a Business Combination within the Combination Period. The Insiders have also agreed to waive their redemption rights with respect to any Public Shares held by them in connection with the consummation of a Business Combination and in connection with a stockholder vote to amend the Company’s Amended and Restated Certificate of Incorporation as described above. However, the Insiders will be entitled to redemption rights with respect to Public Shares if the Company fails to consummate a Business Combination or liquidates within the Combination Period. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per Unit in the Initial Public Offering. Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. Crescendo Advisors, LLC, an entity affiliated with Mr. Rosenfeld, the Company’s Chief SPAC Officer, has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced below $10.15 per share by the claims of target businesses or claims of vendors or other entities that are owed money by the Company for services rendered or contracted for or products sold to it. However, the Company has not independently verified whether Crescendo Advisors LLC has sufficient funds to satisfy its indemnity obligations, the Company has not asked it to reserve for such obligations, and the Company does not believe it has any significant liquid assets.

~~Liquidity, Capital Resources, and Going Concern~~

~~As of September 30, 2022, the Company had $422,073~~ ~~in cash and a working capital balance of $506,419~~.

~~The Company’s liquidity needs~~reporting periods prior to the ~~consummation~~three months ended March 31, 2023 will not present share or per share data.

COVID-19 Considerations

Certain impacts to public health conditions particular to the coronavirus (“COVID-19”) outbreak have had a significant negative impact on our operations and profitability. The continuing extent of the ~~Initial Public Offering were satisfied through~~impact to our financial performance will depend on future developments, including (i) the ~~payment of $25,000~~ ~~from the initial stockholder exchange for issuance of Founder Shares (as defined in Note 5),~~duration and ~~loan proceeds from Eric Rosenfeld, the Company’s Chief SPAC Officer of $65,000~~ ~~and $31,500, respectively, under the Note (as defined in Note 5). The Note balances were settled shortly after the consummation~~spread of the ~~Initial Public Offering. Subsequent to~~outbreak, (ii) the ~~consummation~~restrictions and advisories, (iii) the effects on the financial markets, and (iv) the effects on the economy overall, all of which are highly uncertain and cannot be predicted. If our financial performance is impacted because of these developments for an extended period, our results may be materially adversely affected. We cannot anticipate how the potential widespread distribution of a vaccine will mitigate this impact on either

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COVID-19 or on future variants of the ~~Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds held outside of the Trust Account.~~disease.

2.	Basis of Presentation

Consolidated U.S. GAAP Presentation

The Company intends to use substantially all of the funds held in the Trust Account (excluding deferred underwriting commissions and interest to pay taxes) to acquire a target business or businesses and to pay its expenses relating thereto. To the extent that the Company’s common stock is used in whole or in part as consideration to affect the Business Combination, the remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business or businesses. In addition, in order to finance transaction costs in connection with a Business Combination, the Insiders or their affiliates may, but are not obligated to, provide the Company Working Capital Loans (as defined in Note 4). As of September 30, 2022 and December 31, 2021, there were no ~~amounts outstanding under any Working Capital Loan.~~

Until the consummation of a Business Combination, the Company will be using funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination. If the Company’s estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional financing either to complete a Business Combination or because it becomes obligated to redeem a significant number of its public shares upon completion of a Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. In order to finance transaction costs in connection with a Business Combination, the Company’s officers, directors and initial stockholders and their affiliates may, but are not obligated to, loan it funds as may be required. If the Company completes a Business Combination, the Company would repay such loaned amounts. In the event that a Business Combination does not close, the Company may use any funds available to it outside of the Trust Account to repay any such loaned amounts.

If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, suspending the pursuit of a potential transaction. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.

Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using the funds held outside of the Trust Account for paying offering costs including existing accounts payable and accrued expenses and attempting to consummate the Business Combination with Southland.

The Company has until May 24, 2023 to consummate an initial Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by such time period. If a Business Combination is not consummated within such time period and stockholders do not otherwise approve an amendment to the charter to extend such date, there will be a mandatory liquidation and subsequent dissolution. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern one year from the date that theseThese interim unaudited condensed consolidated ~~condensed~~ financial statements are issued. The unaudited consolidated condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management plans to address this substantial doubt by completing a business combination by the mandatory liquidation date.

~~Note 2 —~~ ~~Summary of Significant Accounting Policies~~

~~Basis of Presentation~~

~~The accompanying unaudited consolidated condensed financial statements are presented in U.S. dollars~~have been prepared in conformity with United States generally accepted accounting principles ~~generally accepted in the United States of America~~ (“GAAP”) ~~for interim~~. The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) contains guidance that form GAAP. New guidance is released via Accounting Standards Update (“ASU”).

The unaudited condensed consolidated financial ~~information and with the instructions to Form 10-Q and Article 8 of Regulation S-X and~~statements have been prepared by us pursuant to the rules and regulations of the ~~SEC.~~SEC regarding interim financial reporting. Accordingly, ~~they do not include all of the~~certain information and ~~footnotes~~footnote disclosures required by ~~GAAP.~~GAAP for complete financial statements have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the unaudited condensed consolidated ~~condensed~~ financial statements ~~reflect all adjustments,~~have been included. These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report which ~~include only normal recurring adjustments necessary for~~was filed on Form 8-K/A on March 22, 2023.

The accompanying balance sheet and related disclosures as of December 31, 2022, have been derived from the ~~fair statement~~8-K/A filed on March 22, 2023. The Company’s financial condition as of ~~the balances~~September 30, 2023, and ~~results for the period presented. Operating~~operating results for the three and nine months ended September 30, ~~2022, and for the Period from July 14, 2021 (inception) through September 30, 2021~~2023, are not necessarily indicative of the financial conditions and results of operations that may be expected ~~through~~for any future interim period or for the year ending December 31, ~~2022 or any future periods.~~ 2023.

The ~~accompanying~~ unaudited condensed consolidated financial statements ~~should be read~~include the accounts of Southland Holdings, Inc., and our majority-owned and controlled subsidiaries and affiliates. All significant intercompany transactions are eliminated within the consolidations process. Investments in ~~conjunction with~~non-construction related partnerships and less-than-majority owned subsidiaries that we do not control, but where we have significant influence are accounted for under the ~~financial statements~~equity method. Certain construction related joint ventures and ~~footnotes thereto included in~~partnerships that we do not control, nor do we have significant influence are accounted for under the ~~Company’s Annual Report on Form 10-K~~equity method for the ~~year ended December 31, 2021 filed with~~balance sheet and the ~~SEC on March 17, 2022.~~proportionate consolidation method for the statement of operations.

~~Emerging Growth Company~~

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited consolidated condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of the ~~unaudited~~ consolidated ~~condensed~~ financial ~~statement~~statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported ~~amounts~~amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the ~~unaudited~~ consolidated ~~condensed~~ financial ~~statement~~statements and the reported amounts of revenues and expenses during the reporting period.

~~Making~~ Actual results could differ from those estimates. Management periodically evaluates estimates ~~requires management to exercise significant judgment.~~used in the preparation of the consolidated financial statements for continued reasonableness. It is ~~at least~~ reasonably possible that ~~the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change~~changes may occur in the near term ~~due~~that would affect our estimates with respect to ~~one or more future confirming events. Accordingly,~~ the ~~actual results could differ significantly from those estimates.~~input method, the allowance for credit losses, recoverability of unapproved contract modifications, deferred tax assets, and other accounts for which estimates are required.

Cash, ~~and~~ Cash Equivalents, and Restricted Cash

~~The Company considers~~We consider all ~~short-term investments~~highly liquid instruments purchased with ~~an original~~a maturity of three months or less ~~when purchased~~as cash equivalents. We maintain our cash in accounts at certain financial institutions. The majority of our balances exceed federally insured limits.

We have not experienced any losses in these accounts, and we do not believe they are exposed to ~~be a~~any significant credit risk.

Restricted cash ~~equivalent. The Company had~~ noand cash equivalents asconsist of ~~September 30, 2022~~amounts held in accounts in our name at certain financial institutions. These accounts are subject to certain control provisions in favor of various surety and ~~December 31, 2021.~~insurance companies for purposes of compliance and security perfections.

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Goodwill and Intangibles

~~Investments Held~~Goodwill and indefinite-lived intangibles are tested for impairment annually in ~~Trust Account~~

~~The Company’s portfolio of investments is comprised solely of U.S. government securities, within~~ the ~~meaning set forth in Section 2(a)(16)~~fourth quarter, or more frequently if events or circumstances indicate that goodwill or indefinite-lived intangibles may be impaired. We evaluate goodwill at the reporting unit level (operating segment or one level below an operating segment). We identify our reporting unit and determine the carrying value of the ~~Investment Company Act,~~reporting unit by assigning the assets and liabilities, including the existing goodwill and indefinite-lived intangibles, to the reporting unit. Our reporting units are based on our organizational and reporting structure. We currently identify three reporting units. We begin with a ~~maturity of 185 days or less, or investments in in money market funds~~qualitative assessment using inputs based on our business, our industry, and overall macroeconomic factors. If our qualitative assessment deems that ~~invest in U.S. government securities, or a combination thereof. The Company’s investments held in~~ the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of ~~these securities are included in investment income on Trust Account in~~a reporting unit is more likely than not less than its carrying amount, we then complete a quantitative assessment to determine the ~~accompanying statement~~fair value of ~~operations. The estimated fair values~~the reporting unit and compare it to the carrying amount of ~~investments held in~~ the ~~Trust Account are determined using available market information.~~reporting unit. During the three and nine months ended September 30, 2023 and 2022, there was no impairment recorded.

Long-Lived Assets

~~Common Stock Subject to Possible Redemption~~

~~The Company accounts for its common stock~~We review long-lived assets, including finite-lived intangible assets subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (the ~~27,600,000~~ ~~public shares, including common stock that features redemption rights that are either within the control of the holder or subject to redemption~~amortization, for impairment upon the occurrence of ~~uncertain~~ events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock sold in the Initial Public Offering features certain redemption rights that are considered to be outside of its control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s consolidated condensed balance sheets.

~~The Company recognizes~~or changes in ~~redemption value as they occur and adjusts~~circumstances that would indicate that the carrying value of ~~redeemable common stock~~the asset or group of assets may not be recoverable. Recoverability of assets to ~~equal~~be held and used is measured by a comparison of the ~~redemption~~carrying amount of an asset or group of assets to the future net cash flows expected to be generated by the asset or group of assets. If such assets are not considered to be fully recoverable, any impairment to be recognized is measured by the amount by which the carrying amount of the asset or group of assets exceeds its respective fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value atless costs to sell. During the three and nine months ended September 30, 2023 and 2022, we did not identify any triggering events that would require a quantitative assessment.

Accounts Receivable, Net

We provide an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information, existing economic conditions, and future expectations. Normal contracts receivables are typically due within 10-30 days after the issuance of the invoice and may vary by customer. Retainages are due after completion of the project and acceptance by the contract owner. We may be able to negotiate release of some retainages upon meeting certain milestones. Warranty retainage receivables are due after the expiration of the warranty period, if applicable. Receivables past due more than 120 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluations and specific circumstances of the customer.

As of September 30, 2023, and December 31, 2022, we had an allowance for credit losses of $1.5 million.

Recently Adopted Accounting Pronouncements

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“Update 2020-04”), which provides optional expedients and exceptions for applying U.S. GAAP principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. We adopted Topic 848 as of January 1, 2021. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected optional expedients for and that are retained through the end of ~~each reporting period. Immediately~~the hedging relationship. The provisions in Update 2020-04 are effective upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount. The change in the carrying value of redeemable shares of common stock resulted in charges against additional paid-in capital (to the extent available)issuance and ~~accumulated deficit.~~ ~~Subsequently, the Company recognizes changes in the redemption value as a accretion as reflected on the accompanying unaudited consolidated condensed statements of changes in stockholders’ deficit.~~

~~Offering Costs~~

The Company complies with the requirements of Financial Accounting Standards Board (“FASB”) ASC 340-10-S99-1. Offering costs consist of legal, accounting, underwriting fees and other costs incurred that directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to the total proceeds received. Upon the completion of the Initial Public Offering, costs associated with the common stock issued were charged against their carrying value. The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

~~Income Taxes~~

The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected tocan be ~~realized.~~

ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no ~~unrecognized tax benefits and~~ no amounts accrued for interest and penalties as of September 30, 2022 and 2021, respectively. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company may be subject to potential examination by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Company is subject to income tax examinations by major taxing authorities since inception. Deferred tax assets were deemed de minimis as of September 30, 2022 andapplied prospectively through December 31, ~~2021.~~

~~Net Income per Common Share~~

~~The Company complies with the accounting and disclosure requirements~~2022. Our adoption of FASB ASC Topic 260, “Earnings Per Share.” Net income per common share is computed by dividing net income applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period (the public and private shares, inclusive of the full exercise of the overallotment option). The Company hasUpdate 2020-04 did not ~~considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of~~ ~~14,385,000~~ shares in the calculation of diluted earnings per share, since their contingency had not been met yet. Accretion associated with the common shares are excluded from earnings per share as the redemption value approximates fair value. As a result, diluted earnings per common share is the same as basic earnings per common share for the periods.

~~The following table reflects the calculation of basic and diluted net income per common share (in dollars):~~

Schedule Of Earnings Per Share Basic And Diluted
For the Three Months
Ended
September 30,
2022 For the Nine Months
Ended
September 30,
2022
For the
Period from July 14, 2021 (inception) through
September 30,
2021

Public
Shares
(basic and
diluted) Founders
Shares
(basic and
diluted) Public
Shares
(basic and
diluted) Founders
Shares
(basic and
diluted) Public
Shares
(basic and
diluted) Founders
Shares
(basic and
diluted)
Basic and diluted net income per common share
Numerator:
Allocation of net income as adjusted $ 682,304 $ 169,325 $ 333,433 $ 82,747 - (549)
Denominator:
Basic weighted average shares outstanding $ 28,771,000 $ 7,140,000 $ 28,771,000 $ 7,140,000 - $ 6,240,000

Basic and diluted net loss per common share $ 0.02 $ 0.02 $ 0.01 $ 0.01 - $ (0.00 )

~~Concentration of Credit Risk~~

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Deposit Insurance Corporation coverage limit of $~~250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.~~

~~Fair Value of Financial Instruments~~

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the consolidated condensed balance sheets, primarily due to their short-term nature.

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

~~Level 1:~~

Quoted prices in active markets for identical assets and liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

~~Level 2:~~

Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

~~Level 3:~~

~~Unobservable inputs based on assessment of the assumptions that market participants would use in pricing the asset or liability.~~

~~Recent Accounting Pronouncements~~

~~The Company’s management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would~~ have a material ~~effect~~impact on our consolidated financial statements and related disclosures. We no longer have any debt that references LIBOR.

In June 2016, FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, (“Topic 326”). The standard requires the ~~accompanying~~immediate recognition of estimated credit losses expected to occur over the life of financial ~~statement.~~assets rather than the current incurred loss impairment model that recognizes losses when a probability threshold is met. Topic 326 is effective for annual periods beginning after January 1, 2023, and interim periods within those fiscal years. The implementation of Topic

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326 in 2023 did not have a material impact on our consolidated financial statements given the nature of our contracts and our historical loss experience.

Significant Accounting Policies

~~Accounting~~The significant accounting policies followed by the Company are set forth in Note 2 to the 8-K/A filed on March 22, 2023, and contained elsewhere herein, other than the policy for ~~Warrants~~:warrants, which is included below. For the three and nine months ended September 30, 2023, there were no significant changes in our use of estimates or significant accounting policies.

Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. The Company has concluded that the Public Warrants and Private Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.

3. Recapitalization

As discussed in Note 1 – Description of Business, on the Closing Date, the Company issued 33,793,111 shares of common stock to the former members of Southland (“Southland Members”) in exchange for their membership interests in Southland (“Southland Membership Interests”). Southland received net proceeds of $17.1 million. Transaction costs of $9.9 million directly related to the Merger, are included in additional paid-in capital in the condensed consolidated balance sheet as of September 30, 2023. Prior to the Merger, Southland LLC declared a $50.0 million dividend to be payable to Southland Members, which is recorded in other noncurrent liabilities on the condensed consolidated balance sheets. Southland Members, in lieu of cash payment, agreed to receive a promissory note for payment in the future. The notes have a four-year term and accrue interest at 7.0%. Southland, at its discretion, may make interim interest and principal payments during the term.

