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What changed in SPAR Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SPAR Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+140 added−155 removedSource: 10-K (2024-04-01) vs 10-K (2023-04-17)

Top changes in SPAR Group, Inc.'s 2023 10-K

140 paragraphs added · 155 removed · 108 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

20 edited+15 added−13 removed36 unchanged
Biggest changeAs of December 31, 2022, the Company's Asia-Pacific Division's labor force totaled approximately 1,600 including the services of field personnel and others furnished by independent third parties. Foreign subsidiaries employed 295 full-time and 3 part-time employees. The Company's Asia-Pacific Division's field force consisted of approximately 1,300 Field Specialists engaged locally by our foreign subsidiaries in their respective international operations.
Biggest changeForeign subsidiaries employed 209 full-time and part-time employees. The Company's Asia-Pacific Division's field force consisted of approximately 1,660 Field Specialists engaged locally by our foreign subsidiaries in their respective international operations. As of December 31, 2023, the Company's EMEA Division's labor force totaled approximately 5,255 including the services of field personnel and others furnished by independent third parties.
Certain of the Company's "SPAR" trademarks (the "Licensed Marks") are licensed: (i) for use by affiliated companies in the United States royalty free and in perpetuity pursuant to license agreements that commenced in 1999 (ii) for use by its wholly-owned subsidiaries worldwide royalty free and in perpetuity pursuant to informal license arrangements; (iii) for use by joint venture subsidiaries in their respective jurisdictions royalty free pursuant to license agreements for limited terms (executed contemporaneously with their respective joint venture agreements); and (iv) for use by the Independent Field Vendor and Independent Field Administrator respectively providing Field Administrators through 2022 and Field Specialists to the Company domestically in the United States for limited terms and modest royalties pursuant to license agreements with (each as defined below).
Certain of the Company's "SPAR" trademarks (the "Licensed Marks") are licensed: (i) for use by affiliated companies in the United States royalty free and in perpetuity pursuant to license agreements that commenced in 1999 (ii) for use by its wholly-owned subsidiaries worldwide royalty free and in perpetuity pursuant to informal license arrangements; (iii) for use by joint venture subsidiaries in their respective jurisdictions pursuant to license agreements for limited terms (executed contemporaneously with their respective joint venture agreements); and (iv) for use by the Independent Field Vendor and Independent Field Administrator respectively providing Field Administrators through December 2022 and providing Field Specialists to the Company domestically in the United States for limited terms and modest royalties pursuant to license agreements with (each as defined below).
As a result, retailers began looking for third parties who could manage the merchandising process and ensure that the store, in total, was ready for the consumer. The result was the growth of the merchandising and marketing services industry. We believe this industry will continue to grow and is more important today than ever before.
As a result, retailers began looking for third parties who could manage the merchandising process and ensure that the store, in total, was ready for the consumer. The result was the growth of the merchandising and marketing services industry. 5 We believe this industry will continue to grow and is more important today than ever before.
Our Customers The Company currently represents numerous manufacturers and/or retail clients in a wide range of retail segments and stores worldwide, and its customers (which it refers to as "clients") include the following markets: Retail segments served include: ● Grocery and HBA ● Pharmacies ● Discount ● Dollar ● Convenience ● Cash and Carry ● Home Improvement ● Consumer Electronics ● Automotive ● Office Supply ● Mass Merchandisers Manufacturer segments served include: ● Personal Technology ● Consumer Electronics ● Beverage ● Household Products ● Consumables ● Financial Products ● Automotive Aftermarket It is important to note that we also work across all channels: retail and online.
Our Customers The Company currently represents numerous manufacturers and/or retail clients in a wide range of retail segments and stores worldwide, and its customers (which it refers to as "clients") include the following markets: Retail segments served include: ● Mass Merchandisers ● Grocery ● HBA ● Pharmacies ● Discount ● Dollar ● Convenience ● Cash and Carry ● Home Improvement ● Consumer Electronics ● Automotive ● Office Supply ● Independents 9 Manufacturer segments served include: ● Personal Technology ● Consumer Electronics ● Beverage ● Household Products ● Consumables ● Financial Products ● Automotive Aftermarket It is important to note that we also work across all channels: retail and online.
( "RPI" ) 51 % Jacksonville, Florida Canada SPAR Canada Company 100 % Vaughan, Ontario, Canada Mexico SPAR TODOPROMO, SAPI, de CV 51 % Mexico City, Mexico Brazil SPAR Brasil Serviços de Merchandising e Tecnologia S.A. 51 % Sao Paulo, Brazil Asia- Pacific Japan SPAR FM Japan, Inc. 100 % Tokyo, Japan India SPAR KROGNOS Marketing Private Limited 51 % New Delhi, India Preceptor Marketing Services Private Limited 51 % New Delhi, India Australia SPARFACTS Australia (PTY), Ltd. 51 % Melbourne, Australia China SPAR (Shanghai) Marketing Management Company Ltd. 51 % Shanghai, China Europe, Middle East, Africa (EMEA) South Africa SGRP Meridian (PTY), Ltd. 51 % Durban, South Africa The Company tracks and reports certain financial information separately for the individual countries using the same metrics.
("RPI") 51 % Jacksonville, Florida Canada SPAR Canada Inc, 100 % Vaughan, Ontario, Canada Mexico SPAR TODOPROMO, SAPI, de CV 51 % Mexico City, Mexico Brazil SPAR Brasil Serviços de Merchandising e Tecnologia S.A. and its subsidiaries 51 % Sao Paulo, Brazil Asia- Pacific Japan SPAR FM Japan, Inc. 100 % Tokyo, Japan India SPAR KROGNOS Marketing Private Limited 51 % New Delhi, India Preceptor Marketing Services Private Limited 51 % New Delhi, India China SPAR (Shanghai) Marketing Management Company Ltd. 51 % Shanghai, China Europe, Middle East, Africa (EMEA) South Africa SGRP Meridian (PTY), Ltd. and its subsidiaries 51 % Durban, South Africa The Company tracks and reports certain financial information separately for the individual countries using the same metrics.
Substantially all of its Field Administrators in the USA were in turn employed by other independent third parties through December 2022 and by the Company thereafter. As of December 31, 2022, the Company's labor force in the Americas totaled approximately 17,500 including the services of Field Specialists and Field Administrators furnished by independent third parties.
Substantially all of its Field Administrators in the USA were in turn employed by other independent third parties through December 2022 and by the Company thereafter. As of December 31, 2023, the Company's labor force in the Americas totaled approximately 17,032 including the services of Field Specialists and Field Administrators furnished by independent third parties.
Our goal is to be the most creative, energizing and effective global services company that drives sales, margins and operating efficiency for our clients. As of December 31, 2022, we operated in nine countries including the United States, Canada, Mexico, Brazil, South Africa, Australia, China, Japan and India.
Our goal is to be the most creative, energizing and effective global services company that drives sales, margins and operating efficiency for our clients. As of December 31, 2023, we operated in eight countries including the United States, Canada, Mexico, Brazil, South Africa, China, Japan and India.
The Company's global technology systems (including the Co-Owned Software) were maintained and further developed and improved by the Company at its own expense at a cost of $1.5 million in 2022 and $1.2 million in 2021, respectively.
The Company's global technology systems (including the Co-Owned Software) were maintained and further developed and improved by the Company at its own expense at a cost of $1.0 million in 2023 and $1.5 million in 2022, respectively.
In many cases, our clients cross over geographical boundaries and we provide services to support their business around the world. The Company did not have any clients that represented 10% or more of the Company's net revenue for the years ended December 31, 2022 and 2021. -6- Trademarks a nd T echnology Licensing The Company has numerous registered trademarks.
In many cases, our clients cross over geographical boundaries and we provide services to support their business around the world. The Company did not have any clients that represented 10% or more of the Company's net revenue for the years ended December 31, 2023 and 2022. Trademarks and Technology Licensing The Company has numerous registered trademarks.
The APAC division is comprised of Japan, China, Australia and India. The EMEA division is comprised of South Africa. The total business is led and operated from our global headquarters in Auburn Hills, Michigan. Each country also has regional leadership and offices in the respective market. Our approach to the international marketplace has historically been to establish joint ventures.
The EMEA division consists of South Africa. The total business is led and operated from our global headquarters in Auburn Hills, Michigan. Each country also has regional leadership and offices in the respective market. Our approach to the international marketplace has historically been to establish joint ventures.
To capitalize on the growing demand, the Company’s business strategy is focused on four (4) priorities: 1) Grow the Core Business; 2) Introduce or Acquire New Services; 3) Invest in Technology; and 4) Expand Globally.
To capitalize on the growing demand, the Company’s business strategy is focused on three (3) priorities: 1) Grow the Core Business; 2) Introduce or Acquire New Services; and 3) Invest in Technology.
In the Company's America Division, the Company's merchandising, audit, assembly and other services for its clients are performed by Field Specialists, and the services of a significant portion of them (approximately 17,000) were supplied to the Company by an independent vendor (the "Independent Field Vendor").
In the Company's Americas Division, the Company's merchandising, audit, assembly and other services for its clients are performed by Field Specialists, and the services of a significant portion of them (approximately 16,491) were supplied to the Company by an independent vendor (the "Independent Field Vendor").
The following table provides details of the structure of our Domestic and International businesses: Primary Territory Entity Name SGRP Percentage Ownership Principal Office Location Americas United States of America SPAR Marketing Force, Inc. 100 % Auburn Hills, Michigan SPAR Assembly and Installation, Inc. 100 % Auburn Hills, Michigan National Merchandising Services, LLC ("NMS" ) 51 % Fayetteville, Georgia Resource Plus of North Florida, Inc.
The following table provides details of the structure of our Domestic and International businesses: Primary Territory Entity Name SGRP Percentage Ownership Principal Office Location Americas United States of America SPAR Marketing Force, Inc. 100 % Auburn Hills, Michigan SPAR Assembly and Installation, Inc. 100 % Auburn Hills, Michigan Resource Plus of North Florida, Inc.
Our Labor Force Worldwide, the Company utilized a labor force in 2022 of up to approximately 25,000 people depending on seasonality, including the services of Field Specialists and Field Administrators provided by independent third parties.
