SPAR Group
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K(Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December31, 2018OR☐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 0-27408SPAR GROUP, INC.(Exact name of registrant as specified in its charter) Delaware33-0684451(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.) 333 Westchester Avenue, Suite 204, White Plains, New York10604(Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code: (248) 364-7727 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $.01 per share Name of exchange on which registered: The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ NO ☒ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. YES ☒ NO ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit suchfiles) YES ☒ NO ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K ☐. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anemerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company," and "emerging growthcompany" in Rule 12b-2 of the Exchange Act.). (Check one): Large Accelerated Filer ☐Accelerated Filer ☐ Non-Accelerated Filer ☐Smaller reporting company ☒ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any newor revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) YES ☐ NO ☒ The aggregate market value of the Common Stock of the Registrant held by non-affiliates of the Registrant on June 30, 2018, based on the closing priceof the Common Stock as reported by the Nasdaq Capital Market on such date, was approximately $7.4 million. The number of shares of the Registrant's Common Stock outstanding as of March 22, 2019, was 20,776,588 shares.  DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive proxy statement for the registrant's 2019 Annual Meeting of Stockholders scheduled to be held on May 16, 2019,which will be subsequently filed with the Securities and Exchange Commission are incorporated by reference into Part III of this Form 10-K.  SPAR GROUP, INC.ANNUAL REPORT ON FORM 10-K INDEX PART I Page Item 1Business5Item 1ARisk Factors14Item 1BUnresolved Staff Comments27Item 2Properties27Item 3Legal Proceedings28Item 4Mine Safety Disclosures36 PART II Item 5Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities37Item 6Selected Financial Data38Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations39Item 7AQuantitative and Qualitative Disclosures about Market Risk44Item 8Financial Statements and Supplementary Data44Item 9Changes in and Disagreements with Accountants on Accounting and Financial Disclosure44Item 9AControls and Procedures44Item 9BOther Information45 PART III Item 10Directors, Executive Officers and Corporate Governance46Item 11Executive Compensation46Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters46Item 13Certain Relationships and Related Transactions, and Director Independence47Item 14Principal Accountant Fees and Services47 PART IV Item 15Exhibits and Financial Statement Schedules48Item 16Form 10-K Summary56 Signatures57  FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K for the year ended December 31, 2018 (this "Annual Report"), contains forward-looking statements withinthe "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, made by, or respecting, SPAR Group, Inc. ("SGRP") and itssubsidiaries (together with SGRP, the "SPAR Group" or the "Company"). There also are "forward-looking statements" contained in SGRP's definitiveProxy Statement respecting its Annual Meeting of Stockholders to be held on or about May 16, 2019 (the "Proxy Statement"), which SGRP expects tofile on or about April 22 2019, with the Securities and Exchange Commission (the "SEC"), and SGRP's Quarterly Reports on Form 10-Q, CurrentReports on Form 8-K and other reports and statements as and when filed with the SEC (including this Annual Report and the Proxy Statement, each a"SEC Report"). "Forward-looking statements" are defined in Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other applicable federal and state securities laws, rules andregulations, as amended (together with the Securities Act and Exchange Act, the "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 Annual Report may include (without limitation) statements regarding:risks, uncertainties, cautions, circumstances and other factors ("Risks"); and plans, intentions, expectations, guidance or other information respectingthe pursuit or achievement of the Company's five corporate objectives (growth, customer value, employee development, greater productivity &efficiency, and increased earnings per share), building upon the Company's strong foundation, leveraging compatible global opportunities, growingthe Company's client base and contracts, continuing to strengthen its balance sheet, growing revenues and improving profitability through organicgrowth, new business development and strategic acquisitions, and continuing to control costs. The Company's forward-looking statements also include(without limitation) those made in this Annual Report in "Business", "Risk Factors", "Legal Proceedings", "Management's Discussion and Analysisof Financial Condition and Results of Operations", "Directors, Executive Officers and Corporate Governance", "Executive Compensation", "SecurityOwnership 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 forward-looking statements (including all risk factors and other cautions anduncertainties) and other information made, contained or noted in or incorporated by reference into this Annual Report, the Proxy Statement and theother 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, legal costs, 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"), and our forward-looking statements (including all Risks) and other information reflect the Company's current viewsabout future events and circumstances. Although the Company believes those Expectations and views are reasonable, the results, actions, levels ofactivity, performance, achievements or condition of the Company or other events and circumstances may differ materially from our Expectations andviews, and they cannot be assured or guaranteed by the Company, since they are subject to Risks and other assumptions, changes in circumstances andunpredictable events (many of which are beyond the Company's control). In addition, new Risks arise from time to time, and it is impossible for theCompany to predict these matters or how they may arise or affect the Company. Accordingly, the Company cannot assure you that its Expectations willbe 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, anyof 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 Annual Report,and the Company does not intend, assume any obligation, or promise to publicly update or revise any forward-looking statements (including any Risksor Expectations) or other information (in whole or in part), whether as a result of new information, new or worsening Risks or uncertainties, changedcircumstances, future events, recognition, or otherwise. -4- PART I Item 1. Business THE COMPANY'S BUSINESS GENERALLY SPAR Group, Inc., a Delaware corporation incorporated in 1995 ("SGRP"), and its subsidiaries (together with SGRP, the "SPAR Group" or the"Company"), is a diversified international merchandising and marketing services company and provides a broad array of services worldwide to helpcompanies improve their sales, operating efficiency and profits at retail locations. The Company provides its merchandising and other marketing servicesto manufacturers, distributors and retailers worldwide, primarily in mass merchandise, office supply, grocery, drug, dollar, independent, convenience,home improvement, and electronics stores. The Company also provides retailers with new store openings, store remodeling and major reset requirements,as well as furniture and other product assembly services in stores, homes and offices and marketing research services. The Company has supplied theseservices in the United States since certain of its predecessors were formed in 1979 and internationally since the Company acquired its first internationalsubsidiary in Japan in May 2001. The Company currently does business in 10 countries that encompass approximately 50% of the total world populationthrough 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 the store level, and theCompany may be engaged by either the retailer or the manufacturer. Those services may include restocking and adding new products, removing spoiledor outdated products, resetting categories on the shelf in accordance with client or store schematics, confirming and replacing shelf tags, setting new saleor promotional product displays and advertising, replenishing kiosks, demonstrating or promoting a product, providing on-site audit and in-store eventstaffing services and providing product assembly services in stores, homes and offices. Other merchandising services include whole store or departmentalproduct 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 expansion of its merchandising, assembly and marketing services businessthroughout the world. An Overview of the Merchandising and Marketing Services Industry: The merchandising and marketing services industry includes manufacturers, retailers, brokers, distributors and professional servicemerchandising companies. Merchandising services primarily involve placing orders, shelf maintenance, display placement, reconfiguring products onstore shelves and replenishing product inventory. Additional marketing services include, but are not limited to, new store sets and remodels, audits, salesassist, installation and assembly, product demos/sampling, promotion and various others. The Company believes that merchandising and marketingservices 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 advantageousdisplay of new items on shelves, and the maintenance of shelf schematics and product placement were properly merchandised. However, retailers, in aneffort to improve their margins, have decreased their own store personnel and increased their reliance on manufacturers to perform such services. At onetime, 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 manufacturersand retailers discovered that using their own sales representatives and employees for this purpose was expensive and inefficient. In addition, the changingretail environment, driven by the rise of digital and mobile technology, is fostering even more challenges to the labor model of retailers andmanufacturers. These challenges include increased consumer demand for more interaction and engagement with retail sales associates, stores remodels toaccommodate more technology, installation and continual maintenance of in-store digital and mobile technology, in-store pick-up and fulfillment ofonline 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 marketingservice needs to third parties capable of operating at a lower cost by (among other things) simultaneously serving multiple manufacturers. The Companyalso believes that it is well positioned, as a domestic and international merchandising and marketing services company, to provide these services toretailers, manufacturers and other businesses around the world more effectively and efficiently than other available alternatives. -5- SPAR Group believes another significant factor impacting the merchandising and marketing services business is the continued preference ofconsumers to shop in stores and their tendency to make product purchase decisions once inside the store. Accordingly, merchandising and marketingservices and in-store product promotions have proliferated and diversified. Retailers are continually re-merchandising and re-modeling entire departmentsand stores in an effort to respond to new product developments and changes in consumer preferences. The Company estimates that these activities haveincreased in frequency over the last few years. Both retailers and manufacturers are seeking third party merchandisers to help them meet the increaseddemand for these labor-intensive services. In addition, the consolidation of many retailers and changing store formats have created opportunities for third party merchandisers when anacquired 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 foreignmarkets, they will need assistance in merchandising or marketing their products. As evidenced in the United States, retailer and manufacturer sponsoredmerchandising and marketing programs are both expensive and inefficient. The Company also believes that the difficulties encountered by theseprograms are only exacerbated by the logistics of operating in foreign markets. This environment has created an opportunity for the Company to exploitits global internet, mobile and data network based technology (as further described below) and its business model worldwide. The Company's Domestic and International Segments: In order to cultivate and expand the Company's merchandising and marketing service businesses in both domestic and foreign markets, andensure a consistent approach to those businesses worldwide, the Company has historically divided its world focus into two geographic areas, the UnitedStates, which is the sales territory for its Domestic Division, and all locations outside the United States, which are the sales territories for its InternationalDivision. To that end, the Company also (1) provides to all of its locations its proprietary internet, digital and mobile based operating, scheduling,tracking and reporting systems (including language translations, ongoing client and financial reports and ongoing IT support), (2) provides and requiresall of its locations to comply with the Company's financial reporting and disclosure controls and procedures, Ethics Code (as defined in Note 10 to theCompany's Consolidated Financial Statements – Related Party Transactions, below) and other policies, (3) provides accounting and auditing support andtracks and reports certain financial and other information separately for those two divisions, and (4) has management teams in its corporate officesresponsible for supporting and monitoring the management, sales, marketing and operations of each of the Company's international subsidiaries andmaintaining consistency with the Company's other subsidiaries worldwide. Each of the Company's divisions provides merchandising and other marketing services primarily on behalf of consumer product manufacturers,distributors and retailers at mass merchandise, office supply, grocery, drug, dollar, independent, convenience, home improvement and electronics stores intheir respective territories. SPAR Group's clients include the makers and distributors of general merchandise, health and beauty care, consumer goods,home improvement, home entertainment, and food products in their respective territories. The Company's international business is conducted through a foreign subsidiary incorporated in its primary territory. The primary territoryestablishment 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 DateEstablished SGRP PercentageOwnership Principal Office LocationDomestic United States of America 1979 100% White Plains, New YorkNational Merchandising Services, LLC 2012 51% Fayetteville, GeorgiaResource Plus of North Florida,Inc. 2018 51% Jacksonville, FloridaInternational Japan May 2001 100% Tokyo, JapanCanada June 2003 100% Vaughan, Ontario, CanadaSouth Africa April 2004 51% Durban, South AfricaIndia April 2004 51% New Delhi, IndiaAustralia April 2006 51% Melbourne, AustraliaChina March 2010 51% Shanghai, ChinaMexico August 2011 51% Mexico City, MexicoTurkey November 2011 51% Istanbul, TurkeyBrazil September 2016 51% Sao Paulo, Brazil -6- Financial Information about the Company's Domestic and International Segments: The Company provides similar merchandising and marketing services throughout the world, operating within two reportable segments, itsDomestic and International Divisions (as described above). The Company tracks and reports certain financial information separately for these twosegments using the same metrics. The primary measurement utilized by management is operating profit level, historically the key indicator of long-termgrowth and profitability, as the Company is focused on reinvesting the operating profits of each of its international subsidiaries back into local markets inan effort to improve its market share and continued expansion efforts. Certain financial information regarding each of the Company's two segments, whichincludes their respective net revenues and operating income for each of the years ended December 31, 2018 and 2017, and their respective assets as ofDecember 31, 2018 and 2017, is provided in Note 12 to the Company's Consolidated Financial Statements – Segment Information, below. The Company's Business Strategies As the marketing services industry continues to expand both in the United States and internationally, many large retailers and manufacturers areoutsourcing their merchandising and marketing service needs to third-party providers. The Company believes that offering marketing services on anational and global basis will provide it with a competitive advantage. Moreover, the Company believes that successful use of and continuousimprovements to a sophisticated technology infrastructure, including the Company's proprietary global internet, digital and mobile technological systems(including servers and other hardware) and its logistical, communication, scheduling, tracking, reporting and accounting software and applications (the"Global Technology Systems"), is key to providing clients with a high level of client service while maintaining efficient, lower cost operations. TheGlobal Technology Systems use proprietary software and applications of the Company as well as software (including operating system, office, exchange,data base and server programs) licensed and hardware purchased or leased from third parties and internet and telecommunication services provided bythird parties. The Global Technology Systems can be accessed through the computers or mobile devices of its authorized personnel and clients andallows the Company to communicate with field management, schedule the store-specific field operations more efficiently, receive information,incorporate, quantify the benefits of its services to clients faster, respond to clients' needs quickly and rapidly implement client programs. The Company'sobjective is to continue to expand international retail merchandising and marketing services by pursuing its operating and growth strategy, as describedbelow. Increasing the Company's Sales Efforts: The Company is seeking to increase revenues from its current clients, as well as to establish long-term relationships with new clients (many ofwhich currently use other merchandising companies for various reasons). In addition to expanding its direct sales efforts, the Company is working tostrengthen the senior executive relationships between the Company and its clients, is executing a marketing plan to expand the Company's presence inmedia and client channels, and is receiving and responding to an increasing number of requests for proposals ("RFPs") from potential and existing clients.The Company believes its technology, field implementation and other competitive advantages will allow it to capture a larger share of this market overtime. However, there can be no assurance that any increased sales will be achieved. Improving the Company's Operating Efficiencies: The Company will continue to seek greater operating efficiencies. The Company believes that its existing field force and technologyinfrastructure can support additional clients and revenue in both its Domestic and International Divisions. Developing New Services: The Company is seeking to increase revenues through the internal development and implementation of new services as well as industrycollaborations that add value to its clients' retail merchandising related activities, some of which have been identified and are currently being tested forfeasibility and market acceptance. However, there can be no assurance that any new services will be developed or that any such new service can besuccessfully marketed. -7- Leveraging and Improving on the Company's Technological Strengths: The Company believes that providing merchandising and marketing services in a timely, accurate and efficient manner, as well as deliveringtimely, accurate and useful reports to its clients, are key components that are and will continue to be critical to the Company's success. The Company'sGlobal Technology Systems improve the productivity of the services provided by merchandising, auditing, assembly and other field personnel (each a"Field Specialist"), whose services are provided to the Company by an independent third party (the "Independent Field Vendor"), to permit anotherindependent third party (the "Independent Field Administrator") to locate, schedule, deploy and administer domestic Field Specialists using such vendor'slocal, regional, district and other personnel (each a "Field Administrator"), and to provide timely data to the Company's clients. Field Specialists usesmartphones, tablets, laptops, and personal computers to report (through the internet or mobile or telecommunication networks) the status of each store orclient product serviced into the Company's Global Technology Systems. Field Specialists report on a variety of issues such as store conditions and statusof client products (e.g. out of stocks, inventory, display placement) or they may scan and process new orders for certain products. The Company's Global Technology Systems include an automated labor tracking system for the Field Specialists to communicate workassignment completion information (via the internet or other telecommunication infrastructure) by using, among other things, smartphones, laptops andpersonal computers, cellular telephones or landlines. This tracking system enables the Company to report hours and other completion information foreach work assignment on a daily basis and provides the Company with daily, detailed tracking of service completion. This information is analyzed anddisplayed in a variety of reports that can be accessed by both the Company and its clients via a secure website. These reports can depict the reported statusof merchandising projects in real-time. This tracking technology also allows the Independent Field Vendor and Independent Field Administrator toschedule the Field Specialists more efficiently, quickly quantify the status and benefits of the Company's services to clients, rapidly respond to clients'needs and rapidly implement programs. Industry sources indicate that clients are increasingly relying on merchandising and marketing service providers to supply rapid, value-addedinformation regarding the results of the clients' merchandising and marketing expenditures on sales and profits. The Company intends to continue toutilize its Global Technology Systems to enhance the Company's efficiency and ability to provide real-time data to its clients as reported to the Company,as well as, maximize the speed of communication with logistical deployment of and reporting from the Field Specialists. The Global Technology Systemscan be accessed through the computers or mobile devices of its authorized personnel and clients and allows the Company to communicate with theIndependent Field Vendor and Independent Field Administrator to schedule the store-specific field operations more efficiently, receive information,incorporate, quantify the benefits of the Company's services to clients faster, respond to clients' needs quickly and implement client programs rapidly. The Company believes that it can continue to improve, modify and adapt its technology to support merchandising and other marketing servicesfor additional clients and projects in the United States and in foreign markets. The Company also believes that its Global Technology Systems give it acompetitive advantage in the marketplace worldwide. The Company has successfully modified and is currently utilizing certain of its softwareapplications in the operation of its International Division. The Company's Global Technology Systems are developed, operated, managed, maintained,and controlled from the Company's information and technology control center in Auburn Hills, Michigan, U.S.A. Portions of the Company's proprietary scheduling, tracking, coordination, reporting and expense software (the "Co-Owned Software") currentlyincluded in the Company's Global Technology Systems are co-owned by the Company and the Company's affiliates, SPAR Business Services, Inc.("SBS"), and SPAR InfoTech, Inc. ("Infotech"). The Company's Global Technology Systems (including the Co-Owned Software) are maintained and furtherdeveloped and improved by the Company at its own expense at a cost of $1.3 and $1.0 million in 2018 and 2017, respectively. See "An Overview of theMerchandising and Marketing Services Industry", above, and " The Company's Competition", below, and Note 10 to the Company's ConsolidatedFinancial Statements - Related Party Transactions - Other Related Party Transactions and Arrangements, below. On November 23, 2018, SBS petitioned for bankruptcy protection under chapter 11 of the United States Bankruptcy Code in the U.S. District forNevada, and as a result, SBS' rights in the Co-Owned Software and Licensed Marks are assets of SBS' estate, subject to sale or transfer in any courtapproved reorganization or liquidation, and could be acquired by competitors or other adverse or unsavory parties. In addition, Infotech is currently suingthe Company in New York and threatening to sue the Company in Romania. See Note 6 to the Company's Consolidated Financial Statements -Commitments and Contingencies -- Legal Matters, Infotech Litigation Against SGRP and SBS Bankruptcy, below. See also Dependence Upon and Risksof Services Provided by Independent Contractors, Potential Conflicts with Affiliates, and Risks Related to the Company's Significant Stockholders andPotential Voting Control and Conflicts in Item 1A -- Risk Factors, below. -8- Acquisition Strategies and Strategic Acquisitions: The Company is seeking to acquire businesses or make other arrangements with companies that offer similar merchandising or marketing servicesboth in the United States and worldwide. The Company believes that increasing its industry expertise, further developing and refining its technologysystems, adding services, and increasing its geographic breadth and local market depth will allow it to service its clients more efficiently and costeffectively. Through such acquisition strategies, the Company may realize additional operating and revenue synergies and may leverage existingrelationships with manufacturers, retailers and other businesses to capitalize on cross-selling opportunities. However, there can be no assurance that any ofthe acquisition strategies will occur or whether, if completed, the integration of the acquired businesses will be successful or the anticipated efficienciesand cross-selling opportunities will occur. See Item 1 - Business - The Company's Domestic and International Segments, above. One key to the Company's domestic and international expansion strategy is its emphasis on developing, maintaining, improving, deploying andmarketing its Global Technology Systems that run on and are developed, managed, maintained and controlled worldwide from the Company'sinformation and technology control center in Auburn Hills, Michigan, U.S.A. The Company's Global Technology Systems are accessible throughcomputers and mobile devices by the local representatives of the Company and its clients in order to enhance local operations, give the Company animportant marketing distinction and advantage over its competitors (such as real-time access to field reporting), and provide the Company with atechnological means to exercise its supervision and control over its subsidiaries, both domestic and international. The Company provides access to itsGlobal Technology Systems for its worldwide operations through its control center on a real-time basis 24/7/365. In addition, this strategy is strengthenedinternationally by the Company's internally developed translation software, which allows its current and future programs included in its GlobalTechnology Systems to be available in any language for any market in which it currently operates or desires to enter in the future. See Item 1 - Business -Leveraging and Improving on the Company's Technological Strengths, above, and The Company's Trademarks and Technology, below. Another key to the Company's international and domestic expansion is its strategy of seeking a minority (i.e., non-controlling) investor that isexperienced (directly or through its principals) in the local area and not otherwise affiliated with the Company (each a "Local Investor") for each newconsolidated joint venture subsidiary acquired by the Company. The Company supervision and control over each such consolidated subsidiary isstrengthened through its subsidiary documentation and the use of its Global Technology Systems. The Company's supervision and control is furtherstrengthened by its company-wide executive management, administrative support, accounting oversight, procedures and controls (financial andreporting), and corporate codes and policies that apply to each such subsidiary (the Company's "Global Administration", and together with its GlobalTechnology Systems, the Company's "Global Contributions"). The Company also seeks to own a majority (at least 51%) of such a subsidiary's equitywhile the Local Investor purchases a minority equity interest in it (49% or less). Since 2014 the Company has sought (in the governing documents foreach new acquisitions or reorganization) to have a majority of the members of such subsidiary's board of directors, to have all quorums and mattersdecided by a simple majority of its equity or directors, and to have such subsidiary agree to be bound by the Company's financial and reporting controlsand procedures, Ethics Code, and other corporate codes and policies. In addition to its equity participation, a Local Investor provides certain services andthe useful local attention, perspective and relationships of a substantial (although non-controlling) equity owner with a strong financial stake in suchsubsidiary's success (the "Local Contributions"). The Local Investor also often contributes an existing customer base and a seasoned operatinginfrastructure as additional Local Contributions to the subsidiary in which it invests. As of the date of this Annual Report, National MerchandisingServices, LLC and Resource Plus of North Florida, Inc., in the U.S.A. (see below) and each of the Company's international operating subsidiaries (otherthan those in Canada and Japan) has a Local Investor. See Item 1A - Risk Factors - Risks Associated with International and Domestic Subsidiaries, Risksof Having Material Local Investors and Local Executives in International and Domestic Subsidiaries, Risks Associated with Foreign Currency and RisksAssociated with International Business, Note 2 to the Company's Consolidated Financial Statements – Summary of Significant Accounting Policies:Principles of Consolidation, Accounting for Joint Venture Subsidiaries, Note 10 to the Company's Consolidated Financial Statements – Related PartyTransactions - International Related Party Services and Related Party Transactions and Arrangements in the Brazil Acquisition, Note 13 to theCompany's Consolidated Financial Statements – Purchase of Interests in Subsidiaries, below. -9- Descriptions Of The Company's Services The Company currently provides a broad array of domestic and international services to some of the world's leading companies. The Companybelieves its full-line capabilities provide fully integrated solutions that distinguish the Company from its competitors. These capabilities include theability to respond to multi-national client RFPs, to develop plans at one centralized location, to effect chain-wide execution, to implement rapid,coordinated responses to its clients' needs and to report on a real time basis throughout the world. The Company also believes its international presence,industry-leading technology, centralized decision-making ability, local follow-through, ability to perform large-scale initiatives on short notice, andstrong retailer relationships provide the Company with a significant advantage over local, regional or other competitors. The Company currently provides six principal types of merchandising and marketing services: syndicated services, dedicated services, projectservices, assembly services, audit services and in-store event staffing services. Syndicated Services: Syndicated services consist of regularly scheduled, routed merchandising and marketing services provided at the retail store level for retailers,manufacturers and distributors. These services are performed for multiple manufacturers and distributors, including, in some cases, manufacturers anddistributors whose products are in the same product category. Syndicated services may include activities such as: • Reordering and replenishment of products • Ensuring that the Company's clients' products authorized for distribution are in stock and on the shelf or sales floor • Adding new products that are approved for distribution but not yet present on the shelf or sales floor • Implementing store planogram schematics • Setting product category shelves in accordance with approved store schematics • Ensuring that product shelf tags are in place • Checking for overall salability of the clients' products • Placing new product and promotional items in prominent positions •Kiosk replenishment and maintenance Dedicated Services: Dedicated services consist of merchandising and marketing services, generally as described above, which are performed for a specific retailer ormanufacturer by a dedicated organization, sometimes including a management team working exclusively for that retailer or manufacturer. These servicesinclude many of the above activities detailed in syndicated services, as well as, new store set-ups, store remodels and fixture installations. These servicesare primarily based on agreed-upon rates and fixed management fees. Project Services: Project services consist primarily of specific in-store services initiated by retailers and manufacturers, such as new store openings, new productlaunches, special seasonal or promotional merchandising, focused product support, product recalls, in-store product demonstrations and in-store productsampling. The Company also performs other project services, such as kiosk product replenishment, inventory control, new store sets and existing storeresets, re-merchandising, remodels and category implementations, under annual or stand-alone project contracts or agreements. Retail New Store Openings and Remodeling Services: Retailer specific services consist primarily of in-store services initiated by retailers, such as new store openings, new store sets and existing storeresets and remodels, under annual or stand-alone project contracts or agreements. Assembly Services: The Company's assembly services are initiated by retailers, manufacturers or consumers, and upon request the Company assembles furniture,grills, and many other products in stores, homes and offices. The Company performs ongoing routed coverage at retail locations to ensure that furnitureand other product lines are well displayed and maintained, and builds any new items or replacement items, as required. In addition, the Company providesin-home and in-office assembly to customers who purchase their product from retailers, whether in store, online or through catalog sales. In-Store Event Staffing Services: The Company provides in-store product samplings, in-store product demonstrations and assisted sales in national chains in target marketsworldwide. -10- Retail Compliance and Price Audit Services: The Company's retail compliance and price audit services are initiated by retailers and manufacturers and focus on the following: ●Validating store promotions ●Confirming the planned placements and layout ●Auditing compliance with corporate branding and signage ●Verifying product placement, displays, point of sale materials, etc. ●Collecting inventory levels and out-of-stock status ●Providing current, accurate pricing intelligence ●Conducting competitive price audits (by product, by market) ●Conducting internal price audits to: oEnsure pricing accuracy and consistency; and oVerify promotional and everyday price changes Other Marketing Services: Other marketing services performed by the Company include: Mystery Shopping - Anonymously calling and visiting retail outlets (e.g. stores, restaurants, banks) to check on distribution or display of abrand and to evaluate products, service of personnel, condition of store, etc. Data Collection - Gathering sales and other information systematically for analysis and interpretation. The Company's Sales and Marketing The Company offers global merchandising solutions to clients that have worldwide distribution. This effort is spearheaded out of the Company'sheadquarters in the United States, and the Company continues to develop local markets through its domestic and international subsidiaries throughoutthe world. The Company's marketing and sales efforts within its Domestic Division are structured to develop new national, regional and local businesswithin the United States, including new sales and customers through the Company's acquisitions of existing businesses. The Company's domesticcorporate business development team directs its efforts toward the senior management of prospective and existing clients. Marketing and sales targets andstrategies are developed at the Company's headquarters and communicated to the Company's domestic sales force for execution. Marketing effortsconcentrate on enhancing SPAR's position as an industry leader, promoting its key advantages, strengthening its industry presence and supporting sales.The Company's sales force is located nationwide and works from both the Company's offices and their home offices. In addition, the Company's domesticcorporate account executives play an important role in the Company's new business development efforts within its existing manufacturer, distributor andretailer client base. The Company's marketing and sales efforts within its International Division are structured to develop new national, regional and local businessin both new and existing international territories by acquiring existing businesses and within the Company's existing international territories throughtargeted sales efforts. The Company has an international acquisition team whose primary focus is to seek out and develop acquisitions throughout theworld. Marketing and sales targets and strategies are developed within an international subsidiary, in consultation with the Company's U.S. headquarters,with assistance from the applicable Local Investor, and are communicated to the Company's applicable international sales force for execution. TheCompany's international sales force for a particular territory is located throughout that territory and work from the Company's office in that territory andtheir home offices. In addition, the Company's international corporate account executives play an important role in the Company's new businessdevelopment efforts within the Company's existing manufacturer, distributor and retail client base within their respective territories. As part of the retailer consolidation, retailers are centralizing most administrative functions, including operations, procurement and categorymanagement. In response to this centralization and the growing importance of large retailers, many manufacturers have reorganized their sellingorganizations around a retailer team concept that focuses on a particular retailer. The Company has responded to this emerging trend and currently has on-site personnel in place at select retailers. -11- The Company's business development process includes a due diligence period to determine the objectives of the prospective or existing client,the work required to satisfy those objectives and the market value of such work to be performed. The Company employs a formal cost development andproposal process that determines the cost of each element of work required to achieve such client's objectives. The Company uses these costs, togetherwith an analysis of market rates, to develop a formal quotation that is then reviewed at various levels within the organization. The pricing of this internalproposal must meet the Company's objectives for profitability, which are established as part of the business planning process. After the Companyapproves this quotation, a detailed proposal is presented to the Company's prospective or existing client. However, the Company has agreed, and in thefuture may agree, from time to time to perform services for a client that become or turn out to be unprofitable even though the Company expected to makea profit when agreeing to perform them. See Item 1A – Risk Factors - Risks of Unprofitable Services, Variability of Operating Results and Uncertainty inClient Revenue, and Risks of Losses and Financial Covenant Violations, below. The Company's Customer Base The Company currently represents numerous manufacturers and/or retail clients in a wide range of retail chains and stores worldwide, and itscustomers (which it refers to as clients) include the following markets: • Mass Merchandisers • Pharmacies • Grocery Stores • Office Supply Stores • Dollar Stores •Convenience Stores • Specialty Stores • Electronic Stores • Home Improvement Stores • Other retail outlets (such as discount and electronic stores, independents, in-home and in-office, etc.) The Company did not have any clients that represented 10% or more of the Company's net revenue for the years ended December 31, 2018 and2017. The Company's Competition The marketing services industry is highly competitive. The Company's competition in the Domestic and International Divisions arise from anumber of large enterprises, many of which are national or international in scope. The Company also competes with a large number of relatively smallenterprises with specific client, channel or geographic coverage, as well as with the internal marketing and merchandising operations of its existing andprospective clients. The Company believes that the principal competitive factors within its industry include development and deployment of technology,breadth and quality of client services, cost, the ability to execute specific client priorities rapidly and consistently over a wide geographic area, and theability to ideate and operate as a retail business partner delivering value above the base services. The Company believes that its current structurefavorably addresses these factors and establishes it as a leader in many retailer and manufacturer verticals. The Company also believes it has the ability toexecute major national and international in-store initiatives and develop and administer national and international manufacturer programs. Finally, theCompany believes that, through the use and continuing improvement of its Global Technology Systems, other technological efficiencies and various costcontrols, the Company will remain competitive in its pricing and services. -12- The Company's Trademarks and Technology The Company has numerous registered trademarks. Although the Company believes its trademarks may have value, the Company believes itsservices are sold primarily based on breadth and quality of service, cost, and the ability to execute specific client priorities rapidly, efficiently andconsistently over a wide geographic area. Certain of the Company's "SPAR" trademarks (the "Licensed Marks") are licensed (i) for use in the United Statesroyalty free and in perpetuity pursuant to license agreements that commenced in 1999 with its affiliates, SBS and Infotech and through SBS its otheraffiliate, SAS, is permitted to use the Licensed Marks (as defined in RELATED PARTIES AND RELATED PARTY LITIGATION, in Item 3, below), (ii) for useworldwide royalty free and in perpetuity pursuant to informal license arrangements with its wholly owned subsidiaries, (iii) for use in their respectivejurisdictions royalty free pursuant to license agreements for limited terms with its joint venture subsidiaries (executed contemporaneously with theirrespective joint venture agreements), and (iv) in the United States for limited terms and modest royalties pursuant to license agreements with theIndependent Field Vendor and Independent Field Administrator respectively providing Field Specialists and Field Administrators to the Companydomestically that commenced in 2018. Portions of the Company's proprietary scheduling, tracking, coordination, reporting and expense software (the"Co-Owned Software") currently included in the Company's Global Technology Systems are co-owned by the Company, SBS and Infotech. TheCompany's Global Technology Systems (including the Co-Owned Software) are maintained and further developed and improved by the Company at itsown expense at a cost of $1.3 and $1.0 million in 2018 and 2017, respectively. Except for SBS and Infotech (who don't need such software licensesbecause of their co-ownership), each subsidiary and vendor trademark license and arrangement also licenses the Co-Owned Software to the licensee. SeeAn Overview of the Merchandising and Marketing Services Industry, The Company's Competition, and Leveraging and Improving on the Company'sTechnological Strengths, in this Item 1 above, and Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions - OtherRelated Party Transactions and Arrangements, below. On November 23, 2018, SBS petitioned for bankruptcy protection under chapter 11 of the United States Bankruptcy Code in the U.S. District forNevada, and as a result, SBS' rights in the Co-Owned Software and Licensed Marks are assets of SBS' estate, subject to sale or transfer in any courtapproved reorganization or liquidation, and could be acquired by competitors or other adverse or unsavory parties. In addition, Infotech is currently suingthe Company in New York and threatening to sue the Company in Romania. See Note 6 to the Company's Consolidated Financial Statements -Commitments and Contingencies -- Legal Matters, Infotech Litigation Against SGRP and SBS Bankruptcy, below. See also Dependence Upon and Risksof Services Provided by Independent Contractors, Potential Conflicts with Affiliates and Risks Related to the Company's Significant Stockholders andPotential Voting Control and Conflicts in Item 1A -- Risk Factors, below. The Company's Labor Force Worldwide the Company utilized a labor force of approximately 19,900 people in 2018, including the services of Field Specialists and FieldAdministrators furnished by independent third parties. The Company executes and administers its domestic field services through the services of field merchandising, auditing, assembly and other fieldpersonnel (each a "Field Specialist"), substantially all of whom 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"), andsubstantially all of the Field Administrators are in turn are employed by other independent third parties. As of December 31, 2018, the Company's Domestic Division's labor force totaled approximately 4,600 including the services of Field Specialistsand Field Administrators furnished by independent third parties. The Company's Domestic Division employed a labor force of 531 individuals, 486 full-time employees and 45 part-time employees engaged in domestic operations. In the Company's Domestic Division, the Company's merchandising, audit,assembly and other services for its domestic clients are performed by Field Specialists provided by independent third parties, approximately 4,100 ofwhose services were supplied to the Company since August 2018 by a new independent vendor (the "Independent Field Vendor") under contract andlicense with the Company (and to the Company's knowledge substantially all of whom were engaged as independent contractors by that vendor). TheField Administrators are provided by other independent third parties, 64 of whom were supplied to the Company since August 2018 by another newindependent vendor (the "Independent Field Administrator") under contract and license with the Company. Prior to August 2018, substantially all of theCompany's domestic Field Specialists were supplied by the Company's independent affiliate, SPAR Business Services, Inc. ("SBS"), and substantially allof the Company's domestic Field Administrators were supplied by another of the Company's independent affiliates, SPAR Administrative Services, Inc.("SAS"). The Company stopped using the services of SBS and SAS after July 2018. See Note 10 to the Company's Consolidated Financial Statements –Related Party Transactions - Domestic Related Party Services, below. See also Note 6 to the Company's Consolidated Financial Statements –Commitments and Contingencies - Legal Matters, below. In part as a result of the Clothier Determination (see Note 6 to the Company's Consolidated Financial Statements – Commitments andContingencies - Legal Matters – Clothier Case, below),the Company, with the approval of SGRP's Board of Directors (the "Board") and SGRP's AuditCommittee, began an extensive re-programming of its proprietary field service software to accommodate scheduling and compensating a field workforceof part time employees and in May of 2018 shifted to an all employee servicing model for Field Specialist services to support the performance of theCompany's services in California for clients in this critical market. Management currently estimates that the potential incremental annual cost of thischange in California from third party independent contractors to Company employees is between approximately $275,000 and $325,000. The Companycontinues to reevaluate its business model of using third party independent contractors as Field Specialists elsewhere (whether or not provided by others)in light of changing client requirements and legal and regulatory environments and intends to begin testing an employee based model nationally forcertain domestic clients that are requiring the Company to use employees as Field Specialists. The Company expects that using employees as FieldSpecialists in additional states will cost substantially more than using third party independent contractors for the same services. See Note 6 to theCompany's Consolidated Financial Statements – Commitments and Contingencies - Legal Matters, and Note 10 to the Company's Consolidated FinancialStatements – Related Party Transactions - Domestic Related Party Services, below. -13- As of December 31, 2018, the Company's International Division's labor force totaled 15,300. Approximately 1,070 individuals were engagedlocally by its foreign subsidiaries, 1,058 full-time and 18 part-time employees. The International Division's field force consisted of approximately 14,200Field Specialists engaged locally by our foreign subsidiaries in their respective international operations. See Note 10 to the Company's ConsolidatedFinancial Statements – Related Party Transactions - International Related Party Services, below. The Company considers its relations with its own employees and independent vendors to be generally good. Internet Address The Company's website can be found at: http://www.sparinc.com, and the Company's SEC filings are available on that website under the TabSEC Filings. Item 1A. Risk Factors Investing in SGRP's common stock ("SGRP Common Stock") involves a high degree of risk and is subject to a number of risks, uncertainties,cautions, circumstances and other factors ("Risks") that could cause the Company's actual results to differ materially from those projected or otherwiseexpected in any forward-looking statements or other information (see Forward-Looking Statements immediately preceding Part I, above). The following are some of the important Risks faced by the Company, but they are not all of the Risks facing the Company. Those Risks listedbelow are in addition to the Risks and other information contained elsewhere in this Annual Report, the Proxy Statement and the Company's other SECReports, and all of them should be carefully considered in evaluating the Company and its business. If any of those Risks occur or become moresignificant (in whole or in part), or if any presently unknown Risk occurs, it could materially and adversely affect the results, actions, levels of activity,performance, achievements or condition of the Company (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financialcondition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or otherachievement, results, risks, trends or condition). You should carefully review and consider the following Risks as well as those made, contained or noted in or incorporated by reference into thisAnnual Report, the Proxy Statement or other applicable SEC Report, but you should not place undue reliance on any of them. All forward-lookingstatements and other information attributable to the Company or persons acting on its behalf are expressly subject to and qualified by all such Risks. Those Risks reflect our expectations, views and assumptions only as of the date of this Annual Report, and the Company does not intend, assumeany obligation, or promise to publicly update or revise any such Risk or information (in whole or in part), whether as a result of new information, new orworsening Risks or uncertainties, changed circumstances, future events, recognition, or otherwise. Dependence on Largest Customer and Large Retail Chains As discussed above in Company's Customer Base, the Company currently does not have a significant customer concentration. However, there canbe no assurance that the Company will be able to obtain new business, renew existing client contracts at the same or higher levels of pricing or that ourcurrent clients will not turn to competitors, cease operations, elect to self-operate or terminate contracts with us. In addition, consolidation by theCompany's clients in the industries it serves could result in our losing business if the combined entity chooses a different provider, and the bankruptcy ofa significant customer could result in the loss of substantial receivables or the return of substantial recent payments. The loss of any of its customers, theloss of the ability to provide merchandising and marketing services in those chains, the loss of substantial receivables or payments, or the failure to attractnew large clients could significantly decrease the Company's revenues and such decreased revenues could have a material adverse effect on the Companyor its performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legalcosts, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends orcondition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. Dependence on Trend Towards Outsourcing The business and growth of the Company depends in large part on the continued trend toward outsourcing of merchandising and marketingservices, which the Company believes has resulted from the consolidation of retailers and manufacturers, as well as the desire to seek outsourcingspecialists to reduce fixed operation expenses and concentrate internal staff on customer service and sales. There can be no assurance that this trend inoutsourcing will continue, as companies may elect to perform such services internally. A significant change in the direction of this trend generally, or atrend in the retail, manufacturing or business services industry not to use, or to reduce the use of, outsourced marketing services such as those provided bythe Company, could significantly decrease the Company's revenues and such decreased revenues could have a material adverse effect on the Company orits performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs,liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends orcondition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. -14- Dependence on Retailers with Physical Stores Retailers with physical store locations are facing increasing consolidation and competition from virtual stores. Some retailers with physical storeshave failed, others are struggling, and others are merging in this highly competitive environment. Although the Company's merchandising services helpphysical retailers in successfully competing against virtual stores, and the Company provides assembly and other services utilized by online retailers, theCompany's business and growth depends in large part on the continuing need for in-store merchandising of products and the continuing success ofretailers with physical store locations. There can be no assurance that the in-store merchandising of products will increase or even continue at currentlevels or that retailers with physical store locations will continue to compete successfully in those stores, and some retailers are shifting their sales focus totheir virtual online stores. A significant decrease in such need for in-store merchandising or success of such physical stores could significantly decreasethe Company's revenues and such decreased revenues could have a material adverse effect on the Company or its performance or condition (including itsaffiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing,operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actual or as planned,intended, anticipated, estimated or otherwise expected. Failure to Successfully Compete The merchandising and marketing services industry is highly competitive and the Company has competitors that are larger (or part of largerholding companies) and may be better financed. In addition, the Company competes with: (i) a large number of relatively small enterprises with specificclient, channel or geographic coverage; (ii) the internal merchandising and marketing operations of its existing and prospective clients; (iii) independentbrokers; and (iv) smaller regional providers. Remaining competitive in the highly competitive merchandising and marketing services industry requiresthat the Company monitor and respond to trends in all industry sectors. There can be no assurance that the Company will be able to anticipate andrespond successfully to such trends in a timely manner. If the Company is unable to successfully compete, it could have a material adverse effect on theCompany or its performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income,legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks,trends or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. If certain competitors were to combine into integrated merchandising and marketing services companies, or additional merchandising andmarketing service companies were to enter into this market, or existing participants in this industry were to become more competitive, it could have amaterial adverse effect on the Company or its performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit,expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxationor other achievement, results, risks, trends or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. Risks of Losses and Financial Covenant Violations In the past, the Company has suffered operating losses and may suffer operating losses in the future. In addition, certain one-time charges andadverse operating results during 2017 and 2018 have resulted in the Company being in default of certain of its financial covenants. The Company changed its domestic lender in April 2019 and entered into a new credit facility with increased availability and improved financialand other covenants. If the Company had this new credit facility in place at December 31, 2018, the Company would have been in compliance of all itsnew domestic lender's bank covenants. See Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note4 to the Company's Consolidated Financial Statements - Credit Facilities – North Mill Credit Facility, below. There can be no assurances that in thefuture: that the Company will be profitable; that the Company will not violate covenants of its current or future credit facilities; that if it does violatethem, that the Company's lenders will waive any violations of such covenants; that the Company will continue to have adequate lines of credit; or thatthe Company will continue to have sufficient availability under its lines of credit. Accordingly, minimal profitability by the Company, additional one-time charges, and changes in the composition and quality of its borrowing base (see Note 6 to the Company's Consolidated Financial Statements -Commitments and Contingencies -- Legal Matters, below.), as well as any failure to maintain sufficient availability or lines of credit from the Company'slenders (which may involve their subjective judgment), could have a material adverse effect on the Company or its performance or condition (includingits affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations,marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actual or asplanned, intended, anticipated, estimated or otherwise expected. -15- Variability of Operating Results and Uncertainty in Client Revenue The Company has experienced and, in the future, may experience fluctuations in quarterly operating results. Factors that may cause theCompany's quarterly operating results to vary from time to time and may result in reduced revenue and profits include: (i) the number of active clientprojects; (ii) seasonality of client products; (iii) client delays, changes and cancellations in projects; (iv) staffing requirements, indemnifications, riskallocations, primary insurance coverages, intellectual property claims, and other contractual provisions and concessions demanded by clients that areunilateral, unreasonable and very time consuming to review and attempt to negotiate; (v) the timing requirements of client projects; (vi) the completion ofmajor client projects; (vii) the timing of new engagements; (viii) the timing of personnel cost increases; (ix) service locations and conditions with higherthan contemplated personnel costs (remote areas, higher minimum wages, higher skill sets required, etc.); and (x) the loss of major clients. In addition, theCompany is subject to revenue or profit uncertainties resulting from factors such as unprofitable client work (see below) and the failure of clients to pay.These revenue fluctuations could materially and adversely affect the Company or its performance or condition (including its affiliates, assets, business,clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance,prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actual or as planned, intended, anticipated, estimatedor otherwise expected. Risks of Unprofitable Services The Company has agreed, and in the future may agree, from time to time to perform services for its clients that become unprofitable even thoughthe Company expected to make a profit when agreeing to perform them. The Company's services for a particular client or project may be or becomeunprofitable due to mistakes or changes in circumstance, including (without limitation) any (i) mistakes or omissions made in investigating, evaluating orunderstanding any relevant circumstance, requirement or request of the Company's client or any aspect of the prospective services or their inherentproblems, (ii) mistakes made in pricing, planning or performing the prospective service, (iii) service non-performance, or free re-performance, (iv) changesin cost, personnel, regulations or other performance circumstances, (v) service locations and conditions with higher than contemplated personnel costs(remote areas, higher minimum wages, higher skill sets required, etc.); or (vi) costs of settling or defending indemnifications, risk allocations, primaryinsurance coverages, intellectual property claims, or other contractual provisions or concessions. Unprofitable services could reduce the Company's netrevenues and, if material in gross amount or degree of unprofitability, could materially and adversely affect the Company or its actual, expected,performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs,liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends orcondition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. Failure to Develop New Services A key element of the Company's growth strategy is the development and sale of new services. While several new services are under currentdevelopment, there can be no assurance that the Company will be able to successfully develop and market new services. The Company's inability orfailure to devise useful merchandising or marketing services or to complete the development or implementation of a particular service for use on a largescale, or the failure of such services to achieve market acceptance, could adversely affect the Company's ability to achieve a significant part of its growthstrategy and the absence of such growth could have a material adverse effect on the Company or its performance or condition (including its affiliates,assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations,performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actual or as planned, intended,anticipated, estimated or otherwise expected and could limit the Company's ability to significantly increase its revenues and profits. Return Risks on Software Capital Expenditures The Company has made and will continue to make significant investments in improving its existing Global Technology Systems and developingnew software, applications and systems, which is a complex and lengthy process and totaled $1.3 and $1.0 million in 2018 and 2017, respectively, forcapitalized software improvement and development. The Company may not be able to charge its clients for such improvements or otherwise recover itscosts, and new developments may never become marketable, chargeable or profitable. However, a failure to improve its existing Global TechnologySystems or develop new software, applications or systems could result in a loss of clients. -16- The failure by the Company to successfully improve its existing Global Technology Systems or develop new software, applications or systems(including unrecovered development costs or client attrition) could have a material adverse effect on the Company or its performance or condition(including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity,locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actualor as planned, intended, anticipated, estimated or otherwise expected. Inability to Identify, Acquire and Successfully Integrate Acquisitions Another key component of the Company's growth strategy is the acquisition of businesses across the United States and worldwide that offersimilar merchandising or marketing services. The successful implementation of this strategy depends upon the Company's ability to identify suitableacquisition candidates, acquire such businesses on acceptable terms, finance the acquisition and consolidate and integrate their operations successfullywith those of the Company. There can be no assurance that such candidates will be available or, if such candidates are available, that the price will beattractive or that the Company will be able to identify, acquire, finance, consolidate or integrate such businesses successfully. In addition, in pursuingsuch acquisition opportunities, the Company may compete with other entities with similar growth strategies; these competitors may be larger and havegreater financial and other resources than the Company. Competition for these acquisition targets could also result in increased prices of acquisitiontargets and/or a diminished pool of companies available for acquisition. The successful integration of these acquisitions also involves a number of additional risks, including: (i) conflicts between the clients of theacquired business and the clients of the Company; (ii) the inability to retain the clients of the acquired business; (iii) the lingering effects of poor clientrelations or service performance by the acquired business, which also may negatively affect the Company's existing business; (iv) the inability to retainover the long term the desirable management, key personnel and other employees of the acquired business; (v) the inability to fully realize the desiredefficiencies and economies of scale; (vi) the inability to establish, implement or police the Company's existing standards, controls, procedures andpolicies on the acquired business; (vii) the diversion of management's attention from the day-to-day business of the Company to acquisition-relatedmatters; and (viii) exposure to client, employee and other legal claims for activities of the acquired business prior to acquisition. In addition, any acquiredbusiness could perform significantly worse than expected. The inability