~~UNITED STATES~~
~~SECURITIES AND EXCHANGE COMMISSION~~
~~WASHINGTON, D.C. 20549~~

~~Form~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the ~~third~~second quarterly period ended ~~September~~ June 30,~~, 2017~~ 2021.

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from __________ to __________.

Commission file number 0-27408

SPAR GROUP, INC.
(Exact name of Registrant as specified in its charter)

~~Commission file number: 0-27408~~

~~SPAR Group, Inc.~~
~~(Exact name of registrant as specified in its charter)~~

Delaware	33-0684451
(State or other jurisdiction of ~~Incorporation~~incorporation or organization)	~~IRS~~(I.R.S. Employer Identification No.)

~~333 Westchester Avenue, South Building, Suite 204, White Plains, New York 10604~~1910 Opdyke Court, Auburn Hills, Michigan	48326
(Address of principal executive ~~offices, including zip code)~~offices)	(Zip Code)

~~Registrant~~'sRegistrant's telephone number, including area code: ~~(914) 332-4100~~(248) 364-7727

Indicate by check mark whether the ~~registrant~~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 12twelve months (or for such shorter period that the ~~registrant~~Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 ~~days:~~

☒days. Yes ☒ No ☐ No

Indicate by check mark whether the ~~registrant~~Registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the ~~registrant~~Registrant was required to submit ~~and post~~ such files).

☒ Yes ☒ No ☐ No

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

Large Accelerated Filer ☐	Accelerated Filer ☐

Non-Accelerated Filer ~~☐ (Do not check if a smaller~~ ☒	Smaller reporting ~~company)~~ company ☒
	~~Smaller Reporting Company~~ ☒
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the ~~registrant~~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.~~Act ☐

Indicate by check mark whether the ~~registrant~~Registrant is a shell company (as defined in Rule 12b-2 of the Exchange ~~Act) .~~Act.) Yes ☐ ~~Yes~~No ☒ No

The aggregate market value of the Common Stock of the Registrant held by non-affiliates of the Registrant on August 10, 2021, based on the closing price of the Common Stock as reported by the Nasdaq Capital Market on such date, was approximately $12.1 million.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

~~On November 10, 2017, there were 20,575,969~~Symbol(s)

Name of each exchange on which registered

Common

SGRP

Nasdaq

The number of shares of the Registrant's Common Stock ~~outstanding.~~

outstanding as of August 10, 2021, was 21,333,371 shares.

Table of Contents

SPAR Group, Inc.

Index

PART I:

FINANCIAL INFORMATION


Item 1	Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2021 (Unaudited), and December 31, ~~2016~~2020	2

	Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020	3

	Condensed Consolidated Statement of Equity (Unaudited) for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2021 and 2020	4

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020	56

	Notes to Condensed Consolidated Financial Statements (Unaudited)	67

Item 2	~~Management~~'sManagement's Discussion and Analysis of Financial Condition and Results of Operations	2625

Item 3	Quantitative and Qualitative Disclosures about Market Risk	33 31

Item 4	Controls and Procedures	33 31

~~PART II:~~

~~OTHER INFORMATION~~

PART II:	OTHER INFORMATION

Item 1	Legal Proceedings	35 32

Item 1A	Risk Factors	37 33

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3733

Item 3	Defaults ~~upon~~Upon Senior Securities	3733

Item 4	Mine Safety Disclosures	3833

Item 5	Other Information	3833

Item 6	Exhibits	3834

SIGNATURES		35	39

Table of Contents

PART I:

FINANCIAL INFORMATION

~~PART I:~~	~~FINANCIAL INFORMATION~~

Item 1.	Condensed Consolidated Financial Statements

SPAR Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

	*June 30,*			*December 31,*
	*2021*			*2020*
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	16,701		$	15,972
Accounts receivable, net		57,232			46,914
Prepaid expenses and other current assets		4,392			3,631
Total current assets		78,325			66,517
Property and equipment, net		2,882			2,795
Operating lease right-of-use assets		2,118			2,900
Goodwill		3,763			3,760
Intangible assets, net		1,996			2,255
Deferred income taxes		4,359			4,201
Other assets		1,537			1,601
Total assets	$	94,980		$	84,029
Liabilities and equity
Current liabilities:
Accounts payable	$	11,117		$	7,859
Accrued expenses and other current liabilities		21,607			18,745
Due to affiliates		3,637			3,775
Customer incentives and deposits		3,706			1,799
Lines of credit and short-term loans		11,386			9,329
Current portion of operating lease liabilities		964			1,398
Total current liabilities		52,417			42,905
Operating lease liabilities, less current portion		1,154			1,502
Long-term debt and other liabilities		1,000			1,000
Total liabilities		54,571			45,407
Commitments and contingencies – See Note 8
Equity:
SPAR Group, Inc. equity
Preferred stock, $.01 par value: Authorized and available shares– 2,445,598 Issued and outstanding shares – None – Balance at June 30, 2021 and December 31, 2020		0			0
Common stock, $.01 par value: Authorized shares – 47,000,000 Issued shares – 21,269,797 – Balance at June 30, 2021, and 21,122,312 – December 31, 2020		213			211
Treasury stock, at cost 1,697 shares – Balance at June 30, 2021 and December 31, 2020		(2	)		(2	)
Additional paid-in capital		16,857			16,645
Accumulated other comprehensive loss		(3,888	)		(3,913	)
Retained earnings		10,649			9,218
Total SPAR Group, Inc. equity		23,829			22,159
Non-controlling interest		16,580			16,463
Total equity		40,409			38,622
Total liabilities and equity	$	94,980		$	84,029

See accompanying notes.

Table of Contents

SPAR Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(unaudited)

(In thousands, except share and per share data)

September 30,
2017

December 31,
2016

(Unaudited) (revised) (1)
Assets

Current assets:

Cash and cash equivalents
$ 7,662 $ 7,324
Accounts receivable, net
36,824 33,669
Prepaid expenses and other current assets
1,629 1,299
Total current assets
46,115 42,292

Property and equipment, net
2,551 2,536
Goodwill
1,841 1,847
Intangible assets, net
1,900 2,340
Deferred income taxes
4,468 4,694
Other assets
1,683 1,142
Total assets
$ 58,558 $ 54,851

Liabilities and equity

Current liabilities:

Accounts payable
$ 7,783 $ 5,567
Accrued expenses and other current liabilities
13,598 9,766
Due to affiliates
4,008 3,349
Customer incentives and deposits
1,587 1,305
Lines of credit and short-term loans
6,222 9,778
Total current liabilities
33,198 29,765
Long-term debt and other liabilities
33 4
Total liabilities
33,231 29,769

Commitments and Contingencies – See Note 9

Equity:

SPAR Group, Inc. equity

Preferred stock, $.01 par value: Authorized and available shares– 2,445,598 Issued and outstanding shares– None – September 30, 2017, and December 31, 2016
– –
Common stock, $.01 par value: Authorized shares – 47,000,000 Issued shares – 20,680,717 – September 30, 2017, and December 31, 2016
207 207
Treasury stock, at cost 115,123 shares – September 30, 2017, and 37,877 shares – December 31, 2016
(127 ) (51 )
Additional paid-in capital
16,234 16,093
Accumulated other comprehensive loss
(2,060 ) (2,407 )
Retained earnings
6,246 5,835
Total SPAR Group, Inc. equity
20,500 19,677
Non-controlling interest
4,827 5,405
Total equity
25,327 25,082
Total liabilities and equity
$ 58,558 $ 54,851

~~(1)~~

~~See Note 2 Correction of Prior Period Financial Statements.~~

	*Three Months Ended*						*Six Months Ended*
	*June 30,*						*June 30,*
	*2021*			*2020*			*2021*			*2020*

Net revenues	$	67,176		$	50,944		$	128,273		$	112,292
Cost of revenues		55,170			41,072			104,008			90,632
Gross profit		12,006			9,872			24,265			21,660
Selling, general and administrative expense		9,585			7,370			18,595			17,141
Depreciation and amortization		534			539			1,064			1,079
Operating income		1,887			1,963			4,606			3,440
Interest expense		129			84			277			312
Other expense (income), net		5			(50	)		(70	)		(58	)
Income before income tax expense		1,753			1,929			4,399			3,186

Income tax expense		621			624			1,486			959
Net income		1,132			1,305			2,913			2,227
Net (income) attributable to non-controlling interest		(618	)		(1,408	)		(1,482	)		(2,034	)
Net income (loss) attributable to SPAR Group, Inc.	$	514		$	(103	)	$	1,431		$	193
Basic and diluted income per common share:	$	0.02		$	0.00		$	0.07		$	0.01
Weighted average common shares – basic		21,262			21,108			21,225			21,107
Weighted average common shares – diluted		21,617			21,125			21,600			21,157

Net income	$	1,132		$	1,305		$	2,913		$	2,227
Other comprehensive income (loss):
Foreign currency translation adjustments	$	491			(79	)		(1,344	)		(3,979	)
Comprehensive income (loss)		1,623			1,226			1,569			(1,752	)
Comprehensive loss (income) attributable to non-controlling interest		(885	)		(1,365	)		(112	)		455
Comprehensive income (loss) attributable to SPAR Group, Inc.	$	738		$	(139	)	$	1,457		$	(1,297	)

See accompanying notes.

Table of Contents

SPAR ~~Group, Inc.~~ ~~and Subsidiaries~~

~~Consolidated Statements~~ of ~~Income and~~ ~~Comprehensive~~~~Income (~~~~Loss~~)

(u~~naudited~~)

~~(In thousands, except per share data)~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

(revised) (1)

(revised) (1)

Net revenues
$ 48,752 $ 33,438 $ 131,361 $ 89,781
Cost of revenues
39,960 26,162 105,563 69,309
Gross profit
8,792 7,276 25,798 20,472

Selling, general and administrative expense
7,477 6,360 21,988 17,637
Depreciation and amortization
487 486 1,526 1,459
Operating income
828 430 2,284 1,376

Interest expense
110 51 117 111
Other (income), net
(78
)
(78
)
(275
)
(183
)
Income before income tax expense
796 457 2,442 1,448

Income tax expense (benefit)
210 (31
)
907 200
Net income
586 488 1,535 1,248
Net income attributable to non-controlling interest
(340
)
(546
)
(1,189
)
(1,164
)
Net income (loss) attributable to SPAR Group, Inc.
$ 246 $ (58
)
$ 346 $ 84

Basic and diluted income per common share:
$ 0.01 $ – $ 0.02 $ –

Weighted average common shares – basic
20,602 20,607 20,633 20,580

Weighted average common shares – diluted
21,320 20,607 21,331 21,299

Net income
$ 586 $ 488 $ 1,535 $ 1,248
Other comprehensive (loss) income:

Foreign currency translation adjustments
(61
)
206 681 (495
)
Comprehensive income
525 694 2,216 753
Comprehensive income attributable to non-controlling interest
(318
)
(651
)
(1,523
)
(807
)
Comprehensive income (loss) attributable to SPAR Group, Inc.
$ 207 $ 43 $ 693 $ (54
)

~~(1)~~

~~See Note 2 Correction of Prior Period Financial Statements.~~

~~See accompanying notes.~~

~~SPAR~~ Group, Inc. and Subsidiaries

Condensed Consolidated Statement of Equity

(unaudited) ~~(revised) (1)~~

(In thousands)

Common Stock

Treasury Stock

Additional

Accumulated Other

Non-

Shares

Amount

Shares

Amount

Paid-In
Capital

Comprehensive
Loss

Retained Earnings

Controlling Interest

Total
Equity

Balance at January 1, 2017
20,681 $ 207 38 $ (51 ) $ 16,093 $ (2,407 ) $ 5,835 $ 5,405 $ 25,082

Share-based compensation
– – – – 178 – – – 178
Purchase of treasury shares
– – 111 (121 ) – – – – (121 )
Reissued treasury shares – RSU's
– – (12 ) 16 (16 ) – – – –
Exercise of stock options
– – (22 ) 29 (21 ) – – – 8
Distributions to non-controlling investors
– – – – – – – (2,101 ) (2,101 )
Adoption of ASU 2016-09 (Note 12)
– – – – – – 65 – 65
Other comprehensive income
– – – – – 347 – 334 681
Net income
– – – – – – 346 1,189 1,535
Balance at September 30, 2017
20,681 $ 207 115 $ (127 ) $ 16,234 $ (2,060 ) $ 6,246 $ 4,827 $ 25,327

	*Common Stock*				*Treasury Stock*					*Additional*			*Accumulated Other*					*Non-*
	*Shares*		*Amount*		*Shares*		*Amount*			*Paid-In Capital*			*Comprehensive Loss*			*Retained Earnings*		*Controlling Interest*			*Total Equity*
Balance at January 1, 2021		21,122	$	211		2	$	(2	)	$	16,645		$	(3,913	)	$	9,218	$	16,463		$	38,622

Exercise of stock options		131		1		0		0			(66	)		0			0		0			(65	)
Share-based compensation		–		0		–		0			99			0			0		0			99
Other comprehensive (loss)		–		0		–		0			0			(198	)		0		(1,637	)		(1,835	)
Net income		–		0		–		0			0			0			917		864			1,781
Balance at March 31, 2021		21,253	$	212		2	$	(2	)	$	16,678		$	(4,111	)	$	10,135	$	15,690		$	38,602
Exercise of stock options		16		1		0		0			(4	)		0			0		0			(3	)
Share-based compensation		–		0		–		0			183			0			0		0			183
Other changes to non-controlling interest		0		0		0		0			0			0			0		4			4
Other comprehensive income		–		0		–		0			0			223			0		268			491
Net income		–		0		–		0			0			0			514		618			1,132
Balance at June 30, 2021		21,269	$	213		2	$	(2	)	$	16,857		$	(3,888	)	$	10,649	$	16,580		$	40,409

~~(1)~~

~~See Note 2 Correction of Prior Period Financial Statements.~~

Table of Contents

SPAR Group, Inc. and Subsidiaries

Condensed Consolidated Statement of Equity

(unaudited continued)

(In thousands)

	*Common Stock*				*Treasury Stock*					*Additional*		*Accumulated Other*						*Non-*
	*Shares*		*Amount*		*Shares*		*Amount*			*Paid-In Capital*		*Comprehensive Loss*			*Retained Earnings*			*Controlling Interest*			*Total Equity*
Balance at January 1, 2020		21,102	$	211		2	$	(2	)	$	16,511	$	(3,616	)	$	5,851		$	12,406		$	31,361

Exercise of stock options		6		0		0		0			0		0			0			0			0
Share-based compensation		–		0		–		0			25		0			0			0			25
Other comprehensive (loss)		–		0		–		0			0		(1,456	)		0			(2,444	)		(3,900	)
Net income		–		0		–		0			0		0			296			626			922
Balance at March 31, 2020		21,108	$	211		2	$	(2	)	$	16,536	$	(5,072	)	$	6,147		$	10,588		$	28,408
Share-based compensation		–		0		–		0			70		0			0			0			70
Other comprehensive (loss)		–		0		–		0			0		(34	)		0			(45	)		(79	)
Net income (loss)		–		0		–		0			0		0			(103	)		1,408			1,305
Balance at June 30, 2020		21,108	$	211		2	$	(2	)	$	16,606	$	(5,106	)	$	6,044		$	11,951		$	29,704

See accompanying notes.

Table of Contents

SPAR Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

	Nine Months Ended September 30,						*Six Months Ended June 30,*
	2017			2016			*2021*			*2020*
Operating activities
Net income	$	1,535		$	1,248		$	2,913		$	2,227
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		1,526			1,459			1,064			1,079
Non-cash lease expense								782			1,562
Bad debt expense, net of recoveries		93			317			139			64
Share based compensation		178			271
Share-based compensation								282			95
Changes in operating assets and liabilities:
Accounts receivable		(3,250	)		(4,643	)		(10,377	)		6,404
Prepaid expenses and other assets		(583	)		(105	)		(867	)		619
Accounts payable		2,234			1,000			3,269			(2,334	)
Operating lease liabilities								(782	)		(1,562	)
Accrued expenses, other current liabilities and customer incentives and deposits		4,679			2,548			4,586			618
Net cash provided by operating activities		6,412			2,095			1,009			8,772

Investing activities
Purchases of property and equipment and capitalized software		(1,046	)		(1,153	)		(890	)		(786	)
Purchases of Brazil subsidiary, net of cash		–			(306	)
Partners' Investment in Subsidiary								4			0
Net cash used in investing activities		(1,046	)		(1,459	)		(886	)		(786	)

Financing activities
Net (payments) borrowing on lines of credit		(2,953	)		2,015
Proceeds from stock options exercised		8			22
Proceeds from local investors in Brazil		–			102
Payments on term debt		(543	)		(21	)
Payments on capital lease obligations		(15	)		–
Purchase of treasury shares		(121	)		(12	)
Distribution to non-controlling investors		(2,101	)		(286	)
Net cash (used in) provided by financing activities		(5,725	)		1,820
Net borrowings on lines of credit								2,093			(792	)
Payments related to stock options exercised								(68	)		0
Net cash provided by (used in) financing activities								2,025			(792	)

Effect of foreign exchange rate changes on cash		697			(672	)		(1,419	)		(3,976	)
Net change in cash and cash equivalents		338			1,784			729			3,218
Cash and cash equivalents at beginning of year		7,324			5,718
Cash and cash equivalents at beginning of period								15,972			10,458
Cash and cash equivalents at end of period	$	7,662		$	7,502		$	16,701		$	13,676

Supplemental disclosure of cash flows information
Supplemental disclosure of cash flows information:
Interest paid	$	216		$	108		$	327		$	413
Income taxes paid	$	247		$	126
Increase in deferred tax asset due to adoption of ASU 2016-09 (Note 12)	$	65		$	-
Income taxes paid							$	238		$	36

See accompanying notes.

Table of Contents

SPAR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

1.	Basis of Presentation

The unaudited, interim condensed consolidated financial statements of SPAR Group, Inc.~~, a Delaware corporation~~ ("~~SGRP"), and its subsidiaries (together with~~ SGRP ~~collectively, the "Company"~~" or the ~~"SPAR Group"~~"Corporation"), and subsidiaries, accompanying this Quarterly Report on Form ~~10-Q~~10-Q for the ~~third~~second quarter ended ~~September~~June 30, ~~2017~~2021 (this ~~"Quarterly Report"~~"Quarterly Report"), have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form ~~10-Q~~10-Q and Article 10 of Regulation ~~S-X.~~S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. SGRP and its subsidiaries may be referred to collectively as "SPAR", the "SPAR Group" or the "Company". The accompanying consolidated balance sheet as of December 31, ~~2016, has been compiled~~2020 is derived from the ~~Company's~~Company’s audited financial statements as of that date. Because certain information and footnote disclosures have been condensed or omitted, these consolidated financial statements should be read in conjunction with the audited consolidated ~~balance sheet~~financial statements and notes thereto as of ~~such date.~~and for the year ended December 31, 2020 contained in the Company’s Annual Report on Form 10-K (the “2020 Form 10-K"). In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation have been included in these interim financial statements. However, these interim financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto for the Company as contained in the ~~SGRP's~~Company's Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016,~~2020, as filed with the Securities and Exchange Commission (the ~~"SEC"~~"SEC") on ~~April 17, 2017 (the "2016~~March 31, 2021, and the First Amendment to SGRP's Annual ~~Report"), and SGRP's Proxy Statement~~Report on Form 10-K/A for ~~its 2017 Annual Meeting of Stockholders~~ the year ended December 31, 2020, as filed with the SEC on April ~~28, 2017 (the "2017 Proxy Statement"~~29, 2021 (as so amended, the "Annual Report"). Particular attention should be given to Items 1 and 1A of the ~~2016~~2020 Annual Report respecting the Company's Business and Risk Factors, respectively ~~and the following parts of SGRP's 2017 Proxy Statement: (i)~~ ~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT~~~~, (ii) CORPORATE GOVERNANCE, (iii) EXECUTIVE COMPENSATION, DIRECTORS AND OTHER INFORMATION and (iv)~~ ~~EXECUTIVE COMPENSATION, EQUITY AWARDS AND OPTIONS.~~. The Company's results of operations for the interim period are not necessarily indicative of its operating results for the entire year.

2.	~~Correction of Prior Period Financial Statements~~Business and Organization

The SPAR Group is a leading global merchandising and marketing services company, providing a broad range of services to retailers, manufacturers and distributors around the world. With more than 40 years of experience, 25,000+ merchandising specialists around the world, 200,000+ average store visits a week and long-term relationships with some of the world’s leading manufacturers and retail businesses, SPAR provides specialized capabilities across 9 countries and 4 continents.

The Company's focus is merchandising and marketing. Its specialists are in stores restocking shelves, auditing inventory, performing competitive price shopping, setting up exciting promotions, assembling fixtures and furniture, preparing new locations for grand openings, assisting with sales and more. SPAR provides the “last mile” of retailing and manufacturer product merchandising and marketing.

The Company's services apply to a wide range of segments and categories. SPAR serves retailers in the grocery, drug, dollar, discount, convenience, cash and carry, home improvement, consumer electronics, automotive, pharmacy, office supply and mass merchandise segments. SPAR serves manufacturers and distributors in the personal technology, electronics, beverage, household product, consumables, automotive aftermarket and consumer product segments. The Company's ability to recognize trends and opportunities across segments and geographies distinguishes the business from local or regional competition.

The Company operates in markets that represent more than 50% of the world’s population. SPAR has expanded internationally to serve clients but also to capitalize on growing global demand. As of June 30, 2021, SPAR is in 9 countries including, United States, Canada, Mexico, Brazil, South Africa, Australia, China, Japan, and India. The Company no longer operates in Turkey.

The Company operates under two divisions: Domestic and International. The Domestic division is comprised of all operations within the United States. The International division is a consolidation of all operations and joint ventures outside of the United States.

The Domestic business is led and operated from its global headquarters in Auburn Hills, MI. The International business is also led from the global headquarters, but then has regional leadership and offices in the respective countries.

The Company's approach to the international marketplace has historically been to establish joint ventures. SPAR believes this approach enables the Company to bring the breadth of its global capabilities and tools while capitalizing on the strength and importance of local executive leadership and resources.

Novel Coronavirus (COVID-19) Outbreak

In ~~connection with~~ March 2020, the ~~preparation~~World Health Organization declared the novel strain of Coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The full impact of the ~~Company's consolidated financial statements for the three months ended March 31, 2017, the Company identified an error in the recognition of accumulated other comprehensive loss both in the equity section~~COVID-19 outbreak continues to evolve as of the ~~consolidated balance sheet, consolidated statement~~date of ~~equity~~this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the ~~comprehensive loss portion~~impact of the ~~consolidated statement of income~~global situation on its financial condition, liquidity, operations, suppliers, industry, and ~~comprehensive loss. In accordance with Staff Accounting Bulletin ("SAB") No. 99, Materiality, and SAB No. 108, Considering~~workforce.

While the ~~Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the error and determined that the related impact was~~ COVID-19 pandemic has not had any material ~~to the~~unfavorable effects on our financial results of operations or financial position for any prior annual or interim period. The correction of this error required reclassification of $1.6 million between comprehensive loss attributable to the Company and comprehensive loss attributable to non-controlling interest for the year ended December 31, ~~2016. Accordingly,~~2020 or through the Company corrected the consolidated balance sheet and consolidated statement of income and comprehensive loss as of and for the year ended December 31, 2016, and will correct these errors for all prior periods presented by revising the appropriate consolidated financial statements. The impact to the consolidated balance sheet as of September 30, 2016, and December 31, 2016, and the consolidated statements of income and comprehensive loss for the three and ninesix months ended ~~September~~June 30, ~~2016,~~2021, the extent of the impact in the future, if any, will depend on future developments, which are highly uncertain, cannot be predicted and could have a material adverse impact on our financial position, operating results and cash flows. The Company has experienced an increase in labor costs and certain wage pressures that could be attributed COVID-19. A prolonged outbreak could, among other things, strain our business continuity plans, create delays in our growth and strategic initiatives, reduce our sales and marketing activities, limit our access to financing on favorable terms, increase our exposure to potential impairment charges related to long-lived and intangible assets, hinder our ability to support our clients and operate our business effectively, heighten the ~~year ended December 31, 2016, is~~risk of disruption to our information and reporting systems and internal controls, including those over financial reporting and other risk management systems, or require us to incur substantial costs. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and may take further actions as ~~follows:~~may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers and partners. As the conditions surrounding the COVID-19 pandemic continue to evolve rapidly, we will continue to actively manage our response in collaboration with customers, government officials and stakeholders, and assess any potential impacts to our financial position and operating results, as well as adverse developments in our business.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. The CARES Act is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of the employer portion of social security payments, net operating loss carryback periods, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. As of June 30, 2021, the Company has elected to defer the employer-paid portion of social security taxes of $1.3 million, which is included in "Accrued expenses and other liabilities" in the Consolidated Balance ~~Sheets~~ ~~(in thousands):~~Sheets. The Company expects to repay approximately half of the deferred balance during 2021 with the remainder to be fully paid by December 2022.

As of
September 30, 2016

As of
December 31, 2016

As
Reported

Adjusted

As
Revised

As
Reported

Adjusted

As
Revised

Accumulated other comprehensive loss
$ (3,364
)
$ 1,373 $ (1,991
)
$ (3,995
)
$ 1,588 $ (2,407
)
Total SPAR Group, Inc. equity
$ 18,572 $ 1,373 $ 19,945 $ 18,089 $ 1,588 $ 19,677
Non-controlling interest
$ 6,574 $ (1,373
)
$ 5,201 $ 6,993 $ (1,588
)
$ 5,405

Amended Mexican Labor Law

Effective June 30, 2021, the Mexican Labor Law was amended to prohibits outsourcing of personnel unless services are considered specialized services. The majority of services provided by SPAR Todopromo are not considered to be specialized, therefore the amendment could have a material adverse effect on revenues. SPAR is currently reviewing the potential impact of the amendment.

