Summary of Spark Group Conference Call Company Overview - **Company Name**: Spark Group - **Ticker Symbol**: SGRP - **Industry**: Retail Services and Merchandising - **Key Executives**: Mike Matakounis (CEO), William Lanain (Chief Strategy and Growth Officer) [3][4] Core Business and Services - Spark Group provides merchandising services, remodel services, and product assembly for retailers and brands, focusing on outsourcing labor through technology [5][6] - The company has divested from several international markets to concentrate on the U.S. and Canada, doubling its business size in these regions over the last four years [6][7] Market Dynamics - Retailers face ongoing challenges with inventory accuracy and fulfillment, especially as they utilize stores as fulfillment centers for digital sales [11][12] - There is a growing demand for flexible labor solutions rather than fixed labor, as retailers seek to optimize their workforce amidst rising labor costs [13][14] Technology and Innovation - Spark Group is leveraging technology and AI to enhance its services, including real-time data capture and analysis of shelf conditions [8][19] - The company has transitioned its systems to the cloud, allowing for scalable operations and improved data management [18][48] Financial Performance - Revenue reported at $73 million, with a strong EBITDA margin and a cash position of $14 million as of June [25] - The company has a pipeline of $200 million in potential business conversations with brands and retailers [23] Strategic Focus - Spark Group aims to expand EBITDA margins, increase net income, and enhance shareholder returns while maintaining a low capital expenditure model [11][41] - The company is focused on optimizing internal operations and exploring AI solutions to improve efficiency [38][48] Client Relationships - Spark Group has long-standing relationships with major retailers, including Walmart, Home Depot, and Dollar General, providing services that address their labor optimization challenges [10][22][46] Recent Developments - The company faced a terminated acquisition offer from Highwire Capital at $2.50 per share, resulting in a $2 million termination penalty, which is currently being pursued [26][32] - Spark Group has exited eight international joint ventures, strengthening its focus on the U.S. and Canadian markets [20][21] Conclusion - Spark Group is positioned to capitalize on the evolving retail landscape by providing innovative solutions that address inventory management and labor optimization challenges, with a clear strategy for growth and operational efficiency [39][40]

SPAR Group is a leading merchandising and marketing services company in North America, providing a broad range of services to retailers, manufacturers, and distributors. With more than 50 years of experience, merchandising across the United States and Canada, an average of 30,000+ store visits a week, and long-term relationships with leading manufacturers and retail businesses, we provide specialized capabilities across North America. Our unique combination of scale, merchandising, and marketing expertise, ...

[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls and procedures [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents SPAR Group's unaudited condensed consolidated financial statements, including operations, balance sheets, equity, and cash flows, with explanatory notes [Condensed Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For Q2 2025, SPAR Group reported a net loss of $1 thousand, improving from a $3.4 million loss in 2024, while achieving a $461 thousand net income for the six months | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Revenues | $38,629 | $43,402 | $72,671 | $92,799 | | Gross Profit | $9,062 | $8,964 | $16,338 | $18,676 | | Operating Income (Loss) | $715 | $(966) | $1,751 | $7,723 | | Income (Loss) before Income Tax Expense | $119 | $(1,260) | $695 | $6,945 | | Net Income (Loss) | $(1) | $(3,443) | $461 | $3,737 | | Net Income (Loss) attributable to SPAR Group, Inc. | $(1) | $(3,891) | $461 | $2,735 | | Basic EPS attributable to SPAR Group, Inc. | $0.00 | $(0.17) | $0.02 | $0.11 | | Diluted EPS attributable to SPAR Group, Inc. | $0.00 | $(0.16) | $0.02 | $0.12 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $71.6 million, driven by accounts receivable, while total liabilities rose to $46.7 million due to higher credit lines | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $13,929 | $18,221 | | Accounts receivable, net | $44,370 | $24,766 | | Total current assets | $60,558 | $45,996 | | Total assets | $71,560 | $56,431 | | Accounts payable | $10,632 | $8,767 | | Lines of credit and short-term loans | $24,701 | $16,082 | | Total current liabilities | $44,618 | $30,050 | | Total liabilities | $46,668 | $32,125 | | Total stockholders' equity | $24,892 | $24,306 | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased from $24.3 million to $24.9 million by June 30, 2025, driven by net income and other comprehensive income | Metric (in thousands) | Balance at January 1, 2025 | Balance at June 30, 2025 | | :-------------------- | :------------------------- | :----------------------- | | Common Stock Amount | $234 | $234 | | Treasury Stock Amount | $(2,075) | $(2,075) | | Additional Paid-In Capital | $19,886 | $19,940 | | Accumulated Other Comprehensive Loss | $(1,198) | $(1,127) | | Retained Earnings | $7,459 | $7,920 | | Total Stockholders' Equity | $24,306 | $24,892 | - Share-based compensation contributed **$54 thousand** to additional paid-in capital during the six months ended June 30, 2025[12](index=12&type=chunk) - Net income of **$462 thousand** was recognized for the period ending March 31, 2025, and a net loss of **$1 thousand** for the period ending June 30, 2025[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, operating activities used $11.9 million cash, a shift from prior year's $170 thousand provided, while financing provided $8.5 million | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash (used in) provided by operating activities | $(11,900) | $170 | | Net cash (used in) provided by investing activities | $(959) | $10,962 | | Net cash (used in) provided by financing activities | $8,547 | $(109) | | Net change in cash, cash equivalents | $(4,292) | $10,976 | | Cash and cash equivalents at end of period | $13,929 | $21,695 | - The significant increase in cash used in operating activities for 2025 was largely due to a **$19,012 thousand** increase in accounts receivable[17](index=17&type=chunk) - Investing activities in 2024 included **$7,982 thousand** from the sale of joint ventures, which was not present in 2025[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section details accounting policies, financial instruments, and transactions, providing crucial context for understanding the company's financial position and performance [1. Nature of the Business](index=9&type=section&id=1.