~~Note 3 —~~ ~~Initial Public Offering~~

~~Pursuant~~Immediately after giving effect to the ~~Initial Public Offering, on November 24, 2021, the Company sold~~ ~~24,000,000~~ ~~Units, at~~Business Combination, there were 44,407,831 shares of common stock and 14,385,500 warrants, each exercisable for a ~~purchase price of $10.00~~ ~~per Unit. Each Unit consists of one Public Share and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one~~ share of common stock at an exercise price of $~~11.50~~$11.50 per share ~~subject to adjustment (see Note 8).~~(including public and private placement warrants) (“Warrants”), outstanding.

Earnout Shares

~~On December 1, 2021, the Company consummated the closing of the sale of an additional~~ ~~3,600,000~~ ~~Units (“Option Units”) at $10.00~~ ~~per Option Unit pursuant~~Pursuant to the ~~underwriters’ exercise in full~~Merger Agreement, Southland Members have the potential to be issued additional consideration of ~~their over-allotment option, generating gross proceeds~~up to 10,344,828 shares of $~~36,000,000~~.

~~Note 4 —~~ ~~Private Placement~~

~~Simultaneously with~~common stock for attaining certain performance targets for the ~~Initial Public Offering, the initial stockholders~~years ended December 31, 2022, and ~~EBC purchased an aggregate of~~ ~~1,045,000~~ ~~Private Units, at $10.00~~ ~~per Private Unit for a total purchase price of $10,450,000~~. Each Private Unit consists of one Private Share and one-half of one warrant, or “Private Warrant”. The proceeds from the Private Units were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the required time period, the proceeds from the sale of the Private Units will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Warrants will expire worthless. There will be no redemption rights or liquidating distributions from the Trust Account with respect to the Private Units.

December 31, 2023. On ~~December 1, 2021, the Company consummated the closing of the sale of an additional~~ ~~126,000~~ ~~Private Units at $10.00~~ ~~per Private Unit, generating gross proceeds of $1,260,000, to the original purchasers of the Private Units in respect of their obligation to purchase such additional Private Units upon the exercise of the underwriters’ over-allotment option.~~

~~Note 5 —~~ ~~Related Party Transactions~~

~~Founders Shares~~

~~In July 2021, the Company~~April 27, 2023, Southland issued ~~an aggregate of~~ ~~5,750,000~~3,448,283 shares of common stock ~~(the “Founder Shares”) for an aggregate purchase price~~to the Southland Members pursuant to the attainment of $~~25,000~~the 2022 Base Target (as defined in the Merger Agreement). ~~On November 22, 2021,~~

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4.	Fair Value Measurements

Fair value of investments measured on a recurring basis as of September 30, 2023, and December 31, 2022, were as follows:


	As of
	September 30, 2023
(Amounts in thousands)	Fair Value		Level 1		Level 2		Level 3
Marketable Securities
Common stocks	$	—	$	—	$	—	$	—
Total		—		—		—		—
Investments Noncurrent
Private equity		3,219		—		—		3,219
Total noncurrent		3,219		—		—		3,219
Overall Total	$	3,219	$	—	$	—	$	3,219


	As of
	December 31, 2022
(Amounts in thousands)	Fair Value		Level 1		Level 2		Level 3
Marketable Securities
Common stocks	$	8	$	8	$	—	$	—
Total		8		8		—		—
Investments Noncurrent
Private equity		3,261		—		—		3,261
Total noncurrent		3,261		—		—		3,261
Overall Total	$	3,269	$	8	$	—	$	3,261

Revenue

Revenue is recognized over time using the ~~Company effected a stock dividend~~input method in accordance with ASC 606, measured by the percentage of ~~0.2~~ ~~shares~~cost incurred to date to estimated total cost for each ~~share outstanding,~~contract. This method is used because we believe expended cost to be the best available measure of progress on contracts.

Our contracts are primarily in the form of firm fixed-price and fixed-price per unit. A large portion of our contracts have scope defined adequately, which allows us to estimate total contract value upon the signing of a new contract. Upon signing a new contract, we allocate the total consideration across various contractual promises to transfer a distinct good or service to a customer. These are grouped into specific performance obligations. This process requires significant management judgement. Most of our contracts have a single performance obligation. For contracts with multiple performance obligations, we allocate the total transaction price based on the estimated standalone selling price, which is the total project costs plus a budgeted margin percentage, for each of the performance obligations.

Revenue is recognized when, or as, the performance obligations are satisfied. Our contracts do not include a significant financing component. Costs to obtain contracts are generally not significant and are expensed in the period incurred.

Estimating cost to complete of long-term contracts involves a significant amount of estimation and judgement. For long-term contracts, we use the calculated transaction price, estimated cost to complete the project, and the total costs incurred on the project to date to calculate the percentage of the project that is complete. The costs to complete the project and the transaction price can change due to unforeseen events that can either increase or decrease the margin on a particular project.

Our contract structure allows for variable consideration. A significant portion of this variable consideration comes in the form of change order requests and claims. Other variable consideration can include volume discounts, performance bonuses, incentives, liquidated damages, and other terms that can either raise or lower the total transaction price. We estimate variable consideration based on the probability of being entitled to collection of specific amounts. We include amounts that we believe we have an enforceable right to collect based on our probability of success with specific claims or contractual rights. Our estimates of total variable consideration rely on all available information about our customer including historical, current, and forecasted information.

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Many of our contracts require contract modifications resulting from a change in ~~6,900,000~~ ~~Founder Shares and~~ ~~240,000~~ ~~representative shares, totaling~~ ~~7,140,000~~ ~~being~~contract scope or requirements. Change orders are issued ~~and outstanding. The Founder Shares included an aggregate of up~~ to ~~900,000~~ ~~shares subject to forfeiture by the holders~~document changes to the ~~extent~~original contract. We can have approved and unapproved change orders. Unapproved change orders are contract modifications for which we or our customers have not agreed to terms, scope and price. Contract modifications are necessary for many reasons, including but not limited to, changes to the contract specifications or design from the customer, modification to the original scope, changes to engineering drawings, or other required deviation from the original construction plan. Contract modifications may also be necessary for reasons including, but not limited to, other changes to the contract which may be out of our control, such as rain or other weather delays, incomplete, insufficient, inaccurate engineering drawings, different site conditions from information made available during the estimating process, or other reasons. An unapproved change order may turn into a formal claim if we cannot come to an agreement with the owner but are contractually entitled to recovery of costs and profits for work performed. Costs incurred related to contract modifications are included in the estimated costs to complete and are treated as project costs when incurred. Unless the contract modification is distinct from the other goods and services included within the project, the contract modification is accounted for as part of the existing contract. The effect of any modifications on the transaction price, and our measure of the percentage-of-completion on specific performance obligations for which the contract modification relates, is recognized as a cumulative catch-up adjustment to revenue recognized. In some cases, contract modifications may not be fully settled until after the completion of work as specified in the original contract.

We review and update our contract estimates regularly. Any adjustments in estimated profit on contracts is recognized under the cumulative catch-up method. Under this method, the cumulative impact of the profit adjustment is recognized in the period the adjustment is identified. Revenue and profit in future periods are then recognized using an updated estimate that uses inputs consisting of the remaining transaction price, the remaining contract term, and the remaining costs to be incurred on the project.

If a contract is deemed to be in a loss position, the projected loss is recognized in full, including any previously recognized margin, in the period in which the change in estimate is made. Losses are recognized as an accrued loss provision on the consolidated balance sheets in the accrued liabilities caption. For contract revenue after the date that the ~~over-allotment~~loss is ~~not exercised in full or in part,~~accrued, the accrued loss provision is adjusted so that the ~~holders will collectively own 20%~~gross profit for the contract remains zero in future periods, subject to future adjustments to the overall expected profit or loss as determined at such time. As of September 30, 2023 and December 31, 2022, we had $16.7 million and $9.4 million, respectively, in accrued loss provision.

As of September 30, 2023, and December 31, 2022, we had $180.2 million and $144.2 million, respectively, of unapproved contract modifications included within our various projects’ transaction prices. These modifications are in negotiation with our customers or other third parties.

We estimate the ~~Company’s issued~~likelihood of collection during the bidding process for new contracts. Customers with history of late or non-payment are avoided in the bidding process. We consider the necessity for write-down of receivable balances in conjunction with GAAP when evaluating our estimates of transaction price and ~~outstanding shares after~~estimated costs to complete our projects.

We bill our customers in conjunction with our contract terms. Our contracts have three main categories, (i) contracts that are billed based on a specific timeline, (ii) contracts that are billed upon the ~~Initial Public Offering (assuming~~completion of certain phases of work, or milestones, and (iii) contracts that are billed as services are provided. Some of our contracts are billed following the ~~initial stockholders~~recognition of certain revenue. This creates an asset on our consolidated balance sheets captioned “contract assets.” Other contracts’ schedules allow us to bill customers prior to recognizing revenue. These contracts create a liability on our consolidated balance sheets captioned “contract liabilities.”

We segregate our business into two reportable segments: Transportation and Civil. Our Chief Operating Decision Maker (“CODM”) uses these segments in order to operate the business. Our segments offer different specialty infrastructure services. Our CODM regularly reviews our operating and financial performance based on these segments. Each of our reportable segments is composed of similar business units that specialize in specialty infrastructure projects that are unique.

Our business is managed using revenue and gross profit primarily. Our CODM regularly uses this information to review operating results, plan future bids, allocate resources, target customers, and plan future growth and capital allocations. To determine reportable segment gross profit, certain allocations, including allocations of shared and indirect costs, such as facility costs, equipment costs, and indirect operating expenses, were made.

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Our Civil segment is comprised of Oscar Renda Contracting, Inc., Mole Constructors, Inc., Southland Contracting, Inc., Southland Holdings, LLC, Renda Pacific, LLC, Southland Renda JV, Southland RE Properties, Oscar Renda Contracting Canada, Southland Mole of Canada, Southland Technicore Mole joint venture, and Southland Astaldi joint venture. This segment focuses on projects throughout North America that include the design and construction of water pipeline, pump stations, lift stations, water and wastewater treatment plants, concrete and structural steel, outfall, and tunneling.

Our Transportation segment is comprised of American Bridge, Heritage Materials, LLC, and Johnson Bros. Corporation. This segment 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.

Total assets by segment are not presented as our CODM, as defined by ASC 280, does not review or allocate resources based on segment assets. We do not ~~purchase any Public Shares in~~have material intersegment revenue or gross profit. Joint ventures are classified into the Initial Public Offering and excluding the Representative Shares (as defined in Note 8)). On December 1, 2021, the underwriters fully exercised their over-allotment option. As a result of the underwriters’ election to fully exercise their over-allotment option, a total of ~~900,000~~ ~~Founder Shares are no longer subject to forfeiture.~~

The holders of the Founder Shares have agreed not to transfer, assign or sell any of the Founder Shares (except to certain permitted transferees) until the earlier of 180 days after the date of the consummation of an initial Business Combination and the date onsegment with which the ~~closing price of the common stock exceeds $12.50 per share~~projects align.

Segment Revenue

Revenue by segment for any 20 trading days within a 30-trading day period following the consummation of an initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the Company consummates a subsequent liquidation, merger, share exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

~~Administrative Service Fee~~

The Company presently occupies office space provided by an entity controlled by Crescendo Advisors II, LLC. Such entity agreed that until the Company consummates a Business Combination, it will make such office space, as well as general and administrative services including utilities and administrative support, available to the Company as may be required by the Company from time to time. The Company agreed to pay an aggregate of $~~15,000~~ ~~per month to Crescendo Advisors II, LLC, an entity controlled by a related party for such services commencing on the effective date of the Initial Public Offering. For~~ the three and nine months ended September 30, 2023 and 2022, was as follows:


	Three Months Ended								Nine Months Ended
(Amounts in thousands)	September 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
			% of Total				% of Total				% of Total				% of Total
Segment	Revenue		Revenue		Revenue		Revenue		Revenue		Revenue		Revenue		Revenue
Civil	$	90,708	29.0	%	$	71,409	21.3	%	$	229,264	27.2	%	$	221,303	25.5	%
Transportation		221,764	71.0	%		263,716	78.7	%		614,964	72.8	%		645,324	74.5	%
Total revenue	$	312,472	100.0	%	$	335,125	100.0	%	$	844,228	100.0	%	$	866,627	100.0	%

Segment Gross Profit

Gross profit by segment for the ~~Company incurred~~three and ~~paid the affiliate $45,000~~ ~~and $135,000, respectively, for such services. For the period from July 14, 2021 (inception) through~~nine months ended September 30, ~~2021, the company did not incur any administration fees.~~2023 and 2022, was as follows:


	Three Months Ended								Nine Months Ended
(Amounts in thousands)	September 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
			% of Segment				% of Segment				% of Segment				% of Segment
Segment	Gross Profit		Revenue		Gross Profit		Revenue		Gross Profit		Revenue		Gross Profit		Revenue
Civil	$	12,465	13.7	%	$	8,926	12.5	%	$	27,137	11.8	%	$	28,315	12.8	%
Transportation		17,064	7.7	%		53,484	20.3	%		(12,459)	(2.0)	%		76,763	11.9	%
Gross profit	$	29,529	9.5	%	$	62,410	18.6	%	$	14,678	1.7	%	$	105,078	12.1	%

~~Note — Related Party~~

~~On August 23, 2021, Eric Rosenfeld, the Company’s Chief SPAC Officer, issued a $65,000~~ ~~principal amount unsecured promissory note to the Company. The note is non-interest bearing and became payable on the consummation~~Revenue earned outside of the ~~Initial Public Offering. Due to~~United States was 25% and 23% for the ~~short-term nature~~three and nine months ended September 30, 2023 and 5% and 6% for the three and nine months ended September 30, 2022.

Debt

Long-term debt and credit facilities consisted of the ~~note, the fair value~~following as of ~~the note approximates the carrying amount. The Note balance was settled on November 26, 2021, shortly after the consummation of the Initial Public Offering. The Note was retired upon settlement~~September 30, 2023, and ~~no further borrowings are available under such Note.~~December 31, 2022:


	As of
(Amounts in thousands)	September 30, 2023		December 31, 2022
Secured notes	$	218,890	$	177,914
Mortgage notes		754		901
Revolving credit facility		90,000		95,000
Equipment notes		—		31
Total debt		309,644		273,846
Unamortized deferred financing costs		(583)		(246)
Total debt, net		309,061		273,600
Less: Current portion		(47,825)		(46,322)
Total long-term debt	$	261,236		227,278

~~On November 5, 2021, Mr. Rosenfeld issued a $~~

~~31,500~~Table of Contents ~~principal amount unsecured promissory note to the Company.~~

The ~~note is non-interest bearing and became payable~~weighted average interest rate on ~~the consummation~~total debt outstanding as of ~~the Public Offering. Due to the short-term nature of the note, the fair value of the note approximates the carrying amount. The Note balance~~September 30, 2023, was ~~settled on November 26, 2021, shortly after the consummation of the Initial Public Offering. The Note was retired upon settlement and no further borrowings are available under such Note.~~

~~Working Capital Loans~~

In order to finance transaction costs in connection with a Business Combination, the Initial Stockholders, the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds from time to time or at any time, as may be required (“Working Capital Loans”)6.09%. Each Working Capital Loan would be evidenced by a promissory note. The Working Capital Loans would either be paid upon consummation of a Business Combination, without interest, or, at the option of the lender, converted into units, which would be identical to the Private Units, upon consummation of a Business Combination. In the event that a Business Combination does not close, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of September 30, ~~2022,~~2023, and December 31, 2022, we were in compliance with all debt covenants.

Revolving Credit Facility

In July 2021, we entered into a revolving credit agreement with Frost Bank for $50.0 million. As of December 31, 2022, the revolving credit facility agreement had been amended and increased to $100.0 million. In August 2023, the revolving line of credit was extended through January 15, 2025 and we incurred $0.3 million as deferred financing cost. The revolving credit facility agreement bears interest on drawn balances at 1-month SOFR, subject to a floor of 0.90%, plus an applicable margin rate of 2.10%. As of September 30, 2023, $90.0 million was drawn on the revolver, and we had $10.0 million available.no ~~Working Capital Loans were outstanding.~~The revolver is collateralized by certain real estate assets, unencumbered assets, and a junior lien position on certain assets of Southland.

