{"url_path":"/sec/sgrp/10-k/2026/item-16","section_key":"item-16","section_title":"Item 16 Form 10-K Summary**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-03-31","source_url":"https://www.sec.gov/Archives/edgar/data/1004989/0001437749-26-010508-index.html","accession_number":"0001437749-26-010508","cik":"0001004989","ticker":"SGRP","issuer_name":"SPAR Group, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1004989/0001437749-26-010508-index.html","primary_entity_key":"0001004989","primary_entity_name":"SPAR Group, Inc."},"word_count":15501,"has_tables":true,"body_markdown":"**Item 16. Form 10-K Summary**\n\n \n\nNone.\n\n \n\n26\n\n \n\n \n\n**SIGNATURES **\n\n \n\nPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.\n\n \n\n \n\nSPAR Group, Inc.\n \n\n  \n \n \n\n \nBy:\n/s/ William Linnane\n \n\n \n \nWilliam Linnane\n \n\n \n \nPresident and Chief Executive Officer\n \n\n    \n\n \n\nDated as of: March 31, 2026\n \n\n \n\nKNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Steven Hennen and William Linnane and each of them, jointly and severally, his attorneys-in-fact, each with full power of substitution, for each of them in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof.\n\n \n\nPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated.\n\n \n\nSIGNATURE\n \nTITLE\n\n   \n\n/s/ William Linnane\n President, Chief Executive Officer and Director,\n\n     William Linnane\n \n(Principal Executive Officer)\n\nDated as of: March 31, 2026\n\n \n \n\n \n  \n\n/s/ James R. Gillis Director\n\n     James R. Gillis  \n\nDated as of: March 31, 2026  \n\n   \n\n/s/ John Bode \nDirector\n\n     John Bode\n  \n\nDated as of: March 31, 2026\n \n \n\n \n  \n\n/s/ Linda Houston \nDirector\n\n     Linda Houston\n  \n\nDated as of: March 31, 2026\n \n \n\n \n  \n\n/s/ Tim Cook \nDirector\n\n     Tim Cook\n\n \n \n\nDated as of: March 31, 2026\n \n \n\n \n  \n\n/s/ James R. Brown, Sr Director\n\nJames R. Brown, Sr\n  \n\nDated as of: March 31, 2026  \n\n   \n\n/s/ Panagiotis Lazaretos Director\n\nPanagiotis Lazaretos  \n\nDated as of: March 31, 2026  \n\n   \n\n/s/ Steven Hennen Chief Financial Officer,\n\n     Steven Hennen Treasurer and Secretary (Principal Financial and Accounting Officer)\n\nDated as of: March 31, 2026  \n\n \n\n \n\n \n\n \n\n \n\n \n\n27\n\n \n\n \n\n \n\n**Report of Independent Registered Public Accounting Firm**\n\n \n\nShareholders and Board of Directors\n\nSPAR Group, Inc.\n\nCharlotte, NC\n\n \n\n**Opinion on the Consolidated Financial Statements**\n\n \n\nWe have audited the accompanying consolidated balance sheets of SPAR Group, Inc. (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.\n\n \n\n**Basis for Opinion**\n\n \n\nThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.\n\n \n\nOur audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\n \n\n**Critical Audit Matter**\n\n \n\nThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.\n\n \n\n**Revenue recognition** \n\n \n\nAs indicated in Note 2 to the consolidated financial statements, the Company generates revenues by providing merchandising services to its customers, generally on a daily, weekly, or monthly basis. The Company recognizes revenues as the services are performed based on the contractually-specified rate-per-driver metric (i.e., rate per hour, rate per store visit, rate per item assembled, or rate by task). For the year ended December 31, 2025, the Company’s net revenues were $136.1 million.\n\n \n\nWe identified revenue recognition from merchandising services as a critical audit matter due to the large volume of customer contracts and transactions. Auditing merchandising services revenue was especially challenging due to the extent of audit effort required to address the matter.\n\n \n\nThe primary procedures we performed to address this critical audit matter included: \n\n \n\n \n●\n\nTesting the accuracy and existence of revenue recognized for a sample of revenue transactions by inspecting source documents such as customer contracts, invoices, cash receipts, and other documents for each applicable per-driver metric (i.e., hours worked, store visits, items assembled, or tasks performed).\n\n \n\n \n●\n\nTesting the cut off of revenue recognized for a sample of revenue transactions prior to and subsequent to December 31, 2025.\n\n \n\n/s/ BDO USA, P.C.\n\nWe have served as the Company's auditor since 2013\n\nTroy, Michigan\n\nMarch 31, 2026\n\n \n\n \n\n \n\n \n\n28\n\n \n\n \n\n \n\n**SPAR Group, Inc. and Subsidiaries**\n\n**Consolidated Statements of Operations and Comprehensive Loss **\n\n*(In thousands, except per share data)*\n\n \n\n \n**Year Ended December 31,**\n \n\n \n**2025**\n \n**2024**\n \n\nNet revenues\n$136,104 $163,629 \n\nCost of revenue\n 114,411  130,032 \n\nGross profit\n 21,693  33,597 \n\nSelling, general and administrative expense\n 32,197  33,880 \n\nRestructuring costs and severance\n 4,765  - \n\nGain on sale of business\n -  (2,536)\n\nDepreciation and amortization\n 1,634  1,553 \n\nOperating (loss) income\n (16,903) 700 \n\nInterest expense\n 2,415  2,191 \n\nOther expenses, net\n 1,235  171 \n\nLoss before income tax expense\n (20,553) (1,662)\n\nIncome tax expense\n 4,073  144 \n\nLoss from continuing operations\n (24,626) (1,806)\n\n       \n\nDiscontinued Operations\n      \n\nIncome from discontinued operations\n -  1,381 \n\nLoss on disposal of business\n -  (1,188)\n\nIncome tax expense\n **-**  (1,074)\n\nNet loss from discontinued operations\n -  (881)\n\nNet loss\n (24,626) (2,687)\n\nNet income attributable to non-controlling interest\n **-**** ** (463)\n\nNet loss attributable to SPAR Group, Inc.\n$(24,626)$(3,150)\n\n       \n\nBasic loss per common share attributable to SPAR Group, Inc. from continuing operations\n (1.04) (0.09)\n\nDiluted loss per common share attributable to SPAR Group, Inc. from continuing operations\n (1.04) (0.09)\n\nBasic loss per common share attributable to SPAR Group, Inc. from discontinued operations\n -  (0.04)\n\nDiluted loss per common share attributable to SPAR Group, Inc. from discontinued operations\n -  (0.04)\n\nBasic loss per common share attributable to SPAR Group, Inc.\n (1.04) (0.13)\n\nDiluted loss per common share attributable to SPAR Group, Inc.\n (1.04) (0.13)\n\n       \n\nWeighted average common shares – basic\n 23,619  23,555 \n\nWeighted average common shares – diluted\n 23,619  23,555 \n\n       \n\nNet loss\n$(24,626)$(2,687)\n\nOther comprehensive loss:\n      \n\nForeign currency translation adjustments\n 44  (1,553)\n\nComprehensive loss\n (24,582) (4,240)\n\nComprehensive income attributable to non-controlling interest\n **-**** ** (172)\n\nComprehensive loss attributable to SPAR Group, Inc.\n$(24,582)$(4,412)\n\n \n\n**See accompanying notes to the Company's consolidated financial statements.**\n\n \n\n29\n\n \n\n \n\n \n\n**SPAR Group, Inc. and Subsidiaries**\n\n**Consolidated Balance Sheets**\n\n*(In thousands, except share and per share data)*\n\n \n\n  \n**December 31, 2025**\n  \n**December 31, 2024**\n \n\n**Assets**\n   ** **   ** **\n\nCurrent assets:\n        \n\nCash and cash equivalents\n $3,262  $18,221 \n\nAccounts receivable, net\n  27,006   24,766 \n\nPrepaid expenses and other current assets\n  1,168   3,009 \n\nTotal current assets\n  31,436   45,996 \n\n         \n\nProperty and equipment, net\n  3,601   2,015 \n\nOperating lease right-of-use assets\n  4,861   630 \n\nGoodwill\n  856   856 \n\nIntangible assets, net\n  709   841 \n\nDeferred income taxes\n  18   4,259 \n\nOther assets\n  2,578   1,834 \n\n**Total Assets**\n $44,059  $56,431 \n\n         \n\n**Liabilities and equity**\n       ** **\n\nCurrent liabilities:\n        \n\nAccounts payable\n $9,342  $8,767 \n\nAccrued expenses and other current liabilities\n  5,576   3,533 \n\nCustomer incentives and deposits\n  1,221   892 \n\nLines of credit and short-term loans\n  20,442   16,082 \n\nCurrent portion of long-term debt\n  500   500 \n\nCurrent operating lease liabilities\n  643   276 \n\nTotal current liabilities\n  37,724   30,050 \n\nOperating lease liabilities, less current portion\n  4,395   353 \n\nDeferred income taxes\n  34   – \n\nLong-term debt\n  1,284   1,722 \n\n**Total Liabilities**\n $43,437  $32,125 \n\n         \n\nCommitments and contingencies – See Note 6\n          \n\n         \n\n**Equity:**\n        \n\nSPAR Group, Inc. equity\n        \n\nPreferred stock, Series - B. $.01 par value:\n        \n\nAuthorized and available shares– 2,000,000 Issued and outstanding shares– 0 at December 31, 2025 and 0 at December 31, 2024\n  –   – \n\nCommon stock, $.01 par value:\n        \n\nAuthorized shares – 47,000,000 Issued and outstanding shares – 24,129,991 at December 31, 2025 and 23,449,701 at December 31, 2024\n  241   234 \n\nTreasury stock, at cost 632,485 shares at December 31, 2025 and 1,205,485 Shares at December 31, 2024\n  (1,047)  (2,075**)**\n\nAdditional paid-in capital\n  19,749   19,886 \n\nAccumulated other comprehensive loss\n  (1,154)  (1,198**)**\n\n(Accumulated deficit)/Retained earnings\n  (17,167)  7,459 \n\n**Total equity**\n  622   24,306 \n\n**Total liabilities and equity**\n $44,059  $56,431 \n\n \n\n**See accompanying notes to the Company's consolidated financial statements.**\n\n \n\n30\n\n \n\n \n\n**SPAR Group, Inc. and Subsidiaries**\n\n**Consolidated Statements of Stockholders' Equity**\n\n*(In thousands)*\n\n \n\n \n \n\n**Common Stock**\n\n \n \n\n**Series B Preferred Stock**\n\n \n \n\n**Treasury Stock**\n\n \n \n\n**Additional Paid-In**\n\n \n \n\n**Accumulated Other Comprehensive**\n\n \n \n\n**Retained**\n\n \n \n\n**Non- Controlling**\n\n \n \n\n**Total**\n\n \n\n \n \n\n**Shares**\n\n \n \n\n**Amount**\n\n \n \n\n**Shares**\n\n \n \n\n**Amount**\n\n \n \n\n**Shares**\n\n \n \n\n**Amount**\n\n \n \n\n**Capital**\n\n \n \n\n**Gain/(Loss)**\n\n \n \n\n**Earnings**\n\n \n \n\n**Interest**\n\n \n \n\n**Equity**\n\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\n**Balance at January 1, 2024**\n\n \n \n23,241\n \n \n$\n232\n \n \n \n650\n \n \n$\n7\n \n \n \n205\n \n \n$\n(285\n)\n \n$\n21,004\n \n \n$\n(3,341\n)\n \n$\n10,609\n \n \n$\n12,020\n \n \n$\n40,246\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nShare-based compensation\n\n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n137\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n137\n \n\nConversion of Series B convertible preferred stock\n\n \n \n975\n \n \n \n10\n \n \n \n(650\n)\n \n \n(7\n)\n \n \n–\n \n \n \n–\n \n \n \n(1\n)\n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n2\n \n\nExercise of stock options\n\n \n \n233\n \n \n \n2\n \n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n(398\n)\n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n(396\n)\n\nPurchase of treasury shares\n\n \n \n(1,000\n)\n \n \n(10\n)\n \n \n*–*\n \n \n \n–\n \n \n \n1,000\n \n \n \n(1,790\n)\n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n(1,800\n)\n\nSale of international operations\n\n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n–\n \n \n \n3,524\n \n \n \n–\n \n \n \n(10,616\n)\n \n \n(7,092\n)\n\nPurchase of non-controlling interest\n\n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n(856\n)\n \n \n–\n \n \n \n–\n \n \n \n(1,695\n)\n \n \n(2,551\n)\n\nOther comprehensive (loss) income, net of tax\n\n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n–\n \n \n \n(1,381\n)\n \n \n–\n \n \n \n(172\n)\n \n \n(1,553\n)\n\nNet (loss) income\n\n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n(3,150\n)\n \n \n463\n \n \n \n(2,687\n)\n\n**Balance at December 31, 2024**\n\n \n \n23,449\n \n \n$\n234\n \n \n \n*-*\n \n \n$\n-\n \n \n \n1,205\n \n \n$\n(2,075\n)\n \n$\n19,886\n \n \n$\n(1,198\n)\n \n$\n7,459\n \n \n$\n-\n \n \n$\n24,306\n \n\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n\nShare-based compensation\n\n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n140\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n*–*\n \n \n \n140\n \n\nSale of treasury shares\n\n \n \n573\n \n \n \n5\n \n \n \n*–*\n \n \n \n–\n \n \n \n(573\n)\n \n \n1,028\n \n \n \n(277\n)\n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n756\n \n\nIssuance of shares for restricted stock units\n\n \n \n107\n \n \n \n2\n \n \n \n*–*\n \n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n2\n \n\nOther comprehensive income, net of tax\n\n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n–\n \n \n \n44\n \n \n \n–\n \n \n \n–\n \n \n \n44\n \n\nNet loss\n\n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n*–*\n \n \n \n–\n \n \n \n–\n \n \n \n–\n \n \n \n(24,626\n)\n \n \n–\n \n \n \n(24,626\n)\n\n**Balance at December 31, 2025**\n\n \n \n24,129\n \n \n$\n241\n \n \n$\n*-*\n \n \n$\n-\n \n \n \n632\n \n \n$\n(1,047\n)\n \n$\n19,749\n \n \n$\n(1,154\n)\n \n$\n(17,167\n)\n \n$\n-\n \n \n$\n622\n \n\n \n\n**See accompanying notes to the Company's consolidated financial statements.