Our Labor Force Worldwide, the Company utilized a labor force in 2023 of up to approximately 24,288 people depending on seasonality, including the services of Field Specialists and Field Administrators provided by independent third parties.
The Company employed in Americas a labor force of 494 full-time employees and 62 part-time employees engaged in operations.
The Company employed in Americas a labor force of 462 full-time employees and 79 part-time employees engaged in operations.
We believe this approach enables us to bring the breadth of our global capabilities and tools while capitalizing on the strength and importance of local executive leadership and resources. We continue to be excited about our international growth opportunities and the performance of our individual businesses.
We believe this approach enables us to bring the breadth of our global capabilities and tools while capitalizing on the strength and importance of local executive leadership and resources.
The services of a significant portion of the Field Administrators who supervise the Field Specialists (approximately 60) were provided to the Company in the USA by an independent vendor (the "Independent Field Administrator") through December 2022 and by the Company thereafter.
The services of a significant portion of the Field Administrators who supervise the Field Specialists (approximately 60) were provided to the Company in the USA by an independent vendor (the "Independent Field Administrator") through December 2023 and by the Company thereafter. 10 As of December 31, 2023, the Company's Asia-Pacific Division's labor force totaled approximately 2,001 including the services of field personnel and others furnished by independent third parties.
As of December 31, 2022, the Company's EMEA Division's labor force totaled approximately 5,200 including the services of field personnel and others furnished by independent third parties. Foreign subsidiaries employed 648 full-time and 4 part-time employees. The Company's EMEA Division's field force consisted of approximately 4,500 Field Specialists engaged locally by our foreign subsidiaries in their respective international operations.
Foreign subsidiaries employed 713 full-time and part-time employees. The Company's EMEA Division's field force consisted of approximately 4,400 Field Specialists engaged locally by our foreign subsidiaries in their respective international operations.
Certain financial information regarding each of the Company's divisions, which includes their respective net revenues and operating income for each of the years ended December 31, 2022 and 2021, and their respective assets as of December 31, 2022 and 2021, is provided in Note 12 to the Company's Consolidated Financial Statements – Segment Information , below. -5- Our Services The Company currently provides six (6) principal types of services: merchandising services, brand marketing services, new store openings and remodeling services, assembly services, distribution staffing services and retail compliance and price audit services.
Certain financial information regarding each of the Company's divisions, which includes their respective net revenues and operating income for each of the years ended December 31, 2023 and 2022, and their respective assets as of December 31, 2023 and 2022, is provided in Note 12 to the Company's Consolidated Financial Statements – Segment Information, below.
At the heart of this strategy is building upon our strength today and the leadership we have developed in country, regionally and around the world. Our Business Divisions The Company operates under three divisions: Americas, Asia Pacific (APAC), and Europe, Middle East and Africa (EMEA). The Americas division is comprised of the United States, Canada, Mexico and Brazil.
Our objective is to provide technology to field merchandisers, our client partners and our management to make smarter decisions that yield better Company results. 6 Our Business Divisions The Company operates through three divisions: Americas, Asia Pacific (APAC), and Europe, Middle East and Africa (EMEA). The Americas division encompasses the United States, Canada, Mexico, and Brazil.
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Our objective is to provide technology to field merchandisers, our client partners and our management to make smarter decisions that yield better Company results. Expand Globally The Company operates in 9 countries. This provides us the unique ability to offer our services across borders and geographies to drive incremental revenue and operating efficiencies.
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The APAC division includes Japan, China, Australia, and India. As detailed in Note 10 (Related Party Transactions), the company divested its stake in the Australian joint venture (JV), effective December 31, 2023. The financial results for the full years of 2023 and 2022 incorporate the Australian operations, which will be excluded from the financial results after 2023.
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We have many global clients that we work with in multiple countries based on the results we deliver and value we create. We believe our ability to offer multi-country agreements is a unique differentiator for us in the marketplace and we will continue to capitalize on this to grow our business.
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Our Services The Company currently provides six (6) principal types of services: Merchandising and Marketing, Category Management and Setup, Remodel and Retail Transformation, Assembly and Installation, Business Analytics and Insights, Fulfilment and Distribution. 7 Merchandising and Marketing Merchandising and Marketing services are pivotal in ensuring that retail environments are optimally organized, products are well-presented, and promotions are effectively implemented to drive sales and enhance customer engagement.
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At the same time, we are continuously exploring ways to expand our current international businesses. As retail channels continue to consolidate around the globe, we look for unique, compelling financial opportunities to acquire, partner or organically grow into new segments, verticals and geographies.
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This category encompasses a broad range of activities tailored to maintain and elevate the retail experience, including: (i) resets and cut-ins, which involve the strategic rearrangement or introduction of products within the retail space to keep the store layout fresh and aligned with current marketing strategies or consumer trends, (ii) price and inventory audits, which ensures that pricing is accurate and inventory levels are properly maintained, providing valuable insights for inventory management and pricing strategies, (iii) stock replenishment and rotation services, which are essential for keeping shelves well-stocked and products fresh, especially for perishable goods, thereby enhancing customer satisfaction and minimizing waste, (iv) out of stock management, which focuses on minimizing the occurrence of stockouts and efficiently addressing them when they happen, thus reducing lost sales opportunities and maintaining customer trust, (v) promotional event setup, which entails the planning and execution of in-store events or displays to highlight specific products or sales promotions, creating an engaging shopping experience, and (vi) display management, which includes the design, setup, and maintenance of product displays to attract customer attention and promote featured items effectively.
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Merchandising Services Merchandising services consist of regularly scheduled merchandising and marketing services provided at the retail store level for retailers, manufacturers and distributors ("syndicated merchandising services") and "dedicated merchandising services" which are performed for a specific retailer or manufacturer by a dedicated organization, sometimes including a management team.
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Together, these Merchandising & Marketing services are crucial for retail success, ensuring products are visible, accessible, and appealing to customers. Category Management and Setup Category Management and Setup is a comprehensive suite of services aimed at optimizing retail space and product presentation for enhanced customer experience and sales performance.
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The syndicated services are performed for multiple manufacturers and distributors while the dedicated services work exclusively for that retailer or manufacturer. Brand Marketing Services Project services consist primarily of specific in-store services initiated by retailers and manufacturers, such as new product launches, special seasonal or promotional merchandising, focused product support, product recalls, in-store product demonstrations and in-store product sampling.
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This service category includes a variety of tasks such as (i) category and product resets, which involve reorganizing and refreshing product arrangements and categories in-store to maintain relevance and appeal; (ii) planogram maintenance, which ensures that the layout of products on shelves aligns with a strategic plan to optimize retail space and product visibility; (iii) display and shelf services, which focuses on the maintenance and arrangement of shelves and displays to ensure products are presented attractively; (iv) POP (Point of Purchase) installation and management, which involves setting up and managing marketing materials at the point of purchase to capture customer attention and encourage sales; and (v) display setup, which includes the assembly and arrangement of product displays to highlight new products or promotions, creating an engaging shopping environment.
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The Company also performs other project services, such as kiosk product replenishment, inventory control, new store sets and existing store resets, re-merchandising, remodels and category implementations, under annual or stand-alone project contracts or agreements.
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Together, these services work to maintain a coherent and appealing retail environment that enhances product visibility and shopper engagement. Remodel and Retail Transformation Remodel & Retail Transformation encompasses a range of strategic services designed to update and revitalize retail environments, ensuring they meet contemporary shopping expectations and trends.
Removed
New Store Openings and Remodeling Services Retailer specific services including store transformation, remodeling, fixture building, major category changes, adaptation of online in the store and regular store refresh program support, under annual or stand-alone project contracts or agreements. Most retailers refresh each store every three, five or seven years.
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This category includes (i) store remodels, where retail spaces undergo comprehensive renovations to enhance aesthetics, functionality, and shopper experience, (ii) store department resets which involve the reorganization and updating of specific sections within a store to improve navigation and product presentation, (iii) fixture and banner installations, which contribute to refreshing the store's visual appeal and marketing communication, (iv) pop-up store services which offer temporary retail setups that can test new markets, products, or concepts in an agile and cost-effective manner and (v) store closings, managed with a focus on efficiency and minimal disruption, ensuring that transitions are smooth for both the retailer and its customers.
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The Company offers services to ensure each store is inviting, exciting and well maintained for the retailer. This may include adding categories of product, changing the front-of-store checkout, building out pack and ship areas within a store to serve regional online delivery and more. Assembly Services The Company's assembly services are initiated by consumers, retailers or manufacturers.
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Through these services, Remodel & Retail Transformation aims to keep retail environments dynamic, engaging, and aligned with brand identity and consumer expectations. Assembly and Installation Assembly and Installation services play a crucial role in enhancing the retail and consumer experience by ensuring that products are properly assembled and set up, whether in-store, in the office, or within the consumer's home.
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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 furniture and other product lines are well displayed and maintained, and builds any new items or replacement items, as required.
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This category covers a broad spectrum of tasks that facilitate the ready-to-use delivery of products, improving convenience and satisfaction for both retailers and end-users.
Removed
In addition, the Company provides in-home and in-office assembly to customers who purchase their product from retailers, whether in store, online or through catalog sales. Distribution Staffing Services The Company offers staff and distribution center experienced resources to retailers and consumer goods manufacturers.
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Services include (i) the assembly of merchandise in stores, such as furniture and desks, enabling customers to visualize the final product and making the shopping experience more engaging and efficient; (ii) in-store services, which extend to the maintenance of these products, ensuring they remain in optimal condition for display and use; (iii) office setup/down-sizing services, which cater to businesses undergoing changes in their physical workspace, providing expert assembly and installation support for a seamless transition; (iv) National In-Home Furniture Assembly services, which offer consumers the convenience of having furniture professionally assembled in their homes, eliminating the hassle and time commitment typically associated with DIY assembly; and (v) the assembly and installation of fitness equipment, whether it's in a commercial gym setting or a home fitness space, ensures that equipment is set up safely and correctly, maximizing functionality and user safety.
Removed
These services support new distribution center set up and testing, receiving, put-away and picking, packing and shipping activities. These services have become in higher demand as the growth of online has accelerated and more retailers and manufacturers are shipping product direct to the end consumer for these facilities.