Secured Notes

13We enter into secured notes in order to finance growth within our business. In July 2023, we refinanced approximately $76.4 million of existing secured notes in exchange for a new equipment note in the amount of $113.5 million. The new equipment note is secured by specific construction equipment assets and has a five-year fully amortizing term at a fixed rate of 7.25%. We incurred $0.3 million as deferred financing cost and $0.6 million as bank service charges in connection with the refinancing. As of September 30, 2023, we had outstanding secured notes scheduled to expire between November 2023 and March 2033. Interest rates on the secured notes range between 1.29% and 8.00%.The secured notes are collateralized by certain assets of Southland’s fleet of equipment.

Mortgage Notes

We also enter into mortgage notes in order to finance growth within our business. As of September 30, 2023, we had outstanding mortgage notes scheduled to expire between October 2023 and February 2029. Interest rates on the mortgage notes range between 3.84% and 5.99%. The mortgage notes are collateralized by certain real estate owned by Southland.

Equipment OEM Notes

We enter into equipment notes in order to complete certain specialty construction projects. As of September 30, 2023, we did not have any outstanding equipment OEM notes that are collateralized by certain equipment owned by Southland.

7.	Commitments and Contingencies

Litigation

In the ordinary course of business, we and our affiliates are involved in various legal proceedings alleging, among other things, liability issues or breach of contract or tortious conduct in connection with the performance of services and/or materials provided, the outcomes of which cannot be predicted with certainty. We and our affiliates are also subject to government inquiries in the ordinary course of business seeking information concerning our compliance with government construction contracting requirements and various laws and regulations, the outcomes of which cannot be predicted with certainty.

Some of the matters in which we or our joint ventures and affiliates are involved may involve compensatory, punitive, or other claims or sanctions that, if granted, could require us to pay damages or make other expenditures in amounts that are not currently probable to be incurred or cannot currently be reasonably estimated. In addition, in some circumstances, our government contracts could be terminated, we could be suspended or incur other administrative penalties or sanctions, or payment of our costs could be disallowed. While any of our pending legal proceedings may be subject to early resolution as a result of our ongoing efforts to resolve the proceeding, whether or when any legal proceeding will be resolved is neither predictable nor guaranteed.

Accordingly, it is possible that future developments in such proceedings and inquiries could require us to (i) adjust existing accruals, or (ii) record new accruals that we did not originally believe to be probable or that could not be reasonably estimated. Such changes could be material to our financial condition, results of operations, and/or cash flows in any particular

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~~Note 6 —~~ ~~Commitments~~reporting period. In addition to matters that are considered probable for which the loss can be reasonably estimated, disclosure is also provided when it is reasonably possible and ~~Contingencies~~

~~Risks and Uncertainties~~

~~Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded~~estimable that ~~while~~a loss will be incurred, when it is reasonably possible that the ~~virus could~~amount of a loss will exceed the amount recorded, or a loss is probable but the loss cannot be estimated.

Liabilities relating to legal proceedings and government inquiries, to the extent that we have ~~a negative effect~~concluded such liabilities are probable and the amounts of such liabilities are reasonably estimable, are recorded on the ~~Company’s financial position, results~~consolidated balance sheets. A certain number of ~~its operations, and/or search~~the claims are insured but subject to varying deductibles, and a certain number of the claims are uninsured. The aggregate range of possible loss related to (i) matters considered reasonably possible, and (ii) reasonably possible amounts in excess of accrued losses recorded for ~~a target company, the specific impact is not readily determinable~~probable loss contingencies was immaterial, as of September 30, 2023, and December 31, 2022. Our estimates of such matters could change in future periods.

Surety Bonds

We, as a condition for entering into a substantial portion of our construction contracts, had outstanding surety bonds as of September 30, 2023, and December 31, 2022. We have agreed to indemnify the ~~date~~surety if the surety experiences a loss on the bonds of any of our affiliates.

Self-Insurance

We are self-insured up to certain limits with respect to workers’ compensation, and general liability and vehicle liability matters, and health insurance. We maintain accruals for self-insurance retentions based upon third-party data and claims history.

8.	Income Taxes

Prior to the Merger, Southland LLC, and various domestic subsidiaries, elected to be taxed as an S-corporation, under the provisions of Subchapter S of the ~~unaudited~~Internal Revenue Code. As such, their respective earnings were not subject to entity level income tax, but instead, the owners were liable for federal income taxes on their respective shares of the applicable income. American Bridge and Oscar Renda, two domestic subsidiaries of Southland LLC, had historically been taxed as separate C-corporation and their income subject to entity-level tax.

Following the closing of the Merger on February 14, 2023, Southland LLC, along with various domestic subsidiaries, elected to voluntarily revoke their S-corporation status effective January 1, 2023. As a result, Southland LLC, and their domestic subsidiaries, will elect to file a consolidated ~~condensed financial statements. The unaudited consolidated condensed financial statements do not include any adjustments that might result from~~corporate income tax return for the ~~outcome of this uncertainty.~~2023 calendar year.

The federal statutory tax rate is 21%. Southland’s effective tax rate was 52.9% and 22.7% for the three months ended September 30, 2023 and 2022, respectively. The primary differences between the statutory rate and the effective rate for the three months ended September 30, 2023 were due to state income taxes, as well as income earned in a foreign jurisdiction with a zero tax rate; however, that foreign income is included within U.S taxable income through GILTI. The effective tax rate was 50.1% and 24.4% for the nine months ended September 30, 2023 and 2022, respectively. The primary differences between the statutory rate and the effective rate for the nine months ended September 30, 2023 were due to state income taxes, the release of the valuation allowance recorded on American Bridge’s U.S. and state net deferred tax assets, permanent book to tax difference related to earnouts, and a lower effective rate on overall foreign earnings.

~~In February 2022,~~The change in filing structure as a result of the ~~Russian Federation~~Merger required recording deferred tax assets and ~~Belarus commenced a military action~~liabilities related to entities previously not subject to income tax with $5.1 million being recorded to income tax expense for the nine months ended September 30, 2023. As the Merger did not require acquisition accounting under U.S. GAAP, the recording of these deferred tax assets and liabilities was recorded to current operations in accordance with the ~~country of Ukraine.~~ requirements under ASC 740. Additionally, $1.1 million was recorded to income tax expense for the nine months ended September 30, 2023 due to the change in the state effective tax rate applied to both American Bridge and Oscar Renda deferred tax assets and liabilities.

As a result of ~~this action, various nations, including~~ the ~~United States, have instituted economic sanctions against~~new U.S. consolidated filing structure, Southland LLC is in a net deferred tax asset position for both federal and state income tax mainly resulting from the ~~Russian Federation~~capitalization of R&D expenses under IRC 174 offset by a deferred tax liability for the acceleration of depreciation for income tax purposes as for the three and ~~Belarus. Further,~~nine month period ended September 30, 2023. Southland LLC is in a three-year cumulative book income position after adjusting for permanent and one-time items and

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is forecasting that the ~~impact of this action and related sanctions on the world economy~~net deferred tax assets, are more-likely-than-not to be fully utilized. Therefore, a valuation allowance is not ~~determinable~~deemed necessary as of September 30, 2023. The valuation allowance related to American Bridge federal and state net deferred tax assets previously recorded at the ~~date~~year ended December 31, 2022 has been removed resulting in a benefit to income tax of ~~these unaudited~~$3.8 million recorded in the three months ended March 31, 2023 and no change was recorded to this in the nine months ended September 30, 2023.

9.	Remaining Unsatisfied Performance Obligations

Remaining Unsatisfied Performance Obligations (“RUPO”) consists of two components: (1) unearned revenue and (2) awarded but not started. Unearned revenue includes the revenue we expect to record in the future on in-progress contracts, including 100% of our consolidated ~~condensed financial statements,~~joint venture contracts and our proportionate share of unconsolidated joint venture contracts. Contracts that are awarded, but not yet started, are included in RUPO once a contract has been fully executed and/or we have received formal “Notice to Proceed” from the ~~specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited consolidated condensed financial statements.~~project owner.

~~Registration Rights~~

The holders of the founders’ shares and representative shares issued and outstanding on the date of Public Offering, as well as the holders of the Private Units and any units the Company’s initial stockholders, officers, directors or their affiliatesProjects included in RUPO may be ~~issued in payment~~canceled or modified by customers and may not be indicative of ~~Working Capital Loans made~~future operating results. It is adjusted to ~~it (and all underlying securities),~~reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate.

Fixed price contracts, particularly with federal, state and local government customers, are ~~entitled~~expected to ~~registration rights pursuant~~continue to ~~an agreement signed on the effective date of the Initial Public Offering. The holders of~~represent a majority of ~~these securities are entitled~~our total RUPO.

The following schedule shows the RUPO as of September 30, 2023, and December 31, 2022:


	As of
(Amounts in millions)	September 30, 2023		December 31, 2022
Remaining Unsatisfied Performance Obligations	$	2,541	$	2,973

The Company expects to ~~make up to two demands that~~recognize approximately 42% of its RUPOs as revenue during the ~~Company registers such securities. The holders~~next twelve months, and the balance thereafter.

10.	Cost and Estimated Earnings on Uncompleted Contracts

Contract assets as of September 30, 2023, and December 31, 2022, consisted of the ~~majority~~following:


	As of
(Amounts in thousands)	September 30, 2023		December 31, 2022
Costs in excess of billings	$	486,077	$	480,825
Costs to fulfill contracts, net		29,284		32,081
Contract assets	$	515,361	$	512,906

Costs and estimated earnings on uncompleted contracts were as follows as of ~~the founders’ shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares~~September 30, 2023, and December 31, 2022:


	As of
(Amounts in thousands)	September 30, 2023		December 31, 2022
Costs incurred on uncompleted contracts	$	7,149,753	$	6,874,709
Estimated earnings		450,888		398,917
Costs incurred and estimated earnings		7,600,641		7,273,626
Less: billings to date		(7,299,191)		(6,924,358)
Costs to fulfill contracts, net		29,284		32,081
Net contract position	$	330,734	$	381,349

Table of common stock are to be released from escrow. The holders of a majority of the representative shares, Private Units and units issued to the Company’s initial stockholders, officers, directors or their affiliates in payment of working capital loans made to it (or underlying securities) can elect to exercise these registration rights at any time after the Company consummates a business combination. Notwithstanding anything to the contrary, EBC may only make a demand on one occasion and only during the five-year period beginningContents

Our net contract position is included on the ~~effective date of~~condensed consolidated balance sheets under the registration statement of which this prospectus forms a part. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s consummation of a business combination; provided, however, that EBC may participate in a “piggy-back” registration only during the seven-year period beginning on the effective date of the registration statement of which this prospectus forms a part. The Company will bear the expenses incurred in connection with the filing of any such registration statements.following captions:


	As of
(Amounts in thousands)	September 30, 2023		December 31, 2022
Contract assets	$	515,361	$	512,906
Contract liabilities		(184,627)		(131,557)
Net contract position	$	330,734	$	381,349

~~Underwriting Agreement~~

~~The underwriters were entitled to be paid cash underwriting commissions of~~ ~~2.00% of the gross proceeds of the Initial Public Offering.~~

~~EarlyBirdCapital is also entitled to a deferred underwriting commission of~~ ~~3.50% of the gross proceeds of the Initial Public Offering.~~

~~On November 29, 2021, the underwriters exercised their over-allotment option in full to purchase an additional~~ ~~3,600,000~~ ~~Units. As a result, on December 1, 2021, the Company sold an additional~~ ~~3,600,000~~ ~~Units at $10.00~~ ~~per Unit for an aggregate amount of $36,000,000. In connection with the underwriters’ exercise of their over-allotment option, the Company also consummated the sale of an additional~~ ~~126,000~~ ~~Private Units at $10.00~~ ~~per unit, generating total proceeds of $1,260,000~~.

~~The underwriters were paid $5,520,000~~ ~~in cash underwriting fees and EarlyBirdCapital is entitled to an aggregate of $9,660,000~~ ~~of deferred underwriting fees.~~

~~Note 7 —~~ ~~Common Stock Subject to Possible Redemption~~

The Company’s common stock sold in the Initial Public Offering features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue ~~50,000,000~~ ~~shares of common stock with a par value of $0.0001~~ ~~per share. Holder of the Company’s common stock are entitled to one vote for each share.~~ As of September 30, ~~2022~~2023, and December 31, ~~2021, there were~~ ~~27,600,000~~ ~~Public Shares outstanding, all~~2022, we had recorded $288.2 million and $260.8 million, respectively, related to claims. The classification of ~~which were subject to redemption.~~

~~As of September 30, 2022 and December 31, 2021, common stock reflected~~these amounts are represented on the consolidated ~~condensed~~ balance sheets ~~are reconciled on the following table:~~

Schedule of common stock reflected on the consolidated condensed balance sheets
Gross Proceeds $ 276,000,000
Less:
Proceeds allocated to public warrants (12,834,000 )
Common stock issuance cost (15,660,526 )
Plus:
Accretion of carrying value to redemption value 32,634,526
Common Stock subject to possible redemption, December 31, 2021 $ 280,140,000
Accretion – increase in redemption value of common stock subject to redemption 1,242,502
Common Stock subject to possible redemption, September 30, 2022 $ 281,382,502

~~Note 8 —~~ ~~Stockholders’ Deficit~~

~~Preferred Stock~~

~~The Company is authorized to issue~~ ~~1,000,000~~ ~~shares of preferred stock with a par value of $0.0001~~ ~~per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of September 30, 2022 and December 31, 2021, there are~~ no ~~shares of preferred stock issued or outstanding.~~

~~Common Stock~~

~~The Company is authorized to issue~~ ~~50,000,000~~ ~~shares of common stock with a par value of $0.0001~~ ~~per share. As of September 30, 2022 and December 31, 2021,~~ ~~35,911,000~~ ~~shares of common stock were issued and outstanding, presented as temporary equity on the consolidated condensed balance sheets, comprised of~~ ~~240,000~~ ~~Representative Shares (as described below),~~ ~~6,900,000~~ ~~Founder Shares,~~ ~~27,600,000~~ ~~public shares, and~~ ~~1,171,000~~ ~~private shares.~~

All of the Founder Shares were placed into an escrow account on the closing of the Initial Public Offering. Subject to certain limited exceptions, these shares will not be released from escrow until the earlier of 180 days after the date of the consummation of an initial Business Combination and the date on which the closing price of the common stock exceeds $12.50 per share for any 20 trading days within a 30-trading day period following the consummation of an initial Business Combination, or earlier if, subsequent to the Company’s initial Business Combination, the Company consummates a subsequent liquidation, merger, share exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

~~Representative Shares~~

~~The Company has issued to the designees of EBC~~ ~~240,000~~ shares of common stock (the “Representative Shares”) for a nominal consideration, paid to the Company, shortly after the IPO. The Company accounted for the Representative Shares as an offering cost of the Proposed Offering, with a corresponding credit to stockholders’ equity. The Company estimated the fair value of Representative Shares to be $~~870~~ based upon the price of the Founder Shares issued to the Initial Stockholders. The holders of the Representative Shares have agreed not to transfer, assign or sell any such shares until the completion of a Business Combination. In addition, the holders have agreed (i) to waive their redemption rights with respect to such shares in connection with the completion of a Business Combination and (ii) to waive their rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete a Business Combination within the Combination Period.

~~Warrants~~

~~As of September 30, 2022 and December 31, 2021, the Company has~~ ~~13,800,000~~ ~~Public Warrants and~~ ~~522,500~~ Private Placement Warrants outstanding. The Public Warrants and Private Placement Warrants are identical except as described below. Warrants may only be exercised for a whole number of shares. No fractional Warrants will be issued upon separation of the Units and only whole Warrants will trade. The Warrants will become exercisable 30 days after the completion of a Business Combination; provided that the Company has an effective registration statement under the Securities Act covering the issuance of the shares of common stock issuable upon exercise of the Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement). The Company agreed that as soon as practicable after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement covering the issuance of the shares of common stock issuable upon exercise of the Warrants, and use its best efforts to cause the same to become effective as soon as possible and to maintain the effectiveness of such registration statement and a current prospectus relating to those shares until the Warrants expire or are redeemed.