**\n\n \n\n31\n\n \n\n \n\n**SPAR Group, Inc. and Subsidiaries**\n\n**Consolidated Statements of Cash Flows**\n\n*(In thousands)*\n\n \n\n  \n**Year Ended December 31,**\n \n\n  \n**2025**\n  \n**2024**\n \n\n**Cash flows from operating activities:**\n ** **** **** ** ** **** **** **\n\nNet loss\n $(24,626) $(2,687)\n\nAdjustments to reconcile net loss to net cash used by operating activities\n        \n\nDepreciation and amortization\n  1,634   1,553 \n\nLoss on property, plant and equipment disposal\n  47   - \n\nAmortization of operating lease assets\n  476   545 \n\nAmortization of debt issuance cost\n  62   - \n\nProvision for expected credit losses\n  -   128 \n\nDeferred income tax expense (benefit)\n  3,819   (1,500)\n\nShare based compensation\n  140   137 \n\nGain on disposal of business\n  -   (2,536)\n\nChanges in operating assets and liabilities, net of business disposals:\n        \n\nAccounts receivable\n  (3,903)  (2,089)\n\nPrepaid expenses and other assets\n  1,099   416 \n\nAccounts payable\n  414   7,459 \n\nOperating lease liabilities\n  (408)  (541)\n\nAccrued expenses, other current liabilities and customer incentives and deposits\n  2,803   (1,124)\n\nNet cash used in continuing operations\n  (18,443)  (239)\n\nNet cash used in discontinued operations\n  -   (426)\n\nNet cash used in operating activities\n  (18,443)  (665)\n\n**Cash flows from investing activities:**\n ** **** **** ** ** **** **** **\n\nProceeds from sale of international operations, net of cash transferred\n  1,918   7,259 \n\nPurchases of property and equipment and internal use software\n  (2,978)  (1,129)\n\nNet cash (used in) provided by investing activities of continuing operations\n  (1,060)  6,130 \n\nNet cash provided by investing activities of discontinued operations\n  -   3,751 \n\nNet cash (used in) provided by investing activities\n  (1,060)  9,881 \n\n**Cash flows from financing activities:**\n ** **** **** ** ** **** **** **\n\nBorrowings under lines of credit\n  134,812   132,133 \n\nRepayments under lines of credit\n  (130,542)  (128,347)\n\nPayment of notes to seller\n  (500)  (1,843)\n\nProceeds from the sale of treasury shares\n  756   - \n\nRepurchase of common stock\n  -   (1,800)\n\nPayments to acquire noncontrolling interests\n  -   (500)\n\nProceeds from long-term debt\n  -   15 \n\nNet cash provided by (used in) financing activities of continuing operations\n  4,526   (341)\n\nNet cash used in financing activities of discontinued operations\n  -   (1,315)\n\nNet cash provided by (used in) financing activities\n  4,526   (1,656)\n\n         \n\nEffect of foreign exchange rate changes on cash\n  18   (58)\n\nNet (decrease)/increase in cash and cash equivalents\n  (14,959)  7,502 \n\nCash and cash equivalents at beginning of year\n  18,221   10,719 \n\nCash and cash equivalents at end of year\n $3,262  $18,221 \n\n         \n\n**Supplemental disclosure of cash flows information**\n ** **** **** ** ** **** **** **\n\nInterest paid\n $2,412  $2,059 \n\nNoncash investment in internal use software, included in accounts payable $154  $- \n\nIncome taxes paid\n $149  $277 \n\nPromissory notes issued to Resource Plus non-controlling interest\n $-  $2,500 \n\n \n\n \n\n**See accompanying notes to the Company's consolidated financial statements.**\n\n \n\n32\n\n \n\nSPAR Group, Inc. and Subsidiaries\n\n**Notes to Consolidated Financial Statements**\n\n \n\n**1. Nature of the Business**\n\n \n\nSPAR Group, Inc. (\"SGRP\" or the \"Corporation\"), and its subsidiaries (and SGRP together with its subsidiaries *may*be referred to as \"SPAR Group\", the \"Company\", \"SPAR\", \"We\", or \"Our\") is a merchandising and brand marketing services company, providing a broad range of services to retailers, consumer goods manufacturers and distributors around the world. \n\n \n\n**2. Summary of Significant Accounting Policies**\n\n \n\n****\n\n**Principles of Consolidation**** **\n\n \n\nThe Company consolidates its *100%*-owned subsidiaries. All significant intercompany transactions have been eliminated in the consolidated financial statements. \n\n \n\n****\n\n**Use of Estimates**\n\n \n\nThe preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (\"U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the amounts disclosed for contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting year. Significant balances subject to such estimates and assumptions include carrying amounts of property and equipment and intangible assets, valuation allowances for receivables, carrying amounts for deferred tax assets and liabilities, and liabilities incurred from operations and customer incentives. Actual results could differ from those estimates.\n\n** **\n\n****\n\n****\n\n**Segment Reporting**\n\n \n\nReportable segments are components of the Company for which separate financial information is available that is evaluated on a regular basis by the Chief Operating Decision Maker (\"CODM”) in assessing performance and deciding how to allocate resources. The Company's CODM is the Chief Executive Officer (\"CEO\").\n\n \n\nIn *November 2025,*the Company appointed a new CEO, William Linnane. During the *fourth* quarter of *2025,* revised internal reporting began to be provided to and reviewed by the CODM. The Company provides similar merchandising, marketing, and business services in the United States (\"U.S.\") and Canada, and the CODM now reviews financial information by *two* geographic components: (i) U.S. and (ii) Canada, for purposes of allocating resources and assessing performance. As a result, beginning in the *fourth* quarter of *2025,* the Company determined that it has two reportable segments: U.S. and Canada. For the *first* *three* quarters of *2025,* the previous CODM managed all business activities on a consolidated basis (as the Company exited substantially all of its international operations during the year ended *December 31, 2024),*and as a result, the Company had one reportable segment. Segment information for the year ended *December 31, 2024 *has been recast to reflect this reportable segment structure.\n\n \n\nFor the year ended *December 31, 2024,*the Company operated in three reportable geographic segments: (i) Americas, comprised of U.S., Canada, and Mexico; (ii) Asia-Pacific (\"APAC”), comprised of Japan, China, and India; and (iii) Europe, Middle East and Africa (\"EMEA”), comprised of South Africa. Brazil was previously included in the Americas segment; however, as a result of the reclassification of the Brazilian joint venture as discontinued operations in *2024,* Brazil was excluded from the Company’s segment reporting for the year ended *December 31, 2024.*\n\n \n\nFor comparative purposes, prior-period segment information has been recast to conform to the current period presentation.\n\n \n\n****\n\n**Variable Interest Entities**\n\n \n\nThe Company consolidates all entities where a controlling financial interest exists. The Company has considered its relationships with its *51%*-owned joint ventures to determine whether the Company has a variable interest in these entities, and if so, whether the Company is the primary beneficiary of the relationship. U.S. GAAP requires variable interest entities (\"VIEs”) to be consolidated if an entity’s interest in the VIE is a controlling financial interest. Under the variable model, a controlling financial interest is determined based on which entity, if any, has (i) the power to direct the activities of the VIE that most significantly impacts the VIE’s economic performance and (ii) the obligations to absorb losses that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.\n\n \n\nManagement performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. The consolidation status of a VIE *may*change as a result of such reassessments. Changes in consolidation status are applied prospectively in accordance with U.S. GAAP.\n\n \n\nAll these entities have been disposed of by *December 31, 2024. *\n\n \n\n****\n\n**Cash Equivalents**\n\n \n\nThe Company considers all short-term, highly liquid investments with original maturities of *three* months or less at the date of purchase to be cash equivalents. There are no cash equivalents at *December 31, 2025 *or *2024.*\n\n** **\n\n****\n\n****\n\n**Concentration of Credit Risk**\n\n \n\nFinancial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains cash balances with high quality financial institutions and periodically evaluates the creditworthiness of such institutions. At times, the Company’s cash and cash equivalents balances with individual banking institutions are in excess of insured limits. The Company does *not* believe it is exposed to significant credit risk and the Company has *not* experienced any losses related to its cash and cash equivalents balances.\n\n \n\nTwo clients each individually accounted for more than *10%* of the Company’s net revenue for the years ended *December 31, 2025 (*Client *1,* 16.8%, or approximately $22.8 million and Client *2,* 10.8%, or approximately $14.7 million, both in the U.S. segment), and one client whose revenue represented more than *10%* of revenue for the year ended *December 31, 2024 (*10.5%, or approximately $17.3 million in the U.S. segment). No customer accounted for more than *10%* of the Company’s accounts receivable, net as of *December 31, 2025 *and *December 31, 2024. *\n\n \n\n****\n\n**Revenue Recognition**\n\n \n\nThe Company generates its revenues by providing merchandising services to its clients. Revenues are recognized when the Company satisfies a performance obligation by transferring services promised in a contract to a customer and in an amount that reflects the consideration that the Company expects to receive in exchange for those services. Performance obligations in the Company’s contracts represent distinct or separate services that we provide to the Company’s customers; generally, the Company’s contracts have a single performance obligation. If, at the outset of an arrangement, the Company determines that a contract with enforceable rights and obligations does *not* exist, revenues are deferred until all criteria for an enforceable contract are met.\n\n \n\n*33*\n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**2. Summary of Significant Accounting Policies (continued)**\n\n****\n\n \n\nThe Company’s merchandising services are provided over time, generally on a daily, weekly, or monthly basis, and transaction price is based on the contractually-specified rate-per-driver metric (i.e., rate per hour, rate per store visit, rate per item assembled, or rate by task). The Company recognizes revenues for its contracts based on the contractually-specified rate-per-driver metric(s) utilizing the right-to-invoice practical expedient because the Company has a right to consideration for merchandising services completed to date. In general, (i) Standard Merchandising Service Contracts have a duration of *1* to *3* years with indexed rate increases while individual brand projects can be added with less than *6* months duration. (ii) Retail Remodel Contracts typically auto-renew with annual project SOWs, with regional awards typically granted *6* to *12* months in advance and individual projects assigned quarterly/monthly. (iii) Fulfillment Contracts are typically an annual award and selected projects can be less than *6* months. (iv) Standard Assembly Service Agreements are *1* to *3* years in duration with indexed rates increases. Customer deposits, which are considered advances on future work, are deferred and recorded as revenue in the period in which the services are provided.\n\n \n\n****\n\n**Unbilled Accounts Receivable**\n\n \n\nUnbilled accounts receivable represents services performed but *not* billed and are included as accounts receivable.\n\n** **\n\n****\n\n****\n\n**Allowance for Credit Losses **\n\n \n\nThe Company continually monitors the collectability of its accounts receivable based upon current client credit information and financial condition. Balances that are deemed to be uncollectible after the Company has attempted reasonable collection efforts are written off through a charge to the allowance for credit losses and a credit to accounts receivable. Accounts receivable balances, net of any applicable reserves or allowances, are stated at the amount that management expects to collect from the outstanding balances. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to allowance for credit losses based in part on management’s assessment of the current status of individual accounts. \n\n \n\n******\n\n***Leases***\n\n \n\nThe Company determines if a contract contains a lease at inception. The Company’s material operating leases consist of office space and equipment. The Company recognizes a right-of-use (\"ROU”) asset and lease liability for operating leases with a term of greater than *one* year. The ROU asset is measured as the sum of (*1*) the present value of all remaining fixed and in-substance fixed payments using the rate implicit in the lease whenever that is readily determinable or the Company’s incremental borrowing rate, (*2*) any lease payments made at or before the commencement date (less any lease incentives received) and (*3*) any initial direct costs incurred. The lease liability is measured similarly to the ROU asset, but excludes any payments made before the commencement date and initial direct costs incurred. Lease terms include options to extend or terminate the lease if it is reasonably certain the Company will exercise these options. Expense for operating leases and leases with a term of *one* year or less is recognized on a straight-line basis over the term of the lease, unless another systematic and rational basis is more representative of the derivation of benefit from use of the leased property. Variable lease payments are recognized in the period in which the related obligation is incurred and consist primarily of payments for insurance and property taxes. Operating lease expense and variable lease payments are recorded in selling, general and administrative expense in the consolidated statements of operations and comprehensive loss.