UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________

FORM 10-K /A

(10-K/A

Amendment No. 1)

No.1

(Mark One)

x

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year endedDecember 31, 2010

2022

OR

o

☐

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 0-27824

0-27408

SPAR GROUP, INC.


(Exact name of registrant as specified in its charter)

Delaware

33-0684451

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

  
560 White Plains Road, Suite 210, Tarrytown, New York

1910 Opdyke Court, Auburn Hills, MI

10591

48326

(Address of principal executive offices)

(Zip Code)


Registrant’s

Registrant's telephone number, including area code: (914) 332-4100

(248) 364-7727

(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $.01 per share

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

SGRP

The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES o    NO  x

Yes  ☐  No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES o    NO x

Yes  ☐  No   ☒

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES x     NO o

Yes  ☒   No  ☐

Indicate by check mark if disclosure of delinquent filerswhether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to ItemRule 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part IIIS-T (§232.405 of this Form 10-K or any amendmentchapter) during the preceding 12 months (or for such shorter period that the registrant was required to this Form 10-K . o

submit such files)  Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. (See definitionSee the definitions of “large"large accelerated filer”filer", “accelerated filer”"accelerated filer", and "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.). (Check one):

Large Accelerated Filer o                                           Accelerated Filer  o
Non-Accelerated Filer o

Large Accelerated Filer ☐

Accelerated Filer ☐ 

Non-Accelerated Filer ☒

Smaller reporting company ☒

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting company  x

(Do notunder Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check ifmark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a smaller reporting company)

recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) YES oNO x

Yes ☐ No ☒

The aggregate market value of the Common Stock of the Registrant held by non-affiliates of the Registrant on June 30, 2010,December 31, 2022, based on the closing price of the Common Stock as reported by the Nasdaq Capital Market on such date, was approximately $3,700,000.

$12,639,963.

The number of shares of the Registrant’sRegistrant's Common Stock outstanding as of December 31, 2010,2022, was 19,314,30622,648,168 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission (the "SEC") pursuant to Regulation 14A not later than 120 days after the end of our fiscal year, for our Annual Meeting of Shareholders, presently scheduled to be held on May 27, 2011, are incorporated by reference into Part III of this Form 10-K.
EXPLANATORY NOTE - PURPOSE OF AMENDMENT

SPAR Group, Inc. ("SGRP" or the "Corporation", and together with its subsidiaries, the "SPAR Group" or the "Company"), is filing this Amendment No. 1 on Form 10-K/A (this "First Amendment"), to its

The Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, originally filed with the SEC on March 15, 2011 (as amended by this First Amendment, SGRP’s "2010 Annual Report"), in order to (among other things):

·  Correct the name in the Exhibit List of the auditor (to Nitin Mittal & Co.) for the Company's subsidiary in India, SPAR Solutions Merchandising Private Limited (which changed its name in 2011 to SPAR KROGNOS Marketing Private Limited);
·  Correct the name in the Rehmann Robson Report (with its consent) of the Company's subsidiary in India, SPAR Solutions Merchandising Private Limited (which changed its name in 2011 to SPAR KROGNOS Marketing Private Limited);
·  File the corrected unqualified auditor's report from Nitin Mittal & Co. for the Company's subsidiary in India, SPAR Solutions Merchandising Private Limited (which changed its name in 2011 to SPAR KROGNOS Marketing Private Limited);
·  Correct the name in SGRP's List of Subsidiaries in Exhibit 21.1 of the Company's subsidiary in India, SPAR Solutions Merchandising Private Limited (which changed its name in 2011 to SPAR KROGNOS Marketing Private Limited); and
·  Reflect the resolution of comments from the SEC Staff (see below).

This First Amendment includes SGRP’s complete 2010 Annual Report, except that Items 10-14 of Part III remain unchanged and continue to be incorporated by reference from SGRP's Proxy Statement for its 2011 Annual Meeting of Stockholders2022, as filed with the SEC on May 2, 2011.
All other items, sections and subsections remain unchanged since suchApril 17, 2023, as amended is hereby incorporated by reference into this Amendment to SGRP's Annual Report was filed on March 15, 2011.
Form 10-K/A.


This First Amendment reflects SGRP's resolution of comments raised in a letter on December 16, 2011, from the SEC's staff respecting their routine review of SGRP's 2010 Annual Report as originally filed.  The SEC's staff noted (among other things) the change in accounting firms in India from 2009 to 2010 respecting the local audit of SGRP's India subsidiary, SPAR KROGNOS Marketing Private Limited (formerly known as SPAR Solutions Merchandising Private Limited and mistakenly referenced in the original SGRP 2010 Annual Report as SPAR Solutions India Private Limited).  SGRP responded that the local auditor changed because of the change in the local India investor referenced in the 2010 Annual Report, and not because of any disagreement with the former local auditor, and that SGRP's Indian subsidiary was immaterial and insignificant (contributing less than 10% of both the Company’s consolidated assets and income from operations).  SGRP believes that the corrections to its 2010 Annual Report noted above are sufficient.
 
 

SPAR GROUP, INC.

ANNUAL REPORT ON

FORM 10-K /A
10-K/A

Amendment No.1

INDEX

PART I

   
  Page

PART III

   
 Item 1Business3
 Item 1ARisk Factors11
 Item 1BUnresolved Staff Comments19
 Item 2Properties19
 Item 3Legal Proceedings19
 Item 4Submission of Matters to a Vote of Security Holders20
PART II
 Item 5Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities21
 Item 6Selected Financial Data 24
 Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources 24
 Item 7AQuantitative and Qualitative Disclosures about Market Risk 31
 Item 8Financial Statements and Supplementary Data 31
 Item 9Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 31
 Item 9A(T)Controls and Procedures31
 Item 9BOther Information32
PART III

Item 10

Directors, Executive Officers and Corporate Governance

33

-3-

Item 11

Executive Compensation

33

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Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

33

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Item 13

Certain Relationships and Related Transactions, and Director Independence

-18-

Item 14

Principal Accountant Fees and Services

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 Item 13Certain Relationships and Related Transactions, and Director Independence33
 Item 14Principal Accountant Fees and Services33

PART IV

   

Item 15

PART IV

Amended Exhibits

-22-

 

Signatures

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 Item 15Exhibits and Financial Statement Schedules34
Signatures42


 
 

PART I
Statements contained in this Annual Report on Form 10-K (this “Annual Report”) of

FIRST AMENDMENT ON FORM 10-K/A

SPAR Group, Inc. (“SGRP”(the "Corporation" or "SGRP", and together with its subsidiaries, the “SPAR Group”"Company") is filing this Amendment No. 1 on Form 10-K/A (this "Amendment") to amend SGRP's Annual Report on Form 10-K for the year ended December 31, 2022 ("Form 10-K"), originally filed with the Securities and Exchange Commission (the "SEC") on April 17, 2023, to include the information required by Part III of our Form 10-K and to make corresponding changes in the table of contents. This information was previously omitted from our Form 10-K in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above referenced items to be incorporated in our Form 10-K by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year-end. We are filing this Amendment to include Part III information in our Form 10-K because a definitive proxy statement containing such information will not be filed within that period. References to the Annual Report in Form 10-K and in this Amendment shall mean SGRP's 10-K as amended by this Amendment.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new Exhibits 31.1 and 31.2 are annexed hereto and filed herewith. Except as described above, this Amendment does not amend or otherwise update any other information in or Exhibit to our Form 10-K. Accordingly, this Amendment should be read in conjunction with our Form 10-K and with our filings with the SEC subsequent to the filing of our Form 10-K.

FORWARD-LOOKING STATEMENTS

This Annual Report (including the 10-K and this Amendment) contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, made by, or respecting, SPAR Group, Inc. ("SGRP" or the “Company”"Corporation",) and its subsidiaries (and SGRP together with its subsidiaries may be referred to as "SPAR Group" and the "Company"). There also are "forward-looking statements" contained in SGRP's definitive Proxy Statement respecting its Annual Meeting of Stockholders to be held later in 2022 (the "Proxy Statement"), include “forward-looking statements” withinwhich SGRP expects to file approximately 30 days prior to the meaningAnnual Meeting of Stockholders, with the Securities and Exchange Commission (the "SEC"), and SGRP's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports and statements as and when filed with the SEC (including this Annual Report Amendment and the Proxy Statement, each a "SEC Report"). "Forward-looking statements" are defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"), and togetherother applicable federal and state securities laws, rules and regulations, as amended (together with the Securities Act and Exchange Act, the “Securities Laws”"Securities Laws"), including.

Readers can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Words such as "may," "will," "expect," "intend," "believe," "estimate," "anticipate," "continue," "plan," "project," or the negative of these terms or other similar expressions also identify forward-looking statements. Forward-looking statements made by the Company in this Annual Report may include (without limitation) statements regarding: risks, uncertainties, cautions, circumstances and other factors ("Risks"); the potential continuing negative effects of the COVID-19 pandemic on the Company's business; the Company's potential non-compliance with applicable Nasdaq director independence; bid price or other rules; the Company's cash flow or financial condition; and plans, intentions, expectations, guidance or other information respecting the pursuit or achievement of the Company's corporate objectives. The Company's forward-looking statements containedalso include (without limitation) those made in the discussions under the headings “Business”, “Risk Factors” and “Management’sthis Annual Report in "Business," "Risk Factors," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations”.  You can identify forward-looking statements in such information by the Company's useOperations," "Directors, Executive Officers and Corporate Governance," "Executive Compensation," "Security Ownership of terms such as "may", "will", "expect", "intend", "believe", "estimate", "anticipate", "continue" or similar words or variations or negatives of those words.  Certain Beneficial Owners and Management and Related Stockholder Matters," and "Certain Relationships and Related Transactions, and Director Independence."

You should carefully review and consider the Company's forward-looking statements (including all suchrisk factors and other cautions and uncertainties) and other information and the other risks and cautionsmade, contained or noted in or incorporated by reference into this Annual Report, andbut you should not place undue reliance on any of them. The results, actions, levels of activity, performance, achievements or condition of the Company's other filings under applicable Securities LawsCompany (including this report, each a "SEC Report") that could cause the Company's actualits affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition to differ materially from thosecondition) and other events and circumstances planned, intended, anticipated, estimated or otherwise expected by the Company (collectively, "Expectations"), and described in theour forward-looking statements (including all Risks) and other information inreflect the Company's forward-looking statements, whether express or implied, as the Company's anticipations are based upon the Company's plans, intentionscurrent views about future events and best estimates and (although the Company believe them to be reasonable) involve known and unknown risks, uncertainties and other factors that could cause them to fail to occur or be realized or to be materially and adversely different from those the Company anticipated.

circumstances. Although the Company believes that its plans, intentionsthose Expectations and estimates reflected or implied in such forward-looking statementsviews are reasonable, the Company cannot assure you that such plans, intentionsresults, actions, levels of activity, performance, achievements or estimates will be achieved in whole or in part, that the Company has identified all potential risks, or that the Company can successfully avoid or mitigate such risks in whole or in part. You should carefully review the risk factors described below (See Item 1A – Risk Factors) and any other cautionary statements contained or incorporated by reference in this Annual Report.  All forward-looking and other statements attributable tocondition of the Company or persons acting on its behalf are expressly subject toother events and qualifiedcircumstances may differ materially from our Expectations and views, and they cannot be assured or guaranteed by all such risk factors and other cautionary statements.
You should not place undue reliance on the Company's forward-looking statements because the mattersCompany, since they describe are subject to known and unknown risks, uncertaintiesRisks and other assumptions, changes in circumstances and unpredictable factors, manyevents (many of which are beyond its control.  Thethe Company's forward-looking statements are based on the information currently available to it and speak only as of the date on the cover of December 31, 2010, or other referenced date or, in the case of forward-looking statements incorporated by reference, as of the date of the SEC Report that includes such statement. New risks and uncertaintiescontrol). In addition, new Risks arise from time to time, and it is impossible for the Company to predict these matters or how they may arise or affect the Company. Over time,Accordingly, the Company's actual assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxationCompany cannot assure you that its Expectations will be achieved in whole or other achievements, results, risksin part, that it has identified all potential Risks, or condition will likely differ from those expressedthat it can successfully avoid or implied by the Company's forward-looking statements, andmitigate such differenceRisks in whole or in part, any of which could be significant and materially adverse to the Company and the value of your investment in the Company's Common Stock.
The

These forward-looking statements reflect the Company's Expectations, views, Risks and assumptions only as of the date of this Annual Report, and the Company does not intend, assume any obligation, or promise and the Company expressly disclaims any obligation, to publicly update or revise any forward-lookingforward- looking statements risk factors(including any Risks or Expectations) or other cautionary statementsinformation (in whole or in part), whether as a result of new information, new or worsening Risks or uncertainties, changed circumstances, future events, or recognition, or otherwise, except asotherwise.

Please see Parts I and toII of SGRP's Annual Report on Form 10-K for the extent requiredyear ended December 31, 2022 ("Form 10-K"), originally filed with the Securities and Exchange Commission (the "SEC") on April 17, 2023, which are incorporated herein by applicable law.reference.

 

Item 1. Business
 
THE COMPANY'S BUSINESS GENERALLY
SPAR Group, Inc., (“SGRP”),

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

The Board of Directors of the Corporation

The Board is responsible for overseeing the management, policies and direction of the Corporation and its subsidiaries (together(collectively, the "Company"), both directly and through its committees (See "Corporate Governance", below). The members of the Board and referenced Committees as of December 31, 2022, were as set forth below (7):

Name

Age

Position with SPAR Group, Inc.

Michael Wager (3) (4)71Chairman of the Board and Director
Michael R. Matacunas55Chief Executive Officer, President and Director
Sean M. Whelan (3) (4) (5)52Director and Chairman of the Audit Committee
Robert G. Brown (1)79Director

William H. Bartels

78

Director

Peter W. Brown (2) (4) (5) (6)

41

Director

(1)

Chairman of the Board through January 25, 2022.

(2)

Vice Chairman of the Board through January 25, 2022.

(3)

Member of the Governance Committee on December 31, 2022.

(4)

Member of the Audit Committee on December 31, 2022.

(5)

Member of the Compensation Committee on December 31, 2022.

(6)

Chairman of the Governance Committee through January 25, 2022. 

(7)James R. Brown, Sr. and Panagiotis (“Panos”) N. Lazaretos were directors on January 1, 2022, but retired from the Board and its Committees on January 25, 2022.  See Item 13 – Change of Control, Voting and Restricted Stock Agreement, below.

Michael Wager was elected Chairman of the Board on September 15, 2022.  He was appointed on October 21, 2021, as a Director and a member of the Audit Committee by the Board. Mr. Wager is an attorney who has specialized in securities, reorganizations, M&A and regulatory compliance throughout his career. He is currently a Senior Counsel with Taft Stettinius & Hollister LLP serving in an advisory role and the Chief Strategy Officer for Byrna Technologies. Mr. Wager is also currently a member of the board and has served as the Chairman of the Audit and Governance Committees for Michael Anthony Holdings. Mr. Wager earned his Bachelor of Arts, Political Science Degree at the American University, College of Public Affairs, his Master of Arts, Political Science Degree at Columbia University, Graduate School of Arts and Sciences, and his Juris Doctor Degree at New York University School of Law.

Michael R. Matacunas serves as the Chief Executive Officer, President and a Director of SGRP the “SPAR Group” or the “Company”),and has held such positions since his appointment as Chief Executive Officer of SGRP on February 16, 2021. He is a diversifiedFortune 500 veteran with more than 30 years of relevant leadership experience. He has worked in public and private companies, developed and led international business growth, driven exceptional operational results and built world-class teams. Mr. Matacunas was previously the Chief Administrative Officer at Dollar Tree, Inc., where he helped lead the successful multi-billion-dollar acquisition and integration of Family Dollar Stores, including, among other things, merchandising, sourcing, operational and marketingexecutive improvements. Prior to this, Mr. Matacunas was CEO of a successful retail professional services business that transformed leading global retailers, wholesalers and consumer packaged goods companies. Mike's experience also includes strategy, consulting and world-wide roles at leading technology companies, including IBM and Manhattan Associates. Mr. Matacunas earned a BA in Economics from Boston University and an MBA from the College of William & Mary Mason School of Business.

Sean M. Whelan was appointed to the Governance Committee on September 15, 2022.  He was appointed on October 21, 2021, as a Director and a member of the Audit Committee and Compensation Committee by the Board, and on October 25, 2021, the Audit Committee elected him as its Chairman. Mr. Whelan is currently the Chief Executive Officer, and was previously the Chief Financial Officer, for Encore Rehabilitation Services. He has also held the Chief Financial Officer role for several other public and private companies including Smile America Partners, Bedrock Manufacturing, LLC, Diplomat Pharmacy and InfuSystem Holdings, Inc. Mr. Whelan is currently a Board member and Chairman of the Audit Committee with Zomedica Corp (NYSE American: ZOM) and also a Board member with OptioRx; he previously served as an Executive Board member with Diplomat Pharmacy and InfuSystem Holding, Inc. Mr. Whelan earned his Bachelor of Business Administration Degree and his Master of Accounting Degree at the University of Michigan's Ross School of Business and is a CPA.

Robert G. Brown rejoined the Board on April 24, 2020.  As one (1) of the two (2) founders of the company, Mr. Brown served as Director of SGRP from July 8, 1999 until his retirement on May 3, 2018. Prior to 1999, Mr. Robert G. Brown served as the Chairman, President and provides a broad arrayChief Executive Officer of services worldwide to help companies improve their sales, operating efficiency and profits at retail locations.  The Company provides its merchandising and other marketing services to manufacturers, distributors and retailers worldwide, primarily in mass merchandisers, office supply, grocery, drug store and other chains, and independent, convenience and electronics stores.  The Company also provides furniture and other product assembly services in stores, homes and offices.  The Company has supplied these project and product services in the United StatesSPAR Companies since certain of its predecessors were formed in 1979 through 2005. During his tenure, Mr. Brown oversaw the change from a software and internationallyconsulting company into a merchandising company in the 1980's and in the 1990's converted the reporting and data collection work to the Internet from mainframes and PC's which gave SPAR a strategic cost and quality advantage. In 1999, he executed a reverse merger making SPAR a public company.

William H. Bartels has served as Director of SGRP since July 8, 1999. As one (1) of the two (2) founders of the Company, acquired its first international subsidiary in Japan in May of 2001.  Today the Company currently operates in 9 countries that encompass approximately 47% of the total world population through operations in the United States, Canada, Japan, South Africa, India, Romania, China, Australia and New Zealand.

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Merchandising services primarily consist of regularly scheduled, special project and other product services provided at the store level, and the Company may be engaged by either the retailer or the manufacturer.  Those services may include restocking and adding new products, removing spoiled or outdated products, resetting categories "on the shelf" in accordance with client or store schematics, confirming and replacing shelf tags, setting new sale or promotional product displays and advertising, replenishing kiosks, providing in-store event staffing, and providing assembly services in stores, homes and offices.  Other merchandising services include whole store or departmental product sets or resets, including new store openings, new product launches and in-store demonstrations, special seasonal or promotional merchandising, focused product support and product recalls.  The Company continues to seek to expand its merchandising, assembly and marketing services business throughout the world.
An Overview of the Merchandising and Marketing Services Industry
According to industry estimates over two billion dollars is spent annually in the United States alone on retail merchandising and marketing services. The merchandising and marketing services industry includes manufacturers, retailers, food brokers, and professional service merchandising companies. The Company believes that merchandising and marketing services add value to retailers, manufacturers and other businesses and enhance sales by making a product more visible and more available to consumers. These services primarily involve placing orders, shelf maintenance, display placement, reconfiguring products on store shelves and replenishing product inventory.
Historically, retailers staffed their stores as needed to provide these services to ensure, that manufacturers’ inventory levels, the advantageous display of new items on shelves, and the maintenance of shelf schematics and product placement were properly merchandised. However retailers, in an effort to improve their margins, decreased their own store personnel and increased their reliance on manufacturers to perform such services. Initially, manufacturers attempted to satisfy the need for merchandising and marketing services in retail stores by utilizing their own sales representatives. Additionally, retailers also used their own employees to merchandise their stores to satisfy their own merchandising needs. However, both the manufacturers and the retailers discovered that using their own sales representatives and employees for this purposehe was expensive and inefficient.
Manufacturers and retailers have been, and SPAR Group believes they will continue, outsourcing their merchandising and marketing service needs to third parties capable of operating at a lower cost by (among other things) serving multiple manufacturers simultaneously.  The Company also believes that it is well positioned, as a domestic and international merchandising and marketing services company, to more effectively provide these services to retailers, manufacturers and other businesses around the world.
Another significant trend impacting the merchandising and marketing services business is the tendency of consumers to make product purchase decisions once inside the store. Accordingly, merchandising and marketing services and in-store product promotions have proliferated and diversified. Retailers are continually re-merchandising and re-modeling entire stores in an effort to respond to new product developments and changes in consumer preferences. We estimate that these activities have increased in frequency over the last five years. Both retailers and manufacturers are seeking third parties to help them meet the increased demand for these labor-intensive services.
In addition, the consolidation of many retailers has created opportunities for third party merchandisers when an acquired retailer's stores are converted to the look and format of the acquiring retailer. In many cases, stores are completely remodeled and re-merchandised after a consolidation.
SPAR Group believes the current trend in business toward globalization fits well with its expansion model. As companies expand into foreign markets they will need assistance in merchandising or marketing their products. As evidenced in the United States, retailer and manufacturer sponsored merchandising and marketing programs are both expensive and inefficient. The Company also believes that the difficulties encountered by these programs are only exacerbated by the logistics of operating in foreign markets. This environment has created an opportunity for the Company to exploit its Internet, hand-held and smart phone based technology and business model worldwide.
The Company's Domestic and International Geographic Divisions:
In order to cultivate foreign markets and expand the Company's merchandising and marketing services business outside of the United States, modify the necessary systems and implement its business model worldwide, and insure a consistent approach to its merchandising and marketing efforts worldwide, and even though it operates in a single business segment (merchandising and marketing services), the Company has divided its world focus into two geographic areas, the United States, which is the sales territory for its Domestic Merchandising Services Division, and international (i.e., all locations outside the United States), which are the sales territories for its International Merchandising Services Division.  To that end, the Company also (1) provides and requires all of its locations to use its Internet based operating,
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scheduling, tracking and reporting systems (including language translations, ongoing client and financial reports and ongoing IT support), (2) provides and requires all of its locations to comply with the Company's financial reporting and disclosure controls and procedures, (3) provides accounting and auditing support and tracks and reports certain financial and other information separately for those two divisions, and (4) has management teams in its corporate offices responsible for supporting and monitoring the management, sales, marketing and operations of eachdeveloping client relationships across the globe for more than 40 years. He was also responsible for marketing/sales for the SPARLINE technology and its related consulting business for evaluating trade promotion spending and strategies for top tier CPG companies, domestic and international. He gained industry-wide recognition as reported through numerous industry publications and guest speeches at major industry conferences, while also negotiating partnerships with research companies in the U.K. and Australia for using the SPARLINE system. Prior to July 8, 1999, Mr. Bartels served as Vice Chairman, Secretary, Treasurer and Senior Vice President of the Company's international subsidiaries and maintaining consistency withSPAR Marketing Companies, since 1967. He retired as an employee of the Company's other subsidiaries worldwide.
EachCompany on January 1, 2020.

Peter W. Brown joined the Board of these divisions provides merchandising and other marketing services primarily on behalf of consumer product manufacturers and retailers at mass merchandisers, drug store chains, convenience and grocery stores in their respective territories.  SPAR Group Inc.’s clients include the makers and distributors of home entertainment, general merchandise, health and beauty care, consumer goods and food products in their respective territories.

SPAR Group has provided merchandising and other marketing services in the United States since the formation of its predecessor in 1979 and outside the United States since it acquired its first international subsidiary in JapanSGRP in May 2018.  He was appointed to the Audit Committee by the Board on July 31, 2022.  Mr. Brown served as a Board Observer to the Corporation's Board of 2001.  TodayDirectors from 2014 through December 2016. He also serves as a director of and is a consultant to the Company currently conducts its business through its domesticCorporation's Brazilian subsidiary, SPAR BSMT, and international divisions in 9 territories aroundowns EILLC (which owns 10% of SPAR BSMT). Mr. Brown received a BS from the world (listedUniversity of Massachusetts's School of Natural Science and an MBA from the University of Massachusetts's Isenberg School of Management.

Executives and Officers of the Corporation

Set forth in the table below) that encompass approximately 47%below are the names, ages and offices held by all Executives and Officers of the total world population.

The Company's international business in each territory outside the United States is conducted through a foreign subsidiary incorporated in its primary territory.  The primary territory (together with each additional territory in which it conducts its business), establishment date (which may include predecessors), the percentage of the Company's equity ownership, and the principal office location for its US (domestic) subsidiaries and each of its foreign (international) subsidiaries is as follows:
Primary Territory
(+ additional Territory)
 
Date
Established
 
SGRP Percentage
Ownership
 Principal Office Location
United States of America 1979  100% 
Tarrytown, New York
United States of America
Japan May 2001  100% Osaka, Japan
Canada June 2003  100% Toronto, Canada
Turkey July 2003  51%* Istanbul, Turkey
South Africa April 2004  51% Durban, South Africa
India April 2004  100%** New Delhi, India
Lithuania September 2005  51%*** Siauliai, Lithuania
Australia (+ New Zealand) April 2006  51% Melbourne, Australia
Romania July 2009  51%**** Bucharest, Romania
China March 2010  51%***** Shanghai, China

*Currently not in operation while the Company explores a change in this subsidiary's market focus.
**As of September 30, 2010, the Company owned 100% of this subsidiary.
***The Company closed this subsidiary's operations in Fourth Quarter 2010.
****Currently the Company owns two subsidiaries in Romania.  One Subsidiary is 100% owned and the second subsidiary, acquired in July 2009, is 51% owned.
*****Currently the Company owns two subsidiaries in China.  One Subsidiary is 100% owned and the second subsidiary, acquired in March 2010 and operational in August 2010, is 51% owned.

One key to the Company’s international expansion strategy is its internally developed capability to translate all of its current and future proprietary Internet-based logistical, communications, scheduling, tracking and reporting software applications into any language for any market in which it operates or would like to enter.  Through the Company’s IT operations currently located in the facilities in Auburn Hills, Michigan, it provides worldwide access to the Company’s proprietary logistical, communications, scheduling, tracking and reporting software to its entire operations worldwide on a 24/7/365 basis.
Another key to the Company’s international strategy is its policy of seeking a material investor in a new subsidiary in an international location who is an experienced person or company in the local country who is not otherwise affiliated with the Company (each a "Local Investor").  The Company generally seeks to own at least 51% of a foreign subsidiary.  As of the date of this Annual Report, the Company owns 100% of the equity of its international subsidiaries in Canada, India and Japan, and one of its two international subsidiaries in each of China and Romania.  The
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Company is actively seeking another Local Investor in India.  A Local Investor provides equity, credit support and certain services to each international subsidiary not wholly owned by the Company, as well as the useful local attention, perspective and relationships of an equity owner with a strong financial stake in such subsidiary's success.  The Company provides executive management and support to each foreign subsidiary as well its operational backbone (and the Company's procedures and controls) through its proprietary Internet-based logistical, communications, scheduling, tracking, reporting and accounting programs.  (See Item 1A, Risks of Having Material Local Investors in International Subsidiaries, page 18, below.)
Financial Information about the Company’s Domestic and International Geographic Divisions
The Company operates in the same single business segment (e.g., merchandising and marketing services) in both its domestic and international divisions, and the Company tracks and reports certain financial information separately for each of those divisions, as described above.  The Company measures the performance of its domestic and international divisions and subsidiaries using the same metrics.  The primary measurement utilized by management is operating profit level, historically the key indicator of long-term growth and profitability, as the Company is focused on reinvesting the operating profits of each of its international subsidiaries back into its local markets in an effort to improve its market share and continued expansion efforts.  Certain financial information regarding each of the Company's two geographic divisions, which includes their respective net revenues and operating income for each of the years ended December 31, 2010, and December 31, 2009, and their respective long-lived assetsCorporation as of December 31, 2010,2022. For biographical information regarding Michael R. Matacunas, See the Board of Directors of the Corporation, above.  Antonio Calisto Pato (Age 44) joined SGRP and December 31, 2009,became Chief Financial Officer, Secretary and Treasurer on February 27, 2023, and his biographical information is providedincluded below.

Name

Age

Position with SPAR Group, Inc. (1) (2)

Michael R. Matacunas55Chief Executive Officer, President and a Director
Fay DeVriese57Chief Financial Officer, Secretary and Treasurer (3) (4)

Kori G. Belzer

57

Global Chief Operating Officer

William Linnane

48

Chief Strategy and Growth Officer

Ron Lutz

63

Chief Global Commercial Officer

(1)

Under the Corporation's 2022 By-Laws and the resolutions of the Board, each of the following individuals have been designated as both an "Executive" and an "Officer" of the Corporation except as otherwise noted below. An Executive is generally an executive officer of the Corporation and part of its senior management.

(2)

Each named individual is an "at will" employee of the Company. Each has a Potential Severance Payment upon a Change-In-Control and Termination, below.

(3)Ms. DeVriese departed SGRP effective as of January 31, 2023.
(4)Mr. Antonio Calisto Pato joined SGRP and became its Chief Financial Officer, Secretary and Treasurer on February 27, 2023.

Antonio Calisto Pato joined SGRP and became its Chief Financial Officer, Secretary and Treasurer on February 27, 2023.  He has leadership experience in Note 12business, finance and international and strategy, tax and operational expertise. Most recently, Mr. Calisto Pato held CFO roles and directed all aspects of finance, accounting, treasury and tax as CFO for Earth Shoes and interim CFO for Street Trend. Prior to these roles, he held increasing leadership positions at Chiquita Brands International from 2011 to 2021. Mr. Calisto Pato also held financial and business leadership roles at Cemex in Switzerland and PWC in Luxembourg.  He speaks four languages (including those principally used in the Company's Consolidated Financial Statements – Geographic Data, below.

The Company'sBrazilian and Mexican offices) and successfully earned a combined 5-year undergraduate and law degree in Portugal, and went on to complete his post-graduate degree in Tax from the Lisbon Business Strategies
As the marketing services industry continues to expand bothSchool. Mr. Calisto Pato also completed a Master of Advanced Studies in International Tax Law in the United StatesNetherlands at Leiden University and is completing his MBA from the University of North Carolina, Kenan-Flagler Business School at Chapel Hill, NC.

Fay DeVriese served as the Chief Financial Officer of SGRP from August 2020 to January 31, 2023. Prior to joining SGRP, she served as Chief Financial Officer at Letica Corporation and served in financial leadership roles at DSM Engineering Plastics, Eaton Corporation, Continental Automotive Systems and Motorola. Ms. DeVriese is a certified public accountant, licensed in the State of New York. She earned a Bachelor of Business Administration degree from the State University of New York.

Kori G. Belzer became the Global Chief Operating Officer of SGRP in July 2021 and has served as Chief Operating Officer of SGRP since January 1, 2004.  From August 7, 2020, through February 21, 2021, she also served as acting Chief Executive Officer of SGRP.  From 2000 through 2003, Ms. Belzer served as the Chief Operating Officer of SPAR Administrative Services, Inc. (then known as SPAR Management Services, Inc.) ("SAS"), and SPAR Business Services, Inc. (then known as SPAR Marketing Services, Inc.), each an affiliate of SGRP (see Transactions with Related Persons, Promoters and Certain Control Persons, below). From 1997 to 2000, Ms. Belzer served as Vice President Operations of SAS and as Regional Director of SAS from 1995 to 1997. Prior to 1995, she served as Client Services Manager for SPAR/Servco, Inc.

William Linnane joined SGRP in July 2021 as its Chief Strategy and Growth Officer. He is an internationally large retailersexperienced business, merchandising, retail, and manufacturers are outsourcing theirfinance leader with more than 20 years of relevant leadership experience. He has worked in the US, in Europe and in Australia; leading multi-billion-dollar businesses and driving exceptional operational results with different market conditions. He was recently the CEO of a successful advisory and investment firm focused on M&A and retail restructurings. Prior to that, Mr. Linnane was President of Kmart's Pharmacy, Drugstore and Grocery businesses in the U.S. and Puerto Rico, Chief Merchant at a leading book retailer in Europe, and led the Beverage, Candy and Snacks business for Tesco in the UK, working with Coca-Cola, PepsiCo, Nestle, Mars, Mondelez and others to drive branded growth opportunities via merchandising and other initiatives, including digital strategies. Mr. Linnane is a qualified accountant and started his career in finance working in the UK and Ireland at Kingfisher PLC (LSE: KGFL) and Tesco PLC (LSE:TSCO). He has strong experience in strategy, finance, operations, merchandising, sourcing, and leadership roles. Mr. Linnane holds an MA in Economics from Trinity College, University of Dublin.

Ron Lutz joined SGRP joined SGRP in July 2021 as its Chief Global Commercial Officer. He built a 35-year executive career guiding Fortune 100 companies and private organizations in the retail customer experience space. He has led retail organizations through transformational growth, change management and market expansions. Throughout his career he has held responsibilities in the areas of sales, operations, strategy, marketing, service needs to third-party providers. The Company believes that offering marketing services on a nationalomni-channel customer experience development, international expansion, and global basis will provide it with a competitive advantage. Moreover, the Company believes that successful use of and continuous improvements to a sophisticated technology infrastructure, including the Company's proprietary Internet-based software, is key to providing clients with a high level of client service while maintaining efficient, low cost operations. The Company’s objective is to becomeacquisitions. Most recently, Ron was consulting as an international strategic retail merchandisingadvisor. Prior to this, he was the Chief Client Officer at a private retail services and marketing service provider by pursuing its operating and growth strategy, as described below.

Increasing the Company's Sales Efforts:
The Company is seeking to increase revenues by increasing sales to its current clients, as well as establishing long-term relationships with new clients, many of which currently use other merchandising companies for various reasons. The Company believes its technology, field implementation and other competitive advantages will allow it to capture a larger share of this market over time. However, there can be no assurance that any increased sales will be achieved.
Developing New Products:
The Company is seeking to increase revenues through the internal development and implementation of new products and services that add value to its clients’ retail merchandising related activities, some of which have been identified and are currently being tested for feasibility and market acceptance. However, there can be no assurance that any new products of value will be developed or that any such new product can be successfully marketed.
Strategic Acquisitions:
The Company is seeking to acquire businesses or enter into joint ventures or other arrangements with companies that offer similar merchandising or marketing services bothsolutions company. With his extensive background in the United Statesindustry, Ron has served in the capacity and/or held titles such as Chief Marketing Officer, Chief Customer Officer, VP Customer Experience Deployment, VP New Store – Remerchandising, VP Enterprise Print /Fixtures, and worldwide. The Company believes that increasing its industry expertise, adding product segments,VP Store Service Solutions. Earlier in his career, he served as a Vice President with Lowe's Companies (NYSE: LOW), where he led the deployment of an omni-channel customer experience solution across 2,000+ North American retail store locations. He also had responsibility for new store development in emerging markets and increasing its geographic breadth will allow it to service its clients more efficientlystore renovations across the US, Canada, and cost effectively. Through such acquisitions, the Company may realize additional operating and revenue synergies and may leverage existing relationships with manufacturers, retailers and other businesses to create cross-selling opportunities. However, there can be no assurance that any of the acquisitions will occur or whether, if completed, the integration of the acquired businesses will be successful or the anticipated efficiencies and cross-selling opportunities will occur.Mexico.

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On December 4, 2009, the Company acquired substantially all of the domestic merchandising service business and customer contracts and hired certain employees of Brenner Associates Inc., which also did business as National Marketing Services or "NMS".  The NMS assets acquired included all of the stock of its wholly owned subsidiaries; National Assembly Services, Inc. ("NAS"), a New Jersey corporation that performs furniture assembly services in stores,
 
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homes

CORPORATE GOVERNANCE

Board Structure, Leadership and offices,Risk Oversight

The Board of Directors of the Corporation (the Board") is responsible for overseeing the Corporation and NMS Retail Services ULC (“NRS”its subsidiaries (collectively, the "Company"), a Nova Scotia unlimited Liability Company that performs merchandising services in Canada.  See Note 14both directly and through its committees (as described below), pursuant to the Consolidated Financial Statements – Acquisitions.

In March 2010,authority conferred by the Corporation's 2022 By-Laws, charters and policies and by applicable law. The Board's responsibilities include (without limitation) the appointment and oversight of the Company's Chief Executive Officer. The Board also provides oversight of risks that could affect the Company, both directly and through its committees with respect to the most significant risks facing the Company (including material operational or financial risks). Pursuant to their respective charters, the Board has established a new Canadian subsidiary, SPAR Wings & Ink Company ("SWI"). On April 1, 2010, SWI acquired substantially all of the business, customer contracts, receivables, work-in progressand delegated various oversight and other assets and assumed certain specified liabilities of 2078281 Ontario Limited, an Ontario merchandising and marketing services company doing business as Wings & Ink (the "Seller").  At that closing, SWI also hired substantially all of the Seller’s employees, which included consulting contractsresponsibilities to the principalsAudit Committee, the Compensation Committee and the Governance Committee, as such committees are defined and more fully described below under the headings "Audit Committee", "Compensation Committee" and "Governance Committee".

The Board is comprised of the Seller. See Note 14Independent Directors, Super Independent Directors (See Board Size, Quorum and Voting, Director Nominations: Experience, Integrity, Diversity and other Criteria and 2022 By Laws, below) and Non- Independent Directors. The Governance Committee is responsible for determining and recommending to the Consolidated Financial Statements – Acquisitions.