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Overall, Assembly and Installation services address a vital need in the post-purchase experience, ensuring products are fully functional and ready for use, thereby enhancing customer satisfaction and loyalty. 8 Business Analytics and Insights Business Analytics and Insights services provide a critical foundation for informed decision-making and strategic planning in retail and merchandising environments.
Removed
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, auditing compliance with branding and signage, verifying product placement and displays, collecting inventory levels and out-of-stock status and more.
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This suite of services leverages data analysis and visualization tools to deliver actionable insights that drive efficiency, sales, and customer satisfaction, including: (i) product dashboards, which offer a comprehensive view of product performance, inventory levels, and sales trends, enabling quick adjustments to product strategy and stock management, (ii) stock out reporting, which identifies and analyzes instances where products are unavailable on the shelves, allowing for rapid response to restock items and prevent lost sales opportunities, (iii) visit reporting, which tracks and evaluates the effectiveness and outcomes of merchandising visits, providing insights into operational efficiency and areas for improvement, (iv) real-time service insights, which delivers immediate feedback on the execution of merchandising and marketing initiatives, enabling dynamic adjustments to enhance in-store experiences and promotional effectiveness, (v) share of shelf analytics, which assesses the visibility and presence of products on the retail shelf compared to competitors, crucial for strategic positioning and market share growth, and (vi) photo analysis, which uses visual data to evaluate the compliance and appeal of product displays, ensuring that merchandising standards are met and that displays are engaging to customers.
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In addition, the Company provides competitive price intelligence gathering for retailers as well as ensuring price accuracy and consistency within the retail itself.
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Together, these Business Analytics & Insights services empower businesses with the knowledge to optimize operations, tailor marketing efforts, and ultimately drive better business outcomes through data-driven strategies.
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Fulfillment and Distribution Fulfillment & Distribution is a critical service offering that encompasses a range of services including (i) Distribution Center Staffing, which provides the necessary workforce for the effective operation of distribution centers, including handling and sorting,(ii) POP (Point of Purchase) Fulfillment Services focus on the storage, assembly, and delivery of marketing and promotional materials directly to retail locations, ensuring that displays are ready and available for immediate use, (iii) Kiosk Prep, which involves preparing and equipping kiosks with the necessary products and promotional materials, tailored for specific marketing or sales campaigns, (iv) returns processing, which manages the flow of returned goods, ensuring they are efficiently processed, restocked, or disposed of according to the retailer's policies, (v) picking and packing services, which are crucial for order fulfillment, involving the selection of the correct products from inventory and packing them for shipment to the customer or retail outlet, and (vi) inventory services which provide comprehensive management of stock levels, including tracking, auditing, and reporting, to ensure inventory accuracy and availability.
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Together, these Fulfillment & Distribution services play an essential role in optimizing our customers' supply chain, enhancing their customers' satisfaction, and maintaining seamless operations from warehouse to consumer.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

29 edited+4 added−16 removed49 unchanged
Biggest changeWe can be adversely affected if governments pass legislation that mandates an increase in wages, changes labor laws or otherwise drives market behavior that negatively impacts the business or operations of SPAR Group or our clients. The Company has operations in nine distinct countries and relies on independent contractors as well as other third-party providers to perform work.
Biggest changeThe Company has operations in nine distinct countries and relies on independent contractors as well as other third-party providers to perform work. There is risk that any government legislation that restricts travel, changes labor laws, impacts wages or otherwise incentivizes behavior that negatively impacts our business or our clients could impact our business.
If such claims are asserted and adversely determined against the Company, then to the extent such claims are not covered by indemnification from the product's seller or manufacturer or by insurance, they could have a material adverse effect on the Company or its performance or condition. We depend upon third-party independent contractors and the services they provide.
If such claims are asserted and adversely determined against the Company, then to the extent such claims are not covered by indemnification from the product's seller or manufacturer or by insurance, they could have a material adverse effect on the Company or its performance or condition. 12 We depend upon third-party independent contractors and the services they provide.
See Our significant stockholders may take actions, subject to the restrictions of the Change of Control, Voting and Restricted Stock Agreement ( " CIC Agreement ” ) and our By-Laws, Item 3 -- Legal Proceedings, below, Note 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies , and Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions Domestic Related Party - (including Change of Control, Voting and Restricted Stock Agreement ) , below. ● Any announcement, estimate or disclosure by the Company, or any projection or other claim or pronouncement by any of the Company's competitors or any financial analyst, commentator, blogger or other person, respecting: (i) any new service created or improved, significant contract, business acquisition or relationship, or other publicized development by the Company or any of its competitors; or (ii) any change, fluctuation or other development in the Company's actual, estimated or desired 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 or in those of any of the Company's competitors, in each case irrespective of accuracy or validity and whether or not adverse or material. ● The general volatility of stock markets, consumer and investor confidence, and the general state of the economy (which often affect the prices of stock issued by the Company and many others without regard to financial results or condition).
See Our significant stockholders may take actions, subject to the restrictions of the Change of Control, Voting and Restricted Stock Agreement ("CIC Agreement”) and our By-Laws, Item 3 -- Legal Proceedings, below, Note 6 to the Company's Consolidated Financial Statements - Commitments and Contingencies, and Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions - (including Change of Control, Voting and Restricted Stock Agreement), below. ● Any announcement, estimate or disclosure by the Company, or any projection or other claim or pronouncement by any of the Company's competitors or any financial analyst, commentator, blogger or other person, respecting: (i) any new service created or improved, significant contract, business acquisition or relationship, or other publicized development by the Company or any of its competitors; or (ii) any change, fluctuation or other development in the Company's actual, estimated or desired 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 or in those of any of the Company's competitors, in each case irrespective of accuracy or validity and whether or not adverse or material. ● The general volatility of stock markets, consumer and investor confidence, and the general state of the economy (which often affect the prices of stock issued by the Corporation and many others without regard to financial results or condition).
As significant stockholders, the Majority Stockholders can have an impact on the nomination and election of directors and the passage of other shareholder meeting proposals. -8- There is inherent business risk for a joint venture business structure.
As significant stockholders, the Majority Stockholders can have an impact on the nomination and election of directors and the passage of other shareholder meeting proposals. There is inherent business risk for a joint venture business structure.
We continuously review the terms and incentives for our executives to retain them and competitively compensate them to deliver industry leading results on behalf of all shareholders. Our significant stockholders may take actions, subject to the restrictions of the Change of Control, Voting and Restricted Stock Agreement ( " CIC Agreement " ) and our By-Laws. The Company's co-founders, Mr.
We continuously review the terms and incentives for our executives to retain them and competitively compensate them to deliver industry leading results on behalf of all shareholders. Our significant stockholders may take actions, subject to the restrictions of the Change of Control, Voting and Restricted Stock Agreement ("CIC Agreement") and our By-Laws. The Company's co-founders, Mr. Robert G.
Management's Discussion and Analysis of Financial Condition and Results of Operations; Overview , and Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions Domestic Related Party Services (including Change of Control, Voting and Restricted Stock Agreement ) , below. Our business performance is connected to the experience and retention of key executives.
Management's Discussion and Analysis of Financial Condition and Results of Operations; Overview, and Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions (including Change of Control, Voting and Restricted Stock Agreement), below. Our business performance is connected to the experience and retention of key executives.
If the Company issues (other than at fair market value for cash) or the Majority Stockholders sell a large number of shares of SGRP Common Stock, or if the market perceives such an issuance or sale is likely or imminent, the market price of SGRP Common Stock could decline.
If the Corporation issues (other than at fair market value for cash) or the Majority Stockholders sell a large number of shares of SGRP Common Stock, or if the market perceives such an issuance or sale is likely or imminent, the market price of SGRP Common Stock could decline.
If the Company fails to satisfy the applicable continued listing requirement again in the future, Nasdaq may commence delisting procedures against the Company (during which the Company may have additional time of up to six (6) months to appeal and correct its non-compliance).
If the Corporation fails to satisfy the applicable continued listing requirement again in the future, Nasdaq may commence delisting procedures against the Corporation (during which the Corporation may have additional time of up to six (6) months to appeal and correct its non-compliance).
However, there can be no assurance that the Company can successfully manage through inherent business risk due to significant misalignment of business objectives. Any cancellation, nonperformance or material changes of the joint venture could have a material adverse effect of the Company. -9- We have inherent risks operating international businesses. The Company operates in 9 countries around the world.
However, there can be no assurance that the Company can successfully manage through inherent business risk due to significant misalignment of business objectives. Any cancellation, nonperformance or material changes of the joint venture could have a material adverse effect of the Company. 16 We have inherent risks operating international businesses. The Company operates in 8 countries around the world.
To the extent that systems experience increased demands on current capacity and for additional capacity from (among other things) an increase in the numbers of users, frequency or duration of use, bandwidth requirements of software, applications and users (including the increasing demand from the Company's clients for data-intensive as-serviced pictures from the Field Specialists), or cyberattacks, there can be no assurance that the Company's technological systems and third-party software, hardware and telecommunication providers will continue to be able to support the demands placed on them by such increased demand or negative events.
To the extent that systems experience increased demands on current capacity and for additional capacity from (among other things) an increase in the numbers of users, frequency or duration of use, bandwidth requirements of software, applications and users (including the increasing demand from the Company's clients for data-intensive as-serviced pictures from the Field Specialists), or cyberattacks, there can be no assurance that the Company's technological systems and third-party software, hardware and telecommunication providers will continue to be able to support the demands placed on them by such increased demand or negative events. 13 The Company relies on third-party vendors to provide its telecommunication network access and other services used in its business, and the Company has no control over such third-party providers.
Our stock is subject to volatility and general market risk. The market price of SGRP Common Stock has historically experienced and may continue to experience significant volatility. During the year ended December 31, 2022, the sale price of SGRP Common Stock fluctuated from $1.27 to $1.30 per share.
Our stock is subject to volatility and general market risk. The market price of SGRP Common Stock has historically experienced and may continue to experience significant volatility. During the year ended December 31, 2023, the sale price of SGRP Common Stock fluctuated from $0.70 to $1.40 per share.