\n\n \n\n****\n\n**Property and Equipment, Net**\n\n \n\nProperty and equipment, including leasehold improvements, are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years for equipment, three to seven years for furniture and fixtures, and three to five years for capitalized software costs. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the related lease terms, which range from *three* to *fifteen* years. Maintenance and minor repairs are expensed as incurred.\n\n \n\n****\n\n**Internal Use Software **\n\n \n\nThe Company capitalizes certain costs associated with its internally developed software. The Company capitalizes the costs of materials and services incurred in developing or obtaining internal use software and such costs include, but are *not* limited to: the cost to purchase software, the cost to write program code, and payroll and related benefits for those employees who are directly involved with and who devote time to the Company’s software development projects. Capitalization of such costs begins during the application development stage once the preliminary project stage is complete, management authorizes and commits to funding the project, and it is probable that the project will be completed and that the software will be used to perform the function intended. Capitalization ceases when the project is substantially complete and ready for its intended purpose. Costs incurred during preliminary project and post-implementation stages, as well as software maintenance and training costs, are expensed in the period in which they are incurred.\n\n** **\n\n****\n\n****\n\n**Impairment of****Long-Lived****Assets**\n\n** **\n\nThe Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the Company’s property and equipment and *may**not* be recoverable. When indicators of potential impairment exist, the Company assesses the recoverability of the assets by estimating whether the Company will recover its carrying value through the undiscounted future cash flows generated by the use of the asset and its eventual disposition. Based on this analysis, if the Company does *not* believe that it will be able to recover the carrying value of the asset, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset. If any assumptions, projections or estimates regarding any asset change in the future, the Company *may*have to record an impairment to reduce the net book value of such individual asset.\n\n \n\n****\n\n**Intangible Assets, Net**\n\n \n\nIntangible assets consist primarily of customer contracts and lists, trade names, patents and non-compete agreements, all of which have a finite useful life. Intangible assets are amortized based on the pattern in which the economic benefits of the intangible assets are estimated to be realized. When facts and circumstances indicate that the carrying value of definite-lived intangible assets *may**not* be recoverable, the Company assesses the recoverability of the carrying value by preparing estimates of sales volume and the resulting profit and cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, the Company recognizes an impairment loss. The impairment loss recognized is the amount by which the carrying amount of the asset or asset group exceeds the fair value.\n\n \n\n****\n\n**Goodwill**\n\n \n\nGoodwill *may *result from business acquisitions. Goodwill is assigned to reporting units based on the expected benefit from the synergies arising from each business combination, determined by using certain financial metrics, including the forecast discounted cash flows associated with each reporting unit. The goodwill acquired in a business combination is allocated to the appropriate reporting unit as of the acquisition date. Goodwill is subject to annual impairment tests and interim impairment tests if impairment indicators are present. The Company performs the annual impairment test as of *October 31*st each year. The impairment tests require the Company to *first* assess qualitative factors to determine whether it is necessary to perform a quantitative goodwill impairment test. The Company is *not* required to calculate the fair value of a reporting unit unless it determines, based on a qualitative assessment, that it is more likely than *not* that its fair value is less than its carrying amount. If it is determined that it is more likely than *not,* or if the Company elects *not* to perform a qualitative assessment, the Company proceeds with the quantitative assessment. Under the quantitative test, if the fair value of a reporting unit exceeds its carrying amount, then goodwill of the reporting unit is considered to *not* be impaired. If the carrying amount of the reporting unit exceeds its fair value, then an impairment loss is recognized in an amount equal to the excess, up to the value of the goodwill.\n\n \n\n*34*\n\n \n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**2. Summary of Significant Accounting Policies (continued)**\n\n \n\n******\n\n***Treasury Stock***\n\n \n\nThe Company records treasury stock activities under the cost method whereby the cost of the acquired stock is recorded as treasury stock. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct the par value from the Company’s common stock and to reflect any excess of cost over par value as a reduction to additional paid-in capital (to the extent created by previous issuances of the shares). Upon reissuance or sale of treasury shares, any difference between the proceeds received and the cost of shares is recognized in equity. Gains are credited to additional paid-in capital and losses are *first* offset against any existing additional paid-in capital related to treasury shares, with any excess charged to retained earnings.\n\n \n\n****\n\n**Noncontrolling Interest**\n\n \n\nThe Company recognizes noncontrolling interest related to VIEs, in which the Company is the primary beneficiary, as equity in the consolidated financial statements separate from the parent entity’s equity. The amount of net income or loss attributable to noncontrolling interests is included in consolidated net income on the face of the consolidated statements of operations and comprehensive loss. Changes in the parent entity’s ownership interest in a subsidiary that do *not* result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. In addition, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary will be initially measured at fair value and the difference between the carrying value and fair value of the retained interest will be recorded as a gain or loss. Because these transactions take place between entities under common control, any gains or losses attributable to these transactions are required to be included within additional paid-in-capital on the consolidated balance sheets. During *2024* the Company deconsolidated its entire controlling interest in all its VIEs. As of *December 31, 2025,*the Company has *no* continuing involvement in these entities. \n\n \n\n****\n\n**Advertising and Promotional Expenses**\n\n \n\nAdvertising and promotional expenses are included in selling, general and administrative expenses within the consolidated statements of operations and comprehensive loss and are expensed when incurred. Advertising and promotional expenses were $258,301 and $41,352 during the years ended *December 31, 2025, *and *2024,* respectively.\n\n \n\n****\n\n**Share-Based Compensation**\n\n \n\nThe Company measures all share-based awards granted to employees and directors based on the fair value on the date of the grant and recognizes compensation expense for those awards, over the requisite service period, which is generally the vesting period of the respective award, on a straight-line basis for the entire award. The fair value of stock options is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the fair market value of the Company’s common stock, expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and the Company’s expected dividend yield.\n\n \n\nThe Company classifies share-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. The Company made a policy election to estimate the number of share-based compensation awards that are expected to vest to determine the amount of compensation expense recognized in earnings. Forfeiture estimates are revised if subsequent information indicates that the actual number of forfeitures is likely to differ from previous estimates.  \n\n \n\nExcess tax benefits are realized from the exercise of stock options and are reported as a financing cash inflow in the consolidated statement of cash flows.\n\n \n\n****\n\n**Fair Value Measurements**\n\n** **\n\nFair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The U.S. GAAP fair value framework uses a *three*-tiered approach. Fair value measurements are classified and disclosed in *one* of the following *three* categories:\n\n \n\n \n●\n\nLevel *1* – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;\n\n \n●\n\nLevel *2* – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are *not* active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and\n\n \n●\n\nLevel *3* – Prices or valuation techniques where little or *no* market data is available that requires inputs significant to the fair value measurement and unobservable.\n\n \n\nIf the inputs used to measure the fair value fall within different levels of the hierarchy, the fair value is determined based upon the lowest level input that is significant to the fair value measurement. Whenever possible, the Company uses quoted market prices to determine fair value. In the absence of quoted market prices, the Company uses independent sources and data to determine fair value.\n\n \n\nThe fair value of the long-term portion of the Resource Plus Seller Notes is determined using a discounted cash flow methodology. Under this approach, the expected future cash flows of the notes are discounted to their present value using a discount rate derived from observable market data, such as current interest rates or yield curves for similar instruments. This valuation technique utilizes inputs classified as Level *2* under the ASC *820* fair value hierarchy. Accordingly, the carrying amount of the long-term portion of the Resource Plus Seller Notes approximates its fair value, as it represents the present value of the notes’ future cash flows.\n\n \n\n****\n\n**Restructuring Costs and Severance**\n\n \n\nThe Company periodically undertakes restructuring initiatives to optimize its cost structure and operations. These activities *may*include employee termination benefits, facility closures, lease exit costs, and contract termination costs and other *one*-time expenses. The Company’s restructuring accruals require the use of significant estimates and judgments, particularly with respect to the timing and amount of expected cash outflows and the identification of costs directly associated with exit activities. These estimates are evaluated on a regular basis and *may*be adjusted as new information becomes available. Changes in estimates are recognized in the period in which they are identified and *may*result in increases or decreases to previously recorded restructuring liabilities. Actual results could differ from these estimates due to changes in market conditions, negotiations with *third* parties, or variations in the execution of restructuring plans.\n\n \n\nRestructuring costs and severance costs for the Company include severance costs paid in connection with the reorganization of the Company's executive team and expenses related to the move of the Company's headquarters from Auburn Hills, Michigan to its existing operations office in Charlotte, North Carolina, in *November 2025.*For the year ended *December 31, 2025,*the Company recognized expense of $4.8 million, which consist of $4.2 million for termination and severance costs and $0.6 million for relocation expense. The costs are presented within \"Restructuring costs and severance\" in the Consolidated Statements of Operations and Comprehensive Loss. Liabilities of $0.4 million for employee severance is included in \"Accrued expenses and other current liabilities\" in the Consolidated Balance Sheets as of *December 31, 2025.*There was *no* restructuring activity for the year ended *December 31, 2024.*\n\n \n\n*35*\n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**2. Summary of Significant Accounting Policies (continued)**\n\n \n\n****\n\n**Income Taxes **\n\n \n\nIncome tax provisions and benefits are made for taxes currently payable or refundable, and for deferred income taxes arising from future tax consequences of events that were recognized in the Company’s financial statements or tax returns and tax credit carry forwards. The effects of income taxes are measured based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. If necessary, a valuation allowance is established to reduce deferred income tax assets to an amount that will more likely than *not* be realized.