Financial Data and Key Metrics Changes - Total revenue for Q3 2022 was $70 million, reflecting a 4% increase year-over-year on a reported basis and a 7% increase on a constant currency basis [9][24] - Gross margin for Q3 was 18.4%, slightly down from 18.7% in the previous year [17][26] - Consolidated operating income was $1.7 million, down 35% from the same period last year [20][27] - Net loss attributable to SPAR Group Inc. for Q3 was $32,000 compared to a net income of $1.2 million in the year-ago quarter [28] Business Line Data and Key Metrics Changes - Americas segment reported record revenue of $53.7 million, an increase of 7.8%, with U.S. revenue growing by 13% to $32.5 million [11][30] - EMEA segment reported revenue of $8.9 million, down 7.3%, but up 8.3% on a constant currency basis [14][24] - APAC segment reported revenue of $7.1 million, a decline of 9.8%, with a slight improvement of 0.4% on a constant currency basis [15][24] Market Data and Key Metrics Changes - The Americas segment accounted for 77% of total business, while EMEA and APAC represented 14% and 10% respectively [17][30] - The APAC market, while making up approximately 10% of overall revenue, is considered immaterial to the bottom line [16] Company Strategy and Development Direction - The company is exploring strategic alternatives to maximize shareholder value, including potential mergers or divestitures [40] - SPAR Group is optimistic about business prospects, particularly in the retail sector, despite low consumer confidence and rising interest rates [41][42] - The company is focusing on expanding its merchandising services and leveraging technology to enhance operational efficiency [19][60] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are challenges from COVID lockdowns in China and Japan, these markets are not significant contributors to the bottom line [67][68] - The company remains focused on growing its top line and improving gross profits, with expectations of continued growth in the Americas [20][41] Other Important Information - The company repurchased 74,000 shares of common stock under its authorized share repurchase program [37] - SPAR Group has invested in resources to support distribution centers, with over 200 people working to fulfill online orders for the holiday season [53] Q&A Session Summary Question: Revenue acceleration in the Americas - Management indicated that the revenue growth is due to both market share gains and comparisons to lower COVID-impacted periods [66] Question: Impact of inflation and COVID lockdowns - Management confirmed ongoing impacts from COVID lockdowns in China and Japan, but emphasized that these are not large contributors to overall performance [67] Question: SG&A increases - Management expects some SG&A increases to continue into Q4, primarily due to strategic alternative process-related fees [69] Question: Current assets and liabilities - Management expressed confidence in the company's financial position, clarifying that the balance sheet reflects healthy operations [76][77] Question: Competition and visibility in the market - Management is actively working to increase visibility with Wall Street through investor relations efforts [78] Question: Revenue recognition from multibillion-dollar deals - Management explained that revenue from new contracts is recognized over time, typically quarterly, as services are rendered [84][88]

Financial Data and Key Metrics Changes - Total revenue for Q2 2022 was $68 million, reflecting a 1% increase year-over-year [8] - Net income was reported at $1.15 million, an increase of 123% compared to the prior year [15][22] - Gross margin improved to 19.1% from 17.9% in the previous year, representing a 120 basis point increase [13][20] Business Line Data and Key Metrics Changes - Americas segment revenue reached a record $53.3 million, up 3.9%, with the U.S. division growing by 16% [9][19] - EMEA segment revenue was $9.1 million, an increase of 7.2% year-over-year, with net income up by 211% [11][19] - APAC segment revenue declined by 27% to $5.4 million, primarily due to a 60-day pandemic lockdown in China [12][20] Market Data and Key Metrics Changes - The Americas segment accounted for 79% of total business, with significant growth in merchandising services [13] - EMEA showed strong organic growth of 7.2%, while APAC faced challenges due to pandemic-related lockdowns [20] - The overall consolidated revenues increased by just 0.9% due to the weakness in the APAC segment [19] Company Strategy and Development Direction - The company is focusing on margin improvement and has developed a pipeline that is twice as large as last year [33] - SPAR is expanding its services and leveraging advanced analytics to enhance client offerings [34][40] - The company aims to disrupt traditional models in the industry by providing innovative solutions and insights [39][42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the economic challenges such as rising inflation and interest rates but sees these as opportunities for SPAR [41][42] - The company is well-positioned to hire faster and execute efficiently, leveraging strong relationships with major clients [42][43] - The pipeline is valued at over $100 million, with significant new business closed in Q2 [43][44] Other Important Information - The company authorized a share buyback program of 500,000 shares, with 74,000 shares repurchased to date [30] - Total worldwide liquidity at the end of Q2 was $16 million, with a strong balance sheet [29] Q&A Session Summary Question: About the labor law change in Mexico - The law requires that if work done in a store is the same as other work, it must be done in-house, impacting SPAR's operations [46] Question: Rise in accounts receivable - Accounts receivable increased due to longer payment terms in China, exacerbated by pandemic-related work stoppages [47][49] Question: Impact of inflation and labor costs - SPAR has not been negatively impacted by rising wages due to competitive pay and focus on profitable segments [52][53] Question: Company exposure to investors - SPAR is engaging research firms for more coverage and has been presenting at various conferences to increase visibility [54] Question: Guidance on future revenues and earnings - The company is not providing guidance at this time [56]

PART I: FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for SPAR Group, Inc [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents SPAR Group's unaudited condensed consolidated financial statements, including income, balance sheets, cash flows, and notes, for Q2 and H1 2022 [Condensed Consolidated Statements of Income and Comprehensive Income (Loss)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income%20(Loss)) This statement details SPAR Group's revenues, gross profit, operating income, and net income for the three and six months ended June 30, 2022 and 2021 Condensed Consolidated Statements of Income and Comprehensive Income (Loss) (In thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2022** | **2021** | **2022** | **2021** | | Net revenues | $67,799 | $67,176 | $126,794 | $128,273 | | Gross profit | $12,948 | $12,006 | $24,780 | $24,265 | | Operating income | $2,357 | $1,887 | $4,425 | $4,606 | | Net income | $1,613 | $1,132 | $3,068 | $2,913 | | Net income attributable to SPAR Group, Inc. | $1,149 | $514 | $1,821 | $1,431 | | Basic and diluted EPS | $0.05 | $0.02 | $0.08 | $0.07 | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of SPAR Group's assets, liabilities, and equity as of June 30, 2022, and December 31, 2021 Condensed Consolidated Balance Sheets (In thousands) | | June 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash, cash equivalents and restricted cash | $12,402 | $13,473 | | Total current assets | $81,807 | $72,026 | | Total assets | $100,217 | $89,016 | | **Liabilities and Equity** | | | | Total current liabilities | $58,932 | $50,206 | | Total liabilities | $60,275 | $51,668 | | Total equity | $39,942 | $37,348 | | Total liabilities and equity | $100,217 | $89,016 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines SPAR Group's cash flows from operating, investing, and financing activities for the six months ended June 30, 2022 and 2021 Condensed Consolidated Statements of Cash Flows (In thousands) | | Six Months Ended June 30, | | :--- | :--- | | | **2022** | **2021** | | Net cash (used in) provided by operating activities | $(3,528) | $1,009 | | Net cash (used in) investing activities | $(794) | $(886) | | Net cash provided by financing activities | $7,439 | $2,025 | | Effect of foreign exchange rate changes on cash | $(4,188) | $(1,419) | | Net change in cash and cash equivalents | $(1,071) | $729 | | Cash, cash equivalents and restricted cash at end of period | $12,402 | $16,701 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures supporting the consolidated financial statements, covering operations, credit facilities, related-party transactions, and segment information - The company operates as a global merchandising and brand marketing services firm across nine countries, organized into three segments: Americas, Asia-Pacific (APAC), and Europe, Middle East and Africa (EMEA)[25](index=25&type=chunk)[26](index=26&type=chunk) - The COVID-19 lockdown in Shanghai during Q2 2022 significantly impacted the company's joint venture in China, causing a net loss attributable to SPAR of **$329,000** for the quarter due to a **50% revenue decrease** while expenses continued[27](index=27&type=chunk) - In January 2022, the company entered into a Change of Control, Voting and Restricted Stock Agreement with its Majority Stockholders, involving the issuance of **2,000,000 shares** of Series B Preferred Stock, a **$250,000 cash payment**, and assumption of certain liabilities, with a total value of approximately **$4.5 million**[51](index=51&type=chunk)[52](index=52&type=chunk)[54](index=54&type=chunk) Segment Performance (In thousands) | Segment | Q2 2022 Revenue | Q2 2021 Revenue | Q2 2022 Operating Income | Q2 2021 Operating Income | | :--- | :--- | :--- | :--- | :--- | | Americas | $53,274 | $51,251 | $2,636 | $1,667 | | Asia - Pacific | $5,386 | $7,401 | $(713) | $(147) | | EMEA | $9,139 | $8,524 | $434 | $367 | | **Total** | **$67,799** | **$67,176** | **$2,357** | **$1,887** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, liquidity, capital resources, and cash flow activities for the three and six months ended June 30, 2022 [Results of Operations - Three Months Ended June 30, 2022](index=26&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030%2C%202022) This section analyzes SPAR Group's financial performance for Q2 2022, highlighting revenue, gross profit, and net income trends by segment Key Financial Metrics - Q2 Performance | Metric | Q2 2022 | Q2 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $67.8M | $67.2M | +0.9% | | Gross Profit | $12.9M | $12.0M | +7.9% | | Gross Margin | 19.1% | 17.9% | +1.2 pts | | Operating Income | $2.4M | $1.9M | +24.9% | | Net Income (to SGRP) | $1.1M | $0.5M | +123.5% | - **Americas Revenue:** Increased by **3.9%** due to organic growth in the US and Brazil, partially offset by a decrease in Mexico from labor regulation changes[106](index=106&type=chunk) - **APAC Revenue:** Decreased by **27.0%** primarily due to the continuing effects of COVID-19 in China and Japan[107](index=107&type=chunk) - **EMEA Revenue:** Increased by **7.1%** from organic growth and the acquisition of Bordax in South Africa[107](index=107&type=chunk) [Results of Operations - Six Months Ended June 30, 2022](index=28&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030%2C%202022) This section analyzes SPAR Group's financial performance for H1 2022, detailing revenue, gross profit, and net income trends by segment Key Financial Metrics - H1 Performance | Metric | H1 2022 | H1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $126.8M | $128.3M | -1.2% | | Gross Profit | $24.8M | $24.3M | +2.1% | | Gross Margin | 19.5% | 18.9% | +0.6 pts | | Operating Income | $4.4M | $4.6M | -4.0% | | Net Income (to SGRP) | $1.8M | $1.4M | +27.3% | - **Americas Revenue:** Remained flat, with growth in the US and Brazil offset by a significant reduction in Mexico due to new labor laws[125](index=125&type=chunk) - **APAC Revenue:** Decreased by **22.3%** due to COVID-19 impacts in China and Japan[126](index=126&type=chunk) - **EMEA Revenue:** Increased by **13.0%** due to organic growth and the Bordax acquisition[126](index=126&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses SPAR Group's working capital, cash flow activities, and capital resources as of June 30, 2022 - Net cash used in operating activities was **$3.5 million** for H1 2022, compared to **$1.0 million** provided in H1 2021, primarily due to increased accounts receivable, higher prepaid expenses, and payments under the Majority Stockholders CIC Agreement[141](index=141&type=chunk) - Net cash provided by financing activities increased to **$7.4 million** in H1 2022 from **$2.0 million** in H1 2021, mainly due to higher net draws on lines of credit[144](index=144&type=chunk) Liquidity Metrics | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Net Working Capital | $22.9M | $21.8M | | Current Ratio | 1.4 | 1.4 | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, SPAR Group is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, SPAR Group, Inc. is not required to provide quantitative and qualitative disclosures about market risk[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that SPAR Group's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[148](index=148&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls over financial reporting[151](index=151&type=chunk) PART II: OTHER INFORMATION This section covers legal proceedings, risk factors, and other miscellaneous information for SPAR Group [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions arising from normal business operations, not expected to have a material adverse impact - The company is involved in various legal proceedings arising from normal business operations, which are not expected to have a material adverse impact[152](index=152&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the company's risk factors since the filing of its Annual Report on Form 10-K - No material changes have occurred in the company's risk factors since the filing of its Annual Report[155](index=155&type=chunk) [Other Items (2, 3, 4, 5)](index=33&type=section&id=Other%20Items) Items 2, 3, 4, and 5 of Part II are reported as "Not applicable" for this reporting period - Items 2, 3, 4, and 5 of Part II are reported as 'Not applicable'[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including credit facility modifications and executive certifications - Exhibits filed include the Fourth Modification Agreement with North Mill Capital, amended change in control severance agreements for executives, and Sarbanes-Oxley certifications[162](index=162&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the first quarterly period ended March 31, 2022. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from __________ to __________. Commission file number 0-27408 SPAR GROUP, INC. (Exact name of Registrant as specified in ...

SPAR Group, Inc. (NASDAQ:SGRP) Q1 2022 Earnings Conference Call May 16, 2022 11:00 AM ET Company Participants Mike Matacunas – President and Chief Executive Officer Fay DeVriese – Chief Financial Officer Sandy Martin – Investor Relations Conference Call Participants Operator Good day and welcome to the SPAR Group. First Quarter 2022 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by [Operator Instruction]. P ...