Robert G. Brown and Mr. William H. Bartels, are significant stockholders (" Significant Stockholders ”) and Directors of SGRP and together with certain related parties (collectively, the " Majority Stockholders ") beneficially own approximately 52.3% of the SGRP Common Stock and could acquire more.
Brown and Mr. William H. Bartels, are significant stockholders ("Significant Stockholders”) and Directors of SGRP and together with certain related parties (collectively, the "Majority Stockholders") beneficially own approximately 62.75% of the SGRP Common Stock and could acquire more.
In addition, the volatility in the market price of SGRP Common Stock could lead to class action securities litigation that could in turn impose substantial costs on the Company, divert management's attention and resources from the day-to-day operations of the Company's business and harm the Company's stock price, the Company or its performance or condition.
In addition, the volatility in the market price of SGRP Common Stock could lead to class action securities litigation that could in turn impose substantial costs on the Company, divert management's attention and resources from the day-to-day operations of the Company's business and harm the Corporation's stock price, the Company or its performance or condition. 14 As a small company with stock price volatility, our stock may be de-listed from NASDAQ.
The Company owns 51% of these joint ventures in all cases; the principal of our local minority investors generally is the Chief Executive Officer, and each joint venture is governed by a Board comprised of directors from both parties.
See Note 10 to the Company's Consolidated Financial Statements Related Party Transactions The Company owns 51% of these joint ventures in all cases; the principal of our local minority investors generally is the Chief Executive Officer, and each joint venture is governed by a Board comprised of directors from both parties.
Accordingly, minimal profitability by the Company, additional one-time charges and changes in the composition and quality of its borrowing base, as well as any failure to maintain sufficient availability or lines of credit from the Company's lenders (which may involve their subjective judgement), could have a material adverse effect on the Company or its performance or condition, whether actual or as planned, intended, anticipated, estimated or otherwise expected.
Accordingly, minimal profitability by the Company, additional one-time charges and changes in the composition and quality of its borrowing base, as well as any failure to maintain sufficient availability or lines of credit from the Company's lenders (which may involve their subjective judgment), could have a material adverse effect on the Company or its performance or condition, whether actual or as planned, intended, anticipated, estimated or otherwise expected. 15 Our business and stock liquidity and market value could be adversely affected if we settle outstanding litigation by making payments or issuing stock.
The Company currently has in place a Repurchase Program (as defined and described in Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities , below). Those repurchases could adversely affect the market liquidity of the SGRP Common Stock.
The Corporation had in place a 2022 Stock Repurchase Program (as defined and described in Item 5 - Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, below), which ended in May 24, 2023. Repurchases by the Corporation could adversely affect the market liquidity of the SGRP Common Stock.
Future litigation settlements may be financed by issuing shares of the SGRP Common Stock (directly or through convertible securities), cash or a combination thereof.
The timing, size and success of litigation settlement efforts and any associated capital commitments cannot be readily predicted. Future litigation settlements may be financed by issuing shares of the SGRP Common Stock (directly or through convertible securities), cash or a combination thereof.
As a small company with stock price volatility, our stock may be de-listed from NASDAQ. There can be no assurance that the Company will be able to comply in the future with Nasdaq's Board Independence Rule, Audit Committee Composition Rule, Bid Price Rule or other Nasdaq continued listing requirements. See Our Significant Stockholders May Take Unilateral Actions, below.
There can be no assurance that the Corporation will be able to comply in the future with Nasdaq's Board Independence Rule, Audit Committee Composition Rule, Bid Price Rule or other Nasdaq continued listing requirements.
That amount was calculated using their respective individual beneficial ownership, excluding affiliates shares, on January 28, 2022, as they represented in the CIC Agreement and the total outstanding ownership (approximately 21.3 million shares) of the SGRP Common Stock on a non-diluted basis as of December 31, 2021.
That amount was calculated using their respective individual beneficial ownership, on December 31, 2023, which includes the amounts they represented in the CIC Agreement and subsequent Form 4 filings, the total outstanding ownership (23,446,444 shares) of the SGRP Common Stock on a non-diluted basis as of December 31, 2023.
The Company also has begun to use the model in the United States in recent years and formed or acquired two joint ventures, National Merchandising Services, LLC (NMS), and Resource Plus Inc. (RPI), domestically.
Currently, of the 8 countries the Company is conducting businesses in, 5 are under a joint venture business structure (Brazil, South Africa, Mexico, China, and India). The Company also has begun to use the model in the United States in recent years and formed or acquired two joint ventures, National Merchandising Services, LLC (NMS), and Resource Plus Inc. (RPI), domestically.
The Company also has risks associated with its clients changing their business plans and/or reducing their third-party services' budgets in response to economic conditions, which could also decrease the Company's revenues. Such revenue decreases could have a material adverse effect on the Company or its performance or condition.
Should the retail or manufacturing industries experience a significant economic downturn, the resultant reduction in product sales could decrease the Company's revenues. The Company also has risks associated with its clients changing their business plans and/or reducing their third-party services' budgets in response to economic conditions, which could also decrease the Company's revenues.
The markets in which the Company operates are cyclical and subject to the effects of economic downturns. The current political, social and economic conditions, including the impact of terrorism and COVID-19 on consumer and business behavior, make it difficult for the Company, its vendors and its clients to accurately forecast and plan future business activities.
The current political, social and economic conditions, including the impact of terrorism and COVID-19 on consumer and business behavior, make it difficult for the Company, its vendors and its clients to accurately forecast and plan future business activities. Substantially all of the Company's key clients are either retailers, manufacturers or those seeking to do product merchandising at retailers.
Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities , and Note 10 to the Company's Consolidated Financial Statements- Related Party Transactions Domestic Related Party Services (including Change of Controls, Voting and Restricted Stock Agreement) , below.
See Security Ownership of Certain Beneficial Owners and Management, in Part III below, Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, and Note 10 to the Company's Consolidated Financial Statements- Related Party Transactions, below.
Our business is dependent on client payments, business performance and broad economic shifts, and we may be at risk of liquidity constraints and not satisfying all of our credit facility covenants. Our business and cash flow can be adversely affected by adverse changes in our client payments, our business performance and broad economic shifts.
Our business and cash flow can be adversely affected by adverse changes in our client payments, our business performance and broad economic shifts.
While we do not foresee any material impact in the short-term, the Company will continue to monitor and manage the business accordingly. -7- Our business depends on variable client projects that can shift from period to period, be delayed, be canceled or otherwise require us to assume higher costs to perform the work.
Our business depends on variable client projects that can shift from period to period, be delayed, be canceled or otherwise require us to assume higher costs to perform the work. The Company has experienced and, in the future, may experience fluctuations in quarterly operating results and cash flow.
The Company relies on third-party vendors to provide its 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 sensitive consumer or corporate information contained in these systems may adversely affect the Company's reputation and lead to claims against it.
Additionally, a cybersecurity breach that results in unauthorized access to sensitive consumer or corporate information contained in these systems may adversely affect the Company's reputation and lead to claims against it. Such claims could include identity theft or other similar fraud-related claims and claims related to violations of applicable data privacy laws.
Such claims could 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.
Any system failure, accident or security breach could result in disruptions to the Company's operations.
The Company's management is responsible for establishing and maintaining adequate internal controls over its financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act. As disclosed in Item 9A of Part II of this report, the Company identified a material weakness in its internal controls as of December 31, 2022.
The Company's management is responsible for establishing and maintaining adequate internal controls over its financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our business is dependent on client payments, business performance and broad economic shifts, and we may be at risk of liquidity constraints and not satisfying all of our credit facility covenants.
There is risk that any government legislation that restricts travel, changes labor laws, impacts wages or otherwise incentivizes behavior that negatively impacts our business or our clients could impact our business. The Company continues to analyze various aspects of potential business impact driven by any legislation in all of the countries we operate.
The Company continues to analyze various aspects of potential business impact driven by any legislation in all of the countries we operate. While we do not foresee any material impact in the short-term, the Company will continue to monitor and manage the business accordingly.
Removed
Our results of operations were adversely affected in 2021 globally by the COVID-19 pandemic, and the adverse impact continued through 2022 in certain international countries. The adverse impact of the COVID-19 pandemic may continue through 2023 and beyond.
Added
The markets we operate in are cyclical and subject to the effects of economic downturns. The markets in which the Company operates are cyclical and subject to the effects of economic downturns.
Removed
In March 2020, the World Health Organization declared the novel strain of Coronavirus (" COVID-19 ") a global pandemic and recommended containment and mitigation measures worldwide. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report.
Added
Such revenue decreases could have a material adverse effect on the Company or its performance or condition. 11 We can be adversely affected if governments pass legislation that mandates an increase in wages, changes labor laws or otherwise drives market behavior that negatively impacts the business or operations of SPAR Group or our clients.
Removed
As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition and future results of operations. Management is actively monitoring the impact of the global situation on its financial condition, operations, suppliers, industry and workforce.
Added
See Our significant stockholders may take actions, subject to the restrictions of the Change of Control, Voting and Restricted Stock Agreement ("CIC Agreement") and our By-Laws, below.
Removed
In 2021, most of our clients whose business was shut down or reduced capacity earlier in 2020 returned to normal operations, and the overall business improved for fiscal year 2021 and 2022. However, a few international countries continued to be impacted during fiscal 2022. Specifically, China and Japan.
Added
On December 22, 2023, entered into an agreement with National Retail Remodel Services (the buyer) to sell its 51 percent interest in National Merchandising Services (NMS).
Removed
The zero-covid policy in China caused many of our client operations in China to suspend operations for several months. In Japan, the government policies have continued to make it more challenging to continue our normal work in stores for 2022.
Removed
Although the Company cannot reasonably estimate the length or severity of the continuing pandemic, we do not anticipate a continual material adverse impact on our consolidated financial position, results of operations and cash flows. The markets we operate in are cyclical and subject to the effects of economic downturns.
Removed
Substantially all of the Company's key clients are either retailers, manufacturers or those seeking to do product merchandising at retailers. Should the retail or manufacturing industries experience a significant economic downturn, the resultant reduction in product sales could decrease the Company's revenues.
Removed
The Company has experienced and, in the future, may experience fluctuations in quarterly operating results and cash flow.