\n\n \n\nThe calculation of income taxes involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a *two*-step process. The *first* step involves evaluating the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than *not* that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The *second* step involves estimating and measuring the tax benefit as the largest amount that is more than *50%* likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company has to determine the probability of various possible outcomes. The Company’s evaluation of uncertain tax positions is based on factors including, but *not* limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.\n\n \n\n******\n\n***Recently Adopted Accounting Pronouncements ***\n\n \n\nIn *December 2023,*the FASB issued ASU *No.* *2023*-*09,* *Income Taxes (Topic 740): Improvements to Income Tax Disclosures*, which requires companies to report specific categories of rate reconciliation, certain details of income taxes paid and certain information by tax jurisdictions. ASU *2023*-*09* is effective for annual periods beginning after *December 15, 2024.*The Company implemented this ASU prospectively for the fiscal year ending *December 31, 2025.*\n\n \n\n**Recently Issued Accounting Pronouncements Not Yet Adopted**\n\n \n\nOn *November 4, 2024,*the FASB issued ASU *2024*-*03,* *Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures* which requires disaggregated disclosure of income statement expenses for public business entities (PBEs). The ASU does *not* change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU *2024*-*03* is effective for all PBEs for fiscal years beginning after *December 15, 2026,*and interim periods within fiscal years beginning after *December 15, 2027.*The Company does *not* believe adoption will have a material effect on its consolidated financial statements and related disclosures.\n\n \n\n \n\n*36*\n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**3. Supplemental Balance Sheet Information**\n\n \n\n  \n**For the Year Ended December 31,**\n \n\n**Summary of Results from Discontinued Operations:**\n \n**2024**\n \n\n*(in thousands)*\n   * *\n\nNet revenues\n $33,185 \n\nCost of revenues\n  28,325 \n\nGross Profit\n  4,860 \n\nSelling, general, and administrative expenses\n  3,385 \n\nLoss on disposal of business\n  1,188 \n\nDepreciation and amortization\n  63 \n\nIncome from operations before tax\n  224 \n\nIncome tax expense\n  1,074 \n\nInterest expense\n  31 \n\nLoss from discontinued operations, net of tax\n $(881)\n\n \n\n  \n**December 31,**\n \n\n**Accounts receivable, net, consists of the following:**\n \n**2025**\n  \n**2024**\n \n\n*(in thousands)*\n   * *   * *\n\nTrade\n $17,774  $12,059 \n\nUnbilled\n  8,841   9,284 \n\nNon-trade\n  391   3,834 \n\nGross accounts receivable\n  27,006   25,177 \n\nLess allowance for credit losses\n  -** **  (411)\n\nAccounts Receivable, net\n $27,006  $24,766 \n\n \n\n  \n**December 31,**\n \n\n**Activity in allowance for credit losses**\n \n**2025**\n  \n**2024**\n \n\n*(in thousands)*\n   * *   * *\n\nBeginning balance in allowance for credit losses\n $411  $1,461 \n\nCurrent provision for expected credit losses\n  **-**   128 \n\nAllowances associated with businesses sold\n  **-**** **  (12)\n\nWrite-offs charged against the allowance\n  (411)  (1,166)\n\nEnding balance in allowance for credit losses\n $**-**  $411 \n\n \n\n  \n**December 31,**\n \n\n**Property and equipment consist of the following:**\n \n**2025**\n  \n**2024**\n \n\n*(in thousands)*\n   * *   * *\n\nEquipment\n $3,904  $4,060 \n\nFurniture and fixtures\n  1,027   591 \n\nLeasehold improvements\n  538   384 \n\nCapitalized internal use software costs\n  21,329   18,967 \n\nCapitalized software in development\n  92   - \n\n   26,890   24,002 \n\nLess accumulated depreciation and amortization\n  (23,289**)**  (21,987)\n\nProperty and equipment, net\n $3,601  $2,015 \n\n \n\nDepreciation expense (including amortization of internal use software and intangible assets as described below) was $1.6 million and $1.6 million for the years ended *December 31, 2025* and *2024*, respectively. The Company capitalized $2.4 million and $1.0 million of costs related to internal use software in the years ended *December 31, 2025* and *2024*. The Company recognized approximately $1.4 million and $1.3 million of amortization expense related to internal use software for the years ended *December 31, 2025* and *2024*, respectively.\n\n \n\n**Goodwill consist of the following:**\n  **U.S.**   **All Other**   **Total** \n\n*(in thousands)*\n   * *   * *   * *\n\n**Balance at January 1, 2024**\n            \n\nAggregate goodwill acquired\n $856  $438  $1,294 \n\nSale of business\n  -   (438)  (438)\n\n**Balance at December 31, 2024**\n  856   -   856 \n\n**Balance at December 31, 2025**\n $856  $-  $856 \n\n \n\n*37*\n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**3. Supplemental Balance Sheet Information (continued)**\n\n \n\n \n**December 31,**\n \n\n**Intangible assets consist of the following:**\n \n**2025**\n  \n**2024**\n \n\n*(in thousands)*\n   * *   * *\n\nTrade names\n $900  $900 \n\nPatents\n  870   870 \n\nGross intangible assets\n  1,770   1,770 \n\nLess accumulated amortization\n  (1,061**)**  (929)\n\nIntangible assets, net\n $709  $841 \n\n \n\nThe Company is amortizing its intangible assets over lives ranging from 5 to 25 years. Amortization expense for the years ended *December 31, 2025* and *2024* was approximately $0.1 million and $0.2 million, respectively.\n\n \n\nThe annual amortization for each of the following years succeeding *December 31, 2025* is summarized as follows (in thousands):\n\n*(in thousands)*\n   * *\n\n**Year**\n \n**Amount**\n \n\n2026\n $133 \n\n2027\n  36 \n\n2028\n  36 \n\n2029\n  36 \n\n2030\n  36 \n\nThereafter\n  432 \n\nTotal\n $709 \n\n \n\n \n\n  \n**December 31,**\n \n\n**Accrued expenses and other current liabilities:**\n \n**2025**\n  \n**2024**\n \n\n*(in thousands)*\n   * *   * *\n\nTaxes payable\n $1,607  $137 \n\nAccrued salaries and wages\n  1,905   1,644 \n\nAccrued third party labor\n  198   131 \n\nOther\n  1,866   1,621 \n\nAccrued expenses and other current liabilities\n $5,576  $3,533 \n\n \n\n*38*\n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**4. Debt**\n\n \n\n***North Mill Capital Credit Facility***\n\n \n\nThe Company, through SPAR Marketing Force, Inc. (\"SMF\") and SPAR Canada Company ULC (\"SCC\", and collectively with SMF, the “NM Borrowers”), has a secured revolving credit facility in the United States (the \"US Revolving Credit Facility\") and Canada (the \"Canada Revolving Credit Facility\", and collectively with the US Revolving Credit Facility, the \"NM Credit Facility\") with North Mill Capital, LLC, d/b/a SLR Business Credit (\"NM\").\n\n \n\nIn order to obtain, document and govern the NM Credit Facility, SMF, SCC, SGRP and certain of SGRP's direct and indirect subsidiaries in the United States and Canada (including SMF and SCC as borrowers and SGRP as a guarantor, collectively, the \"NM Loan Parties\") entered into a Loan and Security Agreement with NM dated as of *April 10, 2019,*which, as amended from time to time (as amended, the \"NM Loan Agreement\"), governs the NM Credit Facility. Pursuant to the NM Loan Agreement, the NM Borrowers agreed to reimburse NM for legal and documentation fees incurred in connection with the NM Loan Agreement and such amendments.\n\n \n\nOn *July 1, 2022,*the NM Loan Parties and NM executed and delivered a Fourth Modification Agreement, effective as of *June 30, 2022 (*the \"Fourth Modification Agreement\"), pursuant to which the NM Loan Parties and NM agreed to extend the NM Credit Facility from *October 10, 2023,*to *October 10, 2024,*and increased the amount of the US Revolving Credit Facility to $17.5 million while the Canada Revolving Credit Facility remained at CDN$1.5 million. In addition, the Fourth Modification Agreement permanently increased SMF's borrowing base availability for billed receivables to up to 90% from 85%, and unbilled receivables to up to 80% from 70%, and increased the cap on unbilled accounts for SMF to $6.5 million from $5.5 million.\n\n \n\nOn *August 9, 2022,*the NM Loan Parties and NM executed and delivered a Fifth Modification Agreement, effective immediately (the \"Fifth Modification Agreement\"), pursuant to which the NM Loan Parties and NM agreed to temporarily increase the borrowing base availability under the NM Credit Facility, and the NM Borrowers agreed to pay certain additional fees.\n\n \n\nOn *February 1, 2023,*the NM Loan Parties and NM executed and delivered a Sixth Modification Agreement, effective immediately (the \"Sixth Modification Agreement\"), pursuant to which the NM Loan Parties and NM agreed to increase the amount of the US Revolving Credit Facility to $28.0 million and increase the Canada Revolving Credit Facility to CDN$2.0 million. In addition, the Sixth Modification Agreement increased the cap on unbilled accounts in the borrowing base for SMF to $7.0 million from $6.5 million.\n\n \n\nOn *March 27, 2024,*the NM Loan Parties and NM executed and delivered a Seventh Modification Agreement, effective immediately (the \"Seventh Modification Agreement\"), pursuant to which the NM Loan Parties and NM agreed to extend the NM Credit Facility from *October 10, 2024*to *October 10, 2025.*\n\n \n\nOn *October 9, 2025,*the NM Loan Parties and NM executed and delivered an Eighth Modification Agreement, effective immediately (the \"Eight Modification Agreement\"), pursuant to which the NM Loan Parties and NM agreed to and extend the NM Credit Facility from *October 9, 2025*to *October 10, 2027,*to increase the amount of the US Revolving Credit Facility to $30.0 million, and increase the Canada Revolving Credit Facility to $6.0 million. In addition, the Eight Modification Agreement increased the cap on unbilled accounts in the borrowing base for SMF to $15.0 million from $7.0 million and increased the cap on eligible unbilled accounts in the Canadian Borrower's borrowing base to $2.0 million (from the prior cap of CDN$800,000). The Eighth Modification Agreement also converted the balance to USD from CAD and modified the minimum interest charges payable under the Canadian Revolving Credit Facility, which are now based on a minimum outstanding balance of $1.0 million (increased from $0.5 million).\n\n \n\nTo evidence the increase in the US Revolving Credit Facility, SMF executed and delivered to NM a $30 million Sixth Amended and Restated Revolving Credit Master Promissory Note (the \"Restated US Note\"), which amends, restates, supersedes and replaces the prior US$ note. To evidence the increase in the Canadian Revolving Credit Facility, SCC executed and delivered to NM a $6 million Fifth Amended and Restated Revolving Credit Master Promissory Note (the \"Restated Canadian Note\"), which amends, restates, supersedes and replaces the prior CDN$ note.\n\n \n\nThe Restated US Note and Restated Canadian Note (together, the \"NM Notes\") and the NM Loan Agreement together require the NM Borrowers to pay interest on the loans thereunder equal to: (i) the Prime Rate designated from time to time by Wells Fargo Bank; plus (ii) *one* and *one* quarter percentage points (1.25%,) or an aggregate minimum of 6.75% per annum. In addition, the NM Borrowers are paying a facility fee to NM in an amount equal to: (i) For the US facility, for the year commencing on *October 10, 2025,*0.60% of the applicable US Benchmark Advance Amount ($24.0 million), with an additional *$6,000* charged at the *first* occurrence of each *$1.0* million increment above the benchmark (up to the US advance limit) and (ii) for the Canadian Facility for the year commencing on *October 10, 2025,**0.60%* calculated on *$2.0* million, and thereafter on the Canadian Benchmark Advance Amount (*$2.0* million), with an additional *$6,000* charged at the *first* occurrence of each *$1.0* million increment above the benchmark (up to the Canadian advance limit).\n\n \n\nAs of *December 31, 2025,*the aggregate interest rate was 8.00% per annum and the aggregate outstanding loan balance was approximately $20.4 million, which is included within lines of credit and short-term loans in the consolidated balance sheets. The aggregate outstanding loan balance is divided between the US Revolving Credit Facility and the Canada Revolving Credit Facility as follows: (i) the outstanding loan balance under the US Revolving Credit Facility was approximately $17.3 million; and (ii) the outstanding loan balance under the Canada Revolving Credit Facility was approximately $3.1 million.\n\n \n\nThe NM Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the NM Loan Parties, including maintaining a positive trailing EBITDA for each the NM Borrowers (i.e., SMF and SCC) and imposes limits on all of the NM Loan Parties (including SGRP) on non-ordinary course payments and transactions, incurring or guaranteeing indebtedness, increases in executive, officer or director compensation, capital expenditures and certain other investments. The NM Loan Parties were in compliance with such covenants as of *December 31, 2025. *The obligations of the NM Borrowers are secured by the receivables and other assets of the NM Borrowers and substantially all of the assets of the other NM Loan Parties, however, the obligations are *not* secured by any equity in, financial asset respecting or asset of any Excluded Subsidiary meaning each of the following direct or indirect subsidiaries of SGRP: (i) Resource Plus of North Florida, Inc. (“Resource Plus”), Mobex of North Florida, Inc., and Leasex, LLC, and their respective subsidiaries; (ii) NMS Retail Services ULC, which is an inactive Nova Scotia ULC; (iii) SPAR Group International, Inc.; (iv) SPAR FM Japan, Inc.; (v) SPAR International, Ltd.; (vi) SPAR Group International, Inc., (vii) NMS Retail Services, ULC (viii) BDA Resources, LLC, (ix) SPAR, Inc., (*x*) SPAR NMS Holdings, Inc,. (xi) SPAR Merchandising & Assembly, Inc. (xii) SPAR Field Administration, Inc., (xiii) each other subsidiary formed outside of the United States or Canada; and (xiv) any other entity in which any such subsidiary is a partner, joint venture or other equity investor.