to identify, acquire, finance and successfully integrate such merchandising or marketing services business could have a materialadverse effect on the Company or its performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses,financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or otherachievement, results, risks, trends or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. Uncertainty of Financing for, and Dilution Resulting from, Future Acquisitions and Settlements The timing, size and success of acquisition and litigation settlement efforts and any associated capital commitments cannot be readily predicted.Future acquisitions and litigation settlements may be financed by issuing shares of the SGRP Common Stock, cash, or a combination thereof. If the SGRPCommon Stock does not maintain a sufficient market value, or if potential acquisition candidates or litigants are otherwise unwilling to accept the SGRPCommon Stock as part of the consideration for the sale of their businesses or settlement of their litigation, the Company may be required to obtainadditional capital through debt or equity financings. To the extent the SGRP Common Stock is used for all or a portion of the consideration to be paid forfuture acquisitions or legal settlements, dilution may be experienced by existing stockholders. A "super majority" vote of at least 75% of all SGRPdirectors is now required for any SGRP stock issuance of more than 500,000 SGRP shares (other than pursuant to stockholder approved plans) and suchissuance can be blocked by any two directors representing the Majority Stockholders. In addition, there can be no assurance that the Company will beable to obtain the additional financing it may need for its acquisitions or litigation settlements on terms that the Company deems acceptable. Failure toobtain such capital would materially and adversely affect the Company or its performance or condition (including its affiliates, assets, business, clients,capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects,sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actual or as planned, intended, anticipated, estimated orotherwise expected. -17- Reliance on the Internet and Third Party Vendors The Company relies on its Global Technology Systems for (among other things) the scheduling, tracking, coordination and reporting of itsmerchandising and marketing services. In addition to proprietary software and applications of the Company, the Global Technology Systems uses andrelies upon software (including operating system, office, exchange, data base and server programs) licensed and hardware purchased or leased from thirdparties and internet and telecommunication services provided by third parties, which third party software, hardware and internet and telecommunicationservices may not continue to be available at all or (if available) at reasonable prices or on commercially reasonable terms. Any defect, error or otherperformance failure in such third-party software, hardware or service also could result in a defect, error or performance failure in our client services. Systems can experience excess traffic and related inefficiencies, from increased demand or otherwise, as well as increased cyberattacks by hackers andother saboteurs. To the extent that systems experience increased demands on current capacity and for additional capacity from (among other things) anincrease in the numbers of users, frequency or duration of use, bandwidth requirements of software, applications and users (including the increasingdemand from the Company's clients for data-intensive as-serviced pictures from the Field Specialists), or internet cyberattacks, there can be no assurancethat the Company's technological systems and third party software, hardware and internet and telecommunication providers will continue to be able tosupport the demands placed on them by such increased demand or negative events. The Company relies on third-party vendors to provide its internet and telecommunication network access and other services used in its business,and the Company has no control over such third-party providers. Additionally, a cybersecurity breach that results in unauthorized access to sensitiveconsumer or corporate information contained in these systems may adversely affect the Company's reputation and lead to claims against it. Such claimscould include identity theft or other similar fraud-related claims and claims related to violations of applicable data privacy laws. Any system failure,accident or security breach could result in disruptions to the Company's operations. To the extent that any disruption or security breach results in a loss ordamage to the Company's data, or results in inappropriate disclosure of confidential information, it could cause significant damage to the Company'sreputation, affect its relationships with its customers, lead to claims against it and ultimately harm its business. In addition, the Company may be requiredto incur significant costs to protect against damage caused by these disruptions or security breaches in the future. Any such software, hardware or service unavailability or unreasonable pricing or terms, defect, error or other performance failure in such third-party software, hardware or service, increased capacity demands, disruption in services, security breach or protective measures could increase theCompany's costs of operation and reduce its efficiency and performance, which could have a material adverse effect on the Company or its performance orcondition (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities,liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition),whether actual or as planned, intended, anticipated, estimated or otherwise expected. Economic and Retail Uncertainty The markets in which the Company operates are cyclical and subject to the effects of economic downturns. The current political, social andeconomic conditions, including the impact of terrorism on consumer and business behavior, make it difficult for the Company, its vendors and its clientsto accurately forecast and plan future business activities. Substantially all of the Company's key clients are either retailers or those seeking to do productmerchandising at retailers. Should the retail industry experience a significant economic downturn, the resultant reduction in product sales couldsignificantly decrease the Company's revenues. The Company also has risks associated with its clients changing their business plans and/or reducing theirmarketing budgets in response to economic conditions, which could also significantly decrease the Company's revenues. Such revenue decreases couldhave a material adverse effect on the Company or its performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit,expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxationor other achievement, results, risks, trends or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. Risks Associated with Furniture and Other Related Assembly Services The Company's technicians assemble furniture and other products in the stores, homes and offices of customers. Working at a customer's store,home or office could give rise to claims against the Company for errors, omissions or misconduct by those technicians, including (without limitation)harassment, personal injury, death, damage to or theft of customer property, or other civil or criminal misconduct by such technicians. Claims also couldbe made against the Company as a result of its involvement in such assembly services due to (among other things) product assembly errors and omissions,product defects, deficiencies, breakdowns or collapse, products that are not merchantable or fit for their particular purpose, products that do not conformto published specifications or satisfy customer expectations, or products that cause personal injury, death or property damage, in each case whether actual,alleged or perceived by customers, and irrespective of how much time may have passed since such assembly. If such claims are asserted and adverselydetermined against the Company, then to the extent such claims are not covered by indemnification from the product's seller or manufacturer or byinsurance, they could have a material adverse effect on the Company or its performance or condition (including its affiliates, assets, business, clients,capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects,sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actual or as planned, intended, anticipated, estimated orotherwise expected. -18- Risks Associated with Audit Services The auditing services industry is highly competitive and the Company has competitors that are larger (or part of larger holding companies) andmay be better financed. In addition, the Company competes with: (i) a large number of relatively small enterprises with specific client, channel orgeographic coverage; (ii) the internal auditing operations of its existing and prospective clients; and (iii) smaller regional providers. Remainingcompetitive in the highly competitive auditing services industry requires that the Company monitor and respond to trends in all industry sectors. Therecan be no assurance that the Company will be able to anticipate and respond successfully to such trends in a timely manner. If the Company is unable tosuccessfully compete, it could have a material adverse effect on the Company or its performance or condition (including its affiliates, assets, business,clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance,prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actual or as planned, intended, anticipated, estimatedor otherwise expected. Dependence Upon and Risks of Services Provided by Third Party Independent Contractors and Related Litigation The success of the Company's domestic business is dependent upon the successful execution and administration of its domestic field servicesthrough the services of field merchandising, auditing, assembly and other field personnel (each a "Field Specialist"), substantially all of whom areprovided to the Company and engaged by independent third parties and located, scheduled, deployed and administered domestically through the servicesof local, regional, district and other personnel (each a "Field Administrator"), and substantially all of the Field Administrators are in turn are employed byother independent third parties. Prior to July 2018, substantially all of the services of the Field Specialists were supplied to the Company by SPAR Business Services, Inc.("SBS"), the Company's affiliate. Due to (among other things) the Clothier Determination and the ongoing proceedings against SBS (see SBS ClothierLitigation, SBS Field Specialist Litigation and SBS Bankruptcy, under the caption Legal Proceedings, below), SBS' continued higher charges, and theCompany's identification of an experienced Independent Field Vendor who would provide comparable services on substantially better terms, theCompany terminated the services of SBS effective July 27, 2018, and the Company has engaged that Independent Field Vendor to replace those fieldservices previously provided by SBS (other than in California, where the Company is using its own employees). Effective August 1, 2018, the Companyalso has engaged the Independent Field Administrator (see below) on substantially better terms to replace those Field Administrator services formerlyprovided by SPAR Administrative Services, Inc. ("SAS"), an affiliate of SBS. The appropriateness of SBS' treatment of its Field Specialists as independent contractors had been periodically subject to legal review orchallenge (both currently and historically) by various states and others. See Note 6 to the Company's Consolidated Financial Statements – Commitmentsand Contingencies - SBS Bankruptcy, SBS Field Specialist Litigation SBS Clothier Litigation, SGRP Hogan Litigation, and SBS and SGRP LitigationGenerally, below. As provided in SBS' Prior Agreement, the Company is not obligated or liable, and the Company has not otherwise agreed and does notcurrently intend, to reimburse SBS for any judgment or similar amount (including any damages, settlement, or related tax, penalty, or interest) in any legalreview, challenge or other proceeding against or involving SBS, and the Company does not believe it has ever done so (other than in insignificantnuisance amounts). See Note 10 to the Company's Condensed Consolidated Financial Statements - Related Party Transactions - Domestic Related PartyServices, below. SBS repeatedly disputed the right of the Company and SGRP's Audit Committee to review and decide whether the reimbursement of any relatedparty defense and other expense reimbursements was in the best interests of the Company. See Note 10 to the Company's Condensed ConsolidatedFinancial Statements - Related Party Transactions - Domestic Related Party Services, below. As a result of SGRP's separate settlement of the ClothierCase, on June 13, 2018, the Company gave SBS notice that it would no longer reimburse any such legal expenses related to this legal action, and inconnection with the termination of SBS' services, which ceased after July 2018, the Company advised SBS that the Company would no longer reimburseany SBS legal defense expenses. See Note 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies -- SBS ClothierLitigation, below. The Company received no services from SBS or SAS after the termination of their respective services took effect. Furthermore, even though SBSwas solely responsible for its operations, methods and legal compliance, in connection with any proceedings against SBS, SBS may claim that theCompany is somehow liable for any judgment or similar amount imposed against SBS and pursue that claim with litigation. The Company does notbelieve there is any basis for such claims and would defend them vigorously. There can be no assurance that plaintiffs or someone else will not claim thatthe Company is liable (under applicable law, through reimbursement or indemnification, or otherwise) for any such judgment or similar amount imposedagainst SBS, or that the Company will be able to successfully defend any claim. Any imposition of liability on the Company for any such amount couldhave 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, legal costs, 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 ConsolidatedFinancial Statements - Commitments and Contingencies -- Legal Matters, below. As a result of SBS filing for Chapter 11 bankruptcy (see Note 6 to the Company's Consolidated Financial Statements - Commitments andContingencies -- SBS Bankruptcy, below), there can be no assurance that SBS will ever be able to fully pay any amounts owed to the Company by SBSand any damage awards resulting from any legal determination adverse to SBS that may result in third party creditors seeking payment from the Companyin connection with SBS's bankruptcy case. Any imposition of such liability on the Company could have a material adverse effect on the Company or itsperformance or condition (including its 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), whether actual or as planned,intended, anticipated, estimated or otherwise expected. -19- The Company had utilized the services of SBS to support its in-store merchandising needs in California and SBSs' independent contractorclassifications had been held invalid in the Clothier Determination (see Note 6 to the Company's Condensed Consolidated Financial Statements -Commitments and Contingencies -- SBS Field Specialist Litigation and SBS Clothier Litigation, below) and in part as a result of the ClothierDetermination (see Note 6 to the Company's Consolidated Financial Statements – Commitments and Contingencies - Legal Matters – Clothier Case,below), the Company determined, with the approval of SGRP's Audit Committee and Board of Directors, and began in May of 2018 to shift to an allemployee servicing model for Field Specialists to support the performance of the Company's services in California for clients in this critical market andnationally for certain domestic clients that are requiring the Company to use employees as Field Specialists. Management currently estimates that thepotential incremental annual cost of this change in California from third party independent contractors to Company employees is between approximately$275,000 and $325,000. Commencing in and since August 2018, the Company engaged an experienced independent vendor (the "Independent Field Vendor") undercontract and license to supply the Company with the services of such vendor's Field Specialists (other than in California, where the Company is using itsown employees). The Independent Field Vendor has other significant customers in addition to the Company, performed service for them for yearspreceding the Company's engagement, and continues to perform service for them. Additionally, commencing in and since August 2018 the Companyengaged another independent vendor (the "Independent Field Administrator") under contract and license to provide the Company with the services ofsuch vendor's Field Administrators. The services provided by the Independent Field Vendor and the Independent Field Administrator to the Company inthe United States are material and there are no assurances that the Company could (if necessary under the circumstances) replace the Field Specialists andField Administrators currently provided by the Independent Field Vendor and Independent Field Administrator, respectively, in sufficient time to performits client obligations or at such favorable rates in the event the Independent Field Vendor or the Independent Field Administrator no longer performedthose services. The Company believes that its business model of executing its services domestically (other than in California, where the Company is using itsown employees) through independent contractors provided by others is equally effective but inherently less costly than doing so with employees, bothunder applicable tax and employment laws and otherwise. However, the Company continues to reevaluate its business model of using third partyindependent contractors as Field Specialists outside of California in light of changing client requirements and legal and regulatory environments andintends to begin testing an employee based model nationally for certain domestic clients that are requiring the Company to use employees as FieldSpecialists. The Company expects that using employees as Field Specialists in additional states will cost substantially more than using third partyindependent contractors for the same services. See Note 6 to the Company's Consolidated Financial Statements – Commitments and Contingencies -Legal Matters, and Note 10 to the Company's Consolidated Financial Statements – Related Party Transactions - Domestic Related Party Services, below. The Independent Field Vendor also utilizes independent contractors to the extent permitted by applicable law, and it is possible that theappropriateness of its treatment of Field Specialists as independent contractors will be periodically subject to legal review or challenge by various statesand others. The Company in its discretion may review and decide each request by the Independent Field Vendor for reimbursement of its legal defenseexpenses on a case-by-case basis, including the relative costs and benefits to the Company of doing so, but the Independent Field Vendor has agreed thatthe Company has no obligation to do so. Although to the Company's knowledge its Independent Field Vendor is not involved in any material proceeding involving its independentcontractors, any material legal defense costs of the Independent Field Vendor approved for reimbursement by the Company, or if SBS, SAS, theIndependent Field Vendor, any related party or any third party claims that the Company is liable for any legal expenses incurred by such parties indefending any claim or satisfying any judgment against such parties, any judicial determination that the Company is liable for any judgment against theIndependent Field Vendor, Independent Field Administrator, SBS, SAS, any related party or other vendor or service provider (in whole or in part), anydecrease in the Independent Field Administrator's or the Independent Field Vendor's performance (quality or otherwise), any inability by the IndependentField Administrator or the Independent Field Vendor to execute the services for the Company or to continue with its present business model, or anyincrease in the Company's use of employees (rather than independent contractors) as its domestic Field Specialists, in each case in whole or in part, couldhave a material adverse effect on the Company or its performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit,expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or otherachievement, results or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. Current material and potentially material proceedings involving independent contractors against SBS and, in one instance, the Company arefurther described under the caption Legal Proceedings, below and in Note 6 to the Company's Consolidated Financial Statements - Commitments andContingencies -- Legal Matters, below. Potential Conflicts with Affiliates SBS, SAS, and SPAR InfoTech, Inc. ("Infotech"), have provided services from time to time to the Company and are related parties and affiliates ofSGRP. SBS, SAS and Infotech are not under the control or part of the consolidated Company and none of them was ever included in the Company'sconsolidated financial statements. SBS is an affiliate because it is owned by Robert G. Brown, and, through November 2018, was also owned in part byWilliam H. Bartels. SAS is an affiliate because it is owned by William H. Bartels and certain relatives of Robert G. Brown or entities controlled by them(each of whom are considered affiliates of the Company for related party purposes). Infotech is an affiliate because it is owned by Robert G. Brown andcertain relatives of Robert G. Brown or entities controlled by them (each of whom are considered affiliates of the Company for related party purposes). Mr.Brown and Mr. Bartels are the Majority Stockholders (see below) and founders of SGRP's predecessor, Mr. Brown was Chairman and an officer anddirector of SGRP through May 3, 2018 (when he retired), and Mr. Bartels was and continues to be Vice Chairman and a director and officer of SGRP. Mr.Brown and family members also have been and are stockholders, directors and executive officers of various other affiliates of SGRP. SBS, SAS andInfotech have been engaged or have threatened to engage in legal proceedings against the Company, which may result in future judgments adverse to theCompany. The Company does not believe there is any reasonable basis for any new such claims and would defend them vigorously. See LegalProceedings, below and Dependence Upon and Risks of Services Provided by Third Party Independent Contractors and Related Litigation and RisksRelated to the Company's Significant Stockholders and Potential Voting Control and Conflicts, in these Risk Factors above and below, and Note 6 to theCompany's Consolidated Financial Statements - Commitments and Contingencies -- Legal Matters, below. The Company executes and administers its domestic field services through the services of field merchandising, auditing, assembly and other fieldpersonnel (each a "Field Specialist"), substantially all of whom 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"), andsubstantially all of the Field Administrators are in turn are employed by other independent third parties. -20- Prior to August 2018, substantially all of the Company's domestic Field Specialist services were supplied SBS and to the Company's knowledgeall of them were engaged as independent contractors by SBS. During this seven month period, SBS provided the services of approximately 3,800 FieldSpecialists (all of whom were engaged as independent contractors by SBS), representing 27% (or $15.4 million) of the total cost of the Field Specialistservices utilized in 2018 by the Company domestically. SBS during 2017 provided the services of approximately 10,700 Field Specialists (all of whomwere engaged as independent contractors by SBS), representing 77% (or $25.9 million) of the total cost of the Field Specialist services utilized by theCompany domestically. The Field Specialists are located, scheduled, deployed and administered domestically by local, regional, district and other personnel (each a"Field Administrator"), substantially all of whom since August 2018 were provided to the Company and engaged by another new independent vendorunder contract and license with the Company. Prior to August 2018, substantially all of the Company's domestic Field Administrators were supplied bySPAR Administrative Services, Inc. ("SAS"). During this seven month period, SAS provided the services of approximately 52 Field Administrators (all ofwhom were employed by SAS) representing 53% (or $2.7 million) of the total cost of the Field Administrators utilized in 2018 by the Companydomestically. SAS during 2017 provided the services of approximately 57 Field Administrators (all of whom were employed by SAS) representing 91%(or $4.2 million) of the total cost of the Field Administrators utilized by the Company domestically. Although neither SBS nor SAS has provided any services to the Company after their service terminations were effective on or shortly before July31, 2018. SBS and SAS have apparently continued to operate and claim that the Company owes them for all of their post-termination expenses inperpetuity. See Note 10 to the Company's Condensed Consolidated Financial Statements - Related Party Transactions - Domestic Related Party Services,below. See also Note 6 to the Company's Condensed Consolidated Financial Statements - Commitments and Contingencies -- SBS Bankruptcy, below. Through December 31, 2018, SBS has invoiced the Company for approximately $120,000, and SAS has invoiced the Company forapproximately $76,000. All such invoices have been rejected by the Company. The Company has determined that it is not obligated to reimburse anysuch post-termination expense (other than for potentially reimbursing SAS for mutually approved reasonable short term ordinary course transitionexpenses in previously allowed categories needed by SAS to wind down its business, if any), and that such a payment would be an impermissible gift to arelated party under Company policy and applicable law, which determinations have been supported by SGRP's Audit Committee. The SBS invoicesincluded legal expenses for its continuing defense in the Clothier Case even though SGRP on June 13, 2018, gave SBS notice that it would no longerreimburse any such expenses as a result of SGRP's separate settlement of the Clothier Case. See Note 10 to the Company's Condensed ConsolidatedFinancial Statements - Related Party Transactions - Domestic Related Party Services, and Note 6 to the Company's Condensed Consolidated FinancialStatements - Commitments and Contingencies -- Legal Matters, below. The Company expects that SBS and SAS may use every available means to attempt to collect reimbursement from the Company for theforeseeable future for all of their post-termination expense, including repeated litigation. See Note 6 to the Company's Condensed ConsolidatedFinancial Statements - Commitments and Contingencies -- Legal Matters, below. Accordingly, Management recommended and the Audit Committee agreed that it would be in the best interest of all stockholders: (i) to submitSGRP and SMF claims against SBS in the SBS Chapter 11 Case in order to preserve their value (including as an offset against SBS' claims), particularlysince those claims against SBS exceed amounts potentially owed to SBS; (ii) to not voluntarily pay any SBS obligations directly to targeted SBScreditors, as such payments would reduce that offset value (potentially dollar-for-dollar), subvert the bankruptcy process and potentially expose SGRPand SMF to direct future liability (for example, liability for a lawsuit if SGRP voluntarily pays for its defense); and (iii) to only make payments to or onbehalf of SBS to the extent proven and required in the SBS Chapter 11 Case or other court with jurisdiction over the dispute. See Note 6 to the Company'sCondensed Consolidated Financial Statements - Commitments and Contingencies -- SBS Bankruptcy, below. Infotech is currently suing the Company in New York seeking reimbursement for approximately $190,000 respecting alleged lost tax benefitsand other expenses it claims to have incurred in connection with SGRP's acquisition of its Brazilian subsidiary and previously denied by bothmanagement and SGRP's Audit Committee, who had jurisdiction because Infotech is a related party. Infotech also is threatening to sue the Company inRomania for approximately $900,000 for programming services allegedly owed to the Company's former Romanian subsidiary (sold at book value toInfotech in 2013) and not provided to Infotech, which the Company vigorously denies. See Note 6 to the Company's Condensed Consolidated FinancialStatements - Commitments and Contingencies -- Infotech Litigation Against SGRP, below. Portions of the Company's proprietary scheduling, tracking, coordination, reporting and expense software (the "Co-Owned Software") are co-owned with SBS and Infotech and each has a license from the Company to use certain "SPAR" trademarks in the United States (the "Licensed Marks"). OnNovember 23, 2018, SBS petitioned for bankruptcy protection under chapter 11 of the United States Bankruptcy Code in the U.S. District for Nevada (the"SBS Chapter 11 Case"), and as a result, SBS' rights in the Co-Owned Software and Licensed Marks are assets of SBS' estate, subject to sale or transfer inany court approved reorganization or liquidation. See Note 6 to the Company's Condensed Consolidated Financial Statements - Commitments andContingencies -- SBS Bankruptcy and Infotech Litigation Against SGRP, below. See also Dependence Upon and Risks of Services Provided byIndependent Contractors and Related Litigation, Risks Related to the Company's Significant Stockholders and Potential Voting Control and Conflictsin these Risk Factors, below. To a lesser extent, conflicts and events could arise with respect to the Company's contracts with joint venture affiliates. The Companyperiodically evaluates whether and the extent (if any) to which it continues to operate with such affiliates. See Note 10 to the Company's CondensedConsolidated Financial Statements - Related Party Transactions - International Related Party Services, below. Additionally, portions of the Company's proprietary scheduling, tracking, coordination, reporting and expense software (the "Co-OwnedSoftware") currently included in the Company's Global Technology Systems are co-owned by the Company and SBS and Infotech, which may result inconflicts arising in the future. See "An Overview of the Merchandising and Marketing Services Industry" and "The Company's Competition", above, andNote 10 to the Company's Consolidated Financial Statements - Related Party Transactions - Other Related Party Transactions and Arrangements, below. Certain of the Company's "SPAR" trademarks (the "Licensed Marks") are also licensed for use (i) in the United States royalty free and in perpetuitypursuant to license agreements that commenced in 1999 with its affiliates, SBS and Infotech (as defined in Related Parties And Related Party Litigation,in Item 3, below), (ii) worldwide royalty free and in perpetuity pursuant to informal license arrangements with its wholly owned subsidiaries, (iii) in theirrespective jurisdictions royalty free pursuant to license agreements for limited terms with its foreign joint venture subsidiaries, and (iv) in the UnitedStates for limited terms and modest royalties pursuant to license agreements with the Independent Field Vendor and Independent Field Administratorrespectively providing Field Specialists and Field Administrators to the Company domestically that commenced in 2018. Except for SBS and Infotech(who don't need such software licenses because of their co-ownership), each subsidiary and vendor trademark license and arrangement also licenses theCo-Owned Software to the licensee. -21- The Company has contracts with certain international affiliates, including certain service providers to the Company's foreign joint venturesubsidiaries. Any disagreement or other dispute in the business relationships arising in connection with such contracts may create a conflict of interest andcause such affiliates to act outside of the best interests of the Company. See Note 10 to the Company's Consolidated Financial Statements - Related PartyTransactions - International Related Party Services, below. Any litigation with any affiliate, any diminution in the value, availability or usefulness of the Co-Owned Software or Licensed Marks, or anycancellation, other nonperformance or material pricing increase under the Company's arrangements with any vendor, could have a material adverse effecton the Company or its performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition,income, legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results,risks, trends or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. Risks Related to the Company's Significant Stockholders and Potential Voting Control and Conflicts The Company's co-founders, Mr. Robert G. Brown and Mr. William H. Bartels, are significant stockholders of SGRP. Mr. Brown was Chairmanand an officer and director of SGRP through May 3, 3018 (when he retired), and Mr. Bartels was and continues to be Vice Chairman and a director andofficer of SGRP. Mr. Brown beneficially owns approximately 32.1% (or approximately 6.7 million shares) of the SGRP Common Stock); and Mr. Bartelsbeneficially owns approximately 25.5% (or approximately 5.3 million shares) of the SGRP Common Stock; which amounts were calculated using theirrespective individual beneficial ownership and the total outstanding ownership (approximately 20.8 million shares) of the SGRP Common Stock on anon-diluted basis at December 31, 2018. This means that together Mr. Brown and Mr. Bartels (the "Majority Stockholders") beneficially own as a group atotal of approximately 57.6% (or 12.0 million shares) of the SGRP Common Stock. If Messrs. Brown and Bartels act together again as group they have,and under certain circumstances if Mr. Brown acts alone he has, the ability to control (or significantly influence in the case of Mr. Brown acting alone) theelection or removal of directors, the approval or disapproval of acquisitions, mergers, employee benefit plans, amendments to the Company's charterand/or bylaws, changes in Board size and all other matters that must or could be approved by the Company's stockholders. On June 1, 2018, the Majority Stockholders each 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 Securities Exchange Act of 1934]" and "may act in concert with respect to certainmatters," including (without limitation) to remove and appoint directors by written consent. On June 29, 2018, and July 5, 2018, SGRP received WrittenConsents from the Majority Stockholders endeavoring to unilaterally approve the selection, appointment and election of Mr. Jeffrey Mayer as a directorof SGRP and remove Lorrence Kellar as an independent director, which was contested and ultimately concluded in a negotiated settlement. See Note 6 tothe Company's Consolidated Financial Statements - Commitments and Contingencies -- Legal Matters – Settled Delaware Litigations, below. On August 6, 2018, the Majority Stockholders each filed another amended Schedule 13D with the SEC, in which they each acknowledged thatthey "may be deemed to comprise a 'group' within the meaning of [the Securities Exchange Act of 1934]" and "may act in concert with respect to certainmatters," including (without limitation) to adopt through a written consent proposed amendments to SGRP's By-Laws. On August 6, 2018, and September18, 2018, SGRP received Written Consents from the Majority Stockholders endeavoring to unilaterally change SGRP's By-Laws in order to (among otherthings) weaken the independence of SGRP's Board of Directors (the "Board") through new supermajority requirements and stockholder only approvals andeliminate the Board's independent majority requirement, all in order to further benefit themselves, which was contested by SGRP and ultimatelyconcluded in a negotiated settlement. See Note 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies-- Legal Matters-- Settled Delaware Litigations, below. On January 25, 2019, the Majority Stockholders each filed another amended Schedule 13D with the SEC, in which they each acknowledged thatthey "may be deemed to comprise a 'group' within the meaning of [the Securities Exchange Act of 1934]" and "may act in concert with respect to certainmatters", including various listed items. -22- Mr. Brown and Mr. Bartels continue to have significant influence and leverage over the Company's business, corporate governance and othersignificant actions, including those involving stockholder approvals. A "super majority" vote of at least 75% of all SGRP directors is now required underthe Restated By-Laws for any committee assignment, SGRP stock issuance of more than 500,000 SGRP shares (other than pursuant to stockholderapproved plans), or By-Laws changes, which can be blocked by any two directors representing the Majority Stockholders. The interests of the MajorityStockholders (such as changing Board composition and potentially weakening its independence, obtaining related party payments previously denied bythe Company and Audit Committee and obtaining new retirement benefits for Mr. Brown previously denied by the Company and CompensationCommittee) may be materially different from time to time from, and potentially in conflict with, the interests of other stockholders, and ownershipconcentration could cause, delay or prevent a change in the Company's control or otherwise discourage the Company's potential acquisition by anotherperson, any of which could cause the market price of the SGRP Common Stock to decline and that decline could be significant. Mr. Brown and Mr. Bartels continue to request material payments from the Company for various reasons, which they appear to believe involvesseveral million dollars directly or indirectly owed to them, and which they have said they will litigate to obtain. The Company believes that there may besome justification for some small amount of payments to certain of their related parties (other than SBS) (see Potential Conflicts with Affiliates, above). As the Majority Stockholder group, Mr. Brown and Mr. Bartels also recently have stated their desire to increase SGRP's Board size to nine, and to add twonew directors of their choosing, and SGRP's Governance Committee has been in discussion with them to evaluate the independence of the proposednominees with a goal of maintain a majority of independent directors on the Board (as required by Nasdaq). Acting as a group, Mr. Brown and Mr. Bartelscould remove all or any part of the current Board by voting "no" for targeted incumbents in the upcoming annual stockholders meeting or by executingmore written consents. With fewer or no independent directors on the Board, Mr. Brown and Mr. Bartels could eventually be able to pay themselveswithout any effective restriction. In an effort to bring stability to the Company and Board for a reasonable period of time and avoid future costlylitigation, the Company has been seeking and will continue to seek a settlement with Mr. Brown and Mr. Bartels that: (i) the Company can afford; (ii) isapproved as a related party transaction by SGRP's Audit Committee as fair; appropriate and beneficial to the Company and all of its stockholders; (iii) isacceptable to the Company's domestic lender; (iv) releases the Company from current and future claims and litigation involving Mr. Brown, Mr. Bartelsand their affiliates; and (v) stabilizes the Board and Company for a reasonable number of years. There can be no assurance that the Majority Stockholders will refrain from together taking any further unilateral action through their writtenconsents or otherwise. If such actions by the Majority Stockholders continue in the future, the Company must continue do devote significantmanagement time and legal and financial resources, which would otherwise be spent on the Company's day-to-day business operations, to respond to andattempt to resolve the frequent claims, responses and actions by the Majority Stockholders (individually and on behalf of SBS, SAS and Infotech), whichhave been increasing in frequency and intensity. If the Majority Stockholders continue to together take such unilateral actions without restriction (seeNote 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies -- Legal Matters – Delaware Litigations Settlement,below), it could have a material adverse effect on the Company or its performance or condition (including its 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), whether actual or as planned, intended, anticipated, estimated or otherwise expected. Risks of Common Stock Ownership Dividends on SGRP Common Stock are discretionary, have never been paid, are subject to restrictions in the Company's credit facilities andapplicable law and can only be paid to the holders of SGRP Common Stock if the accrued and unpaid dividends and potential dividends are first paid tothe holders of the Series A Preferred Stock. In the event of the Company's liquidation, dissolution, or winding-up, the holders of Common Stock are onlyentitled to share in the Company's assets, if any, that remain after the Company makes payment of and provision for all of the Company's debts andliabilities and the liquidation preferences of all of the Company's outstanding Preferred Stock. There can be no assurance that sufficient funds will remainin any such case for dividends or distributions to the holders of SGRP Common Stock. A "super majority" vote of at least 75% of all SGRP directors isnow required for any SGRP stock issuances of more than 500,000 shares (other than pursuant to stockholder approved plans), which issuance can beblocked by any two directors representing the Majority Stockholders. Risks related to the Company's Preferred Stock The Company's ability to issue or redeem Preferred Stock, or any rights to purchase such shares, could discourage an unsolicited acquisitionproposal. For example, the Company could impede a business combination by issuing a series of preferred stock containing class voting rights that wouldenable the holders of such preferred stock to block a business combination transaction. Alternatively, the Company could facilitate a businesscombination transaction by issuing a series of preferred stock having sufficient voting rights to provide a required percentage vote of the stockholders. Additionally, under certain circumstances, the Company's issuance of preferred stock could adversely affect the voting power of the holders of the SGRPCommon Stock. SGRP's Board could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of SGRP'sstockholders may believe to be in their best interests or in which SGRP's stockholders may receive a premium for their stock over prevailing market pricesof such stock. A "super majority" vote of at least 75% of all SGRP directors is now required for any SGRP preferred stock issuance, which issuance can beblocked by any two directors representing the Majority Stockholders. Risks of Illiquidity in SGRP Common Stock The market price of SGRP Common Stock has historically experienced and may continue to experience significant volatility. During the yearended December 31, 2018, the sale price of SGRP Common Stock fluctuated from $0.45 to $3.75 per share. The Company believes that its Common Stockis subject to wide price fluctuations due to (among other things) the following: ●The relatively small public float and corresponding thin trading market for SGRP Common Stock, attributable to (among other things) the largeblock of voting shares beneficially owned by the Company's co-founders (as noted below) and generally low trading volumes, and that thintrading market may cause small trades to have significant impacts on SGRP Common Stock price. -23- ●The substantial beneficial ownership of the Company's voting stock and potential control by Mr. Robert G. Brown and Mr. William H. Bartels,who are the Company's co-founders. Mr. Bartels is a director and Officer of the Company. Mr. Brown beneficially owns approximately 32.1% (or6.7 million shares) of the SGRP Common Stock, and Mr. Bartels beneficially owns approximately 25.5% (or 5.3 million shares) of the SGRPCommon Stock, which amounts were calculated using their individual beneficial ownerships and the total outstanding ownership (20.8 millionshares) of the SGRP Common Stock on a non-diluted basis at December 31, 2018. This means that together they and their group beneficiallyown a total of approximately 57.5% (or 12.0 million shares) of the SGRP Common Stock (see Risks Related to the Company's SignificantStockholders: Potential Voting Control and Conflicts, below). ●The periodic potential risk of the delisting of SGRP Common Stock from trading on The Nasdaq Stock Market LLC ("Nasdaq") (as describedbelow). ●Any announcement, estimate or disclosure by the Company, or any projection or other claim or pronouncement by any of the Company'scompetitors or any financial analyst, commentator, blogger or other person, respecting (i) any new service created or improved, significantcontract, business acquisition or relationship, or other publicized development by the Company or any of its competitors, or (ii) any change,fluctuation or other development in the Company's actual, estimated or desired affiliates, assets, business, clients, capital, cash flow, credit,expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation orother achievement, results or condition or in those of any of the Company's competitors, in each case irrespective of accuracy or validity andwhether or not adverse or material. ●The general volatility of stock markets, consumer and investor confidence, and the general state of the economy (which often affect the prices ofstock issued by the Company and many others without regard to financial results or condition). If the Company issues (other than at fair market value for cash) or the Majority Stockholders sell a large number of shares of SGRP CommonStock, or if the market perceives such an issuance or sale is likely or imminent, the market price of SGRP Common Stock could decline and that declinecould be significant. The Company also has repurchased SGRP Common Stock from time to time, and currently has in place a Repurchase Program (as defined anddescribed in Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, below). Thoserepurchases could adversely affect the market liquidity of the SGRP Common Stock. In addition, the volatility in the market price of SGRP Common Stock could lead to class action securities litigation that could in turn imposesubstantial costs on the Company, divert management's attention and resources from the day-to-day operations of the Company's business and harm theCompany's stock price, the Company or its performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses,financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or otherachievement, results, risks, trends or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. Risks of Dilution The Company may issue stock options and award restricted stock to directors, officers, employees and consultants in the future at Common Stockper-share exercise prices below the market price(s). In addition, the Company may issue shares of SGRP Common Stock in the future in furtherance of theCompany's acquisitions or development of businesses or assets or litigation settlements. Each of those and other issuances of SGRP Common Stock couldhave a dilutive effect on the value of currently held shares, depending on the price the Company is paid (or the value of the assets or business acquired)for such shares, market conditions at the time and other factors. A "super majority" vote of at least 75% of all SGRP directors is now required for anySGRP stock issuance of more than 500,000 shares (other than pursuant to stockholder approved plans), which issuance can be blocked by any twodirectors representing the Majority Stockholders. Risks of a Nasdaq Delisting and Penny Stock Trading SGRP received a notification letter from Nasdaq, dated December 13, 2018 (the "Nasdaq Board Independence Deficiency Letter"), stating thatSGRP no longer complied with Nasdaq's majority independent director requirement, as set forth in Nasdaq Listing Rule 5605(b)(1) as a result of the StatusQuo Order adding Mr. Jeffrey Mayer to SGRP's Board. See Note 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies-- Legal Matters – Delaware Litigation Settlement, below). See Nasdaq Listing Rule 5605(b)(1) requires a majority of the board of directors of a listedcompany to be comprised of independent directors, as defined in Rule 5605(b)(1) (the "Board Independence Rule"). -24- On January 31, 2019, SGRP submitted its plan to Nasdaq to regain compliance with the Board Independence Rule (the "Compliance Plan"). In the Compliance Plan, SGRP explained that it had more fully vetted and re-evaluated the independence of Mr. Mayer, based on (among otherthings) Mr. Mayer's independent business skills, his contribution to the Settlement (as defined in the Compliance Plan) process, his interactions with theBoard of Directors of the Corporation (the "Board") over the last five months, and his lack of financial dealings with the Majority Stockholders (as definedin the Compliance Plan), and determined that he has the requisite independence from the management of the Corporation (to be considered anindependent director under Rule 5605 (a)(2)) for the purposes of serving on the Board and its Compensation Committee. He will, however, be consideredan interested director and excluded from any decision respecting any related party matter (as defined in the Compliance Plan), which are within the AuditCommittee's purview, and he is not being appointed to the Audit Committee or the Governance Committee. On February 5, 2019, Nasdaq sent SGRP a letter (the "Compliance Letter"), stating that Nasdaq "Staff has determined that since the Company'sBoard of Directors currently consists of four independent and three non-independent directors, it complies with the Rule and this matter is now closed." SGRP received a notification letter from Nasdaq dated December 10, 2018 (the "Nasdaq Bid Price Deficiency Letter"), stating that SGRP hadfailed to maintain a minimum closing bid price of $1.00 per share for shares of the SGRP Common Stock for the prior 30 consecutive business dayspreceding the Nasdaq Bid Price Deficiency Letter (i.e., October 25, 2018 - December 7, 2018) as required by Nasdaq Listing Rule 5550(a)(2) (the "BidPrice Rule"). The Nasdaq Bid Price Deficiency Letter provides that SGRP has until June 10, 2019, as a grace period to regain compliance with the BidPrice Rule by maintaining a closing bid price of $1.00 per share for a minimum of ten consecutive business days. If at any time during the grace period thebid price of SGRP's Common Stock closes at $1.00 per share or more for a minimum of ten consecutive business days, Nasdaq will provide SGRP withwritten confirmation of compliance. SGRP has not yet regained compliance with the Bid Price Rule, and its failure to do so could lead to the delisting of SGRP's securities. There can be no assurance that the Company will be able to comply in the future with Nasdaq's Board Independence Rule or Bid Price Rule orother Nasdaq continued listing requirements. If the Company fails to satisfy the applicable continued listing requirement and continues to be in non-compliance with the Bid Price Rule and the applicable six-month grace period ends, Nasdaq may commence delisting procedures against the Company(during which the Company may have additional time of up to six months to appeal and correct its non-compliance). If the SGRP Common Stock shareswere ultimately delisted by Nasdaq, trading of the SGRP Common Stock could be limited to "over-the-counter" trades and the market liquidity of theSGRP Common Stock could be adversely affected, which could result in a decrease in the market price of the SGRP Common Stock due to (among otherthings) the potential for increased spreads between bids and asks, lower trading volumes and reporting delays in over-the-counter trades and the negativeimplications and perceptions that could arise from such a delisting. In addition to the foregoing, if the SGRP Common Stock is delisted from Nasdaq and is traded on the over-the-counter market, the application ofthe "penny stock" rules could adversely affect the market price of the SGRP Common Stock and increase the transaction costs to sell those shares. TheSEC has adopted regulations which generally define a "penny stock" as any equity security not listed on a national securities exchange or quoted onNasdaq that has a market price of less than $5.00 per share, subject to certain exceptions. If the SGRP Common Stock is delisted from Nasdaq and istraded on the over-the-counter market at a price of less than $5.00 per share, the SGRP Common Stock would be considered a penny stock. Unlessotherwise exempted, the SEC's penny stock rules require a broker-dealer, before a transaction in a penny stock, to deliver a standardized risk disclosuredocument that provides information about penny stock and the risks in the penny stock market, the current bid and offer quotations for the penny stock,the compensation of the broker-dealer and the salesperson in the transaction, and monthly account statements showing the market value of each pennystock held in the customer's account. Further, prior to a transaction in a penny stock, the penny stock rules require the broker-dealer to provide a writtendetermination that the penny stock is a suitable investment for the purchaser and receive the purchaser's agreement to the transaction. If applicable in thefuture, the penny stock rules may restrict the ability of brokers-dealers to sell the SGRP Common Stock and may adversely affect the ability of investors tosell their shares. -25- Risk of Failure to Maintain Effective Internal Controls Establishing and maintaining effective internal control over financial reporting and disclosures are necessary for the Company to providereliable financial and other reporting in accordance with accounting principles generally accepted and applicable securities and other law in the UnitedStates. Because of its inherent limitations, internal controls over financial and other reporting are not intended to provide absolute assurance that theCompany could prevent or detect a misstatement of its financial statements or other reports or fraud. Any failure to maintain an effective system of internalcontrol over financial and disclosure reporting could limit the Company's ability to report its financial results and file its other reports accurately andtimely or to detect and prevent fraud. A significant financial or disclosure reporting failure or material weakness in internal control over financial or otherreporting could cause a loss of investor confidence and a decline in the market price of the SGRP Common Stock. See also Risks of Having Material LocalInvestors and Local Executives in International and Domestic Subsidiaries, below. Risks of Having Material Local Investors and Local Executives in International and Domestic Subsidiaries The Company's international model is to join forces with Local Investors (as defined below) having merchandising service expertise andcombine their knowledge of the local market with the Company's proprietary software and expertise in the merchandising business. The Company alsohas begun to use this model in the United States (see Item 1 – Business - The Company's Domestic and International Segments, above). As a result, each ofthe Company's international subsidiaries (other than Canada and Japan) and NMS domestically is owned in material part by an entity in the local countrywhere the international or domestic subsidiary resides and that entity is not otherwise affiliated with the Company (e.g., the "Local Investor"). Theagreements between the Company and the Local Investor in the respective international or domestic subsidiaries specify, among other things, the equity,programming and support services the Company is required to provide and the equity, credit support, certain services and management support that theLocal Investor is required to provide to the international or domestic subsidiary. Certain of those subsidiaries also may be procuring field merchandisingexecution through affiliates of the applicable Local Investors. The Local Investor or its principal generally is the Chief Executive Officer of theinternational or domestic subsidiary for an open-ended term and has considerable autonomy and authority over its operations. The Local Investors alsomay wish to conduct the subsidiary's business differently than desired by the Company. In the event of any disagreement or other dispute in the businessrelationships between the Company and Local Investor, the Local Investor may have one or more conflicts of interest with respect to the relationship andcould cause the applicable international or domestic subsidiary to operate or otherwise act in a way that is not consistent with the Company's instructionsor best interests. The agreements generally have unlimited contract terms and parties generally do not have the right to unilaterally withdraw. However, a non-defaulting party has the right to terminate such agreement upon the other party's default, receipt of notice and failure to cure within a specified period(generally 60 days internationally or 30 days domestically). In addition, either party, at any time after the end of a specified period (usually between threeand five years), may: (1) sell all or part of its equity interest in the international subsidiary to a third party by providing a written notice to the other partyof such intentions (in which case the other party has the right of first refusal and may purchase the equity of the offering party under the same terms andconditions) (a "Right of First Refusal"); or (2) offer to purchase the equity of the other party (in which case the other party generally has 120 days to eitheraccept or reject the offer or to reverse the transaction and actually purchase the offering party's equity under the same terms and conditions) (a "Buy/SellRight"). The Company believes its relationships with the Local Investors in its international subsidiaries remain good. Most of the Company's respectiveinternational subsidiary contracts are either at or near the end of the applicable periods during which either of the parties may trigger the Right of FirstRefusal and Buy/Sell provisions described above. Both the Company and such Local Investors, as part of their ongoing relationship, are or will beassessing appropriate action as described above. There can be no assurance that the Company could (if necessary under the circumstances) successfully (i) enforce its legal remedies and stop aLocal Investor's principals from leaving the local subsidiary and establishing a competing business, (ii) replace equity, credit support, management, fieldmerchandiser and other services currently provided by any Local Investor in sufficient time to perform its client obligations or (iii) provide these servicesand or equity in the event the Local Stockholder were to sell its stock or reduce any support to the Company's subsidiary in the applicable country. Anycancellation, other nonperformance or material change under the subsidiary agreements with Local Investors could have a material adverse effect on theCompany or its performance or condition (including its affiliates, assets, business, clients, capital, cash flow, credit, expenses, financial condition, income,legal costs, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks,trends or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. -26- Risks Associated with International and Domestic Subsidiaries While the Company endeavors to limit its exposure for claims and losses in any international or domestic consolidated subsidiary throughcontractual provisions, insurance and use of single purpose entities for such ventures, there can be no assurance that the Company will not be held liablefor the claims against and losses of a particular international or domestic consolidated subsidiary under applicable local law or local interpretation of anysubsidiary agreements or insurance provisions. If any such claims and losses should occur, be material in amount and be successfully asserted against theCompany, such claims and losses could have a material adverse effect on the Company or its performance or condition (including its affiliates, assets,business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations,performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actual or as planned, intended,anticipated, estimated or otherwise expected. Risks Associated with Foreign Currency The Company also has foreign currency risk exposure associated with its international subsidiaries. In 2018, these foreign currency exposureswere primarily concentrated in the Mexican Peso, South African Rand, Chinese Yuan, Japanese Yen, Indian Rupee, Canadian Dollar, Australian Dollar,and Brazilian Real. Risks Associated with International Business The Company's expansion strategy includes expansion into various countries around the world. There can be no assurances that the respectivebusiness environments will remain favorable. In the future, the Company's international operations and sales may be affected by the following risks, whichmay adversely affect United States companies doing business in foreign countries: •Political and economic risks, including terrorist attacks and political instability; • Various forms of protectionist trade legislation that currently exist or have been proposed; • Expenses associated with customizing services and technology; • Local laws and business practices that favor local competition; • Dependence on local vendors and potential for undisclosed related party transactions; • Multiple, conflicting and changing governmental laws, regulations and enforcement; • Potentially adverse tax and employment law consequences; • Local accounting principles, practices and procedures; • Local legal principles, practices and procedures, local contract review and negotiation, and limited familiarity with contract issues(excessive warranties, extra-territoriality, sweeping intellectual property claims and the like); •Limited familiarity or an unwillingness to comply with, or wrongly believing the inapplicability of, generally accepted accountingprinciples in the USA ("GAAP"), applicable corporate controls and policies of the Company (including its Ethics Code), or applicable lawin the USA (including Nasdaq rules, securities laws, anti-terrorism law, Sarbanes Oxley and the Foreign Corrupt Practices Act); • Foreign currency exchange rate fluctuations and limits on the export of funds; • Substantial communication barriers, including those arising from language, culture, custom and time zones; and • Supervisory challenges arising from agreements, distance, physical absences and such communication barriers. If any developments should occur with respect to any of those international risks and materially and adversely affect the Company's applicableinternational subsidiary, such developments could have a material adverse effect on the Company or its performance or condition (including its affiliates,assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations,performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition), whether actual or as planned, intended,anticipated, estimated or otherwise expected. Item 1B. Unresolved Staff Comments None. Item 2. Properties The Company does not own any real property. The Company leases certain office space and storage facilities for its corporate headquarters,divisions and subsidiaries under various operating leases, which expire at various dates during the next six years. These leases generally require theCompany to pay rents at market rates, subject to periodic adjustments, plus other charges, including utilities, real estate taxes and common areamaintenance. The Company believes its relationships with its landlords to be generally good. However, as these leased facilities generally are used foroffices and storage, the Company believes that other leased spaces could be readily found and utilized on similar terms should the need arise. -27- The Company maintains its corporate headquarters in approximately 4,000 square feet of leased office space located in White Plains, New York,under an operating lease with a term expiring November 30, 2022, and maintains its data processing center and warehouse at its regional office in AuburnHills, Michigan, under an operating lease expiring October 31, 2020. The Company believes that its existing facilities are adequate for its currentbusiness. However, new facilities may be added should the need arise in the future. The following is a list of the headquarter locations for the Company and its international subsidiaries: DOMESTIC: White Plains, NY (Corporate Headquarters)Auburn Hills, MI (Operational Headquarters)Southfield, MI (Worldwide Data Center)Fayetteville, GA Jacksonville, FL INTERNATIONAL: Vaughan, Ontario, CanadaTokyo, JapanDurban, South AfricaNew Delhi, IndiaMelbourne, AustraliaMexico City, MexicoShanghai, ChinaIstanbul, TurkeySao Paulo, Brazil Item 3. Legal Proceedings The Company is a party to various legal actions and administrative proceedings arising in the normal course of business. In the opinion ofCompany's management, resolution of these matters is not anticipated to have a material adverse effect on the Company or its estimated or desiredaffiliates, 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. RELATED PARTIES AND RELATED PARTY LITIGATION: SPAR Business Services, Inc., f/k/a SPAR Marketing Services, Inc. ("SBS"), SPAR Administrative Services, Inc. ("SAS"), and SPAR InfoTech, Inc.