Leveraging and Improving onfull Board whether a Director satisfies the Company's Technological Strengths:
The Company believes that providing merchandising and marketing services in a timely, accurate and efficient manner, as well as delivering timely, accurate and useful reports to its clients, are key components that are and will continue to be critical toapplicable Nasdaq independent requirements or the Company’s success. The Company has developed Internet-based logistic deployment, communications, scheduling, tracking and reporting systems that improve the productivity of its merchandising specialists and assembly technicians, and provide timely data to its clients. The Company’s merchandising specialists and assembly technicians use hand-held, laptop and personal computers and Interactive Voice Response (“IVR”) technology to report the status of each store or client product they service. Merchandising specialists and technicians report on a variety of issues such as store conditions, status of client products (e.g. out of stocks, inventory, display placement) or they may scan and process new orders for certain products.
The Company has developed a proprietary automated labor tracking system for its merchandising specialists and assembly technicians to communicate work assignment completion information via the Internet or other telecommunication infrastructure by using, among other things, hand held, laptop and personal computers, cellular telephones, landlines or IVRs.  This tracking system enables the Company to report hours and other completion information for each work assignment on a daily basis and provides the Company with daily, detailed tracking of work completion.  This information is analyzed and displayed in a variety of reports that can be accessed by both the Company and its clients via a secure website. These reports can depict the status of merchandising projects in real time. This tracking technology also allows the Company to schedule its merchandising specialists and technicians more efficiently, quickly quantify the benefits of its services to clients, rapidly respond to clients’ needs and rapidly implement programs.
The Company intends to continue to utilize computer (including hand-held computers), Internet, cellular telephone and other technologies to enhance its efficiency and ability to provide real-time data to its clients, as well as, maximize the speed of communication, and logistical deployment of its merchandising specialists and assembly technicians. Industry sources indicate that clients are increasingly relying on merchandising and marketing service providers to supply rapid, value-added information regarding the results of merchandising and marketing expenditures on sales and profits. The Company (together with certain of its affiliates) has developed and owns proprietary Internet-based, hand-held and smart phone software technology that allows it to utilize the Internet to communicate with its field management, schedule its store-specific field operations more efficiently, receive information and incorporate the data immediately, quantify the benefits of its services to clients faster, respond to clients’ needs quickly and implement client programs rapidly. The Company has successfully modified and is currently utilizing certain of its software applicationscomprehensive super-independence requirements established in the operation of its international subsidiaries.
2022 By-Laws. The Company believes that it can continue to improve, modify and adapt its technology to support merchandising and other marketing services for additional clients and projects in the United States and in foreign markets. The Company also believes that its proprietary Internet-based, wireless and other software technology gives it a competitive advantage in the marketplace.
Improving the Company's Operating Efficiencies:
The Company will continue to seek greater operating efficiencies. The Company believes that its existing field force and technology infrastructure can support additional clients and revenue in both its Domestic Merchandising Services Division and International Merchandising Services Division.
Descriptions Of The Company's Services
The Company currently provides a broad array of merchandising and marketing services to some of the world’s leading companies, both domestically and internationally. The Company believes its full-line capabilities provide fully integrated solutions that distinguish the Company from its competitors. These capabilities include the ability to develop plans at one centralized location, effect chain wide execution, implement rapid, coordinated responses to its clients’ needs and report on a real time Internet enhanced basis throughout the world. The Company also believes its
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international presence, industry-leading technology, centralized decision-making ability, local follow-through, ability to recruit, train and supervise merchandisers, ability to perform large-scale initiatives on short notice, and strong retailer relationships provide the Company with a significant advantage over local, regional or other competitors.
The Company’s operations are currently divided into two divisions: the Domestic Merchandising Services Division and the International Merchandising Services Division. The Company's domestic division provides merchandising and marketing services, furniture and other product assembly services, RFID services, technology services and marketing research to manufacturers, distributors and retailers in the United States. Those services are primarily performed in mass merchandisers, office supply, grocery, drug store and other chains, and independent, convenience and electronics stores. The Company's international division, established in May 2001, currently provides similar merchandising, marketing services and in-store event staffing through subsidiaries in Japan, Canada, South Africa, India, Romania, China, Australia and New Zealand. Today the Company operates in 9 countries that encompass approximately 47% of the total world population.
The Company currently provides five principal types of merchandising and marketing services: syndicated services, dedicated services, project services, assembly services and in-store event staffing services.
Syndicated Services:
Syndicated services consist of regularly scheduled, routed merchandising and marketing services provided at the retail store level for various manufacturers and distributors. These services are performed for multiple manufacturers and distributors, including, in some cases, manufacturers and distributors whose products are in the same product category. Syndicated services may include activities such as:
•Reordering and replenishment of products
•Ensuring that the Company's clients' products authorized for distribution are in stock and on the shelf or sales floor
•Adding new products that are approved for distribution but not yet present on the shelf or sales floor
•Designing and implementing store planogram schematics
•Setting product category shelves in accordance with approved store schematics
•Ensuring that product shelf tags are in place
•Checking for overall salability of the clients' products
•Placing new product and promotional items in prominent positions
•Kiosk replenishment and maintenance

Dedicated Services:
Dedicated services consist of merchandising and marketing services, generally as described above, which are performed for asuper-independence requirement establishes specific retailer or manufacturer by a dedicated organization, including a management team working exclusively for that retailer or manufacturer. These services include many of the above activities detailed in syndicated services, as well as, new store set-ups, store remodels and fixture installations. These services are primarily based on agreed-upon rates and fixed management fees.
Project Services:
Project services consist primarily of specific in-store services initiated by retailers and manufacturers, such as new store openings, new product launches, special seasonal or promotional merchandising, focused product support, product recalls, in-store product demonstrations and in-store product sampling. The Company also performs other project services, such as kiosk product replenishment, inventory control, new store sets and existing store resets, re-merchandising, remodels and category implementations, under annual or stand-alone project contracts or agreements.
Assembly Services:
The Company's assembly services are initiated by retailers, manufacturers or consumers, and upon request the Company assembles furniture, grills, fitness equipment and many other products in stores, homes and offices.  The Company performs ongoing routed coverage at retail locationscriteria to ensure that furniture and other product lines are well displayed and maintained, and buildinga Director is unaffiliated with any new items or replacement items, as required.specific significant stockholder. In addition, the Company provides in-homeBoard has established the position of Chairman of the Board, which is a non-executive position, and in-office assemblyChief Executive Officer (who is also President). Per the 2022 By-Laws, the Chairman, the Vice Chairman and Chairman of any Committee must be Super Independent Directors. The Board believes these definitions and criteria ensure a strong, experienced and independent Board to customers who purchaseprovide oversight on behalf of all stockholders.

To assist the Board and its Committees in their product from retailers, whether in store, on line or through catalog sales.

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In-Store Event Staffing Services:
The Company provides in-store product samplings and in-store product demonstrations to national chains in target markets worldwide. The Company has also developed additional product offerings in an effort to expand this aspect of its business.
Other Marketing Services:
Other marketing services performed byrespective oversight roles, the Company include:
Test Market Research - Testing promotion alternatives, new products and advertising campaigns, as well as packaging, pricing, and location changes, at the store level.
Mystery Shopping - Calling anonymously on retail outlets (e.g. stores, restaurants, banks) to check on distribution or display of a brand and to evaluate products, service of personnel, conditions of store, etc.
Data Collection - Gathering sales and other information systematically for analysis and interpretation.
RFID – Utilizing technology to track merchandiser performance, product inventory at store level as well as other related merchandising and marketing applications.
The Company's Sales and Marketing
The Company offers global merchandising solutions to clients that have worldwide distribution. This effort is spearheaded outChief Executive Officer brings members of the Company's headquarters in the United States, and the Company continues to develop local markets through its domestic and international subsidiaries throughout the world.
The Company’s marketing and sales efforts within its Domestic Merchandising Services Division are structured to develop new national, regional and localmanagement from various business within the United States, including new sales and customers through the Company's acquisitions of existing businesses. The Company’s domestic corporate business development team directs its efforts toward the senior management of prospective and existing clients. Marketing and sales targets and strategies are developed at the Company’s headquarters and communicated to the Company’s domestic sales force for execution. The Company's sales force is located nationwide and works from both the Company's offices and their home offices. In addition, the Company’s domestic corporate account executives play an important role in the Company’s new business development efforts within its existing manufacturer, distributor and retailer client base.
The Company's marketing and sales efforts within its International Merchandising Services Division are structured to develop new national, regional and local businesses in both new and existing international territories by acquiring existing businesses (or establishing new joint ventures) and within the Company's existing international territories through targeted sales efforts.  The Company has an international acquisition team whose primary focus is to seek out and develop acquisitions throughout the world and consists of personnel located in the United States, Greece and Australia and other support from the Company's information technology, field operation, client services and finance specialists.  Marketing and sales targets and strategies are developed within an international subsidiary, in consultation with the Company's U.S. headquarters, with assistance from the applicable Local Investor, and are communicated to the Company's applicable international sales force for execution.  The Company's international sales force for a particular territory is located throughout that territory and work from the Company's office in that territory and their home offices.  In addition, the Company's international corporate account executives play an important role in the Company's new business development efforts within the Company's existing manufacturer, distributor and retailer client base within their respective territories.
As partor administrative areas into meetings of the retailer consolidation, retailers are centralizing most administrative functions, including operations, procurement and category management. In response to this centralization and the growing importance of large retailers, many manufacturers have reorganized their selling organizations around a retailer team concept that focuses on a particular retailer. The Company has responded to this emerging trend and currently has on-site personnel in place at select retailers.
The Company’s business development process includes a due diligence period to determine the objectives of the prospectiveBoard or existing client, the work required to satisfy those objectives and the market value of such work to be performed. The Company employs a formal cost development and proposal process that determines the cost of each element of work required to achieve such client’s objectives. The Company uses these costs, together with an analysis of market rates, to develop a formal quotation that is then reviewed at various levels within the organization. The pricing of this internal proposal must meet the Company’s objectives for profitability, which are established as part of the business
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planning process. After the Company approves this quotation, a detailed proposal is presented to the Company's prospective or existing client. However, the Company has agreed, and in the future may agree,applicable Committee from time to time to perform servicesmake presentations, answer questions and provide insight to the members, including insights into areas of potential risk. Each Committee endeavors to satisfy its responsibilities through: (i) its receipt and review of regular reports directly from officers responsible for a client that becomeoversight of particular risks within the Company; (ii) direct communications by the Committee or turn out to be unprofitable even thoughits Chairman with the Company expected to make a profit when agreeing to perform them.  See "Risks of Unprofitable Services" and "Variability of Operating Results and Uncertainty in Client Revenue" in Part 1A – Risk Factors, below.
The Company'SCustomer Base
The Company currently represents numerous manufacturers and/or retail clients in a wide range of retail chains and stores worldwide, and its customers (which it refers to as clients) include:
•Mass Merchandisers    
•Drug
•Grocery
•Office Supply
•Other retail outlets (such as discount and electronic stores, in-home and in-office, etc.)

One customer accounted for 10%Corporation's senior management; (iii) independent registered public accounting firm (in the case of the Company's net revenues forAudit Committee) and counsel respecting such matters and related risks; (iv) its executive sessions; (v) its reports (generally through its Chairman) to the years ended December 31, 2010,full Board respecting the Committee's considerations; and 2009, resulting from merchandising services performed for a large pharmaceutical distributor. This customer accounted for approximately 5%(vi) if applicable, actions and 6% of the Company's accounts receivable at December 31, 2010,recommendations regarding such matters and 2009, respectively.
In addition, approximately 10% and less than 1% of the Company’s net revenue for the years ended December 31, 2010, and 2009, respectively, resulting from merchandising and assembly services performed for a major office supply chain and for manufacturers within this chain.  These customers accounted for approximately 3% and less than 1% of the Company’s accounts receivable at December 31, 2010, and 2009, respectively.
Approximately 7% and 6% of the Company’s net revenues for the years ended December 31, 2010, and 2009, respectively, resulted from merchandising services performed for manufacturers and others in stores operated by a leading mass merchandising chain in the United States. This customer accounted for approximately 4% and 9% of the Company’s accounts receivable at December 31, 2010, and 2009, respectively.
In 2010, the Company performed merchandising and marketing services for manufacturers and others in a national drug store chain.  These services accounted for approximately 6% of the Company’s net revenues for the twelve months ended December 31, 2010.  Effective March 1, 2011, the Company will no longer be providing these merchandising and marketing services in this national drug store chain.
The Company's Competition
The marketing services industryrisks as deemed appropriate.

Risk oversight is highly competitive. The Company’s competition in the Domestic Merchandising Services Division and International Merchandising Services Divisions arises from a number of large enterprises, many of which are national or international in scope. The Company also competes with a large number of relatively small enterprises with specific client, channel or geographic coverage, as well as with the internal marketing and merchandising operations of its existing and prospective clients. The Company believes that the principal competitive factors within its industry include development and deployment of technology, breadth and quality of client services, cost, and the ability to execute specific client priorities rapidly and consistently over a wide geographic area. The Company believes that its current structure favorably addresses these factors and establishes it as a leader in the mass merchandiser, electronics and chain drug store channels of trade. The Company also believes it has the ability to execute major national and international in-store initiatives and develop and administer national and international retailer programs. Finally, the Company believes that,conducted primarily through the useAudit Committee, but also is conducted through the Compensation Committee or Governance Committee, as applicable. The Audit Committee is responsible for overseeing the accounting, auditing and continuing improvement of its proprietary Internet software, other technological efficienciesfinancial reporting and various costdisclosure principles, policies, practices and controls the Company will remain competitive in its pricing and services.

The Company's Trademarks
The Company has numerous registered trademarks. Although the Company believes its trademarks may have value, the Company believes its services are sold primarily based on breadth and quality of service, cost, and the ability to execute specific client priorities rapidly, efficiently and consistently over a wide geographic area. (See “An Overview of the Merchandising and Marketing Services Industry” and “Competition”, above).
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The Company's Employees
Worldwide the Company utilized a labor force of approximately 10,000 people in 2010. Today the Company operates in 9 countries that encompass approximately 47% of the total world population.
During 2010, the Company’s Domestic Merchandising Services Division utilized a labor force of approximately 7,500 people. As of December 31, 2010 there were 76 full-time employees and 42 part-time employees engaged in domestic operations. The Company’s Domestic Merchandising Services Division utilized the services of its affiliate, SPAR Management Services, Inc. (“SMSI”), to schedule and supervise its field force of merchandising specialists and assembly technicians, which consists of field merchandising specialist furnished by SPAR Marketing Services, Inc. (“SMS”), another affiliate of the Company, as well as the Company’s domestic field employees.  (See Item 13 – Certain Relationships and Related Transactions and Director Independence, below) and (Note 10 to the Consolidated Financial Statements – Related Party Transactions) SMS and SMSI furnished approximately 7,300 merchandising specialists and assembly technicians (all of whom are independent contractors of SMS) and 54 field managers (all of whom were full-time employees of SMSI), respectively
As of December 31, 2010, the Company’s International Merchandising Services Division’s labor force consisted of approximately 2,500 people. There were 227 full-time and 34 part-time employees engaged in international operations.  The International Merchandising Services Division’s field force consisted of approximately 2,200 merchandising specialists.
To support the International Merchandising Services Division, the Company utilizes employees of its Domestic Merchandising Services Division as well as the employees of its affiliates, SMSI and SMS.  However, dedicated employees will be added to the International Merchandising Services Division as the need arises. In 2009, the Company’s affiliate, SPAR InfoTech, Inc. (“SIT”), also provided programming and other assistance to the Company’s various divisions.  In 2010 these services are now provided directly by the Company (See Item 13 – Certain Relationships and Related Transactions and Director Independence, below).
The Company, SMS, SMSI and SIT consider their relations with their respective employees and field merchandising specialist to be good.
Item 1A. Risk Factors
There are various risks associated with investing in any common stock issued by SGRP ("SGRP Common Stock") that are more fully described below. You should carefully consider each of those risk factors before you purchase or trade any  SGRP Common Stock.  If any of the described risks develops into actual events, or any other risks arise and develop into actual events, the Company's present or future assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results, risks or condition could be materially and adversely affected (in whole or in part), the market price of the SGRP Common Stock could decline, and you could lose all or part of your investment in your SGRP Common Stock.
The Company has described the risk factors that it currently consider material based on its best estimates respecting those risk factors, the Company's current and future assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition, the likelihood of those risks developing into actual events and the likely impact of those events on them, which all involve and include "forward-looking statements" within the meaning of applicable Securities Law (as discussed above).  The Company also may be facing additional risks individually, and the Company's industry or the economy may be facing additional risks, whether domestically or internationally, that are currently unknown to the Company, that are more material or otherwise different than the Company currently believes, or that the Company may have incorrectly analyzed (whether as to the nature or likelihood of such risks or their potential effect).   There also may be risks that you (as a potential investor or trader) would recognize or consider more likely or material than the Company does.
Any of the risk factors or other cautionary statements described in this Annual Report or any other SEC Report, or any other event or circumstance bearing risk or harm, could at any time arise, become applicable, change or worsen (as the case may be) and materially and adversely effect the Company or any of its assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results, risks or condition.
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Accordingly, the Company's risk factors and forward-looking statements each involve known and unknown risks, uncertainties, potential errors and misjudgments and other factors that could materially and adversely affect, and could contribute to the Company's failure to achieve or realize, in whole or in part, the Company's estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results, risks or condition, whether as expressed or implied by such forward-looking statements.
The Company does not intend or promise, and the Company expressly disclaims any obligation, to publicly update or revise any forward-looking statements, any of those risk factors or any other cautionary statements (in whole or in part), whether as a result of new information, future events or recognition or otherwise, except as and to the extent required by applicable law.
Dependence on Largest Customer and Large Retail Chains
As discussed above in “Customer Base”, the Company has a significant amount of business with certain customers. The loss of any of these customers, the loss of the ability to provide merchandising and marketing services in those chains, or the failure to attract new large clients could significantly decrease the Company’s revenues and such decreased revenues could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Dependence on Trend Towards Outsourcing
The business and growth of the Company depends in large part on the continued trend toward outsourcing of merchandising and marketing services, which the Company believes has resulted from the consolidation of retailers and manufacturers, as well as the desire to seek outsourcing specialists and reduce fixed operation expenses. There can be no assurance that this trend in outsourcing will continue, as companies may elect to perform such services internally. A significant change in the direction of this trend generally, or a trend in the retail, manufacturing or business services industry not to use, or to reduce the use of, outsourced marketing services such as those provided by the Company, could significantly decrease the Company’s revenues and such decreased revenues could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Failure to Successfully Compete
The merchandising and marketing services industry is highly competitive and the Company has competitors that are larger (or part of larger holding companies) and may be better financed. In addition, the Company competes with: (i) a large number of relatively small enterprises with specific client, channel or geographic coverage; (ii) the internal merchandising and marketing operations of its existing and prospective clients; (iii) independent brokers; and (iv) smaller regional providers. Remaining competitive in the highly competitive merchandising and marketing services industry requires that the Company monitor and respond to trends in all industry sectors. There can be no assurance that the Company will be able to anticipate and respond successfully to such trends in a timely manner. If the Company is unable to successfully compete, it could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
If certain competitors were to combine into integrated merchandising and marketing services companies, or additional merchandising and marketing service companies were to enter into this market, or existing participants in this industry were to become more competitive, it could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Risks of Continuing Losses and Financial Covenant Violations
The Company was profitable in both 2010 and in 2009 (See Item 8 – Financial Statements and Supplementary Data, below).  The Company also was profitable in 2008 but suffered losses in 2007.  The Company's 2007 losses and related effects caused repeated violations of certain covenants in the Company's old domestic credit facility during 2007, 2008 and 2009, which its old lender periodically waived for fees rather than permanently reset to realistically achievable levels.  However, the Company changed its domestic lenders in 2010 and entered into a new credit facility with financial covenants that the Company believe are more realistic and thus less likely to require waivers.  The Company was in compliance of all its bank covenants in 2010.  See Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources, below.
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There can be no assurances that in the future the Company will be profitable, will not violate covenants of its current or future Credit Facilities, its lenders would waive any violations of such covenants, the Company will continue to have adequate lines of credit, or will continue to have sufficient availability under its lines of credit. Accordingly, continued losses or marginal profitability by the Company, as well as any failure to maintain sufficient availability or lines of credit from the Company’s lenders, could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Variability of Operating Results and Uncertainty in Client Revenue
The Company has experienced and, in the future, may experience fluctuations in quarterly operating results. Factors that may cause the Company’s quarterly operating results to vary from time to time and may result in reduced revenue and profits include: (i) the number of active client projects; (ii) seasonality of client products; (iii) client delays, changes and cancellations in projects; (iv) the timing requirements of client projects; (v) the completion of major client projects; (vi) the timing of new engagements; (vii) the timing of personnel cost increases; and (viii) the loss of major clients. In addition, the Company is subject to revenue or profit uncertainties resulting from factors such as unprofitable client work (see below) and the failure of clients to pay. The Company attempts to mitigate these risks by dealing primarily with large credit-worthy clients, by entering into written or oral agreements with its clients and by using project budgeting systems. These revenue fluctuations could materially and adversely affect the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Risks of Unprofitable Services
The Company has agreed, and in the future may agree, from time to time to perform services for its client that become or turn out to be unprofitable even though the Company expected to make a profit when agreeing to perform them.  The Company's services for a particular client or project may be or become unprofitable due to mistakes or changes in circumstance, including (without limitation) any (i) mistake or omission made in investigating, evaluating or understanding any relevant circumstance, requirement or request of the Company's client or any aspect of the prospective services or their inherent problems, (ii) mistake made in pricing, planning or performing the prospective service, (iii) service non-performance, mis-performance or free re-performance, or (iv) change in cost, personnel, regulation or other performance circumstance.  Unprofitable services could reduce the Company's net revenues and, if material in gross amount or degree of unprofitability, could materially and adversely affect the Company or its actual, expected, estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Failure to Develop New Products
A key element of the Company’s growth strategy is the development and sale of new products. While several new products are under current development, there can be no assurance that the Company will be able to successfully develop and market new products. The Company’s inability or failure to devise useful merchandising or marketing products or to complete the development or implementation of a particular product for use on a large scale, or the failure of such products to achieve market acceptance, could adversely affect the Company’s ability to achieve a significant part of its growth strategy and the absence of such growth could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition and could limit the Company’s ability to significantly increase its revenues and profits.
Inability to Identify, Acquire and Successfully Integrate Acquisitions
Another key component of the Company��s growth strategy is the acquisition of businesses across the United States and worldwide that offer similar merchandising or marketing services. The successful implementation of this strategy depends upon the Company’s ability to identify suitable acquisition candidates, acquire such businesses on acceptable terms, finance the acquisition and integrate their operations successfully with those of the Company. There can be no assurance that such candidates will be available or, if such candidates are available, that the price will be attractive or that the Company will be able to identify, acquire, finance or integrate such businesses successfully. In addition, in pursuing such acquisition opportunities, the Company may compete with other entities with similar growth strategies, these competitors may be larger and have greater financial and other resources than the Company. Competition for these acquisition targets could also result in increased prices of acquisition targets and/or a diminished pool of companies available for acquisition.
The successful integration of these acquisitions also may involve a number of additional risks, including: (i) the inability to retain the clients of the acquired business; (ii) the lingering effects of poor client relations or service
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performance by the acquired business, which also may taint the Company’s existing businesses; (iii) the inability to retain the desirable management, key personnel and other employees of the acquired business; (iv) the inability to fully realize the desired efficiencies and economies of scale; (v) the inability to establish, implement or police the Company’s existing standards, controls, procedures and policies on the acquired business; (vi) diversion of management attention; and (vii) exposure to client, employee and other legal claims for activities of the acquired business prior to acquisition. In addition, any acquired business could perform significantly worse than expected.
The inability to identify, acquire, finance and successfully integrate such merchandising or marketing services business could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Uncertainty of Financing for, and Dilution Resulting from, Future Acquisitions
The timing, size and success of acquisition efforts and any associated capital commitments cannot be readily predicted. Future acquisitions may be financed by issuing shares of the SGRP Common Stock, cash, or a combination of Common Stock and cash. If the SGRP Common Stock does not maintain a sufficient market value, or if potential acquisition candidates are otherwise unwilling to accept the SGRP Common Stock as part of the consideration for the sale of their businesses, the Company may be required to obtain additional capital through debt or equity financings. To the extent the SGRP Common Stock is used for all or a portion of the consideration to be paid for future acquisitions, dilution may be experienced by existing stockholders. In addition, there can be no assurance that the Company will be able to obtain the additional financing it may need for its acquisitions on terms that the Company deems acceptable. Failure to obtain such capital would materially and adversely affect the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Reliance on the Internet and Third Party Vendors
The Company relies on the Internet for the scheduling, tracking, coordination and reporting of its merchandising and marketing services. The Internet has experienced, and is expected to continue to experience, significant growth in the numbers of users and amount of traffic as well as increased attacks by hackers and other saboteurs. To the extent that the Internet continues to experience increased numbers of users, frequency of use or increased bandwidth requirements of users, there can be no assurance that the Internet infrastructure will continue to be able to support the demands placed on the Internet by this continued growth or that the performance or reliability of the Internet will not be adversely affected. Furthermore, the Internet has experienced a variety of outages and other delays as a result of accidental and intentional damage to portions of its infrastructure, and could face such outages and delays in the future of similar or greater effect. The Company relies on third-party vendors to provide its Internet access and other services used in its business, and the Company has no control over such third-party providers. Any protracted disruption or material slowdown in Internet or other services could increase the Company’s costs of operation and reduce efficiency and performance, which could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Economic and Retail Uncertainty
The markets in which the Company operates are cyclical and subject to the effects of economic downturns. The current political, social and economic conditions, including the impact of terrorism on consumer and business behavior, make it difficult for the Company, its vendors and its clients to accurately forecast and plan future business activities. Substantially all of the Company’s key clients are either retailers or those seeking to do product merchandising at retailers. Should the retail industry experience a significant economic downturn, the resultant reduction in product sales could significantly decrease the Company’s revenues. The Company also has risks associated with its clients changing their business plans and/or reducing their marketing budgets in response to economic conditions, which could also significantly decrease the Company’s revenues. Such revenue decreases could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Risks Associated with Furniture and Other Related Assembly Services
The Company's technicians assemble furniture and other products in the homes and offices of customers.  Working at a customer's home or office could give rise to claims against the Company for errors, omissions or misconduct by those technicians, including (without limitation) harassment, personal injury, death, damage to or theft of customer property, or other civil or criminal misconduct by such technicians.  Claims also could be made against the
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Company as a result of its involvement in such assembly services due to (among other things) product assembly errors and omissions, product defects, deficiencies, breakdowns or collapse, products that are not merchantable or fit for their particular purpose, products that do not conform to published specifications or satisfy customer expectations, or products that cause personal injury, death or property damage, in each case whether actual, alleged or perceived by customers, and irrespective of how much time may have passed since such assembly.  If such claims are asserted and adversely determined against the Company, then to the extent such claims are not covered by indemnification from the product's seller or manufacturer or by insurance, they could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Dependence Upon and Potential Conflicts in Services Provided by Affiliates
The success of the Company’s domestic business is dependent upon the successful execution of its field services by SPAR Marketing Services, Inc. (“SMS”), and SPAR Management Services, Inc. (“SMSI”), each of which is an affiliate, but not a subsidiary, of the Company and none of whichregularly considers (among other things) financial, reporting, internal control, related party, legal and other issues and related risks and uncertainties material to the Company. The Compensation Committee is consolidated inresponsible for overseeing the Company’s financial statements. SMS provides substantially allperformance and compensation of the merchandising specialists used byexecutives, director compensation and the Company in conducting its domestic business (86% of domestic field expense in 2010),other compensation, equity incentive, related policies, and SMSI provides substantially allmaterial benefits of the domestic field management services (94%Company. The Governance Committee is responsible for overseeing the finding, vetting and nomination of domestic field management in 2010) used bydirectors and committee members for the Company in conductingBoard and senior Executives for SGRP, and the content and application of the 'Ethics Code, corporate documents and governance policies and practices.

Each of the Committee charters requires the Board to determine that each of its businessmembers satisfy applicable Nasdaq requirements for the respective Committee and be free from any relationship which may interfere with the exercise of his or her independent judgment as a member. The 2022 By-Laws also require that the Chairman of each Committee and at least two (2) of its members be a Super Independent Director (See Item 13 – Certain RelationshipsBoard Size, Quorum and Related Transactions, Voting, and Director Independence),Nominations: Experience, Integrity, Diversity and (See Note 10other Criteria, below). 

Board Meetings

The Board meets regularly to the Consolidated Financial Statements – Related Party Transactions). These services provided to the Companyreceive and discuss operating and financial reports presented by SMS and SMSI are on a cost-plus basis pursuant to contracts that are cancelable on 60 days notice prior to December 31 of each year or with 180 days notice at any other time (See Item 13 – Certain Relationships and Related Transactions, and Director Independence, below), and (See Note 10 to the Consolidated Financial Statements – Related Party Transactions). The Company has determined that the services provided by SMS and SMSI are at rates that are slightly favorable to the Company.

SMS and SMSI (collectively, the “SPAR Affiliates”) are owned solely by Mr. Robert G. Brown, founder, director, Chairman of the Company, and Mr. William H. Bartels, founder, director, and Vice Chairman of the Company, each of whom are also directors and executive officers of each of the SPAR Affiliates (See Item 13 – Certain Relationships and Related Transactions, and Director Independence, below), and (Note 10 to the Consolidated Financial Statements – Related Party Transactions). In the event of any dispute in the business relationships between the Company and one or more of the SPAR Affiliates, it is possible that Messrs. Brown and Bartels may have one or more conflicts of interest with respect to those relationships and could cause one or more of the SPAR Affiliates to renegotiate or cancel their contracts with the Company or otherwise act in a way that is not in the Company’s best interests.
While the Company’s relationships with SMS and SMSI are excellent, there can be no assurance that the Company could (if necessary under the circumstances) replace the field merchandising specialists and management currently provided by SMS and SMSI, respectively, in sufficient time to perform its client obligations or at such favorable rates in the event the SPAR Affiliates no longer performed those services. Any cancellation, other nonperformance or material pricing increase under those affiliate contracts could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Risks of Common Stock Ownership
Dividends on SGRP Common Stock are discretionary, have never been paid, are subject to restrictions in the Company's credit facilities and applicable law and can only be paid to the holders of SGRP Common Stock if the accrued and unpaid dividends and potential dividends are first paid to the holders of the Series A Preferred Stock.  In the event of the Company's liquidation, dissolution, or winding-up, the holders of Common Stock are only entitled to share in the Company's assets, if any, that remain after the Company make payment of and provision for all of the Company's debts and liabilities and the liquidation preferences of all of the Company's outstanding Preferred Stock.  There can be no assurance that sufficient funds will remain in any such case for dividends or distributions to the holders of SGRP Common Stock.
Risks related to the Company's Preferred Stock
The Company's ability to issue or redeem Preferred Stock, or any rights to purchase such shares, could discourage an unsolicited acquisition proposal.  For example, the Company could impede a business combination by issuing a series of preferred stock containing class voting rights that would enable the holders of such preferred stock to block a business combination transaction.  Alternatively, the Company could facilitate a business combination transaction by issuing a series of preferred stock having sufficient voting rights to provide a required percentage vote of
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the stockholders.  Additionally, under certain circumstances, the Company's issuance of preferred stock could adversely affect the voting power of the holders of the Company's common stock.  Although the Company's board of directors is required to make any determination to issue any preferred stock based on its judgment as to the best interests of the Company's stockholders, the Company's board of directors could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of the Company's stockholders may believe to be in their best interests or in which stockholders may receive a premium for their stock over prevailing market prices of such stock.  The Company's board of directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or applicable stock exchange requirements.
Risks of Illiquidity in SGRP Common Stock
The market price of the Company's common stock has historically experienced and may continue to experience significant volatility.advisors. During the year ended December 31, 2010,2022, the sale priceBoard held sixteen (16) meetings. Each incumbent Director is required to attend 75% of SGRP Common Stock fluctuatedthe board meetings. In 2022, all then current members attended at least 75% of the meetings.

Board Size, Quorum and Voting

Under the 2022 By-Laws: the current Board size is fixed at seven (7) directors as of January 25, 2022; the Chairman and at least three (3) of the Board members must be Super Independent Directors (as defined therein), and the Chairman, Vice Chairman and Chairman of each Committee and at least two (2) of each Committee's members must be a Super Independent Director.

The Board size can only be changed from $0.42time to $1.10 per share. The Company believes thattime by amending the 2022 By-Laws.

Board meetings require an attendance quorum of at least 70% of its Common Stockmembers, including a majority of the Super Independent Directors.

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Except as noted below: each director shall be entitled to one (1) vote; and the vote of the majority of the directors present at any meeting at which a quorum is subject to wide price fluctuations due to (among other things)present shall be the following:

act of the Board.

However, in the event the Board:

· 

(i)

Includes two (2) Super Independent Directors and the relatively small public floatChief Executive Officer, the director with the least tenure on the Board who is not a Super- Independent Director (other than the Chief Executive Officer) shall lose the right to vote on any matters that come before the Board;

(ii)

Includes one (1) Super Independent Director and corresponding thin trading market for SGRP Common Stock, attributable to (among other things) the large block of voting shares beneficially owned by the Company's co-founders (as noted below) and generally low trading volumes, and that thin trading market may cause small trades to have significant impacts on SGRP Common Stock price;

·  the substantial beneficial ownership of approximately 62.4%Chief Executive Officer, then two (2) of the Company's voting stockthen-serving directors who have the least tenure on the Board and potential control byare not Super Independent Directors (other than the Company's co-founders (who also are directorsChief Executive Officer) shall lose the right to vote on any matters that come before the Board; or

(iii)

Includes no Super Independent Directors and executive officersthe Chief Executive Officer, all of the Company), Mr. Robert G. Brown,then-serving directors who beneficially owns approximately 36.4% (or 7,678,289 shares) of SGRP Common Stock, and Mr. William H. Bartels, who beneficially owns approximately 26.1% (or 5,490,505 shares) of SGRP Stock, which amounts were calculated using total beneficial ownership (21,101,161 shares) and their individual beneficial ownerships at March 11, 2011 (including all shares then beneficially owned under currently exercisable warrants and vested options), as more fully described above and below;

·  are not Super Independent Directors (other than the periodic potential risk ofChief Executive Officer) shall lose the delisting of SGRP Common Stock from tradingright to vote on Nasdaq (as described below);
·  any announcement, estimate or disclosure bymatters that come before the Company, or any projection or other claim or pronouncement by anyBoard.

In addition, Section 3.12 of the Company's competitors or any financial analyst, commentator, blogger or other person, respecting (i) any new product created, product improvement, significant contract, business acquisition or relationship, or other publicized development by the Company or any of its competitors, or (ii) any change, fluctuation or other development in the Company's actual, estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition or in those of any of the Company's competitors, in each case irrespective of accuracy or validity and whether or not adverse or material; and

·  the general volatility of stock markets, consumer and investor confidence and the economy generally (which often affect the prices of stock issued by the Company and many others without regard to financial results or condition).
If the Company issues (other2022 By-Laws requires that certain actions by the Board be approved by a super-majority of the Board consisting of at least 70% of the directors then in office, including a majority of the Super Independent Directors. Those super-majority actions include any amendment to the 2022 By-Laws, any Committee Charter, or SGRP's Ethics Code, and the issuance of more than at fair market value for cash) or the Company's co-founders sell a large number of250,000 shares of SGRPSGRP's Common Stock or ifany right to acquire them (See Director Nominations: Experience, Integrity, Diversity and other Criteria, below).

Board Committees

From time to time the market perceivesBoard may establish permanent standing committees and temporary special committees to assist the Board in carrying out its responsibilities, and may delegate Board power and authority pursuant to charters approved by the Board. Under the 2022 By-Laws (see below), a "super majority" vote of at least 70% of all SGRP directors is now required for any new committee, change in any committee charter, or certain other actions (meaning any such Board action brought before a Board consisting of seven directors can be blocked by any three (3) directors), and an issuanceabsolute majority of the Board is now required for the appointment to or saleremoval of any director from any committee (meaning any such Board action brought before a Board consisting of seven directors can be blocked by any four (4) directors). Currently, SGRP has three (3) permanent standing committees; the Audit Committee, the Compensation Committee, and the Governance Committee. An audit committee is likelyrequired by the Nasdaq Stock Market, Inc. ("Nasdaq"), the SEC, and applicable law. While SGRP is not similarly required to have either a compensation committee or imminent,governance committee, certain responsibilities assigned to these committees in their respective charters are required to be fulfilled by independent directors by Nasdaq Rules or SEC Rules.

Each of the market priceCommittee charters requires the Board to determine that each of SGRP Common Stock could declineits members satisfy applicable Nasdaq requirements for such a Committee and be free from any relationship would interfere with the exercise of his or her independent judgment as a member. The 2022 By-Laws also require that decline couldthe Chairman of each Committee and at least two (2) of the members of the Audit Committee and Governance Committee be significant.

In addition,a Super Independent Director (See Board Size, Quorum and Voting, above, and Director Nominations: Experience, Integrity, Diversity and other Criteria, and 2022 By-Laws, below).

The standing committees of the volatilityBoard are the Audit Committee of the Board (the "Audit Committee"), the Compensation Committee of the Board (the "Compensation Committee"), and the Governance Committee of the Board (the "Governance Committee"), as provided in the market priceCorporation's 2022 By-Laws and their respective charters (See Limitation of SGRP Common Stock could lead to class action securities litigation that (however unjustified) could in turn impose substantial costs on the Company, divert management’s attentionLiability and resources and harm the Company's stock price, business, prospects, results of operations and financial condition.

The Company is endeavoring to increase its public float and reduce such volatility by the sale of up to 3,000,000 shares of SGRP Common Stock by the Company and certain selling stockholders to the public pursuant to (among other things) a registration statement on Form S-3 that is being amended and will soon be resubmitted to the SEC for additional and potentially final review.  See "SGRP Common Stock Offering and S-3 Registration Statement"Indemnification Matters, on page 22, below.below).