\n\n \n\n**Resource Plus****–** **Seller Notes**\n\n \n\nOn *April 18, 2024, *the Company entered into a Securities Purchase Agreement to buy from Mr. Richard Justus the remaining minority joint venture interests of Resource Plus and its sister companies, Mobex of North Florida, Inc., and Leasex, LLC. Based on the terms set in the original joint venture agreement, the Company will pay a total of $3.0 million in annual payments over a *five*-year period. $0.25 million was paid within the *five* business days of closing, and the remaining $2.75 million will be paid pursuant to a Secured Promissory Note. The agreement resulted in the termination of all relevant shareholder and operating agreements, although specific confidentiality obligations remain effective for *three* years post-closing and specific mutual releases were provided. The purchase was closed and completed on *May 1, 2024. *As of *December 31, **2025,* $1.0 million has been paid and the remaining $2.0 million Promissory Note is outstanding and is reported on the balance sheet (net of discount) in current portion of long-term debt and long-term debt, net of current portion. \n\n \n\n*39*\n\n \n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**4. Debt (continued)**\n\n \n\n**Summary of the Company**’**s lines of credit (dollars in thousands):**\n\n  \n**Interest Rate as of**\n  \n**Balance as of**\n  \n**Interest Rate as of**\n  \n**Balance as of**\n \n\n  \n**December 31, 2025**\n  \n**December 31, 2025**\n  \n**December 31, 2024**\n  \n**December 31, 2024**\n \n\nUSA / Canada North Mill Capital\n  8.00%  20,442   9.40%  16,082 \n\nTotal\n  * *  $20,442   * *  $16,082 \n\n \n\nThe effective interest rate on these instruments is *not* materially different from the stated rate.\n\n \n\n**Summary of****Unused****Company Credit and Other Debt Facilities (in thousands)****:*** *\n\n  \n**December 31, 2025**\n  \n**December 31, 2024**\n \n\nUnused Availability:\n        \n\nUnited States / Canada\n  13,935   13,310 \n\nTotal Unused Availability\n $13,935  $13,310 \n\n \n\n***Summary of the Company's Seller Notes (dollars in thousands):***\n\n  \n**Interest Rate**\n  \n**Balance**\n  \n**Interest Rate**\n  \n**Balance**\n \n\n  \n**as of**\n  \n**as of**\n  \n**as of**\n  \n**as of**\n \n\n  \n**December 31, 2025**\n  \n**December 31, 2025**\n  \n**December 31, 2024**\n  \n**December 31, 2024**\n \n\nUSA - Resource Plus Seller Notes (Current)\n  4.30%  500   4.30%  500 \n\nUSA - Resource Plus Seller Notes (Long-term)\n  4.30%  1,284   4.30%  1,722 \n\n   * *** ** $**1,784**   * *** ** $**2,222** \n\n \n\n*40*\n\n \n\nSPAR Group, Inc. and Subsidiaries \n\nNotes to Consolidated Financial Statements (continued)\n\n \n\n**5. Income Taxes **\n\n \n\n**Income Taxes**\n\n \n\nOn *July 4, 2025,*President Donald J. Trump enacted legislation officially titled “An Act to provide for reconciliation pursuant to title II of H.Con. Res. *14”—commonly* known as the One Big Beautiful Bill Act (OBBBA). The bill implemented *three* main changes to business taxes: *1.* *100%* bonus depreciation has been reinstated for assets placed in service after *January 19, 2025,**2.* The deduction for domestic section *174* expenses has been permanently restored and unamortized domestic costs from tax years *2022*-*2024* *may*be deducted in *2025* or split between *2025* and *2026,* and *3.* The addbacks for depreciation, amortization, and depletion when calculated adjusted taxable income for purposes of section *163*(j) have been permanently restored. The Company has**concluded to continue to capitalize and amortize their domestic section *174* expenses.\n\n \n\nLoss from continuing operations before income taxes is summarized as follows (in thousands):\n\n  \n**Year Ended December 31,**\n \n\n   **2025**   **2024** \n\nDomestic\n $(21,131) $668 \n\nForeign\n  578   (2,330)\n\nTotal:\n $(20,553) $(1,662)\n\n \n\nThe income tax expense from continuing operations is summarized as follows (in thousands):\n\n  \n**Year Ended December 31,**\n \n\n  \n**2025**\n  \n**2024**\n \n\nCurrent tax expense:\n        \n\nFederal\n $-  $21 \n\nForeign\n  457   1,401 \n\nState and local\n  (203)  222 \n\nTotal current tax expense\n  254   1,644 \n\n         \n\nDeferred tax expense (benefit):\n        \n\nFederal\n  3,425   (1,196)\n\nForeign\n  -   (114)\n\nState and local\n  394   (190)\n\nTotal deferred tax expense (benefit)\n  3,819   (1,500)\n\n         \n\nTotal income tax expense:\n        \n\nFederal\n  3,425   (1,175)\n\nForeign\n  457   1,287 \n\nState and local\n  191   32 \n\nTotal income tax expense\n $4,073  $144 \n\n \n\nThe provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference are as follows (in thousands):\n\n  \n**Year Ended December 31,**\n \n\n  \n**2025**\n  \n**Rate**\n \n\n         \n\nUS federal statutory tax rate\n $(4,316)  21.0%\n\nState and local income taxes, net of federal income tax effect (1)\n  210   (1.0%)\n\nForeign Tax Effects:\n        \n\nForeign tax rate differential\n  32   (0.2%)\n\nEffect of cross-border tax laws\n  526   (2.6%)\n\nTax credits\n  -   0.0%\n\nChanges in valuation allowance\n  6,927   (33.7%)\n\n         \n\nNontaxable or nondeductible items:\n        \n\nExecutive compensation disallowed under Section 162(m)\n  654   (3.2%)\n\nOther permanent differences\n  136   (0.7%)\n\nOther adjustments:\n        \n\nReturn to provision\n  68   (0.3%)\n\nOther\n  (164)  0.8%\n\nEffective Tax Rate:\n $4,073   (19.8%)\n\n*(1) State taxes in Illinois, Texas, Michigan, and California for 2025 made up the majority (greater than 50 percent) of the tax effect in this category.*\n \n\n \n\n \n\n \n\n*41*\n\n \n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**5. Income Taxes (continued)**\n\n  \n**Year Ended December 31,**\n \n\n  \n**2024**\n  \n**Rate**\n \n\n*(in thousands)*        \n\nProvision for income taxes at federal statutory rate\n $(349)  21.0%\n\nState income taxes, net of federal benefit\n  32   (1.9%)\n\nPermanent differences\n  (136)  8.2%\n\nSection 162(m) adjustment\n  245   (14.7%)\n\nReturn to provision adjustment\n  (10)  0.6%\n\nForeign tax rate differential\n  (288)  17.3%\n\nGILTI tax\n  284   (17.1%)\n\nSale of foreign entities\n  (369)  22.2%\n\nTransaction costs\n  118   (7.1%)\n\nWithholding tax\n  1,046   (62.9%)\n\nSubpart F Income\n  213   (12.8%)\n\nForeign tax credit\n  (556)  33.5%\n\nForeign disregarded income\n  292   (17.6%)\n\nChange in valuation allowance\n  (2)  0.1%\n\nDiscontinued operations SG&A allocation\n  (430)  25.9%\n\nOther\n  54   (3.3%)\n\nNet expense\n $144   (8.7%)\n\n \n\nComponents of income taxes paid, net of refunds consist of the following (in thousands):\n \n**Year Ended December 31,**\n \n\n  \n**2025**\n \n\nFederal\n $15 \n\nState\n    \n\nIndiana\n  14 \n\nMississippi\n  8 \n\nNew Jersey\n  8 \n\nNorth Carolina\n  14 \n\nPennsylvania\n  23 \n\nTexas\n  53 \n\nOther U.S. States\n  14 \n\nForeign\n  - \n\nTotal\n $149 \n\n \n\nDeferred taxes from continuing operations consist of the following (in thousands):\n \n**December 31,**\n \n\n  \n**2025**\n  \n**2024**\n \n\nDeferred tax assets:\n        \n\nNet operating loss carryforwards\n $4,693  $389 \n\nFederal research and development credit\n  240   164 \n\nForeign withholding tax\n  796   872 \n\nAccrued payroll\n  110   4 \n\nTransaction costs\n  –   753 \n\nAllowance for credit losses and other receivable\n  –   93 \n\nShare-based compensation expense\n  250   258 \n\nBusiness interest limitation\n  1,237   889 \n\nOperating lease liability\n  1,134   128 \n\nCapitalized software development costs\n  –   277 \n\nOther\n  695   891 \n\nTotal deferred tax assets, gross\n  9,155   4,718 \n\nValuation allowance\n  (7,622)  - \n\nTotal deferred tax assets\n  1,533   4,718 \n\n         \n\nDeferred tax liabilities:\n        \n\nGoodwill & intangible assets of subsidiaries\n  334   291 \n\nAllowance for credit losses and other receivable\n  2   - \n\nRight to use asset\n  1,094   127 \n\nCapitalized software development costs\n  28   - \n\nDepreciation\n  91   41 \n\nTotal deferred tax liabilities\n  1,549   459 \n\nNet deferred income taxes\n $(16) $4,259 \n\n \n\nAs of *December 31, 2025,*the Company’s deferred tax assets were primarily the result of the business interest limitation and net operating losses. The Company has gross U.S. Federal NOL carryforwards of $20.6 million and tax effected amount of $4.3 million. $20.0 million of the U.S Federal NOL carryforward has *no* expiration date. The remaining $0.6 million has expiration dates beginning in *2026* through *2035.* The Company has a U.S. State NOL deferred tax asset of $0.4 million of varying expiration dates from *2025* to *2041.* The Company has $0.2 million of U.S. Research and Development credits with expiration dates ranging from *2031* to *2035.* The Company has $0.8 million of U.S. foreign tax credits with expiration dates ranging from *2033* to *2034.*\n\n \n\n*42*\n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n**5. Income Taxes (continued)**\n\n \n\nA valuation allowance is recognized if, based on the weight of available evidence, it is more likely than *not* that some portion or all of the deferred tax asset will *not* be realized in a particular tax jurisdiction. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a deferred tax asset. Judgement must be used in considering the relative impact of negative and positive evidence. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the *three*-year period ended *December 31, 2025. *Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. Based on the weight of the available evidence, the Company provided a valuation allowance against its US and state deferred tax assets. The valuation allowance was $7.6 million and $0.0 million as of *December 31, 2025*and *2024* respectively. A valuation allowance was *not* provided for the foreign deferreds.\n\n \n\n *(in thousands):* \n**2025**\n  \n**2024**\n \n\nValuation allowance, beginning of year\n $-  $- \n\nIncome tax expense:\n        \n\nDecrease/(increase) in valuation allowance\n  (7,622)  - \n\nValuation allowance, end of year\n $(7,622) $- \n\n \n\nA reconciliation of the beginning and ending amount of uncertain tax position reserves is as follows (in thousands):\n\n  \n**Year Ended December 31,**\n \n\n   **2025**   **2024** \n\nBeginning balance\n $114  $54 \n\nAdditions based on tax positions related to the current year\n  43   60 \n\nEnding balance\n $157  $114 \n\n \n\nThe provision for income taxes includes the impact of uncertain tax position reserves and changes to reserves that are considered appropriate. As of *December 31, 2025,*included in the balance of uncertain tax position reserves are $0.16 million of reserves that, if recognized, would affect the effective rate of income from continuing operations. Interest and penalties that the tax law requires to be paid on the underpayment of taxes should be accrued on the difference between the amount claimed or expected to be claimed on the return and the tax benefit recognized in the financial statements. The Company's policy is to record this interest and penalties as additional tax expense. We accrued penalties of $0.6 thousand and interest of $3 thousand during *2025* and in total, as of *December 31, 2025 *recognized a liability related to the uncertain tax position reserves noted above for penalties of $16 thousand and interest of $23 thousand. During *2024,* we accrued penalties of $0.8 thousand and interest of $3 thousand and in total, as of *December 31, 2024,*recognized a liability of penalties of $16 thousand and interest of $20 thousand. \n\n \n\nIn management's view, the Company's tax reserves at *December 31, 2025 *and *2024,* for potential domestic state tax liabilities were sufficient.\n\n \n\nSPAR and its subsidiaries file numerous consolidated, combined and separate company income tax returns in the U.S. Federal jurisdiction and in many U.S. states and foreign jurisdictions. With few exceptions, SPAR is subject to U.S. Federal, state and local income tax examinations for the years *2022* through the present. Foreign entities are subject to tax audits that vary based on jurisdiction. However, tax authorities have the ability to review years prior to the position taken by the Company to the extent that SPAR utilized tax attributes carried forward from those prior years.\n\n \n\n \n\n \n\n*43*\n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**6. Commitments and Contingencies**\n\n \n\n***Legal Matters***\n\n \n\nThe Company is a party to various legal actions and administrative proceedings arising in the normal course of business. In the opinion of Company's management, resolution of these matters is *not* anticipated to have a material adverse effect on the Company or its estimated or desired affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.