# ReposiTrak, Inc. (TRAK) FY 2026 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ReposiTrak, Inc.'s 10-K for fiscal year 2026.

SEC filing source: https://www.sec.gov/Archives/edgar/data/50471/000143774926031392/trak20260630_10k.htm
Accession: 0001437749-26-031392
Filing date: 2026-09-28
Report date: 2026-06-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/TRAK/
All MD&A years: /company/TRAK/mda/
Previous year: /company/TRAK/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis is intended to assist the reader in understanding our results of operations and financial condition. Management’s Discussion and Analysis is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K (this "Annual Report"). This Annual Report includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”). All statements, other than statements of historical fact, included in this Annual Report that address activities, events or developments that we expect, project, believe, or anticipate will or may occur in the future, including matters having to do with expected and future revenue, our ability to fund our operations and repay debt, business strategies, expansion and growth of operations and other such matters, are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments, and other factors it believes are appropriate in the circumstances. These statements are subject to a number of assumptions, risks and uncertainties, including general economic and business conditions, the business opportunities (or lack thereof) that may be presented to and pursued by us, our performance on our current contracts and our success in obtaining new contracts, our ability to attract and retain qualified employees, and other factors, many of which are beyond our control. You are cautioned that these forward-looking statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in such statements.

Overview

ReposiTrak, Inc. is a SaaS which operates a B2B e-commerce, compliance & traceability, and supply chain management platform that partners with retailers, wholesalers, distributors and their product suppliers to (a) help them manage specific programs, such as out-of-stock management and scan-based trading; (b) reduce risk in their supply chain by managing compliance documents and data; ensure compliance with new regulatory requirements supporting traceability; and (c) improve product ordering and forecasting in order to accelerate sales, control risks, and improve supply chain efficiencies. The Company’s fiscal year ends on June 30. References to fiscal 2026 refer to the fiscal year ended June 30, 2026, and references to fiscal 2025 refer to the fiscal year ended June 30, 2025.

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Sources of Revenue

The principal customers for the Company’s products are multi-store retail chains, wholesalers and distributors, and their suppliers. The Company has a hub and spoke business model, whereby the Company is typically engaged by Hubs, which in turn require their Spokes to utilize the Company’s services.

The Company’s software and services are designed to address the business problems faced by our customers. These solutions are delivered via a cloud-based infrastructure and grouped in three product application suites that mirror the workflow of the Company’s customers as they manage the activities of their supply chain.

The Company’s services are grouped in three application suites:

[[GREPCENT_TABLE]]
[["","1.","ReposiTrak Compliance Management (\u201cCompliance\u201d) solutions, which help the Company\u2019s customers vet suppliers and reduce a company\u2019s potential regulatory, legal, and criminal risk from its supply chain partners by providing a way for them to ensure these suppliers are compliant with food safety regulations, such as the Food Safety Modernization Act of 2011 (\u201cFSMA\u201d);"],["","2.","ReposiTrak Traceability Network (\u201cTraceability\u201d or \u201cRTN\u201d), which helps the Company\u2019s customers comply with federal regulatory requirements of traceability and is designed to provide a scalable, cost-effective approach to capturing and sharing key data elements (\u201cKDEs\u201d) now required by Section 204(d) of FSMA 2011 as designated products move through the supply chain at each \u2018event\u2019 known as a \u2018critical tracking event\u2019 or \u201cCTE\u201d, which includes tracking from farm to shelf; and"],["","3.","ReposiTrak Supply Chain Solutions (\u201cSupply Chain\u201d), which help the Company\u2019s customers to more efficiently manage various interactions with their suppliers. In other words, it provides customers with greater flexibility in sourcing products by enabling them to choose new suppliers and integrate them into their supply chain faster and more cost effectively, and it helps them to manage these relationships more efficiently, enhancing revenue while lowering working capital, labor costs and reducing waste."]]
[[/GREPCENT_TABLE]]

The Company derives revenue from five sources: (i) subscription fees, (ii) transaction-based fees, (iii) professional services fees, (iv) license fees, and (v) hosting and maintenance fees.