[PART I](index=5&type=section&id=PART%20I) [Business](index=5&type=section&id=Item%201.%20Business) SPAR Group is a global merchandising and brand marketing services company operating in 9 countries, focused on growing its core business, introducing new services, investing in technology, and expanding its global footprint - SPAR Group is a global merchandising and brand marketing services company, providing sales-enhancing services to retailers and consumer goods manufacturers[22](index=22&type=chunk) - The company operates in **9 countries**: the United States, Canada, Mexico, Brazil, South Africa, Australia, China, Japan, and India[23](index=23&type=chunk) - The company's growth strategy focuses on four key areas: 1) Grow the Core Business, 2) Introduce or Acquire New Services, 3) Invest in Technology, and 4) Expand Globally[36](index=36&type=chunk) Company Structure and Ownership | Primary Territory | Entity Name | SPAR Percentage Ownership | Principal Office Location | | :--- | :--- | :--- | :--- | | **Domestic** | | | | | United States | SPAR Group, Inc. | 100% | Auburn Hills, Michigan | | | National Merchandising Services, LLC (NMS) | 51% | Fayetteville, Georgia | | | Resource Plus of North Florida, Inc. (RPI) | 51% | Jacksonville, Florida | | **International** | | | | | Japan | SPAR FM Japan, Inc. | 100% | Tokyo, Japan | | Canada | SPAR Canada, Inc. | 100% | Vaughan, Ontario, Canada | | South Africa | SGRP Meridian (PTY), Ltd. | 51% | Durban, South Africa | | India | SPAR KROGNOS Marketing Private Limited | 51% | New Delhi, India | | Australia | SPARFACTS Australia (PTY), Ltd. | 51% | Melbourne, Australia | | China | SPAR (Shanghai) Marketing Management Co Ltd. | 51% | Shanghai, China | | Mexico | SPAR TODOPROMO, SAPI, de CV | 51% | Mexico City, Mexico | | Brazil | SGRP Brasil Participações Ltda | 51% | Sao Paulo, Brazil | - The company's principal services include merchandising, brand marketing, new store openings and remodeling, assembly services, distribution staffing, and retail compliance/price audits[47](index=47&type=chunk) - For the fiscal years 2021 and 2020, no single client accounted for **10% or more of the company's net revenue**[56](index=56&type=chunk) [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces various risks including the lingering impact of COVID-19, economic downturns, legislative changes, reliance on variable projects, competition, third-party contractor dependence, technology failures, stock volatility, and joint venture complexities - The COVID-19 pandemic adversely affected global operations in 2020, with continued negative impacts in certain international countries through 2021[70](index=70&type=chunk) - The business is exposed to risks from economic downturns and legislative changes, such as increases in minimum wage, which could negatively impact operations or client budgets[73](index=73&type=chunk)[74](index=74&type=chunk) - Operational risks include dependence on variable client projects that can be delayed or canceled, and the possibility of clients choosing to perform merchandising services in-house[77](index=77&type=chunk)[78](index=78&type=chunk) - The company's domestic business is highly dependent on services provided by third-party independent contractors, which introduces legal and operational risks[82](index=82&type=chunk)[83](index=83&type=chunk) - The common stock (SGRP) has experienced significant price volatility, fluctuating between **$1.01 and $3.86 per share** during the year ended December 31, 2021[91](index=91&type=chunk) - The company's co-founders and related parties (the "Majority Stockholders") beneficially own approximately **43.4% of the common stock**, which could increase to **50.4%** after vesting of preferred stock, allowing them significant influence[104](index=104&type=chunk) - The joint venture business structure, used in 6 of 9 countries and domestically, carries inherent risks related to potential misalignments of business objectives with local partners[106](index=106&type=chunk)[108](index=108&type=chunk) [Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[111](index=111&type=chunk) [Properties](index=17&type=section&id=Item%202.%20Properties) SPAR Group does not own any real property, leasing all its facilities including its corporate headquarters, and believes alternative leased spaces could be readily found if needed - The Company does not own any real property and leases all office space and storage facilities[112](index=112&type=chunk) - The corporate headquarters were relocated to Auburn Hills, Michigan in September 2020[114](index=114&type=chunk) [Legal Proceedings](index=18&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal actions arising from the normal course of business, which management does not expect to have a material adverse effect, and previous claims involving significant stockholders have been resolved - Management does not anticipate that the resolution of various legal actions from the normal course of business will have a material adverse effect on the company[116](index=116&type=chunk) - Previous claims involving the Significant Stockholders were resolved and released as part of the CIC Agreement[117](index=117&type=chunk) [Mine Safety Disclosures](index=18&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[118](index=118&type=chunk) [PART II](index=19&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=19&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock (SGRP) trades on the Nasdaq Capital Market, with **21.3 million shares outstanding** as of December 31, 2021, and no cash dividends have ever been paid, while a 2021 stock repurchase program expired without repurchases, and Series A Preferred Stock was eliminated in January 2022 to create new Series B Preferred Stock - The company's common stock trades on the Nasdaq Capital Market under the symbol "SGRP" As of December 31, 2021, there were **21,320,414 shares outstanding**[121](index=121&type=chunk)[125](index=125&type=chunk) - The company has never declared or paid cash dividends on its common stock and does not anticipate doing so in the foreseeable future[126](index=126&type=chunk) - The 2021 Stock Repurchase Program, authorizing the repurchase of up to **500,000 shares**, expired with no shares having been repurchased[128](index=128&type=chunk) - In January 2022, the company cancelled its Series A Preferred Stock and created **2,000,000 shares** of a new Series B Preferred Stock, which are non-voting and convertible into common stock on a **1 for 1.5 basis**[123](index=123&type=chunk)[124](index=124&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2021, SPAR Group achieved record annual revenue of **$255.7 million**, a **10.9% increase**, driven by post-pandemic recovery, but a **$4.5 million** Change of Control expense led to a **$1.8 million net loss** and decreased operating cash flow [Overview](index=21&type=section&id=Overview) In 2021, the company achieved record annual revenue with **10.9% growth** driven by post-pandemic recovery, but gross profit declined due to increased labor costs, and a one-time Change of Control Agreement expense negatively impacted financials - Annual revenue grew **10.9%** in 2021 to a record high, with International revenue up **12.3%** and Domestic revenue up **8.9%**[134](index=134&type=chunk) - Gross profit declined by **1%** compared to 2020 due to incremental labor expenses, higher travel costs for the remodel business, and client pressure on operating efficiency[136](index=136&type=chunk) - The Change of Control (CIC) Agreement with majority shareholders was a significant event, resolving all outstanding claims and disputes but resulting in a one-time negative financial effect in 2021[138](index=138&type=chunk) - The 2021 net loss of **$1.8 million** is attributed to the one-time financial impact of the CIC Agreement Excluding this and a 2020 deferred tax benefit, net income would have shown year-over-year improvement[142](index=142&type=chunk) [Critical Accounting Estimates](index=22&type=section&id=Critical%20Accounting%20Estimates) The company identifies critical accounting estimates including goodwill impairment, revenue recognition, allowance for doubtful accounts, and capitalization of internal-use software development costs, with no goodwill impairment in 2021 or 2020 and **$1.2 million** capitalized for software development in 2021 - Goodwill is tested for impairment annually or when triggering events occur No impairment loss was recognized in 2021 or 2020[144](index=144&type=chunk)[145](index=145&type=chunk) - Revenue from contracts, which are typically one year or less, is recognized as services are performed using the right-to-invoice practical expedient[151](index=151&type=chunk)[152](index=152&type=chunk) - The company capitalized approximately **$1.2 million** in costs for internally developed software in 2021, compared to **$1.0 million** in 2020[156](index=156&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Net revenues increased **10.9% to $255.7 million** in 2021, but rising cost of revenues and a **$4.5 million** Change of Control charge resulted in a **net loss of $1.8 million** compared to net income in 2020 Consolidated Results of Operations (in millions) | | 2021 | 2020 | | :--- | :--- | :--- | | **Net revenues** | **$255.7** | **$230.5** | | Cost of revenues | $208.2 | $185.3 | | Gross Profit | $47.5 | $45.2 | | Selling, general & administrative expense | $36.8 | $33.3 | | Majority stockholders change of control agreement | $4.5 | - | | Operating Income | $4.2 | $9.7 | | Income before income taxes | $4.1 | $9.3 | | Net income | $2.0 | $9.0 | | **Net (loss) income attributable to SPAR Group, Inc.