%20Nature%20of%20the%20Business) SPAR Group, Inc. is a global merchandising and brand marketing services company serving retailers, manufacturers, and distributors worldwide - SPAR Group, Inc. provides global merchandising and brand marketing services to retailers, consumer goods manufacturers, and distributors[19](index=19&type=chunk) [2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements adhere to U.S. GAAP and SEC interim rules, consolidating subsidiaries and using management estimates, with recent adoptions of new accounting pronouncements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial statements[20](index=20&type=chunk) - The Company consolidates its wholly-owned subsidiaries, and all significant intercompany transactions are eliminated[22](index=22&type=chunk) - As of March 31, 2025, the Company's reportable segments changed to one segment due to the exit of substantially all international operations during 2024[24](index=24&type=chunk) - The Company adopted ASU No. 2023-05 (Business Combinations – Joint Venture Formations) effective January 1, 2025, which did not have a material effect as the Company has exited all previous joint ventures[25](index=25&type=chunk)[26](index=26&type=chunk) - The Company adopted ASU 2023-07 (Segment Reporting) effective January 1, 2024, for fiscal year and January 1, 2025, for interim periods, requiring enhanced segment disclosure[27](index=27&type=chunk) - The Company is evaluating the impact of ASU No. 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures) which are effective for annual periods beginning after December 15, 2024, and December 15, 2026, respectively[28](index=28&type=chunk)[29](index=29&type=chunk) Accounts Receivable, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Trade | $29,368 | $12,059 | | Unbilled | $12,506 | $9,284 | | Non-trade| $2,738 | $3,834 | | Gross Accounts Receivable | $44,612 | $25,177 | | Less allowance for credit losses | $(242) | $(411) | | Accounts Receivable, net | $44,370 | $24,766 | Property and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Equipment | $4,025 | $4,060 | | Furniture and fixtures | $668 | $591 | | Leasehold improvements | $387 | $384 | | Capitalized internal use software costs | $20,610 | $18,967 | | Gross property and equipment | $25,690 | $24,002 | | Less accumulated depreciation and amortization | $(22,725) | $(21,987) | | Property and equipment, net | $2,965 | $2,015 | Intangible Assets, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Trade names | $900 | $900 | | Patents | $870 | $870 | | Gross intangible assets | $1,770 | $1,770 | | Less accumulated amortization | $(995) | $(929) | | Intangible assets, net | $775 | $841 | Accrued Expenses and Other Current Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Taxes payable | $519 | $137 | | Accrued salaries and wages | $3,737 | $1,644 | | Accrued third party labor | $2,321 | $1,314 | | Other | $439 | $438 | | Total | $7,016 | $3,533 | [3. Debt](index=14&type=section&id=3.%20Debt) The Company's debt includes a secured revolving credit facility with North Mill Capital, extended to October 2025, and seller notes, with all debt covenants in compliance as of June 30, 2025 - The North Mill Credit Facility (US and Canada Revolving Credit Facility) was extended from October 10, 2024, to **October 10, 2025**[43](index=43&type=chunk) - The Company is evaluating refinancing options and plans to secure an extension or replacement financing before the maturity date of the NM Credit Facility[43](index=43&type=chunk) - As of June 30, 2025, the aggregate interest rate on the NM Credit Facility was **9.40%** per annum, with an outstanding loan balance of approximately **$24.7 million**[45](index=45&type=chunk) - The NM Loan Parties were in compliance with all financial and other restrictive covenants as of June 30, 2025[46](index=46&type=chunk) - The Company acquired the remaining minority joint venture interests of Resource Plus and its sister companies for a total of **$3 million**, with **$2.3 million** remaining outstanding as of June 30, 2025, reported as a promissory note[47](index=47&type=chunk) Summary of Company's Lines of Credit (in thousands) | Lender | Interest Rate (June 30, 2025) | Balance (June 30, 2025) | Interest Rate (December 31, 2024) | Balance (December 31, 2024) | | :----- | :---------------------------- | :---------------------- | :-------------------------------- | :-------------------------- | | USA / Canada North Mill Capital | 9.40% | $24,701 | 9.40% | $16,082 | | Total | | $24,701 | | $16,082 | Summary of Company's Seller Notes (in thousands) | Note Type | Interest Rate (June 30, 2025) | Balance (June 30, 2025) | Interest Rate (December 31, 2024) | Balance (December 31, 2024) | | :-------- | :---------------------------- | :---------------------- | :-------------------------------- | :-------------------------- | | USA - Resource Plus Seller Notes (Current) | 4.30% | $500 | 4.30% | $500 | | USA - Resource Plus Seller Notes (Long-term) | 4.30% | $1,753 | 4.30% | $1,722 | | Total | | $2,253 | | $2,222 | Summary of Unused Company Credit and Other Debt Facilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | United States / Canada | $1,179 | $13,310 | | Total Unused Availability | $1,179 | $13,310 | [4. Commitments and Contingencies](index=17&type=section&id=4.%20Commitments%20and%20Contingencies) The Company is engaged in routine legal and administrative proceedings, with management expecting no material adverse effect on financial condition or operations - Management believes that the resolution of current legal actions and administrative proceedings will not have a material adverse effect on the Company[51](index=51&type=chunk) [5. Common Stock](index=17&type=section&id=5.