Note 3 - Restatement of Previously Issued Consolidated Financial Statements (as Restated)

12 Months Ended

Dec. 31, 2024

3. Restatement of Previously Issued Consolidated Financial Statements (as Restated)

Subsequent to filing the Company's December 31, 2024 form 10-K on May 16, 2025, the Company determined that the sale of its Brazilian joint venture (see Note 11, Related Party Transactions) represented a strategic shift in the Company's operations that will have a significant impact to the financial statements. As such, the Company has restated its December 31, 2024 and 2023 audited financial statements to reflect the Brazilian joint venture as discontinued operations. The Company has also restated impacted amounts within the accompanying Notes to Consolidated Financial Statements. Below are tables that reconcile the previously filed audited financial statements with the "as restated" financial statements in this Form 10-K/A:

The following tables reflect the impact of the restatements to the specific line items presented in the Company’s previously reported Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2024 and 2023 (in thousands, except per share data).

Year Ended December 31

2024

2023

As Previously Reported

Adjustment

Restated

As Previously Reported

Adjustment

Restated

Net revenues

196,814

(33,185

)

163,629

262,747

(74,873

)

187,874

Related party - cost of revenues

5,197

Cost of revenues

158,357

(28,325

)

130,032

202,070

(63,830

)

138,240

Gross profit

38,457

(4,860

)

33,597

55,480

(11,043

)

44,437

Selling, general and administrative expense

37,265

(3,385

)

33,880

43,673

(7,047

)

36,626

(Gain) / Loss on sale of business

(1,348

)

(1,188

)

(2,536

)

408

Depreciation and amortization

1,616

(63

)

1,553

2,001

(174

)

1,827

Operating income (loss)

924

(224

)

700

9,398

(3,822

)

5,576

Interest expense (income)

2,222

(31

)

2,191

1,919

312

2,231

Other expense, net

171

346

Income (loss) before income tax expense

(1,469

)

(193

)

(1,662

)

7,133

(4,134

)

2,999

Income tax expense (benefit)

1,218

(1,074

)

144

2,357

(1,709

)

648

Income (loss) from continuing operations

(2,687

)

881

(1,806

)

4,776

(2,425

)

2,351

Discontinued Operations

Income from discontinued operations

1,381

4,134

Loss on disposal of business

(1,188

)

(1,188

)

Income tax expense

(1,074

)

(1,074

)

(1,709

)

(1,709

)

Net (loss) income from discontinued operations

(881

)

(881

)

2,425

Net income (loss)

(2,687

)

(2,687

)

4,776

Net income attributable to non-controlling interest

(463

)

(463

)

(874

)

(874

)

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

(3,150

)

(3,150

)

3,902

Basic earnings (loss) per common share attributable to SPAR Group, Inc. from continuing operations

(0.13

)

0.04

(0.09

)

0.17

(0.10

)

0.07

Diluted earnings (loss) per common share attributable to SPAR Group, Inc. from continuing operations

(0.13

)

0.04

(0.09

)

0.16

(0.10

)

0.06

Basic earnings (loss) per common share attributable to SPAR Group, Inc. from discontinued operations

(0.04

)

(0.04

)

0.10

Diluted earnings (loss) per common share attributable to SPAR Group, Inc. from discontinued operations

(0.04

)

(0.04

)

0.10

Basic earnings (loss) per common share attributable to SPAR Group, Inc.

(0.13

)

(0.13

)

0.17

Diluted earnings (loss) per common share attributable to SPAR Group, Inc.

(0.13

)

(0.13

)

0.16

Weighted-average common shares outstanding – basic

23,555

23,333

Weighted-average common shares outstanding – diluted

23,729

24,455

Net income (loss)

(2,687

)

(2,687

)

4,776

Other comprehensive (loss) income

Foreign currency translation adjustments

(1,553

)

–

(1,553

)

1,283

–

1,283

Comprehensive income (loss)

(4,240

)

(4,240

)

6,059

Comprehensive income attributable to non-controlling interest

(172

)

(172

)

(317

)

(317

)

Comprehensive income (loss) attributable to SPAR Group, Inc.

(4,412

)

(4,412

)

5,742

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

The following tables reflect the impact of the restatements to the specific line items presented in the Company’s previously reported Consolidated Balance Sheets as of December 31, 2023 (in thousands, except share and per share data).