Removed
While this control deficiency did not result in a material error in the annual or interim financial statements, there was a reasonable possibility that a material misstatement in the annual or interim financial statements would not have been detected. As such, Management has determined this control deficiency constitutes a material weakness.
Removed
Please see the discussion of these conclusions below under Item 9A. “Controls and Procedures” of this Annual Report on Form 10-K. Due to the material weakness in the Company's internal control over financial reporting, the Company also concluded that its disclosure controls and procedures were not effective as of December 31, 2022.
Removed
Our inability to remediate the material weaknesses, our discovery of additional weaknesses, and our ability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting could affect our ability to ensure timely and reliable financial reports, affect the ability of our auditors to attest to the effectiveness of our internal controls, and weaken investor confidence in our financial reporting.
Removed
The Company is actively engaged in developing a remediation plan designed to address the material weakness, but cannot be certain as to when its remediation plans will be fully completed.
Removed
If the remedial measures are insufficient to address the material weakness or if additional material weaknesses or significant deficiencies in the internal controls are discovered or occur in the future, the consolidated financial statements may contain material misstatements and the Company could be required to restate its financial results, which could materially and adversely affect the Company's business and results of operations or financial condition, restrict its ability to access the capital markets, require the Company to expend significant resources to correct the weaknesses or deficiencies, subject it to fines, lawsuits, penalties, judgements or other legal expenses, harm its reputation, create delays or the inability to meet future SEC reporting obligations or otherwise cause a decline in investor confidence.
Removed
Our business and stock liquidity and market value could be adversely affected if we settle outstanding litigation by making payments or issuing stock. The timing, size and success of litigation settlement efforts and any associated capital commitments cannot be readily predicted.
Removed
Assuming no other purchases or sales, after the vesting of their Series B Preferred Stock and its conversion into SGRP Common Stock in accordance with the CIC Agreement, the Significant Stockholders will together beneficially own approximately 52.3% of the SGRP Common Stock, excluding affiliates shares.
Removed
Currently, of the 9 countries the Company conducting businesses in, 6 of the countries are under a joint venture business structure (Brazil, South Africa, Mexico, China, Australia and India).

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed1 unchanged
Biggest changeHowever, as these leased facilities generally are used for offices and storage, the Company believes that other leased spaces could be readily found and utilized on similar terms should the need arise. -10- The Company relocated its corporate headquarters from New York to its existing operations office in Auburn Hills, Michigan, in September of 2020.
Biggest changeThe Company believes its relationships with its landlords to be generally good. However, as these leased facilities generally are used for offices and storage, the Company believes that other leased spaces could be readily found and utilized on similar terms should the need arise.
The following is a list of the headquarter locations for the Company and its domestic and international subsidiaries: DOMESTIC: Auburn Hills, Michigan (Corporate Headquarters) Southfield, Michigan (Data Center) Fayetteville, Georgia (NMS) Jacksonville, Florida (Resource Plus) INTERNATIONAL: Vaughan, Ontario, Canada Tokyo, Japan Durban, South Africa New Delhi, India Melbourne, Australia Mexico City, Mexico Shanghai, China Sao Paulo, Brazil
The following is a list of the headquarter locations for the Company and its domestic and international subsidiaries: DOMESTIC : Auburn Hills, Michigan (Corporate Headquarters) Southfield, Michigan (Data Center) Jacksonville, Florida (Resource Plus) INTERNATIONAL : Vaughan, Ontario, Canada Tokyo, Japan Durban, South Africa New Delhi, India Sao Paulo, Brazil Mexico City, Mexico Shanghai, China
The Company also maintains its data processing center in Southfield, Michigan and its warehouse in Auburn Hills, Michigan, under an extended operating lease expiring October 31, 2025.
The Company relocated its corporate headquarters from New York to its existing operations office in Auburn Hills, Michigan, in September of 2020. The Company also maintains its data processing center in Southfield, Michigan and its warehouse in Auburn Hills, Michigan, under an extended operating lease expiring October 31, 2025.
Removed
The Company believes its relationships with its landlords to be generally good.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−3 removed2 unchanged
Biggest changeAll previous open and potential claims between the Significant Stockholders and the Company have been released mutually upon execution of the Change of Control, Voting and Restricted Stock Agreement (" CIC Agreement "), as of January 28, 2022.
Biggest changeAll previous open and potential claims between the Significant Stockholders and the Company have been released mutually upon execution of the Change of Control, Voting and Restricted Stock Agreement ("CIC Agreement"), as of January 28, 2022. See Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions, below.
The matters resolved in the CIC Agreement included all previous claims of the Majority Stockholders that the Company was somehow liable for claims and judgements by or against them or their respective companies, as well as all legal bills and other expense and amounts.
The matters resolved in the CIC Agreement included all previous claims of the Majority Stockholders that the Company was somehow liable for claims and judgments by or against them or their respective companies, as well as all legal bills and other expense and amounts.
Removed
See Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions Domestic Related Party Services (including Change of Control, Voting and Restricted Stock Agreement ) , below.
Removed
All prior litigations associated with the Company through SPAR Business Services, Inc., a corporation ("SBS") and its Independent Contractors have been resolved, including the claims of SBS and the Corporation in the SBS bankruptcy and settlement, and all additional related claims raised later by SBS and Robert G Brown were released by them in the CIC Agreement.
Removed
The SBS bankruptcy and settlement are described in the Corporation's Current Report filed with the SEC on August 8,2019.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

14 edited+2 added−0 removed8 unchanged
Biggest changeAt December 31, 2022, 854,753 shares of Series B Preferred Stock remained issued and outstanding (which upon vesting will automatically convert to 1,282,129 shares of SGRP Common Stock), and 1,145,247 shares of Series B Preferred Stock had been surrendered and automatically converted to 1,717,870 shares of SGRP Common Stock.
Biggest changeDuring the year ended December 31, 2023, all of the remaining 854,753 shares of Series B convertible preferred stock vested and automatically became convertible into 1,282,129 shares of the Corporation’s common stock of which 307,129 shares of the Corporation’s Common Stock were issued prior to December 31, 2023.
When there are no more shares of Series B Preferred Stock outstanding, SGRP may change or cancel the authorized Series B Preferred Stock, 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.
Since there are no more shares of Series B Preferred Stock outstanding, SGRP may change or cancel the authorized Series B Preferred Stock, 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.
However, the holders of the Series B Preferred Stock have a liquidation preferences over the SGRP Common Stock and vote together for matters pertaining only to the Series B Preferred Stock (such as amending SGRP's Certificate of Designation of Series B Preferred Stock) where only the holders of the Series B Preferred Stock are entitled to vote.
However, the holders of the Series B Preferred Stock have a liquidation preference over the SGRP Common Stock and vote together for matters pertaining only to the Series B Preferred Stock (such as amending SGRP's Certificate of Designation of Series B Preferred Stock) where only the holders of the Series B Preferred Stock are entitled to vote.
See Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions Domestic Related Party Services (including Change of Control, Voting and Restricted Stock Agreement ) , below .
See Note 10 to the Company's Consolidated Financial Statements - Related Party Transactions (including Change of Control, Voting and Restricted Stock Agreement), below.
SGRP Common Stock Issuances During 2022, the Corporation issued 73,867 SGRP Shares (including Treasury Shares and new shares of SGRP Common Stock) in support of its requirement to satisfy the conversion of vested and surrendered Series B Preferred Stock (see above), benefit awards and stock purchase plans, including employee Restricted Stock Units that vested and settled with stock, and the exercise of vested employee stock options.
SGRP Common Stock Issuances During 2023, the Corporation issued 387,306 SGRP Shares (including Treasury Shares and new shares of SGRP Common Stock) in support of its requirement to satisfy the conversion of vested and surrendered Series B Preferred Stock (see above), benefit awards and stock purchase plans, including employee Restricted Stock Units that vested and settled with stock, and the exercise of vested employee stock options.
Market Information SGRP's Common Stock is traded on the Nasdaq Capital Market under the symbol "SGRP". As of December 31, 2022, there were approximately 169 stockholders of record. Dividends The Corporation has never declared or paid any cash dividends on its Common Stock and does not anticipate paying cash dividends on its Common Stock in the foreseeable future.
Market Information SGRP's Common Stock is traded on the Nasdaq Capital Market under the symbol "SGRP". As of December 31, 2023, there were approximately 2,360 stockholders of record. 20 Dividends The Corporation has never declared or paid any cash dividends on its Common Stock and does not currently anticipate paying cash dividends on its Common Stock in the foreseeable future.
No dividends are payable on the Series B Preferred Stock. The Company currently intends to retain future earnings to finance its operations and fund the growth of the business.
No dividends are payable on the Series B Preferred Stock. The Company historically has retained earnings to finance its operations and fund future growth of the business.
Stock Repurchase Program On May 24, 2022, the Board of Directors of SGRP (the " Board "), authorized SGRP to repurchase up to 500,000 shares of its SGRP Shares pursuant to the 2022 Stock Repurchase Program (the " 2022 Stock Repurchase Program "), which repurchases would be made from time to time over a one-year period in the open market and through privately-negotiated transactions, subject to cash availability and general market and other conditions.
Stock Repurchase Program On May 24, 2022, the Board of Directors of SGRP (the "Board"), authorized SGRP to repurchase up to 500,000 shares of its SGRP Shares pursuant to the 2022 Stock Repurchase Program (the "2022 Stock Repurchase Program"), which repurchases were made from time to time over the one-year period that ended May 24, 2023 in the open market and through privately-negotiated transactions.
See Item IA - Risk Factors - Our significant stockholders may take actions, subject to the restrictions of the Change of Control, Voting and Restricted Stock Agreement ( " CIC Agreement " ) and our By-Laws, and Note 10 to the Company's Consolidated Financial Statements- Related Party Transactions Domestic Related Party Services (including Change of Controls, Voting and Restricted Stock Agreement), below.
See Item IA - Risk Factors - Our significant stockholders may take actions, subject to the restrictions of the Change of Control, Voting and Restricted Stock Agreement ("CIC Agreement") and our By-Laws, Security Ownership of Certain Beneficial Owners and Management, in Part III below, and Note 10 to the Company's Consolidated Financial Statements- Related Party Transactions, below.