(" Infotech "), have provided services from time to time to the Company and are related parties and affiliates of SGRP, but are not under the control or partof the consolidated Company. SBS is an affiliate because it is owned by Robert G. Brown and William H. Bartels. SAS is an affiliate because it is ownedby William H. Bartels and certain relatives of Robert G. Brown or entities controlled by them (each of whom are considered affiliates of the Company forrelated party purposes). Infotech is an affiliate because it is owned by Robert G. Brown and certain relatives of Robert G. Brown or entities controlled bythem (each of whom are considered affiliates of the Company for related party purposes). See Note 10 to the Company's Consolidated FinancialStatements - Related Party Transactions – Domestic Transactions, below. Mr. Brown and Mr. Bartels are the Majority Stockholders (see below) andfounders of SGRP, Mr. Brown was Chairman and an officer and director of SGRP through May 3, 3018 (when he retired), and Mr. Bartels was andcontinues to be Vice Chairman and a director and officer of SGRP. Mr. Brown and Mr. Bartels also have been and are stockholders, directors andexecutive officers of various other affiliates of SGRP. Delaware Litigation Settlement On January 18, 2019, SGRP, Robert G. Brown, a substantial stockholder of SGRP and former Executive Chairman and director of SGRP, andWilliam H. Bartels, a substantial stockholder of SGRP and current Vice Chairman and director and officer of SGRP (together with Robert G. Brown, the"Majority Stockholders"), and Christiaan Olivier, Chief Executive Officer, President and a Director of SGRP, and all four of the members of theGovernance Committee, namely Lorrence T. Kellar, Chairman, and Jack W. Partridge, Arthur B. Drogue and R. Eric McCarthey (together with Mr. Olivier,the "225 Defendants"), reached a settlement (the "Settlement") in the By-Laws Action and the 225 Action as such terms are defined below (collectively,the "Actions) and had the Actions then dismissed. -28- On September 4, 2018, SGRP filed in the Court of Chancery of the State of Delaware (the "Court") a claim, C.A. No. 2018-0650, which itamended on September 21, 2018 (the "By-Laws Action "), in a Verified Complaint Seeking Declaratory Judgment and Injunctive Relief against theMajority Stockholders. SGRP sought to invalidate the proposed amendments to SGRP's By-Laws put forth in a written consent by the MajorityStockholders (the "Proposed Amendments") because the Board's Governance Committee believed that the Proposed Amendments would have negativelyimpacted all stockholders (particularly minority stockholders) by (among other things)weakening the independence of the Board through newsupermajority requirements, eliminating the Board's independent majority requirement, and subjecting various functions of the Board respectingvacancies on the Board to the prior approval of the holders of a majority of the Common Stock (i.e., the Majority Stockholders), and thus also potentiallyreducing the representation of SGRP's minority stockholders. Please see Note 9 to the Company's Consolidated Financial Statements – Commitments andContingencies -- Legal Matters - Stockholder By-Laws Litigation, in the Corporation's Quarterly Report on Form 10-Q as filed with the SEC on November19, 2018, and the Corporation's Current Report on Form 8-K as filed with the SEC on September 28, 2018. On September 18, 2018, Robert G Brown (one of the Majority Stockholders) commenced an action in the Court pursuant to 8 Del. C. §225(a)from (C.A. No. 2018-00687-TMR) (the "225 Action") against the 225 Defendants seeking to remove Lorrence T. Kellar from the Board and add JeffreyMayer to the Board. Please see Note 9 to the Company's Consolidated Financial Statements – Commitments and Contingencies -- Legal Matters - BoardSeating Litigation, in the Corporation's Quarterly Report on Form 10-Q as filed with the SEC on November 19, 2018, ant the Corporation's Current Reporton Form 8-K as filed with the SEC on September 28, 2018. On September 20, 2018, the Court issued a Status Quo Order in the 225 Action (the" Status Quo Order ") that (among other things) seated JeffreyMayer on the Board, provided for Lorrence T. Kellar to remain seated on the Board, and effectively increased the Board size from seven to eight for theduration of the order. The By-Laws Action was dismissed upon the filing of the Stipulation of Dismissal. On January 23, 2019, the Court granted the dismissal of the225 Action and vacated its previously entered Status Quo Order entered in that action. As part of the Settlement, on January 18, 2019, the Board of Directors of the Corporation (the "Board") appointed Jeffrey Mayer to the Board andaccepted Lorrence T. Kellar's retirement from the Board. The Board also appointed Mr. Mayer to the Board's Compensation Committee on therecommendation of its Governance Committee. Mr. Mayer was first seated on the Board on November 20, 2018, pursuant to the Status Quo Order (see Settled Actions above), which order hasnow been vacated. Mr. Mayer had previously been determined to not be independent because he was unilaterally chosen by the Majority Stockholders,so as a result of the Status Quo Order and resulting change in Board composition, SGRP received a notification letter from Nasdaq dated December 13,2018, stating that SGRP no longer satisfies Nasdaq's majority independent director requirement (the "Nasdaq Board Independence Deficiency"), as setforth in Nasdaq Listing Rule 5605(b)(1), as more fully described in the Corporation's Current Report on Form 8-K as filed with the SEC on December 14,2018. In connection with the Settlement, the Governance Committee re-evaluated the independence of Mr. Mayer, based on (among other things) Mr.Mayer's independent business skills and contribution to the Settlement process, determined that he has the requisite independence from the managementof the Corporation except for the Related Party Matters (as defined below), and accordingly Mr. Mayer: (a) will be an independent director for all purposesother than any Related Party Matter; (b) will be a non-independent director respecting any Related Party Matter; and (c) may participate in discussionsbut will be excluded and shall recuse himself from any and all decisions of the Board and applicable Board Committees respecting any Related PartyMatter. "Related Party Matter" shall mean any payment to or for, or any transaction or litigation with, Robert G. Brown, William H. Bartels, any of theirrespective family members, or any company or other business or entity directly or indirectly owned or controlled by any one or more of Mr. Brown, Mr.Bartels or their respective family members. The Governance Committee and the Board believe that such re-evaluation and redetermination (together with the 2019 Restated By-Lawsdescribed below) will help the Corporation maintain the independent Board desired by the Governance Committee and the Board and required underNasdaq rules, and correct the Nasdaq Board Independence Deficiency. In the Settlement the parties agreed to amend and restate SGRP's By-Laws (the "2019 Restated By-Laws") with negotiated changes to theProposed Amendments that preserves the current roles of the Governance Committee and Board in the location, evaluation, and selection of candidates fordirector and in the nominations of those candidates for the annual stockholders meeting and appointment of those candidates to fill Board vacancies(other than those under a stockholder written consent making a removal and appointment, which is unchanged). The Board approved and adopted the2019 Restated By-Laws on January 18, 2018. The Governance Committee and the Board believe that those changes in the 2019 Restated By-Laws willhelp the Corporation maintain the independent Board desired by them. -29- In addition to the compromise provisions described above in Settlement Terms above, the Governance Committee and Board accepted certain ofthe Proposed Amendments with negotiated changes and clarifications that are now contained in the 2019 Restated By-Laws, including the following: ●Any vacancy that results from the death, retirement or resignation of a director that remains unfilled by the directors for more than 90 days maybe filled by the stockholders. ●Certain stockholder proposals may now be made up to the 90th day prior to the first anniversary of the preceding year's Annual Meeting. ●The Board size has been fixed at seven and can only be changed by the stockholders (as provided in the Proposed Amendments). ●The section requiring majority Board independence has been removed (as provided in the Proposed Amendments). ●Each candidate for director is now required to sign a written irrevocable letter of resignation and retirement effective upon such person failing tobe re-elected by the required majority stockholder vote. ●A "super majority" vote of at least 75% of all directors is now required for (and any two directors can block) any of the following (as provided inthe Proposed Amendments): oIssuance of more than 500,000 shares of stock (other than under the Corporation's stock compensa1tion plans); oIssuance of any preferred stock; oDeclaration of any non-cash dividend on the shares of capital stock of the Corporation; oBy-Laws modification; oFormation or expansion of the authority of any Committee or subcommittee; or oAppointment or removal of any Committee director. The descriptions of the negotiated compromise 2019 Restated By-Laws above are qualified in their entirety by reference to the copy of the 2019Restated By-Laws incorporated herein by reference from Exhibit 3.3 hereto. As part of the Settlement of the Actions, the parties to the Actions executed a Limited Mutual Release Agreement limited to the Actions andsubject to specific exclusions (the "Release"). The foregoing description of the Release is qualified in its entirety by reference to the copy of the Releaseincorporated herein by reference from Exhibit 10.80 hereto. As part of the Settlement, the parties to the Actions mutually agreed upon Stipulations of Dismissal ending those actions without prejudice andwithout admission or retraction of any fact cited therein, and the parties caused them to be filed with the Court on January 18, 2019. The foregoingdescription of the Stipulations of Dismissal is qualified in its entirety by reference to the copies of the Stipulations of Dismissal incorporated herein byreference from Exhibit 10.81 and Exhibit 10.82 hereto. The Releases are limited to matters related to those actions described therein and subject to specific exclusions, and the parties expresslypreserved all unrelated actions and claims. Accordingly, there remain a number of unresolved claims and actions (each a "Non-Settled Matter") betweenthe Company and the following Related Parties (as defined below), including (without limitation), post termination claims by and against SPAR BusinessServices, Inc. (which is now in a voluntary bankruptcy proceeding in Nevada), and SPAR Administrative Services, Inc., the lawsuit by SPAR InfoTech,Inc., against the Company, and the Bartels Advancement Claim and the claim by Mr. Brown for a similar advancement (see Advancement Claims, below). Advancement Claims In an email to Arthur Drogue, SGRP's Chairman, on October 3, 2018, and in subsequent calls with him, William H. Bartels, a substantialstockholder of SGRP and current Vice Chairman and director and officer of SGRP (and one of the Majority Stockholders), requested indemnification forhis legal fees and expenses incurred in his defense of the By-Laws Case brought by SGRP against him and Mr. Brown. On November 2, 2018, in a letter from his counsel, Mr. Bartels demanded advancement of his proportionate share of the legal fees and expensesincurred in his defense of the By-Laws Case against him. -30- SGRP's Audit Committee determined on November 5, 2018, that Mr. Bartels was not entitled to indemnification by SGRP for his fees andexpenses incurred in his defense of the By-Laws Case because (among other things) Mr. Bartels was sued predominantly as a stockholder in the By-LawsCase and not as a director and the By-Laws Case alleged numerous instances of improper conduct by Mr. Bartels that could preclude indemnificationunder the Corporation's By-Laws. However, the Audit Committee made no determination regarding improper conduct or the issue of advancement. On November 28, 2018, Mr. Bartels filed with the Court a Verified Complaint For Advancement against SGRP (the "Bartels AdvancementComplaint") seeking advancement of his proportionate share of the legal fees and expenses incurred in the By-Laws Case against him ("Allocated By-Laws Expenses"). In evaluating the Bartels Advancement Complaint, counsel advised SGRP that generally advancement was somewhat different thanindemnification in that money was advanced on the condition (which Bartels have accepted in writing) that the advances be repaid if indemnification wasdetermined to be improper on the grounds of improper conduct or otherwise. In December 2018 SGRP reached agreement with Mr. Bartels through counsel to make conditionally an advancement of his reasonablydocumented Allocated By-Laws Expenses (the "Bartels Advancement Settlement"), pursuant to which payment to Mr. Bartels of the accepted AllocatedBy-Laws Expenses is due in April 2019. The amount currently claimed under the Bartels Advancement Settlement is $113,764.22, and payment ispending. If Mr. Bartels is ultimately determined to not be entitled to indemnification, he could be obligated to return all amounts advanced to him bySGRP. On December 3, 2018, Robert G. Brown sent an email to Mr. McCarthey, Chairman of SGRP's Audit Committee, demanding advancement fromSGRP for his proportionate share of the legal fees and expenses incurred by him in the By-Laws Case against him (the "Brown Advancement Demand"). Counsel advised that Brown had been sued as a stockholder and alleged conspirator in the By-Laws Action against him, and not as a director,and counsel didn't believe Brown could reasonably and successfully bring or sustain a lawsuit for advancement. SGRP, with the support of its AuditCommittee, rejected the Brown Advancement Demand, stating that "The bylaw action does not sue you in your capacity as an officer or director of thecompany. Section 6.02 of the bylaws requires the proceeding subject to advancement to be brought "by /reason of the Indemnitee's position with theCorporation or any of its subsidiaries … at the request of the Corporation ….". This provision does not, and was not intended to, cover shareholders foradvancement. On January 27, 2019, Mr. Brown sent a draft of his proposed Delaware litigation complaint in an email to Arthur Drogue, SGRP's Chairman,threatening to sue SGRP respecting the Brown Advancement Demand, which he repeated in an email to Mr. McCarthey on February 2, 2019. No suchcomplaint has been filed by Mr. Brown through April 15, 2019, and SGRP continues to deny the Brown Advancement Demand. SBS Bankruptcy The Company received no services from SBS after the termination of SBS' services took effect. Furthermore, even though SBS was solelyresponsible for its operations, methods and legal compliance, SBS continues to claim that the Company is somehow liable to reimburse SBS for itsexpenses in those proceedings. The Company does not believe there is any basis for such claims and would defend them vigorously. The Companyanticipates that SBS may use every available means to attempt to collect reimbursement from the Company for the foreseeable future for all of its post-termination expense. See Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions – Domestic Transactions, below. On November 23, 2018, SBS petitioned for bankruptcy protection under chapter 11 of the United States Bankruptcy Code in the U.S. District forNevada (the "SBS Chapter 11 Case"), so the pre-petition claims of SBS' creditors must now have to be made in the SBS Chapter 11 Case. On March 11,2019, the Bankruptcy Court entered an order modifying the automatic stay in the SBS Chapter 11 Case to permit the plaintiffs in the Clothier Case toproceed with the second part of their case to determine damages in the same California Court that rendered the Clothier Determination. The BankruptcyCourt did not modify the automatic stay to permit collection of any resulting damage award from SBS absent further Bankruptcy Court order, and absentsuch further order, any damage award in Clothier Case will therefore have to be pursued as against SBS in the SBS Chapter 11 Case. -31- On the advice of SGRP's bankruptcy counsel, management reported and the Audit Committee agreed that while SBS is in the SBS Chapter 11Case; (a) SBS cannot legally pay the third-party pre-petition invoices and other emailed claims sent via email from SBS to the Company, which areunsecured claims ordinarily payable in chapter 11 as part of the unsecured creditor claim pool (potentially pennies or less per dollar) without specificlegal authorization or court order (including under a Bankruptcy Court approved reorganization plan, which is the usual mechanism for paying non-priority claims in a chapter 11 case); (b) any SGRP payment to SBS would likely be utilized to fund the SBS Chapter 11 Case and after that to pay theClothier claims and other unsecured claimants; (c) SGRP and SMF claims against SBS (including, without limitation, reimbursement claims for fundingthe Affinity Security Deposits and field payment checks that would have otherwise bounced and indemnification for the Clothier settlement and legalcosts) must be and have been asserted in the SBS Chapter 11 Case and can only be satisfied in that case through a Court permitted setoff (potentiallydollar-for-dollar), or from the unsecured creditor pool (potentially pennies or less per dollar); (d) any resolution of claims between SBS and SGRP sought(at this time) by SBS from the Bankruptcy Court requires such court's approval after notice to creditors (including the plaintiffs in the Clothier Case) andthe U.S. Trustee, so finality can only be achieved in the SBS Chapter 11 Case; and (e) when SBS seeks payment through the Bankruptcy Court (whetherfor pre- or post-petition claims), SGRP has the right to defend them on the merits and to assert an offset for amounts owed to SMF and SGRP (potentiallydollar-for-dollar). Accordingly, Management recommended and the Audit Committee agreed that it would be in the best interest of all stockholders: (i) to submitSGRP and SMF claims against SBS in the SBS Chapter 11 Case in order to preserve their value (including as an offset against SBS' claims), particularlysince those claims against SBS exceed amounts potentially owed to SBS; (ii) to not voluntarily pay any SBS obligations directly to targeted SBScreditors, as such payments would reduce that offset value (potentially dollar-for-dollar), subvert the bankruptcy process and potentially expose SGRPand SMF to direct future liability (for example, liability for a lawsuit if SGRP voluntarily pays for its defense); and (iii) to only make payments to or onbehalf of SBS to the extent proven and required in the SBS Chapter 11 Case or other court with jurisdiction over the dispute. As a result of the SBS Chapter 11 Case, the claims of SBS' creditors must now generally be pursued in the SBS Chapter 11 Case. On March 11,2019, the Bankruptcy Court entered an order modifying the automatic stay in the SBS Chapter 11 Case to permit the plaintiffs in the Clothier Case toproceed with the second part of the case to determine damages against SBS in the same California Court that rendered the Clothier Determination. However, the Bankruptcy Court did not modify the automatic stay to permit collection from SBS of any resulting damage award against it absent furtherBankruptcy Court order, and therefore and absent such further order, any such damage award will have to be pursued against SBS in the SBS Chapter 11Case. Accordingly, the Company believes there can be no assurance that SBS will ever be able to fully pay any such damage award resulting from anydetermination in the Clothier Case or any other judgment or similar amount resulting from any legal determination adverse to SBS On March 18, 2019, the Company filed claims in the SBS Chapter 11 Case seeking reimbursement for $378,838 for SMF's funding of the AffinitySecurity Deposits and $12,963 for SMF's funding of the field payment checks that would have otherwise bounced, and $1,839,459 for indemnification ofSGRP for the Clothier settlement (see below) and legal costs and an unspecified amount for indemnification of SGRP for the Hogan action (see below) andother yet to be discovered indemnified claims. Infotech Litigation Against SGRP On September 19, 2018, SGRP was served with a Summons and Complaint by SPAR InfoTech, Inc. ("Infotech"), an affiliate of SGRP that isowned principally by Robert G. Brown (one of the Majority Stockholders, a defendant in the By-Laws Action, and the plaintiff in the 225 Action) asplaintiff commencing a case against SGRP entitled SPAR InfoTech, Inc. v. SPAR Group, Inc., et al., Index no. 64452/2018 (Supreme Court, WestchesterCounty) (the "Infotech Action"). The Infotech Action seeks payment from SGRP of approximately $190,000 for alleged lost tax benefits and otherexpenses that it claims to have incurred in connection with SGRP's acquisition of its Brazilian subsidiary and that were previously denied by bothmanagement and SGRP's Audit Committee (which had jurisdiction because Infotech is a related party). In 2016, SGRP acquired SPAR Brasil Serviços de Merchandising e Tecnologia S.A. ("SPAR BSMT"), its Brazilian subsidiary, with the assistanceof Robert G. Brown ("Mr. Brown"), who retired as Chairman and an officer and director on May 3, 2018, and his nephew, Peter W. Brown, who became adirector on May 3, 2018. Mr. Brown used his private company, Infotech and undisclosed Irish companies to structure the acquisition for SGRP. Mr. Brown also asserted alleged expenses associated with the transaction through Infotech, including large salary allocations for unauthorizedpersonnel and claims for his "lost tax breaks." One of those unauthorized personnel had agreed in her severance agreement with SGRP to never directly orindirectly perform any services for SGRP or any services that could be directly or indirectly billed to SGRP, which restriction was fully disclosed to andknown by Mr. Brown and, therefore, Infotech. Mr. Brown submitted " to SGRP a claim of approximately $200,000 for those alleged "expenses, andSGRP's management and Audit Committee allowed approximately $50,000 of them and disallowed approximately $150,000 of them. Mr. Brown hasrepeatedly sought payment of the disallowed expenses, and on August 4, 2018, counsel for Infotech (also counsel for SBS and Mr. Brown) sent SGRP adraft complaint for a proposed action by Infotech against SGRP to be filed seeking to obtain the disallowed expenses. -32- On September 18, 2018, Infotech commenced the Infotech Action in in the Supreme Court (which is the general trial court) in WestchesterCounty, New York, seeking to obtain those previously disallowed unauthorized expenses, now totaling approximately $190,000, to overturn the adversedetermination and objection of SGRP's management and Audit Committee (whose approval was required by applicable law for such a related partypayment). The parties are now engaged in pretrial settlement discussions. SGRP will vigorously contest the Infotech Action. Infotech also is threatening to sue the Company in Romania for approximately $900,000 for programming services allegedly owed to theCompany's former Romanian subsidiary (sold at book value to Infotech in 2013) and not provided to Infotech, which the Company vigorously denies.Infotech has given a draft complaint to the Company. 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"). The Company's affiliate, SBS, during 2017 provided the services of approximately 10,700Field Specialists (all of whom to the Company's knowledge were engaged as independent contractors by SBS), representing 77% (or $25.9 million) of thetotal cost of the Field Specialist services utilized by the Company domestically, and continued to provide such services through July 27, 2018 (when thetermination of SBS' services took effect). SBS is not a subsidiary or in any way under the control of SGRP, SBS is not consolidated in the Company'sfinancial statements, , SGRP did not manage, direct or control SBS, and SGRP does not participate in or control the defense by SBS of any litigationagainst it. The Company terminated its relationship with SBS and received no services from SBS after July 27, 2018. For affiliation, termination,contractual details and payment amounts, see Note 6 to the Company's Consolidated Financial Statements - Related Party Transactions - DomesticRelated Party Service, above. The appropriateness of SBS' treatment of Field Specialists as independent contractors has been periodically subject to legal challenge (bothcurrently and historically) by various states and others. SBS' expenses of defending those challenges and other proceedings have historically beenreimbursed by the Company under SBS' Prior Agreement, and SBS' expenses of defending those challenges and other proceedings were reimbursed by theCompany in the seven month period ending July 31, 2018, and twelve month period ending December 31, 2017, in the amounts of $18.1 million and$30.1 million, respectively, after determination (on a case by case basis) that those defense expenses were costs of providing services to the Company. In March 2017, the Company advised SBS that, since there was no currently effective comprehensive written services agreement with SBS, theCompany would continue to review and decide each request by SBS for reimbursement of its legal defense expenses (including appeals) on a case-by-casebasis in its discretion, including the relative costs and benefits to the Company. See Note 10 to the Company's Consolidated Financial Statements -Related Party Transactions - Domestic Related Party Services, above. SBS has disputed the right of the Company and SGRP's Audit Committee to reviewand decide the appropriateness of the reimbursement of any of those related party defense and other expense reimbursements. As provided in SBS' PriorAgreement, the Company is not obligated or liable, and the Company has not otherwise agreed and does not currently intend, to reimburse SBS for anyjudgment or similar amount (including any damages, settlement, or related tax, penalty, or interest) in any legal challenge or other proceeding against orinvolving SBS, and the Company does not believe it has ever done so (other than in insignificant nuisance amounts). As a result of the SBS Chapter 11 Case (see above), there can be no assurance that SBS will ever be able to satisfy any such judgment or similarclaim or amount resulting from any adverse legal determination. In addition, even though SBS was solely responsible for its operations, methods and legal compliance, in connection with any proceedingsagainst SBS, SBS may claim that the Company is somehow liable for any judgment or similar amount imposed against SBS and pursue that claim withlitigation. The Company does not believe there is any basis for such claims and would defend them vigorously. There can be no assurance that someoneelse will not claim that the Company is liable (under applicable law, through reimbursement or indemnification, or otherwise) for any such judgment orsimilar amount imposed against SBS, and there can be no assurance that the Company will be able to successfully defend any claim. Any imposition ofliability on the Company for any such amount 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, legal costs, liabilities, liquidity, locations, marketing, operations,prospects, sales, strategies, taxation or other achievement, results or condition), whether actual or as planned, intended, anticipated, estimated or otherwiseexpected. See Note 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies -- Legal Matters, above. -33- As the Company had utilized the services of SBS to support its in-store merchandising needs in California through independent contractorssupplied by SBS, and SBS' independent contractor classifications had been held invalid in the Clothier Determination (see below), management of theCompany determined, with the support of SGRP's Audit Committee and Board of Directors, and began in May of 2018 to shift to an all employeeservicing model for Field Specialists to support the performance of the Company's services in California for clients in this critical market and nationallyfor certain domestic clients that are requiring the Company to use employees as Field Specialists. As previously noted, management currently estimatesthat the potential incremental annual cost of this change in California from third party independent contractors to Company employees could besubstantial. Due to (among other things) the Clothier Determination and the ongoing proceedings against SBS, which could have had a material adverseeffect on SBS' ability to provide future services needed by the Company, and the Company's identification of an independent third party company whowould provide comparable services on substantially better terms, the Company terminated the services of SBS effective July 27, 2018, and the Companyhas engaged that independent third party company to replace those services formerly provided by SBS. Current material and potentially material proceedings against SBS and, in one instance, the Company are described below. SBS continues toclaim that the Company is liable to reimburse SBS for its expenses in those proceedings. These descriptions are based on an independent review by theCompany 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" with SBS (prepared solely by SBS) 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 (the"Clothier Case"), in which Ms. Clothier asserted claims on behalf of herself and a putative class of similarly situated merchandisers in California who areor were classified by SBS as independent contractors at any time between July 16, 2008, and June 30, 2014. Ms. Clothier alleged that she and other classmembers were misclassified by SBS as independent contractors and that, as a result of this misclassification, the defendants improperly underpaid them inviolation of various California minimum wage and overtime laws. The Company was originally a defendant in the Clothier Case but was subsequentlydismissed 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 weremisclassified as independent contractors. After hearing evidence, receiving post-trial briefings and considering the issues, the Court issued its Statementof Decision on September 9, 2016, finding that the class members had been misclassified by SBS as independent contractors rather than employees (the"Clothier Determination"). The plaintiffs and SBS have now moved into phase two to determine damages (if any), which has included discovery as to themeasure of damages in this case. The plaintiffs and SBS are still proceeding with the damages phase of the Clothier Case, which trial was scheduled for December of 2018 but wastemporarily stayed as a result of the SBS Chapter 11 Case (see above and below). Facing significant potential damages in the Clothier Case, SGRP chose, and on June 7, 2018, entered into mediation with the plaintiffs andplaintiff's counsel in the Clothier Case to try to settle any potential future liability for any possible judgment against SGRP in that case. SGRP asked SBSto participate financially and provide its knowledge in that mediation, but SBS and its stockholders wanted SGRP to bear the full cost of any settlementand on several occasions they declined or failed to participate in that mediation... SGRP disagreed, insisting on the Majority Stockholders' and SBS'economic participation. After extensive discussions, SGRP reached a settlement and entered into a memorandum of settlement agreement, which issubject to court approval and not likely to become final until several months into 2019 if and when the settlement is approved by the court. If approved,SGRP will pay a maximum settlement amount of $1.3 million, payable in four equal annual installments that commence 30 days after the settlementbecomes final, and the Company will be released by plaintiff and the settlement class from all other liability under the Clothier Case (the "ClothierSettlement"). SBS did not participate in the Clothier Settlement and will not be released. The Company has recorded a $1.3 million charge for theClothier Settlement during the second quarter of 2018. On March 21, 2019, the court issued a tentative ruling preliminarily approving the Clothiersettlement. -34- Since SGRP has no further involvement in the Clothier Case, SGRP stopped paying (as of June 7, 2018) for SBS' legal expenses (defense andappeal) in the Clothier Case and notified SBS. Defendants continue to demand that those expenses be reimbursed by SGRP. As a result of the SBS Chapter 11 Case (see above), the claims of SBS' creditors must now generally be pursued in the SBS Chapter 11 Case. OnMarch 11, 2019, the Bankruptcy Court entered an order modifying the automatic stay in the SBS Chapter 11 Case to permit the plaintiffs in the ClothierCase to proceed with the second part of the case to determine damages against SBS in the same California Court that rendered the Clothier Determination. However, the Bankruptcy Court did not modify the automatic stay to permit collection from SBS of any resulting damage award against it absent furtherBankruptcy Court order, and therefore and absent such further order, any such damage award will have to be pursued against SBS in the SBS Chapter 11Case. Accordingly, the Company believes there can be no assurance that SBS will ever be able to fully pay any such damage award resulting from anydetermination in the Clothier Case or any other judgment or similar amount resulting from any legal determination adverse to SBS. See Note 6 to theCompany's Consolidated Financial Statements - Commitments and Contingencies -- SBS Bankruptcy, below. SGRP Hogan Litigation Paradise Hogan was engaged by and provided services to SBS as an independent contractor pursuant to the terms of an "Independent ContractorMaster Agreement" with SBS (prepared solely by SBS) acknowledging his engagement as an independent contractor. On January 6, 2017, Hogan filedsuit 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 ofMassachusetts. Hogan initially asserted claims on behalf of himself and an alleged nationwide class of similarly situated individuals who providedservices to SBS and SGRP as independent contractors. Hogan alleged that he and other alleged class members were misclassified as independentcontractors, and as a result of this purported misclassification, Hogan asserted claims on behalf of himself and the alleged Massachusetts class membersunder the Massachusetts Wage Act and Minimum Wage Law for failure to pay overtime and minimum wages, as well as state law claims for breach ofcontract, unjust enrichment, quantum meruit, and breach of the covenant of good faith and fair dealing. In addition, Hogan asserted claims on behalf ofhimself and the nationwide class for violation of the Fair Labor Standards Act's overtime and minimum wage provisions. On March 28, 2017, theCompany moved to refer Hogan's claim to arbitration pursuant to his agreement, to dismiss or stay Hogan's case pending arbitration, and to dismissHogan's case for failure to state a specific claim upon which relief could be granted. On March 12, 2018, the Court denied both defendants' Motion to Dismiss for failure to state a claim, denied the Motion to Compel Arbitration asto SGRP (because as drafted by SBS, the arbitration clause did not reference or protect SGRP), denied the Motion to Stay as to SGRP, and allowed theMotion to Stay as to SBS pending the outcome of the Supreme Court's decision in in Epic Systems Corp. v. Lewis. In May 2018, the Supreme Courtdecided arbitration clauses that include an express waiver of a worker's right to bring or participate in a class action did not violate the National LaborRelations Act, which resulted in all SBS disputes (but not any SGRP disputes) being sent to arbitration. On April 24, 2018, SGRP filed a notice of appealwith the First Circuit of the District Court's decision that the arbitration clause (as written by SBS) did not protect SGRP. SGRP and Hogan agreed to staythe District Court litigation pending the First Circuit's decision on SGRP's appeal. Briefing on SGRP's appeal closed on August 8, 2018 and the appealhearing was heard by the First Circuit on September 11, 2018. On January 25, 2019, the First Circuit issued a judgment affirming the District Court'sdecision that the arbitration clause (as written by SBS) did not protect SGRP and remanding the case back to the District Court for further proceedings. Asa result, SGRP would have been required to go to trial without SBS. -35- Facing lengthy and costly litigation and significant potential damages in the Hogan Case, on March 27, 2019, SGRP entered into mediation withthe plaintiffs and plaintiff's counsel 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. After extensive discussions, SGRP reached asettlement and entered into a memorandum of settlement agreement, which is subject to court approval and not likely to become final until later in 2019 ifand when the settlement is approved by the court. If approved, SGRP will pay a maximum settlement amount of $250,000 (in three installments) onehundred eighty (180) days after the settlement becomes final, and the Company will be released by plaintiff and the settlement class from all otherliability under the Hogan Case (the "Hogan Settlement"). The Company has recorded $250,000 liability as a result. SBS and SGRP Litigation Generally As a result of the SBS Chapter 11 Case (see above), the claims of SBS' creditors must now generally be pursued in the SBS Chapter 11 Case. OnMarch 11, 2019, the Bankruptcy Court entered an order modifying the automatic stay in the SBS Chapter 11 Case to permit the plaintiffs in the ClothierCase to proceed with the second part of the case to determine damages against SBS in the same California Court that rendered the Clothier Determination. However, the Bankruptcy Court did not modify the automatic stay to permit collection from SBS of any resulting damage award against it absent furtherBankruptcy Court order, and therefore and absent such further order, any such damage award will have to be pursued against SBS in the SBS Chapter 11Case. Accordingly, the Company believes there can be no assurance that SBS will ever be able to fully pay any such damage award resulting from anydetermination in the Clothier Case or any other judgment or similar amount resulting from any legal determination adverse to SBS. See Note 6 to theCompany's Consolidated Financial Statements - Commitments and Contingencies -- SBS Bankruptcy, below. In addition, there can be no assurance that SBS or someone else will not claim, and no assurance that SBS will be able shield any claim tosuccessfully, that the Company is liable (under applicable law, through reimbursement or indemnification, or otherwise) for any such judgment or similaramount imposed against SBS. Any decrease in SBS' performance (quality or otherwise), any inability by SBS to use its assets without encumbrance orexecute the services for the Company, or any increase in the Company's use of employees (rather than independent contractors) as its domestic FieldSpecialists, 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, legal costs, liabilities, liquidity, locations, marketing, operations,prospects, sales, strategies, taxation or other achievement, results or condition), whether actual or as planned, intended, anticipated, estimated or otherwiseexpected. See Item 1 Business - The Company's Labor Force, Item 1A - Risk Factors – Dependence Upon and Risks of Services Provided by IndependentContractors, Potential Conflicts with Affiliates, and Risks Related to the Company's Significant Stockholders: Potential Voting Control and Conflicts,above, , Note 6 to the Company's Consolidated Financial Statements – Commitments and Contingencies - Legal Matters, and Note 10 to the Company'sConsolidated Financial Statements – Related Party Transactions – Domestic Related Party Services, below. Item 4. Mine Safety Disclosures Not applicable. -36- PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company's Capital Stock Generally SGRP's certificate of incorporation authorizes it to issue 47,000,000 shares of common stock with a par value of $0.01 per share (the "SGRPCommon Stock"), which all have the same voting, dividend and liquidation rights. SGRP Common Stock is traded on the Nasdaq Capital Market("Nasdaq") under the symbol "SGRP". On December 31, 2018, there were 20,776,548 shares of SGRP Common Stock outstanding in the aggregate (whichdoes not include Treasury Shares), and 7.3 million shares (or approximately 33.4%) of SGRP Common Stock beneficially owned by non-affiliates of theCompany in the aggregate on a non-diluted basis (i.e., SGRP's public float). See Item IA - Risk Factors - Risks Related to the Company's SignificantStockholders: Potential Voting Control and Conflicts, above, and Item 12 – Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters, below. SGRP's certificate of incorporation also authorizes it to issue 3,000,000 shares of preferred stock with a par value of $0.01 per share (the "SGRPPreferred Stock"), which may have such preferences and priorities over the SGRP Common Stock and other rights, powers and privileges as SGRP's Boardof Directors may establish in its discretion from time to time. SGRP has created and authorized the issuance of a maximum of 3,000,000 shares of Series APreferred Stock pursuant to SGRP's Certificate of Designation of Series A Preferred Stock (the "Series A Preferred Stock"), which preferred shares havedividend and liquidation preferences, have a cumulative dividend of 10% per year, are redeemable at the Company's option and are convertible at theholder's option (and without further consideration) on a one-to-one basis into SGRP Common Stock. 554,402 shares of Series A preferred stock werepreviously issued, reacquired and retired. After such retirement, 2,445,598 shares of Series A Preferred Stock remain authorized and available for issuance.At December 31, 2018, no shares of Series A Preferred Stock were issued and outstanding. SGRP can change or cancel the authorized Series A PreferredStock, and to the extent it reduces such authorization without issuance, it can create other series of Preferred Stock with potentially different dividends,preferences and other terms. The holders of SGRP Common Stock and Series A Preferred Stock vote together for directors and other matters, other thanmatters pertaining only to the Series A Preferred Stock (such as amending SGRP's Certificate of Designation of Series A Preferred Stock) where only theholders of the Series A Preferred Stock are entitled to vote. Market Information SGRP's Common Stock is traded on the Nasdaq Capital Market ("Nasdaq") under the symbol "SGRP". As of the Record Date, March 22, 2019,there were approximately 162 stockholders of record. The following table sets forth the reported high and low sales prices of SGRP Common Stock for the quarters indicated as reported on the NasdaqCapital Market. 2018 2017 High Low High Low First Quarter $3.75 $1.15 $1.24 $0.92 Second Quarter 1.65 1.19 1.10 0.87 Third Quarter 1.49 0.90 1.15 0.99 Fourth Quarter 1.22 0.45 1.66 1.00 Dividends The Company has never declared or paid any cash dividends on its Common Stock and does not anticipate paying cash dividends on itsCommon Stock in the foreseeable future. The Company currently intends to retain future earnings to finance its operations and fund the growth of thebusiness. Any payment of future dividends will be at the discretion of the Board of Directors of the Company and will depend upon, among other things,the Company's earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions in respect to the payment of dividendsand other factors that the Company's Board of Directors deems relevant. -37- Equity Compensation Information regarding the Company's equity compensation plans may be found in Item 12 of this Annual Report, which is hereby incorporatedby reference. Stock Repurchase Program The Company's 2017 Stock Repurchase Program (the "2017 Repurchase Program"), as approved by SGRP's Audit Committee and adopted by itsBoard of Directors on November 10, 2017 and ratified on March 14, 2018. Under the 2017 Repurchase Program, SGRP may repurchase shares of SGRPCommon Stock through November 10, 2020, but not more than 500,000 shares in total, and those repurchases would be made from time to time in theopen market and through privately-negotiated transactions, subject to general market and other conditions. SGRP does not intend to repurchase anyshares in the market during any blackout period applicable to its officers and directors under the SPAR Group, Inc. Statement of Policy RegardingPersonal Securities Transactions in SGRP Stock and Non-Public Information As Adopted, Restated, Effective and Dated as of May 1, 2004, and As FurtherAmended Through March 10, 2011 (other than purchases that would otherwise be permitted under the circumstances for anyone covered by such policy).As of December 31, 2017, the Company had 500,000 shares remaining to be purchased under the 2017 Repurchase Program. Under the preceding stockrepurchase program (adopted in 2012 and extended and modified in 2015), the Company repurchased all 532,235 shares through December 31, 2017. SGRP Common Stock Issuances During 2018, the Company issued 103,766 new shares of SGRP Common Stock in support of its requirement to satisfy employee exercised stockoption grants under its existing registered stock compensation and stock purchase plans (See Note 11 – Stock Based Compensation). In 2017, SGRP didnot issue any new SGRP Common Stock. Item 6. Selected Financial Data Not applicable. -38- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements withinthe "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, made or respecting by SPAR Group, Inc. ("SGRP") and itssubsidiaries (together with SGRP, the "SPAR Group" or the "Company"). See FORWARD-LOOKING STATEMENTS preceding Part I, above. Therealso are "forward-looking statements" contained elsewhere in this Annual Report, the Proxy Statement, and the other applicable SEC Reports filedwith the SEC from time to time under the Securities Act, the Exchange Act and other Securities Laws (as all such terms are defined inFORWARD-LOOKING STATEMENTS, preceding Part I, above). All forward-looking statements and other information attributable to the Company or persons acting on its behalf are expressly subject to andqualified by all of the risks, uncertainties, cautions, circumstances and other factors ("Risks") facing the Company, including the Risks and otherinformation described in Item IA - Risk Factors, above, or elsewhere in this Annual Report, the Proxy Statement or any other applicable SEC Report. The Company does not intend, assume any obligation, or promise to publicly update or revise any such forward-looking statement, Risk orinformation (in whole or in part), whether as a result of new information, new or worsening Risks or uncertainties, changed circumstances, futureevents, recognition, or otherwise. Overview SPAR Group, Inc. ("SGRP"), and its subsidiaries (together with SGRP, the "SPAR Group" or the "Company"), is a diversified internationalmerchandising and marketing services company and provides a broad array of services worldwide to help companies improve their sales, operatingefficiency and profits at retail locations. The Company provides merchandising and other marketing services to manufacturers, distributors and retailersworldwide, primarily in mass merchandise, office supply, grocery, drug, dollar, home improvement, independent, convenience and electronics stores, aswell as providing furniture and other product assembly services in stores, homes and offices and marketing research services. The Company has suppliedthese services in the United States since certain of its merchandising predecessors were formed in 1985 and research predecessors were formed in 1979 andinternationally since the Company acquired its first international subsidiary in Japan in May 2001. Today the Company operates in 10 countries thatencompass approximately 50% of the total world population through operations in the United States, Australia, Brazil, Canada, China, India, Japan,Mexico, South Africa, and Turkey. Critical Accounting Policies & Estimates The Company's critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 2 to theCompany's Consolidated Financial Statements - Summary of Significant Accounting Policies. These policies have been consistently applied in allmaterial respects and address such matters as revenue recognition, doubtful accounts and credit risks, internal use software development costs, assetimpairment recognition, consolidation of subsidiaries and other companies. While the estimates and judgments associated with the application of thesepolicies may be affected by different assumptions or conditions, the Company believes the estimates and judgments associated with the reported amountsare appropriate under the circumstances. Impairment of Long-Lived Assets The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the Company'sproperty and equipment and intangible assets subjected to amortization may not be recoverable. When indicators of potential impairment exist, theCompany assesses the recoverability of the assets by estimating whether the Company will recover its carrying value through the undiscounted futurecash flows generated by the use of the asset and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able torecover the carrying value of the asset, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value ofthe asset. If any assumptions, projections or estimates regarding any asset change in the future, the Company may have to record an impairment to reducethe net book value of such individual asset. -39- Accounting for Joint Venture Subsidiaries For the Company's less than wholly owned subsidiaries, the Company first analyzes to determine if a joint venture subsidiary is a variableinterest entity (a "VIE") in accordance with ASC 810 and if so, whether the Company is the primary beneficiary requiring consolidation. A VIE is an entitythat has (i) insufficient equity to permit it to finance its activities without additional subordinated financial support or (ii) equity holders that lack thecharacteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, which is the entity that has both the power to direct theactivities that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from theentity that potentially could be significant to the entity. Variable interests in a VIE are contractual, ownership, or other financial interests in a VIE thatchange with changes in the fair value of the VIE's net assets. The Company continuously re-assesses at each level of the joint venture whether the entity is(i) a VIE, and (ii) if the Company is the primary beneficiary of the VIE. If it was determined that an entity in which the Company holds an interestqualified as a VIE and the Company was the primary beneficiary, it would be consolidated. Based on the Company's analysis for each of its 51% owned joint ventures, the Company has determined that each is a VIE and that Company isthe primary beneficiary of that VIE. In addition to its controlling interest, the Company controls the proprietary information technology that is used atand is significant to each joint venture and the Company has the ability to control other key decisions. Accordingly, the Company has the power to directkey activities and the obligation to absorb losses or the right to receive benefits that could be significant and consolidates each joint venture under theVIE rules and reflects the 49% interests in the Company's consolidated financial statements as non-controlling interests. The Company records these non-controlling interests at their initial fair value, adjusting the basis prospectively for their share of the respective consolidated investments' net income orloss or equity contributions and distributions. These non-controlling interests are not redeemable by the equity holders and are presented as part ofpermanent equity. Income and losses are allocated to the non-controlling interest holder based on its economic ownership percentage. Revenue Recognition The Company's services are provided to its clients under contracts or agreements. The Company bills its clients based upon service feearrangements. Revenues under service fee arrangements are recognized when the service is performed. Customer deposits, which are considered advanceson future work, are recorded as revenue in the period services are provided. In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (Topic 606) "Revenue from Contracts with Customers." Topic 606supersedes the revenue recognition requirements in Topic 605 "Revenue Recognition" (Topic 605) and requires entities to recognize revenue whencontrol of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitledto in exchange for those goods or services. The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective transition methodwith the impact upon adoption not significant. The Company records revenue from contracts with its customers through the execution of a Master Service Agreement ("MSA") that areeffectuated through individual Statements of Work ("SOW" and with the applicable MSA collectively a "Contract"). The MSAs generally define thefinancial, service, and communication obligations between the client and SPAR while the SOWs state the project objective, scope of work, time frame,rate and driver in which SPAR will be paid. Only when the MSA and SOW are combined as a Contract can all five revenue standard criteria be met. TheCompany integrates a series of tasks promised within these Contracts into a bundle of services that represent the combined performance obligation ofMerchandising Services. Such Merchandising Services are performed over the duration of the SOW. Most Merchandising Services are performed on adaily, weekly or monthly basis. Revenue from Merchandising Services are recognized as the services are performed based on a rate per driver basis (perhour, store visit or unit stocked) with services delivered as they are consumed. All of the Company's Contracts with customers have a duration of one year or less, with over 90% being completed in less than 30-days, andrevenue is recognized as services are performed. Given the nature of the Company's business, how the Contracts are structured and how the Company iscompensated the Company has elected the right-to-invoice practical expedients method allowed under the revenue standard. Doubtful Accounts and Credit Risks The Company continually monitors the collectability of its accounts receivable based upon current client credit information and financialcondition. Balances that are deemed to be uncollectible after the Company has attempted reasonable collection efforts are written off through a charge tothe bad debt allowance and a credit to accounts receivable. Accounts receivable balances, net of any applicable reserves or allowances, are stated at theamount that management expects to collect from the outstanding balances. The Company provides for probable uncollectible amounts through a chargeto earnings and a credit to bad debt allowance based in part on management's assessment of the current status of individual accounts. Based onmanagement's assessment, the Company established an allowance for doubtful accounts of $533,000 and $342,000 at December 31, 2018, and 2017,respectively. Bad debt expense was $196,000 and $113,000 for the years ended December 31, 2018 and 2017, respectively. -40- Internal Use Software Development Costs The Company capitalizes certain costs associated with its internally developed software. Specifically, the Company capitalizes the costs ofmaterials and services incurred in developing or obtaining internal use software. These costs include (but are not limited to) the cost to purchase software,the cost to write program code, payroll and related benefits and travel expenses for those employees who are directly involved with and who devote timeto the Company's software development projects. Capitalized software development costs are amortized over three years on a straight-line basis. The Company capitalized approximately $1.3 million and $1.0 million of costs related to software developed for internal use in 2018 and 2017,respectively, and recognized approximately $1.2 million of amortization of capitalized software for both the years ended December 31, 2018 and 2017. -41- Results of Operations The following table sets forth selected financial data and such data as a percentage of net revenues for the years indicated (dollars in millions). Year Ended December 31, 2018 % 2017 % Net revenues $229.1 100.0% $181.4 100.0%Cost of revenues 184.9 80.7 144.6 79.7 Selling, general & administrative expense 38.4 16.8 30.6 16.9 Depreciation & amortization 2.1 0.9 2.1 1.2 Interest expense, net 1.0 0.5 0.3 0.2 Other (income), net (0.4) (0.2) (0.4) (0.2)Income before income taxes 3.1 1.3 4.2 2.2 Income tax expense 1.4 0.6 3.0 1.6 Net income 1.7 0.7 1.2 0.6 Net income attributable to non-controllinginterest (3.2) (1.4) (2.1) (1.2)Net loss attributable to SPAR Group, Inc. $(1.5) (0.7)% $(0.9) (0.6)% Results of operations for the year ended December 31, 2018, compared to the year ended December 31, 2017 Net Revenues Net revenues for the year ended December 31, 2018, were $229.1 million compared to $181.4 million for the year ended December 31, 2017, anincrease of $47.7 million or 26.4%. The increase in net revenue is primarily attributable to the acquisition of our Resource Plus subsidiary, whichcontributed $24.2 million. The international segment contributed $20.0 million of the increase year over year. Domestic net revenues totaled $80.0 million and $52.3 million at December 31, 2018 and 2017, respectively. The increase of $27.7 million or53.1% is primarily attributable to the acquisition of Resource Plus. International net revenues totaled $149.1 million for the year ended December 31, 2018, compared to $129.1 million for the year endedDecember 31, 2017, an increase of $20.0 million or 15.5%. The increase in 2018 international net revenues was primarily due to increased revenueprimarily in Brazil, Japan and China. See Note 12 to the Company's Consolidated Financial Statements – Segment Information, below. Cost of Revenues The Company's cost of revenues consists of its in-store labor and field management wages, related benefits, travel and other direct labor-relatedexpenses and was 80.7% of net revenue for the twelve-month period ended December 31, 2018 compared to 79.7% of net revenues for the year endedDecember 31, 2017. Domestic cost of revenue as a percent of net revenue was 76.5% and 72.8% for the years ended December 31, 2018 and 2017. The domestic costof revenues percentage increase of 3.7 percentage points was primarily due to an unfavorable mix in project work compared to the same period in 2017.Approximately 30% and 79% of the Company's domestic cost of revenues in the years ended December 31, 2018 and 2017, resulted from in-storemerchandiser specialist and field management services purchased from certain of the Company's affiliates, SPAR Business Services, Inc. ("SBS"), andSPAR Administrative Services, Inc. ("SAS") (See Item 13 - Certain Relationships and Related Transactions, and Director Independence – DomesticRelated Party Services, and Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions – Domestic Related PartyServices, below). International cost of revenue as a percent of net revenue was 82.9 and 82.5% for the years ended December 31, 2018 and 2017, respectively. Theinternational cost of revenue percentage increase of 0.4 percentage points was primarily due to higher cost margin business in Brazil and a write down inAustralia for one-time cost reserve adjustments, partially offset by margin improvement in Mexico, China and Japan. -42- 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 were approximately $38.4million and approximately $30.6 million for the years ended December 31, 2018 and 2017, respectively. Of the increase of approximately $7.8 million,the Resource Plus acquisition contributed approximately $4.0 million. Other significant contributing factors to the year over year increase in selling,general and administrative expenses were the following one-time charges; $1.6 million related to the Clothier Settlement and Hogan Settlement, and$800,000 in incremental legal expenses for settled litigations, see Note 6 to the Company's Consolidated Financial Statements – Commitments andContingencies - Legal Matters, and $900,000 for reserves against related party receivables regarding Affinity insurance, see Note 10 to the Company'sConsolidated Financial Statements – Related Party Transactions – Affinity Insurance, below. Domestic selling, general and administrative expenses totaled approximately $19.9 million for the year ended December 31, 2018 compared toapproximately $12.2 million for the year ended December 31, 2017. Of the increase of approximately $7.7 million, the Resource Plus acquisitioncontributed approximately $4.0 million. International selling, general and administrative expenses totaled approximately $18.5 million and $18.4 million for the years ended December31, 2018 and 2017, respectively. Depreciation and Amortization Depreciation and amortization expense totaled approximately $2.1 million for both years ended December 31, 2018 and 2017. Interest Expense The Company's interest expense was $1.0 million and $0.3 million for the years ended December 31, 2018 and 2017, respectively. The international segment contributed $719,000 to the increase in the Company's 2018 interest expense primarily due to borrowing requirementsfrom the Company's subsidiary in Brazil and a reduction in interest income in South Africa. In the domestic segment, 2018 interest expense increased byapproximately $40,000 compared to 2017. Other Income Other income was $406,000 and $401,000 for the years ended December 31, 2018 and 2017, respectively. Income Tax The income tax expense for the years ended December 31, 2018 and 2017 was $1,402,000 and $2,977,000, respectively. The increase in taxexpense is primarily due to the re-measurement and application of the Tax Cuts and Jobs Act of 2017. Non-controlling Interest Net operating profits from the non-controlling interests, relating to the Company's 51% owned subsidiaries, resulted in a reduction of net incomeattributable to SPAR Group, Inc. of $3.2 million and $2.1 million for the years ended December 31, 2018 and 2017, respectively. Net Loss The Company reported a net loss attributable to SPAR Group, Inc. of $1.5 million for the year ended December 31, 2018, or $(0.07) per dilutedshare, compared to a net loss of $923,000 for the year ended December 31, 2017, or ($0.04) per diluted share, based on diluted shares outstanding of 21.3million at both December 31, 2018, and 2017. Off Balance Sheet Arrangements None. -43- Liquidity and Capital Resources For the years ended December 31, 2018 and 2017, the Company had net income before non-controlling interest of $1.6 million and $1.2 million,respectively. Net cash provided by operating activities was $2.1 million and $6.8 million for the years ended December 31, 2018 and 2017, respectively. Netcash provided by operating activities was primarily due to cash impacting earnings and increases in accounts payable and accrued expenses, partiallyoffset by increases in accounts receivable, and prepaid and other assets. Net cash used in investing activities for the years ended December 31, 2018 and 2017, was approximately $0.9 million and $1.4 million,respectively. The net cash used in investing activities during 2018 was attributable to fixed asset additions offset by the cash acquired in Resource Plusacquisition. Net cash provided by financing activities for the year ended December 31, 2018 was approximately $0.2 million compared to $5.1 million usedin financing activities in 2017. Net cash provided by financing activities during 2018 was primarily due to net borrowing on lines of credit offset bydistributions to non-controlling investors. The above activity and the impact of foreign exchange rate changes resulted in a decrease in cash and cash equivalents for the year endedDecember 31, 2018 of approximately $1.7 million. At December 31, 2018, the Company had net working capital of $12.7 million, as compared to net working capital of $14.5 million at December31, 2017. The Company's current ratio was 1.3 and 1.4 at both December 31, 2018 and December 31, 2017, respectively. Credit Facilities: The Company is a party to various domestic and international credit facilities. See Note 4 to the Company's Consolidated Financial Statements –Credit Facilities. These various domestic and international credit facilities require compliance with their receptive financial covenants. During 2018, except for itsdomestic credit facility, the Company was in compliance with all other financial covenants. Management believes that based upon the continuation of the Company's existing credit facilities, projected results of operations, vendorpayment requirements and other financing available to the Company (including amounts due to affiliates), sources of cash availability should bemanageable and sufficient to support ongoing operations over the next year. However, delays in collection of receivables due from any of the Company'smajor clients, or a significant reduction in business from such clients could have a material adverse effect on the Company's cash resources and itsongoing ability to fund operations. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Not applicable. Item 8. Financial Statements and Supplementary Data See Item 15 – Exhibits and Financial Statement Schedules of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures -44- Management's Report on Internal Control Over Financial Reporting The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting for the registrant,as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Management has designed such internal control over financial reporting bythe Company to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements forexternal purposes in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company's management has evaluated the effectiveness of the Company's internal control over financial reporting using the "InternalControl – Integrated Framework (2013)" created by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") framework. Basedon this evaluation, management has concluded that internal controls over financial reporting were effective as of December 31, 2018. Management's Evaluation of Disclosure Controls and Procedures The Company's chief executive officer and chief financial officer have each reviewed and evaluated the effectiveness of the Company'sdisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2018, as required by Exchange ActRules 13a-15(b) and Rule 15d-15(b). Based on that evaluation, the chief executive officer and chief financial officer have each concluded that theCompany's current disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in reports itfiles, or submits under the Exchange Act were recorded, processed, summarized and reported within the time period specified in the SEC's rules and forms.Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed byan issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including itsprincipal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding requireddisclosure. Changes in Internal Controls There have been no changes in the Company's internal controls over financial reporting that occurred during the Company's 2018 fiscal year thatmaterially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting. Item 9B. Other Information None. -45- PART III Item 10. Directors, Executive Officers and Corporate Governance Reference is made to the information set forth under the captions "The Board of Directors of the Corporation", "Executives and Officers of theCorporation", "Security Ownership of Certain Beneficial Owners and Management" and "Corporate Governance" in SGRP's definitive Proxy Statementrespecting its Annual Meeting of Stockholders currently scheduled to be held on May 16, 2019, as and when filed with the SEC (which SGRP plans to filepursuant to Regulation 14A in April of 2019, but not later than 120 days after the end of the Company's 2018 fiscal year), which information isincorporated by reference to this Annual Report. For clarity (and without limitation), information appearing in the sections in such Proxy Statemententitled "PROPOSAL 3 - ADVISORY VOTE ON EXECUTIVE COMPENSATION", "PROPOSAL 4 - ADVISORY VOTE ON THE FREQUENCY THATTHE CORPORATION HOLDS THE ADVISORY VOTE ON EXECUTIVE COMPENSATION", and "REPORT OF THE AUDIT COMMITTEE OF THEBOARD OF DIRECTORS" shall not be deemed to be incorporated by reference in this Annual Report. Without in any way limiting any of the information incorporated by reference above, in order to (among other things) assist the Board and theAudit Committee in connection with an overall review of the Company's related party transactions and certain worker classification-related litigationmatters, in April 2017 the Board formed a special subcommittee of the Audit Committee (the "Special Subcommittee") to (among other things) review thestructure, documentation, fairness, conflicts, fidelity, appropriateness, and practices respecting each of the relationships and transactions discussed in Item13 – Certain Relationships and Related Transactions, and Director Independence, and Note 10 to the Company's Consolidated Financial Statements –Related Party Transactions (including those described under Domestic Related Party Services in that Item and Note). The Special Subcommittee iscontinuing that review with the assistance of special auditors and counsel is currently being retained by such Subcommittee. The Company is currentlyunable to predict the duration, ultimate scope, or results of this review by the Special Subcommittee. See also Item 1 Business - The Company's LaborForce, Item 1A - Risk Factors - Potential Conflicts with Affiliates, Potential Conflicts with Affiliates, and Risks Related to the Company's SignificantStockholders: Potential Voting Control and Conflicts, and Item 3 - Legal Proceedings, above, and Note 6 to the Company's Consolidated FinancialStatements – Commitments and Contingencies - Legal Matters, and Note 10 to the Company's Consolidated Financial Statements – Related PartyTransactions - Domestic Related Party Services, below. Item 11. Executive Compensation Reference is made to the information set forth under the captions "Security Ownership of Certain Beneficial Owners and Management","Executive Compensation, Directors and Other Information", "Executive Compensation, Equity Awards and Options", and "Compensation Plans", inSGRP's definitive Proxy Statement respecting its Annual Meeting of Stockholders currently scheduled to be held on May 16, 2019, as and when filed withthe SEC (which SGRP plans to file pursuant to Regulation 14A in April of 2019, but not later than 120 days after the end of the Company's 2018 fiscalyear), which information is incorporated by reference to this Annual Report. For clarity (and without limitation), information appearing in the sections insuch Proxy Statement entitled "PROPOSAL 3 - ADVISORY VOTE ON EXECUTIVE COMPENSATION", "PROPOSAL 4 - ADVISORY VOTE ON THEFREQUENCY THAT THE CORPORATION HOLDS THE ADVISORY VOTE ON EXECUTIVE COMPENSATION", and "REPORT OF THE AUDITCOMMITTEE OF THE BOARD OF DIRECTORS" shall not be deemed to be incorporated by reference in this Annual Report. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Reference is made to the information set forth under the captions "Security Ownership of Certain Beneficial Owners and Management","Executive Compensation, Equity Awards and Options", and "Compensation Plans" in SGRP's definitive Proxy Statement respecting its Annual Meetingof Stockholders currently scheduled to be held on May 16, 2019, as and when filed with the SEC (which SGRP plans to file pursuant to Regulation 14A inApril of 2019, but not later than 120 days after the end of the Company's 2018 fiscal year), which information is incorporated by reference to this AnnualReport. For clarity (and without limitation), information appearing in the sections in such Proxy Statement entitled "PROPOSAL 3 - ADVISORY VOTEON EXECUTIVE COMPENSATION", "PROPOSAL 4 - ADVISORY VOTE ON THE FREQUENCY THAT THE CORPORATION HOLDS THE ADVISORYVOTE ON EXECUTIVE COMPENSATION", and "REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS" shall not be deemed to beincorporated by reference in this Annual Report. -46- Item 13. Certain Relationships and Related Transactions, and Director Independence Reference is made to the information set forth under the caption "Transactions with Related Persons, Promoters and Certain Control Persons" inSGRP's definitive Proxy Statement respecting its Annual Meeting of Stockholders currently scheduled to be held on May 16, 2019, as and when filed withthe SEC (which SGRP plans to file pursuant to Regulation 14A in April of 2019, but not later than 120 days after the end of the Company's 2018 fiscalyear), which information is incorporated by reference to this Annual Report. For clarity (and without limitation), information appearing in the sections insuch Proxy Statement entitled "PROPOSAL 3 - ADVISORY VOTE ON EXECUTIVE COMPENSATION", "PROPOSAL 4 - ADVISORY VOTE ON THEFREQUENCY THAT THE CORPORATION HOLDS THE ADVISORY VOTE ON EXECUTIVE COMPENSATION", and "REPORT OF THE AUDITCOMMITTEE OF THE BOARD OF DIRECTORS" shall not be deemed to be incorporated by reference in this Annual Report. Without in any way limiting any of the information incorporated by reference above, in order to (among other things) assist the Board and theAudit Committee in connection with an overall review of the Company's related party transactions and certain worker classification-related litigationmatters, in April 2017 the Board formed a special subcommittee of the Audit Committee (the "Special Subcommittee") to (among other things) review thestructure, documentation, fairness, conflicts, fidelity, appropriateness, and practices respecting each of the relationships and transactions discussed in Item13 – Certain Relationships and Related Transactions, and Director Independence, and Note 10 to the Company's Consolidated Financial Statements –Related Party Transactions (including those described under Domestic Related Party Services in that Item and Note). The Special Subcommittee iscontinuing that review with the assistance of special auditors and counsel currently being retained by such Subcommittee. The Company is currentlyunable to predict the duration, ultimate scope, or results of this review by the Special Subcommittee. See also Item 1 Business - The Company's LaborForce, Item 1A - Risk Factors - Potential Conflicts with Affiliates, Potential Conflicts with Affiliates, and Risks Related to the Company's SignificantStockholders: Potential Voting Control and Conflicts, and Item 3 - Legal Proceedings, above, and Note 6 to the Company's Consolidated FinancialStatements – Commitments and Contingencies - Legal Matters, and Note 10 to the Company's Consolidated Financial Statements – Related PartyTransactions - Domestic Related Party Services, below. Item 14. Principal Accountant Fees and Services Reference is made to the information set forth under the caption "PROPOSAL 2 - RATIFICATION, ON AN ADVISORY BASIS, OF THEAPPOINTMENT OF BDO USA, LLP AS THE COMPANY'S PRINCIPAL INDEPENDENT ACCOUNTANTS" in SGRP's definitive Proxy Statementrespecting its Annual Meeting of Stockholders currently scheduled to be held on May 16, 2019, as and when filed with the SEC (which SGRP plans to filepursuant to Regulation 14A in April of 2019, but not later than 120 days after the end of the Company's 2018 fiscal year), which information isincorporated by reference to this Annual Report. For clarity (and without limitation), information appearing in the section "REPORT OF THE AUDITCOMMITTEE OF THE BOARD OF DIRECTORS" shall not be deemed to be incorporated by reference in this Annual Report. -47- PART IV Item 15. Exhibits and Financial Statement Schedules 1. Index to Financial Statements filed as part of this report: Report of Independent Registered Public Accounting FirmF-1 Consolidated Balance Sheets as of December 31, 2018 and 2017F-2 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2018 and 2017F-3 Consolidated Statements of Equity for the years ended December 31, 2018 and 2017F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2017F-5 Notes to Consolidated Financial StatementsF-6 2. Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2018 and 2017F-46 3.Exhibits ExhibitNumber Description 3.1 Certificate of Incorporation of SPAR Group, Inc. (referred to therein under its former name of PIA Merchandising Services, Inc.), asamended ("SGRP"), incorporated by reference to SGRP's Registration Statement on Form S-1 (Registration No. 33-80429), as filedwith the Securities and Exchange Commission ("SEC") on December 14, 1995 (the "Form S-1"), and the Certificate of Amendmentfiled with the Secretary of State of the State of Delaware on July 8, 1999 (which, among other things, changes SGRP's name to SPARGroup, Inc.), (incorporated by reference to Exhibit 3.1 to SGRP's Quarterly Report on Form 10-Q for the 3rd Quarter ended September30, 1999). 3.2 Certificate of Designation of Series "A" Preferred Stock of SPAR Group, Inc., as of March 28, 2008 (incorporated by reference toSGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC on March 31, 2008). 3.3 Amended and Restated By-Laws of SPAR Group, Inc., as adopted, restated, effective and dated January 18, 2019 (incorporated byreference to Exhibit 3.3 to SGRP's Current Report on Form 8-K, as filed with the SEC on January 25, 2019). 3.4 Amended and Restated Charter of the Audit Committee of the Board of Directors of SPAR Group, Inc., adopted on May 18, 2004(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004). 3.5 Charter of the Compensation Committee of the Board of Directors of SPAR Group, Inc., adopted on May 18, 2004 (incorporated byreference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004). 3.6 Charter of the Governance Committee of the Board of Directors of SPAR Group, Inc., adopted on May 18, 2004 (incorporated byreference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004). 3.7 Charter of the Special Subcommittee of the Board of Directors of SPAR Group, Inc., adopted in April 7, 2017 (as filed herewith). -48- 3.8 SPAR Group, Inc. Statement of Policy Respecting Stockholder Communications with Directors, adopted on May 18, 2004(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004). 3.9 SPAR Group, Inc. Statement of Policy Regarding Director Qualifications and Nominations, adopted on May 18, 2004(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on May 27, 2004). 3.10 SPAR Group, Inc. Statement of Policy Respecting Complaints and Communications by Employees and Others as Amended andRestated as of August 13, 2015 (also known as the Whistleblower Policy) (as filed herewith). 4.1 Form of SGRP's Common Stock Certificate (incorporated by reference to SGRP's Pre-Effective Amendment No. 1 to itsRegistration Statement on Form S-3 (Registration No. 333-162657) as filed with the SEC on February 7, 2011). 4.2 Form of SGRP's Preferred Stock Certificate (incorporated by reference to SGRP's Pre-Effective Amendment No. 1 to itsRegistration Statement on Form S-3 (Registration No. 333-162657) as filed with the SEC on February 7, 2011). 4.3 Registration Rights Agreement entered into as of January 21, 1992, by and between SGRP (as successor to, by merger in 1996with, PIA Holding Corporation, f/k/a RVM Holding Corporation, the California Limited Partnership, The Riordan Foundationand Creditanstalt-Bankverine (incorporated by reference to the Form S-1). 4.4 SGRP's Offer to Exchange Certain Outstanding Stock Options for New Stock Options dated August 24, 2009 (incorporated byreference to Exhibits 99(a)(1)(A) through (G) of SGRP's Schedule TO dated August 24, 2009, as filed with the SEC on August25, 2009 ("SGRP's SC TO-I")). 10.1 2018 Stock Compensation Plan of SGRP, effective as of May 2, 2018 (incorporated by reference to Annex A to SGRP'sDefinitive Proxy Statement filed with the SEC on April 18, 2018). 10.2 SPAR Group, Inc. 2008 Stock Compensation Plan, effective as of May 29, 2008, and as amended through May 28, 2009 (the"SGRP 2008 Plan") (incorporated by reference to SGRP's Current Report on Form 8-K dated June 4, 2009, as filed with the SECon June 4, 2009). 10.3 Summary Description and Prospectus dated August 24, 2009, respecting the SPAR Group, Inc. 2008 Stock Compensation Plan,as amended (incorporated by reference to Exhibit 99(a)(1)(G) to SGRP's SC TO-I). 10.4 Form of Nonqualified Stock Option Contract for new awards under the SGRP 2008 Plan (incorporated by reference to SGRP'sfirst and final amendment to its SC TO-I on Schedule TO I/A dated October 20, 2009, as filed with the SEC on October 22,2009). 10.5 2000 Stock Option Plan, as amended through May 16, 2006 (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, as filed with the SEC on November 14, 2006). 10.6 2001 Employee Stock Purchase Plan (incorporated by reference to SGRP's Proxy Statement for SGRP's annual stockholdersmeeting held on August 2, 2001, as filed with the SEC on July 12, 2001). 10.7 2001 Consultant Stock Purchase Plan (incorporated by reference to SGRP's Proxy Statement for SGRP's Annual meeting heldon August 2, 2001, as filed with the SEC on July 12, 2001). 10.8 SGRP 2018 Stock Repurchase Program as approved by SGRP's Audit Committee and adopted by its Board of Directors onNovember 10, 2017 and ratified on March 14, 2018 (as filed herewith). 10.9 Amended and Restated Change in Control Severance Agreement between William H. Bartels and SGRP, dated as of December22, 2008 (incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2009, as filedwith the SEC on April 15, 2010). 10.10 Amended and Restated Change in Control Severance Agreement between James R. Segreto and SGRP, dated as of September 5,2017 (incorporated by reference to Exhibit 10.1 to SGRP's Current Report on Form 8-K, as filed with the SEC on September 8,2018), and their First Amendment to Amended and Restated Change in Control Severance Agreement dated as of November 8,2018 (as filed herewith). 10.11 Amended and Restated Change in Control Severance Agreement between Kori G. Belzer and SGRP, dated as of September 5,2017 (incorporated by reference to Exhibit 10.2 to SGRP's Current Report on Form 8-K, as filed with the SEC on September 8,2018), and their First Amendment to Amended and Restated Change in Control Severance Agreement dated as of November 8,2018 (as filed herewith). -49- 10.12 Amended and Restated Change in Control Severance Agreement between Gerard Marrone and SGRP dated as of September 5, 2017(incorporated by reference to Exhibit 10.3 to SGRP's Current Report on Form 8-K, as filed with the SEC on September 8, 2018), and their First Amendment to Amended and Restated Change in Control Severance Agreement dated as of November 8, 2018 (as filedherewith). 10.13 Amended and Restated Change in Control Severance Agreement between Steven J. Adolph and SGRP dated as of September 5, 2017(incorporated by reference to Exhibit 10.4 to SGRP's Current Report on Form 8-K, as filed with the SEC on September 8, 2018), andtheir Corrected First Amendment to Severance Agreements dated as of August 8, 2018 (as filed herewith), and their SecondAmendment to Severance Agreements dated as of November 8, 2018 (as filed herewith). 10.14 Executive Officer Severance Agreement between Steven J. Adolph and SGRP dated as of June 17, 2016 (incorporated by reference toExhibit __to SGRP's ______Report on Form ___, as filed with the SEC on , 2018) , and their Corrected First Amendment toSeverance Agreements dated as of August 8, 2018 (as filed herewith), and their Second Amendment to Severance Agreements datedas of November 8, 2018 (as filed herewith). 10.15 Amended and Restated Change in Control Severance Agreement between Lawrence David Swift and SGRP dated as of September 5,2017 (incorporated by reference to Exhibit 10.5 to SGRP's Current Report on Form 8-K, as filed with the SEC on September 8, 2018),and their First Amendment to Amended and Restated Change in Control Severance Agreement dated as of November 8, 2018 (asfiled herewith). 10.16 Amended and Restated Change in Control Severance Agreement between Christiaan M. Olivier and SGRP dated as of September 5,2017 (incorporated by reference to Exhibit 10.1 to SGRP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, asfiled with the SEC on August 20, 2018), and their First Amendment to Severance Agreements dated as of November 8, 2018 (as filedherewith). 10.17 Executive Officer Severance Agreement between Christiaan M. Olivier and SGRP dated as of September 5, 2017 (incorporated byreference to Exhibit 10.2 to SGRP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, as filed with the SEC onAugust 20, 2018), and their First Amendment to Severance Agreements dated as of November 8, 2018 (as filed herewith). 10.18 Amended and Restated Field Service Agreement dated and effective as of January 1, 2004, by and between SPAR MarketingServices, Inc., and SPAR Marketing Force, Inc. (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarterended March 31, 2004, as filed with the SEC on May 21, 2004). 10.19 First Amendment to Amended and Restated Field Service Agreement between SPAR Marketing Services, Inc., a Nevada corporation,and SPAR Marketing Force, Inc., a Nevada corporation ("SMF"), dated September 30, 2008, and effective as of September 24, 2008(the "First Amendment") (incorporated by reference to SGRP's Current Report on Form 8-K dated October 6, 2008, as filed with theSEC on October 10, 2008). 10.20 Amended and Restated Field Management Agreement dated and effective as of January 1, 2004, by and between SPAR ManagementServices, Inc., and SPAR Marketing Force, Inc. (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarterended March 31, 2004, as filed with the SEC on May 21, 2004). 10.21 Amended and Restated Programming and Support Agreement by and between SPAR Marketing Force, Inc. and SPAR InfoTech, Inc.,dated and effective as of September 15, 2007 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SECon November 14, 2007). 10.22 Trademark License Agreement dated as of July 8, 1999, by and between SPAR Marketing Services, Inc., and SPAR Trademarks, Inc.(incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the SECon March 31, 2003). 10.23 Trademark License Agreement dated as of July 8, 1999, by and between SPAR InfoTech, Inc., and SPAR Trademarks, Inc.(incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2002, as filed with the SECon March 31, 2003). 10.24 Joint Venture Agreement dated as of March 29, 2006, by and between FACE AND COSMETIC TRADING SERVICES PTY LIMITEDand SPAR International Ltd., respecting the Company's subsidiary in Australia (incorporated by reference to SGRP's Annual Reporton Form 10-K for the fiscal year ended December 31, 2006, as filed with the SEC on April 2, 2007). 10.25 Joint Venture Shareholders Agreement between Friedshelf 401 (Proprietary) Limited, SPAR Group International, Inc., Derek O'Brien,Brian Mason, SMD Meridian CC, Meridian Sales & Merchandising (Western Cape) CC, Retail Consumer Marketing CC, MerholdHolding Trust in respect of SGRP Meridian (Proprietary) Limited, dated as of June 25, 2004, respecting SGRP's consolidatedsubsidiary in South Africa (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31,2004, as filed with the SEC on April 12, 2005). -50- 10.26 Joint Venture Agreement dated as of September 3, 2012, by and between Combined Manufacturers National (Pty) Ltd and SGRPMeridian (Pty) Ltd, respecting SGRP's additional consolidated subsidiary in South Africa (incorporated by reference to SGRP'sAnnual Report on Form 10-K, as filed with the SEC on April 2, 2013). 10.27 Joint Venture Agreement dated as of August 2, 2011, by and among Todopromo, S.A. de C.V., Sepeme, S.A. de C.V., TopPromoservicios, S.A. de C.V., Conapad, S.C., Mr. Juan Francisco Medina Domenzain, Mr. Juan Francisco Medina Staines, Mr. JorgeCarlos Medina Staines, Mr. Julio Cesar Hernandez Vanegas, and SPAR Group International, Inc., respecting SGRP's consolidatedsubsidiary in Mexico (incorporated by reference to SGRP's Annual Report on Form 10-K, as filed with the SEC on April 2, 2013). 10.28 Joint Venture Agreement dated as of August 30, 2012, by and between National Merchandising of America, Inc., a Georgiacorporation, SPAR NMS Holdings, Inc., a Nevada corporation and consolidated subsidiary of SGRP, and National MerchandisingServices, LLC, a Nevada limited liability company and consolidated subsidiary of SGRP (incorporated by reference to SGRP'sQuarterly Report on Form 10-Q, as filed with the SEC on November 9, 2012). 10.29 Joint Venture Contract dated July 4, 2014, among SPAR China Inc., established and existing under the laws of Hong Kong, WedoneShanghai, Co., Ltd., organized and existing under the laws of P.R. China, Shanghai Gold Pack Investment Management Co., Ltd.,organized and existing under the laws of P.R. China, and XU Gang, an Australian citizen (incorporated by reference to SGRP'sAnnual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC on April 17, 2017). 10.30 Joint Venture Agreement dated as of September 13, 2016, by and between JK Consultoria Empresarial Ltda.-ME, a limitada formedunder the laws of Brazil, Earth Investments, LLC, a Nevada limited liability company, and SGRP Brasil Participações Ltda., alimitada formed under the laws of Brazil (as filed herewith). 10.31 Field Services Agreement dated as of September 1, 2012, between National Merchandising of America, Inc., a Georgia corporation,and National Merchandising Services, LLC, a Nevada limited liability company and consolidated subsidiary of SGRP (incorporatedby reference to SGRP's Quarterly Report on Form 10-Q, as filed with the SEC on November 9, 2012). 10.32 Asset Purchase Agreement dated as of March 15, 2013, between Market Force Information, Inc., a Delaware corporation, and SPARMarketing Force, Inc., a Nevada corporation and consolidated subsidiary of SGRP (incorporated by reference to SGRP's CurrentReport on Form 8-K, as filed with the SEC on March 20, 2013). 10.33 Master Field Services Agreement dated as of August 1, 2013, between National Retail Source, LLC, a Georgia limited liabilitycompany and affiliate of SGRP, and National Merchandising Services, LLC, a Nevada limited liability company and consolidatedsubsidiary of SGRP (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013,as filed with the SEC on November 14, 2013). 10.34 Share Purchase Agreement (respecting equity and debt interests in SPAR Business Ideas Provider S.R.L.) dated as of August 31,2013, between SPAR InfoTech, Inc. ("Infotech"), a Nevada corporation and affiliate of SGRP, and SPAR International Ltd. ("SPARCayman"), a Cayman Islands corporation and consolidated subsidiary of SGRP (incorporated by reference to SGRP's QuarterlyReport on Form 10-Q for the quarter ended September 30, 2013, as filed with the SEC on November 14, 2013). 10.35 Stock Purchase Agreement as of October 13, 2017, by and between the SPAR Marketing Force, Inc. ("SMF"), as buyer and Joseph L.Paulk, as seller (the "Resource Paulk SPA") (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SECon January 16, 2018). 10.36 Stock Purchase Agreement as of October 13, 2017, by and between SMF, as buyer, and Richard Justus, as seller (the "Resource JustusSPA") (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018). 10.37 $2,600,000.00 secured promissory note from SMF to Joseph L. Paulk dated as of January 1, 2018 (the "Resource Paulk Note")(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018). -51- 10.38 Securities Pledge and Escrow Agreement securing the Resource Paulk Note between SMF and Joseph L. Paulk dated as of January 1,2018 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018). 10.39 Guaranty of the Resource Paulk Note by SPAR Group, Inc. ("SGRP"), in favor of Joseph L. Paulk dated as of January 1, 2018(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018). 10.40 $100,000.00 secured Promissory Note from SMF to Richard Justus dated as of January 1, 2018 (the "Resource Justus Note")(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018). 10.41 Securities Pledge and Escrow Agreement securing the Resource Justus Note between SMF and Richard Justus dated as of January 1,2018 (incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018). 10.42 Executive Officer Employment Terms and Severance Agreement between RPI and Richard Justus dated as of January 1, 2018(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 16, 2018). 10.43 Loan and Security Agreement entered into as of April 10, 2019, by and among North Mill Capital LLC, a Delaware limited liabilitycompany ("North Mill"), SPAR Marketing Force, Inc., a Nevada corporation (the "US NM Borrower"), SPAR Canada Company, anunlimited company organized under the laws of Nova Scotia (the "Canadian NM Borrower"), and each of SPAR Group, Inc., aDelaware corporation ("SGRP"), and SPAR Acquisition, Inc., SPAR Canada, Inc., SPAR Trademarks, Inc., and SPAR Assembly &Installation, Inc., each a Nevada corporation (including SGRP, each as a "NM Guarantor"), as filed herewith. 10.44 $12,500,000.00 Revolving Credit Master Promissory Note dated April 10, 2019, issued by the US NM Borrower to North Mill, asfiled herewith 10.45 CDN$2,500,000.00 Revolving Credit Master Promissory Note dated April 10, 2019, issued by the Canadian NM Borrower to NorthMill, as filed herewith. 10.46 Corporate Guaranty dated as of April 10, 2019, from the NM Guarantors to North Mill, as filed herewith. 10.47 Collateral Pledge Agreement dated as of April 10, 2019, by SGRP, the US NM Borrower and SPAR Acquisition, Inc., in favor ofNorth Mill, as filed herewith. 10.48 Collateral Assignment (Security Agreement) (Trademarks) effective: April 10, 2019, from SPAR Trademarks, Inc., to North Mill, asfiled herewith. 10.49 Loan Agreement dated as of January 16, 2018, by and among PNC Bank, National Association ("PNC"), and SPAR Group, Inc.("SGRP"), and certain of its direct and indirect subsidiaries in the United States and Canada, namely SPAR Marketing Force, Inc.,SPAR Assembly & Installation, Inc., and SPAR Canada Company (each, a "PNC Borrower" and collectively, the "PNC Borrowers"),and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Group International, Inc., and SPAR Trademarks, Inc. (together with SGRP,each a "PNC Guarantor" and collectively, the "PNC Guarantors) (incorporated by reference to SGRP's Current Report on Form 8-K, asfiled with the SEC on January 26, 2018). 10.50 US$9,000,000.00 Committed Line Of Credit Note dated January 16, 2018, issued by the PNC Borrowers to PNC (incorporated byreference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 26, 2018). 10.51 Guaranty and Suretyship Agreement dated as of January 16, 2018, by and among the PNC Guarantors and PNC (incorporated byreference to SGRP's Current Report on Form 8-K, as filed with the SEC on January 26, 2018). 10.52 Security Agreement dated as of January 16, 2018, by and among the PNC Borrowers and PNC Guarantors (each, a "PNC Loan Party"and collectively, the "PNC Loan Parties") and PNC (incorporated by reference to SGRP's Current Report on Form 8-K, as filed withthe SEC on January 26, 2018). 10.53 Revolving Loan and Security Agreement dated as of July 6, 2010 (the "Sterling Loan Agreement"), by and among SGRP, and certainof its direct and indirect subsidiaries, namely SPAR Incentive Marketing, Inc., PIA Merchandising Co., Inc., Pivotal Sales Company,National Assembly Services, Inc., SPAR/Burgoyne Retail Services, Inc., SPAR Group International, Inc., SPAR Acquisition, Inc.,SPAR Trademarks, Inc., SPAR Marketing Force, Inc. and SPAR, Inc. (each a "Subsidiary Borrower", and together with SGRP,collectively, the "SPAR Sterling Borrowers"), and Sterling National Bank, as Agent (the "Sterling Agent"), and Sterling NationalBank and Cornerstone Bank, as lenders (collectively, the "Sterling Lenders") (incorporated by reference to SGRP's Current Report onForm 8-K, as filed with the SEC on July 12, 2010). 10.54 Secured Revolving Loan Note in the original maximum principal amount of $5,000,000 issued by the SPAR Sterling Borrowers toSterling National Bank pursuant to (and governed by) the Sterling Loan Agreement and dated as of July 6, 2010 (incorporated byreference to SGRP's Current Report on Form 8-K, as filed with the SEC on July 12, 2010). 10.55 Secured Revolving Loan Note in the original maximum principal amount of $1,500,000 issued by the SPAR Sterling Borrowers toCornerstone Bank pursuant to (and governed by) the Sterling Loan Agreement and dated as of July 6, 2010 (incorporated byreference to SGRP's Current Report on Form 8-K, as filed with the SEC on July 12, 2010). -52- 10.56 Limited Continuing Guaranty of the obligations of the SPAR Sterling Borrowers under the Sterling Loan Agreement from Robert G.Brown and William H. Bartels in favor of the Sterling Lenders dated as of July 6, 2010 (incorporated by reference to SGRP's CurrentReport on Form 8-K, as filed with the SEC on July 12, 2010). 10.57 Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents dated as of September 1, 2011, andeffective as of June 1, 2011, among the SPAR Sterling Borrowers, the Sterling Lenders and the Sterling Agent and confirmed byRobert G. Brown and William H. Bartels as guarantors (incorporated by reference to SGRP's Annual Report on Form 10-K, as filedwith the SEC on March 21, 2012). 10.58 Second Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents dated and effective as of July1, 2012, among the SPAR Sterling Borrowers, the Sterling Lenders (including Cornerstone as a departing Lender), and the SterlingAgent (incorporated by reference to SGRP's Quarterly Report on Form 10-Q, as filed with the SEC on August 10, 2012). 10.59 Third Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents dated as of February 11, 2013,and effective as of January 1, 2013, among the SPAR Sterling Borrowers, the Sterling Lenders and the Sterling Agent (incorporatedby reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on April 2, 2013). 10.60 Fourth Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents, effective as of July 1, 2013, byand among Sterling National Bank, as "Lender" and "Agent", and SPAR Group, Inc., National Assembly Services, Inc., SPAR GroupInternational, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., and SPAR Marketing Force, Inc., as "Borrower" (incorporated byreference to SGRP's Current Report on Form 8-K, as filed with the SEC on July 15, 2013). 10.61 Fifth Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents, dated and effective as of October30, 2013, by and among Sterling National Bank, as "Lender" and "Agent", and SPAR Group, Inc., National Assembly Services, Inc.,SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., and SPAR Marketing Force, Inc., each as an original"Borrower", and SPAR Canada, Inc., SPAR Canada Company and SPAR Wings & Ink Company, each as a "Borrower" newly added tosuch loan agreement by such amendment (incorporated by reference to SGRP's Quarterly Report on Form 10-Q for the quarter endedSeptember 30, 2013, as filed with the SEC on November 14, 2013). 10.62 Sixth Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents, dated and effective as of July 1,2014, by and among Sterling National Bank, as "Lender" and "Agent", and SPAR Group, Inc., National Assembly Services, Inc.,SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPAR Canada, Inc.,and SPAR Canada Company, each as a "Borrower" under such loan agreement as of such amendment date (incorporated by referenceto SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, as filed with the SEC on May 14, 2015). 10.63 Amended and Restated Secured Revolving Loan Note dated as of July 1, 2014, in the original maximum principal amount of$7,500,000 issued to Sterling National Bank by SPAR Group, Inc., National Assembly Services, Inc., SPAR Group International, Inc.,SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPAR Canada, Inc., and SPAR Canada Company, eachas a "Borrower" under such note, pursuant to (and governed by) the Sterling Loan Agreement as amended (incorporated by referenceto SGRP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, as filed with the SEC on May 14, 2015). 10.64 Seventh Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents, dated and effective as ofSeptember 28, 2015, by and among Sterling National Bank, as "Lender" and "Agent", and SPAR Group, Inc., SPAR NationalAssembly Services, Inc., SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force,Inc., SPAR Canada, Inc., and SPAR Canada Company, each as a "Borrower" under such loan agreement as of such amendment date(incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC onMarch 30, 2016). -53- 10.65 Amended and Restated Secured Revolving Loan Note dated as of September 28, 2015, in the original maximum principal amount of$8,500,000 issued to Sterling National Bank by SPAR Group, Inc., SPAR National Assembly Services, Inc., SPAR GroupInternational, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPAR Canada, Inc., and SPARCanada Company, each as a "Borrower" under such note, pursuant to (and governed by) the Sterling Loan Agreement as amended(incorporated by reference to SGRP's Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC onMarch 30, 2016). 10.66 Waiver letter from Sterling National Bank, dated as of May 16, 2016, but effective as of March 31, 2016 (incorporated by reference toSGRP's Quarterly Report on Form 10-Q, as filed with the SEC on August 15, 2016). 10.67 Waiver letter from Sterling National Bank, dated as of November 18, 2016, but effective as of September 30, 2016 (incorporated byreference to SGRP's Quarterly Report on Form 10-Q, as filed with the SEC on November 21, 2016). 10.68 Eighth Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents, dated and effective as ofDecember 22, 2016, by and among Sterling National Bank, as "Lender" and "Agent", and SPAR Group, Inc., SPAR National AssemblyServices, Inc., SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPARCanada, Inc., and SPAR Canada Company, each as a "Borrower" under such loan agreement as of such amendment date (incorporatedby reference to SGRP's Current Report on Form 8-K, as filed with the SEC on December 28, 2016). 10.69 Amended and Restated Secured Revolving Loan Note dated as of December 22, 2016, in the original maximum principal amount of$9,000,000 issued to Sterling National Bank by SPAR Group, Inc., SPAR National Assembly Services, Inc., SPAR GroupInternational, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPAR Canada, Inc., and SPARCanada Company, each as a "Borrower" under such note, pursuant to (and governed by) the Sterling Loan Agreement as amended(incorporated by reference to SGRP's Current Report on Form 8-K, as filed with the SEC on December 28, 2016). 10.70 Ninth Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents, dated and effective as of March3, 2017, by and among Sterling National Bank, as "Lender" and "Agent", and SPAR Group, Inc., SPAR National Assembly Services,Inc., SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPAR Canada,Inc., and SPAR Canada Company, each as a "Borrower" under such loan agreement as of such amendment date (incorporated byreference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC on April 17,2017). 10.71 Amended and Restated Secured Revolving Loan Note dated as of March 3, 2017, in the original maximum principal amount of$9,000,000 issued to Sterling National Bank by SPAR Group, Inc., SPAR National Assembly Services, Inc., SPAR GroupInternational, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPAR Canada, Inc., and SPARCanada Company, each as a "Borrower" under such note, pursuant to (and governed by) the Sterling Loan Agreement as amended(incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SECon April 17, 2017). 10.72 Tenth Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents, dated and effective as of June27, 2017, by and among Sterling National Bank, as "Lender" and "Agent", and SPAR Group, Inc., SPAR Installation & Assembly, Inc.,SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPAR Canada, Inc., andSPAR Canada Company, each as a "Borrower" under such loan agreement as of such amendment date (incorporated by reference toSGRP's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, as filed with the SEC on May 22, 2017). 10.73 Eleventh Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents, dated and effective as of June27, 2017, by and among Sterling National Bank, as "Lender" and "Agent", and SPAR Group, Inc., SPAR Installation & Assembly,Inc., SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPAR Canada,Inc., and SPAR Canada Company, each as a "Borrower" under such loan agreement as of such amendment date (incorporated byreference to SGRP's Current Report on Form 8-K, as filed with the SEC on July 5, 2017). -54- 10.74 Twelfth Agreement of Amendment to Revolving Loan and Security Agreement And Other Documents, dated and effective as ofSeptember 6, 2017, by and among Sterling National Bank, as "Lender" and "Agent", and SPAR Group, Inc., SPAR Installation &Assembly, Inc., SPAR Group International, Inc., SPAR Acquisition, Inc., SPAR Trademarks, Inc., SPAR Marketing Force, Inc., SPARCanada, Inc., and SPAR Canada Company, each as a "Borrower" under such loan agreement as of such amendment date (incorporatedby reference to SGRP's Current Report on Form 8-K, as filed with the SEC on September 25, 2017). 10.75 Confirmation of Credit Facilities Letter by Royal Bank of Canada in favor of SPAR Canada Company dated as of October 17, 2006(incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as filed with the SECon April 2, 2007). 10.76 Confirmation of Credit Facilities Letter Terms and Conditions by SPAR Canada Company in favor of Royal Bank of Canada datedas of October 20, 2006 (incorporated by reference to SGRP's Annual Report on Form 10-K for the fiscal year ended December 31,2006, as filed with the SEC on April 2, 2007). 10.77 Waiver Letter and Amendment by and between Royal Bank of Canada and SPAR Canada Company, dated as of March 31, 2008(incorporated by reference to SGRP's Annual Report on Form 10-K, as filed with the SEC on March 31, 2008). 10.78 Letter of Offer dated September 29, 2011, and General Business Factoring Agreement (undated) between Oxford Funding Pty Ltd andSPARFACTS Pty Ltd (incorporated by reference to SGRP's Annual Report on Form 10-K, as filed with the SEC on April 2, 2013). 10.79 Letter from Nasdaq to the Company dated July 13, 2017, giving the Company notice that it had regained compliance with Nasdaq'sBid Price Rule (as filed herewith) 10.80 Limited Mutual Release Agreement, dated as of January 18, 2019, among Robert G. Brown, William H. Bartels, Christiaan Olivier,Lorrence T. Kellar, Jack W. Partridge, Arthur B. Drogue and R. Eric McCarthey (incorporated by reference to Exhibit 10.1 to SGRP'sCurrent Report on Form 8-K, as filed with the SEC on January 25, 2019). 10.81 Stipulation of Dismissal, dated as of January 18, 2019 (incorporated by reference to Exhibit 10.2 to SGRP's Current Report on Form8-K, as filed with the SEC on January 25, 2019). 10.82 Stipulation and Proposed Order of Dismissal, dated as of January 23, 2019 (incorporated by reference to Exhibit 10.3 to SGRP'sCurrent Report on Form 8-K, as filed with the SEC on January 25, 2019). 10.83 Notice of Termination of Service Term to Become Effective August 1, 2018, and dated May 7, 2018, from SPAR Marketing Force,Inc., to SPAR Administrative Services, Inc. (incorporated by reference to Exhibit 10.1 to SGRP's Current Report on Form 8-K, as filedwith the SEC on May 10, 2018). 10.84 Notice of Cessation of Use of SBS Services Anticipated on or before August 15, 2018, and dated May 23, 2018, from SPARMarketing Force, Inc., to SPAR Business Services, Inc. (incorporated by reference to Exhibit 10.1 to SGRP's Current Report on Form8-K, as filed with the SEC on May 25, 2018). 14.1 SPAR Group Code of Ethical Conduct for its Directors, Executives, Officers, Employees, Consultants and other RepresentativesAmended and Restated (as of) March 15, 2018 (as filed herewith). 14.2 Statement of Policy Regarding Personal Securities Transactions in SGRP Stock and Non-Public Information, as adopted, restated,effective and dated as of May 1, 2004, and as further amended through March 10, 2011 (incorporated by reference to SGRP's AnnualReport on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 15, 2011). 21.1 List of Subsidiaries (as filed herewith). 23.1 Consent of BDO USA, LLP (as filed herewith). 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (as filed herewith). 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (as filed herewith). -55- 32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (as filed herewith). 32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (as filed herewith). 101.INS* XBRL Instance 101.SCH* XBRL Taxonomy Extension Schema 101.CAL* XBRL Taxonomy Extension Calculation 101.DEF* XBRL Taxonomy Extension Definition 101.LAB* XBRL Taxonomy Extension Labels 101.PRE* XBRL Taxonomy Extension Presentation * XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject toliability under these sections. Item 16. Form 10-K Summary None. -56- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized. SPAR Group, Inc. By:/s/ Christiaan M. Olivier Christiaan M. Olivier Chief Executive Officer Date: April 15, 2019 KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Christiaan M.Olivier and James R. Segreto and each of them, jointly and severally, his attorneys-in-fact, each with full power of substitution, for him in any and allcapacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connectiontherewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact or his substitute orsubstitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities indicated. SIGNATURE TITLE /s/ Christiaan M. Olivier Chief Executive Officer and Director Christiaan M. Olivier (Principal Executive Officer)Date: April 15, 2019 /s/ Arthur B. Drogue Chairman of the Board and Director Arthur B. Drogue Date: April 15, 2019 /s/ William H. Bartels Vice Chairman and Director William H. Bartels Date: April 15, 2019 /s/ Jack W. Partridge Director Jack W. Partridge Date: April 15, 2019 /s/ R. Eric McCarthey Director R. Eric McCarthey Date: April 15, 2019 /s/ Jeffrey A. Mayer Director Jeffrey A. Mayer Date: April 15, 2019 /s/ Peter W. Brown Director Peter W. Brown Date: April 15, 2019 /s/ James R. Segreto Chief Financial Officer, James R. Segreto Treasurer and Secretary (Principal Financial and Accounting Officer)Date: April 15, 2019 -57- Report of Independent Registered Public Accounting Firm Board of The Directors and StockholdersSPAR Group, Inc. and SubsidiariesWhite Plains, New York Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of SPAR Group, Inc. (the "Company") and subsidiaries as of December 31, 2018 and2017, the related consolidated statements of loss and comprehensive loss, statements of equity, and cash flows for each of the two years in the periodended December 31, 2018, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the"consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position ofthe Company and subsidiaries at December 31, 2018 and 2017, and the results of their operations and their cash flows for each of the two years in theperiod ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on theCompany's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is notrequired to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain anunderstanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internalcontrol over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of materialmisstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Suchprocedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits alsoincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of theconsolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. We have served as the Company's auditor since 2013. /s/ BDO USA, LLPTroy, MichiganApril 15, 2019 F-1 SPAR Group, Inc. and SubsidiariesConsolidated Balance Sheets(In thousands, except share and per share data) December 31,2018 December 31,2017 Assets Current assets: Cash and cash equivalents $7,111 $8,827 Accounts receivable, net 46,142 35,964 Prepaid expenses and other current assets 1,879 2,031 Total current assets 55,1132 46,822 Property and equipment, net 2,950 2,712 Goodwill 3,788 1,836 Intangible assets, net 3,332 1,634 Deferred income taxes 2,568 3,055 Other assets 1,325 1,929 Total assets $69,095 $57,988 Liabilities and equity Current liabilities: Accounts payable $8,668 $7,341 Accrued expenses and other current liabilities 18,168 13,581 Due to affiliates 4,645 3,026 Customer incentives and deposits 620 1,539 Lines of credit and short-term loans 10,414 6,839 Total current liabilities 42,515 32,326 Long-term debt 1,806 107 Total liabilities 44,321 32,433 Commitments and contingencies – See Note 6 Equity: SPAR Group, Inc. equity Preferred stock, $.01 par value: Authorized and available shares– 2,445,598 Issued and outstanding shares– None – December 31, 2018and December 31, 2017 – – Common stock, $.01 par value: Authorized shares – 47,000,000 Issued shares – 20,784,483 – December 31, 2018 and 20,680,717 –December 31, 2017 208 207 Treasury stock, at cost 7,895 shares – December 31, 2018 and 104,398 shares – December 31, 2017 (8) (115)Additional paid-in capital 16,304 16,271 Accumulated other comprehensive loss (3,638) (1,690)Retained earnings 3,432 4,977 Total SPAR Group, Inc. equity 16,298 19,650 Non-controlling interest 8,476 5,905 Total equity 24,774 25,555 Total liabilities and equity $69,095 $57,988 See accompanying notes to the Company's consolidated financial statements. F-2 SPAR Group, Inc. and SubsidiariesConsolidated Statements of Loss and Comprehensive Loss(In thousands, except per share data) Year Ended December 31, 2018 2017 Net revenues $229,191 $181,381 Cost of revenues 184,904 144,601 Gross profit 44,287 36,780 Selling, general and administrative expense 38,449 30,564 Depreciation and amortization 2,109 2,126 Operating income 3,729 4,090 Interest expense, net 1,095 337 Other income, net (406) (401)Income before income tax expense 3,040 4,154 Income tax expense 1,402 2,977 Net income 1,638 1,177 Net income attributable to non-controlling interest (3,189) (2,100)Net loss attributable to SPAR Group, Inc. $(1,551) $(923)Basic and diluted loss per common share attributable to SPAR Group, Inc.: $(0.07) $(0.04)Weighted average common shares – basic and diluted 20,684 20,617 Net income $1,638 $1,177 Other comprehensive (loss) income: Foreign currency translation adjustments (3,284) 1,315 Comprehensive (loss) income (1,646) 2,492 Comprehensive income attributable to non-controlling interest (1,837) (2,698)Comprehensive loss attributable to SPAR Group, Inc. $(3,483) $(206) See accompanying notes to the Company's consolidated financial statements. F-3 SPAR Group, Inc. and SubsidiariesConsolidated Statements of Equity(In thousands) Common Stock Treasury Stock AdditionalPaid-In AccumulatedOtherComprehensive Retained Non-Controlling Total Shares Amount Shares Amount Capital Loss Earnings Interest Equity Balance at January 1,2017 20,681 $207 38 $(51) $16,093 $(2,407) $5,835 $5,405 $25,082 Share-basedcompensation – – – – 225 – – – 225 Exercise of stockoptions – – (25) 32 (22) – – – 10 Distributions to non-controlling investors – – – – – – – (2,198) (2,198)Adoption of ASU 2016-09 – – – – – – 65 – 65 Purchase of treasuryshares – – 111 (121) – – – – (121)Reissued treasury shares– RSUs – – (20) 25 (25) – – – – Other comprehensiveincome – – – – – 717 – 598 1,315 Net income (loss) – – – – – – (923) 2,100 1,177 Balance at December31, 2017 20,681 207 104 (115) 16,271 (1,690) 4,977 5,905 25,555 Share-basedcompensation – – – – 221 – – – 221 Exercise of stockoptions 104 1 (75) 97 (185) – – – (87)Distributions to non-controlling investors – – – – – (16) 6 (1,914) (1,924)Reissued treasury shares– RSUs – – (21) 10 (3) – – – 7 Non-controlling interestrelated to ResourcePlus acquisition – – – – – – – 2,648 2,648 Other comprehensiveincome – – – – – (1,932) – (1,352) (3,284)Net income (loss) – – – – – – (1,551) 3,189 1,638 Balance at December31, 2018 20,785 $208 8 $(8) $16,304 $(3,638) $3,432 $8,476 $24,774 See accompanying notes to the Company's consolidated financial statements. F-4 SPAR Group, Inc. and SubsidiariesConsolidated Statements of Cash Flows(In thousands) Year Ended December 31, 2018 2017 Operating activities Net income $1,638 $1,177 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,109 2,126 Bad debt expense, net of recoveries 196 113 Deferred income tax expense (benefit) (85) 1,639 Share based compensation 186 225 Changes in operating assets and liabilities, net of business acquisitions: Accounts receivable, net (9,296) (2,423)Prepaid expenses and other assets 852 (1,396)Accounts payable (144) 1,810 Accrued expenses, other current liabilities and customer incentives and deposits 6,594 3,501 Net cash provided by operating activities 2,050 6,772 Investing activities Purchases of property and equipment and capitalized software (1,622) (1,448)Purchase of Resource Plus subsidiary, net of cash acquired 767 – Net cash used in investing activities (855) (1,448)Financing activities Net borrowing (payments) on lines of credit 1,700 (2,070)(Payments) proceeds related to stock options exercised (52) 10 Proceeds from term debt 872 - Payments on term debt (333) (711)Purchase of treasury shares – (121)Distribution to non-controlling investors (1,914) (2,198)Payments on capital lease obligations (72) (44)Net cash provided by (used in) financing activities 201 (5,134) Effect of foreign exchange rate changes on cash (3,112) 1,313 Net change in cash and cash equivalents (1,716) 1,503 Cash and cash equivalents at beginning of year 8,827 7,324 Cash and cash equivalents at end of year $7,111 $8,827 Supplemental disclosure of cash flows information Interest paid $994 $460 Income taxes paid $309 $307 See accompanying notes to the Company's consolidated financial statements. F-5 SPAR Group, Inc. and SubsidiariesNotes to Consolidated Financial Statements 1. Business and Organization The SPAR Group, Inc., a Delaware corporation ("SGRP"), and its subsidiaries (together with SGRP, the "SPAR Group" or the "Company"), is a supplier ofmerchandising and other marketing services throughout the United States and internationally. The Company also provides in-store event staffing, productsampling, audit services, furniture and other product assembly services, technology services and marketing research services. Assembly services areperformed in stores, homes and offices while those other services are primarily performed in mass merchandise, office supply, grocery, drug, homeimprovement, independent, convenience and electronics stores. Merchandising services primarily consist of regularly scheduled, special project and other product services provided at the store level, and the Companymay be engaged by either the retailer or the manufacturer. Those services may include restocking and adding new products, removing spoiled or outdatedproducts, resetting categories "on the shelf" in accordance with client or store schematics, confirming and replacing shelf tags, setting new sale orpromotional product displays and advertising, replenishing kiosks, providing in-store event staffing and providing assembly services in stores, homes andoffices. Other merchandising services include whole store or departmental product sets or resets, including new store openings, new product launches andin-store demonstrations, audit services, special seasonal or promotional merchandising, focused product support and product recalls. The Company alsoprovides technology services and marketing research services. The Company operates in 10 countries and divides its operations into two reportable segments: its Domestic Division, which provides those services inthe United States of America since certain of its predecessors were formed in 1979, and its International Division, which began operations in May 2001and provides similar merchandising, marketing, audit and in-store event staffing services in Australia, Brazil, Canada, China, India, Japan, Mexico, SouthAfrica, and Turkey. The Company continues to focus on expanding its merchandising and marketing services business throughout the world. The Company's Domestic Division provides nationwide merchandising and other marketing services throughout the United States of America primarilyon behalf of consumer product manufacturers and retailers at mass merchandise, office supply, grocery, drug, dollar, home improvement, independent,convenience and electronics stores. Included in its clients are home entertainment, general merchandise, health and beauty care, consumer goods and foodproducts companies. The Company executes and administers its domestic field services through the services of field merchandising, auditing, assembly and other fieldpersonnel (each a "Field Specialist"), substantially all of whom 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"), andsubstantially all of the Field Administrators are in turn employed by other independent third parties. Substantially all the Field Specialist services wereprovided by an affiliate to the Company, SPAR Business Services, Inc. ("SBS), for this reporting period through July 2018 when the Company terminatedits relationship with SBS. The Company is reevaluating its domestic business model of using independent contractor Field Specialists provided by otherthird parties in light of changing client requirements and regulatory environments and intends to begin testing an employee based model for certaindomestic clients that are requiring the Company to use employees as Field Specialists. The Company's international business in each territory outside the United States is conducted through a foreign subsidiary incorporated in its primaryterritory. The primary territory establishment date (which may include predecessors), the percentage of the Company's equity ownership, and the principaloffice location for its US (domestic) subsidiaries and each of its foreign (international) subsidiaries is as follows: Primary Territory DateEstablished SGRP PercentageOwnership Principal Office LocationDomestic United States of America 1979 100% White Plains, New YorkNational Merchandising Services, LLC 2012 51% Fayetteville, Georgia Resource Plus of North Florida, Inc. 2018 51% Jacksonville, FloridaInternational Japan May 2001 100% Tokyo, JapanCanada June 2003 100% Vaughan, Ontario, CanadaSouth Africa April 2004 51% Durban, South AfricaIndia April 2004 51% New Delhi, IndiaAustralia April 2006 51% Melbourne, AustraliaChina March 2010 51% Shanghai, ChinaMexico August 2011 51% Mexico City, MexicoTurkey November 2011 51% Istanbul, TurkeyBrazil September 2016 51% Sao Paulo, Brazil F-6 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Summary of Significant Accounting Policies Principles of Consolidation The Company consolidates its 100% owned subsidiaries and all of its 51% owned joint venture subsidiaries in accordance with the provisions required bythe Consolidation Topic 810 of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). All significantintercompany accounts and transactions have been eliminated. Accounting for Joint Venture Subsidiaries For the Company's less than wholly owned subsidiaries, the Company first analyzes to determine if a joint venture subsidiary is a variable interest entity(a "VIE") in accordance with ASC 810 and if so, whether the Company is the primary beneficiary requiring consolidation. A VIE is an entity that has (i)insufficient equity to permit it to finance its activities without additional subordinated financial support or (ii) equity holders that lack the characteristicsof a controlling financial interest. VIEs are consolidated by the primary beneficiary, which is the entity that has both the power to direct the activities thatmost significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity thatpotentially could be significant to the entity. Variable interests in a VIE are contractual, ownership, or other financial interests in a VIE that change withchanges in the fair value of the VIE's net assets. The Company continuously re-assesses at each level of the joint venture whether the entity is (i) a VIE,and (ii) if the Company is the primary beneficiary of the VIE. If it was determined that an entity in which the Company holds an interest qualified as a VIEand the Company was the primary beneficiary, it would be consolidated. Based on the Company's analysis for each of its 51% owned joint ventures, the Company has determined that each is a VIE and that Company is theprimary beneficiary of that VIE. In addition to its controlling interest, the Company controls the proprietary information technology that is used at and issignificant to each joint venture and the Company has the ability to control other key decisions. Accordingly, the Company has the power to direct keyactivities and the obligation to absorb losses or the right to receive benefits that could be significant and consolidates each joint venture under the VIErules and reflects the 49% interests in the Company's consolidated financial statements as non-controlling interests. The Company records these non-controlling interests at their initial fair value, adjusting the basis prospectively for their share of the respective consolidated investments' net income orloss or equity contributions and distributions. These non-controlling interests are not redeemable by the equity holders and are presented as part ofpermanent equity. Income and losses are allocated to the non-controlling interest holder based on its economic ownership percentage. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States ("GAAP")requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the amounts disclosed for contingentassets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting year.Actual results could differ from those estimates. Cash Equivalents The Company considers all highly liquid short-term investments with original maturities of three months or less at the time of acquisition to be cashequivalents. Cash equivalents are stated at cost, which approximates fair value. Concentration of Credit Risk The Company maintains cash balances with high quality financial institutions and periodically evaluates the creditworthiness of such institutions andbelieves that the Company is not exposed to significant credit risk. F-7 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Summary of Significant Accounting Policies (continued) Revenue Recognition The Company's services are provided to its clients under contracts or agreements. The Company bills its clients based upon service fee arrangements.Revenues under service fee arrangements are recognized when the service is performed. Customer deposits, which are considered advances on future work,are recorded as revenue in the period services are provided. In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (Topic 606) "Revenue from Contracts with Customers." Topic 606 supersedesthe revenue recognition requirements in Topic 605 "Revenue Recognition" (Topic 605) and requires entities to recognize revenue when control of thepromised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchangefor those goods or services. The Company adopted Topic 606 as of January 1, 2018 using the modified retrospective transition method with the impactupon adoption not significant. The Company records revenue from contracts with its customers through the execution of a Master Service Agreement ("MSA") that are effectuatedthrough individual Statements of Work ("SOW" and with the applicable MSA collectively a "Contract"). The MSAs generally define the financial, service,and communication obligations between the client and SPAR while the SOWs state the project objective, scope of work, time frame, rate and driver inwhich SPAR will be paid. Only when the MSA and SOW are combined as a Contract can all five revenue standard criteria be met. The Companyintegrates a series of tasks promised within these Contracts into a bundle of services that represent the combined performance obligation ofMerchandising Services. Such Merchandising Services are performed over the duration of the SOW. Most Merchandising Services are performed on adaily, weekly or monthly basis. Revenue from Merchandising Services are recognized as the services are performed based on a rate per driver basis (perhour, store visit or unit stocked) with services delivered as they are consumed. All of the Company's Contracts with customers have a duration of one year or less, with over 90% being completed in less than 30-days, and revenue isrecognized as services are performed. Given the nature of the Company's business, how the Contracts are structured and how the Company is compensatedthe Company has elected the right-to-invoice practical expedient allowed under the revenue standard. Unbilled Accounts Receivable Unbilled accounts receivable represent services performed but not billed and are included as accounts receivable. Doubtful Accounts and Credit Risks The Company continually monitors the collectability of its accounts receivable based upon current client credit information and financial condition.Balances that are deemed to be uncollectible after the Company has attempted reasonable collection efforts are written off through a charge to the baddebt allowance and a credit to accounts receivable. Accounts receivable balances, net of any applicable reserves or allowances, are stated at the amountthat management expects to collect from the outstanding balances. The Company provides for probable uncollectible amounts through a charge toearnings and a credit to bad debt allowance based in part on management's assessment of the current status of individual accounts. Based onmanagement's assessment, the Company established an allowance for doubtful accounts of $533,000 and $342,000 at December 31, 2018, and 2017,respectively. Bad debt expense was $196,000 and $113,000 for the years ended December 31, 2018 and 2017, respectively. Property and Equipment and Depreciation Property and equipment, including leasehold improvements, are stated at cost. Depreciation is calculated on a straight-line basis over estimated usefullives of the related assets, which range from three to seven years. Leasehold improvements are depreciated over the shorter of their estimated useful livesor lease term, using the straight-line method. Maintenance and minor repairs are charged to expense as incurred. Depreciation expense for the years endedDecember 31, 2018 and 2017 (including amortization of capitalized software as described below) was $1.5 million for both periods. F-8 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Summary of Significant Accounting Policies (continued) Internal Use Software Development Costs The Company capitalizes certain costs associated with its internally developed software. Specifically, the Company capitalizes the costs of materials andservices incurred in developing or obtaining internal use software. These costs include (but are not limited to) the cost to purchase software, the cost towrite program code, payroll and related benefits and travel expenses for those employees who are directly involved with and who devote time to theCompany's software development projects. Capitalization of such costs ceases when the project is substantially complete and ready for its intendedpurpose. Costs incurred during preliminary project and post-implementation stages, as well as software maintenance and training costs, are expensed inthe period in which they are incurred. Capitalized software development costs are amortized over three years on a straight-line basis. The Company capitalized $1.3 and $1.0 million of costs related to software developed for internal use in 2018 and 2017, respectively, and recognizedapproximately $1.2 million of amortization of capitalized software for both the years ended December 31, 2018 and 2017. Impairment of Long-Lived Assets The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the Company's property andequipment and intangible assets subjected to amortization may not be recoverable. When indicators of potential impairment exist, the Company assessesthe recoverability of the assets by estimating whether the Company will recover its carrying value through the undiscounted future cash flows generatedby the use of the asset and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carryingvalue of the asset, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset. If anyassumptions, projections or estimates regarding any asset change in the future, the Company may have to record an impairment to reduce the net bookvalue of such individual asset. Goodwill Goodwill may result from our business acquisitions. Goodwill is assigned to our reporting units based on the expected benefit from the synergies arisingfrom each business combination, determined by using certain financial metrics, including the forecast discounted cash flows associated with eachreporting unit. We allocate goodwill acquired in a business combination to the appropriate reporting unit as of the acquisition date. Goodwill is subject to annual impairment tests and interim impairment tests if impairment indicators are present. The impairment tests require theCompany to first assess qualitative factors to determine whether it is necessary to perform a two-step quantitative goodwill impairment test. The Companyis not required to calculate the fair value of a reporting unit unless it determines, based on a qualitative assessment, that it is more likely than not that itsfair value is less than its carrying amount. If the qualitative assessment indicates a potential impairment, the Company performs the two step quantitativeimpairment test. Step one of the two step impairment test is to compare the fair value of the reporting unit with the reporting unit's carrying amountincluding goodwill. If the test indicates that the fair value is less than the carrying value, then step two is required to compare the implied fair value of thereporting unit's goodwill with the carrying amount of the reporting unit's goodwill. If the carrying amount of the goodwill exceeds its implied fair value,an impairment loss shall be recognized in an amount equal to that excess. The Company has determined that it has two reporting units, and that a two-stepquantitative goodwill impairment test was not necessary, as of December 31, 2018 and 2017. Accounting for Share Based Compensation The Company measures all employee share-based compensation awards using a fair value method and records the related expense in the financialstatements over the period during which an employee is required to provide service in exchange for the award. Excess tax benefits are realized from theexercise of stock options and are reported as a financing cash inflow rather than as a reduction of taxes paid in cash flow from operations. For each awardthat has a graded vesting schedule, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entireaward. Share based employee compensation expense for the years ended December 31, 2018 and 2017 was $221,000 and $225,000, respectively. F-9 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Summary of Significant Accounting Policies (continued) Fair Value Measurements Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date. The generally accepted accounting principles fair value framework uses a three-tiered approach. Fair valuemeasurements are classified and disclosed in one of the following three categories: ●Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities; ●Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are notactive, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and ●Level 3 – Prices or valuation techniques where little or no market data is available that requires inputs that are significant to the fair valuemeasurement and unobservable. If the inputs used to measure the fair value fall within different levels of the hierarchy, the fair value is determined based upon the lowest level input thatis significant to the fair value measurement. Whenever possible, the Company uses quoted market prices to determine fair value. In the absence of quotedmarket prices, the Company uses independent sources and data to determine fair value. Due to their short maturity, the carrying amounts of cash and cashequivalents, accounts receivable, accounts payable, and accrued expenses approximated the fair values (Level 1) at December 31, 2018 and 2017. Thecarrying value of the Company's long-term debt with variable interest rates approximates fair value based on instruments with similar terms (Level 2). Accounting for Income Taxes Income tax provisions and benefits are made for taxes currently payable or refundable, and for deferred income taxes arising from future tax consequencesof events that were recognized in the Company's financial statements or tax returns and tax credit carry forwards. The effects of income taxes are measuredbased on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. If necessary, a valuation allowance isestablished to reduce deferred income tax assets to an amount that will more likely than not be realized. The calculation of income taxes involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities foruncertain tax positions based on a two-step process. The first step involves evaluating the tax position for recognition by determining if the weight ofavailable evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigationprocesses, if any. The second step involves estimating and measuring the tax benefit as the largest amount that is more than 50% likely to be realizedupon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company has to determine the probability of variouspossible outcomes. Our evaluation of uncertain tax positions is based on factors including, but not limited to, changes in facts or circumstances, changesin tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of atax benefit or an additional charge to the tax provision. The Tax Cuts and Jobs Act ("the Tax Act") signed into law what is a comprehensive U.S. tax reform package that, effective January 1, 2018, among otherthings, lowered the corporate income tax rate from 35% to 21% and moved the country towards a territorial tax system with a one-time mandatory tax onpreviously deferred foreign earnings of foreign subsidiaries. See Note 5 to the Company's Consolidated Financial Statements – Income Taxes, below, forfurther information on the tax impacts of the Tax Act. Net Income Per Share Basic net income per share amounts are based upon the weighted average number of common shares outstanding. Diluted net income per share amountsare based upon the weighted average number of common and potential common shares outstanding except for periods in which such potential commonshares are anti-dilutive. Potential common shares outstanding include stock options and restricted stock and are calculated using the treasury stockmethod. Translation of Foreign Currencies The financial statements of the foreign entities consolidated into the Company's consolidated financial statements were translated into United Statesdollar equivalents at exchange rates as follows: balance sheet accounts for assets and liabilities were converted at year-end rates, equity at historical ratesand income statement accounts at average exchange rates for the year. The resulting translation gains and losses are reflected in accumulated othercomprehensive income or loss in the consolidated statements of equity. F-10 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Summary of Significant Accounting Policies (continued) New Accounting Pronouncements In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-15, which aligns the requirements for capitalizing implementationcosts incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtaininternal-use software (and hosting arrangements that include an internal-use software license). The ASU is effective for annual reporting periods beginningafter December 15, 2019, including interim reporting periods within those annual periods, with early adoption permitted. Entities have the option toapply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively. The Company is currently evaluatingthe impact of the new guidance on the consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-13 which eliminates, adds and modifies certain fair value measurement disclosures. The ASU is effective forannual reporting periods beginning after December 15, 2019, including interim reporting periods within those annual periods, with early adoptionpermitted. The Company does not expect the adoption of this standard to have a material impact to the consolidated financial statements. In June 2018, the FASB issued ASU 2018-07 simplifying the accounting for nonemployee share-based payment awards by expanding the scope of ASCTopic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees.Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-basedpayments granted to employees. The ASU is effective for annual reporting periods beginning after December 15, 2018, including interim reportingperiods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on theconsolidated financial statements and related disclosures. In February 2018, the FASB issued ASU 2018-02 allowing reclassification from accumulated other comprehensive income (loss) to retained earnings forthe income tax effects resulting from the Act enacted by the U.S. federal government in December 2017. The new guidance eliminates the stranded taxeffects resulting from the Act and will improve the usefulness of information reported to financial statement users. It also requires certain disclosures aboutstranded tax effects. ASU 2018-02 relates only to the reclassification of the income tax effects of the Act and does not change the underlying guidancerequiring that the effect of a change in tax laws or rates be included in income from continuing operations. The ASU is effective for annual periods, andinterim periods within those annual periods, beginning after December 15, 2018. It should be applied either in the period of adoption or retrospectively toeach period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. Early adoption ispermitted. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements and related disclosures. In May 2017, the FASB issued ASU 2017-09 clarifying when changes to the terms or conditions of a share-based payment award must be accounted for asmodifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for asmodifications. It does not change the accounting for modifications. The ASU was effective prospectively for reporting periods beginning after December15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. The adoptionof this ASU did not have an impact on the Company's consolidated financial statements. In January 2017, the FASB issued ASU 2017-04 simplifying the accounting for goodwill impairment for all entities. The new guidance eliminates therequirement to calculate the implied fair value of goodwill (Step 2 of the current two-step goodwill impairment test under ASC 350). Instead, entities willrecord an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (Step 1 of the current two-step goodwillimpairment test). The ASU is effective prospectively for reporting periods beginning after December 15, 2019, with early adoption permitted for annualand interim goodwill impairment testing dates after January 1, 2017. The Company elected to early adopt ASU 2017-04 as of year-end 2018 and theadoption of this ASU did not have an impact on our goodwill impairment testing process or our consolidated financial statements. In November 2016, the FASB issued ASU 2016-18 amending the presentation of restricted cash within the statement of cash flows. The new guidancerequires that restricted cash be included within cash and cash equivalents on the statement of cash flows. The ASU was effective retrospectively forreporting periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this guidance effective January 1, 2018. Seethe consolidated statement of cash flows for the impact of this standard. The adoption of this standard did not have a material impact on the consolidatedfinancial statements. F-11 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. Summary of Significant Accounting Policies (continued) In August 2016, the FASB issued ASU 2016-15 clarifying how entities should classify certain cash receipts and payments on the statement of cash flows.The new guidance addresses classification of cash flows related to the following transactions: 1) debt prepayment or debt extinguishment costs; 2)settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interestrate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5)proceeds from the settlement of corporate-owned life insurance policies; 6) distributions received from equity method investees; and 7) beneficialinterests in securitization transactions. ASU 2016-15 also clarifies how the predominance principle should be applied when cash receipts and cashpayments have aspects of more than one class of cash flows. This ASU was effective for annual periods, and interim periods within those annual periods,beginning after December 15, 2017 and required retrospective application. Early adoption was permitted. The Company adopted this guidance effectiveJanuary 1, 2018 and the impact related to this implementation was immaterial. In June 2016, the FASB issued ASU 2016-13 amending how entities will measure credit losses for most financial assets and certain other instruments thatare not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a newimpairment model based on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historicalexperience, current conditions and forecasted information rather than the current methodology of delaying recognition of credit losses until it is probablea loss has been incurred. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019 with early adoption permittedfor annual reporting periods beginning after December 15, 2018. The Company is currently evaluating the impact of the new guidance on ourconsolidated financial statements and related disclosures. This ASU applies to trade accounts receivable and may have an impact on the calculation of theallowance for uncollectible accounts receivable. In February 2016, the FASB issued ASU 2016-02 amending the existing accounting standards for lease accounting and requiring lessees to recognizelease assets and lease liabilities for all leases with lease terms of more than 12 months, including those classified as operating leases. Both the asset andliability will initially be measured at the present value of the future minimum lease payments, with the asset being subject to adjustments such as initialdirect costs. Consistent with current U.S. GAAP, the presentation of expenses and cash flows will depend primarily on the classification of the lease aseither a finance or an operating lease. The new standard also requires additional quantitative and qualitative disclosures regarding the amount, timing anduncertainty of cash flows arising from leases in order to provide additional information about the nature of an organization's leasing activities. This ASUis effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 and requires modified retrospectiveapplication. In July 2018, the FASB issued ASU 2018-11, which provided entities with an additional optional transition method to adopt the new leasestandard at the adoption date, as compared to the beginning of the earliest period presented, and recognize a cumulative-effect adjustment to thebeginning balance of retained earnings in the period of adoption. The Company will elect the optional transition method at the adoption date. Inaddition, the Company will elect the package of practical expedients permitted under the transition guidance, which allows us to carry forward ourhistorical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior toadoption of the new standard. The Company will also elect to combine lease and non-lease components and to keep leases with an initial term of 12months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of earnings on a straight-line basis overthe lease term. The Company continues to evaluate and is finalizing its documentation of the impact of the pending adoption of the new standard on its consolidatedfinancial position, disclosures and/or internal controls process. The Company does not expect material changes to the recognition of operating leaseexpense in our consolidated statements of loss. The Company believes the adoption of Topic 842 will have a material impact on the consolidated balancesheets upon the recognition of right-of-use assets and liabilities for leases currently classified as operating leases, along with enhanced disclosures of leaseactivity. The Company is in the process of finalizing its calculation of the present value of its current lease obligations. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have asignificant impact on our consolidated financial statements and related disclosures. 3. Supplemental Balance Sheet Information (in thousands) December 31, Accounts receivable, net, consists of the following: 2018 2017 Trade $34,824 $29,437 Unbilled 8,305 5,863 Non-trade 3,546 1,006 46,970 36,306 Less allowance for doubtful accounts (533) (342)Accounts Receivable, net $46,142 $35,964 F-12 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 3. Supplemental Balance Sheet Information (continued) December 31, Property and equipment consist of the following: 2018 2017 Equipment $6,249 $5,873 Furniture and fixtures 2,254 853 Leasehold improvements 278 267 Capitalized software development costs 12,210 10,794 20,991 17,787 Less accumulated depreciation and amortization (18,041) (15,075)Property and equipment, net $2,950 $2,712 United States International Total Goodwill: Balance December 31, 2017 $1,188 $648 $1,836 Purchase of interest in subsidiary 1,962 – 1,962 Change in goodwill due to impact of foreign currency – (10) (10)Balance December 31, 2018 $3,150 $638 $3,788 December 31, Intangible assets consist of the following: 2018 2017 Customer contracts and lists $2,680 $4,015 Trade names 900 - Patents 870 - Non compete 520 - Less accumulated amortization (1,638) (2,381)Intangible assets, net $3,332 $1,634 Intangible assets consist primarily of customer contracts and lists, developed technology, trade names, patents and non-compete agreements, all of whichhave a finite useful life, as well as goodwill. Intangible assets are amortized based on either the pattern in which the economic benefits of the intangibleassets are estimated to be realized or on a straight-line basis, which approximates the manner in which the economic benefits of the intangible asset will beconsumed. Goodwill is generally not deductible for tax purposes. The Company is amortizing its intangible assets of $5.0 million on a straight line basis over lives ranging from 5 to 25 years. Amortization expense for theyears ended December 31, 2018 and 2017 was approximately $569,000 and $628,000, respectively. The annual amortization for each of the followingyears succeeding December 31, 2018, is summarized as follows: Year Amount 2019 533 2020 533 2021 508 2022 419 2023 280 Thereafter 1,059 Total $3,332 December 31, Accrued expenses and other current liabilities: 2018 2017 Taxes payable $2,961 $2,358 Accrued salaries and wages 6,503 3,791 Accrued accounting and legal expenses 3,777 3,240 Uncertain tax position reserves 101 116 Litigation settlement - Clothier 1,300 – Accrued third party labor 737 – Dividend payable to partners – 1,042 Other 2,789 3,034 Accrued expenses and other current liabilities $18,168 $13,581 F-13 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. Credit Facilities Domestic Credit Facilities On April 10, 2019, the Company repaid and replaced its 2018 credit facility with PNC Bank, National Association ("PNC") with a new secured revolvingcredit facility in the United States and Canada (the "NM Credit Facility") with North Mill, LLC ("NM"). In order to obtain, document and govern the new NM Credit Facility: SGRP and certain of its direct and indirect subsidiaries in the United States andCanada, namely SPAR Marketing Force ("SMF"), Inc., and SPAR Canada Company ("SCC") (each, a "NM Borrower" and collectively, the "NMBorrowers"), and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Assembly and Installation, Inc., and SPAR Trademarks, Inc. (together with SGRP, eacha "NM Guarantor" and collectively, the "NM Guarantors), entered into eighteen (18) month individual Loan and Security Agreements with NM dated as ofApril 10, 2019 (the "NM Loan Agreements") which secures the obligations of the NM Loan Parties to NM with pledges of substantially all of the assets ofthe NM Loan Parties (other than SGRP's foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets); the SMFBorrower issued its $10.5 million Revolving Credit Master Promissory Note to NM dated April 10, 2019 and the SCC Borrower issued its $1.5 millionRevolving Credit Master Promissory Note to NM dated April 10, 2019 (the "Original NM Notes"), which evidences the NM Borrowers' loans and otherobligations to NM; the NM Guarantors entered into a Guaranty Agreement with NM dated as of April 10, 2019 (the "NM Guaranty"), which guaranties theNM Borrowers' loans and other obligations to NM. The NM Loan Agreements have an approved borrowing capacity of $12.5 million for the SMFBorrower and $2.5 million for the SCC Borrower. On April 10, 2019, the Company drew down an initial advance under the NM Credit Facility of approximately $9.8 million, which was used to repay theCompany's existing credit facility with PNC. The NM Note currently requires 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 (1.25%). In addition, the Company is paying a fee to NM in the amount of 1.5% of the Promissory Notes or$180,000 payable at $10,000 per month over the term of the agreement. The Company utilized a broker to assist in this financing and has paid a fee of$120,000 for their services, Revolving loans are available to the Borrowers under the NM Credit Facility based upon the borrowing base formula defined in the NM Loan Agreement(principally 85% of "eligible" accounts receivable less certain reserves and 60% of eligible unbilled accounts receivable at a maximum limit of $4.5million). The NM Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the NM Loan Parties, including,maintaining a positive trailing EBITDA for each Borrower and limits on capital expenditures and other investments. In January 2018, the Company repaid and replaced its credit facility with Sterling Bank with a secured revolving credit facility in the United States andCanada (as amended the "PNC Credit Facility") with PNC Bank, National Association. In order to obtain, document and govern the PNC Credit Facility: SGRP and certain of its direct and indirect subsidiaries in the United States and Canada,namely SPAR Marketing Force ("SMF"), Inc., SPAR Assembly & Installation, Inc., and SPAR Canada Company (each, a "PNC Borrower" and collectively,the "PNC Borrowers"), and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Group International, Inc., and SPAR Trademarks, Inc. (together with SGRP,each a "PNC Guarantor" and collectively, the "PNC Guarantors), entered into a Loan Agreement with PNC dated as of January 16, 2018 (the "PNC LoanAgreement"); the PNC Borrowers issued their $9 million Committed Line Of Credit Note to PNC dated January 16, 2018 (the "Original PNC Note"), whichevidences the PNC Borrowers' loans and other obligations to PNC; the PNC Guarantors entered into a Guaranty and Suretyship Agreement with PNCdated as of January 16, 2018 (the "PNC Guaranty"), which guaranties the PNC Borrowers' loans and other obligations to PNC; and the PNC Borrowers andPNC Guarantors (each, a "PNC Loan Party" and collectively, the "PNC Loan Parties") entered into a Security Agreement with PNC dated as of January 16,2018 (the "PNC Security Agreement"), which secures the obligations of the PNC Loan Parties to PNC with pledges of substantially all of the assets of thePNC Loan Parties (other than SGRP's foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets). F-14 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. Credit Facilities (continued) An amendment to the PNC Credit Facility dated as of July 3, 2018, among other things, increased the maximum principal amount of the Revolving Loansto $9.5 million. The PNC Note currently requires the PNC Borrowers to pay interest on the loans thereunder equal to (A) the Daily LIBOR Rate (as defined therein) perannum, plus (B) two hundred fifty basis points (2.50%). On December 31, 2018, the aggregate interest rate under that formula was 5.02% per annum, andthe outstanding loan balance was $8.8 million. Revolving loans of up to $9.5 million are available to the Company under the PNC Credit Facility based upon the borrowing base formula defined in thePNC Loan Agreement (principally 85% of "eligible" accounts receivable less certain reserves) rendering a maximum borrowing amount of $9.5 million asof December 31, 2018. The PNC Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the PNC Loan Parties, including,maintaining a minimum Tangible Net Worth of $13.4 million and limits on capital expenditures and other investments. On December 31, 2018, the PNC Loan Parties were not in compliance with the minimum Tangible Net Worth covenant, PNC Bank did not issue a waiverfor the reporting period and as a result, the Company had entered into the NM Credit Facility effective April 2019. Fifth Third Credit Facility On January 9, 2018, the Company completed its acquisition of a 51% interest in its new subsidiaries, Resource Plus of North Florida, Inc., and relatedcompanies (collectively, "Resource Plus"). See Note 13 to the Company's Consolidated Financial Statements – Purchase of Interests in Subsidiaries –Resource Plus Acquisition, below. When acquired, Resource Plus was a party to a revolving line of credit facility it secured on May 23, 2016, (the "FifthThird Credit Facility") from Fifth Third Bank for $3.5 million, which was scheduled to expire on May 23, 2018. Effective April 11, 2018, the term of theFifth Third Credit Facility was extended and is currently scheduled to become due on April 23, 2020. As there are no provisions (other than defaults)requiring the pay down of the loan until April 23, 2020, any amounts outstanding are classified as long-term debt. 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 definedin the agreement (principally 80% of "eligible" accounts receivable less certain reserves). As of December 31, 2018, there was no outstanding balance. TheFifth 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 inthe agreement) per annum, plus (B) two hundred fifty basis points (2.50%). On December 31, 2018, the aggregate interest rate under that formula was4.975% per annum. Other Debt Effective with the closing of the Resource Plus acquisition, the Company entered into promissory notes with the sellers totaling $2.3 million. The notesare payable in annual installments at various amounts due on December 31st of each year starting with December 31, 2018 and continuing throughDecember 31, 2023. As such these notes are classified as both short term and long term for the appropriate amounts. The total balance owed at December31, 2018 was $1.97 million. International Credit Facilities: SPARFACTS Australia Pty. Ltd. has a secured line of credit facility with National Australia Bank, effective October 31, 2017, for $800,000 (Australian) orapproximately $564,000 USD (based upon the exchange rate at December 31, 2018). The facility provides for borrowing based upon a formula, as definedin the agreement (principally 80% of eligible accounts receivable less certain deductions). The outstanding balance with National Australia Bank as ofDecember 31, 2018 was $462,000 (Australian) or $326,000 USD and is due on demand. F-15 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. Credit Facilities (continued) SPAR Todopromo has secured a line of credit facility with BBVA Bancomer Bank for 5.0 million Mexican Pesos or approximately $255,000 USD (basedupon the exchange rate at December 31, 2018). The revolving line of credit was secured on March 15, 2016, and originally expired March 2018. Thefacility has been amended to extend the terms to March 2020. The variable interest rate is TIIE (Interbank Interest Rate) +4%, which resulted in an annualinterest rate of 12.23% as of December 31, 2018. The outstanding balance at December 31, 2018 was 3 million Mexican Pesos or approximately $153,000USD. On November 29, 2016, SPAR Brazil established a line of credit facility with Itau Bank for 4.0 million Brazilian Real or approximately $1,031,000 USD(based upon the exchange rate at December 31, 2018). The facility provides for borrowing with no formal guarantees. This account was closed as of July 1,2018. On December 26, 2016, SPAR Brazil secured a line of credit facility with Daycoval Bank for 5.0 million Brazilian Real or approximately $1.3 millionUSD (based upon the exchange rate at December 31, 2018). The facility provides for borrowing based upon a formula, as defined in the agreement(principally 80% of eligible accounts receivable less certain deductions). This account was closed as of October 5, 2018. On May 29, 2018, SPAR Brazil established a line of credit facility with Banco Bradesco for 1.2 million Brazilian Real or approximately $309,000 USD(based upon the exchange rate at December 31, 2018). The facility provides for borrowing with no formal guarantees. The agreement expires on November29, 2019. The outstanding balance at December 31, 2018, was approximately 147,000 Brazilian Real or approximately $38,000 USD. On May 25, 2018, SPAR Brazil established a temporary line of credit facility with Banco Safra for 3.0 million Brazilian Real or approximately $774,000USD (based upon the exchange rate at December 31, 2018). The agreement was from month to month at the Company's request. This account was closedas of August 13, 2018. On October 5, 2018 SPAR Brazil secured a line of credit facility with Branco Bradesco for approximately 3.5 million Brazilian Real or approximately$910,000 USD (based upon the exchange rate at December 31, 2018). The outstanding balance as of December 31, 2018 was approximately 3.4 millionBrazilian Real or approximately $872,000 USD. The note is due December 19, 2019, with varying monthly payments. On October 5, 2018 SPAR Brazil secured a line of credit facility with Branco Santander for approximately 381,000 Brazilian Real or approximately$98,000 USD (based upon the exchange rate at December 31, 2018). The outstanding balance as of December 31, 2018 was approximately 381,000Brazilian Real or approximately $98,000 USD. Interest Rate as of December 31, 2018 2019 2020 2021 2022 2023 Brazil - Bradesco0.37%-0.92% 910 – – – – Brazil – Santander 1.38% 98 – – – – USA - PNC Bank 5.02% 8,747 – – – – USA - Fifth Third Bank 4.97% – – – – – USA - Resource Plus Sellers 1.85% 333 334 300 300 700 National Australia Bank 6.60% 326 – – – – Mexico - BBVA /Shareholder 12.23% – 153 – – – Total $10,414 $487 $300 $300 $700 Summary of Unused Company Credit and Other Debt Facilities (in thousands): December 31, 2018 December 31, 2017 Unused Availability: United States $4,253 $3,530 Australia 238 731 Brazil 304 1,554 Mexico 102 254 Total Unused Availability $4,897 $6,069 F-16 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. Credit Facilities (continued) Management believes that based upon the continuation of the Company's existing credit facilities, projected results of operations, vendor paymentrequirements and other financing available to the Company (including amounts due to affiliates), sources of cash availability should be manageable andsufficient to support ongoing operations over the next year. However, delays in collection of receivables due from any of the Company's major clients, ora significant reduction in business from such clients could have a material adverse effect on the Company's cash resources and its ongoing ability to fundoperations. 5. Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act ("the Act") significantly revised U.S. corporate income tax law. The Act includes, among other things, areduction in the U.S. federal corporate income tax rate from 35% to 21% effective for taxable years beginning after December 31, 2017, and theimplementation of a modified territorial tax system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries("Transition Tax") that is payable over a period of up to eight years. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of GAAP in situations when a registrant did nothave the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certainincome tax effects of the Act. The Company recognized the provisional tax impacts related to the deemed repatriated earnings and the revaluation ofdeferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The finalimpact differed from these provisional amounts, due to additional analysis and regulatory guidance issued. The accounting was completed in the fourthquarter of 2018. Beginning in 2018, the Act includes two new U.S. corporate tax provisions, the global intangible low-taxed income (“GILTI”) and the base-erosion andanti-abuse tax (“BEAT”). The GILTI provision requires the Company to include in its U.S. income tax return non-U.S. subsidiary earnings in excess of anallowable return on the non-U.S. subsidiary’s tangible assets. The Company has elected to treat GILTI as a period cost. The Company evaluated theGILTI resulting in a financial statement impact of $0.4 million for the year ended December 31, 2018. The Company is below the three year averagegross receipts threshold for BEAT to apply. Income before income taxes is summarized as follows (in thousands): Year Ended December 31, 2018 2017 Domestic $(2,802) $289 Foreign 5,842 3,865 Total: $3,040 $4,154 The income tax expense is summarized as follows (in thousands): Year Ended December 31, 2018 2017 Current: Federal $(155) $79 Foreign 1,501 1,131 State 158 128 Deferred expense (benefit): Federal (54) 1,571 Foreign 147 (117)State (195) 185 Net expense $1,402 $2,977 F-17 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 5. Income Taxes (continued) The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before incometaxes. The items causing this difference are as follows (dollars in thousands): Year Ended December 31, 2018 Rate 2017 Rate Provision for income taxes at federal statutory rate $638 21.0% $1,421 34.0%State income taxes, net of federal benefit (73) (2.4%) 17 0.4%Permanent differences (60) (2.0%) 85 2.1%Federal Research and Development Credit – – 41 1.0%U.S. tax on foreign earnings 304 10.0% (494) (11.8%)Foreign dividend tax 439 14.4% 798 19.0%Reduction in deferred tax asset – Reduction of corporate tax rate – – 1,043 24.8%Other 154 5.5% 66 1.7%Net expense $1,402 46.5% $2,977 71.2% Deferred taxes consist of the following (in thousands): December 31, 2018 2017 Deferred tax assets: Net operating loss carry forwards $1,357 $1,313 Federal Research and Development Credit 240 240 Deferred revenue 109 360 Accrued payroll 73 – Allowance for doubtful accounts and other receivable 36 59 Share-based compensation expense 545 646 Foreign subsidiaries 733 588 Depreciation 396 360 Other 439 26 Federal Alternative Minimum Tax – 156 Valuation allowance (292) – Total deferred tax assets 3,470 3,748 Deferred tax liabilities: Goodwill 76 224 Intangible assets of subsidiaries 513 – Capitalized software development costs 479 469 Total deferred tax liabilities 1,068 693 Net deferred taxes $2,402 $3,055 At both December 31, 2018, and December 31, 2017, the Company has Federal and State NOL carryforwards of $5.4 million which if unused will expire inyears 2026 through 2029, except for approximately $200,000 that has no expiration. Approximately $300,000 of the NOLs were incurred prior to the acquisition of PIA Merchandising Services, Inc. in 1999. The acquisition resulted in achange of ownership under Internal Revenue Code ("IRC") section 382 and placed a limit on the amount of pre-acquisition NOLs that may be used eachyear to reduce taxable income. This NOL of approximately $300,000 was unused in 2018 and was written off, resulting in a $84,000 tax expense. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing netdeferred tax assets. For our U.S. based net deferred tax assets, which are approximately $2 million, management continues to monitor its operatingperformance and currently believes that the achievement of the required future taxable income necessary to realize these deferred assets is more-likely-than-not. Key considerations in this assessment includes current tax law that is expected to continue to generate future U.S. taxable income based on theresults of our foreign operations (foreign dividend tax), our expectation of improvements in U.S. operating results and the period of time available togenerate future taxable income. It is reasonably possible that this belief could change in the near term requiring the establishment of a valuationallowance which could significantly impact our operating results. A reconciliation of the beginning and ending amount of uncertain tax position reserves is as follows (in thousands): Year Ended December 31, 2018 2017 Beginning balance $116 $116 Removal for tax provisions of prior years (15) – Ending balance $101 $116 Interest and penalties that the tax law requires to be paid on the underpayment of taxes should be accrued on the difference between the amount claimedor expected to be claimed on the return and the tax benefit recognized in the financial statements. The Company's policy is to record this interest andpenalties as additional tax expense. F-18 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 5. Income Taxes (continued) Details of the Company's tax reserves at December 31, 2018, are outlined in the table below (in thousands): Taxes Interest Penalty Total TaxLiability Domestic State $101 $50 $8 $159 Federal – – – – International – – – – Total reserve $101 $50 $8 $159 In management's view, the Company's tax reserves at December 31, 2018 and 2017, for potential domestic state tax liabilities were sufficient. TheCompany has evaluated the tax liabilities of its international subsidiaries and does not believe a reserve is necessary at this time. SPAR and its subsidiaries file numerous consolidated, combined and separate company income tax returns in the U.S. Federal jurisdiction and in manyU.S. states and foreign jurisdictions. With few exceptions, SPAR is subject to U.S. Federal, state and local income tax examinations for the years 2013through the present. However, tax authorities have the ability to review years prior to the position taken by the Company to the extent that SPAR utilizedtax attributes carried forward from those prior years. 6. Commitments and Contingencies Lease Commitments The Company leases equipment and certain office space in several cities, under non-cancelable operating lease agreements. Certain leases require theCompany to pay its share of any increases in operating expenses and real estate taxes. Rent expense was approximately $2,211,000 and $1,806,000 forthe years ended December 31, 2018 and 2017, respectively. Equipment lease expense was approximately $167,000 and $163,000 for the years endedDecember 31, 2018 and 2017, respectively. At December 31, 2018, future minimum commitments under all non-cancelable operating lease arrangementsare as follows (in thousands): Year Amount 2019 $1,946 2020 1,428 2021 945 2022 682 2023 340 Total $5,341 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'smanagement, resolution of these matters 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. RELATED PARTIES AND RELATED PARTY LITIGATION: SPAR Business Services, Inc., f/k/a SPAR Marketing Services, Inc. ("SBS"), SPAR Administrative Services, Inc. ("SAS"), and SPAR InfoTech, Inc. ("Infotech "), have provided services from time to time to the Company and are related parties and affiliates of SGRP, but are not under the control or part ofthe consolidated Company. SBS is an affiliate because it is owned by Robert G. Brown and William H. Bartels. SAS is an affiliate because it is owned byWilliam H. Bartels and certain relatives of Robert G. Brown or entities controlled by them (each of whom are considered affiliates of the Company forrelated party purposes). Infotech is an affiliate because it is owned by Robert G. Brown and certain relatives of Robert G. Brown or entities controlled bythem (each of whom are considered affiliates of the Company for related party purposes). See Note 10 to the Company's Consolidated FinancialStatements - Related Party Transactions – Domestic Transactions, below. Mr. Brown and Mr. Bartels are the Majority Stockholders (see below) andfounders of SGRP, Mr. Brown was Chairman and an officer and director of SGRP through May 3, 3018 (when he retired), and Mr. Bartels was andcontinues to be Vice Chairman and a director and officer of SGRP. Mr. Brown and Mr. Bartels also have been and are stockholders, directors andexecutive officers of various other affiliates of SGRP. F-19 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Commitments and Contingencies (continued) Delaware Litigation Settlement On January 18, 2019, SGRP, Robert G. Brown, a substantial stockholder of SGRP and former Executive Chairman and director of SGRP, William H.Bartels, a substantial stockholder of SGRP and current Vice Chairman and director and officer of SGRP (together with Robert G. Brown, the "MajorityStockholders"), and Christiaan Olivier, Chief Executive Officer, President and a Director of SGRP, and all four of the members of the GovernanceCommittee, namely Lorrence T. Kellar, Chairman, and Jack W. Partridge, Arthur B. Drogue and R. Eric McCarthey (together with Mr. Olivier, the "225Defendants"), reached a settlement (the "Settlement") in the By-Laws Action and the 225 Action as such terms are defined below (collectively, the"Actions) and had the Actions then dismissed. On September 4, 2018, SGRP filed in the Court of Chancery of the State of Delaware (the "Court") a claim, C.A. No. 2018-0650, which it amended onSeptember 21, 2018 (the "By-Laws Action "), in a Verified Complaint Seeking Declaratory Judgment and Injunctive Relief against the MajorityStockholders. SGRP sought to invalidate the proposed amendments to SGRP's By-Laws put forth in a written consent by the Majority Stockholders (the"Proposed Amendments") because the Board's Governance Committee believed that the Proposed Amendments would have negatively impacted allstockholders (particularly minority stockholders) by (among other things) weakening the independence of the Board through new supermajorityrequirements, eliminating the Board's independent majority requirement, and subjecting various functions of the Board respecting vacancies on the Boardto the prior approval of the holders of a majority of the Common Stock (i.e., the Majority Stockholders), and thus also potentially reducing therepresentation of SGRP's minority stockholders. Please see Note 6 to the Company's Consolidated Financial Statements – Commitments andContingencies -- Legal Matters - Stockholder By-Laws Litigation, in the Corporation's Quarterly Report on Form 10-Q as filed with the SEC on November19, 2018, and the Corporation's Current Report on Form 8-K as filed with the SEC on September 28, 2018. On September 18, 2018, Robert G Brown (one of the Majority Stockholders) commenced an action in the Court pursuant to 8 Del. C. §225(a) from (C.A.No. 2018-00687-TMR) (the "225 Action") against the 225 Defendants seeking to remove Lorrence T. Kellar from the Board and add Jeffrey Mayer to theBoard. Please see Note 6 to the Company's Consolidated Financial Statements – Commitments and Contingencies -- Legal Matters - Board SeatingLitigation, in the Corporation's Quarterly Report on Form 10-Q as filed with the SEC on November 19, 2018, ant the Corporation's Current Report onForm 8-K as filed with the SEC on September 28, 2018. On September 20, 2018, the Court issued a Status Quo Order in the 225 Action (the" Status Quo Order ") that (among other things) seated Jeffrey Mayer onthe Board, provided for Lorrence T. Kellar to remain seated on the Board, and effectively increased the Board size from seven to eight for the duration ofthe order. The By-Laws Action was dismissed upon the filing of the Stipulation of Dismissal. On January 23, 2019, the Court granted the dismissal of the 225 Actionand vacated its previously entered Status Quo Order entered in that action. As part of the Settlement, on January 18, 2019, the Board of Directors of the Corporation (the "Board") appointed Jeffrey Mayer to the Board and acceptedLorrence T. Kellar's retirement from the Board. The Board also appointed Mr. Mayer to the Board's Compensation Committee on the recommendation ofits Governance Committee. Mr. Mayer was first seated on the Board on November 20, 2018, pursuant to the Status Quo Order (see Settled Actions above), which order has now beenvacated. Mr. Mayer had previously been determined to not be independent because he was unilaterally chosen by the Majority Stockholders, so as aresult of the Status Quo Order and resulting change in Board composition, SGRP received a notification letter from Nasdaq dated December 13, 2018,stating that SGRP no longer satisfies Nasdaq's majority independent director requirement (the "Nasdaq Board Independence Deficiency"), as set forth inNasdaq Listing Rule 5605(b)(1), as more fully described in the Corporation's Current Report on Form 8-K as filed with the SEC on December 14, 2018. In connection with the Settlement, the Governance Committee re-evaluated the independence of Mr. Mayer, based on (among other things) Mr. Mayer'sindependent business skills and contribution to the Settlement process, determined that he has the requisite independence from the management of theCorporation except for the Related Party Matters (as defined below), and accordingly Mr. Mayer: (a) will be an independent director for all purposes otherthan any Related Party Matter; (b) will be a non-independent director respecting any Related Party Matter; and (c) may participate in discussions but willbe excluded and shall recuse himself from any and all decisions of the Board and applicable Board Committees respecting any Related Party Matter."Related Party Matter" shall mean any payment to or for, or any transaction or litigation with, Robert G. Brown, William H. Bartels, any of their respectivefamily members, or any company or other business or entity directly or indirectly owned or controlled by any one or more of Mr. Brown, Mr. Bartels ortheir respective family members. The Governance Committee and the Board believe that such re-evaluation and redetermination (together with the 2019 Restated By-Laws describedbelow) will help the Corporation maintain the independent Board desired by the Governance Committee and the Board and required under Nasdaq rules,and correct the Nasdaq Board Independence Deficiency. F-20 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Commitments and Contingencies (continued) In the Settlement the parties agreed to amend and restate SGRP's By-Laws (the "2019 Restated By-Laws") with negotiated changes to the ProposedAmendments that preserve the current roles of the Governance Committee and Board in the location, evaluation, and selection of candidates for directorand in the nominations of those candidates for the annual stockholders meeting and appointment of those candidates to fill Board vacancies (other thanthose under a stockholder written consent making a removal and appointment, which is unchanged). The Board approved and adopted the 2019 RestatedBy-Laws on January 18, 2018. The Governance Committee and the Board believe that those changes in the 2019 Restated By-Laws will help theCorporation maintain the independent Board desired by them. In addition to the compromise provisions described above in Settlement Terms above, the Governance Committee and Board accepted certain of theProposed Amendments with negotiated changes and clarifications that are now contained in the 2019 Restated By-Laws, including the following: ●Any vacancy that results from the death, retirement or resignation of a director that remains unfilled by the directors for more than 90 days maybe filled by the stockholders. ●Certain stockholder proposals may now be made up to the 90th day prior to the first anniversary of the preceding year's Annual Meeting. ●The Board size has been fixed at seven and can only be changed by the stockholders (as provided in the Proposed Amendments). ●The section requiring majority Board independence has been removed (as provided in the Proposed Amendments). ●The By-Laws now require that each candidate for director sign a written irrevocable letter of resignation and retirement effective upon suchperson failing to be re-elected by the required majority stockholder vote. ●A "super majority" vote of at least 75% of all directors is now required for (and any two directors can block) any of the following (as provided inthe Proposed Amendments): oIssuance of more than 500,000 shares of stock (other than under the Corporation's stock compensa1tion plans); oIssuance of any preferred stock; oDeclaration of any non-cash dividend on the shares of capital stock of the Corporation; oBy-Laws modification; oFormation or expansion of the authority of any Committee or subcommittee; or oAppointment or removal of any Committee director. The descriptions of the negotiated compromise 2019 Restated By-Laws above are qualified in their entirety by reference to the copy of the 2019 RestatedBy-Laws incorporated herein by reference from Exhibit 3.3 hereto. As part of the Settlement of the Actions, the parties to the Actions executed a Limited Mutual Release Agreement limited to the Actions and subject tospecific exclusions (the "Release") and the parties to the Actions mutually agreed upon Stipulations of Dismissal ending those actions without prejudiceand without admission or retraction of any fact cited therein, and the parties caused them to be filed with the Court on January 18, 2019. The Releases are limited to matters related to those actions described therein and subject to specific exclusions, and the parties expressly preserved allunrelated actions and claims. Accordingly, there remain a number of unresolved claims and actions (each a "Non-Settled Matter") between the Companyand the following Related Parties (as defined below), including (without limitation), post termination claims by and against SPAR Business Services, Inc.(which is now in a voluntary bankruptcy proceeding in Nevada), and SPAR Administrative Services, Inc., the lawsuit by SPAR InfoTech, Inc., against theCompany, and the Bartels Advancement Claim and the claim by Mr. Brown for a similar advancement (see Advancement Claims, below). F-21 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Commitments and Contingencies (continued) Advancement Claims In an email to Arthur Drogue, SGRP's Chairman, on October 3, 2018, and in subsequent calls with him, William H. Bartels, a substantial stockholder ofSGRP and current Vice Chairman and director and officer of SGRP (and one of the Majority Stockholders), requested indemnification for his legal feesand expenses incurred in his defense of the By-Laws Case brought by SGRP against him and Mr. Brown. On November 2, 2018, in a letter from his counsel, Mr. Bartels demanded advancement of his proportionate share of the legal fees and expenses incurredin his defense of the By-Laws Case against him. SGRP's Audit Committee determined on November 5, 2018, that Mr. Bartels was not entitled to indemnification by SGRP for his fees and expensesincurred in his defense of the By-Laws Case because (among other things) Mr. Bartels was sued predominately as a stockholder in the By-Laws Case andnot as a director and the By-Laws Case alleged numerous instances of improper conduct by Mr. Bartels that could preclude indemnification under theCorporation's By-Laws. However, the Audit Committee made no determination regarding improper conduct or the issue of advancement. On November 28, 2018, Mr. Bartels filed with the Court a Verified Complaint For Advancement against SGRP (the "Bartels Advancement Complaint")seeking advancement of his proportionate share of the legal fees and expenses incurred in the By-Laws Case against him ("Allocated By-LawsExpenses"). In evaluating the Bartels Advancement Complaint, counsel advised SGRP that generally advancement was somewhat different thanindemnification in that money was advanced on the condition (which Bartels have accepted in writing) that the advances be repaid if indemnification wasdetermined to be improper on the grounds of improper conduct or otherwise. In December 2018 SGRP reached agreement with Mr. Bartels through counsel to conditionally make his reasonably documented Allocated By-LawsExpenses (the "Bartels Advancement Settlement"), pursuant to which payment to Mr. Bartels of the accepted Allocated By-Laws Expenses is due in April2019. If Mr. Bartels is ultimately determined to not be entitled to indemnification, he could still be obligated to return all amounts advanced to him bySGRP. On December 3, 2018, Robert G. Brown sent an email to Mr. McCarthey, Chairman of SGRP's Audit Committee, demanding advancement from SGRP forhis proportionate share of the legal fees and expenses incurred by him in the By-Laws Case against him (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, and they didn'tbelieve Brown could reasonably and successfully bring or wage a lawsuit for advancement. SGRP, with the support of its Audit Committee, rejected theBrown Advancement Demand, stating that "The bylaw action does not sue you in your capacity as an officer or director of the company. Section 6.02 ofthe bylaws requires the proceeding subject to advancement to be brought "by /reason of the Indemnitee's position with the Corporation or any of itssubsidiaries … at the request of the Corporation …." This provision does not, and was not intended to, cover shareholders for advancement. On January 27, 2019, Mr. Brown sent a draft of his proposed Delaware litigation complaint in an email to Arthur Drogue, SGRP's Chairman, threatening tosue SGRP respecting the Brown Advancement Demand, which he repeated in an email to Mr. McCarthey on February 2, 2019. No such complaint hasbeen filed by Mr. Brown through April 15, 2019, and SGRP continues to deny the Brown Advancement Demand. SBS Bankruptcy The Company received no services from SBS after the termination of SBS' services took effect. Furthermore, even though SBS was solely responsible forits operations, methods and legal compliance, SBS continues to claim that the Company is to reimburse SBS for its expenses in various cases and stateproceedings. The Company anticipates that SBS may use every available means to attempt to collect reimbursement from the Company for theforeseeable future for all of their post-termination expense. The Company does not believe there is any basis for such claims and would defend themvigorously. See Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions – Domestic Transactions, below. On November 23, 2018, SBS petitioned for bankruptcy protection under chapter 11 of the United States Bankruptcy Code in the U.S. District for Nevada(the "SBS Chapter 11 Case"), so the pre-petition claims of SBS' creditors now must be made in the SBS Chapter 11 Case. On March 11, 2019, theBankruptcy Court entered an order modifying the automatic stay in the SBS Chapter 11 Case to permit the plaintiffs in the Clothier Case to proceed withthe second part of their case to determine damages in the same California Court that rendered the Clothier Determination. The Bankruptcy Court did notmodify the automatic stay to permit collection of any resulting damage award from SBS absent further Bankruptcy Court order, and absent such furtherorder, any damage award in Clothier Case will therefore have to be pursued against SBS in the SBS Chapter 11 Case. F-22 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Commitments and Contingencies (continued) On the advice of SGRP's bankruptcy counsel, management reported and the Audit Committee agreed that while SBS is in the SBS Chapter 11 Case; (a)SBS cannot legally pay the third-party pre-petition invoices and other emailed claims sent via email from SBS to the Company, which are non-priorityclaims (i.e., claims that both are unsecured and lack administrative priority) payable in chapter 11 as part of the unsecured creditor claim pool (potentiallypennies or less per dollar) without specific legal authorization or court order (including under a Bankruptcy Court approved reorganization plan, which isthe usual mechanism for paying non-priority claims in a chapter 11 case); (b) any SGRP payment to SBS would likely be utilized to fund the SBS Chapter11 Case and after that to pay the Clothier claims and other non-priority claimants; (c) SGRP and SMF non-priority claims against SBS (including, withoutlimitation, reimbursement claims for funding the Affinity Security Deposits and field payment checks that would have otherwise bounced andindemnification for the Clothier settlement and legal costs) must be and have been asserted in the SBS Chapter 11 Case and can only be satisfied in thatcase only through a Court permitted setoff (potentially dollar-for-dollar), or from the unsecured creditor pool (potentially pennies or less per dollar); (d)any resolution of claims between SBS and SGRP sought (at this time) by SBS from the Bankruptcy Court requires such court's approval after notice tocreditors (including the plaintiffs in the Clothier Case) and the U.S. Trustee, so finality can only be achieved in the SBS Chapter 11 Case; and (e) whenSBS seeks payment through the Bankruptcy Court (whether for pre- or post-petition claims), SGRP has the right to defend them on the merits and to assertan offset for amounts owed to SMF and SGRP (potentially dollar-for-dollar). Accordingly, Management recommended and the Audit Committee agreed that it would be in the best interest of all stockholders: (i) to submit SGRP andSMF claims against SBS in the SBS Chapter 11 Case in order to preserve their value (including as an offset against SBS' claims), particularly since thoseclaims against SBS exceed amounts potentially owed to SBS; (ii) to not voluntarily pay any SBS obligations directly to targeted SBS creditors, as suchpayments would reduce that offset value (potentially dollar-for-dollar), subvert the bankruptcy process and potentially expose SGRP and SMF to directfuture liability (for example, liability for a lawsuit if SGRP voluntarily pays for its defense); and (iii) to only make payments to or on behalf of SBS to theextent proven and required in the SBS Chapter 11 Case or other court with jurisdiction over the dispute. As a result of the SBS Chapter 11 Case, the claims of SBS' creditors must now generally be pursued in the SBS Chapter 11 Case. On March 11, 2019, theBankruptcy Court entered an order modifying the automatic stay in the SBS Chapter 11 Case to permit the plaintiffs in the Clothier Case to proceed withthe second part of the case to determine damages against SBS in the same California Court that rendered the Clothier Determination. However, theBankruptcy Court did not modify the automatic stay to permit collection from SBS of any resulting damage award against it absent further BankruptcyCourt order, and therefore and absent such further order, any such damage award will have to be pursued against SBS in the SBS Chapter 11 Case.Accordingly, the Company believes there can be no assurance that SBS will ever be able to fully pay any such damage award resulting from anydetermination in the Clothier Case or any other judgment or similar amount resulting from any legal determination adverse to SBS. On March 18, 2019, the Company filed claims in the SBS Chapter 11 Case seeking reimbursement for $378,838 for SMF's funding of the Affinity SecurityDeposits,$12,963 for SMF's funding of the field payment checks that would have otherwise bounced, $1,839,459 for indemnification of SGRP for theClothier settlement (see below) and legal costs, and an unspecified amount for indemnification of SGRP for the Hogan action (see below) and other yet tobe discovered indemnified claims. Infotech Litigation Against SGRP On September 19, 2018, SGRP was served with a Summons and Complaint by SPAR InfoTech, Inc. ("Infotech"), an affiliate of SGRP that is ownedprincipally by Robert G. Brown (one of the Majority Stockholders, a defendant in the By-Laws Action, and the plaintiff in the 225 Action) as plaintiffcommencing a case against SGRP entitled SPAR InfoTech, Inc. v. SPAR Group, Inc., et al., Index no. 64452/2018(Supreme Court, Westchester County)(the "Infotech Action"). The Infotech Action seeks payment from SGRP of approximately $190,000 for alleged lost tax benefits and other expenses that itclaims to have incurred in connection with SGRP's acquisition of its Brazilian subsidiary and that were previously denied by both management andSGRP's Audit Committee (which had jurisdiction because Infotech is a related party). F-23 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Commitments and Contingencies (continued) In 2016, SGRP acquired SPAR Brasil Serviços de Merchandising e Tecnologia S.A. ("SPAR BSMT"), its Brazilian subsidiary, with the assistance ofRobert G. Brown ("Mr. Brown"), who retired as Chairman and an officer and director on May 3, 2018, and his nephew, Peter W. Brown, who became adirector on May 3, 2018. Mr. Brown used his private company, Infotech and undisclosed Irish companies to structure the acquisition for SGRP. Mr. Brown also ran his alleged expenses associated with the transaction through Infotech, including large salary allocations for unauthorized personneland claims for his "lost tax breaks." One of those unauthorized personnel had agreed in her severance agreement with SGRP to never directly or indirectlyperform any services for SGRP or any services that could be directly or indirectly billed to SGRP, which restriction was fully disclosed to and known byMr. Brown and, therefore, Infotech. Mr. Brown submitted his unauthorized and unsubstantiated "expenses" to SGRP, and SGRP's Audit Committeeallowed approximately $50,000 of them and disallowed approximately $150,000 of them. Mr. Brown has repeatedly sought payment of the disallowedexpenses, and on August 4, 2018, counsel for Infotech (also counsel for SBS and Mr. Brown) sent SGRP a draft complaint for a proposed action byInfotech against SGRP to be filed in the Supreme Court, Westchester County, New York seeking to obtain the disallowed expenses. On September 18, 2018, Infotech commenced the Infotech Action seeking to obtain those previously disallowed unauthorized expenses, now totalingapproximately $190,000, to circumvent the adverse determination and objection of SGRP's Audit Committee (whose approval is required by applicablelaw for such a related party payment). The parties are now engaged in pretrial settlement discussions and management has accrued for $75,000 with estimated total liability between $75,000-$90,000. SGRP will vigorously contest the Infotech Action. Infotech also is threatening to sue the Company in Romania for approximately $900,000 for programming services allegedly owed to the Company'sformer Romanian subsidiary (sold at book value to Infotech in 2013) and not provided to Infotech, which the Company vigorously denies. Infotech hasgiven a draft complaint to the Company. SBS Field Specialist Litigation The Company's merchandising, audit, assembly and other services for its domestic clients are performed by field merchandising, auditing, assembly andother field personnel (each a "Field Specialist") substantially all of whose services were provided to the Company prior to August 2018 by SBS, theCompany's affiliate. SBS, during 2017 provided the service of approximately 10,700 Field Specialists (all of whom were engaged by SBS as independentcontractors by SBS), representing 77% (or $25.9 million) of the total cost of the Field Specialist services utilized by the Company domestically, andcontinued to provide such services through July 27, 2018 (when the termination of SBS' services took effect). SBS is not a subsidiary or in any way underthe control of SGRP, SBS is not consolidated in the Company's financial statements, , SGRP does not manage, direct or control SBS, and SGRP does notparticipate in or control the defense by SBS of any litigation against it. The Company terminated its relationship with SBS and received no services fromSBS after July 27, 2018. For affiliation, termination, contractual details and payment amounts, see Note 10 to the Company's Consolidated FinancialStatements - Related Party Transactions - Domestic Related Party Services, above. The appropriateness of SBS' treatment of Field Specialists as independent contractors has been periodically subject to legal challenge (both currently andhistorically) by various states and others. SBS' expenses of defending those challenges and other proceedings have historically been reimbursed by theCompany under SBS' Prior Agreement, and SBS' expenses of defending those challenges and other proceedings were reimbursed by the Company throughthe termination of the contract in July 2018, and twelve month period ending December 31, 2017, in the amounts of $50,000 and $260,000, , respectively,after determination (on a case by case basis) that those defense expenses were costs of providing services to the Company. In March 2017, the Company advised SBS that, since there was no currently effective comprehensive written services agreement with SBS, the Companywould continue to review and decide each request by SBS for reimbursement of its legal defense expenses (including appeals) on a case-by-case basis inits discretion, including the relative costs and benefits to the Company. See Note 10 to the Company's Consolidated Financial Statements - Related PartyTransactions - Domestic Related Party Services, above. SBS has disputed the right of the Company and SGRP's Audit Committee to review and decidethe appropriateness of the reimbursement of any of those related party defense and other expense reimbursements. As provided in SBS' Prior Agreement,the Company is not obligated or liable, and the Company has not otherwise agreed and does not currently intend, to reimburse SBS for any judgment orsimilar amount (including any damages, settlement, or related tax, penalty, or interest) in any legal challenge or other proceeding against or involvingSBS, and the Company does not believe it has ever done so (other than in insignificant nuisance amounts). F-24 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Commitments and Contingencies (continued) As a result of the SBS Chapter 11 Case (see above), there can be no assurance that SBS will ever be able to satisfy any such judgment or similar claim oramount resulting from any adverse legal determination See Note 6 to the Company's Consolidated Financial Statements - Commitments andContingencies -- SBS Bankruptcy, above. As the Company had utilized the services of SBS' Field Specialists to support its in-store merchandising needs in California and SBS' independentcontractor classifications had been held invalid in the Clothier Determination (see below), management of the Company determined, with the support ofSGRP's Audit Committee and Board of Directors, and began in May of 2018 to shift to an all employee servicing model for Field Specialists to support theperformance of the Company's services in California for clients in this critical market. As previously noted, management currently estimates that thepotential incremental annual cost of this change in California from third party independent contractors to Company employees could be substantial. Due to (among other things) the Clothier Determination and the ongoing proceedings against SBS, which could have had a material adverse effect onSBS' ability to provide future services needed by the Company, and the Company's identification of an independent third party company who wouldprovide comparable services on substantially better terms, the Company terminated the services of SBS effective July 27, 2018, and the Company hasengaged that independent third party company to provide the Field Specialist services formerly provided by SBS. Current material and potentially material proceedings against SBS and, in one instance, the Company are described below. These descriptions are basedon 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 "IndependentMerchandiser Agreement" with SBS (prepared solely by SBS) 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 (the "ClothierCase"), in which Ms. Clothier asserted claims on behalf of herself and a putative class of similarly situated merchandisers in California who are or wereclassified by SBS as independent contractors at any time between July 16, 2008, and June 30, 2014. Ms. Clothier alleged that she and other classmembers were misclassified by SBS as independent contractors and that, as a result of this misclassification, the defendants improperly underpaid them inviolation of various California minimum wage and overtime laws. The Company was originally a defendant in the Clothier Case but was subsequentlydismissed from the action without prejudice (meaning it could have joined back into the case). 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 asindependent contractors. After hearing evidence, receiving post-trial briefings and considering the issues, the Court issued its Statement of Decision onSeptember 9, 2016, finding that the class members had been misclassified by SBS as independent contractors rather than employees (the "ClothierDetermination"). The plaintiffs and SBS have now moved into phase two to determine damages (if any), which has included discovery as to the measureof damages in this case. The plaintiffs and SBS are still proceeding with the damages phase of the Clothier Case, which trial was scheduled for December of 2018 but wastemporarily stayed as a result of the SBS Chapter 11 Case (see above and below). F-25 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Commitments and Contingencies (continued) Facing significant potential damages in the Clothier Case, SGRP chose, and on June 7, 2018, entered into mediation with the plaintiffs and plaintiff'scounsel in the Clothier Case to try to settle any potential future liability for any possible judgment against SGRP in that case. SGRP asked SBS toparticipate financially and provide its knowledge in that mediation, but SBS and its stockholders wanted SGRP to bear the full cost of any settlement andon several occasions they declined or failed to participate in that mediation. SGRP disagreed, insisting on the Majority Stockholders' and SBS' economicparticipation. After extensive discussions, SGRP reached a settlement and entered into a memorandum of settlement agreement, which is subject to courtapproval and not likely to become final until several months into 2019 if and when the settlement is approved by the court. If approved, SGRP will pay amaximum settlement amount of $1.3 million, payable in four equal annual installments that commence 30 days after the settlement becomes final, and theCompany will be released by plaintiff and the settlement class from all other liability under the Clothier Case (the "Clothier Settlement"). SBS did notparticipate in the Clothier Settlement and will not be released. The Company has recorded a $1.3 million charge for the Clothier Settlement during 2018.On March 21, 2019, the court issued a tentative ruling preliminarily approving the Clothier settlement. Since SGRP has no further involvement in the Clothier Case, SGRP stopped paying (as of June 7, 2018) for SBS' legal expenses (defense and appeal) inthe Clothier Case and notified SBS. Defendants continue to demand that those expenses be reimbursed by SGRP. As a result of the SBS Chapter 11 Case (see above), the claims of SBS' creditors must now generally be pursued in the SBS Chapter 11 Case. On March 11,2019, the Bankruptcy Court entered an order modifying the automatic stay in the SBS Chapter 11 Case to permit the plaintiffs in the Clothier Case toproceed with the second part of the case to determine damages against SBS in the same California Court that rendered the Clothier Determination. However, the Bankruptcy Court did not modify the automatic stay to permit collection from SBS of any resulting damage award against it absent furtherBankruptcy Court order, and therefore and absent such further order, any such damage award will have to be pursued against SBS in the SBS Chapter 11Case. Accordingly, the Company believes there can be no assurance that SBS will ever be able to fully pay any such damage award resulting from anydetermination in the Clothier Case or any other judgment or similar amount resulting from any legal determination adverse to SBS. See Note 6 to theCompany's Consolidated Financial Statements - Commitments and Contingencies -- SBS Bankruptcy, above. 