** | **($1.8)** | **$3.4** | | **(Loss) Income per share** | **($0.08)** | **$0.16** | - Net revenues increased by **$25.2 million (10.9%)**, with the Domestic segment growing by **$8.2 million** and the International segment by **$17.0 million**[159](index=159&type=chunk) - Cost of revenues as a percentage of net revenue increased from **80.4% to 81.4%**, primarily driven by higher labor costs and an unfavorable project mix in the Domestic segment[162](index=162&type=chunk)[163](index=163&type=chunk) - Selling, general and administrative expenses included a one-time **$4.5 million** expense related to the CIC Agreement[165](index=165&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash from operations decreased to **$2.6 million** in 2021 due to increased accounts receivable, with net working capital at **$22.1 million**, though management anticipates sufficient liquidity for the next year - Net cash provided by operating activities decreased from **$8.8 million** in 2020 to **$2.6 million** in 2021, mainly due to an increase in accounts receivable[175](index=175&type=chunk) - Net cash used in investing activities was **$1.7 million**, primarily for capitalization of internal use software[176](index=176&type=chunk) - Net working capital stood at **$22.1 million** at December 31, 2021, compared to **$23.6 million** at the end of 2020[178](index=178&type=chunk) - Management believes cash availability will be manageable and sufficient to support ongoing operations over the next year[181](index=181&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is not applicable to the company - Not applicable[182](index=182&type=chunk) [Financial Statements and Supplementary Data](index=28&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to Item 15 for the company's full financial statements and schedules - Refers to Item 15 for the full financial statements[183](index=183&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=28&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company states that all information required to be disclosed under Form 8-K during the fourth quarter of 2021 was disclosed - All required 8-K disclosures for the fourth quarter of 2021 were made[184](index=184&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of December 31, 2021, management, including the CEO and CFO, concluded that the company's internal controls over financial reporting and disclosure controls and procedures were effective, with no material changes to internal controls during the year - Management concluded that internal controls over financial reporting were effective as of December 31, 2021, based on the COSO framework[187](index=187&type=chunk) - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[188](index=188&type=chunk) - No changes in internal controls over financial reporting occurred during the year that materially affected, or are reasonably likely to materially affect, the company's internal controls[189](index=189&type=chunk) [PART III](index=30&type=section&id=PART%20III) [Directors, Executive Officers, Compensation, Security Ownership, and Accountant Fees](index=30&type=section&id=Items%2010-14) Information for Items 10 through 14, covering directors, executive officers, corporate governance, executive compensation, security ownership, related party transactions, director independence, and principal accountant fees, is incorporated by reference from the company's 2022 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships and Related Transactions, and Principal Accountant Fees and Services is incorporated by reference from the company's 2022 Proxy Statement[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [PART IV](index=31&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedules](index=31&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index to the consolidated financial statements and lists all exhibits filed with the Form 10-K, including corporate governance documents, compensation plans, material contracts, and certifications - Provides an index to the audited consolidated financial statements and the financial statement schedule for valuation and qualifying accounts[201](index=201&type=chunk) - Lists all exhibits filed with the report, including corporate governance documents, compensation plans, material contracts, and certifications[202](index=202&type=chunk) [Form 10-K Summary](index=39&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company did not provide a summary for this item - None[211](index=211&type=chunk) [Financial Statements and Notes](index=41&type=section&id=Financial%20Statements%20and%20Notes) [Report of Independent Registered Public Accounting Firm](index=41&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) BDO USA, LLP issued an unqualified opinion on the financial statements, identifying the **Realizability of Deferred Tax Assets** as a critical audit matter due to significant subjective judgments - The auditor, BDO USA, LLP, provided an unqualified opinion, stating the financial statements are fairly presented in conformity with U.S GAAP[219](index=219&type=chunk) - The audit identified the "Realizability of Deferred Tax Assets" as a critical audit matter due to the complex and subjective judgments involved in assessing their future utilization[223](index=223&type=chunk)[225](index=225&type=chunk) [Consolidated Financial Statements](index=43&type=section&id=Consolidated%20Financial%20Statements) In 2021, the company reported **$255.7 million** in net revenues and a **$1.8 million net loss**, with total assets of **$89.0 million** and cash decreasing to **$13.5 million** Key Financial Performance (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net revenues | $255,719 | $230,517 | | Gross profit | $47,522 | $45,188 | | Operating income | $4,183 | $9,722 | | Net (loss) income attributable to SPAR Group, Inc. | $(1,779) | $3,367 | | Basic (loss) income per share | $(0.08) | $0.16 | Key Balance Sheet Data (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $13,473 | $15,972 | | Accounts receivable, net | $54,171 | $46,914 | | Total current assets | $72,026 | $66,517 | | Total assets | $89,016 | $84,029 | | Total current liabilities | $50,206 | $42,905 | | Total liabilities | $51,668 | $45,407 | | Total equity | $37,348 | $38,622 | [Notes to Consolidated Financial Statements](index=47&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including joint venture consolidation, credit facilities, income taxes, the **$4.5 million** Change of Control Agreement, stock-based compensation, and segment performance showing a profitable International division - The company consolidates its **51% owned joint ventures** as Variable Interest Entities (VIEs) for which it is the primary beneficiary (Note 2)[254](index=254&type=chunk) - The company's primary domestic credit facility with North Mill Capital was extended to October 2023 Total outstanding debt on lines of credit and short-term loans was **$11.0 million** at year-end (Note 4)[293](index=293&type=chunk)[312](index=312&type=chunk) - The effective tax rate for 2021 was **51.3%**, driven by foreign tax rate differentials and GILTI tax This compares to **3.3%** in 2020, which benefited from a **$2.1 million** valuation allowance release in Brazil (Note 5)[316](index=316&type=chunk)[319](index=319&type=chunk) - A Change of Control (CIC) Agreement with majority stockholders resulted in a **$4.5 million** charge to earnings in 2021, consisting of convertible preferred stock, cash, and assumption of liabilities (Note 10)[344](index=344&type=chunk)[345](index=345&type=chunk) - Total stock-based compensation expense was **$711,000** in 2021, a significant increase from **$136,000** in 2020, largely due to inducement grants for new executives (Note 11)[272](index=272&type=chunk) Segment Performance 2021 (in thousands) | Segment | Revenue | Operating (Loss) Income | | :--- | :--- | :--- | | Domestic | $100,326 | $(4,228) | | International | $155,393 | $8,411 | | **Total** | **$255,719** | **$4,183** |

SPAR Group, Inc. (NASDAQ:SGRP) Q4 2021 Earnings Conference Call March 29, 2022 11:00 AM ET Company Participants Sandy Martin - Investor Relations Mike Matacunas - President and Chief Executive Officer Fay Devriese - Chief Financial Officer Conference Call Participants Operator Good day. And welcome to the SPAR Group Fourth Quarter and Full Year 2021 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sandy Mart ...

