Forward-Looking Statements This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements. The words or phrases “would be”, “will allow”, “intends to”, “will likely result”, “are expected to”, “will continue”, “is anticipated”, “estimate”, “project”, or similar expressions are intended to identify “forward-looking statements”. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties, including those risks factors contained in our June 30, 2025 Annual Report on Form 10-K, incorporated by reference herein. Statements made herein are as of the date of the filing of this Report with the Securities and Exchange Commission (“SEC”) and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement. Overview ReposiTrak, Inc., a Nevada corporation (“ReposiTrak”, “We”, “us”, “our” or the “Company”) is a Software-as-a-Service (“SaaS”) which operates a business-to-business (“B2B”) e-commerce, compliance & traceability, and supply chain management platform that partners with retailers, wholesalers, distributors and their product suppliers to (a) help them manage specific programs, such as out-of-stock management and scan-based trading; (b) reduce risk in their supply chain by managing compliance documents and data; ensure compliance with new regulatory requirements supporting traceability; and (c) improve product ordering and forecasting in order to accelerate sales, control risks, and improve supply chain efficiencies. The Company’s services are grouped in three application suites: 1. ReposiTrak Compliance Management (“Compliance”) solutions, which helps the Company’s customers vet suppliers and reduce a company’s potential regulatory, legal, and criminal risk from its supply chain partners by providing a way for them to ensure these suppliers are compliant with food safety regulations, such as the Food Safety Modernization Act of 2011 (“FSMA”); 2. ReposiTrak Traceability Network (“Traceability” or “RTN”), which helps the Company’s customers comply with federal regulatory requirements of traceability and provides the lowest cost, easiest to use way to manage the capture and sharing of key data elements (“KDEs”) now required by Section 204d of FSMA 2011 as designated products move through the supply chain at each ‘event’ known as a ‘critical tracking event’ or “CTE”, which includes tracking from farm to shelf; and 3. ReposiTrak Supply Chain Solutions (“Supply Chain”), which help the Company’s customers to more efficiently manage various interactions with their suppliers. In other words, it provides customers with greater flexibility in sourcing products by enabling them to choose new suppliers and integrate them into their supply chain faster and more cost effectively, and it helps them to manage these relationships more efficiently, enhancing revenue while lowering working capital, labor costs and reducing waste. The Company’s services are delivered though proprietary software products designed, developed, marketed and supported by the Company. These products provide visibility and facilitate improved business processes among all key constituents in the supply chain, starting with the retailer and moving backwards to suppliers and eventually to raw material providers. The Company provides cloud-based applications and services that address e-commerce, supply chain, food safety, compliance and traceability activities. The principal customers for the Company’s products are household name multi-store food retail chains and restaurants including their suppliers, branded food manufacturers, food wholesalers and distributors, and other food service businesses. The Company has a hub and spoke business model. The Company is typically engaged by retailers and wholesalers (“Hubs”), which in turn require their suppliers (“Spokes”) to utilize the Company’s services. - 12 - Table of Contents On December 21, 2023, the Company effected a change of its corporate name from Park City Group, Inc. to ReposiTrak, Inc. The Company is incorporated in the State of Nevada and has two principal subsidiaries: PC Group, Inc., a Utah corporation (98.76% owned) (“PCG Utah”), and Park City Group, Inc., a Delaware corporation (100% owned) (“PCG Delaware” and together with PCG Utah, the “Subsidiaries”). All intercompany transactions and balances have been eliminated in the Company’s consolidated financial statements, which contain the Company’s results from operations. The Company has no business operations separate from the operations conducted through its Subsidiaries. The Company’s principal executive offices are located at 5282 South Commerce Drive, Suite D292, Murray, Utah 84107. Its telephone number is (435) 645-2000. Its website address is www.repositrak.com. Recent Developments Dividend Payment On March 20, 2026, The Company's Board of Directors declared a quarterly cash dividend of $0.02 per share ($0.08 per year), payable on or about May 15, 2026 to shareholders of record as of March 31, 2026. Based on the closing prices on March 31, 2026, this represented an annual dividend yield of