A significant portion of the Company’s revenue is generated from its Compliance and Supply Chain Food Safety solutions, with a growing portion of the revenue derived from its newest Traceability solution. The revenue generated is primarily in the form of a recurring subscription payment from the suppliers. Subscription fees can be based on a negotiated flat fee per supplier, or some volumetric metric, such as the number of stores, or the volume of economic activity between a retailer and its suppliers. Subscription revenue contains arrangements with customers for use of the application, application and data hosting, maintenance of the application, and standard support.

The Company also provides professional consulting services targeting implementation, assessments, profit optimization and support functions for its applications and related products, for which revenue is recognized over time using an appropriate measure of progress, including the output method, depending on the nature of the engagement. Premier customer support includes extended availability and additional services and is available along with additional support services such as developer support and partner support for an additional fee.

In rare instances, the Company may sell its software in the form of a license. License arrangements may be term-based or perpetual. Software license maintenance agreements are typically annual contracts, paid in advance or according to terms specified in the contract. When sold as a license, the Company’s software is usually accompanied by a corresponding maintenance and/or hosting agreement to support the service.

Software maintenance agreements provide the customer with access to new software enhancements, maintenance releases, patches, updates and technical support personnel. Our hosting services provide remote management and maintenance of our software and customers’ data, which is physically located in third-party facilities. Customers access “hosted” software and data through a secure internet connection. 

Critical Accounting Estimates

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses the Company’s financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expense during the reporting period.

On an ongoing basis, management evaluates its estimates and assumptions based on historical experience of operations and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Income Taxes

In determining the carrying value of the Company’s net deferred income tax assets, the Company must assess the likelihood of sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions, to realize the benefit of these assets. If these estimates and assumptions change in the future, the Company may record a reduction in the valuation allowance, resulting in an income tax benefit in the Company’s statements of operations. Management evaluates quarterly whether to realize the deferred income tax assets and assesses the valuation allowance.

Goodwill and Other Long-Lived Asset Valuations

Goodwill is assigned to specific reporting units and is reviewed for possible impairment at least annually or upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. Management reviews the long-lived tangible and intangible assets for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Management evaluates, at each balance sheet date, whether events and circumstances have occurred which indicate possible impairment.

The carrying value of a long-lived asset is considered impaired when the anticipated cumulative undiscounted cash flows of the related asset or group of assets is less than the carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the estimated fair market value of the long-lived asset. Economic useful lives of long-lived assets are assessed and adjusted as circumstances dictate. 

Stock-Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. The Company records compensation expense on a straight-line basis. The fair value of any options granted are estimated at the date of grant using a Black-Scholes option pricing model with assumptions for the risk-free interest rate, expected life, volatility, dividend yield and forfeiture rate.

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Capitalization of Software Development Costs

The Company accounts for research costs of computer software to be sold, leased or otherwise marketed as expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established.

We have determined that technological feasibility for our software products is reached shortly after a working prototype is complete and meets or exceeds design specifications including functions, features, and technical performance requirements. Costs incurred after technological feasibility is established have been and will continue to be capitalized until such time as when the product or enhancement is available for general release to customers.

Available-for-Sale Debt Investments  

We classify our investments in fixed income securities as available-for-sale debt investments. Our available-for-sale debt investments primarily consist of U.S. government, U.S. government agency, non-U.S. government and agency, corporate debt, U.S. agency mortgage-backed securities, commercial paper and certificates of deposit. These available-for-sale debt investments are primarily held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of available-for-sale debt investments sold. These investments are recorded in the Consolidated Balance Sheets at fair value. Unrealized gains and losses on these investments are included as a separate component of accumulated other comprehensive income (“AOCI”). We classify our investments as current based on the nature of the investments and their availability for use in current operations.

Impairment Consideration of Investments  

For our available-for-sale debt securities in an unrealized loss position, we determine whether a temporary or permanent credit loss exists. In this assessment, which requires judgment, among other factors, we consider the extent to which the fair value is less than the amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security. If factors indicate a permanent credit loss exists, an allowance for credit loss is recorded to other income (loss), net, limited by the amount that the fair value is less than the amortized cost basis. The amount of fair value change relating to all other factors will be recognized in other comprehensive income (“OCI”).