~~The Warrants have an exercise price of $11.50~~ ~~per share, subject to adjustments, and will expire five~~ 5 years after the completion of a Business Combination or earlier upon redemption or liquidation. In addition, if (x) the Company issues additional shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the Company’s initial stockholders or their affiliates, without taking into account any founders’ shares held by them prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the completion of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the Warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price.

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants will not be transferable, assignable or salable until after the completion of a Business Combination, subject to certain limited exceptions.

~~Redemption of Warrants:~~ ~~Once the Warrants become exercisable, the Company may redeem the outstanding warrants:~~

	-	~~in whole and not in part;~~

	-	~~at a price of $0.01 per warrant;~~

	-	~~upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and~~

	-	if, and only if, the last reported sale price of common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30 trading day period commencing once the Warrants become exercisable and ending three business days before the Company sends the notice of redemption to the warrant holders.

The Company will not redeem the Warrants as described above unless an effective registration statement under the Securities Act covering the common stock issuable upon exercise of the Warrants is effective and a current prospectus relating to those of shares is available throughout the 30-day redemption period or the Company has elected to require the exercise of the warrants on a “cashless basis”.

~~Note 9 —~~ ~~Fair Value Measurements~~

~~The following tables present information about the Company’s assets that are measured at fair value on a recurring basis~~ as of September 30, ~~2022,~~2023, and December 31, ~~2021, and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:~~2022, as follows:


(Amounts in thousands)	September 30, 2023		December 31, 2022
Costs in excess of billings	$	190,024	$	156,127
Investments		98,224		104,643
Claims asset total	$	288,248	$	260,770

~~September 30,~~On January 1, 2022,

Schedule of fair value measurements
Description Quoted
Prices in
Active
Markets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Other
Unobservable
Inputs
(Level 3)
Assets:
Investments held in Trust Account – Money Market Fund $ 281,506,666 $ - $ -

~~December 31, 2021~~

Description Quoted
Prices in
Active
Markets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Other
Unobservable
Inputs
(Level 3)
Assets:
Investments held in Trust Account – Money Market Fund $ 280,164,163 $ - $ -

~~Level 1 assets include investments comprised solely~~ we had contract liabilities of ~~U.S. government securities. The Company uses inputs such~~$111.3 million, of which $14.2 million and $104.9 were recognized as ~~actual trade data, quoted market prices from dealers or brokers, and other similar sources to determine the fair value of its investments.~~

~~Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were no transfers to/from Levels 1, 2, and 3~~revenue during the three and nine months ended September 30, 2022.

On January 1, 2023, we had contract liabilities of $131.6 million, of which $18.9 million and $118.2 were recognized as revenue during the three and nine months ended September 30, 2023.

11.	Noncontrolling Interests Holders

Southland has several controlling interests including both joint ventures and partnerships. We have controlling interests and allocate earnings and losses in those entities to the noncontrolling interest holders based on our ownership percentages.

We owned an 84.7% interest in Oscar Renda Contracting, Inc. (“Oscar Renda”), as of September 30, 2023, and September 30, 2022.

We owned a 65.0% interest in the Southland Technicore Mole joint venture and a 70.0% interest in the Southland Astaldi joint venture as of September 30, 2023, and September 30, 2022.

We consolidated each of Oscar Renda Contracting, Inc., Southland Technicore Mole joint venture, and Southland Astaldi joint venture because of our control of the entity through our ownership percentage over the joint venture operations. We have fully consolidated revenue, cost of construction, and other costs on our unaudited condensed consolidated statements of operations and balances on the unaudited condensed consolidated balance sheets.

12. Related Party Transactions

Southland occasionally enters into subcontracts with a subcontractor in which certain employees hold a minority ownership. Cost of construction related to this subcontractor was $0.4 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively, and $1.7 million and $0.1 million for the nine months ended September 30, 2023 and 2022, respectively. Accounts payable balance due to this subcontractor was $0.5 million and $0.1 million as of September 30, 2023 and December 31, 2022. The terms on which Southland enters into agreements with this related party are substantially the same as terms the Company would enter into with a similar, unrelated party.

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13. Earnings (Loss) per Share

Basic and diluted net loss per share for the three and nine months ended September 30, 2023 consisted of the following (in thousands, except shares and per share amounts):


	Three Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2023
Numerator:
Net income (loss)	$	4,791	$	(11,376)
Less net income attributable to noncontrolling interests		991		2,314
Net income (loss) attributable to common stockholders, basic and diluted		3,800		(13,690)

Denominator⁽¹⁾:
Weighted average common shares outstanding — basic		47,856,114		46,771,938
Add: Dilutive effect of restricted stock units		15,928		-
Weighted average common shares outstanding — diluted		47,872,042		46,771,938

Net income (loss) per share — basic	$	0.08	$	(0.29)
Net income (loss) per share — diluted	$	0.08	$	(0.29)

(1)

The structure of Southland’s historical common equity structure was in the form of membership percentages and no shares were issued. As such, reporting periods prior to the three months ended March 31, 2023 will not present share or per share data.

As the average market price of common stock for the three and nine months ended September 30, 2023 did not exceed the exercise price of the Warrants, the potential dilution from the

~~Period~~ Warrants converting into 14,385,500 shares of common stock for both periods have been excluded from ~~July 14, 2021 (inception) through September 30, 2021.~~

~~Note 10 —~~ ~~Merger Agreement~~

~~On May 25, 2022,~~ the Company, Merger Sub and Southland entered into the Merger Agreement. Pursuant to the Merger Agreement, upon the Closing of the Transactions, Merger Sub will merge with and into Southland, with Southland being the surviving entity of the Merger and becoming a wholly owned subsidiary of the Company.

Pursuant to the Merger Agreement, at the Effective Time (as defined below), by virtue of the Merger and without any further action on the part of the parties to the Merger Agreement, each Southland Membership Interest (expressed as a percentage) issued and outstanding immediately before the effective time of the Merger (the “Effective Time”) will be converted into and become the right to receive (I) a number of shares ~~of the Company’s Common Stock (the “Per Membership Interest Merger Consideration”) equal to (a) (i) $343,000,000~~ ~~divided by (ii) $10.15~~, multiplied by (b) such Southland Member’s percentage of all Southland Membership Interests issued and outstanding immediately prior to the Effective Time (i.e., 100%), (II) the right to receive a number of shares of the Company’s Common Stock (the “Earnout Merger Consideration”) equal to (a) (i) $~~105,000,000~~ ~~divided by (ii) $10.15~~, multiplied by (b) such Southland Member’s percentage of all Southland Membership Interests issued and outstanding immediately prior to the Effective Time, upon the achievement of certain targets and (III) an amount of cash (the “Cash Consideration” and together with the Per Membership Interest Merger Consideration and Earnout Merger Consideration, the “Merger Consideration”) equal to (a) $~~50,000,000~~ ~~multiplied by (b) such Southland Member’s percentage of all Southland Membership Interests issued and outstanding immediately prior to the Effective Time (i.e., 100%); provided, however, that~~used in ~~lieu of receiving all or part of the Cash Consideration, up to $50,000,000~~ ~~of cash held by Southland or its subsidiaries may be distributed to the Southland Members, or to such other persons~~calculating diluted net income (loss) per share as instructed by the Southland Members, if either (1) there is not sufficient funds in the Trust Account to pay such amount in cash or (2) Southland elects, in its sole discretion, to make such dividend at or prior to the Closing. Any cash paid as a dividend on or prior to the Closing pursuant to such provision shall reduce the Cash Consideration payable to the Southland Members at Closing by a like amount.their inclusion would have been antidilutive.

~~The Merger Agreement provides for the payment of up to an aggregate of~~ ~~10,344,828~~ additional shares of the Company’s Common Stock as earnout consideration as described below. As used in the following discussion of the earnout consideration, “Adjusted EBITDA” means, for the applicable fiscal year, using results and expenses taken from the audited financial statements of the Company and its subsidiaries, including but not limited to Southland and its affiliates, on a consolidated basis, but excluding any results attributable to businesses acquired after the date of the Merger Agreement except for certain permitted acquisitions, the following calculation: income before provision for income taxes, plus interest expense, less interest income, plus depreciation and amortization, plus any expenses arising solely from the Merger charged to income in such fiscal year, including but not limited to filing fees borne by Southland with respect to the Registration Statement (as defined below) and notifications required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), plus expenses relating to certain incentive compensation arrangements. In addition, any Company or Merger Sub expenses incurred prior to or at the Closing that are included in the Company’s 2022 income statement will be excluded for purposes of Adjusted EBITDA calculation. For the purposes of calculating Adjusted EBITDA for the fiscal year of the Company ending December 31, 2022, Adjusted EBITDA shall be calculated after giving pro forma effect to the Merger as if the Merger was consummated on the first day of such fiscal year.

~~If, for the fiscal year of the Company ending December 31, 2022, Legato has Adjusted EBITDA equal to or greater than $125,000,000~~ ~~(the “2022 Base Target”), the Company shall issue to the holders of Southland Membership Interests outstanding immediately prior to the Effective Time, in the aggregate,~~ ~~3,448,276~~ ~~shares of the Company’s Common Stock; provided that if the Company has Adjusted EBITDA equal to or greater than $145,000,000~~ ~~(the “2022 Bonus Target”), then the aggregate number of shares of Common Stock to be issued to the holders of Southland Membership Interests shall be increased to~~ ~~5,172,414~~ ~~shares; and~~

~~If, for the fiscal year of the Company ending December 31, 2023, Legato has Adjusted EBITDA equal to or greater than $145,000,000~~ ~~(the “2023 Base Target”), the Company shall issue to the holders of Southland Membership Interests outstanding immediately prior to the Effective Time, in the aggregate,~~ ~~3,448,276~~ ~~shares of the Company’s Common Stock; provided that if the Company has Adjusted EBITDA equal to or greater than $165,000,000~~ ~~(the “2023 Bonus Target”), then the aggregate number of shares of Common Stock to be issued to the holders of Southland Membership Interests shall be increased to~~ ~~5,172,414~~ ~~shares.~~

The Closing is expected to occur in the second half of 2022, following receipt of the required stockholder approval by the Company, Southland Member approval and the fulfilment of certain other conditions set forth in the Merger Agreement.

~~Note 11 —~~ ~~Subsequent Events~~

The Company evaluated subsequent events and transactions occurred after the unaudited consolidated condensed balance sheet date and up to the date the unaudited consolidated condensed interim financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited consolidated condensed financial statements.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Legato Merger Corp. II. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis contain forward-looking statements relating to future events or our future financial performance, which involve risk and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. Please see the discussion regarding forward-looking statements included under the “Cautionary Note Regarding Forward-Looking Statements” section for a discussion of some of the ~~Company’s financial condition~~uncertainties, risks, and assumptions associated with these statements.

The following discussion and analysis present information that we believe is relevant to an assessment and understanding of our condensed consolidated balance sheets, statements of cash flows, and results of ~~operations~~operations. This information should be read in conjunction with the ~~unaudited~~condensed consolidated ~~condensed~~ financial statements and the notes ~~thereto contained elsewhere~~thereto.

Overview

Southland Holdings, Inc. (“Southland”) is a diverse leader in ~~this Quarterly Report. Certain information contained~~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 ~~discussion~~following end markets: bridges, tunnels, communications, transportation and ~~analysis set forth below includes~~facilities, marine, steel structures, water and wastewater treatment, and water pipelines.

Southland is based in Grapevine, Texas. We are the parent company of Johnson Bros. Corporation, American Bridge Company, Oscar Renda Contracting, Southland Contracting, Mole Constructors, and Heritage Materials. With the combined capabilities of these six primary operating subsidiaries and their affiliates, Southland has become a diverse industry leader with both public and private customers.

Business Environment

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

Our Civil segment operates throughout North America and specializes in services that include the design and construction of water pipeline, pump stations, lift stations, water and wastewater treatment plants, concrete and structural steel, outfall, and tunneling.

Our Transportation segment 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 structures including many of the most recognizable bridges, convention centers, sports stadiums, marine facilities, and ferris wheels in the world.

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Market Trends and Uncertainties

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. These two advantages contribute to what sets us apart from our competition. We believe that the primary factors influencing competition in our industry are price, reputation for quality, safety, schedule certainty, relevant experience, availability of field supervision and skilled labor, machinery and equipment, financial strength, as well as knowledge of local markets and conditions. We believe that we can compete favorably in all of these factors.

~~Special Note Regarding Forward-Looking Statements~~Many of our competitors have the ability to perform work in either the private or public sectors. When opportunities for work in one sector are reduced, competitors tend to look for opportunities in the other sector. This migration has the potential to reduce revenue growth and/or increase pressure on gross profit margins.

We have seen an increase in demand for specialty construction projects in recent years at the federal, state, and local level. We anticipate the additional spending on infrastructure related to economic stimulus spending including the Infrastructure Investment and Jobs Act that was passed in 2021, and other federal, state, or local initiatives.

We believe that the combination of our experience, reputation, and technical expertise are unmatched among companies of our size. This ~~Quarterly Report includes “forward-looking statements” within the meaning~~combination of ~~Section 27A~~skills has allowed us to pursue complex projects with fewer competitors.

Seasonality, Cyclicality, and Variability

The results of our operations are subject to quarterly variations. Much of the ~~Securities Act~~variation is the result of ~~1933,~~weather, particularly rain, ice, snow, heat, wind, and named storms, which can impact our ability to perform construction activities. These weather impacts can affect revenue and profitability in either of our business segments. Any quarter can be affected either negatively or positively by atypical weather patterns in any part of North America, or other areas in which we operate. Traditionally, our first quarter is the most weather-affected; however, this may or may not necessarily be true in future periods.

Our business may also be affected by overall economic market conditions, including but not limited to declines in spending by project owners, delays in new projects, by changes in client schedules, or for other reasons.

Key Business Metrics

Backlog

In our industry, backlog is an indicator of future revenue streams for work that has been awarded but not completed. We define backlog as ~~amended (the “Securities Act”) and Section 21E~~a measure of the ~~Exchange Act~~total amount of revenue remaining to be earned on projects that have been awarded. We only include a project in our backlog once we have an executed contract, or authorized notice to proceed. As a result, we believe our backlog is firm, although cancellations or scope adjustments may occur.

Backlog should not be considered a comprehensive indicator of future revenue as any of our contracts can be terminated by our customers on relatively short notice, and backlog does not include future work for which we may be awarded. In the event of a cancelation, we are ~~not historical facts, and involve risks and uncertainties that could cause actual results~~typically reimbursed for all of our costs through a specific contractual date, as well as our costs to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materiallydemobilize from the ~~events, performance~~project site. Costs may include preconstruction and ~~results discussed~~engineering services as well as that of our subcontractors. Our contracts do not typically grant us rights to revenue reflected in ~~the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated~~backlog. Projects may remain in ~~the forward-looking statements, please refer to the Risk Factors section~~backlog for extended periods of the Company’s final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whethertime as a result of ~~new information, future events~~schedule delays, regulatory requirements, project specific issues, or ~~otherwise.~~other reasons. Contract amounts from contracts where a transaction price cannot be reasonably estimated are not included within our backlog amount.

~~Overview~~

We are a blank check company formed under the laws of the State of Delaware on July 14, 2021, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Units, our capital stock, debt or a combination of cash, stock and debt.

We expect to continue to incur significant costs in connection with closing our initial Business Combination. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.

On May 25, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Legato Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of ours (“Merger Sub”), and Southland Holdings LLC, a Texas limited liability company (“Southland”). Pursuant to the Merger Agreement, upon the closing (“Closing”) of the transactions contemplated by the Merger Agreement (the “Transactions”), Merger Sub will merge with and into Southland (the “Merger”), with Southland being the surviving entity of the Merger (“Surviving Company”) and becoming a wholly-owned subsidiary of the Company. In connection therewith, the members of Southland (“Southland Members”) will receive shares of common stock, par value $0.0001 per share, of the Company, cash and the right to receive certain contingent consideration in exchange for all the outstanding limited liability company membership interests of Southland.