[PART I: FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, including income, balance sheets, cash flows, and detailed notes on accounting policies and key events [Item 1. Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for SPAR Group, Inc. as of September 30, 2021, including statements of income, balance sheets, equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and key events during the period, such as business combinations and related-party transactions [Condensed Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) For the third quarter of 2021, net revenues increased by 14.4% year-over-year to $67.4 million, but operating income decreased from $3.3 million to $2.7 million, with net income attributable to SPAR Group relatively flat at $1.18 million, while for the nine-month period, revenues grew 14.3% to $195.7 million, and net income attributable to SPAR Group nearly doubled to $2.6 million from $1.3 million in the prior year Condensed Consolidated Statements of Income (in thousands) | Financial Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Net revenues** | $67,423 | $58,865 | $195,696 | $171,157 | | **Gross profit** | $12,610 | $12,016 | $36,875 | $33,679 | | **Operating income** | $2,675 | $3,341 | $7,282 | $6,783 | | **Net income** | $2,139 | $2,445 | $5,052 | $4,672 | | **Net income attributable to SPAR Group, Inc.** | $1,180 | $1,144 | $2,611 | $1,337 | | **Basic and diluted income per common share** | $0.06 | $0.05 | $0.12 | $0.06 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2021, the company's total assets grew to $97.7 million from $84.0 million at year-end 2020, driven primarily by an increase in accounts receivable, while total liabilities also increased to $56.5 million from $45.4 million, largely due to higher lines of credit and accrued expenses, with total equity rising to $41.2 million Condensed Consolidated Balance Sheets (in thousands) | Account | September 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Total current assets** | $79,854 | $66,517 | | **Total assets** | $97,711 | $84,029 | | **Total current liabilities** | $54,423 | $42,905 | | **Total liabilities** | $56,489 | $45,407 | | **Total SPAR Group, Inc. equity** | $24,372 | $22,159 | | **Total equity** | $41,222 | $38,622 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash provided by operating activities was $1.1 million, a significant decrease from $7.2 million in the prior-year period, mainly due to a large increase in accounts receivable, while net cash used in investing activities was $2.4 million, primarily for business acquisition and equipment purchases, and net cash from financing activities was $4.4 million, driven by net borrowings on lines of credit Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,119 | $7,223 | | **Net cash used in investing activities** | ($2,432) | ($1,248) | | **Net cash provided by financing activities** | $4,374 | $3,207 | | **Effect of foreign exchange rate changes on cash** | ($3,733) | ($3,890) | | **Net change in cash and cash equivalents** | ($672) | $5,292 | | **Cash and cash equivalents at end of period** | $15,300 | $15,750 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes provide detailed explanations of the company's accounting policies and financial results, including the acquisition of Bordax in South Africa, details of domestic and international credit facilities, extensive related-party transactions, ongoing legal contingencies, and a breakdown of performance by business segment and geography - On July 15, 2021, the Company acquired Bordax Retail Services in South Africa for a total purchase price of approximately **$1.6 million**, with an initial payment of **$1.1 million**[30](index=30&type=chunk)[32](index=32&type=chunk) - The company has significant related-party transactions, including services provided by affiliates totaling **$7.2 million** for the first nine months of 2021[69](index=69&type=chunk) - The company is involved in several legal disputes, including a demand for **$901,000** from an affiliate (fully reserved), and rejected claims from directors Robert G. Brown and William H. Bartels valued at up to **$5.6 million**[112](index=112&type=chunk)[116](index=116&type=chunk)[123](index=123&type=chunk) Segment Revenue and Operating Income (Nine Months Ended Sep 30, 2021, in thousands) | Segment | Revenue | Operating Income | | :--- | :--- | :--- | | United States | $79,623 | $2,176 | | International | $116,073 | $5,106 | | **Total** | **$195,696** | **$7,282** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for the third quarter and first nine months of 2021, noting strong revenue growth both domestically and internationally driven by business development and economic recovery, despite gross margin compression due to increased wage pressures and an unfavorable mix of project work, while liquidity remains sufficient, though cash from operations decreased due to higher accounts receivable, with the acquisition of Bordax in South Africa highlighted as a key event [Results of Operations](index=35&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2021, net revenues increased 14.3% to $195.7 million, with domestic revenue up 9.8% and international revenue up 17.7%, while gross profit increased to $36.9 million, but the gross margin percentage slightly decreased to 18.8% from 19.7% due to higher labor costs, and net income attributable to the company nearly doubled to $2.6 million, or $0.12 per diluted share Revenue Growth (Nine Months Ended Sep 30, 2021 vs 2020) | Segment | 2021 Revenue (in millions) | 2020 Revenue (in millions) | Growth % | | :--- | :--- | :--- | :--- | | Domestic | $79.6 | $72.5 | 9.8% | | International | $116.1 | $98.7 | 17.7% | | **Total** | **$195.7** | **$171.2** | **14.3%** | - The increase in cost of revenues as a percentage of sales was primarily due to increased wage pressures and an unfavorable mix of project work, particularly in the domestic segment[187](index=187&type=chunk) - Net income attributable to SPAR Group, Inc. for the nine months ended September 30, 2021, was **$2.6 million** (**$0.12** per diluted share), compared to **$1.3 million** (**$0.06** per diluted share) for the same period in 2020[197](index=197&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company's working capital increased to $25.4 million as of September 30, 2021, with net cash from operations at $1.1 million, significantly lower than the prior year due to an increase in accounts receivable from higher revenue, while $2.4 million was used in investing activities, including the Bordax acquisition, and $4.4 million was generated from financing activities through draws on its credit lines, with management believing existing cash and credit facilities are sufficient to meet working capital needs for the next twelve months - Net cash provided by operating activities decreased to **$1.1 million** for the first nine months of 2021 from **$7.2 million** in 2020, primarily due to an increase in accounts receivable driven by higher revenue[199](index=199&type=chunk) - Net cash used in investing activities of **$2.4 million** was due to fixed asset additions and the acquisition of Bordax in South Africa[200](index=200&type=chunk) - Working capital was **$25.4 million** at September 30, 2021, up from **$23.6 million** at December 31, 2020, with the current ratio at **1.5**[203](index=203&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is a smaller reporting company and is not required to provide the information for this item - As a smaller reporting company defined by Rule 12b-2 of the Exchange Act, the Company is not required to provide quantitative and qualitative disclosures about market risk[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of September 30, 2021, the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting related to the resignation of all three members of the Audit Committee in June 2021, which resulted in a lack of required oversight, though the company regained compliance with Nasdaq rules by appointing new independent directors on October 14, 2021, and expects the material weakness to be remediated in the fourth quarter of 2021 - Management concluded that the Company's disclosure controls and procedures were not effective as of September 30, 2021[205](index=205&type=chunk) - A material weakness existed related to the oversight by the Board of Directors, specifically due to the resignation of all three Audit Committee members on June 9, 2021, leaving the company non-compliant with Nasdaq's majority independent board and audit committee requirements[209](index=209&type=chunk)[210](index=210&type=chunk) - The company regained compliance with Nasdaq's audit committee requirements on October 14, 2021, after the reporting period, by filling the vacancies, and management expects the material weakness to be corrected during the fourth quarter of 2021[215](index=215&type=chunk) [PART II: OTHER INFORMATION](index=41&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, other disclosures, and a list of exhibits filed with the report [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is party to various legal actions in the normal course of business, but management does not anticipate these to have a material adverse effect, with further details on specific legal matters cross-referenced to Note 9 of the financial statements - The Company is involved in various legal proceedings arising from the normal course of business, which management believes will not have a material adverse effect on its financial condition or results of operations[219](index=219&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors since those disclosed in its Annual Report on Form 10-K - There have been no material changes in the Company's risk factors since the Annual Report[222](index=222&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the reporting period - Not applicable[223](index=223&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) This item is not applicable for the reporting period - Not applicable[226](index=226&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including severance agreements and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act