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Risks Related to

Audit Committee

The Audit Committee assists the Board in fulfilling its oversight responsibilities respecting the accounting, auditing and financial reporting and disclosure principles, policies, practices and controls of the Company, the integrity of the Company's Significant Stockholders: Potential Voting Control and Conflicts

The Company's co-founders, Mr. Robert G. Brown and Mr. William H. Bartels are directors, executive officers (Chairman and Vice-Chairman, respectively) and significant stockholdersconsolidated financial statements, the audits of the financial statements of the Company and the Company's compliance with legal and regulatory requirements and disclosure. The specific functions and responsibilities of the Audit Committee are set forth in the written Amended and Restated Charter of the Audit Committee of the Board of Directors of SPAR Group, Inc., dated (as of) May 18, 2004 (the "Audit Charter"), approved and recommended by the Audit Committee and Governance Committee and adopted by the Board on May 18, 2004. The Audit Committee also is given specific functions and responsibilities by and is subject to Nasdaq Rules, SEC Rules, the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), and other applicable law, which are sellingreflected in the Audit Charter. You can obtain and review a current copy of the Audit Charter on the Company's web site (www.sparinc.com), on which it is posted and available to stockholders and the public under the 2011 S-3 Registration Statement (see "SGRP Common Stock OfferingInvestor Relations tab and S-3 Registration Statement" on page 22, below).  Mr. Brown beneficially owns approximately 36.4%, Mr. Bartels beneficially owns approximately 26.1%,Corporate Governance sub-tab. The Audit Charter was amended and they own approximately 62.4%restated to reflect the evolution of the Audit Committee's expanding responsibilities, the adoption of Sarbanes-Oxley, and changes in Nasdaq Rules, SEC Rules, securities laws and other applicable law pertaining to all audit committees. The Audit Committee reviews and reassesses the Audit Charter annually and recommends any needed changes to the Board for approval. 

The Audit Committee (among other things and as more fully provided in the aggregate of the SGRP Common Stock, which amounts were calculated using total beneficial ownership (21,101,161 shares) and their individual beneficial ownerships (7,678,289 shares and 5,490,505 shares, respectively) at March 11, 2011, which ownerships included all shares beneficially owned under currently exercisable warrants and vested options.  Although the Company expects those percentages to decrease through sales of SGRP Common Stock by the Company and the Selling Stockholders pursuant to the 2011 S-3 Registration Statement (See "SGRP Common Stock Offering and S-3 Registration Statement" on page 22, below), after all such sales, Mr. Brown will beneficially own at least 7,178,289 shares (or 31.0%), Mr. Bartels will beneficially own at least 4,990,505 shares (or 21.6%), and Mr. Brown and Mr. Bartels will beneficially own in aggregate at least 12,168,794 shares (or 52.6%) of the SGRP Common Stock then beneficially owned on a pro forma basis (assuming no other changes). Mr. Brown and Mr. Bartels have, should they choose to act together, and under certain circumstances Mr. Brown acting alone may have, the ability to control the election of directors, the approval of mergers and all other matters that must or may be approved by the Company's stockholders.  In any event, Mr. Brown and Mr. Bartels continue to have significant influence over the Company's business and operations and the outcome of the Company's corporate actions, including those involving stockholder approvals.  The interests of any significant stockholder may be different from time to time from, and potentially in conflict with, the interests of other stockholders, and ownership concentration could delay or prevent a change in the Company's control or otherwise discourage the Company's potential acquisition by another person, any of which could cause the market price of the SGRP Common Stock to decline and that decline could be significant.

Risks of Dilution
The Company may issue and the selling stockholders may sell SGRP Common Stock at varying prices under the pending 2011 S-3 Registration Statement once it becomes effective (see "SGRP Common Stock Offering and S-3 Registration Statement" on page 22, below).  The Company will try to maximize the net proceeds it receives in each sale, and it hopes to sell the SGRP Common Stock for more than the Company's net book value per share (and thus avoid diluting the existing equity of its existing stockholders by its sales of newly issued SGRP Common Stock), but there can be no assurance that the Company will be able to do so.  The Selling Stockholders are reselling shares of Common Stock that are already issued and outstanding, and those sales cannot dilute or otherwise affect the existing equity of the Company's existing stockholders.  The Company also will issue Common Stock at $0.40 per share under the repriced stock options described above, as and when exercised, and the Company may issue additional options to directors, officers, employees and consultants in the future at per-share exercise prices below the price you pay.  In addition, the Company may issue shares of SGRP Common Stock in the future in furtherance of the Company's acquisitions or development of businesses or assets.  Each of those and other issuances of SGRP Common Stock could have a dilutive effect on the value of your shares, depending on the price the Company are paid (or the value of the assets or business acquired) for such shares, market conditions at the time and other factors.
Risks of a Nasdaq Delisting:
The SGRP Common Stock is currently trading, has recently traded and could continue to trade for less than $1.00 per share, which is below Nasdaq's minimum trading price for continued listing on the Nasdaq stock market.  On two separate occasions during  the last two years (September 2009 and April 2010), the Company received notices from Nasdaq advising that the Company failed to maintain a minimum closing bid price of $1.00 per share for shares of SGRP Common Stock for the prior 30 consecutive business days as required by Nasdaq Listing Rule 5550(a)(2) (known as the "Bid Price Rule"), and that the Company had a 180 day grace period in which to regain compliance with the Bid Price Rule by maintaining a closing bid price of $1.00 per share for the SGRP Common Stock for a minimum of ten consecutive business days.  In each case such compliance was achieved within the applicable grace periods, and the Company received notice from Nasdaq (in December 2009 and September 2010, respectively) that the Company had regained compliance with the Bid Price Rule and that such matter was closed.
There can be no assurance that the Company will be able to comply with the Bid Price Rule during such grace period or be able to comply in the future with Nasdaq's continued listing requirements. If the Company continues to be in non-compliance after such six month grace period ends, Nasdaq may commence delisting procedures against the Company (during which the Company will have additional time of up to six months to appeal and correct its non-compliance).  If the SGRP Common Stock shares were ultimately delisted by Nasdaq, the market liquidity of the SGRP Common Stock could be adversely affected and its market price could decrease, even though such shares may continue to be traded "over the counter", due to (among other things) the potential for increased spreads between bids and asks, lower trading volumes and reporting delays in over-the-counter trades and the negative implications and perceptions that could arise from such a delisting.
Risks Associated with International Subsidiaries
While the Company endeavors to limit its exposure for claims and losses in any international subsidiary through contractual provisions, insurance and use of single purpose entities for such ventures, there can be no assurance that the Company will not be held liable for the claims against and losses of a particular international subsidiary under applicable local law or local interpretation of any subsidiary agreements or insurance provisions. If any such claims and losses should occur, be material in amount and be successfully asserted against the Company, such claims and losses could
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have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Risks of Having Material Local Investors in International Subsidiaries
The Company’s international model is to join forces with local investors having merchandising service expertise and combine their knowledge of the local market with the Company’s proprietary software and expertise in the merchandising business.  As a result, each of the Company's international subsidiaries (other than Canada, Japan and China) that is owned in material part by an entity in the local country where the international subsidiary resides and that is not otherwise affiliated with the Company (each a "Local Stockholder").  The joint venture agreements between the Company and the Local Stockholder in the respective international subsidiaries specify, among other things, the equity, programming and support services the Company is required to provide and the equity, credit support, certain services and management support that the Local Stockholder is required to provide to the international subsidiary.  In the event of any disagreement or other dispute in the business relationships between the Company and Local Stockholder, it is possible that the Local Stockholder may have one or more conflicts of interest with respect to the relationship and could cause the applicable international subsidiary to operate or otherwise act in a way that is not in the Company’s best interests.
The joint venture agreements generally have unlimited contract terms and parties generally do not have the right to unilaterally withdraw. However, a non-defaulting party has the right to terminate such agreement upon the other party's default, receipt of notice and failure to cure within a specified period (generally 60 days).  In addition, either party, at any time after the end of a specified period (usually between three and five years), may: (1) sell all or part of its equity interest in the international subsidiary to a third party by providing a written notice to the other party of such intentions (in which case the other party has the right of first refusal and may purchase the equity of the offering party under the same terms and conditions) (a "Right of First Refusal"); or (2) offer to purchase the equity of the other party (in which case the other party has 120 days to either accept or reject the offer or to reverse the transaction and actually purchase the offering party’s equity under the same terms and conditions) (a "Buy/Sell Right").
The Company believes its relationships with the Local Stockholders in its international subsidiaries remain good.  Several of the company’s respective international subsidiary contracts are either at or near the end of the applicable periods during which either of the parties may trigger the Right of First Refusal and Buy/Sell provisions described above.  Both the Company and such Local Stockholders, as part of their ongoing relationship, are or will be assessing appropriate action as described above.
There can be no assurance that the Company could (if necessary under the circumstances) replace equity, credit support, management and other services currently provided by any Local Stockholder in sufficient time to perform its client obligations or that the Company could provide these services and or equity in the event the Local Stockholder was to sell its stock or reduce any support to the Company’s subsidiary in the applicable country.  Any cancellation, other nonperformance or material change under the joint venture agreements with Local Stockholders could have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
Risks Associated with Foreign Currency
The Company also has foreign currency exposure associated with its international subsidiaries. In 2010, these exposures are primarily concentrated in the Canadian Dollar, South African Rand, Japanese Yen, and Australian Dollar.
Risks Associated with International Business
The Company’s expansion strategy includes expansion into various countries around the world. While the Company endeavors to limit its exposure by entering only countries where the political, social and economic environments are conducive to doing business, there can be no assurances that the respective business environments will remain favorable. In the future, the Company’s international operations and sales may be affected by the following risks, which may adversely affect United States companies doing business in foreign countries:
Audit Charter):

 •

(a)

PoliticalServes as an independent and economic risks, including political instability;
•Various forms of protectionist trade legislation that currently exist, or have been proposed;
•Expenses associated with customizing products;
•Local lawsobjective party to monitor the Company's financial reporting process and business practices that favor local competition;
•Dependence on local vendors;
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•Multiple, conflictinginternal accounting and changing governmental lawsdisclosure control system and regulations;
•Potentially adverse tax consequences;
•Local accounting principles, practicestheir adequacy and procedures and limited familiarity with US GAAP;
•Foreign currency exchange rate fluctuations;
•Communication barriers, including those arising from language, culture, custom and times zones; and
•Supervisory challenges arising from distance, physical absences and such communication barriers.

Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company does not own any real property. The Company leases certain office space and storage facilities for its corporate headquarters, divisions and subsidiaries under various operating leases, which expire at various dates during the next five years. These leases generally require the Company to pay rents at or below market rates, subject to periodic adjustments, plus other charges, including utilities, real estate taxes and common area maintenance. The Company believes that its relationships with its landlords generally to be good. However, as these leased facilities generally are used for offices and storage, the Company believes that other leased spaces could be readily found and utilized on similar terms should the need arise.
The Company maintains its corporate headquarters in approximately 5,600 square feet of leased office space located in Tarrytown, New York, under an operating lease with a term expiring October 31, 2013, and maintains its data processing center and warehouse at its regional office in Auburn Hills, Michigan, under an operating lease expiring October 31, 2015.  The Company believes that its existing facilities are adequate for its current business. However, new facilities may be added should the need arise in the future.
The following is a list of the headquarter locations for the Company and its international subsidiaries:
DOMESTIC:
Tarrytown, NY (Corporate Headquarters)
Auburn Hills, MI (Regional Office, Warehouse and Central Computer Operations)effectiveness;
   
INTERNATIONAL:

(b)

Is directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company;

  
Toronto, Ontario, CanadaTokyo, Japan

(c)

Bucharest, Romania
Durban, South AfricaNew Delhi, IndiaMelbourne, AustraliaResolves disagreements between the Company's senior management and the Company's independent registered public accounting firm regarding financial reporting;
 Shanghai, China 

(d)

Communicates directly with the Company's independent registered public accounting firm;

(e)

Reviews and appraises the audit efforts of the Company's independent registered public accounting firm, including the plans for and scope of the audit, the audit procedures to be utilized and results of the audit;

(f)

Provides an open avenue of communication among the Company's independent registered public accounting firm, the Company's financial and senior management and the Board;

(g)

Reviews and approves, in advance, all non-audit services to be performed by the Company's independent registered public accounting firm, either individually or through policies and procedures for particular types of services to be performed within specified periods;

(h)

Reviews the performance, qualifications and independence of the Company's independent registered public accounting firm;

(i)

Reviews the financial reports and other financial information provided by SGRP to any governmental body or the public;

(j)

Encourages continuous improvement of, and fosters adherence to, the Company's accounting controls, disclosure controls, risk management and similar policies, procedures and practices at all levels;

(k)

Reviews and approves the overall fairness to the Company of all material related-party transactions; and

(l)

May retain independent counsel, accountants or others to assist it in the conduct of an investigation or such other action as the Audit Committee may otherwise determine as necessary to carry out its duties under its Charter and applicable law, the fees and expenses of all of which will be paid by the Corporation.


Item 3. Legal Proceedings
Longstanding litigation with Safeway Inc. ("Safeway") concluded in August 2010. On October 24, 2001, Safeway filed a complaint against PIA Merchandising Co.

As of December 31, 2022, the Audit Committee consisted of Mr. Sean M. Whelan (its Chairman), Inc. ("PIA Co."), a wholly-owned subsidiaryMr. Peter W. Brown, and Michael Wager, each of SPAR Group, Inc. ("SGRP"), Pivotal Sales Company ("Pivotal"), a wholly-owned subsidiary of PIA Co., and SGRP in Alameda County (California) Superior Court, case no. 2001028498.  Safeway’s claims, as subsequently amended, alleged causes of action for breach of contract and breach of implied contract. PIA Co. and Pivotal filed cross-claims against Safeway, including causes of action for breach of contract and interference with economic relationships. The case proceeded to trialwhom has been determined by jury.  On May 26, 2006, the jury returned a verdict that awarded certain damages on different claims to PIA Co. and Pivotal and awarded certain damages to Safeway, resulting in a net award of $1,307,700 to Pivotal. Judgment was entered in favor of Pivotal and against Safeway on August 14, 2006, for $1,307,700. A subsequent order awarded Pivotal certain court costs totaling $33,725.

Thereafter, both sides filed appeals. On May 27, 2010, the California Court of Appeal issued a decision affirming the judgment in full. All appellate proceedings concluded on July 28, 2010.  On August 2, 2010, Safeway tendered,Governance Committee and the Company accepted, payment of $1,888,000 in full paymentBoard to meet the independence requirements for Audit Committee members under Nasdaq Rules and SEC Rules and the 2022 By-Laws require that its Chairman and at least two (2) of the judgment.
members of the Audit Committee and Governance Committee be Super Independent Directors. In additionconnection with his appointment as a Director, the Governance Committee and the Board determined that Mr. Whelan was qualified to be the above,"Audit Committee financial expert" as required by Nasdaq Rules, SEC Rules and other applicable law.

During the Company is a party to various other legal actions and administrative proceedings arising inyear ended December 31, 2022, the normal courseAudit Committee met five (5) times. All then current members attended at least 75% of business. In the opinion of Company’s management, disposition of these other matters are not anticipated to have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.meetings.

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Item 4. Submission

Compensation Committee

The Compensation Committee assists the Board in fulfilling its oversight responsibilities respecting the compensation of Matters to a Vote of Security Holders

None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Mattersthe named executive officers and Issuer Purchases of Equity Securities
The Company's Capital Stock Generally:
SGRP's certificate of incorporation authorizes it to issue 47,000,000 shares of common stock with a par value of $0.01 per share (the "SGRP Common Stock"), which all have the same voting, dividend and liquidation rights.  SGRP Common Stock is traded on the Nasdaq Capital Market ("Nasdaq") under the symbol "SGRP".  On March 11, 2011: the SGRP Common Stock closing price was $1.95 per share; there were 19,923,292 shares of SGRP Common Stock issued and outstanding in the aggregate, which had an aggregate market value of $38,850,419; there were 21,101,161 shares of SGRP Common Stock beneficially owned in the aggregate, which beneficial ownership included all shares then beneficially owned under currently exercisable warrants and vested options; there were 15,216,001 shares (or approximately 72%) of SGRP Common Stock beneficially owned by the officers, directors and affiliates of SGRP in the aggregate, which affiliated ownership included shares then beneficially owned under currently exercisable warrants and vested options and had an aggregate market value of $29,671,202; and there were 5,885,161 shares (or approximately 28%) of SGRP Common Stock beneficially owned by non-affiliatesother related policies of the Company, through which the Company endeavors to attract, motivate and retain the executive talent needed to optimize stockholder value in a competitive environment while facilitating the business strategies and long-range plans of the Company. The specific functions and responsibilities of the Compensation Committee are set forth in the aggregate (i.e., SGRP's public float), which float included shares then beneficially owned under currently exercisable warrants and vested options and had an aggregate market value of $11,476,063.  See “Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”, below.
SGRP's certificate of incorporation also authorizes it to issue 3,000,000 shares of preferred stock with a par value of $0.01 per share (the "SGRP Preferred Stock"), which may have such preferences and priorities over the SGRP Common Stock and other rights, powers and privileges as the Company's Board of Directors may establish in its discretion from time to time.  The Company has created and authorized the issuance of a maximum of 3,000,000 shares of Series A Preferred Stock pursuant to SGRP's Certificate of Designation of Series "A" Preferred Stock (the "SGRP Series A Preferred Stock"), which have dividend and liquidation preferences, have a cumulative dividend of 10% per year, are redeemable at the Company's option and are convertible at the holder's option (and without further consideration) on a one-to-one basis into SGRP Common Stock.  The number of shares authorized by such designation could, however, be reduced by amendment or redemption to facilitate the creation of other SGRP Preferred Series.  On December 31, 2010, 554,402 shares of SGRP Series A Preferred Stock were issued and outstanding, such preferred shares are fully paid and non-assessable, the Company owed $123,000 in accumulated and unpaid dividends on those preferred shares, all of those preferred shares were held by two pension plans substantially for the benefit of affiliateswritten Charter of the Company, and there were 2,445,598 shares of authorized Series A Preferred Stock that remained unissued and available for issuance.  See “Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”, and “Item 13 – Certain Relationships and Related Transactions, and Director Independence”, below.  See "Note 8 to Consolidated Financial Statements – Preferred Stock", below, respecting the conversion of such preferred shares into SGRP Common Stock on March 11, 2011.
The holders of SGRP Common Stock and Series A Preferred Stock vote together for directors and other matters, other than matters pertaining only to the Series A Preferred Stock (such as amending SGRP's Certificate of Designation of Series "A" Preferred Stock) where only the holders of the Series A Preferred Stock are entitled to vote.  For a more complete description of the SGRP Common Stock and SGRP Preferred Stock, director and officer exculpation and indemnification, absence of cumulative voting rights and certain other governance matters, please see "Our Capital Stock" on pages 7 through 11 of SGRP's Amendment No. 1 to its Registration Statement on Form S-3 as filed with the SEC on February 7, 2011.
Price Range of Common Stock
The following table sets forth the reported high and low sales prices of the Common Stock for the quarters indicated as reported on the Nasdaq Capital Market.
  2010  2009 
  High  Low  High  Low 
First Quarter $1.10  $0.76  $0.75  $0.45 
Second Quarter  1.00   0.45   0.70   0.36 
Third Quarter  1.09   0.42   0.95   0.36 
Fourth Quarter  1.10   0.80   1.10   0.65 

Dividends
The Company has never declared or paid any cash dividends on its Common Stock and does not anticipate paying cash dividends on its Common Stock in the foreseeable future. While the Company's recently issued Preferred Stock accrues a 10% dividend payable in either cash or common stock when authorized by the Board, the Company does not anticipate paying a cash dividend in the foreseeable future.  The Company currently intends to retain future earnings to finance its operations and fund the growth of the business. Any payment of future dividends will be at the discretionCompensation Committee of the Board of Directors of SPAR Group, Inc., dated (as of) May 18, 2004, and amended through August 12, 2020 (the "Compensation Charter"), approved and recommended by the CompanyCompensation Committee and will depend upon, amongGovernance Committee and adopted by the Board on May 18, 2004, and amended on August 12, 2020. The Compensation Committee also is given specific functions and responsibilities by and is subject to Nasdaq Rules, SEC Rules, Sarbanes-Oxley and other applicable law. You can obtain and review a current copy of the Compensation Charter on the Company's web site (www.sparinc.com), on which it is posted and available to stockholders and the public under the Investor Relations tab and Corporate Governance sub-tab. The Compensation Charter was adopted to reflect the evolution of the Compensation Committee's informal responsibilities, the adoption of Sarbanes- Oxley, and changes in Nasdaq Rules, SEC Rules, securities laws and other applicable law pertaining to compensation committees. The Compensation Committee reviews and reassesses the Compensation Charter annually and recommends any needed changes to the Board for approval.

The Compensation Committee (among other things and as more fully provided in the Company’s earnings, financial condition, capitalCompensation Charter):

(a)

Reviews the existing and proposed compensation plans, policies and practices of the Company, and reviews and recommends any desirable changes or additions to any such plan, policy or practice, all in order to: (i) attract and retain quality directors, executives and employees; (ii) provide total compensation competitive with similar companies; (iii) reward and reinforce the attainment of the Company's performance objectives; and (iv) align the interests of SGRP's directors and the Company's executives and employees with those of SGRP's stockholders (the "Company's Compensation Objectives");

(b)

Reviews the Company's existing and proposed Compensation Objectives from time to time;

(c)

Reviews the performance of and establishes the compensation for the Company's named executive officers;

(d)

Oversees the Company's equity awards, employee stock purchase plan and other benefit plans and severance policies, and reviews and recommends any necessary or desirable changes or additions to any such plan, policy or practice; and

(e)

May retain independent counsel, accountants or others to assist it in the conduct of an investigation or such other action as the Compensation Committee may otherwise determine as necessary to carry out its duties under its Charter and applicable law, the fees and expenses of all of which will be paid by the Corporation.

As of December 31, 2022, the Compensation Committee consisted of Mr. Peter W. Brown and Mr. Sean M. Whelan, each of whom has been determined by the Governance Committee and the Board to meet the independence requirements level of indebtedness, contractual restrictions in respect tofor Compensation Committee members under Nasdaq Rules and SEC Rules.

During the payment of dividends and other factors that the Company’s Board of Directors deems relevant.

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Issuer Purchases of Equity Securities
SGRP did not repurchase any of its equity securities during its fiscal year ended December 31, 2010.2022, the Compensation Committee met six (6) times. All then current members attended at least 75% of the meetings.

Governance Committee

The Governance Committee assists the Board in fulfilling its oversight responsibilities respecting the nomination of directors and committee members for the Board and the corporate documents and governance policies and practices of the Corporation. The specific functions and responsibilities of the Governance Committee are set forth in the written Charter of the Governance Committee of the Board of Directors of SPAR Group, Inc., Dated (as of) May 18, 2004 (the "Governance Charter"), approved and recommended by the Governance Committee and adopted by the Board on May 18, 2004, and amended on March 18, 2021. The Governance Committee also is given specific functions and responsibilities by and is subject to the Nasdaq Rules, SEC Rules, Sarbanes-Oxley, and other applicable law, which are reflected in the Governance Charter. You can obtain and review a current copy of the Governance Charter on the Company's web site (www.sparinc.com), on which it is posted and available to stockholders and the public under the Investor Relations tab and Corporate Governance sub-tab. The Governance Charter was adopted to reflect the evolution of the Governance Committee's informal responsibilities, the adoption of Sarbanes-Oxley, and changes in Nasdaq Rules, SEC Rules, securities laws, and other applicable law pertaining to governance committees. The Governance Committee reviews and reassesses the Governance Charter, Nomination Policy and Ethics Code (as such terms are defined below), as well as the 2022 By-Laws of the Corporation and the other Committee Charters, annually and recommends any needed changes to the Board for approval.

The Governance Committee (among other things and as more fully provided in the Governance Charter):

(a)

Oversees the identification, vetting and nomination of candidates for directors of SGRP and the selection of committee members, reviews their qualifications (including outside director independence) and recommends any proposed nominees to the Board;

(b)

Oversees SGRP's organizational documents and policies and practices on corporate governance and recommends any proposed changes to the Board for approval;

(c)

Oversees the Ethics Code and other internal policies and guidelines and monitors the Corporation's enforcement of them and incorporation of them into the Corporation's culture and business practices; and

(d)

May retain independent counsel, accountants or others to assist it in the conduct of an investigation or such other action as the Governance Committee may otherwise determine as necessary to carry out its duties under its Charter and applicable law, the fees and expenses of all of which will be paid by the Corporation.

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SGRP Common Stock Issuances
SGRP did not issue

As of December 31, 2022, the Governance Committee consisted of Mr. Peter W. Brown, Mr. Michael Wager, and Mr. Sean M. Whelan, each of whom has been determined by the Governance Committee and the Board to meet the independence requirements for Governance Committee members under Nasdaq Rules and SEC Rules. Mr. Michael Wager also has been determined by the Governance Committee and the Board to be a Super Independent Director satisfying the new stricter requirements of the 2022 By-Laws. The 2022 By-Laws require that the Governance Committee's Chairman and at least two (2) of the members of the Audit Committee and Governance Committee to be a Super Independent Director.   See Board Size, Quorum and Voting, above, and 2022 By-Laws, below.

During the year ended December 31, 2022, the Governance Committee met seven (7) times. All then current members attended at least 75% of the meetings.

Director Nominations: Experience, Integrity, Diversity and other Criteria

The Governance Committee oversees the identification, vetting and nomination of candidates for directors and the selection of committee members, the review of their qualifications (including outside director independence), and recommends any SGRP Common Stock during 2009 or 2010 other than (i) pursuantproposed nominees to its existing registered stock compensation and stock purchase plans, (ii) its Offer to Exchange Certain Outstanding Stock Options for New Stock Options dated August 24, 2009 (as filedthe Board in accordance with the SEC in SGRP’s Schedule TOGovernance Charter and with the SPAR Group, Inc. Statement of Policy Regarding Director Qualifications and Nominations dated as of May 18, 2004 (the "Nomination Policy"), as approved and recommended by the Governance Committee and adopted by the Board on August 25, 2009)May 18, 2004. You can obtain and review a current copy of this policy on the Company's web site (www.sparinc.com), (iii) its agreement on August 15, 2009,which it is posted and available to privately sell 120,000 shares of SGRP Common Stock to Alliance Advisors, LLC, for total consideration of $0.47 per share (the fair market value atstockholders and the time of our agreement) or $56,000 inpublic under the aggregate (as more fully described in Item 2(a) of SGRP's Quarterly Report respecting the quarter ended September 30, 2010),Investor Relations tab and (iv) its agreement on March 26, 2010, to privately issue warrants to purchase 75,000 shares of SGRP Common Stock to Michael Anthony Holdings, Inc., in consideration of its term loan to us (asCorporate Governance sub-tab.

The Nomination Policy, applicable law and exchange rules require that loan is more fully described in Note 4 to the Consolidated Financial Statements in SGRP's Quarterly Report respecting the quarter ended September 30, 2010), which warrants have an exercise price of $0.85 per share (the fair market value at the time of such agreement) and expire on March 26, 2012.  The offer and salea majority of the shares referenced in clause (iii)directors satisfy the independence requirements under the applicable Nasdaq Rules and SEC Rules and Delaware law. Each of the Committee charters requires the Board to determine that each of the members satisfy applicable Nasdaq requirements for such a Committee and be free from any relationship would interfere with the exercise of his or her independent judgment as a member. The By- Laws also require that the Chairman of the Board, at least three (3) Board members and the warrantsChairman and shares referenced in clause (iv)at least two (2) members of this paragraph have not been registered undereach Committee be a Super- Independent Director (See Board Size, Quorum and Voting, above).

The Nomination Policy identifies numerous characteristics believed important by the Securities Act or other securities laws,Board for any nominee for director and provides that each nominee for director should possess as they were made in  a non-public offer and sale made in reliance uponmany of them as practicable. These desirable characteristics include (among other things) Section 4 (2)the highest professional and personal ethics and integrity, sufficient time and attention to devote to Board and Committee duties and responsibilities, strong relevant business and industry knowledge and contacts, and business and financial sophistication, common sense and wisdom, the contribution to the diversity of perspectives in the Board and its Committees, and the ability to make informed judgments on a wide range of issues, the ability and willingness to exercise and express independent judgments, and the apparent ability and willingness to meet or exceed the Board's performance expectations. The Nomination Policy specifically recognizes the desirability of ethnic, racial, gender and geographic diversity for the Board but does not specify any metrics for evaluating potential candidates in that regard. However, the Governance Committee takes all relevant factors (including such diversity) into account when identifying and evaluating candidates for Board membership.

Performance expectations for each director have also been established by the Board in the Nomination Policy, including (among other things) the director's regular preparation for, attendance at and participation in all meetings (including appropriate questioning), support and advice to management in his areas of expertise, maintenance of focus on the Board's agenda, understanding the business, finances, plans and strategies of Company, professional and collegial interaction, acting in the best interests of the Securities Act.

SGRP Common Stock OfferingCompany and S-3 Registration Statement
the stockholders, and compliance with the Company's Ethics Code.

Candidates for vacant positions on the Board may be suggested to the Governance Committee from time to time by its members or by officers or other directors of the Corporation. The CompanyGovernance Committee from time to time also has filedused and amendedmay use recruiting firms to consider as director candidates. The Governance Committee generally will consider recommending the re-nomination of incumbent directors in accordance with the Nomination Policy, provided that they continue to satisfy the applicable personal characteristic criteria and performance expectations. The Nomination Policy reflects the Board's belief that qualified incumbent directors are generally uniquely positioned to provide stockholders the benefit of continuity of leadership and seasoned judgment gained through experience as a registration statement on Form S-3 (as amended, the "2011 S-3 Registration Statement") for the saledirector of SGRP, Common Stock to the public, which currently is being amended and will soon be resubmitted to the SEC for additional and potentially final review.  When effective, the Company will be permitted to sell a maximum of 2,000,000 shares for its benefit and the selling stockholders, Mr. Brown and Mr. Bartels, will be permitted to sell a maximum of 500,000 shares each for their respective benefit under the 2011 S-3 Registration Statement (which maximums could be increased by amendment and payment of the requisite fees).  However, based on the SGRP Common Stock beneficially owned by the Company's non-affiliates (i.e., its public float) and the SGRP Common Stock Price of $1.95 per share on March 11, 2011, the Company will be further limited under the applicable S-3 rules to sales of approximately $3,825,316 in proceeds (or 1,961,701 shares) at that price, and the maximum sales by Mr. Brown and Mr. Bartels will be proportionally reduced accordingly.  An increase in its public float or a discounted offering sale price would permit the Company to sell more of its Common Stock under the 2011 S-3 Registration Statement.

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SGRP Common Stock Performance
The following graph shows a comparison of cumulative total returns for SGRP’s Common Stock, the Nasdaq Stock Market (U.S. Companies) Index and the Nasdaq Stocks (SIC 7380-7389 U.S. Companies) Miscellaneous Business Services Index, Russell 2000 and S&P Advertising for the period during which SGRP’s Common Stock has been registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The graph assumes that the value of an investment in Common Stockthese benefits may outweigh many other factors. However, the Governance Committee is not required to recommend to the Board the nomination of any eligible incumbent director for re-election (See Stockholder Communications - Submission of Stockholder Proposals and in each such indexDirector Nominations, below).

Each nominee for director was $100required to complete and submit a Directors' and Officers' Questionnaire as part of the process for making director nominations and preparation of this Proxy Statement.

In considering the potential director nominee slate (including incumbent directors) to recommend to the Board, the Nomination Policy directs the Governance Committee to take into account: (i) the benefits of incumbency, as noted above; (ii) any perceived needs of Board, any Committee or the Company at the time for business contacts, skills or experience or other particular desirable personal characteristics; (iii) the collegiality of Board members; (iv) the need for independent directors or financial experts under that Policy or applicable law for the Board or its Committees; (v) any other requirements of applicable law or exchange rules; and (vi) the desirability of ethnic, racial, gender and geographic diversity. The Governance Committee will consider proposed nominees from any source, including those properly submitted by stockholders (See Stockholder Communications - Submission of Stockholder Proposals and Director Nominations, below).

At least three of the seven directors on December 31, 2005, and that all dividends have been reinvested.

The comparisonthe Board must be Super Independent Directors as defined in the graph2022 By-Laws.  All of the non-Super Independent Director positions must be filled pursuant to contracts with SGRP.  Under the CIC Agreement (See Change of Control, Voting and Restricted Stock Agreement in Domestic Related Party Transactions, below, and Board Size, Quorum and Voting, above), Mr. Robert G. Brown is basedentitled to nominate two (2) directors (including himself), and Mr. William H. Bartels is entitled to nominate one (1) director (including himself). Under the terms of his employment as SGRP's Chief Executive Officer, Michael R. Matacunas is entitled to be a director.

There is currently one vacancy on historical datathe SGRP Board, which under the 2022 By-Laws must be filled with a Super Independent Director.  See Board Size, Quorum and is not intended to forecast the possible future performance of SGRP’s Common Stock.

Voting, and Director Nominations: Experience, Integrity, Diversity and other Criteria, above, and 2022 By-Laws, below.


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  12/31/05  12/31/06  12/31/07  12/31/08  12/31/09  12/31/10 
SPAR Group, Inc.  100.00   135.41   76.58   83.24   88.79   92.12 
NASDAQ Composite  100.00   111.74   124.67   73.77   107.12   125.93 
Russell 2000  100.00   118.37   116.51   77.15   98.11   124.46 
S&P Advertising  100.00   124.96   106.80   59.47   92.31   115.32 
 
-23-

Item 6. Selected Financial Data
Not applicable.
Item 7. Management's Discussion

Based on the prior Directors' and AnalysisOfficers' Questionnaires of Financial Conditioneach director, as required by the Nominations Policy and Results of Operations, Liquiditythe committee charters, the Governance Committee and Capital Resources

Statements contained in this “Management’s DiscussionBoard each determined that: (i) Mr. Sean M. Whelan, Mr. Peter W. Brown and Analysis of Financial ConditionMr. Michael Wager each satisfies the independence requirements for Audit Committee members under Nasdaq Rules and Results of Operations” include “forward-looking statements” withinSEC Rules and the meaningAudit Committee Charter, and Mr. Sean M. Whelan is an "audit committee financial expert" under SEC Rules, as required by such rules and the Audit Charter; (ii) Mr. Sean M. Whelan and Mr. Michael Wager are Super Independent Directors under the 2022 By-Laws (See Board Size, Quorum, and Voting, above); (iii) Mr. Michael Wager, Mr. Sean Whelan and Mr. Peter W. Brown each satisfies the independence requirements for Governance Committee members under Nasdaq Rules and SEC Rules and the Governance Committee Charter; (iv) Mr. Sean M. Whelan and Mr. Peter W. Brown each satisfies the independence requirements for Compensation Committee members under Nasdaq Rules and SEC Rules and the Compensation Committee Charter; and (v) Mr. Robert G. Brown satisfies the general independence requirements for independent directors of the Securities LawsBoard under Nasdaq Rules and are based onSEC Rules and the Company’s best estimates2022 By-Laws. 

2022 By-Laws

On January 25, 2022, the Board adopted and determinations. You can identify forward-looking statementsapproved amendments to SGRP's then existing Amended 2022 By-Laws in connection with the entry into the CIC Agreement (the "Amendments", and as amended, the "2022 By-Laws"). The Amendments include the following:

(i)

The size of the Board is set at seven (7) directors, which shall include at least three (3) "Super Independent Directors", as defined in the 2022 By-Laws (See Board Size, Quorum and Voting, above).

(ii)

The 2022 By-Laws now require 70% (or five (5) of seven (7)) of the directors, including a majority of Super Independent Directors to establish quorum, set the annual meeting agenda, issue or sell more than 250,000 shares of common stock (other than through stockholder approved plans) or any preferred stock, declare dividends, amend SGRP's certificate of incorporation, the 2022 By-Laws, any committee charter or SGRP's Ethics Code (See Board Size, Quorum and Voting, above).

(iii)

The threshold for the stockholders to amend the 2022 By-Laws is increased from a majority to 75% of the outstanding stock of the Corporation.

(iv)

Officers are allowed to adjourn shareholder meetings at their discretion.

(v)

The 2022 By-Laws establish voting rules to maintain "super" independence if there are less than three (3) Super Independent Directors (effectively reducing the votes held by certain other directors - See Board Size, Quorum and Voting, above).

(vi)

The 2022 By-Laws establish that only Super Independent Directors can be the Chairman or Vice Chairman of the Board or the Chairman of a committee.

(vii)

The Chairman no longer automatically holds the position of Chief Executive Officer upon a vacancy.

(viii)

On or before December 31, 2026, the threshold to call a special meeting of the Corporation is increased from 20% to 75% of the outstanding stock of the Corporation entitled to vote. On or after January 1, 2027, the threshold to call a special meeting of the Corporation is decreased from 75% to 25% of the outstanding stock of the Corporation.

The 2022 By-Laws continue to require that each candidate for director sign a written irrevocable letter of resignation and retirement effective upon such informationperson failing to be re-elected by the Company's userequired majority stockholder vote.

The foregoing description is only a summary of terms such as "may", "will", "expect", "intend", "believe", "estimate", "anticipate", "continue" or similar words or variations or negativesthe Amendments and is qualified in its entirety by reference to a copy of those words.  You should carefully consider all such information and the other risks and cautions noted in2022 By-Laws, which is incorporated by reference into this Annual Report as Exhibit 3.3 hereto.