~~Results of Operations~~

We have neither engaged in any operations nor generated any revenues to date. Our only activities through September 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering and searching for a target business for our initial Business Combination and entering into the Merger Agreement. We do not expect to generate any operating revenues until after the completion of our Business Combination, at the earliest. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

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Other Non-GAAP Financial Measures

~~For the three months ended September 30, 2022, we had a net~~

In addition to financial results determined in accordance with GAAP, in our industry, it is customary to manage our business using earnings before interest expense, income ~~of $851,629, which consisted of operating costs of $276,080~~taxes, depreciation and an income tax expense of $279,080, offset by Investment income on Trust Account of $1,406,789. For the nine months ended September 30, 2022, we had a net income of $416,180, which consisted of operating costs of $1,025,775 and an income tax expense of $343,430, offset by Investment income on Trust Account of $1,785,385. For the period from July 14, 2021 (inception) through September 30, 2021, we had a net loss of $549, solely consisting of general and administrative expenses.

~~Liquidity and Capital Resources~~

~~As of September 30, 2022, the Company had $422,073 in cash, and a working capital balance of $506,419.~~

The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from the initial stockholder exchange for issuance of Founder Shares (as defined in Note 5), and loan proceeds from Eric Rosenfeld, the Company’s Chief SPAC Officer of $65,000 and $31,500, respectively under the Note (as defined in Note 5)amortization (“EBITDA”). The Note balances were settled shortly after the consummation of the Initial Public Offering. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds held outside of the Trust Account.

We intend to use substantially all of the funds held in the Trust Account (excluding deferred underwriting commissions and interest to pay taxes) to acquire Southland and to pay our expenses relating thereto. The remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of Southland following the closing of the Business Combination.

~~Until the consummation of a Business Combination, the~~ Company will ~~be using funds held outside of the Trust Account for paying existing accounts payable and seeking~~also utilize certain adjustments to consummate the Business Combination with Southland. If the Company’s estimates of the costs of consummating the Business Combination with Southland are less than the actual amount necessary to do so, the CompanyEBITDA (“Adjusted EBITDA”), which may have insufficient funds available to operate its business prior to a Business Combination. Moreover, the Company may need to obtain additional financing either to complete a Business Combination or because it becomes obligated to redeem a significant number of its public shares upon completion of a Business Combination, in which case the Company may issue additional securities or incur debt in connection with such Business Combination. In order to finance transaction costs in connection with a Business Combination, our officers, directors and initial stockholders and their affiliates may, but are not obligated to, loan us funds as may be required. If the Company completes a Business Combination, the Company would repay such loaned amounts. In the event that a Business Combination does not close, the Company may use any funds available to it outside of the Trust Account to repay any such loaned amounts.

~~If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could~~ include but not ~~necessarily~~ be limited to ~~suspending~~certain non-cash charges, stock-based compensation, and other one-time income or expenses. EBITDA and Adjusted EBITDA assist management and our Board and may be useful to investors in comparing our operating performance consistently over time as it removes the ~~pursuit~~impact of ~~a potential transaction. The Company cannot provide any assurance~~our capital structure and expenses that ~~new financing will be available to it on commercially acceptable terms, if at all.~~

~~Going Concern Consideration~~

The Company has until May 24, 2023 to consummate an initial Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by such time period. If a Business Combination is not consummated within such time period and stockholders do not ~~otherwise approve an amendment~~relate to the charter to extend such date, there will be a mandatory liquidation and subsequent dissolution. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s ability to continue as a going concern one year from the date that these unaudited consolidated condensed financial statements are issued. The unaudited consolidated condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management plans to address this substantial doubt by completing a Business Combination by the mandatory liquidation date. our core operations.

~~Off-Balance Sheet Arrangements~~

~~We did not have any off-balance sheet arrangements as of September 30, 2022.~~

~~Contractual Obligations~~

~~We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.~~

Critical Accounting Policies

The preparation of ~~the~~ financial statements ~~and related disclosures~~ in conformity with ~~accounting principles generally accepted in the United States of America~~GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent ~~assets and~~ liabilities atas of the date of the financial statements and ~~income~~the reported amounts of revenues and expenses earned and incurred, respectively, during the ~~periods reported. Actual~~reporting period. Critical accounting estimates are fundamental to the portrayal of both our financial condition and results of operations and often require difficult, subjective, and complex estimates and judgments. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could ~~materially~~ differ significantly from ~~those~~these estimates. ~~There have been no significant~~Changes in these estimates resulting from the continuing changes in the economic environment will be reflected in the financial statements in future periods. With respect to our critical accounting policies asand estimates, there have been no material developments or changes from the policies and estimates discussed in our annual disclosures.

More information about our accounting policies can be found in Note 2 of our audited financial statements, and Management’s Discussion and Analysis, for the year ended December 31, 2022 on our Current Report on Form 8-K, ~~and the final prospectus~~as originally filed ~~by us~~ with the SEC on ~~December 1, 2021~~February 14, 2023 and ~~November 23, 2021,~~ as ~~well as~~subsequently amended on March 22, 2023.

Recent Events

In the ~~Annual Report on Form 10-K filed March 17, 2022.~~second quarter of 2023, Southland decided to discontinue certain types of projects in its Materials & Paving business line (“M&P”) and sold assets related to producing large scale concrete and asphalt. M&P is reported in the Transportation segment. In the third quarter of 2023, M&P contributed $47.8 million to revenue and ($11.3) million to gross profit. As of September 30, 2023, approximately 11% of Southland’s backlog was in M&P, and Southland estimates this work to be completed within the next two years.

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Results of Operations

The following table sets forth summary financial information for the three months ended September 30, 2023 and 2022:


	Three Months Ended
(Amounts in thousands)	September 30,��2023		September 30, 2022
Revenue	$	312,472	$	335,125
Cost of construction		282,943		272,715
Gross profit		29,529		62,410
Selling, general, and administrative expenses		15,247		15,606
Operating income		14,282		46,804
Loss on investments, net		(21)		(100)
Other income, net		2,151		2,292
Interest expense		(6,231)		(2,285)
Income before income taxes		10,181		46,711
Income tax expense		5,390		10,588
Net income		4,791		36,123
Net income attributable to noncontrolling interests		991		924
Net income attributable to Southland Stockholders	$	3,800	$	35,199

Revenue

~~Recent Accounting Standards~~

~~The Company’s management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have~~Revenue for the three months ended September 30, 2023, was $312.5 million, a ~~material effect on the accompanying unaudited consolidated condensed financial statements.~~

~~Related Party Transactions~~

~~Founders Shares~~

~~In July 2021, the Company issued an aggregate~~decrease of 5,750,000 shares of common stock (the “Founder Shares”) for an aggregate purchase price of $25,000. On November 22, 2021, the Company effected a stock dividend of 0.2 shares for each share outstanding, resulting in 6,900,000 Founder Shares and 240,000 representative shares, totaling 7,140,000 being issued and outstanding. The Founder Shares included an aggregate of up to 900,000 shares subject to forfeiture by the holders$22.7 million, or 6.8%, compared to the ~~extent that the over-allotment~~three months ended September 30, 2022. The decrease was not exercised in full or in part, so that the holders will collectively own 20% of the Company’s issued and outstanding shares after the Initial Public Offering (excluding the Representative Shares (as defined in Note 8)). On December 1, 2021, the underwriters fully exercised their over-allotment option. As a result of the underwriters’ election to fully exercise their over-allotment option, a total of 900,000 Founder Shares are no longer subject to forfeiture.

The holders of the Founder Shares have agreed not to transfer, assign or sell any of the Founder Shares (except to certain permitted transferees) until (i) the earlier of 180 days after the completion of a Business Combination and the date on which the closing price of the common shares equals or exceeds $12.50 per share (as adjusted for share splits, share capitalizations, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after a Business Combination and (ii) if, subsequentprimarily attributable to a ~~Business Combination, the Company completes a liquidation, merger, share exchange or other similar transaction which results~~decrease in ~~all of the Company’s stockholders having the right to exchange their common shares for cash, securities or other property.~~

~~Administrative Service Fee~~

~~The Company presently occupies office space provided~~revenue in our Transportation segment, partially offset by an ~~entity controlled~~increase in revenue in our Civil segment.

Cost of construction

Cost of construction for the three months ended September 30, 2023, was $282.9 million, an increase of $10.2 million, or 3.8%, compared to the three months ended September 30, 2022. The increase was primarily attributable to an $15.7 million increase in our Civil segment, partially offset by ~~Crescendo Advisors II, LLC. Such entity agreed that until~~a $5.5 million decrease in our Transportation segment.

Gross profit

Gross profit for the ~~Company consummates~~three months ended September 30, 2023, was $29.5 million, a ~~Business Combination, it will make such office space, as well as~~decrease of $32.9 million, or 52.7%, compared to the three months ended September 30, 2022. The decrease was primarily attributable to activity related to the M&P business line discussed in the Recent Events section and progress completions in our Transportation segment.

Selling, general, and administrative ~~services including utilities~~costs

Selling, general, and administrative ~~support, available~~costs for the three months ended September 30, 2023, were $15.2 million, a decrease of $0.4 million, or 2.3%, compared to the ~~Company as may be required by the Company from time~~three months ended September 30, 2022. The decrease was related to ~~time. The Company agreed to pay an aggregate~~a decrease in professional fees of ~~$15,000 per month to Crescendo Advisors II, LLC, an entity controlled~~$1.1 million; partially offset by a ~~related party~~$0.3 million increase in costs of becoming a public company and $0.6 million increase in salaries.

Loss on investments, net

Loss on investments, net for ~~such services commencing~~the three months ended September 30, 2023, was $0.0 million compared to $0.1 million loss on investments, net for the three months ended September 30, 2022.

Interest expense

Interest expense for the three months ended September 30, 2023, was $6.2 million, an increase of $3.9 million, or 172.7%, compared to the three months ended September 30, 2022. The difference is primarily driven by an increase in

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external borrowings compared to the prior year and higher interest rates on the additional borrowings. We also experienced increased borrowing costs on our revolving line of credit compared to the same period in 2022.

Income tax expense

Income tax expense for the three months ended September 30, 2023, was $5.4 million, or an effective ~~date~~rate of 52.9%. The primary differences between the federal statutory tax rate of 21% and the effective rate were state income taxes, the inclusion of foreign sourced income within U.S. taxable income through GILTI, and the impact of worldwide forecast revisions on the interim calculation under ASC 740.

Income tax expense for the three months ended September 30, 2022, was $10.6 million, or an effective rate of 22.7%. The primary differences between the statutory rate and the effective rate were due to state income taxes and a valuation allowance recorded on American Bridge’s U.S. and state net deferred tax assets, offset with inclusion of earnings from certain filing entities being taxed as pass-through entities and a lower effective rate on overall foreign earnings.

The following table sets forth summary financial information for the nine months ended September 30, 2023 and 2022:


	Nine Months Ended
(Amounts in thousands)	September 30, 2023		September 30, 2022
Revenue	$	844,228	$	866,627
Cost of construction		829,550		761,549
Gross profit		14,678		105,078
Selling, general, and administrative expenses		47,266		43,395
Operating income (loss)		(32,588)		61,683
Loss on investments, net		(3)		(79)
Other income, net		23,559		936
Interest expense		(13,790)		(6,317)
Income (loss) before income taxes		(22,822)		56,223
Income tax expense (benefit)		(11,446)		13,745
Net income (loss)		(11,376)		42,478
Net income attributable to noncontrolling interests		2,314		1,474
Net income (loss) attributable to Southland Stockholders	$	(13,690)	$	41,004

Revenue

Revenue for the nine months ended September 30, 2023, was $844.2 million, a decrease of $22.4 million, or 2.6%, compared to the nine months ended September 30, 2022. The decrease was primarily attributable to a decrease in revenue in our Transportation segment, partially offset by an increase in revenue in our Civil segment.

Cost of construction

Cost of construction for the nine months ended September 30, 2023, was $829.6 million, an increase of $68.0 million, or 8.9%, compared to the nine months ended September 30, 2022. The increase was primarily attributable to an $9.1 million increase in our Civil segment and an $58.9 million increase in our Transportation segment.

Gross profit

Gross profit for the nine months ended September 30, 2023, was $14.7 million, a decrease of $90.4 million, or 86.0%, compared to the nine months ended September 30, 2022. The decrease was primarily attributable to activity related to the M&P business line discussed in the Recent Events section and progress completions in our Transportation segment.

Selling, general, and administrative costs

Selling, general, and administrative costs for the nine months ended September 30, 2023, were $47.3 million, an increase of $3.9 million, or 8.9%, compared to the nine months ended September 30, 2022. The increase was related to an

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increase of $1.8 million increase in costs of becoming a public company and $2.6 million increase in salaries; partially offset by $1.3 million decrease in professional fees.

Loss on investments, net

Loss on investments, net for nine months ended was $0.0 million compared to $0.1 million loss on investments, net for the nine months ended September 30, 2022.

Interest expense

Interest expense for the nine months ended September 30, 2023, was $13.8 million, an increase of $7.5 million, or 118.3%, compared to the nine months ended September 30, 2022. The difference is primarily driven by an increase in external borrowings compared to the prior year and higher interest rates on the additional borrowings. We also experienced increased borrowing costs on our revolving line of credit compared to the same period in 2022.

Income tax expense (benefit)

Income tax benefit for the nine months ended September 30, 2023, was $11.4 million, or an effective rate of 50.1%. The primary differences from the federal statutory tax rate of 21% was driven by state income taxes, the release of the ~~Initial Public Offering. For~~valuation allowance recorded on American Bridge’s U.S. and state net deferred tax assets, permanent book to tax difference related to earnouts and GILTI, a lower effective rate on overall foreign earnings, and elections made by various subsidiaries to voluntarily revoke their S-corporation status effective January 1, 2023.

Income tax expense for the ~~three and~~ nine months ended September 30, 2022, was $13.7 million, or an effective rate of 24.4%. The primary differences between the ~~Company incurred~~statutory rate and ~~paid~~ the ~~affiliate $45,000~~effective rate were due to state income taxes and ~~$135,000,~~a valuation allowance recorded on American Bridge’s U.S. and state net deferred tax assets, offset with inclusion of earnings from certain filing entities being taxed as pass-through entities and a lower effective rate on overall foreign earnings.

Segment Results

The following table sets forth segment information for the three months ended September 30, 2023 and 2022:


	Three Months Ended
(Amounts in thousands)	September 30, 2023				September 30, 2022
			% of Total				% of Total
Segment	Revenue		Revenue		Revenue		Revenue
Civil	$	90,708	29.0	%	$	71,409	21.3	%
Transportation		221,764	71.0	%		263,716	78.7	%
Total revenue	$	312,472	100.0	%	$	335,125	100.0	%


	Three Months Ended
(Amounts in thousands)	September 30, 2023				September 30, 2022
			% of Segment				% of Segment
Segment	Gross Profit		Revenue		Gross Profit		Revenue
Civil	$	12,465	13.7	%	$	8,926	12.5	%
Transportation		17,064	7.7	%		53,484	20.3	%
Gross profit	$	29,529	9.5	%	$	62,410	18.6	%

Civil

Revenue for the three months ended September 30, 2023, was $90.7 million, an increase of $19.3 million, or 27.0%, compared to the three months ended September 30, 2022. This was primarily attributable to increased revenues of $30.3 million for the three months ended September 30, 2023 versus the same period in 2022, from new projects started in 2023. These increases were offset by decreased revenues of $5.9 million and $5.3 million from a water line project in the Midwest that was completed earlier this year and plant project on the east coast approaching completion, respectively, for ~~such services.~~the three months ended September 30, 2023 versus the same period in 2022.

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Gross profit for the three months ended September 30, 2023, was $12.5 million, or 13.7% of segment revenue, compared to $8.9 million, or 12.5% of segment revenue, for the three months ended September 30, 2022. The primary contributions to the increase of $3.5 million were increased profit of $8.6 million for the three months ended September 30, 2023 versus the same period in 2022, from new projects started in 2023. These increases were offset by decreased profit of $3.7 million and $1.0 million from a water line project in the Midwest that was completed earlier this year and plant project on the east coast approaching completion, respectively, for the three months ended September 30, 2023 versus the same period in 2022.