SGRP Common Stock is traded on the Nasdaq Capital Market under the symbol "SGRP." On December 31, 2022, there were 22,960,966 shares of SGRP Common Stock outstanding in the aggregate (which does not include Treasury Shares), and there were 10,127,244 million shares (or approximately 47.6%) of SGRP Common Stock beneficially owned by non-affiliates of the Company in the aggregate on a non-diluted basis ( i.e. , SGRP's public float).
SGRP Common Stock is traded on the Nasdaq Capital Market under the symbol "SGRP." On December 31, 2023, there were 23,446,444 shares of SGRP Common Stock outstanding in the aggregate (which does not include Treasury Shares), and there were 7,075,069 shares (or approximately 30%) of SGRP Common Stock beneficially owned by non-affiliates of the Company in the aggregate on a non-diluted basis (i.e., SGRP's public float).
Any payment of future dividends will be at the discretion of the Board of Directors of the Corporation 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 dividends and other factors that the Corporation Board of Directors deems relevant. -12- Equity Compensation Information regarding the Company's equity compensation plans may be found in Item 12 of this Annual Report, which is hereby incorporated by reference.
Any payment of future dividends will be at the discretion of the Board of Directors of the Corporation and will depend upon, among other things, the Company's earnings, financial condition, capital requirements, cash flow, level of indebtedness, contractual restrictions in respect to the payment of dividends and other factors that the Corporation Board of Directors deems relevant.
On January 28, 2022, pursuant to the CIC Agreement, the Corporation issued to the Majority Stockholders 2,000,000 restricted shares of Series B Preferred Stock, which were automatically convertible upon vesting into 3,000,000 SGRP Shares pursuant to the 1:1.5 conversion ratio set forth in the Preferred Designation and the CIC Agreement, subject to adjustment for a forward or reverse share split, share dividend, or similar transactions.
On January 28, 2022, pursuant to the CIC Agreement, the Company issued to the Majority Stockholders 2,000,000 restricted shares of Series B Preferred Stock, which have all vested and automatically converted into 3,000,000 SGRP Shares pursuant to the 1:1.5 conversion ratio set forth in the Preferred Designation and the CIC Agreement.
Through December 31, 2022, 151,156 shares of SGRP Common Stock were repurchased under the 2022 program and became Treasury Shares.
Those repurchases were made subject to cash availability and general market and other conditions. Through December 31, 2023, 151,156 shares of SGRP Common Stock were repurchased under the 2022 program and became Treasury Shares.
See Note 11 to the Company's Consolidated Financial Statements – Stock Based Compensation and Other Plans, below. -13-
See The Company's Capital Stock Generally, in Item 5 above, and Note 11 to the Company's Consolidated Financial Statements – Share Based Compensation, below.
Added
Equity Compensation Information regarding the Company's equity compensation plans may be found in Item 11 of this Annual Report, which is hereby incorporated by reference.
Added
However, that share total does not include the 975,000 shares of SGRP Common Stock that were in the process of being issued and the remaining shares of Series B Preferred Stock were in the process of being returned and cancelled on December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

40 edited+11 added−14 removed38 unchanged
Biggest changeThe following is a reconciliation of our net (loss) income to Adjusted EBITDA for the periods presented: Twelve Months Ended December 31, (in thousands) 2022 2021 Consolidated Net Income $ 2,126 $ 2,000 Depreciation and amortization 2,033 2,083 Interest expense 965 585 Income Tax expense 2,777 2,108 Other income (482 ) (509 ) Consolidated EDITDA 7,419 6,268 Costs and other relating to CIC (32 ) 4,814 Review of Strategic Alternatives 540 72 Goodwill impairment 2,458 - Board of Directors compensation - 711 Board of Directors incremental compensation 394 - Consolidated Adjusted EBITDA 10,779 11,864 Adjusted EBITDA attributable to non-controlling interest (4,637 ) (4,908 ) Adjusted EBITDA attributable to SPAR Group, Inc. $ 6,142 $ 6,957 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, 2022 % 2021 % Net revenues $ 261.3 100 % $ 255.7 100 % Related party - cost of revenues 8.8 3.4 7.4 2.9 Cost of revenues 201.5 77.1 200.8 78.5 Selling, general and administrative expense 41.1 15.7 36.8 14.4 Majority stockholders change of control agreement - - 4.5 1.8 Depreciation and amortization 2.0 0.8 2.1 0.8 Impairment of goodwill 2.5 1.0 - - Interest expense, net 1.0 0.4 0.5 0.2 Other income, net (0.5 ) (0.2 ) (0.5 ) (0.2 ) Income before income taxes 4.9 1.9 4.1 1.6 Income tax expense 2.8 1.1 2.1 0.8 Net income 2.1 0.8 2.0 0.8 Net income attributable to noncontrolling interest (2.9 ) (1.1 ) (3.8 ) (1.5 ) Net loss attributable to SPAR Group, Inc. $ (0.7 ) (0.3 )% $ (1.8 ) (0.7 )% Results of operations for the year ended December 31, 2022, compared to the year ended December 31, 2021 .
Biggest changeThe following is a reconciliation of our net income to Adjusted EBITDA for the periods presented: Year Ended December 31, (in thousands) 2023 2022 Consolidated Net Income $ 4,776 $ 2,126 Depreciation and amortization 2,001 2,033 Interest expense 1,919 965 Income tax expense 2,357 2,777 Other (income), loss 346 (482) Subtotal of Adjustments to Consolidated Net Income 6,623 5,294 Consolidated EBITDA $ 11,399 $ 7,420 Costs and other relating to CIC - (32) Review of Strategic Alternatives 544 540 Goodwill impairment - 2,458 Loss on sale of businesses 408 - Restructuring costs 28 - Legal costs / Settlements - non-recurring 289 - Share Based Compensation 297 - Board of Directors incremental compensation - 394 Consolidated Adjusted EBITDA $ 12,965 $ 10,780 Adjusted EBITDA attributable to non-controlling interest (3,022) (4,637) Adjusted EBITDA attributable to SPAR Group, Inc. 9,943 6,143 23 Results of Operations The following table sets forth selected financial data for the years indicated (dollars in millions): Year Ended December 31, 2023 % 2022 % Net revenues $ 262.7 100% $ 261.3 100% Related Party - Cost of revenues 5.2 2.0 $ 8.8 3.4 Cost of revenues 202.1 76.9 201.5 77.1 Selling, general and administrative expense 43.7 16.6 41.1 15.8 Impairment of Goodwill - - 2.5 1.0 Loss on sale of business 0.4 0.2 - - Depreciation and amortization 2.0 0.8 2.0 0.8 Interest expense 1.9 0.7 1.0 0.4 Other expense (income), net 0.3 0.1 (0.5) (0.2) Income before income taxes 7.1 2.7 4.9 1.9 Income tax expense 2.4 0.9 2.8 1.1 Net income 4.8 1.8 2.1 0.8 Net income attributable to non-controlling interest (0.9) (0.3) (2.9) (1.1) Net income attributable to SPAR Group, Inc. $ 3.9 1.5% $ (0.7) (0.3)% Results of operations for the year ended December 31, 2023, compared to the year ended December 31, 2022.
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 Analysis of Financial Condition and Results of Operations," "Directors, Executive Officers and Corporate Governance," "Executive Compensation," "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," and "Certain Relationships and Related Transactions, and Director Independence." You should carefully review and consider the Company's forward-looking statements (including all risk factors and other cautions and uncertainties) and other information made, contained or noted in or incorporated by reference into this Quarterly Report, the Annual Report, the Proxy Statement, the First Special Meeting Proxy/Information Statement and the First Special Meeting Report and the other applicable SEC Reports, but you should not place undue reliance on any of them.
The 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 Analysis of Financial Condition and Results of Operations," "Directors, Executive Officers and Corporate Governance," "Executive Compensation," "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," and "Certain Relationships and Related Transactions, and Director Independence." 21 You should carefully review and consider the Company's forward-looking statements (including all risk factors and other cautions and uncertainties) and other information made, contained or noted in or incorporated by reference into this Quarterly Report, the Annual Report, the Proxy Statement, the First Special Meeting Proxy/Information Statement and the First Special Meeting Report and the other applicable SEC Reports, but you should not place undue reliance on any of them.
Recent Accounting Pronouncements See the sections titled "Summary of Significant Accounting Policies—Recent Accounting Pronouncements” and "—Recently issued accounting pronouncements not yet adopted” in Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10‑K. -17- Liquidity and Capital Resources Funding Requirements Management believes that based upon the continuation of the Company's existing credit facilities, projected results of operations, vendor payment requirements and other financing available to the Company (including amounts due to affiliates), sources of cash availability should be manageable and sufficient to support ongoing operations over the next year.
Recent Accounting Pronouncements See the sections titled "Summary of Significant Accounting Policies—Recent Accounting Pronouncements” and "—Recently issued accounting pronouncements not yet adopted” in Note 2 to the Company's Consolidated Financial Statements, Summary of Significant Accounting Policies, included elsewhere in this Annual Report on Form 10‑K. 27 Liquidity and Capital Resources Funding Requirements Management believes that based upon the continuation of the Company's existing credit facilities, projected results of operations, vendor payment requirements and other financing available to the Company (including amounts due to affiliates), sources of cash availability should be manageable and sufficient to support ongoing operations over the next year.
Customer deposits, which are considered advances on future work, are deferred and recorded as revenue in the period in which the services are provided. Allowance for Doubtful Accounts The Company continually monitors the collectability of its accounts receivable based upon current client credit information and financial condition.
Customer deposits, which are considered advances on future work, are deferred and recorded as revenue in the period in which the services are provided. Allowance for Credit Losses The Company continually monitors the collectability of its accounts receivable based upon current client credit information and financial condition.
If the carrying amount of the reporting unit exceeds its fair value, then an impairment loss is recognized in an amount equal to the excess, up to the value of the goodwill. -15- Revenue Recognition The Company generates its revenues by providing merchandising services to its clients.