Limitation of Liability and Indemnification Matters

The Corporation's Certificate of Incorporation, as amended, eliminates the Company's other filingsliability of all directors to the Corporation and its stockholders for monetary damages for breaches of their fiduciary duties as directors to the maximum extent such liability can be eliminated or limited under applicable Securities Laws (includingthe Delaware General Corporation Law, as amended (the "DGCL"), which applies to the Corporation as a Delaware corporation. The DGCL permits a certificate of incorporation to include a provision eliminating such personal liability of its directors, and such elimination is effective under the DGCL, except that such liability currently may not be eliminated or limited under the DGCL: (i) for any breach of their duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or (iv) for any transaction from which the director derived an improper personal benefit.

The 2022 By-Laws (unchanged in this report, each a "SEC Report") that could cause the Company's actual assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results, risks or condition to differ materially from those anticipatedregard by the Companylatest restatement) provide that the Corporation must indemnify each of its current and describedformer directors, executive officers and other designated persons (including those serving its affiliates in such capacities at the Corporation's request), and may in the information inBoard's discretion indemnify the Company's forward-looking statements, whether express or implied, as the Company's anticipations are based upon the Company's plans, intentionsother current and best estimatesformer officers, employees and (althoughother agents of the Company, believeagainst expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any threatened, pending or completed action, suit or proceeding against them to be reasonable) involve known and unknown risks, uncertainties and other factors that could cause them to fail to occur or be realized or to be materially and adversely different from those the Company anticipated.

Although the Company believes that its plans, intentions and estimates reflected or implied in such forward-looking statements are reasonable,capacity to the Company cannot assure you that such plans, intentions or estimates will be achieved in whole or in part,fullest extent permitted by DGCL. The 2022 By-Laws also provide that the Company has identified all potential risks,Corporation must advance the expenses (including attorneys' fees) actually and reasonably incurred by any director in defending any such action, suit or that the Company can successfully avoid or mitigate such risksproceeding in whole or in part. You should carefully review the risk factors described above (See Item 1A – Risk Factors, above) and any other cautionary statements contained or incorporated by reference in this Annual Report.  All forward-looking and other statements attributable to the Company or persons acting onadvance of its behalf are expresslyfinal disposition, subject to and qualified by all such risk factors and other cautionary statements.
You should not place undue reliance on the Company's forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond its control.  The Company's forward-looking statements are based on the information currently available to it and speak only as of the date on the cover of December 31, 2010, or other referenced date or, in the case of forward-looking statements incorporated by reference, as of the date of the SEC Report that includes such statement. New risks and uncertainties arise from time to time, and it is impossible for the Company to predict these matters or how they may arise or affect the Company.  Over time, the Company's actual assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievements, results, risks or condition will likely differ from those expressed or implied by the Company's forward-looking statements, and such difference could be significant and materially adverse to the Company and  the value of your investment in the Company's Common Stock.
The Company does not intend or promise, and the Company expressly disclaims any obligation, to publicly update or revise any forward-looking statements, risk factors or other cautionary statements (in whole or in part), whether as a result of new information, future events or recognition or otherwise, except as andperson's agreement to the extent required by applicable law.the DGCL under the circumstances to reimburse the Corporation if such person is not entitled to indemnification. The 2022 By-Laws and these mandatory indemnification provisions were approved and recommended by the Governance Committee and adopted by the Board of Directors of the Corporation in order to conform to the current practices of most public companies and to attract and maintain quality candidates for its directors and management, and are included in the 2022 By-Law is (see above). A current copy of the 2022 By-Laws is posted and available to stockholders and the public on the Corporation's web site (www.sparinc.com).

-9-
 
Overview

Section 145 of the DGCL provides that the Corporation (as a Delaware corporation) has the power to indemnify under various circumstances anyone who is or was serving as a director, officer, employee or agent of the Corporation or (at its request) another corporation, partnership, joint venture, trust or other enterprise, which includes indemnification against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), but only if: (i) such person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Corporation; (ii) in the case of any criminal action or proceeding, such person had no reasonable cause to believe his or her conduct was unlawful; and (iii) in the case of any suit by or in the right of the Corporation in which the person is adjudged to be liable to the Corporation, the applicable court determines such person is nevertheless fairly and reasonably entitled to such indemnification under the circumstances. Section 145 of the DGCL also permits the Corporation to pay or advance the expenses (including attorneys' fees) actually and reasonably incurred by any such person in defending any such action, suit or proceeding, and requires that the Corporation indemnify such person for such unpaid expenses upon a successful defense of such action, suit or proceeding.

The Company maintains director and officer liability insurance that (subject to deductibles, maximums and exceptions) covers most liabilities arising out of the acts or omissions of any officer, director, employee or other covered person, both for the benefit of the Company and the direct benefit of its directors and officers, regardless of whether the 2022 By-Laws or DGCL Section 145 would permit indemnification of the matters covered by such insurance. The 2022 By-Laws (and DGCL Section 145) expressly permit the Corporation to secure such insurance and expressly provide that their respective indemnification provisions are not exclusive of any other rights to which the indemnified party may be entitled, including such insurance.

There is no pending action, suit or proceeding involving any director, officer, employee or agent of the Company in such capacity in which advancement or indemnification may be required or permitted.

Ethics Codes

SGRP has adopted codes of ethical conduct applicable to all of its directors, officers and employees, as approved and recommended by the Governance Committee and Audit Committee and adopted by the Board, in accordance with Nasdaq Rules and SEC Rules. These codes of conduct (collectively, the " Ethics Code") consist of: (1) the SPAR Group Inc. (“SGRP”Code of Ethical Conduct for its Directors, Executives, Officers, Employees, Consultants and other Representatives Amended and Restated (as of) March 15, 2018 (the "Restated Ethical Code"); and (2) Statement of Policy Regarding Personal Securities Transactions in SGRP Stock and Non-Public Information, as amended and restated on May 1, 2004, and as further amended through March 10, 2011. Both Committees were involved because general authority over the Ethics Codes shifted from the Audit Committee to the Governance Committee with the adoption of the committee charters on May 18, 2004. However, the Audit Committee retained the express duty to review and approve the overall fairness of all material related-party transactions. You can obtain and review current copies of such code and policy on the Company's web site (www.sparinc.com), which are posted and available to stockholders and the public under the Investor Relations tab and Corporate Governance sub-tab.

The Ethics Code is intended to promote and reward honest, ethical, respectful and professional conduct by each director, executive, officer, employee, consultant and other representative of any of SGRP and its subsidiaries (together with SGRP, the “SPAR Group”"Company") and each other Covered Person (as defined in the Ethics Code) in his or her position with the “Company”),Company anywhere in the world, including (among other things) serving each customer, dealing with each vendor and treating each other with integrity and respect, and behaving honestly, ethically and professionally with each customer, each vendor, each other and the Company. Article II of the Ethics Code specifically prohibits various forms of self-dealing (including dealing with relatives) and collusion and Article V of the Ethics Code generally prohibits each "Covered Person" (including SGRP's officers and directors) from using or disclosing the Confidential Information of the Company or any of its customers or vendors, seeking or accepting anything of value from any competitor, customer, vendor, or other person relating to doing business with the Company, or engaging in any business activity that conflicts with his or her duties to the Company, and directs each "Covered Person" to avoid any activity or interest that is inconsistent with the best interests of the SPAR Group, in each case except for any "Approved Activity" (as such terms are defined in the Ethics Code). Examples of violations include (among other things) having any ownership interest in, acting as a diversified international merchandisingdirector or officer of or otherwise personally benefiting from business with any competitor, customer or vendor of the Company other than pursuant to any Approved Activity. Approved Activities include (among other things) any contract with an affiliated person (each an "Approved Affiliate Contract") or anything else disclosed to and marketing services company and provides a broad array of services worldwide to help companies improve their sales, operating efficiency and profits at retail locations.  The Company provides merchandising and other marketing services to manufacturers, distributors and retailers worldwide, primarily in mass merchandisers, office supply, grocery, drug store and other chains and independent, convenience and electronics stores,approved by SGRP's Audit Committee, as well as providing furniturethe ownership, board, executive and other product assemblypositions held in and services in stores, homes and offices.  The Company has supplied these projectother contributions to affiliates of SGRP and product services in the United States sinceits subsidiaries by certain directors, officers or employees of SGRP, any of its predecessors were formedsubsidiaries or any of their respective family members. The Company's senior management is generally responsible for monitoring compliance with the Ethics Code and establishing and maintaining compliance systems, including those related to the oversight and approval of conflicting relationships and transactions, subject to the review and oversight of SGRP's Governance Committee as provided in 1979Part I Sections 2, 3, 11 and internationally since12 of the Company acquired its first international subsidiaryGovernance Committee's Charter, and SGRP's Audit Committee as provided in JapanPart IV Section 15 of the Audit Committee's Charter.

Significant Stockholder Governance Limitations

In consideration and as part of the CIC Agreement, the Majority Stockholders agreed that they and their affiliates will not directly or indirectly take any of the listed actions (the "Covered Matters") during the term of the CIC Agreement respecting their SGRP Shares (including voting, consents, proxies or other corporate actions), alone or in Mayconjunction with other stockholders of 2001.  Today the Corporation, unless any of the matters are the subject of a vote at a meeting of the Corporation's stockholders called by the Board.

The Covered Matters include taking or attempting any of the following:

(i)

Action by written stockholder consent;

(ii)

Submission of any stockholder proposals in advance of any annual or special stockholders meeting of the Corporation;

(iii)

Stockholder call for any special meetings of the Corporation's stockholders;

(iv)

Continuation or commencement of any legal claims against the Company;

(v)

Changing the size of the Board;

(vi)

Appointing or removing any director or officer of the Corporation, except as expressly permitted in the CIC Agreement;

(vii)

Amending the Corporation's Certificate of Incorporation or 2022 By-Laws; or

(viii)

Entering any agreement, arrangement or understanding (written or otherwise) with any other Person in an effort to take any action in furtherance of the foregoing.

-10-
 
-24-

Company operates in 9 countries that encompass approximately 47%

The foregoing description is only a summary of the total world population, through operationsCIC Agreement and is qualified in the United States, Canada, Japan, South Africa, India, Romania, China, Australia and New Zealand.

Critical Accounting Policies & Estimates
The Company’s critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Note 2its entirety by reference to the Consolidated Financial Statements. These policies have been consistently applied in all material respects and address such matters as revenue recognition, depreciation methods, asset impairment recognition, consolidation of subsidiaries and other companies. While the estimates and judgments associated with the application of these policies may be affected by different assumptions or conditions, the Company believes the estimates and judgments associated with the reported amounts are appropriate in the circumstances. Four critical accounting policies are consolidation of subsidiaries, revenue recognition, allowance for doubtful accounts, and internal use software development costs.
Consolidation of Subsidiaries
The Company consolidates its 100% owned subsidiaries. The Company also consolidates all of its 51% owned subsidiaries as the Company believes it is the primary beneficiary and controls the economic activities in accordance with Accounting Standards Codification (ASC) 810-10, Consolidation of Variable Interest Entity.
Revenue Recognition
The Company’s services are provided to its clients under contracts or agreements. The Company bills its clients based upon service fee and per unit fee billing arrangements. Revenues under service fee billing arrangements are recognized when the service is performed. The Company’s per unit fee arrangements provide for fees to be earned based on the retail sales of a client’s products to consumers. The Company recognizes per unit fees in the period such amounts become determinable and are reported to the Company.
Allowance for Doubtful Accounts
The Company continually monitors the validity of its accounts receivable based upon current client credit information and financial condition. Balances that are deemed to be uncollectible after the Company has attempted reasonable collection efforts are written off through a charge to the bad debt allowance and a credit to accounts receivable. Accounts receivable balances, net of any applicable reserves or allowances, are stated at the amount that management expects to collect from the outstanding balances. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to bad debt allowance based in part on management’s assessmentcopy of the current status of individual accounts. Based on management’s assessment, the Company established an allowance for doubtful accounts of $143,000 and $317,000 at December 31, 2010, and 2009, respectively. Bad debt expenses were $265,000 and $412,000 in 2010, and 2009, respectively.
Internal Use Software Development Costs
In accordance with ASC-350-10-720, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, the Company capitalizes certain costs associated with its internally developed software. Specifically, the Company capitalizes the costs of materials and services incurred in developing or obtaining internal use software. These costs include (but are not limited to) the cost to purchase software, the cost to write program code, payroll and related benefits and travel expenses for those employees who are directly involved with and who devote time to the Company’s software development projects. Capitalized software development costs are amortized over three years on a straight-line basis.
The Company capitalized $632,000 and $586,000 of costs related to software developed for internal use in 2010, and 2009, respectively, and recognized approximately $518,000 and $396,000 of amortization of capitalized software for the twelve months ended December 31, 2010, and 2009, respectively.
-25-

Results of Operations
CIC Agreement, which is incorporated by reference into this Annual Report as Exhibit 10.9.

Item 11. Executive Compensation

Summary Compensation Table

The following table sets forth selected financial data and such data as a percentage of net revenuesall compensation for services rendered to the Company in all capacities for the years indicated (in millions).

  Year Ended December 31, 
  2010  %  2009  % 
Net revenues $63.2   100.0% $57.5   100.0%
Cost of revenues  42.2   66.8   40.0   69.5 
Selling, general & administrative expense  17.1   27.1   16.1   28.0 
Depreciation & amortization  1.0   1.6   1.1   1.9 
Interest expense  0.3   0.5   0.2   0.3 
Other (income)  –   –   (0.6)  (1.0)
                 
Income before income tax provision and non-controlling interest
  2.6   4.0   0.7   1.3 
Provision for income taxes  0.3   0.4   0.1   0.3 
                 
Net income  2.3   3.6   0.6   1.0 
Net (income)  attributable to non-controlling interest  (0.1)  (0.2)  (0.1)  (0.1)
Net income $2.2   3.4% $0.5   0.9%
Results of operations for the twelve months ended December 31, 2010, when compared to2022 and 2021 (but See - Transactions with Related Persons, Promoters and Certain Control Persons, below), by: (i) the same period in  2009
Net Revenues
Net revenuesCorporation's Chief Executive Officer; and (ii) each of the Company forother persons named below, which include the twelve months ended December 31, 2010, were $63.2 million, compared to $57.5 million for the twelve months ended December 31, 2009, an increase of $5.7 million.
The Company’s domestic net revenues increased $10.2 milliontwo (2) most highly compensated Executives or 38.4% to $36.6 million in 2010 from $26.4 million in 2009.  The increase was attributable to both acquisition and organic growth.
The Company’s international net revenues totaled $26.6 million for 2010, decreasing 15% from $31.1 million in 2009. The primary reason for the decrease in 2010 international net revenues as compared to 2009 was the loss of marginally profitable sales promotion business in Japan, the loss of a key client in India, partially offset by increased revenue in Canada related to the business acquired from Wings and Ink.
Cost of Revenues
The Company’s cost of revenues consists of in-store labor and field management wages, related benefits, travel and other direct labor-related expenses. Cost of revenues was 66.8% of net revenues for the twelve months ended December 31, 2010, compared to 69.5% for the twelve months ended December 31, 2009.
Domestic cost of revenuesOfficers of the Company. "Named Executive Officers" shall mean each of the individuals listed below, other than Mr. Bartels. The Company does not have any Non-Equity Incentive Compensation Plans other than as part of its individual Incentive Bonus Plans, any pension plans or any non-qualified deferred compensation plans, and accordingly those columns have been omitted.

Effective as of February 22, 2021, SGRP appointed Mr. Mike Matacunas as its Chief Executive Officer and President and as a percentageDirector of SGRP.  Ms. Fay DeVriese departed SGRP effective as of January 31, 2023.  Mr. Antonio Calisto Pato joined SGRP and became Chief Financial Officer, Secretary and Treasurer on February 27, 2023 (4).    Effective July 13, 2021, SGRP appointed Ron Lutz as its domestic net revenues were 64.1%Chief Global Commercial Officer and 63.2% forWilliam Linnane as its Chief Strategy and Growth Officer of SGRP. Effective as of August 31, 2020, Ms. Fay DeVriese became the twelve months ended December 31, 2010,Chief Financial Officer of SGRP. Mr. Steven J. Adolph resigned as President International of SGRP effective April 23, 2021. Mr. Gerard Marrone retired as Chief Revenue Officer of SGRP effective June 15, 2021. 

 

 

Name and Principal Positions

 

 

Year

 

 

Salary ($)

 

 

Bonus ($) (1)

 

Option and RSU Compensation

($) (2)

All Other

Compensation

($) (3)

 

Total ($)

Michael R. Matacunas2022407,813200,000--4,800612,613
Chief Executive Officer, President and Director2021250,00050,000--4,086304,086
       
Fay DeVriese (4) (5)2022329,58372,23354,3044,800460,920
Chief Financial Officer, Treasurer and Secretary2021278,750--37,4452,400318,595
       

Kori Belzer (6)

2022

306,042

68,24410,3594,800389,445

Global Chief Operating Officer

2021

261,848

--94,026

4,800

360,674
       

William Linnane

2022

296,042

85,000

30,914

4,800416,756

Chief Strategy and Growth Officer

2021110,83350,000--2,400163,233
       

Ron Lutz

2022

296,042

62,50030,9144,800394,256

Chief Global Commercial Officer

2021110,83350,000--2,400163,233

(1)

These are the bonuses paid in the referenced year (2022 or 2021) respecting performance in the preceding year (2021 or 2020).
(2)These are not amounts actually paid to or received by the Named Executive or Officer. These are "compensation expenses" for restricted stock unit or stock option awards recognized by the Corporation under generally accepted accounting principles computed in accordance with ASC-718- 10.

(3)

"Other Compensation" primarily represents allowances for automobiles, cell phone and internet service. 

(4)

Ms. DeVriese departed SGRP effective as of January 31, 2023.

(5)Mr. Antonio Calisto Pato joined SGRP and became Chief Financial Officer, Secretary and Treasurer on February 27, 2023.
(6)Ms. Belzer's salary includes an additional increment in 2021 for her services as acting Chief Executive Officer of SGRP, which position she held from August 7, 2020, through February 21, 2021.

Narrative to Summary Compensation Table

Compensation Elements

As indicated in the Summary Compensation Table above, in addition to base salary, we provide the following compensation and 2009, respectively.  The increase in cost of revenues as a percentage of net revenues was less than 1% due primarilybenefits to the mix of project work.  Approximately 87% and 84% of the Company’s domestic cost of revenue in both the twelve months ended December 31, 2010, and 2009, respectively, resulted from in-store merchandiser and field management services purchased from the Company’s affiliates, SMS and SMSI, respectively. (See Item 13 – Certain Relationships and Related Transactions, and Director Independence, above) and (See Note 10 to the Consolidated Financial Statements – Related Party Transactions)our Named Executive Officers:

●

Cash Bonuses. Annually, the Company enters into bonus plans with key management and administrators based on specified goals. The bonuses noted in the above table that were paid in 2020 were in fact earned in 2019.

●

Stock and Option Awards. The Corporation grants our Named Executive Officers awards of stock options and restricted stock units from time to time. Such options were issued with an exercise price equal to the fair market value on the date of grant and vest and become exercisable 25% on each of the first four anniversaries of the date of grant, provided that the recipient remains employed through the vesting date.

●

Retirement Benefits. The only retirement plan the Company maintains in the United States is its 401(k) Profit Sharing Plan, which is which is a tax-qualified defined contribution plan that is available to all of its eligible employees, including the Named Executive Officers. Although it is not required to do so, the Corporation makes discretionary contributions to plan participants from time to time. The Corporation contributed to that plan in 2021 and 2022, which contributions were shared proportionally by all the participants in the plan. The amounts that the Corporation contributed to each of the Named Executive Officers is included in the "All Other Compensation" column above. The Corporation does not maintain any defined benefit pension plans, supplemental retirement plans, or nonqualified deferred compensation plans. However, See Bartels' Retirement and Director Compensation, below.

●

Other Benefits and Perquisites. Other than providing car allowances and paying for life and long-term disability benefits, each as described in footnote (2) to the Summary Compensation Table above, the Corporation does not provide any perquisites or other benefits to its Named Executive Officers. The Corporation provides standard healthcare benefits to its eligible employees, including the Named Executive Officers.

-11-
Internationally, the Company’s cost of revenues as a percentage of its international net revenues were 70.4% and 74.9% for the twelve months ended December 31, 2010, and 2009, respectively. The cost of revenue percentage improvement of 4.5 percentage points was primarily due to a profitable mix of product services in Japan and Australia, partially offset by an unfavorable product mix of business in Canada and China.
 
-26-

 

Chief Executive Officer (PEO) Pay Versus Performance Table

 

 

 

Year

 

Summary

Compensation Table

Total for

Michael R.
Matacunas

  

Summary

Compensation Table

Total for

Kori G. Belzer

  

 

Compensation Actually
Paid (3) to

Michael R.
Matacunas

  

 

Compensation
Actually Paid (3) to

Kori G. Belzer

  

Average Summary

Compensation Table

Total for

Non-PEO NEOs

  

Average

Compensation Actually

Paid (3) to

Non-PEO NEOs

  

 

Total

Shareholder
Return

  

 

 

Company’s

Net Income

 

2022

 $612,613   N/A  $749,718   N/A  $415,344  $384,882   113.04  $2,126,000 

2021

 $304,086 (1)  $60,112 (2)  $722,932 (1)   50,878 (2)  $348,448  $324,647   106.96  $2,000,000 

Operating Expenses

(1) Ms. Belzer was acting Chief Executive Officer of SGRP through February, 2021.

(2) Mr. Matacunas became Chief Executive Office of SGRP on February 22, 2021.

(3) Amount includes non-cash compensation respecting certain stock-based awards adjusted for changes in equity award values.

 

Potential Severance Payments upon a Change-In-Control and Termination

In order to retain and motivate certain highly qualified executives in the event of a "Change-in-Control", the Corporation entered into separate Change of Control Severance Agreements (each a "CICSA") with Messrs. Michael R. Matacunas, Antonio Calisto Pato, William Linnane, Ron Lutz and Ms. Kori Belzer.  Ms. Fay DeVriese had a CICSA which ended and was released as part of her departure.

Each CICSA provides that the applicable executive will receive a lump sum severance payment if both: (1) a "Change in Control" occurs; and (2) within the "Protected Period" the executive is terminated other than in a "Termination For Cause". The Company’s operating expenses consistProtected Period is equal to the Term or 24 months from the then most recent Change in Control. The term is 36 months and automatically extends daily for another day unless the Corporation gives notice of selling, general and administrative expenses, depreciation and amortization. Selling, general and administrative expensesnon-renewal (in which case the Term ends on the third anniversary of such notice). The CICSA severance payment is equal to the sum of: (i) two (2) (Mr. Matacunas), or one (1) times the executive's annual salary plus (ii) the maximum bonus paid to such executive in either of the Company include corporate overhead, project management, information technology, executive compensation, human resource, legal and accounting expenses. last two (2) years.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth the Company’s operating expensesunexercised options, unvested stock options and percentagecertain related information for each Named Officer outstanding as of net revenues for the years indicated (in millions):

  Year Ended December 31, 
  2010  %  2009  % 
             
Selling, general & administrative $17.1   27.1% $16.1   28.0%
Depreciation and amortization  1.0   1.6   1.1   1.9 
                 
Total operating expenses $18.1   28.7% $17.2   29.9%

December 31, 2022.

Stock Option Awards

 

 

 

 

 

 

Name

 

 

 

 

 

Grant

Date

Number of

Securities

Underlying

Unexercised

Options

Exercisable

at 12/31/22 (#)

Number of

Securities

Underlying

Unexercised

Options Not

Exercisable

at 12/31/22 (#)

 

 

 

 

 

Option

Price ($)

 

 

 

 

 

Option

Date

Kori Belzer

08/06/13

35,000

--

$              2.14

08/06/23

 

05/07/17

6,250

--(1)

$              0.90

05/17/27

 

05/03/18

15,000

5,000(1)

$              1.23

05/03/28

 

04/05/19

--

12,500(2)

$              0.64

04/05/29

Fay DeVriese

08/31/20

--

150,000(3)

$              0.85

08/31/30

William Linnane----------
Ron Lutz----------
Michael Matacunas02/22/21--630,000(1)$              1.9002/22/31

(1)

Amounts vest on the anniversary of the grant date in 2022.

(2)

Amounts vest on the anniversary of the grant date, one half in 2022 and 2023.

(3)

Amounts vest on the anniversary of the grant date, one third in each 2022, 2023, and 2024.

Compensation of Directors

The Company’s domestic selling, general and administrative expenses totaled $9.2 million for 2010 compared to $7.8 million in 2009.  The increase in domestic selling, general and administrative expenses of approximately $1.4 million or 17.4% was primarily due to the incremental spending required to support the acquisitionfollowing table sets forth all compensation costs of the business of National Marketing Services.

International selling, generalCorporation for services rendered to it by its directors (other than any Named Officer), and administrative expenses of the Company for the twelve months ended December 31, 2010, were $8.0 million comparedcertain other amounts that may have been received by or allocated to $8.3 million for the prior year. The decrease of approximately $350,000 or 4.2% in the Company’s international selling, general and administrative expenses was primarily due to expense reductions in Japan of $1.1 million primarily driven by lower salary and other employee related expenses as a result of ownership change.  This favorability was partially offset by increased expenses in the Canadian market attributed to the Wings and Ink acquisition.
The Company’s depreciation and amortization charges were $1.0 million for the twelve months ended December 31, 2010, compared to $1.1 million for the twelve months ended December 31, 2009.
Interest Expense
The Company’s interest expense totaled approximately $309,000 for 2010, compared to interest expense of approximately $178,000 for 2009. The increase of $131,000 resulted from increased borrowings both domestically and internationally, in Australia and Canada.
Other Income
The Company’s other income was approximately $21,000 for twelve months ended December 31, 2010, compared to other income of approximately $582,000 for the twelve months ended December 31, 2009.  The 2009 income resulted from a third party litigation settlement and a credit from counsel against prior period legal expenses.
Income Taxes
The Company’s income tax provision for the twelve months ended December 31, 2010, was $263,000 resulting primarily from domestic Alternative Minimum Tax, state and international tax expense of $61,000, $95,000 and $107,000, respectively. The Company’s income tax provision for the twelve months ended December 31, 2009, was $169,000 resulting primarily from tax provisions related to international profits.
Non-Controlling Interest
The Company’s non-controlling interest income of $112,000 and $55,000 resulted from the net operating profits of the Company’s 51% owned subsidiaries for the twelve months ended December 31, 2010 and 2009, respectively.
Net Income
The SPAR Group had a net income for 2010 of approximately $2.2 million or $0.11 per diluted share, compared to net income for 2009 of approximately $502,000, or $0.03 per diluted share.
Off Balance Sheet Arrangements
None.
-27-
Liquidity and Capital Resources
For the twelve months ended December 31, 2010, the Company had a net income before non-controlling interest of $2.3 million, compared to a net income before non-controlling interest of $557,000 for the twelve months ended December 31, 2009.
The Company’s operating activitiesthem, for the year ended December 31, 2010 was $260,000, compared2022. The Corporation has not given restricted stock unit awards to net cash provided by operating activities of $1.4 million in 2009. The decrease of approximately $1.2 million in cash provided by operating activities is primarily due to increases in accounts receivableits directors and payments of accounts payable, accrued expenses and other liabilities partially offset by decreases in other assets and increased net income.
Net cash used by the Company in investing activitiesdoes not have pension plans or non-qualified deferred compensation plans for the year ended December 31, 2010 and 2009, was $1.4 million and $831,000, respectively. The change in its net cash used in investing activities was a result of purchases of property and equipment and software capitalization, including the Company’s purchases of the business of Wings & Ink and certain non-controlling interest in subsidiaries.directors, so those columns have been omitted.

 

 

Name

 

 

Year

Fees Earned

or Paid in

Cash ($)

 

RSU and Option Awards

($)(1)

 

All Other

Compensation ($)

 

 

Total ($)

William H. Bartels (7) (8)

2022

180,000--

--

180,000

James R. Brown, Sr. (2)

2022

56,243

--

--

56,243

Peter W. Brown (5)

2022

131,613

--

--131,613

Robert G. Brown (8)

2022

132,726--

--

132,726

Panagiotis N. Lazaretos (6)

2022

----

--

--

Michael Wager (3)

2022

142,500--

--

142,500

Sean M. Whelan (4)

2022

140,000--

--

140,000

(1)

These are not amounts actually paid to or received by the named director. These are "compensation expenses" for restricted stock unit or stock option awards recognized by the Corporation under generally accepted accounting principles computed in accordance with ASC- 718-10.

(2)

Mr. James R. Brown, Sr.'s tenure as a director of SGRP started on January 19, 2021 and ended on January 25, 2022.  His compensation does not include any consulting fees payable to him as a consultant by SGRP after January 25, 2022.  See Item 13 --James R. Brown, Sr. Advisor Agreement, below.

(3)

Mr. Michael Wager tenure as a director of SGRP started on October 21, 2021.

(4)

Mr. Sean M. Whelan tenure as a director of SGRP started on October 21, 2021.

(5)

Mr. Peter W. Brown received other compensation in 2022 for consulting work for the Corporation's Brazilian subsidiary SPAR BSMT, and indirectly for dividends declared and paid by SPAR BSMT to Mr. Brown's company, EILLC.

(6)

Mr. Panagiotis N. Lazaretos retired from the SGRP Board effective January 25, 2022.  His compensation does not include any consulting fees payable to him as a consultant by SGRP after January 25, 2022.  See Item 13 -- Panagiotis Lazaretos Consulting Agreement, below.

(7)

Mr. William H. Bartels' compensation does not include the cash payments made to him respecting his retirement as an officer of SGRP as of January 1, 2020, consisting in 2022 of $100,000 and $15,588 for reimbursement of certain health insurance costs.

(8)Mr. Robert G. Brown's compensation does not include the cash payments or the value of the Preferred Stock received by Mr. Brown, Mr. Bartels and their affiliates as stockholders under the CIC Agreement.  See Item 13 -- Change of Control, Voting and Restricted Stock Agreement, below.

-12-
Net cash provided by the Company’s financing activities for the year ended December 31, 2010 was $376,000 compared with net cash used in financing activities of $743,000 for the year ended December 31, 2009. The cash provided by financing activities was primarily a result of the Company’s net borrowings on its lines of credit offset by payments on capital leases.
The above activities resulted in a decrease in the Company’ s cash and cash equivalents for the twelve months ended December 31, 2010, of $736,000.
The Company had positive working capital of $4.4 million at December 31, 2010 compared to positive working capital of $252,000 at December 31, 2009. The Company’s current ratios were 1.37 and 1.02 at December 31, 2010 and 2009, respectively. The increase in working capital and current ratio were primarily due to increases in accounts receivable and decreases in accounts payable partially offset by reduced cash and other assets and increased accrued expenses and other liabilities.
Credit Facilities:
Domestic Credit Facility (“Webster Credit Facility)(reporting period through July 5, 2010):
In January 2003, the Company (other than SGRP’s foreign subsidiaries) and Webster Business Credit Corporation, then known as Whitehall Business Credit Corporation (“Webster”), entered into the Third Amended and Restated Revolving Credit and Security Agreement (as amended, collectively, the “Webster Credit Facility”). The Webster Credit Facility provided for a $5.0 million revolving line of credit which matured on March 15, 2010. In February 2008, the Webster Credit Facility was amended to establish monthly EBITDA covenants until September 30, 2008, and to set a Fixed Charge Coverage Ratio covenant for the year ended December 31, 2008.  In January 2009 the Webster Credit Facility was amended to extend the agreement until March 15, 2009, adjust the interest rate to the greater of 5%, the Alternative Base Rate or 30 day LIBOR plus 2.75% and to increase the limit on the capital expenditures to $1.3 million.  In March 2009, the Webster Credit Facility was amended to extend the maturity until March 15, 2010, extend the monthly Fixed Charge Coverage Ratio covenant until March 15, 2010 and reset the limit on capital expenditures to $800,000.  On March 15, 2010, the Webster Credit Facility was further amended to extend the maturity and continue the monthly covenant requirements until September 15, 2010.
Borrowings were based upon a borrowing base formula as defined in the agreement (principally 85% of “eligible” domestic accounts receivable less certain reserves). The Webster Credit Facility was secured by all of the assets of the Company's domestic subsidiaries. The Webster Credit Facility also limited certain expenditures, including, but not limited to, capital expenditures and other investments.
In addition, Mr. Robert G. Brown, a Director, the Chairman and a major stockholder of SGRP, and Mr. William H. Bartels, a Director, the Vice Chairman and a major stockholder of SGRP, provided personal guarantees of the Webster Credit Facility totaling $1.0 million.
The basic interest rate under the Webster Credit Facility was the greater of i) Webster’s “Alternative Base Rate” plus 1.0% per annum, which automatically changed with each change made by Webster in such Alternative Base Rate, ii) LIBOR plus 2.75% per annum, or iii) the minimum rate imposed by Webster of 5% per annum. The actual average interest rate under the Webster Credit Facility was 5% per annum for the period that commenced on January 1, 2010, and
 
-28-
ended on July 6, 2010.  

Discussion of Directors' Compensation

The Webster Credit Facility was secured by substantially allCompensation Committee administers the compensation of the assets of the Company (other than SGRP’s foreign subsidiaries and their assets).

New Domestic Credit Facility (“Sterling Credit Facility”)(July 6, 2010, to present):
SGRP and certain of its domestic direct and indirect subsidiaries, namely SPAR Incentive Marketing, Inc., PIA Merchandising Co., Inc., Pivotal Sales Company, National Assembly Services, Inc., SPAR/Burgoyne Retail Services, Inc., SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc. and SPAR, Inc. (each a "Subsidiary Borrower", and together with SGRP, collectively, the " Borrowers "), entered into a Revolving Loan and Security Agreement dated as of July 6, 2010 (the "Loan Agreement"), with Sterling National Bank and Cornerstone Bank as the lenders (the "Lenders"), and issued their Secured Revolving Loan Notes in the original maximum principal amounts of $5.0 million to Sterling National Bank and $1.5 million to Cornerstone Bank (the "Notes"), to document and govern its new credit facility with them (the "Sterling Credit Facility").   The Sterling Credit Facility replaced the Webster Credit Facility on July 6, 2010, and the first advance under such new facility was used to fully repay and terminate the Webster Credit Facility and its documents and liens.
In addition, Mr. Robert G. Brown, a Director, the Chairman and a major stockholder of SGRP, and Mr. William H. Bartels, a Director, the Vice Chairman and a major stockholder of SGRP, have provided personal guarantees of the Sterling Credit Facility totaling $2.5 milliondirectors pursuant to their Limited Continuing Guaranty in favor ofSGRP's Director Compensation Plan for its outside Directors, as approved and amended by the Lenders dated as of July 6, 2010. (the "Limited Guaranty").
Revolving Loans of up to $6.5 million are available to the Borrowers under this new Sterling Credit Facility based upon the borrowing base formula defined in the Loan Agreement (principally 85% of "eligible" domestic accounts receivable less certain reserves).  The Sterling Credit Facility is secured by substantially all of the assets of the Borrowers (other than SGRP's foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets).
The domestic revolving loan balance outstanding under the Sterling Credit Facility was approximately $3.5 million at December 31, 2010, and the revolving loan balances outstanding under the Webster Credit Facility was approximately $ 4.0 million at December 31, 2009.  As of December 31, 2010, the Company had unused availability under the Sterling Credit Facility of $1.7 million out of the remaining maximum $3.0 million unused revolving line of credit.
The basic interest rate under the Sterling Credit Facility is equal to the fluctuating Prime Rate of interest published in the Wall Street JournalCommittee from time to time plus one(the "Directors Compensation Plan"), as well as the compensation for SGRP's executives. The Directors Compensation Plan was modified in the March 16, 2017, quarterly meeting of the Compensation Committee, effective April 1, 2017.

Under the Directors Compensation Plan taking effect for all periods on and one-half  (1.50%) percentafter April 1, 2017: (i) each Independent Director and Non- Employee Director is entitled to receive director's fees of $55,000 per annum which automatically changes withand a one-time cash fee of $75,000 for 2022; (ii) each change in such rate.  The aggregate interest rate on December 31, 2010, was 4.75%applicable Independent Director is entitled to receive for chairing the applicable committee an additional $10,000 per annum under that formula.  The actual average interest rate underfee in the Sterling Credit Facility was 4.75%case of the Audit Committee Chairman; and (iii) an additional $7,500 per annum fee in the case of the Chairman of each of the Governance or Compensation Committees in each case payable quarterly in cash. The Compensation Committee in May 2018 approved total compensation of $90,000 per year for the period that commenced on July 6, 2010, and ended on December 31, 2010.