approximately 1.05%. Subsequent dividends will be paid within 45 days of each fiscal quarter end. Federal Regulation & Traceability: FSMA 204(d) and USDA SOE In 2020, the United States Food and Drug Administration (“FDA”) announced the “New Era of Smarter Food Safety” blueprint, outlining objectives to enhance traceability, strengthen predictive analytics, accelerate outbreak response, address evolving business models, reduce food contamination, and promote a more robust food safety culture. In November 2022, the FDA issued the final rule under the Food Safety Modernization Act Section 204(d) (“FSMA 204”) relating to traceability for high-risk foods. The rule became effective on January 20, 2023, and applies broadly to entities that manufacture, process, pack, or hold foods designated on the FDA’s Food Traceability List (“FTL”). The FTL encompasses 16 food categories, representing thousands of products commonly distributed across grocery, convenience, and foodservice channels. FSMA 204 requires impacted entities to establish traceability programs capable of capturing, creating, maintaining, and sharing specified Key Data Elements (“KDEs”) at defined Critical Tracking Events (“CTEs”) throughout the supply chain. These records must be retained for a minimum of two years and be retrievable within 24 hours upon request by the FDA. Compliance necessitates the management of substantial volumes of supply chain data across a highly fragmented network of more than one million facilities. In March 2025, the FDA extended the compliance deadline for FSMA 204 by 30 months to July 20, 2028. Despite this extension, adoption of traceability solutions continues to accelerate due to commercial and competitive pressures. Several major retailers have announced traceability requirements that exceed the scope of FSMA 204, including requirements for additional data elements, application across all food categories (not limited to the FTL), and implementation timelines preceding FDA enforcement. While the FTL currently defines the regulatory scope, the FDA has indicated that it views these requirements as foundational and encourages broader, industry-wide adoption. Early indicators suggest the industry is moving toward comprehensive traceability across all food products. Traceability is fundamentally a supply chain data management challenge, which aligns with the Company’s core competencies. The Company has developed the ReposiTrak Traceability Network (“RTN”), a scalable, cloud-based solution designed to facilitate compliant traceability through low-cost, rapid deployment across supplier, distributor, and retailer networks. The RTN connects thousands of supply chain participants and is designed to support end-to-end traceability, improve recall responsiveness, and enhance food safety outcomes. Patent-Pending Technology The Company has developed proprietary, patent-pending technologies designed to address critical challenges associated with large-scale traceability data management. These innovations focus on (i) the automated detection and correction of errors in supply chain traceability data and (ii) the generation of compliant traceability records without reliance on case-level scanning or probabilistic methods. The first patent-pending technology relates to the use of advanced algorithms and machine learning techniques to identify inconsistencies, omissions, and inaccuracies within traceability datasets and to automatically correct such errors in real time. This capability is intended to materially improve data integrity, reduce manual intervention, and increase confidence in compliance with regulatory requirements. The second patent-pending technology relates to the Company’s ability to generate end-to-end traceability records across distribution environments without requiring physical scanning of individual cases. This approach leverages system-level data integration and validation techniques to create compliant Key Data Element records at each Critical Tracking Event, enabling scalable deployment in high-volume distribution operations. These patent-pending innovations are integral to the Company’s traceability platform and are designed to enhance scalability, reduce implementation complexity, and differentiate the Company’s offering in a rapidly evolving regulatory and commercial environment. - 13 - Table of Contents Results of Operations Comparison of the Three Months Ended March 31, 2026 to the Three Months Ended March 31, 2025. Revenue Fiscal Quarter Ended March 31, Variance 2026 2025 Dollars Percent Revenue $ 5,883,198 $ 5,913,732 $ (30,534 ) (1 )% Revenue was $5,883,198 and $5,913,732 for the three months ended March 31, 2026 and 2025, respectively, a 1% decrease year-over-year. The decrease in revenue was due to the timing of a large increase in onboarding fees that occurred in fiscal 2025 that did not occur in the same period of fiscal 2026 offset partially by growth in all lines of business. Although no assurances can be given, we continue to focus our sales efforts