If the carrying amount of the reporting unit exceeds its fair value, then an impairment loss is recognized in an amount equal to the excess, up to the value of the goodwill. 26 Revenue Recognition The Company generates its revenues by providing merchandising services to its clients.
Critical Accounting Policies and Estimates The Company’s critical accounting policies, including the assumptions and judgements underlying them, are disclosed in Note 2 to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates The Company’s critical accounting policies, including the assumptions and judgments underlying them, are disclosed in Note 2 to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
While the estimates and judgements associated with the application of these policies may be affected by different assumptions or conditions, the Company believes the estimates and judgements associated with the reported amounts are appropriate under the circumstances.
While the estimates and judgments associated with the application of these policies may be affected by different assumptions or conditions, the Company believes the estimates and judgments associated with the reported amounts are appropriate under the circumstances.
Bad debt expense was $1.3 million and $0.1 million for the years ended December 31, 2022 and 2021, respectively. -16- Internal Use Software The Company capitalizes certain costs associated with its internally developed software.
Bad debt expense was $0.3 million and $1.3 million for the years ended December 31, 2023 and 2022, respectively. Internal Use Software The Company capitalizes certain costs associated with its internally developed software.
The Company’s goal is to be the most creative, energizing and effective global services company that drives sales, margins and operating efficiency for our clients. As of December 31, 2022, the Company operated in nine countries: the United States, Canada, Mexico, Brazil, South Africa, Australia, China, Japan and India.
The Company’s goal is to be the most creative, energizing and effective global services company that drives sales, margins and operating efficiency for our clients. As of December 31, 2023, the Company operated in eight countries: the United States, Canada, Mexico, Brazil, South Africa, China, Japan and India.
These policies have been consistently applied in all material respects and address matters such as impairment of long-lived assets, intangible assets, and goodwill, revenue recognition, allowance for doubtful accounts, and internal use software.
These policies have been consistently applied in all material respects and address matters such as impairment of long-lived assets, intangible assets, and goodwill, revenue recognition, allowance for credit losses, and internal use software.
The Company capitalized approximately $1.5 million and $1.2 million of costs related to software developed for internal use in 2022 and 2021, respectively, and recognized approximately $1.3 million of amortization of capitalized software for the years ended December 31, 2022 and 2021.
The Company capitalized approximately $1.0 million and $1.5 million of costs related to software developed for internal use in 2023 and 2022, respectively, and recognized approximately $1.3 million of amortization of capitalized software for the years ended December 31, 2023 and 2022.
The Company provides for probable uncollectible amounts through a charge to earnings and a credit to bad debt allowance based in part on management’s assessment of the current status of individual accounts. Based on management’s assessment, the Company established an allowance for doubtful accounts of $1.6 million and $0.6 million at December 31, 2022, and 2021, respectively.
The Company provides for probable uncollectible amounts through a charge to earnings and a credit to bad debt allowance based in part on management’s assessment of the current status of individual accounts. Based on management’s assessment, the Company established an allowance for credit losses of $1.5 million and $1.6 million at December 31, 2023, and 2022, respectively.
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-related expenses and was 80.5% of net revenue for the year ended December 31, 2022 compared to 81.4% of net revenues for the year ended December 31, 2021.
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-related expenses and was 78.9% of net revenue for the year ended December 31, 2023 compared to 80.5% of net revenues for the year ended December 31, 2022.
Selling, general and administrative expenses were approximately $41.1 million, or 15.7% of net revenue, and approximately $41.3 million, or 16.2% of net revenue for the years ended December 31, 2022 and 2021, respectively.
Selling, general and administrative expenses were approximately $43.7 million, or 16.7% of net revenue, and approximately $41.1 million, or 15.8% of net revenue for the years ended December 31, 2023 and 2022, respectively.
We delivered a 90-basis point improvement in gross margins against the global pressure of recruiting and wages. The Americas cost of revenue as a percent of net revenue was 81.5% and 83.2% for the years ended December 31, 2022 and 2021, respectively.
We delivered a (159)-basis point improvement in gross margins against the global pressure of recruiting and wages. 24 The Americas cost of revenue as a percent of net revenue was 79.8% and 81.5% for the years ended December 31, 2023 and 2022, respectively.
Our Consolidated EBITDA was approximately $7.4 million and $6.3 million for the years ended December 31, 2022 and 2021, respectively.
Our Consolidated EBITDA was approximately $11.4 million and $7.4 million for the years ended December 31, 2023 and 2022, respectively.
Noncontrolling Interest Net income attributable to noncontrolling interest was $(2.9) million and $(3.8) million for the years ended December 31, 2022 and 2021, respectively.
Net income attributable to non-controlling interest Net income attributable to noncontrolling interest was $0.9 million and $2.9 million for the years ended December 31, 2023 and 2022, respectively.
Cash Flows for the Years Ended December 31, 2022 and 2021 Net cash used in operating activities was $4.9 million for the year ended December 31, 2022 and net cash provided by operating activities was $2.6 million for the year ended December 31, 2021.
Cash Flows for the Years Ended December 31, 2023 and 2022 Net cash provided by operating activities was $6.8 million for the year ended December 31, 2023 and net cash used in operating activities was $5.0 million for the year ended December 31, 2022.
However, delays in collection of receivables due from any of the Company's major clients, a significant reduction in business from such clients, or a negative economic downturn resulting from the continuing impact of the COVID-19 pandemic, could have a material adverse effect on the Company's business, cash resources and ongoing ability to fund operations.
However, delays in collection of receivables due from any of the Company's major clients, a significant reduction in business from such clients, or a negative economic downturn could have a material adverse effect on the Company's business, cash resources and ongoing ability to fund operations. The Company is a party to various domestic and international credit facilities.
Interest Expense, Net The Company's interest expense, net was $1.0 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively. The America interest expense, net was $0.7 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively. The increase was a result of higher interest rates.
The America interest expense was $1.4 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively. The increase was a result of higher interest rates. The Asia-Pacific interest expense of $0.1 for the year ended December 31, 2023 versus $0.0 for the year ended December 31, 2022.
Adjusted EBITDA Adjusted EBITDA is a non-GAAP measure of our operating performance and should not be considered as an alternative to net income as a measure of financial performance or any other performance measure derived in accordance with generally accepted accounting principles in the United States of America ("US GAAP").
The Company’s business is led and operated from its global headquarters in Auburn Hills, Michigan, with local leadership and offices in each country. 22 Adjusted EBITDA Adjusted EBITDA is a non-GAAP measure of our operating performance and should not be considered as an alternative to net income as a measure of financial performance or any other performance measure derived in accordance with generally accepted accounting principles in the United States of America ("US GAAP").
Net Revenues Net revenues for the year ended December 31, 2022, were $261.3 million compared to $255.7 million for the year ended December 31, 2021, an increase of $5.6 million or 2.2%.
Net Revenues Net revenues for the year ended December 31, 2023, were $262.7 million compared to $261.3 million for the year ended December 31, 2022, an increase of $1.4 million or 1%.
The decrease in cost of 1.8% was the result of 2% lower costs in our owned U.S. business, 60-basis point lower cost in Brazil, 1.8% lower costs in Mexico, 3.7% lower costs in our U.S. joint ventures offset by a 50-basis point increase in costs in Canada.
The decrease in cost of 1.6% was the result of 2.5% lower costs in our owned U.S. business and U.S. joint ventures and 1.4% lower cost in Brazil, partially offset by a 230-basis point increase in costs in Mexico.
Income Tax Expense The Company had income tax expense of $2.8 million with an effective tax rate of 56.6% and $2.1 million with an effective rate of 51.3%, for the years ended December 31, 2022 and 2021, respectively.
Other Expense (Income), Net Other expense, net was $0.3 million versus income of $0.5 million for the years ended December 31, 2023 and 2022, respectively. 25 Income Tax Expense The Company had income tax expense of $2.4 million with an effective tax rate of 33.0% and $2.8 million with an effective rate of 56.6%, for the years ended December 31, 2023 and 2022, respectively.
Depreciation and Amortization Depreciation and amortization expense was approximately $2.0 million and $2.1 million for the years ended December 31, 2022 and 2021.respectively Impairment of Goodwill Impairment of goodwill was $2.5 million and nil for the years ended December 31, 2022 and 2021, respectively.
Depreciation and Amortization Depreciation and amortization expense was approximately $2.0 million and $2.0 million for the years ended December 31, 2023 and 2022, respectively Interest Expense The Company's interest expense was $1.9 million and $1.0 million for the years ended December 31, 2023 and 2022, respectively.
The decrease in cost of 2.1% was primarily the result of our focus on pricing, operating improvements and new client business. -14- 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.
The decrease in cost of 1.1% was primarily the result of the service mix during the quarter and our ability to manage gross margins. 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.
The Americas selling, general and administrative expenses totaled $28.4 million and $26.9 million at December 31, 2022 and 2021, respectively.
The Americas selling, general and administrative expenses totaled $32.2 million and $28.4 million for the years ended December 31, 2023 and 2022, respectively.
The net cash used in investing activities was primarily attributable to capitalization of internal use software. Net cash provided by financing activities for the year ended December 31, 2022 was approximately $3.5 million compared to $1.3 million in 2021 .
The year-over-year increase in net cash provided by operating activities was primarily due to improved working capital management. Net cash used in investing activities for the years ended December 31, 2023 and 2022 , was $2.3 million and $1.8 million, respectively. The net cash used in investing activities was primarily attributable to capitalization of internal use software.
Selling, general and administrative expenses for the year-ended December 31, 2022 includes several one-time expenses of approximately $.5 million related to our consideration of strategic alternatives and a $1.2 million of bad debt expense related to the bankruptcy of one of our customers.
Selling, general and administrative expenses for the year-ended December 31, 2023 includes expenses of approximately $0.5 million related to our consideration of strategic alternatives and higher salary and benefits cost, partially offset by lower bad debt expense as 2022 reflected the impending bankruptcy of a larger client.
The EMEA interest income of $0.3 million and $43,000 for the years ended December 31, 2022 and 2021, respectively. Other Income, Net Other income, net was $0.5 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively.
The EMEA incurred interest expense of $0.4 million versus $0.3 million for the years ended December 31, 2023 and 2022, respectively.