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenue and results of operation, liquidity or capital expenditures.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09 (ASC Topic 740), Improvements to Income Tax Disclosures, which requires incremental income tax disclosures that increase the transparency and usefulness of income tax disclosures. The updated disclosures primarily require specific categories and greater disaggregation within the rate reconciliation, disaggregation of income taxes paid, and modifications of other income tax-related disclosures. The Company adopted this guidance prospectively effective July 1, 2025. The adoption impacted the presentation and disclosure of income taxes but did not have a material impact on the Company’s financial statements.

In November 2024, the FASB issued ASU 2024-03 (ASC Subtopic 220-40), Disaggregation of Income Statement Expenses. The Company is required to disclose, in the notes to the financial statements, specified information about certain costs and expenses. The Company is required to adopt this guidance for its annual reporting in fiscal year 2028, and for interim period reporting beginning the first quarter of fiscal year 2029 on either a prospective or retrospective basis. Early adoption is permitted. This standard is expected to impact the Company's disclosures and will not have an impact on its Consolidated Financial Statements.

Results of Operations – Fiscal Years Ended June 30, 2026 and 2025

Revenue

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

During the fiscal year ended June 30, 2026, the Company generated revenue of $23.3 million, compared with $22.6 million for the fiscal year ended June 30, 2025, representing an increase of approximately 3%. The increase in revenue was primarily attributable to growth in recurring subscription revenue across the Company’s compliance, supply chain and traceability solutions.

Demand for the Company’s subscription-based services continues to be influenced by increased regulatory requirements, food safety and traceability initiatives, and greater demand for transparency throughout the food supply chain. These factors have increased the compliance, documentation and traceability requirements applicable to grocery retailers, wholesalers, distributors and their suppliers. As adoption of these requirements has expanded, the Company has experienced increased demand for its compliance and traceability services.

The Company continues to focus its sales and marketing efforts on recurring subscription-based software services while placing less emphasis on non-recurring transactional revenue. Certain customers may, from time to time, elect to purchase specific services or licenses on a non-recurring basis. Accordingly, the Company expects that a portion of its revenue may continue to be derived from non-recurring transactions; however, its strategy remains focused on increasing recurring subscription revenue.

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Cost of Services and Product Support

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Cost of services and product support was $3.3 million, or 14% of total revenue, for the fiscal year ended June 30, 2026, compared with $3.7 million, or 16% of total revenue, for the fiscal year ended June 30, 2025, representing a decrease of approximately 10%. The decrease was primarily attributable to the capitalization of certain qualifying software development costs that otherwise would have been recognized as expense during the period. This decrease was partially offset by increased cybersecurity costs and higher offshore development costs associated with the Company’s Traceability initiative.

Sales and Marketing Expense

[[GREPCENT_TABLE]]
[["","","Year Ended","","","$","","","%","","","Year Ended"],["","","June 30, 2026","","","Change","","","Change","","","June 30, 2025"],["Sales and marketing","","$","5,751,151","","","$","(92,121",")","","","-2","%","","$","5,843,272"],["Percent of total revenue","","","25","%","","","","","","","","","","","26","%"]]
[[/GREPCENT_TABLE]]

Sales and marketing expense was $5.8 million, or 25% of total revenue, for the fiscal year ended June 30, 2026, compared with $5.8 million, or 26% of total revenue, for the fiscal year ended June 30, 2025, representing a decrease of approximately 2%. The decrease was primarily attributable to lower personnel costs resulting from a reduction in marketing staff and lower trade show expenses. The Company also continued to utilize artificial intelligence and other technology-enabled tools to enhance the efficiency and targeting of its sales and marketing activities.

General and Administrative Expense

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

General and administrative expense was $5.7 million, or 25% of total revenue, for the fiscal year ended June 30, 2026, compared with $5.6 million, or 25% of total revenue, for the fiscal year ended June 30, 2025, representing an increase of approximately 2%. The increase was primarily attributable to higher personnel-related costs, including stock-based compensation and employee benefit costs, as well as increased liability insurance premiums, bad debt expense and travel-related costs.

Depreciation and Amortization Expense

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

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The Company’s depreciation and amortization expense was $647,637 and $1,251,514 for the years ended June 30, 2026 and 2025, respectively, a decrease of 48%. The decrease was primarily attributable to lower depreciation and amortization as certain existing property, software and acquired intangible assets became fully depreciated or amortized.