on marketing our software services on a recurring subscription basis and placing less emphasis on transactional revenue. However, we believe there will continue to be an insignificant percentage of customers that will, from time to time, require buying a particular service outright (i.e., a license). We have and will continue to deemphasize non-recurring transactional revenue when we are able. Cost of Services and Product Support Fiscal Quarter Ended March 31, Variance 2026 2025 Dollars Percent Cost of services and product support $ 803,353 $ 911,693 $ (108,340 ) (12 )% Percent of total revenue 14 % 15 % Cost of services and product support was $803,353 and $911,693 for the three months ended March 31, 2026 and 2025, respectively, a 12% decrease. This $108,340 decrease is primarily the result of certain development costs to be capitalized as part of significant enhancements being developed to our current platform of services as well as several new software programs to be released at a future date. The demand in traceability has required additional development of software used on the ReposiTrak platform in order to accurately meet the complex requirements of FSMA 204 in addition to further accelerate the systematic onboarding of customers with little if any human intervention. Sales and Marketing Expense Fiscal Quarter Ended March 31, Variance 2026 2025 Dollars Percent Sales and marketing $ 1,356,865 $ 1,408,861 $ (51,996 ) (4 )% Percent of total revenue 23 % 24 % Sales and marketing expense was $1,356,865 and $1,408,861 for the three months ended March 31, 2026 and 2025, respectively, a 4% decrease. The decrease in sales and marketing expense was primarily the result of lower sales commissions in the fiscal quarter compared to the same period in the prior year and a decrease in headcount of marketing and marketing support personnel. We believe marketing spending, excluding commissions and other variable costs due to sales volumes, will flatten over time as awareness of the traceability regulatory deadline approaches and the industry continues to mandate early adoption. General and Administrative Expense Fiscal Quarter Ended March 31, Variance 2026 2025 Dollars Percent General and administrative $ 1,376,346 $ 1,455,602 $ (79,256 ) (5 )% Percent of total revenue 23 % 25 % General and administrative expense was $1,376,346 and $1,455,602 for the three months ended March 31, 2026 and 2025, respectively, a 5% decrease. The decrease in general and administrative expense was due to reduction of administrative headcount and associated costs, timing of renewal fees, lower stock compensation costs, and lower lease costs. - 14 - Table of Contents Depreciation and Amortization Expense Fiscal Quarter Ended March 31, Variance 2026 2025 Dollars Percent Depreciation and amortization $ 95,414 $ 328,723 $ (233,309 ) (71 )% Percent of total revenue 2 % 6 % Depreciation and amortization expense was $95,414 and $328,723 for the three months ended March 31, 2026 and 2025, respectively, a decrease of 71%. The decrease was due to certain leased assets obtained with financing arrangements becoming fully amortized. Other Income and Expense Fiscal Quarter Ended March 31, Variance 2026 2025 Dollars Percent Net other income (expense) $ 184,415 $ 306,866 $ (122,451 ) (40 )% Percent of total revenue 3 % 5 % Net other income was $184,415 for the three months ended March 31, 2026, compared to net other income of $306,866 for the three months ended March 31, 2025. Other income decreased due to unrealized losses on certain investments offset by an increase in interest income attributable to earnings on fixed income instruments as a result in higher cash balances. In September 2024, the Federal Reserve began cutting interest rates, which reductions make it unlikely the Company will be able to maintain the same interest income on its existing cash balances without taking additional credit risk or increasing the total amount of cash held for investment. Preferred Dividends Fiscal Quarter Ended March 31, Variance 2026 2025 Dollars Percent Preferred dividends $ 34,285 $ 85,725 $ (51,440 ) (60 )% Percent of total revenue 1 % 1 % Preferred dividends accrued on the Company’s Preferred Stock was $34,285 for the three months ended March 31, 2026 and $85,725 for the three months ended March 31, 2025. Dividends decreased due to the redemption and retirement of Preferred Stock since the inception of the redemption plan that commenced in fiscal 2024. Although no assurances can be given, the Company announced that it intends to redeem all of the Series B and B-1 Preferred on or before December 2026. Since inception, a total of 676,912 shares of Preferred Stock, including Series B and Series B-1 Preferred, at the redemption price of $10.70 per share, have been redeemed for a total of 7,242,958. The Company fully redeemed the Series B-1 Preferred during fiscal 2024. There is a total of $1.72 million of Series B Preferred remaining to be redeemed. - 15 - Table of Contents Comparison of the Nine Months Ended