%20Common%20Stock) As of June 30, 2025, 47 million common shares were authorized, with rights subject to preferred stock, no cash dividends paid, and 1 million shares repurchased in April 2024 - As of June 30, 2025, **47,000,000** shares of common stock were authorized, with **23,489,752** shares issued and outstanding[10](index=10&type=chunk) - No cash dividends were declared or paid on common stock during the periods presented[52](index=52&type=chunk) - Under the 2024 Stock Repurchase Program, **1,000,000** shares of common stock were repurchased from William H. Bartels, a director and significant stockholder, at **$1.80 per share** on April 30, 2024[53](index=53&type=chunk) [6. Preferred Stock](index=17&type=section&id=6.%20Preferred%20Stock) The Corporation is authorized to issue 3 million preferred shares, with all Series B convertible preferred stock converting to common stock by March 31, 2024 - The Corporation is authorized to issue **3,000,000** shares of preferred stock[54](index=54&type=chunk) - All **854,753** shares of Series B convertible preferred stock vested and converted into **1,282,129** shares of common stock during 2023, with the process completed by March 31, 2024[57](index=57&type=chunk) - Series B convertible preferred stock did not carry voting or dividend rights and converted at a **1-to-1.5 ratio** to common stock upon vesting[56](index=56&type=chunk) [7. Share-Based Compensation](index=17&type=section&id=7.%20Share-Based%20Compensation) Share-based compensation for stock options and RSUs decreased in H1 2025, while Phantom Stock Awards expense significantly increased due to vesting Share-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock Options | $0 | $35 | $2 | $70 | | Restricted Stock Units | $25 | $93 | $50 | $186 | | Phantom Stock Awards | $414 | $0 | $466 | $0 | - Phantom Stock Units, issued to executives in 2022 and 2023, represent the right to receive cash payments based on the fair market value of common stock at vesting and are classified as liabilities[62](index=62&type=chunk)[63](index=63&type=chunk) [8. Related Party Transactions](index=19&type=section&id=8.%20Related%20Party%20Transactions) Related party transactions involve director benefits, minority interest acquisitions, and marketing services, alongside the strategic divestiture of several international joint ventures in 2024 - Retirement benefits for William H. Bartels, a director and founder, totaling **$1.1 million** over five years, concluded on December 31, 2024[66](index=66&type=chunk) - The Company repurchased **1,000,000** shares of common stock from William H. Bartels for **$1.80 per share** on April 30, 2024[67](index=67&type=chunk) - The Company acquired the remaining minority joint venture interests of Resource Plus and its sister companies from Mr. Richard Justus for **$3 million**, with **$2.3 million** outstanding as of June 30, 2025[68](index=68&type=chunk) - Expenses for marketing and advertising services from WB Marketing, Inc. (now Qantm Creative), an entity owned by the CEO's wife, were approximately **$170 thousand** for the six months ended June 30, 2025, up from **$87 thousand** in 2024[70](index=70&type=chunk) - The Company sold its **51%** ownership interest in its South African Joint Venture for approximately **$7.7 million** (**80%** paid upon closing) in April 2024, recognizing a pre-tax gain of approximately **$7.2 million**[73](index=73&type=chunk)[74](index=74&type=chunk) - The Company sold its **51%** ownership interest in its Chinese Joint Venture for **$200,000** in April 2024, recognizing a loss of **$1.1 million**[75](index=75&type=chunk) - The Company sold its Brazilian holding company (owning **51%** interest in its Brazilian joint venture) for approximately **$11.8 million** in June 2024, recognizing a loss of **$1.2 million**[76](index=76&type=chunk) - The Company sold its **100%** ownership interest in SPAR Japan for **$500,000** in August 2024, recognizing a loss of **$0.7 million**[77](index=77&type=chunk) - The Company sold its **51%** ownership interest in its Indian Joint Venture for **$500,000** in September 2024, recognizing a loss of **$1.4 million**[78](index=78&type=chunk) - The Company sold its **51%** ownership interest in its Mexican Joint Venture for **$417,000** in December 2024, recognizing a loss of **$1.1 million**[79](index=79&type=chunk) [9. Segment Information](index=21&type=section&id=9.%20Segment%20Information) After exiting most international operations in 2024, SPAR Group now operates as a single segment, with most revenue and assets concentrated in the United States and Canada - The Company operates as one operating segment, with the CEO reviewing financial information on a consolidated basis[80](index=80&type=chunk) Long-Lived Assets (in thousands) | Geographic Region | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | United States | $4,858 | $4,014 | | Canada | $418 | $465 | | Total long lived assets | $5,276 | $4,479 | Geographic Net Revenue (in thousands) | Geographic Region | Three Months Ended June 30, 2025 | % of Consolidated Net Revenue (3M 2025) | Three Months Ended June 30, 2024 | % of Consolidated Net Revenue (3M 2024) | Six Months Ended June 30, 2025 | % of Consolidated Net Revenue (6M 2025) | Six Months Ended June 30, 2024 | % of Consolidated Net Revenue (6M 2024) | | :---------------- | :------------------------------- | :-------------------------------------- | :------------------------------- | :-------------------------------------- | :----------------------------- | :-------------------------------------- | :----------------------------- | :-------------------------------------- | | United States | $35,258 | 91.3% | $32,993 | 76.0% | $66,135 | 91.0% | $61,816 | 66.6% | | Canada | $3,371 | 8.7% | $3,900 | 9.0% | $6,536 | 9.0% | $7,169 | 7.7% | | Total net revenue | $38,629 | 100.0% | $43,402 | 100.0% | $72,671 | 100.0% | $92,799 | 100.0% | [10. Leases](index=23&type=section&id=10.