[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of SPAR Group, Inc [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents SPAR Group, Inc.'s unaudited condensed consolidated financial statements for Q2 2021, including balance sheets, income statements, equity, cash flows, and explanatory notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2021, and December 31, 2020 **Condensed Consolidated Balance Sheets (In thousands):** | Metric | June 30, 2021 (Unaudited) | December 31, 2020 | | :-------------------------------- | :------------------------ | :------------------ | | Total current assets | $78,325 | $66,517 | | Total assets | $94,980 | $84,029 | | Total current liabilities | $52,417 | $42,905 | | Total liabilities | $54,571 | $45,407 | | Total equity | $40,409 | $38,622 | [Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20%28Loss%29%20and%20Comprehensive%20Income%20%28Loss%29) This section presents the company's financial performance, including revenues, gross profit, operating income, and net income for the three and six months ended June 30, 2021 and 2020 **Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (In thousands, except per share data):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $67,176 | $50,944 | $128,273 | $112,292 | | Gross profit | $12,006 | $9,872 | $24,265 | $21,660 | | Operating income | $1,887 | $1,963 | $4,606 | $3,440 | | Net income | $1,132 | $1,305 | $2,913 | $2,227 | | Net income (loss) attributable to SPAR Group, Inc. | $514 | $(103) | $1,431 | $193 | | Basic and diluted income per common share | $0.02 | $0.00 | $0.07 | $0.01 | [Condensed Consolidated Statement of Equity](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Equity) This section details changes in the company's equity, including common stock, additional paid-in capital, retained earnings, and non-controlling interest, from January 1 to June 30, 2021 **Condensed Consolidated Statement of Equity (In thousands):** | Metric | Balance at January 1, 2021 | Balance at June 30, 2021 | | :-------------------------------- | :------------------------- | :----------------------- | | Common Stock (Shares) | 21,122 | 21,269 | | Common Stock (Amount) | $211 | $213 | | Additional Paid-In Capital | $16,645 | $16,857 | | Retained Earnings | $9,218 | $10,649 | | Non-Controlling Interest | $16,463 | $16,580 | | Total Equity | $38,622 | $40,409 | - Total equity increased from **$38,622 thousand** at January 1, 2021, to **$40,409 thousand** at June 30, 2021, driven by net income and share-based compensation, partially offset by other comprehensive loss and stock option exercises[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2021 and 2020 **Condensed Consolidated Statements of Cash Flows (In thousands):** | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,009 | $8,772 | | Net cash used in investing activities | $(886) | $(786) | | Net cash provided by (used in) financing activities | $2,025 | $(792) | | Effect of foreign exchange rate changes on cash | $(1,419) | $(3,976) | | Net change in cash and cash equivalents | $729 | $3,218 | | Cash and cash equivalents at end of period | $16,701 | $13,676 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering various accounting policies and financial items [1. Basis of Presentation](index=8&type=section&id=1.%20Basis%20of%20Presentation) This note describes the accounting principles and reporting standards used for the unaudited interim condensed consolidated financial statements - The unaudited interim condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions, and should be read in conjunction with the 2020 Annual Report on Form 10-K[21](index=21&type=chunk) [2. Business and Organization](index=8&type=section&id=2.%20Business%20and%20Organization) This note provides an overview of SPAR Group's global operations, business divisions, and the impact of external factors like the COVID-19 pandemic and regulatory changes - SPAR Group is a global merchandising and marketing services company with over **40 years of experience**, **25,000+ specialists**, and operations in **9 countries** across **4 continents**, focusing on 'last mile' retailing and manufacturer product merchandising[22](index=22&type=chunk)[23](index=23&type=chunk)[25](index=25&type=chunk) - The company operates under two divisions: Domestic (United States) and International (all operations and joint ventures outside the U.S.)[26](index=26&type=chunk) - The COVID-19 pandemic has not had material unfavorable effects on financial results through June 30, 2021, but the company has experienced increased labor costs and wage pressures, and future impacts remain uncertain[30](index=30&type=chunk) - The CARES Act allowed the company to defer **$1.3 million** in employer-paid social security taxes, with repayment expected by December 2022[31](index=31&type=chunk) - An amendment to Mexican Labor Law effective June 30, 2021, prohibiting outsourcing unless services are specialized, could materially adversely affect SPAR Todopromo's revenues[32](index=32&type=chunk) [3. Earnings Per Share](index=10&type=section&id=3.%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per common share for the three and six months ended June 30, 2021 and 2020 **Earnings Per Share (In thousands, except per share data):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to SPAR Group, Inc. | $514 | $(103) | $1,431 | $193 | | Shares used in basic net income per share calculation | 21,262 | 21,108 | 21,225 | 21,107 | | Shares used in diluted net income per share calculations | 21,617 | 21,125 | 21,600 | 21,157 | | Basic and diluted net income per common share | $0.02 | $0.00 | $0.07 | $0.01 | [4. Credit Facilities and Other Debt](index=10&type=section&id=4.%20Credit%20Facilities%20and%20Other%20Debt) This note outlines the company's credit agreements, outstanding debt balances, interest rates, and compliance with covenants, including available credit facilities - The company extended its North Mill Capital Credit Facility to **October 10, 2023**, increasing the US facility to **$16.5 million** and improving borrowing base availability and interest rates[43](index=43&type=chunk) - As of June 30, 2021, the North Mill Capital Credit Facility had an outstanding balance of **$10.0 million** at an interest rate of **5.25%**[44](index=44&type=chunk) - Resource Plus was not in compliance with its Fifth Third Credit Facility's debt service charge coverage ratio covenant as of June 30, 2021, but obtained a waiver[49](index=49&type=chunk) **Summary of Unused Company Credit and Other Debt Facilities (in thousands):** | Metric | June 30, 2021 | December 31, 2020 | | :------------------------ | :-------------- | :---------------- | | Unused Availability: United States / Canada | $8,487 | $10,238 | | Unused Availability: Australia | $566 | $262 | | Unused Availability: Mexico | $399 | $463 | | Total Unused Availability | $9,452 | $10,963 | [5. Related-Party Transactions](index=15&type=section&id=5.