Table of Contents

SPAR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited) (continued)

~~Consolidated Statement of Income and Comprehensive Loss (in thousands):~~

Three months ended
September 30, 2016

Nine months ended
September 30, 2016

As
Reported

Adjusted

As
Revised

As
Reported

Adjusted

As
Revised

Comprehensive income attributable to non-controlling interest
$ (546
)
$ (105
)
$ (651
)
$ (1,164
)
$ 357 $ (807
)
Comprehensive loss attributable to SPAR Group, Inc.
$ 148 $ (105
)
$ 43 $ (411
)
$ 357 $ (54
)

Twelve months ended
December 31, 2016

As
Reported

Adjusted

As
Revised

Comprehensive income attributable to non-controlling interest
$ (1,583
)
$ 572 $ (1,011
)
Comprehensive loss attributable to SPAR Group, Inc.
$ (953
)
$ 572 $ (381
)

3.3.

~~Business and Organization~~

~~The Company is a supplier of merchandising and other marketing services throughout the United States and internationally.~~ The Company provides merchandising and other marketing services to manufacturers, distributors and retailers worldwide, primarily in mass merchandiser, office supply, grocery, drug, dollar, independent, convenience, toy, home improvement and electronics stores, as well as providing furniture and other product assembly services, audit services, in-store events, technology services and marketing research.

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 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, ~~audit services, special seasonal or promotional merchandising, focused product support and product recalls. The Company also provides technology services and marketing research services.~~

~~As of~~ September 30, 2017, the Company operates in 10 countries and divides its operations into two reportable segments: its Domestic Division, which has provided services in the United States of America since certain of its predecessors were formed in 1979, and its International Division, which began operations in May 2001 and provides similar merchandising, marketing, audit and in-store event staffing services in Australia, Brazil, Canada, China, India, Japan, Mexico, South Africa, and Turkey.

~~SPAR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited) (continued)~~

4.	Earnings Per Share

The following table sets forth the computations of basic and diluted net income per share (in thousands, except per share data):

										*Three Months Ended*					*Six Months Ended*
	Three Months Ended September 30,					Nine Months Ended September 30,				*June 30,*					*June 30,*
	2017		2016			2017		2016		*2021*		*2020*			*2021*		*2020*
Numerator:
Net income (loss) attributable to SPAR Group, Inc.	$	246	$	(58	)	$	346	$	84	$	514	$	(103	)	$	1,431	$	193

Denominator:
Weighted average shares used in basic net income per share calculation		20,602		20,607			20,633		20,580
Shares used in basic net income per share calculation											21,262		21,108			21,225		21,107
Effect of diluted securities:
Stock options and unvested restricted shares											355		17			375		50
Shares used in diluted net income per share calculations											21,617		21,125			21,600		21,157

Weighted average shares used in diluted net income per share calculation		21,320		20,607			21,331		21,299

Basic and diluted net income per common share	$	0.01	$	–		$	0.02	$	–
Basic and diluted net income per common share:										$	0.02	$	0.00		$	0.07	$	0.01

4.	Credit Facilities and Other Debt

5.Domestic Credit Facilities

~~Sterling Credit Facility:~~

~~SGRP and certain of its US and Canadian subsidiaries (namely~~ SPAR Marketing Force, Inc., SPAR Assembly & Installation, Inc. (F/K/A SPAR National Assembly Services, Inc.), SPAR Group International, Inc., SPAR Trademarks, Inc., SPAR Acquisition, Inc., SPAR Canada, Inc.), and SPAR Canada Company ("SCC") (together with SGRP and SCC, each a "Borrower") are parties to a Revolving Loan and Security Agreement dated July 6, 2010, as amended in June 2011, July 2012, January 2013, July 2013, October 2013, June 2014, September 2015, December 2016, March 2017, April 2017, June 2017 and September 2017 (as amended, the "Sterling Loan Agreement"), with Sterling National Bank (the "Lender"), and their Secured Revolving Loan Note in the amended maximum principal amounts of $9.0 million (see below) to the Lender (as amended by all loan amendments, the "Sterling Note"), to document and govern their credit facility with the Lender (including such agreement and note, the "Sterling Credit Facility"). The Sterling Credit Facility currently is scheduled to expire and the Borrowers' loans thereunder will become due on January 15, 2018.

~~The Sterling Loan Agreement currently requires the Borrowers to pay interest on the loans thereunder equal to the Agent~~'s floating Prime Rate (as defined in such agreement) plus one half of one percent (1/2%) per annum, and a fee on the maximum unused line thereunder equal to one-eighth of one percent (0.125%) per annum.

Revolving loans of up to $9.0 million are available to the Borrowers under the Sterling Credit Facility based upon the borrowing base formula defined in the Sterling Loan Agreement (principally 85% of "eligible" US and Canadian accounts receivable less certain reserves). The Sterling Credit Facility is secured by substantially all of the assets of the Borrowers (other than SGRP~~'s non-Canadian foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets).~~

The amendment to the Sterling Loan Agreement dated as of December 22, 2016, among other things, increased the maximum principal amount of the Secured Revolving Loan Note to $9.0 million until January 31, 2017, and increased the interest rate to Prime plus one half of one percent. The amendment to the Sterling Loan Agreement dated as of March 3, 2017, among other things, extended the Secured Revolving Loan Note of $9.0 million until July 6, 2017, and the amendment dated as of April 13, 2017, among other things, provided for a waiver of the Company's default on its Fixed Charge Ratio ("FCR") for the year ended December 31, 2016, and provided for an adjustment to its FCR for 2017. The June 27, 2017, amendment to the Sterling Loan Agreement extended the termination date to September 6, 2017. The September 6, 2017, amendment to the Sterling Loan Agreement extended the termination date to January 15, 2018.

SPAR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited) (continued)

North Mill Capital Credit Facility

The ~~Sterling~~Company has a secured revolving credit facility in the United States and Canada (the "NM Credit Facility") with North Mill Capital, LLC, d/b/a SLR Business Credit ("NM").

In order to obtain, document and govern the NM Credit Facility: SGRP and certain of its direct and indirect subsidiaries in the United States and Canada, namely SPAR Marketing Force, Inc. ("SMF"), and SPAR Canada Company ("SCC") and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks, Inc. (together with SGRP, each a "NM Guarantor" and collectively, the "NM Guarantors", and together with SMF and SCC, each an "NM Loan Party" and collectively, the "NM Loan Parties"), entered into 18-month individual Loan and Security Agreements with NM dated as of April 10, 2019.

On January 5, 2021, the NM Loan Parties and NM executed and delivered a Waiver and Modification Agreement ~~requires~~ entered in as of January 4, 2021, and effective as of December 31, 2020 (the "First Modification Agreement"), pursuant to which NM and the NM Loan Parties agreed to extend the NM Loan Agreements from October 2021 to April 10, 2022, and increased the amounts of the credit facilities for SMF to $14.5 (USD) million in the USA and decreased the SCC facility to $1.5 (CDN) million in Canada; in addition the First Modification Agreement increased SMF's borrowing base availability for unbilled receivables to up to 70% from January 1, 2021 through June 30, 2021, which thereafter reverts to 65%, and increased the unbilled cap for SMF to $4.5 million (USD) from $3.9 million (USD). SCC's facility received similar increases.

The credit facility continues to require the NM Borrowers to ~~maintain certain financial covenants, including maintenance~~pay interest on the loans thereunder equal to (A) Prime Rate designated by ~~the Borrowers of~~Wells Fargo Bank, plus (B) one hundred twenty-five basis points (1.25%) or a minimum ~~combined tangible net worth~~ of ~~$7.4 million and minimum consolidated tangible net worth of $10.0 million, with those figures increasing by at least 50% of combined and consolidated net profit each year, respectively.~~6.75%. In addition, the ~~Borrowers~~Company continues to pay a facility fee to NM of 1.5% for the first$10.5 million loan balance, or $157,500 per year over the term of the agreement, plus a $15,000 one-time fee for each incremental $1 million increase in loan balance up to $14.5 million. Additionally, for the First Modification Agreement, SPAR paid NM a fee of $7,500 and agreed to reimburse NM's legal and documentation fees.

On March 22, 2021, NM Loan Parties and NM executed and delivered a Second Modification Agreement entered in as of March 22, 2021, and effective as of April 1, 2021 (the "Second Modification Agreement"), pursuant to which NM and the NM Loan Parties agreed to extend the NM Loan Agreements from April 10, 2022 to October 10, 2023, and increased the amounts of the credit facilities for SMF to $16.5 (USD) million in the USA while the SCC facility remained at $1.5 (CDN) million in Canada; in addition, the Second Modification Agreement increased SMF's borrowing base availability for unbilled receivables to up to 70% permanently, and increased the unbilled cap for SMF to $5.5 (USD) million from $4.5 (USD) million. The amended agreement (together, the "NM Notes") will require the NM Borrowers to pay interest on the loans thereunder equal to: (A) Prime Rate designated by Wells Fargo Bank, plus; (B) one hundred twenty-five basis points (0.95%) or a minimum of 5.25%. In addition, the Company ~~must not exceed~~continues to pay a ~~maximum combined indebtedness~~facility fee to ~~tangible net worth ratio~~NM of ~~3.0~~0.8% decreased from 1.5% for the first$10.5 million loan balance, or $84,000 per year, over the term of the agreement, plus a $15,000 one-time fee for each incremental $1 million increase in loan balance up to ~~1.0,~~$16.5 million. Additionally, the early termination fee has decreased from 1.0% to 0.85% of the advance limit.

On June 30, 2021, the aggregate interest rate was 5.25% per annum, and the outstanding loan balance was $10.0 million. Outstanding amounts are classified as short-term debt.

Revolving loans are available to the Borrowers ~~must maintain~~under the NM Credit Facility based upon the borrowing base formula defined in the NM Loan Agreement.

The NM Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the NM Borrowers, including, maintaining a ~~minimum fixed charge coverage ratio of 1.5 to 1.0. Also,~~positive trailing EBITDA for each Borrower, limits on non-ordinary course payments and transactions, incurring or guarantying indebtedness, increases in executive, officer or director compensation, capital expenditures ~~for the Borrowers cannot exceed $2.0 million during any fiscal year,~~ and ~~on a consolidated basis, the Company's year-end operations may not result in a loss or deficit, as determined in accordance with GAAP.~~other investments. The Company was in compliance of such covenants as of June 30, 2021.

Fifth Third Credit Facility - Resource Plus

One of the Company's consolidated subsidiaries, Resource Plus of North Florida, Inc. ("Resource Plus"), is a party to a revolving line of credit facility (the "Fifth Third Credit Facility") from Fifth Third Bank for $3.5 million, which is currently scheduled to become due on June 16,2022.

Revolving loans of up to $3.5 million are available to Resource Plus under the Fifth Third Credit Facility based upon the borrowing base formula defined in the agreement (principally 80% of "eligible" accounts receivable less certain reserves). As of June 30, 2021, there was 0 outstanding balance. The Fifth Third Credit Facility is secured by substantially all assets of Resource Plus.

The Fifth Third Credit Facility currently requires Resource Plus to pay interest on the loans thereunder equal to (A) the Daily LIBOR Rate (as defined in the agreement) per annum, plus (B) two hundred fifty basis points (2.50%). On June 30, 2021, the aggregate interest rate under that formula was 3.6% per annum. The Fifth Third Credit Facility contains a debt service charge coverage ratio financial covenant requiring Resource Plus to maintain a minimum ratio of 1.2 for available cash flow to fixed charges, as defined in the agreement. Resource Plus was not in compliance with ~~its financial covenants at September~~ the covenant as of June 30, ~~2017.~~2021 and has obtained a waiver from Fifth Third Bank.

Resource Plus - Seller Notes

Effective with the closing of the Resource Plus acquisition, the Company entered into promissory notes with the sellers totaling $2.3 million. The notes are payable in annual installments at various amounts due on December 31st of each year starting with December 31, 2018 and continuing through December 31, 2023. As such these notes are classified as both short term and long term for the appropriate amounts. The total balance owed at June 30, 2021 was approximately $1.3 million.

Table of Contents

SPAR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited) (continued)

International Credit Facilities:

SPARFACTS Australia Pty. Ltd. has a secured line of credit facility with ~~Oxford Funding Pty Ltd.~~ National Australia Bank, effective October 31, 2017, for ~~$1.2 million~~$800,000 (Australian) or approximately $~~940,000~~$611,391 USD (based upon the exchange rate at ~~September~~June 30, ~~2017)~~2021). The facility provides for borrowing based upon a formula, as defined in the agreement (principally 80% of eligible accounts receivable less certain deductions). The ~~agreement expired on October 31, 2012, but was extended from month to month at the Company’s request. A new credit facility was signed in July 2017~~outstanding balance with National Australia Bank ~~Limited and went into effect on October 31, 2017. The outstanding balance with Oxford~~ as of ~~September~~June 30, ~~2017~~2021 was ~~$334,000 USD.~~$58,801 (Australian) or $44,938 USD and is due on demand.

~~On March 7, 2011, the Japanese subsidiary,~~ SPAR ~~FM Japan, Inc., a wholly owned subsidiary,~~China has secured a ~~term~~ loan with ~~Mizuho~~Construction Bank ~~in the amount of 20.0~~for 1.0 million ~~Yen (Japanese),~~Chinese Yuan or approximately $178,000 USD. The loan is payable in monthly installments of 238,000 Yen or approximately $2,100 USD at an interest rate of 0.1% per annum with a maturity date of February 28, 2018. The outstanding balance at September 30, 2017, was approximately 1.2 million Yen or $11,000$156,000 USD (based upon the exchange rate at ~~September~~ June 30, ~~2017), all~~2021). The loan will expire May 31, 2022. The annual interest rate was 4.25% as of ~~which~~June 30,2021. The outstanding balance with Construction Bank as of June 30,2021 was 1.0 million Chinese Yuan or $156,000 USD and is ~~now classified as short term.~~due on demand.

~~On November 29, 2016,~~ SPAR ~~Brazil established~~China has secured a ~~line~~loan with People's Bank of ~~credit with Itau Bank~~China for ~~1.5~~1.0 million ~~Brazilian Real~~Chinese Yuan or approximately $~~475,000~~$156,000 USD (based upon the exchange rate at ~~September~~ June 30, ~~2017)~~2021). The ~~line of credit expires November 29, 2017, and the current~~loan will expire June 7, 2022. The annual interest rate ~~is 2.08% per month.~~was 3.65% as of June 30,2021. The outstanding balance ~~at September~~ with People's Bank of China as of June 30, ~~2017~~2021 was ~~zero.~~1.0 million Chinese Yuan or $156,000 USD and is due on demand.

~~On December 26, 2016,~~ SPAR ~~Brazil~~China has secured a ~~term~~ loan with ~~Bradesco~~Industrial Bank for ~~2.0~~3.0 million ~~Brazilian Real~~Chinese Yuan or approximately $~~633,000~~$467,000 USD (based upon the exchange rate at ~~September~~ June 30, ~~2017)~~2021). The ~~term~~ loan ~~is payable in monthly installments of 184,000 Brazilian Real or approximately $58,000 USD at an~~will expire December 17, 2021. The annual interest rate was 6.0% as of ~~17.3%~~June 30,2021. The outstanding balance with Industrial Bank as of June 30,2021 was 3.0 million Chinese Yuan or $467,000 USD and is due on demand.

Effective February 4, 2020, SPAR Todopromo established a ~~maturity date~~line of ~~December 15, 2017. As of September 30, 2017, 497,000 Brazilian Real~~credit facility with Ve Por Mas for 8.0 million Mexican Pesos or ~~$157,000~~approximately $399,000 USD ~~was outstanding~~ (based upon the exchange rate at ~~September~~June 30, ~~2017)~~2021).The line expires on February 2022. The variable interest rate is TIIE plus 3.0% resulting in a rate of 7.3% as of June 30,2021. There was 0 outstanding balance as of June 30, 2021.

SPAR Todopromo has secured a line of credit facility with BBVA Bancomer ~~Ban~~k for 5.0 million Mexican Pesos, or approximately ~~$274,000~~$250,000 USD (based upon the exchange rate at ~~September~~ June 30, ~~2017)~~2021). The revolving line of credit ~~was secured on March 15, 2016, and~~ expires ~~March 2018.~~May 2022. The variable interest rate is TIIE ~~(Interbank Interest Rate) +4%, which resulted~~plus 5.2% resulting in ~~an annual interest~~a rate of ~~11.4% at the end~~9.5% as of ~~September 2017.~~June 30,2021. The outstanding balance ~~at September~~with Bancomer as of June 30, ~~2017~~ 2021 was ~~zero.~~5.0 million Mexican Pesos or $250,000 USD and is due on demand.

~~The Company had scheduled future maturities of loans as of~~ ~~September 30, 2017, approximately as follows (dollars in thousands):~~

	*Interest Rate*
	*as of*
	*June 30, 2021*			*2021*		*2022*		*2023*		*2024*		*2025*		*2026*
Australia - National Australia Bank		6.56	%		45		0		0		0		0		0
China- Construction Bank		4.25	%		156		0		0		0		0		0
China- People's Bank of China		3.65	%		156		0		0		0		0		0
China - Industrial Bank		6.00	%		467		0		0		0		0		0
Mexico - Bancomer Bank		9.50	%		250		0		0		0		0		0
USA - North Mill Capital		5.25	%		10,012		0		0		0		0		0
USA - Resource Plus Seller Notes		1.85	%		300		300		700		0		0		0
Total				$	11,386	$	300	$	700	$	0	$	0	$	0

Interest Rate as of
September 30, 2017

2017

2018

USA - Sterling National Bank
4.8 % $ – 5,720
Japan - Mizuho Bank
0.1 % 7 $ 4
Australia - Oxford Funding Pty Ltd.
6.4 % 334 –
Brazil – Bradesco Bank
17.3 % 157 –
Total
$ 498 $ 5,724

~~SPAR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited) (continued)~~

Summary of Unused Company Credit and Other Debt Facilities (in thousands):

	September 30, 2017		December 31, 2016		*June 30,*		*December 31,*
Unused Availability:
United States	$	3,280	$	500
					*2021*		*2020*
Unused Availability:
United States / Canada					$	8,487	$	10,238
Australia		606		688		566		262
Mexico		274		241		399		463
Brazil		475		–
Total Unused Availability	$	4,635	$	1,429	$	9,452	$	10,963

Management believes that based upon the continuation of the ~~Company~~'sCompany's existing credit facilities, projected results of operations, vendor payment requirements and other financing available to the Company (including amounts due to affiliates), sources of cash availability should be manageable and sufficient to support ongoing operations over the next year. However, delays in collection of receivables due from any of the Company's major clients, or a significant reduction in business from such clients ~~and possible litigation expenses~~ could have a material adverse effect on the Company's cash resources and its ongoing ability to fund operations. ~~See Note 9 - Commitments and Contingencies:~~ ~~Legal Matters~~~~and~~ ~~Potential Adverse Effects of the SBS Litigation~~, ~~below~~.

Table of Contents

SPAR Group, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited) (continued)

6.5.

Related-Party Transactions

~~SGRP~~'sSPAR's policy respecting approval of transactions with related persons, promoters and control persons is contained in the SPAR Group Code of Ethical Conduct for its Directors, ~~Senior~~ Executives, Officers, Employees, Consultants and ~~Employees~~other Representatives Amended and Restated (as of) ~~August 13, 2015 (the "Ethics Code"~~March 15, 2018 (the "Ethics Code"). 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, "SPAR" or the "Company") and each other Covered Person (as defined in the Ethics ~~Code~~Code) in his or her position with the 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 director 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 approved by SGRP's Board of Directors (the ~~"Board"~~"Board"), its Governance Committee or its Audit Committee, as required and the case may be, as well as the ownership, board, executive and other positions held in and services and other contributions to affiliates of SGRP and its subsidiaries by certain directors, officers or employees of SGRP, any of its subsidiaries 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 clause IV.11 of the Governance Committee's Charter, and SGRP's Audit Committee as provided in clause I.2(l) of the Audit Committee's Charter. The Governance Committee and Audit Committee each consist solely of independent outside ~~directors.~~directors (see Independent Director Resignations, Nasdaq Deficiencies and Search for New Independent Directors, Domestic Related Party Services, Affinity Insurance and Related Reimbursement Dispute, International Related Party Services, Other Related Party Transactions and Arrangements, and SBS Bankruptcy, Settlement and March 2020 Claim, below).

~~SGRP~~'sSPAR'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.~~transactions and payments. The Audit Committee receives affiliate contracts and amendments thereto for its review and approval (to the extent approval is given), and these contracts are periodically (often annually) again reviewed, in accordance with the Audit Committee Charter, the Ethics Code, the rules of the Nasdaq Stock Market ~~Inc.~~LLC ("~~Nasdaq"~~Nasdaq"), 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). The Audit Committee periodically reviews all related party relationships and transactions described below.

~~SPAR Group, Inc.~~ The Audit Committee currently does not have the three independent directors required under Nasdaq Rules. See Independent Director Resignations, Nasdaq Deficiencies and ~~Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited) (continued)~~Search for New Independent Directors, below.

~~In addition,~~ Independent Director Resignations, Nasdaq Deficiencies and Search for New Independent Directors

On June 9, 2021, in ~~order~~a letter to ~~(among other things) assist~~the Corporation, all three members of SGRP's Audit Committee, namely Mr. Arthur H. Baer (its Chairman), Mr. Igor Novgorodtsev, and Mr. Jeffrey A. Mayer, resigned from the Board and its Committees (the "Resignations"), effective immediately. Each of them was an independent director both under the general Nasdaq Rules and under Nasdaq's more stringent Audit Committee Rules (each a "Resigning Independent Director"). On June 15, 2021, Nasdaq notified SGRP that, due to the simultaneous resignations of all three directors on its audit committee, SGRP no longer complied with Nasdaq's majority independent board and audit committee requirements.

On July 2, 2021, SGRP submitted a plan of compliance (the "Plan") to Nasdaq, in which SGRP outlined its efforts to find and appoint three new independent directors to the Board and Audit Committee, by October 1, 2021, thereby enabling the Company to regain compliance with Nasdaq's rules, which efforts include the retention of Caldwell Partners to lead SGRP's independent director search and identify suitable candidates independent under Nasdaq's more stringent Audit Committee Rules.

On July 16, 2021, Nasdaq responded in a letter to SGRP (the "Response") and accepted the Plan to appoint three new independent directors to the Board and Audit Committee. In the Response, Nasdaq gave SGRP an extension until October 15, 2021, to implement the Plan and regain compliance with the majority independent board and Audit Committee requirement rules.

Following the Resignations on June 9, 2021, the remaining members of the Board were and continue to be Mr. Robert G. Brown (Chairman of the Board and one of the Majority Stockholders), Mr. William H. Bartels (also one of the Majority Stockholders), Mr. Peter W. Brown, Mr. Panagiotis N. Lazaretos, Mr. James R. Brown, Sr., and Mr. Michael R. Matacunas (CEO and President of SGRP). At that time, the Board had previously determined that only Mr. Peter W. Brown and Mr. Panagiotis N. Lazaretos were then independent directors for general board purposes and that Mr. James R. Brown, Sr. would become an independent director for general board purposes on August 1, 2021. However, on July 30, 2021, a majority of the Board determined Mr. Robert G. Brown would become an independent director for general board purposes on August 1, 2021. Accordingly, the Board now has a majority (4 of 6) of independent director for general board purposes.

Nasdaq Listing Rule 5605(c)(2) requires that a listed company have an Audit Committee of at least three independent directors with members that each have financial literacy and even greater independence under Nasdaq's more stringent Audit Committee rules.

On July 8, 2021, a majority of the Board approved the appointment of Mr. Panagiotis N. Lazaretos to the Audit Committee, ~~in connection with an overall review~~and on July 30, 2021, a majority of the ~~Company's related party transactions~~Board confirmed (over the objection of SGRP's management) that Mr. Lazaretos had the requisite financial literacy and ~~certain worker classification-related litigation matters, in April 2017~~stricter degree of independence required for Audit Committee membership and that Mr. Lazaretos' consulting position with SGRP earlier this year was not a bar to such membership.

The Corporation is currently undertaking a rigorous search for three new independent director candidates to replace the Resigning Independent Directors (the "Search"). The Search is also focused on finding diverse candidates who meet the Board the financial literacy and greater independence requirements for Audit Committee members.

Termination of their 13D Control Group by Robert G. Brown and William H. Bartels

Mr. Bartels and Robert G. Brown (collectively, the "Majority Stockholders") own approximately 53.5% of SGRP's outstanding shares and together had formed a ~~special subcommittee~~control group and periodically acted together. On March 11,2020, Mr. Bartels and Mr. Brown filed an amended Schedule 13D with the SEC, in which they each acknowledged that they "may be deemed to comprise a 'group' within the meaning of the ~~Audit Committee~~Securities Exchange Act of 1934" and "may act in concert with respect to certain matters", including written consents and various listed items. On May 14, 2021, Mr. Bartels, and on May 17, 2021, Mr. Brown, filed amendments to their respective 13D filings with the SEC to remove themselves from each other's group. However, the Majority Stockholders have reserved the right "alone or in conjunction with other stockholders, . . .from time to time, to engage with the Company's Board of Directors (the ~~"Special Subcommittee"~~"Board") and to ~~(among other things) review the structure, documentation, fairness, conflicts, fidelity, appropriateness, and practices respecting each of the relationships and transactions discussed~~take actions in ~~this Note 6 (including those described in this Note under~~ their capacity as significant stockholders. . ."