%20Leases) The Company leases office space and equipment, with total lease costs decreasing to $425 thousand in H1 2025, and a weighted-average remaining lease term of 2.86 years Lease Costs (in thousands) | Lease Costs | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $57 | $93 | $129 | $269 | | Short-term lease cost | $272 | $128 | $296 | $299 | | Total lease cost | $329 | $221 | $425 | $568 | Balance Sheet Information Related to Leases (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Operating lease right-of-use assets | $477 | $630 | | Current portion of operating lease liabilities | $180 | $276 | | Non-current portion of operating lease liabilities | $297 | $353 | | Total Operating lease liabilities | $477 | $629 | - Weighted average remaining lease term for operating leases is **2.86 years** as of June 30, 2025, with a weighted average discount rate of **8.06%**[84](index=84&type=chunk) [11. Earnings Per Share](index=25&type=section&id=11.%20Earnings%20Per%20Share) Basic and diluted EPS for Q2 2025 were $0.00, an improvement from a loss in 2024, while six-month EPS decreased to $0.02 from $0.11-$0.12 in 2024 | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.00 | $(0.17) | $0.02 | $0.11 | | Diluted EPS | $0.00 | $(0.16) | $0.02 | $0.12 | | Weighted-average common shares outstanding – basic | 23,470 | 23,786 | 23,460 | 23,670 | | Weighted-average common shares outstanding – diluted | 23,499 | 24,010 | 23,532 | 23,873 | [12. Subsequent Events](index=25&type=section&id=12.%20Subsequent%20Events) Post-period, on August 12, 2025, the Company extended its North Mill Capital credit facilities to October 2027, increasing the total facility size to $36 million - On August 12, 2025, the Company agreed to extend its credit facilities with North Mill Capital through **October 10, 2027**[87](index=87&type=chunk) - The total credit facility size will increase to **$36 million** (**$30 million** for the US facility and **$6 million** for the Canadian facility)[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results, including key performance drivers, non-GAAP measures, liquidity, the impact of international divestitures, and internal control remediation efforts [Forward-Looking Statements](index=26&type=section&id=Forward-Looking%20Statements) This section warns that forward-looking statements are subject to risks and uncertainties, and actual results may differ materially, with no obligation for public updates - The report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from expectations[89](index=89&type=chunk)[91](index=91&type=chunk) - The Company does not intend to publicly update or revise any forward-looking statements[92](index=92&type=chunk) [Overview of Our Business](index=27&type=section&id=Overview%20of%20Our%20Business) SPAR Group, a leading merchandising and brand marketing services company in North America, strategically exited international ventures in 2024 to enhance client sales and efficiency - SPAR Group is a leading merchandising and brand marketing services company[94](index=94&type=chunk) - As of June 30, 2025, the Company operates in the United States and Canada, having strategically exited joint ventures in Mexico, Brazil, South Africa, China, Japan, and India during 2024[95](index=95&type=chunk) - The Company's goal is to drive sales, margins, and operating efficiency for brand and retail clients through specialized services, including new product launches, promotional displays, fixture assembly, stock availability, store renovations, and distribution center optimization[94](index=94&type=chunk)[97](index=97&type=chunk) [EBITDA and Adjusted EBITDA](index=27&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) EBITDA and Adjusted EBITDA are non-GAAP measures for operating performance, with Consolidated Adjusted EBITDA decreasing to $1.3 million for Q2 2025 and $2.8 million for the six months - EBITDA and Adjusted EBITDA are non-GAAP measures used to compare operating performance by excluding non-recurring items[99](index=99&type=chunk)[100](index=100&type=chunk) Consolidated Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Consolidated EBITDA | $1,128 | $41 | $2,531 | $10,124 | | Consolidated Adjusted EBITDA | $1,313 | $1,905 | $2,809 | $5,289 | | Adjusted EBITDA attributable to SPAR Group, Inc. | $1,313 | $1,380 | $2,809 | $3,846 | - Adjusted EBITDA has limitations as an analytical tool, as it does not reflect cash expenditures, working capital changes, debt service, or non-cash compensation[104](index=104&type=chunk) [RESULTS OF OPERATIONS](index=28&type=section&id=RESULTS%20OF%20OPERATIONS) Q2 and H1 2025 results show decreased net revenues and cost of revenues due to international exits, with improved gross profit margins and increased Q2 operating income [For the three months ended June 30, 2025, compared to the three months ended June 30, 2024](index=28&type=section&id=For%20the%20three%20months%20ended%20June%2030%2C%202025%2C%20compared%20to%20the%20three%20months%20ended%20June%2030%2C%202024) Q2 2025 net revenues decreased 11.0% to $38.6 million due to international exits, yet gross profit slightly increased, and operating income became positive | Metric (in thousands) | 2025 ($) | 2025 (%) | 2024 ($) | 2024 (%) | | :-------------------- | :------- | :------- | :------- | :------- | | Net revenues | 38,629 | 100.0% | 43,402 | 100.0% | | Total cost of revenue | 29,567 | 76.5% | 34,438 | 79.4% | | Gross profit | 9,062 | 23.5% | 8,964 | 20.6% | | Selling, general and administrative expense | 7,934 | 20.5% | 8,068 | 18.6% | | Operating income (loss) | 715 | 1.9% | (966) | (2.3)% | | Income (loss) before income tax expense | 119 | 0.3% | (1,260) | (3.0)% | | Loss from continuing operations | (1) | 0.0% | (2,194) | (5.1)% | | Net loss | (1) | 0.0% | (3,443) | (8.0)% | - Net revenues decreased by **$4.8 million** (**11.0%**) due to the exit of Mexico, China, Japan, and India operations in late 2024[106](index=106&type=chunk) - Cost of revenues decreased by **$4.9 million** (**14.1%**), improving as a percentage of net revenue from **79.4%** to **76.5%**[107](index=107&type=chunk)[108](index=108&type=chunk) - Selling, general, and administrative expenses decreased by **$0.2 million**, primarily due to the exit of international operations[109](index=109&type=chunk) - Income tax expense for Q2 2025 was **$0.1 million** with an effective rate of **100.8%**, differing from the statutory rate due to permanent differences[113](index=113&type=chunk) [For the six months ended June 30, 2025, compared to the six months ended June 30, 2024](index=31&type=section&id=For%20the%20six%20months%20ended%20June%2030%2C%202025%2C%20compared%20to%20the%20six%20months%20ended%20June%2030%2C%202024) H1 