%20Related-Party%20Transactions) This note discloses transactions and balances with affiliated entities and individuals, including services provided, loans, and compensation arrangements - All three independent directors of SGRP's Audit Committee resigned on **June 9, 2021**, leading to Nasdaq non-compliance[64](index=64&type=chunk)[65](index=65&type=chunk) The company submitted a plan to Nasdaq to appoint three new independent directors by **October 15, 2021**, which was accepted[66](index=66&type=chunk) - The company is owed **$901,000** from SAS (an affiliate) for security deposit and premium advances, which SAS has acknowledged but refused to repay, leading to pending legal action[76](index=76&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk) **Summary of Certain Related Party Transactions (Costs charged to the Company, in thousands):** | Service Provider | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | National Store Retail Services (NSRS) | $1,959 | $1,050 | $3,799 | $2,392 | | Office lease expenses (Mr. Burdekin) | $6 | $6 | $12 | $12 | | Office lease expenses (RJ Holdings) | $214 | $177 | $442 | $350 | | Office and vehicle lease expenses (MPT) | $18 | $11 | $35 | $27 | | Vehicle rental expenses (MCPT) | $12 | $281 | $24 | $580 | | Office and vehicle rental expenses (MHT) | $30 | $58 | $59 | $131 | | Consulting and administrative services (CON) | $- | $11 | $- | $23 | | Legal services (KMSA) | $16 | $34 | $30 | $57 | | Warehousing rental (JFMD) | $12 | $12 | $24 | $25 | | Consulting and administrative fees (SPARFACTS) | $62 | $41 | $138 | $72 | | **Total services provided by affiliates** | **$2,329** | **$1,681** | **$4,563** | **$3,669** | **Due to affiliates (in thousands):** | Category | June 30, 2021 | December 31, 2020 | | :------------------------------------ | :-------------- | :---------------- | | Loans from local investors: Australia | $483 | $586 | | Loans from local investors: Mexico | $623 | $623 | | Loans from local investors: Brazil | $139 | $139 | | Loans from local investors: China | $1,762 | $1,746 | | Loans from local investors: South Africa | $364 | $415 | | Loans from local investors: Resource Plus | $266 | $266 | | **Total due to affiliates** | **$3,637** | **$3,775** | - William H. Bartels, a director and significant stockholder, retired as an employee but continues to receive **$220,558 annually** in retirement compensation, director fees, and medical benefits for a **five-year period**[99](index=99&type=chunk)[100](index=100&type=chunk)[102](index=102&type=chunk) [6. Preferred Stock](index=23&type=section&id=6.%20Preferred%20Stock) This note details the company's authorized and outstanding preferred stock, specifically Series A Preferred Stock - SGRP is authorized to issue **3,000,000 shares** of preferred stock, with **2,445,598 shares** of Series A Preferred Stock remaining authorized[113](index=113&type=chunk) As of June 30, 2021, **no shares** of SGRP Series A Preferred Stock were issued and outstanding[113](index=113&type=chunk) [7. Stock-Based Compensation and Other Plans](index=23&type=section&id=7.%20Stock-Based%20Compensation%20and%20Other%20Plans) This note describes the company's stock-based compensation plans, including stock option and restricted stock awards, and associated expenses **Stock-Based Compensation Expense (In thousands):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock option awards expense | $183 | $70 | $282 | $95 | | Restricted stock expense | $12 | $0 | $18 | $0 | | Total unrecognized stock-based compensation expense (as of June 30, 2021) | $707 (stock options) | - | $32 (restricted stock) | - | - The 2020 Plan, approved by stockholders on **January 19, 2021**, authorized the issuance of up to **700,000 non-qualified stock options (NQSOs)** but terminated on **May 1, 2021**, with no further awards permitted unless amended[117](index=117&type=chunk)[118](index=118&type=chunk)[122](index=122&type=chunk) [8. Commitments and Contingencies](index=24&type=section&id=8.%20Commitments%20and%20Contingencies) This note addresses the company's legal actions, administrative proceedings, and other potential liabilities, including class action settlements and ongoing claims - The company is involved in various legal actions and administrative proceedings, but management does not anticipate a material adverse effect on the company's financial condition or operations[127](index=127&type=chunk)[250](index=250&type=chunk) - Robert G. Brown continues to make claims against the company for SBS, totaling approximately **$5.6 million**, which the company rejects, asserting it was released from such claims by the SBS Settlement Agreement[144](index=144&type=chunk)[145](index=145&type=chunk)[149](index=149&type=chunk) - The company settled the Clothier class action case for **$1.3 million**, with **$650,000** paid and **$650,000** accrued as of June 30, 2021[153](index=153&type=chunk) - The company settled the Hogan class action case for **$250,000**, with all payments completed by June 2020[158](index=158&type=chunk) [9. Segment Information](index=30&type=section&id=9.%20Segment%20Information) This note provides financial data segmented by the company's domestic and international operations, including revenues and operating income by geographic region **Segment Revenue and Operating Income (In thousands):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue: United States | $27,252 | $22,123 | $50,927 | $45,412 | | Revenue: International | $39,924 | $28,821 | $77,346 | $66,880 | | Operating income: United States | $332 | $315 | $1,090 | $623 | | Operating income: International | $1,555 | $1,648 | $3,516 | $2,817 | | Net income (loss) attributable to SPAR Group, Inc.: United States | $173 | $(471) | $546 | $(434) | | Net income (loss) attributable to SPAR Group, Inc.: International | $341 | $368 | $885 | $627 | **International Revenue by Country (In thousands, % of consolidated net revenue):** | Country | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Brazil | $13,596 (20.2%) | $10,539 (20.7%) | $25,897 (20.2%) | $26,103 (23.2%) | | South Africa | $8,524 (12.7%) | $6,088 (12.0%) | $16,246 (12.7%) | $13,002 (11.6%) | | Mexico | $8,363 (12.4%) | $4,820 (9.5%) | $15,622 (12.2%) | $10,667 (9.5%) | | China | $3,195 (4.8%) | $2,756 (5.4%) | $6,458 (5.0%) | $5,320 (4.7%) | | Japan | $2,538 (3.8%) | $1,915 (3.8%) | $4,988 (3.9%) | $4,207 (3.7%) | | Canada | $2,040 (3.0%) | $1,004 (2.0%) | $3,918 (3.1%) | $2,720 (2.4%) | | India | $1,358 (2.0%) | $1,649 (3.2%) | $3,584 (2.8%) | $4,431 (3.9%) | | Australia | $310 (0.5%) | $50 (0.1%) | $633 (0.5%) | $430 (0.4%) | | **Total international revenue** | **$39,924 (59.4%)** | **$28,821 (56.7%)** | **$77,346 (60.4%)** | **$66,880 (59.4%)** | [10. Recent Accounting Pronouncements](index=32&type=section&id=10.%20Recent%20Accounting%20Pronouncements) This note discusses the adoption of new accounting standards and the evaluation of their potential impact on the company's financial statements - The company adopted ASU 2019-12 (simplifying income tax accounting) in December 2019, which had no material impact on goodwill impairment testing or consolidated financial statements[172](index=172&type=chunk) - The company is evaluating the impact of ASU No. 2016-13 (Credit Losses), effective for smaller reporting companies after December 15, 2022[173](index=173&type=chunk) [11. Leases](index=33&type=section&id=11.%20Leases) This note details the company's lease accounting under ASC 842, including lease liabilities, right-of-use assets, and lease costs - Under ASC 842, SPAR recognizes operating leases on the balance sheet as a lease liability with a corresponding right-of-use (ROU) asset[175](index=175&type=chunk) **Lease Costs (In thousands):** | Lease Costs | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $218 | $694 | $435 | $1,368 | | Short-term lease cost | $206 | $100 | $508 | $213 | | Variable costs | $42 | $97 | $92 | $194 | | **Total lease cost** | **$466** | **$891** | **$1,035** | **$1,775** | **Maturities of Lease Liabilities (In thousands, as of June 30, 2021):** | Period Ending December 31, | Amount | | :------------------------- | :----- | | 2021 | $660 | | 2022 | $795 | | 2023 | $339 | | 2024 | $246 | | 2025 | $392 | | Thereafter | $141 | | **Total Lease Payments** | **$2,573** | | Less: imputed interest | $455 | | **Total** | **$2,118** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operational results for the periods ended June 30, 2021, including forward-looking statements, business overview, and liquidity [Forward-Looking Statements](index=35&type=section&id=Forward-Looking%20Statements) This section highlights statements about future events and financial performance, cautioning readers about inherent risks and uncertainties - The report contains forward-looking statements regarding potential negative effects of COVID-19, cash flow, corporate objectives (growth, customer value, employee development, productivity, EPS), and strategies for organic growth, new business, and acquisitions[186](index=186&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, as actual results may differ materially due to various risks and unpredictable events beyond the company's control[187](index=187&type=chunk) [General Business Overview](index=37&type=section&id=General%20Business%20Overview) This section provides a summary of SPAR Group's global merchandising and marketing services, its operational structure, and market segments - SPAR Group is a global merchandising and marketing services company operating in **9 countries** across **4 continents**, providing 'last mile' retailing and manufacturer product merchandising[190](index=190&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk) - The company serves diverse segments including grocery, drug, home improvement, and consumer electronics, and operates through Domestic and International divisions, often utilizing joint ventures internationally[192](index=192&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenues, costs, and profitability, for the reported periods [Three