Other Income and Expense

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Net other income was $1,676,124 for the fiscal year ended June 30, 2026, compared with $1,426,834 for the fiscal year ended June 30, 2025, representing an increase of $249,290, or approximately 17%. The increase was primarily attributable to higher interest income and a favorable year-over-year change in unrealized gains on investments, partially offset by lower realized gains on investments. Interest income may fluctuate in future periods based on changes in market interest rates and the amount of cash and investments held by the Company.

Preferred Dividends

[[GREPCENT_TABLE]]
[["","","Year Ended","","","$","","","%","","","Year Ended"],["","","June 30, 2026","","","Change","","","Change","","","June 30, 2025"],["Preferred dividends","","$","167,804","","","$","(192,502",")","","","-53","%","","$","360,306"],["Percent of total revenue","","","1","%","","","","","","","","","","","2","%"]]
[[/GREPCENT_TABLE]]

Dividends accrued on the Company’s Series B Preferred Stock and Series B-1 Preferred Stock were $167,804 and $360,306 for the fiscal years ended June 30, 2026 and 2025, respectively, representing a decrease of approximately 53%. The decrease was primarily attributable to the redemption and retirement of shares of Preferred Stock during fiscal 2026.

Since inception of the redemption program, the Company has redeemed and retired an aggregate of 676,912 shares of Series B Preferred Stock and Series B-1 Preferred Stock at a redemption price of $10.70 per share, for total consideration of approximately $7.2 million. As of June 30, 2026, approximately $1.7 million of Preferred Stock remained outstanding and subject to redemption. The Company currently intends to redeem the remaining outstanding Preferred Stock on or before December 31, 2026, subject to the availability of sufficient cash and other applicable considerations.

Financial Position, Liquidity and Capital Resources

We believe that our existing cash and short-term investments, together with cash expected to be generated from operations, will be sufficient to meet our anticipated operating, investing and other cash requirements for at least the next twelve months.

Our future capital requirements will depend on a number of factors, including general macroeconomic conditions, our rate of revenue growth, sales and marketing activities, investments in research and development, capital expenditures, strategic investments, including our investment in SPAR Group, Inc., and other uses of capital, and continued market acceptance of our products and services.

[[GREPCENT_TABLE]]
[["","","As of","","","Variance"],["","","June 30, 2026","","","June 30, 2025","","","Dollars","","","Percent"],["Cash and cash equivalents","","$","27,256,008","","","$","28,568,805","","","$","(1,312,797",")","","","(5",")%"]]
[[/GREPCENT_TABLE]]

Historically, the Company has funded its operations through cash generated from operations, equity financings and borrowings under a revolving credit facility with U.S. Bank N.A. In March 2024, the Company terminated its revolving credit facility and currently has no outstanding borrowings under a credit facility.

Cash and cash equivalents were $27.3 million as of June 30, 2026, compared with $28.6 million as of June 30, 2025, representing a decrease of $1.3 million, or approximately 5%. During fiscal 2026, operating activities provided $8.2 million of cash, while investing activities used $4.1 million and financing activities used $5.4 million of cash.

Net Cash Flows from Operating Activities

[[GREPCENT_TABLE]]
[["","","Year Ended","","","$","","","%","","","Year Ended"],["","","June 30, 2026","","","Change","","","Change","","","June 30, 2025"],["Cash provided by operating activities","","$","8,224,806","","","$","(195,326",")","","","-2","%","","$","8,420,132"]]
[[/GREPCENT_TABLE]]

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Net cash provided by operating activities is summarized as follows:

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Net cash provided by operating activities was $8.2 million for fiscal 2026, compared with $8.4 million for fiscal 2025, representing a decrease of approximately $0.2 million. The year-over-year change primarily reflected an approximately $3.0 million decrease in noncash adjustments to net income, partially offset by a $0.6 million increase in net income and an approximately $2.2 million favorable change in operating assets and liabilities. The decrease in noncash adjustments primarily reflected $2.3 million of common stock received in settlement of accounts receivable and lower depreciation and amortization expense, partially offset by higher bad debt expense.