The year-over-year increase in net cash provided by financing activities during 2022 was primarily due to increase in net borrowing on lines of credit. The above activity and the impact of foreign exchange rate changes resulted in a decrease in cash and cash equivalents for the year ended December 31, 2022 of approximately $4.1 million.
Net cash used in financing activities for the year ended December 31, 2023 was approximately $3.0 million compared to $3.5 million provided in 2022 . The year-over-year decrease in net cash provided by financing activities during 2023 was primarily due to repayment of lines of credit.
The increase of $12.2 million or 6.5% is the result of 16% growth in the U.S. owned services business, 24% growth in our Brazil joint venture revenue offset by a 2% and 57% drop in Canada and Mexico revenue, respectively.
The increase of $5.1 million or 2.6% is the result of 51% growth in the Canadian business, 10% growth in our Brazil joint venture revenue and 3% growth in our US SPAR owned business, partially offset by a 37% and 43% drop in our US Joint Ventures, Resource Plus and NMS respectively.
The decrease of $2.5 million, or 25.3%, is primarily attributable to a $0.8 million reduction in Japan’s selling, general and administrative expenses as we carefully manage this business in response to the broader economic trends and a $1.0 million reduction in China selling, general and administrative expenses as we reduced expenses in reaction to the client impact of zero-Covid policies.
The Asia-Pacific selling, general and administrative expenses totaled $6.5 million and $7.4 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $0.9 million, or 12.0% is primarily attributable to reduction in China and Japan's SG&A's expenses as we carefully manage these businesses in response to the broader economic trends.
See Note 4 to the Company's consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
These various domestic and international credit facilities require compliance with their respective financial covenants. For the year ended December 31, 2023, the Company was in compliance with all financial covenants under these arrangements. See Note 4 to the Company's Consolidated Financial Statements, Debt, included elsewhere in this Annual Report on Form 10-K.
The EMEA cost of revenue as a percent of net revenue was 77.4% and 79.5% for the years ended December 31, 2022 and 2021, respectively.
This improvement in cost of 2.6% was partially due to operating fully in China compared to the slow recovery from the zero-tolerance policy in 2022, which inflated cost of revenue ratios in 2022. The EMEA cost of revenue as a percent of net revenue was 76.3% and 77.4% for the years ended December 31, 2023 and 2022, respectively.
The EMEA net revenues totaled $36.7 million and $35.5 million at December 31, 2022 and 2021, respectively. The increase of $1.2 million or 3.3% is the result of the continued growth of our joint venture in South Africa.
The EMEA net revenues totaled $34.6 million and $36.7 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $2.1 million or 5.8% is driven by unfavorable foreign exchange rates in South Africa, when compared to 2022 rates. South Africa local currency net revenues increased 5% in 2023 compared to 2022.
The combination of resource scale, deep expertise, advanced technology and unwavering commitment to excellence, separates the Company from the competition. The Company’s focus is services. The team works closely with clients to determine their key objectives to execute globally, focusing on enhancing their sales and profit.
The combination of resource scale, deep expertise, advanced technology and unwavering commitment to excellence, separates the Company from the competition. The Company is dedicated to delivering a spectrum of specialized services tailored to enhance retail operations and profitability across the globe.
For the year ended December 31, 2022, our effective income tax rate of 56.6% varied from the U.S. federal statutory rate of 21% primarily as a result of dispersion of global income and impact of higher foreign tax rates, permanent items including goodwill impairment charges as well as the incremental tax expense associated with the global intangible low-taxed income inclusion under the Tax Cuts and Jobs Act of 2017.
For the year ended December 31, 2023, our effective income tax rate of 33.0% varied from the U.S. federal statutory rate of 21% primarily as a result of foreign rate differential, sale of membership interest disposition of National Merchandising Services, LLC and permanent differences.
The EMEA selling, general and administrative expenses totaled $5.3 million and $4.5 million at December 31, 2022 and 2021, respectively. The increase of $0.8 million, or 17.8%, is primarily attributable to the investment in resources and operations to support the emerging growth.
The EMEA selling, general and administrative expenses totaled $5.0 million and $5.3 million for the years ended December 31, 2023 and 2022, respectively. SG&A for EMEA was flat compared to 2022.
We were able to achieve these results by focusing on recruiting, client pricing, adding fuel surcharges when the market demanded, reducing field resource travel and reducing overtime among other improvements. The Asia-Pacific cost of revenue as a percent of net revenue was 77.3% and 73.5% for the years ended December 31, 2022 and 2021, respectively.
These results were achieved through our persistent emphasis on contract pricing, stabilization of market wages, enhancement of our higher-margin service offerings, and diminution of travel expenditures associated with remodel projects. The Asia-Pacific cost of revenue as a percent of net revenue was 74.7% and 77.3% for the years ended December 31, 2023 and 2022, respectively.
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At retail, the Company’s merchandising brand marketing specialists perform a wide range of programs to maximize product sell-through to consumers. Some of these programs include launching new products, installing displays, assembling product fixtures, and ensuring shelves are fully stocked and reordering when they are not. The Company also assists with sales and customer service.
Added
Our team collaborates closely with clients to identify their primary goals, ensuring the execution of strategies that boost sales and profit margins. With a focus on merchandising and brand marketing, our specialists deploy a variety of programs aimed at maximizing product sell-through to consumers.
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As retailers adapt to changes and new opportunities, our team engages in the total renovations and updating of stores, as well as preparing new locations for grand openings. The Company’s distribution associates work in retail and consumer goods distribution centers to prepare the centers to open, testing systems, putting away, picking products and providing peak staffing services for our clients.
Added
These initiatives range from launching new products and setting up promotional displays to assembling fixtures and ensuring consistent stock availability, thus facilitating efficient reordering processes. Furthermore, we extend our expertise to sales enhancement and customer service improvement.
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The Company’s business is led and operated from its global headquarters in Auburn Hills, Michigan, with local leadership and offices in each country.
Added
As the retail landscape evolves, our team is adept at undertaking comprehensive store renovations and preparing new locations for their grand openings, ensuring they meet the modern consumer's expectations.
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This increase was on top of the headwinds we faced cycling the 2021 Mexican labor law change, zero-Covid policy in China beginning in the first quarter of 2022, and a negative foreign exchange rate impact. The Americas net revenues totaled $198.6 million and $186.4 million at December 31, 2022 and 2021, respectively.
Added
Additionally, our distribution associates play a pivotal role in retail and consumer goods distribution centers, preparing these facilities for operation, optimizing system functionality, managing product logistics, and providing essential staffing solutions to meet our clients' needs effectively.
Removed
We won a number of new clients, extended agreements with current clients and continued to grow our remodel and distribution services businesses. The Asia-Pacific net revenues totaled $26.0 million and $33.8 million at December 31, 2022 and 2021, respectively.
Added
This increase in revenue was primarily driven by stronger performance in the Americas, particularly Canada, Brazil and US SPAR owned business, partially offset by lower performance at Asia Pacific and EMEA and US Joint Ventures. Foreign Currency rates were also a negative headwind in 2023.
Removed
The decrease of $7.8 million or 23.1% is primarily the result of the zero-Covid policy that impacted our business in China and broader economic pressures in Japan. Our joint venture business in China was down 31% and has not fully recovered from the impact of first quarter 2022.
Added
The Americas net revenues totaled $203.7 million and $198.6 million for the years ended December 31, 2023 and 2022, respectively.
Removed
The increase in cost of 3.8% was primarily the result of temporary loss of our higher margin business in China during the lockdown, rising rates in Japan, and challenge attracting resources in Australia due to the low unemployment.
Added
These results reflect growth in our core merchandising services business offset by delays in retail remodel projects to later in the year or early next year by our clients. Core merchandising had a strong growth in the US SPAR owned business, in Brazil and in Canada.
Removed
The increase of $1.5 million, or 5.6%, is primarily the result of the one-time strategic alternative expenses, the bad debt write-off, increased board compensation, and an increase in selling, general and administrative expenses in our Brazil joint venture as an investment to support the accelerated growth.
Added
The Asia-Pacific net revenues totaled $24.5 million and $26.0 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $1.5 million or 5.9% is primarily the result of negative foreign exchange rate movement as well as other extraneous conditions.
Removed
The Asia-Pacific selling, general and administrative expenses totaled $7.4 million and $9.9 million at December 31, 2022 and 2021, respectively.
Added
The increase of $3.7 million, or 13.1% is primarily the result of consulting and legal charges associated with the review of strategic alternatives, higher compensation related expenses, and the annualization of our investment in recruiting and moving our technology to the cloud.
Removed
The increase of $2.5 million, or 100%, was attributable to the recognition of impairment losses of $2.0 million and $0.5 million for the reporting units Resource Plus of North Florida, Inc. and SPAR TODOPROMO, SAPI, de CV, respectively, during the three months ended December 31, 2022.
Added
For the year ended December 31, 2023, the company experienced a net increase in cash and cash equivalents amounting to approximately $1.4 million. This positive change reflects foreign exchange rate fluctuations, which contributed a decrease of $0.2 million.
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The Asia-Pacific interest expense of $39,000 for the year ended December 31, 2022 versus interest income of $9,000 for the year ended December 31, 2021. Net interest income in 2021 was primarily due to expenses being offset by income generated from cash balance in banks.
Added
In contrast, the prior fiscal year ending December 31, 2022, recorded a net decrease in cash and cash equivalents of $4.1 million, inclusive of a $0.8 million impact due to foreign exchange rate variations. These figures highlight the significant turnaround in our liquidity position, driven by both improved operational outcomes and favorable exchange rate movements.
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The Company is a party to various domestic and international credit facilities. These various domestic and international credit facilities require compliance with their respective financial covenants.
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For the year ended December 31, 2022, the Company was in compliance with all financial covenants under these arrangements other than Resource Plus of North Florida, Inc.’s credit facility with Fifth Third Bank, under which there was no outstanding balance as of December 31, 2022.
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The year-over-year decrease in net cash provided by operating activities was primarily due to significant increase in accounts receivable due to revenue growth. Net cash used in investing activities for the years ended December 31, 2022 and 2021 , was $1.8 million and $1.7 million, respectively.

Other SGRP 10-K year-over-year comparisons