March 31, 2026 to the Nine Months Ended March 31, 2025. Revenue Nine Months Ended March 31, Variance 2026 2025 Dollars Percent Revenue $ 17,711,476 $ 16,845,782 $ 865,694 5 % Revenue was $17,711,476 and $16,845,782 for the nine months ended March 31, 2026 and 2025, respectively, a 5% increase year-over-year. The increase in revenue was due to growth in recurring subscription revenue in all lines of business. These include compliance, supply chain and traceability. Growth in traceability is the result of growing industry and consumer response to food contaminations and food safety hazards, whether biological, chemical, physical, or allergenic. The risks have elevated regulatory requirements, documentation requisites, and principally has resulted in tighter mandates from the retailers to its suppliers. As more and more retailers, wholesalers and distributors mandate their requirements to suppliers, the Company continues to see a corresponding rise in demand for its services. Although no assurances can be given, we continue to focus our sales efforts on marketing our software services on a recurring subscription basis and placing less emphasis on transactional revenue. However, we believe there will continue to be an insignificant percentage of customers that will, from time to time, require buying a particular service outright (i.e., a license). We have and will continue to deemphasize non-recurring transactional revenue when we are able. Cost of Services and Product Support Nine Months Ended March 31, Variance 2026 2025 Dollars Percent Cost of services and product support $ 2,511,249 $ 2,773,468 $ (262,219 ) (9 )% Percent of total revenue 14 % 16 % Cost of services and product support was $2,511,249 and $2,773,468 for the nine months ended March 31, 2026 and 2025, respectively, a 9% decrease. This $262,219 decrease is primarily the result of certain development costs capitalized as part of significant enhancements being developed to our current platform of services as well as several new software programs to be released at a future date. The demand in traceability has required additional development of software used on the ReposiTrak platform in order to accurately meet the complex requirements of FSMA 204 in addition to further accelerate the systematic onboarding of customers with little if any human intervention. Sales and Marketing Expense Nine Months Ended March 31, Variance 2026 2025 Dollars Percent Sales and marketing $ 4,458,676 $ 4,392,997 $ 65,679 1 % Percent of total revenue 25 % 26 % Sales and marketing expense was $4,458,676 and $4,392,997 for the nine months ended March 31, 2026 and 2025, respectively, a 1% increase. The increase in sales and marketing expense was primarily the result of higher sales commissions, travel expense, and investment in marketing for our suite of services. The increase in sales and marketing expense resulted from increased commissions paid due to higher sales and FSMA 204 traceability awareness marketing. We believe the uptick in marketing spending, excluding commissions and other variable costs due to higher sales, will flatten as awareness of the traceability regulatory deadline approaches and the industry continues to mandate early adoption. General and Administrative Expense Nine Months Ended March 31, Variance 2026 2025 Dollars Percent General and administrative $ 4,216,435 $ 4,124,706 $ 91,729 2 % Percent of total revenue 24 % 24 % General and administrative expense was $4,216,435 and $4,124,706 for the nine months ended March 31, 2026 and 2025, respectively, a 2% increase. The increase in general and administrative expense was primarily due to higher employee benefit costs, general liability insurance, increases in D&O insurance due to a higher market cap, and higher payroll taxes due to an increase in commissions and other benefit programs. - 16 - Table of Contents Depreciation and Amortization Expense Nine Months Ended March 31, Variance 2026 2025 Dollars Percent Depreciation and amortization $ 563,090 $ 913,646 $ (350,556 ) (38 )% Percent of total revenue 3 % 5 % Depreciation and amortization expense was $563,090 and $913,646 for the nine months ended March 31, 2026 and 2025, respectively, a decrease of 38%. The decrease was due to certain leased assets obtained with financing arrangements becoming fully amortized. Other Income and Expense Nine Months Ended March 31, Variance 2026 2025 Dollars Percent Net other income (expense) $ 879,177 $ 993,094 $ (113,917 ) (11 )% Percent of total revenue 5 % 6 % Net other income was $879,177 for the nine months ended March 31, 2026, compared to net other income of $993,094 for the nine months ended March 31, 2025. Other income decreased due to an decrease in interest income attributable to earnings on fixed income instruments as a result in declining interest rates. In September 2024, the Federal Reserve began cutting interest rates, which reductions make it unlikely the Company will be able to maintain the same interest income on its existing cash balances without