SGRP 10-K & 10-Q changes, risk factors and insider trading
SPAR Group, Inc. · OTC · Services-Business Services, Nec · CIK 1004989 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our leadership transition in 2025 may result in operational disruptions or changes in our strategic direction.”
Removed heading “Our potential going private transaction poses various risks”
Removed heading “The buyer may not be able to consummate the Proposed Acquisition pursuant to the Merger Agreement, and failure to complete the Proposed Acquisition could negatively impact our stock price and our business, financial condition and results of operations.”
Largest changes
“The Corporation had in place a 2022 Stock Repurchase Program (as defined and described in Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, below), which ended on May 24, 2023 and a 2024 Stock Repurchase Program, under which 1,000,000 shares were repurchased on May 3, 2024. Repurchases by the Corporation could adversely affect the market liquidity of the SGRP Common Stock.”see in full comparison
see in full comparisonDueThe Company devoted significant resources to the remediation efforts to address the identified material weaknessesinandthepreventCompany'sadditionalinternalmaterialcontrolweaknessesoverfromfinancialoccurring.reporting, theThe Companyalsoconcludedthat its disclosure controls and procedures were not effectivethat, as of December 31,2024. Our inability to remediate2025, the previously identified materialweaknesses,weaknessesourhaddiscoverybeen remediated following the completion ofadditional weaknesses, and our ability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting could affect our ability to ensure timely and reliable financial reports, and weaken investor confidence in our financial reporting. The Company is actively engaged in developing athe remediationplanplan,designedhoweverto address the material weaknesses, butit cannot becertainassuredasthattothewhenmeasuresitsweremediationhaveplanstaken will befullysufficientcompleted.toIfavoid potential future material weaknesses. Accordingly, if the remedial measures are insufficient to address the materialweaknessweaknesses or if additional material weaknesses or significant deficiencies in the internal controls are discovered or occur in the future, the consolidated financial statements may contain material misstatements and the Company could be required to restate its financial results, which could materially and adversely affect the Company's business and results of operations or financial condition, restrict its ability to access the capital markets, require the Company to expend significant resources to correct the weaknesses or deficiencies, subject it to fines, lawsuits, penalties, judgements or other legal expenses, harm its reputation, create delays or the inability to meet future SEC reporting obligations or otherwise cause a decline in investor confidence.
“The buyer may not be able to consummate the Proposed Acquisition pursuant to the Merger Agreement, and failure to complete the Proposed Acquisition could negatively impact our stock price and our business, financial condition and results of operations.”see in full comparison
“Our leadership transition in 2025 may result in operational disruptions or changes in our strategic direction.”see in full comparison
“If the Proposed Acquisition is not consummated, the price of SGRP Common Stock may decline and our business, financial condition and results of operations may be impacted. In addition, we have incurred substantial costs planning and negotiating the Merger Agreement. These costs include, but are not limited to, costs associated with employing and retaining third-party advisors who performed the financial, auditing, and legal services required before we were able to enter into the Merger Agreement and which will continue as we seek to complete the Merger. …”see in full comparison
Full comparison: every changed paragraph (15)
Our potential going private transaction poses various risks
As previously announced, on August 30, 2024, the Corporation entered into an Agreement and Plan of Merger (the "Merger Agreement"), with Highwire Capital, LLC, a Texas limited liability company ("Highwire"), and Highwire Merger Co. I, Inc., a Delaware corporation and a wholly owned subsidiary of Highwire ("Merger Sub"), pursuant to which Highwire, in a cash merger and the closing of the transaction (the " Proposed Acquisition"), will acquire all of the stock of the Corporation for $2.50 per fully diluted share in cash, representing an aggregate purchase price of $58,000,000 (subject to certain adjustments).
The Proposed Acquisition involves various Risks, including (without limitation): the uncertainty of the closing of the Proposed Acquisition within the anticipated time period, or at all, due to any reason, including any failure to satisfy the conditions to the consummation of the Proposed Acquisition or to complete any necessary financing arrangements; the risk that the Proposed Acquisition disrupts our current plans and operations or diverts management's attention from its ongoing business; the impact of the news of the Proposed Acquisition or developments in it; the nature, cost and outcome of any legal proceedings related to the Proposed Acquisition; the impact of the Corporation's continued strategic review process, or any resulting action or inaction, should the Proposed Acquisition not occur.
While the Company and Highwire are working to complete the Proposed Acquisition, either party may terminate the Merger Agreement if the Merger is not completed by May 30, 2025.
The buyer may not be able to consummate the Proposed Acquisition pursuant to the Merger Agreement, and failure to complete the Proposed Acquisition could negatively impact our stock price and our business, financial condition and results of operations.
As previously announced, on August 30, 2024, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Highwire Capital, LLC, a Texas limited liability company ("Highwire") and Highwire Merger Co. I, Inc., a Delaware corporation and a wholly owned subsidiary of Highwire ("Merger Sub"), pursuant to which Highwire will acquire the Company in a cash merger, with Merger Sub merging with and into the Company (the “Proposed Acquisition”). While the Company and Highwire are working to complete the Proposed Acquisition, either party may terminate the Merger Agreement if the Merger is not completed by May 30, 2025.
If the Proposed Acquisition is not consummated, the price of SGRP Common Stock may decline and our business, financial condition and results of operations may be impacted. In addition, we have incurred substantial costs planning and negotiating the Merger Agreement. These costs include, but are not limited to, costs associated with employing and retaining third-party advisors who performed the financial, auditing, and legal services required before we were able to enter into the Merger Agreement and which will continue as we seek to complete the Merger. We will be responsible for these costs in the event the Merger is not successful, which could adversely affect our liquidity and financial results.
The Corporation had in place a 2022 Stock Repurchase Program (as defined and described in Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, below), which ended on May 24, 2023 and a 2024 Stock Repurchase Program, under which 1,000,000 shares were repurchased on May 3, 2024. Repurchases by the Corporation could adversely affect the market liquidity of the SGRP Common Stock.