SeeDomestic Related Party Services, Affinity Insurance and Related Reimbursement Dispute, International Related Party Services, Other Related Party Transactions and Arrangements, ~~below). The Special Subcommittee commenced that review~~Further Re-determining Independence of Peter W. Brown, and Determining Independence of James R. Brown, Sr. and Emergency Seating on Governance Committee in ~~the first quarter of 2017 with the assistance of special auditors~~this Note, below, and ~~counsel~~Related Parties and ~~is currently reviewing the preliminary results of such review, including the feedback received from its special auditors~~ Related Party Litigation and ~~counsel. The Company is currently unable to predict the remaining duration~~SBS Bankruptcy, Settlement and ~~final results of this review by the Special Subcommittee. See~~March 2020 Claim in Note ~~9 to the Company's Consolidated Financial Statements –~~ 8 --~~Commitments and Contingencies~~ – Legal Matters, below.

Domestic Related Party Services:

Domestic Related Party Services and Disputes

SPAR Business Services, Inc. ("~~SBS"~~SBS"), SPAR Administrative Services, Inc. ("~~SAS"~~SAS"), and SPAR InfoTech, Inc. ("~~SIT"~~Infotech"), have provided services in the past to the Company and are related parties and affiliates of SGRP, but are not under the control or part of the consolidated Company. ~~Mr.~~SBS is an affiliate because it is owned by SBS LLC which in turn is beneficially owned by Robert G. Brown, director, chairman of the Board, and significant shareholder of SGRP. SAS is an affiliate because it is owned by William H. Bartels, also a ~~Director, Chairman~~director and ~~a major stockholder~~significant shareholder of SGRP, and ~~Mr. William H. Bartels, a Director, Vice Chairman and a major stockholder~~certain relatives of ~~SGRP, are the sole stockholders of SBS. Mr.~~Robert G. Brown is the sole stockholder of SIT. Mr. Brown is a director and officer of SBS and SIT. Mr. Bartels is a director and officer of SAS. The stockholders of SAS were Mr. Bartels and parties related to Mr. Brown, eachor entities controlled by them (each of whom isare considered ~~an affiliate~~affiliates of the Company for related party ~~purposes~~purposes). Infotech is an affiliate because it is owned principally by Robert G. Brown. See Termination of their ~~family relationships with Mr. Brown.~~13D Control Group by Robert G. Brown and William H. Bartels, above.

The Company executes its domestic field services through the services ~~it provides to its domestic clients primarily through independent~~of field merchandising, auditing, assembly and other field personnel (each a ~~"Field Specialist"~~"Field Specialist"), and a significant portion of them are provided to the Company and engaged by independent third parties and located, scheduled, deployed and administered domestically through the services of local, regional, district and other personnel (each a "Field Administrator"), and a significant portion of the Field Administrators are in turn employed by other independent third parties.

Prior to July 2018, substantially all of ~~whom are provided~~the services of the Field Specialists were supplied to the Company by SBS, and ~~administers those services through local and regional administrators,~~ substantially all of ~~whom are provided~~the services of the Field Administrators were supplied to the Company by SAS. The Company ~~paid $19.6 million~~terminated the services of SBS effective July 27, 2018. The Company similarly terminated SAS effective August 1, 2018.

Affinity Insurance and ~~$15.8 million during~~Related Reimbursement Dispute:

SPAR Marketing Force, Inc. ("SMF"), a wholly-owned subsidiary of SGRP that provides merchandising and marketing service to its clients throughout the ~~nine months ended September 30, 2017~~United States through (among other things) services provided by others, is owed $675,000 for security deposit advances and ~~2016, respectively,~~$226,000 for quarterly premium advances made by SMF (as described below) to SAS.

Affinity Insurance Company, Ltd. ("Affinity") is a captive insurance company that provides insurance and reinsurance products to its shareholders and their affiliates in exchange for payment of premium installments, posting of security collateral and other requirements, and subject to adjustments and assessments. SAS is a shareholder and member of Affinity and has been since approximately 2000. SMF became a direct shareholder and member of Affinity in March 2018 to directly procure insurance for the domestic employees of the Company.

The business services SAS provided to, or on behalf of, SMF included insurance coverages for SMF and other SGRP employees domestically for SAS' Field Administrators and other employees and for the Field Specialists provided by SBS to SMF through the termination by SMF of SBS’ services effective on or about July 31, 2018, all in connection with services provided by SMF to its clients. In connection with the business services provided by SAS, and based on arrangements between the parties, the Affinity insurance premiums for such coverage were ultimately charged (through SAS) for their fair share of the costs of that insurance to SMF, SAS (which then charges the Company) and SBS.

At the time SMF terminated SAS's services; the security deposit that SAS provided to Affinity to procure insurance coverage on behalf of SMF was approximately $965,000. SMF financed approximately $675,000 of that security deposit. During 2020, SAS received $426,795 of the security deposit refund in cash and applied almost all the remaining balance toward various fees as payments. SMF has demanded repayment of its ~~provision as needed~~advances to SAS from refunds received from Affinity, but SAS has refused. SAS has recently stated it has no funds available to remit to SMF. SAS has acknowledged owing these advances to SMF.

In a related matter, SMF also advanced monies to SAS to fund the payments that SAS was obligated to pay to Affinity for quarterly premium installments. SMF advanced and SAS accrued a liability of approximately ~~6,400~~ $226,000 for monies advanced by SMF to SAS for such quarterly premium installments. Affinity is obligated to refund any excess premiums and in fact in May of ~~SBS's available Field Specialists~~2020, Affinity refunded $94,414 of those premium payments to SAS.

On July 8, 2020 the Company issued a demand notice to SAS for the return of $901,000 (the $675,000 security advances and the $226,000 premium advances) but to-date SAS has not complied with this demand. The Company has subsequently prepared the draft of a complaint to be filed in the ~~U.S.A. (which amounted to approximately 75% and 78%~~Supreme Court of the ~~Company's total domestic Field Specialist expense~~State of New York in Westchester County, NY, seeking appropriate relief and recovery from SAS and other related parties. Filing of the complaint is still pending.

The Company recorded a reserve for the ~~nine months ended September 30, 2017~~full $901,000 in such receivables in 2018 but has not and ~~2016, respectively). The Company~~will not release SAS' obligations to repay those amounts.

SAS is claiming alleged ongoing post-termination expenses, but SMF believes that no post-termination expenses are required to be paid ~~$3.2 and $3.1 million for the nine months ended September 30, 2017 and 2016, respectively,~~ to SAS for its ~~provision~~expenses following the termination of its 60 and 61 full-time regional, district and office administrators as of September 30, 2017 and 2016, respectively (which amounted to approximately 90% and 92% of the Company's total domestic field administrative service cost for the nine months ended September 30, 2017 and 2016, respectively). In addition to these field service and administration expenses, SAS also incurs other administrative expenses related to benefit and employment tax expenses of SAS and payroll processing, legal and other administrative expenses and SBS incurs expenses for processing vendor payments, legal defense and other administrative expenses (but those expenses are only reimbursed by SGRP to the extent approved by the Company as described below). The total cost recorded by the Company for the expenses of SBS and SASSAS' services two years ago in providing their services to the Company, including the "Cost Plus Fee" arrangement (as defined and discussed below) and other expenses paid directly by the Company on behalf of and invoiced to SBS and SAS, was $22.8 and $19.0 million, for the nine months ended September 30, 2017 and 2016, respectively.July 2018.

~~The terms of the Amended~~See SBS Bankruptcy, Settlement and Restated Field Service Agreement with SBS dated as of January 1, 2004, as amended in 2011, and the Amended and Restated Field Management Agreement with SAS dated as of January 1, 2004 (each a "Prior Agreement"), defined reimbursable expenses and established a "Cost Plus Fee" arrangement where the Company paid SBS and SAS for their costs of providing those services plus a fixed percentage of such reimbursable expenses (the "Cost Plus Fee"). The parties have had negotiations respecting replacement agreements since the Prior Agreements expired on November 30, 2014. As further described below, a new Field Administration Agreement was entered into with SAS in 2016.

~~SPAR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited) (continued)~~

The Company and SBS have agreed in principle to a revised Cost Plus Fee arrangement equal to 2.96% of the Field Specialists and certain other approved reimbursable expenses incurred by SBS in performing services for the Company, subject to certain offsetting credits. This agreement in principle went into effect on and has applied since December 1, 2014.

No SBS compensation to any officer, director or other related party has been reimbursed or approved to date by the Company, and no such compensation reimbursements were made or approved under SBS's Prior Agreement. This is not a restriction on SBS since SBS is not controlled by the Company and may pay any compensation to any person that SBS desires out of its own funds. However, SBS has invoiced the Company monthly for certain such compensation payments from July of 2015 through December 2016, and again from July 2017 to September 30, 2017, but the Company has rejected those invoices as non-reimbursable expenses. Since SBS is a "Subchapter S" corporation, all income from SBS is allocated to its stockholders (see above).

The Company has determined that the rates charged by SBS for the services of its field merchandising, auditing, assembly and other field personnel (each a "Field Specialist") are favorable to the Company when compared to other possible non-affiliate providers. SBS has advised the Company that those favorable rates are dependent (at least in part) on SBS's ability to continue to use independent contractors as its Field Specialists, that such Field Specialists generally provide greater flexibility and performance quality at lower total costs as a result of their business independence and initiative, and that it has an agreement with each Field Specialist clearly confirming his, her, or its status as an independent contractor.

~~The appropriateness of SBS~~'s treatment of its Field Specialists as independent contractors has been periodically subject to legal challenge (both currently and historically) by various states and others, SBS's expenses of defending those challenges and other proceedings have historically been reimbursed by the Company under SBS's Prior Agreement, and SBS's expenses of defending those challenges and other proceedings were reimbursed by the Company for the nine months ended September 30, 2017 and 2016 (in the amounts of $218,000 and $587,000, respectively), after determination (on a case by case basis) that those defense expenses were costs of providing services to the Company. The Company has advised SBS that, since there is no currently effective comprehensive written services agreement with SBS, the Company will continue to review and decide each request by SBS for reimbursement of its legal defense expenses (including appeals) on a case-by-case basis in its discretion, including the relative costs and benefits to the Company. The Company has not agreed, and does not currently intend, to reimburse SBS for any judgment or similar amount (including any damages, settlement, or related tax, penalty, or interest) in any legal challenge or other proceeding against or involving SBS, and the Company does not believe it has ever done so (other than in insignificant nuisance amounts). However, there can be no assurance that SBS will be able to satisfy any such judgment or similar amount resulting from any adverse legal determination, that SBS or someone else will not claim, or that SBS will be able to successfully defend any claim, that the Company is liable (through reimbursement, indemnification or otherwise) for any such judgment or similar amount imposed against SBS. Furthermore, there can be no assurance that SBS will succeed in defending any such legal challenge, the legal expenses of prolonged litigation and appeals could continue to be (and have from time to time been) significant, and prolonged litigation and appeals and any adverse determination in any such challenge could have a material adverse effect on SBS's ability to provide services needed by the Company and the Company's costs of doing business.

~~Current material and potentially material proceedings against SBS and, in one instance, the Company are described~~ March 2020 Claim in Note ~~9 to the Company's Consolidated Financial Statements –~~ 8 --~~Commitments and Contingencies~~ – Legal Matters, below. ~~These descriptions are based on an independent review by the Company and do not reflect the views of SBS, its management or its counsel.~~

~~Any prolonged continuation of or material increase in the legal defense costs of SBS (and thus the reimbursable expenses SBS may charge to and that may be paid by the Company~~ to the extent reimbursement is approved by the Company in its discretion), the failure of SBS to satisfy any such judgment or similar amount resulting from any adverse legal determination against SBS, any claim by SBS, SAS, any other related party or any third party that the Company is somehow liable for any such judgment or similar amount imposed against SBS or SAS or any other related party, any judicial determination that the Company is somehow liable for any such judgment or similar amount imposed against SBS or SAS or any other related party (in whole or in part), any decrease in SBS's or SAS's performance (quality or otherwise), any inability by SBS or SAS to execute the services for the Company, or any increase in the Company's use of employees (rather than independent contractors) as its domestic Field Specialists, in each case in whole or in part, could have a material adverse effect on the Company or its performance or condition (including its assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected.

~~SPAR Group, Inc. and Subsidiaries~~

~~Notes to Consolidated Financial Statements~~

~~(unaudited) (continued)~~

~~On June 14, 2016, SAS and SPAR Marketing Force, Inc. ("SMF") entered into a new Field Administration Agreement (the "SAS Agreement").~~ In order to provide continuity with SAS's Prior Agreement, the SAS Agreement is effective and governs the relationship of the parties as of December 1, 2014, and amends, restates and completely replaces SAS's Prior Agreement. The SAS Agreement more clearly defines reimbursable and excluded expenses and the budget and approval procedures and continues the indemnifications and releases provided by SAS's Prior Agreement (which indemnifications and releases were and are comparable to those applicable to SGRP's directors and executive officers under its By-Laws and applicable law). Specifically, the SAS Agreement reduced the Cost Plus Fee from 4% to 2% effective as of June 1, 2016.

~~SGRP~~'s Audit Committee has approved the SAS Agreement pursuant to its specific duty and responsibility to review and approve the overall fairness of all material related-party transactions, as more fully provided above in this Note 6 to the Company's Consolidated Financial Statements.

~~No SAS compensation to any officer, director or other related party~~ (other than Mr. Peter W. Brown pursuant to previously approved budgets) has been reimbursed or approved to date by the Company, and no such compensation reimbursements were made or approved under SAS's Prior Agreement. This is not a restriction on SAS since SAS is not controlled by the Company and may pay any compensation to any person that SAS desires out of its own funds. Since SAS is a "Subchapter S" corporation, all income from SAS is allocated to its stockholders (see above). Peter W. Brown ("Peter Brown") is an employee of SAS, is the nephew of SGRP's Chairman, Mr. Robert G. Brown, an officer and employee of the Company's affiliate, SIT (which is owned by Mr. Robert G. Brown), and is a director of SPAR BSMT and owns EILLC (see ~~International~~Other Domestic Related Party ~~Services~~Transactions~~, below). Peter Brown was an official observer at the meetings of SGRP's Board from 2014 through December 2016. Accordingly, Peter Brown is a related party in respect of the Company.~~

National Merchandising Services, LLC ("~~NMS"~~NMS"), is a consolidated domestic subsidiary of the Company and is owned jointly by ~~SGRP~~SPAR through its indirect ownership of 51% of the NMS membership interests and by National Merchandising of America, Inc. ("~~NMA"~~NMA"), through its ownership of the other 49% of the NMS membership interests. 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~~'sBurdekin's wife, is the sole stockholder and a director of NMA and a director of NMS. NMA is an affiliate of the Company but is not under the control of or consolidated with the Company. Mr. Burdekin also owns 100% of National Store Retail Services ("NSRS"). Since September 2018, NSRS provided substantially all 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.

Also, NMS leases office and operational space that is owned personally by Mr. Burdekin. The lease expense is $2,000 a month. While there is no formal signed agreement, there is no expected change to the arrangement.

On August 10, 2019, NMS, to protect continuity of its Field Specialist nationwide, petitioned for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the U.S. District for Nevada (the "NMS Chapter 11 Case"). On March 22, 2021, the U.S. Bankruptcy Court for the District of Nevada closed the Chapter 11 case.

Resource Plus is a consolidated domestic subsidiary of the Company and is owned jointly by SGRP through its indirect ownership of 51% of the Resource Plus membership interests and by Mr. Richard Justus through his ownership of the other 49% of the Resource Plus membership interests. Mr. Justus has a 50% ownership interest in RJ Holdings which owns the buildings where Resource Plus is headquartered and operates. Both buildings are subleased to Resource Plus.

International Related Party Services:

SGRP Meridian (Pty), Ltd. ("~~Meridian"~~Meridian") is a consolidated international subsidiary of the Company and is owned 51% by SGRP, 23% by Friedshelf 401 Proprietary Limited and ~~49%~~26% by ~~the following individuals: Mr. Brian Mason, Mr. Garry Bristow, and~~Lindicom Empowerment Holdings Proprietary Limited. Mr. Adrian ~~Wingfield. Mr. Mason~~Wingfield, who is ~~President and~~ a ~~director and Mr. Bristow~~Director of CMR Meridian, is ~~an officer and director~~one of Meridian. Mr. Mason is also an officer and director and 50% shareholder of Merhold Property Trust ("MPT"). Mr. Mason and Mr. Bristow are both officers and directors and both own 50% of Merhold Cape Property Trust ("MCPT"). Mr. Mason, Mr. Bristow and Mr. Wingfield are all officers and own 46.7%, 20% and 33.3%, respectivelythe beneficial owners of Merhold Holding Trust ("~~MHT"~~MHT")~~, which provides services~~ ~~similar to those provided by MPT. MPT~~. MHT owns the building where Meridian is headquartered and is subleased to Meridian. MCPT provides a fleet of approximately 160 vehicles to Meridian under a 4 year lease program. These leases are provided to Meridian at local market rates included in the summary table below.headquartered.

SPAR Todopromo is a consolidated international subsidiary of the Company and is owned 51% by SGRP and 49% by the following individuals: Mr. Juan F. Medina Domenzain ("JFMD"), Juan Medina Staines, Julia Cesar Hernandez Vanegas, and Jorge Medina Staines. Mr. Juan F. Medina Domenzain is an officer and director of SPAR Todopromo and is also majority shareholder (90%) of CONAPAD ("~~CON"~~CON"), which had supplied administrative and operational consulting support to SPAR Todopromo ~~for the three and nine month periods ended September 30, 2017 and 2016.~~

~~SPAR Group, Inc. and Subsidiaries~~

~~Notes~~from 2016 to ~~Consolidated Financial Statements~~

~~(unaudited) (continued)~~November 2020.

~~In August 2016, Mr. Juan F. Medina Domenzain ("JFMD"),~~JFMD, partner in SPAR Todopromo, ~~purchased the~~leased a warehouse ~~that was being leased by~~to SPAR Todopromo. ~~A new~~The lease ~~expiring~~ expires on December 31, ~~2017, was entered into with SPAR Todopromo with the same terms and cost as with the previous owner.~~2021.

~~On September 8, 2016, the Company (through~~ one of its subsidiaries, SPAR International Ltd.) acquired 100% ownership of SGRP Brasil Participações Ltda. ("SGRP Holdings"), a Brazilian limitada (which is a form of limited liability company), from its affiliate, SIT, at cost (including approved expenses). SGRP Holdings then completed the formation and acquired a majority of the stock of SPAR Brasil Serviços de Merchandising e Tecnologia S.A., a Brazilian corporation ("SPAR BSMT"). SGRP Holdings and SPAR BSMT are consolidated subsidiaries of the Company. SPAR BSMT is owned 51% by the Company, 39% by JK Consultoria Empresarial Ltda.-ME, a Brazilian limitada ("~~JKC"~~JKC"), and 10% by ~~Earth Investments, LLC,~~EILLC. In November 2020, SPAR BSMT hired Peter Brown as a ~~Nevada limited liability company ("EILLC").~~consultant to provide Brazil acquisition strategy services to SPAR BSMT, with a one-time initiation fee of $30,000 Brazilian Real and a monthly fee of $15,000 Brazilian Real effective December 1, 2020; on January 6, 2021, he resigned from the Audit Committee in accordance with Nasdaq Rules.

JKC is owned by Mr. Jonathan Dagues Martins, a Brazilian citizen and resident ("~~JDM"~~JDM") and his sister, Ms. Karla Dagues Martins, a Brazilian citizen and resident. JDM is the Chief Executive Officer and President of each SPAR Brazil company pursuant to a Management Agreement between JDM and SPAR BSMT dated September 13, 2016. JDM also is a director of SPAR BSMT. A~~ccordingly,~~Accordingly, JKC and JDM are each a related party ~~in respect of~~respecting the Company. EILLC is owned by Mr. Peter W. Brown, ~~who is~~ a citizen and resident of the USA ("PWB") and a ~~related party in respect~~director of ~~the Company (See~~SPAR BSMT and SGRP and nephew of Robert G. Brown. See ~~Domestic Related Party Services~~Further Re-determining Independence of Peter W. Brown, ~~above). Accordingly, EILLC also is a related party in respect of the Company.~~below.

SPAR BSMT has contracted with Ms. Karla Dagues Martins, JDM's sister and a ~~Brazilian citizen and resident and JDM's sister~~part owner of SPAR BSMT, to handle the labor litigation cases for SPAR BSMT and its subsidiaries. These legal services are being provided to them ~~at local market rates~~ by Ms. ~~Martins's~~Martins' company, Karla Martins Sociedade de Advogados ("~~KMSA"~~KMSA"). Accordingly, Ms. Karla Dagues Martins is an affiliate and a related party respecting of the Company.

Table of Contents
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)

~~The NM Acquisition~~ ~~(as defined below in Note 11 to the Company's Consolidated Financial Statement -~~ ~~Purchase of Interest in Subsi~~d~~iaries) and associated related party transactions were reviewed and approved by the Audit Committee of SGRP's Board of Directors.~~
~~The Company believes it is the largest and most important customer of SBS, SAS, NRS, MPT, MCPT, MHT, CON, JFMD and KMSA (and from time to time may be~~ each entity's only customer), and accordingly the Company generally has been able to negotiate better terms, receives more personal and responsive service and is more likely to receive credits and other financial accommodations from SBS, SAS, NRS, MPT, MCPT, MHT, CON, JFMD and KMSA than the Company could reasonably expect to receive from an unrelated service provider who has significant other customers and business. SBS, SAS and other material affiliate contracts and arrangements are annually reviewed and considered for approval by SGRP's Audit Committee, subject to the ongoing negotiations with SBS as described above.
Summary of Certain Related Party ~~Services:~~Transactions:

The following costs of affiliates were charged to the Company (in thousands):

Three Months Ended

Six Months Ended

Three Months Ended
September 30,

Nine Months Ended
September 30,

June 30,

June 30,

2017

2016

2017

2016

2021

2020

2021

2020

Services provided by affiliates:

Field merchandiser and other expenses (SBS)
$ 6,788 $ 5,491 $ 19,593 $ 15,828
Field administration and other expenses (SAS)
1,044 1,011 3,178 3,138
Office and vehicle rental expenses (MPT)
30 8 46 32
National Store Retail Services (NSRS)
$ 1,959 1,050 $ 3,799 2,392
Office lease expenses (Mr. Burdekin)
6 6 12 12
Office lease expenses (RJ Holdings)
214 177 442 350
Office and vehicle lease expenses (MPT)
18 11 35 27
Vehicle rental expenses (MCPT)
579 245 870 618 12 281 24 580
Office and vehicle rental expenses (MHT)
85 34 126 85 30 58 59 131
Field merchandiser expenses (NDS Reklam)
– 1 – 1
Consulting and administrative services (CON)
61 74 181 241 0 11 0 23
Legal Services (KMSA)
31 – 79 –
Legal services (KMSA)
16 34 30 57
Warehousing rental (JFMD)
13 3 38 3 12 12 24 25

Consulting and administrative fees (SPARFACTS)
62 41 138 72
Total services provided by affiliates
$ 8,631 $ 6,867 $ 24,111 $ 19,946 $ 2,329 $ 1,681 $ 4,563 $ 3,669
Due to affiliates consists of the following (in thousands):

June 30,

December 31,

2021

2020

Loans to local investors:

China (included in Other Receivables)
$ 0 $ 613

Loans from local investors:(1)

Australia
$ 483 $ 586
Mexico
623 623
Brazil
139 139
China
1,762 1,746
South Africa
364 415
Resource Plus
266 266
Total due to affiliates
$ 3,637 $ 3,775
(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 and as such have been classified as current liabilities in the Company's consolidated financial statements.