Because of the requirement to maintain a lock box arrangement with the Agent and the Lenders' ability to invoke a subjective acceleration clause at its discretion, borrowings under the Sterling Credit Facility will be classified as current.
The new Sterling Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the Borrowers, including, but not limited to, capital expenditures and other investments.  At December 31, 2010 the Company was in compliance with such covenants and does not expect to be in violation at future measurement dates. However, there can be no assurances that the Company will not be in violation of certain covenants in the future, and should the Company be in violation; there can be no assurances that the Lenders will issue waivers for any future violations.
International Credit Facilities:
The Japanese subsidiary SPAR FM Japan, Inc.’s line of credit agreement totaling 100 million Yen or approximately $1.1 million (based upon the exchange rate at November 30, 2009) was cancelled on November 30, 2009, in connection with SGRP’s increase in ownership from 50% to 100%.
In 2008, the Australian subsidiary, SPARFACTS Australia Pty. Ltd., entered into a revolving line of credit arrangement with Commonwealth Bank of Australia (CBA) for $2.0 million (Australian).  On September 11, 2009, the line of credit arrangement was amended to reduce the line of credit to $1.5 million (Australian), or approximately $1.5 million (based upon the exchange rate at December 31, 2010). At December 31, 2010, SPARFACTS Australia Pty. Ltd.
-29-
had $540,000 (Australian), or approximately $548,000, outstanding under the line of credit (based upon the exchange rate at that date). The average interest rate under this facility was 10.2% per annum for the twelve months ended December 31, 2010.
On October 20, 2006, SPAR Canada Company, a wholly owned subsidiary, entered into a secured credit agreement with Royal Bank of Canada providing for a Demand Operating Loan for a maximum borrowing of $750,000 (Canadian) or approximately $750,000 (based upon the exchange rate at December 31, 2010). The Demand Operating Loan provides for borrowing based upon a formula as defined in the agreement (principally 75% of eligible accounts receivable less certain deductions) and a minimum total debt to tangible net worth covenant.  On March 28, 2008, Royal Bank of Canada amended the secured credit agreement to reduce the maximum borrowing to $500,000 (Canadian) however, in October 2008, Royal Bank of Canada reinstated the loan limit to $750,000 (Canadian). At December 31, 2010, SPAR Canada Company had $623,000 (Canadian or USD), outstanding under the line of credit (based upon the exchange rate at December 31, 2010).  The average interest rate under this line of credit was 4.0% per annum for the twelve months ended December 31, 2010.
The Company was in compliance with the minimum total debt to tangible net worth covenant under this line of credit at December 31, 2010.
At the March 2010 quarterly board meeting of SGRP, the Board of Directors authorized the Company to secure bridge financing for future acquisition efforts in an amount not to exceed $1.0 million. On March 26, 2010 the Company signed a Loan and Security Agreement and a Promissory Note with Michael Anthony Holdings, Inc. for a total of $1.0 million and the Company received its first advance of $500,000 which was used for the acquisition of certain assets of a Canadian company that closed on April 1, 2010. The parties amended such loan agreement on November 5, 2010, to reduce the applicable interest rates.  The remaining $500,000 balance of the originally-contemplated loan would have been advanced to the Company upon request and satisfaction of certain conditions prior to maturity, but the Company currently does not expect to request that advance.  The loan matures and is due in full on March 31, 2011.  The Company currently plans to repay the loan in full on maturity.
The loan is payable on an interest only basis at the rate of 9.5% per annum (originally 14% per annum prior to such amendment).  If the loan is not paid in full by March 31, 2011, the interest rate automatically increases to 14% per annum (which would have been 24% per annum prior to such amendment).  The average interest rate for this loan was 13.1% per annum for the twelve months ended December 31, 2010.
Corporation's Chairman.

In addition to their cash compensation, in the costpast, each Independent Director received options to purchase 10,000 SGRP Shares upon acceptance of interest,the directorship, options to purchase 10,000 additional SGRP Shares after one (1) year of service, and options to purchase 10,000 additional SGRP Shares for each additional year of service thereafter (typically granted by the Corporation at the regularly scheduled board meeting which coincided with the Annual Meeting). All such options have an exercise price equal to 100% of the fair market value of a SGRP Share at the date of grant and prior to 2020 vested 100% on the first anniversary of the Award's grant date and for grants in 2020 or later over four (4) years, with one fourth of the original grant amount vesting on each anniversary of the grant date, if the Participant 's relationship as a director of SGRP or employee of the Company paid, at closing,has not terminated by such anniversary.

All stock options and restricted stock awards to Michael Anthony Holding, Inc. a fee of $10,000 in cashIndependent Directors have been granted under the 2018 Plan and issued 75,000 warrants to purchase 75,000 sharesPrior Plans, under which each member of the SGRP Common Stock. The warrants are exercisable over two (2) years at the market price of $0.85 per Common share (SPAR’s closing stock price on that date).  The Company recorded a $52,000 expense for the cost of the warrants during 2010.  In addition, the loanBoard is secured by the stock of SPAR Canada Company.

The Company’s international model iseligible to form a joint venture subsidiary with a local investor having local merchandising expertise and combine the local investor's knowledge of the local market with the Company’s proprietary software and expertise in the merchandising and marketing business. In 2001, the Company established its first international subsidiary and has continued this strategy. As of this filing, the Company is currently operating in Japan, Canada, South Africa, India, Romania, China, Australia and New Zealand through 7 active international subsidiaries.
Certain of these international subsidiaries are marginally profitable while others are operating at a loss. None of these entities have excess cash reserves. In the event of continued losses, the Company may find it necessary to provide additional cash infusions into these subsidiaries.
Management believes that based upon (among other things) its anticipated business, revenues and receivables collections and the existing credit facilities, the Company’s sources of cash availabilityparticipate. Independent Directors will be sufficient to support ongoing operations overreimbursed for all reasonable expenses incurred during the next twelve months.
-30-
Certain Contractual Obligations
course of their duties. There is no additional compensation for committee participation, phone meetings, or other Board activities.

Compensation Plans

Equity Compensation Plans

The following table contains a summary of certainthe number of shares of Common Stock of SGRP to be issued upon the vesting of the Company’s contractual obligationsRSU's (if SGRP elects to issue shares instead of paying cash) or the exercise of stock options outstanding at December 31, 2022, under the Inducement Plans, 2020 Plan, 2018 Plan, 2008 Plan and the Prior Plans, the weighted-average exercise price of those outstanding stock options, and the number of additional shares of Common Stock remaining available for future issuance of stock options and other stock-based awards.

Equity Compensation Plan Information

 

 

 

 

Plan Category

 

Number of securities to

be issued upon exercise

of outstanding stock

options and

stock rights (#)

 

Weighted average

exercise price of

outstanding stock

options and

stock rights ($)

Number of securities

remaining available

for future issuance of

options, rights and 

other stock- based 

awards (#)

Equity compensation plans approved by security holders:   

2008 Plan

691,162

1.53

–

2018 Plan

160,000

.93

–

2020 Plan

385,000

1.55

–

CFO Option Inducement

150,000

.85

–

CEO Option Inducement

630,000

1.90

–

CEO RSU Inducement26,3151.90–

CEO RSU Inducement

89,286

1.12–


Inducement Stock Based Award Summary

On August 2, 2021, as an inducement to Ron Lutz to become the Corporation's Chief Global Commercial Officer, the Corporation granted to Mr. Lutz's RSU Awards issued and effective on that date having a fair market value of $50,000 (representing  26,882 SGRP Shares at $1.86 per share) as of that date and vesting in one (1) year. On August 2, 2022, those RSUs automatically vested and converted and became payable either, at the option of SGRP, in cash or SGRP's Common Stock issued directly from SGRP. On September 30, 2022, SGRP elected to issue Common Stock in a letter to Mr. Lutz, giving rise to Mr. Lutz's right to receive such Common Stock but no exercise price or other payment for such shares was required.

On August 2, 2021, as an inducement to William Linnane to become the Corporation's Chief Strategy and Growth Officer, the Corporation granted to Mr. Linnane RSU Awards issued and effective on that date having a fair market value of $50,000 (representing 26,882 SGRP Shares at $1.86 per share) as of that date and vesting in one (1) year. On August 2, 2022, those RSUs automatically vested and converted and became payable either, at the option of SGRP, in cash or SGRP's Common Stock issued directly from SGRP. On September 30, 2022, SGRP elected to issue Common Stock in a letter to Mr. Linnane, giving rise to Mr. Linnane 's right to receive such Common Stock but no exercise price or other payment for such shares was required.

On February 22, 2021, Michael R. Matacunas received the following inducement awards approved by categorySGRP's (the Issuer) Board of Directors for:

1.             Options to purchase 630,000 shares of the Common Stock of the Issuer at an exercise price of $1.90 per share (which was the market price on February 22, 2021, the date the options were issued). Subject to certain conditions (including Mr. Matacunas'  continued employment by the Issuer at such time), the options were scheduled to automatically vest in one year. On February 22, 2022, the options automatically vested and became exercisable at the option of the Reporting Person, which requires notice and payment of $1.90 per share to SGRP to effect such exercise. The options automatically expire on February 22, 2031.

2.             Restricted Stock Units (RSUs) for $50,000 of shares of SGRP's Common Stock representing 26,315 shares of SGRP's Common Stock based on the market price of $1.90 per share on February 22, 2021 (the RSU issuance date). On February 22, 2022, those RSUs automatically vested and converted and became payable either, at the option of SGRP, in cash or SGRP's Common Stock issued directly from SGRP. On September 30, 2022, SGRP elected to issue Common Stock in a letter to Mr. Matacunas, giving rise to Mr. Matacunas' right to receive such Common Stock but no exercise price or other payment for such shares was required.

3.             RSUs for $100,000 of shares of SGRP's Common Stock issuable on May 15 of each year he remains employed by SGRP, commencing in 2022. On May 15, 2022, Mr. Matacunas automatically received from SGRP for RSUs for 89,286 shares of the SGRP's Common Stock based on the market price of $1.12 per share on May 13, 2022 (the last trading day preceding the RSU issuance date). Subject to certain conditions (including Mr. Matacunas' continued employment by the Issuer at such time), those RSUs (and each of the anniversary issuances) are scheduled to automatically vest one year after their May 15 issuance and convert and become payable either (at the option of SGRP) in cash or Common Stock issued directly from the Issuer, but no exercise price or other payment for such shares is required.

On August 31, 2020, as an inducement to Fay DeVriese to become the Corporation's Chief Financial Officer, Treasurer and Secretary, the Corporation granted to Ms. DeVriese an Award consisting of nonqualified options to acquire 200,000 SGRP shares at $0.85 per share, vesting twenty-five percent (25%) of the total number of shares of Common Stock subject hereto on August 31, 2021, and the balance of the Option shall thereafter were to have vested and become exercisable in a series of three (3) successive equal annual installments upon the Optionee's completion of each additional year of employment over the three-year period following August 31, 2021.  An additional twenty-five percent (25%) of the total number of shares of Common Stock subject to such option vested on August 31, 2022.  The remaining unvested balance of the fifty percent (50%) of shares subject to such options expired when Ms. DeVriese left employment with the Company on February 27, 2023.  None of Ms. DeVriese's vested options have been exercised.

2021 Plan

On June 4, 2021, the Board and the Board's Compensation Committee (the "Compensation Committee") approved the revised proposed 2021 Stock Compensation Plan of SPAR Group, Inc. (the "2021 Plan") for submission, approval and ratification by the Corporation's stockholders at their Annual Meeting on August 12, 2021. At that meeting, the 2021 Plan was ratified and approved by the Corporation's stockholders and became effective immediately on August 12, 2021 (the "2021 Plan Effective Date"), through May 31, 2022 (the "2021 Plan Period"). The 2021 Plan terminated on May 31, 2022.

The 2021 Plan provides for the issuance of Awards for NQSOs and RSUs (as defined below) respecting shares of SGRP's Common Stock ("SGRP Shares") covering up to a total of 400,000 SGRP Shares ("Maximum Award") under the 2021 Plan ("New Awards") to, in or otherwise respecting SGRP Shares ("New Award Shares") so long as the New Award Shares covered by each proposed New Award or group of New Awards in the aggregate (NQSOs plus RSUs) do not at the time of the proposed issuance exceed the Maximum Award and the RSU component does not exceed 150,000 New Award Shares.

No Option Awards were granted in 2022 or 2021 under the 2021 Plan.

As of December 31, 2010 (in thousands).

  Payments due by Period 
  Total  Less than 1 year  1-3 years  3-5 years  More than 5 years 
                
Credit Facilities $5,263  $5,263   –   –   – 
Capital Lease Obligations  253   99  $154   –   – 
Operating Lease Obligations  2,853   780   1,606  $467   – 
Total $8,369  $6,142  $1,760  $467   – 

Item 7A. Quantitative2021, RSU Awards covering 58,011 SGRP Shares had been granted under the 2021 Plan, and Qualitative Disclosures about Market Risk
Not applicable.
Item 8. Financial Statementsno RSU Awards were granted in 2022 under the 2021 Plan. RSU Awards covering 14,502. SGRP Shares granted under the 2021 Plan vested during 2022, which the Corporation elected to satisfy through the issuance of SGRP Shares, and Supplementary Data
See Item 15RSU Awards covering 29,004 SGRP Shares granted under the 2021 Plan remained unvested at December 31, 2022.

Option Awards under the 2021 Plan expire on the fifth anniversary of this Annual Reportgrant or sooner as provided in the 2021 Plan, whether or not vested. Once vested under the 2021 Plan, RSU Awards do not expire. Under the 2021 Plan: (i) each stock option Award must vest over a four-year period following the date of grant in four (4) equal amounts annually starting on Form 10-K.

Item 9. Changesthe first anniversary of the grant date; (ii) any RSU Award granted to an employee shall vest over a three-year period following the date of grant annually in three (3) equal amounts starting on the first anniversary of the RSU grant date; and Disagreements(iii) any RSU Award granted to a Director shall vest over a one-year period following the date of grant in four (4) equal amounts quarterly with Accountantsone (1) installment vesting at the end of each three-month period following the date of the RSU grant date.

2020 Plan

The Board authorized and approved the revised proposed 2020 stock compensation plan of SGRP (the "2020 Plan"), which was submitted to and approved by SGRP's stockholders at the Special Meeting of SGRP's stockholders on AccountingJanuary 19, 2021 (the "2020 Plan Effective Date"). The 2020 Plan became effective immediately upon such approval.

The 2020 Plan: (a) has a four-month term from the 2020 Plan Effective Date (as defined below) through May 1, 2021 (the "2020 Plan Period"); and Financial Disclosure

None.
Item 9A.(T) Controls and Procedures
Management's Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting(b) provides for the registrant,issuance of "non-qualified" option awards to purchase shares of SGRP's Common Stock ("SGRP Shares") aggregating: (i) 550,000 SGRP Shares; plus (ii) 50,000 SGRP Shares for each of up to the first three (3) additional new Directors during the period December 1, 2020, to April 30, 2021 (for a possible total of 700,000 SGRP Shares) available for future Awards during the 2020 Plan Period as such termoutlined below (the "20-21 Maximum") under 2020 Plan. Since one (1) new director joined the Board on the 2020 Plan Effective Date, 600,000 SGRP Shares were available for Awards on the 2020 Plan Effective Date. 

The 2020 Plan required the Corporation to issue as of the plan effective date new awards for options to purchase: (i) an aggregate of 125,000 SGRP Shares to 19 employees (other than the Named Executive Officers) in individual amounts designated by the Board; (ii) 10,000 SGRP Shares to each of Panagiotis N. Lazaretos, Igor Novgorodtsev, Robert G. Brown and Arthur H. Baer (each a director); and (iii) 50,000 SGRP Shares to each member of the Board of Directors on the Effective Date of the Plan. Those options were granted by the Board on February 4, 2021. The 2020 Plan was terminated on May 1, 2021, and no further options were granted under it.

-13-

2008 Plan Summary

2008 Plan Stock option award activity for the years ended December 31, 2022 and 2021 is definedsummarized below for the periods presented:

          

Weighted-

     
      

Weighted-

  

Average

  

Aggregate

 
      

Average

  

Remaining

  

Intrinsic

 
      

Exercise

  

Contractual

  

Value

 

Option Awards

 

Shares

  

Price

  

Term (Years)

  

(thousands)

 

Outstanding at January 1, 2021

  

1,457,936

  

$

1.31

   

3.63

  

$

113

 

Granted

  

–

   

–

   

–

   

–

 

Exercised/cancelled

  

679,062

   

1.08

   

–

   

295

 

Forfeited or expired

  

(87,712

)

  

–

   

–

   

–

 

Outstanding at December 31, 2021

  

691,162

  

$

1.53

   

2.60

  

$

72

 

Granted

  

–

   

–

   

–

   

–

 

Exercised

  

57,500

   

1.07

   

–

   

10

 

Forfeited or expired

  

(120,562

)

  

–

   

–

   

–

 

Outstanding at December 31, 2022

  

513,100

  

$

1.63

   

2.16

  

$

68

 

Exercisable at December 31, 2022

  

513,100

  

$

1.63

   

2.15

  

$

68

 

The Company recognized $0 and $13,000 in Exchange Act Rules 13a-15(f)stock-based compensation expense relating to stock option awards during the years ended December 31, 2022 and 15d-15(f)2021, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December 31, 2022 and 2021, was approximately $0 and $3,000, respectively.

As of December 31, 2022, total unrecognized stock-based compensation expense related to stock options was $0.

-14-

2018 Plan Summary

2018 Plan Stock option award activity for the years ended December 31, 2022 and 2021 are summarized below:

          

Weighted-

     
      

Weighted-

  

Average

  

Aggregate

 
      

Average

  

Remaining

  

Intrinsic

 
      

Exercise

  

Contractual

  

Value

 

Option Awards

 

Shares

  

Price

  

Term (Years)

  

(thousands)

 

Outstanding at January 1, 2021

  

430,000

  

$

0.90

   

7.87

  

$

8

 

Granted

  

–

   

-

   

–

   

–

 

Exercised/cancelled

  

230,000

   

0.85

   

–

   

235

 

Forfeited or expired

  

(40,000

)

  

–

   

–

   

–

 

Outstanding at December 31, 2021

  

160,000

  

$

0.93

   

6.82

  

$

31

 

Granted

  

–

   

–

   

–

   

–

 

Exercised

  

12,500

   

0.76

   

–

   

8

 

Forfeited or expired

  

(2,500

)

  

-

   

–

   

–

 

Outstanding at December 31, 2022

  

145,000

  

$

0.94

   

5.79

  

$

52

 

Exercisable at December 31, 2022

  

135,000

  

$

0.98

   

5.64

  

$

44

 

No stock options were granted in 2022 under the 2018 Plan.  The total intrinsic value of stock options awards exercised during the year ended December 31, 2022 and 2021 was $8,000 and $235,000, respectively.

The Company recognized $6,000 and $23,000 in stock-based compensation expense relating to stock option awards during the years ended December 31, 2022 and 2021, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December 31, 2022 and 2021 was approximately $2,000 and $6,000, respectively.

As of December 31, 2022, there was no unrecognized stock-based compensation expense related to stock options granted under the 2018 Plan.

2020 Plan Summary

Following are the specific valuation assumptions used for options granted in 2021 for the 2020 Plan:

2021

Expected volatility

52.8%

Expected dividend yields

0.0%

Expected term (in years)

5

Risk free interest rate

1.0%

Expected forfeiture rate

4.0%

2020 Plan Stock option award activity for the years ended December 31, 2022 and 2021 are summarized below:

          

Weighted-

     
      

Weighted-

  

Average

  

Aggregate

 
      

Average

  

Remaining

  

Intrinsic

 
      

Exercise

  

Contractual

  

Value

 

Option Awards

 

Shares

  

Price

  

Term (Years)

  

(thousands)

 

Outstanding at January 1, 2021

  

–

  

$

–

   

–

  

$

–

 

Granted

  

565,000

   

1.55

   

4.10

   

–

 

Exercised/cancelled

  

–

   

–

   

–

   

–

 

Forfeited or expired

  

(180,000

)

  

–

   

–

   

–

 

Outstanding at December 31, 2021

  

385,000

  

$

1.55

   

4.10

  

$

– 

Granted

  

–

   

–

   

–

   

–

 

Exercised

  

–

   

–

   

–

   

–

 

Forfeited or expired

  

(10,000

)

  

–

   

–

   

–

 

Outstanding at December 31, 2022

  

375,000

  

$

1.55

   

3.10

  

$

–

 

Exercisable at December 31, 2022

  

91,250

  

$

1.55

   

3.10

  

$

–

 

No stock options were granted in 2022 under the 2020 Plan. The total intrinsic value of stock option awards exercised during the years ended December 31, 2022 and 2021 was $0.

The Company recognized $58,000 and $57,000 in stock-based compensation expense relating to stock option awards during the years ended December 31, 2022 and 2021, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December 31, 2022 and 2021 was approximately $15,000 and $16,000, respectively.

As of December 31, 2022, total unrecognized stock-based compensation expense related to stock options was $121,000. This expense is expected to be recognized over a weighted average period of approximately 2.1 years.

-15-

CFO Inducement Award Stock Option Summary

CFO Inducement Award stock option activity for the years ended December 31, 2022 and 2021 are summarized below:

          

Weighted-

     
      

Weighted-

  

Average

  

Aggregate

 
      

Average

  

Remaining

  

Intrinsic

 
      

Exercise

  

Contractual

  

Value

 

Option Awards

 

Shares

  

Price

  

Term (Years)

  

(thousands)

 

Outstanding at January 1, 2021

  

200,000

  

$

0.85

   

9.67

  

$

60.00

 

Granted

  

–

   

–

   

–

   

–

 

Exercised/cancelled

  

50,000

   

0.85

   

–

   

–

 

Forfeited or expired

  

–

   

–

   

–

   

–

 

Outstanding at December 31, 2021

  

150,000

  

$

0.85

   

8.67

  

$

57

 

Granted

  

–

   

–

   

–

   

–

 

Exercised

  

50,000

   

0.85

   

–

   

–

 

Forfeited or expired

  

–

   

–

   

–

   

–

 

Outstanding at December 31, 2022

  

100,000

  

$

0.85

   

7.67

  

$

45

 

Exercisable at December 31, 2022

  

–

  

$

–

   

–

  

$

–

 

No stock options were granted in 2022 under the CFO Inducement Plan.  The total intrinsic value of stock option awards exercised during the years ended December 31, 2022 and 2021 was $45,000 and $37,000.

The Company recognized $19,000 and $22,000 in stock-based compensation expense relating to stock option awards during the years ended December 31, 2022 and 2021, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December 31, 2022 and 2021, was approximately $5,000 and $5,000, respectively.

As of December 31, 2022, total unrecognized stock-based compensation expense related to stock options was $32,000. This expense is expected to be recognized over a weighted average period of approximately 1.7 years.

CEO Inducement Award Stock Option Summary

Following are the specific valuation assumptions used for the stock option awards granted in 2021 for the CEO Inducement Award:

2021

Expected volatility

52.7%

Expected dividend yields

0.0%

Expected term (in years)

1

Risk free interest rate

0.76%

Expected forfeiture rate

6.0%

CEO Inducement Award stock option activity for the years ended December 31, 2022 and 2021 are summarized below:

          

Weighted-

     
      

Weighted-

  

Average

  

Aggregate

 
      

Average

  

Remaining

  

Intrinsic

 
      

Exercise

  

Contractual

  

Value

 

Option Awards

 

Shares

  

Price

  

Term (Years)

  

(thousands)

 

Outstanding at January 1, 2021

  

–

  

$

–

   

–

  

$

–

 

Granted

  

630,000

   

1.90

   

9.15

   

–

 

Exercised/cancelled

  

–

   

–

   

–

   

–

 

Forfeited or expired

  

–

   

–

   

–

   

–

 

Outstanding at December 31, 2021

  

630,000

  

$

1.90

   

9.15

  

$

– 

Granted

  

–

   

–

   

–

   

–

 

Exercised

  

–

   

–

   

–

   

–

 

Forfeited or expired

  

–

   

–

   

–

   

–

 

Outstanding at December 31, 2022

  

630,000

  

$

1.90

   

8.15

  

$

–

 

Exercisable at December 31, 2022

  

630,000

  

$

1.90

   

8.15

  

$

–

 

No stock options were granted in 2022 under the CEO Inducement Award.  The total intrinsic value of stock option awards exercised during the years ended December 31, 2022 and 2021 was $0.

The Company recognized $85,000 and $509,000 in stock-based compensation expense relating to stock option awards during the years ended December 31, 2022 and 2021, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December 31, 2022 and 2021, was $21,000 and $126,000, respectively.

As of December 31, 2022, there was no unrecognized share-based compensation expense related to stock options granted under the CEO Inducement Award.

CEO InducementAward RSU Summary

The following table summarizes the activity for Restricted Stock Unit (RSU) CEO awards during the years ended December 31, 2022 and 2021:

      

Weighted-

 
      

Average

 
      

Grant Date

 
      

Fair Value

 
  

Shares

  

per Share

 

Unvested at January 1, 2021

  

–

  

$

–

 

Granted

  

138,090

   

1.87

 

Vested

  

–

   

–

 

Forfeited

  

–

   

–

 

Unvested at December 31, 2021

  

138,090

  

$

1.85

 

Granted

  -   

–

 

Vested

  

99,415

   

1.86

 

Forfeited

  

–

   

–

 

Unvested at December 31, 2022

  

38,675

  

$

1.81

 

During the years ended December 31, 2022 and 2021, the Company recognized approximately $101,000 and $87,000, respectively, of stock-based compensation expense related to RSUs. The recognized tax benefit on stock-based compensation expense related to RSUs during the years ended December 31, 2022 and 2021 was approximately $25,000 and $21,000, respectively. 

During the years ended December 31, 2022 and 2021, the total fair value of RSUs vested was $120,000 and $0 respectively.

As of December 31, 2022, total unrecognized stock-based compensation expense related to unvested RSUs awards was $56,000. This expense is expected to be recognized over a weighted average period of approximately 1.6 years.

Share-Based Compensation Expense

Share-based compensation expense for the years ended December 31, 2022 and 2021 was $346,000 and $711,000, respectively.

-16-

Employee Stock Purchase Plans

In 2001, SGRP adopted its 2001 Employee Stock Purchase Plan (the "ESP Plan"), which replaced its earlier existing plan, and its 2001 Consultant Stock Purchase Plan (the "CSP Plan"). Management has designed such internal control over financial reporting byThese plans were each effective as of June 1, 2001. The ESP Plan allows employees of the Company, and the CSP Plan allows employees of the affiliates of the Company to provide reasonable assurance regardingpurchase SGRP's Common Stock from SGRP without having to pay any brokerage commissions. On August 8, 2002, the reliabilityBoard approved a 15% discount for employee purchases of financial reportingCommon Stock under the ESP Plan and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

The Company’s management has evaluated the effectivenessrecommended that its affiliates pay 15% of the Company’s internal control over financial reporting using the “Internal Control – Integrated Framework (1992)” created by the Committee of Sponsoring Organizationsvalue of the Treadway Commission (“COSO”) framework.  Based on this evaluation, management has concluded that internal controls over financial reporting were effectivestock purchased as a cash bonus for affiliate consultant purchases of Common Stock under the CSP Plan.

Audit and Compensation Committee Interlocks and Insider Participation

No member of the Board's Audit Committee, Compensation Committee or Governance Committee was at any time during the year ended December 31, 2010.

Under applicable Securities Law,2021, or at any other time an officer or employee of the Company. No executive officer of the Company is not yet required to obtain an attestation report from the Company's independent registered public accounting firm regarding internal control over financial reporting, and accordingly such an attestation has not been obtained or included in this Annual Report.
Management’s EvaluationBoard member (including any member of Disclosure Controls and Procedures
The Company’s chief executive officer and chief financial officer have each reviewed and evaluated the effectivenessSGRP's Board, Audit Committee, Compensation Committee or Governance Committee) serves as a member of the Company’s disclosure controlsboard of directors, audit, compensation or governance committee of any other entity, except for the positions of Messrs. Brown and procedures (as defined in Exchange Act Rules 13a-15(e)Bartels as directors of SGRP and 15d-15(e)) as directors and officers of the endcertain of the period covered by this report, as required by Exchange Act Rules 13a-15(b)its affiliates, including SBS, SAS and Rule 15d-15(b). Based on that evaluation, the chief executive officerInfotech (See Transactions with Related Persons, Promoters and chief financial officer have each concluded that the Company’s current disclosure controls and procedures are effective to insure that the information required to be disclosed by the Company in reports it files, or submits under the Exchange Act were recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.Certain Control Persons, below).

-17-
 
-31-
Changes in Internal Controls
There have been no changes in the Company’s internal controls over financial reporting that occurred during the Company’s fourth quarter of its 2010 fiscal year that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting, except for completion of the improvements the Company had undertaken with respect to its Indian subsidiary’s period end closing and reporting procedures related to accumulation and reporting of annual financial results and disclosures (as more fully described in the Company’s Amendment No. 2 to its 2009 Annual Report on Form 10-K as filed with the SEC on October 8, 2010.
Item 9B. Other Information
None.
-32-

PART III
Item 10. Directors, Executive Officers and Corporate Governance
Reference is made to the information set forth in the Company’s definitive proxy statement, which will be filed with the Securities and Exchange Commission for its Annual Meeting of Shareholders, presently scheduled to be held on May 26, 2011, pursuant to Regulation 14A not later than 120 days after the end of our fiscal year, which information is incorporated by reference to this Annual Report. Notwithstanding the foregoing, information appearing in the sections “Executive Compensation Report of the Compensation Committee” and “Audit Committee Report” shall not be deemed to be incorporated by reference in this Annual Report.
Item 11. Executive Compensation
Reference is made to the information set forth in the Company’s definitive proxy statement, which will be filed with the Securities and Exchange Commission for its Annual Meeting of Shareholders, presently scheduled to be held on May 26, 2011, pursuant to Regulation 14A not later than 120 days after the end of our fiscal year, which information is incorporated by reference to this Annual Report. Notwithstanding the foregoing, information appearing in the sections “Executive Compensation Report of the Compensation Committee” and “Audit Committee Report” shall not be deemed to be incorporated by reference in this Annual Report.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Reference

The following table sets forth certain information regarding beneficial ownership of SGRP's Common Stock as of December 31, 2022, by: (i) each person who is madeknown by SGRP to own beneficially more than 5% of SGRP's Common Stock; (ii) each of SGRP's directors; and (iii) each of the information set forthNamed Executive Officers in the Company’s definitive proxy statement, which will be filedSummary Compensation Table. Except as indicated in the footnotes to this table, the persons named in the table, based on information provided by such persons, have sole voting and sole investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable.

 

Title of Class

Name and Address

of Beneficial Owner

Number of Shares

Beneficially Owned

See

Note #

 

Percentage

Common Shares

Robert G. Brown

7,194,789

(1)

30.28%

Common Shares

William H. Bartels

5,309,214

(1)

22.35%

Common Shares

Michael R. Matacunas

645,393(1) (2)

2.72%

Common Shares

Peter W. Brown

132,694

(1) (3)

*

Common Shares

Kori G. Belzer

74,173

(1) (4)

*

Common Shares

James R. Brown, Sr.

43,084

(1)

*

Common SharesFay DeVriese21,471(1)*

Common Shares

William Linnane

17,909

(1)

*

Common Shares

Ronald Lutz

17,678(1)

*

Common SharesMichael Wager12,500(1)*
Common SharesSean Whelan12,500(1)*

Common Shares

All Executives and Directors

13,481,405

-

56.75%

*       Less than 1%

(1)

The address of such owners is c/o SPAR Group, Inc. 1910 Opdyke Court, Auburn Hills, Michigan 48326.

(2)

Mr. Matacunas' beneficial ownership includes 630,000 shares issuable upon exercise of options and 26,315 shares upon vesting of restricted stock units.

(3)

Mr. Peter Brown's beneficial ownership includes 80,000 shares issuable upon exercise of options.

(4)

Ms. Belzer's beneficial ownership includes 67,500 shares issuable upon exercise of options and 16,574 shares upon vesting of restricted stock units.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act ("Section 16(a)") requires SGRP's directors and certain of its officers and persons who own more than 10% of SGRP's Common Stock to file reports of ownership and changes in their ownership of SGRP's Common Stock with the SecuritiesCommission. Insiders are required by Commission regulations to furnish SGRP with copies of all Section 16(a) forms they file.  The following is a report of late Section 16(a) filings by the current officers and Exchange Commission fordirectors of SGRP (collectively, "Insiders").

Based solely on its Annual Meeting of Shareholders, presently scheduled to be held on May 26, 2011, pursuant to Regulation 14A not later than 120 days after the end of our fiscal year, which information is incorporated by reference to this Annual Report. Notwithstanding the foregoing, information appearing in the sections “Executive Compensation Reportreview of the Compensation Committee”copies of such forms received by it for the year ended December 31, 2019 ("2019"), filings by certain Insiders during or for 2019, or written representations from such Insiders for 2019, SGRP believes that its Insiders complied with all applicable Section 16(a) filing requirements for such year, with the exception that: (i) eight (8) Form 4s were filed late by Mr. Robert G. Brown; and “Audit Committee Report” shall not be deemed to be incorporated(ii) three (3) Form 4s were filed late by referenceMs. Kori G. Belzer.

Based solely on its review of the copies of such forms received by it for the year ended December 31, 2020 ("2020"), filings by certain Insiders during or for 2020, or written representations from such Insiders for 2020, SGRP believes that its Insiders complied with all applicable Section 16(a) filing requirements for such year, with the exception that: (i) one (1) Form 4 was filed late by Mr. Robert G. Brown; (ii) one (1) Form 3 was filed late by Mr. Peter W. Brown; and (iii) one (1) Form 4 was filed late by Ms. Kori G. Belzer.

Based solely on its review of the copies of such forms received by it for the year ended December 31, 2021 ("2021"), filings by certain Insiders during or for 2021, or written representations from such Insiders for 2021, SGRP believes that its Insiders complied with all applicable Section 16(a) filing requirements for such year, with the exception that: (i) four (4) Form 4s were filed late by Mr. Robert G. Brown; (ii) five (5) Form 4s were filed late by Mr. William H. Bartels; (iii) one (1) Form 3 was filed late by Mr. James R. Brown, Sr.; (iv) one (1) Form 3 was filed late by Mr. Michael Wager; (v) one (1) Form 3 was filed late by Mr. Sean Whelan; (vi) one (1) Form 3 was filed late by Mr. Michael R. Matacunas; (vii) four (4) Form 4s were filed late by Ms. Kori G. Belzer; and (viii) one (1) Form 3 was filed late by Ms. Fay DeVriese.

Based solely on its review of the copies of such forms received by it for the year ended December 31, 2022 ("2022"), filings by certain Insiders during or for 2022, or written representations from such Insiders for 2022, SGRP believes that its Insiders complied with all applicable Section 16(a) filing requirements for such year, with the exception that: (i) one (1) Form 4 was filed late by Mr. Robert G. Brown; (ii) one (1) Form 3 and one (1) Form 4 were filed late by SPAR Business Services, Inc., respecting shares beneficially owned by Mr. Robert G. Brown, and several of his Form 4s were amended in this Annual Report.

early 2023; (iii) three (3) Form 4s were filed late by Mr. William H. Bartels, which were filed in early 2023; (iv) one (1) Form 4 was filed late by Mr. Michael R. Matacunas, which was filed in early 2023; (v) two (2) Form 4s were filed late by Kori G. Belzer; (vi) one (1) Form 3 and one (1) Form 4 were filed late by Mr. William Linnane; (vii) one (1) Form 3 and one (1) Form 4 were filed late by Mr. Ronald Lutz; and (viii) three (3) Form 4s were filed late by Ms. Fay DeVriese.

All such Section 16(a) filing requirements have since been completed by each of the aforementioned Insiders.


Item 13. Certain Relationships and Related Transactions, and Director Independence

 
ReferenceRelated Party Transactions

SPAR's policy respecting approval of transactions with related persons, promoters and control persons is madecontained in the Ethics Code (See Ethics Code, above) The Company's senior management is generally responsible for monitoring compliance with the Ethics Code and establishing and maintaining compliance systems, including those related to the informationoversight and approval of conflicting relationships and transactions, subject to the review and oversight of SGRP's Governance Committee as provided in Part I Sections 2, 3, 11 and 12 of the Governance Committee's Charter, and SGRP's Audit Committee as provided in Part IV Section 15 of the Audit Committee's Charter. The Governance Committee and Audit Committee each consist solely of independent directors. The 2022 By-Laws require that the Chairman of each such Committee and at least two (2) of its members be a Super Independent Director (See Item 10. Board Size, Quorum and Voting, Director Nominations: Experience, Integrity, Diversity and other Criteria, 2022 By-Laws, and Significant Stockholder Governance Limitations, above).

SPAR's Audit Committee has the specific duty and responsibility to review and approve the overall fairness to the Company and terms of all material related- party transactions and payments. The Audit Committee reviews all related party transactions, in accordance with the Audit Committee Charter, the Ethics Code, the Nasdaq rules and other applicable law to ensure that the overall economic and other terms will be (or continue to be) no less favorable to the Company than would be the case in an arms-length contract with an unrelated provider of similar services (i.e., its overall fairness to the Company, including pricing, payments to related parties and the ability to provide services at comparable performance levels).

Domestic Related Party Transactions

Mr. Robert G. Brown and Mr. William H. Bartels are directors and significant stockholders of SGRP, and thus each is a related party and affiliate of SGRP.  Mr. Robert G. Brown was the Chairman of the Board of Directors of SGRP (the "Board"), but ceased to be eligible to hold that position when the 2022 By-Laws became effective on January 25, 2022. SPAR Business Services, Inc. ("SBS"), SPAR InfoTech, Inc. ("Infotech"), and SPAR Administrative Services, Inc. ("SAS"), are related parties and affiliates of SGRP, but are not under the control or part of the Company. SBS is a related party and affiliate of SGRP because it is owned by SBS LLC, which in turn is beneficially owned by Mr. Robert G. Brown. Infotech is a related party and affiliate because it is owned principally by Mr. Robert G. Brown. SAS is a related party and affiliate of SGRP because it is owned principally by Mr. William H. Bartels and entities owned by affiliates of Mr. Robert G. Brown.

-18-

Change of Control, Voting and Restricted Stock Agreement

The Change of Control, Voting and Restricted Stock Agreement (the "CIC Agreement") became effective on January 28, 2022, when signed by the Company and Robert G. Brown, ("Mr. Brown"), William H. Bartels, ("Mr. Bartels"), SPAR Administrative Services, Inc., a corporation ("SAS"), and collectively with Mr. Brown, Mr. Bartels and SAS, the ("Majority Stockholders"). Mr. Bartels and Mr. Brown are Directors of the Corporation. Mr. Brown was the Chairman of the Board of Directors of SGRP (the "Board"), but ceased holding that position when the 2022 By-Laws (as defined below) became effective on January 25, 2022.

The execution of the CIC Agreement was conditional upon making the changes to and restatement of the Corporation's 2022 By-Laws, which were approved by the Board and became effective on January 25, 2022 (the "2022 By-Laws").