Establishing and maintaining effective internal control over financial reporting and disclosures are necessary for the Company to provide reliable financial and other reporting in accordance with accounting principles generally accepted and applicable securities and other laws in the United States and all other countries in which we operate. Because of its inherent limitations, internal controls over financial and other reporting are not intended to provide absolute assurance that the Company could prevent or detect a misstatement of its financial statements or other reports or any misconduct or fraud. Any failure to maintain an effective system of internal control over financial and disclosure reporting could limit the Company's ability to report its financial results and file its other reports accurately and timely or to detect and prevent misconduct or fraud. A significant financial or disclosure reporting failure or material weakness in internal control over financial or other reporting could cause a loss of investor confidence and a decline in the market price of the SGRP Common Stock. The Company's management is responsible for establishing and maintaining adequate internal controls over its financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act. As disclosed in Item 9A of Part II of this report, the Company identified material weaknesses in its internal controls as of December 31, 2024. ThisThese material weaknesses resulted in errors in revenue, expense, accrual accounts and prepaid accounts reconciliation at year end as well as a material error in the calculation overand presentation of the sale of international components and the deconsolidation of one subsidiary.
DueThe Company devoted significant resources to the remediation efforts to address the identified material weaknesses inand theprevent Company'sadditional internalmaterial controlweaknesses overfrom financialoccurring. reporting, theThe Company also concluded that its disclosure controls and procedures were not effectivethat, as of December 31, 2024. Our inability to remediate2025, the previously identified material weaknesses,weaknesses ourhad discoverybeen remediated following the completion of additional weaknesses, and our ability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting could affect our ability to ensure timely and reliable financial reports, and weaken investor confidence in our financial reporting. The Company is actively engaged in developing athe remediation planplan, designedhowever to address the material weaknesses, butit cannot be certainassured asthat tothe whenmeasures itswe remediationhave planstaken will be fullysufficient completed.to Ifavoid potential future material weaknesses. Accordingly, if the remedial measures are insufficient to address the material weaknessweaknesses or if additional material weaknesses or significant deficiencies in the internal controls are discovered or occur in the future, the consolidated financial statements may contain material misstatements and the Company could be required to restate its financial results, which could materially and adversely affect the Company's business and results of operations or financial condition, restrict its ability to access the capital markets, require the Company to expend significant resources to correct the weaknesses or deficiencies, subject it to fines, lawsuits, penalties, judgements or other legal expenses, harm its reputation, create delays or the inability to meet future SEC reporting obligations or otherwise cause a decline in investor confidence.
The timing, size and success of litigation settlement efforts and any associated capital commitments cannot be readily predicted. Future litigation settlements may be financed by issuing shares of the SGRP Common Stock (directly or through convertible securities), cash or a combination thereof. If the SGRP Common Stock does not maintain a sufficient market value, or if potential litigants are otherwise unwilling to accept the SGRP Common Stock as part of the consideration for the settlement of their litigation, the Company may be required to obtain additional capital through debt or equity financings. To the extent the SGRP Common Stock is used for all or a portion of the consideration to be paid for legal settlements, dilution may be experienced by existing stockholders. In addition, there can be no assurance that the Company will be able to obtain the additional financing it may need for litigation settlements on terms that the Company deems acceptable. Failure to obtain such capital would materially and adversely affect the Company or its performance or condition. There also can be no assurance that the other parties in any settlement will abide by the terms or any settlement or any related releases. See Item 3 -- Legal Proceedings, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; Overview,Overview and Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions, below.
Our leadership transition in 2025 may result in operational disruptions or changes in our strategic direction.
During the fiscal year ended December 31, 2025, the Company appointed a new Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"). These transitions involve changes in management style and strategic priorities that could result in operational disruptions if not managed effectively.
The business strategy, client relationships and operating knowledge are critical to the Company’s long-term success. We believe we have attracted and developed the most experienced and proven executive leadership team in the industry. However, we work in a competitive industry where talent is visiblevisible, and other companies may approach and attract our key executives. We continuously review the terms and incentives for our executives to retain them and competitively compensate them to deliver industry leading results on behalf of all shareholders.
The Company's co-founders, Mr. Robert G. Brown and Mr. William H. Bartels, are significant stockholders ("Significant Stockholders”) and Mr. Bartels is a Director of SGRP and together with certain related parties (collectively, the "Majority Stockholders") beneficially own approximately 46.6%46.2% of the SGRP Common Stock and could acquire more. That amount was calculated using their respective individual beneficial ownership, on December 31, 2024,2025, which includes the amounts they represented in the CIC Agreement and subsequent Form 4 filings, the total outstanding ownership (23,449,70124,129,991 shares) of the SGRP Common Stock on a non-diluted basis as of December 31, 2024.2025. See Security Ownership of Certain Beneficial Owners and Management, in Part III below, Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, and Item 13. Certain Relationships and Related Transactions, and Director Independence, and Note 10 to the Company's Consolidated Financial Statements- Related Party Transactions, below. Although the CIC Agreement currently requires arbitration and prohibits the Majority Stockholders from using written stockholder consents, calling for special stockholder meetings, commencing certain litigation, and taking other specified actions, the CIC Agreement expires in January 2027.
Management's Discussion & Analysis (MD&A)
New heading “Cost of Revenue”
New heading “Selling, General and Administrative Expense”
New heading “Restructuring Costs and Severance”
Removed heading “Cost of Revenues”
Removed heading “Selling, General and Administrative Expenses”
Removed heading “Brazil Joint Venture Sale and Non-GAAP EPS Impact”
Removed heading “Economic Substance of the Transaction”
Removed heading “U.S. GAAP Accounting Treatment and Impact”
Removed heading “Restatement of Quarterly Financial Data”
Largest changes
“An income tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on its technical merits. The unrecognized tax reserves at December 31, 2025 and 2024 were $0.16 million and $0.11 million respectively, excluding accrued interest and penalties.”see in full comparison
“Selling, general and administrative expense ("SG&A") for the Company include its corporate overhead, project management, information technology, executive compensation, human resources, legal and accounting expenses. SG&A expenses were approximately $32.2 million, or 23.7% of net revenue, and approximately $33.9 million, or 20.7% of net revenue for the years ended December 31, 2025 and 2024, respectively. …”see in full comparison
“The Company has restated its previously issued unaudited interim financial statements for the three and six months ended June 30, 2024 and the three and nine months ended September 30, 2024 (the “Non-Reliance Periods”). Detailed restatements of the Company's condensed consolidated quarterly financial statements are provided in Note 16 – Restatement (Unaudited) in the accompanying notes to the consolidated financial statements.”see in full comparison
“U.S. SG&A expenses totaled $29.5 million and $25.2 million for the years ended December 31, 2025 and 2024, respectively. The increase in expense of 17.1% was the result of strategic initiatives, legal costs, expenses incurred to resolve prior year restatements, and shareholder matters.”see in full comparison
Full comparison: every changed paragraph (72)
As of December 31, 2024,2025, the Company operated in the United StatesU.S. and Canada. During 2024, the companyCompany strategically exited jointinternational venturesoperations in Mexico, Brazil, South Africa, China, Japan and India.