12
Table of Contents

SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)

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

September 30,

December 31,

2017

2016

Loans from local investors:(1)

Australia
$ 250 $ 231
Mexico
1,001 1,001
Brazil
139 139
China
720 761
South Africa
15 –
NMS LLC
– 348
Accrued Expenses due to affiliates:

SBS/SAS
1,883 869
Total due to affiliates
$ 4,008 $ 3,349

~~(1)~~     ~~Represent loans from~~
Bartels' Retirement and Director Compensation
William H. Bartels retired as an employee of the ~~local investors into~~Company as of January 1, 2020. However, he continues to serve as a member of SPAR's Board of Directors (the "Board"), positions he has held since July 8, 1999. Mr. Bartels is also one of the ~~Company's subsidiaries (representing their proportionate share~~founders and a significant stockholder of ~~working capital loans).~~ SGRP.
Effective as of January 18, 2020, SPAR's Governance Committee proposed and unanimously approved the following benefits for the five year period commencing January 1, 2020, and ending December 31, 2024 (the "Five Year Period"), for Mr. Bartels in connection with his retirement: (a) retirement payments of $100,000 per year ("Retirement Compensation"); (b) the then applicable regular non-employee director fees ("Regular Fees"), currently $55,000 per year, and a supplemental Board fee of $50,000 per year ("Supplemental Fees"); and (c) the same medical, dental, eye and life insurance benefits he received as of December 31, 2019, under an arrangement whereby Mr. Bartels shared part of the cost of Medicare and supplemental health benefits, currently valued at approximately $15,588 per year ("Medical Benefits"); in each case paid in accordance with SGRP's payroll schedule and policies, and payable whether or not Mr. Bartels remains a director of SGRP for any reason.
The ~~loans have no payment terms~~Retirement Compensation, Regular Fees and ~~are due on demand~~Supplemental Fees that remain unpaid during the Five-Year Period: (i) shall be accelerated and ~~as such have been classified as current liabilities~~paid to Mr. Bartels (or his heirs or assigns) in full upon the sale to a third party of a majority of the SGRP Shares or all or substantially all SGRP's assets; and (ii) shall survive and be payable in full to his heirs and assigns in the ~~Company's consolidated financial statements.~~event of the death of Mr. Bartels.
Based on current rates and benefits, the aggregate value of such compensation, fees and benefits payable to Mr. Bartels will be approximately $220,558 per year and a total of $1,102,790 for the Five-Year Period. Such compensation, fees and benefits (in whole or in part) may be extended beyond the Five-Year Period at the discretion of the Board. The Company recognized $700,000 of retirement benefits in 2020, representing the present value of the future payments due Mr. Bartels.
In the event of any future business transaction involving Mr. Bartels and SPAR for which Mr. Bartels may receive additional compensation as mutually agreed at the time of or in connection with such transaction, which under applicable law also will require approval of SPAR's Audit Committee as a related party payment or transaction (as Mr. Bartels will still be a related party if he is then a director or significant stockholder), such retirement compensation, fees or benefits will not offset, replace or limit any such additional approved transactional compensation payable to Mr. Bartels.

Loan to Majority Shareholders
On March 25, 2021, the Company has entered a short-term loan agreement with Mr. William H. Bartels, for the total amount of $100,000 secured by his pledge of SGRP Shares. The loan bears interest at a fixed annual rate equal to 2% per annum through the maturity date of May 25, 2021. After the maturity date, all outstanding obligations bear interest until paid in full at the fixed annual rate equal to 6% per annum, compounded monthly. Mr. Bartels has secured the obligations with equivalent shares of common stock issued by SGRP. The loan has been repaid in full with interest in August of 2021.
Further Re-determining Independence of Peter W. Brown
The Governance Committee re-evaluated the independence of Peter W. Brown and determined, effective July 16, 2020, that Peter W. Brown could be considered independent except for related party matters and that he would not be voting on related party matters. A "Related Party Matter" means anything directly or indirectly related to any payment to or for, or any transaction, settlement or litigation with: (i) Robert G. Brown, William H. Bartels, any of their respective family members, or any company or other business or entity (other than the Corporation) directly or indirectly owned or controlled by any one or more of Mr. Brown, Mr. Bartels or their respective family members; (ii) Mr. Jonathan Dagues Martins, any of his family members, or any company or other business or entity directly or indirectly owned or controlled by any one or more of Mr. Martins or his family members; (iii) Earth Investments, LLC, or any other company or other business or entity directly or indirectly owned or controlled by any one or more of Peter W. Brown or his family members; or (iv) SGRP Brasil Participações Ltda., SPAR Brasil Serviços de Merchandising e Tecnologia S.A., or any of the Corporation's other Brazilian subsidiaries. On July 8, 2021, on the recommendation of the Governance Committee, of which Peter W. Brown is the Chair, the Board determined that Peter W. Brown would be considered fully independent without regard to Related Party Matters with the understanding that (like any other director) he would recuse himself as appropriate from any vote involving a conflict.
Peter W. Brown was appointed as a Director on the Board as of May 3, 2018, replacing Mr. Robert G. Brown upon his retirement from the Board and Company at that date. Peter W. Brown has been re-determined to be an independent director (see above). However, Peter W. Brown remains an affiliate and related party respecting SGRP and was proposed by Mr. Robert G. Brown to represent the Brown family interests. He worked for and is a stockholder of SAS (see above) and certain of its affiliates, he is the nephew of Mr. Robert G. Brown, son of James R. Brown, Sr. and owns EILLC, which owns 10% interest in SPAR BSMT, SGRP's Brazilian subsidiary.
In November, 2020, SPAR BSMT hired Peter W. Brown as a consultant to provide Brazil acquisition strategy services to SPAR BSMT, with a one-time initiation fee of $30,000 Brazilian Real and a monthly fee of $15,000 Brazilian Real effective December 1, 2020, and on January 6, 2021, he resigned from the Audit Committee as he was no longer sufficiently independent for membership on the Audit Committee in accordance with Nasdaq Rules.
Determining Independence of James R. Brown, Sr. and Emergency Seating on Governance Committee
James R. Brown, Sr., joined the Board as a director in January 2021 when appointed in a special meeting of SGRP's stockholders and is the father of Peter W. Brown and brother of Robert G. Brown, each a director and affiliate of SGRP. On June 2, 2021, the Board confirmed the Governance Committee's determination that James R. Brown, Sr. will become an independent director and member of the Governance Committee on July 31, 2021, three years after SGRP's termination of service agreement with SBS which is beneficially owned by Robert G. Brown. On June 2, 2021, James R. Brown, Sr.'s immediate membership on the Governance Committee as a non-independent director was also approved on an emergency basis under Nasdaq Rule 5605(e)(3) by the Board in a 5-4 vote by the Board. Nasdaq Rule 5605(e)(3) permits a non-independent director to temporarily serve as a member of a nominations committee (i.e., the Governance Committee) exceptional and limited circumstances if the Board determines that such individual's membership on the committee is required by the best interests of the Company and its Shareholders. The supporters of the need for this immediate action cited the need for legal expertise on the Governance Committee in addition to its former Chairman, Mr. Mayer, because of disputes over nominations, independence and filing and approval requirements with other directors, management and counsel.
Other Related Party Transactions and ~~Arrangements~~Arrangements:

In July 1999, SMF, SBS and ~~SIT~~Infotech entered into a perpetual software ownership agreement providing that each party independently owned an undivided share of and ~~had~~has the right to unilaterally license and exploit their "Business Manager" Internet job scheduling software (which had been jointly developed by such parties), and all related improvements, revisions, developments and documentation from time to time voluntarily made or procured by anycertain portions of ~~them at its own expense. Business Manager and its other~~the Company's proprietary ~~software and applications are used by the Company for (among other things) the~~ scheduling, tracking, coordination, reporting and ~~reporting of its merchandising~~expense software (the "Co-Owned Software") are co-owned with SBS and ~~marketing services~~Infotech and ~~are accessible via the Internet or other applicable telecommunication network by the authorized representatives of~~each entered into a non-exclusive royalty-free license from the Company and its clients through their respective computers and mobile devices. In addition, SPAR Trademarks, Inc., a wholly owned subsidiary of SGRP ("STM"), SBS and SIT entered into separate perpetual trademark licensing agreements whereby STM has granted non-exclusive royalty-free licenses to ~~SIT and SBS (and through them to their commonly controlled subsidiaries and affiliates by sublicenses, including SAS) for their continued~~ use ~~of the name~~certain "SPAR" ~~and certain other~~ trademarks ~~and related rights of STM. SBS and SAS provide services to the Company, as described above, SIT assisted~~ in the ~~Brazilian acquisition at a cost to the Company of $49,000, as described below, and SIT no longer provides services to and does not compete with the Company.~~
Through arrangements with the Company, SBS, SAS and other companies owned by Mr. Brown or Mr. Bartels 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 such transactions between the Company and the above affiliates are paid and/or collected by the Company in the normal course of business.
In addition to the above, SAS purchases insurance coverage for worker compensation, casualty and property insurance risk for itself, for SBS for its Field Specialists that require such insurance coverage, and for the Company from Affinity Insurance, Ltd. ~~("Affinity"~~United States (the "Licensed Marks"). SAS owns a minority (less than 1%) of the common stock in Affinity. The Affinity insurance premiums for such coverage are ultimately charged to SAS, which then charges the Company and SBS for their fair share of the insurance cost based on informal arrangements between the parties.

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SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)

7.6.
Preferred Stock

~~SGRP~~'sSGRP's certificate of incorporation authorizes it to issue 3,000,000 shares of preferred stock with a par value of $0.01 per share (the ~~"SGRP~~"SGRP Preferred ~~Stock"~~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~~"SGRP Series A Preferred ~~Stock"~~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~~one-to-one basis into SGRP Common Stock. The Company issued 554,402 of SGRP shares to affiliated retirement plans, which were all converted into common shares in 2011 (including dividends earned thereon), leaving 2,445,598 shares of remaining authorized preferred stock. At ~~September~~June 30, ~~2017, no~~2021, 0 shares of SGRP Series A Preferred Stock were issued and outstanding.

8.7.
Stock-Based Compensation and Other Plans

~~SGRP has granted restricted stock and stock option~~As of June 30, 2021, there were awards ~~to its eligible directors, officers and employees and certain employees of its affiliates respecting~~representing 600,000 shares of SGRP's Common Stock ~~issued by SGRP ("SGRP Shares") pursuant to SGRP's 2008 Stock Compensation~~that had been granted under the 2018 Plan ~~(as amended, the "2008 Plan"),~~(313,750 of which ~~was approved by SGRP's stockholders in May of 2008 and 2009. The 2008 Plan provides for the granting of restricted SGRP shares, stock options to purchase SGRP shares (either incentive or nonqualified)~~remain outstanding), and ~~restricted stock units, stock appreciation rights and other~~ awards ~~based on SGRP~~representing 874,087 shares ~~("Awards") to SGRP Directors and the Company's specified executives, employees and consultants (which are employees~~ of certain of its affiliates), although to date SGRP has not issued any permissible form of Award other than stock option, restricted share awards, and performance stock units. As of September 30, 2017, approximately 677,488 SGRP shares were available for Award grantsSGRP's Common Stock outstanding under the ~~amended~~ 2008 Plan. In After May 31, 2019, the ~~third quarter, there were 733,000 options awarded; 550,000 to officers~~2018 Plan ended, and ~~183,000 to certain employees~~0 further grants can be made under the 2018 Plan respecting such shares of ~~SPAR Group, Inc.~~SGRP's Common Stock.

The Company recognized ~~$37,000~~$183,000 and ~~$86,000~~$70,000 in stock-based compensation expense relating to stock option awards during the three ~~month~~-month periods ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, respectively. The tax benefit available from ~~stock based~~stock-based compensation expense related to stock option during both the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 was approximately ~~$14,000~~$46,000 and ~~$33,000~~$11,000 respectively. The Company recognized ~~$146,000~~$282,000 and ~~$220,000~~$95,000 in stock-based compensation expense relating to stock option ~~Awards~~awards during the ~~nine month~~six-month periods ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, respectively. The tax benefit available ~~to the Company,~~ from ~~stock based~~stock-based compensation expense related to stock ~~options~~option during both the ~~nine~~six months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 was approximately ~~$55,000~~$78,000 and ~~$84,000,~~$17,000 respectively. As of ~~September~~June 30, ~~2017,~~2021, total unrecognized stock-based compensation expense related to stock options was ~~$505,000.~~$707,000.

During the three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016,~~2020, the Company recognized approximately ~~$11,000~~$12,000 and ~~$9,000, respectively of stock based compensation expense related to restricted stock.~~ The tax benefit available to the Company from stock based compensation expense related to restricted stock during both three months ended September 30, 2017 and 2016 was approximately $4,000. During the nine months ended September 30, 2017 and 2016, the Company recognized approximately $32,000 and $39,000,$0, respectively of stock-based compensation expense related to restricted stock. The tax benefit available to the Company from ~~stock based~~stock-based compensation expense related to restricted stock during the ~~nine~~three months ended ~~September~~June 30, ~~2017~~ 2021 and ~~2016~~2020 was approximately ~~$12,000~~$3,000 and ~~$15,000,~~$0, respectively. During the six months ended June 30, 2021 and 2020, the Company recognized approximately $18,000 and $0, respectively, of stock-based compensation expense related to restricted stock. The tax benefit available to the Company from stock-based compensation expense related to restricted stock during the six months ended June 30, 2021 and 2020 was approximately $4,000 and $0, respectively. As of ~~September~~June 30, ~~2017, total~~2021, there was $32,000 unrecognized stock-based compensation expense related to unvested restricted stock ~~Awards was $24,000.~~awards.

2020 Plan

The Board authorized and approved the revised proposed 2020 stock compensation plan of SPAR Group, Inc. (the "2020 Plan"), which was submitted to and ~~Subsidiaries~~
~~Notes~~approved by the Corporation's stockholders at the Special Meeting of SGRP's stockholders on January 19, 2021 (the "2020 Plan Effective Date"). The 2020 Plan became effective immediately upon such approval, and the 2020 Plan will govern all options issued thereafter. Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to ~~Consolidated Financial Statements~~
~~(unaudited) (continued)~~them in the 2020 Plan.

The 2020 Plan: (a) has four-month term from the 2020 Plan Effective Date (as defined below) through May 1, 2021 (the "20-21 Period"); (b) provides for the issuance of "non-qualified" option awards to purchase shares of SGRP's Common Stock ("SGRP Shares") aggregating: (i) 550,000 SGRP Shares plus; and (ii) 50,000 SGRP Shares for each of up to the firstthree 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 20-21 Period as outlined below (the "20-21 Maximum") under 2020 Plan.; Since one 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. After making the contemplated awards after the 2020 Plan Effective Date, the remaining availability for future new awards for options to purchase will be 35,000 SGRP Shares unless new directors join the Board between January 19, 2021 and April 1, 2021.
Under the 2020 Plan, the Company (through its Compensation Committee with Board approval) may from time-to-time grant Awards in the form of nonqualified stock options ("NQSOs"), respecting SGRP Shares to and the Company's specified executives and employees and directors. However, unlike the 2008 Plan and 2018 Plan, the 2020 Plan does not permit the granting of incentive stock options ("ISOs"), stock appreciation rights based on SGRP Shares ("SARs"), restricted SGRP Shares ("Restricted Stock"), or restricted stock units based on SGRP Shares ("RSUs").
The 2020 Plan: required the Company to issue as of the 2020 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.
Summary of the 2020 Plan
The 2020 Plan and 2018 Plan and information regarding options, thereunder are summarized below, but these descriptions are subject to and are qualified in their entirety by the full text of the 2020 Plan. Unless again amended and extended (as approved by SGRP's stockholders), the 2020 Plan terminated on May 1, 2021, and thereafter no further Awards may be made under it unless additional time and shares are added to it in an amendment approved by the Board and stockholders. Awards granted prior to the end the final term of the 2020 Plan shall continue to be governed by the 2020 Plan (which 2020 Plan shall continue in full force and effect for that purpose).
Subject to the terms and conditions and within the limitations of the 2020 Plan, the Compensation Committee has the power and authority to recommend to the Board for Board approval: (i) the persons who shall be granted Awards under the 2020 Plan; (ii) when they shall receive Awards and the applicable grant dates; (iii) the standard term of each award, including any provisions for early termination or forfeiture; (iv) the method or formula for determining: (A) the date each option shall become exercisable; (B) whether the installments shall be cumulative; and (C) the date each installment shall become exercisable or vest and the term of each installment; (v) the form of payment of the exercise price for any option; (vi) the method or formula for determining: (A) the exercise price of each option; and (B) the Fair Market Value of a share of Common Stock for all purposes of the Plan; (vii) whether and under what conditions to subject the exercise or vesting of all or any portion of an award to the fulfillment of certain restrictions or contingencies, including (without limitation) restrictions or contingencies relating to: (A) entering into a covenant not to compete with any SGRP Company; (B) financial objectives for the Corporation, any of its Subsidiaries, a division, a product line or other category; and/or (C) the period of continued employment or consulting of the awardee with any SGRP Company, and in each case to determine whether such restrictions or contingencies have been met; (viii) the method or formula for determining the amount, if any, necessary to satisfy the obligation to withhold taxes or other amounts with respect to any award; (ix) whether to cancel or modify an award either with or without the consent of the Awardee or as provided in the Contract, provided, however, that any modified provision is permitted to be included in an Award granted under the 2020 Plan on the date of the modification, and provided, further, that in the case of a modification (within the meaning of Section 424(h) of the Code) of an ISO, such option as modified would be permitted to be granted on the date of such modification under the terms of the 2020 Plan; (x) how to construe the respective Contracts and the 2020 Plan; and (xi) the policies, rules and regulations relating to the 2020 Plan and how and when to prescribe, amend and rescind the same.
The 2020 Plan sets and limits the maximum number of shares of Common Stock that may be issued pursuant to Awards made under the 2020 Plan to the 20-21 Maximum during the 20-21 Period, subject to adjustment as provided in the 2020 Plan (see below).
The employees, officers and directors of the providing services to the Company (collectively, the "Participants") under the 2020 Plan may be (and under the 2018 Plan may have been) granted certain Equity Compensation Awards based on SGRP Shares. There are approximately 120 employees, officers and directors who currently meet the eligibility requirements to participate in the 2020 Plan.
Like the 2018 Plan, the 2020 Plan permits the granting of awards consisting of non-qualified options to purchase shares of SGRP Shares Common Stock ("NQSOs" or "Options"). However (unlike the 2018 Plan and 2008 Plan), the 2020 Plan does not permit granting options that qualify under Section 422 of the United States Internal Revenue Code of 1986 as amended (the "Code") for treatment as incentive stock options ("Incentive Stock Options" or "ISOs") stock appreciation rights based on SGRP Shares ("SARs"), restricted SGRP Shares ("Restricted Stock"), and restricted stock units based on SGRP Shares ("RSUs").
9.8.
Commitments and Contingencies

Legal Matters

The Company is a party to various legal actions and administrative proceedings arising in the normal course of business. In the opinion of ~~Company~~'sCompany's management, ~~disposition~~resolution of these matters ~~are~~ is not anticipated to have a material adverse effect on the Company or its estimated or desired affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.
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SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)
RELATED PARTIES AND RELATED PARTY LITIGATION:
SBS, SAS, and Infotech, provided services up until 2018 to the Company and are related parties and affiliates of SGRP, but were not under the control or part of the consolidated Company. SBS was an affiliate because it is owned by an entity controlled by Mr. Robert G. Brown and prior to November 2018 was owned by Mr. Robert G. Brown and Mr. William H. Bartels. SAS was an affiliate because it is owned by Mr. William H. Bartels, Mr. Peter W. Brown and certain other relatives of Mr. Robert G. Brown or entities controlled by them (each of whom are considered affiliates of the Company for related party purposes). Infotech was an affiliate because it is owned by Mr. Robert G. Brown. Messrs. Brown and Bartels (including, as applicable, certain related parties, the "Majority Stockholders") collectively own approximately 53.2% of SGRP's common stock and were the founders of SGRP. Mr. Robert G. Brown is a significant shareholder of SGRP. SGRP's former Chairman and Director of SGRP, became a director again on April 24, 2020, pursuant to the written consents of Robert G. Brown, William H. Bartels and related parties, and became the Chairman of the SGRP Board again on March 18, 2021. Mr. William H. Bartels is a Director of SGRP. Mr. William H. Bartels retired as an employee of the Company as of January 1, 2020. Messrs. Brown, Bartels and related parties also are shareholders, directors and/or executive officers of various affiliates of SGRP. See Termination of their 13D Control Group by Robert G. Brown and William H. Bartels, above.
Advancement Claims
From October 2018 through January 2019, Robert G. Brown and William H. Bartels, in a series of correspondence, demanded advancement and indemnification from SGRP of their respective shares of legal fees and expenses incurred by them in connection with the Delaware Actions and other related party litigation matters.
SGRP denied Mr. Bartels' claims for advancement and indemnification because Mr. Bartels was sued predominately as a stockholder in the By-Laws Action and not as a director. Mr. Bartels sued SPAR for advancement as a sitting director. Counsel advised SGRP that in principle advancement was different than indemnification as money was advanced on the condition to be repaid if indemnification was determined to be improper and that Mr. Bartels was a sitting director. In April 2019, SGRP settled with Mr. Bartels, pursuant to which his action was dismissed and Mr. Bartels' accepted allocated By-Laws expenses of approximately $106,000 were paid by SGRP.
On December 3, 2018, Robert G. Brown demanded advancement from SGRP for his proportionate share of the legal fees and expenses incurred by him in the Delaware Actions (the "Brown Advancement Demand"). Counsel advised that Brown had been sued as a stockholder and conspirator in the By-Laws Action against him, and not as a director, Brown was not a director at the time, and they didn't believe Brown could reasonably succeed in a lawsuit for advancement. SGRP, with the support of its Audit Committee, rejected the Brown Advancement Demand.
On January 27, 2019, Mr. Robert G. Brown sent a draft of his proposed Delaware litigation complaint threatening to sue SGRP respecting the Brown Advancement Demand, which he repeated on February 2, 2019. Mr. Brown on several occasions has sent copies of that complaint to SGRP in 2020; and filed his complaint on his own behalf in the Delaware Court of Chancery on September 17, 2020; however, through June 30, 2021, no such complaint has been properly served by Mr. Brown. SGRP continues to deny the Brown Advancement Demand.
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SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)
SBS Bankruptcy, Settlement and March 2020 Claim
In 2019, the Company filed claims against Robert G, Brown's company, SBS, in its federal bankruptcy proceeding in Nevada (the "SBS Chapter 11 Case") seeking reimbursement for $378,838 for SMF's funding of the Affinity Security Deposits and $12,963 for SMF's funding of field payment checks, and $1,839,459 for indemnification of SGRP for its settlement (see below) of the Clothier class action case in California ("Clothier") and legal costs and an unspecified amount for indemnification of SGRP for the Hogan action (see below) and other to be discovered indemnified claims.

The Company ~~executes~~ settled with SBS pursuant to their Compromise and Settlement Agreement, dated July 26, 2019 (the ~~services it provides~~"Settlement Agreement"). The Settlement Agreement was submitted to the court in the SBS Chapter 11 Case. Pursuant to the Settlement Agreement, the Company settled its claims for (among other things) indemnification from SBS in the Clothier and the Rodgers class action case in Texas ("Rodgers"). See SBS Clothier Litigation, SBS and SGRP Hogan Litigation, and SBS Rodgers Litigation, below.
On August 6, 2019, the Bankruptcy Court approved the Settlement Agreement and the SBS reorganization pursuant to SBS' First Amended Chapter 11 Plan of Reorganization, as amended by the Settlement Agreement (the "Plan of Reorganization"). Pursuant to its ~~domestic clients~~ ~~primarily through independent field merchandising, auditing, assembly~~Plan of Reorganization, SBS also settled its potential liability in the Clothier and ~~other field personnel (each a "Field Specialist"~~Rodgers cases, but the Company believes that Robert G. Brown and William H. Bartels were not released from Clothier, any related case or Rodgers. See SBS Rodgers Litigation, below. In the Settlement Agreement, except for the carve-out described below, SBS completely released the Company from all obligations that may be owed to SBS, and the Company’s $2.2 million in claims were settled for $174,097, payable by SBS over 24 monthly installments starting January 1, 2020, and without any interest (collectively, the "Discounted Claim Payments"), ~~almost all~~as such terms are defined in the SBS Settlement Agreement.
On August 6, 2019, with the support of ~~whom are engaged~~the Clothier and ~~provided as independent contractors by SBS. For contractual details~~Rodgers plaintiffs and ~~payment amounts, see Note 6~~the Company, the Court approved the SBS Settlement Agreement and the SBS Reorganization pursuant to the ~~Company's Consolidated Financial Statements –~~ ~~Related Party Transactions~~ – ~~Domestic Related Party Services~~~~, above.~~SBS Plan (as defined in the SBS Settlement Release).