taking additional credit risk or increasing the total amount of cash held for investment. Preferred Dividends Nine Months Ended March 31, Variance 2026 2025 Dollars Percent Preferred dividends $ 139,653 $ 289,223 $ (149,570 ) (52 )% Percent of total revenue 1 % 2 % Preferred dividends accrued on the Company’s Preferred Stock was $139,653 for the nine months ended March 31, 2026 and $289,223 for the nine months ended March 31, 2025. Dividends decreased due to the redemption and retirement of Preferred Stock since the inception of the redemption plan that commenced in fiscal 2024. Although no assurances can be given, the Company announced that it intends to redeem all of the Series B and B-1 Preferred on or before December 2026. Since inception, a total of 676,912 shares of Preferred Stock, including Series B and Series B-1 Preferred, at the redemption price of $10.70 per share, have been redeemed for a total of $7,242,958. The Company fully redeemed the Series B-1 Preferred during fiscal 2024. There is a total of $1.72 million of Series B Preferred remaining to be redeemed. - 17 - Table of Contents Financial Position, Liquidity and Capital Resources We believe that our existing cash and short-term investments, together with funds generated from operations, are sufficient to fund operating and investment requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including macroeconomic conditions, our rate of revenue growth, sales and marketing activities, the timing and extent of spending required for research and development efforts and the continuing market acceptance of our products and services. As of Variance March 31, June 30, 2026 2025 Dollars Percent Cash and cash equivalents $ 26,409,558 $ 28,568,805 $ (2,159,247 ) (8 )% We have historically funded our operations with cash from operations, equity financings, and borrowings from our existing line of credit with U.S. Bank N.A. (the “Bank”), which was revised on October 6, 2021, and again in 2022. In March 2024, given our strong financial position, we terminated the credit facility with the Bank. Cash and cash equivalents was $26,409,558 and $28,568,805 at March 31, 2026 and June 30, 2025, respectively. This $2,159,247 decrease is primarily the result of a note receivable issued to SPAR Marketing offset by higher revenue and the corresponding cash receipts. Net Cash Flows from Operating Activities Nine Months Ended March 31, Variance 2026 2025 Dollars Percent Cash provided by operating activities $ 5,860,138 $ 6,763,371 $ (903,233 ) (13 )% Net cash provided by operating activities is summarized as follows: Nine Months Ended March 31, 2026 2025 Net income $ 5,491,204 $ 5,182,023 Noncash expense and income, net 1,565,159 1,713,283 Net changes in operating assets and liabilities (1,196,225 ) (131,935 ) $ 5,860,138 $ 6,763,371 Net cash provided by operating activities for the nine months ended March 31, 2026 was $5,860,138 compared to net cash provided by operating activities of $6,763,371 for the nine months ended March 31, 2025. Net cash provided by operating activities decreased 13% due principally to an increase in accounts receivable due to longer term contracts and an increase in prepaid expense and other assets. Noncash expense in the quarter decreased by $148,124 in the nine months ended March 31, 2026, compared to the nine months ended March 31, 2025 as a result of lower depreciation and amortization expenses partially offset by an increase in additional bad debt expense and stock compensation expense. Net Cash Flows from Investing Activities Nine Months Ended March 31, Variance 2026 2025 Dollars Percent Cash provided by (used in) investing activities $ (3,051,666 ) $ 6,315 $ (3,057,981 ) 48,424 % Net cash used in investing activities for the nine months ended March 31, 2026 was $3,051,666 compared to net cash provided by investing activities of $6,315 for the nine months ended March 31, 2025. This decrease in cash provided by investing activities for the nine months ended March 31, 2026 was due the issuance of notes receivable and the purchase of fixed assets and certain marketable securities. Net Cash Flows from Financing Activities Nine Months Ended March 31, Variance 2026 2025 Dollars Percent Cash used in financing activities $ (4,967,719 ) $ (3,789,227 ) $ 1,178,492 31 % Net cash used in financing activities totaled $4,967,719 for the nine months ended March 31, 2026, compared to cash used in financing activities of $3,789,227 for the nine months ended March 31, 2025. The increase in net cash used in financing activities is due to an increase in our buyback of Common Stock partially offset by a decrease in the redemption of Preferred Stock during the period. - 18 - Table of Contents Liquidity and Working Capital At March 31, 2026, the Company had positive working capital of $26,336,048 as compared with positive working capital of $28,154,682 at June 30, 2025. This $1,818,634 decrease in working capital is primarily due to the issuance of notes receivable, an increase in accrued liabilities