The Company is dedicated to delivering a spectrum of specialized services tailored to enhance retail operations and profitability across the globe.profitability. Our team collaborates closely with clients to identify their primary goals, ensuring the execution of strategies that boost sales and profit margins. With a focus on merchandising and brand marketing, our specialists deploy a variety of programs aimed at maximizing product sell-through to consumers. These initiatives range from launching new products and setting up promotional displays to assembling fixtures and ensuring consistent stock availability, thus facilitating efficient reordering processes. Furthermore, we extend our expertise to sales enhancement and customer service improvement. As the retail landscape evolves, our team is adept at undertaking comprehensive store renovations and preparing new locations for their grand openings, ensuring they meet the modern consumer's expectations. Additionally, our distribution associates play a pivotal role in retail and consumer goods distribution centers, preparing these facilities for operation, optimizing system functionality, managing product logistics, and providing essential staffing solutions to meet our clients' needs effectively.
The Company’s business is led and operated from its global headquarters in AuburnCharlotte, Hills,North Michigan,Carolina, with local leadership and offices in eachthe country.U.S. and Canada.
Delayed Filing
In fiscal year 2024, the Company navigated an exceptionally complex set of transactions and operational changes. During the year, the Company divested six foreign joint ventures and acquired the remaining 49% ownership interest in another joint venture, significantly reshaping its corporate and consolidation structure. The Company also implemented a new enterprise resource planning (ERP) system, running it in parallel during the fourth quarter to transition from legacy financial systems. In addition, preparations for an anticipated acquisition of Highwire late in the year necessitated a delay in completing the year-end financial close and postponed the start of the annual audit. These events collectively created an unusually challenging financial reporting environment for 2024.
EBITDA and Adjusted EBITDA is a non-GAAP measure of our operating performance and should not be considered as an alternative to net income as a measure of financial performance or any other performance measure derived in accordance with generally accepted accounting principles in the United States of America ("USU.S. GAAP"). "EBITDA" is defined as net income before (i) depreciation and amortization, (ii) interest expense, net, and (iii) income tax expense. "Adjusted EBITDA" is defined as net (loss) income before (i) depreciation and amortization of long-lived assets, (ii) interest expense (iii) income tax expense, (iv) restructuring expenses, (v) impairment, (vi) nonrecurring legal settlement costs and associated legal expenses unrelated to the Company's core operations, (vii) special items as determined by management, and (viii) review of strategic alternatives, which includes primarily legal, consulting, and investment bank fees. This metric is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with, USU.S. GAAP.
Our management believes Adjusted EBITDA is helpful in highlighting trends in our core operating performance compared to other measures, which can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. We also use Adjusted EBITDA to supplement U.S. GAAP measures of performance in the evaluation of the effectiveness of our business strategies and to make budgeting decisions.
Adjusted EBITDA has its limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under USU.S. GAAP. Some of these limitations include:
Our Consolidatedloss Netfrom Incomecontinuing (loss)operations was approximately ($2.7)$24.6 million and $4.8$1.8 million for the years ended December 31, 2024,2025, and December 31, 2023.2024. Our Consolidated EBITDA loss was approximately $2.5$16.5 million and $11.4income of $3.6 million for the years ended December 31, 20242025 and 20232024 respectively. The following is a reconciliation of our net income to Adjusted EBITDA for the periods presented:
Consolidated net revenues for the year ended December 31, 2024,2025, were $ 196.8$136.1 million compared to $ 262.7$163.6 million for the year ended December 31, 2023,2024, a decrease of $ 65.9$27.5 million or 25.1%.16.8%. This decrease in revenue was primarily driven by the sale of all international jointoperations, venturesexcept Canada, during various times throughout the year.2024.
The Americas net revenues totaled $ 177.2 million and $ 203.7 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $ 26.5 million or 13.0% is the result of the sale of our Brazilian joint venture during the second quarter. The decline in revenues associated with the sale of Brazil were partially offset by 11% revenue growth in the United States and 15% revenue growth in Canada.
The Asia-Pacific net revenues totaled $ 11.3 million and $ 24.5 million for the years ended December 31, 2024 and 2023, respectively, a decrease of $ 13.2 million or 53.9%. The decline in revenues at Asia-Pacific is due to the exit of all joint ventures in the region in 2024, compared to a full year of revenues in the prior year.
The EMEAU.S. net revenues totaled $ 8.3$122.1 million and $ 34.6$117.5 million for the years ended December 31, 20242025 and 2023,2024, respectively,respectively. aThe decreaseincrease of $ 26.3$4.6 million or 76.1%.3.9% Theis declinedriven by continued growth in revenues is due to the exitU.S. of our South African joint venture in 2024.market.
Cost of Revenues
The Company's cost of revenues consists of its in-store labor and field management wages, related benefits, travel and other direct labor-related expenses and was 80.5% of net revenue for the year ended December 31, 2024 compared to 78.9% of net revenues for the year ended December 31, 2023. The decline in margin in 2024 was driven by significant growth in revenue from the remodel business, which is lower margin than the traditional merchandising business.
The Americas cost of revenue as a percent of net revenue was 80.2% and 79.8% for the years ended December 31, 2024 and 2023, respectively. The increase in cost of 0.4% was the result of higher costs in our owned U.S. business related to the high proportion of revenue growth in the remodel business. These higher costs were partially offset by a partial year impact of the exit of Mexico and Brazil, which are traditionally lower margin businesses than those in the U.S. and Canada.