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 MasterAgreement" with SBS (prepared solely by SBS) acknowledging his engagement as an independent contractor. On January 6, 2017, Hogan filed suitagainst 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 andSGRP as independent contractors. Hogan alleged that he and other alleged class members were misclassified as independent contractors, and as a result ofthis purported misclassification, Hogan asserted claims on behalf of himself and the alleged Massachusetts class members under the Massachusetts WageAct 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 nationwideclass for violation of the Fair Labor Standards Act's overtime and minimum wage provisions. On March 28, 2017, the Company moved to refer Hogan'sclaim 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 specificclaim upon which relief could be granted. F-26 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. Commitments and Contingencies (continued) On March 12, 2018, the Court denied both defendants' Motion to Dismiss for failure to state a claim, denied the Motion to Compel Arbitration as to SGRP(because as drafted by SBS, the arbitration clause did not reference or protect SGRP), denied the Motion to Stay as to SGRP, and allowed the Motion toStay as to SBS pending the outcome of the Supreme Court's decision in in Epic Systems Corp. v. Lewis. In May 2018, the Supreme Court decidedarbitration clauses that include an express waiver of a worker's right to bring or participate in a class action did not violate the National Labor RelationsAct, which resulted in all SBS disputes (but not any SGRP disputes) being sent to arbitration. On April 24, 2018, SGRP filed a notice of appeal with theFirst Circuit of the District Court's decision that the arbitration clause (as written by SBS) did not protect SGRP. SGRP and Hogan agreed to stay theDistrict Court litigation pending the First Circuit's decision on SGRP's appeal. Briefing on SGRP's appeal closed on August 8, 2018 and the appealhearing was heard by the First Circuit on September 11, 2018. On January 25, 2019, the First Circuit issued a judgment affirming the District Court'sdecision that the arbitration clause (as written by SBS) did not protect SGRP and remanding the case back to the District Court for further proceedings. Asa result, SGRP would have been required to go to trial without SBS. Facing lengthy and costly litigation and significant potential damages in the Hogan Case, on March 27, 2019, SGRP entered into mediation with theplaintiffs and plaintiff's counsel in the Hogan Case to try to settle any potential future liability for any possible judgment against SGRP in that case. SBSand its stockholders were no longer involved in that case and so were not involved in that mediation. After extensive discussions, SGRP reached asettlement and entered into a memorandum of settlement agreement, which is subject to court approval and not likely to become final until later in 2019 ifand when the settlement is approved by the court. If approved, SGRP will pay a maximum settlement amount of $250,000 (in three installments) onehundred eighty (180) days after the settlement becomes final, and the Company will be released by plaintiff and the settlement class from all otherliability under the Hogan Case (the "Hogan Settlement"). The Company has recorded $250,000 liability as a result of the settlement. SBS and SGRP Litigation Generally As a result of the SBS Chapter 11 Case (see above), the claims of SBS' creditors must now generally be pursued in the SBS Chapter 11 Case. On March 11,2019, the Bankruptcy Court entered an order modifying the automatic stay in the SBS Chapter 11 Case to permit the plaintiffs in the Clothier Case toproceed with the second part of the case to determine damages against SBS in the same California Court that rendered the Clothier Determination. However, the Bankruptcy Court did not modify the automatic stay to permit collection from SBS of any resulting damage award against it absent furtherBankruptcy Court order, and therefore and absent such further order, any such damage award will have to be pursued against SBS in the SBS Chapter 11Case. Accordingly, the Company believes there can be no assurance that SBS will ever be able to fully pay any such damage award resulting from anydetermination in the Clothier Case or any other judgment or similar amount resulting from any legal determination adverse to SBS. See Note 6 to theCompany's Consolidated Financial Statements - Commitments and Contingencies -- SBS Bankruptcy, above. F-27 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 7. Treasury Stock Pursuant to the Company's 2017 Stock Repurchase Program (the "2017 Repurchase Program"), as approved by SGRP's Audit Committee and adopted byits Board of Directors on November 10, 2017 and ratified on March 14, 2018, the Company may repurchase shares of SGRP Common Stock throughNovember 10, 2020, but not more than 500,000 shares in total, and those repurchases would be made from time to time in the open market and throughprivately-negotiated transactions, subject to general market and other conditions. SGRP does not intend to repurchase any shares in the market duringany blackout period applicable to its officers and directors under the SPAR Group, Inc. Statement of Policy Regarding Personal Securities Transactions inSGRP Stock and Non-Public Information As Adopted, Restated, Effective and Dated as of May 1, 2004, and As Further Amended Through March 10,2011 (other than purchases that would otherwise be permitted under the circumstances for anyone covered by such policy). As of December 31, 2018, theCompany had 500,000 shares remaining to be purchased under the 2017 Repurchase Program. Under the preceding stock repurchase program (adopted in2012 and extended and modified in 2015), the Company repurchased all 532,235 shares through December 31, 2018. 8. Preferred Stock SGRP'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 PreferredStock"), which may have such preferences and priorities over the SGRP Common Stock and other rights, powers and privileges as the Company's Board ofDirectors 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 ofSeries A Preferred Stock pursuant to SGRP's Certificate of Designation of Series "A" Preferred Stock (the "SGRP Series A Preferred Stock"), which havedividend and liquidation preferences, have a cumulative dividend of 10% per year, are redeemable at the Company's option and are convertible at theholder's option (and without further consideration) on a one-to-one basis into SGRP Common Stock. The Company issued 554,402 of SGRP shares toaffiliated retirement plans which were all converted into common shares in 2011 (including dividends earned thereon), leaving 2,445,598 shares ofremaining authorized preferred stock. At December 31, 2018, no shares of SGRP Series A Preferred Stock were issued and outstanding. 9. Retirement Plans The Company has a 401(k) Profit Sharing Plan covering substantially all eligible domestic employees. The Company made a contribution of $50,000 forthe year ended December 31, 2017 and did not make a contribution in 2018. 10. Related Party Transactions SGRP's policy respecting approval of transactions with related persons, promoters and control persons is contained in the SPAR Group Code of EthicalConduct for its Directors, Executives, Officers, Employees, Consultants and other Representatives Amended and Restated (as of) 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, the "Company") and each other CoveredPerson (as defined in the Ethics Code) in his or her position with the Company anywhere in the world, including (among other things) serving eachcustomer, dealing with each vendor and treating each other with integrity and respect, and behaving honestly, ethically and professionally with eachcustomer, each vendor, each other and the Company. Article II of the Ethics Code specifically prohibits various forms of self-dealing (including dealingwith relatives) and collusion and Article V of the Ethics Code generally prohibits each "Covered Person" (including SGRP's officers and directors) fromusing or disclosing the Confidential Information of the Company or any of its customers or vendors, seeking or accepting anything of value from anycompetitor, customer, vendor, or other person relating to doing business with the Company, or engaging in any business activity that conflicts with his orher duties to the Company, and directs each "Covered Person" to avoid any activity or interest that is inconsistent with the best interests of the SPARGroup, in each case except for any "Approved Activity" (as such terms are defined in the Ethics Code). Examples of violations include (among otherthings) having any ownership interest in, acting as a director or officer of or otherwise personally benefiting from business with any competitor, customeror vendor of the Company other than pursuant to any Approved Activity. Approved Activities include (among other things) any contract with anaffiliated person (each an "Approved Affiliate Contract") or anything else disclosed to and approved by SGRP's Board of Directors (the "Board"), itsGovernance Committee or its Audit Committee, as the case may be, as well as the ownership, board, executive and other positions held in and services andother contributions to affiliates of SGRP and its subsidiaries by certain directors, officers or employees of SGRP, any of its subsidiaries or any of theirrespective family members. The Company's senior management is generally responsible for monitoring compliance with the Ethics Code and establishingand maintaining compliance systems, including those related to the oversight and approval of conflicting relationships and transactions, subject to thereview and oversight of SGRP's Governance Committee as provided in clause IV.11 of the Governance Committee's Charter, and SGRP's Audit Committeeas provided in clause I.2(l) of the Audit Committee's Charter. The Governance Committee and Audit Committee each consist solely of independentoutside directors (see Domestic Related Party Services, International Related Party Services, Related Party Transaction Summary, Related PartyTransaction Summary, Affinity Insurance, and Other Related Party Transactions and Arrangements, below). F-28 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Related Party Transactions (continued) SGRP's Audit Committee has the specific duty and responsibility to review and approve the overall fairness and terms of all material related-partytransactions. The Audit Committee receives affiliate contracts and amendments thereto for its review and approval (to the extent approval is given), andthese contracts are periodically (often annually) again reviewed, in accordance with the Audit Committee Charter, the Ethics Code, the rules of the NasdaqStock Market LLC ("Nasdaq"), and other applicable law to ensure that the overall economic and other terms will be (or continue to be) no less favorable tothe 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 periodicallyreviews all related party relationships and transactions described below. In addition, in order to (among other things) assist the Board and the Audit Committee in connection with an overall review of the Company's relatedparty transactions and certain worker classification-related litigation matters, in April 2017 the Board formed a special subcommittee of the AuditCommittee (the "Special Subcommittee") to (among other things) review the structure, documentation, fairness, conflicts, fidelity, appropriateness, andpractices respecting each of the relationships and transactions discussed in this Note. The Special Subcommittee engaged Morrison Valuation & Forensic Services, LLC ("Morrison"), to perform a third-party financial evaluation of certaindomestic related party relationships and transactions (principally with SAS and SBS of the Company, which included the review of certain financialrecords of the Company (but not those of its affiliates)) and discussions with management of the Company. Their task included (among other things) theidentification and mapping of and apparent purposes for and benefits from cash flows between the Company and its affiliates. Morrison identified anumber of transactions between the parties, while not material, were inefficient, time consuming and of limited business value to the parties. Theyincluded expense reimbursement for indirect charges for supply purchases, corporate vendor service cost and use of corporate credit cards in the paymentof vendor services. These inefficiencies have largely resolved themselves since the relationship with SAS and SBS has ended and others have been andwill continue to be addressed by the Company. The Special Subcommittee also engaged Holland & Knight to provide ongoing legal advice on relatedparty issues, and Paul Hastings to provide ongoing legal advice on independent contractor classification issues (including the SBS Clothier Case). SeeNote 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies - Legal Matters, below. The Special Committee also has been involved in the review of the Proposed Amendments to SGRP's By-Laws and the By-Laws Action and 225 Action(see Note 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies -- Settled Delaware Litigations, below). Domestic Related Party Services: SPAR Business Services, Inc. ("SBS"), SPAR Administrative Services, Inc. ("SAS"), and SPAR InfoTech, Inc. (" Infotech "), have provided services fromtime to time to the Company and are related parties and affiliates of SGRP, but are not under the control or part of the consolidated Company. SBS is anaffiliate because it is owned by Robert G. Brown and William H. Bartels. SAS is an affiliate because it is owned by William H. Bartels and certain relativesof Robert G. Brown or entities controlled by them (each of whom are considered affiliates of the Company for related party purposes). Infotech is anaffiliate because it is owned by Robert G. Brown and certain relatives of Robert G. Brown or entities controlled by them (each of whom are consideredaffiliates of the Company for related party purposes). Mr. Brown and Mr. Bartels are the Majority Stockholders (see below) and founders of SGRP, Mr.Brown was Chairman and an officer and director of SGRP through May 3, 3018 (when he retired), and Mr. Bartels was and continues to be Vice Chairmanand a director and officer of SGRP. Mr. Brown and Mr. Bartels also have been and are stockholders, directors and executive officers of various otheraffiliates of SGRP. F-29 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Related Party Transactions (continued) The Company executes and administers its domestic field services through the services of field merchandising, auditing, assembly and other fieldpersonnel (each a "Field Specialist"), substantially all of whom 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"), andsubstantially all of the Field Administrators are in turn are employed by other independent third parties. SBS provided substantially all of the Field Specialist services in the U.S.A. to the Company from January 1 through July 27, 2018, and an independentvendor and licensee provided them for the balance of the year. The Company paid $15.4 million and $25.9 million during the period January 1 throughJuly 27, 2018, and the year ended December 31, 2017, respectively, to SBS for its provision as needed of the services of approximately 3,800 of SBS'savailable Field Specialists in the U.S.A. (which amounted to approximately 27% and 77% of the Company's total domestic Field Specialist serviceexpense for the period January 1 through July 27, 2018, and the year ended December 31, 2017, respectively). The total cost recorded by the Company forthe expenses of SBS in providing their Field Specialist services to the Company, including the "Cost Plus Fee" arrangement (as defined and discussedbelow) and other expenses paid directly by the Company on behalf of and invoiced to SBS, was $18.1 million and $30.1 million, for the seven monthsended July 27, 2018, and the year ended December 31 2017, respectively. Since the termination of the Amended and Restated Field Service Agreement with SBS December 1, 2014(as amended, the "Prior SBS Agreement"), theCompany and SBS agreed to an arrangement where the Company reimbursed SBS for the Field Specialist service costs and certain other approvedreimbursable expenses incurred by SBS in performing services for the Company and paid SBS a revised fixed percentage of such reimbursable expenses(the "Cost Plus Fee") equal to 2.96% of those reimbursable expenses, subject to certain offsetting credits. The Company had offered a new agreement toSBS confirming that reimbursable expenses were subject to review and approval by the Company, but SBS rejected that proposal. Due to (among other things) the Clothier Determination and the ongoing proceedings against SBS (which could have had a material adverse effect onSBS's ability to provide future services needed by the Company), SBS' continued higher charges and expense reimbursement disputes, and the Company'sidentification of an experienced independent third party company (the "Independent Field Vendor") who would provide comparable services onsubstantially better terms, the Company terminated the services of SBS effective July 27, 2018, and the Company has engaged that Independent FieldVendor to replace those field services previously provided by SBS (other than in California). The Company similarly terminated SAS and has engagedanother independent third party company on substantially better terms to replace those administrative services formerly provided by SAS, effectiveAugust 1, 2018. Even though the Company had paid SBS for all services provided through July 27, 2018, the Company received notice that there may not be sufficientfunds in SBS' bank accounts to honor all payments SBS had made by check to their Field Specialists. Based on this notice, the Company withheldapproximately $125,000 of final mark-up compensation due SBS and had been making payments, on a daily basis, into the SBS bank account designatedfor Field Specialist payments to ensure all SBS Field Specialists that had provided services to the Company are properly compensated for those services. The $125,000 has been completely exhausted and the Company was required to fund an additional $12,000 to cover these duplicate Field Specialistpayments. The Company believes that there may be checks for Field Service payments for as much as an additional $120,000 that the Company believesmay not be honored by SBS. The Company has made plans to ensure that all of the current Field Specialists are properly paid and is exploring its legaloptions for recovery of all duplicate payments it is making on SBS's behalf. No SBS compensation to any officer, director or other related party had been reimbursed or approved to date by the Company, and no such compensationreimbursements were made or approved under SBS's Prior Agreement. This was not a restriction on SBS since SBS is not controlled by the Company andmay pay any compensation to any person that SBS desires out of its own funds. However, SBS had in the past invoiced the Company for suchcompensation payments, but the Company had rejected those invoices as non-reimbursable expenses. Since SBS is a "Subchapter S" corporation, allincome from SBS is allocated to its stockholders (see above). F-30 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Related Party Transactions (continued) The appropriateness of SBS's treatment of its Field Specialists as independent contractors had been periodically subject to legal challenge (both currentlyand historically) by various states and others, SBS's expenses of defending those challenges and other proceedings had historically been reimbursed bythe Company under SBS's Prior Agreement, and SBS's expenses of defending those challenges and other proceedings were reimbursed by the Company forthe ten month period ended November 23, 2018, and the twelve months ended December 31, 2017, in the amounts of $50,000 and $260,000, respectively,after determination (on a case by case basis) that those defense expenses were costs of providing services to the Company. On May 15, 2017, the Company advised SBS that, since there was no currently effective comprehensive written services agreement with SBS, theCompany would continue to review and decide each request by SBS for reimbursement of its legal defense expenses (including appeals) on a case-by-casebasis in its discretion, including the relative costs and benefits to the Company. SBS has disputed the right of the Company and SGRP's Audit Committeeto review and decide the appropriateness of the reimbursement of any of those related party defense and other expense reimbursements. In addition, onJune 13, 2018, the Company gave SBS notice that it would no longer reimburse any such expenses as a result of SGRP's separate settlement of theClothier Case. As provided in SBS's Prior Agreement, the Company is not obligated or liable, and the Company has not otherwise 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 orother proceeding against or involving SBS, and the Company does not believe it has ever done so (other than in insignificant nuisance amounts). Furthermore, even though SBS was solely responsible for its operations, methods and legal compliance, in connection with any proceedings against SBS,SBS may claim that the Company is somehow liable for any judgment or similar amount imposed against SBS and pursue that claim with litigation. TheCompany does not believe there is any basis for such claims and would defend them vigorously. There can be no assurance that plaintiffs or someone elsewill not claim that the Company is liable (under applicable law, through reimbursement or indemnification, or otherwise) for any such judgment or similaramount imposed against SBS, or that the Company will be able to successfully defend any claim. Any imposition of liability on the Company for anysuch amount could have a material adverse effect on the Company or its performance or condition (including its assets, business, clients, capital, cashflow, credit, expenses, financial condition, income, legal costs, liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxationor other achievement, results or condition), whether actual or as planned, intended, anticipated, estimated or otherwise expected. See Note 6 to theCompany's Consolidated Financial Statements - Commitments and Contingencies -- Legal Matters, below. The Company has reached a non-exclusive agreement on substantially better terms than SBS with an experienced independent third-party vendor toprovide substantially all of the domestic Field Specialist services used by the Company. The Company has also reached a separate non-exclusiveagreement on substantially better terms than with SAS with another independent third-party vendor to provide substantially all of the domestic FieldAdministrator services used by the Company. The Company transitioned to such new vendors during July 2018, and such transition was virtuallyunnoticeable to the Company's clients. SAS provided substantially all of the Field Administrators in the U.S.A. to the Company from January 1 through July 31, 2018, and an independentvendor and licensee provided them for the balance of the year. The Company paid $2.7 million and $4.2 million for the period January1 through July 31,2018, and the year ended December 31, 2017, respectively, to SAS for its provision of its 52 full-time regional and district administrators (whichamounted to approximately 53% and 91% of the Company's total domestic field administrative service cost for the seven and twelve months,respectively. The total cost recorded by the Company for the expenses of SAS in providing SAS' 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 SAS, was $2.7 million and$4.2 million, for the seven months ended July 27, 2018, and the year ended December 31 2017, respectively. In addition to these field service and administration expenses, SAS also incurred other administrative expenses related to benefit and employment taxexpenses of SAS and payroll processing, and other administrative expenses and SBS incurred expenses for processing vendor payments, legal defense andother administrative expenses (but those expenses were only reimbursed by SGRP to the extent approved by the Company as described below). F-31 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Related Party Transactions (continued) In 2016, SAS and SMF entered into a new Field Administration Agreement (the "SAS Agreement"). The SAS Agreement more clearly defines reimbursableand excluded expenses and the budget and approval procedures and provides for indemnifications and releases (which indemnifications and releases arecomparable to those applicable to SGRP's directors and executive officers under its By-Laws and applicable law). Specifically, the SAS Agreementreduced the Cost Plus Fee for SAS from 4% to 2% effective as of June 1, 2016. No SAS compensation to any officer, director or other related party (other than to Mr. Peter W. Brown, a related party as noted below, pursuant topreviously approved budgets) had been reimbursed or approved to date by the Company, and no such compensation reimbursements were made orapproved 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 toany 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 (seeabove). On May 7, 2018, the Company gave a termination notice to SAS specifying July 31, 2018, as the end of the Service Term under (and as defined in) SASAgreement. The Company has reached a non-exclusive agreement with an independent third party vendor to provide substantially all of the domesticField Administrators used by the Company. The Company transitioned to such new vendor during July 2018, and it was virtually unnoticeable to theCompany's clients. Although neither SBS nor SAS has provided or authorized to perform any services to the Company after their terminations described above effective on orbefore July 31, 2018, they have apparently continued to operate and claim that the Company owes them for all of their post-termination expenses for theforeseeable future. For the period from August through December 31, 2018, SBS has invoiced the Company for approximately $120,000, and SAS hasinvoiced the Company for approximately $76,000 for the same period. All such invoices have been rejected by the Company. The Company hasdetermined that it is not obligated to reimburse any such post-termination expense (other than for potentially reimbursing SAS for mutually approvedreasonable short term ordinary course transition expenses in previously allowed categories needed by SAS to wind down its business, if any), and thatsuch a payment would be an impermissible gift to a related party under applicable law, which determinations have been supported by SGRP's AuditCommittee. The SBS invoices included legal expenses for its continuing defense in the Clothier Case even though SGRP on June 13, 2018, gave SBSnotice that it would no longer reimburse any such expenses as a result of SGRP's separate settlement of the Clothier Case. See Note 10 to the Company'sConsolidated Financial Statements - Related Party Transactions - Domestic Related Party Services, and Note 6 to the Company's Consolidated FinancialStatements - Commitments and Contingencies -- Legal Matters, below. The Company expects that SBS and SAS may use every available means to attempt to collect reimbursement from the Company for the foreseeable futurefor all of their post-termination expense, including repeated litigation. See Note 6 to the Company's Consolidated Financial Statements - Commitmentsand Contingencies -- Legal Matters, below. On November 23, 2018, SBS petitioned for bankruptcy protection under chapter 11 of the United States Bankruptcy Code in the U.S. District for Nevada(the "SBS Chapter 11 Case"), and as a result, the claims of SBS' creditors must now generally be pursued in the SBS Chapter 11 Case. The Companybelieves there can be no assurance that SBS will ever be able to fully pay any damage award resulting from any determination in the Clothier Case or anyother judgment or similar amount resulting from any legal determination adverse to SBS. See Note 6 to the Company's Consolidated Financial Statements- Commitments and Contingencies -- Related Party Litigation and SBS Bankruptcy, below. Any failure of SBS to satisfy any judgment or similar amount resulting from any adverse legal determination against SBS, any claim by SBS, SAS, anyother 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 anyother related party, any judicial determination that the Company is somehow liable for any such judgment or similar amount imposed against SBS or SASor any other related party (in whole or in part), or any increase in the Company's use of employees (rather than the services of independent contractorsprovided by third parties) to perform Field Specialist services domestically, in each case in whole or in part, could have a material adverse effect on theCompany or its performance or condition (including its assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, legalcosts liabilities, liquidity, locations, marketing, operations, prospects, sales, strategies, taxation or other achievement, results or condition), whether actualor as planned, intended, anticipated, estimated or otherwise expected. See Note 6 to the Company's Consolidated Financial Statements - Commitments andContingencies -- Legal Matters, below. F-32 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Related Party Transactions (continued) Current material and potentially material legal proceedings impacting the Company are described in Note 6 to the Company's Consolidated FinancialStatements - Commitments and Contingencies - Legal Matters, below. These descriptions are based on an independent review by the Company and donot reflect the views of SBS, its management or its counsel. Furthermore, even though SBS was solely responsible for its operations, methods and legalcompliance, in connection with any proceedings against SBS, SBS continues to claim that the Company is somehow liable to reimburse SBS for itsexpenses in those proceedings. The Company does not believe there is any basis for such claims and would defend them vigorously. Infotech is currently suing the Company in New York seeking reimbursement for approximately $190,000 respecting alleged lost tax benefits and otherexpenses it claims to have incurred in connection with SGRP's acquisition of its Brazilian subsidiary and previously denied by both management andSGRP's Audit Committee, who had jurisdiction because Infotech is a related party. Infotech also is threatening to sue the Company in Romania forapproximately $900,000 for programming services allegedly owed to the Company's former Romanian subsidiary (sold at book value to Infotech in 2013)and not provided to Infotech, which the Company vigorously denies. See Note 6 to the Company's Consolidated Financial Statements - Commitmentsand Contingencies -- Legal Matters -- Related Party Litigation, below. Peter W. Brown was appointed as a Director on the SGRP Board as of May 3, 2018, replacing Mr. Robert G. Brown upon his retirement from the Board andCompany at that date. He is not considered independent because Peter Brown an affiliate and related party in respect of 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), Infotech (see above) and certain of itsaffiliates, he is the nephew of Mr. Robert G. Brown (a current significant stockholder of SGRP and SGRP's former Chairman and director), he is a directorof SPAR Brasil Serviços de Merchandising e Tecnologia S.A., a Brazilian corporation ("SPAR BSMT") and owns Earth Investments LLC, ("EILLC"),which owns 10% interest in the SGRP's Brazilian subsidiary. National Merchandising Services, LLC ("NMS"), is a consolidated domestic subsidiary of the Company and is owned jointly by SGRP through its indirectownership of 51% of the NMS membership interests and by National Merchandising of America, Inc. ("NMA"), through its ownership of the other 49% ofthe NMS membership interests. Mr. Edward Burdekin is the Chief Executive Officer and President and a director of NMS and also is an executive officerand director of NMA. Ms. Andrea Burdekin, Mr. Burdekin's wife, is the sole stockholder and a director of NMA and a director of NMS. NMA is an affiliateof 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 of the domestic merchandising specialist field force used by NMS. For those services,NMS agrees to reimburse NSRS the total costs for providing those services and to pay NSRS a premium equal to 1.0% of its total cost. Resource Plus of North Florida, Inc. ("RPI"), is a consolidated domestic subsidiary of the Company and is owned jointly by SGRP through its indirectownership of 51% of the RPI membership interests and by Mr. Richard Justus through his ownership of the other 49% of the RPI membership interests.(See Note 13 to the Company's Consolidated Financial Statements - Purchase of Interest in Subsidiaries, below). Mr. Justus has a 50% ownership interestRJ Holding which owns the buildings where RPI is headquartered and operates. Both buildings are subleased to RPI at local market rates. International Related Party Services: SGRP Meridian (Pty), Ltd. ("Meridian") is a consolidated international subsidiary of the Company and is owned 51% by SGRP and 49% by the followingindividuals: Mr. Brian Mason, Mr. Garry Bristow, and Mr. Adrian Wingfield. Mr. Mason is President and a director and Mr. Bristow is an officer anddirector of Meridian. Mr. Mason is also an officer and director and 50% shareholder of Merhold Property Trust ("MPT"). Mr. Mason and Mr. Bristow areboth officers and directors and both own 50% of Merhold Cape Property Trust ("MCPT"). Mr. Mason, Mr. Bristow and Mr. Wingfield are all officers andown 46.7%, 20% and 33.3%, respectively of Merhold Holding Trust ("MHT") which provides similar services like MPT. MPT owns the building whereMeridian is headquartered and also owns 20 vehicles, all of which are subleased to Meridian. MCPT provides a fleet of 172 vehicles to Meridian under a 4year lease program. These leases are provided to Meridian at local market rates included in the summary table below. SPAR Todopromo is a consolidated international subsidiary of the Company and is owned 51% by SGRP and 49% by the following individuals: Mr. JuanF. Medina Domenzain, Juan Medina Staines, Julia Cesar Hernandez Vanegas, and Jorge Medina Staines. Mr. Juan F. Medina Domenzain is an officer anddirector of SPAR Todopromo and is also majority shareholder (90%) of CONAPAD ("CON") which supplied administrative and operational consultingsupport to SPAR Todopromo in 2016. F-33 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Related Party Transactions (continued) In August 2016, Mr. Juan F. Medina Domenzain ("JFMD"), partner in SPAR Todopromo, purchased the warehouse that was being leased by SPARTodopromo. A lease expired on December 31, 2017, and was renewed until December 31, 2020 at the same terms and cost. On September 8, 2016, the Company (through its Cayman Islands subsidiary) acquired 100% ownership of SGRP Brasil Participações Ltda. ("SGRPHoldings"), a Brazilian limitada (which is a form of limited liability company), from its affiliate, SIT, at cost (including approved expenses). See RelatedParty Transactions and Arrangements in the Brazil Acquisition in this Note, below. SGRP Holdings then completed the formation and acquired a majorityof the stock of SPAR Brasil Serviços de Merchandising e Tecnologia S.A., a Brazilian corporation ("SPAR BSMT"). SGRP Holdings and SPAR BSMT areconsolidated subsidiaries of the Company. SPAR BSMT is owned 51% by the Company, 39% by JK Consultoria Empresarial Ltda.-ME, a Brazilianlimitada ("JKC"), and 10% by Earth Investments, LLC, a Nevada limited liability company ("EILLC"). JKC is owned by Mr. Jonathan Dagues Martins, a Brazilian citizen and resident ("JDM") and his sister, Ms. Karla Dagues Martins, a Brazilian citizen andresident. JDM is the Chief Executive Officer and President of each SPAR Brazil company pursuant to a Management Agreement between JDM and SPARBSMT dated September 13, 2016. JDM also is a director of SPAR BSMT. Accordingly, JKC and JDM are each a related party in respect of the Company.EILLC is owned by Mr. Peter W. Brown, a citizen and resident of the USA ("PWB"). Accordingly, PWB and EILLC are each a related party in respect ofthe Company. SPAR BSMT has contracted with Ms. Karla Dagues Martins, a Brazilian citizen and resident and JDM's sisterand a part owner of SPAR BSMT, to handlethe labor litigation cases for SPAR BSMT and its subsidiaries. These legal services are being provided to them at local market rates by Ms. Martins'company, Karla Martins Sociedade de Advogados ("KMSA"). Accordingly, Mr. Jonathan Dagues Martins and Ms. Karla Dagues Martins are each anaffiliate and a related party in respect of the Company. The Company believes it is the largest and most important customer of MPT, MCPT, MHT, CON, JFMD and KMSA (and from time to time may be theironly customer), and accordingly the Company generally has been able to negotiate better terms, receives more personal and responsive service and ismore likely to receive credits and other financial accommodations from SBS, SAS, MPT, MCPT, MHT, CON, JFMD and KMSA than the Company couldreasonably expect to receive from an unrelated service provider who has significant other customers and business. SBS, SAS and other material affiliatecontracts and arrangements are annually reviewed and considered for approval by SGRP's Audit Committee, subject to the ongoing negotiations with SBSas described above. Summary of Certain Related Party Transactions: The following costs of affiliates were charged to the Company (in thousands): Year Ended December 31, 2018 2017 Services provided by affiliates: Field Specialist Service expenses* (SBS) $15,404 $25,866 Field Administration Service expenses* (SAS) 2,738 4,215 NSRS 986 - RJ HOLDINGS 247 - Office and vehicle rental expenses (MPT) 66 62 Vehicle rental expenses (MCPT) 1,248 1,146 Office and vehicle rental expenses (MHT) 228 170 Field administration expenses* (NDS Reklam) 2 2 Consulting and administrative services (CON) 220 244 Warehouse Rental (JFMD) 49 47 Legal Services (KMSA) 135 10 Total services provided by affiliates $21,323 $31,762 * Includes substantially all overhead (in the case of SAS and SBS), or related overhead, plus any applicable markup. The services provided by SAS andSBS were terminated as of July 2018. F-34 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Related Party Transactions (continued) Due to affiliates consists of the following (in thousands): December 31, 2018 2017 Loans from local investors:(1) Australia $226 $250 Mexico 1,001 1,001 Brazil 139 139 China 2,130 719 South Africa 618 24 Resource Plus 531 – Accrued Expenses due to affiliates: SBS/SAS – 893 Total due to affiliates $4,645 $3,026 (1) Represent loans from the local investors into the Company's subsidiaries (representing their proportionate share of working capital loans). The loanshave no payment terms and are due on demand and as such have been classified as current liabilities in the Company's consolidated financial statements. Affinity Insurance: In addition to the above, through August 1, 2018, SAS purchased insurance coverage from Affinity Insurance, Ltd. ("Affinity") for worker compensation,casualty and property insurance risk for itself, for SBS on behalf of Field Specialists that require such insurance coverage (if they do not provide theirown), and for the Company. SAS owns a minority (less than 1%) of the common stock in Affinity. Based on informal arrangements between the parties, theAffinity insurance premiums for such coverage were ultimately charged (through SAS) for their fair share of the costs of that insurance to SMF, SAS (whichthen charges the Company) and SBS. Since August 1, 2018, the new independent vendor providing the Company's Field Administrators also is a memberof and provided such insurance through Affinity for itself and on behalf of the Field Specialists that require such insurance coverage (if they do notprovide their own), and the Company is obtaining its own such insurance through Affinity (in which the Company is also now a member). In addition to those required periodic premiums, Affinity also requires payment of cash collateral deposits ("Cash Collateral"), and Cash Collateralamounts are initially determined and from time to time re-determined (upward or downward) by Affinity. From 2013 through August 1, 2018, SASdeposited Cash Collateral with Affinity that now totals approximately $965,000; approximately $379,000 of that Cash Collateral was allocable to SBSand approximately $296,000 of that Cash Collateral was allocable to SMF and the balance of approximately $290,000 was allocated to other affiliates ofthe Company. The Cash Collateral deposits allocable to SBS have been paid by SAS on behalf of SBS, SAS received advances to make such paymentsfrom SBS, and SBS in turn received advances to make such payments from SMF. $675,000 of the Cash Collateral deposits allocable to SAS have beenpaid with advances to make such payments from SMF. The Cash Collateral deposits allocable to SMF have been paid by SAS on behalf of SMF, and SASreceived advances to make such payments from SMF. At the time those advances by the Company to SAS and SBS were not specifically disclosed by Mr.Robert G. Brown (then SGRP executive Chairman) or Mr. William H. Bartels (SGRP Vice Chairman then and now) to or approved by the Audit Committeeor Board (as a related party transaction or otherwise), and at the time Mr. Brown and Mr. Bartels were the sole owners and executives of SAS and SBS. Inaddition to funding such Cash Collateral, the Company believes that it has provided (after 1999) all of the funds for all premium payments to and equityinvestments in Affinity and that the Company may be owed related amounts by SAS, SBS and their affiliates. The Company also has advanced money to SAS to prepay Affinity insurance premiums (which in the case of workers compensation insurance are apercentage of payroll). The Company had advanced approximately $225,000 to SAS for the 2019-2020 Affinity plan year based on estimates thatassumed SBS and SAS would be providing services to the Company for the full plan year. However, the Company terminated them and they ceasedproviding SAS' services by August 2018, so that insurance was required for only one month's payroll. Upon completion of the Affinity audit for theAffinity 2019-2020 plan year, the Company anticipates that SAS will receive a premium refund from Affinity of approximately $150,000 and will beobligated to repay that amount to the Company. Affinity from time to time may (in the case of a downward adjustment in such periodic premiums or the Cash Collateral) make refunds, rebates or otherreturns of such periodic premiums and Cash Collateral deposits to SAS for the benefit of itself, SBS and SMF (including any premium refund, as returnedor returnable, "Affinity Returns"). The Company believes that SAS is obligated to return to SMF any and all Affinity Returns allocable to SMF inrepayment of the corresponding advances from SMF and allocable to SAS in repayment of the corresponding advances from SMF. The Company alsobelieves that SAS is obligated to return to SBS, and SBS is obligated to return to SMF, any and all Affinity Returns allocable to SBS in repayment of thecorresponding advances. The Company believes that SBS and SAS will have limited operations after August 1, 2018, that the litigation and likelyresulting financial difficulties facing SBS are significant, and that without adequate security, those circumstances puts such repayments to the Companyat a material risk. F-35 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. Related Party Transactions (continued) SMF had been in negotiations with SBS and SAS (respectively represented by Robert G. Brown and William H. Bartels, who together own over 59% ofSGRP's common stock) since November 2017 for reimbursement and security agreements to document and secure those advances and repaymentobligations, which advances total approximately $675,000. Although SBS and SAS had orally accepted those agreements in principal, the negotiationshave recently broken down over their refusal to allow fully perfected first priority security interests in the Cash Collateral and SAS's policies with andequity interests in Affinity, as well as their demands for post-termination payments and offsets potentially larger than the Cash Collateral. As a result theCompany has recorded a reserve for the full $900,000 in such receivables in 2018. The Company is exploring its legal options for recovering the AffinityReturns from SAS and SBS. See Note 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies, above. The $900,000reserve includes the premium refund for the 2019-2020 Affinity plan year. The Company has filed a claim for $375,000 respecting the Affinity Cash Collateral loan to SBS in the SBS Chapter 11 Proceeding. See Note 6 to theCompany's Consolidated Financial Statements - Commitments and Contingencies -- SBS Bankruptcy, above. Other Related Party Transactions and Arrangements: In July 1999, SMF, SBS and SIT entered into a perpetual software ownership agreement providing that each party independently owned an undividedshare of and has the right to unilaterally license and exploit certain portions of the Company's proprietary scheduling, tracking, coordination, reportingand expense software (the "Co-Owned Software") are co-owned with SBS and Infotech and each entered into a non-exclusive royalty-free license from theCompany to use certain "SPAR" trademarks in the United States (the "Licensed Marks"). As a result of the SBS Chapter 11 Case, SBS' rights in the Co-Owned Software and Licensed Marks are assets of SBS' estate, subject to sale or transfer in any court approved reorganization or liquidation. See Note 6 tothe Company's Consolidated Financial Statements - Commitments and Contingencies -- Legal Matters, Related Party Litigation and SBS Bankruptcy,above. Through arrangements with the Company, SBS (owned by Mr. Bartels and Mr. Brown), SAS (owned by Mr. Bartels and family members of Mr. Brown),and other companies owned by Mr. Brown participate in various benefit plans, insurance policies and similar group purchases by the Company, for whichthe 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 suchtransactions between the Company and the above affiliates are paid and/or collected by the Company in the normal course of business. 11. Stock Based Compensation and Other Plans The Company believes that it is desirable to align the interests of its directors, executives, employees and consultants with those of its stockholdersthrough their ownership of shares of Common Stock issued by SGRP ("SGRP Shares"). Although the Company does not require its directors, executives,employees or consultants to own SGRP Shares, the Company believes that it can help achieve this objective by providing long term equity incentivesthrough the issuance to its eligible directors, executives, employees or consultants of options to purchase SGRP Shares and other stock-based awardspursuant to the 2018 Plan (as defined below) and facilitating the purchase of SGRP Shares at a modest discount by all of its eligible executives,employees and consultants who elect to participate in its Employee or Consultant Stock Purchase Plans (as defined below). In particular, the Companybelieves that granting stock based awards (including restricted stock and options to purchase SGRP Shares) to such directors, executives, employees andconsultants encourages growth in their ownership of SGRP Shares, which in turn leads to the expansion of their stake in the long-term performance andsuccess of the Company. In connection with the 2018 Annual Meeting, the Board, based (in part) on the recommendation of its Compensation Committee, approved themodifications to the proposed SPAR Group, Inc. 2018 Stock Compensation Plan (the "2018 Plan") to remove adjustments for existing plans, which theBoard determined was within its authority and not materially adverse to the interest of SGRP's existing stockholders. The SPAR Group, Inc. 2018 StockCompensation Plan (including the above changes) was approved by the stockholders on May 2, 2018. F-36 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 11. Stock Based Compensation and Other Plans (continued) The 2018 Plan and information regarding options, stock appreciation rights, restricted stock and restricted stock units granted thereunder are summarizedbelow. The 2018 Plan is substantially similar to the 2008 Plan except for its one-year initial term and resetting the maximum award shares available to600,000 under the 2018 Plan. The 2008 Plan terminated upon the adoption of the 2018 Plan, and thereafter no further Awards may be made under the2008 Plan. There were approximately 345,750 SGRP shares remaining for grant Awards that were cancelled at that date. The 2018 Plan has an initial term that ends on May 31, 2019, and no Award may be granted thereafter under this Plan, unless an extension or eliminationof such initial term Plan is approved by stockholders of SGRP if and as required pursuant to the 2018 Plan. In any event, no Award may be granted underthe 2018 Plan on or after the tenth (10th) anniversary of the Effective Date of the 2018 Plan unless an extension of the term of the 2018 Plan is approvedby stockholders of SGRP if and as required pursuant to the 2018 Plan and Applicable Law. Awards granted prior to the end of the term of the 2018 Planshall continue to be governed by the 2018 Plan (which 2018 Plan shall continue in full force and effect for that purpose). The 2018 Plan resets and limits the maximum number of shares of Common Stock that may be issued pursuant to Awards made under the plan to 600,000shares (the "2018 Plan Maximum"). The 2018 Plan permits the granting of Awards consisting of options to purchase shares of Common Stock ("Options"), stock appreciation rights ("SARs"),restricted stock ("Restricted Stock"), and restricted stock units ("RSUs"). The 2018 Plan permits the granting of both Options that qualify under Section422 of the United States Internal Revenue Code of 1986 as amended (the "Code") for treatment as incentive stock options ("Incentive Stock Options" or"ISOs") and Options that do not qualify under the Code as Incentive Stock Options ("Nonqualified Stock Options" or "NQSOs"). ISOs may only be grantedto employees of SGRP or its subsidiaries. The shares of Common Stock that may be issued pursuant to the Options, SARs, Restricted Stock and RSUs under the 2018 Plan are all subject to the2018 Plan Maximum. SGRP has granted restricted stock and stock option awards to its eligible directors, officers and employees and certain employees of its affiliatesrespecting shares of Common Stock issued by SGRP ("SGRP Shares") pursuant to SGRP's 2008 Stock Compensation Plan (as amended, the "2008 Plan"),which was approved by SGRP's stockholders in May of 2008 and 2009. The 2008 Plan provided for the granting of restricted SGRP shares, stock options to purchase SGRP shares (either incentive or nonqualified), andrestricted stock units, stock appreciation rights and other awards based on SGRP shares ("Awards") to SGRP Directors and the Company's specifiedexecutives, employees and consultants (which are employees of certain of its affiliates), although to date SGRP has not issued any permissible form ofAward other than stock option, restricted share awards, and performance stock units. At the May 3, 2018 Annual meeting of stockholders, the 2008 Planwas terminated. At that time, the 2018 Plan was approved by SGRP's stockholders. As of December 31, 2018, approximately 335,000 shares were available for Award grants under the 2018 Plan. The 2018 Plan (like the 2008 Plan as amended in 2009) gives SGRP's Compensation Committee the full authority and complete flexibility from time totime to designate and modify (in its discretion) one or more of the outstanding Awards (including their exercise and base prices and other components andterms) to (among other things) restore their intended values and incentives to their holders. However, the exercise price, base value or similar component(if equal to SGRP's full stock price at issuance) of any Award cannot be lowered to an amount that is less than the Fair Market Value (as defined in the2018 Plan) on the date of the applicable modification, and no modification can adversely affect an awardee's rights or obligations under an award withoutthe awardee's consent. No further consent of SGRP's stockholders is required for any repricing or other modification of any outstanding or other awareunder the 2018 Plan or 2008 Plan, including those previously issued under the Prior Plans. To date, Awards have only been repriced once (in 2009)pursuant to this authority. F-37 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 11. Stock Based Compensation and Other Plans (continued) The stock option Awards issued under the 2018 Plan are typically "nonqualified" (as a tax matter), have a ten (10) year maximum life (term) and vestduring the first four years following issuance at the rate of 25% on each anniversary date of their issuance so long as the holder continues to be employedby the Company. Stock-based compensation cost is measured on the grant date, based on the fair value of the stock options Award calculated at that date,and is recognized as compensation expense on a straight-line basis over the requisite service period, which generally is the options' vesting period. Fairvalue is calculated using the Black-Scholes option pricing model. The Restricted Stock Awards issued under the 2018 Plan (like those under the 2008 Plan) vest during the first four years following issuance at the rate of25% on each anniversary date of their issuance so long as the holder continues to be employed by the Company. Restricted Stock is measured at fair valueon the date of the grant, based on the number of shares granted and the quoted price of the Company's common stock. The shares of stock are issued andvalue is recognized as compensation ratably over the requisite period which generally is the Award's vesting period. 2008 Plan Summary Following are the specific valuation assumptions used for options granted in 2018 for the 2008 Plan: Expected volatility 43%Expected dividend yields 0%Expected term (in years) 5 Risk free interest rate 2.5%Expected forfeiture rate 5% 2008 Plan Stock option Award activity for the years ended December 31, 2018 and 2017 is summarized below: Weighted- Weighted- Average Aggregate Average Remaining Intrinsic Covered Exercise Contractual Value Option Awards Shares Price Term (Years) (thousands) Outstanding at January 1, 2017 3,111,052 $0.98 4.74 $678 Granted 943,000 1,05 – – Exercised/cancelled 110,187 0.87 – – Forfeited or expired 599,688 – – – Outstanding at December 31, 2017 3,344,177 $0.96 5.17 $1,221 Granted 45,000 1.67 – – Exercised 306,750 0.40 – – Forfeited or expired 37,500 – – – Outstanding at December 31, 2018 3,044,927 $1.01 4.55 $103 Exercisable at December 31, 2018 2,239,677 $1.00 3.15 $103 F-38 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 11. Stock Based Compensation and Other Plans (continued) The weighted-average grant-date fair value of stock option Awards granted during the year ended December 31, 2018 was $0.76. The total intrinsic valueof stock option Awards exercised during the year ended December 31, 2018 and 2017 was $274,000 and $16,000, respectively. The Company recognized $155,000 and $187,000 in stock-based compensation expense relating to stock option Awards during the years endedDecember 31, 2018 and 2017, respectively. The recognized tax benefit on stock based compensation expense related to stock options during the yearsended December 31, 2018 and 2017, was approximately $38,000 and $71,000, respectively. As of December 31, 2018, total unrecognized stock-based compensation expense related to stock options was $309,000. This expense is expected to berecognized over a weighted average period of approximately 2.0 years, and will be adjusted for changes in estimated forfeitures. 2018 Plan Summary Following are the specific valuation assumptions used for options granted in 2018 for the 2018 Plan: Expected volatility 43%Expected dividend yields 0%Expected term (in years) 5 Risk free interest rate 2.8%Expected forfeiture rate 5% 2018 Plan Stock option Award activity for the year ended December 31, 2018 is summarized below: Weighted- Weighted- Average Aggregate Average Remaining Intrinsic Covered Exercise Contractual Value Option Awards Shares Price Term (Years) (thousands) Granted 245,000 1.23 – – Exercised – – – – Cancelled – – – – Forfeited or expired 10,000 – – – Outstanding at December 31, 2018 235,000 $1.23 9.35 $– Exercisable at December 31, 2018 – $– – $– The weighted-average grant-date fair value of stock option Awards granted during the year ended December 31, 2018 was $0.57. The total intrinsic valueof stock option Awards exercised during the year ended December 31, 2018 was $0. The Company recognized $31,000 and $0 in stock-based compensation expense relating to stock option Awards during the years ended December 31,2018 and 2017, respectively. The recognized tax benefit on stock based compensation expense related to stock options during the years ended December31, 2018 and 2017, was approximately $8,000 and $0, respectively. As of December 31, 2018, total unrecognized stock-based compensation expense related to stock options was $98,000. This expense is expected to berecognized over a weighted average period of approximately 3.0 years, and will be adjusted for changes in estimated forfeitures. F-39 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 11. Stock Based Compensation and Other Plans (continued) Restricted Stock- 2008 Plan The restricted stock Awards previously issued under the 2008 Plan vested during the first four years following issuance at the rate of 25% on eachanniversary date of their issuance so long as the holder continues to be employed by the Company. Restricted stock granted under the 2008 Plan ismeasured at fair value on the date of the grant, based on the number of shares granted and the quoted price of the Company's common stock. The shares ofstock are issued and value is recognized as compensation expense ratably over the requisite service period which generally is the Award's vesting period.In 2018, the Company did not issue restricted stock Awards to its employees or Directors. The following table summarizes the activity for restricted stock Awards during the years ended December 31, 2018 and 2017: Weighted- Average Grant Date Fair Value Shares per Share Unvested at January 1, 2017 132,000 $1.32 Granted – – Vested (22,800) 1.53 Forfeited (40,800) 1.08 Unvested at December 31, 2017 68,400 1.38 Granted – – Vested (18,900) 1.48 Forfeited (48,500) 1.35 Unvested at December 31, 2018 1,000 $1.36 During the years ended December 31, 2018 and 2017, the Company recognized approximately $15,000 and $38,000, respectively, of stock-basedcompensation expense related to restricted stock. The recognized tax benefit on stock based compensation expense related to restricted stock during theyears ended December 31, 2018 and 2017 was approximately $4,000 and $14,000, respectively. During the years ended December 31, 2018 and 2017, the total fair value of restricted stock vested was $23,000 and $24,000, respectively. As of December 31, 2018, total unrecognized stock-based compensation expense related to unvested restricted stock Awards was $1,000, which isexpected to be expensed over a weighted-average period of 1 year. Restricted Stock- 2018 Plan The restricted stock Awards previously issued under the 2018 Plan (like those under the 2008 Plan) vested during the first four years following issuance atthe rate of 25% on each anniversary date of their issuance so long as the holder continues to be employed by the Company. Restricted stock granted underthe 2018 Plan (like those under the 2008 Plan) is measured at fair value on the date of the grant, based on the number of shares granted and the quotedprice of the Company's common stock. The shares of stock are issued and value is recognized as compensation expense ratably over the requisite serviceperiod which generally is the Award's vesting period. In 2018, the Company issued 20,000 restricted stock Awards to its Directors. The following table summarizes the activity for restricted stock Awards during the year ended December 31, 2018: Weighted- Average Grant Date Fair Value Shares per Share Granted 20,000 1.23 Vested (10,000) 1.23 Forfeited – – Unvested at December 31, 2018 10,000 $1.23 F-40 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 11. Stock Based Compensation and Other Plans (continued) During the years ended December 31, 2018 and 2017, the Company recognized approximately $20,000 and $0, respectively, of stock-basedcompensation expense related to restricted stock. The recognized tax benefit on stock based compensation expense related to restricted stock during theyears ended December 31, 2018 and 2017 was approximately $5,000 and $0, respectively. During the years ended December 31, 2018 and 2017, the total fair value of restricted stock vested was $12,000 and $0, respectively. As of December 31, 2018, total unrecognized stock-based compensation expense related to unvested restricted stock Awards was $4,000, which isexpected to be expensed over a weighted-average period of 1 year. Stock Purchase Plans In 2001, SGRP adopted its 2001 Employee Stock Purchase Plan (the "ESP Plan"), which replaced its earlier existing plan, and its 2001 Consultant StockPurchase Plan (the "CSP Plan"). These plans were each effective as of June 1, 2001. The ESP Plan allows employees of the Company, and the CSP Planallows employees of the affiliates of the Company to purchase SGRP's Common Stock from SGRP without having to pay any brokerage commissions. OnAugust 8, 2002, SGRP's Board approved a 15% discount for employee purchases of Common Stock under the ESP Plan and recommended that itsaffiliates pay 15% of the value of the stock purchased as a cash bonus for affiliate consultant purchases of Common Stock under the CSP Plan. 12. Segment Information The Company reports net revenues from operating income by reportable segment. Reportable segments are components of the Company for whichseparate financial information is available that is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resourcesand in assessing performance. The Company provides similar merchandising and marketing services throughout the world, operating within two reportable segments, its DomesticDivision and its International Division. The Company uses those divisions to improve its administration and operational and strategic focuses, and ittracks and reports certain financial information separately for each of those divisions. The Company measures the performance of its Domestic andInternational Divisions and subsidiaries using the same metrics. The primary measurement utilized by management is operating profits, historically thekey indicator of long-term growth and profitability, as the Company is focused on reinvesting the operating profits of each of its international subsidiariesback into its local markets in an effort to improve market share and continued expansion efforts. F-41 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 12. Segment Information (continued) 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): Year Ended December 31, 2018 2017 Revenue, net: United States $80,049 $52,273 International 149,142 129,108 Total revenue $229,191 $181,381 Operating income (loss): United States $(2,543) $518 International 6,272 3,572 Total operating income $3,729 $4,090 Interest expense: United States $260 $221 International 835 116 Total interest expense $1,095 $337 Other (income) expense, net: United States $(1) $8 International (405) (409)Total other (income), net $(406) $(401) Income (loss) before income tax expense: United States $(2,802) $289 International 5,842 3,865 Total income before income tax expense $3,040 $4,154 Income tax expense (benefit): United States $(266) $1,956 International 1,668 1,021 Total income tax expense $1,402 $2,977 Net (loss) income: United States $(2,536) $(1,667)International 4,174 2,844 Total net income $1,638 $1,177 Net income attributable to non-controlling interest: United States $544 $99 International 2,645 2,001 Total net income attributable to non-controlling interest $3,189 $2,100 Net (loss) income attributable to SPAR Group, Inc.: United States $(3,080) $(1,766)International 1,529 843 Total net loss attributable to SPAR Group, Inc. $(1,551) $(923) Depreciation and amortization: United States $1,431 $1,378 International 678 748 Total depreciation and amortization $2,109 $2,126 Capital expenditures: United States $1,345 $942 International 277 506 Total capital expenditures $1,622 $1,448 Note: There were no inter-company sales for 2018 or 2017. F-42 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 12. Segment Information (continued) December 31, 2018 2017 Assets: United States $27,280 $17,511 International 41,815 40,477 Total assets $69,095 $57,988 Geographic Data (in thousands) Year Ended December 31, 2018 2017 Net international revenues: % of consolidatednet revenue % of consolidatednet revenue Brazil $54,060 23.6% $42,853 23.6%South Africa 28,566 12.5 26,661 14.7 Mexico 21,233 9.3 22,128 12.2 China 13,181 5.8 11,045 6.1 Japan 10,814 4.7 8,125 4.5 India 9,269 4.0 7,308 4.0 Canada 8,392 3.7 6,913 3.8 Australia 3,405 1.5 3,789 2.1 Turkey 222 0.1 277 0.2 Total international revenue $149,142 65.2% $129,108 71.2% Year Ended December 31, 2018 2017 Long lived assets: United States $2,122 $7,109 International 438 4,057 Total long lived assets $2,560 $11,166 13. Purchase of Interests in Subsidiaries Resource Plus Acquisition On January 9, 2018, the Company completed its acquisition of a 51% interest (the "Acquisition") in Resource Plus of North Florida, Inc. ("RPI"), a supplierof professional fixture installation and product merchandising services; and a 51% interest in both of its sister companies, Mobex of North Florida, Inc.("Mobex"), a proprietary retail fixture mobilization system manufacturer, and Leasex, LLC ("Leasex"), a company formed to lease Mobex's proprietaryequipment. RPI owns a 70% interest in BDA Resource, LLC, a Florida limited liability company ("BDA"), and RPI, Leasex, Mobex and BDA may bereferred to individually and collectively as "Resource Plus". SGRP's subsidiary, SPAR Marketing Force, Inc. ("SMF"), purchased those equity interests in Resource Plus from Joseph L. Paulk and Richard Justuspursuant to separate Stock Purchase Agreements each dated as of October 13, 2017 (each a "SPA"), which were subject to due diligence and completion ofdefinitive documents. The base purchase prices under the SPAs for those Resource Plus equity interests were $3,000,000 for Mr. Paulk and $150,000 forMr. Justus, subject to adjustment and potential bonuses as provided in their respective SPAs. At the closing on January 9, 2018, Mr. Paulk received thebase purchase price in $400,000 cash and a Promissory Note for $2,600,000; and Mr. Justus received the base purchase price in $50,000 cash and aPromissory Note for $100,000. Those notes were issued by SMF, guaranteed by SGRP pursuant to separate Guaranties, and secured by SMF pursuant toseparate Securities Pledge and Escrow Agreements to the sellers of the respective acquired equity interests, with each of those documents dated andeffective as of January 1, 2018. Mr. Paulk's note is repayable in installments of $300,000, plus interest at 1.85% per annum, per year on December 31 ofeach year (commencing in 2018, which payment was made in 2018), with the balance due on December 31, 2023; and Mr. Justus's note on December 31of each such year (commencing in 2018, which payment was also made in 2018) is repayable in installments of $33,333 per year, plus interest at 1.85%per annum, on December 31 of each year, with the balance of $33,334 due on December 31, 2020. In connection with that closing, Mr. Paulk retired, while Mr. Justus continued as President of Resource Plus and received an Executive OfficerEmployment Terms and Severance Agreement with RPI ("ETSA"), with a base salary of $200,000 per year (plus an incentive bonus), and a term of officeand severance protection through January 1, 2020, subject to annual extensions in the discretion of the parties. F-43 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 13. Purchase of Interests in Subsidiaries (continued) This acquisition was accounted for using the purchase method of accounting with the purchase price allocated to the assets purchased and liabilitiesassumed based upon their estimated fair values at the date of acquisition. A summary of purchase price consideration to be allocated by SGRP in the acquisition of RPI is provided below: Cash consideration $456 Notes payable 2,300 Total consideration paid $2,756 The estimated assets acquired and liabilities assumed by SGRP are provided below: Cash and cash equivalents $1,223 Accounts receivable 2,699 Accounts payable (255)Property and equipment 155 Prepaid assets 86 Marketable securities 20 Other assets 50 Accrued expenses (1,389)Deferred tax liability (572)Revolving line of credit (865)Other intangible assets 2,290 Residual goodwill 1,962 Estimated fair value of assets acquired 5,404 Non-controlling interest (2,648)Consideration paid for acquisition $2,756 The following table contains unaudited pro forma revenue and net income for SPAR Group, Inc. assuming SPAR Resource Plus closed on January 1, 2017(in thousands): Revenue Net Income Consolidated supplemental pro forma for the twelve month period ended December 31, 2017 $205,604 $407 The pro forma in the table above includes adjustments for, amortization of intangible assets and acquisition costs to reflect results that are morerepresentative of the results of the transactions as if the Resource Plus acquisition closed on January 1, 2017. This pro forma information utilizes certainestimates, 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 the results reflected in the pro forma information. The unaudited pro forma financial information does notreflect the impact of future events that may occur after the acquisition, such as anticipated cost savings from operating synergies. For the twelve monthperiod ended December 31, 2018, Resource Plus contributed $24.2 million to the Company's total revenue and increased net income for the same periodby $1.3 million. F-44 SPAR Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 14. Net Income Per Share The following table sets forth the computations of basic and diluted net income per share (in thousands, except per share data): Year Ended December 31, 2018 2017 Numerator: Net loss attributable to SPAR Group, Inc. $(1,551) $(923) Denominator: Shares used in basic net income per share calculation 20,684 20,617 Effect of diluted securities: Stock options and unvested restricted shares – – Shares used in diluted net income per share calculations 20,684 20,617 Basic and Diluted net loss per common share: $(0.07) $(0.04) 15. Capital Lease Obligations The Company has two outstanding capital lease obligations with interest rates as follows. The related capital lease asset balances are detailed below (inthousands): Start Date: Interest Rate Original Cost AccumulatedAmortization Net Book Valueat December 31,2018 January 2017 5.8% $76 $26 $26 August 2017 6.4% $147 $20 $78 Annual future minimum lease payments required under the leases, together with the present value as of December 31, 2018, are as follows (in thousands): Year EndingDecember 31, Amount 2019 $82 2020 31 Total 113 Less amount representing interest 5 Present value of net minimum lease payments included in accrued expenses and other currentliabilities, and long term debt $108 F-45 SPAR Group, Inc. and Subsidiaries Schedule II – Valuation and Qualifying Accounts (In thousands) Balance atBeginningof Period (RecoveredFrom)/Chargedto Costs andExpenses Deductions(1) Balance at Endof Period Year ended December 31, 2018: Deducted from asset accounts: Allowance for doubtful accounts $342 196 5 $533 Year ended December 31, 2017: Deducted from asset accounts: Allowance for doubtful accounts $288 113 59 $342 (1) Uncollectible accounts written off, net of recoveries F-46 Exhibit 10.10 FIRST AMENDMENT TO AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT Dated as of November 8, 2018 This First Amendment to Amended and Restated Change in Control Severance Agreement (this "Amendment"), dated as of November 8, 2018 (the"Amendment Date"), is by and between James R. Segreto, an individual (the "Employee"), and SPAR Group, Inc., a Delaware corporation ("SGRP", the"Company" or the "Corporation"). The Employee and Company may be referred to individually as a "Party" and collectively as the "Parties". The Parties are parties to that certain existing Amended and Restated Change in Control Severance Agreement dated September 5, 2017 (the "ExistingCICSA"), which the Parties now desire to amend upon the terms and provisions and subject to the conditions set forth in this Agreement to clarify that aconfidentiality and non-solicitation agreement (rather than a non-compete) will be required for severance, as approved by SGRP's Audit Committee. The Existing CICSA also may be referred to as an "Existing Severance Agreement", and as amended by this Amendment, may be referred as a "SeveranceAgreement". In consideration of past, present and future employment by the Company, the mutual covenants below and other good and valuable consideration (thereceipt and adequacy of which are hereby acknowledged by each Party), the Employee and Company, intending to be legally bound, hereby agree asfollows: NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Amendment and the Existing Agreement, andother good and valuable consideration (the receipt and adequacy of which is hereby acknowledged by the Parties), the Parties hereto hereby agree asfollows: 1. Certain Definitions. Except as otherwise provided herein, all capitalized terms used and not otherwise defined or amended in thisAmendment shall have the meanings respectively given to them in the Existing CICSA. 