2025 net revenues decreased 21.7% to $72.7 million due to international divestitures, but the company achieved net income from continuing operations and improved cost of revenues | Metric (in thousands) | 2025 ($) | 2025 (%) | 2024 ($) | 2024 (%) | | :-------------------- | :------- | :------- | :------- | :------- | | Net revenues | 72,671 | 100.0% | 92,799 | 100.0% | | Total cost of revenue | 56,333 | 77.5% | 74,123 | 79.9% | | Gross profit | 16,338 | 22.5% | 18,676 | 20.1% | | Selling, general and administrative expense | 13,807 | 19.0% | 15,773 | 17.0% | | Operating income | 1,751 | 2.4% | 7,723 | 8.3% | | Income before tax expense | 695 | 1.0% | 6,945 | 7.5% | | Income from continuing operations | 461 | 0.6% | 4,618 | 5.0% | | Net income | 461 | 0.6% | 3,737 | 4.0% | - Net revenues decreased by **$20.1 million** (**21.7%**) due to the exit of South Africa, Mexico, China, Japan, and India operations in late 2024[115](index=115&type=chunk) - Cost of revenues decreased by **$17.8 million** (**24.0%**), improving as a percentage of net revenue from **79.9%** to **77.5%**[117](index=117&type=chunk)[118](index=118&type=chunk) - Selling, general, and administrative expenses decreased by **$2.0 million**, primarily due to the exit of international operations[119](index=119&type=chunk) - Income tax expense for the six months ended June 30, 2025, was **$0.2 million** with an effective rate of **33.7%**, compared to **$2.3 million** with a **33.5%** effective rate in 2024[123](index=123&type=chunk) [Critical Accounting Estimates](index=32&type=section&id=Critical%20Accounting%20Estimates) Financial statement preparation involves management estimates and judgments, which, while believed reasonable, may differ from actual results due to inherent uncertainties - The preparation of financial statements requires management to make estimates and judgments, which may differ from actual results[124](index=124&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The Company expects sufficient liquidity for 12 months, contingent on credit facility extension, with operating cash flow shifting to negative and financing activities providing significant cash in 2025 - The Company expects current credit facilities, projected operations, and other financing to be sufficient for liquidity over the next 12 months, pending an extension or replacement of credit facilities[126](index=126&type=chunk) - Delays in receivable collection, reduced business from major clients, or economic downturns could materially affect the Company's liquidity[126](index=126&type=chunk) Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :----------------------------- | :----------------------------- | | Operating Activities | $(11,900) | $170 | | Investing Activities | $(959) | $10,962 | | Financing Activities | $8,547 | $(109) | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) SPAR Group, Inc., as a smaller reporting company, is exempt from providing quantitative and qualitative market risk disclosures - SPAR Group, Inc. is a smaller reporting company and is not required to provide disclosures about market risk[130](index=130&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective as of June 30, 2025, due to material weaknesses in financial statement close processes and non-recurring transactions, with remediation efforts underway including ERP implementation and team centralization - Disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[131](index=131&type=chunk) - Material weaknesses include ineffective controls related to the financial statement close process (completeness and accuracy of reconciliations, segment disclosures) and non-recurring transactions (deconsolidation and sale of international components)[132](index=132&type=chunk)[133](index=133&type=chunk) - Remediation efforts include implementing a new ERP system (live January 1, 2025), hiring an experienced Assistant Controller (January 1, 2025), consolidating the finance and accounting team, and simplifying the organizational structure by divesting six foreign joint venture operations[134](index=134&type=chunk) - No other material changes in internal controls over financial reporting occurred during the three months ended June 30, 2025, beyond the described remediation efforts[136](index=136&type=chunk) [PART II: OTHER INFORMATION](index=36&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) This section addresses legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and required exhibits [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The Company is engaged in routine legal and administrative proceedings, with management expecting no material adverse effect on financial condition or operations - Management does not anticipate that the resolution of ongoing legal and administrative proceedings will have a material adverse effect on the Company[137](index=137&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the Company's risk factors have occurred since the filing of its 2024 Annual Report on Form 10-K/A - No material changes to the Company's risk factors have occurred since the 2024 Annual Report on Form 10-K/A[139](index=139&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the Company for the current reporting period [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the current reporting period [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the current reporting period [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the Company for the current reporting period [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits include CEO and CFO certifications (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL documents[146](index=146&type=chunk) [SIGNATURES](index=38&type=section&id=SIGNATURES) This section contains the required signatures for the filing

Strengthening quarterly sales, up 13.5% from first quarter, with stronger gross margins of 23.5% after 2024 divestitures of previously consolidated international JVs AUBURN HILLS, Mich., Aug. 14, 2025 (GLOBE NEWSWIRE) -- SPAR Group, Inc. (NASDAQ: SGRP) ("SPAR," "SPAR Group" or the "Company"), a leading provider of merchandising, marketing, and distribution services, today reported financial and operating results for the three and six months ended June 30, 2025. Mike Matacunas, the Company's President and Ch ...