Transportation

21Revenue for the three months ended September 30, 2023, was $221.8 million, a decrease of $42.0 million, or 15.9%, compared to the three months ended September 30, 2022. The decrease was primarily attributable to decreased revenues of $17.1 million as we completed projects in M&P, and $57.3 million as we made progress completing the takeover work related to the American Bridge acquisition, in the three months ended September 30, 2023 versus the same period in 2022. These decreases were offset by increased volume on a project in the Bahamas of $27.5 million in the three months ended September 30, 2023 versus the same period in 2022.

Gross profit for the three months ended September 30, 2023, was $17.1 million, or 7.7% of segment revenue, compared to gross profit of $53.5 million, or 20.3% of segment revenue, for the three months ended September 30, 2022. The primary contributions to the decrease of $36.4 million for the three months ended September 30, 2023 versus the same period in 2022 were decreases in profitability of $3.7 million in M&P, and $29.2 million as we make progress completing the takeover work related to the American Bridge acquisition.

The following table sets forth segment information for the nine months ended September 30, 2023 and 2022:


	Nine Months Ended
(Amounts in thousands)	September 30, 2023				September 30, 2022
			% of Total				% of Total
Segment	Revenue		Revenue		Revenue		Revenue
Civil	$	229,264	27.2	%	$	221,303	25.5	%
Transportation		614,964	72.8	%		645,324	74.5	%
Total revenue	$	844,228	100.0	%	$	866,627	100.0	%


	Nine Months Ended
(Amounts in thousands)	September 30, 2023				September 30, 2022
			% of Segment				% of Segment
Segment	Gross Profit		Revenue		Gross Profit		Revenue
Civil	$	27,137	11.8	%	$	28,315	12.8	%
Transportation		(12,459)	(2.0)	%		76,763	11.9	%
Gross profit	$	14,678	1.7	%	$	105,078	12.1	%

Civil

Revenue for the nine months ended September 30, 2023, was $229.3 million, an increase of $8.0 million, or 3.6%, compared to the nine months ended September 30, 2022. This was primarily attributable to increased revenues of $54.5 million for the nine months ended September 30, 2023 versus the same period in 2022, from new projects started in 2023. These increases were offset by decreased revenues of $5.6 million, $28.1 million, and $15.6 million from a water line project in the Midwest that was completed earlier this year, two plant projects on the east coast approaching completion, and lower activity related to a tunnel project in Texas, respectively, for the nine months ended September 30, 2023 versus the same period in 2022.

Gross profit for the nine months ended September 30, 2023, was $27.1 million, or 11.8% of segment revenue, compared to $28.3 million, or 12.8% of segment revenue, for the nine months ended September 30, 2022. The primary contributions to the decrease of $1.2 million for the nine months ended September 30, 2023 versus the same period in 2022 were decreases in profit contributions of $3.9 million, $4.1 million, and $5.3 million from a water line project in the

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Midwest that was completed earlier this year, two plant projects on the east coast approaching completion, and lower activity related to a tunnel project in Texas, respectively. Offsetting these decreases was an increase in profit contribution of $13.0 million from new projects started in 2023.

~~Note — Related Party~~

Transportation

~~On August 23, 2021, Eric Rosenfeld,~~Revenue for the ~~Company’s Chief SPAC Officer, issued~~nine months ended September 30, 2023, was $615.0 million, a ~~$65,000 principal amount unsecured promissory note~~decrease of $30.4 million, or 4.7%, compared to the ~~Company.~~nine months ended September 30, 2022. The ~~note~~decrease was primarily attributable to decreased contributions during the nine months ended September 30, 2023, of $88.4 million as we make progress completing the takeover work related to the American Bridge acquisition and $51.2 million from M&P. The decrease was offset by increases for the nine months ended September 30, 2023, versus the same period in 2022, of $85.8 million from a project in the Bahamas and $30.3 million from a new bridge project start in Florida.

Gross loss for the nine months ended September 30, 2023, was $12.5 million, or (2.0%) of segment revenue, compared to gross profit of $76.8 million, or 11.9% of segment revenue, for the nine months ended September 30, 2022. The primary contributions to the decrease of $89.2 million for the nine months ended September 30, 2023, versus the same period in 2022 were decreases of $41.4 million from M&P, and $37.8 million as we make progress completing the takeover work related to the American Bridge acquisition. Offsetting these decreases was an increase in profit contribution of $5.6 million from a new bridge project start in Florida for the nine months ended September 30, 2023 versus the same period in 2022.

Adjusted EBITDA Reconciliation

In our industry, it is ~~non-interest bearing~~customary to manage our business using Adjusted EBITDA. Below is a reconciliation of net income to Adjusted EBITDA.


	Three Months Ended				Nine Months Ended
(Amounts in thousands)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Net income (loss) attributable to Southland Stockholders	$	3,800	$	35,199	$	(13,690)	$	41,004
Depreciation and amortization		7,968		11,523		24,704		35,163
Income taxes expense (benefit)		5,390		10,588		(11,446)		13,745
Interest expense		6,231		2,285		13,790		6,317
Interest income		(1,060)		(18)		(1,358)		(29)
EBITDA		22,329		59,577		12,000		96,200
Transaction related costs		—		—		1,594		—
Contingent earnout consideration non-cash expense reversal		—		—		(20,689)		—
Adjusted EBITDA	$	22,329	$	59,577	$	(7,095)	$	96,200

Adjusted EBITDA for the three months ended September 30, 2023, decreased to $22.3 million from $59.6 million compared to the three months ended September 30, 2022, due primarily to activity related to the M&P business line discussed in the Recent Events section and ~~became payable~~the decrease of net income.

Adjusted EBITDA for the nine months ended September 30, 2023, decreased to negative $7.1 million from $96.2 million compared to the nine months ended September 30, 2022, due primarily to activity related to the M&P business line discussed in the Recent Events section and the reversal of contingent earnout consideration.

Liquidity, Capital Commitments and Resources

Our principal sources of liquidity are cash generated from operations, funds from borrowings, and existing cash on hand. Our principal uses of cash typically include the ~~consummation~~funding of working capital obligations, debt service, and investment in machinery and equipment for our projects.

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In connection with the closing of the ~~Initial Public Offering. Due to the short-term nature~~Business Combination, holders of 25,296,280 shares of common stock, or 91.7% of the ~~note, the fair value~~shares with redemption rights, exercised their right to redeem their shares at a redemption price of $10.30 per share. As a result, a substantial portion of the note approximates the carrying amount. The Note balance was settled on November 26, 2021, shortly after the consummation of the Initial Public Offering. The Note was retired upon settlement and no further borrowings are available under such Note.

On November 5, 2021, Eric Rosenfeld issued a $31,500 principal amount unsecured promissory note to the Company. The note is non-interest bearing and became payable on the consummation of the Public Offering. Due to the short-term nature of the note, the fair value of the note approximates the carrying amount. The Note balance was settled on November 26, 2021, shortly after the consummation of the Initial Public Offering. The Note was retired upon settlement and no further borrowings are available under such Note.

~~Working Capital Loans~~

~~In order to finance transaction costs~~cash proceeds from our initial public offering we received in connection with athe Business Combination were not available to us after giving effect to the ~~Initial Stockholders,~~Business Combination. Prior to the ~~Company’s officers~~closing of the Business Combination, we planned to use the cash acquired in the Business Combination (i) to fund organic growth with increased working capital, (ii) to fund future potential acquisitions, and ~~directors~~(iii) for general corporate needs including paying down debt. In light of the high level of redemptions, we may seek cash from (x) increasing institutional borrowings or increase the amount of our revolving loan, (y) selling off unused or underutilized construction assets, or (z) expediting or sell our claim settlements. However, we do not believe that the limited cash proceeds received in connection with the Business Combination will have a materially adverse impact on our operations or financial position.

We will receive the proceeds from any exercise of any Warrants for cash. We believe the likelihood that Warrant holders will exercise their ~~affiliates~~Warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock. On November 9, 2023, the closing price of our common stock was $5.65 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.

Based on historical and anticipated future operating results, we believe cash flow from operations, available cash, amounts available to us under the revolving credit agreement, and other financing will be adequate to meet our liquidity needs for at least the next twelve months, including any anticipated requirements for working capital, capital expenditures, and scheduled debt service.

Our current and future liquidity is greatly dependent upon our operating results, which are largely determined by overall economic conditions and our current contracts and backlog. Our liquidity could be adversely affected by a disruption in the availability of credit. If such a material adverse event were to occur, we may ~~but are not obligated~~be unable to ~~loan the Company funds from time to time~~borrow under our revolving credit agreement or ~~at any time, as~~ may be required ~~(“Working Capital Loans”~~to seek additional financing. In addition, we may be required to seek additional financing to refinance all or a significant portion of our existing debt on or prior to maturity. We may also seek to access the public or private equity markets to support our liquidity whenever conditions are favorable to us. There can be no assurance that we will be able to raise additional capital or obtain additional financing when needed or on terms that are favorable to us.

We previously included projected financial information regarding Southland LLC for fiscal years 2022, 2023 and 2024 in the proxy statement/prospectus filed with the SEC on February 1, 2023 (the “Business Combination Prospectus”) in connection with the proposed Business Combination. Southland LLC provided Legato II with certain initial forecasted financial information prior to entering into the Merger Agreement (the “Initial Forecasted Financial Information”). ~~Each Working Capital Loan would be evidenced by a promissory note.~~Southland LLC subsequently realized lower revenues, lower costs, and higher gross margin performance through September 30, 2022 than initially anticipated, and Southland LLC provided updated certain forecasted financial information to Legato II in October 2022 (the “Updated Forecasted Financial Information,” and together with the Initial Forecasted Financial Information, the “Forecasted Financial Information”). The ~~Working Capital Loans would either be paid upon consummation~~Forecasted Financial Information was prepared solely for internal use for various purposes, including for Legato II’s board of adirectors to assess the Business Combination ~~without interest,~~and for workforce staffing, resource allocation and other management objectives, is subjective in many respects and is therefore susceptible to varying interpretations and the need for periodic revision based on actual experience and business developments. The Forecasted Financial Information was not intended to be looked upon as “guidance” of any sort and was not intended for third-party use, including by investors or holders. The Forecasted Financial Information was based on numerous variables and assumptions made by Legato II and Southland LLC management at the ~~option of the lender, converted into units, which would be identical~~time and prepared with respect to matters specific to the ~~Private Units, upon consummation of a~~ Business Combination. InThe Forecasted Financial Information was not based on Public Company Accounting Oversight Board compliant audited financials.

For the ~~event that a Business Combination does not close, the Company may use a portion~~fiscal year ended December 31, 2022, our revenue was approximately $1,161.4 million, which was below our projected revenue for fiscal year ended December 31, 2022 of ~~the proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held~~$1,520.0 million contained in the ~~Trust Account would be~~Initial Forecasted Financial Information and $1,200.0 million contained in the Updated Forecasted Financial Information, primarily due to

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the timing of completion of certain projects. For the fiscal year ended December 31, 2022, our EBITDA was approximately $128.3 million, which was below our projected EBITDA for fiscal year ended December 31, 2022 of $135.0 million contained in both the Initial Forecasted Financial Information and the Updated Forecasted Financial Information, primarily due to lower than anticipated revenues due to the timing of completion of certain projects. Our actual revenue and EBITDA being lower than projected revenue and EBITDA had a negative impact on our cash and cash equivalents position. However, we do not believe that it is expected to have a materially adverse impact on our operations or financial position.

We are exposed to market risks relating to fluctuations in interest rates and currency exchange risks. Significant changes in market conditions could cause interest rates to increase and have a material impact on the financing needed to operate our business.

The following table sets forth summary change in cash, cash equivalent and restricted cash for the nine months ended September 30, 2023 and 2022:


	Nine Months Ended
(Amounts in thousands)	September 30, 2023		September 30, 2022
Net cash used in operating activities	$	(36,588)	$	(70,936)
Net cash used in investing activities		(507)		(311)
Net cash provided by financing activities		11,730		15,695
Effect of exchange rate changes		126		1,834
Net change in cash, cash equivalents, and restricted cash	$	(25,239)	$	(53,718)

Net cash used in operating activities was $36.6 million during the nine months ended September 30, 2023, compared to ~~repay~~$70.9 million for the ~~Working Capital Loans.~~ nine months ended September 30, 2022. During the nine months ended September 30, 2023, the primary differences in cash used in operating activities compared to the nine months ended September 30, 2022, were increases in accounts payable of $27.6 million, increases in contract liabilities of $82.6 million and decreases in contract assets of $68.3 million, which were partially offset by reversal of net income to net loss by $53.9 million and increases in accounts receivables of $45.3 million.

Net cash used in investing activities was $0.5 million during the nine months ended September 30, 2023, compared to $0.3 million for the nine months ended September 30, 2022. During the nine months ended September 30, 2023, the primary difference in cash used in investing activities compared to the nine months ended September 30, 2022, was an increase in proceeds from sale of fixed assets of $3.6 million, which were partially offset by increases in purchase of fixed assets of $3.1 million and decreases in proceeds from the sale of trading securities of $0.8 million.

Net cash provided by financing activities was $11.7 million for the nine months ended September 30, 2023 compared to $15.7 million for the nine months ended September 30, 2022. During the nine months ended September 30, 2023, the primary difference in cash provided by financing activities compared to the nine months ended September 30, 2022, was a decrease of $52.0 million in borrowing on a line of credit, an increase of $8.0 million of payments on line of credit and an increase of $80.7 million of payments on notes payable, which was offset by the $17.1 million in proceeds from the Merger and an increase of $115.2 million in borrowing on notes payable.

As of September 30, ~~2022, and~~2023, we had long-term debt of $309.1 million, of which $47.8 million is due within the next twelve months.

Revolving Credit Facility

In July 2021, we entered into a revolving credit agreement with Frost Bank for $50.0 million. As of December 31, ~~2021, no Working Capital Loans were outstanding.~~2022, the revolving credit facility agreement had been amended and increased to $100.0 million. In August 2023, the revolving line of credit was extended through January 15, 2025 and we incurred $0.3 million as deferred financing cost. The revolving credit facility agreement bears interest on drawn balances at 1-month SOFR, subject to a floor of 0.90%, plus an applicable margin rate of 2.10%. As of September 30, 2023, $90.0 million was drawn on the revolver, and we had $10.0 million available.

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Secured Notes

We enter into secured notes in order to finance growth within our business. In July 2023, we refinanced approximately $76.4 million of existing secured notes in exchange for a new equipment note in the amount of $113.5 million. The new equipment note is secured by specific construction equipment assets and has a five-year fully amortizing term at a fixed rate of 7.25%. We incurred $0.3 million as deferred financing cost and $0.6 million as bank service charges in connection with the refinancing. As of September 30, 2023, we had outstanding secured notes scheduled to expire between November 2023 and March 2033. Interest rates on the secured notes range between 1.29% and 8.00%.

Mortgage Notes

~~Investments held~~We also enter into mortgage notes in ~~Trust Account~~order to finance growth within our business. As of September 30, 2023, we had outstanding mortgage notes scheduled to expire between October 2023 and February 2029. Interest rates on the mortgage notes range between 3.84% and 5.99%.

Equipment OEM Notes

~~The Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16)~~Backlog

We define backlog as a measure of the ~~Investment Company Act, with a maturity~~total amount of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in investment income on Trust Account in the accompanying statement of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

~~Accounting for Warrants~~

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the instruments are outstanding. The Company has concluded that the Public Warrants and Private Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.

~~Common Stock Subject to Possible Redemption~~

The Company accounts for its common stock subject to possible conversion in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (the 27,600,000 Public Shares, including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock, solid in the initial public offering, features certain redemption rights that are consideredrevenue remaining to be ~~outside of~~earned on projects that have been awarded. We only include a project in our ~~control and subject~~backlog once we have an executed contract, or authorized notice to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of our consolidated condensed balance sheets.

The Company recognizes changes in redemption value as they occur and adjust the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount. The change in the carrying value of redeemable shares of common stock resulted in charges against additional paid-in capital, (to the extent available), and accumulated deficit.

~~Net Loss per Common Share~~

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income per share is computed by dividing net income applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period (the public and private shares, inclusive of the full exercise of the overallotment option). The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of 14,385,000 shares in the calculation of diluted earnings per share, since their contingency had not been met yet.proceed. As a result, ~~diluted earnings per share~~we believe our backlog is firm, although cancellations or scope adjustments may occur.