2. Amendment to Existing CICSA. Upon execution and delivery of this Amendment, the Existing CICSA is hereby supplemented andamended as follows, effective as of the Amendment Date: (a) The defined terms: "Existing CICSA" shall mean that certain existing Amended and Restated Change in Control Severance Agreementdated September 5, 2017, as amended, by and between James R. Segreto, an individual (as the "Employee" thereunder), and SPAR Group, Inc., aDelaware corporation (as ("SGRP", the "Company" or the "Corporation" thereunder). "First Amendment" shall mean the First Amendment to Amendedand Restated Change in Control Severance Agreement dated as of November 8, 2018 by and between James R. Segreto, an individual (as the "Employee"thereunder), and SPAR Group, Inc., a Delaware corporation ( as ("SGRP", the "Company" or the "Corporation" thereunder). "CICSA" shall mean theExisting CICSA as amended by the First Amendment and as such agreement otherwise may have been and hereafter may be supplemented, modified,amended or restated from time to time in the manner provided therein. The defined term "Agreement" shall mean the CICSA. (b) Section 1 of the Existing CICSA is hereby amended by the addition of the following new subsection to the end of such Section (without thedeletion or modification of any other material): (f) Other Severance Agreements; Non-Duplicative Payments. The Employee and the Company may enter into other severance agreementsfrom time to time (as amended, each an "EOSA"). Notwithstanding anything in this Agreement to the contrary: No ESOA shall in any wayreplace, amend or affect this Agreement; and this Agreement shall not replace, amend or affect any EOSA; and the severance payments under thisAgreement and any applicable EOSA are not intended to be duplicative and the Employee is only entitled to be paid once for his Employee'sDaily Compensation for the same period of time if the applicable payment periods under those agreements overlap. (c) In Section 3 of the Existing CICSA, subsection (b) (entitled "Release, Non-Compete Agreement and Resignations Required for SeveranceBenefits") is hereby deleted in its entirety, and the following new amended and restated subsection is hereby inserted in its place (without the deletion ormodification of any other material): (b) Release, Confidentiality and Non-Solicitation and Resignations Agreement Required for Severance Benefits. As a condition precedentto the payment of any benefits under this Agreement in the event of a Severance Termination, the Company may in its discretion require (withinthe 30 day period described below) the execution and delivery by the Employee of any one or more of a Release, Confidentiality Agreement andResignation (as such terms are defined below); provided, however, that each Release, Confidentiality Agreement and Resignation shall expresslyexclude and reserve, and shall not in any way affect, the Employee's rights under this Agreement and any other severance agreement and rights toindemnification (including advancement and defense) under the Company's By-Laws and insurance policies and under applicable law. NoRelease, Confidentiality Agreement or Resignation shall be required unless the Company gives (by hand or overnight delivery with a copy byemail) to the Employee the requested Release, Confidentiality Agreement and/or Resignation signed by the Company within the thirty (30) dayperiod following the date of such Severance Termination. "Release" shall mean a mutual release agreement between the Employee and theCompany (on behalf of all of all SGRP Companies) dated and effective as of the date of the Severance Termination substantially in the same formas Exhibit A hereto. "Confidentiality Agreement" shall mean a Confidentiality and Non-Solicitation Agreement between the Employee and theCompany (with, among other things, a five year period of confidentiality and a three year period of non-solicitation following termination, butwithout any non-compete) dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit B hereto."Resignation" shall mean a confirmatory resignation letter from the Employee for each applicable SGRP Company (other than the Company)dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit C hereto. -1- 3. Continuing Severance Agreement, Binding upon Successors. The Existing Severance Agreement, as supplemented and amended by thisAmendment, shall remain and continue in full force and effect after the Amendment Date. This Amendment's provisions shall be binding upon theapplicable Party and its heirs, successors, assigns and legal representatives and shall inure to the benefit of the heirs, successors, assigns and legalrepresentatives of each other Party. 4. Counterparts, Amendments and Authority. This Amendment may be executed in multiple counterparts and delivered electronically(including by fax or email) or physically, each of which shall be deemed an original and all of which together shall constitute a single agreement bindingupon all of the Parties. Any supplement, modification, amendment, restatement, waiver, extension, discharge, release or termination of this Amendmentmust be in writing and signed by all of the Parties hereto and cannot be given orally. Each individual signing below represents and warrants to the otherParty that such individual has the authority to bind the Party on whose behalf he or she has executed this Amendment. 5. Governance and Entire Agreement. This Amendment shall be governed by and construed in accordance with the applicable provisions ofthe Severance Agreement, which provisions are hereby incorporated herein by reference into this Amendment, and shall be interpreted as if thisAmendment were the "Agreement" referred to in those incorporated provisions. This Amendment and the Severance Agreement together contain the entireagreement and understanding of the Parties and supersede and completely replace all prior and other representations, warranties, promises, assurances andother agreements, understandings and information (including, without limitation, all letters of intent, term sheets, existing agreements, offers, requests,responses and proposals), whether written, electronic, oral, express, implied or otherwise, from a Party or between them with respect to the matterscontained in this Amendment and the Severance Agreement. In Witness Whereof, the Parties hereto have executed and delivered this Amendment through their duly authorized signatories on the datesstated below and intend to be legally bound by this Amendment effective as of the Amendment Date. COMPANY: EMPLOYEE: SPAR Group, Inc. James R. Segreto By: [ ▲ Executive's Signature ▲] [ ▲ Employee's Signature ▲ ] Executive's Name: Christiaan M. Olivier Executive's Title: Chief Executive Officer and President James R. Segreto [Employee's Name ▲ Please Type or Print] Date Signed: Date Signed: Company's Current Address: Employee's Current Address:SPAR Group, Inc. 333 Westchester Avenue, South Building, Suite 204, White Plains, New York 10604 -2-Exhibit 10.11 FIRST AMENDMENT TO AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT Dated as of November 8, 2018 This First Amendment to Amended and Restated Change in Control Severance Agreement (this "Amendment"), dated as of November 8, 2018 (the"Amendment Date"), is by and between Kori G. Belzer, an individual (the "Employee"), and SPAR Group, Inc., a Delaware corporation ("SGRP", the"Company" or the "Corporation"). The Employee and Company may be referred to individually as a "Party" and collectively as the "Parties". The Parties are parties to that certain existing Amended and Restated Change in Control Severance Agreement dated September 5, 2017 (the "ExistingCICSA"), which the Parties now desire to amend upon the terms and provisions and subject to the conditions set forth in this Agreement to clarify that aconfidentiality and non-solicitation agreement (rather than a non-compete) will be required for severance, as approved by SGRP's Audit Committee. The Existing CICSA also may be referred to as an "Existing Severance Agreement", and as amended by this Amendment, may be referred as a "SeveranceAgreement". In consideration of past, present and future employment by the Company, the mutual covenants below and other good and valuable consideration (thereceipt and adequacy of which are hereby acknowledged by each Party), the Employee and Company, intending to be legally bound, hereby agree asfollows: NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Amendment and the Existing Agreement, andother good and valuable consideration (the receipt and adequacy of which is hereby acknowledged by the Parties), the Parties hereto hereby agree asfollows: 1. Certain Definitions. Except as otherwise provided herein, all capitalized terms used and not otherwise defined or amended in thisAmendment shall have the meanings respectively given to them in the Existing CICSA. 2. Amendment to Existing CICSA. Upon execution and delivery of this Amendment, the Existing CICSA is hereby supplemented andamended as follows, effective as of the Amendment Date: (a) The defined terms: "Existing CICSA" shall mean that certain existing Amended and Restated Change in Control Severance Agreementdated September 5, 2017, as amended, by and between Kori G. Belzer, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delawarecorporation (as ("SGRP", the "Company" or the "Corporation" thereunder). "First Amendment" shall mean the First Amendment to Amended andRestated Change in Control Severance Agreement dated as of November 8, 2018 by and between Kori G. Belzer, an individual (as the "Employee"thereunder), and SPAR Group, Inc., a Delaware corporation ( as ("SGRP", the "Company" or the "Corporation" thereunder). "CICSA" shall mean theExisting CICSA as amended by the First Amendment and as such agreement otherwise may have been and hereafter may be supplemented, modified,amended or restated from time to time in the manner provided therein. The defined term "Agreement" shall mean the CICSA. (b) Section 1 of the Existing CICSA is hereby amended by the addition of the following new subsection to the end of such Section (without thedeletion or modification of any other material): (f) Other Severance Agreements; Non-Duplicative Payments. The Employee and the Company may enter into other severance agreementsfrom time to time (as amended, each an "EOSA"). Notwithstanding anything in this Agreement to the contrary: No ESOA shall in any wayreplace, amend or affect this Agreement; and this Agreement shall not replace, amend or affect any EOSA; and the severance payments under thisAgreement and any applicable EOSA are not intended to be duplicative and the Employee is only entitled to be paid once for his Employee'sDaily Compensation for the same period of time if the applicable payment periods under those agreements overlap. (c) In Section 3 of the Existing CICSA, subsection (b) (entitled "Release, Non-Compete Agreement and Resignations Required for SeveranceBenefits") is hereby deleted in its entirety, and the following new amended and restated subsection is hereby inserted in its place (without the deletion ormodification of any other material): (b) Release, Confidentiality and Non-Solicitation and Resignations Agreement Required for Severance Benefits. As a condition precedentto the payment of any benefits under this Agreement in the event of a Severance Termination, the Company may in its discretion require (withinthe 30 day period described below) the execution and delivery by the Employee of any one or more of a Release, Confidentiality Agreement andResignation (as such terms are defined below); provided, however, that each Release, Confidentiality Agreement and Resignation shall expresslyexclude and reserve, and shall not in any way affect, the Employee's rights under this Agreement and any other severance agreement and rights toindemnification (including advancement and defense) under the Company's By-Laws and insurance policies and under applicable law. NoRelease, Confidentiality Agreement or Resignation shall be required unless the Company gives (by hand or overnight delivery with a copy byemail) to the Employee the requested Release, Confidentiality Agreement and/or Resignation signed by the Company within the thirty (30) dayperiod following the date of such Severance Termination. "Release" shall mean a mutual release agreement between the Employee and theCompany (on behalf of all of all SGRP Companies) dated and effective as of the date of the Severance Termination substantially in the same formas Exhibit A hereto. "Confidentiality Agreement" shall mean a Confidentiality and Non-Solicitation Agreement between the Employee and theCompany (with, among other things, a five year period of confidentiality and a three year period of non-solicitation following termination, butwithout any non-compete) dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit B hereto."Resignation" shall mean a confirmatory resignation letter from the Employee for each applicable SGRP Company (other than the Company)dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit C hereto. -1- 3. Continuing Severance Agreement, Binding upon Successors. The Existing Severance Agreement, as supplemented and amended by thisAmendment, shall remain and continue in full force and effect after the Amendment Date. This Amendment's provisions shall be binding upon theapplicable Party and its heirs, successors, assigns and legal representatives and shall inure to the benefit of the heirs, successors, assigns and legalrepresentatives of each other Party. 4. Counterparts, Amendments and Authority. This Amendment may be executed in multiple counterparts and delivered electronically(including by fax or email) or physically, each of which shall be deemed an original and all of which together shall constitute a single agreement bindingupon all of the Parties. Any supplement, modification, amendment, restatement, waiver, extension, discharge, release or termination of this Amendmentmust be in writing and signed by all of the Parties hereto and cannot be given orally. Each individual signing below represents and warrants to the otherParty that such individual has the authority to bind the Party on whose behalf he or she has executed this Amendment. 5. Governance and Entire Agreement. This Amendment shall be governed by and construed in accordance with the applicable provisions ofthe Severance Agreement, which provisions are hereby incorporated herein by reference into this Amendment, and shall be interpreted as if thisAmendment were the "Agreement" referred to in those incorporated provisions. This Amendment and the Severance Agreement together contain the entireagreement and understanding of the Parties and supersede and completely replace all prior and other representations, warranties, promises, assurances andother agreements, understandings and information (including, without limitation, all letters of intent, term sheets, existing agreements, offers, requests,responses and proposals), whether written, electronic, oral, express, implied or otherwise, from a Party or between them with respect to the matterscontained in this Amendment and the Severance Agreement. In Witness Whereof, the Parties hereto have executed and delivered this Amendment through their duly authorized signatories on the datesstated below and intend to be legally bound by this Amendment effective as of the Amendment Date. COMPANY: EMPLOYEE: SPAR Group, Inc. Kori G. Belzer By: [ ▲ Executive's Signature ▲] [ ▲ Employee's Signature ▲ ] Executive's Name: Christiaan M. Olivier Executive's Title: Chief Executive Officer and President Kori G. Belzer [Employee's Name ▲ Please Type or Print] Date Signed: Date Signed: Company's Current Address: Employee's Current Address:SPAR Group, Inc. 333 Westchester Avenue, South Building, Suite 204, White Plains, New York 10604 -2-Exhibit 10.12 FIRST AMENDMENT TO AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT Dated as of November 8, 2018 This First Amendment to Amended and Restated Change in Control Severance Agreement (this "Amendment"), dated as of November 8, 2018 (the"Amendment Date"), is by and between Gerard Marrone, an individual (the "Employee"), and SPAR Group, Inc., a Delaware corporation ("SGRP", the"Company" or the "Corporation"). The Employee and Company may be referred to individually as a "Party" and collectively as the "Parties". The Parties are parties to that certain existing Amended and Restated Change in Control Severance Agreement dated September 5, 2017 (the "ExistingCICSA"), which the Parties now desire to amend upon the terms and provisions and subject to the conditions set forth in this Agreement to clarify that aconfidentiality and non-solicitation agreement (rather than a non-compete) will be required for severance, as approved by SGRP's Audit Committee. The Existing CICSA also may be referred to as an "Existing Severance Agreement", and as amended by this Amendment, may be referred as a "SeveranceAgreement". In consideration of past, present and future employment by the Company, the mutual covenants below and other good and valuable consideration (thereceipt and adequacy of which are hereby acknowledged by each Party), the Employee and Company, intending to be legally bound, hereby agree asfollows: NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Amendment and the Existing Agreement, andother good and valuable consideration (the receipt and adequacy of which is hereby acknowledged by the Parties), the Parties hereto hereby agree asfollows: 1. Certain Definitions. Except as otherwise provided herein, all capitalized terms used and not otherwise defined or amended in thisAmendment shall have the meanings respectively given to them in the Existing CICSA. 2. Amendment to Existing CICSA. Upon execution and delivery of this Amendment, the Existing CICSA is hereby supplemented andamended as follows, effective as of the Amendment Date: (a) The defined terms: "Existing CICSA" shall mean that certain existing Amended and Restated Change in Control Severance Agreementdated September 5, 2017, as amended, by and between Gerard Marrone, an individual (as the "Employee" thereunder), and SPAR Group, Inc., aDelaware corporation (as ("SGRP", the "Company" or the "Corporation" thereunder). "First Amendment" shall mean the First Amendment to Amendedand Restated Change in Control Severance Agreement dated as of November 8, 2018 by and between Gerard Marrone, an individual (as the "Employee"thereunder), and SPAR Group, Inc., a Delaware corporation ( as ("SGRP", the "Company" or the "Corporation" thereunder). "CICSA" shall mean theExisting CICSA as amended by the First Amendment and as such agreement otherwise may have been and hereafter may be supplemented, modified,amended or restated from time to time in the manner provided therein. The defined term "Agreement" shall mean the CICSA. (b) Section 1 of the Existing CICSA is hereby amended by the addition of the following new subsection to the end of such Section (without thedeletion or modification of any other material): (f) Other Severance Agreements; Non-Duplicative Payments. The Employee and the Company may enter into other severance agreementsfrom time to time (as amended, each an "EOSA"). Notwithstanding anything in this Agreement to the contrary: No ESOA shall in any wayreplace, amend or affect this Agreement; and this Agreement shall not replace, amend or affect any EOSA; and the severance payments under thisAgreement and any applicable EOSA are not intended to be duplicative and the Employee is only entitled to be paid once for his Employee'sDaily Compensation for the same period of time if the applicable payment periods under those agreements overlap. (c) In Section 3 of the Existing CICSA, subsection (b) (entitled "Release, Non-Compete Agreement and Resignations Required for SeveranceBenefits") is hereby deleted in its entirety, and the following new amended and restated subsection is hereby inserted in its place (without the deletion ormodification of any other material): (b) Release, Confidentiality and Non-Solicitation and Resignations Agreement Required for Severance Benefits. As a condition precedentto the payment of any benefits under this Agreement in the event of a Severance Termination, the Company may in its discretion require (withinthe 30 day period described below) the execution and delivery by the Employee of any one or more of a Release, Confidentiality Agreement andResignation (as such terms are defined below); provided, however, that each Release, Confidentiality Agreement and Resignation shall expresslyexclude and reserve, and shall not in any way affect, the Employee's rights under this Agreement and any other severance agreement and rights toindemnification (including advancement and defense) under the Company's By-Laws and insurance policies and under applicable law. NoRelease, Confidentiality Agreement or Resignation shall be required unless the Company gives (by hand or overnight delivery with a copy byemail) to the Employee the requested Release, Confidentiality Agreement and/or Resignation signed by the Company within the thirty (30) dayperiod following the date of such Severance Termination. "Release" shall mean a mutual release agreement between the Employee and theCompany (on behalf of all of all SGRP Companies) dated and effective as of the date of the Severance Termination substantially in the same formas Exhibit A hereto. "Confidentiality Agreement" shall mean a Confidentiality and Non-Solicitation Agreement between the Employee and theCompany (with, among other things, a five year period of confidentiality and a three year period of non-solicitation following termination, butwithout any non-compete) dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit B hereto."Resignation" shall mean a confirmatory resignation letter from the Employee for each applicable SGRP Company (other than the Company)dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit C hereto. -1- 3. Continuing Severance Agreement, Binding upon Successors. The Existing Severance Agreement, as supplemented and amended by thisAmendment, shall remain and continue in full force and effect after the Amendment Date. This Amendment's provisions shall be binding upon theapplicable Party and its heirs, successors, assigns and legal representatives and shall inure to the benefit of the heirs, successors, assigns and legalrepresentatives of each other Party. 4. Counterparts, Amendments and Authority. This Amendment may be executed in multiple counterparts and delivered electronically(including by fax or email) or physically, each of which shall be deemed an original and all of which together shall constitute a single agreement bindingupon all of the Parties. Any supplement, modification, amendment, restatement, waiver, extension, discharge, release or termination of this Amendmentmust be in writing and signed by all of the Parties hereto and cannot be given orally. Each individual signing below represents and warrants to the otherParty that such individual has the authority to bind the Party on whose behalf he or she has executed this Amendment. 5. Governance and Entire Agreement. This Amendment shall be governed by and construed in accordance with the applicable provisions ofthe Severance Agreement, which provisions are hereby incorporated herein by reference into this Amendment, and shall be interpreted as if thisAmendment were the "Agreement" referred to in those incorporated provisions. This Amendment and the Severance Agreement together contain the entireagreement and understanding of the Parties and supersede and completely replace all prior and other representations, warranties, promises, assurances andother agreements, understandings and information (including, without limitation, all letters of intent, term sheets, existing agreements, offers, requests,responses and proposals), whether written, electronic, oral, express, implied or otherwise, from a Party or between them with respect to the matterscontained in this Amendment and the Severance Agreement. In Witness Whereof, the Parties hereto have executed and delivered this Amendment through their duly authorized signatories on the datesstated below and intend to be legally bound by this Amendment effective as of the Amendment Date. COMPANY: EMPLOYEE:SPAR Group, Inc. Gerard Marrone By: [ ▲ Executive's Signature ▲] [ ▲ Employee's Signature ▲ ] Executive's Name: Christiaan M. Olivier Executive's Title: Chief Executive Officer and President Gerard Marrone [Employee's Name ▲ Please Type or Print] Date Signed: Date Signed: Company's Current Address: Employee's Current Address:SPAR Group, Inc. 333 Westchester Avenue, South Building, Suite 204, White Plains, New York 10604 -2-Exhibit 10.13 CORRECTED FIRST AMENDMENT TO SEVERANCE AGREEMENTS Dated as of August 8, 2018 This Corrected First Amendment to Severance Agreements (this "Amendment"), dated as of August 8, 2018 (the "Amendment Date"), is by andbetween Steven J. Adolph, an individual (the "Employee"), and SPAR Group, Inc., a Delaware corporation ("SGRP", the "Company" or the"Corporation"). The Employee and Company may be referred to individually as a "Party" and collectively as the "Parties". The Parties are parties to that certain existing Executive Officer Severance Agreement dated June 17, 2016 (the "Existing EOSA"), and that certainexisting Amended and Restated Change in Control Severance Agreement dated September 5, 2017 (the "Existing CICSA"), which the Parties now desireto amend upon the terms and provisions and subject to the conditions set forth in this Agreement to clarify that each such agreement is independent (butthat payments are not intended to be duplicative). The Existing EOSA and Existing CICSA may be referred to individually as an "Existing SeveranceAgreement" and collectively as the "Existing Severance Agreements", and as amended by this Amendment, may be referred individually as a"Severance Agreement" and collectively as the "Severance Agreements" In consideration of past, present and future employment by the Company, the mutual covenants below and other good and valuable consideration (thereceipt and adequacy of which are hereby acknowledged by each Party), the Employee and Company, intending to be legally bound, hereby agree asfollows: NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Amendment and the Existing Agreement, andother good and valuable consideration (the receipt and adequacy of which is hereby acknowledged by the Parties), the Parties hereto hereby agree asfollows: 1. Certain Definitions. Except as otherwise provided herein, all capitalized terms used and not otherwise defined or amended in thisAmendment shall have the meanings respectively given to them in the Existing EOSA or Existing CICSA, as applicable. 2. Amendment to Existing EOSA. Upon execution and delivery of this Amendment, the Existing EOSA is hereby supplemented and amendedas follows, effective as of the Amendment Date: (a) The defined terms: "Existing EOSA" shall mean that certain existing Executive Officer Severance Agreement dated September 5, 2017, byand between Steven J. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation (as ("SGRP", the"Company" or the "Corporation" thereunder). "Existing CICSA" shall mean that certain existing Amended and Restated Change in Control SeveranceAgreement dated September 5, 2017, by and between Steven J. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delawarecorporation (as ("SGRP", the "Company" or the "Corporation" thereunder). "First Amendment" shall mean the Corrected First Amendment to SeveranceAgreements dated as of August 8, 2018, by and between Steven J. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., aDelaware corporation ( as "SGRP", the "Company" or the Corporation thereunder). "EOSA" shall mean the Existing ESOA as amended by the FirstAmendment and as such agreement otherwise may have been and hereafter may be supplemented, modified, amended or restated from time to time in themanner provided therein. "CICSA" shall mean the Existing CICSA as amended by the First Amendment and as such agreement otherwise may have beenand hereafter may be supplemented, modified, amended or restated from time to time in the manner provided therein. The defined term "Agreement" shallmean the EOSA. (b) Section 1 of the Existing EOSA is hereby amended by the addition of the following new subsection to the end of such Section (without thedeletion or modification of any other material): (d) Separate CICSA Agreement; Non-Duplicative Payments. The Employee and the Company have entered into the separate CICSA.This Agreement does not replace, amend or affect the CICSA, and the CICSA Agreement does not replace, amend or affect this Agreement;provided, however, that the severance payments under this Agreement and the CICSA are not intended to be duplicative and the Employee isonly entitled to be paid once for his Employee's Daily Salary for the same period of time if the applicable payment periods under thoseAgreements overlap. (c) In Section 2 of the Existing EOSA, subsection (l) (entitled "Protected Period") is hereby deleted in its entirety, and the following newamended and restated subsection is hereby inserted in its place (without the deletion or modification of any other material): (l) "Protected Period" shall mean the period commencing on the Effective Date and ending at 11:59 pm (NYC time) on the day beforeJune 17, 2020. The Protected Period may be renewed for additional twelve month periods from time to time by the written agreement of bothParties in their discretion and the approval of the SGRP Compensation Committee in its discretion, which written agreements shall specify thecommencement, duration and end date for each such renewal. -1- 3. Amendment to Existing CICSA. Upon execution and delivery of this Amendment, the Existing CICSA is hereby supplemented andamended as follows, effective as of the Amendment Date: (a) The defined terms: "Existing EOSA" shall mean that certain existing Executive Officer Severance Agreement dated September 5, 2017, byand between Steven J. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation (as ("SGRP", the"Company" or the "Corporation" thereunder). "Existing CICSA" shall mean that certain existing Amended and Restated Change in Control SeveranceAgreement dated September 5, 2017 (the "Existing CICSA"), by and between Steven J. Adolph, an individual (as the "Employee" thereunder), and SPARGroup, Inc., a Delaware corporation (as ("SGRP", the "Company" or the "Corporation" thereunder). "First Amendment" shall mean the Corrected FirstAmendment to Severance Agreements dated as of August 8, 2018 by and between Steven J. Adolph, an individual (as the "Employee" thereunder), andSPAR Group, Inc., a Delaware corporation ( as ("SGRP", the "Company" or the "Corporation" thereunder). "EOSA" shall mean the Existing ESOA asamended by the First Amendment and as such agreement otherwise may have been and hereafter may be supplemented, modified, amended or restatedfrom time to time in the manner provided therein. "CICSA" shall mean the Existing CICSA as amended by the First Amendment and as such agreementotherwise may have been and hereafter may be supplemented, modified, amended or restated from time to time in the manner provided therein. Thedefined term "Agreement" shall mean the CICSA. (b) Section 1 of the Existing CICSA is hereby amended by the addition of the following new subsection to the end of such Section (without thedeletion or modification of any other material): (f) Separate EOSA Agreement; Non-Duplicative Payments. The Employee and the Company have entered into the separate EOSA. ThisAgreement does not replace, amend or affect the EOSA, and the EOSA Agreement does not replace, amend or affect this Agreement; provided,however, that the severance payments under this Agreement and the EOSA are not intended to be duplicative and the Employee is only entitledto be paid once for his Employee's Daily Compensation for the same period of time if the applicable payment periods under those Agreementsoverlap. 4. Continuing Severance Agreements, Binding upon Successors. The Existing Severance Agreements, as supplemented and amended by thisAmendment, shall remain and continue in full force and effect after the Amendment Date. This Amendment's provisions shall be binding upon theapplicable Party and its heirs, successors, assigns and legal representatives and shall inure to the benefit of the heirs, successors, assigns and legalrepresentatives of each other Party. 5. Counterparts, Amendments and Authority. This Amendment may be executed in multiple counterparts and delivered electronically(including by fax or email) or physically, each of which shall be deemed an original and all of which together shall constitute a single agreement bindingupon all of the Parties. Any supplement, modification, amendment, restatement, waiver, extension, discharge, release or termination of this Amendmentmust be in writing and signed by all of the Parties hereto and cannot be given orally. Each individual signing below represents and warrants to the otherParty that such individual has the authority to bind the Party on whose behalf he or she has executed this Amendment. 6. Governance and Entire Agreement. This Amendment shall be governed by and construed in accordance with the applicable provisions ofthe applicable Severance Agreement, which provisions are hereby incorporated herein by reference into this Amendment, and shall be interpreted as if thisAmendment were the "Agreement" referred to in those incorporated provisions. This Amendment and the applicable Severance Agreement togethercontain the entire agreement and understanding of the Parties and supersede and completely replace all prior and other representations, warranties,promises, assurances and other agreements, understandings and information (including, without limitation, all letters of intent, term sheets, existingagreements, offers, requests, responses and proposals), whether written, electronic, oral, express, implied or otherwise, from a Party or between them withrespect to the matters contained in this Amendment and the applicable Severance Agreement. In Witness Whereof, the Parties hereto have executed and delivered this Amendment through their duly authorized signatories on the datesstated below and intend to be legally bound by this Amendment effective as of the Amendment Date. COMPANY: EMPLOYEE:SPAR Group, Inc. Steven J. Adolph By: [ ▲ Executive's Signature ▲] [ ▲ Employee's Signature ▲ ] Executive's Name: Christiaan M. Olivier Executive's Title: Chief Executive Officer and President Steven J. Adolph [Employee's Name ▲ Please Type or Print] Date Signed: Date Signed: Company's Current Address: Employee's Current Address:SPAR Group, Inc. Steven J. Adolph333 Westchester Avenue, South Building, Suite 204, White Plains, New York 10604 -2-Exhibit 10.14 SECOND AMENDMENT TO SEVERANCE AGREEMENTS Dated as of November 8, 2018 This Second Amendment to Severance Agreements (this "Amendment"), dated as of November 8, 2018 (the "Amendment Date"), is by and betweenSteven J. Adolph, an individual (the "Employee"), and SPAR Group, Inc., a Delaware corporation ("SGRP", the "Company" or the "Corporation"). TheEmployee and Company may be referred to individually as a "Party" and collectively as the "Parties". The Parties are parties to that certain existing Executive Officer Severance Agreement dated June 17, 2016, as amended (the "Existing EOSA"), and thatcertain existing Amended and Restated Change in Control Severance Agreement dated September 5, 2017, as amended (the "Existing CICSA"), which theParties now desire to amend upon the terms and provisions and subject to the conditions set forth in this Agreement to clarify that a confidentiality andnon-solicitation agreement (rather than a non-compete) will be required for severance, as approved by SGRP's Audit Committee. The Existing EOSA andExisting CICSA may be referred to individually as an "Existing Severance Agreement" and collectively as the "Existing Severance Agreements", and asamended by this Amendment, may be referred individually as a "Severance Agreement" and collectively as the "Severance Agreements" In consideration of past, present and future employment by the Company, the mutual covenants below and other good and valuable consideration (thereceipt and adequacy of which are hereby acknowledged by each Party), the Employee and Company, intending to be legally bound, hereby agree asfollows: NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Amendment and the Existing Agreement, andother good and valuable consideration (the receipt and adequacy of which is hereby acknowledged by the Parties), the Parties hereto hereby agree asfollows: 1. Certain Definitions. Except as otherwise provided herein, all capitalized terms used and not otherwise defined or amended in thisAmendment shall have the meanings respectively given to them in the Existing EOSA or Existing CICSA, as applicable. 2. Amendment to Existing EOSA. Upon execution and delivery of this Amendment, the Existing EOSA is hereby supplemented and amendedas follows, effective as of the Amendment Date: (a) The defined terms: "Existing EOSA" shall mean that certain existing Executive Officer Severance Agreement dated September 5, 2017, byand between Steven J. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation (as ("SGRP", the"Company" or the "Corporation" thereunder), as amended by the First Amendment. "Existing CICSA" shall mean that certain existing Amended andRestated Change in Control Severance Agreement dated September 5, 2017, by and between Steven J. Adolph, an individual (as the "Employee"thereunder), and SPAR Group, Inc., a Delaware corporation (as ("SGRP", the "Company" or the "Corporation" thereunder), as amended by the FirstAmendment. "First Amendment" shall mean the Corrected First Amendment to Severance Agreements dated as of August 8, 2018, by and between StevenJ. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation (as "SGRP", the "Company" or the"Corporation" thereunder). "Second Amendment" shall mean the Second Amendment to Severance Agreements dated as of November 8, 2018, by andbetween Steven J. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation ( as "SGRP", the "Company" orthe "Corporation" thereunder). "EOSA" shall mean the Existing ESOA as amended by the First Amendment and Second Amendment and as suchagreement otherwise may have been and hereafter may be supplemented, modified, amended or restated from time to time in the manner provided therein."CICSA" shall mean the Existing CICSA as amended by the First Amendment and Second Amendment and as such agreement otherwise may have beenand hereafter may be supplemented, modified, amended or restated from time to time in the manner provided therein. The defined term "Agreement" shallmean the EOSA. (b) In Section 3 of the Existing EOSA, subsection (b) (entitled "Release, Non-Compete Agreement and Resignations Required for SeveranceBenefits") is hereby deleted in its entirety, and the following new amended and restated subsection is hereby inserted in its place (without the deletion ormodification of any other material): (b) Release, Confidentiality and Non-Solicitation and Resignations Agreement Required for Severance Benefits. As a condition precedentto the payment of any benefits under this Agreement in the event of a Severance Termination, the Company may in its discretion require (withinthe 30 day period described below) the execution and delivery by the Employee of any one or more of a Release, Confidentiality Agreement andResignation (as such terms are defined below); provided, however, that each Release, Confidentiality Agreement and Resignation shall expresslyexclude and reserve, and shall not in any way affect, the Employee's rights under this Agreement and any other severance agreement and rights toindemnification (including advancement and defense) under the Company's By-Laws and insurance policies and under applicable law. NoRelease, Confidentiality Agreement or Resignation shall be required unless the Company gives (by hand or overnight delivery with a copy byemail) to the Employee the requested Release, Confidentiality Agreement and/or Resignation signed by the Company within the thirty (30) dayperiod following the date of such Severance Termination. "Release" shall mean a mutual release agreement between the Employee and theCompany (on behalf of all of all SGRP Companies) dated and effective as of the date of the Severance Termination substantially in the same formas Exhibit A hereto. "Confidentiality Agreement" shall mean a Confidentiality and Non-Solicitation Agreement between the Employee and theCompany (with, among other things, a five year period of confidentiality and a three year period of non-solicitation following termination, butwithout any non-compete) dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit B hereto."Resignation" shall mean a confirmatory resignation letter from the Employee for each applicable SGRP Company (other than the Company)dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit C hereto. -1- 3. Amendment to Existing CICSA. Upon execution and delivery of this Amendment, the Existing CICSA is hereby supplemented andamended as follows, effective as of the Amendment Date: (a) The defined terms: "Existing EOSA" shall mean that certain existing Executive Officer Severance Agreement dated September 5, 2017, byand between Steven J. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation (as ("SGRP", the"Company" or the "Corporation" thereunder) , as amended by the First Amendment. "Existing CICSA" shall mean that certain existing Amended andRestated Change in Control Severance Agreement dated September 5, 2017 (the "Existing CICSA"), by and between Steven J. Adolph, an individual (asthe "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation (as ("SGRP", the "Company" or the "Corporation" thereunder) , as amendedby the First Amendment. "First Amendment" shall mean the Corrected First Amendment to Severance Agreements dated as of August 8, 2018, by andbetween Steven J. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation ( as "SGRP", the "Company" orthe "Corporation" thereunder). "Second Amendment" shall mean the Second Amendment to Severance Agreements dated as of November 8, 2018, byand between Steven J. Adolph, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation ( as "SGRP", the "Company"or the "Corporation" thereunder). "EOSA" shall mean the Existing ESOA as amended by the First Amendment and Second Amendment and as suchagreement otherwise may have been and hereafter may be supplemented, modified, amended or restated from time to time in the manner provided therein."CICSA" shall mean the Existing CICSA as amended by the First Amendment and Second Amendment and as such agreement otherwise may have beenand hereafter may be supplemented, modified, amended or restated from time to time in the manner provided therein. The defined term "Agreement" shallmean the CICSA. (b) In Section 3 of the Existing CICSA, subsection (b) (entitled "Release, Non-Compete Agreement and Resignations Required for SeveranceBenefits") is hereby deleted in its entirety, and the following new amended and restated subsection is hereby inserted in its place (without the deletion ormodification of any other material): (b) Release, Confidentiality and Non-Solicitation and Resignations Agreement Required for Severance Benefits. As a condition precedentto the payment of any benefits under this Agreement in the event of a Severance Termination, the Company may in its discretion require (withinthe 30 day period described below) the execution and delivery by the Employee of any one or more of a Release, Confidentiality Agreement andResignation (as such terms are defined below); provided, however, that each Release, Confidentiality Agreement and Resignation shall expresslyexclude and reserve, and shall not in any way affect, the Employee's rights under this Agreement and any other severance agreement and rights toindemnification (including advancement and defense) under the Company's By-Laws and insurance policies and under applicable law. NoRelease, Confidentiality Agreement or Resignation shall be required unless the Company gives (by hand or overnight delivery with a copy byemail) to the Employee the requested Release, Confidentiality Agreement and/or Resignation signed by the Company within the thirty (30) dayperiod following the date of such Severance Termination. "Release" shall mean a mutual release agreement between the Employee and theCompany (on behalf of all of all SGRP Companies) dated and effective as of the date of the Severance Termination substantially in the same formas Exhibit A hereto. "Confidentiality Agreement" shall mean a Confidentiality and Non-Solicitation Agreement between the Employee and theCompany (with, among other things, a five year period of confidentiality and a three year period of non-solicitation following termination, butwithout any non-compete) dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit B hereto."Resignation" shall mean a confirmatory resignation letter from the Employee for each applicable SGRP Company (other than the Company)dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit C hereto. 4. Continuing Severance Agreements, Binding upon Successors. The Existing Severance Agreements, as supplemented and amended by thisAmendment, shall remain and continue in full force and effect after the Amendment Date. This Amendment's provisions shall be binding upon theapplicable Party and its heirs, successors, assigns and legal representatives and shall inure to the benefit of the heirs, successors, assigns and legalrepresentatives of each other Party. 5. Counterparts, Amendments and Authority. This Amendment may be executed in multiple counterparts and delivered electronically(including by fax or email) or physically, each of which shall be deemed an original and all of which together shall constitute a single agreement bindingupon all of the Parties. Any supplement, modification, amendment, restatement, waiver, extension, discharge, release or termination of this Amendmentmust be in writing and signed by all of the Parties hereto and cannot be given orally. Each individual signing below represents and warrants to the otherParty that such individual has the authority to bind the Party on whose behalf he or she has executed this Amendment. 6. Governance and Entire Agreement. This Amendment shall be governed by and construed in accordance with the applicable provisions ofthe applicable Severance Agreement, which provisions are hereby incorporated herein by reference into this Amendment, and shall be interpreted as if thisAmendment were the "Agreement" referred to in those incorporated provisions. This Amendment and the applicable Severance Agreement togethercontain the entire agreement and understanding of the Parties and supersede and completely replace all prior and other representations, warranties,promises, assurances and other agreements, understandings and information (including, without limitation, all letters of intent, term sheets, existingagreements, offers, requests, responses and proposals), whether written, electronic, oral, express, implied or otherwise, from a Party or between them withrespect to the matters contained in this Amendment and the applicable Severance Agreement. -2- In Witness Whereof, the Parties hereto have executed and delivered this Amendment through their duly authorized signatories on the datesstated below and intend to be legally bound by this Amendment effective as of the Amendment Date. COMPANY: EMPLOYEE:SPAR Group, Inc. Steven J. Adolph By: [ ▲ Executive's Signature ▲] [ ▲ Employee's Signature ▲ ] Executive's Name: Christiaan M. Olivier Executive's Title: Chief Executive Officer and President Steven J. Adolph [Employee's Name ▲ Please Type or Print] Date Signed: Date Signed: Company's Current Address: Employee's Current Address:SPAR Group, Inc. Steven J. Adolph333 Westchester Avenue, South Building, Suite 204, White Plains, New York 10604 -3-Exhibit 10.15 FIRST AMENDMENT TO AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE AGREEMENT Dated as of November 8, 2018 This First Amendment to Amended and Restated Change in Control Severance Agreement (this "Amendment"), dated as of November 8, 2018 (the"Amendment Date"), is by and between Lawrence David Swift, an individual (the "Employee"), and SPAR Group, Inc., a Delaware corporation ("SGRP",the "Company" or the "Corporation"). The Employee and Company may be referred to individually as a "Party" and collectively as the "Parties". The Parties are parties to that certain existing Amended and Restated Change in Control Severance Agreement dated September 5, 2017 (the "ExistingCICSA"), which the Parties now desire to amend upon the terms and provisions and subject to the conditions set forth in this Agreement to clarify that aconfidentiality and non-solicitation agreement (rather than a non-compete) will be required for severance, as approved by SGRP's Audit Committee. The Existing CICSA also may be referred to as an "Existing Severance Agreement", and as amended by this Amendment, may be referred as a "SeveranceAgreement". In consideration of past, present and future employment by the Company, the mutual covenants below and other good and valuable consideration (thereceipt and adequacy of which are hereby acknowledged by each Party), the Employee and Company, intending to be legally bound, hereby agree asfollows: NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Amendment and the Existing Agreement, andother good and valuable consideration (the receipt and adequacy of which is hereby acknowledged by the Parties), the Parties hereto hereby agree asfollows: 1. Certain Definitions. Except as otherwise provided herein, all capitalized terms used and not otherwise defined or amended in thisAmendment shall have the meanings respectively given to them in the Existing CICSA. 2. Amendment to Existing CICSA. Upon execution and delivery of this Amendment, the Existing CICSA is hereby supplemented andamended as follows, effective as of the Amendment Date: (a) The defined terms: "Existing CICSA" shall mean that certain existing Amended and Restated Change in Control Severance Agreementdated September 5, 2017, as amended, by and between Lawrence David Swift, an individual (as the "Employee" thereunder), and SPAR Group, Inc., aDelaware corporation (as ("SGRP", the "Company" or the "Corporation" thereunder). "First Amendment" shall mean the First Amendment to Amendedand Restated Change in Control Severance Agreement dated as of November 8, 2018 by and between Lawrence David Swift, an individual (as the"Employee" thereunder), and SPAR Group, Inc., a Delaware corporation ( as ("SGRP", the "Company" or the "Corporation" thereunder). "CICSA" shallmean the Existing CICSA as amended by the First Amendment and as such agreement otherwise may have been and hereafter may be supplemented,modified, amended or restated from time to time in the manner provided therein. The defined term "Agreement" shall mean the CICSA. (b) Section 1 of the Existing CICSA is hereby amended by the addition of the following new subsection to the end of such Section (without thedeletion or modification of any other material): (f) Other Severance Agreements; Non-Duplicative Payments. The Employee and the Company may enter into other severance agreementsfrom time to time (as amended, each an "EOSA"). Notwithstanding anything in this Agreement to the contrary: No ESOA shall in any wayreplace, amend or affect this Agreement; and this Agreement shall not replace, amend or affect any EOSA; and the severance payments under thisAgreement and any applicable EOSA are not intended to be duplicative and the Employee is only entitled to be paid once for his Employee'sDaily Compensation for the same period of time if the applicable payment periods under those agreements overlap. (c) In Section 3 of the Existing CICSA, subsection (b) (entitled "Release, Non-Compete Agreement and Resignations Required for SeveranceBenefits") is hereby deleted in its entirety, and the following new amended and restated subsection is hereby inserted in its place (without the deletion ormodification of any other material): (b) Release, Confidentiality and Non-Solicitation and Resignations Agreement Required for Severance Benefits. As a condition precedentto the payment of any benefits under this Agreement in the event of a Severance Termination, the Company may in its discretion require (withinthe 30 day period described below) the execution and delivery by the Employee of any one or more of a Release, Confidentiality Agreement andResignation (as such terms are defined below); provided, however, that each Release, Confidentiality Agreement and Resignation shall expresslyexclude and reserve, and shall not in any way affect, the Employee's rights under this Agreement and any other severance agreement and rights toindemnification (including advancement and defense) under the Company's By-Laws and insurance policies and under applicable law. NoRelease, Confidentiality Agreement or Resignation shall be required unless the Company gives (by hand or overnight delivery with a copy byemail) to the Employee the requested Release, Confidentiality Agreement and/or Resignation signed by the Company within the thirty (30) dayperiod following the date of such Severance Termination. "Release" shall mean a mutual release agreement between the Employee and theCompany (on behalf of all of all SGRP Companies) dated and effective as of the date of the Severance Termination substantially in the same formas Exhibit A hereto. "Confidentiality Agreement" shall mean a Confidentiality and Non-Solicitation Agreement between the Employee and theCompany (with, among other things, a five year period of confidentiality and a three year period of non-solicitation following termination, butwithout any non-compete) dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit B hereto."Resignation" shall mean a confirmatory resignation letter from the Employee for each applicable SGRP Company (other than the Company)dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit C hereto. -1- 3. Continuing Severance Agreement, Binding upon Successors. The Existing Severance Agreement, as supplemented and amended by thisAmendment, shall remain and continue in full force and effect after the Amendment Date. This Amendment's provisions shall be binding upon theapplicable Party and its heirs, successors, assigns and legal representatives and shall inure to the benefit of the heirs, successors, assigns and legalrepresentatives of each other Party. 4. Counterparts, Amendments and Authority. This Amendment may be executed in multiple counterparts and delivered electronically(including by fax or email) or physically, each of which shall be deemed an original and all of which together shall constitute a single agreement bindingupon all of the Parties. Any supplement, modification, amendment, restatement, waiver, extension, discharge, release or termination of this Amendmentmust be in writing and signed by all of the Parties hereto and cannot be given orally. Each individual signing below represents and warrants to the otherParty that such individual has the authority to bind the Party on whose behalf he or she has executed this Amendment. 5. Governance and Entire Agreement. This Amendment shall be governed by and construed in accordance with the applicable provisions ofthe Severance Agreement, which provisions are hereby incorporated herein by reference into this Amendment, and shall be interpreted as if thisAmendment were the "Agreement" referred to in those incorporated provisions. This Amendment and the Severance Agreement together contain the entireagreement and understanding of the Parties and supersede and completely replace all prior and other representations, warranties, promises, assurances andother agreements, understandings and information (including, without limitation, all letters of intent, term sheets, existing agreements, offers, requests,responses and proposals), whether written, electronic, oral, express, implied or otherwise, from a Party or between them with respect to the matterscontained in this Amendment and the Severance Agreement. In Witness Whereof, the Parties hereto have executed and delivered this Amendment through their duly authorized signatories on the datesstated below and intend to be legally bound by this Amendment effective as of the Amendment Date. COMPANY: EMPLOYEE:SPAR Group, Inc. Lawrence David Swift By: [ ▲ Executive's Signature ▲] [ ▲ Employee's Signature ▲ ] Executive's Name: Christiaan M. Olivier Executive's Title: Chief Executive Officer and President Lawrence David Swift [Employee's Name ▲ Please Type or Print] Date Signed: Date Signed: Company's Current Address: Employee's Current Address:SPAR Group, Inc. 333 Westchester Avenue, South Building, Suite 204, White Plains, New York 10604 -2-Exhibit 10.16 FIRST AMENDMENT TO SEVERANCE AGREEMENTS Dated as of November 8, 2018 This First Amendment to Severance Agreements (this "Amendment"), dated as of November 8, 2018 (the "Amendment Date"), is by and betweenChristiaan M. Olivier, an individual (the "Employee"), and SPAR Group, Inc., a Delaware corporation ("SGRP", the "Company" or the "Corporation").The Employee and Company may be referred to individually as a "Party" and collectively as the "Parties". The Parties are parties to that certain existing Amended and Restated Change in Control Severance Agreement dated September 5, 2017 (the "ExistingCICSA"), which the Parties now desire to amend upon the terms and provisions and subject to the conditions set forth in this Agreement to clarify that aconfidentiality and non-solicitation agreement (rather than a non-compete) will be required for severance, as approved by SGRP's Audit Committee. The Parties are parties to that certain existing Executive Officer Severance Agreement dated September 5, 2017 (the "Existing EOSA"), which the Partiesnow desire to amend upon the terms and provisions and subject to the conditions set forth in this Agreement to clarify that a confidentiality and non-solicitation agreement (rather than a non-compete) will be required for severance, as approved by SGRP's Audit Committee. The Existing CICSA and Existing EOSA also each may be referred to as an "Existing Severance Agreement", and as amended by this Amendment, maybe referred as a "Severance Agreement". In consideration of past, present and future employment by the Company, the mutual covenants below and other good and valuable consideration (thereceipt and adequacy of which are hereby acknowledged by each Party), the Employee and Company, intending to be legally bound, hereby agree asfollows: NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Amendment and the Existing Agreement, andother good and valuable consideration (the receipt and adequacy of which is hereby acknowledged by the Parties), the Parties hereto hereby agree asfollows: 1. Certain Definitions. Except as otherwise provided herein, all capitalized terms used and not otherwise defined or amended in thisAmendment shall have the meanings respectively given to them in the the Existing EOSA or Existing CICSA, as applicable. 2. Amendment to Existing CICSA. Upon execution and delivery of this Amendment, the Existing CICSA is hereby supplemented andamended as follows, effective as of the Amendment Date: (a) The defined terms: "Existing CICSA" shall mean that certain existing Amended and Restated Change in Control Severance Agreementdated September 5, 2017, as amended, by and between Christiaan M. Olivier, an individual (as the "Employee" thereunder), and SPAR Group, Inc., aDelaware corporation (as ("SGRP", the "Company" or the "Corporation" thereunder). "First Amendment" shall mean the First Amendment to SeveranceAgreements dated as of November 8, 2018 by and between Christiaan M. Olivier, an individual (as the "Employee" thereunder), and SPAR Group, Inc., aDelaware corporation ( as ("SGRP", the "Company" or the "Corporation" thereunder). "CICSA" shall mean the Existing CICSA as amended by the FirstAmendment and as such agreement otherwise may have been and hereafter may be supplemented, modified, amended or restated from time to time in themanner provided therein. The defined term "Agreement" shall mean the CICSA. (b) In Section 3 of the Existing CICSA, subsection (b) (entitled "Release, Non-Compete Agreement and Resignations Required for SeveranceBenefits") is hereby deleted in its entirety, and the following new amended and restated subsection is hereby inserted in its place (without the deletion ormodification of any other material): 3. (b) Release, Confidentiality and Non-Solicitation and Resignations Agreement Required for Severance Benefits. As a conditionprecedent to the payment of any benefits under this Agreement in the event of a Severance Termination, the Company may in its discretion require (withinthe 30 day period described below) the execution and delivery by the Employee of any one or more of a Release, Confidentiality Agreement andResignation (as such terms are defined below); provided, however, that each Release, Confidentiality Agreement and Resignation shall expressly excludeand reserve, and shall not in any way affect, the Employee's rights under this Agreement and any other severance agreement and rights to indemnification(including advancement and defense) under the Company's By-Laws and insurance policies and under applicable law. No Release, ConfidentialityAgreement or Resignation shall be required unless the Company gives (by hand or overnight delivery with a copy by email) to the Employee therequested Release, Confidentiality Agreement and/or Resignation signed by the Company within the thirty (30) day period following the date of suchSeverance Termination. "Release" shall mean a mutual release agreement between the Employee and the Company (on behalf of all of all SGRPCompanies) dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit A hereto. "ConfidentialityAgreement" shall mean a Confidentiality and Non-Solicitation Agreement between the Employee and the Company (with, among other things, a five yearperiod of confidentiality and a three year period of non-solicitation following termination, but without any non-compete) dated and effective as of thedate of the Severance Termination substantially in the same form as Exhibit B hereto. "Resignation" shall mean a confirmatory resignation letter from theEmployee for each applicable SGRP Company (other than the Company) dated and effective as of the date of the Severance Termination substantially inthe same form as Exhibit C hereto. -1- 4. Amendment to Existing EOSA. Upon execution and delivery of this Amendment, the Existing EOSA is hereby supplemented and amendedas follows, effective as of the Amendment Date: (a) The defined terms: "Existing EOSA" shall mean that certain existing Executive Officer Severance Agreement dated September 5, 2017, asamended, by and between Christiaan M. Olivier, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation (as("SGRP", the "Company" or the "Corporation" thereunder). "First Amendment" shall mean the First Amendment to Severance Agreements dated as ofNovember 8, 2018 by and between Christiaan M. Olivier, an individual (as the "Employee" thereunder), and SPAR Group, Inc., a Delaware corporation (as ("SGRP", the "Company" or the "Corporation" thereunder). "EOSA" shall mean the Existing EOSA as amended by the First Amendment and as suchagreement otherwise may have been and hereafter may be supplemented, modified, amended or restated from time to time in the manner provided therein.The defined term "Agreement" shall mean the EOSA. (b) In Section 3 of the Existing EOSA, subsection (b) (entitled "Release, Non-Compete Agreement and Resignations Required for SeveranceBenefits") is hereby deleted in its entirety, and the following new amended and restated subsection is hereby inserted in its place (without the deletion ormodification of any other material): (b) Release, Confidentiality and Non-Solicitation and Resignations Agreement Required for Severance Benefits. As a condition precedentto the payment of any benefits under this Agreement in the event of a Severance Termination, the Company may in its discretion require (withinthe 30 day period described below) the execution and delivery by the Employee of any one or more of a Release, Confidentiality Agreement andResignation (as such terms are defined below); provided, however, that each Release, Confidentiality Agreement and Resignation shall expresslyexclude and reserve, and shall not in any way affect, the Employee's rights under this Agreement and any other severance agreement and rights toindemnification (including advancement and defense) under the Company's By-Laws and insurance policies and under applicable law. NoRelease, Confidentiality Agreement or Resignation shall be required unless the Company gives (by hand or overnight delivery with a copy byemail) to the Employee the requested Release, Confidentiality Agreement and/or Resignation signed by the Company within the thirty (30) dayperiod following the date of such Severance Termination. "Release" shall mean a mutual release agreement between the Employee and theCompany (on behalf of all of all SGRP Companies) dated and effective as of the date of the Severance Termination substantially in the same formas Exhibit A hereto. "Confidentiality Agreement" shall mean a Confidentiality and Non-Solicitation Agreement between the Employee and theCompany (with, among other things, a five year period of confidentiality and a three year period of non-solicitation following termination, butwithout any non-compete) dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit B hereto."Resignation" shall mean a confirmatory resignation letter from the Employee for each applicable SGRP Company (other than the Company)dated and effective as of the date of the Severance Termination substantially in the same form as Exhibit C hereto. 