The ~~appropriateness~~SBS Settlement Agreement provides for a comprehensive mutual release of claims (the "SBS~~'s treatment of its Field Specialists as independent contractors has been periodically subject to legal challenge (both currently~~ Releases"), including the SBS Claims and ~~historically)~~the SGRP Claims (as defined therein), except for the Discounted Claim Payments payable by ~~various states~~SBS and ~~others, SBS's expenses of defending those challenges and other proceedings have historically been reimbursed~~the proven Unpaid A/R (as defined in the SBS Settlement Agreement) if any payable by the Company ~~under SBS's Prior~~upon its determination. In the SBS Settlement Agreement, the parties agreed to have a third party financial and accounting services firm independently determine the Proven Unpaid A/R based on parameters set forth in the SBS Settlement Agreement and ~~SBS's expenses of defending those challenges~~to accept that third party determination as final and ~~other proceedings were reimbursed by~~binding. That third party financial and accounting services firm has determined that the Company ~~during the three month periods ended September 30, 2017~~had paid all amounts due to SBS and 2016 (in the amounts of $39,000 and $144,000, respectively), and the nine month periods ended September 30, 2017 and 2016 (in the amounts of $218,000 and $587,000, respectively), after determination (on a case by case basis) that those defense expenses were costs of providing services to the Company. has no further obligation (the "Independent Final Determination").
The Company has ~~advised~~recorded the total settlement amount of $174,097 as of December 31, 2019. To date, SBS ~~that, since there~~ is ~~no currently effective comprehensive written services agreement with SBS,~~in default of all outstanding payments and formal default notices have been sent to SBS. As of this date the Company believes these SBS payments must ultimately be paid by SBS and will continue to ~~review~~evaluate its collectability from SBS and ~~decide each request by~~establish reserves as appropriate. As of June 30, 2021, the total settlement amount has been reserved.
On March 6, 2020, Robert G. Brown, President, Director and indirect owner of SBS, ~~for reimbursement~~sent an email communication on behalf of ~~its legal defense expenses (including appeals) on a case-by-case basis in its discretion, including~~SBS demanding payment of $1,707,374 to SBS from the ~~relative costs and benefits~~Company pursuant to the ~~Company.~~SBS Settlement Agreement (the " March 2020 Claim"). The Company has ~~not agreed,~~reviewed the March 2020 Claim and ~~does~~ disagrees that any such amount is owed. The Company has not ~~currently intend,~~ accrued anything respecting Mr. Robert G. Brown's renewed claims.
At SGRP’s March 2020 Board meeting, Mr. Bartels was requested by an independent director to ~~reimburse~~compile a list of claims that he and Mr. Brown believe are owed to them by the Company. On March 17, 2020, that list was given to the Audit Committee Chairman and included additional claims, net of an anticipated reduction, totaling approximately $1.3 million, bringing their total claims to approximately $3 million. The Company has rejected these claims, and believes it was released from all such claims by SBS ~~for any judgment or similar amount (including any damages, settlement, or related tax, penalty, or interest)~~ in ~~any legal challenge or other proceeding against or involving~~the SBS Releases.
Since February and the ~~Company does not believe it has ever done so (other than in insignificant nuisance amounts). However, there can be no assurance~~appointment of SGRP’s new CEO, Mr. Robert G. Brown and Mr. William H. Bartels provided management with a revised list of expenses that ~~SBS will be able~~increased the implied value of the claims and owed expenses to ~~satisfy any such judgment or similar amount resulting from any adverse legal determination, that SBS or someone else will not claim, or that SBS will be able to successfully defend any claim,~~$5.6 million. In a July 30, 2021 Board meeting, Mr. Robert G. Brown and Mr. William H. Bartels specifically noted that the ~~Company~~list they provided is liable (through reimbursement, indemnification or otherwise) for any such judgment or similar amount imposed against SBS. Furthermore, there can be no assurance that SBS will succeed in defending any such legal challenge, the legal expenses of prolonged litigation and appeals could continue to be (and havenot a demand from time to time been) significant, and prolonged litigation and appeals and any adverse determination in any such challenge could have a material adverse effect on SBS's ability to provide services needed by the Company and only intended to provide information to new management of the ~~Company's costs~~expenses and details of ~~doing business.~~claims to date.

Current material and potentially material proceedings against SBS and, in one instance, the Company are described below. These descriptions are based on an independent review by the Company and do not reflect the views of SBS, its management or its counsel.
~~SBS Clothier Litigation~~
Melissa Clothier was engaged by SBS (then known as SPAR Marketing Services, Inc.) and provided services pursuant to the terms of an "Independent Merchandiser Agreement" acknowledging her engagement as an independent contractor. On June 30, 2014, Ms. Clothier filed suit against SBS and the Company styled Case No. RG12 639317, in the Superior Court in Alameda County, California, in which Ms. Clothier asserted claims on behalf of herself and a putative class of similarly situated merchandisers in California who are or were classified as independent contractors at any time between July 16, 2008, and June 30, 2014. Ms. Clothier alleged that she and other class members were misclassified as independent contractors and that, as a result of this misclassification, the defendants improperly underpaid them in violation of various California minimum wage and overtime laws. The Company ~~was subsequently dismissed from~~continues to reject these claims of any amount and maintains the action without prejudice. The court ordered that the case be heard in two phases. Phase one was limited to the determination of whether members of the class were misclassified as independent contractors. After hearing evidence, receiving post-trial briefings and considering the issues, the Court issued its Statement of Decision on September 9, 2016, finding that the class members had been misclassified as independent contractors rather than employees. The parties have now moved into phase two to determine damages (if any), which included discovery as to the measure of damages in the case. Trial on phase two was scheduled for September 11, 2017, but was postponed. The Court has scheduled a case management conference for December 19, 2017, to establish a new trial date for phase two. SBS has advised the Company that SBS could appeal the adverse phase one determination when permitted under the court's rules.same position.

16

Table of Contents
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)

SBS Field Specialist Litigation
The Company's merchandising, audit, assembly and other services for its domestic clients are performed by field merchandising, auditing, assembly and other field personnel (each a "Field Specialist"), a significant portion of them were furnished by others and substantially all of whose services were provided to the Company from 2000 to August 2018 by SBS.
The appropriateness of SBS' treatment of Field Specialists as independent contractors had been periodically subject to legal challenge (both currently and historically) by various states and others. SBS' expenses of defending those challenges and other proceedings generally were, through but not after the termination of the SBS services, reimbursed by the Company after and to the extent the Company determined (on a case-by-case basis) that those defense expenses were costs of providing services to the Company.
The Company settled its potential liability (as a current or former party) under two class action lawsuits against SBS, namely Clothier and Hogan. SBS was separately dismissed from the Hogan class action prior to the Company's settlement. SBS settled with Clothier and Rodgers in the SBS Chapter 11 Case, but the Company believes that Robert G. Brown and William H. Bartels were not released from Clothier, any related case or Rodgers (see above). The Company has never been a party to the Rodgers case. The Company has been comprehensively released by SBS pursuant to the Settlement Agreement and SBS Releases, but Mr. Brown continues to make claims for SBS against the Company. See SBS Bankruptcy, Settlement and March 2020 Claim, above, and SBS Clothier Litigation and SBS Rodgers Litigation, below.

~~Maceo Rodgers~~
17
Table of Contents
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)
SBS Clothier Litigation
Melissa Clothier provided services to SBS (then known as SPAR Marketing Services, Inc.) pursuant to an "Independent Merchandiser Agreement" (prepared solely by SBS) acknowledging her engagement as an independent contractor. In 2014, Ms. Clothier sued SBS and the Company in Alameda County, California (the "Clothier Case"), in which Ms. Clothier asserted claims on behalf of herself and a putative class of similarly situated merchandisers in California who were classified by SBS as independent contractors. Ms. Clothier alleged that she and other class members were misclassified by SBS as independent contractors (instead of as employees) and that, as a result of this misclassification, the defendants improperly underpaid them in violation of various California minimum wage and overtime laws. The Company was ~~engaged~~originally a defendant in the Clothier Case but was subsequently dismissed from the action without prejudice (meaning it could have been joined back into the case).
SGRP entered into mediation on June 7, 2018, to try to settle any potential future liability for any possible judgment against SGRP related to that case. SGRP asked SBS to participate financially and provide its knowledge in that mediation, but SBS and its stockholders wanted Mr. Brown to lead that mediation and for SGRP to bear the full cost of any settlement, and on several occasions, they declined or failed to participate in that mediation. SGRP disagreed, insisting on the economic participation of the Majority Shareholders and SBS. SGRP reached a settlement and entered into a memorandum of settlement agreement, pursuant to which the Company would pay a maximum settlement amount of $1.3 million, payable in four equal annual installments of $325,000 each that commenced in December 2019, subject to the final court approval (the "Clothier Settlement"). Final approval was granted on September 20, 2019, and the Company was released by plaintiff and the settlement class from all other liability under the Clothier Case. The Company recorded a $1.3 million charge for the Clothier Settlement during 2018, when the agreement in the Clothier Settlement was reached. To date, the Company has made 2 installment payments totaling $650,000 under the Clothier Settlement, and $650,000 is accrued as of June 30, 2021.
18
Table of Contents
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)
SBS and SGRP Hogan Litigation
Paradise Hogan and others provided services to SBS pursuant to the terms of ~~his "Master Agreements"~~their separate Independent Contractor Master Agreements with SBS (prepared solely by SBS), and in such agreements acknowledging ~~his~~their engagement as an independent contractor. ~~On February 21, 2014, Rodgers filed suit against~~ In January 2017, Hogan sued SBS ~~Robert G. Brown~~ and ~~William H. Bartels, styled Civil Action No. 3:14-CV-00055,~~SGRP in the U.S. District Court for the Southern District of Texas (Galveston Division). Plaintiff asserted claims on behalf of himself and an alleged class of similarly situated individuals who provided services to SBS as independent contractors at any time on or after July 15, 2012, claiming they all were misclassified as independent contractors and that, as a result of this misclassification, the Defendants improperly underpaid them in violation of the Fair Labor Standards Act's overtime and minimum wage provisions. Although the Court conditionally certified the class on December 8, 2015, only 61 individuals joined the action as opt-in plaintiffs, and all but 11 of them have potentially disqualifying arbitration provisions, residences outside the class's geographic area, or late opt-in filings, and were challenged by the Defendants in various motions, including a motion to decertify the class. The Court, however, did not rule on these motions and instead stayed the case on September 19, 2017 to allow the parties to mediate. On October 24, 2017, the Court granted the parties' joint motion to extend the stay order until January 31, 2018.
~~SBS and SGRP Hogan Litigation~~
Paradise Hogan was engaged by and provided services to SBS as an independent contractor pursuant to the terms of an "Independent Contractor Master Agreement" with SBS acknowledging his engagement as an independent contractor. On January 6, 2017, Hogan filed suit against SBS and SGRP (and part of the Company), styled Civil Action No. 1:17-cv-10024-LTS, in the U.S. District Court for District of Massachusetts. Hogan initially assertedMassachusetts asserting claims on behalf of himself and an alleged nationwide class of similarly situated individuals who provided services to ~~SBS and SGRP as independent contractors.~~SBS. Hogan alleged that he and other alleged class members were misclassified by SBS as independent contractors (instead of as employees), and as a result of this purported misclassification, Hogan asserted claims on behalf of himself and the alleged Massachusetts class members under ~~the Massachusetts Wage Act~~federal and ~~Minimum Wage Law~~state law for failure to pay overtime and minimum wages ~~as well as~~and other state law claims for breach of contract, unjust enrichment, quantum meruit, and breach of the covenant of good faith and fair dealing. In addition, Hogan asserted claims on behalf of himself and the nationwide class for violation of the Fair Labor Standards Act's overtime and minimum wage provisions.claims. On March 28, 2017, ~~the Company~~SGRP moved to refer Hogan's claim to arbitration pursuant to his agreement, to dismiss or stay Hogan's case pending arbitration, and to dismiss Hogan's case for failure to state a specific claim upon which relief could be granted. ~~Plaintiff's~~
On March 12, 2018, the Court denied the Motion to Compel Arbitration as to SGRP because as drafted by SBS, the arbitration clause did not reference or protect SGRP according to the Court. However, the Court eventually granted SBS the right to arbitrate without SGRP. SGRP appealed to the First Circuit but lost as the appeals court decided that the arbitration clause (as written by SBS) did not protect SGRP. As a result, SGRP would have been required to go to trial without SBS.
Facing litigation and potential damages in the Hogan Case, on March 27, 2019, SGRP entered into mediation with the plaintiffs and plaintiff's counsel ~~subsequently notified SGRP's attorney~~in the Hogan Case to try to settle any potential future liability for any possible judgment against SGRP in that case. SBS and its stockholders were no longer involved in that case and so were not involved in that mediation. SGRP reached a settlement and entered into a memorandum of ~~their intent to amend their Complaint without prejudice. The Amended Complaint,~~settlement agreement (the "Hogan Settlement"), which was approved by the court and became final in November 2019, and the Company was released by plaintiff and the settlement class from all other liability under the Hogan Case. Pursuant to the Hogan Settlement, SGRP agreed to a settlement amount of $250,000 (in three installments), which payments commenced in December 2019 with the first payment of $150,000. $50,000 was paid in March 2020 and the remaining $50,000 was paid in June 2020.
SBS Rodgers Litigation
Maceo Rodgers provided services to SBS pursuant to the terms of his "Master Agreements", and in such agreements acknowledging his engagement as an independent contractor. On February 21, 2014, Rodgers filed suit against SBS, Robert G. Brown and William H. Bartels in the U.S. District Court for the Southern District of Texas (“Rogers”). Plaintiff asserted claims on ~~May 2, 2017, eliminated all~~behalf of ~~Plaintiff's claims except for a single claim against SGRP for failure to pay Hogan~~himself and aan alleged class of similarly situated ~~class of Massachusetts~~individuals who provided services to SBS as independent contractors, claiming they all ~~wages under the Massachusetts Wage Act~~were misclassified by SBS independent contractors and that, as a ~~separate, but identical claim against SBS. The~~ result of this misclassification, the ~~amendment significantly narrowed the scope~~Defendants improperly underpaid them in violation of the ~~litigation and eliminated the original nationwide~~ Fair Labor Standards ~~Act claims.~~Act's overtime and minimum wage provisions. The Company ~~was granted leave to refile their motion to compel arbitration to dismiss Hogan's case pending arbitration,~~reimbursed defense expenses incurred by SBS in Rodgers until SBS' services were terminated in July 2018. The Company believes that SBS defended Robert G. Brown and ~~to dismiss Hogan's case for failure to state a specific claim upon which relief could be granted. The Company's motion was filed on June 7, 2017, Plaintiff's opposition to~~William H. Bartels in Rodgers but is no longer doing so in Rodgers or the ~~Company's motion was filed on June 21, 2017~~related arbitrations. See SBS Bankruptcy, Settlement and ~~the Company thereafter filed a reply brief in support of its motion on June 30, 2017. The parties currently await a hearing date on the Company's motion.~~ March 2020 Claim and SBS Field Specialist Litigation, above.

~~Potential Adverse Effects~~Rodgers settled for a claim of ~~the~~ approximately $618,000 against SBS ~~Litigation~~
~~Any prolonged continuation of~~(but not any claims against Brown or ~~material increase~~Bartels), in the ~~legal defense costs~~SBS Chapter 11, and in full settlement of that claim they agreed upon a discounted payment amount of approximately $48,000, payable in equal quarterly installments over a five-year period. See SBS ~~(and thus the reimbursable expenses SBS may charge to~~Bankruptcy, Settlement and ~~that may be paid by the Companyto the extent reimbursement is approved by the Company in its discretion), the failure of SBS to satisfy anysuch~~judgment or similar amount, any claim by SBS, any other related party or any third party that the Company is somehow liable for any judgment or similar amount (including any damages, settlement, or related tax, penalty, or interest) in any legal challenge or other proceeding imposed against or involving SBS or other related party, any judicial determination that the Company is somehow liable for any such judgment or similar amount imposedagainst SBS or other related party (in whole or in part), any decrease in SBS's performance (quality or otherwise), any inability by SBS to execute the services for the Company, or any increase in the Company's use of employees (rather than independent contractors) as its domestic Field Specialists, in each case in whole or in part, could have a material adverse effect on the Company or its performance or condition (including its assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. See Note 6 to the Company's Consolidated Financial Statements – ~~Related Party Transactions~~March 2020 Claim – ~~Domestic Related Party Services~~, above.

19

Table of Contents
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)

10~~.      Segment Information~~
9.
Segment Information

The Company reports net revenues from operating income by reportable segment. Reportable segments are components of the Company for which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company provides similar merchandising,, business technology and marketing services throughout the world, operating within two reportable segments, its Domestic ~~Division~~division and its ~~International Division.~~international 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. The Company measures the performance of its Domestic and International ~~Divisions~~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.

The accounting policies of each of the reportable segments are the same as those described in the Summary of Significant Accounting Policies. Management evaluates performance as follows (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Revenue:

United States
$ 15,062 $ 11,332 $ 40,069 $ 32,268
International
33,690 22,106 91,292 57,513
Total revenue
$ 48,752 $ 33,438 $ 131,361 $ 89,781

Operating income (loss):

United States
$ 343 $ (184
)
$ 701 $ (120
)
International
485 614 1,583 1,496
Total operating income
$ 828 $ 430 $ 2,284 $ 1,376

Interest expense (income):

United States
$ 56 $ 36 $ 158 $ 88
International
54 15 (41
)
23
Total interest expense
$ 110 $ 51 $ 117 $ 111

Other (income), net:

United States
$ – $ – $ – $ –
International
(78
)
(78
)
(275
)
(183
)
Total other (income), net
$ (78
)
$ (78
)
$ (275
)
$ (183
)

Income (loss) before income tax expense:

United States
$ 287 $ (220
)
$ 543 $ (208
)
International
509 677 1,899 1,656
Total income before income tax expense
$ 796 $ 457 $ 2,442 $ 1,448

Income tax (benefit) expense:

United States
$ 14 $ (306
)
$ (71
)
$ (394
)
International
196 275 978 594
Total income tax (benefit) expense
$ 210 $ (31
)
$ 907 $ 200

Net income:

United States
$ 273 $ 86 $ 614 $ 186
International
313 402 921 1,062
Total net income
$ 586 $ 488 $ 1,535 $ 1,248

Depreciation and amortization:

United States
$ 339 $ 334 $ 1,018 $ 1,014
International
148 152 508 445
Total depreciation and amortization
$ 487 $ 486 $ 1,526 $ 1,459

Capital expenditures:

United States
$ 172 $ 291 $ 683 $ 798
International
183 151 363 376
Total capital expenditures
$ 355 $ 442 $ 1,046 $ 1,174
~~Note:~~ ~~There were no inter-company sales for the three and nine month periods ended September 30, 2017 or 2016.~~

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Revenue:

United States
$ 27,252 $ 22,123 $ 50,927 $ 45,412
International
39,924 28,821 77,346 66,880
Total revenue
$ 67,176 $ 50,944 $ 128,273 $ 112,292

Operating income:

United States
$ 332 $ 315 $ 1,090 $ 623
International
1,555 1,648 3,516 2,817
Total operating income
$ 1,887 $ 1,963 $ 4,606 $ 3,440

Interest expense (income):

United States
$ 151 $ 144 $ 289 $ 276
International
(22 ) (60 ) (12 ) 36
Total interest expense
$ 129 $ 84 $ 277 $ 312

Other expense (income), net:

United States
(1 ) (1 ) (3 ) (1 )
International
6 (49 ) (67 ) (57 )
Total other expense (income), net
$ 5 $ (50 ) $ (70 ) $ (58 )

Income before income tax expense:

United States
$ 182 $ 172 $ 804 $ 348
International
1,571 1,757 3,595 2,838
Total income before income tax expense
$ 1,753 $ 1,929 $ 4,399 $ 3,186

Income tax expense:

United States
$ 7 $ 124 $ 176 $ 199
International
614 500 1,310 760
Total income tax expense
$ 621 $ 624 $ 1,486 $ 959

20
Table of Contents
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)

September 30,

December 31,

2017

2016

Assets:

United States
$ 21,804 $ 22,189
International
36,754 32,662
Total assets
$ 58,558 $ 54,851
Net income:

United States
$ 175 $ 48 $ 628 $ 149
International
957 1,257 2,285 2,078
Total net income
$ 1,132 $ 1,305 $ 2,913 $ 2,227

Net (income) attributable to non-controlling interest:

United States
$ (2 ) $ (519 ) $ (82 ) $ (583 )
International
(616 ) (889 ) (1,400 ) (1,451 )
Total net (income) attributable to non-controlling interest
$ (618 ) $ (1,408 ) $ (1,482 ) $ (2,034 )

Net income (loss) attributable to SPAR Group, Inc.:

United States
$ 173 $ (471 ) $ 546 $ (434 )
International
341 368 885 627
Total net income (loss) attributable to SPAR Group, Inc.
$ 514 $ (103 ) $ 1,431 $ 193

Depreciation and amortization:

United States
$ 385 $ 419 $ 775 $ 832
International
149 120 289 247
Total depreciation and amortization
$ 534 $ 539 $ 1,064 $ 1,079

Capital expenditures:

United States
$ 352 $ 288 $ 637 $ 669
International
207 156 253 117
Total capital expenditures
$ 559 $ 444 $ 890 $ 786

~~Geographic Data~~ ~~(in thousands)~~Note: There were 0 inter-company sales for the three and six months ended June 30, 2021 or 2020.

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

International
revenue:

% of consolidated net revenue

% of consolidated net revenue

% of consolidated net revenue

% of consolidated net revenue

Brazil
$ 11,132 22.8 % $ 1,850 5.5 % $ 29,232 22.3 % $ 1,850 2.1 %
South Africa
6,703 13.7 5,936 17.8 19,646 15.0 14,871 16.6
Mexico
6,115 12.5 5,495 16.4 16,177 12.3 15,600 17.4
China
2,868 5.9 3,029 9.1 7,396 5.6 8,646 9.6
Japan
2,426 5.0 1,799 5.4 5,970 4.5 5,157 5.7
India
1,947 4.0 1,523 4.6 5,397 4.1 4,203 4.7
Canada
1,499 3.1 1,453 4.3 4,544 3.5 4,582 5.1
Australia
935 1.9 945 2.8 2,741 2.1 2,359 2.6
Turkey
65 0.1 76 0.2 189 0.1 245 0.3
Total international revenue
$ 33,690 69.0 % $ 22,106 66.1 % $ 91,292 69.5 % $ 57,513 64.1 %

September 30,

December 31,

June 30,

December 31,

2017

2016

2021

2020

Long lived assets:

Assets:

United States
$ 8,061 $ 8,594 $ 38,489 $ 31,675
International
4,382 3,965 56,491 52,354
Total long lived assets
$ 12,443 $ 12,559
Total assets
$ 94,980 $ 84,029

1~~1. Purchase of Interests in Subsidiaries~~

June 30,

December 31,

2021

2020

Long lived assets:

United States
$ 4,553 $ 4,809
International
1,984 2,487
Total long lived assets
$ 6,537 $ 7,296

In September 2016, after acquiring SGRP Brasil Participações Ltda. ("SGRP Holdings"), a Brazilian limitada (which is a form of limited liability company), and establishing SPAR Brasil Serviços de Merchandising e Tecnologia S.A., a Brazilian corporation ("SPAR BSMT"), in a series of related party transactions (See Note ~~6 to the Company's Consolidated Financial Statements -~~ ~~Related Party Transactions~~–~~International~~ ~~Related Party~~ ~~Services~~, above), SGRP Holdings and SPAR BSMT (the "Purchasers") entered into a Quota Purchase Agreement dated September 13, 2016 (the "NM QPA"), with Interservice Publicidade Sociedade Ltda., a Brazilian limitada, Momentum Promoções Ltda., a Brazilian limitada, and IPG Nederland B.V., a Netherlands company (collectively, the "Sellers"). The Sellers are subsidiaries of The Interpublic Group of Companies, Inc., a Delaware corporation ("Interpublic"), which is a global provider of advertising, media and other business services. The NM QPA provided for the acquisition by the Purchasers from the Sellers (the "NM Acquisition") of all of the equity shares (called "quotas") in New Momentum Ltda., a Brazilian limitada, and New Momentum Serviços Temporários Ltda., a Brazilian limitada (each a "NM Company" or collectively the "NM Companies"), two of Interpublic's "In Store" companies in Brazil. SPAR BSMT acquired 99% of the quotas issued by each NM Company and SGRP Holdings acquired 1% of the quotas issued by each NM Company pursuant to the NM QPA. The closing of the acquisition of the NM Companies was completed with the disbursement of the purchase price to the Sellers on September 19, 2016, effective as of close of business on September 13, 2016. The purchase price for the NM Companies was R$1,312,000 (approximately US$401,000). The Company has since changed the names of the NM Companies to SPAR Brasil Serviços LTDA. and SPAR Brasil Serviços Temporários LTDA.
Momentum Promoções Ltda., one of the Sellers, also agreed to provide certain transition services and continued use of certain existing office space to SPAR BSMT and each of the NM Companies (collectively, "SPAR Brazil"), pursuant to a Transition Services Agreement dated September 13, 2016 (the "Transition Agreement"), and a Sublease Agreement dated September 13, 2016 (the "Sublease"), respectively. The Sublease has an initial term of 12 months and requires monthly rent and back office support payments of R$205,417 (approximately $65,~~000 USD). After December 31, 2016, the Transition Agreement relating to Accounting Service, terminated on April 30, 2017, and for IT service, terminated on September 13, 2017.~~

21

Table of Contents

SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)

Geographic Data (in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

% of

% of

% of

% of

consolidated

consolidated

consolidated

consolidated

International revenue:

net revenue

net revenue

net revenue

net revenue

Brazil
$ 13,596 20.2 % $ 10,539 20.7 % $ 25,897 20.2 % $ 26,103 23.2 %
South Africa
8,524 12.7 6,088 12.0 16,246 12.7 13,002 11.6
Mexico
8,363 12.4 4,820 9.5 15,622 12.2 10,667 9.5
China
3,195 4.8 2,756 5.4 6,458 5.0 5,320 4.7
Japan
2,538 3.8 1,915 3.8 4,988 3.9 4,207 3.7
Canada

2,040

3.0

1,004

2.0

3,918

3.1

2,720

2.4

India
1,358 2.0 1,649 3.2 3,584 2.8 4,431 3.9
Australia
310 0.5 50 0.1 633 0.5 430 0.4
Total international revenue
$ 39,924 59.4 % $ 28,821 56.7 % $ 77,346 60.4 % $ 66,880 59.4 %
10.
Recent Accounting Pronouncements
The Company ~~has completed its preliminary calculation~~reviews new accounting pronouncements as they are issued or proposed by the Financial Accounting Standards Board (“FASB”).
Recently Adopted
In December 2019, the FASB issued ASU 2019-12 simplifying various aspects related to the accounting for income taxes. The guidance removes exceptions to the general principles in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The ASU is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual periods, with early adoption permitted. The adoption of this standard did not have a material impact on the goodwill impairment testing process or the consolidated financial statements.
Not Yet Adopted
In June 2016, the FASB issued ASU No.2016-13, “Financial Instruments (Topic 326) Credit Losses”. Topic 326 changes the impairment model for most financial assets and certain other instruments. Under the new standard, entities holding financial assets and net investment in leases that are not accounted for at fair value through net income are to be presented at the net amount expected to be collected. An allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the ~~fair~~financial asset to present the net carrying value at the amount expected to be collected on the financial asset. Topic 326 is effective as of January 1, 2020, although in November 2019, the FASB delayed the effective date until fiscal years beginning after December 15, 2022 for SEC filers eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities. The Company qualifies as a smaller reporting company under the SEC’s definition. Early adoption is permitted. The Company is currently evaluating the impact of Topic 326 on its consolidated balance sheets, statements of operations, statements of cash flows and related allocation of assets between goodwill and other. The amounts listed below reflect the results of our preliminary assessment and may be updated should additional information become available related to this acquisition. A summary of assets acquired, goodwill and liabilities assumed and net of purchase price are as follows (in thousands):disclosures.