The financial terms of the CIC Agreement to the Majority Stockholders, totaled $4,477,585, consisting of the following:

1.

The Corporation issued to the Majority Stockholders 2,000,000 restricted shares of Series B Preferred Stock, which are convertible into 3,000,000 SGRP Shares pursuant to the 1:1.5 conversion ratio set forth in the Preferred Designation and the CIC Agreement, subject to adjustment for a forward or reverse share split, share dividend, or similar transactions. These shares will vest over time upon execution of the CIC Agreement in 5 phases through November 10, 2023, assuming the Majority Stockholders' ongoing compliance with the terms and conditions of the CIC Agreement. Series B Preferred Shares may only be transferred to affiliates and certain related parties of the Majority Stockholders if those affiliates and certain related parties execute a joinder to the CIC Agreement. The Series B Preferred Stock shares was valued at $3,690,000 in total, based on the SGRP stock price on December 31, 2021 of $1.23 per share for the 3,000,000 conversion SGRP shares.

2.

The Corporation made a $250,000 cash payment to Mr. Brown and agreed to reimburse up to $35,000 of the legal expenses of the Majority Stockholders that were incurred after January 1, 2021, in connection with the negotiation and execution of the CIC Agreement.

3.

The Corporation assumed financial responsibility for, and paid directly to Affinity Insurance Company, Ltd., $502,585 to settle SAS obligations and the related claim for the 2014-2015 plan year

Pursuant to the CIC Agreement, all actions, claims and demands between the Majority Stockholders and the Company were resolved; and the Majority Stockholders and their affiliates during the five-year term of the CIC Agreement have agreed to give up their rights to do any of the following; (i) act or attempt to act by written consent; (ii) submit or attempt to submit any stockholder proposals in advance of any annual or special stockholders meeting of the Corporation; (iii) call or attempt to call any special meetings of the Corporation's stockholders; (iv) continue or commence or attempt to continue or commence any legal claims against the Company; (v) change or attempt to change the size of the Board; (vi) appoint or remove or attempt to appoint or remove any director or officer of the Corporation, except as expressly permitted with in the Company’s definitive proxy statement,CIC Agreement; (vii) amend or attempt to amend the Corporation's Certificate of Incorporation or 2022 By-Laws; and (viii) enter or attempt to enter into any agreement, arrangement or understanding with any other person in an effort to take any of those actions.

The Corporation's amended and restated 2022 By-Laws were adopted to increase the independence of the Board by making the following changes (among others): (i) the Board size was fixed at 7 and must consist of at least three (3) Super Independent Directors (as defined below) plus the CEO at all times; (ii) the Chairman, Vice Chairman and all Committee Chairpersons must qualify as Super Independent Directors ; and (iii) to establish a quorum, any Board meeting must have 70% of the Directors including the majority of Super Independent Directors.  If there are less than three (3) Super Independent Directors, than the least tenured non-Super Independent Director, other than the CEO, may not vote on Board matters, which helps to ensure that the Board remains under independent governance.  As defined in the 2022 By-Laws "Super Independent Director" means a member of the Board who: (1) qualifies as an independent director under applicable laws and regulations; (2) is affirmatively determined to be an independent director by the Governance Committee of the Board; (3) excludes the Majority Stockholders, Spar Administrative Services, Inc. and Spar Business Services, Inc. and any of their respective Relatives, Family Members, or Affiliates; and (4) excludes any Person that is or was a present or past employee or advisor of any company with which any of the Majority Stockholders has been involved and any Person that is, or was in the past, related or affiliated in any way to any of the Majority Stockholders, including, without limitation, any Affiliates of Innovative Global Technologies, LLC or SP/R, Inc. Defined Benefit Pension Trust.

In January 2022, for the CIC Agreement and 2022 By-Law to go into effect, two (2) of the Board members at the time, James R. Brown, Sr. and Panagiotis Lazaretos, who are affiliated with the Majority Stockholders, retired from the Board and assumed other advisory roles with the Company under separate agreements (see below). 

For the current Board composition and corporate, governance, see Item 10 Directors, Executive Officers and Corporate Governance, above.

James R. Brown, Sr. Advisor Agreement

On January 25, 2022, the Corporation entered into a consulting agreement with Mr. James R. Brown, Sr., effective January 26, 2022, following his retirement as a director of SGRP on January 25, 2022, pursuant to which Mr. Brown will serve as a Board advisor to SGRP from time to time for a term of one (1) year (the "Brown Advisor Agreement"). As compensation for his services, Mr. Brown was entitled to receive compensation at a rate of $55,000 for the term of the Brown Advisor Agreement. Payments will be filedmade in equal quarterly installments and will be pro-rated for partial quarters.  This agreement has expired. 

Panagiotis Lazaretos Consulting Agreement

On January 27, 2022, the Corporation entered into a consulting agreement with Thenablers, Ltd. effective February 1, 2022 (the " Lazaretos Consulting Agreement"). Thenablers, Ltd. is wholly owned by Mr. Panagiotis Lazaretos, a retired director of the Corporation. Following Mr. Lazaretos' retirement as a director on January 25, 2022, Thenablers, Ltd. agreed to provide the consulting services of Mr. Lazaretos to the Corporation regarding global sales and new markets' expansion. The Lazaretos Consulting Agreement cannot be terminated by the consent of either party for the first twelve (12) months, and automatically expires on January 31, 2024. As compensation for its services, Thenablers, Ltd. is entitled to receive: (i) base compensation at a rate of $10,000 per month for the term of the Consulting Agreement; (ii) incentive-based compensation as calculated in Exhibit A of the Lazaretos Consulting Agreement; and (iii) the outstanding options granted to Mr. Panagiotis ("Panos") N. Lazaretos on February 4, 2022 will continue to be outstanding and vest according to their terms under the agreement. As permitted by that agreement, on February 2, 2023, the Corporation gave notice that it was terminating that agreement effective July 31, 2023.

Other Domestic Related Party Transactions

National Merchandising Services, LLC ("NMS"), is a consolidated domestic subsidiary of the Company and is owned jointly by SGRP and by National Merchandising of America, Inc. ("NMA"). Mr. Edward Burdekin is the Chief Executive Officer and President and a director of NMS and also is an executive officer and director of NMA. Ms. Andrea Burdekin, Mr. Burdekin's wife, is the sole stockholder and also a director of both NMA and NMS. NMA is a related party of the Company but is not under the control of or consolidated with the SecuritiesCompany. Mr. Burdekin's wife also owns National Store Retail Services ("NSRS"). Since September 2018 through June of 2021, NSRS provided substantially all of the domestic merchandising specialist field force used by NMS. For those services, NMS agrees to reimburse NSRS certain costs for providing those services plus a premium ranging from 4.0% to 10.0% of certain costs. Starting in July of 2021, the domestic merchandising specialist field force services provided by NSRS was transitioned to National Remodel & Setup Services, LLC ("NRSS") with the same financial arrangement. Ms. Andrea Burdekin is the owner of NRSS. NMS also leases office space from Mr. Burdekin's Personal property.

Resource Plus, is a consolidated domestic subsidiary of the Company and Exchange Commissionis owned jointly by the Company and by Mr. Richard Justus. Mr. Justus has an ownership interest in RJ Holdings which owns the buildings where Resource Plus is headquartered and operates. Both buildings are subleased to Resource Plus.

On December 1, 2021, the Corporation entered into the Agreement for Marketing and Advertising Services (the "WB Agreement") with WB Marketing, Inc. (the "Agent", and together with the Company, the "Parties"). The Agent is an entity owned and controlled by Mrs. Jean Matacunas who is the wife of President and Chief Executive Officer, Michael R. Matacunas. Mr. Matacunas is also a minority owner of the Agent. The service fees paid to WB Marketing for the year ended December 31, 2022 was $189,000.

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International Related Party Services

SGRP Meridian (Pty), Ltd. ("Meridian") is a consolidated international subsidiary of the Company and is owned 51% by the Company, Mr. Adrian Wingfield, who is a Director of Meridian, is one of the owners of Merhold Holding Trust ("MHT"). MHT owns the building where Meridian is headquartered.

The Corporation's principal Brazilian subsidiary, SPAR BSMT, is owned 51% by the Company, 39% by JK Consultoria Empresarial Ltda.-ME, a Brazilian limitada ("JKC"), and 10% by Earth Investments, LLC ("EILLC"). JKC is owned by Mr. Jonathan Dagues Martins ("JDM") and his sister, Ms. Karla Dagues Martins. JDM is the Chief Executive Officer and President of SPAR BSMT and each of its Annual Meeting of Shareholders, presently scheduled to be held on May 26, 2011,subsidiaries pursuant to Regulation 14A not later than 120 days aftera Management Agreement between JDM and SPAR BSMT dated September 13, 2016. JDM also is a director of SPAR BSMT. Accordingly, JKC and JDM are each a related party respecting the endCompany. EILLC is owned by Mr. Peter W. Brown, who is a director of our fiscal year, which informationSPAR BSMT and SGRP, and who also is incorporatedthe nephew of Robert G. Brown.

SPARFACTS is a consolidated international subsidiary of the Company and is owned 51% by referenceSGRP. Ms. Lynda Chapman is a director of SPARFACTS. Her various companies provide office lease, accounting and consultant services to this Annual Report. NotwithstandingSPARFACTS.

Summary of Certain Related Party Transactions

The following costs of affiliates were charged to the foregoing, information appearingCompany (in thousands): 

  

Year Ended December 31,

 
  

2022

  

2021

 

Services provided by affiliates:

        

National Store Retail Services (NSRS) (1)

 

$

-

  

$

3,799

 

National Remodel & Setup Services (NRSS) (1)

  

8,565

   

3,484

 

Consulting and administrative services (RJ Holdings) (2)

  

477

   

567

 

Office lease expenses (RJ Holdings) (2)

  

248

   

248

 

Office and vehicle lease expenses (MPT, MCPT, MHT) (2)

  

-

   

115

 

Consulting and administrative fees (SPARFACTS) (2)

  

431

   

325

 

Other (2)

  

157

   

151

 

Total services provided by affiliates

 

$

9,878

  

$

8,689

 

    Due to affiliates consists of the following (in thousands):

 

December 31,

 
  

2022

  

2021

 

Loans from local investors:(3)

        

China

 

$

1,382

  

$

1,784

 

Mexico

  

623

   

623

 

Australia

  

693

   

597

 

Resource Plus

  

266

   

266

 

Total due to affiliates

 

$

2,964

  

$

3,270

 

(1)     Represent loans from the local investors into the Company's subsidiaries (representing their proportionate share of working capital loans). The loans have no payment terms and are due on demand.

(2)     These expenses are reflected in "Selling, general, and administrative expense" expense in the sections “Executiveconsolidated statements of operations and comprehensive (loss) income.

(3)     Represent loans from the local investors into the Company's subsidiaries (representing their proportionate share of working capital loans).  The loans have no payment terms and are due on demand.

Bartels' Retirement and Director Compensation Report

William H. Bartels retired as an employee of the Company as of January 1, 2020. However, he continues to serve as a member of SPAR's Board. Mr. Bartels is also one of the founders and a significant stockholder of SGRP.

Effective as of January 18, 2020, SPAR's Governance Committee proposed and unanimously approved retirement benefits for the five-year period commencing January 1, 2020, and ending December 31, 2024 (the "Five-Year Period"), for Mr. Bartels. The aggregate value of benefits payable to Mr. Bartels is approximately $220,558 per year and a total of $1,102,790 for the Five-Year Period. The Company recognized $700,000 of retirement benefits during the year ended December 31, 2020, representing the present value of the future Retirement Compensation, Committee”Supplemental Fees and “Audit Committee Report” shall not be deemed to be incorporated by reference in this Annual Report.Medical Benefits payments due Mr. Bartels. As of December 31, 2022 $290,917 of retirement benefits remains outstanding and is included within Accrued expenses and other current liabilities on the consolidated balance sheets. 

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2022 Deferred Compensation Agreement

The Corporation prepared a 2022 Stock Compensation Plan that would have included Awards for NQSOs and RSUs (as defined below), but that plan was never submitted to its shareholders for approval. However, the Board had previously approved, for certain key executives, incentive stock-based awards for 2022 using RSUs or cash. Since there were no plan based RSUs available, those executives instead received deferred compensation. 

On and effective as of March 24, 2022, the Corporation issued an award of 111,111 Phantom Stock Units to each of its executives: Kori G. Belzer; William Linnane; and Ron Lutz. Each Phantom Stock Unit represents the right of the grantee to receive cash payments based on the fair market value of SGRP's Common Stock at the time of vesting. Vesting will occur in three tranches of one-third each over the three (3) year period following the Grant Date, provided that (i) the Grantee is an employee of the Company at the time and (ii) the Corporation has achieved 90% of the agreed upon the applicable financial target for the year commencing with 2022 (which was EBITDA for 2022), but tranches will rollover to the following year and be payable upon achievement of 120% of the agreed upon the applicable financial target for such following year. The Phantom Stock Units do not possess the rights of common stockholders of the Corporation, including any voting or dividend rights, and cannot be exercised or traded for the SGRP's Common Stock. Due to the cash settlement feature, the Phantom Stock Units are classified as liabilities in accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheet. As of December 31, 2022, no Phantom Stock Unit had vested and performance targets are not probable of being met, therefore no expense has been recognized for these awards.

Other Related Party Transactions and Arrangements

SPAR Business Services, Inc. ("SBS"), and SPAR InfoTech, Inc. ("Infotech"), are related parties and affiliates of SGRP, but are not under the control or part of the consolidated Company. SBS is an affiliate and related party because it is owned by SBS LLC, which in turn is beneficially owned by Robert G. Brown, Director and significant shareholder of SGRP. Infotech is an affiliate and related party because it is owned principally by Robert G. Brown. SPAR Administrative Services, Inc. ("SAS"), is a related party and affiliate of SGRP, but is not under the control or part of the consolidated Company. SAS is an affiliate and related party because it is beneficially owned by William H Bartels (a Director and significant stockholder of SGRP) and family members of Robert G. Brown. See Change of Controls, Voting and Restricted Stock Agreement, above.

In July 1999 SMF, SBS and Infotech entered into a perpetual software ownership agreement providing that each party independently owned an undivided share of and has the right to unilaterally license and exploit certain portions of the Company's proprietary scheduling, tracking, coordination, reporting and expense software are co-owned with SBS and Infotech and each entered into a non-exclusive royalty-free license from the Company to use certain "SPAR" trademarks in the United States. SAS uses the "SPAR name through the SBS License.

Director Independence

See Board Size, Quorum and Voting and Director Nominations: Experience, Integrity, Diversity and other Criteria, and 2022 By-Laws, above.

Item 14. Principal Accountant Fees and Services

Reference is made

The aggregate fees billed to us for professional accounting services by BDO USA, LLP, including the informationaudit of the Company's annual financial statements for the years ended December 31, 2022 and 2021, are set forth in the Company’s definitive proxy statement, which will be filedtable below (amounts in thousands):

 

 

2022

 

2021

Audit fees

$

903 

640

Audit-related fees

 33 

50

Tax fees

 169 

187

Total

$

1,105

$

877

For purposes of the preceding table professional fees are classified as follows:

●

Audit fees — These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by the independent registered accounting firm in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent registered accounting firm in connection with statutory and regulatory filings or engagements.

●

Audit-related fees — These are fees for assurance and related services that traditionally are performed by independent registered accounting firm that are reasonably related to the performance of the audit or review of the financial statements. Audit related fees in the above table represent fees for a 401(k) audit and fees for a stand-alone audit of a subsidiary requested by the Company.

●

Tax fees — These are fees for all professional services performed by professional staff in our independent registered accounting firm's tax division, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning and tax advice, including federal, state and local issues. Services may also include assistance with tax audits and appeals before the IRS and similar state and local agencies, as well as federal, state and local tax issues related to due diligence.

Since the Audit Committee's formation in 2003, as required by applicable law and Nasdaq rules, each audit-related or tax or other non-audit service performed by the Company's independent registered accounting firm either: (i) was approved in advance on a case-by-case basis by SGRP's Audit Committee; or (ii) fit within a pre-approved "basket" of audit-related or tax and other non-audit services of limited amount, scope and duration established in advance by SGRP's Audit Committee. In connection with the Securities and Exchange Commissionstandards for its Annual Meeting of Shareholders, presently scheduled to be held on May 26, 2011, pursuant to Regulation 14A not later than 120 days after the end of our fiscal year, which information is incorporated by reference to this Annual Report. Notwithstanding the foregoing, information appearing in the sections “Executive Compensation Reportindependence of the Compensation Committee” and “AuditCompany's independent registered accounting firm promulgated by the SEC, the Audit Committee Report” shall notconsiders (among other things) whether the provision of such services would be deemed to be incorporated by reference in this Annual Report.compatible with maintaining the independence of the Company's registered independent accounting firm.

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PART IV

Item 15. Exhibits and Financial Statement Schedule
1.      Index to Financial Statements filed as part of this report:

Reports of Independent Registered Public Accounting Firms

15.

Amended Exhibits

Exhibit

Number

 

Description

  
  – Rehmann RobsonF-1
 
  – Nitin Mittal & Co.

31.1

F-2
 
Consolidated Balance Sheets as of December 31, 2010, and December 31, 2009F-3
Consolidated Statements of Income for the years ended December 31, 2010, and December 31, 2009F-4
Consolidated Statements of Equity for the years ended December 31, 2010, and December 31, 2009F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2010, and December 31, 2009F-6
Notes to Consolidated Financial StatementsF-7

2.      Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts for the two years ended December 31, 2010F-30
3.      Exhibits.
Exhibit
Number
Description
3.1Certificate of Incorporation of SPAR Group, Inc. (referred to therein under its former name of PIA Merchandising Services, Inc.), as amended ("SGRP"), incorporated by reference to SGRP's Registration Statement on Form S-1 (Registration No. 33-80429), as filed with the Securities and Exchange Commission ("SEC") on December 14, 1995 (the "Form S-1"), and the Certificate of Amendment filed with the Secretary of State of the State of Delaware on July 8, 1999 (which, among other things, changes SGRP's name to SPAR Group, Inc.), (incorporated by reference to Exhibit 3.1 to SGRP's Quarterly Report on Form 10-Q for the 3rd Quarter ended September 30, 1999).
3.2Amended and Restated By-Laws of SPAR Group, Inc., adopted on May 18, 2004, as amended through August 5, 2010 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on August 10,2010).
3.3Amended and Restated Charter of the Audit Committee of the Board of Directors of SPAR Group, Inc., adopted on May 18, 2004 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004).
3.4Charter of the Compensation Committee of the Board of Directors of SPAR Group, Inc., adopted on May 18, 2004 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004).
3.5Charter of the Governance Committee of the Board of Directors of SPAR Group, Inc., adopted on May 18, 2004 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004).
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3.6SPAR Group, Inc. Statement of Policy Respecting Stockholder Communications with Directors, adopted on May 18, 2004 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004).
3.7SPAR Group, Inc. Statement of Policy Regarding Director Qualifications and Nominations, adopted on May 18, 2004 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004).
3.8Certificate of Designation of Series "A" Preferred Stock of SPAR Group, Inc., As of March 28, 2008 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC on March 31, 2008).
4.1Registration Rights Agreement entered into as of January 21, 1992, by and between RVM Holding Corporation, RVM/PIA, a California Limited Partnership, The Riordan Foundation and Creditanstalt-Bankverine (incorporated by reference to the Form S-1).
4.2Amended and Restated Series A Preferred Stock Subscription Agreement by and among SGRP, Robert G. Brown, William H. Bartels and SPAR Management Services, Inc., a Nevada corporation ("SMSI"), dated September 30, 2008, and effective as of March 31, 2008 (incorporated by reference to SGRP's Current Report on Form 8-K dated October 6, 2008, as filed with the SEC on October 10, 2008).
4.3
Series A Preferred Stock Subscription Agreement by and among SGRP, SP/R Inc. Defined Benefit Pension Plan, acting through Robert G. Brown, its Trustee, WHB Services, Inc. Defined Benefit Trust, acting through William H. Bartels, its Trustee, and WHB Services, Inc. Investment Savings Trust, acting through William H. Bartels, its Trustee, affiliates of Mr. Robert G. Brown and Mr. William H. Bartels, dated September 30, 2008, and effective as of September 24, 2008 (incorporated by reference to SGRP's Current Report on Form 8-K dated October 6, 2008, as filed with the SEC on October 10, 2008).
4.4SGRP's Offer to Exchange Certain Outstanding Stock Options for New Stock Options dated August 24, 2009, (incorporated by reference to Exhibits 99(a)(1)(A) through (G) of SGRP's Schedule TO dated August 24, 2009, as filed with the SEC on August 25, 2009 ("SGRP's SC TO-I")).
4.5Form of SGRP's Common Stock Certificate (incorporated by reference to SGRP's Pre-Effective Amendment No. 1 to its Registration Statement on Form S-3 (Registration No. 333-162657) as filed with the SEC on February 7, 2011).
4.6Form of SGRP's Preferred Stock Certificate (incorporated by reference to SGRP's Pre-Effective Amendment No. 1 to its Registration Statement on Form S-3 (Registration No. 333-162657) as filed with the SEC on February 7, 2011).
10.1 
SPAR Group, Inc. 2008 Stock Compensation Plan, effective as of May 29, 2008, and as amended through May 28, 2009 (the "SGRP 2008 Plan") (incorporated by reference to SGRP's Current Report on Form 8-K dated June 4, 2009, as filed with the SEC on June 4, 2009).
10.2 
Summary Description and Prospectus dated August 24, 2009, respecting the SPAR Group, Inc. 2008 Stock Compensation Plan, as amended (incorporated by reference to Exhibit 99(a)(1)(G) to SGRP's SC TO-I).
10.3 
Form of Nonqualified Stock Option Contract for new awards under the SGRP 2008 Plan (incorporated by reference to SGRP's first and final amendment to its SC TO-I on Schedule TO I/A dated October 20, 2009, as filed with the SEC on October 22, 2009).
10.4 2000 Stock Option Plan, as amended through May 16, 2006 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, as filed with the SEC on November 14, 2006).
10.5 2001 Employee Stock Purchase Plan (incorporated by reference to SGRP's Proxy Statement for SGRP's annual stockholders meeting held on August 2, 2001, as filed with the SEC on July 12, 2001).
10.6 2001 Consultant Stock Purchase Plan (incorporated by reference to SGRP's Proxy Statement for SGRP's Annual meeting held on August 2, 2001, as filed with the SEC on July 12, 2001).

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10.7 
Amended and Restated Change in Control Severance Agreement between William H. Bartels and SGRP, dated as of December 22, 2008 (incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on April 15, 2010).
10.8 
Amended and Restated Change in Control Severance Agreement between Gary S. Raymond and SGRP, dated as of December 30, 2008 (incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on April 15, 2010).
10.9 
Amended and Restated Change in Control Severance Agreement between Kori G. Belzer and SGRP, dated as of December 31, 2008 (incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on April 15, 2010).
10.10 
Amended and Restated Change in Control Severance Agreement between Patricia Franco and SGRP, dated as of December 31, 2008 (incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on April 15, 2010).
10.11 
Amended and Restated Change in Control Severance Agreement between James R. Segreto and SGRP, dated as of December 20, 2008 (incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on April 15, 2010).
10.12 
Amended and Restated Field Service Agreement dated and effective as of January 1, 2004, by and between SPAR Marketing Services, Inc., and SPAR Marketing Force, Inc. (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, as filed with the SEC on May 21, 2004).
10.13 
First Amendment to Amended and Restated Field Service Agreement between SPAR Marketing Services, Inc., a Nevada corporation ("SMS"), and SPAR Marketing Force, Inc., a Nevada corporation ("SMF"), dated September 30, 2008, and effective as of September 24, 2008 (the "First Amendment") (incorporated by reference to SGRP's Current Report on Form 8-K dated October 6, 2008, as filed with the SEC on October 10, 2008).
10.14 
Amended and Restated Field Management Agreement dated and effective as of January 1, 2004, by and between SPAR Management Services, Inc., and SPAR Marketing Force, Inc. (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, as filed with the SEC on May 21, 2004).
10.15 
Amended and Restated Programming and Support Agreement by and between SPAR Marketing Force, Inc. and SPAR Infotech, Inc., dated and effective as of September 15, 2007 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on November 14, 2007).
10.16 
Trademark License Agreement dated as of July 8, 1999, by and between SPAR Marketing Services, Inc., and SPAR Trademarks, Inc. (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the SEC on March 31, 2002).
10.17 
Trademark License Agreement dated as of July 8, 1999, by and between SPAR Infotech, Inc., and SPAR Trademarks, Inc. (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the SEC on March 31, 2002).
10.18 
Master Lease Agreement by and between SPAR Marketing Services, Inc. and SPAR Marketing Force, Inc. dated as of November 2004 relating to lease of handheld computer equipment (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on April 12, 2005).
10.19 
Amended and Restated Equipment Leasing Schedule 001 to Master Lease Agreement by and between SPAR Marketing Services, Inc., and SPAR Marketing Force, Inc., dated as of November 1, 2004, relating to lease of handheld computer equipment (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC on May 18, 2005).
10.20 
Amended and Restated Equipment Leasing Schedule 002 to Master Lease Agreement by and between SPAR Marketing Services, Inc., and SPAR Marketing Force, Inc., dated as of January 4, 2005, relating to lease of handheld computer equipment (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC on May 18, 2005).
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10.21 
Amended and Restated Equipment Leasing Schedule 003 to Master Lease Agreement by and between SPAR Marketing Services, Inc., and SPAR Marketing Force, Inc., dated as of January 31, 2005, relating to lease of handheld computer equipment (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC on May 18, 2005).
10.22 
Equipment Leasing Schedule 004 to Master Lease Agreement by and between SPAR Marketing Services, Inc., and SPAR Marketing Force, Inc., dated as of March 24, 2005, relating to lease of handheld computer equipment (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC on May 18, 2005).
10.23 
Master Lease Agreement by and between SPAR Marketing Services, Inc. and SPAR Canada Company dated as of January 2005 relating to lease of handheld computer equipment (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on April 12, 2005).
10.24 
Amended and Restated Equipment Leasing Schedule 001 to Master Lease Agreement by and between SPAR Marketing Services, Inc., and SPAR Canada Company dated as of January 4, 2005, relating to lease of handheld computer equipment (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC on May 18, 2005).
10.25 
Bill of Sale and Lease Termination Under Certain Schedules to Master Equipment Leases by and among SMF, SPAR Canada Company, a Nova Scotia corporation, and SMS dated September 30, 2008, and effective as of September 24, 2008 (the "Bill of Sale") (incorporated by reference to SGRP's Current Report on Form 8-K dated October 6, 2008, as filed with the SEC on October 10, 2008).
10.26 
Master Lease Agreement by and between SPAR Marketing Services, Inc. ("SMS"), and SGRP's subsidiary, SPAR Marketing Force, Inc. ("SMF"), dated as of July 1, 2008, relating to leases of handheld computer equipment (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, as filed with the SEC on May 15, 2009).
10.27 
Equipment Leasing Schedule No. 001 to Master Lease Agreement by and between SMS and SMF dated as of July 1, 2008 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, as filed with the SEC on May 15, 2009).
10.28 
Equipment Leasing Schedule No. 002 to Master Lease Agreement by and between SMS and SMF dated as of September 1, 2008 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, as filed with the SEC on May 15, 2009).
10.29 
Joint Venture Agreement dated as of March 26, 2004, by and between Solutions Integrated Marketing Services Ltd. and SPAR Group International, Inc., respecting the Corporation's subsidiary in India (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on April 12, 2005).
10.30 
Joint Venture Agreement dated as of May 1, 2001, by and between Paltac Corporation and SGRP, respecting the Corporation's subsidiary in Japan (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on April 12, 2005).
10.31 
Agreement on Amendment dated as of August 1, 2004, by and between SGRP and SPAR FM Japan, Inc., respecting the Corporation's subsidiary in Japan (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on April 12, 2005).
10.32 
Joint Venture Agreement dated as of January 26, 2005, by and between Best Mark Investments Holdings Ltd. and SPAR International Ltd., respecting the Corporation's subsidiary in China (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on April 12, 2005).
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10.33 
Joint Venture Agreement dated as of March 29, 2006 by and between FACE AND COSMETIC TRADING SERVICES PTY LIMITED and SPAR International, Ltd., respecting the Corporation's subsidiary in Australia (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as filed with the SEC on April 2, 2007).
10.34 
Stock Purchase and Sale Agreement by and among Performance Holdings, Inc. and SPAR Incentive Marketing, Inc., effective as of June 30, 2002 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, as filed with the SEC on August 14, 2002).
10.35 
Revolving Credit, Guaranty and Security Agreement by and among Performance Holdings, Inc. and SPAR Incentive Marketing, Inc., effective as of June 30, 2002 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, as filed with the SEC on August 14, 2002).
10.36 
Term Loan, Guaranty and Security Agreement by and among Performance Holdings, Inc. and SPAR Incentive Marketing, Inc., effective as of June 30, 2002 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, as filed with the SEC on August 14, 2002).
10.37 
Promissory Note in the principal amount of $764,271.00 by STIMULYS, Inc., in favor of SPAR Incentive Marketing, Inc., dated as of September 10, 2004 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on April 12, 2005).
10.38 
Payoff and Release Letter by and between STIMULYS, Inc., and SPAR Incentive Marketing, Inc., dated as of September 10, 2004 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on April 12, 2005).
10.39 
Sales Proceeds Agreement by and between STIMULYS, Inc. and SPAR Incentive Marketing, Inc., dated as of September 10, 2004 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2004, as filed with the SEC on April 12, 2005).
10.40 
Third Amended and Restated Revolving Credit and Security Agreement dated as of January 24, 2003 (as amended, the "Webster Credit Agreement"), by and among Webster Business Credit Corporation, formerly known as Whitehall Business Credit Corporation ("Webster") with SGRP, SPAR Marketing Force, Inc., SPAR, Inc., SPAR/Burgoyne Retail Services, Inc., SPAR Incentive Marketing, Inc., SPAR Trademarks, Inc., SPAR Marketing, Inc. (DE), SPAR Marketing, Inc. (NV), SPAR Acquisition, Inc., SPAR Group International, Inc., SPAR Technology Group, Inc., SPAR/PIA Retail Services, Inc., Retail Resources, Inc., Pivotal Field Services Inc., PIA Merchandising Co., Inc., Pacific Indoor Display Co. and Pivotal Sales Company (as such borrower list may be amended from time to time, collectively, the "SPAR Borrowers"), (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the SEC on March 31, 2003).
10.41 
Consent, Joinder, Release and Amendment Agreement (Amendment No. 1) to the Webster Credit Agreement among the SPAR Webster Borrowers and Webster dated as of October 31, 2003 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2003, as filed with the SEC on March 30, 2004).
10.42 
Waiver and Amendment Letter (Amendment No. 2) to the Webster Credit Agreement among the SPAR Webster Borrowers and Webster dated as of January 1, 2004 (incorporated by reference to SGRP's Amended Annual Report on Form 10-K/A for the fiscal year ended December 31, 2003, as filed with the SEC on June 28, 2004).
10.43 
Waiver And Amendment No. 3 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of March 26, 2004 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 26, 2004). 
-38-
10.44 
Waiver And Amendment No. 4 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of May 17, 2004 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 26, 2004).
10.45 
Waiver and Amendment No. 5 to Third Amended and Restated Revolving Credit and Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of August 20, 2004 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, as filed with the SEC on August 23, 2004).
10.46 
Waiver and Amendment No. 6 to Third Amended and Restated Revolving Credit and Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of November 15, 2004 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, as filed with the SEC on November 17, 2004).
10.47 
Waiver to the Third Amended and Restated Revolving Credit and Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of March 31, 2005 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC on May 18, 2005).
10.48 
Waiver to the Third Amended and Restated Revolving Credit and Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of May 11, 2005, with respect to the fiscal quarter ended March 31, 2005 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, as filed with the SEC on May 18, 2005).
10.49 
Waiver to the Third Amended and Restated Revolving Credit and Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of August 10, 2005, with respect to the fiscal quarter ended June 30, 2005 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, as filed with the SEC on August 15, 2005).
10.50 
Waiver to the Third Amended and Restated Revolving Credit and Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of November 10, 2005, with respect to the fiscal quarter ended September 30, 2005 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, as filed with the SEC on November 14, 2005).
10.51 
Amendment No. 7 to the Third Amended and Restated Revolving Credit and Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of January 18, 2006 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 26, 2006).
10.52 
Waiver And Amendment No. 8 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of March 28, 2007, with respect to the fiscal year ended December 31, 2006 (incorporated by reference to SGRP's Annual Report on Form 10-K for year ended December 31, 2006, as filed with the SEC on April 2, 2007).
10.53 
Waiver And Amendment No. 9 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of May 18, 2007, with respect to the fiscal year ended December 31, 2006 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, as filed with the SEC on May 21, 2007).
10.54 
Limited Guaranty of Robert G. Brown respecting certain obligations of the SPAR Webster Borrowers under the Webster Credit Agreement in favor of Webster dated as of May 18, 2007 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, as filed with the SEC on May 21, 2007).
10.55 
Limited Guaranty of William H. Bartels respecting certain obligations of the SPAR Webster Borrowers under the Webster Credit Agreement in favor of Webster dated as of May 18, 2007 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, as filed with the SEC on May 21, 2007).
-39-
10.56 
Waiver And Amendment No. 10 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of August 1, 2007, with respect to the fiscal quarter ended June 30, 2007 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, as filed with the SEC on August 20, 2007).
10.57 
Waiver And Amendment No. 11 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of November 16, 2007, with respect to the fiscal year ended December 31, 2006 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, as filed with the SEC on November 19, 2007).
10.58 
Waiver And Amendment No. 12 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of February 12, 2008, with respect to the fiscal year ended December 31, 2007 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as filed with the SEC on March 31, 2008).
10.59 
Waiver And Amendment No. 13 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of August 14, 2008, with respect to the fiscal quarter ended June 30, 2008 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, as filed with the SEC on August 14, 2008).
10.60 
Amendment No. 14 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of January 23, 2009 (incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on April 15, 2010).
10.61 
Amendment No. 15 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of March15, 2009 (incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on April 15, 2010).
10.62 
Amendment No. 16 To Third Amended And Restated Revolving Credit And Security Agreement (i.e., to the Webster Credit Agreement) among the SPAR Webster Borrowers and Webster dated as of March 15, 2010 (incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on April 15, 2010).
10.63 
Revolving Loan and Security Agreement dated as of July 6, 2010 (the "Sterling Loan Agreement"), by and among SGRP, and certain of its direct and indirect subsidiaries, namely SPAR Incentive Marketing, Inc., PIA Merchandising Co., Inc., Pivotal Sales Company, National Assembly Services, Inc., SPAR/Burgoyne Retail Services, Inc., SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc. and SPAR, Inc. (each a "Subsidiary Borrower", and together with SGRP, collectively, the "SPAR Sterling Borrowers"), and Sterling National Bank, as Agent (the "Sterling Agent"), and Sterling National Bank and Cornerstone Bank, as lenders (collectively, the "Sterling Lenders") (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on July 12, 2010).
10.64 
Secured Revolving Loan Note in the original maximum principal amount of $5,000,000.00 issued by the SPAR Sterling Borrowers to Sterling National Bank pursuant to (and governed by) the Sterling Loan Agreement and dated as of July 6, 2010 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on July 12, 2010).
10.65 
Secured Revolving Loan Note in the original maximum principal amount of $1,500,000.00 issued by the SPAR Sterling Borrowers to Cornerstone Bank pursuant to (and governed by) the Sterling Loan Agreement and dated as of July 6, 2010 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on July 12, 2010).
10.66 
Limited Continuing Guaranty of the obligations of the SPAR Sterling Borrowers under the Sterling Loan Agreement from Robert G. Brown and William H. Bartels in favor of the Sterling Lenders dated as of July 6, 2010 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on July 12, 2010).
-40-
10.67 
Confirmation of Credit Facilities Letter by Royal Bank of Canada in favor of SPAR Canada Company dated as of October 17, 2006 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as filed with the SEC on April 2, 2007).
10.68 
General Security Agreement by SPAR Canada Company in favor of Royal Bank of Canada dated as of October 20, 2006 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as filed with the SEC on April 2, 2007).
10.69 
Waiver Letter and Amendment by and between Royal Bank of Canada Company, dated as of March 31, 2008 (incorporated by reference to SGRP's Annual Report on Form 10-K, as filed with the SEC on March 31, 2008).
10.70 
Debtor Finance Agreement dated as of May 24, 2006, by and among Bendingo Bank Limited ACN and SPARFACTS Pty Ltd. together with Bendingo Bank Limited ACN Standard Terms and Conditions (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, as filed with the SEC on May 15, 2008).
14.1
Code of Ethical Conduct for the Directors, Senior Executives and Employees, of SPAR Group, Inc., dated May 1, 2004 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 5, 2004)."
14.2
Statement of Policy Regarding Personal Securities Transactions in SGRP Stock and Non-Public Information, as adopted and restated on May 1, 2004, and as further amended through March 10, 2011 (as filed herewith).
21.1List of Subsidiaries (as filed herewith).
23.1Consent of Rehmann Robson (as filed herewith).
23.2Consent of Nitin Mittalan & Co.  (as filed herewith).
31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (as filed herewith).

31.2

31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (as filed herewith).

32.1

32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (as filed herewith).

32.2

32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (as filed herewith).

104Cover Page Interactive Data File (embedded within the Inline XBRL document).

Please see SGRP'sExhibits andFinancial Statement Schedules in Part IV in SGRP's Annual Report on Form 10-K for the year ended December 31, 2022 ("Form 10-K"), originally filed with the Securities and Exchange Commission (the "SEC") on April 17, 2023, which are incorporated herein by reference.

SGRP's Independent Registered Public Accounting Firm is BDO USA, LLP; Troy, Michigan; PCAOB ID#243.