The Asia-Pacific cost of revenue as a percent of net revenue was 80.7% and 74.7% for the years ended December 31, 2024 and 2023, respectively. Margins declined in Asia-Pacific due to lower margins in China and the full year impact of the sale of Australia, which had high margins in 2023. As of December 31, 2024, the Company has exited all business in Asia-Pacific.
The EMEA cost of revenue as a percent of net revenue was 84.6% and 76.3% for the years ended December 31, 2024 and 2023, respectively. This decrease in gross margin is due to (i) additional variable expenses in the cost of sales, (ii) government imposed wage increases (8.5%) ahead of inflation (5.3%) at a time when the economy is under pressure which forced margin reduction in contract renegotiations. The Company exited the EMEA region in the first quarter of 2024.
Selling, General and Administrative Expenses
Selling, general and administrative expenses of the Company include its corporate overhead, project management, information technology, executive compensation, human resources, legal and accounting expenses. Selling, general and administrative expenses were approximately
$ 37.3 million, or
18.9% of net revenue, and approximately
$ 43.7 million, or
16.6% of net revenue for the years ended
December 31, 2024 and
2023, respectively. Selling, general and administrative expenses for the year-ended
December 31, 2024 includes expenses of approximately $5.5 million related to our consideration of strategic alternatives, costs to execute sale of joint ventures, and transaction costs associated with the proposed merger with Highwire capital. Absent these costs, which are not on-going in nature, Selling, general and administrative expenses were 16.5% of net revenue in 2024.
The Americas selling, general and administrative expenses totaled $ 33.0 million and $ 32.2 million for the years ended December 31, 2024 and 2023, respectively. Costs were essentially flat to prior year as the impact of the sale of Brazil was offset by higher costs associated with the evaluation of strategic alternatives.
The Asia-Pacific selling, general and administrative expenses totaled $ 3.1 million and $ 6.5 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $ 3.4 million, or 52.2% is primarily attributable to the exit of international joint ventures by the end of the third quarter of 2024.
TheCanada EMEAnet selling, general and administrative expensesrevenues totaled $ 1.1$14.0 million and $ 5.0$14.3 million for the years ended December 31, 20242025 and 2023,2024, respectively.respectively, EMEAa was exited in second quarterdecrease of 2024.$0.3 million or 2.1%.
All Other net revenues totaled $31.8 million for the year ended December 31, 2024. The Company exited all international operations, except Canada, in 2024.
Cost of Revenue
The Company's cost of revenue consists of its in-store labor and field management wages, related benefits, travel and other direct labor-related expenses and was 84.1% of net revenue for the year ended December 31, 2025 compared to 79.5% of net revenues for the year ended December 31, 2024. The decline in margin in 2025 was driven by significant growth in revenue from the remodel business, which is lower margin than the traditional merchandising business.
U.S. cost of revenue as a percent of net revenue was 85.6% and 79.5% for the years ended December 31, 2025 and 2024, respectively. The increase in cost of 6.1% was the result of higher costs in our U.S. business related to the high proportion of revenue growth in the remodel business.
The Canada cost of revenue as a percent of net revenue was 70.9% and 68.8% for the years ended December 31, 2025 and 2024, respectively. This increase in cost of 2.1% was the result of increased merchandising business with a large client which has a lower profit margin.
All Other cost of revenue as a percent of net revenues was 84.2% for the year ended December 31, 2024. The Company exited all international operations, except Canada in 2024.
Selling, General and Administrative Expense
Selling, general and administrative expense ("SG&A") for the Company include its corporate overhead, project management, information technology, executive compensation, human resources, legal and accounting expenses. SG&A expenses were approximately $32.2 million, or 23.7% of net revenue, and approximately $33.9 million, or 20.7% of net revenue for the years ended December 31, 2025 and 2024, respectively. SG&A expenses for the year-ended December 31, 2025 includes expenses of approximately $2.0 million related to strategic initiatives, legal costs, expenses incurred to resolve prior year restatements, and shareholder matters. For the year-ended December 31, 2024, includes expenses of approximately $5.5 million related to costs to execute sales of international operations and transaction costs associated with strategic initiatives.
U.S. SG&A expenses totaled $29.5 million and $25.2 million for the years ended December 31, 2025 and 2024, respectively. The increase in expense of 17.1% was the result of strategic initiatives, legal costs, expenses incurred to resolve prior year restatements, and shareholder matters.
Canada SG&A expenses totaled $2.7 million and $2.7 million for the years ended December 31, 2025 and 2024, respectively.
All Other SG&A expenses totaled $6.0 million for the year ended December 31, 2024. The Company exited all international operations, except Canada in 2024.
Restructuring Costs and Severance
Restructuring costs and severance for the Company include costs related to relocating its corporate headquarters from Auburn Hills, Michigan to its existing operations office in Charlotte, North Carolina, in November of 2025 and the severance of certain Executives during this move. Restructuring costs and severance were approximately $4.8 million and $0.0 million for the year ended December 31, 2025 and 2024, respectively.
Depreciation and amortization expense was approximately $ 1.6$1.6 million and $ 2.0$1.5 million for the years ended December 31, 20242025 and 2023,2024, respectively.
The Company's interest expense was $ 2.2$2.4 million and $ 1.9$2.2 million for the years ended December 31, 20242025 and 2023,2024, respectively.
The America interest expense was $ 2.1 million and $ 1.4 million for the years ended December 31, 2024 and 2023, respectively. The increase was due to higher debt balances resulting from, among other factors, the legal obligation to have balance sheet cash of no less than $14.2 million at the closing date of the Highwire merger.
Other Expense,Expenses, Net
Other expense,expenses, net was $ 0.2$1.2 and $ 0.3$0.2 million for the years ended December 31, 20242025 and 2023,2024, respectively.