In our industry, backlog is an indicator of future revenue streams for work that has been awarded but not completed. We define backlog as anticipated revenue from the ~~same~~uncompleted portion of existing contracts and therefore can be estimated.


(Amounts in thousands)	Backlog
Balance December 31, 2022	$	2,973,886
New contracts, change orders, and adjustments		412,756
Gross backlog		3,386,642
Less: contract revenue recognized in 2023		(845,323)
Balance September 30, 2023	$	2,541,319

Backlog should not be considered a comprehensive indicator of future revenue as ~~basic earnings per share~~any of our contracts can be terminated by our customers on relatively short notice, and backlog does not include future work for which we may be awarded or new awards for which we are awaiting an executed contract or authorized notice to proceed. In the ~~periods.~~ event of a cancelation, we are typically reimbursed for all of our costs through a specific contractual date, as well as our costs to demobilize from the project site. Our contracts do not typically grant us rights to revenue reflected in backlog. Projects may remain in backlog for extended periods of time as a result of schedule delays, regulatory requirements, project specific issues, or other reasons. Contract amounts from contracts where a transaction price cannot be reasonably estimated may not be included within our backlog amount.

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Segment Backlog

Below is our Backlog by segment.

Transportation


(Amounts in thousands)	Backlog
Balance December 31, 2022	$	2,213,723
New contracts, change orders, and adjustments		356,038
Gross backlog		2,569,761
Less: contract revenue recognized in 2023		(620,673)
Balance September 30, 2023	$	1,949,088

Civil


(Amounts in thousands)	Backlog
Balance December 31, 2022	$	760,163
New contracts, change orders, and adjustments		56,717
Gross backlog		816,880
Less: contract revenue recognized in 2023		(224,649)
Balance September 30, 2023	$	592,231

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Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures About Market Risk

Not applicable.

~~We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Disclosure controls are procedures that are designed with the objective of ensuring that information required~~It is management’s responsibility to ~~be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized,~~establish and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our principal executive officer and principal financial and accounting officer (our “Certifying Officers”), the effectiveness of ourmaintain adequate disclosure controls and procedures, ~~as of September 30, 2022,~~ as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. ~~Based upon~~Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the company’s principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and our Chief Financial Officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report. Following this review and evaluation, our ~~Certifying Officers concluded~~management determined that as of ~~September 30, 2022,~~the end of the period covered by this Quarterly Report, our disclosure controls and procedures were ~~effective.~~effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control over Financial Reporting

There ~~were~~was no ~~changes~~change in our internal control over financial reporting ~~(as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)~~that occurred during the ~~most recent~~ fiscal ~~period~~quarter ended September 30, 2023 covered by this Quarterly Report on Form 10-Q that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

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PART II -— OTHER INFORMATION

Item 1. Legal Proceedings

See Note 7 – “Commitments and Contingencies”, included in the notes to our unaudited condensed consolidated financial statements included under Part I of this Quarterly Report.

Item 1A. Risk Factors

~~As of the date of this Quarterly Report,~~Other than as set forth below, there have been no additional risk factors identified and no material changes with ~~respect~~regard to ~~those~~the risk factors previously disclosed inunder “Item 1A. Risk Factors” to Part I of our Annual Report on Form 10-K ~~for~~as of the fiscal year ended December 31, ~~2021 except as set forth below. Additional risk factors not presently known to us~~2022.

Sales of our common stock, or ~~that we currently deem immaterial may also impair~~the perception of sales of our ~~business~~common stock, by the Company or ~~results of operations.~~

~~The excise tax included~~our stockholders in the ~~Inflation Reduction Act of 2022 may decrease~~public market, including pursuant to the ~~value~~prospectus contained in our Registration Statement on Form S-1 (File No. 333-271057) (the “Registration Statement”), could cause the market price of our securities ~~following~~to decline, and certain of the selling securityholders named in the prospectus contained in the Registration Statement (the “Selling Securityholders”) may still experience a ~~business combination, hinder~~significant return on investment.

If we or our ~~ability~~stockholders sell or indicate an intention to ~~consummate a business combination,~~sell substantial amounts of our securities in the public market, including through sales pursuant to the prospectus contained in the Registration Statement, the trading price of our securities could decline. In addition, shares underlying any outstanding options and ~~decrease~~restricted stock units will become eligible for sale if exercised or settled, as applicable, to the ~~amount~~extent permitted by the provisions of ~~funds available~~various vesting agreements and Rule 144 of the Securities Act. All the shares of common stock reserved for ~~distribution~~issuance under our equity incentive plan have been registered on Form S-8 under the Securities Act and will be eligible for sale in the public markets, subject to Rule 144 limitations applicable to affiliates. If these shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

Although the stockholders of Legato II prior to Legato II’s initial public offering (the “Initial Stockholders”) and certain Southland Members are subject to certain restrictions regarding the transfer of their shares of common stock, these shares may be sold after the expiration of their respective lock-ups. As restrictions on transfer have expired, the market price of our common stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

In connection with ~~a liquidation.~~

~~On August 16, 2022,~~ the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amountclosing of the ~~excise tax is generally 1%~~Business Combination, holders of ~~the fair market value~~25,296,280 shares of common stock, or 91.7% of the shares ~~repurchased at~~with redemption rights, exercised their right to redeem their shares. The shares of common stock being offered for resale pursuant to the ~~time~~prospectus contained in the Registration Statement by the Selling Securityholders represent approximately 88% of potential shares outstanding (which includes in the denominator, shares outstanding, shares reserved for issuance upon exercise of the ~~repurchase. However,~~Warrants, shares earned for ~~purposes~~hitting certain targets outlined in the Merger Agreement, and shares reserved for issuance under equity incentive plans) as of ~~calculating~~April 27, 2023. Given the ~~excise tax, repurchasing corporations are permitted~~substantial number of shares of common stock being registered for potential resale by Selling Securityholders pursuant to ~~net~~ the ~~fair~~prospectus contained in the Registration Statement, the sale of shares by the Selling Securityholders, or the perception in the market ~~value~~that the Selling Securityholders of ~~certain new stock issuances against~~a large number of shares intend to sell shares, could cause the ~~fair market value~~trading price of ~~stock repurchases during the same taxable year.~~ our securities could decline.

In addition, ~~certain exceptions apply~~some of our Selling Securityholders acquired the securities being registered for resale pursuant to the ~~excise tax. The U.S. Department~~prospectus contained in the Registration Statement at prices significantly lower than the per unit purchase price paid by public stockholders in our initial public offering of $10.00 per unit. As a result, despite the decline in the public trading price since our initial public offering, some of the ~~Treasury (the “Treasury”) has been given authority~~Selling Securityholders may still experience a positive return on investment and may have an incentive to ~~provide regulations~~sell shares of our common stock. For example, the Initial Stockholders purchased 5,750,000 shares of common stock prior to our initial public offering at $0.005 per share and ~~other guidance to carry out~~subsequently acquired 1,150,000 additional shares for no additional consideration as a result of a stock dividend of 0.2 shares for each share outstanding. In addition, EarlyBirdCapital, Inc. acquired 200,000 shares of common stock at $0.0001 per share and ~~prevent the abuse or avoidance~~subsequently acquired 40,000 additional shares for no additional consideration as a result of ~~the excise tax. Any~~a stock dividend of 0.2 shares

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for each share ~~redemption or other share repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject~~outstanding. By way of example only, if all 5,750,000 shares of common stock originally issued to the ~~excise tax. Whether and~~Initial Stockholders were sold at a price of $5.65 per share, which was the closing price of our common stock as reported on NYSE on November 9, 2023, the Initial Stockholders would experience a gain equal to ~~what extent the Company would be subject to the excise tax~~$5.65 per share. Investors in ~~connection with a Business Combination, extension vote or otherwise will depend on a number~~our initial public offering who acquired shares of ~~factors, including (i) the fair market value of the redemptions and repurchases~~common stock in connection with the ~~Business Combination, extension or otherwise, (ii)~~purchase of units at $10.00 per unit would not be expected to experience a similar return on investment.

The Warrants may never be in the ~~structure of a Business Combination, (iii)~~money, and may expire worthless.

We believe the ~~nature~~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 November 9, 2023, the closing price of our common stock was $5.65 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 ~~“PIPE” or other equity issuances in connection with~~such exercise. There is no way to ensure that the market price of our common stock will exceed the exercise price of the Warrants following the time they become exercisable and prior to their expiration. As a ~~Business Combination (or otherwise issued~~result, the Warrants may expire worthless, and we may not ~~in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance~~receive any proceeds from the ~~Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment~~exercise of the ~~excise tax have~~Warrants.

If we do not ~~been determined. The foregoing could cause~~file and maintain a ~~reduction in~~current and effective prospectus relating to the ~~cash available~~common stock issuable upon exercise of the Warrants, holders will only be able to exercise such Warrants on ~~hand~~a “cashless basis.”

If we do not file and maintain a current and effective prospectus relating to ~~complete~~the common stock issuable upon exercise of the Warrants at the time that holders wish to exercise such Warrants, they will only be able to exercise them on a ~~Business Combination and in~~“cashless basis” provided that an exemption from registration is available. As a result, the ~~Company’s ability to complete a Business Combination.~~

~~Item 2. Unregistered Sales~~number of ~~Equity Securities and Use of Proceeds.~~

~~On November 24, 2021, we consummated our IPO of 24,000,000 units. Each unit consisted of one share~~shares of common stock that holders will receive upon exercise of the Warrants will be fewer than it would have been had such holder exercised his Warrant for cash. Further, if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and ~~one-half~~would only be able to exercise their Warrants for cash if a current and effective prospectus relating to the common stock issuable upon exercise of ~~one redeemable~~the warrants is available. Under the terms of the Warrant Agreement with American Stock Transfer & Trust Company, as warrant ~~with each whole warrant entitling~~agent, we have agreed to use our best efforts to meet these conditions and to file and maintain a current and effective prospectus relating to the common stock issuable upon exercise of the Warrants until the expiration of the Warrants. However, we cannot assure you that we will be able to do so. If we are unable to do so, the potential “upside” of the holder’s investment in our company may be reduced or the Warrants may expire worthless.

An investor will only be able to exercise a Warrant if the issuance of shares of common stock upon such exercise has been registered or qualified or is deemed exempt under the securities laws of the state of residence of the holder of the Warrants.

No Warrants will be exercisable and we will not be obligated to ~~purchase one share~~issue shares of Common Stock unless the shares of common stock issuable upon such exercise has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the Warrants. If the shares of common stock issuable upon exercise of the Warrants are not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, the Warrants may be deprived of any value, the market for the Warrants may be limited and they may expire worthless if they cannot be sold.

We may amend the terms of the Warrants in a manner that may be adverse to holders with the approval by the holders of at least a majority of the then outstanding Warrants.

Our Warrants have been issued in registered form under the Warrant Agreement between American Stock Transfer & Trust Company, as warrant agent, and us. The Warrant Agreement provides that the terms of the Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision. The Warrant Agreement requires the approval by the holders of at least a majority of the then outstanding Warrants in order to make any change that adversely affects the interests of the registered holders.

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We may redeem your unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Warrants worthless.

We have the ability to redeem outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of ~~$11.50~~$0.01 per ~~share. The units were sold at an offering~~warrant, provided that the last reported sales price of ~~$10.00~~common stock equals or exceeds $18.00 per ~~unit, generating gross proceeds~~share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading-day period commencing at any time after the Warrants become exercisable and ending on the third business day prior to proper notice of ~~$240,000,000. EarlyBirdCapital, Inc. acted as sole book-running manager~~such redemption provided that on the date we give notice of redemption and during the ~~offering. The securities sold in~~entire period thereafter until the ~~IPO were registered~~time we redeem the Warrants, we have an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the Warrants and a current prospectus relating to them is available. If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Warrants could force you (i) to exercise your Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Warrants at the then-current market price when you might otherwise wish to hold your Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, is likely to be substantially less than the market value of your Warrants.

Our management’s ability to require holders of our Warrants to exercise such Warrants on a registration statement on Form S-1 (No. 333-260816) which was declared effective by the Securities and Exchange Commission on November 22, 2021, and a registration statement on Form S-1MEF (No. 333-261260) which became effective automaticallycashless basis will cause holders to receive fewer shares of common stock upon ~~filing on November 22, 2021.~~

~~Simultaneous with the consummation~~their exercise of the Initial Public Offering, we consummated the private placement of an aggregate of 104,500 Private Units to our initial stockholders and EarlyBirdCapital at a price of $10.00 per Private Unit, generating total proceeds of $10,450,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

Following the closing of the IPO on November 24, 2021, an amount of $240,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Units was placed in a trust account (the “Trust Account”).

~~On December 1, 2021, as a result of the underwriters’ election~~Warrants than they would have received had they been able to exercise their ~~over-allotment~~Warrants for cash.

If we call our Warrants for redemption after the redemption criteria described elsewhere in this Quarterly Report have been satisfied, our management will have the option ~~in full, we consummated~~to require any holder that wishes to exercise his Warrant (including any Private Warrants) to do so on a “cashless basis.” If our management chooses to require holders to exercise their Warrants on a cashless basis, the ~~sale~~number of ~~an additional 3,600,000 Units, at $10.00 per Unit, and~~shares of common stock received by a holder upon exercise will be fewer than it would have been had such holder exercised his Warrant for cash. This will have the ~~sale~~effect of ~~an additional 126,000 Private Units, at a price of $10.00 per Private Unit, generating total gross proceeds of $1,260,000. A total of $36,540,000~~reducing the potential “upside” of the ~~net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held~~holder’s investment in the ~~Trust Account to $280,140,000.~~Company.

Item 5. Other Information

During the last fiscal quarter, none of our directors or officers adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.

~~On or about December 22, 2021, the shares~~

Table of ~~Common Stock and Warrants included in the Units began separate trading.~~Contents

Transaction costs amounted to $15,660,526, consisting of $5,520,000 in underwriting fees, $9,660,000 of deferred underwriting fees and $480,526 of other offering costs. In addition, as of December 31, 2021, cash of $1,100,031 was held outside of the Trust Account (as defined below) and is available for the payment of offering costs and for working capital purposes.

~~For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.~~

Item 6. Exhibits

~~The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.~~

~~No.~~				~~Description of Exhibit~~

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of May 25, 2022, by and among the Company, Legato Merger Sub, Inc. and Southland Holdings, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 25, 2022).
3.1	Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2023).
3.2	Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2023).
4.1	Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement on Form S-1 (File No. 333-260816) filed with the SEC on November 5, 2021).
4.2	Warrant Agreement between American Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 23, 2021).
4.3	Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (File No. 333-260816) filed with the SEC on November 5, 2021).
31.1*			Certification of Principal Executive Officer ~~Pursuant~~pursuant to ~~Securities~~ Exchange Act Rules ~~13a-14(a),~~13a-14 and 15d-14, as adopted ~~Pursuant~~pursuant to Section 302 ~~of the Sarbanes-Oxley~~Sarbanes Oxley Act of ~~2002~~2002.
31.2*			Certification of Principal Financial Officer ~~Pursuant~~pursuant to ~~Securities~~ Exchange Act Rules ~~13a-14(a),~~13a-14 and 15d-14, as adopted ~~Pursuant~~pursuant to Section 302 ~~of the Sarbanes-Oxley~~Sarbanes Oxley Act of ~~2002~~2002.
32.1**			Certification of Principal Executive Officer ~~Pursuant~~pursuant to Section 18 U.S.C. Section 1350, as adopted ~~Pursuant~~pursuant to Section 906 of the ~~Sarbanes-Oxley~~Sarbanes Oxley Act of ~~2002~~2002.
32.2**			Certification of Principal Financial Officer ~~Pursuant~~pursuant to Section 18 U.S.C. Section 1350, as adopted ~~Pursuant~~pursuant to Section 906 of the ~~Sarbanes-Oxley~~Sarbanes Oxley Act of ~~2002~~2002.
101.INS** 101*			The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline ~~XBRL Instance Document~~XBRL: (i) Condensed Consolidated Balance Sheets (Unaudited); (ii) Condensed Consolidated Statements of Operations (unaudited); (iii) Condensed Consolidated Statements of Comprehensive Income (unaudited); (iv) Condensed Consolidated Statements of Equity (unaudited); (v) Condensed Consolidated Statements of Cash Flows (unaudited); and (vi) Notes to Condensed Consolidated Financial Statements (unaudited), tagged as blocks of text and including detailed tags.
101.SCH** 104*			~~Inline XBRL Taxonomy Extension Schema Document~~
101.CAL**		~~Inline XBRL Taxonomy Extension Calculation Linkbase Document~~
101.DEF**		~~Inline XBRL Taxonomy Extension Definition Linkbase Document~~
101.LAB**		~~Inline XBRL Taxonomy Extension Labels Linkbase Document~~
101.PRE**		~~Inline XBRL Taxonomy Extension Presentation Linkbase Document~~
104**		Cover Page Interactive Data File (formatted asin Inline XBRL and contained in Exhibit 101).