December 31, 2023

As Previously Reported

Adjustment

Restated

Assets

Current assets:

Cash and cash equivalents

10,719

(6,228

)

4,491

Accounts receivable, net

59,776

(16,670

)

43,106

Prepaid expenses and other current assets

5,614

(3,350

)

2,264

Current assets of discontinued operations

26,248

Total current assets

76,109

Property and equipment, net

2,871

(154

)

2,717

Operating lease right-of-use assets

2,323

(392

)

1,931

Goodwill

1,382

(88

)

1,294

Intangible assets, net

1,180

)

1,178

Deferred income taxes, net

4,687

(1,365

)

3,322

Other assets

1,729

)

1,727

Non-current assets of discontinued operations

2,003

Total assets

90,281

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

9,488

(4,673

)

4,815

Accrued expenses and other current liabilities

15,274

(10,564

)

4,710

Due to affiliates

3,205

Customer incentives and deposits

1,905

Lines of credit and short-term loans

17,530

Current portion of operating lease liabilities

1,163

(218

)

945

Current liabilities of discontinued operations

15,455

Total current liabilities

48,565

Operating lease liabilities, net of current portion

1,160

(174

)

986

Long-term debt

310

Non-current liabilities of discontinued operations

174

174

Total liabilities

50,035

Commitments and contingencies – See Note 7

Stockholders' equity:

Preferred stock, Series - B. $.01 par value:

Authorized and available shares– 2,000,000 Issued and outstanding shares– 0 at December 31, 2024 and 650,000 at December 31, 2023

Common stock, $.01 par value:

Authorized shares – 47,000,000 Issued and outstanding shares – 23,449,701 at December 31, 2024 and 23,240,959 at December 31, 2023

232

Treasury stock, at cost 1,205,485 shares at December 31, 2024 and 205,485 Shares at December 31, 2023

(285

)

(285

)

Additional paid-in capital

21,004

Accumulated other comprehensive (loss)

(3,341

)

(3,341

)

Retained earnings

10,609

Total stockholders' equity attributable to SPAR Group, Inc.

28,226

Non-controlling interest

12,020

Total stockholders’ equity

40,246

Total liabilities and stockholders’ equity

90,281

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

The following tables reflect the impact of the restatement to the specific line items presented in the Company's previously reported Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 (in thousands):

Year Ended December 31, 2024

As Previously Reported

Adjustment

Restated

Cash flows from operating activities:

Net loss

(2,687

)

(2,687

)

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization

1,616

(63

)

1,553

Amortization of operating lease assets

545

Provision for expected credit losses

128

Deferred income tax benefit

(1,500

)

(1,500

)

Share based compensation

137

Gain on disposal of business

(1,348

)

(1,188

)

(2,536

)

Changes in operating assets and liabilities, net of business disposals:

Accounts receivable

(5,656

)

3,567

(2,089

)

Prepaid expenses and other assets

(2,375

)

2,791

416

Accounts payable

6,958

501

7,459

Operating lease liabilities

(541

)

(541

)

Accrued expenses, other current liabilities and customer incentives and deposits

4,058

(5,182

)

(1,124

)

Net cash (used in) provided by operating activities of continuing operations

(665

)

426

(239

)

Net cash used in operating activities of discontinued operations

(426

)

(426

)

Net cash used in operating activities

(665

)

(665

)

Cash flows from investing activities:

Proceeds from sale of joint ventures, net of cash transferred

11,020

(3,761

)

7,259

Purchases of property and equipment and internal use software

(1,139

)

(1,129

)

Net cash provided by (used in) investing activities of continuing operations

9,881

(3,751

)

6,130

Net cash provided by investing activities of discontinued operations

3,751

Net cash provided by investing activities

9,881

Cash flows from financing activities:

Borrowings under lines of credit

132,133

Repayments under lines of credit

(128,347

)

(128,347

)

Payment of notes to seller

(1,843

)

(1,843

)

Repurchase of common stock

(1,800

)

(1,800

)

Distribution to non-controlling investors

(1,315

)

1,315

Payments to acquire noncontrolling interests

(500

)

(500

)

Proceeds from long-term debt

Net cash (used in) provided by financing activities of continuing operations

(1,657

)

1,315

(341

)

Net cash used in financing activities of discontinued operations

(1,315

)

(1,315

)

Net cash used in financing activities

(1,657

)

(1,656

)

Effect of foreign exchange rate changes on cash

(58

)

(58

)

Net increase in cash and cash equivalents

7,502

Cash and cash equivalents at beginning of year

10,719

Cash and cash equivalents at end of year

18,221

Less cash and cash equivalents of discontinued operations

Cash and cash equivalents from continuing operations

18,221

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

Year Ended December 31, 2023

As Previously Reported

Adjustment

Restated

Cash flows from operating activities:

Net income

4,776

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization

2,001

(174

)

1,827

Amortization of operating lease assets

875

Provision for expected credit losses

Deferred income tax expense

921

337

1,258

Share based compensation

297

Loss on disposal of business

408

Changes in operating assets and liabilities, net of business disposals:

Accounts receivable

3,232

(2,986

)

246

Prepaid expenses and other assets

2,082

(3,432

)

(1,350

)

Accounts payable

(2,960

)

950

(2,010

)

