Supporting Financial Information

Accounts Receivable



			(in thousands)
		June 30,			September 30,
	Ref		2014			2013
Billed receivables			$	2,692		$	2,408
Unbilled receivables	(a)		9,562			9,535
Total accounts receivable			12,254			11,943
Less: Allowance for doubtful accounts			—			—
Accounts receivable, net			$	12,254		$	11,943

Ref (a): Receivable portion of retroactive billings. Revenues related to these retroactive billings were recognized in fiscal 2008 in accordance with GAAP, as follows: (1) the Company developed and calculated an amount for such prior period services and had a contractual right to bill for such amounts under its arrangements, (2) there were no remaining unfulfilled conditions for approval of such billings and (3) collectibility was reasonably assured based on historical practices with, and contractual requirements of, the DVA. The related direct costs, principally comprised of salaries and benefits, were accrued to match the recognized reimbursements from the Federal agency; upon approval, wages will be processed for payment to the employees. During the year ended September 30, 2008, DLH recognized revenues of $10.8 million revenue related to these non-recurring arrangements. DLH has had ongoing interactions with the customer during third quarter fiscal 2014, and we expect closure on this issue within the next several months.

Other Current Assets



			(in thousands)
		June 30,			September 30,
	Ref		2014			2013
Workers' compensation receivable	(a)		$	199		$	358
Prepaid insurance expense			250			143
Other prepaid expenses			185			98
Total other current assets			$	634		$	599

Ref (a): As part of the Company’s discontinued PEO operations, DLH had a workers’ compensation program with Zurich American Insurance Company (“Zurich”) which covered the period from March 22, 2002 through November 16, 2003, inclusive. DLH estimates that the remaining workers compensation receivable of approximately $0.2 million will be received within the next twelve months.

Debt Obligations



			(in thousands)
		June 30,			September 30,
	Ref		2014			2013
Bank loan payable			$	—		$	951
Current portion of capital lease obligation			—			22
Convertible debenture, net	(a)		—			340
Total debt obligations			$	—		$	1,313

Ref (a): See Note 12 regarding maturity and closure of the convertible debenture.

Accrued Payroll



			(in thousands)
		June 30,			September 30,
	Ref		2014			2013
Accrued current payroll			$	2,599		$	2,461
Accrued payroll related to unbilled accounts receivable			8,677			8,677
Total accrued payroll			$	11,276		$	11,138

Equipment and Improvements, net



			(in thousands)
		June 30,				September 30,
	Ref		2014				2013
Furniture and equipment			$	139			$	139
Computer equipment			126				126
Computer software			430				417
Leasehold improvements			24				24
			719				706
Less accumulated depreciation and amortization			(630		)		(550		)
Equipment and improvements, net			$	89			$	156

Accounts Payable, Accrued Expenses, and Other Current Liabilities



			(in thousands)
		June 30,			September 30,
	Ref		2014			2013
Accounts payable			$	1,424		$	1,396
Accrued benefits			715			596
Accrued bonus and incentive compensation			447			860
Accrued workers compensation insurance			733			563
Other accrued expenses			366			534
Payroll tax accrual	(a)		1,433			1,394
Total accrued expenses and other current liabilities			$	5,118		$	5,343

Ref (a): From 2006 through 2009, DLH received notices from the Internal Revenue Service (“IRS”) claiming taxes, interest and penalties due related to payroll taxes. These notices are predominantly related to the former PEO operations which were sold in fiscal 2003. The liability includes estimated accrued penalties and interest totaling approximately $600 thousand.

Other Income (Expense)



		(in thousands)						(in thousands)
		Three Months Ended						Nine Months Ended
		June 30,						June 30,
	Ref	2014			2013			2014			2013
Interest income (expense), net		$	(24	)	$	(38	)	$	(75	)	$	(131	)
Amortization of deferred financing costs		—			(38		)	(10		)	(144		)
Change in value of financial instruments	(a)	—			7			99			48
Other income (expense), net		7			(21		)	9			(16		)
Total other income (expense), net		(17		)	(90		)	23			(243		)

Ref (a): Represents the adjustment to fair value of embedded conversion feature and warrants related to the Company's convertible debentures. Such instruments did not meet the requirements for qualified hedge accounting under GAAP.