 

-22-
 
-41-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to the report to be signed on its behalf by the undersigned, thereunto duly authorized.

SPAR Group, Inc.

  
 SPAR Group, Inc.

By:

/s/ Michael R. Matacunas

Michael R. Matacunas

President and Chief Executive Officer

  
 
By: /s/ Gary S. Raymond

Dated as of:  May 1, 2023

 
Gary S. Raymond
Chief Executive Officer
Date:  May 29, 2012

KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael R. Matacunas and Antonio Calisto Pato and each of them, jointly and severally, his attorneys-in-fact, each with full power of substitution, for them in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this amendment to the report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated.

SIGNATURE

 

TITLE

   

/s/ Gary S. RaymondMichael R. Matacunas

 President, Chief Executive Officer and Director,
     Gary S. RaymondMichael R. Matacunas (Principal Executive Officer)
Date:Dated as of: May 29, 2012
1, 2023		  
   
/s/     Robert G. Brown Chairman of the Board and Director
     Robert G. Brown  
Date:Dated as of: May 29, 2012
1, 2023		  
   
/s/ William H. BartelsSean M. Whelan (1) Vice Chairman and Director
     William H. Bartels  Sean M. Whelan  
Date:Dated as of: May 29, 2012
1, 2023		  
   

/s/ Jack W. PartridgeMichael Wager (1)

 Director
     Jack W. Partridge

     Michael Wager

  
Date:

Dated as of: May 29, 2012

1, 2023

  
   

/s/ Jerry B. GilbertWilliam H. Bartels (1)

 

Director

     Jerry B. Gilbert

     William H. Bartels

  
Date:

Dated as of: May 29, 2012

1, 2023

  
   

/s/ Lorrence T. KellarPeter W. Brown (1)

 

Director

     Lorrence T. Kellar  

     Peter W. Brown 

  
Date:

Dated as of: May 29, 2012

1, 2023

  
   

/s/ C. Manly MolpusAntonio Calisto Pato

 Director

Chief Financial Officer,

 C. Manly MolpusAntonio Calisto Pato 
Date:  May 29, 2012
/s/ James R. SegretoChief Financial Officer,
     James R. Segreto

Treasurer and Secretary (Principal Financial and Accounting Officer)

Date:

Dated as of: May 29, 2012

1, 2023

 

-42-
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
SPAR Group, Inc. and Subsidiaries
Tarrytown, New York
We have audited the accompanying consolidated balance sheets of SPAR Group, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity, and cash flows for years then ended. Our audits also included the financial statement schedule for these years as listed in the index at Item 15. These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion

(1)  Executed on these consolidated financial statements and schedule based on our audits. We did not audit the financial statements of SPAR Solutions Merchandising Private Limited as of and for the years ended December 31, 2010 and 2009. These statements reflect total assets constituting 5% and 7% of consolidated total assets as of December 31, 2010 and 2009, respectively, and total revenues constituting 5% and 9% of total consolidated revenue for the years then ended, respectively. Such financial statements were auditedhis behalf by another auditor whose report has been furnished to us, and our opinion, insofar as it relatesMichael R. Matacunas pursuant to the amounts included for SPAR Solutions Merchandising Private Limited for 2010 and 2009, is based solely on the reportpower of the other auditor.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditattorney granted to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of the other auditor provide a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditor for 2010 and 2009, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of SPAR Group, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for the for the years then ended, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial schedule for those years, when considered in relation to the consolidated financial statements taken as a whole presents fairly, in all material respects, the information set forth therein.
/s/ Rehmann Robson
Troy, Michigan
March 15, 2011

F-1
Report of Independent Public Accounting Firm
The Board of Directors and Stockholders
SPAR Solutions Merchandising Private Limited
New Delhi, India
We have audited the accompanying balance sheets of SPAR Solutions Merchandising Private Limited, a company incorporated under the laws of India, as of December 31, 2010 and 2009 and the related statements of income, stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examination on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SPAR Solutions Merchandising Private Limited, as of December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in United States.

/s/ Nitin Mittal & Co.

New Delhi, India
March 11, 2011
F-2
 SPAR Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
  December 31, 
  2010  2009 
Assets      
Current assets:      
Cash and cash equivalents $923  $1,659 
Accounts receivable, net  13,999   10,231 
Prepaid expenses and other current assets  1,283   1,182 
Total current assets  16,205   13,072 
         
Property and equipment, net  1,452   1,550 
Goodwill  848   798 
Intangibles  362   - 
Other assets  226   1,931 
Total assets $19,093  $17,351 
         
Liabilities and equity        
Current liabilities:        
Accounts payable $1,804  $3,819 
Accrued expenses and other current liabilities  2,733   2,226 
Accrued expenses due to affiliates  1,575   1,436 
Customer deposits  471   477 
Lines of credit and other debt  5,263   4,862 
Total current liabilities  11,846   12,820 
         
Equity:        
SPAR Group, Inc. equity        
Preferred stock, $.01 par value:        
Authorized shares - 3,000,000 Issued and outstanding shares-554,402 – December 31, 2010 and 2009
  6   6 
Common stock, $.01 par value:        
Authorized shares - 47,000,000 Issued and outstanding shares - 19,314,306 – December 31, 2010 - 19,139,365 – December 31, 2009
  193   191 
Treasury stock  (1)  (1)
Additional paid-in capital  13,549   13,099 
Accumulated other comprehensive loss  (142)  (220)
Accumulated deficit  (6,808)  (8,975)
Total SPAR Group, Inc. equity  6,797   4,100 
Non-controlling interest  450   431 
Total liabilities and equity $19,093  $17,351 
See accompanying notes.
F-3
SPAR Group, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
  Year Ended December 31, 
  2010  2009 
         
Net revenues $63,154  $57,549 
Cost of revenues  42,165   40,019 
Gross profit  20,989   17,530 
Selling, general and administrative expense  17,140   16,127 
Depreciation and amortization  1,018   1,081 
Operating income  2,831   322 
Interest expense  310   178 
Other (income)  (21)  (582)
Income before provision for income taxes  2,542   726 
         
Provision for income taxes  263   169 
Net income  2,279   557 
         
Net income  attributable to non-controlling interest  112   55 
Net income attributable to SPAR Group, Inc $2,167  $502 
Net income per basic and diluted common share:        
         
Net income – basic and diluted $0.11  $0.03 
Weighted average common shares – basic  19,209   19,139 
Weighted average common shares – diluted  20,602   19,434 

See accompanying notes.
F-4

SPAR Group, Inc. and Subsidiaries
Consolidated Statements of Equity
(In thousands)
  Preferred Stock  Common Stock        Accumulated Other Comprehensive  Non-    
  Shares  Amount  Shares  Amount  
Treasury
Stock
  
Paid-In
Capital
  Accumulated Deficit  
(Loss)
Gain
  Controlling Interest  
Total
Equity
 
Balance at January 1, 2009  554  $6   19,139  $191  $(1) $12,821  $(9,477) $(361) $488  $3,667 
                                         
Preferred Stock Issued          –   –   –   –   –   –   –     
Issuance of stock options to non-employees for services          –   –   –   70   –   –   –   70 
Issuance of stock options to employees for services          –   –   –   136   –   –   –   136 
Purchase of non-controlling interest in joint ventures          –   –   –   51   –   –   (112)  (61)
Stock Compensation          –   –   –   21   –   –   –   21 
Comprehensive income:                                        
Foreign currency translation gain          –   –   –   –   –   141   –   141 
Net Income                          502   –   55   557 
Comprehensive income                          502   141   55   698 
Balance at December 31, 2009  554  $6   19,139  $191  $(1) $13,099  $(8,975) $(220) $431  $4,531 
                                         
Preferred Stock Issued          –   –   –   –   –   –   –     
                                         
Issuance of stock options and warrants to non-employees for services          120   1   –   204   –   –   –   205 
                                         
Issuance of stock options to employees for services          –   –   –   131   –   –   –   131 
Exercise of Options          55   1   –   25   –   –   –   26 
Purchase of non-controlling interest in joint ventures          –   –   –   90   –   –   (141)  (51)
Other changes to non-controlling interest                                  48   48 
Comprehensive income:                                        
Foreign currency translation gain          –   –   –   –   –   78   –   78 
Net Income                          2,167   –   112   2,279 
Comprehensive income                          2,167   78   112   2,357 
Balance at
    December 31, 2010
  554  $6   19,314  $193  $(1) $13,549  $(6,808) $(142) $450  $7,247 

See accompanying notes.
F-5

SPAR Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
  Year Ended December 31, 
  2010  2009 
Operating activities      
       
Net income $2,279  $557 
Adjustments to reconcile net income to net cash provided by operating activities        
Depreciation  1,018   1,081 
Issuance of stock and stock options for service  336   278 
Additional paid-in capital purchase of non-controlling interest and other changes in non-controlling interest  93   (112)
Changes in operating assets and liabilities:        
Accounts receivable  (3,790)  2,997 
Prepaid expenses and other assets  1,604   139 
Accounts payable, accrued expenses, other current liabilities and customer deposits  (1,280)  (3,529)
Net cash provided by operating activities  260   1,411 
         
Investing activities        
         
Purchases of property and equipment and non-controlling interest in subsidiary  (1,439)  (831)
         
Financing activities        
         
Net borrowing (repayments) from lines of credit  445   (743)
Repayments of capital lease obligations  (95)  – 
Proceeds from employee stock purchase plan and exercised options  26   – 
Net cash provided by (used in) financing activities  376   (743)
         
Effect of foreign exchange rate changes on cash  67   137 
         
Net change in cash and cash equivalents  (736)  (26)
Cash and cash equivalents at beginning of year  1,659   1,685 
Cash and cash equivalents at end of year $923  $1,659 
         
Supplemental disclosure of cash flows information        
         
Interest paid $378  $288 
Income taxes paid $203  $799 
Equipment purchased through capital lease $250  $– 

See accompanying notes.
F-6
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

1. Business and Organization
The SPAR Group, Inc., a Delaware corporation (“SGRP”), and its subsidiaries (together with SGRP, the “SPAR Group” or the “Company”), is a supplier of merchandising and other marketing services throughout the United States and internationally. The Company also provides in-store event staffing, product sampling, furniture and other product assembly services, Radio Frequency Identification (“RFID”) services, technology services and marketing research services.  Assembly services are performed in stores, homes and offices while those other services are primarily performed in mass merchandisers, office supply, grocery and drug store chains, and independent, convenience and electronics stores.
Merchandising services primarily consist of regularly scheduled, special project and other product services provided at the store level, and the Company may be engaged by either the retailer or the manufacturer.  Those services may include restocking and adding new products, removing spoiled or outdated products, resetting categories "on the shelf" in accordance with client or store schematics, confirming and replacing shelf tags, setting new sale or promotional product displays and advertising, replenishing kiosks, providing in-store event staffing and providing assembly services in stores, homes and offices.  Other merchandising services include whole store or departmental product sets or resets, including new store openings, new product launches and in-store demonstrations, special seasonal or promotional merchandising, focused product support and product recalls.  The Company also provides RFID services, technology services and marketing research services.
Today the Company operates in 9 countries that encompass approximately 47% of the total world population. Although it operates in a single business segment (merchandising and marketing services), the Company currently divides its operations for marketing, administrative and other purposes into two geographic divisions: its Domestic Merchandising Services Division, which provides those services in the United States of America since certain of its predecessors were formed in 1979; and its International Merchandising Services Division, which began operations in May of 2001 and provides similar merchandising, marketing services and in-store event staffing services in Japan, Canada, South Africa, India, Romania, China, Australia and New Zealand.
The Company continues to focus on expanding its merchandising and marketing services business throughout the world.
Domestic Merchandising Services Division
The Company’s Domestic Merchandising Services Division provides nationwide merchandising and other marketing services throughout the United States of America primarily on behalf of consumer product manufacturers and retailers at mass merchandisers, office supply, grocery and drug store chains, and independent, convenience and electronics stores. Included in its clients are home entertainment, general merchandise, health and beauty care, consumer goods and food products companies.
F-7
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Business and Organization (continued)
The Company's international business in each territory outside the United States is conducted through a foreign subsidiary incorporated in its primary territory.  The primary territory (together with each additional territory in which it conducts its business), establishment date (which may include predecessors), the percentage of the Company's equity ownership, and the principal office location for its US (domestic) subsidiaries and each of its foreign (international) subsidiaries is as follows:
Primary Territory
(+ additional Territory)
 
Date
Established
 
SGRP Percentage
Ownership
 Principal Office Location
United States of America 1979  100% 
Tarrytown, New York
United States of America
Japan May 2001  100% Osaka, Japan
Canada June 2003  100% Toronto, Canada
Turkey July 2003  51%* Istanbul, Turkey
South Africa April 2004  51% Durban, South Africa
India April 2004  100%** New Delhi, India
Lithuania September 2005  51%*** Siauliai, Lithuania
Australia (+ New Zealand) April 2006  51% Melbourne, Australia
Romania July 2009  51%**** Bucharest, Romania
China March 2010  51%***** Shanghai, China

*Currently not in operation while the Company explores a change in this subsidiary's market focus.
**As of September 30, 2010, the Company owned 100% of this subsidiary.
***The Company closed this subsidiary's operations in Fourth Quarter 2010.
****Currently the Company owns two subsidiaries in Romania.  One Subsidiary is 100% owned and the second subsidiary, acquired in July 2009, is 51% owned.
*****Currently the Company owns two subsidiaries in China.  One Subsidiary is 100% owned and the second subsidiary, acquired in March 2010 and operational in August 2010, is 51% owned.

2. Summary of Significant Accounting Policies
Principles of Consolidation
The Company consolidates its 100% owned subsidiaries. The Company also consolidates all of its 51% owned subsidiaries as the Company believes it is the primary beneficiary and controls the economic activities in accordance with Accounting Standards Codification (ASC) 810-10, Consolidation of Variable Interest Entities.
All significant intercompany accounts and transactions have been eliminated.
Cash Equivalents
The Company considers all highly liquid short-term investments with maturities of three months or less at the time of acquisition to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value.
Revenue Recognition
The Company’s services are provided to its clients under contracts or agreements. The Company bills its clients based upon service fee or per unit fee arrangements. Revenues under service fee arrangements are recognized when the service is performed. The Company’s per unit fee arrangements provide for fees to be earned based on the retail sales of a client’s products to consumers. The Company recognizes per unit fees in the period such amounts become determinable and are reported to the Company.
F-8

SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Unbilled Accounts Receivable
Unbilled accounts receivable represent services performed but not billed and are included as accounts receivable.
Doubtful Accounts and Credit Risks
The Company continually monitors the validity of its accounts receivable based upon current client credit information and financial condition. Balances that are deemed to be uncollectible after the Company has attempted reasonable collection efforts are written off through a charge to the bad debt allowance and a credit to accounts receivable. Accounts receivable balances, net of any applicable reserves or allowances, are stated at the amount that management expects to collect from the outstanding balances. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to bad debt allowance based in part on management’s assessment of the current status of individual accounts. Based on management’s assessment, the Company established an allowance for doubtful accounts of $143,000 and $317,000 at December 31, 2010, and 2009, respectively. Bad debt expenses were $265,000 and $412,000 in 2010, and 2009, respectively.
Property and Equipment and Depreciation
Property and equipment, including leasehold improvements, are stated at cost. Depreciation is calculated on a straight-line basis over estimated useful lives of the related assets, which range from three to seven years. Leasehold improvements are depreciated over the shorter of their estimated useful lives or lease term, using the straight-line method.
Capital Lease Obligations
The Company has two outstanding capital lease obligations. The first lease originating in March 2010 has a cost of $215,000, accumulated depreciation of $29,800 and a net book value of $185,200 at December 31, 2010.  The second lease originating in November 2010 has a cost of $48,100, accumulated depreciation of $2,700 and a net book value of $45,400 at December 31, 2010.
Annual future minimum lease payments required under the lease, together with the present value as of December 31, 2010 are as follows:
Year Ending
December 31,
 Amount 
2011 $99 
2012  99 
2013  55 
   253 
Less amount representing interest  23 
Present value of net minimum lease payments included with other liabilities $230 

Internal Use Software Development Costs
In accordance with ASC-350-10-720, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, the Company capitalizes certain costs associated with its internally developed software. Specifically, the Company capitalizes the costs of materials and services incurred in developing or obtaining internal use software. These costs include (but are not limited to) the cost to purchase software, the cost to write program code, payroll and related benefits and travel expenses for those employees who are directly involved with and who devote time to the Company’s software development projects. Capitalized software development costs are amortized over three years on a straight-line basis.
The Company capitalized $632,000 and $586,000 of costs related to software developed for internal use in 2010, and 2009, respectively, and recognized approximately $518,000 and $396,000 of amortization of capitalized software for the twelve months ended December 31, 2010, and 2009, respectively.
F-9
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that an asset’s carrying amount may be higher than its fair value. If an asset is considered to be impaired, the impairment charge that would be recognized is the excess of the asset’s carrying value over the asset’s fair value.
Fair Value of Financial Instruments
The Company’s balance sheets include the following financial instruments: accounts receivable, accounts payable and lines of credit. The Company considers the carrying amounts of current assets and liabilities in the financial statements to approximate the fair value for these financial instruments, because of the relatively short period of time between origination of the instruments and their expected realization or payment. The carrying amount of the lines of credit approximates fair value because the obligations bear interest at a floating market rate of interest.
Excess Cash
The Company’s domestic cash balances are generally utilized to pay its bank lines of credit. International cash balances are maintained in liquid cash accounts and are utilized to fund daily operations.
Major Customers - Domestic
One customer accounted for 10% of the Company's net revenues for the years ended December 31, 2010, and 2009, resulting from merchandising services performed for a large pharmaceutical distributor. This customer accounted for approximately 5% and 6% of the Company's accounts receivable at December 31, 2010, and 2009, respectively.
In addition, approximately 10% and less than 1% of the Company’s net revenue for the years ended December 31, 2010, and 2009, respectively, resulting from merchandising and assembly services performed for a major office supply chain and for manufacturers within this claim.  These customers accounted for approximately 3% and less than 1% of the Company’s accounts receivable at December 31, 2010, and 2009, respectively.
Approximately 7% and 6% of the Company’s net revenues for the years ended December 31, 2010, and 2009, respectively, resulting from merchandising services performed for manufacturers and others in stores operated by a leading mass merchandising chain in the United States. This customer accounted for approximately 4% and 9% of the Company’s accounts receivable at December 31, 2010, and 2009, respectively.
In 2010, the Company performed merchandising and marketing services for manufacturers and others in a national drug store chain.  The services accounted for approximately 6% of the company's net revenues for the twelve months ended December 31, 2010.  Effective March 1, 2011, the Company will no longer be providing these merchandising and marketing services in this national drug store chain.
Foreign Currency Rate Fluctuations
The Company has foreign currency exposure associated with its international subsidiaries. In both 2010 and 2009, these exposures are primarily concentrated in the Canadian Dollar, South African Rand, Australian Dollar and Japanese Yen. At December 31, 2010, international assets totaled $8.2 million and international liabilities totaled $6.2 million. For 2010, international revenues of subsidiaries posted $26.6 million and the international share of the Company’s net income was a net loss of approximately $506,000.
F-10
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Interest Rate Fluctuations
The Company is exposed to market risk related to the variable interest rate on its lines of credit. At December 31, 2010, the Company’s outstanding debt totaled $5.3 million, as noted in the table below (in thousands):
Location 
Variable Interest Rate (1)
 
US Dollars (2)
United States  4.75% $3,536 
International  4.0% - 10.2%  1,727 
      $5,263 

(1)         Per annum interest at December 31, 2010
(2)         Based on exchange rate at December 31, 2010

Based on 2010 average outstanding borrowings under variable-rate debt, a one-percentage point increase in interest rates would negatively impact annual pre-tax earnings and cash flows by approximately $45,000.
Income Taxes
Deferred tax assets and liabilities represent the future tax return consequences of certain temporary differences that will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income and tax credits that are available to offset future income taxes. In the event the future consequences of differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities result in a net deferred tax asset, an evaluation is required of the probability of being able to realize the future benefits indicatedMr. Matacunas by such asset. A valuation allowance is provided when it is more likely than not that some portion or the entire deferred tax asset will not be realized.
Stock-Based Compensation
As of January 1, 2006, ASC-718-10 became effective and applicable to the Company’s accounting for its employee options. Under ASC-718-10, compensation expense is recognized in the Company’s financial statements when employee stock options are granted. Share-based compensation cost is measureddirector SGRP's Annual Report on the grant date, based on the fair value of the award calculated at that date, and is recognized over the employee’s requisite service period, which generally is the options’ vesting period. Fair value is calculated using the Black-Scholes option pricing model. The options granted have a ten (10) year life and vest over four-year periods at a rate of 25% per year, beginning on the first anniversary of the date of grant.
The fair value of each option grant is estimated based on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 0% for all years; volatility factor of expected market price of common stock of 140% and 144% for 2010, and 2009, respectively; risk-free interest rate of 3.30% and 3.85% for 2010, and 2009, respectively; and expected lives of six years.
Net Income Per Share
Basic net income per share amounts are based upon the weighted average number of common shares outstanding. Diluted net income per share amounts are based upon the weighted average number of common and potential common shares outstanding except for periods in which such potential common shares are anti-dilutive. Potential common shares outstanding include stock options and are calculated using the treasury stock method.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the amounts disclosed for contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates.
Goodwill and Other Intangible Assets
The Company follows ASC-805-10, Goodwill and Other Intangible Assets, as such, goodwill is no longer amortized, but is subject to annual impairment tests. At December 31, 2010 and 2009 the Company performed the required impairment test. The Company calculated the fair value of each business unit for which goodwill was recorded to determine if there was an impairment. The fair value of each unit was based upon the estimate of the discounted cash flow generated by the respective business unit. As a result of these calculations, it was determined that there was no impairment to the goodwill.

On April 1, 2010, with the approval of SGRP's directors, the Company acquired substantially all of the business, customer contracts, receivables, work-in progress, other assets and certain liabilities of 2078281 Ontario Limited, an Ontario merchandising and marketing company doing business as Wings & Ink.  A portion of this purchase was allocated to customer contracts.  The contracts are being amortized on a straight line basis over 5 years.
Translation of Foreign Currencies
The financial statements of the foreign entities consolidated into SPAR Group, Inc. consolidated financial statements were translated into United States dollar equivalents at exchange rates as follows: balance sheet accounts for assets and liabilities were converted at year-end rates, equity at historical rates and income statement accounts at average exchange
F-11

SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
rates for the year. The resulting translation gains and losses are reflected in accumulated other comprehensive gain or loss in the statements of stockholders’ equity. Foreign currency transaction gains and losses are reflected in net earnings.
Recently Issued Accounting Standards
In June 2009, the FASB issued a new accounting standard related to the consolidation of VIEs.  The standard replaces the quantitative-based risks and rewards calculation with an approach that is primarily qualitative.  The standard also requires ongoing reassessments of the appropriateness of consolidation, and additional disclosures about involvement with VIEs.  The standard is effective for us as of January 1, 2010.  The adoption of this standard did not have a material impact on our financial condition, results of operations, and financial statement disclosures.
During December 2010, the FASB issued ASU No. 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations.” The ASU is effective prospectively for business combinations whose acquisition date is at or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The ASU specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments to this guidance also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The adoption of the ASU will impact disclosures in future interim and annual financial statements issued if the Company enters into business combinations.
Reclassifications
Certain reclassifications have been made to the 2009 financial statements to conform to the 2010 presentation.
3. Supplemental Balance Sheet Information
  December 31, 
Accounts receivable, net, consists of the following (in thousands): 2010  2009 
       
       
Trade $9,846  $7,250 
Unbilled  3,914   2,953 
Non-trade  382   345 
   14,142   10,548 
Less:        
Allowance for doubtful accounts  (143)  (317)
  $13,999  $10,231 
F-12
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. Supplemental Balance Sheet Information (continued)
  December 31, 
Property and equipment consists of the following (in thousands): 2010  2009 
       
Equipment $7,893  $7,669 
Furniture and fixtures  541   558 
Leasehold improvements  250   245 
Capitalized software development costs  3,518   2,886 
   12,202   11,358 
Less accumulated depreciation and amortization  10,750   9,808 
  $1,452  $1,550 

  December 31, 
Other assets (in thousands): 2010  2009 
       
Safeway settlement (inclusive of interest) $–  $1,744 
Other  226   187 
  $226  $1,931 
  December 31, 
Accrued expenses and other current liabilities (in thousands): 2010  2009 
       
Accrued accounting and legal expenses $266  $201 
Accrued salaries payable  708   696 
Other  1,759   1,329 
  $2,733  $2,226 

4. Lines of Credit
Domestic Credit Facility (“Webster Credit Facility)(reporting period through July 5, 2010):
In January 2003, the Company (other than SGRP’s foreign subsidiaries) and Webster Business Credit Corporation, then known as Whitehall Business Credit Corporation (“Webster”), entered into the Third Amended and Restated Revolving Credit and Security Agreement (as amended, collectively, the “Webster Credit Facility”). The Webster Credit Facility provided for a $5.0 million revolving line of credit which matured on March 15, 2010. In February 2008, the Webster Credit Facility was amended to establish monthly EBITDA covenants until September 30, 2008, and to set a Fixed Charge Coverage Ratio covenantForm 10-K for the year ended December 31, 2008.  In January 20092022, filed with the Webster Credit Facility was amended to extend the agreement until March 15, 2009, adjust the interest rate to the greater of 5%, the Alternative Base Rate or 30 day LIBOR plus 2.75%Securities and to increase the limitExchange Commission on the capital expenditures to $1.3 million.  In March 2009, the Webster Credit Facility was amended to extend the maturity until March 15, 2010, extend the monthly Fixed Charge Coverage Ratio covenant until March 15, 2010April 17, 2023.

Please see Parts I and reset the limit on capital expenditures to $800,000.  On March 15, 2010, the Webster Credit Facility was further amended to extend the maturityII and continue the monthly covenant requirements until September 15, 2010.

Borrowings were based upon a borrowing base formula as definedSGRP'sFinancial Statement Schedules in the agreement (principally 85% of “eligible” domestic accounts receivable less certain reserves). The Webster Credit Facility was secured by all of the assets of the Company's domestic subsidiaries. The Webster Credit Facility also limited certain expenditures, including, but not limited to, capital expenditures and other investments.
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Lines of Credit (continued)
In addition, Mr. Robert G. Brown, a Director, the Chairman and a major stockholder of SGRP, and Mr. William H. Bartels, a Director, the Vice Chairman and a major stockholder of SGRP, provided personal guarantees of the Webster Credit Facility totaling $1.0 million.
The basic interest rate under the Webster Credit Facility was the greater of i) Webster’s “Alternative Base Rate” plus 1.0% per annum, which automatically changes with each change made by WebsterPart IV in such Alternative Base Rate, ii) LIBOR plus 2.75% per annum, or iii) the minimum rate imposed by Webster of 5% per annum. The actual average interest rate under the Webster Credit Facility was 5% per annum SGRP's Annual Report on Form 10-K for the period that commenced on January 1, 2010, and ended on July 6, 2010.  The Webster Credit Facility was secured by substantially all of the assets of the Company (other than SGRP’s foreign subsidiaries and their assets).
New Domestic Credit Facility (“Sterling Credit Facility”)(July 6, 2010, to present):
SGRP and certain of its domestic direct and indirect subsidiaries, namely SPAR Incentive Marketing, Inc., PIA Merchandising Co., Inc., Pivotal Sales Company, National Assembly Services, Inc., SPAR/Burgoyne Retail Services, Inc., SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc. and SPAR, Inc. (each a "Subsidiary Borrower", and together with SGRP, collectively, the " Borrowers "), entered into a Revolving Loan and Security Agreement dated as of July 6, 2010 (the "Loan Agreement"), with Sterling National Bank and Cornerstone Bank as the lenders (the "Lenders"), and issued their Secured Revolving Loan Notes in the original maximum principal amounts of $5.0 million to Sterling National Bank and $1.5 million to Cornerstone Bank (the "Notes"), to document and govern its new credit facility with them (the "Sterling Credit Facility").   The Sterling Credit Facility replaced the Webster Credit Facility on July 6, 2010, and the first advance under such new facility was used to fully repay and terminate the Webster Credit Facility and its documents and liens.
In addition, Mr. Robert G. Brown, a Director, the Chairman and a major stockholder of SGRP, and Mr. William H. Bartels, a Director, the Vice Chairman and a major stockholder of SGRP, have provided personal guarantees of the Sterling Credit Facility totaling $2.5 million pursuant to their Limited Continuing Guaranty in favor of the Lenders dated as of July 6, 2010. (the "Limited Guaranty").
Revolving Loans of up to $6.5 million are available to the Borrowers under this new Sterling Credit Facility based upon the borrowing base formula defined in the Loan Agreement (principally 85% of "eligible" domestic accounts receivable less certain reserves).  The Sterling Credit Facility is secured by substantially all of the assets of the Borrowers (other than SGRP's foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets).
The domestic revolving loan balance outstanding under the Sterling Credit Facility was approximately $3.5 million at December 31, 2010, and the revolving loan balances outstanding under the Webster Credit Facility was approximately $ 4.0 million at December 31, 2009.  As of December 31, 2010, the Company had unused availability under the Sterling Credit Facility of $1.7 million out of the remaining maximum $3.0 million unused revolving line of credit.
The basic interest rate under the Sterling Credit Facility is equal to the fluctuating Prime Rate of interest published in the Wall Street Journal from time to time plus one and one-half  (1.50%) percent per annum, which automatically changes with each change in such rate.  The aggregate interest rate on December 31, 2010, was 4.75% per annum under that formula.  The actual average interest rate under the Sterling Credit Facility was 4.75% per annum for the period that commenced on July 6, 2010, and ended on December 31, 2010.
Because of the requirement to maintain a lock box arrangement with the Agent and the Lenders' ability to invoke a subjective acceleration clause at its discretion, borrowings under the Sterling Credit Facility will be classified as current.
The new Sterling Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the Borrowers, including, but not limited to, capital expenditures and other investments.  At December 31, 2010 the Company was in compliance with such covenants and does not expect to be in violation at future measurement dates. However, there can be no assurances that the Company will not be in violation of certain covenants
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Lines of Credit (continued)
in the future and should the Company be in violation; there can be no assurances that the Lenders will issue waivers for any future violations.
International Credit Facilities and Other Debt:
The Japanese subsidiary SPAR FM Japan, Inc. line of credit agreement totaling 100 million Yen or approximately $1.1 million (based upon the exchange rate at November 30, 2009) was cancelled on November 30, 2009 in connection with SGRP’s increase in ownership from 50% to 100%.
In 2008, the Australian subsidiary, SPARFACTS Australia Pty. Ltd., entered into a revolving line of credit arrangement with Commonwealth Bank of Australia (CBA) for $2.0 million (Australian).  On September 11, 2009, the line of credit arrangement was amended to reduce the line of credit to $1.5 million (Australian), or approximately $1.5 million (based upon the exchange rate at December 31, 2010). At December 31, 2010, SPARFACTS Australia Pty. Ltd. had $540,000 (Australian), or approximately $548,000, outstanding under the line of credit (based upon the exchange rate at that date). The average interest rate under this facility was 10.2% per annum for the twelve monthsyear ended December 31, 2010.
On October 20, 2006, SPAR Canada Company, a wholly owned subsidiary, entered into a secured credit agreement with Royal Bank of Canada providing for a Demand Operating Loan for a maximum borrowing of $750,000 (Canadian) or approximately $750,000 (based upon the exchange rate at December 31, 2010). The Demand Operating Loan provides for borrowing based upon a formula as defined in the agreement (principally 75% of eligible accounts receivable less certain deductions) and a minimum total debt to tangible net worth covenant.   On March 28, 2008, Royal Bank of Canada amended the secured credit agreement to reduce the maximum borrowing to $500,000 (Canadian) however, in October 2008, Royal Bank of Canada reinstated the loan limit to $750,000 (Canadian). At December 31, 2010, SPAR Canada Company had $623,000 (Canadian or USD) outstanding under the line of credit (based upon the exchange rate at December 31, 2010).  The average interest rate under this line of credit was 4.0% per annum for the twelve months ended December 31, 2010.
The Company was in compliance with the minimum total debt to tangible net worth covenant under this line of credit at December 31, 2010.
At the March 2010 quarterly board meeting of SGRP, the Board of Directors authorized the Company to secure bridge financing for future acquisition efforts in an amount not to exceed $1.0 million. On March 26, 2010 the Company signed a Loan and Security Agreement and a Promissory Note with Michael Anthony Holdings, Inc. for a total of $1.0 million and the Company received its first advance of $500,000 which was used for the acquisition of certain assets of a Canadian company that closed on April 1, 2010. The parties amended such loan agreement on November 5, 2010, to reduce the applicable interest rates.  The remaining $500,000 balance of the originally-contemplated loan would have been advanced to the Company upon request and satisfaction of certain conditions prior to maturity, but the Company currently does not expect to request that advance.  The loan matures and is due in full on March 31, 2011.  The Company currently plans to repay the loan in full on maturity.
The loan is payable on an interest only basis at the rate of 9.5% per annum (originally 14% per annum prior to such amendment).  If the loan is not paid in full by March 31, 2011, the interest rate automatically increases to 14% per annum (which would have been 24% per annum prior to such amendment).  The average interest rate for this loan was 13.1% per annum for the twelve months ended December 31, 2010.
In addition to the cost of interest, the Company paid, at closing, to Michael Anthony Holding, Inc. a fee of $10,000 in cash and issued 75,000 warrants to purchase 75,000 shares of SGRP Common Stock. The warrants are exercisable over two (2) years at the market price of $0.85 per Common share (SPAR’s closing stock price on that date). The Company recorded a $52,000 expense for the cost of the warrants during 2010.  In addition, the loan is secured by the stock of SPAR Canada Company.
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Income Taxes
The provision for income tax expense is summarized as follows (in thousands):
  Year Ended December 31, 
  2010  2009 
Current $263  $169 
Deferred  –   – 
  $263  $169 

The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference are as follows (in thousands):
  Year Ended December 31, 
  2010  2009
Provision for income taxes at federal statutory rate, net of foreign tax $726  $136 
State income taxes, net of federal benefit  89   43 
Permanent differences  18   18 
Change in valuation allowance  (722)  (202)
International tax provisions  92   109 
Federal Alternative Minimum Tax  58   – 
Change in Tax Reserve  22   4 
Other  (20)  61 
Provision for income taxes $263  $169 
Deferred taxes consist of the following (in thousands): December 31, 
  2010  2009 
Deferred tax assets:      
Net operating loss carryforwards $5,953  $7,179 
Deferred revenue  145   3 
SIM reserve against loan commitment  147   147 
Allowance for doubtful accounts and other receivable  36   115 
Share-based compensation expense  427   374 
Depreciation  34   72 
Accrued expenses  –   5 
Other  27   27 
Valuation allowance  (6,275)  (6,997)
Total deferred tax assets  494   926 
         
Deferred tax liabilities:        
Goodwill  121   101 
Litigation receivables  –   496 
Capitalized software development costs  373   329 
Total deferred tax liabilities  494   926 
Net deferred tax assets $–  $– 

At December 31, 2010, the Company has net operating loss carryforwards (NOLs) of $4.9 million, related to the PIA Acquisition available to reduce future federal taxable income.  Section 382 of the Internal Revenue Code restricts the annual utilization of the NOLs incurred prior to a change in ownership. Such a change in ownership had occurred in 1999.  The Company may utilize $657,500 of the PIA NOLs per year through the year 2018.
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
In addition, the Company incurred NOLs related to its prior year losses totaling $10.8 million of which:
$2.7 expires in 2024,
$0.7 expires in 2025,
$3.6 expires in 2026,
$2.9 expires in 2027, 
$0.7 expires in 2028, and
$0.2 expires in 2029.
As a result of losses, a challenging market and the lack of certainty of continued profitability in 2010, the Company has established a valuation allowance of approximately $6.3 million against deferred tax assets at December 31, 2010.
The Company does not provide currently for U.S. income taxes on the undistributed earnings of its profitable foreign subsidiaries since, at the present time, management expects any earnings to be reinvested in the foreign subsidiaries and not distributed.  Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes, which could potentially be offset by foreign tax credits.  Distribution of those earnings can also subject the Company to related withholding taxes payable to various non-U.S. jurisdictions.  Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculations.
ASC-740-10 prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprise's financial statements in accordance with ASC-740-10. Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of ASC-740-10 and in subsequent periods. ASC-740-10 is effective for fiscal years beginning after December 15, 2006 and the provisions of ASC-740-10 will be applied to all tax positions upon initial adoption of the Interpretation. The Company has adopted ASC-740-10 as of January 1, 2007.
The Company adopted provisions of ASC-740-10, Accounting for Uncertainty in Income Taxes, on January 1, 2007.  A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
  Year Ended December 31, 
  2010  2009 
Beginning Balance $119  $115 
Additions for tax positions of prior years  33   21 
Reductions for tax positions of prior years  (109)  (17)
Ending Balance $43  $119 
ASC-740-10 requires that interest and penalties that the tax law requires to be paid on the underpayment of taxes should be accrued on the difference between the amount claimed or expected to be claimed on the return and the tax benefit recognized in the financial statements. The Company's policy is to record this interest and penalties as additional tax expense.
SPAR and its subsidiaries file numerous consolidated, combined and separate company income tax returns in the U.S. Federal jurisdiction and in many U.S. state and foreign jurisdictions. With few exceptions, SPAR is subject to U.S. Federal, state and local income tax examinations for the years 2005 through the present. However, tax authorities have the ability to review years prior to the position taken by the Company to the extent that SPAR utilized tax attributes carried forward from those prior years.
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
In management's view, the Company's tax reserves at December 31, 2010, totaling $43,000 for potential domestic state tax liabilities were sufficient to meet the requirements of ASC-740-10. The Company has evaluated the tax liabilities of its international subsidiaries and does not believe a reserve is necessary at this time.
Details of the Company's tax reserves at December 31, 2010, are outlined in the table below (in thousands):
  Taxes  Interest  Penalty  Total Tax Liability 
Domestic            
State $34  $5  $4  $43 
Federal  –   –   –   – 
International  –   –   –   – 
Total reserve $34  $5  $4  $43 