Cash
$ 484
Net Working Capital, net of cash
(155
)
Fixed Assets
22
Intangible Assets
336
Goodwill
133
Assumed Liabilities
(419
)
Net Fair Value of Assets Acquired
$ 401

22

Table of Contents
SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)

~~The following table contains unaudited pro forma revenue and net income for SPAR Group, Inc. assuming SPAR Brasil closed on January 1, 2016 (in thousands):~~

Revenue

Net (Loss)

Consolidated supplemental pro forma for the nine month period ended September 30, 2016
$ 113,783 $ (194 )
11.
Leases

The ~~pro forma in~~Company is a lessee under certain operating leases for office space and equipment.
ASC 842 requires lessees to recognize leases on the ~~table above includes adjustments for, amortization~~balance sheet as a lease liability with a corresponding right of ~~intangible assets and acquisition costs~~use ("ROU") asset, subject to ~~reflect results that are more representative~~certain permitted accounting policy elections.
Under ASC 842, SPAR determines, at the inception of the ~~results of~~contract, whether the ~~transactions as if~~contract is or contains a lease based on whether the contract provides SPAR ~~Brasil acquisition closed on January 1,~~ ~~2016. This pro forma information utilizes certain estimates, is presented for illustrative purposes only and may not be indicative of~~ the ~~results of operation that would have actually occurred. In addition, future results may vary significantly from~~right to control the results reflected in the pro forma information. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, such as anticipated cost savings from operating synergies.
1~~2. Summary of Significant Accounting Policies~~
~~New Accounting Pronouncements~~
~~ASU 2017-09, Scope of Modification Accounting, clarifies Topic 718, Compensation~~ ~~– Stock Compensation, such that an entity must apply modification accounting to changes in the terms or conditions~~use of a ~~share-based payment award unless~~physically distinct asset or substantially all of the ~~following criteria~~capacity of an asset.
Many of SPAR's equipment leases are ~~met: (1)~~short-term or cancellable with notice. SPAR’s office space leases have remaining lease terms between one and approximately eleven years, many of which include one or more options to extend the ~~fair value~~term for periods thereafter. Certain leases contain options to terminate the lease early, which may include a penalty for exercising the option. Many of the ~~modified award~~termination options require notice within a specified period, after which the option is no longer available to SPAR if not exercised. The extension options and termination options may be exercised at SPAR’s sole discretion. SPAR does not consider in the ~~same~~measurement of ROU assets and lease liabilities an option to extend or terminate a lease if SPAR is not reasonably certain to exercise the option. As of the end of this reporting period, SPAR has not included any options to extend or terminate in its measurement of ROU assets or lease liabilities.
Certain of SPAR’s leases include covenants that oblige SPAR, at its sole expense, to repair and maintain the leased asset periodically during the lease term. SPAR is not a party to any leases that contain residual value guarantees nor is SPAR a party to any leases that provide an option to purchase the underlying asset.
Many of SPAR's office space leases include fixed and variable payments. Variable payments relate to real estate taxes, insurance, operating expenses, and common area maintenance, which are usually billed at actual amounts incurred proportionate to SPAR's rented square feet of the building. Variable payments that do not depend on an index or rate are expensed by SPAR as they are incurred and are not included in the measurement of the lease liability.
Some of SPAR's leases contain both lease and non-lease components. Fixed and variable payments are allocated to each component relative to observable or estimated standalone prices. SPAR measures its variable lease costs as the ~~fair value~~portion of ~~the original award immediately before the modification. The ASU indicates~~variable payments that ~~if the modification does not affect any of the inputs~~are allocated to the valuation technique used to value the award, the entity is not required to estimate the value immediately before and after the modification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the modification; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the modification. The ASU is effective for all entities for fiscal years beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact the adoption of ASU 2017-09 will have on its consolidated financial statements.
In January 2017, the FASB issued Accounting Standard Update 2017-04 (ASU 2017-04), Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. With ASU 2017-04, an entity will no longer determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Instead, an entity will compare the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact the adoption of ASU 2017-04 will have on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is required to be applied prospectively for reporting periods beginning after December 31, 2017. The impact on ~~the Company's consolidated financial statements will depend on the facts and circumstances of any specific future transactions.~~lease components.

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SPAR Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited) (continued)

ASU 2016-17, Interests Held through Related Parties That Are under Common Control, amends the variable interest entity (VIE) guidance within Topic 810, Consolidation. It does not change the two required characteristicsSPAR measures its lease liability for ~~a single decision maker to be the primary beneficiary (~~"power" and "economics"), but it revises one aspect of the related analysis. The amendments change how a single decision maker of a VIE treats indirect variable interests held through related parties that are under common control when determining whether it is the primary beneficiary of that VIE. The ASU requires consideration of such indirect interests on a proportionate basis, instead of being the equivalent of direct interests in their entirety, thereby making consolidation less likely. ASU 2016-17 is effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, ASU 2016-17 is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Early adoption is permitted. However, if an entity early adopts the amendments in an interim period, any adjustments should be reflectedeach leased asset as of the beginning of that fiscal year. Entities that have not yet adopted ASU 2015-02 are required to adopt ASU 2016-17 at the same time they adopt ASU 2015-02 and should apply the same transition method elected for ASU 2015-02. Entities that have already adopted ASU 2015-02 are required to apply ASU 2016-17 retrospectively to all relevant prior periods beginning with the fiscal year in which ASU 2015-02 initially was applied.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows ("ASU 2016-15"), which reduces diversity in practice in how certain transactions are classified in the statement of cash flows. The new standard is effective for reporting periods after December 15, 2017, with early adoption permitted. The adoption of this guidance will not have a material impact on the Company~~'s consolidated financial statements.~~
In June 2016, the FASB issued ASU 2016-13 amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions and forecasted information rather than the current methodology of delaying recognition of credit losses until it is probable a loss has been incurred. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019 with early adoption permitted for annual reporting periods beginning after December 15, 2018. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.
~~In March 2016, the FASB issued ASU No. 2016-09, Compensation~~ – Stock Compensation (Topic 718) ("ASU 2016-09"). The guidance changes how companies account for certain aspects of equity-based payments to employees. Entities will be required to recognize income tax effects of awards in the income statement when the awards vest or are settled. The guidance also allows an employer to repurchase more of an employee's shares than it can under current guidance for tax withholding purposes providing for withholding at the employee's maximum rate as opposed to the minimum rate without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The updated guidance is effective for annual periods beginning after December 15, 2016. Effective January 1, 2017, the Company adopted the accounting guidance contained within ASU 2016-09.
In February 2016, the FASB issued ASU 2016-02 amending the existing accounting standards for lease accounting and requiring lessees to recognize lease assets and lease liabilities for all leases with lease terms of more than 12 months, including those classified as operating leases. Both the asset and liability will initially be measured at the present value of ~~the future minimum~~ lease payments, ~~with~~as defined in ASC 842, allocated to the ~~asset being subject~~lease component, discounted using an incremental borrowing rate specific to ~~adjustments such as initial direct costs.~~ ~~Consistent with current U.S. Generally Accepted Accounting Principles ("GAAP"),~~ the ~~presentation of expenses and cash flows will depend primarily~~underlying asset. SPAR's ROU assets are equal to the lease liability. SPAR estimates its incremental borrowing rate based on the ~~classification of~~interest rate SPAR would incur to borrow an amount equal to the lease ~~as either~~payments on a ~~finance or an operating lease. The new standard also requires additional quantitative and qualitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases~~collateralized basis over a similar term in order to provide additional information about the nature of an organization's leasing activities. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and requires modified retrospective application. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. As our operations are conducted in leased facilities, this ASU may require us to disclose additional information about our leasing activities. The Company plans to evaluate the impact of the new guidance on its consolidated financial statements and related disclosures.

~~SPAR Group, Inc. and Subsidiaries~~
~~Notes to Consolidated Financial Statements~~
~~(unaudited) (continued)~~
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, simplifying the balance sheet classification of deferred taxes by requiring all deferred taxes, along with any related valuation allowance, to be presented as noncurrent. This ASU is effective for the Company beginning in the first quarter of 2017, which the Company has applied retroactively. Upon the adoption of the guidance, the Company has reclassified $471,000 from current assets to non-current assets, and reduced both non-current and current liabilities by $2,389,000.
In May 2014, the FASB issued new revenue recognition guidance under ASU 2014-09 that will supersede the existing revenue recognition guidance under U.S. GAAP. The new standard, along with amendments in 2015 and 2016, focuses on creating a ~~single source of~~ revenue guidance for revenue arising from contracts with customers. The objective of the new standard is for companies to recognize revenue when it transfers the promised goods or services to its customers at an amount that represents what the company expects to be entitled to in exchange for those goods or services. Additionally, the new standard requires enhanced disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including revenue recognition policies to identify performance obligations, assets recognized from costs incurred to obtain and fulfill a contract, and significant judgments in measurement and recognition. The standard, as amended, will be effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period.similar economic environment.

The ~~Company, along with its third-party advisor, is currently performing an analysis that~~components of SPAR's lease expenses for the ~~new standard will have on its revenue for both the domestic~~three and ~~international segments. This analysis includes evaluating~~six months ended June 30, 2021 and 2020, which ~~if any, practical expedients the~~ Company will elect upon adoption. Based on analysis to date, we currently believe our revenue recognition under the new standard will be mostly consistent with the current standard, with performance obligations being satisfied over time as our customers simultaneously receive and consume the benefits of our performance obligations. We expect that the disclosuresare included in the ~~notes to our~~condensed consolidated financial statements related to revenue recognition will be significantly expanded under the new standard, specifically regarding quantitative and qualitative information about performance obligations.
~~The Company expects to adopt the standard using the modified retrospective approach, under which the cumulative effect of the initial application of the new standard wi~~ll be recognized as an adjustment to the opening balance of retained earnings in the first quarter of 2018. As we are still in the process of evaluating ASU 2014-09 along with the subsequent amendments our initial assessment may change as we continue to refine our systems, processes, controls and assumptions.
13~~.     Capital Lease Obligations~~
~~The Company has~~ ~~an outstanding capital lease obligation with an interest rate of 5.8%. The related capital lease assets balances are detailed below (in thousands):~~
Start Date:

Original Cost

Accumulated
Amortization

Net Book Value at
September 30, 2017

January 2017
$ 76 $ 19 $ 57

~~SPAR Group, Inc. and Subsidiaries~~
~~Notes to Consolidated Financial Statements~~
~~(unaudited) (continued)~~
~~Annual future minimum lease payments required under the leases, together with the present value as of~~ ~~September 30, 2017,~~income statement, are as follows (in thousands):

Year Ending
December 31,

Amount

2017
$ 7
2018
28
2019
28
Total
63
Less amount representing interest
4
Present value of net minimum lease payments included in accrued expenses and other current liabilities, and long term debt
$ 59

Three Months Ended

Six Months Ended

June 30,

June 30,

Lease Costs

Classification

2021

2020

2021

2020

Operating lease cost

Selling, General and Administrative Expense
$ 218 $ 694 $ 435 $ 1,368
Short-term lease cost

Selling, General and Administrative Expense
206 $ 100 508 213
Variable costs

Selling, General and Administrative Expense
42 $ 97 92 194
Total lease cost
$ 466 $ 891 $ 1,035 $ 1,775
Supplemental cash flow information related to SPAR’s leases for three and six months ended June 30, 2021 and 2020 is as follows (in thousands):

Three Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Cash paid for amounts included in the measurement of lease liabilities
$ 426 $ 794 $ 946 $ 1,514

Assets obtained in exchange for new operating lease liabilities

Operating lease
$ 0 $ 741 $ 0 $ 1,463

At June 30, 2021, SPAR had the following maturities of lease liabilities related to office space and equipment, all of which are under non-cancellable operating leases (in thousands):
Period Ending December 31,

Amount

2021
$ 660
2022
795
2023
339
2024
246
2025
392
Thereafter
141
Total Lease Payments
2,573
Less: imputed interest
455
Total
2,118

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SPAR Group, Inc. and Subsidiaries

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this " ~~(this "Quarterly Report"~~Quarterly Report") 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"~~SGRP") and its subsidiaries (together with SGRP, “SPAR”, the ~~"SPAR Group"~~"SPAR Group" or the ~~"Company"~~"Company"), and this Quarterly Report has been filed by SGRP with the Securities and Exchange Commission (the ~~"SEC"~~"SEC"). There also are ~~"forward-looking statements"~~forward-looking statements contained in ~~SGRP~~'sSGRP's Annual Report on Form 10-Kfor its fiscal year ended December 31, ~~2016 (as~~2020, as filed with the ~~"Annual Report"),~~SEC on March 31, 2021, and SGRP's First Amendment to Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed with the SEC on April ~~17, 2017, in SGRP~~29, 2021 (as so amended, the "'Annual Reports"), in SGRP's amended definitive Proxy Statement respecting its Annual Meeting of Stockholders to be held on ~~May 18, 2017 (the "Proxy Statement"),~~August 12,2021, which SGRP filed with the SEC on ~~April 28, 2017, and SGRP~~July 20,2021(the "'Proxy Statements "), and SGRP'sQuarterly 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 Quarterly Report, the Annual Report and the Proxy Statement, each a ~~"SEC Report"~~"SEC Report"). "Forward-looking statements" are defined in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~"Exchange Act"~~"Exchange Act"), and other applicable federal and state securities laws, rules and regulations, as amended (together with the Securities Act and Exchange Act, the ~~"Securities Laws"~~"Securities Laws").

All statements (other than those that are purely historical) are forward-looking statements. Words such as "may," "will," "expect," "intend", "believe", "estimate", "anticipate," "continue," "plan," "project," or the negative of these terms or other similar expressions also identify forward-looking statements. Forward-looking statements made by the Company in this Quarterly Report or the Annual Report may include (without limitation) statements regarding: risks, uncertainties, cautions, circumstances and other factors ("~~Risks"~~Risks"); and plans, intentions, expectations, guidance or other information respecting the potential negative effects of the Coronavirus and COVID-19 pandemic on Company's business, cash flow or financial condition, the Company's cash flow later this year, or the pursuit or achievement of the ~~Company~~'sCompany's five corporate objectives (growth, customer value, employee development, greater productivity & efficiency, and increased earnings per share), building upon the ~~Company~~'sCompany's strong foundation, leveraging compatible global opportunities, growing the ~~Company~~'sCompany's client base and contracts, continuing to strengthen its balance sheet, growing revenues and improving profitability through organic growth, new business development and strategic acquisitions, and continuing to control ~~costs.~~costs. The ~~Company~~'Company's forward-looking statements also include (without limitation) those made in the Annual Report in "Business", "Risk Factors", "Legal Proceedings", "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Directors, Executive Officers and Corporate Governance", "Executive Compensation", "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters", and "Certain Relationships and Related Transactions, and Director Independence".

You should carefully review and consider the Company's's forward-looking statements (including all risk factors and other cautions and uncertainties) and other information made, contained or noted in or incorporated by reference into this Quarterly Report, the Annual Report, the Proxy Statement, the First Special Meeting Proxy/Information Statement and the First Special Meeting Report and the other applicable SEC Reports, but you should not place undue reliance on any of them. The results, actions, levels of activity, performance, achievements or condition of the Company (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition) and other events and circumstances planned, intended, anticipated, estimated or otherwise expected by the Company (collectively, ~~"Expectations"~~"Expectations"), and our forward-looking statements (including all Risks) and other information reflect the Company's current views about future events and circumstances. Although the Company believes those Expectations and views are reasonable, the results, actions, levels of activity, performance, achievements or condition of the Company or other events and circumstances may differ materially from our Expectations and views, and they cannot be assured or ~~guarantied~~guaranteed by the Company, since they are subject to Risks and other assumptions, changes in circumstances and unpredictable events (many of which are beyond the Company's control). 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. Accordingly, the Company cannot assure you that its Expectations will be achieved in whole or in part, that it has identified all potential Risks, or that it can successfully avoid or mitigate such Risks 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.

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

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SPAR Group, Inc. and Subsidiaries

GENERAL

The ~~Company~~SPAR Group is a diversified international merchandising, business technology 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 its merchandising and other marketing services to manufacturers, distributors and retailers worldwide, primarily in mass merchandise, office supply, value, grocery, drug, independent, convenience, toy, home improvement and electronics stores. The Company also provides furniture and other product assembly services in stores, homes and offices. The Company has supplied these services in the United States since certain of its predecessors were formed in 1979 and internationally since the Company acquired its first international subsidiary in Japan in May of 2001. The Company currently does business in 10 countries that encompass approximately 50% of the total world population through its operations in the United States, Australia, Brazil, Canada, China, India, Japan, Mexico, South Africa, and Turkey.
Merchandising services primarily consist of regularly scheduled, special project and other product services provided at 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, demonstrating or promoting a product, providing on-site audit and in-store event staffing services and providing product 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~~
The merchandising and marketing services industry includes manufacturers, retailers, brokers, distributors and professional service merchandising companies. Merchandising services primarily involve placing orders, shelf maintenance, display placement, reconfiguring products on store shelves and replenishing product inventory. Additional marketing services include but are not limited to new store sets and remodels, audits, sales assist, installation and assembly, product demos/sampling, promotion and various others. 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.
~~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, have decreased their own store personnel and increased their reliance on manufacturers to perform such services. At one time, 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 manufacturers and retailers discovered that using their own sales representatives and employees for this purpose was expensive and inefficient. In addition, the changing retail environment, driven by the rise of digital and mobile technology, is fostering even more challenges to the labor model of retailers and manufacturers. These challenges include increased consumer demand for more interaction and engagement with retail sales associates, stores remodels to accommodate more technology, installation and continual maintenance of in-store digital and mobile technology, in-store pick-up and fulfillment of online orders and increased inventory management to reduce out-of-stocks from omnichannel shopping.
Most 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 internationalleading global merchandising and marketing services company, ~~to provide these~~providing a broad range of services to retailers, manufacturers and ~~other businesses~~distributors around the world. With more than 40 years of experience, 25,000+ merchandising specialists around the world, 200,000+ average store visits a week and long-term relationships with some of the world’s leading manufacturers and retail businesses, SPAR provides specialized capabilities across 9 countries and 4 continents.
The Company's focus is merchandising and marketing. Its specialists are in stores restocking shelves, auditing inventory, performing competitive price shopping, setting up exciting promotions, assembling fixtures and furniture, preparing new locations for grand openings, assisting with sales and more. SPAR provides the “last mile” of retailing and manufacturer product merchandising and marketing.
The Company’s services apply to a wide range of segments and categories. SPAR serves retailers in the grocery, drug, dollar, discount, convenience, cash and carry, home improvement, consumer electronics, automotive, pharmacy, office supply and mass merchandise segments. SPAR serves manufacturers and distributors in the personal technology, electronics, beverage, household product, consumables, automotive aftermarket and consumer product segments. The Company's ability to recognize trends and opportunities across segments and geographies distinguishes the business from local or regional competition.
The Company operates in markets that represent more ~~effectively~~than 50% of the world’s population. SPAR has expanded internationally to serve clients but also to capitalize on growing global demand. As of June 30, 2021, SPAR is in 9 countries including, United States, Canada, Mexico, Brazil, South Africa, Australia, China, Japan, and ~~efficiently than other available alternatives.~~India. The Company no longer operates in Turkey.
The Company operates under two divisions: Domestic and International. The Domestic division is comprised of all operations within the United States. The International division is a consolidation of all operations and joint ventures outside the United States.
The Domestic business is led and operated from its global headquarters in Auburn Hills, MI. The International business is also led from the global headquarters, but then has regional leadership and offices in the respective countries.
The Company’s approach to the international marketplace has historically been to establish joint ventures. SPAR believes this approach enables the Company to bring the breadth of its global capabilities and tools while capitalizing on the strength and importance of local executive leadership and resources.
Summaries of the Company’s business and domestic and international business are set forth below. Please see Item 1 of the Annual Report for a more detailed description of the Company's Business, and the following parts of the Proxy Statement (which were incorporated by reference into the Annual Report): (i) Security Ownership of Certain Beneficial Owners and Management, (ii) Corporate Governance, (iii) Executive Compensation, Directors and Other Information and (iv) Executive Compensation, Equity Awards and Options.
Please also see, review and give particular attention to (1) the Risk Factors in Item 1A of the Annual Report (including, without limitation, Dependence Upon and Cost of Services Provided by Affiliates and Use of Independent Contractors,Potential Conflicts in Services Provided by Affiliates,Risks Related to the Company's Significant Stockholders: Potential Voting Control and Conflicts, and Risks of a Nasdaq Delisting and Penny Stock Trading), (2) Note 8 to the Company's Condensed Consolidated Financial Statements – Commitments and Contingencies -Legal Matters, above, and (3) Note 5 to the Company's Condensed Consolidated Financial Statements – Related Party Transactions – Domestic Related Party Services, Independent Director Resignations, Nasdaq Deficiencies and Search for New Independent Directors, Termination of their 13D Control Group by Robert G. Brown and William H. Bartels, and Affinity Insurance and Related Reimbursement Dispute, above.

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SPAR Group, Inc. and Subsidiaries

Another significant trend impacting the merchandising and marketing services business is the continued preference of consumers to shop in stores and their tendency 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 departments and 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 few years. Both retailers and manufacturers are seeking third party merchandisers to help them meet the increased demand for these labor-intensive services.
~~In addition, the consolidation of many retailers and changing store formats have 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 of those cases, stores are completely remodeled and re-merchandised to implement the new store formats.~~
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 global Internet and data network based technology (through computers or mobile devices) and its business model worldwide.
~~The Company's Domestic and International Geographic Segments:~~
~~The Company~~ provides similar merchandising, business technology and marketing services throughout the world, operating within two reportable segments, its Domestic and International Divisions. The Company tracks and reports certain financial information separately for these two segments 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 local markets in an effort to improve its market share and continued expansion efforts. Certain financial information regarding each of the Company's two segments, which includes, among other items, their respective net revenues, operating income and net income for each of the three and nine month periods ended September 30, 2017 and 2016, and their respective assets as of September 30, 2017, and December 31, 2016, is provided above in Note 10 to the Company's Condensed Consolidated Financial Statements – ~~Segment~~ ~~Information~~.
~~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 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

Date
Established

SGRP Percentage
Ownership

Principal Office Location
United States of America

1979

100%

White Plains, New York, United States of America
Japan

May 2001

100%

Tokyo, Japan
Canada

June 2003

100%

Vaughan, Canada
South Africa

April 2004

51%

Durban, South Africa
India

April 2004

51%

New Delhi, India
Australia

April 2006

51%

Melbourne, Australia
China

March 2010

51%

Shanghai, China
Mexico

August 2011

51%

Mexico City, Mexico
Turkey

November 2011

51%

Istanbul, Turkey
Brazil¹

September 2016

51%

Sao Paolo, Brazil
1.
~~In September 2016, the Company established a new joint venture subsidiary in Brazil as noted above in Note 11 to the Company's Condensed Consolidated Financial Statements –~~ ~~Purchase of Interests in Subsidiaries~~~~. This new subsidiary purchased stock in two Brazilian companies – New Momentum, Ltda. and New Momentum Servicos Temporarios Ltda.~~

~~SPAR Group, Inc. and Subsidiaries~~
~~Critical Accounting Policies~~
~~Other than the adoption of accounting pronouncements~~ as described above, there have been no significant changes to the Company's accounting policies since it filed its audited consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2016, with the SEC on April 17, 2017.
Results of Operations

Three months ended ~~September~~ June 30, 2021~~, 2017~~, compared to three months ended June 30, 2020~~September~~ 30~~, 2016~~

The following table sets forth selected financial data and data as a percentage of net revenues for the periods indicated (in thousands, except percent data).

Three Months Ended September 30,

Three Months Ended June 30,

2017

2016

2021

2020

$
%
$
%

$

%

$

%

Net revenues
$ 48,752 100.0 % $ 33,438 100.0 % $ 67,176 100.0 % $ 50,944 100.0 %
Cost of revenues
39,960 82.0 26,162 78.2 55,170 82.1 41,072 80.6
Gross profit
8,792 18.0 7,276 21.8 12,006 17.9 9,872 19.4
Selling, general & administrative expense
7,477 15.3 6,360 19.0 9,585 14.3 7,370 14.5
Depreciation & amortization
487 1.0 486 1.5 534 0.8 539 1.1
Operating income
828 1.7 430 1.3 1,887 2.8 1,963 3.8
Interest expense, net
110 0.2 51 0.2 129 0.2 84 0.2
Other (income), net
(78 ) (0.2 ) (78 ) (0.2 )
Other expense (income), net
5 0.0 (50 ) (0.0 )
Income before income taxes
796 1.7 457 1.3 1,753 2.6 1,929 3.6
Income tax expense (benefit)
210 0.4 (31 ) (0.1 )
Income tax expense
621 0.9 624 1.2
Net income
586 1.3 488 1.4 1,132 1.7 1,305 2.4
Net income attributable to non-controlling interest
(340 ) (0.7 ) (546 ) (1.6 ) (618 ) (0.9 ) (1,408 ) (2.8 )
Net income (loss) attributable to SPAR Group, Inc.
$ 246 0.6 % $ (58 ) (0.2 )% $ 514 0.8 % $ (103 ) (0.4 )%

Net Revenues

Net revenues for the three months ended ~~September~~June 30, ~~2017,~~2021 were ~~$48.8~~$67.2 million, compared to ~~$33.4~~$50.9 million for the three months ended ~~September~~June 30, ~~2016,~~2020, an increase of ~~$15.3~~$16.3 million or ~~45.8%~~31.9%. The increase in net revenue is primarily attributable to the acquisition of our Brazil subsidiary, which contributed $9.3 million. In addition, the remainder of our international segment increased $2.3 million, and our domestic segment increased $3.7 million.