*Filed herewith.

**Furnished herewith.

*	~~Filed herewith.~~

**	~~Furnished.~~

Table of Contents

SIGNATURES

~~Part III~~

~~SIGNATURES~~

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

Date: November 13, 2023

	~~LEGATO MERGER CORP. II~~
			SOUTHLAND HOLDINGS, INC.
~~Date: November 14, 2022~~	~~By:~~	~~/s/ Gregory Monahan~~
	~~Name:~~ By:	~~Gregory Monahan~~ /s/ Frank Renda
	~~Title:~~ Name:	Frank Renda
	Title:	President, Chief Executive Officer
		(Principal Executive Officer)

~~Date: November 14, 2022~~	By:	/s/ ~~Adam Jaffe~~Cody Gallarda
	Name:	~~Adam Jaffe~~ Cody Gallarda
	Title:	Executive Vice President, Chief Financial Officer
		(Principal Financial and Accounting Officer)

2636

~~Delaware~~		~~87-1783910~~
Delaware		87-1783910
(State or other jurisdiction of incorporation or organization)		(~~I.R.S.~~IRS Employer Identification No.)



Title of ~~each class~~Each Class	Trading ~~Symbol(s)~~Symbol	Name of ~~each exchange~~Each Exchange on ~~which registered~~Which Registered
~~Units, each consisting of one share of Common Stock and one-half of one redeemable warrant~~	~~LGTOU~~	~~The Nasdaq Stock Market LLC~~
Common Stock, par value $0.0001 per share	~~LGTO~~SLND	~~The Nasdaq Stock Market~~NYSE American LLC
Redeemable warrants, exercisable for shares of ~~Common Stock~~common stock at an exercise price of $11.50 per share	~~LGTOW~~SLND WS	~~The Nasdaq Stock Market~~NYSE American LLC




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

		~~Page~~


~~Part I.~~PART I – Financial Information		1

~~Item~~ITEM 1. ~~Consolidated Interim~~ Financial Statements		1
- Condensed Consolidated ~~Condensed~~ Balance Sheets (unaudited)		1
- Condensed Consolidated ~~Condensed~~ Statements of Operations (unaudited)		2
- Condensed Consolidated ~~Condensed~~ Statements of ~~Changes in Stockholders’ Equity (Deficit)~~Comprehensive Income (Loss) (unaudited)		3
- Condensed Consolidated Statements of Equity (unaudited)	4
- Condensed Consolidated Statements of Cash Flows (unaudited)		4 6
- Notes to ~~Unaudited~~ Condensed Consolidated Financial Statements (unaudited)		5 7

~~Item~~ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

~~Item~~ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		23 31

~~Item~~ITEM 4. Controls and Procedures		23 31

~~Part II.~~PART II – Other Information		24 32

ITEM 1. Legal Proceedings	32
~~Item~~
ITEM 1A. Risk Factors		24 32
~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~		24
~~Item~~ITEM 5. Other Information	34

ITEM 6. Exhibits		25 35

~~Part III.~~ Signatures		26 36


	September 30, 2022			December 31, 2021
	(unaudited)
ASSETS

Current Assets:
Cash	$	422,073		$	1,100,031
Prepaid expenses		245,835			416,012
Total current assets		667,908			1,516,043
Investments held in Trust Account		281,506,666			280,164,163
Total assets	$	282,174,574		$	281,680,206

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable and accrued expenses	$	33,359		$	5,719
Franchise tax payable		103,400			77,582
Income taxes payable		24,730			-
Total current liabilities		161,489			83,301
Deferred underwriting commissions		9,660,000			9,660,000
Total liabilities		9,821,489			9,743,301

Commitments and contingencies
Common stock subject to possible redemption, $0.0001 par value; 50,000,000 shares authorized, 27,600,000 shares at redemption value at $10.20 and $10.15 per share as of September 30, 2022 and December 31, 2021, respectively ⁽¹⁾		281,382,502			280,140,000

Stockholders’ deficit:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding		-			-
Common stock, $0.0001 par value; 50,000,000 shares authorized, 8,311,000 non-redeemable shares issued and outstanding (excluding 27,600,000 shares subject to possible redemption) ⁽²⁾		831			831
Additional paid-in capital		-			-
Accumulated deficit		(9,030,248	)		(8,203,926	)
Total stockholders’ deficit		(9,029,417	)		(8,203,095	)
Total liabilities and stockholders’ deficit	$	282,174,574		$	281,680,206


(Amounts in thousands, except share and per share data)	As of
ASSETS	September 30, 2023		December 31, 2022
Current assets
Cash and cash equivalents	$	32,211	$	57,915
Restricted cash		14,541		14,076
Accounts receivable, net		198,967		135,678
Retainage receivables		125,196		122,682
Contract assets		515,361		512,906
Other current assets		22,635		24,047
Total current assets		908,911		867,304

Property and equipment, net		100,558		114,084
Right-of-use assets		12,858		16,893
Investments - unconsolidated entities		123,666		113,724
Investments - limited liability companies		2,590		2,590
Investments - private equity		3,219		3,261
Deferred tax asset		21,631		—
Goodwill		1,528		1,528
Intangible assets, net		1,822		2,218
Other noncurrent assets		3,171		3,703
Total noncurrent assets		271,043		258,001
Total assets	$	1,179,954	$	1,125,305

LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	137,347	$	126,385
Retainage payable		39,059		33,677
Accrued liabilities		125,236		121,584
Current portion of long-term debt		47,825		46,322
Short-term lease liabilities		13,922		16,572
Contract liabilities		184,627		131,557
Total current liabilities		548,016		476,097

Long-term debt		261,236		227,278
Long-term lease liabilities		5,314		10,032
Deferred tax liabilities		2,876		3,392
Other noncurrent liabilities		96,343		48,622
Total long-term liabilities		365,769		289,324
Total liabilities		913,785		765,421

Commitment and contingencies (Note 7)

Stockholders' equity
Preferred stock, $0.0001 par value, authorized 50,000,000 shares, none issued and outstanding in 2023		—		—
Preferred stock, $1.00 par value, 24,400,000 shares issued and outstanding in 2022		—		24,400
Common stock, $0.0001 par value, authorized 500,000,000 shares, 47,856,114 and none issued and outstanding in 2023 and 2022, respectively		8		—
Additional paid-in-capital		269,920		—
Accumulated deficit		(13,690)		—
Accumulated other comprehensive loss		(2,551)		(2,576)
Members’ capital		—		327,614
Total stockholders' equity		253,687		349,438
Noncontrolling interest		12,482		10,446
Total equity		266,169		359,884
Total liabilities and equity	$	1,179,954	$	1,125,305


	Three Months Ended				Nine Months Ended
(Amounts in thousands except shares and per share data)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenue	$	312,472	$	335,125	$	844,228	$	866,627
Cost of construction		282,943		272,715		829,550		761,549
Gross profit		29,529		62,410		14,678		105,078
Selling, general, and administrative expenses		15,247		15,606		47,266		43,395
Operating income (loss)		14,282		46,804		(32,588)		61,683
Loss on investments, net		(21)		(100)		(3)		(79)
Other income, net		2,151		2,292		23,559		936
Interest expense		(6,231)		(2,285)		(13,790)		(6,317)
Income (loss) before income taxes		10,181		46,711		(22,822)		56,223
Income tax expense (benefit)		5,390		10,588		(11,446)		13,745
Net income (loss)		4,791		36,123		(11,376)		42,478
Net income attributable to noncontrolling interests		991		924		2,314		1,474
Net income (loss) attributable to Southland Stockholders	$	3,800	$	35,199	$	(13,690)	$	41,004

Net income (loss) per share attributable to common stockholders
Basic ⁽¹⁾	$	0.08			$	(0.29)
Diluted ⁽¹⁾	$	0.08			$	(0.29)
Weighted average shares outstanding
Basic ⁽¹⁾		47,856,114				46,771,938
Diluted ⁽¹⁾		47,872,042				46,771,938


	For the Three Months Ended September 30, 2022			For the Nine Months Ended September 30, 2022			For the Period from July 14, 2021 (inception) through September 30, 2021
General and administrative costs	$	(276,080	)	$	(1,025,775	)	$	(549	)
Loss from operations		(276,080	)		(1,025,775	)		(549	)

Other income:
Investment income on Trust Account		1,406,789			1,785,385			-
Gain (loss) before income tax provision		1,130,709			759,610			(549	)
Provision for income taxes		(279,080	)		(343,430	)		-

Net Income (Loss)	$	851,629		$	416,180		$	(549	)

Weighted average shares outstanding of common stock, basic and diluted-Public Shares⁽¹⁾		28,771,000			28,771,000			-
Basic and diluted net loss per share, Public Shares	$	0.02		$	0.01		$	-
Weighted average shares outstanding of common stock, basic and diluted-Founders Shares⁽²⁾		7,140,000			7,140,000			6,240,000
Basic and diluted net loss per share, Founders Shares	$	0.02		$	0.01		$	(0.01	)


	Common Stock				Additional paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Deficit
Balance at June 30, 2022 (unaudited)		8,311,000	$	831	$	-	$	(8,794,605	)	$	(8,793,774	)
Accretion - increase in redemption value of common stock subject to redemption		-		-		-		(1,087,272	)		(1,087,272	)
Net income		-		-		-		851,629			851,629

Balance at September 30, 2022 (unaudited)		8,311,000	$	831	$	-	$	(9,030,248	)	$	(9,029,417	)


	Nine Months Ended September 30, 2023
	Preferred		Common				Additional		Accumulated		Members		Noncontrolling		Total
(Amounts in thousands)	Stock		Stock		AOCI		Paid-In Capital		Deficit		Capital		Interest		Equity
Balance as of December 31, 2022	$	24,400	$	—	$	(2,576)	$	—	$	—	$	327,614	$	10,446	$	359,884
Recapitalization		—		4		—		284,569		—		(327,614)		—		(43,041)
Balance as of December 31, 2022		24,400		4		(2,576)		284,569		—		—		10,446		316,843
Preferred stock repurchase and dividends		(24,400)		—		—		(50,129)		—		—		(24)		(74,553)
Issuance of post-merger earnout shares		—		4		—		34,996		—		—		—		35,000
Distributions to joint venture partner		—		—		—		—		—		—		(110)		(110)
Net income (loss)		—		—		—		—		(4,664)		—		398		(4,266)
Other comprehensive income		—		—		504		—		—		—		2		506
Balance as of March 31, 2023	$	—	$	8	$	(2,072)	$	269,436	$	(4,664)	$	—	$	10,712	$	273,420
Net income (loss)		—		—		—		—		(12,826)		—		925		(11,901)
Other comprehensive income		—		—		1,149		—		—		—		198		1,347
Balance as of June 30, 2023	$	—	$	8	$	(923)	$	269,436	$	(17,490)	$	—	$	11,835	$	262,866
Share based compensation		—		—		—		484		—		—		—		484
Net income		—		—		—		—		3,800		—		991		4,791
Other comprehensive loss		—		—		(1,628)		—		—		—		(344)		(1,972)
Balance as of September 30, 2023	$	—	$	8	$	(2,551)	$	269,920	$	(13,690)	$	—	$	12,482	$	266,169


	For the Nine Months Ended September 30, 2022			For the Period from July 14, 2021 (inception) through September 30, 2021
Cash flow from operating activities
Net income (Loss)	$	416,180		$	(549	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Investment income on Trust Account		(1,785,385	)		-
Changes in operating assets and liabilities:
Prepaid expense		170,177			-
Accounts payable		27,640			-
Franchise tax payable		25,818			-
Income tax payable		24,730			-
Net cash used in operating activities		(1,120,840	)		(549	)

Cash flow from investing activities
Cash withdrawn from trust account		442,882			-
Net cash provided by investing activities		442,882			-

Cash flows from financing activities
Proceeds from sale of shares of common stock to initial stockholder		-			12,500
Offering costs paid		-			(67,337	)
Proceeds from stockholder note		-			65,000
Net cash provided by financing activities		-			10,163

Net change in cash and cash equivalents		(677,958	)		9,614
Cash at beginning of period		1,100,031			-
Cash at end of period	$	422,073		$	9,614

Supplemental disclosure of non-cash financing activities:
Deferred offering costs paid by the initial stockholder in exchange for common stock	$	-		$	12,500
Issuance of Representative Shares (see Note 8)	$	-		$	870


	Nine Months Ended September 30, 2022
	Preferred		Common				Additional		Members		Noncontrolling		Total
(Amounts in thousands)	Stock		Stock		AOCI		Paid-In Capital		Capital		Interest		Equity
Balance as of December 31, 2021	$	24,400	$	—	$	(937)	$	—	$	267,831	$	11,057	$	302,351
Recapitalization		—		4		—		224,786		(267,831)		—		(43,041)
Balance as of December 31, 2021		24,400		4		(937)		224,786		—		11,057		259,310
Preferred stock repurchase and dividends		—		—		—		(172)		—		(31)		(203)
Distributions to members		—		—		—		316		—		(1,539)		(1,223)
Net income (loss)		—		—		—		(13,601)		—		628		(12,973)
Other comprehensive loss		—		—		(1,562)		—		—		(145)		(1,707)
Balance as of March 31, 2022	$	24,400	$	4	$	(2,499)	$	211,329	$	—	$	9,970	$	243,204
Preferred stock repurchase and dividends		—		—		—		(211)		—		(38)		(249)
Other		—		—		(1)		—		—		—		(1)
Distributions to members		—		—		—		(48)		—		—		(48)
Net income (loss)		—		—		—		19,406		—		(78)		19,328
Other comprehensive income (loss)		—		—		3,987		—		—		(7)		3,980
Balance as of June 30, 2022	$	24,400	$	4	$	1,487	$	230,476	$	—	$	9,847	$	266,214
Preferred stock repurchase and dividends		—		—		—		(298)		—		(53)		(351)
Net income		—		—		—		35,199		—		924		36,123
Other comprehensive loss		—		—		(4,090)		—		—		(563)		(4,653)
Balance as of September 30, 2022	$	24,400	$	4	$	(2,603)	$	265,377	$	—	$	10,155	$	297,333

Schedule Of Earnings Per Share Basic And Diluted
	For the Three Months Ended September 30, 2022				For the Nine Months Ended September 30, 2022				For the Period from July 14, 2021 (inception) through September 30, 2021
	Public Shares (basic and diluted)		Founders Shares (basic and diluted)		Public Shares (basic and diluted)		Founders Shares (basic and diluted)		Public Shares (basic and diluted)		Founders Shares (basic and diluted)
Basic and diluted net income per common share
Numerator:
Allocation of net income as adjusted	$	682,304	$	169,325	$	333,433	$	82,747		-		(549)
Denominator:
Basic weighted average shares outstanding	$	28,771,000	$	7,140,000	$	28,771,000	$	7,140,000		-	$	6,240,000

Basic and diluted net loss per common share	$	0.02	$	0.02	$	0.01	$	0.01		-	$	(0.00	)

Schedule of common stock reflected on the consolidated condensed balance sheets
Gross Proceeds	$	276,000,000
Less:
Proceeds allocated to public warrants		(12,834,000	)
Common stock issuance cost		(15,660,526	)
Plus:
Accretion of carrying value to redemption value		32,634,526
Common Stock subject to possible redemption, December 31, 2021	$	280,140,000
Accretion – increase in redemption value of common stock subject to redemption		1,242,502
Common Stock subject to possible redemption, September 30, 2022	$	281,382,502

Schedule of fair value measurements
Description	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets:
Investments held in Trust Account – Money Market Fund	$	281,506,666	$	-	$	-