The Company had income tax expense of $ 1.2$4.1 million, with an effective tax rate of -82.9%,(19.8%), and $ 2.4$0.1 million, with an effective rate of 33.0%,(8.7%) for the years ended December 31, 20242025 and 2023,2024, respectively. For the year ended December 31, 2025, our effective income tax rate varied from the U.S. federal statutory rate of 21.0% primarily as a result of the valuation allowance, executive compensation disallowed pursuant to Section 162(m), adjustments in tax credits, foreign rate differential and other permanent differences. For the year ended December 31, 2024, our effective income tax rate of -82.9% varied from the U.S. federal statutory rate of 21%21.0% primarily as a result of foreignBrazilian ratewithholding differential, the sale oftaxes, foreign entitiesdisregarded primarily as a result of the sale of the Brazilian JV qualifying as a gain in Brazil and subject to foreign withholding tax but being characterized as a loss under US GAAP,income, and permanent differences.
Net income attributable to noncontrolling interest was $ 0.5$0.0 million and $ 0.9$0.5 million for the years ended December 31, 20242025 and 2023,2024, respectively.
Goodwill is subject to annual impairment tests and interim impairment tests if impairment indicators are present. The Company performs the annual impairment test duringon theOctober third quarter31 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.
The 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, or rate per unititem stockedassembled, or rate by task). The Company recognizes revenues for its contracts based on the contractually-specifiedcontractually 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. AllMost of the Company’s contracts have a duration of one year or less and over 90% of the Company’s contracts are completed in less than 30 days.
The 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 bad debt allowance 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 bad debtthe allowance for credit losses based in part on management’s assessment of the current status of individual accounts.
Based on management’s assessment, the Company established an allowance for credit losses of $0.4$0.0 million and $1.5$0.4 million atas of December 31, 20242025 and 2023,2024, respectively. Credit loss expense was $0.1 million and $0.3$0.4 million for the years ended December 31, 20242025 and 2023,2024, respectively.
Income Taxes
The Company records deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determinations, the Company considers all available evidence, including future reversals of existing deferred tax liabilities, projected future taxable income, feasible and prudent tax planning strategies, and recent financial operating results. If the Company determines that it will not be able to realize deferred income tax assets in the future, a valuation allowance is recorded. If sufficient positive evidence arises in the future indicating that all or a portion of the deferred tax assets meet the more likely than not standard for realization, the valuation allowance would be reduced accordingly in the period that such a conclusion is reached.
Valuation allowances of $7.6 million and $0.0 million at December 31, 2025 and 2024, respectively, related principally to deferred tax assets for net operating losses ("NOLs"), disallowed interest expense and tax credits that are uncertain as to realizability.
An income tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on its technical merits. The unrecognized tax reserves at December 31, 2025 and 2024 were $0.16 million and $0.11 million respectively, excluding accrued interest and penalties.
The Company has historically calculated its quarterly tax provision based on its best estimate of the full year tax rate applicable to the quarter. The Company did not significantly change the methodology for calculating income tax expenses, deferred tax assets and liabilities and reserves for uncertain tax positions for the years presented. See Note 5, Income Taxes in the Notes to Consolidated Financial Statements for additional information."
The Company is a party to variousboth domesticU.S. and internationalCanada credit facilities. These various domestic and international credit facilities require compliance with their respective financial covenants. For the year ended December 31, 2024,2025, the Company was in compliance with all financial covenants under these arrangements. See Note 4 to the Company's Consolidated Financial Statements, Debt, included elsewhere in this Annual Report on Form 10-K.
Net cash used in operating activities was $18.4 million for the year ended December 31, 2025 and net cash used in operating activities was $0.7 million for the year ended December 31, 2024. The year-over-year increase in net cash used by operating activities was mainly driven by lower operating income and unfavorable changes in working capital, largely due to the timing of customer collections, partially offset by favorable timing of payments to suppliers.
Net cash used in investing activities was $1.1 million for the year ended December 31, 2025 compared to cash provided by investing activities of $9.9 million for the year ended December 31, 2024. The net use of cash for investing activities was primarily attributable to the costs associated with software developed for internal use, implementation of a new enterprise resource planning system, and expenditures related to outfitting the new corporate headquarters.
Net cash used in operating activities was $ (0.7) million for the year ended December 31, 2024 and net cash provided by operating activities was $ 6.8 million for the year ended December 31, 2023. The year-over-year decrease in net cash provided by operating activities was primarily due to the sale of Brazil & South Africa, which both generated strong operating cash flows in 2023. This impact was partially offset by improved working capital management in the US.
Net cash provided by investing activities for the year ended December 31, 2024 was $ 9.9 million, compared to cash used in investing activities of $ (2.3) million for the year ended December 31, 2023. The net cash provided by investing activities was primarily attributable to the sale of international joint ventures, net of transaction costs.
Net cash usedprovided inby financing activities was $4.5 million for the year ended December 31, 2024 was approximately $ (1.7) million2025 compared to $ (3.0) millioncash used in financing activities inof 2023.$1.7 million for the year ended December 31, 2024. The year-over-year decreaseincrease in cash from financing activities was driven by paymentborrowings under the line of notescredits toand the sellers of Resource Plus, the purchasesale of treasury stock, and distributions to non-controlling investors.shares.
For the year ended December 31, 2024,2025, the Company experienced a net increasedecrease in cash and cash equivalents amounting to approximately $ 7.5$15.0 million, net of the impact of foreign exchange rate fluctuations of $(0.1)$0.0 .million. The overallyear-over-year increasedecrease in cash and cash equivalents was drivendue to lower operating income and unfavorable changes in working capital, largely due to the timing of customer collections, the costs associated with software developed for internal use, expenditures related to outfitting the new corporate headquarters, offset by proceedsfavorable from the saletiming of internationalpayments jointto ventures as well as improved working capital management.suppliers.
Brazil Joint Venture Sale and Non-GAAP EPS Impact
What changed in the latest 10-Q
Risk Factors
New heading “We are subject to a shareholder derivative lawsuit that could result in substantial costs and a diversion of management's attention and resources.”