\n\n \n\n \n\n**7. Common Stock**\n\n \n\nAs of *December 31, 2025,*the Corporation's certificate of incorporation authorized the Corporation to issue 47,000,000 shares of common stock, par value $0.01 per share. The voting, dividend and liquidation rights of the holders of the Corporation's common stock are subject to and qualified by the rights, powers and preferences of the holders of the Corporation's Series B convertible preferred stock. Each share of the Corporation's common stock is entitled to *one* vote on all matters submitted to a vote of the Corporation's stockholders. Holders of the Corporation's common stock are entitled to receive dividends as *may*be declared by the Corporation's board of directors (the \"Board\"), if any, subject to the preferential dividend rights of the Corporation's Series B convertible preferred stock. No cash dividends had been declared or paid during the periods presented.\n\n \n\nOn *March 28, 2024, *the Board approved SGRP's repurchase of up to 2,500,000 of SGRP's Shares of Common Stock (\"SGRP Shares\") under the *2024* Stock Repurchase Program (the *\"2024* Stock Repurchase Program\"), which repurchases would be made from time to time over a *one*-year period in the open market and through privately-negotiated transactions, subject to cash availability and general market and other conditions. Pursuant to the *2024* Stock Repurchase Program, on *May 3, 2024, *SGRP's Board and its Audit Committee approved SGRP's Repurchase Agreement with William H. Bartels for SGRP's private repurchase of 1,000,000 shares of SGRP's Common Stock from William H. Bartels, dated and effective as of *April 30, 2024, *at a purchase price of $1.80 per share (the Nasdaq closing price on *April 29, 2024). *Upon their repurchase those shares became Treasury Shares. Mr. Bartels is a Director and significant stockholder of SGRP, is *one* of the founders of the Company, and is an affiliate and related party of SGRP. There have been *no* other share repurchases to date under the *2024* Stock Repurchase Program, which expired on *March 28, 2025.*\n\n \n\n \n\n**8. Preferred Stock**\n\n \n\nThe Corporation’s certificate of incorporation authorizes it to issue 3,000,000 shares of preferred stock with a par value of $0.01 per share, which *may*have such preferences and priorities over the Corporation’s common stock and other rights, powers and privileges as the Board of *may*establish in its discretion.\n\n \n\nIn *January 2022,*the Corporation filed a \"Certificate of Designation of Series \"B” Preferred Stock of SPAR Group, Inc.” (the \"Preferred Designation”) with the Secretary of State of Delaware, which designation had been approved by the Board in *January 2022.*The Preferred Designation created a series of 2,000,000 shares of convertible preferred stock designated as \"Series B” convertible preferred stock, par value of $0.01 per share.\n\n \n\nThe Series B convertible preferred stock do *not* carry any voting or dividend rights and upon vesting converted into the Corporation's common stock at a ratio of *1*-to-1.5. The holders of the Series B convertible preferred stock had a liquidation preference over the Corporation's common stock and voted together for matters pertaining only to the Series B convertible preferred stock where only the holders of the Series B convertible preferred stock are entitled to vote. The holders of outstanding Series B Preferred Stock do *not* have the right to vote for directors or other matters submitted to the holders of the Corporation's common stock.\n\n \n\nIn *January 2022,*2,000,000 shares of Series B convertible preferred stock were issued to the majority stockholders and related parties pursuant to the Change of Control, Voting and Restricted Stock Agreement.\n\n \n\nDuring the year ended *December 31, 2022,*1,145,247 shares of Series B convertible preferred stock converted to 1,717,870 shares of the Corporation's common stock. As of the year ended *December 31, 2022,*854,753 shares of Series B convertible preferred stock were outstanding, which upon vesting would automatically convert into 1,282,129 shares of the Corporation's common stock. \n\n \n\nDuring the year ended  *December 31, 2023, *all of the remaining 854,753 shares of Series B convertible preferred stock vested and automatically became convertible into 1,282,129 shares of the Corporation's common stock of which 307,129 shares of the Corporation's Common Stock were issued prior to  *December 31, 2023. *The remaining 975,000 shares of SGRP Common Stock were in the process of being issued and the remaining shares of Series B Preferred Stock were in the process of being returned and cancelled at *December 31, 2023. *These issuances and cancellations were completed during the quarter ending *March 31, 2024. *\n\n \n\nSGRP *may*change or cancel the authorized Series B Preferred Stock, and to the extent it reduces such authorization without issuance, it can create other series of Preferred Stock with potentially different dividends, preferences and other terms.\n\n \n\n \n\n**9. Retirement Plans**\n\n \n\nThe Company has a *401*(k) Profit Sharing Plan covering substantially all eligible domestic employees. The Company made discretionary contributions of $0.0 million and $0.1 million for the years ended *December 31, 2025* and *2024*, respectively.\n\n \n\n \n\n*44*\n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**10. Related Party Transactions **\n\n \n\n***Domestic Related Party Transactions***\n\n \n\nOn *December 1, 2021, *the Company entered into the Agreement for Marketing and Advertising Services (the \"WB Agreement\") with WB Marketing, Inc., which later became Qantm Creative (the \"Agent\", and together with the Company, the \"Parties\"). The Agent is an entity owned and controlled by Mrs. Jean Matacunas who is the wife of former President and Chief Executive Officer, Michael R. Matacunas. Mr. Matacunas is also a minority owner of the Agent. The service fees paid to Qantm Creative for the years ended *December 31, 2025 *and *2024,* were $229,000 and $104,000, respectively. The Company cancelled this agreement in *November **2025.*\n\n \n\nOn *December 22, 2023,*the Company entered into an agreement with National Retail Remodel Services (the \"Buyer\") to sell its 51% ownership interest in National Merchandising Services, LLC (\"NMS\") to the Buyer for total consideration of $1,441,004. The transaction closed on *December 31, 2023. *Per the agreement, the purchase price is due from the Buyer as follows: (*1*) a payment of $700,000 due immediately to the escrow agent upon closing, releasable to the Company in *January 2024; (**2*) $523,000 in the form of the Buyer's promissory note due and payable on *January 31, 2024;*and (*3*) a payment of up to $209,004 contingent upon collection of an outstanding receivable. The $700,000 and $523,000 portions of consideration for this transaction are recorded in \"Other Receivables\" at *December 31, 2023*and were received in *first* quarter of *2024.* The Company’s *December 31, 2023*financial results include a loss on this sale of approximately $427,000, primarily reflecting the write-off of remaining goodwill related to NMS. As of *December 31, 2025,*payment upon collection of the outstanding receivables has *not* been made and attempts to collect are ongoing. The Company has *not* included the receivables related to this collection on its balance sheet. \n\n \n\n**Summary of Certain Related Party Transactions**\n\n** **\n\nThe following costs of affiliates were charged to the Company (in thousands):\n\n  \n**Year Ended December 31,**\n \n\n  \n**2025**\n  \n**2024**\n \n\nServices provided by affiliates:\n        \n\nAdvertising and promotional materials (Qantm Creative) (1)\n $229  $- \n\nOffice lease expenses (RJ Holdings) (1)\n  -   4 \n\nConsulting and administrative services (RJ Holdings) (1)\n  -   161 \n\nOther (1)\n  -   50 \n\nTotal services provided by affiliates\n $229  $215 \n\n(*1*)     These expenses are reflected in \"Selling, general, and administrative expense\" in the consolidated statements of operations and comprehensive loss.\n\n \n\n**Bartels' Retirement and Director Compensation**\n\n \n\nWilliam H. Bartels retired as an employee of the Company as of *January 1, 2020.*Mr. Bartels is a significant stockholder of SGRP, is *one* of the founders of the Company, and is an affiliate and related party of SGRP. Mr. Bartels retired from the Board on *August 12, 2025.  *\n\n \n\nEffective as of *January 18, 2020,*SPAR's Governance Committee proposed and unanimously approved retirement benefits for Mr. Bartels, for the *five*-year period commencing *January 1, 2020,*and ending *December 31, 2024 (*the \"Five-Year Period\"), for Mr. Bartels. The aggregate value of benefits payable to Mr. Bartels is approximately $0.2 million per year and a total of $1.1 million for the Five-Year Period.  As of *December 31, 2025,*all retirement benefits have been paid.\n\n \n\nPursuant to the *2024* Stock Repurchase Program, on *May 3, 2024, *SGRP's Board and its Audit Committee approved SGRP's Repurchase Agreement with William H. Bartels for SGRP's private repurchase of 1,000,000 shares of SGRP's Common Stock from William H. Bartels, dated and effective as of *April 30, 2024, *at a purchase price of $1.80 per share (the Nasdaq closing price on *April 29, 2024). *\n\n \n\n***Willliam H. Bartels Independent Contractor Agreement***\n\n \n\nOn *October 1, 2025,*the Company entered into an Independent Contractor Agreement with Mr. William H. Bartels (the \"Bartels Consulting Agreement”), following his retirement from the Board. Mr. Bartels’ Consulting Agreement provides for monthly payments of $10,000 and expires on *December 31, 2026,*but *may*be extended by the parties in writing in their discretion. Under the Bartels Consulting Agreement, Mr. Bartels will provide consulting services from time to time at the request of the Company’s executive management or the Chairman of the Board. \n\n \n\n**Other Related Party Transactions and Arrangements**\n\n \n\nOn  *April 18, 2024, *the Company entered into a Securities Purchase Agreement to buy from Mr. Richard Justus the remaining minority joint venture interests of Resource Plus and its sister companies, Mobex of North Florida, Inc., and Leasex, LLC. Based on the terms set in the original joint venture agreement, the Company will pay a total of $3 million in annual payments over a *five*-year period. $0.3 million was paid within the *five* business days of closing, and the remaining $2.8 million will be paid pursuant to a Secured Promissory Note. The agreement resulted in the termination of all relevant shareholder and operating agreements, although specific confidentiality obligations remain effective for *three* years post-closing and specific mutual releases were provided. The purchase was closed and completed on *May 1, 2024. *As of *December 31, **2025,* $1.0 million has been paid and the remaining $2.0 million Promissory Note is outstanding and is reported on the balance sheet (net of discount) in current portion of long-term debt and long-term debt, net current portion.\n\n \n\n**International Transactions**\n\n \n\n**Agreement to sell the Company**’**s ownership interest in its South African Joint Venture**\n\n \n\nPrior to *March 31, 2024, *SGRP Meridian Proprietary Limited (\"Meridian\") was a consolidated international subsidiary of the Company and was owned 51% by the Company and 49% by Friedshelf (Pty) Ltd., Lindicom Proprietary Limited, and Lindicom Empowerment Holdings Proprietary Limited (\"Local Owners\"). On *February 7, 2024, *the Company entered into an agreement to sell its 51% ownership interest in Meridian to the Local Owners for 180,700,000 South African Rand, *80%* of which would be paid upon closing. \n\n \n\nThe closing conditions under that agreement were satisfied in all material respects by *March 31, 2024. *and on *April 29, 2024*the Company received 144,560,000 South African Rand from the Local Buyers (or approximately $7.7 million). The remaining purchase price of approximately $1.9 million was received as of *December 31, 2025.*The Company has also licensed certain technology (including SPARView) and trademarks to Meridian in connection with the sale. The Company recognized a pre-tax gain of approximately $7.2 million on this transaction, which is presented within “Gain on sale of business” in the Consolidated Statements of Operations and Comprehensive Loss. The Company has *no* continuing involvement in Meridian.\n\n \n\n*45*\n\n \n\nSPAR Group, Inc. and Subsidiaries \n\nNotes to Consolidated Financial Statements (continued)\n\n \n\n**10. Related Party Transactions (continued)**\n\n \n\n**Agreement to sell the Company**’**s ownership interest in its Chinese Joint Venture**\n\n \n\nOn *February 23, 2024, *the Company entered into an agreement to sell its 51% ownership interest in SPAR (Shanghai) Marketing Management Co., Ltd. to Shanghai Jingbo Enterprise Consulting Co., Ltd. and Shanghai Wedone Marketing Management Co. Ltd.  The total price paid to the Company is $200,000. The sale was completed in *April 2024. *The Company has recognized a loss of $1.1 million in the *second* quarter of *2024* as a result of this transaction, which is presented within “Gain on sale of business” in the Consolidated Statements of Operations and Comprehensive Loss. The Company has *no* continuing involvement in SPAR (Shanghai) Marketing Management Co., Ltd.