Company Performance - SPAR Group, Inc. (SGRP) experienced a decline of 2.66% in its stock price, closing at $1.10, which was less than the S&P 500's daily loss of 0.13% [1] - Over the past month, SPAR Group's shares appreciated by 15.31%, outperforming the Business Services sector's loss of 0.51% and the S&P 500's gain of 3.39% [1] Earnings Estimates - For the upcoming earnings disclosure, Zacks Consensus Estimates project earnings of $0.12 per share and revenue of $0 million, indicating no change from the previous year [2] - Recent changes to analyst estimates for SPAR Group suggest a positive outlook, reflecting analyst optimism regarding the company's business and profitability [3] Zacks Rank and Valuation - SPAR Group currently holds a Zacks Rank of 3 (Hold), with the consensus EPS projection remaining stagnant over the past 30 days [5] - The company has a Forward P/E ratio of 9.42, which is a discount compared to its industry's Forward P/E of 18.33 [6] - The Business Services industry, which includes SPAR Group, has a Zacks Industry Rank of 91, placing it in the top 37% of over 250 industries [6]

Core Points - A group of large shareholders of SPAR Group, Inc. is demanding that two directors, Linda Houston and John Bode, who were not re-elected at the 2024 Annual Shareholders' Meeting, comply with the company's Bylaws regarding their resignation [2][4] - The Bylaws state that a director must submit a written irrevocable letter of resignation prior to their election or re-election, which becomes effective if they fail to receive the required majority vote [2] - The voting results showed that Linda Houston received 8,041,083 votes for and 9,714,561 against, while John Bode received 8,023,093 votes for and 9,747,031 against, indicating their failure to be re-elected [3] Shareholder Actions - The shareholders, led by Robert G. Brown, have formally notified SPAR's legal counsel that Houston and Bode should have resigned immediately following the Shareholder Meeting on June 12, 2025 [3][5] - As of July 22, 2025, neither Houston nor Bode has resigned, prompting the shareholders to urge the Board to respect the voting outcomes and adhere to the Bylaws [4][5]

[SPAR Group, Inc. Q1 2025 Earnings Release](index=1&type=section&id=SPAR%20Group%2C%20Inc.%20Q1%202025%20Earnings%20Release) [Executive Summary & Business Outlook](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Outlook) The core US and Canada business saw 6% revenue growth and positive net income, supported by a record business pipeline exceeding $200 million - The core U.S. and Canada business grew **6% in revenue**, with improved operating margins and reduced SG&A, leading to a **net income of $0.5 million** from continuing operations ($0.02 EPS)[3](index=3&type=chunk) - The company reports its largest-ever pipeline of new business opportunities, valued at **over $200 million**[3](index=3&type=chunk) - The merger agreement with Highwire Capital was terminated due to Highwire's inability to secure funding, and SPAR Group's Board intends to **pursue the termination fee**[4](index=4&type=chunk) - The 10-K and 10-Q filings were delayed because the company expected to be private following the merger and will be current upon submission of the 10-Q[5](index=5&type=chunk) [First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) The company reported $34.0 million in revenue, $0.5 million in net income from continuing operations, and maintained a solid liquidity position Q1 2025 Key Financial Metrics | Metric | Q1 2025 | Q1 2024 | Note | | :--- | :--- | :--- | :--- | | **Net Revenues** | $34.0M | $49.4M (incl. int'l JVs) | - | | **Consolidated Gross Margin** | 21.4% | 19.7% | Improvement YoY | | **Net Income (Continuing Ops)** | $0.5M | $6.6M | Q1 2024 included a $7.2M gain on sale | | **Diluted EPS (Continuing Ops)** | $0.02 | $0.26 | - | | **Adjusted EBITDA** | $1.5M | $2.5M | - | Financial Position as of March 31, 2025 | Metric | Value | | :--- | :--- | | **Total Worldwide Liquidity** | $23.4 million | | **Cash and Cash Equivalents** | $17.9 million | | **Unused Availability** | $5.5 million | | **Net Working Capital** | $15.7 million | [Financial Statements](index=4&type=section&id=Financial%20Statements) Unaudited statements show decreased revenue due to divestitures but an improved gross margin percentage for Q1 2025 [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 revenue was $34.0 million, with net income falling to $0.5 million due to a large prior-year gain on a business sale Q1 2025 vs Q1 2024 Statement of Operations (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net revenues** | $34,041 | $49,396 | | **Gross profit** | $7,275 | $9,712 | | **Operating income** | $1,036 | $8,671 | | **Income from continuing operations** | $462 | $6,796 | | **Net income attributable to SPAR Group, Inc.** | $462 | $6,627 | | **Diluted EPS from continuing operations** | $0.02 | $0.26 | - The significant decrease in operating and net income compared to the prior year is primarily due to a one-time **$7.2 million gain on the sale of a business** recorded in Q1 2024[18](index=18&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $70.2 million, driven by higher accounts receivable, while liabilities also increased Balance Sheet Comparison (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $59,062 | $45,996 | | **Total assets** | $70,164 | $56,431 | | **Total current liabilities** | $43,402 | $30,050 | | **Total liabilities** | $45,458 | $32,125 | | **Total stockholders' equity** | $24,706 | $24,306 | - The increase in current assets was primarily due to a rise in Accounts Receivable to **$38.2 million** from $24.8 million, while the increase in current liabilities was driven by higher Lines of Credit ($20.4 million vs $16.1 million) and Accounts Payable ($13.8 million vs $8.8 million)[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a $4.0 million cash outflow from operations, primarily due to an increase in accounts receivable Cash Flow Summary for Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash (used in) provided by operating activities** | $(4,044) | $615 | | **Net cash used in investing activities** | $(525) | $(878) | | **Net cash provided by financing activities** | $4,290 | $6,344 | | **Net (decrease) increase in cash** | $(279) | $5,910 | | **Cash and cash equivalents at end of period** | $17,942 | $16,629 | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=7&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Measures) The company reported Q1 2025 Adjusted Net Income of $0.5 million and Adjusted EBITDA of $1.5 million Adjusted Net Income Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Income attributable to SPAR Group Inc.