Largest changes
“Following the end of the fiscal quarter covered by this Quarterly Report, a purported shareholder derivative action was filed against certain of our current and former directors and officers, naming the Company as a nominal defendant, alleging breach of fiduciary duty, unjust enrichment, and requests for declaratory and equitable relief relating to allegedly void or voidable Board actions. …”see in full comparison
“We are subject to a shareholder derivative lawsuit that could result in substantial costs and a diversion of management's attention and resources.”see in full comparison
see in full comparisonVariousThere have been no material changes to the risk factorsapplicabledisclosedtounderthePartCompany and its businesses are described inI, Item1A under the caption1A, "Risk Factors" inthe 2025our Annual Report on Form 10-K for the fiscal year ended December 31, 2025,whichexceptRiskasFactorssetareforthincorporatedbelow.byThereferenceriskintofactorthisdescribedQuarterlybelow should be read in conjunction with the risk factors and other information disclosed in our Annual Report on Form10-Q10-K,forwhichthearethreeincorporatedmonthshereinendedbyMarch 31, 2026.reference.
“There have been no material changes in the Company's risk factors since the 2025 Annual Report on Form 10-K for the year ended December 31, 2025.”see in full comparison
Full comparison: every changed paragraph (4)
VariousThere have been no material changes to the risk factors applicabledisclosed tounder thePart Company and its businesses are described inI, Item 1A under the caption1A, "Risk Factors" in the 2025our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, whichexcept Riskas Factorsset areforth incorporatedbelow. byThe referencerisk intofactor thisdescribed Quarterlybelow should be read in conjunction with the risk factors and other information disclosed in our Annual Report on Form 10-Q10-K, forwhich theare threeincorporated monthsherein endedby March 31, 2026.reference.
We are subject to a shareholder derivative lawsuit that could result in substantial costs and a diversion of management's attention and resources.
Following the end of the fiscal quarter covered by this Quarterly Report, a purported shareholder derivative action was filed against certain of our current and former directors and officers, naming the Company as a nominal defendant, alleging breach of fiduciary duty, unjust enrichment, and requests for declaratory and equitable relief relating to allegedly void or voidable Board actions. For additional information regarding this matter, see Part II, Item 1, "Legal Proceedings" and Note 13 - Subsequent Events, to the condensed consolidated financial statements included in this Quarterly Report. We intend to defend the action vigorously, but litigation of this nature is inherently uncertain, and we cannot predict its outcome at this stage. Regardless of the outcome, the litigation could result in substantial costs to us, including costs associated with indemnification obligations to current and former directors and officers, and could divert the attention and resources of our management and board of directors from the operation of our business. Derivative litigation of this kind may also lead to reputational harm, increased scrutiny of our corporate governance practices and public disclosures, and volatility in the trading price of our common stock. In addition, our directors' and officers' liability insurance may not be sufficient to cover the costs of defending or resolving this matter, and any amounts we are required to pay in excess of available insurance coverage, or any adverse outcome not covered by insurance, could have a material adverse effect on our business, financial condition, and results of operations. Even if we are ultimately successful in defending against this lawsuit, the process of doing so may be costly and time-consuming and may adversely affect our reputation and relationships with customers, shareholders, employees, and other stakeholders.
There have been no material changes in the Company's risk factors since the 2025 Annual Report on Form 10-K for the year ended December 31, 2025.
Management's Discussion & Analysis (MD&A)
New heading “Recent Developments”
New heading “Provision for Income Taxes”
New heading “For the six months ended June 30, 2026, compared to the six months ended June 30, 2025”
New heading “Cost of Revenues”
New heading “Selling, General and Administrative Expense”
New heading “Restructuring Costs and Severance”
New heading “Depreciation and Amortization”
New heading “Interest Expense, Net”
New heading “Other Expense (Income), Net”
New heading “Provision for Income Taxes”
Removed heading “Income Tax Expense (Benefit)”
Largest changes
“For the six months ended June 30, 2026, compared to the six months ended June 30, 2025”see in full comparison
“Effective June 1, 2026, the Company and TRAK entered into a further IT & Development Services Agreement for a term beginning on June 1, 2026 through May 31, 2027 (“IT Agreement”). …”see in full comparison
Full comparison: every changed paragraph (61)
Readers can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Words such as "may," "will," "expect," "intend," "believe," "estimate," "anticipate," "continue," "plan," "project," or the negative of these terms or other similar expressions also identify forward-looking statements. Forward-looking statements made by the Company in this Quarterly Report and the Annual Report may include (without limitation) statements regarding: risks, uncertainties, cautions, circumstances and other factors ("Risks"). Those Risks include (without limitation): the costs and effects of changing the Company's principal independent registered accounting firm; satisfying Nasdaq's required minimum market value of listed securities, minimum net income from continuing operations or minimum market price in a timely fashion; potential or continued revenue growth, gross margin expansion, and continued favorable shift in service mix from remodeling toward merchandising services; continued and new long-standing relationships with retailers, distributors and makers of consumer goods; successful results from merchandising partnerships and relationships with other companies, borrowing, repaying or guarantying the Company's recent unsecured loans or paying interest thereon; issuing the shares of the Corporation's 'Common Stock; the departure in 2025 of various of the Corporation's executives previously reported and the agreements made with them; potential non-compliance with applicable Nasdaq rules regarding minimum bid prices, the filing of periodic financial reports, director independence, holding annual meetings, or other rules; the impact of the Company's strategic review process or any resulting action or inaction; the impact of selling certain of the Company's subsidiaries; the impact of adding new directors or new finance team members; the potential negative effects of any stock repurchase and/or payment; the potential continuing negative effects of the COVID pandemic on the Company's business; the Company's potential non-compliance with applicable Nasdaq director independence, bid price or other rules; the Company's cash flow or financial condition; plans, intentions, expectations, guidance or other information respecting the pursuit or achievement of the Company's corporate objectives; and or any resulting impact on revenues, earnings, cash or financial condition resulting from our related to any such Risk. The Company's forward-looking statements also include (without limitation) statements made (as applicable) in this Quarterly Report and in the 2025 Annual Report in "Business", "Risk Factors", "Cybersecurity", "Legal Proceedings", "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities", "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Controls and Procedures", "Directors, Executive Officers and Corporate Governance", "Executive Compensation", "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters", and "Certain Relationships and Related Transactions, and Director Independence".
As of MarchJune 31,30, 2026, the Company operated in the U.S. and Canada.