months ended June 30, 2021, compared to three months ended June 30, 2020](index=38&type=section&id=Three%20months%20ended%20June%2030%2C%202021%2C%20compared%20to%20three%20months%20ended%20June%2030%2C%202020) This section compares the company's financial results for the three-month periods ended June 30, 2021, and 2020, highlighting key changes in revenues and expenses **Financial Performance (Three Months Ended June 30, In thousands, except percent data):** | Metric | 2021 | % of Net Revenues | 2020 | % of Net Revenues | Change ($) | Change (%) | | :------------------------------------------ | :----- | :---------------- | :----- | :---------------- | :--------- | :--------- | | Net revenues | $67,176 | 100.0% | $50,944 | 100.0% | $16,232 | 31.9% | | Cost of revenues | $55,170 | 82.1% | $41,072 | 80.6% | $14,098 | 34.3% | | Gross profit | $12,006 | 17.9% | $9,872 | 19.4% | $2,134 | 21.6% | | Selling, general & administrative expense | $9,585 | 14.3% | $7,370 | 14.5% | $2,215 | 30.1% | | Operating income | $1,887 | 2.8% | $1,963 | 3.8% | $(76) | -3.9% | | Net income (loss) attributable to SPAR Group, Inc. | $514 | 0.8% | $(103) | -0.4% | $617 | -599.0% | - International net revenues increased by **$11.1 million** or **38.5%** due to foreign currency translation and increased revenues in Brazil, Mexico, and South Africa[203](index=203&type=chunk) - Cost of revenues increased as a percentage of net revenues (**82.1%** in 2021 vs **80.6%** in 2020) due to increased wage pressure and an unfavorable mix of project work domestically, and increasing labor costs globally[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk) - Selling, general and administrative expenses increased by **$2.2 million**, reflecting reduced savings from 2020 pandemic-related furloughs and continued investment in business growth[208](index=208&type=chunk) [Six months ended June 30, 2021, compared to six months ended June 30, 2020](index=40&type=section&id=Six%20months%20ended%20June%2030%2C%202021%2C%20compared%20to%20six%20months%20ended%20June%2030%2C%202020) This section compares the company's financial results for the six-month periods ended June 30, 2021, and 2020, detailing changes in revenues, costs, and profitability **Financial Performance (Six Months Ended June 30, In thousands, except percent data):** | Metric | 2021 | % of Net Revenues | 2020 | % of Net Revenues | Change ($) | Change (%) | | :------------------------------------------ | :----- | :---------------- | :----- | :---------------- | :--------- | :--------- | | Net revenues | $128,273 | 100.0% | $112,292 | 100.0% | $15,981 | 14.2% | | Cost of revenues | $104,008 | 81.1% | $90,632 | 80.7% | $13,376 | 14.8% | | Gross profit | $24,265 | 18.9% | $21,660 | 19.3% | $2,605 | 12.0% | | Selling, general & administrative expense | $18,595 | 14.5% | $17,141 | 15.3% | $1,454 | 8.5% | | Operating income | $4,606 | 3.6% | $3,440 | 3.0% | $1,166 | 33.9% | | Net income attributable to SPAR Group, Inc. | $1,431 | 1.1% | $193 | 0.1% | $1,238 | 641.5% | - Net revenues increased by **$16.0 million** or **14.2%** year-over-year, driven by business development efforts and global pandemic recovery[220](index=220&type=chunk) - Domestic cost of revenues increased as a percentage of net domestic revenues (**79.5%** in 2021 vs **77.6%** in 2020) due to increased wage pressures and a shift in project mix[223](index=223&type=chunk) - International selling, general and administrative expenses increased by **$1.6 million**, reflecting continued investment in business growth[227](index=227&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to generate and manage cash, including operating cash flows, financing activities, and available capital to meet future obligations - Net cash provided by operating activities decreased significantly to **$1.0 million** for the six months ended June 30, 2021, from **$8.8 million** in the prior year, primarily due to an increase in accounts receivable[235](index=235&type=chunk) - Net cash provided by financing activities was **$2.0 million** for the six months ended June 30, 2021, compared to cash used of **$792,000** in the prior year, mainly due to net draws on lines of credit[238](index=238&type=chunk) - The company believes existing cash, short-term investments, available debt, and cash from operations will be sufficient to meet working capital and capital expenditure requirements for at least the next twelve months[235](index=235&type=chunk) **Working Capital and Current Ratio (In millions):** | Metric | June 30, 2021 | December 31, 2020 | | :-------------------- | :-------------- | :---------------- | | Net working capital | $25.9 | $23.6 | | Current ratio | 1.5 | 1.6 | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=42&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 quantitative and qualitative disclosures about market risk - SPAR Group, Inc. is a smaller reporting company and is exempt from providing quantitative and qualitative disclosures about market risk[240](index=240&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of the company's disclosure controls and procedures and internal control over financial reporting, identifying a material weakness related to the oversight by the Board of Directors due to the resignation of the entire Audit Committee [Management's Evaluation of Disclosure Controls and Procedures](index=42&type=section&id=Management%27s%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management's assessment of the effectiveness of the company's disclosure controls and procedures as of June 30, 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of **June 30, 2021**, due to a material weakness in internal control over financial reporting[241](index=241&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=42&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management's report on the effectiveness of internal control over financial reporting, noting a material weakness related to Board oversight - A material weakness existed as of **June 30, 2021**, related to the Board's oversight of internal control development and performance, specifically due to the resignation of the entire Audit Committee[245](index=245&type=chunk) - Management believes this material weakness did not affect financial results or oversight effectiveness for the current period but could lead to material misstatements in future financial statements[246](index=246&type=chunk) - Remediation efforts are underway, with the company expecting to appoint additional Board members to serve on the Audit Committee[247](index=247&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=43&type=section&id=Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) This section reports on any changes in internal controls over financial reporting during the quarter ended June 30, 2021 - Other than the identified material weakness, there were no changes in internal controls over financial reporting during the quarter ended June 30, 2021, that materially affected or are reasonably likely to materially affect them[248](index=248&type=chunk) [PART II: OTHER INFORMATION](index=44&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions and administrative proceedings in the normal course of business, which management does not anticipate will have a material adverse effect on the company's financial condition or operations - The company is a party to various legal actions and administrative proceedings, but management believes their resolution will not have a material adverse effect on the company[250](index=250&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section incorporates by reference the existing risk factors from the 2020 Annual Report, noting no material changes since that filing, and advises readers to review all identified risk factors - Existing risk factors from the 2020 Annual Report are incorporated by reference, with no material changes reported since that filing[254](index=254&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the company for the reporting period [Item 3. Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the company for the reporting period [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO under the Sarbanes-Oxley Act and Inline XBRL documents - Exhibits include CEO and CFO certifications (**31.1**, **31.2**, **32.1**, **32.2**) and various Inline XBRL documents (**101.INS**, **101.SCH**, **101.CAL**, **101.DEF**, **101.LAB**, **101.PRE**, **104**)[262](index=262&type=chunk) [SIGNATURES](index=47&type=section&id=SIGNATURES) The report is duly signed on behalf of SPAR Group, Inc. by Fay DeVriese, Chief Financial Officer, Treasurer, and Secretary, as of August 16, 2021 - The report was signed by Fay DeVriese, Chief Financial Officer, Treasurer, and Secretary, on **August 16, 2021**[265](index=265&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the first quarterly period ended March 31, 2021. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from __________ to __________. Commission file number 0-27408 SPAR GROUP, INC. (Exact name of registrant as specified in ...