and deferred revenue offset by an increase in prepaid expense, other current assets, and accounts receivables. Cash and cash equivalents also decreased due to the issuance of notes receivable offset by an increase in cash receipts from customers in all lines of business. As of As of Variance March 31, June 30, 2026 2025 Dollars Percent Current assets $ 33,102,985 $ 33,685,800 $ (582,815 ) (2 )% Current assets totaled $33,102,985 as of March 31, 2026, as compared to $33,685,800 as of June 30, 2025. The decrease in current assets is primarily attributable to the decrease in cash and cash equivalents and increases in accounts receivable and prepaid expenses and other current assets. As of As of Variance March 31, June 30, 2026 2025 Change Percent Current liabilities $ 6,766,937 $ 5,531,118 $ 1,235,819 22 % Current ratio 4.89 6.09 Current liabilities totaled $6,766,937 as of March 31, 2026 as compared to $5,531,118 as of June 30, 2025. The increase in current liabilities is primarily attributable to the increase in accrued liabilities and deferred revenue offset partially by the decrease in accounts payable and notes payable. As of March 31, 2026, the Company had zero bank debt. On October 6, 2021, the Company and the Bank executed a Revolving Credit Agreement (the "Revolving Credit Agreement”) and accompanying addendum (the "Addendum"), and Stand-Alone Revolving Note (the "Note" and collectively with the Revolving Credit Agreement and Addendum, the "Credit Agreement"), with an effective date of September 30, 2021. The Credit Agreement replaced the Company’s prior $6.0 million Revolving Credit Agreement and Stand-Alone Revolving Note between the Company and the Bank, as amended and revised on January 9, 2019, and provided the Company with a $10.0 million revolving line of credit that matured on March 31, 2023. The Credit Agreement contained customary affirmative and negative covenants and conditions to borrowing, as well as customary events of default. Among other things, the Company must maintain liquid assets equal to $12 million and maintain a Senior Funded Debt (as defined in the Credit Agreement) to EBITDA Ratio (as defined in the Credit Agreement) of not more than 3:1. On April 28, 2023, the Company and the Bank executed an amendment to the Credit Agreement (the “Amendment”), with an effective date of March 31, 2023. The Amendment sets forth that (1) the Company will increase its liquidity requirement from $10 million to $12 million, which the Company currently maintains over $22 million in cash and a current ratio of over 6:1, and (2) draws on the facility accrue interest at the annual rate, equal to 1.75% plus the one-month SOFR rate, instead of the previous LIBOR rate. As of March 31, 2024, the balance of the facility was zero. The Company had zero bank debt at March 31, 2026. On March 15, 2024, given its strong financial position, the Company chose not to renew the Revolving Credit Agreement. There were no amounts due at the time of renewal. While no assurances can be given, management currently believes that the Company will continue to increase its cash flow from operations and its working capital position in subsequent periods. The Company’s increase in anticipated cash flow from operations and working capital position is expected to be offset by the use of cash required to fund: 1. Quarterly Cash Dividends: In September 2022, the Company's Board of Directors first declared a quarterly cash dividend of $0.015 per share ($0.06 per year). In November 2023, the Board approved a 10% increase in the quarterly cash dividend, to $0.066 cents per share annually, or $0.0165 cents per share quarterly, commencing with the December 2023 dividend. In September 2024, the Board again declared a 10% increase in the quarterly dividend of $0.01815 per quarter ($0.0726 per share annually) to shareholders of record on December 31, 2024 payable on or about February 14, 2025. In June 2025, the Board declared a 10% increase in the quarterly dividend to shareholders of record as of September 30, 2025, or a dividend of $0.01 per quarter ($0.08 annually), payable on or about November 14, 2025. This represents the third 10% increase in the Company's dividend since the dividend was established in September 2022. Subsequent dividends will be paid within 45 days of each fiscal quarter end. 2. Preferred Stock Redemptions: Since inception, a total of 676,912 shares of Preferred Stock, including Series B and Series B-1 Preferred, have been redeemed at the redemption price of $10.70 per share for a total of $7,242,959. The Company fully redeemed the Series B-1 Preferred during fiscal 2024. There is a total of $1.72 million of Series B Preferred remaining to be redeemed. On March 17, 2026, the Company, through its subsidiary PC Group Inc., entered into a financing arrangement with SPAR Marketing Force, Inc. providing up to $4.0 million of funding, of which $3.0 million has been advanced. The arrangement provides for interest income at 8.0% and includes additional return