5. Continuing Severance Agreements, Binding upon Successors. The Existing Severance Agreements, as supplemented and amended by thisAmendment, shall remain and continue in full force and effect after the Amendment Date. This Amendment's provisions shall be binding upon theapplicable Party and its heirs, successors, assigns and legal representatives and shall inure to the benefit of the heirs, successors, assigns and legalrepresentatives of each other Party. 6. Counterparts, Amendments and Authority. This Amendment may be executed in multiple counterparts and delivered electronically(including by fax or email) or physically, each of which shall be deemed an original and all of which together shall constitute a single agreement bindingupon all of the Parties. Any supplement, modification, amendment, restatement, waiver, extension, discharge, release or termination of this Amendmentmust be in writing and signed by all of the Parties hereto and cannot be given orally. Each individual signing below represents and warrants to the otherParty that such individual has the authority to bind the Party on whose behalf he or she has executed this Amendment. 7. Governance and Entire Agreement. This Amendment shall be governed by and construed in accordance with the applicable provisions ofthe applicable Severance Agreement, which provisions are hereby incorporated herein by reference into this Amendment, and shall be interpreted as if thisAmendment were the "Agreement" referred to in those incorporated provisions. This Amendment and the applicable Severance Agreement togethercontain the entire agreement and understanding of the Parties and supersede and completely replace all prior and other representations, warranties,promises, assurances and other agreements, understandings and information (including, without limitation, all letters of intent, term sheets, existingagreements, offers, requests, responses and proposals), whether written, electronic, oral, express, implied or otherwise, from a Party or between them withrespect to the matters contained in this Amendment and the applicable Severance Agreement. -2- In Witness Whereof, the Parties hereto have executed and delivered this Amendment through their duly authorized signatories on the datesstated below and intend to be legally bound by this Amendment effective as of the Amendment Date. COMPANY: EMPLOYEE:SPAR Group, Inc. Christiaan M. Olivier By: [ ▲ Executive's Signature ▲] [ ▲ Employee's Signature ▲ ] Executive's Name: Christiaan M. Olivier Executive's Title: Chief Executive Officer and President Christiaan M. Olivier [Employee's Name ▲ Please Type or Print] Date Signed: Date Signed: Company's Current Address: Employee's Current Address:SPAR Group, Inc. Steven J. Adolph333 Westchester Avenue, South Building, Suite 204, White Plains, New York 10604 -3-Exhibit 10.44 REVOLVING CREDIT MASTER PROMISSORY NOTE $12,500,000.00Princeton, New Jersey April 10, 2019 FOR VALUE RECEIVED, the undersigned SPAR MARKETING FORCE, INC., a Nevada corporation ("Borrower"), promises to pay to theorder of NORTH MILL CAPITAL LLC, a Delaware limited liability company ("Lender"), at 821 Alexander Road, Suite 130, Princeton, New Jersey08540, or such other address as Lender may notify Borrower, such sum up to Twelve Million Five Hundred Thousand and 00/100 Dollars($12,500,000.00), together with interest as hereinafter provided, as may be outstanding on Advances by Lender to Borrower under Section 2.1(a) of theLoan and Security Agreement dated April 10, 2019, by and among Lender, Borrower and SPAR CANADA COMPANY, an unlimited company organizedunder the laws of Nova Scotia (as amended, modified, supplemented, substituted, extended or renewed from time to time, the "Loan Agreement"). Thisinstrument, as amended, modified, supplemented, substituted, extended or renewed from time to time, may be referred to as the "Note". Capitalized termsnot otherwise defined herein have the meanings set forth in the Loan Agreement. The Loan Agreement is incorporated herein as though fully set forth, andBorrower acknowledges its reading and execution thereof. In the event of any conflict or inconsistency between this Note and the Loan Agreement, theapplicable provision of the Loan Agreement shall control, govern and be given effect. The principal amount owing hereunder shall be paid to Lender onthe Termination Date, which is currently October 10, 2020, or as may otherwise be provided for in the Loan Agreement. On the first day of each calendar month hereafter, Borrower shall pay to Lender accrued interest, computed on the basis of a 360 day year for theactual number of days elapsed, on the Daily Balance, at the per annum rate of one and one-quarter percentage points (1.25%) above the Prime Rate ineffect from time to time, but not less than six and three-quarters percent (6.75%) per annum. If there is a change in the Prime Rate, the rate of interest on theDaily Balance shall be changed accordingly as of the date of the change in the Prime Rate, without notice to Borrower. To secure the payment of this Note and the Obligations, Borrower has granted to Lender a continuing security interest in and lien on theCollateral. In addition to all remedies provided by law upon default on payment of this Note, or upon an Event of Default, Lender may, at its option: (1) declare this Note and the Obligations immediately due and payable; (2) collect interest on this Note at the Default Rate set forth in the Loan Agreement from the date of such Event of Default, and if this Note isreferred to an attorney for collection, collect reasonable attorneys' fees; and (3) exercise any and all remedies provided for in the Loan Agreement. BORROWER WAIVES PRESENTMENT FOR PAYMENT, PROTEST AND NOTICE OF PROTEST FOR NON-PAYMENT OF THISNOTE AND TRIAL BY JURY IN ANY ACTION UNDER OR RELATING TO THIS NOTE AND THE ADVANCES EVIDENCED HEREBY. THISNOTE IS GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. [signature page follows]  SPAR MARKETING FORCE, INC. By: Name: Title: Exhibit 10.45 REVOLVING CREDIT MASTERPROMISSORY NOTE CDN$2,500,000.00Princeton, New Jersey April 10, 2019 FOR VALUE RECEIVED, the undersigned SPAR CANADA COMPANY, an unlimited company organized under the laws of Nova Scotia("Borrower"), promises to pay to the order of NORTH MILL CAPITAL LLC, a Delaware limited liability company ("Lender"), at 821 AlexanderRoad, Suite 130, Princeton, New Jersey 08540, or such other address as Lender may notify Borrower, such sum up to Two Million Five Hundred Thousandand 00/100 Canadian Dollars (CDN$2,500,000.00), together with interest as hereinafter provided, as may be outstanding on Advances by Lender toBorrower under Section 2.1(b) of the Loan and Security Agreement dated April 10, 2019, by and among Lender, Borrower and SPAR MARKETINGFORCE, INC., a Nevada corporation (as amended, modified, supplemented, substituted, extended or renewed from time to time, the "Loan Agreement").This instrument, as amended, modified, supplemented, substituted, extended or renewed from time to time, may be referred to as this "Note". Capitalizedterms not otherwise defined herein have the meanings set forth in the Loan Agreement. The Loan Agreement is incorporated herein as though fully setforth, and Borrower acknowledges its reading and execution thereof. In the event of any conflict or inconsistency between this Note and the LoanAgreement, the applicable provision of the Loan Agreement shall control, govern and be given effect. The principal amount owing hereunder shall bepaid to Lender on the Termination Date, which is currently October 10, 2020, or as may otherwise be provided for in the Loan Agreement. On the first day of each calendar month hereafter, Borrower shall pay to Lender accrued interest, computed on the basis of a 360 day year for theactual number of days elapsed, on the Daily Balance, at the per annum rate of one and one-quarter percentage points (1.25%) above the Prime Rate ineffect from time to time, but not less than six and three-quarters percent (6.75%) per annum. If there is a change in the Prime Rate, the rate of interest on theDaily Balance shall be changed accordingly as of the date of the change in the Prime Rate, without notice to Borrower. To secure the payment of this Note and the Obligations, Borrower has granted to Lender a continuing security interest in and lien on theCollateral. In addition to all remedies provided by law upon default on payment of this Note, or upon an Event of Default, Lender may, at its option: (1) declare this Note and the Obligations immediately due and payable; (2) collect interest on this Note at the Default Rate set forth in the Loan Agreement from the date of such Event of Default, and if this Note isreferred to an attorney for collection, collect reasonable attorneys' fees; and (3) exercise any and all remedies provided for in the Loan Agreement. BORROWER WAIVES PRESENTMENT FOR PAYMENT, PROTEST AND NOTICE OF PROTEST FOR NON-PAYMENT OF THISNOTE AND TRIAL BY JURY IN ANY ACTION UNDER OR RELATING TO THIS NOTE AND THE ADVANCES EVIDENCED HEREBY. THISNOTE IS GOVERNED BY THE LAWS OF THE STATE OF NEW JERSEY WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. [signature page follows]  SPAR CANADA COMPANY By: Name: Title: Exhibit 10.46 CORPORATE GUARANTY THIS CORPORATE GUARANTY (as amended, modified, supplemented, substituted, extended or renewed from time to time, this "Guaranty"),dated as of April 10, 2019, is made by SPAR MARKETING FORCE, INC., a Nevada corporation ("US Borrower"), SPAR CANADA COMPANY, anunlimited company organized under the laws of Nova Scotia ("Canadian Borrower"), SPAR GROUP, INC., a Delaware corporation, SPARACQUISITION, INC., a Nevada corporation, SPAR CANADA, INC., a Nevada corporation, SPAR TRADEMARKS, INC., a Nevada corporation, andSPAR ASSEMBLY & INSTALLATION, INC., a Nevada corporation (collectively, "Guarantors", and each individually, a "Guarantor"), each with anoffice at 333 Westchester Avenue, South Building, Suite 204, White Plains, New York 10604, in favor of NORTH MILL CAPITAL LLC, a Delawarelimited liability company ("Lender"), with an office at 821 Alexander Road, Suite 130, Princeton, New Jersey 08540. WHEREAS, each of US Borrower and Canadian Borrower (collectively, "Borrowers") is now and may in the future be indebted to Lender forloans and advances and other financial accommodations made or to be made by Lender to or on behalf of US Borrower and Canadian Borrower, asapplicable, and WHEREAS, to induce Lender to make and/or to continue to make loans and other financial accommodations to or on behalf of US Borrower andCanadian Borrower, each Guarantor has agreed to execute and deliver a guaranty of all present and future liabilities of US Borrower and CanadianBorrower to Lender pursuant to the Loan Agreement (defined below). NOW, THEREFORE, in consideration of the foregoing premises to induce Lender to make loans, advances and other financial accommodationsto or on behalf of US Borrower and Canadian Borrower, and with full knowledge that said loans, advances and other financial accommodations would notbe issued without this Guaranty, each Guarantor agrees as follows: 1. The term "Liability of Borrowers" shall include all Obligations and all other obligations and liabilities, direct or indirect, absolute orcontingent, joint and several, now or hereafter existing, due or to become due of each of US Borrower and Canadian Borrower to, or held or to be held byLender for its own account or as agent for others, whether created directly or acquired by assignment or otherwise, including, without limitation, allprincipal of and interest (including without limitation any post-petition interest on all obligations at the rate set forth in the appropriate loan documents,accruing whether or not granted or permitted in any bankruptcy or similar insolvency proceeding) and fees and all costs and expenses, includingreasonable attorney's fees, on all present and future liabilities and indebtedness of each of US Borrower and Canadian Borrower to Lender under thatcertain Loan and Security Agreement dated April 10, 2019, among US Borrower, Canadian Borrower and Lender (as amended, modified, supplemented,substituted, extended or renewed from time to time, the "Loan Agreement"), whether or not the same involve modifications to interest rates or otherpayment terms of such indebtedness, obligations or liabilities. This Guaranty has been executed and delivered pursuant to and shall be governed by andconstrued in accordance with the provisions of the Loan Agreement, the provisions of the Loan Agreement are hereby incorporated herein by reference,and in the event of any conflict or inconsistency between this Guaranty and the Loan Agreement, the applicable provision of the Loan Agreement shallcontrol, govern and be given effect. Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in theLoan Agreement or other relevant Loan Document (as defined in the Loan Agreement). This Guaranty is secured by the Collateral granted to the Lenderby each Guarantor in the Loan Documents. 2. Each Guarantor hereby jointly and severally guarantees the full, prompt and unconditional payment when due of each and everyLiability of Borrowers to Lender, now existing or hereafter incurred, whether matured or unmatured, and the full, prompt, and unconditional performanceof every term and condition of any transaction to be kept and performed by each of US Borrower and Canadian Borrower to Lender. This Guaranty is aprimary obligation of each Guarantor and shall be a continuing inexhaustible Guaranty without limitation as to the amount or duration and may not berevoked except by notice (the "Notice") in writing to Lender received at least thirty (30) days prior to the date set for such revocation; provided, however,no Notice shall affect the liability under this Guaranty for any such Liability of Borrowers arising prior to the date set for revocation whether made beforeor after the Notice.  3. Each Guarantor hereby represents and warrants the following: (A) Each Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware orNevada or the Province of Nova Scotia, as applicable. (B) Each Guarantor has the power to execute, deliver and carry out the terms and provisions of this Guaranty. This Guaranty has beenduly executed and delivered by each Guarantor and constitutes such Guarantor's binding, valid and enforceable obligation, enforceable in accordancewith its terms, except as enforcement thereof may be limited, modified or prevented by any law relating to bankruptcy, insolvency or the like. (C) Each Guarantor is not in default in any material respect under any indenture, mortgage, deed of trust or other instrument to whichsuch Guarantor is a party or by which such Guarantor or any of such Guarantor's assets may be bound. The execution and delivery of this Guaranty, theconsummation of the transactions herein contemplated and the compliance with the provisions hereof will not violate any law or regulation, or any orderor decree of any court or governmental instrumentality, will not conflict with, or result in the material breach of, or constitute a material default under, anyindenture, mortgage, deed of trust, agreement or other instrument to which any Guarantor is a party or by which any Guarantor may be bound, or result inthe creation or imposition of any lien, charge or encumbrance upon any of the property of any Guarantor thereunder. (D) Each Guarantor's most recent financial statements furnished to Lender accurately represent in all material respects such Guarantor'sfinancial condition as of the date thereof, and there has been no material adverse change in such condition from the date of said financial statements to thedate hereof. (E) Each Guarantor has relied upon such Guarantor's own due diligence in making such Guarantor's own independent evaluation andappraisal of Borrowers, each Borrower's business affairs and financial condition including the Liability of Borrowers to Lender; each Guarantor willcontinue to be responsible for making such Guarantor's own independent appraisal of such matters; and no Guarantor has relied upon and will nothereafter rely upon Lender for information regarding Borrowers, any Collateral (as defined in the Loan Agreement) or the Liability of Borrowers to Lender. 4. Without incurring responsibility to each Guarantor and without impairing or releasing any Guarantor's obligation hereunder, Lender may atany time and from time to time, without the consent of or notice to any Guarantor, upon any terms or conditions: (A) Change the manner, place or terms of payment (including changes to interest rates, fees and charges) and/or change or extend fromtime to time the time for payment or renew or alter the Liability of Borrowers or any security therefor, and this Guaranty shall apply to the Liability ofBorrowers as so changed, extended, renewed or altered; (B) Sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoeverat any time pledged, mortgaged or in which a lien is given to secure the Liability of Borrowers or the indebtedness of any of the Obligors, as such term isdefined below, to Lender; (C) Exercise or refrain from exercising any rights against any Borrower or any surety, endorser or guarantor (including any Guarantor)(collectively, the "Obligors") or against any security, or otherwise act or refrain from acting; (D) Release, settle or compromise any Liability of Borrowers or any obligation of any Obligor, dispose of any security therefor, with orwithout consideration, or any liability incurred directly or indirectly in respect thereof or hereof; - 2 - (E) Apply any sums by whomsoever paid or howsoever realized to any Liability of Borrowers; and (F) Take or refrain from taking any or all actions against any Borrower, any Obligor, or any of the security, whether similar or dissimilarto the foregoing. 5. (A) No invalidity, irregularity or unenforceability of all or any part of the Liability of Borrowers, failure to perfect on or the impairment or loss ofany security therefor, whether caused by any actions or inactions of Lender, or otherwise, shall affect, impair or be a defense to this Guaranty. (B) Each Guarantor hereby waives any right of subrogation to any security. (C) Each Guarantor hereby expressly reserves and retains each and every claim, right or remedy any Guarantor may now have orhereafter acquire against any Borrower or any other Guarantor that arises hereunder and/or as a result of any Guarantor's performance hereunder including,without limitation, any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim,right or remedy of Lender against any Borrower or any security which Lender now has or hereafter acquires, whether or not such claim, right or remedyarises in equity, under contract, by statute, under common law or otherwise; provided, however, that each and every such claim, right or remedy is herebysubordinated to, and may not be exercised or enforced by any Guarantor unless and until payment in full in legal tender of, all of the then outstandingLiability of Borrowers. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence, such amount shall be held intrust for the benefit of Lender, and shall forthwith be paid to Lender to be credited and applied to the Liability of Borrowers and all other amounts payableunder this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Agreement, or to be held as Collateral for any Liability ofBorrowers or other amounts payable under this Guaranty thereafter arising. 6. Upon an Event of Default, as defined in the Loan Agreement, under the Liability of Borrowers, Lender may, without notice to any Guarantor,declare the outstanding Liability of Borrowers immediately due and payable by written notice to Borrowers and demand payment from Guarantors in awritten notice (provided, that any such written notice may be contained in an electronically transmitted PDF and combined with other notices). If Lenderrefers this Guaranty to an attorney for collection, Guarantors shall pay Lender any and all reasonable attorneys' fees and other costs and expenses incurredby Lender in enforcing Lender's rights hereunder. 7. (A) In addition to all liens upon and rights of setoff against the monies, securities or other property of any Guarantor given to Lender by law,Lender shall have, with respect to each Guarantor's indebtedness to Lender under this Guaranty and to the extent permitted by law, a contractualpossessory security interest in and a right of setoff against, and each Guarantor hereby assigns, conveys, delivers, pledges and transfers to Lender all ofsuch Guarantor's right, title and interest in and to, all deposits, moneys, securities, and other property of such Guarantor now or hereafter in the possessionof or on deposit with Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held forsafekeeping or otherwise, excluding however all IRA, Keogh and trust accounts. Every such security interest and right of setoff may be exercised withoutdemand upon or notice to any Guarantor at any time after the occurrence and during the continuance of an Event of Default. No security interest or rightof setoff shall be deemed to have been waived by any act or condition on the part of Lender or by any neglect to exercise such right of setoff or to enforcesuch security interest or by any delay in so doing. Every right of setoff and security interest shall continue in full force and effect until such right of setoffor security interest is specifically waived or released by an instrument in writing executed by Lender or payment in full in legal tender of all Liability ofBorrowers, whichever occurs first. - 3 - (B) In the event that for any reason whatsoever any Borrower is now or shall hereafter become indebted for borrowed money to anyGuarantor in the event of insolvency and consequent liquidation of the assets of any Borrower through bankruptcy, by an assignment for the benefit ofcreditors, by voluntary liquidation or otherwise, such Guarantor agrees that the amount of such indebtedness and all interest thereon shall at all times besubordinate as to lien, time of payment and in all respects to all sums, including principal and interest and other amounts, at any time owing on theLiability of Borrowers to Lender, and such Guarantor shall not be entitled to enforce or receive payment thereof until the Liability of Borrowers to Lenderis paid in full, whether or not any Borrower becomes insolvent. For clarity, intercompany advances between the Loan Parties are book entries, are notloans for money borrowed, are not evidenced by notes or other instruments and are periodically adjusted for intercompany purposes. In the event ofinsolvency and consequent liquidation of the assets of any Borrower through bankruptcy, by an assignment for the benefit of creditors, by voluntaryliquidation or otherwise, the assets of such Borrower applicable to the payment of the claims of both Lender and Guarantors shall be paid to Lender andshall be applied first by Lender to the Liability of Borrowers to Lender. Each Guarantor does hereby assign to Lender as additional Collateral all claimswhich such Guarantor may have or acquire against any Borrower or any other Guarantor or against any assignees or trustee in bankruptcy of any Borroweror any Guarantor, provided, however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of theoutstanding Liability of Borrowers to Lender until such assignment is specifically waived or released by an instrument in writing executed by Lender orpayment in full in legal tender of all Liability of Borrowers, whichever occurs first. (C) If a claim is ever made upon Lender for repayment or recovery of any amount or amounts received by Lender in payment or onaccount of any of the Liability of Borrowers and Lender repays all or part of said amount by reason of (i) any judgment, decree or order of any court oradministrative body having jurisdiction over Lender or any of its property, or (ii) any settlement or compromise of any such claim effected by Lender withany such claimant (including any Borrower), then, and in such event, each Guarantor agrees that any such judgment, decree, order, settlement orcompromise shall be binding upon it, notwithstanding any revocation hereof or the cancellation of any instrument evidencing any Liability of Borrowers,and each Guarantor shall be liable to Lender under this Guaranty for the amount so repaid or recovered to the same extent as if such amount had neveroriginally been received by Lender. (D) This Guaranty shall remain in full force and effect, and shall be automatically reinstated, without any further action on the part of theLender, if Lender is required, in any bankruptcy, insolvency or other proceeding involving any Borrower, to return or rescind any payment made to, orvalue received by, Lender from or for the account of any Borrower. This paragraph shall remain in full force and effect notwithstanding any revocation ortermination of this Guaranty or release by Lender of any Guarantor. (E) Settlement of any claim by Lender against any Borrower or any other Obligor, whether in any proceedings or not, and whethervoluntary or involuntary, shall not reduce the amount due under this Guaranty except to the extent of any amount actually received by Lender under anysuch settlement that is applied to the Liability of Borrowers. (F) All rights, powers and remedies of Lender hereunder and under any agreement(s) between any Borrower or any other Obligor andLender, now, or at any time hereafter in force, shall be cumulative and not alternative, and shall be in addition to all rights, powers and remedies given toLender by law or at equity. (G) No delay on the part of Lender in exercising any of its options, powers or rights or partial or single exercise thereof shall constitute awaiver thereof. No waiver of any of Lender's rights hereunder and no modification or amendment of this Guaranty shall be deemed to be made by Lenderunless the same shall be in writing, executed on behalf of Lender by a duly authorized officer, and each such waiver, if any, shall apply only with respectto the specific instance involved, and shall in no way impair the rights of Lender or the obligations of any Guarantor to Lender in any other respect at anyother time. (H) Each Guarantor hereby authorizes Lender, in its sole discretion, to disclose any financial or other information about such Guarantorto any present, future or prospective participant or successor in interest in any loan, Advance or other financial accommodation to US Borrower orCanadian Borrower from Lender, or any regulatory body or agency having jurisdiction over Lender. - 4 - (I) Each Guarantor shall indemnify, defend and hold Lender and any member, officer, director, investor, bank group member, official,agent, employee and attorney of Lender, and their respective heirs, successors and assigns (collectively, the "Indemnified Parties"), harmless from anyclaim, cause of action, demand, or other matter that is brought or threatened against any Indemnified Party by any Borrower, or by any third party (exceptto the extent caused by the gross negligence or willful misconduct of any of the Indemnified Parties), including, without limitation, any receiver, trustee,or other person appointed in any bankruptcy, insolvency, or other proceeding involving any Borrower, and from all costs and expenses (including,without limitation, attorney's fees and expenses) relating to or arising out of Lender's relationship with any Borrower (each of which may be defended,compromised, settled, or pursued with counsel of Lender's selection) but at such Guarantor's risk and expense. This paragraph shall remain in full force andeffect notwithstanding any termination of this Guaranty or release by Lender of any Guarantor. (J) Each Guarantor's obligation to pay and perform in accordance with the terms of this Guaranty, any remedy for the enforcementthereof and/or the amount of the Liability of Borrowers shall not be impaired, modified, changed, stayed, released or limited in any manner whatsoever byany impairment, modification, change, discharge, release, limitation or stay of the Liability of Borrowers or the obligations of any of the Obligors or anyObligor's estate in bankruptcy or any remedy for the enforcement thereof, resulting from the operation of any present or future provision of the federalBankruptcy Code, the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada), the Winding-Up and RestructuringAct (Canada), or other statute, state, provincial or federal, or from the decision of any court interpreting any of the same, and each Guarantor shall beobligated under this Guaranty and the amount of the Liability of Borrowers shall for the purposes of this Guaranty be determined as if no such impairment,stay, modification, change, discharge, release or limitation had occurred. (K) Each Guarantor waives notice of acceptance of this Guaranty and notice of any Liability of Borrowers to which notice may applyand waives notice of default, non-payment, partial payment, presentment, demand, protest, notice of protest or dishonor and all other notices to Borrowersto which such Guarantor might otherwise be entitled or which might be required by law to be given to such Guarantor by Lender. (L) This Guaranty shall be binding upon each Guarantor and its successors and shall inure to the benefit of Lender, its successors andassigns. This Guaranty shall be construed in accordance with the laws of the State of New Jersey, without regard to principles of conflicts of law. (M) Each Guarantor hereby irrevocably consents to the non-exclusive jurisdiction of the courts of the State of New Jersey or any federalcourt in such State in connection with any action or proceeding arising out of or related to this Guaranty. Each Guarantor hereby irrevocably waives, tothe fullest extent permitted by applicable law, any right such Guarantor may have to assert the doctrine of "forum non conveniens" or to object to venue tothe extent any proceeding is brought in the State of New Jersey in accordance with this paragraph. In any such litigation, each Guarantor waives personalservice of any summons, complaint or other process and agrees that service may be made by certified or registered mail to such Guarantor, at the addressprovided herein. Each Guarantor agrees that any action brought by any Guarantor against Lender shall be commenced and maintained only in a court inthe federal judicial district or county in which Lender has its principal place of business in New Jersey. Nothing in this Guaranty restricts the right ofLender to bring legal actions or other proceedings in any other competent jurisdiction. (N) Nothing herein shall in any way be deemed to limit the ability of Lender to serve any such writs, process or summonses in any othermanner permitted by applicable law or to obtain jurisdiction over any Guarantor in such other jurisdictions, and in such manner as may be permitted byapplicable law. (O) Each Guarantor agrees to furnish to Lender within 110 days of the end of each year a financial statement in form satisfactory toLender and a copy of such Guarantor's federal, provincial and state income tax returns (including all schedules thereto), as applicable, within thirty (30)days of filing same. (P) If Guarantor consists of more than one person, the liabilities and obligations of each such person shall be joint and several and theword "Guarantor" means each of them, any of them and/or all of them. (Q) As used herein, the singular shall include the plural, the plural shall include the singular and the use of the masculine, feminine orneuter gender shall include all genders. - 5 - (R) EACH GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION UNDER OR RELATING TO THIS GUARANTY AND TOTHE LIABILITY OF BORROWER TO LENDER.[signature page follows] - 6 - IN WITNESS WHEREOF, each Guarantor has executed this Guaranty as of the date first above written. WITNESS OR ATTEST:SPAR MARKETING FORCE, INC., a Nevada corporation By: By: Name: Name: James R. Segreto Title: Title: Chief Financial Officer, Secretary and Treasurer WITNESS OR ATTEST:SPAR CANADA GROUP, an unlimited company organized under thelaws of Nova Scotia By: By: Name: Name: James R. Segreto Title: Title: Chief Financial Officer, Secretary and Treasurer WITNESS OR ATTEST:SPAR GROUP, INC., a Delaware corporation By: By: Name: Name: James R. Segreto Title: Title: Chief Financial Officer, Secretary and Treasurer WITNESS OR ATTEST:SPAR ACQUISITION, INC., a Nevada corporation By: By: Name: Name: James R. Segreto Title: Title: Chief Financial Officer, Secretary and Treasurer WITNESS OR ATTEST:SPAR CANADA, INC., a Nevada corporation By: By: Name: Name: James R. Segreto Title: Title: Chief Financial Officer, Secretary and Treasurer WITNESS OR ATTEST:SPAR TRADEMARKS, INC., a Nevada corporation By: By: Name: Name: James R. Segreto Title: Title: Chief Financial Officer, Secretary and Treasurer  WITNESS OR ATTEST:SPAR ASSEMBLY & INSTALLATION, INC., a Nevadacorporation By: By: Name: Name: James R. Segreto Title: Title: Chief Financial Officer, Secretary and Treasurer Exhibit 10.47 COLLATERAL PLEDGE AGREEMENT THIS COLLATERAL PLEDGE AGREEMENT (as amended, modified, supplemented, substituted, extended or renewed from time to time, this"Agreement") is dated as of April 10, 2019, by SPAR GROUP, INC., a Delaware corporation, SPAR ACQUISITION, INC., a Nevada corporation, andSPAR MARKETING FORCE, INC., a Nevada corporation (collectively, "Obligors", and each individually, an "Obligor"), in favor of NORTH MILLCAPITAL LLC, a Delaware limited liability company ("Secured Party"). Pursuant to a certain Loan and Security Agreement dated as of even date hereof (as amended, modified, supplemented, substituted, extended orrenewed from time to time, the "Loan Agreement"), Secured Party is extending credit accommodations to each of SPAR MARKETING FORCE, INC., aNevada corporation, and SPAR CANADA COMPANY, an unlimited company organized under the laws of Nova Scotia (collectively, "Borrowers"). Each Obligor is the record and beneficial owner of the outstanding shares of capital stock of the companies listed in Exhibit A attached heretoand made a part hereof as set forth on such Exhibit A (such companies, collectively called "Issuers", and each individually, an "Issuer"). As a condition to extending and thereafter continuing to extend credit to Borrowers, Secured Party has required the execution and delivery byeach Obligor of a Corporate Guaranty dated as of even date hereof, guaranteeing the payment and performance of all present and future obligations ofBorrowers to Secured Party, including, without limitation, those arising under or pursuant to the Loan Agreement (as amended, modified, supplemented,substituted, extended or renewed from time to time, the "Guaranty"). As a further condition to same, Secured Party has required the execution anddelivery of this Agreement by each Obligor. All capitalized terms used herein and not defined shall have the meanings ascribed to such terms in the Loan Agreement. ACCORDINGLY, in consideration of the mutual covenants contained in the Loan Agreement and herein, the parties hereby agree as follows: 1. Security Interest and Collateral. To secure the payment and performance of each and every debt, liability and obligation of every type anddescription which any Borrower or any Obligor may now or at any time hereafter owe to Secured Party (whether such debt, liability or obligation nowexists or is hereafter created or incurred, and whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary,liquidated or unliquidated, or joint, several or joint and several; all such debts, liabilities and obligations being herein collectively referred to as the"Obligations"), each Obligor hereby grants Secured Party a security interest (herein called the "Security Interest") in all shares of the capital stock ofIssuers described in Exhibit A attached hereto and made a part hereof next to such Obligor's name, whether now owned or hereafter acquired by suchObligor (the "Shares"), together with all additions, exchanges, replacements therefor, dividends and distributions thereon, all rights in connection withsuch property and all proceeds thereof (collectively, the "Collateral"). However, Collateral does not include any equity in, financial asset respecting, orasset of any of the following direct or indirect subsidiaries of SPAR Group, Inc. ("SGRP"): (i) Resource Plus of North Florida, Inc., Mobex of North Florida,Inc., and Leasex, LLC., and their respective subsidiaries; (ii) NMS Retail Services ULC, which is an inactive Nova Scotia ULC; (iii) SPAR GroupInternational, Inc.; (iv) SPAR FM Japan, Inc.; (v) SPAR International, Ltd.; (vi) each other direct or indirect subsidiary of SGRP formed outside of theUnited States or Canada; and (vii) any other entity in which any such subsidiary is a partner, joint venture or other equity investor. 2. Representations, Warranties and Covenants. Each Obligor represents, warrants and covenants that: (a) The Shares represent one hundred percent (100%) of the capital stock of each Issuer and are fully paid and non-assessable. 1 (b) Each Obligor shall deliver certificate(s) representing the Shares it owns to Secured Party and shall duly endorse, in blank, each andevery instrument constituting such Collateral by signing on said instrument or by signing a separate document of assignment or transfer, ifrequired by Secured Party. For clarity, the Shares pledged to PNC Bank, National Association (which are being released from such pledge on thedate hereof with the initial Advance under the Loan Agreement) will be delivered directly by PNC Bank, National Association to Secured Party. (c) Each Obligor is the owner of its Collateral free and clear of all liens, encumbrances, security interests and restrictions, except theSecurity Interest and any restrictive legend appearing on any instrument constituting Collateral. (d) Each Obligor will keep the Collateral it owns free and clear of all liens, encumbrances and security interests, except for the SecurityInterest and any restrictive legend appearing on any instrument constituting Collateral. (e) Each Obligor will pay, when due, all taxes and other governmental charges levied or assessed upon or against any Collateral it owns. (f) At any time, upon request by Secured Party, each Obligor will deliver to Secured Party all notices, financial statements, reports orother communications received by such Obligor as an owner or holder of the Collateral it owns. For clarity, intercompany advances between theLoan Parties are book entries and not so evidenced. (g) Each Obligor will upon receipt deliver to Secured Party in pledge as additional Collateral all securities distributed on account of theCollateral it owns such as stock dividends and securities resulting from stock splits, reorganizations and recapitalizations. 3. Rights of Secured Party. Each Obligor agrees that Secured Party may, at any time after the occurrence and during the continuance of anEvent of Default and without notice or demand of any kind, (a) notify the obligor on or issuer of any Collateral to make payment to Secured Party of anyamounts due or distributable thereon; (b) in such Obligor's name or Secured Party's name, enforce collection of any Collateral by suit or otherwise, orsurrender, release or exchange all or any part of it, or compromise, extend or renew for any period any obligation evidenced by the Collateral; (c) receiveall proceeds of the Collateral; and (d) hold any increase or profits received from the Collateral as additional security for the Obligations, except that anymoney received from the Collateral shall, at Secured Party's option, be applied in reduction of the Obligations, in such order of application as SecuredParty may determine, or be remitted to Obligors. For clarity, so long as no Event of Default has occurred and is continuing, the applicable Obligor shallhave the right, from time to time, to vote and give consents with respect to the Collateral, or any part thereof for all purposes not inconsistent with theprovisions of this Agreement, the Loan Agreement or any other Loan Document; provided, however, that no vote shall be cast, and no consent shall begiven or action taken, which would have the effect of impairing the position or interest of Secured Party in respect of the Collateral or which wouldauthorize, effect or consent to (unless and to the extent not prohibited by this Agreement or by the Loan Agreement or any other Loan Document): (i) thedissolution or liquidation, in whole or in part, of an Issuer; (ii) the consolidation or merger of an Issuer with any other entity; (iii) the sale, disposition orencumbrance of all or substantially all of the assets of an Issuer, except for liens in favor of Secured Party and the Permitted Liens; (iv) any change in theauthorized number of shares, the stated capital or the authorized share capital of an Issuer or the issuance of any additional shares of its capital stock; or(v) the alteration of the voting rights with respect to the capital stock of an Issuer. 4. Event of Default. The occurrence of an Event of Default (as defined in the Loan Agreement) shall constitute an event of default under thisAgreement. 5. Remedies upon Event of Default. Upon the occurrence of an Event of Default and at any time thereafter during its continuance, SecuredParty may exercise any one or more of the following rights or remedies: (a) exercise all voting and other rights as a holder of the Collateral; (b) exerciseand enforce any or all rights and remedies available upon default to a secured party under the Uniform Commercial Code as in effect from time to time inthe State of New Jersey, including the right to offer and sell the Collateral privately to purchasers who will agree to take the Collateral for investment andnot with a view to distribution and who will agree to the imposition of restrictive legends on the certificates representing the Collateral, and the right toarrange for a sale which would otherwise qualify as exempt from registration under the Securities Act of 1933; and if notice to Obligors of any intendeddisposition of the Collateral or any other intended action is required by law in a particular instance, such notice shall be deemed commercially reasonableif given at least ten (10) calendar days prior to the date of intended disposition or other action; (c) exercise or enforce any or all other rights or remediesavailable to Secured Party in the Loan Agreement or any other Loan Document or by law or agreement against the Collateral, against any Obligor oragainst any other person or property. For clarity, none of the Collateral is registered under any federal or state securities law, and any sale or disposition ofany Collateral must be made in accordance with all applicable law. 2 EACH OBLIGOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS SECURED PARTY AS THE PROXY AND ATTORNEY-IN-FACT OFSUCH OBLIGOR WITH RESPECT TO THE COLLATERAL WITH THE RIGHT, ONLY UPON AND DURING THE CONTINUANCE OF AN EVENT OFDEFAULT, TO TAKE ANY OF THE FOLLOWING ACTIONS: (I) TRANSFER AND REGISTER IN ITS NAME OR IN THE NAME OF ITS NOMINEE THEWHOLE OR ANY PART OF THE COLLATERAL, (II) VOTE THE SHARES, WITH FULL POWER OF SUBSTITUTION TO DO SO, (III) RECEIVE ANDCOLLECT ANY DIVIDEND OR OTHER PAYMENT OR DISTRIBUTION IN RESPECT OF OR IN EXCHANGE FOR THE COLLATERAL OR ANYPORTION THEREOF, TO GIVE FULL DISCHARGE FOR THE SAME AND TO INDORSE ANY INSTRUMENT MADE PAYABLE TO SUCH OBLIGORFOR SAME, (IV) EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF THE COLLATERAL WOULDBE ENTITLED (INCLUDING, WITH RESPECT TO THE SHARES, GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS,CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS), AND (V) TAKE ANY ACTION AND TO EXECUTE ANYINSTRUMENT WHICH SECURED PARTY MAY DEEM NECESSARY OR ADVISABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT.THE APPOINTMENT OF SECURED PARTY AS PROXY AND ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND SHALL BEIRREVOCABLE UNTIL THE TERMINATION OF THIS AGREEMENT. SUCH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUTTHE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY SHARES ON THE RECORD BOOKS OF THE ISSUER THEREOF) BYANY PERSON (INCLUDING THE ISSUER OF THE SHARES OR ANY OFFICER OR AGENT THEREOF). NOTWITHSTANDING THE FOREGOING,SECURED PARTY SHALL NOT HAVE ANY DUTY TO EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLEFOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO. 6. Loan Agreement Controls. This Agreement has been executed and delivered pursuant to and shall be governed by and construed inaccordance with the provisions of the Loan Agreement, the provisions of the Loan Agreement are hereby incorporated herein by reference, and in theevent of any conflict or inconsistency between this Agreement and the Loan Agreement, the applicable provision of the Loan Agreement shall control,govern and be given effect. For clarity, Obligors are Guarantors and Loan Parties, and Secured Party is Lender, under the Loan Agreement. 3 7. Miscellaneous. Any disposition of the Collateral in the manner provided in Section 5 shall be deemed commercially reasonable. ThisAgreement can be waived, modified, amended, terminated or discharged, and the Security Interest can be released, only explicitly in an authorizationsigned by Secured Party, and, in the case of amendment or modification, in an authorization signed by each Obligor. A waiver signed by Secured Partyshall be effective only in the specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise orenforcement of any of Secured Party's rights or remedies. All rights and remedies of Secured Party shall be cumulative and may be exercised singularly orconcurrently, at Secured Party's option, and the exercise or enforcement of any one such right or remedy shall neither be a condition to nor bar the exerciseor enforcement of any other. All notices to be given to Obligors shall be deemed sufficiently given if delivered to each Obligor in accordance with Section12 of the Loan Agreement at the address set forth in the signature pages hereto or at the most recent address or facsimile number or email shown onSecured Party's records. All requests under Section 9-210 of the Uniform Commercial Code (a) shall be made in a writing signed by a person dulyauthorized by each Obligor, (b) shall be delivered in accordance with Section 12 of the Loan Agreement, (c) shall be deemed to be sent when received bySecured Party and (d) shall otherwise comply with the requirements of Section 9-210. Each Obligor requests that Secured Party respond to all suchrequests which on their face appear to come from an authorized individual and releases Secured Party from any liability for so responding. Secured Party'sduty of care with respect to Collateral in its possession (as imposed by law) shall be deemed fulfilled if Secured Party exercises reasonable care inphysically safekeeping such Collateral or, in the case of Collateral in the custody or possession of a bailee or other third person, exercises reasonable carein the selection of the bailee or other third person, and Secured Party need not otherwise preserve, protect, insure or care for any Collateral. Secured Partyshall not be obligated to preserve any rights any Obligor may have against prior parties, to exercise at all or in any particular manner any voting rightswhich may be available with respect to any Collateral, to realize on the Collateral at all or in any particular manner or order, or to apply any cash proceedsof Collateral in any particular order of application. Each Obligor will reimburse Secured Party for all expenses (including reasonable attorneys' fees andlegal expenses, including those of in-house counsel) incurred by Secured Party for in the protection, defense or enforcement of the Security Interest,including expenses incurred in any litigation or bankruptcy or insolvency proceedings. This Agreement shall become effective upon execution anddelivery by each Obligor and acceptance by Secured Party, and shall be binding upon and inure to the benefit of each Obligor and Secured Party and theirrespective heirs, representatives, successor and assigns, as applicable, and shall take effect when signed by each Obligor and delivered to Secured Party.Each Obligor waives notices of Secured Party's acceptance hereof. If any provision or application of this Agreement is held unlawful or unenforceable inany respect, such illegality or unenforceability shall not affect other provisions or applications which can be given effect and this Agreement shall beconstrued as if the unlawful or unenforceable provision or application had never been contained herein or prescribed hereby. All representations andwarranties contained in this Agreement shall survive the execution, delivery and performance of this Agreement and the creation and payment of theObligations. If this Agreement is signed by more than one person as Obligor, the term "Obligor" shall refer to each of them separately and to both or all ofthem jointly; all such persons shall be bound both severally and jointly with the other(s); and all property described in Section 1 shall be included as partCollateral, whether it is owned jointly by both or all Obligors or is owned in whole or in part by one (or more) of them. This Agreement shall be governedby the internal laws (other than conflict laws) of the State of New Jersey and, unless the context otherwise requires, all terms used herein which are definedin Articles 1, 8 and 9 of the Uniform Commercial Code, as in effect in the State of New Jersey, from time to time, shall have the meanings therein stated.The parties hereto hereby (a) consent to the personal jurisdiction of the state and federal courts located in the State of New Jersey in connection with anycontroversy related to this Agreement, (b) waive any argument that venue in any such forum is not convenient, (c) agree that any litigation initiated bySecured Party or any Obligor in connection with this Agreement or the other Loan Documents may be venued in either the state or federal courts locatedin Mercer County, New Jersey and (d) agree that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in otherjurisdictions by suit on the judgment or in any other manner provided by law. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTIONOR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT. [signature page follows] 4 IN WITNESS WHEREOF, each Obligor and Secured Party has executed this Agreement as of the date first above written. SPAR GROUP, INC. By: Name: James R. Segreto Title: Chief Financial Officer, Secretary and Treasurer Address for notices: 333 Westchester AvenueSouth Building, Suite 204White Plains, New York 10604ATTN: James R. Segreto, CFOTelephone: 1-914-332-4100Telecopy: 1-914-332-0741 SPAR ACQUISITION, INC. By: Name: James R. SegretoTitle: Chief Financial Officer, Secretary and Treasurer Address for notices: 333 Westchester AvenueSouth Building, Suite 204White Plains, New York 10604ATTN: James R. Segreto, CFOTelephone: 1-914-332-4100Telecopy: 1-914-332-0741 SPAR MARKETING FORCE, INC. By: Name: James R. Segreto Title: Chief Financial Officer, Secretary and Treasurer Address for notices: 333 Westchester AvenueSouth Building, Suite 204White Plains, New York 10604ATTN: James R. Segreto, CFOTelephone: 1-914-332-4100Telecopy: 1-914-332-0741  Accepted and Agreed to: NORTH MILL CAPITAL LLC, as Secured Party By: Name: Beatriz HernandezTitle: Executive Vice President  EXHIBIT A Description of Collateral: Name of ObligorName of IssuerClass ofSharesNumber ofSharesPercentage ofOutstandingShares PledgedCertificateNumber(s)SPAR Group, Inc.SPAR Acquisition, Inc.Common1,000100%16SPAR Group, Inc.SPAR Canada, Inc.Common100100%1SPAR Acquisition, Inc.SPAR Marketing Force, Inc.Common72100%4SPAR Acquisition, Inc.SPAR Trademarks, Inc.Common72100%3SPAR Marketing Force, Inc.SPAR Assembly & Installation,Inc.Common100100%1 Exhibit 10.48 COLLATERAL ASSIGNMENT(Security Agreement)(Trademarks)Effective: April 10, 2019 WHEREAS, SPAR TRADEMARKS, INC., a Nevada corporation ("Assignor"), located and doing business at 333 Westchester Avenue, SouthBuilding, Suite 204, White Plains, New York 10604, is the owner of the certain trademarks which are registered in the United States Patent and TrademarkOffice. WHEREAS, NORTH MILL CAPITAL LLC, a Delaware limited liability company ("Assignee"), located and doing business 821 AlexanderRoad, Suite 103, Princeton, New Jersey 08540, has extended and may hereafter extend credit to Assignor and/or its affiliates, and Assignor has executedand delivered to Assignee a certain Loan and Security Agreement dated as of April 10, 2019 (as amended, modified, supplemented, substituted, extendedor renewed from time to time, the "Loan Agreement") pursuant to which Assignor grants to Assignee a security interest in substantially all assets ofAssignor to secure all of the Obligations (as defined in the Loan Agreement) and Assignor may hereafter execute and deliver to Assignee other similarsecurity agreements; and WHEREAS, in order to further secure Assignor's present and future Obligations (as defined in the Loan Agreement) to Assignee, Assignor wishesto grant to Assignee a security interest in the Collateral (as defined below) and the goodwill and certain other assets with respect to the Collateral, asfurther set forth herein. NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, Assignor, as additional security for thefull payment and performance of the Obligations, and to further evidence the security interest granted to Assignee pursuant to the Loan Agreement,hereby assigns, sells, transfers, and conveys to Assignee and grants to Assignee a security interest in all of Assignor's right, title and interest in: (a) all state (including common law), federal and foreign trademarks, service marks and tradenames, and application registration of suchtrademarks, service marks and trade names (but excluding any application to register any trademark, service mark or other mark prior to the filing underapplicable law of a verified statement of use (or the equivalent) for such trademark, service mark or other mark to the extent the creation of a securityinterest therein or the grant of a mortgage thereon would void or invalidate such trademark, service mark or other mark) (the "Trademarks"), all licensesrelating to any of the foregoing and all income and royalties with respect to any licenses (including, without limitation, such U.S. marks, names andapplications described in Exhibit A attached hereto), whether registered or unregistered and wherever registered, all rights to sue for past, present or futureinfringement or unconsented use thereof, all rights arising therefrom and pertaining thereto and all reissues, extensions and renewals thereof; (b) all right of action, claims for damages, profits and costs, all other demands for any sum or sums of money whatsoever which it has or mayhave either at law or in equity, against any and all persons, firms, corporations and associations by reason of claims of infringement upon said Trademarks; (c) the entire goodwill of or associated with the business now ore hereafter conducted by Assignor connected with and symbolized by any ofthe aforementioned properties and assets; (d) all general intangibles and all intangible intellectual or other similar property of Assignor of any kind or nature, associated with or arisingout of any of the aforementioned properties and assets and not otherwise described above; (e) all proceeds of any or all of the foregoing (including license royalties, rights to payments, accounts and proceeds of infringement suits) and,to the extent not otherwise included, all payments under insurance (whether or not Assignee is the loss payee thereof) or any indemnity warranty orguaranty payable by reason of loss or damage to or otherwise with respect to the foregoing. - 1 - All of the foregoing items set forth in clauses (a) through (e) are hereinafter referred to collectively as the "Collateral." AND Assignor and Assignee agree as follows: 1. Representations and Warranties. Assignor represents and warrants to Assignee that a true and correct listing of all of the existing Collateralconsisting of U.S. trademarks, service marks, trade names, and all trademark, service mark and trade name applications owned by Assignor, in whole or inpart, is set forth in Exhibit A. 2. Assignor's Obligations. Assignor agrees that, notwithstanding this Collateral Assignment, it will perform and discharge and remain liable forall its covenants, duties, and obligations arising in connection with the Collateral and any licenses and agreements related thereto. Assignee shall have noobligation or liability in connection with the Collateral or any licenses or agreements relating thereto by reason of this Collateral Assignment or anypayment received by Assignee relating to Collateral, nor shall Assignee be required to perform any covenant, duty, or obligation or Assignor arising inconnection with the Collateral or any license or agreement related thereto or to take any other action regarding the Collateral or any such licenses oragreement. Assignor shall have the obligation to maintain, preserve or renew the Trademarks, and take any action to prohibit the infringements orunauthorized use of same by any third party. Assignee shall have no obligation to maintain, preserve or renew the Trademarks, nor to take any action toprohibit the infringements or unauthorized use of same by any third party. 3. Use Prior to Default. Unless and until an Event of Default under, and as defined in or under the Loan Agreement, shall occur and becontinuing, Assignor shall retain the legal and equitable title to the Trademarks and shall have the right to use the Collateral, subject to the terms andcovenants of the Loan Agreement and this Collateral Assignment. 4. Remedies Upon Default. Whenever any Event of Default under and defined in the Loan Agreement shall occur and be continuing, Assignor'srights pursuant to Section 2 hereof shall terminate and be null and void, and Assignee shall have all the rights and remedies granted to it in such event bythe Loan Agreement or any other Loan Document, which rights and remedies are specifically incorporated herein by reference and made a part hereof.Assignee in such event may collect directly any payments due to Assignor in respect of the Collateral and may sell, license, lease, assign, or otherwisedispose of the Collateral in the manner set forth in the Loan Agreement or in any other Loan Document by Assignor in favor of Assignee. Assignor agreesthat, in the event of any disposition of the Collateral upon any such Event of Default, it will duly execute, acknowledge, and deliver all documentsnecessary or advisable to record title to the Collateral in any transferee or transferees thereof, including, without limitation, valid, recordable assignmentsof the Trademarks. In the event Assignor fails or refuses to execute and deliver such documents, Assignor hereby irrevocably appoints Assignee as itsattorney-in-fact, with power of substitution, to execute, deliver, and record any such documents on Assignor's behalf. For the purpose of enablingAssignee to exercise rights and remedies upon any such Event of Default, Assignee hereby grants to Assignee an irrevocable, non-exclusive license(exercisable without payment of royalty or other compensation to Assignor) to use, assign, license, or sub-license any of the Collateral, now owned orhereafter acquired by Assignor, and wherever the same may be located. 5. Cumulative Remedies. This Collateral Assignment has been entered into in conjunction with the security interest granted to Assignee underthe Loan Agreement. The rights and remedies provide herein are cumulative and not exclusive of any other rights or remedies provided by law. The rightsand remedies provided herein are intended to be in addition to and not in substitution of the rights and remedies provided by the Loan Agreement or anyother agreement or instrument delivered in connection therewith. 6. Amendments and Waivers. This Collateral Assignment may not be modified, supplemented or amended, or any of its provisions waived atthe request of Assignor, without the prior written consent of Assignee. - 2 - 7. Reassignment. At such time as Assignor shall completely satisfy all of the Obligations, Assignee will, at Assignor's request, execute anddeliver to Assignor all deeds, assignments and other instruments as may be necessary or proper to re-vest Assignor full title to the Collateral, subject todisposition thereof which may have been made by Assignee pursuant hereto. 8. Severability. If any clause or provision of this Collateral Assignment shall be held invalid or unenforceable, in whole or in part, in anyjurisdiction, such invalidity or unenforceability shall attach only to such clause or provision, or part thereof, and shall not in any manner affect any otherclause or provision in any jurisdiction. 9. Notices. All notices, requests and demands to or upon Assignor or Assignee under this Collateral Assignment shall be given in the mannerprescribed in the Loan Agreement. 10. Governing Law. This Collateral Assignment shall be governed by, construed, applied and enforced in accordance with the substantive lawsof the State of New Jersey and the United States of America as applicable. [signature page follows] - 3 - IN WITNESS WHEREOF, the parties have entered into this Collateral Assignment as of the date first above written. WITNESS/ATTEST:SPAR TRADEMARKS, INC., as Assignor By: Name: James R. Segreto Title: Chief Financial Officer, Secretary andTreasurer NORTH MILL CAPITAL LLC, as Assignee By: Name: Beatriz HernandezTitle: Executive Vice President  Exhibit A Trademarks U.S. Trademarks TrademarkCountryApp. No.Reg. No.Reg. DateNATIONAL ASSEMBLYSERVICESUnited States of America85085181399242112-Jul-2011SPARUnited States of America73521305135712827-Aug-1985SPARUnited States of America73619782144190909-Jun-1987SPAR & DesignUnited States of America73824216159727522-May-1990SPEED TO SHELF SPAR GROUP,INC. & DesignUnited States of America78307083315601717-Oct-2006  STATE OF: : SS.COUNTY OF: Before me this ___ day of ________, 2019, personally appeared James R. Segreto, to me personally known, and acknowledged to methat he is the Chief Financial Officer, Secretary and Treasurer of SPAR Trademarks, Inc. and acknowledged the foregoing instrument to be the freeact and deed of said corporation.  STATE OF NEW JERSEY: : SS.COUNTY OF MERCER: Before me this ________ day of ______________, 2019 personally appeared Beatriz Hernandez, the Executive Vice President ofNorth Mill Capital LLC, to me personally known, and acknowledged to me that she is an officer, and acknowledged she was authorized to execute anddeliver the foregoing instrument on behalf of said limited liability company.  Exhibit 21.1 SPAR Group, Inc.List of Subsidiaries 100 % Owned Subsidiaries State or Country of Incorporation SPAR Acquisition, Inc.NevadaSPAR Assembly & Installation, Inc. (f/k/a SPAR National Assembly Services, Inc.)NevadaSPAR Canada CompanyNova Scotia, CanadaSPAR Canada, Inc.NevadaSPAR Group International, Inc.NevadaSPAR, Inc.NevadaSPAR International Ltd.Cayman IslandsSPAR Marketing Force, Inc.NevadaSPAR Trademarks, Inc.NevadaSPAR Merchandising Romania, Ltd. (inactive)RomaniaSPAR China Ltd.ChinaSPAR FM Japan, Inc.JapanSPAR (Shanghai) Field Marketing Ltd. (inactive)ChinaSGRP Brasil Participações Ltda. ("SPAR Holdings")BrazilNMS Holdings, Inc.NevadaNMS Retail Services, ULCNova Scotia, Canada 51% Owned Subsidiaries State or Country of Incorporation National Merchandising Services, LLCNevadaResource Plus of North Florida, Inc. (RPI")*FloridaOwns 70% BDA Resources, LLCFloridaLeasex, LLC.FloridaMobex of North Florida, Inc.FloridaSGRP Meridian (Pty), Ltd.South AfricaOwns 51% of CMR-Meridian (Pty) Ltd.South AfricaSPARFACTS Australia (Pty), Ltd.AustraliaSPAR (Shanghai) Marketing Management Company Ltd.ChinaOwns 100% of UnilinkChinaOwns 75.5% of SPAR DSI Human Resource CompanyChinaSPAR TODOPROMO, SAPI, de CVMexicoSPAR NDS Tanitim Ve Danismanlik A.S.TurkeySPAR KROGNOS Marketing Private Limited IndiaPreceptor Marketing Services Private LimitedIndiaSPAR Brasil Serviços de Merchandising e Tecnologia S.A. ("SPAR Brazil")BrazilSPAR Brasil Serviços LTDA. (f/k/a New Momentum Ltda.) **BrazilSPAR Brasil Serviços Temporários LTDA. (f/k/a New Momentum Serviços Temporários Ltda.) **Brazil * RPI owns a 70% interest in BDA Resource, LLC, a Florida limited liability company** The Company effectively owns slightly more than 51% of this subsidiary since SPAR Brazil owns 99% and SPAR Holdings owns 1% of the equity inthis subsidiary. Exhibit 23.1 Consent of Independent Registered Public Accounting Firm SPAR Group, Inc. and SubsidiariesWhite Plains, New York We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-162657) and Form S-8 (Nos. 333-07377, 333-53400, 333-73000, 333-73002, 333-152706, 333-72998, 333-189964 and 333-228185) of SPAR Group, Inc. and Subsidiaries of our report dated April15, 2019, relating to the consolidated financial statements and the financial statement schedule which appears in this Annual Report on Form 10-K. /s/ BDO USA, LLP. Troy, MichiganApril 15, 2019 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Christiaan M. Olivier, certify that: 1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2018, of SPAR Group, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting. Date: April 15, 2019/s/ Christiaan M. Olivier Christiaan M. Olivier, Chief Executive Officer Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, James R. Segreto, certify that: 1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2018 of SPAR Group, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting. Date: April 15, 2019/s/ James R. Segreto James R. Segreto, Chief Financial Officer,Treasurer and Secretary EXHIBIT 32.1 Certification of Chief Executive Officer Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 In connection with the annual report on Form 10-K for the year ended December 31, 2018 (this "report"), of SPAR Group, Inc. (the "registrant"), theundersigned hereby certifies that, to his knowledge: 1. The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and 2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of theregistrant. /s/ Christiaan M. Olivier Christiaan M. Olivier Chief Executive Officer April 15, 2019 A signed original of this written statement required by Section 906 has been provided to SPAR Group, Inc. and will be retained by SPAR Group, Inc.,and furnished to the Securities and Exchange Commission or its staff upon request. EXHIBIT 32.2 Certification of Chief Financial Officer Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 In connection with the annual report on Form 10-K for the year ended December 31, 2018 (this "report"), of SPAR Group, Inc. (the "registrant"), theundersigned hereby certifies that, to his knowledge: 1. The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and 2. The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of theregistrant. /s/ James R. Segreto James R. Segreto Chief Financial Officer, Treasurer and Secretary April 15, 2019 A signed original of this written statement required by Section 906 has been provided to SPAR Group, Inc. and will be retained by SPAR Group, Inc.,and furnished to the Securities and Exchange Commission or its staff upon request. 

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