Net Cash Flows Used in Investing Activities

[[GREPCENT_TABLE]]
[["","","Year Ended","","","$","","","%","","","Year Ended"],["","","June 30, 2026","","","Change","","","Change","","","June 30, 2025"],["Cash (used in) provided by investing activities","","$","(4,117,006",")","","$","4,117,175","","","","NM","","","$","169"]]
[[/GREPCENT_TABLE]]

Net cash used in investing activities was $4.1 million for fiscal 2026, compared with nominal net cash provided by investing activities in fiscal 2025. The increase in cash used in investing activities was primarily attributable to $3.0 million advanced under the SPAR note receivable and approximately $1.0 million of capitalized software development costs.

Net Cash Flows from Financing Activities

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Net cash used in financing activities was $5.4 million for fiscal 2026, compared with $5.0 million for fiscal 2025. The increase in cash used in financing activities was primarily attributable to higher repurchases of the Company’s common stock, partially offset by lower redemptions of Preferred Stock and lower payments on notes payable and finance lease obligations.

Liquidity and Working Capital

At June 30, 2026, the Company had working capital of $24.2 million, compared with $28.2 million at June 30, 2025, representing a decrease of approximately $3.9 million. The decrease was attributable to a $0.9 million decrease in current assets and a $3.0 million increase in current liabilities.  The decrease also partially reflected our investment in SPAR Group, Inc. during the quarter ended June 30, 2026, described below.

The decrease in current assets primarily reflected a $1.3 million decrease in cash and cash equivalents and a $0.1 million decrease in prepaid expenses and other current assets, partially offset by a $0.5 million increase in accounts receivable. The increase in current liabilities primarily reflected increases of approximately $1.4 million in accrued liabilities, $1.3 million in deferred revenue and $0.2 million in accounts payable.

[[GREPCENT_TABLE]]
[["","","As of","","","As of","","","Variance"],["","","June 30, 2026","","","June 30, 2025","","","Dollars","","","Percent"],["Current assets","","$","32,752,828","","","$","33,685,800","","","$","(932,972",")","","","-3","%"]]
[[/GREPCENT_TABLE]]

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Current assets totaled $32,752,828 as of June 30, 2026, as compared to $33,685,800 as of June 30, 2025. The decrease in current assets is primarily attributable to the decrease in cash, and prepaid expense and other current assets partially offset by an increase in accounts receivable.

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

Current liabilities were $8.5 million as of June 30, 2026, compared with $5.5 million as of June 30, 2025. The increase was primarily attributable to higher deferred revenue and accrued liabilities, partially offset by a decrease in operating lease liabilities following the termination of the Company’s operating lease in March 2025.

The Company previously maintained a revolving credit facility with U.S. Bank N.A. On March 15, 2024, the Company elected not to renew the facility. No amounts were outstanding under the facility at the time of termination. As of June 30, 2026, the Company had no outstanding bank debt and no borrowing availability under the former credit facility.

The Company expects that cash generated from operations, together with its existing cash and short-term investments, will be used to fund its operating requirements and other anticipated uses of capital. Significant anticipated uses of cash include the following:

Quarterly Cash Dividends. The Company has paid quarterly cash dividends since fiscal 2023. In June 2025, the Board of Directors approved an increase in the quarterly cash dividend to $0.02 per share, or $0.08 per share on an annualized basis, beginning with the dividend payable with respect to the quarter ended September 30, 2025. The declaration and payment of future dividends are subject to the discretion of the Board of Directors and will depend on, among other factors, the Company’s financial condition, results of operations, cash requirements and other factors deemed relevant by the Board.

Preferred Stock Redemptions. Since inception of the Company’s preferred stock redemption program, the Company has redeemed an aggregate of 676,912 shares of Series B Preferred Stock and Series B-1 Preferred Stock at a redemption price of $10.70 per share, for total consideration of approximately $7.2 million. The Series B-1 Preferred Stock was fully redeemed during fiscal 2024. As of June 30, 2026, approximately $1.7 million of Series B Preferred Stock remained outstanding and subject to redemption.