\n\n \n\n**Agreement to sell the Company**’**s Brazilian subsidiary that owns its interest in its Brazilian Joint Venture**\n\n \n\nOn *March 26, 2024, *the Company signed a share purchase agreement with JK Consultoria Empresarial Ltda. (\"JKC\") for JKC to acquire the Company's Brazilian holding company (which in turn owns the Company's 51 percent interest in its Brazilian joint venture subsidiary) for BRL 58.9 million or approximately $11.8 million. Closing of the sale occurred in *June 2024.*The Company has recognized a loss of $1.2 million in the *second* quarter of *2024* as a result of this transaction, which is presented within “Loss on disposal of business” in the Consolidated Statements of Operations and Comprehensive Loss. The Company has *no* continuing involvement in the Brazilian Joint Venture.  \n\n \n\n**Agreement to sell** **SPAR's** **100%** **ownership interest in SPAR Japan**\n\n \n\nOn *July 23, 2024, *the Company entered into an agreement to sell its 100% ownership interest in SPAR Japan for $500,000. The sale closed on *August 30, 2024. *The Company has recognized a loss of $0.7 million in the *third* quarter of *2024* as a result of this transaction, which is presented within “Gain on sale of business” in the Consolidated Statements of Operations and Comprehensive Loss. The Company has *no* continuing involvement in SPAR Japan. \n\n \n\n**Agreement to sell** **SPAR's** **51%** **ownership interest in its Indian Joint Venture**\n\n \n\nOn *August 31, 2024,*the Company closed on an agreement to sell its 51% ownership interest in its Indian Joint venture for $500,000. The sale closed on *September 25, 2024. *The Company has recognized a loss of $1.4 million in the *third* quarter of *2024* as a result of this transaction, which is presented within “Gain on sale of business” in the Consolidated Statements of Operations and Comprehensive Loss. The Company has *no* continuing involvement in the Indian Joint Venture. \n\n \n\n**Agreement to sell** **SPAR's** **51%** **ownership interest in its Mexican Joint Venture**\n\n \n\nOn *December 19, 2024, *the Company closed on an agreement to sell its 51% ownership interest in its Mexican Joint venture for $417,000. The sale closed on *December 19, 2024. *The Company has recognized a loss of $1.1 million in the *fourth* quarter of *2024* as a result of this transaction, which is presented within “Gain on sale of business” in the Consolidated Statements of Operations and Comprehensive Loss. As of *December 31, 2025,*the Company had a receivable of $390,000 included in accounts receivable, net in the accompanying consolidated balance sheets. The Company has *no* continuing involvement in the Mexican Joint Venture. \n\n \n\n \n\n*46*\n\n \n\nSPAR Group, Inc. and Subsidiaries \n\nNotes to Consolidated Financial Statements (continued)\n\n \n\n**11. Share Based Compensation **\n\n \n\nAs of *December 31, 2025,*the Company has outstanding stock options and unvested restricted stock units granted under its *2008* Stock Compensation Plan, *2018* Stock Compensation Plan, *2020* Stock Compensation Plan and *2021* Stock Compensation Plan, which generally permitted stock-based awards under terms determined by the Company’s board of directors. Stock options and RSUs generally provided for vesting over service periods of one to four years, with option exercise prices generally equal to fair market value on the date of grant. As of *December 31, 2025,*no further shares were available under these plans for future awards. The Company also granted stock options and restricted stock units as inducements under contracts with selected executives.\n\n \n\n**Stock options**\n\n \n\n**2008** **Plan Summary**\n\n \n\nThe Company’s *2008* Stock Compensation Plan, as amended, provides for equity-based awards to employees, directors, and eligible consultants. Awards under the Plan *may*take the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units (RSUs), stock appreciation rights (SARs), or other stock-based awards, all of which are classified as equity. Awards are generally settled by issuing shares of the Company’s common stock. Stock options and SARs are granted with exercise prices at least equal to the fair market value of the common stock on the grant date and typically have a contractual term of up to *ten* years. In accordance with ASC *718,* the Company measures stock-based compensation expense for awards under the Plan at the grant-date fair value and recognizes it over the awards’ requisite service or performance period (generally the vesting period). The fair value of stock option and SAR grants is estimated on the grant date using the Black-Scholes option pricing model, while the fair value of restricted stock and RSUs is based on the market price of the Company’s stock at grant. Awards generally vest over a multi-year period of continuous service (e.g. *four*-year graded vesting for stock options) or upon achievement of specified performance goals, as applicable. Unvested awards are generally forfeited upon termination of employment or service, unless the Company’s Compensation Committee exercises its discretion to accelerate vesting or provide for alternative vesting arrangements in certain cases. The *2008* Plan Stock option award activity for the years ended  *December 31, 2025 *and *2024* is summarized below for the periods presented. \n\n   * *** **  * *** ** \n**Weighted-**\n   * *** **\n\n   * *** ** \n**Weighted-**\n  \n**Average**\n  \n**Aggregate**\n \n\n   * *** ** \n**Average**\n  \n**Remaining**\n  \n**Intrinsic**\n \n\n   * *** ** \n**Exercise**\n  \n**Contractual**\n  \n**Value**\n \n\n**Option Awards**\n \n**Shares**\n  \n**Price**\n  \n**Term (Years)**\n  \n**(thousands)**\n \n\nOutstanding at January 1, 2024\n  222,000  $1.01   3.27  $12 \n\nGranted\n  *–*   *–*   *–*   *–* \n\nExercised / cancelled\n  (79,000)  0.97   *–*   98 \n\nForfeited or expired\n  (56,000)  *–*   *–*   *–* \n\nOutstanding at December 31, 2024\n  87,000  $1.01   2.66  $73 \n\nGranted\n  *–*   *–*   *–*   *–* \n\nExercised / cancelled\n  –   *–*   *–*   – \n\nForfeited or expired\n  (10,000)  1.05   *–*   *–* \n\nOutstanding at December 31, 2025\n  77,000  $1.11   1.60  $- \n\nExercisable at December 31, 2025\n  77,000  $1.11   1.60  $- \n\n \n\nThe Company recognized no stock-based compensation expense relating to stock option awards during the years ended *December 31, 2025 *and *2024* for the *2008* plan. There were no shares exercised in *2025.* The recognized tax benefit on stock-based compensation expense related to stock options during the years ended *December 31, 2025 *and *2024,* was $0.\n\n \n\n**2018** **Plan Summary**\n\n \n\nSPAR Group’s *2018* Stock Compensation Plan provides for stock-based awards including stock options, stock appreciation rights (“SARs”), restricted stock, and restricted stock units (“RSUs”). All awards under the plan are classified as equity instruments and are generally settled by issuing shares of the Company’s common stock. Stock options are granted with exercise prices at least equal to the fair market value of the stock on the grant date and have a contractual term of up to *ten* years. The fair value of stock option and SAR awards is measured on the grant date using the Black-Scholes option pricing model, and the fair value of restricted stock and RSU awards is determined based on the market price of the Company’s common stock on the grant date. Awards generally vest over the recipients’ requisite service period, often in equal annual installments over *four* years from the grant date. Stock-based compensation cost is measured at the grant-date fair value of awards and recognized as expense on a straight-line basis over the vesting period, net of estimated forfeitures. If an award is forfeited before it vests, any previously recognized compensation expense is reversed. The plan also provides for accelerated vesting of outstanding awards under certain conditions such as the participant’s death, disability, or a change in control, which would result in immediate recognition of any remaining unrecognized compensation cost. *2018* Plan Stock option award activity for the years ended *December 31, 2025*and *2024* are summarized below. \n\n \n\n   * *** **  * *** ** \n**Weighted-**\n   * *** **\n\n   * *** ** \n**Weighted-**\n  \n**Average**\n  \n**Aggregate**\n \n\n   * *** ** \n**Average**\n  \n**Remaining**\n  \n**Intrinsic**\n \n\n   * *** ** \n**Exercise**\n  \n**Contractual**\n  \n**Value**\n \n\n**Option Awards**\n \n**Shares**\n  \n**Price**\n  \n**Term (Years)**\n  \n**(thousands)**\n \n\nOutstanding at January 1, 2024\n  145,000  $0.94   4.79  $26 \n\nGranted\n  *–*   *–*   *–*   *–* \n\nExercised/cancelled\n  (75,000)  0.99   *–*   90 \n\nForfeited or expired\n  (30,000)  *–*   *–*   *–* \n\nOutstanding at December 31, 2024\n  40,000  $0.93   3.80  $40 \n\nGranted\n  *–*   *–*   *–*   *–* \n\nExercised\n  –   –   *–*   – \n\nForfeited or expired\n  –   *–*   *–*   *–* \n\nOutstanding at December 31, 2025\n  40,000  $0.93   2.80  $3 \n\nExercisable at December 31, 2025\n  40,000  $0.93   2.80  $3 \n\n \n\nThe Company recognized no stock-based compensation expense relating to stock option awards during the years ended *December 31, 2025 *and *2024* under the *2018* plan. There were no shares exercised in *2025.* The recognized tax benefit on stock-based compensation expense related to stock options during the years ended *December 31, 2025 *and *2024,* was $0.\n\n \n\n*47*\n\n \n\nSPAR Group, Inc. and Subsidiaries \n\nNotes to Consolidated Financial Statements (continued)\n\n \n\n**11. Share Based Compensation **(continued)\n\n \n\n**2020** **Plan Summary**\n\n \n\nUnder the *2020* Stock Compensation Plan, SPAR Group grants equity-classified stock-based awards exclusively in the form of non-qualified stock options (NQSOs). The plan does *not* authorize incentive stock options, stock appreciation rights, restricted stock, or restricted stock units. Each option award is settled by issuing shares of the Company’s common stock upon exercise. In accordance with ASC *718,* the Company measures stock-based compensation expense for stock options at the grant-date fair value of the award (estimated using the Black-Scholes option pricing model) and recognizes it over the requisite service period (generally the vesting period) on a straight-line basis. The total expense is adjusted for estimated forfeitures of awards to reflect only those options expected to vest. Stock options under the *2020* Plan generally vest in annual installments over approximately *four* years of continuous service. The options have a contractual term of *five* years from the grant date. If a participant’s service terminates before an option is fully vested, any unvested portion is forfeited (*no* acceleration occurs on termination). Vested options typically remain exercisable for up to *three* months following termination of service, including in cases of retirement, death, or disability. In the event of a participant’s death, any remaining unvested options become fully vested immediately and are exercisable for up to *three* months thereafter by the participant’s estate or legal representative. *2020* Plan Stock option award activity for the years ended *December 31, 2025 *and *2024* are summarized below. \n\n \n\n   * *** **  * *** ** \n**Weighted-**\n   * *** **\n\n   * *** ** \n**Weighted-**\n  \n**Average**\n  \n**Aggregate**\n \n\n   * *** ** \n**Average**\n  \n**Remaining**\n  \n**Intrinsic**\n \n\n   * *** ** \n**Exercise**\n  \n**Contractual**\n  \n**Value**\n \n\n**Option Awards**\n \n**Shares**\n  \n**Price**\n  \n**Term (Years)**\n  \n**(thousands)**\n \n\nOutstanding at January 1, 2024\n  355,000  $1.55   2.10  $*-* \n\nGranted\n  *–*   *–*   *–*   *–* \n\nExercised/cancelled\n  *(22,500*)  *1.55*   *–*   *17* \n\nForfeited or expired\n  (220,000)  *–*   *–*   *–* \n\nOutstanding at December 31, 2024\n  112,500  $1.55   1.10  $*44* \n\nGranted\n  *–*   *–*   *–*   *–* \n\nExercised\n  –   –   *–*   – \n\nForfeited or expired\n  (12,500)  *1.55*   *–*   *–* \n\nOutstanding at December 31, 2025\n  100,000  $1.55   0.10  $- \n\nExercisable at December 31, 2025\n  100,000  $1.55   0.10  $- \n\n \n\nThe Company recognized $2,200 and $19,500 in stock-based compensation expense relating to stock option awards during the years ended *December 31, 2025 *and *2024,* respectively. There were no shares exercised in *2025.*\n\n \n\nAs of *December 31, 2025,*there was no remaining unrecognized stock-based compensation expense related to stock options. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended *December 31, 2025,*and *2024,* was $559 and $5,800, respectively.\n\n \n\n**CEO Inducement** **Plan Summary**\n\n \n\nThe Company granted a nonqualified stock option as an inducement award to the prior CEO, outside of the Company’s stockholder-approved equity plan. This stock option is classified as an equity award and carries a *ten*-year term. The grant-date fair value of the option was measured using the Black-Scholes option pricing model. The resulting compensation cost is recognized over the award’s requisite service period (the vesting period) on a straight-line basis. Vesting and Forfeiture Provisions: The option vested *100%* on *February 22, 2022.