Domestic net revenues totaled ~~$15.1~~$27.3 million in the three months ended ~~September~~June 30, ~~2017, compared to $11.3 million for the same period in 2016, an increase of 32.9%.~~ ~~The increase was primarily due to an increase in project work compared to last year.~~
~~International net revenues totaled $33.7 million for the three months ended September 30, 2017,~~2021, compared to $22.1 million for the same period in ~~2016,~~2020.
International net revenues totaled $39.9 million for the three months ended June 30, 2021, compared to $28.8 million for the same period in 2020, an increase of ~~$11.6~~$11.1 million or ~~52.4%~~38.5%. The increase in international net revenues was ~~primarily~~ due to ~~the September 2016 acquisition of our Brazilian operation, which added $9.3 million, an increase~~foreign currency translation, and increased revenues in Brazil, Mexico and South ~~Africa of $0.8 million, and an increase in Japan of $0.6 million.~~Africa.

Cost of Revenues

The Company's cost of revenues consists of its on-site labor and field ~~administration~~administration fees, travel and other direct ~~labor-related~~labor related expenses and was ~~82.0%~~82.1% of its net revenues for the three months ended ~~September~~June 30, ~~2017,~~2021, and ~~78.2%~~80.6% of its net revenues for the three months ended ~~September~~June 30, ~~2016.~~2020.

Domestic cost of revenues was ~~76.5%~~81.2% of net domestic revenues for the three months ended ~~September~~June 30, ~~2017,~~2021, and ~~73.5%~~79.1% of net domestic revenues for the three months ended ~~September~~June 30, ~~2016.~~2020. The increase in cost of revenues was due primarily to increased wage pressure and unfavorable mix of project work.
Internationally, the cost of revenues as a percentage of net international revenues ~~of 3.0 percentage points~~ was ~~due primarily to continued price pressure~~82.8% and ~~an unfavorable mix of project work compared to the same period last year. For~~81.8% for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016, approximately 68% and 76%, respectively, of the Company's domestic cost~~2020, respectively. The increase in costs of revenues resulted from in-store merchandiser specialist, on-site assembly technician and field administration services, purchased from certain of the Company's affiliates, SBS, and SAS, respectively. (See Note 6 to the Condensed Consolidated Financial Statements - ~~Related-Party Transactions~~.)was driven by increasing labor costs globally.

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Internationally, the cost of revenues increased to 84.4% of net revenues for the three months ended September 30, 2017, compared to 80.7% of net revenues for the three months ended September 30, 2016. The cost of revenue increase of 3.7 percentage points ~~was primarily due to a mix of higher cost margin business in Brazil, China and Mexico.~~

Selling, General and Administrative Expenses

Selling, general and administrative expenses of the Company include its corporate overhead, project management, information technology, executive compensation, human resources, legal and accounting expenses. Selling, general and administrative expenses werewere approximately ~~$7.5~~$9.6 million and ~~$6.4~~$7.4 million for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively. The year-over-year increase is a reflection of the savings in 2020 from pandemic-related furloughs and continued investment in the growth of the business in 2021.

Domestic selling, general and administrative expenses totaled ~~$2.9~~$4.4 million and $3.9 million for ~~both~~ the three ~~month periods~~months ended ~~September~~June 30, ~~2017~~2021 and ~~201~~6,2020, respectively.

International selling, general and administrative expenses totaled ~~$4.6~~$5.2 million and $3.5 million for the three months ended ~~September~~June 30, ~~2017, compared to $3.5 million for the same period in 2016. The increase of approximately $1.1 million was primarily attributable to the Brazil acquisition.~~2021 and 2020, respectively.

Depreciation and Amortization

Depreciation and amortization charges totaled ~~$487,000~~$534,000 and $539,000 for the three months ended ~~September~~June 30, ~~2017,~~2021 and ~~$486,000 for the same period in 2016.~~2020, respectively.

Interest Expense

The Company's net interest expense was ~~$110,000~~$129,000 for the three months ended ~~September~~June 30, ~~2017, compared to $51,000~~2021, and $84,000 for the same period in 2020.
Other Expense (Income)
Other expense was $5,000 and other income was $50,000 for the three months ended ~~September~~June 30, ~~2016. The change is due primarily to increased domestic average borrowing~~2021 and ~~interest rate and lower interest income due to distribution of cash in the form of a dividend from South Africa.~~
~~Other Income~~
~~Other income totaled $78,000 for both the three month periods ended September 30, 2017 and 2016,~~2020, respectively.

Income Taxes

Income tax expense was ~~$210,000 for the three months ended September 30, 2017, compared to a net tax benefit of $31,000~~$621,000 for the three months ended ~~September~~June 30, ~~2016. The change is due primarily to improved domestic performance~~2021, compared to ~~prior year.~~$624,000 for the three months ended June 30, 2020.
Non-controlling Interest

Net operating profits from thethe non-controlling interest, from the Company's 51% owned subsidiaries, resulted in a reduction of net income attributable to SPAR Group, Inc. of ~~$340,000 and $546,000~~$618,000 for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~$1.4 million for three months ended June 30, 2020 respectively.

Net Income (Loss)

The ~~Company~~Company reported net income of ~~$246,000~~$514,000 for the three months ended ~~September~~June 30, ~~2017,~~2021, or ~~$0.01~~$0.02 per diluted share, compared to a net loss of ~~$58,000,~~$103,000, or $0.00 per diluted share, for the corresponding period last year. ~~The change is due primarily to increased domestic and international sales.~~

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~~Nine~~Six months ended ~~September~~ June 30, 2021~~30, 2017~~, compared to ~~nine~~six months ended ~~September~~ June 30, ~~2016~~2020

The following table sets forth selected financial data and data as a percentage of net revenues for the periods indicated (in thousands, except percent data).

Nine Months Ended September 30,

2017

2016

$
%
$
%

Net revenues
$ 131,361 100.0 % $ 89,781 100.0 %
Cost of revenues
105,563 80.4 69,309 77.2
Gross profit
25,798 19.6 20,472 22.8
Selling, general & administrative expense
21,988 16.7 17,637 19.7
Depreciation & amortization
1,526 1.2 1,459 1.6
Operating income
2,284 1.7 1,376 1.5
Interest expense, net
117 0.1 111 0.1
Other (income), net
(275 ) (0.2 ) (183 ) (0.2 )
Income before income taxes
2,442 1.8 1,448 1.6
Income tax expense
907 0.7 200 0.2
Net income
1,535 1.1 1,248 1.4
Net income attributable to non-controlling interest
(1,189 ) (0.9 ) (1,164 ) (1.3 )
Net income attributable to SPAR Group, Inc.
$ 346 0.2 % $ 84 0.1 %

Six Months Ended June 30,

2021

2020

$

%

$

%

Net revenues
$ 128,273 100.0 % $ 112,292 100.0 %
Cost of revenues
104,008 81.1 90,632 80.7
Gross profit
24,265 18.9 21,660 19.3
Selling, general & administrative expense
18,595 14.5 17,141 15.3
Depreciation & amortization
1,064 0.8 1,079 1.0
Operating income
4,606 3.6 3,440 3.0
Interest expense, net
277 0.2 312 0.3
Other income, net
(70 ) (0.1 ) (58 ) (0.1 )
Income before income taxes
4,399 3.5 3,186 2.8
Income tax expense
1,486 1.2 959 0.9
Net income
2,913 2.3 2,227 1.9
Net income attributable to non-controlling interest
(1,482 ) (1.2 ) (2,034 ) (1.8 )
Net income attributable to SPAR Group, Inc.
$ 1,431 1.1 % $ 193 0.1 %

Net Revenues

Net revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021 were ~~$131.3~~$128.3 million, compared to ~~$89.8~~$112.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2020, an increase of ~~$41.5~~$16.0 million or ~~46.3%~~14.2%. The year-over-year increase ~~in net revenue attributable to our international segment~~ was ~~$33.8 million, primarily~~driven by a combination of continued business development efforts and the economic improvements from ~~our Brazil, India and South Africa operations. Our domestic segment contributed an increase of $7.8 million compared to last year.~~the global pandemic recovery.

Domestic net ~~revenue~~srevenues totaled ~~$40.1~~$50.9 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$32.3~~$45.4 million for the same period in ~~2016, an increase of 24.2%. The increase was primarily due to an increase in project work compared to last year.~~2020.

International net ~~revenu~~esrevenues totaled ~~$91.3~~$77.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$57.5~~$66.9 million for the same period in ~~2016,~~2020, an increase of ~~$33.8~~$10.5 million or ~~58.7%~~15.7%. ~~The increase in net revenues was primarily due to the September 2016 acquisition of our Brazilian operation, which contributed $27.3 million, and an increase in South Africa by $4.8 million.~~

Cost of Revenues

The Company's cost of revenues consists of its on-site labor and field administration fees, travel and other direct ~~labor-related~~labor related expenses and was ~~80.4%~~81.1% of its net revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, and ~~77.2%~~80.7% of its net revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020.

Domestic cost of revenues was ~~73.6%~~79.5% of net domestic revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2017, and 71.5%~~2021, and 77.6% of net domestic revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. The increase in cost of revenues was due primarily to increased wages pressures and a shift in mix of project work.
Internationally, the cost of revenues as a percentage of net international revenues ~~of 2.1 percentage points~~ was ~~due primarily to continued price pressure~~82.1% and ~~an unfavorable mix of project work compared to~~82.8% for the ~~same period last year. For the nine~~six months ended ~~September~~June 30, ~~2017~~2021 and 2016, approximately 77% and 80%, respectively, of the Company's domestic cost of revenues resulted from in-store merchandiser specialist, on-site assembly technician and field administration services, purchased from certain of the Company's affiliates, SBS and SAS,2020, respectively. ~~(See Note 6 to the Condensed Consolidated Financial Statements -~~ ~~Related-Party Transactions~~.)

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~~Internationally, the cost of revenues~~ increased to 83.3% of net revenues for the nine months ended September 30, 2017, compared to 80.4% of net revenues for the nine months ended September 30, 2016. The cost of revenue increase of 2.9 percentage points was primarily due to a mix of higher cost margin business in Brazil and Mexico.

Selling, General and Administrative Expenses

Selling, general and administrative expenses of the Company include its corporate overhead, project management, information technology, executive compensation, human resources, legal and accounting expenses. Selling, general and administrative expenses werewere approximately ~~$22.0~~$18.6 million and ~~$17.6~~$17.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively. The year-over-year increase is a reflection of the savings in 2020 from pandemic-related furloughs and continued investment in the growth of the business in 2021.

Domestic selling, general and administrative expenses totaled ~~$8.9~~$8.6 million and ~~$8.3~~$8.7 million for the ~~nine month periods~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively. ~~The increase in selling, general and administrative expense was directly related to increased spending on accounting and legal services.~~

International selling, general and administrative expenses totaled $~~13.1~~$10.0 million and $8.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, compared to $9.3 million for the same period in 2016. The increase of approximately $3.8 million was primarily attributable to the Brazil acquisition.~~2021 and 2020, respectively.

Depreciation and Amortization

Depreciation and amortization charges totaled ~~$1.5~~$1.1 million for both the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021 and ~~2016.~~2020.

Interest Expense

The Company's net interest expense was ~~$117,000~~$277,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017, compared to net interest expense of $111,000~~2021, and $312,000 for the ~~nine months ended September 30, 2016.~~same period in 2020.

Other Income

Other income ~~totaled $275,000~~was $70,000 and ~~$183,000~~$58,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016, respectively, with the increase primarily in South Africa.~~2020, respectively.

Income Taxes

Income tax expense was ~~$907,000~~$1.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared to ~~$200,000~~$1.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016. The change is due primarily to improved domestic performance compared to prior year.~~2020.
Non-controlling Interest

Net operating profits from the non-controlling interest, from the Company's 51% owned subsidiaries, resulted in a reduction of net income attributable to SPAR Group, Inc. of ~~$1.2~~$1.5 million for ~~both~~ the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~$2.0 million for six months ended June 30, 2020 respectively.

Net Income

The Company reported a net income of ~~$346,000~~$1.4 million for the ~~nine~~six months ended ~~September 30, 2017,~~June 30, 2021, or ~~$0.02~~$0.07 per diluted share, compared to ~~$84,000,~~a net income of $193,000, or ~~$0.00~~$0.01 per diluted share, for the corresponding period last year.

Liquidity and Capital Resources

In the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, the Company had a net income before ~~non-controllin~~gnon-controlling interest of ~~$1.5~~$2.9 million.
Net cash provided by operating activities was $1.0 million for the six months ended June 30, 2021, compared to $8.8 million for the six months ended June 30, 2020. The net cash provided by operating activities during the six months ended June 30, 2021, was primarily due to increase in accounts receivable driven by higher revenue, partially offset by non-cash items, increases in accounts payable and accrued expenses. Cash from operations could be affected by various risks and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic and the other risks detailed in the section titled "Risk Factors" included elsewhere in our Annual Report. However, we believe that our existing cash, cash equivalents, short-term investment balances, funds available under our debt agreement, and cash generated from operations, will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.
Net cash used in investing activities was $886,000 for the six months ended June 30, 2021, compared to $786,000 for the six months ended June 30, 2020. The net cash used in investing activities during the six months ended June 30, 2021, was due to fixed asset additions, primarily capitalized software.

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Net cash ~~provided by operating activities was $6.4 million and $2.1 million for the nine months ended September 30, 2017 and 2016, respectively.~~ The net cash provided by operating activities during the nine months ended September 30, 2017, was primarily due to cash-impacting earnings and an increase in accrued expenses, other current liabilities, customer incentives and deposits and accounts payable, partially offset by an increase in accounts receivable, prepaid expenses and other current assets.
Net cash used in investing activities was $1.0 million for the nine months ended September 30, 2017, compared to $1.5 million for the nine months ended September 30, 2016. The net cash used in investing activities during the nine months ended September 30, ~~2017, was due to fixed asset additions, primarily capitalized software.~~
~~Net cash used in financing activities for the nine months ended September 30, 2017, was approximately $5.7 million, compared to $1.8 million~~ provided by financing activities for the n~~ine~~six months ended ~~September~~June 30, ~~2016. Net~~2021, was $2.0 million compared to cash used in financing activity of $792,000 for the six months ended June 30, 2020. Net cash provided by financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, was primarily due to net draws/payments on lines of ~~credit, and a distribution to non-controlling local investors in South Africa.~~credit.

The a~~bove~~above activity and the impact of foreign exchange rate changes resulted in an increase in cash and cash equivalents for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 of approximately ~~$338,000.~~$729,000.

~~At September 30, 2017, the~~The Company had net working capital of ~~$12.9 million, as compared to net working capital of $12.5~~$25.9 million and $23.6 million at June 30, 2021 and December 31, ~~2016.~~2020 respectively. The Company's current ratio was ~~1.4~~1.5 at ~~both September~~June 30, ~~2017,~~2021, and 1.6 at December 31, ~~2016, respectively.~~2020.

Item 3.     ~~Quantitative and Qualitative Disclosures about Market Risk~~
Quantitative and Qualitative Disclosures about Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this ~~item~~.item.
Item 4.
Controls and Procedures
Management's Evaluation of Disclosure Controls and Procedures

~~Item 4.~~      ~~Controls and Procedures~~
~~Restatement of Previously Issued Financial Statements~~
An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosureDisclosure controls and procedures ~~as of~~ ~~September 30, 2017. The evaluation of our disclosure~~(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by ~~our~~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. The Company's Chief Executive Officer and Chief Financial Officer ~~included a review~~have reviewed and evaluated the effectiveness of the ~~restatement described in~~Company's disclosure controls and procedures as of the ~~filing~~end of the period covered by this ~~Form 10-Q, where we restated our consolidated balance sheet, consolidated statements of operations~~report, as required by Exchange Act Rules 13a-15(b) and ~~comprehensive income and consolidated statements of equity.~~Rule 15d-15(b). Based on ~~this~~that evaluation, ~~our~~the Chief Executive Officer and Chief Financial Officer have concluded that ~~our~~the Company's current disclosure controls and procedures were not effective as of ~~September~~June 30, 2017, at the reasonable assurance level, to enable us to record, process, summarize and report information required to be disclosed by us in reports that we file or submit within the time periods specified in the SEC rules or forms due to2021 because of the material weakness in internal control over financial reporting described ~~below.~~below, although they believe that the material weakness did not have an effect on our financial results and there were no identified instances of any ineffective oversight in the establishment and monitoring of the Company’s internal controls for the current reporting period.

~~Material Weakness in~~Management's Report on Internal Control ~~over~~Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting for the Registrant, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management has designed such internal control over financial reporting by the Company to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

A material weakness is defined as a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis. ~~In connection with~~
The Company's management has evaluated the ~~evaluation~~effectiveness of ~~our disclosure controls and procedures as of September 30, 2017, we identified a material weakness in our~~the Company's internal control over financial reporting ~~associated with~~using the ~~recognition~~"Internal Control – Integrated Framework (2013)" created by the Committee of ~~accumulated other comprehensive loss both in the equity section~~Sponsoring Organizations of the ~~consolidated balance sheet and~~Treadway Commission ("COSO") framework. The Company's internal control environment establishes the ~~comprehensive loss portion~~tone of the ~~consolidated statement~~organization and other components of ~~income and comprehensive loss.~~
The Company did not design and maintain effective control over the assessment of the presentation of foreign currency translation adjustments when preparing the consolidated financial statements. While this is considered a material weakness in internal control over financial reporting, which is the ~~Company determined~~responsibility of management and is subject to the oversight of SGRP's Audit Committee and SGRP's Board of Directors (the "Board").
Based on this evaluation, management has concluded that a material weakness related to the oversight by the Board of Directors of the development and performance of internal control existed as of June 30, 2021. Specifically, on June 9, 2021, three independent directors, constituting SGRP’s entire Audit Committee, resigned from our Board of Directors. See Independent Director Resignations, Nasdaq Deficiencies and Search for New Independent Directors in Note 5 to SPAR Group's Consolidated Financial Statements, above. In the interim, for the limited purposes of communications with SGRP's independent public accountants, SGRP's Board currently may act as SGRP's interim Audit Committee respecting those communications. The effectiveness of SGRP's Board acting as SGRP's interim Audit Committee respecting those communications may be weakened given the pending claims between two of our directors and the Company.
Management believes that the ~~related impact was~~material weakness did not have an effect on our financial results or in any ineffective oversight in the establishment and monitoring of our internal controls. However, management believes that the material weakness could result in a material misstatement in our financial statements in future periods.
Management is committed to the ~~results~~implementation of ~~operations or financial position for any prior annual or interim period as described above in Note 2~~remediation efforts to address the material weaknesses. The Company expects to appoint additional members to our Board of Directors who would serve on our Audit Committee following the ~~Company's prior period financial statements for the year ended December 31, 2016.~~

~~SPAR Group, Inc. and Subsidiaries~~
completion of our candidate search.

Changes in Internal ~~Control over~~Controls Over Financial Reporting

Other than the material weakness as set forth above, ~~during the quarter ended September 30, 2017,~~ there have been no changes in our internal controls over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the quarter ended ~~September~~June 30, ~~2017,~~2021, identified in connection with our evaluation that has materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
~~Management's Remediation Initiatives~~
We have taken, and continue to take, the actions described below to remediate the identified material weakness. As we continue to evaluate and work to improve our internal controls over financial reporting, our senior management may determine to take additional measures to address control deficiencies or modify the remediation efforts, or in appropriate circumstances not to complete certain of the remediation measures described in this section. While the Audit Committee and senior management are closely monitoring the implementation, until the remediation efforts discussed in this section, including any additional remediation efforts that our senior management identifies as necessary, are completed, tested, and determined effective, the material weakness described above will continue to exist.
~~To address this material weakness, our management has implemented new procedures and internal controls surrounding the reporting of its majority owned international subsidiaries to~~ ~~ensure comprehensive income (loss) and non-controlling interest are properly adjusted to account for the impact of foreign currency translation.~~

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PART II: OTHER INFORMATION

Item 1.     ~~Legal Proceedings~~
Legal Proceedings

The Company is a party to various legal actions and administrative proceedings arising in the normal course of business. In the opinion of ~~Company~~'sCompany's management, ~~disposition~~resolution of these matters ~~are~~is not anticipated to have a material adverse effect on the Company or its estimated or desired affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition.

~~The Company executes the services it provides to its domestic clients~~ ~~primarily through independent field merchandising, auditing, assembly and other field personnel (each~~For a ~~"Field Specialist"), almost all~~further discussion of ~~whom are engaged and provided as independent contractors by SBS. For contractual details and payment amounts,~~certain legal proceedings, see Note 65 and Note 8 to the Company's Condensed Consolidated Financial Statements – ~~Related Party Transactions~~ – ~~Domestic Related Party Services~~, above.
~~The appropriateness of SBS~~'s treatment of its Field Specialists as independent contractors has been periodically subject to legal challenge (both currently and historically) by various states and others, SBS's expenses of defending those challenges and other proceedings have historically been reimbursed by the Company under SBS's Prior Agreement, and SBS's expenses of defending those challenges and other proceedings were reimbursed by the Company during the three month periods ended September 30, 2017 and 2016 (in the amounts of $39,000 and $144,000, respectively), and the nine month periods ended September 30, 2017 and 2016 (in the amounts of $218,000 and $587,000, respectively), after determination (on a case by case basis) that those defense expenses were costs of providing services to the Company. The Company has advised SBS that, since there is no currently effective comprehensive written services agreement with SBS, the Company will continue to review and decide each request by SBS for reimbursement of its legal defense expenses (including appeals) on a case-by-case basis in its discretion, including the relative costs and benefits to the Company. The Company has not agreed, and does not currently intend, to reimburse SBS for any judgment or similar amount (including any damages, settlement, or related tax, penalty, or interest) in any legal challenge or other proceedingagainst or involving SBS, and the Company does not believe it has ever done so (other than in insignificant nuisance amounts). However, there can be no assurance that SBS will be able to satisfy any such judgment or similar amount resulting from any adverse legal determination, that SBS or someone else will not claim, or that SBS will be able to successfully defend any claim, that the Company is liable (through reimbursement, indemnification or otherwise) for any such judgment or similar amount imposed against SBS. Furthermore, there can be no assurance that SBS will succeed in defending any such legal challenge, the legal expenses of prolonged litigation and appeals could continue to be (and have from time to time been) significant, and prolonged litigation and appeals and any adverse determination in any such challenge could have a material adverse effect on SBS's ability to provide services needed by the Company and the Company's costs of doing business.
Current material and potentially material proceedings against SBS and, in one instance, the Company are described below. These descriptions are based on an independent review by the Company and do not reflect the views of SBS, its management or its counsel.
~~SBS Clothier Litigation~~
Melissa Clothier was engaged by SBS (then known as SPAR Marketing Services, Inc.) and provided services pursuant to the terms of an "Independent Merchandiser Agreement" acknowledging her engagement as an independent contractor. On June 30, 2014, Ms. Clothier filed suit against SBS and the Company styled Case No. RG12 639317, in the Superior Court in Alameda County, California, in which Ms. Clothier asserted claims on behalf of herself and a putative class of similarly situated merchandisers in California who are or were classified as independent contractors at any time between July 16, 2008, and June 30, 2014. Ms. Clothier alleged that she and other class members were misclassified as independent contractors and that, as a result of this misclassification, the defendants improperly underpaid them in violation of various California minimum wage and overtime laws. The Company was subsequently dismissed from the action without prejudice. The court ordered that the case be heard in two phases. Phase one was limited to the determination of whether members of the class were misclassified as independent contractors. After hearing evidence, receiving post-trial briefings and considering the issues, the Court issued its Statement of Decision on September 9, 2016, finding that the class members had been misclassified as independent contractors rather than employees. The parties have now moved into phase two to determine damages (if any), which included discovery as to the measure of damages in the case. Trial on phase two was scheduled for September 11, 2017, but was postponed. The Court has scheduled a case management conference for December 19, 2017, to establish a new trial date for phase two. SBS has advised the Company that SBS will appeal the adverse phase one determination when permitted under the court's rules.