** | $462 | $6,627 | | Adjustments to Consolidated EBITDA (net of taxes) | $73 | $(5,292) | | **Adjusted Net income attributable to SPAR Group, Inc.** | $535 | $1,335 | Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Consolidated net income from continuing operations** | $462 | $6,796 | | Depreciation and amortization | $367 | $475 | | Interest expense | $469 | $475 | | Income tax expense | $114 | $1,393 | | Other adjustments (Gain on Sale, Strategic Review, etc.) | $84 | $(6,699) | | **Adjusted EBITDA attributable to SPAR Group, Inc.** | $1,496 | $2,466 | [Company Overview](index=1&type=section&id=Company%20Overview) SPAR Group is a leading merchandising and marketing services company in the US and Canada with over 50 years of experience - SPAR Group is a leading merchandising and marketing services company in North America[9](index=9&type=chunk) - The company has over 50 years of experience and averages **more than 30,000 store visits weekly**[9](index=9&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section contains a standard legal disclaimer regarding forward-looking statements and associated risks - The press release contains "forward-looking statements" within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995[11](index=11&type=chunk) - Investors are advised to carefully consider the company's risk factors and other disclosures in its SEC reports, as actual performance may differ materially from expectations[13](index=13&type=chunk)[14](index=14&type=chunk)

PART I: FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion, and disclosures on market risk and internal controls for the quarter [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Q1 2025 reflect decreased net revenue and net income, primarily due to the strategic exit from international operations and a shift to a single North American segment [Condensed Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For the three months ended March 31, 2025, SPAR Group reported net revenue of **$34.0 million**, a sharp decline from **$49.4 million** in the prior-year period, with net income significantly lower at **$0.46 million** Q1 2025 vs Q1 2024 Statement of Operations Highlights (in thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Revenues** | **$34,041** | **$49,396** | | Gross Profit | $7,275 | $9,712 | | Operating Income | $1,036 | $8,671 | | Gain on sale of business | - | $(7,157) | | **Net Income Attributable to SPAR Group, Inc.** | **$462** | **$6,627** | | Diluted EPS | $0.02 | $0.28 | - The significant decrease in operating income and net income year-over-year is largely attributable to a one-time gain on the sale of a business of **$7.16 million** recognized in Q1 2024, which was not present in Q1 2025[7](index=7&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to **$70.2 million** from **$56.4 million** at year-end 2024, driven by a significant rise in accounts receivable, while total liabilities also increased to **$45.5 million** Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | **$59,062** | **$45,996** | | Accounts Receivable, net | $38,219 | $24,766 | | **Total Assets** | **$70,164** | **$56,431** | | **Total Current Liabilities** | **$43,402** | **$30,050** | | Lines of credit and short-term loans | $20,373 | $16,082 | | **Total Liabilities** | **$45,458** | **$32,125** | | **Total Stockholders' Equity** | **$24,706** | **$24,306** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, the company experienced a net cash outflow from operating activities of **$4.0 million**, a reversal from the **$0.6 million** inflow in Q1 2024, mainly due to a large increase in accounts receivable Cash Flow Summary for the Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(4,044) | $615 | | Net cash used in investing activities | $(525) | $(878) | | Net cash provided by financing activities | $4,290 | $6,344 | | **Net change in cash and cash equivalents** | **$(279)** | **$5,910** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies and events, including the company's shift to a single reportable segment, debt facilities, and the termination of a 'going private' merger agreement - Following the exit from substantially all international operations in 2024, the company has changed its reporting structure to a single segment as of March 31, 2025, with the CEO as the Chief Operating Decision Maker (CODM) managing all activities on a consolidated basis[24](index=24&type=chunk) - The company's revolving credit facility with North Mill Capital was extended to October 10, 2025, with an outstanding balance of approximately **$20.4 million** as of March 31, 2025[44](index=44&type=chunk)[46](index=46&type=chunk) - The company terminated its merger agreement with Highwire Capital on May 23, 2025, and is now actively pursuing a termination fee from Highwire Capital[88](index=88&type=chunk) - During 2024, the company sold its joint venture interests in South Africa, China, Brazil, Japan, India, and Mexico, marking a strategic shift to focus on North American operations[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **31.1%** decrease in Q1 2025 net revenues to the strategic exit from international markets, while gross profit margin improved from **19.7%** to **21.4%** Q1 2025 vs Q1 2024 Key Metrics | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Revenues | $34.0M | $49.4M | | Revenue Change | -31.1% | N/A | | Gross Profit Margin | 21.4% | 19.7% | | Cost of Revenues (% of Net Revenue) | 78.6% | 80.3% | - The decrease in net revenues, cost of revenues, and SG&A expenses is primarily due to the exit of operations in South Africa, Mexico, China, Japan, and India during 2024[104](index=104&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Consolidated net income from continuing operations | $462 | $6,796 | | Consolidated EBITDA | $1,403 | $10,083 | | **Adjusted EBITDA attributable to SPAR Group, Inc.