6. Commitments and Contingencies
Lease Commitments
The Company leases equipment and certain office space in several cities, under non-cancelable operating lease agreements. Certain leases require the Company to pay its share of any increases in operating expenses and real estate taxes. Rent expense was approximately $346,000 and $418,000 for 2010, and 2009, respectively. At December 31, 2010, future minimum commitments under all non-cancelable operating lease arrangements are as follows (in thousands):
Year  Amount 
2011 $780 
2012  710 
2013  473 
2014  423 
2015  467 
Total $2,853 

International Commitments
The Company’s international model is to join forces with local investors experienced with merchandising services and combine their knowledge of their local markets with the Company’s proprietary software and expertise in the merchandising and marketing business. In 2001, the Company established its first international subsidiary and has continued this strategy. As of this filing, the Company is currently operating in Japan, Canada, South Africa, India, Romania, China, Australia and New Zealand through 7 active international subsidiaries.
Certain of these international subsidiaries are marginally profitable while others are operating at a loss. None of these entities have excess cash reserves. In the event of continued losses, SGRP may find it necessary to provide additional cash infusions into these subsidiaries.
Legal Matters
Longstanding litigation with Safeway Inc.2022 ("Safeway") concluded in August 2010. On October 24, 2001, Safeway filed a complaint against PIA Merchandising Co., Inc. ("PIA Co.Form 10-K"), a wholly-owned subsidiary of SPAR Group, Inc. ("SGRP"), Pivotal Sales Company ("Pivotal"), a wholly-owned subsidiary of PIA Co., and SGRP in Alameda County (California) Superior Court, case no. 2001028498.  Safeway’s claims, as subsequently amended, alleged causes of action for breach of contract and breach of implied contract. PIA Co. and Pivotal filed cross-claims against Safeway, including causes of action for breach of contract and interference with economic relationships. The case proceeded to trial by jury.  On May 26, 2006, the jury returned a verdict that awarded certain damages on different claims to PIA Co. and Pivotal and awarded certain damages to Safeway, resulting in a net award of $1,307,700 to Pivotal. Judgment was entered in favor of Pivotal and against Safeway on August 14, 2006, for $1,307,700. A subsequent order awarded Pivotal certain court costs totaling $33,725.
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Commitments and Contingencies (continued)
Thereafter, both sides filed appeals. On May 27, 2010, the California Court of Appeal issued a decision affirming the judgment in full. All appellate proceedings concluded on July 28, 2010.  On August 2, 2010, Safeway tendered, and the Company accepted, payment of $1,888,000 in full payment of the judgment.
In addition to the above, the Company is a party to various other legal actions and administrative proceedings arising in the normal course of business. In the opinion of Company’s management, disposition of these other matters are not anticipated to have a material adverse effect on the Company or its estimated or desired assets, business, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
7. Treasury Stock
The Company initiated a share repurchase program in 2002, which allowed for repurchase of up to 100,000 shares. In 2003, the Board of Directors authorized the repurchase of an additional 122,000 shares increasing the total to 222,000 shares.
The Company’s treasury stock balances have remained unchanged at a quantity of 254 shares at a value of $1,212 for the years 2010 and 2009.
8. Preferred Stock
SGRP's certificate of incorporation also authorizes it to issue 3,000,000 shares of preferred stock with a par value of $0.01 per share (the "SGRP Preferred Stock"), which may have such preferences and priorities over the SGRP Common Stock and other rights, powers and privileges as the Company's Board of Directors may establish in its discretion from time to time.  The Company has created and authorized the issuance of a maximum of 3,000,000 shares of Series A Preferred Stock pursuant to SGRP's Certificate of Designation of Series "A" Preferred Stock (the "SGRP Series A Preferred Stock"), which have dividend and liquidation preferences, have a cumulative dividend of 10% per year, are redeemable at the Company's option and are convertible at the holder's option (and without further consideration) on a one-to-one basis into SGRP Common Stock.  The number of shares authorized by such designation could, however, be reduced by amendment or redemption to facilitate the creation of other SGRP Preferred Series.  On December 31, 2010, there were 554,402 shares of SGRP Series A Preferred Stock were issued and outstanding, such shares are fully paid and non-assessable, and the Company owes approximately $118,000 in accumulated and unpaid dividends on those shares, and there were 2,455,598 shares of authorized Series A Preferred Stock that remained unissued and available for issuance.
On December 31, 2010, there were 338,801 shares of such Series A Preferred Stock owned by a non-SGRP retirement plan whose trustee is and beneficiaries include Robert G. Brown (who is a co-founder, director, executive officer and significant shareholder of SGRP), and 215,601 shares of such Series A Preferred Stock owned by a non-SGRP retirement plan whose trustees is and beneficiaries include William H. Bartels (who also is a co-founder, director, executive officer and significant shareholder of SGRP), which shares collectively constituted all of the outstanding shares of Series A Preferred Stock. Those shares were originally purchased pursuant to subscription agreements on March 31, 2008, and September 24, 2008, at the closing Nasdaq bid price of SGRP Common Stock for the preceding trading day, which was $1.12 per share for the March purchases and $0.86 per share for the September purchases.  The offer and sale of such Preferred Stock was not registered under the Securities Act or other securities laws, as they were a non-public offer and sale made in reliance upon (among other things) Section 4 (2) of the Securities Act.  For more information respecting these purchases - "See Note 10 to the Consolidated Financial Statements – Related Party Transactions, below."
On or before March 10, 2011, Mr. Brown and Mr. Bartels, as trustees of those plans, each had requested that their plan's preferred shares be converted into SGRP Common Stock in accordance with its terms, and in order to facilitate conversion of those shares by payment of all accrued and unpaid dividends, on March 10, 2011, SGRP's Board of Directors (i) fixed March 10, 2011, as the applicable record date for determination of the holders of the SGRP Series A Preferred Stock eligible to receive such dividends, (ii) declared a dividend on such SGRP Series A Preferred Stock equal to the accrued and unpaid dividends thereon, payable in shares of SGRP Common Stock valued at their market value ($2.34 per share) on such record date, and (iii) authorized the issuance of the shares of SGRP Common Stock necessary to effect such conversion (554,402 shares) and accrued dividend payment (54,584 shares) in consideration of the preferred shares surrendered and the accrued dividends thereby satisfied.  As a result of such conversions and stock dividends, on March 11, 2011, Mr. Brown's plans received 372,158 shares of SGRP Common Stock (33,357 shares of
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Preferred Stock (continued)
which were for accrued dividends) and Mr. Bartel's plan received 236,828 shares of SGRP Common Stock (21,227 shares of which were for accrued dividends).
9. Employee Benefits
Stock Purchase Plans
The Company has Employee and Consultant Stock Purchase Plans (the “SP Plans”). The SP Plans allow employees and consultants of the Company to purchase common stock without having to pay any commissions on the purchases. On August 8, 2002, the Company’s Board of Directors approved a 15% discount for employee purchases and recommended that its affiliates (See Note 10 – Related-Party Transactions) approve a 15% cash bonus for affiliate consultant purchases. The maximum amount that any employee or consultant can contribute to the SP Plans per quarter is $6,250, and the total number of shares reserved by the Company for purchase under the SP Plans is 500,000.
Shares purchased by employees and consultants under the SP Plans were 16,763 and 13,237 for 2010, and 2009, respectively.  As of December 31, 2010, 141,907 shares remain outstanding under the SP plan.
The Company’s expense resulting from the 15% discount offered to employees and consultants was immaterial for all years presented.
Retirement/Pension Plans
The Company has a 401(k) Profit Sharing Plan covering substantially all eligible employees. Employer contributions were suspended for 2009 and 2010.
10. Related-Party Transactions
Mr. Robert G. Brown, a Director, the Chairman and a major stockholder of SGRP, and Mr. William H. Bartels, a Director and the Vice Chairman of the Company and a major stockholder of SGRP, are executive officers and the sole stockholders and directors of SPAR Marketing Services, Inc. (“SMS”), SPAR Management Services, Inc. (“SMSI”), and SPAR Infotech, Inc. (“SIT”).
SMS and SMSI provided approximately 99% of the Company’s domestic merchandising specialists field force and approximately 92% of the Company’s domestic field management at a total cost of approximately $20 million and $14 million for 2010 and 2009, respectively. Pursuant to the terms of the Amended and Restated Field Service Agreement dated as of January 1, 2004, as amended (the "Field Services Agreement"), SMS provides merchandising services to the Company through the use of approximately 5,300 of its field force of merchandising specialists.  Pursuant to the terms of the Amended and Restated Field Management Agreement dated as of January 1, 2004, SMSI provides 54 full-time national, regional and district managers to the Company.  For those services, the Company has agreed to reimburse SMS and SMSI for all of their costs of providing those services and to pay SMS and SMSI each a premium equal to 4% of their respective costs (the "Plus Compensation").  In 2009, SMS and the Company agreed to provide a temporary price concession by lowering the Plus Compensation rate by one percentage point, from 4% to 3%, effective January 1, 2009, continuing through December 31, 2009, at which time the Plus Compensation rate was re-instated to 4% as of January 1, 2010. The total Plus Compensation earned by SMS and SMSI for services rendered in 2010 was $778,000.  The total Plus Compensation (3% of the costs of SMS and SMSI for 2009) earned by SMS and SMSI for services rendered in 2009 was $404,000.
The Company has continued to purchase those services because it believes the terms it receives from them are at least as favorable to the Company as it could obtain from non-affiliated providers of similar services.  The Company periodically engages an outside firm to conduct a survey of fees and rates charged by comparable national labor sourcing firms to serve as a comparison to the rates charged by such affiliates.  The most recent such survey showed that the rates negotiated with the Affiliates are in fact slightly less than those charged by unrelated vendors providing similar services.  The Company's cost of revenue would have increased by $609,000 and $492,000 for the years ended December 31, 2010 and 2009, respectively, if the Company would have instead used an unaffiliated entity to provide comparable services at the surveyed rates.  All affiliate contracts are reviewed and approved by SGRP's Audit Committee, as described below.
The Company has been advised that Messrs. Brown and Bartels are not paid any salaries as officers of SMS or SMSI so there were no salary reimbursements for them included in such costs or premium. However, since SMS and SMSI are “Subchapter S” corporations and are owned by Messrs. Brown and Bartels, all income from SMS and SMSI is allocated to them.
In an effort to further reduce costs and improve efficiencies, on January 1, 2010, the Company began performing its own programming services through its centralized data processing facility located in Auburn Hills, Michigan, using its own employees and contractors worldwide, and ceased utilizing the programming services of SIT.  The Company hired the majority of the employees and contractors who previously worked for SIT with SIT's cooperation.  In 2009, SIT provided substantially all of the Internet computer programming services purchased by the Company at a total cost of $572,000 for the twelve months ended December 31, 2009. SIT provided approximately 21,000 hours of Internet computer programming services to the Company for the twelve months ended December 31, 2009. The average hourly billing rate was $26.64 for the twelve months ended December 31, 2009. The Company has been advised that no hourly charges or business expenses for Messrs. Brown and Bartels were charged to the Company by SIT for the twelve months ended December 312009. However, since SIT is a "Subchapter S" corporation and is owned by Messrs. Brown and Bartels, all income of SIT is allocated to them.
In July 2008, the Company, through SPAR Marketing Force, Inc. (“SMF”), entered into a new Master Lease Agreement with SMS, and in July and September of 2008 entered into new separate operating leases with SMS pursuant to Equipment Leasing Schedules under that Master Lease Agreement.  Each operating lease has a 36 month term and representations, covenants and defaults customary for the leasing industry. The leases are for handheld computers to be used by field merchandisers in the performance of various merchandising and marketing services in the United States and have a total monthly payment of $11,067. These handheld computers had an original purchase price of $401,188. The monthly payments are based upon a lease factor of 3.1%.

SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Related-Party Transactions (continued)
In November 2004 and January 2005 and as amended in May 2005, the Company entered into separate operating lease agreements between SMS and the Company’s wholly owned subsidiaries, SPAR Marketing Force, Inc. (“SMF”) and SPAR Canada Company (“SPAR Canada”).  Each lease, as amended, has a 36 month term and representations, covenants and defaults customary for the leasing industry. The SMF lease is for handheld computers to be used by field merchandisers in the performance of various merchandising and marketing services in the United States and has a monthly payment of $17,891. These handheld computers had an original purchase price of $632,200. The SPAR Canada lease is also for handheld computers to be used by field merchandisers in the performance of various merchandising and marketing services in Canada and has a monthly payment of $2,972. These handheld computers had an original purchase price of $105,000. The monthly payments, as amended, are based upon a lease factor of 2.83%. In March 2005, SMF entered into an additional 36 month lease with SMS for handheld computers. The lease factor is 2.83% and the monthly payment is $2,341. These handheld computers had an original purchase price of $82,727.
By March 31, 2008, all of the operating leases noted above had expired. Both SMF and SPAR Canada elected to notify SMS of their intention to continue to lease the equipment for an additional twelve month period. On September 24, 2008, SMS entered into a Bill of Sale and Lease Termination agreement with SMF and SPAR Canada, pursuant to which the parties terminated those leases and SMF purchased from SMS the equipment SMF leased under its existing equipment lease pursuant to its option thereunder and the equipment SPAR Canada leased under its existing equipment lease (with SPAR Canada's consent), for a total purchase price of $500,000 (the fair market value of the hand held computer units so purchased).  SGRP’s Audit Committee and Board of Directors each reviewed and approved this affiliated transaction, including (without limitation) the terms of the Bill of Sale and the affiliated relationship of the parties.
Through arrangements with the Company, SMS, SMSI and SIT participate in various benefit plans, insurance policies and similar group purchases by the Company, for which the Company charges them their allocable shares of the costs of those group items and the actual costs of all items paid specifically for them. All transactions between the Company and the above affiliates are paid and/or collected by the Company in the normal course of business.
The following transactions occurred between the Company and the above affiliates (in thousands):
  Year Ended December 31, 
  2010  2009 
Services provided by affiliates:      
Independent contractor services (SMS) $16,052  $10,820 
         
Field management services (SMSI) $4,110  $3,223 
         
Handheld computer leases (SMS) $132  $132 
         
Internet and software program consulting services (SIT) $–  $572 

Accrued expenses due to affiliates (in thousands): December 31, 
  2010  2009 
Total accrued expenses due to affiliates $1,575  $1,436 

In addition to the above, through the services of Affinity Insurance, Ltd. (“Affinity”), the Company purchases insurance coverage for its casualty and property insurance risk. The Company’s Chairman and Vice Chairman own, through SMSI, a minority (less than 1%) equity interest in Affinity.
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Related-Party Transactions (continued)
SGRP’s Audit Committee periodically reviews and has approved all of the related party relationships and transactions described above, as required by and in accordance with its Charter and the Company's Code of Ethical Conduct, NASDAQ rules and applicable law, the Audit Committee reviews each material related party transaction for its overall fairness to the Company, both initially and periodically (often annually), which review includes (without limitation) the costs and benefits to the Company, the other terms of the transactions, the affiliated relationship of the parties, and whether the overall economic and other terms are (or continue to be) no less favorable to the Company than would be the case with an unrelated provider of substantially similar services.
11. Stock Based Compensation
SGRP currently has five stock option plans:  the 2008 Stock Compensation Plan ("2008 Plan"), the 2000 Stock Option Plan ("2000 Plan"), the Special Purpose Stock Option Plan ("Special Purpose Plan"), the Amended and Restated 1995 Stock Option Plan (“1995 Plan”) and the Directors Plan.
On May 29, 2008, SGRP's stockholders approved and adopted the 2008 Plan as the successor to the 2000 Plan, the 1995 Plan and the Director’s Plan with respect to all new options issued. The 2008 Plan provides for the granting of either incentive or nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and other stock based awards to specified employees, consultants, and directors of the Company, although to date SGRP has not issued any permissible form of award other than stock options.  Pursuant to the 2008 Plan, no more than 5,600,000 shares of SGRP's common stock in the aggregate ("Maximum Covered Shares") may be covered by options or other awards issued from time to time under the 2008 Plan on or after May 29, 2009 ("New Awards"), or to the extent still outstanding on May 29, 2008, issued at any time under the 2000 Plan or 1995 Plan ("Continuing Awards").  Shares covered by New Awards or Continuing Awards that expire, lapse, terminate, are forfeited, become void or otherwise cease to exist (other than as a result of exercise) are added back to the Maximum Covered Shares and become available for new grants, while those shares covered by exercised New Awards or Continuing Awards are not added back and accordingly effectively reduce the Maximum Covered Shares under the 2008 Plan.  The options have a maximum term of ten years, except in the case of incentive stock options granted to greater than 10% stockholders (whose terms are limited to a maximum of five years), and SGRP has generally issued options having maximum terms.
On December 4, 2000, SGRP adopted the 2000 Plan as the successor to the 1995 Plan and the Director’s Plan with respect to all new options issued. The 2000 Plan provides for the granting of either incentive or nonqualified stock options to specified employees, consultants, and directors of the Company for the purchase of up to 3,600,000 (less those options still outstanding under the 1995 Plan or exercised after December 4, 2000 under the 1995 Plan). The options generally had a term of ten years, except that incentive stock options granted to greater than 10% stockholders generally had five year terms. The exercise price of nonqualified stock options must be equal to at least 85% of the fair market value of SGRP’s common stock at the date of grant (although typically the options are issued at 100% of the fair market value), and the exercise price of incentive stock options must be equal to at least the fair market value of SGRP’s common stock at the date of grant.
On July 8, 1999, in connection with the merger, SGRP established the Special Purpose Plan of PIA Merchandising Services, Inc. to provide for the issuance of substitute options to the holders of outstanding options granted by SPAR Acquisition, Inc. There were options to purchase 134,114 shares granted at $0.01 per share under this plan. Since July 8, 1999, SGRP has not granted any new options under this plan.
The 1995 Plan provided for the granting of either incentive or nonqualified stock options to specific employees, consultants, and directors of the Company for the purchase of up to 3,500,000 shares of SGRP’s common stock. The options had a term of ten years from the date of issuance, except in the case of incentive stock options granted to greater than 10% stockholders for which the term was five years. The 1995 Plan was superseded by the 2008 Plan and the 2000 Plan with respect to all new options issued.
The Director’s Plan was a stock option plan for non-employee directors and provided for the purchase of up to 120,000 shares of SGRP’s common stock. Since 2000, SGRP has not granted any new options under this plan. The Director’s Plan has been replaced by the 2008 Plan and the 2000 Plan with respect to all new options issued.
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Stock Based Compensation (continued)
Summary of 2010 Plan Activities:
  Outstanding Options    
Plan 
Beginning
Balance
  Granted  Exercised  Cancelled  December 31, 2010 Balance 
2008 Plan  2,102,189   422,950   (40,065)  (32,600)  2,452,474 
2000 Plan  281,041   –   (14,876)  (37,000)  229,165 
Special Purpose Plan  –   –   –   –   – 
1995 Plan  2,000   –   –   (2,000)  – 
Director’s Plan  –   –   –   –   – 
Total  2,385,230   422,950   (54,941)  (71,600)  2,681,639 
SGRP grants options to purchase shares of common stock issued by SGRP to its directors, officers, employees and certain employees of its affiliates pursuant to its 2008 Stock Compensation Plan, as amended (the “2008 Plan”), and has granted stock options under various predecessor plans that continue to be outstanding. SGRP has the authority to issue other types of stock-based awards under the 2008 Plan, but to date has not done so. The Company accounts for its employee and affiliate employee stock option expense as compensation expense in the Company’s financial statements when the stock options are granted. Share-based compensation cost is measured on the grant date, based on the fair value of the award calculated at that date, and is recognized over the requisite service period, which generally is the options’ vesting period. Fair value is calculated using the Black-Scholes option pricing model.  The options granted have a ten (10) year life and vest over four-year periods at a rate of 25% per year, beginning on the first anniversary of the date of grant.
On August 6, 2009, 330,000 new stock option grants were issued to employees, officers, and certain employees of its affiliate at an exercise price of $0.40, which represents the fair market value of a share of the Company’s common stock on August 6, 2009, as determined in accordance with the Company’s 2008 Stock Compensation Plan.  The estimated stock compensation expense is $93,000 and $42,000 for employees and non-employees, respectively, which will be recognized ratably over the four-year vesting period.
At the 2009 annual meeting on May 28, 2009, the stockholders of SGRP approved an amendment (the “Repricing Amendment”) to the 2008 Plan that gives the Compensation Committee of SGRP's Board of Directors (the "Compensation Committee") the full authority and complete flexibility from time to time to designate and modify (in its discretion) one or more of the outstanding stock options or other awards (including their exercise prices and other terms) to (among other things) restore their intended values and incentives to their holders.  No further consent of SGRP’s stockholders is required for any repricing or other modification of any award pursuant to the Repricing Amendment.  The Repricing Amendment permits changes in all outstanding stock options and other awards, including those previously issued under predecessor plans.  However, no modification can adversely affect an awardee’s rights or obligations under an award without the awardee’s consent.
On August 6, 2009, in order to restore the intended value and incentives under SGRP's outstanding stock options as permitted by the Repricing Amendment, the Compensation Committee and Board approved a plan to offer to its employees, officers, directors, consultants and retirees the opportunity to surrender options on approximately 2.1 million shares of the Company's common stock  in exchange for repriced replacement options (“New Option Contracts”)  in the same amount as the surrendered option shares except for those surrendered by outside directors, who will receive fewer replacement shares.
The Company detailed such plan in its Offer to Exchange Certain Outstanding Stock Options for New Stock Options dated August 24, 2009 (including its exhibits and incorporated documents, the "Exchange Offer"), as filed with the Securities and Exchange Commission (the "SEC in its Schedule TO") on August 25, 2009.
On September 24, 2009, pursuant to the Company’s Exchange Offer: eighty-one of the Company’s eligible officers, employees and consultants voluntarily surrendered for exchange and cancellation their existing option contracts to
April 17, 2023, which are incorporated herein by reference.

F-24
-23-
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Stock Based Compensation (continued)
purchase an aggregate of 1,257,740 shares of SGRP's common stock, representing approximately 82.5% of the total option shares under all existing option contracts eligible for exchange. Those existing option contracts were accepted for exchange by the Company; and in exchange for those surrendered option contracts, the Company issued new stock option contracts to them to purchase an aggregate of 1,257,740 shares of SGRP's common stock (“New Option Contracts”). These New Option Contracts have an exercise price of $0.40 per share, which represents the fair market value of a share of SGRP's common stock on August 6, 2009 (their grant date), as determined in accordance with SGRP's  2008 Stock Compensation Plan and will vest over four (4) years.  The incremental compensation expense to the Company is approximately $92,000 (based on current Black-Scholes computation factors), which will be recognized ratably over the vesting period from August 7, 2009, to August 6, 2013.
Also on September 24, 2009, pursuant to the Company’s Exchange Offer: all five of the Company’s eligible current and retired outside directors voluntarily surrendered for exchange and cancellation their existing option contracts to purchase an aggregate of 530,564 shares of SGRP's common stock, representing 98.2% of the total option shares under all existing option contracts eligible for exchange by such directors; those existing option contracts were accepted for exchange by the Company; and in exchange for those surrendered option contracts, the Company issued new stock option contracts to them to purchase an aggregate of 446,000 shares of SGRP's common stock for exchange and cancellation of their existing option contracts.  These new contracts have an exercise price of $0.40 per share, which represents the fair market value of a share of SGRP's common stock on August 6, 2009 (their grant date), as determined in accordance with the Company's 2008 Stock Compensation Plan, vest immediately, and have no incremental compensation expense to the Company.  The number of shares covered by the new stock options received by the outside directors averaged 0.83 new option shares for each surrendered and cancelled option share, which they required to avoid any such incremental compensation expense to the Company from their participation in the repricing exchange.
Based upon the Black-Scholes calculation, share-based compensation expense related to employee stock option grants totaled $131,000 and $136,000 for the years ended December 31, 2010 and 2009, respectively. Compensation expense related to non-employee stock option grants awarded to the employees of the Company’s affiliates was $80,000 and $70,000 for the years ended December 31, 2010 and 2009, respectively.  The unamortized expense as of December 31, 2010, was approximately $340,000 for outstanding stock option grants.  The impact of the total share-based compensation expense on basic/diluted earnings per share was $0.01 for both years ended December 31, 2010 and 2009.
On March 10, 2010, in connection with an Investor Relations Consulting agreement dated August 15, 2009, with Alliance Advisors LLC, the Board of Directors approved the issuance of 120,000 shares of SGRP common stock in return for a cash payment of $0.01 per share and services rendered by Alliance Advisors LLC to the Company.
The following table summarizes stock option activity under SGRP’s plans:
   
Shares
   
Weighted Average
Exercise Price
 
Options outstanding, January 1, 2009  2,245,449  $1.21 
         
2009        
         
Granted  2,123,739  $0.41 
Exercised  –   – 
Canceled or expired  (1,983,958)  1.22 
Options outstanding, December 31, 2009  2,385,230  $0.48 
         
2010        
         
Granted  422,950  $0.98 
Exercised  (54,941)  0.47 
Canceled or expired  (71,600)  0.90 
Options outstanding, December 31, 2010  2,681,639  $0.55 
Option price range at December 31, 2010 $0.01 to $4.65
F-25
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

11. Stock Based Compensation (continued)
  2010  2009 
       
Grant Date weighted average fair value of options granted during the year $0.98  $0.41 

The following table summarizes information about stock options outstanding at December 31, 2010:
   Options Outstanding  Options Exercisable 
Range of
Exercise Prices
  
Number
Outstanding at
December 31, 2010
 
Weighted
Average
Remaining
Contractual Life
 
Weighted
Average
Exercise
Price
  
Number
Exercisable at
December 31,
2010
  
Weighted
Average
Exercise Price
 
Less than $1.01   2,598,474  8.57 years $0.52     976,657   $0.46  
$ 1.01 - $2.00   78,915  4.02 years  1.25     73,418    1.27  
$ 2.01 - $4.00   4,000  2.08 years  2.96     4,000    2.96  
Greater than $4.00   250  2.60 years $4.65    250   $4.65  
Total   2,681,639         1,054,325      

12. Geographic Data
The Company operates in the same single business segment (e.g., merchandising and marketing services) in both its Domestic Merchandising Services Division and its International Merchandising Services Division.  The Company uses those divisions to improve its administration and operational and strategic focuses, and it tracks and reports certain financial information separately for each of those divisions, as described in Item 1 – Business in our Annual Report, above.  The Company measures the performance of its domestic and international divisions and subsidiaries using the same metrics.  The primary measurement utilized by management is operating profits, historically the key indicator of long-term growth and profitability, as the Company is focused on reinvesting the operating profits of each of its international subsidiaries back into its local markets in an effort to improve market share and continued expansion efforts.  Set forth below are summaries (in thousands) of the Company's net revenues from its United States subsidiaries (i.e., the Domestic Merchandising Services Division) and from its international (non-U.S.) subsidiaries (i.e., the International Merchandising Services Division), net revenue from certain international subsidiaries as a percent of consolidated net revenue, operating income (loss) and long lived assets by geographic area for 2010 and 2009, respectively:
  Year Ended December 31, 
  2010  2009 
Net revenues:      
United States $36,564  $26,427 
International  26,590   31,122 
Total net revenues $63,154  $57,549 
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SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Geographic Data (continued)
  Year Ended December 31, 
  2010  2009 
Net revenues International : % of consolidated net revenue  % of consolidated net revenue 
Australia $7,711   12.2% $6,171   10.7%
Canada  7,219   11.4%  4,663   8.1%
Japan  4,089   6.5%  10,972   19.1%
India  2,935   4.6%  5,010   8.7%
All Others  4,636   7.3%  4,306   7.5%
Total international net revenue $26,590   42.0% $31,122   54.1%

  Year Ended December 31, 
  2010  2009 
Operating income (loss):      
United States $3,043  $888 
International  (212)  (566)
Total operating income $2,831  $322 

  
December 31,
2010
  
December 31,
2009
 
Long lived assets:      
United States $2,231  $4,001 
International  657   278 
Total long lived assets $2,888  $4,279 

Purchase of Interest in Subsidiaries
In July 2009, the Company purchased the remaining 49% ownership in the Company's existing Romanian subsidiary, which currently has minimal operations.  As consideration for purchase, the Company forgave $34,344 of debt owed by the former local investor.  The Company is currently assessing ongoing business opportunities for this subsidiary.
On August 6, 2009, the Board of Directors and its Audit Committee approved the purchase of the 51% ownership in S.C. SPAR City S.R.L., a Romanian marketing services company, held by SPAR Infotech, Inc. (“SIT”), an affiliated company (See Note 10, Related-Party Transactions, above), for a cost of $61,876, which was the fair market value of SIT's interest in the company as of June 30, 2009.  The purchase by the Company of SIT's entire 51% ownership in such new Romanian subsidiary was effective as of July 1, 2009, for purposes of the consolidation of the new Romanian subsidiary into the Company's financial statements.  The remaining 49% ownership in the new Romanian subsidiary is held by a Romanian party not affiliated with the Company.
On September 27, 2010, the Company purchased the remaining 49% ownership in the Company’s subsidiary in India at a cost of $90,000.  The Company is actively pursuing alternative local investors to purchase a 49% ownership interest in India.
Effective August 31, 2009, the Company purchased the remaining 50% ownership in the Company’s subsidiary in China, SPAR China Limited, at a cost of $1.00 and its assumption of a working capital loan payable to the previous local investor for approximately $191,000 USD payable in eight monthly installments beginning September 2009. The
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SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Geographic Data (continued)
Company was actively pursuing a new local investor in the merchandising business to purchase a 49% interest in its subsidiary in China.  On March 23, 2010, the Company entered into a joint venture agreement with a Local Partner in mainland China.  
Effective November 30, 2009 the Company purchased the remaining 50% ownership in the Company’s subsidiary in Japan, SPAR FM Japan, Inc., at a cost of 667,578 Yen or approximately $8,000 US dollars.  The Company is actively pursuing a new local partner in the merchandising business to purchase a 49% interest in its subsidiary in Japan.
New International Subsidiary organized
On July 26, 2010 the Company announced the structuring of a new joint venture corporation in China with its new joint venture local investor Shanghai Wedone Marketing Consulting Co., Ltd. The new joint venture will have national market presence in China.
The new joint venture corporation is called SPAR (Shanghai) Marketing Management Company Ltd.. SPAR owns 51% of the joint venture corporation while Shanghai Wedone Marketing Consulting owns 49% in accordance with the laws of the People's Republic of China. The new joint venture corporation, which started operations on August 1, 2010, has begun providing merchandising and related marketing services to manufacturers and retailers throughout China.
Shanghai Wedone Marketing Consulting is a comprehensive marketing management company that provides brand communication and retail marketing management service in China. They work with more than 50 international brands such as Coca-Cola, Unilever, Johnson & Johnson and Swatch, and several prominent Chinese brands such as Meng Niu Dairy, Guan Sheng Yuan and Dong-e E-jiao. Their business covers all tier 1, 2 and 3 cities in China, which equal more than 150 cities throughout the country.
The effects of the above transactions on the net income attributed to the Company and transfers from the non- controlling interest are as follows (in thousands):
  Year Ended  Year Ended 
  December 31, 2010  December 31, 2009 
       
Net income attributed to SPAR Group, Inc. $2,167  $502 
Increase in SPAR Group, Inc. Paid in Capital for purchase of  subsidiaries common stock  51   61 
Change from net income attributed to SPAR Group, Inc. and transfer from non-controlling interest $2,218  $563 

The purpose of the above schedule is to disclose the effects of changes in the Company’s ownership interest in its subsidiaries on the Company’s equity.
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SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)

13. Net Income Per Share
The following table sets forth the computations of basic and diluted net income per share (in thousands, except per share data):
  Year Ended December 31, 
  2010  2009 
Numerator:      
Net income $2,167  $502 
         
Denominator:        
Shares used in basic net income per share calculation  19,209   19,139 
Effect of diluted securities:        
Employee stock options:  1,393   295 
Shares used in diluted net income per share calculations  20,602   19,434 
         
Basic and diluted net income per common share: $0.11  $0.03 

14. Acquisitions
On December, 4 2009, the Company acquired substantially all of the business and customer contracts and hired certain employees of Brenner Associates Inc., an assembly service and merchandising service company that also did business as National Marketing Services or "NMS".  NMS was in a bankruptcy proceeding. With the approval of the court, the trustee and NMS's secured lender, JPMorgan Chase Bank, N.A. ("Chase"), and in return for the transfer of certain NMS assets to the Company, Chase released certain claims against NMS, and the Company agreed to compensate Chase through a contingent earn-out based on achieving certain future gross revenue levels and to indemnify Chase for up to $50,000 of uncollected NMS receivables in the event the collections by the trustee and Chase were less than the specified minimum.  The $50,000 was paid to Chase and recorded as goodwill.  No other consideration was paid for NMS.
The earn out is based on the Company achieving at least $8.0 million in gross revenue from the acquired NMS business on a rolling 12 month basis. If this revenue level is achieved, Chase will be paid a monthly earn-out that could aggregate $350,000 during a 12 month period. If the Company achieved a similar gross revenue level on such a basis during a second 12 month period, Chase will be paid a second monthly earn-out that could aggregate $350,000 over that period (thus providing Chase with a potential earn-out of $700,000 over a 24 month period).   The earn out of $8.0 million in gross revenue was not achieved in the first twelve months and current revenue levels do not indicate that the remaining earn out will be triggered, as such, no contingent liability was recorded.The acquired NMS assets included all of the stock of its wholly owned subsidiaries; National Assembly Services, Inc., a New Jersey corporation that performs in-home furniture assembly services ("NAS"), and NMS Retail Services ULC (“NRS”), a Nova Scotia unlimited Liability Company that performs merchandising services in Canada.  The principal assets of NAS and NRS were cash and accounts receivable, which had an approximate fair value of $205,000 on December 4, 2009, and their principal liabilities were accounts payable and accrued expenses, which had a fair value of $214,000 on the date of such acquisition.  As subsidiaries of the Company, the assets and liabilities of NAS and NMS Canada, as well as their results since the date of acquisition, are included in the Company's 2009 consolidated financial statements.
In March 2010, the Company established a new Canadian subsidiary, SPAR Wings & Ink Company ("SWI") specifically to expand its merchandising and marketing services throughout Canada. On April 1, 2010, with the approval of SGRP’s directors, SWI acquired substantially all of the business, customer contracts, receivables, work-in progress, other assets and certain liabilities of 2078281 Ontario Limited, an Ontario merchandising and marketing company doing business as Wings & Ink (the "Seller"). The Company, at closing, also hired substantially all of the Seller’s employees including offering consulting contracts to the principals of the Seller.
In return for the purchase of such assets and assumed liabilities, at closing SWI compensated the Seller through 1) a cash payment of $500,000 Canadian dollars (“CAD”), 2) issued a $75,000 CAD interest bearing promissory note payable over an 18 month period and 3) placed $50,000 in escrow for a 12 month period and 4) assumed $446,000 CAD of liabilities.
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SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
14. Acquisitions (continued)
The Company has completed its valuation of the fair value and allocation for the assets acquired and liabilities assumed and has recorded the following (in US dollars):
Accounts Receivable $644,000 
Equipment  2,000 
Customer contracts  426,000 
  $1,072,000 

The Company is amortizing the customer contracts of $426,000 on a straight line basis over 5 years.  The net book value at December 31, 2010 was $362,000.  Amortization expense for the year ending December 31, 2010 was approximately $64,000.  The annual amortization amount of these contracts is expected to be approximately $82,000 for 2011-2013 and $18,000 in 2014.
SWI also agreed to pay an earn out to the principals of the Seller based on SWI achieving certain revenue and gross profit margin levels of the acquired business for each of the next two12 month periods. The earn out is based on revenue and gross profit margins exceeding certain agreed upon base levels, if achieved, the principles will be paid one third of the excess gross profit dollars in each of the two 12 month periods.  The Company has not recorded a contingent liability as it is unlikely these revenue and gross margin targets will be met.
15. Mergers
In 2010, the Company entered into merger agreements between several of its inactive subsidiaries in an effort to simplify the Company’s reporting structure.  
The following inactive subsidiaries were merged into SPAR All Store Marketing Services, Inc. (as the survivor):
·  SPAR Technology Group, Inc.
·  SPAR/PIA Retail Services, Inc.
·  Retail Resources, Inc.
·  Pivotal Field Services, Inc.
The following inactive subsidiaries were merged into PIA Merchandising Co. Inc. (as the survivor):
·  Pivotal Sales Company
The following inactive subsidiaries were merged into SPAR Marketing Force, Inc. (as the survivor):
·  SPAR/Burgoyne Retail Services, Inc.
·  SPAR, Inc.
·  SPAR Marketing, Inc.
There is no expected tax or reporting impact expected from the above mergers, as all such subsidiaries were inactive.
F-30

SPAR Group, Inc. and Subsidiaries
Schedule II – Valuation and Qualifying Accounts
(In thousands)
  
Balance at
Beginning of
Period
  
Charged to
Costs and
Expenses
  
Deductions(1)
  
Balance at End
of Period
 
Year ended December 31, 2010:            
             
Deducted from asset accounts:            
Allowance for doubtful accounts $317   265   439  $143 
                 
Year ended December 31, 2009:                
                 
Deducted from asset accounts:                
Allowance for doubtful accounts $292   412   387  $317 

(1)           Uncollectible accounts written off, net of recoveries
F-31