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~~SBS Rodgers Litigation~~
Item 1A.
~~Maceo Rodgers was engaged by and provided services to SBS pursuant to the terms of his "Master Agreements" with SBS acknowledging his engagement as an independent contractor.~~ On February 21, 2014, Rodgers filed suit against SBS, Robert G. Brown and William H. Bartels, styled Civil Action No. 3:14-CV-00055, in the U.S. District Court for the Southern District of Texas (Galveston Division). Plaintiff asserted claims on behalf of himself and an alleged class of similarly situated individuals who provided services to SBS as independent contractors at any time on or after July 15, 2012, claiming they all were misclassified as independent contractors and that, as a result of this misclassification, the Defendants improperly underpaid them in violation of the Fair Labor Standards Act's overtime and minimum wage provisions. Although the Court conditionally certified the class on December 8, 2015, only 61 individuals joined the action as opt-in plaintiffs, and all but 11 of them have potentially disqualifying arbitration provisions, residences outside the class's geographic area, or late opt-in filings, and were challenged by the Defendants in various motions, including a motion to decertify the class. The Court, however, did not rule on these motions and instead stayed the case on September 19, 2017, to allow the parties to mediate. On October 24, 2017, the Court granted the parties' joint motion to extend the stay order until January 31, 2018.
~~SBS and SGRP Hogan Litigation~~
Paradise Hogan was engaged by and provided services to SBS as an independent contractor pursuant to the terms of an "Independent Contractor Master Agreement" with SBS acknowledging his engagement as an independent contractor. On January 6, 2017, Hogan filed suit against SBS and SGRP and part of the Company), styled Civil Action No. 1:17-cv-10024-LTS, in the U.S. District Court for District of Massachusetts. Hogan initially asserted claims on behalf of himself and an alleged nationwide class of similarly situated individuals who provided services to SBS and SGRP as independent contractors. Hogan alleged that he and other alleged class members were misclassified as independent contractors, and as a result of this purported misclassification, Hogan asserted claims on behalf of himself and the alleged Massachusetts class members under the Massachusetts Wage Act and Minimum Wage Law for failure to pay overtime and minimum wages, as well as state law claims for breach of contract, unjust enrichment, quantum meruit, and breach of the covenant of good faith and fair dealing. In addition, Hogan asserted claims on behalf of himself and the nationwide class for violation of the Fair Labor Standards Act's overtime and minimum wage provisions. On March 28, 2017, the Company moved to refer Hogan's claim to arbitration pursuant to his agreement, to dismiss or stay Hogan's case pending arbitration, and to dismiss Hogan's case for failure to state a specific claim upon which relief could be granted. Plaintiff's counsel subsequently notified SGRP's attorney of their intent to amend their Complaint without prejudice. The Amended Complaint, which was filed on May 2, 2017, eliminated all of Plaintiff's claims except for a single claim against SGRP for failure to pay Hogan and a similarly situated class of Massachusetts independent contractors all wages under the Massachusetts Wage Act and a separate, but identical claim against SBS. The result of the amendment significantly narrowed the scope of the litigation and eliminated the original nationwide Fair Labor Standards Act claims. The Company was granted leave to refile their motion to compel arbitration to dismiss Hogan's case pending arbitration, and to dismiss Hogan's case for failure to state a specific claim upon which relief could be granted. The Company's motion was filed on June 7, 2017, Plaintiff's opposition to the Company's motion was filed on June 21, 2017, and the Company thereafter filed a reply brief in support of its motion on June 30, 2017. The parties currently await a hearing date on the Company's motion.
~~Potential Adverse Effects of the SBS Litigation~~
~~Any prolonged continuation of or material increase in the legal defense costs of SBS (and thus the reimbursable expenses SBS may charge to and that may be paid by the Company~~to the extent reimbursement is approved by the Company in its discretion), the failure of SBS to satisfy any judgment or similar amount (including any damages, settlement, or related tax, penalty, or interest) in any legal challenge or other proceeding imposed against or involving SBS, any claim by SBS, any other related party or any third party that the Company is somehow liable for any such judgment or similar amount imposed against SBS or other related party, any judicial determination that the Company is somehow liable for any such judgment or similar amount imposed against SBS or other related party (in whole or in part), any decrease in SBS's performance (quality or otherwise), any inability by SBS to execute the services for the Company, or any increase in the Company's use of employees (rather than independent contractors) as its domestic Field Specialists, in each case in whole or in part, could have a material adverse effect on the Company or its performance or condition (including its assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. See Note 6 to the Company's Consolidated Financial Statements – ~~Related Party Transactions~~ – ~~Domestic Related Party Services~~~~, above.~~

~~SPAR Group, Inc. and Subsidiaries~~
Risk Factors

~~Item 1A.~~      ~~Risk Factors~~
Existing Risk Factors

Various risk factors applicable to the Company and its businesses are described in Item 1A under the caption "Risk Factors" in the ~~2016~~2020 Annual Report, which ~~risk factors~~Risk Factors are incorporated by reference into this Quarterly Report. There have been no material changes in the Company's risk factors since the ~~2016~~2020 Annual ~~Report other than as disclosed below.~~Report. You should review and give attention to all of those Risk Factors.

We have identified a material weakness in our internal control over financial reporting. If we fail to remediate this material weakness, our ability to produce accurate and timely financial statements could be impaired, which could adversely affect investor views of us and ~~the value of our common stock.~~
As a public company, we are required to comply with the standards adopted by the Public Company Accounting Oversight Board in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, regarding internal control over financial reporting. In connection with our evaluation of compliance, we identified a material weakness in our internal control over financial reporting as of March 31, 2017. A "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. During the first quarter of 2017, we have identified a material weakness in our internal control over financial reporting associated with the recognition of accumulated other comprehensive loss both in the equity section of the consolidated balance sheet and the comprehensive loss portion of the consolidated statement of income and comprehensive loss. Specifically, the Company previously attributed 100% of the foreign currency translation adjustment recorded in annual comprehensive loss to the Company compared to allocating a proportionate amount to the non-controlling interest portion on both the consolidated balance sheet and the consolidated statement of income and comprehensive loss. To address this material weakness, our management has implemented new procedures and internal controls surrounding the reporting of its majority owned international subsidiaries to insure comprehensive income (loss) and non-controlling interest are properly adjusted to account for the impact of foreign currency translation. However, these steps will take time to fully integrate and confirm, and until the remediation steps are fully implemented and tested, the material weakness will continue to exist.
If we fail to remediate the identified material weakness or identify further material weaknesses, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price. In addition, our failure to timely file our periodic reports could eventually result in the delisting of our common stock from the New York Stock Exchange, regulatory sanctions from the SEC, and/or the breach of covenants in our credit facilities or of any preferred equity or debt securities we may issue in the future, any of which could have a material adverse impact on our operations and your investment in our common stock.
~~Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds~~
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Not ~~applicable~~.applicable.

~~Item 3.       Defaults upon Senior Securities~~
Item 3.
Defaults upon Senior Securities
Not applicable.
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5.
Other Information

Not applicable.

33

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SPAR Group, Inc. and Subsidiaries

~~Item 4.       Mine Safety Disclosures~~
~~Not applicable.~~
~~Item 5.       Other Information~~
~~Not applicable.~~
~~Item 6.       Exhibits~~
Item 6.
Exhibits

31.1
Certification of the CEO pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as filed herewith.

31.2
Certification of the CFO pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as filed herewith.

32.1
Certification of the CEO pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as filed herewith.

32.2
Certification of the CFO pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as filed herewith.

101.INS
Inline XBRL Instance Document - the instance document does not appear in the interactive Inline XBRL document.

101.SCH
Inline XBRL Taxonomy Extension Schema Document

101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB
Inline XBRL Taxonomy Extension ~~Labels~~Label Linkbase Document

101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

34

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SPAR Group, Inc. and Subsidiaries

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~November 14, 2017~~August 16, 2021
SPAR Group, Inc., Registrant

By:/s/ ~~James R. Segreto~~Fay DeVriese

~~James~~ ~~R. Segreto~~
Fay DeVriese
Chief Financial Officer, Treasurer and Secretary

39
35

	September 30, 2017			December 31, 2016
	(Unaudited)			(revised) (1)
Assets
Current assets:
Cash and cash equivalents	$	7,662		$	7,324
Accounts receivable, net		36,824			33,669
Prepaid expenses and other current assets		1,629			1,299
Total current assets		46,115			42,292

Property and equipment, net		2,551			2,536
Goodwill		1,841			1,847
Intangible assets, net		1,900			2,340
Deferred income taxes		4,468			4,694
Other assets		1,683			1,142
Total assets	$	58,558		$	54,851

Liabilities and equity
Current liabilities:
Accounts payable	$	7,783		$	5,567
Accrued expenses and other current liabilities		13,598			9,766
Due to affiliates		4,008			3,349
Customer incentives and deposits		1,587			1,305
Lines of credit and short-term loans		6,222			9,778
Total current liabilities		33,198			29,765
Long-term debt and other liabilities		33			4
Total liabilities		33,231			29,769

Commitments and Contingencies – See Note 9
Equity:
SPAR Group, Inc. equity
Preferred stock, $.01 par value: Authorized and available shares– 2,445,598 Issued and outstanding shares– None – September 30, 2017, and December 31, 2016		–			–
Common stock, $.01 par value: Authorized shares – 47,000,000 Issued shares – 20,680,717 – September 30, 2017, and December 31, 2016		207			207
Treasury stock, at cost 115,123 shares – September 30, 2017, and 37,877 shares – December 31, 2016		(127	)		(51	)
Additional paid-in capital		16,234			16,093
Accumulated other comprehensive loss		(2,060	)		(2,407	)
Retained earnings		6,246			5,835
Total SPAR Group, Inc. equity		20,500			19,677
Non-controlling interest		4,827			5,405
Total equity		25,327			25,082
Total liabilities and equity	$	58,558		$	54,851

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
				(revised) (1)						(revised) (1)
Net revenues	$	48,752		$	33,438		$	131,361		$	89,781
Cost of revenues		39,960			26,162			105,563			69,309
Gross profit		8,792			7,276			25,798			20,472

Selling, general and administrative expense		7,477			6,360			21,988			17,637
Depreciation and amortization		487			486			1,526			1,459
Operating income		828			430			2,284			1,376

Interest expense		110			51			117			111
Other (income), net		(78	)		(78	)		(275	)		(183	)
Income before income tax expense		796			457			2,442			1,448

Income tax expense (benefit)		210			(31	)		907			200
Net income		586			488			1,535			1,248
Net income attributable to non-controlling interest		(340	)		(546	)		(1,189	)		(1,164	)
Net income (loss) attributable to SPAR Group, Inc.	$	246		$	(58	)	$	346		$	84

Basic and diluted income per common share:	$	0.01		$	–		$	0.02		$	–

Weighted average common shares – basic		20,602			20,607			20,633			20,580

Weighted average common shares – diluted		21,320			20,607			21,331			21,299

Net income	$	586		$	488		$	1,535		$	1,248
Other comprehensive (loss) income:
Foreign currency translation adjustments		(61	)		206			681			(495	)
Comprehensive income		525			694			2,216			753
Comprehensive income attributable to non-controlling interest		(318	)		(651	)		(1,523	)		(807	)
Comprehensive income (loss) attributable to SPAR Group, Inc.	$	207		$	43		$	693		$	(54	)

	Common Stock				Treasury Stock						Additional			Accumulated Other					Non-
	Shares		Amount		Shares			Amount			Paid-In Capital			Comprehensive Loss			Retained Earnings		Controlling Interest			Total Equity
Balance at January 1, 2017		20,681	$	207		38		$	(51	)	$	16,093		$	(2,407	)	$	5,835	$	5,405		$	25,082

Share-based compensation		–		–		–			–			178			–			–		–			178
Purchase of treasury shares		–		–		111			(121	)		–			–			–		–			(121	)
Reissued treasury shares – RSU's		–		–		(12	)		16			(16	)		–			–		–			–
Exercise of stock options		–		–		(22	)		29			(21	)		–			–		–			8
Distributions to non-controlling investors		–		–		–			–			–			–			–		(2,101	)		(2,101	)
Adoption of ASU 2016-09 (Note 12)		–		–		–			–			–			–			65		–			65
Other comprehensive income		–		–		–			–			–			347			–		334			681
Net income		–		–		–			–			–			–			346		1,189			1,535
Balance at September 30, 2017		20,681	$	207		115		$	(127	)	$	16,234		$	(2,060	)	$	6,246	$	4,827		$	25,327

	As of September 30, 2016									As of December 31, 2016
	As Reported			Adjusted			As Revised			As Reported			Adjusted			As Revised

Accumulated other comprehensive loss	$	(3,364	)	$	1,373		$	(1,991	)	$	(3,995	)	$	1,588		$	(2,407	)
Total SPAR Group, Inc. equity	$	18,572		$	1,373		$	19,945		$	18,089		$	1,588		$	19,677
Non-controlling interest	$	6,574		$	(1,373	)	$	5,201		$	6,993		$	(1,588	)	$	5,405

	Three months ended September 30, 2016									Nine months ended September 30, 2016
	As Reported			Adjusted			As Revised			As Reported			Adjusted		As Revised

Comprehensive income attributable to non-controlling interest	$	(546	)	$	(105	)	$	(651	)	$	(1,164	)	$	357	$	(807	)
Comprehensive loss attributable to SPAR Group, Inc.	$	148		$	(105	)	$	43		$	(411	)	$	357	$	(54	)

	Interest Rate as of September 30, 2017			2017		2018
USA - Sterling National Bank		4.8	%	$	–		5,720
Japan - Mizuho Bank		0.1	%		7	$	4
Australia - Oxford Funding Pty Ltd.		6.4	%		334		–
Brazil – Bradesco Bank		17.3	%		157		–
Total				$	498	$	5,724

									*Three Months Ended*				*Six Months Ended*
	Three Months Ended September 30,				Nine Months Ended September 30,				*June 30,*				*June 30,*
	2017		2016		2017		2016		*2021*		*2020*		*2021*		*2020*
Services provided by affiliates:
Field merchandiser and other expenses (SBS)	$	6,788	$	5,491	$	19,593	$	15,828
Field administration and other expenses (SAS)		1,044		1,011		3,178		3,138
Office and vehicle rental expenses (MPT)		30		8		46		32
National Store Retail Services (NSRS)									$	1,959		1,050	$	3,799		2,392
Office lease expenses (Mr. Burdekin)										6		6		12		12
Office lease expenses (RJ Holdings)										214		177		442		350
Office and vehicle lease expenses (MPT)										18		11		35		27
Vehicle rental expenses (MCPT)		579		245		870		618		12		281		24		580
Office and vehicle rental expenses (MHT)		85		34		126		85		30		58		59		131
Field merchandiser expenses (NDS Reklam)		–		1		–		1
Consulting and administrative services (CON)		61		74		181		241		0		11		0		23
Legal Services (KMSA)		31		–		79		–
Legal services (KMSA)										16		34		30		57
Warehousing rental (JFMD)		13		3		38		3		12		12		24		25

Consulting and administrative fees (SPARFACTS)										62		41		138		72
Total services provided by affiliates	$	8,631	$	6,867	$	24,111	$	19,946	$	2,329	$	1,681	$	4,563	$	3,669

Due to affiliates consists of the following (in thousands):	*June 30,*		*December 31,*
	*2021*		*2020*
Loans to local investors:
China (included in Other Receivables)	$	0	$	613

Loans from local investors:(1)
Australia	$	483	$	586
Mexico		623		623
Brazil		139		139
China		1,762		1,746
South Africa		364		415
Resource Plus		266		266
Total due to affiliates	$	3,637	$	3,775

Due to affiliates consists of the following (in thousands):	September 30,		December 31,
	2017		2016
Loans from local investors:(1)
Australia	$	250	$	231
Mexico		1,001		1,001
Brazil		139		139
China		720		761
South Africa		15		–
NMS LLC		–		348
Accrued Expenses due to affiliates:
SBS/SAS		1,883		869
Total due to affiliates	$	4,008	$	3,349

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue:
United States	$	15,062		$	11,332		$	40,069		$	32,268
International		33,690			22,106			91,292			57,513
Total revenue	$	48,752		$	33,438		$	131,361		$	89,781

Operating income (loss):
United States	$	343		$	(184	)	$	701		$	(120	)
International		485			614			1,583			1,496
Total operating income	$	828		$	430		$	2,284		$	1,376

Interest expense (income):
United States	$	56		$	36		$	158		$	88
International		54			15			(41	)		23
Total interest expense	$	110		$	51		$	117		$	111

Other (income), net:

United States	$	–		$	–		$	–		$	–
International		(78	)		(78	)		(275	)		(183	)
Total other (income), net	$	(78	)	$	(78	)	$	(275	)	$	(183	)

Income (loss) before income tax expense:

United States	$	287		$	(220	)	$	543		$	(208	)
International		509			677			1,899			1,656
Total income before income tax expense	$	796		$	457		$	2,442		$	1,448

Income tax (benefit) expense:
United States	$	14		$	(306	)	$	(71	)	$	(394	)
International		196			275			978			594
Total income tax (benefit) expense	$	210		$	(31	)	$	907		$	200

Net income:

United States	$	273		$	86		$	614		$	186
International		313			402			921			1,062
Total net income	$	586		$	488		$	1,535		$	1,248

Depreciation and amortization:
United States	$	339		$	334		$	1,018		$	1,014
International		148			152			508			445
Total depreciation and amortization	$	487		$	486		$	1,526		$	1,459

Capital expenditures:
United States	$	172		$	291		$	683		$	798
International		183			151			363			376
Total capital expenditures	$	355		$	442		$	1,046		$	1,174

	Three Months Ended September 30,										Nine Months Ended September 30,
	2017					2016					2017					2016
International revenue:			% of consolidated net revenue					% of consolidated net revenue					% of consolidated net revenue					% of consolidated net revenue
Brazil	$	11,132		22.8	%	$	1,850		5.5	%	$	29,232		22.3	%	$	1,850		2.1	%
South Africa		6,703		13.7			5,936		17.8			19,646		15.0			14,871		16.6
Mexico		6,115		12.5			5,495		16.4			16,177		12.3			15,600		17.4
China		2,868		5.9			3,029		9.1			7,396		5.6			8,646		9.6
Japan		2,426		5.0			1,799		5.4			5,970		4.5			5,157		5.7
India		1,947		4.0			1,523		4.6			5,397		4.1			4,203		4.7
Canada		1,499		3.1			1,453		4.3			4,544		3.5			4,582		5.1
Australia		935		1.9			945		2.8			2,741		2.1			2,359		2.6
Turkey		65		0.1			76		0.2			189		0.1			245		0.3
Total international revenue	$	33,690		69.0	%	$	22,106		66.1	%	$	91,292		69.5	%	$	57,513		64.1	%

	*Three Months Ended June 30,*										*Six Months Ended June 30,*
	*2021*					*2020*					*2021*					*2020*
			*% of*					*% of*					*% of*					*% of*
			*consolidated*					*consolidated*					*consolidated*					*consolidated*
International revenue:			*net revenue*					*net revenue*					*net revenue*					*net revenue*
Brazil	$	13,596		20.2	%	$	10,539		20.7	%	$	25,897		20.2	%	$	26,103		23.2	%
South Africa		8,524		12.7			6,088		12.0			16,246		12.7			13,002		11.6
Mexico		8,363		12.4			4,820		9.5			15,622		12.2			10,667		9.5
China		3,195		4.8			2,756		5.4			6,458		5.0			5,320		4.7
Japan		2,538		3.8			1,915		3.8			4,988		3.9			4,207		3.7
Canada		2,040		3.0			1,004		2.0			3,918		3.1			2,720		2.4
India		1,358		2.0			1,649		3.2			3,584		2.8			4,431		3.9
Australia		310		0.5			50		0.1			633		0.5			430		0.4
Total international revenue	$	39,924		59.4	%	$	28,821		56.7	%	$	77,346		60.4	%	$	66,880		59.4	%

Cash	$	484
Net Working Capital, net of cash		(155	)
Fixed Assets		22
Intangible Assets		336
Goodwill		133
Assumed Liabilities		(419	)
Net Fair Value of Assets Acquired	$	401

		Revenue				Net (Loss)
Consolidated supplemental pro forma for the nine month period ended September 30, 2016		$	113,783			$	(194	)

Year Ending December 31,	Amount

2017	$	7
2018		28
2019		28
Total		63
Less amount representing interest		4
Present value of net minimum lease payments included in accrued expenses and other current liabilities, and long term debt	$	59

		Three Months Ended				Six Months Ended
		June 30,				June 30,
Lease Costs	Classification	2021		2020		2021		2020
Operating lease cost	Selling, General and Administrative Expense	$	218	$	694	$	435	$	1,368
Short-term lease cost	Selling, General and Administrative Expense		206	$	100		508		213
Variable costs	Selling, General and Administrative Expense		42	$	97		92		194
Total lease cost		$	466	$	891	$	1,035	$	1,775

Period Ending December 31,	Amount
2021	$	660
2022		795
2023		339
2024		246
2025		392
Thereafter		141
Total Lease Payments		2,573
Less: imputed interest		455
Total		2,118

Primary Territory	Date Established	SGRP Percentage Ownership	Principal Office Location
United States of America	1979	100%	White Plains, New York, United States of America
Japan	May 2001	100%	Tokyo, Japan
Canada	June 2003	100%	Vaughan, Canada
South Africa	April 2004	51%	Durban, South Africa
India	April 2004	51%	New Delhi, India
Australia	April 2006	51%	Melbourne, Australia
China	March 2010	51%	Shanghai, China
Mexico	August 2011	51%	Mexico City, Mexico
Turkey	November 2011	51%	Istanbul, Turkey
Brazil¹	September 2016	51%	Sao Paolo, Brazil

	Three Months Ended September 30,												Three Months Ended June 30,
	2017						2016						2021						2020
		$		%				$		%			$			%			$			%
Net revenues	$	48,752			100.0	%	$	33,438			100.0	%	$	67,176			100.0	%	$	50,944			100.0	%
Cost of revenues		39,960			82.0			26,162			78.2			55,170			82.1			41,072			80.6
Gross profit		8,792			18.0			7,276			21.8			12,006			17.9			9,872			19.4
Selling, general & administrative expense		7,477			15.3			6,360			19.0			9,585			14.3			7,370			14.5
Depreciation & amortization		487			1.0			486			1.5			534			0.8			539			1.1
Operating income		828			1.7			430			1.3			1,887			2.8			1,963			3.8
Interest expense, net		110			0.2			51			0.2			129			0.2			84			0.2
Other (income), net		(78	)		(0.2	)		(78	)		(0.2	)
Other expense (income), net														5			0.0			(50	)		(0.0	)
Income before income taxes		796			1.7			457			1.3			1,753			2.6			1,929			3.6
Income tax expense (benefit)		210			0.4			(31	)		(0.1	)
Income tax expense														621			0.9			624			1.2
Net income		586			1.3			488			1.4			1,132			1.7			1,305			2.4
Net income attributable to non-controlling interest		(340	)		(0.7	)		(546	)		(1.6	)		(618	)		(0.9	)		(1,408	)		(2.8	)
Net income (loss) attributable to SPAR Group, Inc.	$	246			0.6	%	$	(58	)		(0.2	)%	$	514			0.8	%	$	(103	)		(0.4	)%

	Nine Months Ended September 30,
	2017						2016
		$		%				$		%
Net revenues	$	131,361			100.0	%	$	89,781			100.0	%
Cost of revenues		105,563			80.4			69,309			77.2
Gross profit		25,798			19.6			20,472			22.8
Selling, general & administrative expense		21,988			16.7			17,637			19.7
Depreciation & amortization		1,526			1.2			1,459			1.6
Operating income		2,284			1.7			1,376			1.5
Interest expense, net		117			0.1			111			0.1
Other (income), net		(275	)		(0.2	)		(183	)		(0.2	)
Income before income taxes		2,442			1.8			1,448			1.6
Income tax expense		907			0.7			200			0.2
Net income		1,535			1.1			1,248			1.4
Net income attributable to non-controlling interest		(1,189	)		(0.9	)		(1,164	)		(1.3	)
Net income attributable to SPAR Group, Inc.	$	346			0.2	%	$	84			0.1	%

	Six Months Ended June 30,
	2021						2020
	$			%			$			%
Net revenues	$	128,273			100.0	%	$	112,292			100.0	%
Cost of revenues		104,008			81.1			90,632			80.7
Gross profit		24,265			18.9			21,660			19.3
Selling, general & administrative expense		18,595			14.5			17,141			15.3
Depreciation & amortization		1,064			0.8			1,079			1.0
Operating income		4,606			3.6			3,440			3.0
Interest expense, net		277			0.2			312			0.3
Other income, net		(70	)		(0.1	)		(58	)		(0.1	)
Income before income taxes		4,399			3.5			3,186			2.8
Income tax expense		1,486			1.2			959			0.9
Net income		2,913			2.3			2,227			1.9
Net income attributable to non-controlling interest		(1,482	)		(1.2	)		(2,034	)		(1.8	)
Net income attributable to SPAR Group, Inc.	$	1,431			1.1	%	$	193			0.1	%

	31.1	Certification of the CEO pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as filed herewith.

	31.2	Certification of the CFO pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as filed herewith.

	32.1	Certification of the CEO pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as filed herewith.

	32.2	Certification of the CFO pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as filed herewith.


101.INS	Inline XBRL Instance Document - the instance document does not appear in the interactive Inline XBRL document.

	101.SCH	Inline XBRL Taxonomy Extension Schema Document

	101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

	101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

	101.LAB	Inline XBRL Taxonomy Extension ~~Labels~~Label Linkbase Document

	101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Date: ~~November 14, 2017~~August 16, 2021	SPAR Group, Inc., Registrant


	By:/s/ ~~James R. Segreto~~Fay DeVriese
	~~James~~ ~~R. Segreto~~ Fay DeVriese Chief Financial Officer, Treasurer and Secretary