Recent Developments
On March 29, 2026, the Company entered into an amendment with ReposiTrak, Inc., an affiliate of PC Group (the “TRAK”) (the “Amendment”), to that certain Services Agreement dated March 13, 2026 (the “Agreement”) entered into and between the Company and TRAK. Under the terms of the Agreement, the Company agreed to provide certain services to the Company related to (i) data analytics and internal reporting of the Company’s merchandising services that support consumer brands and retailers; (ii) out-of-stocks verification and remediation; (iii) scanned based trading merchandising; (iv) merchandising route optimization; (v) IT and technical optimization; and (v) consulting and training (together, the “Services”) for a one-year term beginning March 13, 2026 with an aggregate contract value of $2,325,000. In accordance with the terms of the Agreement, the Company was to pay TRAK in cash for the Services provided thereunder.
Under the terms of the Amendment, TRAK had the option to elect to receive payment for the Services in cash, shares of common stock of the Company, or a combination thereof. Any issuance of common stock pursuant to the Amendment was valued based upon the volume weighted average price (“VWAP”) of common stock for the five trading days immediately preceding the applicable issuance date.
On May 29, 2026, TRAK elected to receive payment of the outstanding balance owed to TRAK under the Amendment in shares of common stock, resulting in the issuance by the Company to the TRAK of 3,190,569 shares of common stock at a deemed value of $0.728710119 per share, in consideration of the payment of $2,325,000 otherwise payable to TRAK under the terms of the Agreement.
Effective June 1, 2026, the Company and TRAK entered into a further IT & Development Services Agreement for a term beginning on June 1, 2026 through May 31, 2027 (“IT Agreement”). Under the terms of the IT Agreement, TRAK will (i) develop, configure, and implement the TRAK application framework to support the functional capabilities of the SPAR View; (ii) evaluate the SPAR View application and define the technical approach for migrating its functionality to the upgraded platform; (iii) access the capabilities, skills, and organizational fit of current IT and development personnel; (iv) review SPAR’s existing IT organization, systems and processes; and (v) provide recommendations regarding SPAR’s technology architecture, staffing and suggest operational improvements (together, “IT Services”). The consideration to be paid for the IT Services is $151,500 per month.
EBITDA and Adjusted EBITDA is a non-GAAP measure of our operating performance and should not be considered as an alternative to net income as a measure of financial performance or any other performance measure derived in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). "EBITDA" is defined as net income before (i) depreciation and amortization, (ii) interest expense, net, and (iii) income tax expense. "Adjusted EBITDA" is defined as net income (loss) income before (i) depreciation and amortization of long-lived assets, (ii) interest expense (iii) income tax expense, (iv) restructuring expenses, (v) impairment, (vi) nonrecurring legal settlement costs and associated legal expenses unrelated to the Company's core operations, (vii) special items as determined by management, and (viii) review of strategic alternatives, which includes primarily legal, consulting, and investment bank fees. This metric is a supplemental measure of our operating performance that is neither required by, nor presented in accordance with, U.S. GAAP.
The following is a reconciliation of our net income (loss) income to Adjusted EBITDA for the periods presented:
The following table sets forth selected financial data and data as a percentage of Net revenues for the periods indicated (dollars in thousands):
For the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025
Net revenues for three months ended MarchJune 31,30, 2026 were $30.5$36.9 million, compared to $34.0$38.6 million for the three months ended MarchJune 31,30, 2025, a decrease of $3.5$1.7 million, or 10.3%.4.5%. Net revenues decreased during the quarter primarily due to lower volume in the remodel business.
U.S. net revenues totaled $27.2$32.5 million and $30.8$35.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease of $3.4$2.7 million or 11.7%7.7% is driven by a soft quarter in our remodel business.
Canada net revenues totaled $3.3$4.4 million and $3.2$3.4 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increase of $1.0 million or 29.4% is driven by the merchandising business.
The Company's cost of revenues consists of its in-store labor and field management wages, related benefits, travel and other direct labor-related expenses and was 77.7%77.2% of net revenue for the three months ended MarchJune 31,30, 2026 compared to 78.6%76.7% of net revenues for the three months ended MarchJune 31,30, 2025.
Cost of revenues for the three months ended MarchJune 31,30, 2026 were $23.7$28.5 million, compared to $26.8$29.6 million for the three months ended MarchJune 31,30, 2025. The decrease is in line with the reduction of revenue and driven by the mix of services in the U.S. partially offset by a reduction in the field management expenses.
U.S. cost of revenues totaled $21.3$25.1 million and $24.5$27.1 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease of $3.2$2.0 million is in line with the reduction of revenue and driven by the mix of services in the U.S. partially offset by a reduction in the field management expenses.
Canada cost of revenues totaled $2.4$3.4 million and $2.3$2.5 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increase of $0.9 million is driven by the increased revenue for the quarter along with a mix in services.
Selling, General and Administrative ExpensesExpense
Selling, general and administrative expensesexpense ("SG&A") of the Company include its corporate overhead, project management, information technology, executive compensation, human resources, legal and accounting expenses. Selling, general and administrative expensesexpense werewas approximately $6.2$6.8 million, or 20.3%18.3% of net revenue, and approximately $5.9$7.9 million, or 17.2%20.5% of net revenue for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increasedecrease in selling, general and administrative expensesexpense was primarily due to highercost expensessavings related to legal and accounting services as a result of timing, subscription expenses related to the enterprise resource planning systemmeasures that wenthave livebeen in early 2025 and increased consulting fees.implemented.
U.S. SG&A expensesexpense totaled $5.7$6.2 million and $5.4$7.1 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease of $0.9 million was primarily driven by lower compensation costs and lower consulting expenses.
Canada SG&A expensesexpense totaled $0.5$0.6 million and $0.5$0.8 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease was driven by lower compensation costs.
Restructuring costs and severance 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 to Charlotte, NC. For the three months ended MarchJune 31,30, 2026 the Company recognized expenseno of $0.2 million.expense.
For the three months ended MarchJune 31,30, 2026 and 2025, depreciation and amortization was approximately $0.4 million and $0.4 million, respectively.
Interest ExpenseExpense, Net
For the three months ended MarchJune 31,30, 2026 and 2025, interest expense was approximately $0.5$0.6 million and $0.5$0.6 million, respectively.
Other Income,Expense, Net
For the three months ended MarchJune 31,30, 2026 and 2025, other income,expense, net was immaterial.