*Upon vesting, any exercised portions were settled in shares of the Company’s common stock. The CEO Inducement Plan stock option award activity for the years ended *December 31, **2025* and *2024* are summarized below. \n\n \n\n  ** **** **** ** ** **** **** ** \n**Weighted-**\n  ** **** **** **\n\n  ** **** **** ** \n**Weighted-**\n  \n**Average**\n  \n**Aggregate**\n \n\n  ** **** **** ** \n**Average**\n  \n**Remaining**\n  \n**Intrinsic**\n \n\n  ** **** **** ** \n**Exercise**\n  \n**Contractual**\n  \n**Value**\n \n\n**Option Awards**\n \n**Shares**\n  \n**Price**\n  \n**Term (Years)**\n  \n**(thousands)**\n \n\nOutstanding at January 1, 2024\n  630,000  $1.90   7.15  $*-* \n\nGranted\n  *-*   *-*   *-*   *-* \n\nExercised/cancelled\n  *-*   *-*   *-*   *-* \n\nForfeited or expired\n  *-*   *-*   *-*   *-* \n\nOutstanding at December 31, 2024\n  630,000  $1.90   6.15  $*25* \n\nGranted\n  *-*   *-*   *-*   *-* \n\nExercised\n  *-*   *-*   *-*   *-* \n\nForfeited or expired\n  *-*   *-*   *-*   *-* \n\nOutstanding at December 31, 2025\n  630,000  $1.90   5.15  $- \n\nExercisable at December 31, 2025\n  630,000  $1.90   5.15  $- \n\n \n\nThe Company recognized $0 stock-based compensation expense relating to stock option awards during the years ended *December 31, 2025 *and *2024.* The recognized tax benefit on stock-based compensation expense related to stock options during the years ended *December 31, 2025 *and *2024,* was $0.\n\n \n\nAs of *December 31, 2025, *there was no unrecognized share-based compensation expense related to stock options granted under the CEO Inducement Plan. \n\n \n\n*48*\n\n \n\nSPAR Group, Inc. and Subsidiaries \n\nNotes to Consolidated Financial Statements (continued)\n\n \n\n**11. Share Based Compensation **(continued)\n\n \n\n***Restricted Stock Units***\n\n \n\nThe following table summarizes the activity for Restricted Stock Unit (\"RSUs\") awards during the years ended \n*December 31, 2025*and\n*2024.*\n\n   * *** ** \n**Weighted-**\n \n\n   * *** ** \n**Average**\n \n\n   * *** ** \n**Grant Date**\n \n\n   * *** ** \n**Fair Value**\n \n\n  \n**Shares**\n  \n**per Share**\n \n\nUnvested at January 1, 2024\n  226,276  $1.19 \n\nGranted\n  57,143   1.75 \n\nVested\n  (226,276)  1.19 \n\nForfeited\n  –   - \n\nUnvested at December 31, 2024\n  57,143  $1.75 \n\nGranted\n  96,154   1.04 \n\nVested\n  (153,297)  1.30 \n\nForfeited\n  –   - \n\nUnvested at December 31, 2025\n  –  $- \n\n \n\nDuring the years ended *December 31, 2025 *and *2024,* the Company recognized approximately $140,000 and $1*17,500,* respectively, of stock-based compensation expense related to RSUs. During the years ended *December 31, 2025 *and *2024,* the total fair value of RSUs vested was $174,000 and $315,000, respectively. As of *December 31, 2025, *stock-based compensation expense related to unvested RSUs awards was fully recognized.\n\n \n\n**Phantom Stock Awards**\n\n \n\nThe Corporation prepared a *2022* Stock Compensation Plan that would have included Awards for NQSOs and RSUs (as defined below), but that plan was never submitted to its shareholders for approval. However, the Board had previously approved, for certain key executives, incentive stock based awards for *2022* using RSUs or cash. Since there were *no* plan based RSUs available, those executives instead received phantom stock awards. \n\n \n\nOn and effective as of *March 24, 2022, *the Corporation issued an award of 111,111 Phantom Stock Units to each of its executives: Kori G. Belzer; William Linnane; and Ron Lutz. Each Phantom Stock Unit represents the right of the grantee to receive cash payments based on the fair market value of SGRP's Common Stock at the time of vesting. Vesting will occur in *three* tranches of *one*-*third* each over the three (*3*) year period following the Grant Date, provided that (i) the Grantee is an employee of the Company at the time and (ii) the Corporation has achieved *90%* of the agreed upon the applicable financial target for the year commencing with *2022* (which was EBITDA for *2022*), but tranches will rollover to the following year and be payable upon achievement of *120%* of the agreed upon the applicable financial target for such following year. The Phantom Stock Units do *not* possess the rights of common stockholders of the Corporation, including any voting or dividend rights, and cannot be exercised or traded for the SGRP's Common Stock. Due to the cash settlement feature, the Phantom Stock Units are classified as liabilities in accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheet. Accrued expenses and other current liabilities on the Consolidated Balance Sheet included $36,000 and $0 related to Phantom Stock Units as of *December 31, 2025*and *December 31, 2024,*respectively. During the year ended *December 31, 2025,*the Company recognized approximately $0.6 million of stock-based compensation expense related to Phantom Stock Units.\n\n \n\n*49*\n\n \n\nSPAR Group, Inc. and Subsidiaries \n\nNotes to Consolidated Financial Statements (continued)\n\n \n\n**12. Segment Information**\n\n \n\nThe Company has two reportable segments: (i) U.S. and (ii) Canada. These operating segments, which also form the Company's reportable segments, are identified in accordance with the changes in the CODM internal review of financial results and the CODM uses this information to evaluate the Company's performance and allocate resources.\n\n \n\nThe CODM assesses performance of the segments based on gross margin. The CODM uses gross margin to develop the annual operating plan and regular forecasting process. Additionally, the CODM considers budget-to-actual variances for this measure on a quarterly basis as well as segment-specific forecasting when making decisions about the allocation of operating and capital resources to each segment.\n\n             \n\n  \n**Year Ended December 31, 2025**\n \n\n*(in thousands)*\n \n**U.S.**\n  \n**Canada**\n  \n**Total**\n \n\n             \n\nNet revenues\n $122,053  $14,051  $136,104 \n\nCost of revenue\n  104,482   9,929   114,411 \n\nSegment gross profit\n  17,571   4,122   21,693 \n\n             \n\n**Reconciling items (income) expense:**\n   ** **   ** **   ** **\n\nSelling, general, and administrative expense\n  * *   * *  $32,197 \n\nRestructuring costs and severance\n  * *   * *   4,765 \n\nDepreciation and amortization\n  * *   * *   1,634 \n\nInterest expense\n  * *   * *   2,415 \n\nOther expenses, net\n  * *   * *   1,235 \n\nLoss before income tax expense\n  * *   * *  $(20,553)\n\n             \n\n \n\n  \n**Year Ended December 31, 2024**\n \n\n*(in thousands)*\n \n**US**\n  \n**Canada**\n  \n**Total**\n \n\n             \n\nNet revenues\n $117,507  $14,305  $131,812 \n\nOther net revenues (a)\n  * *   * *   31,817 \n\nConsolidated net revenues\n  * *   * *   163,629 \n\nCost of revenue\n  93,397   9,848   * * \n\nSegment gross profit\n  24,109   4,457   60,384 \n\n             \n\n**Reconciling items (income) expense:**\n   ** **   ** **   ** **\n\nOther cost of revenue (a)\n  * *   * *  $26,787 \n\nSelling, general, and administrative expense\n  * *   * *   33,880 \n\nGain on sale of business\n  * *   * *   (2,536)\n\nDepreciation and amortization\n  * *   * *   1,553 \n\nInterest expense\n  * *   * *   2,191 \n\nOther expenses, net\n  * *   * *   171 \n\nLoss before income tax expense\n  * *   * *  $(1,662)\n\n*(a) Other net revenues and other cost of revenue includes all international operations that were sold in 2024 that did not qualify for discontinued operation presentation.*\n \n\n \n\n \n\nThere were\nno inter-segment sales for\n*2025* or\n*2024.*\n\n \n\n  \n**December 31,**\n \n\n*(in thousands)*\n **2025**  **2024** \n\n**Assets:**\n        \n\nUnited States\n $38,482  $53,767 \n\nCanada\n  5,577   2,664 \n\nTotal assets\n $44,059  $56,431 \n\n \n\n**Geographic Data** \n\n  \n**Year Ended December 31,**\n \n\n  \n**2025**\n  \n**2024**\n \n\n*(in thousands)*\n  * *  \n**% of consolidated net revenue**\n   * *** ** **% of consolidated net revenue** \n\n**Net revenue:**\n                \n\nUnited States\n $122,053   89.7% $117,507   71.8%\n\nCanada\n  14,051   10.3%  14,305   8.7%\n\nSouth Africa\n  -   -   8,277   5.1%\n\nMexico\n  -   -   12,235   7.5%\n\nChina\n  -   -   2,698   1.6%\n\nJapan\n  -   -   3,778   2.3%\n\nIndia\n  -   -   4,829   3.0%\n\nTotal net revenue\n $136,104   100.0% $163,629   100.0%\n\n \n\n \n\n50\n\n \n\nSPAR Group, Inc. and Subsidiaries \n\nNotes to Consolidated Financial Statements (continued)\n\n \n\n \n\n \n\n**13. Earnings Per Share**\n\n \n\nThe following table sets forth the computations of basic and diluted earnings per share:\n\n  \n**Year Ended December 31,**\n \n\n*(in thousands)*\n \n**2025**\n  **2024** \n\n*Numerator:*\n        \n\nNet loss attributable to SPAR Group, Inc.\n $(24,626) $(3,150)\n\n         \n\n*Denominator:*\n        \n\nShares used in basic net loss per share calculation\n  23,619   23,555 \n\nEffect of diluted securities:\n        \n\nStock options and unvested restricted shares\n  –   – \n\nShares used in diluted net loss per share calculations\n  23,619   23,555 \n\n         \n\nBasic loss per common share attributable to SPAR Group, Inc.\n  ($1.04)  ($0.13)\n\nDiluted loss per common share attributable to SPAR Group, Inc.\n  ($1.04)  ($0.13)\n\n \n\nThe Company excluded 21,000 stock options and 32,000 RSUs from the computation of diluted net loss per share for the year ended *December 31, 2025 *because including them would have had an anti-dilutive effect. The Company excluded 103,000 stock options and 71,000 RSUs from the computation of consolidated diluted net loss per share for the year ended *December 31, 2024*because including them would have had an anti-dilutive effect.\n\n \n\n*51*\n\n \n\nSPAR Group, Inc. and Subsidiaries \nNotes to Consolidated Financial Statements (continued)\n\n \n\n**14. Leases**\n\n \n\nThe Company is a lessee under certain operating leases for office space and equipment. \n\n \n\nThe components of lease expenses consisted of the following for the periods presented (in thousands):\n\n  * * \n**Year Ended**\n  \n**Year Ended**\n \n\n**Lease Costs**\n \n**Classification**\n \n**December 31, 2025**\n  \n**December 31, 2024**\n \n\nOperating lease cost\n \n*Selling, General and Administrative Expense*\n $827  $545 \n\nShort-term lease cost\n \n*Selling, General and Administrative Expense*\n  24   370 \n\n*Total lease cost*\n $851  $915 \n\n \n\nThe following includes supplemental information for the periods presented (in thousands):\n\n  \n**Year Ended**\n  \n**Year Ended**\n \n\n  \n**December 31, 2025**\n  \n**December 31, 2024**\n \n\n         \n\nOperating cash flows from operating leases\n $476  $545 \n\n         \n\nRight-of-use assets obtained in exchange for lease obligations\n        \n\nOperating leases\n $4,715  $- \n\n \n\nBalance sheet information related to leases consisted of the following as of the periods presented (in thousands):\n\n \n\n \n \n**December 31, 2025**\n  \n**December 31, 2024**\n \n\n*Assets:*\n   * *   * *\n\nOperating lease right-of-use assets\n $4,861  $630 \n\n*Liabilities:*\n   * *   * *\n\nCurrent portion of operating lease liabilities\n  643   276 \n\nNon-current portion of operating lease liabilities\n  4,395   353 \n\nTotal operating lease liabilities\n $5,038  $629 \n\n         \n\nWeighted average remaining lease term - operating leases (in years)\n  5.58   2.64 \n\nWeighted average discount rate - operating leases\n  8.5%  7.7%\n\n \n\nThe following table summarizes the maturities of lease liabilities as of *December 31, 2025 (*in thousands):\n\n \n\n**For the Year Ended December 31,**\n \n**Amount**\n \n\n2026\n $1,084 \n\n2027\n  1,201 \n\n2028\n  1,039 \n\n2029\n  950 \n\n2030\n  977 \n\nThereafter\n  1,094 \n\nTotal future operating lease liability\n $6,345 \n\nLess: present value discount\n  (1,307)\n\nPresent value of operating lease liabilities\n $5,038 \n\n \n\n \n\n \n\n*52*\n\n \n\nSPAR Group, Inc. and Subsidiaries \n\nNotes to Consolidated Financial Statements (continued)\n\n**15. Subsequent Events**\n\n \n\n***Unsecured Loan Agreement and Share Grant***\n\nOn *March 13, 2026,*the Company entered into a $4,000,000 unsecured loan agreement (the \"Loan\") with PC Group, Inc (“PC Group”). The Loan bears interest at a fixed rate of 8% per annum, with interest-only payments required monthly for a term of 36 months.\n\n \n\nThe Loan provides for a staggered funding schedule as follows:\n\n \n\n \n●\n\n**Initial Drawdown**: $3,000,000 was drawn by the Company on *March 16, 2026.*\n\n \n●\n\n**Additional Drawdown**: The remaining $1,000,000 is available for drawdown in *July 2026.*\n\n \n\nIn connection with the Loan, the Company granted PC Group 1,000,000 shares of the Company’s common stock at a deemed value of $0.80 per share, totaling $800,000. Under the terms of the agreement, this $800,000 deemed value will be applied as a reduction to the final principal payoff amount due at the end of the 36-month term.\n\n \n\nThe Company has evaluated all subsequent events through *March 31, 2026,*the date the consolidated financial statements were available to be issued, noting *no* additional events occurring subsequent to *December 31, 2025,*that require consideration as adjustments to or disclosures in the consolidated financial statement.\n\n \n\n53"}