Operating lease liabilities

(875

)

(875

)

Accrued expenses, other current liabilities and customer incentives and deposits

(4,024

)

2,105

(1,919

)

Net cash (used in) provided by operating activities of continuing operations

6,821

(3,200

)

3,621

Net cash provided by operating activities of discontinued operations

3,200

Net cash provided by operating activities

6,821

Cash flows from investing activities:

Proceeds from sale of joint ventures, net of cash transferred

(1,027

)

(40

)

(1,067

)

Purchases of property and equipment and internal use software

(1,242

)

(1,194

)

Net cash provided by (used in) investing activities of continuing operations

(2,269

)

(2,261

)

Net cash used in investing activities of discontinued operations

)

Net cash used in investing activities

(2,269

)

(2,269

)

Cash flows from financing activities:

Borrowings under lines of credit

103,742

Repayments under lines of credit

(104,845

)

(104,845

)

Payment of notes to seller

Repurchase of common stock

Distribution to non-controlling investors

(1,673

)

1,247

(426

)

Payments to acquire noncontrolling interests

(473

)

(473

)

Proceeds from long-term debt

930

Payments on term debt

(701

)

(701

)

Net cash (used in) provided by financing activities of continuing operations

(3,020

)

1,247

(1,773

)

Net cash used in financing activities of discontinued operations

(1,247

)

(1,247

)

Net cash used in financing activities

(3,020

)

(3,020

)

Effect of foreign exchange rate changes on cash

(158

)

(158

)

Net increase in cash and cash equivalents

1,374

Cash and cash equivalents at beginning of year

9,345

Cash and cash equivalents at end of year

10,719

Less cash and cash equivalents of discontinued operations

6,228

Cash and cash equivalents from continuing operations

10,719

(6,228

)

4,491

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

Amounts included in the consolidated financial statements for discontinued operations are detailed below:

*Summary of Results from Discontinued Operations*
	*Twelve Months Ended December 31,*
$ in thousands	*2024*			*2023*
Net revenues	$	33,185		$	74,873
Cost of revenues		28,325			63,830
Gross profit		4,860			11,043
Selling, general, and administrative expenses		3,385			7,047
Loss on disposal of business		1,188			-
Depreciation and amortization		63			174
Income from operations before tax		224			3,822
Income tax expense		1,074			1,709
Interest expense (income)		31			(312	)
Income (loss) from discontinued operations, net of tax	$	(881	)	$	2,425

*Summary of assets and liabilities of discontinued operations*
$ in thousands	*December 31, 2024*		*December 31, 2023*
Assets
Current Assets:
Cash and cash equivalents	$	-	$	6,228
Accounts receivable, net		-		16,670
Prepaid expenses and other current assets		-		3,350
Total current assets		-		26,248
Property and equipment, net		-		154
Operating lease right-of-use assets		-		392
Goodwill		-		88
Intangible assets, net		-		2
Deferred income taxes, net		-		1,365
Other assets		-		2
Total assets		-		28,251

Liabilities:
Current Liabilities:
Accounts payable		-		4,673
Accrued expenses and other current liabilities		-		10,564
Current portion of operating lease liabilities		-		218
Total current liabilities		-		15,455
Operating lease liabilities, net of current portion		-		174
Total liabilities	$	-	$	15,629

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

While preparing this Form 10-K/A, management identified a separate, unrelated presentation error in the Segment Information footnote involving four tables that were not accurately reported. Below are restated segment disclosures that correct the presentation error and the restatement of discontinued operations:

	*Year Ended December 31*
	*2024*
$ in thousands		*As Previously Reported*			*Reclass Adjustment*			*Discontinued Operations Adjustment*			*Restated*
Interest expense
Americas	$	65		$	2,092		$	(31	)	$	2,126
Asia - Pacific		2,157			(2,092	)		-			65
EMEA		-			-			-			-
Total Interest expense	$	2,222		$	-		$	(31	)	$	2,191

	*As Previously Reported*			*Reclass Adjustment*			*Discontinued Operations Adjustment*			*Restated*
Income (loss) before income tax expense
Americas	$	(4,990	)	$	5,737		$	(193	)	$	554
Asia - Pacific		6,338			(7,402	)		-			(1,064	)
EMEA		(2,817	)		1,665			-			(1,152	)
Total Income (loss) before income tax expense	$	(1,469	)	$	-		$	(193	)	$	(1,662	)

	*As Previously Reported*			*Reclass Adjustment*			*Discontinued Operations Adjustment*			*Restated*
Net income (loss)
Americas	$	(6,233	)	$	5,737		$	881		$	385
Asia - Pacific		6,402			(7,402	)		-			(1,000	)
EMEA		(2,856	)		1,665			-			(1,191	)
Total Net income (loss)	$	(2,687	)	$	-		$	881		$	(1,806	)

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