components in the form of equity consideration and contingent price protection provisions. These features may increase the effective yield on the loan but also introduce variability in expected returns and earnings due to potential fair value adjustments and contingent cash flows. As a result, the Company's future results of operations may be impacted by changes in the market price of SPAR Group, Inc. common stock and the timing and issuance of equity consideration. The Company is currently evaluating the accounting treatment of these features, including potential derivative accounting. The ultimate impact on earnings may vary based on future equity pricing and market conditions. The loan is unsecured, and the Company is exposed to credit risk associated with the Borrower's financial condition. - 19 - Table of Contents Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenue, and results of operation, liquidity or capital expenditures. Contractual Obligations Total contractual obligations and commercial commitments as of March 31, 2026 are summarized in the following table: Financing Leases Less than 1 Year $ 248,478 1-3 Years 116,949 Total lease payments 365,427 Less imputed interest (15,965 ) Total $ 349,462 Critical Accounting Policies This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. We commenced operations in the software development and professional services business during 1990. The preparation of our financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expense during the reporting period. On an ongoing basis, management evaluates its estimates and assumptions. Management bases its estimates and judgments on historical experience of operations and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies, among others, will affect its more significant judgments and estimates used in the preparation of our consolidated financial statements. Income Taxes In determining the carrying value of the Company’s net deferred income tax assets, the Company must assess the likelihood of sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions, to realize the benefit of these assets. If these estimates and assumptions change in the future, the Company may record a reduction in the valuation allowance, resulting in an income tax benefit in the Company’s statements of operations. Management evaluates quarterly whether to realize the deferred income tax assets and assesses the valuation allowance. Goodwill and Other Long-Lived Asset Valuations Goodwill is assigned to specific reporting units and is reviewed for possible impairment at least annually or upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. Management reviews the long-lived tangible and intangible assets for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Management evaluates, at each balance sheet date, whether events and circumstances have occurred which indicate possible impairment. - 20 - Table of Contents The carrying value of a long-lived asset is considered impaired when the anticipated cumulative undiscounted cash flows of the related asset or group of assets is less than the carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the estimated fair market value of the long-lived asset. Economic useful lives of long-lived assets are assessed and adjusted as circumstances dictate. Revenue Recognition Effective July 1, 2018, the Company adopted the Financial Accounting Standards Board’s Accounting Standards Update 2014-09: Revenue from Contracts with Customers (Topic 606), and its related amendments (“ASU 2014-09”). ASU 2014-09 provides a unified model to determine when and how revenue is recognized and enhances certain disclosure around the nature, timing, amount and uncertainty of revenue and cash flows arising from customers. ASU 2014-09 represents a change in the accounting model utilized for the recognition of revenue and certain expense arising from contracts with customers. The Company adopted ASU 2014-09 using a “modified retrospective” approach and, accordingly, revenue and expense totals for all periods before July 1, 2018 reflect those previously reported under the prior accounting model and have not been restated. See Note 2 to our Unaudited Consolidated Financial Statements included in Part I, Item 1 of this Report for a full description of the impact of the adoption of new accounting standards on our financial statements. Following the adoption of this guidance, the revenue recognition for our sales arrangements remained materially consistent with our historical practice and there have been no material changes to our critical accounting policies and estimates as compared to our critical accounting policies and estimates included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Share-Based Compensation The Company accounts for its share-based compensation to employees and non-employees in accordance with FASB ASC 718, Compensation – Stock Compensation. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service or vesting period. Leases Effective July 1, 2019, the Company adopted the requirements of Accounting Standards Update No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). All amounts and disclosures set forth in this Report have been updated to comply with this new standard with results for reporting periods beginning after July 1, 2019 presented under ASU 2016-02, while prior period amounts and disclosures are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Available-for-Sale Debt Investments We classify our investments in fixed income securities as available-for-sale debt investments. Our available-for-sale debt investments primarily consist of U.S. government, U.S. government agency, non-U.S. government and agency, corporate debt, U.S. agency mortgage-backed securities, commercial paper and certificates of deposit. These available-for-sale debt investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of available-for-sale debt investments sold. These investments are recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on these investments are included as a separate component of accumulated other comprehensive income (“AOCI”). We classify our investments as current based on the nature of the investments and their availability for use in current operations. Investments in debt and equity securities can be classified in three categories depending on the nature, timing and intent of the investment. As noted in ASC 320-10-25, each debt security acquired must be classified in one of the following three categories at the time of the purchase: 1. Trade Securities – investments purchased with the intent of selling for an immediate profit. Trading securities are bought and held principally for the purpose of selling them in the near term and therefore held for only a short period of time. If the debt security is expected to be sold within hours or days, the security should be classified as a trading security. Trading securities generally reflect active and frequent buying and selling, with the objective of generating profits on short-term differences in price. 2. Held-to-maturity – investments purchased with the positive intent and ability to hold the security to maturity. If a reporting entity’s intention is uncertain whether they will hold or can hold the security to maturity, then the security should be classified as available-for-sale and not classified as held-to-maturity. 3. Available-for-Sale – investments in debt securities not classified as trading securities or as held-to-maturity securities. These investments are purchased with the intent of selling before the debt security reaches its maturity date, while at the same time, the intent isn’t to sell it for an immediate profit based on short-term differences in price. - 21 - Table of Contents The Company’s intention with purchasing publicly traded debt securities is not to be actively trading and managing the investments on a day-to-day basis to attempt to generate profits on short-term price differences; therefore, the Company will not classify its investment in debt securities as trading securities. The Company also is not intending to hold the investments until the investments mature. Instead, the intention is to invest excess cash in debt securities that will earn a greater rate of return than what a savings or money market account will pay. The Company views these investments as available to support operations, if needed, which creates uncertainty of whether the Company can hold the investments to maturity. Therefore, the investments would not qualify as held-to-maturity investments. Therefore, since the investments are neither trading securities, nor held-to-maturity per the definitions identified in ASC 320-10-25-1, the Company will classify its investments in individual corporate bonds or bond funds as an available-for-sale (“AFS”) investment. Because the Company views these debt securities as available to support current operations, the Company will account for these debt securities as available-for-sale and classify them as current assets on its consolidated balance sheet within the cash line item. The Company will classify marketable securities regardless of maturity as cash based upon the Company’s ability and intent to use any and all of those marketable securities to satisfy the liquidity needs of the Company’s current operations. Impairment Consideration of Investments For our available-for-sale debt securities in an unrealized loss position, we determine whether a temporary or permanent credit loss exists. In this assessment, which requires judgment, among other factors, we consider the extent to which the fair value is less than the amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security. If factors indicate a permanent credit loss exists, an allowance for credit loss is recorded to other income (loss), net, limited by the amount that the fair value is less than the amortized cost basis. The amount of fair value change relating to all other factors will be recognized in other comprehensive income (“OCI”).