** | **$1,496** | **$2,466** | - The company believes that its sources of cash availability should be manageable and sufficient to support working capital and capital expenditure requirements over the next 12 months, contingent on the continuation of its existing credit facilities[114](index=114&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=20&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, SPAR Group, Inc. is not required to provide information for this item - As a smaller reporting company, SPAR Group, Inc. is not required to provide quantitative and qualitative disclosures about market risk[118](index=118&type=chunk) [Item 4. Controls and Procedures](index=20&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025, due to identified material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of the end of the period due to material weaknesses in internal control over financial reporting[119](index=119&type=chunk) - Material weaknesses were identified in the financial statement close process, specifically regarding balance sheet reconciliations, and in controls over non-recurring transactions like the deconsolidation and sale of international businesses[120](index=120&type=chunk)[121](index=121&type=chunk) - Remediation efforts include implementing a new ERP system, hiring an Assistant Controller, consolidating the finance team, and simplifying the organizational structure by divesting foreign operations[122](index=122&type=chunk) PART II: OTHER INFORMATION This section covers legal proceedings, risk factors, and a list of exhibits filed with the quarterly report [Item 1. Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions and administrative proceedings that arise in the normal course of business, which management does not expect to have a material adverse effect - The Company is party to various legal actions arising in the normal course of business, but management does not anticipate these to have a material adverse effect[126](index=126&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors since the filing of its 2024 Annual Report on Form 10-K/A - No material changes have occurred in the Company's risk factors since the 2024 Annual Report on Form 10-K/A[128](index=128&type=chunk) [Item 6. Exhibits](index=22&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002 and Inline XBRL documents - The report includes required CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL data files[135](index=135&type=chunk)

Core Viewpoint - SPAR Group, Inc. reported a strong first quarter of 2025, achieving 6% topline growth in the U.S. and Canada, despite the absence of international joint ventures, and has a significant pipeline of future business opportunities valued at over $200 million [2][3][10]. Financial Performance - Net revenues for the first quarter of 2025 were $34.0 million, a decrease from $49.4 million in the same period of 2024 [10][18]. - The consolidated gross margin improved to 21.4% of sales, compared to 19.7% in the prior year [10]. - Net income from continuing operations was $0.5 million, or $0.02 per diluted share, down from $6.6 million, or $0.26 per diluted share in the prior year [10][18]. - Adjusted EBITDA attributable to SPAR Group was $1.5 million, or 4.4% of sales, compared to $2.5 million, or 5.0% of sales in the previous quarter [10][28]. Operational Highlights - The company ended the quarter with total worldwide liquidity of $23.4 million, including $17.9 million in cash and cash equivalents [7]. - The company has the largest pipeline of opportunities in its history, with more than $200 million in potential future business [2]. Corporate Developments - The merger agreement with Highwire Capital was terminated due to their inability to secure funding, and the company is pursuing a termination fee or greater value for shareholders [3]. - The company experienced delays in filing its 10-K and 10-Q reports but expects to be current with all filings soon [4]. Balance Sheet Position - As of March 31, 2025, total assets were $70.2 million, up from $56.4 million at the end of 2024 [20]. - Total liabilities increased to $45.5 million from $32.1 million at the end of the previous year [20].

Core Viewpoint - SPAR Group, Inc. is under scrutiny as a large shareholder, Mr. Robert G. Brown, has requested the production of the company's books and records to investigate potential breaches of fiduciary duty by the Board of Directors and management [1]. Group 1: Shareholder Actions - On March 13, 2025, Mr. Brown formally demanded to inspect the company's books and records [2]. - Following a lack of compliance, Mr. Brown sent additional letters expressing concerns on April 16, 2025, and a supplemental demand on June 5, 2025, after the termination of a merger transaction with Highwire [2]. - On July 1, 2025, the company acknowledged Mr. Brown's request, stating that "a material initial production of the books and records of the Company will be made available" [3]. Group 2: Requested Documentation - The requested documentation includes all Board materials, documents, and communications related to Highwire Capital, financing commitments, shareholder meeting minutes, and Form 10-K filings from January 1, 2022, to the present [5][6]. - Additional requests cover financial statements, tax returns, general ledgers, bank statements, and any documents related to mergers or asset sales from 2022 to the present [6][7]. - Specific inquiries also include communications regarding related-party transactions, legal bills related to shareholder meetings, and any discussions about the Highwire merger and its subsequent termination [7][13]. Group 3: Governance and Compliance Issues - The documentation request highlights potential governance issues, including the company's failure to maintain the required number of board members and compliance with bylaws [7][9]. - There are concerns regarding the relationship between the CEO and related parties, as well as the company's due diligence efforts related to the Highwire merger [8][9]. - The request also seeks clarity on the company's financial practices, including cash flow projections and the handling of subsidiary acquisitions [8][9].