Provision for Income Taxes
Income Tax Expense (Benefit)
For the three months ended MarchJune 31,30, 2026 income tax expense was $28$0.1 thousandmillion with an effective rate of (5.3%),21.5%, compared to expense of $114$0.1 thousandmillion with an effective rate of 19.8%100.8% for the three months ended MarchJune 31,30, 2025. The first quarter 2026 effective tax rate differs from the statutory rate of 21% mostly due to permanent differences and a recording of a valuation allowance on deferred tax assets to the extent the Company believes that these assets are more likely than not to be realized.
For the six months ended June 30, 2026, compared to the six months ended June 30, 2025
Net Revenues
Net revenues for six months ended June 30, 2026 were $67.4 million, compared to $72.7 million for the six months ended June 30, 2025, a decrease of $ 5.3 million, or 7.2%. Net revenues decreased primarily due to lower volume in the remodel business.
U.S. net revenues totaled $59.7 million and $66.2 million for the six months ended June 30, 2026 and 2025, respectively. The decrease of $6.5 million or 9.8% is driven by a soft quarter in our remodel business.
Canada net revenues totaled $7.7 million and $6.5 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $1.2 million or 18.5% is driven by the merchandising business.
Cost of Revenues
The Company's cost of revenues consists of its in-store labor and field management wages, related benefits, travel and other direct labor-related expenses and was 77.4% of net revenue for the six months ended June 30, 2026 compared to 77.4% of net revenues for the six months ended June 30, 2025.
Cost of revenues for the six months ended June 30, 2026 were $52.2 million, compared to $56.3 million for the six months ended June 30, 2025. The decrease is in line with the reduction of revenue and driven by the mix of services in the U.S.
U.S. cost of revenues totaled $46.4 million and $51.7 million for the six months ended June 30, 2026 and 2025, respectively. The decrease of $5.3 million is in line with the reduction of revenue and driven by the mix of services in the U.S. partially offset by a reduction in the field management expenses.
Canada cost of revenues totaled $5.8 million and $4.6 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $1.2 million is driven by the increased revenue for the quarter along with a mix of services.
Selling, General and Administrative Expense
Selling, general and administrative expense ("SG&A") of the Company include its corporate overhead, project management, information technology, executive compensation, human resources, legal and accounting expenses. Selling, general and administrative expense was approximately $13.0 million, or 19.2% of net revenue, and approximately $13.8 million, or 19.0% of net revenue for the six months ended June 30, 2026 and 2025, respectively. The decrease in selling, general and administrative expense was primarily due to cost savings measures that have been implemented.
U.S. SG&A expense totaled $11.9 million and $12.2 million for the six months ended June 30, 2026 and 2025, respectively.
Canada SG&A expense totaled $1.1 million and $1.6 million for the six months ended June 30, 2026 and 2025, respectively. The decrease was driven by lower compensation costs.
Restructuring Costs and Severance
Restructuring costs and severance include severance costs paid in connection with the reorganization of the Company's executive team and expense related to the move of the Company's headquarters to Charlotte, NC. For the six months ended June 30, 2026 the Company recognized expense of $0.2 million. The Company incurred no restructuring charges for the six months ended June 30, 2026.
Depreciation and Amortization
For the six months ended June 30, 2026 and 2025, depreciation and amortization was approximately $0.8 million and $0.8 million, respectively.
Interest Expense, Net
For the six months ended June 30, 2026 and 2025, interest expense was approximately $1.1 million and $1.1 million, respectively.
Other Expense (Income), Net
For the six months ended June 30, 2026 and 2025, other expense (income), net was immaterial.
Provision for Income Taxes
For the six months ended June 30, 2026 income tax expense was $0.1 million with an effective rate of (3,500.0%), compared to expense of $0.2 million with an effective rate of 33.7% for the six months ended June 30, 2025.
The preparation of our consolidated financial statements in conformity with USU.S. GAAP requires us to make estimates and judgments that affect the amounts reported in those financial statements and related notes thereto. However, we believe we have used reasonable estimates and assumptions in preparing the unaudited condensed consolidated financial statements. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates.
Cash Flows for the For the ThreeSix months ended MarchJune 31,30, 2026 and 2025
Net cash used in operating activities was $3.9$8.7 million compared to $4.0$11.9 million used in operating activities for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The immaterial change was primarily due to the decrease in accounts receivable which correlates to the decrease in revenue period over period,period and improved collection of outstanding customer balances, offset by the decrease in accounts payable.
Net cash used in investing activities was approximately $0.5$1.0 million compared to $0.5$1.0 million used in investing activities for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.
Net cash provided by financing activities was approximately $5.5$9.4 million compared to $4.3$8.5 million provided by financing activities for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. This was primarilyprincipally due to proceeds received from the PC Group under the terms of an unsecured promissory note duringin the threeprincipal monthsamount endedof March$3.0M, 31,which 2026,was offset by changes in the net borrowings under the Company’s line of credit.
SGRP insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 78,000 shares, about $49.9K) and open-market sales in 2 filings (2 insiders, 2 trade dates, 4,719,837 shares, about $8.5K). Net open-market shares: -4,641,837 (purchases minus sales); net value about $41.4K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-29 | Bode John B |
Grant/award | 110,000 | — | — |
| 2026-09-29 | Cook Timothy Patrick |
Grant/award | 110,000 | — | — |
| 2026-09-29 | Houston Linda M |
Grant/award | 110,000 | — | — |
| 2026-09-17 | Linnane William |
Grant/award | 200,000 | — | — |
| 2026-07-30 | Brown Robert G/ |
Gift | 135,000 | — | — |
| 2026-07-01 | Bartels William H |
Open-market sale | 4,709,837 | — | — |
| 2026-06-24 | Brown Robert G/ |
Gift | 4,000 | — | — |
| 2026-06-11 | Brown Robert G/ |
Open-market sale | 10,000 | $0.85 | $8.5K |
| 2026-05-01 | Hennen Steven Michael |
Open-market purchase | 78,000 | $0.64 | $49.9K |
Well-known investors holding SGRP (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 76,941 | $63.6K | 0.0% | Reduced 39% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 38,154 | $31.5K | 0.0% | Reduced 36% |