SPAR Group Transactions

On March 17, 2026, the Company, through its subsidiary PC Group Inc., entered into a financing arrangement with SPAR Marketing Force, Inc. providing up to $4.0 million of funding, of which $3.0 million has been advanced. The arrangement provides for interest income at 8.0% and includes additional return components in the form of equity consideration and contingent price protection provisions. These features may increase the effective yield on the loan but also introduce variability in expected returns and earnings due to potential fair value adjustments and contingent cash flows. As a result, the Company's future results of operations may be impacted by changes in the market price of SPAR Group, Inc. common stock and the timing and issuance of equity consideration.

On March 29, 2026, the Company entered into an amendment (the “Amendment”) to that certain Services Agreement dated March 13, 2026 (the “Agreement”) by and between the Company and SPAR Group, Inc. (the “Client”), which Agreement was entered into in the ordinary course of business. Under the terms of the Agreement, the Company agreed to provide certain services the (“Services”) to the Client for a one-year term beginning March 13, 2026. In accordance with the terms of the Agreement, the Client was to pay the Company in cash for the Services provided thereunder.

Under the terms of the Amendment, the Company can elect to receive payment for the Services in cash, shares of common stock, par value $0.01 per share, of the Client (“Client Stock”), or a combination thereof. Any issuance of Client Stock pursuant to the Amendment shall be valued based upon the volume weighted average price (“VWAP”) of Client Stock for the five (5) trading days immediately preceding the applicable issuance date.

On May 29, 2026, the Company elected to receive payment of an outstanding balance owed to the Company under an amendment (the “Amendment”) to that certain Services Agreement dated March 13, 2026 (the “Agreement”) by and between the Company and SPAR Group, Inc. (the “Client”) in shares of common stock, par value $0.01 per share, of the Client (“Client Stock”), resulting in the issuance by Client to the Company of 3,190,569 shares of Client Stock at a deemed value of $0.728710119 per share, in consideration of the payment of $2,325,000 otherwise payable to the Company under the terms of the Agreement.

On July 1, 2026 (the “Closing Date”), the Company entered into Stock Purchase Agreements with William Bartels (“Bartels”) and WHB Services, Inc. Incentive Savings Plan and Trust (“WHB”) (together, the “Agreements”). Under the terms of the Agreements, on the Closing Date, the Company is to be issued an aggregate of 4,709,837 shares of common stock (the “SPAR Shares”) of Client. Aggregate contingent consideration due under the Agreements on the Closing Date by the Company for the SPAR Shares is approximately $3.3 million consisting of (i) a previously paid non-refundable deposit of $100,000 (the “Deposit”); (ii) $139,883 to be paid upon delivery to the Company of the SPAR Shares held by William Bartels; (iii), $485,118 to be paid upon delivery to the Company of the SPAR shares held by WHB; and (iv) the issuance of an unsecured promissory note in the principal amount of $2,571,885 (the “Note”). The Note bears interest at 6.0% per annum and matures on the fourth anniversary of its issuance. Principal is payable in annual cash installments of $725,000, together with all accrued and unpaid interest, on each of the first three anniversaries of the Note, with the remaining outstanding principal and accrued interest due at maturity on July 1, 2030. The Note may be prepaid at any time without premium or penalty and contains customary events of default, including payment defaults and bankruptcy events. Upon an event of default, the holder may accelerate all outstanding amounts due under the Note. The Note also provides for automatic acceleration upon certain change-of-control transactions involving the Company or upon the sale of substantially all of the Company’s assets. In addition, amounts remaining outstanding become payable to the seller’s designated heirs or beneficiaries within sixty (60) days following the seller’s death.

The Company is currently evaluating the accounting treatment of these features, including potential derivative accounting. The ultimate impact on earnings may vary based on future equity pricing and market conditions. The loan is unsecured, and the Company is exposed to credit risk associated with the Borrower's financial condition.

Contractual Obligations

Total contractual obligations and commercial commitments as of June 30, 2026 are summarized in the following table:

[[GREPCENT_TABLE]]
[["","","Financing Leases"],["Less than 1Year","","$","243,460"],["1-3 Years","","","62,131"],["Total lease payments","","","305,591"],["Less imputed interest","","","(11,251",")"],["Total","","$","294,340"]]
[[/GREPCENT_TABLE]]

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Inflation

The impact of inflation has historically not had a material effect on the Company’s financial condition or results from operations; however, higher rates of inflation may cause retailers to slow their spending in the technology area, which could have an impact on the Company’s sales.