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<SEC-DOCUMENT>0000910680-04-000915.txt : 20040823
<SEC-HEADER>0000910680-04-000915.hdr.sgml : 20040823
<ACCEPTANCE-DATETIME>20040823163011
ACCESSION NUMBER:		0000910680-04-000915
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20040630
FILED AS OF DATE:		20040823
DATE AS OF CHANGE:		20040823

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SPAR GROUP INC
		CENTRAL INDEX KEY:			0001004989
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-BUSINESS SERVICES, NEC [7389]
		IRS NUMBER:				330684451
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0101

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-27408
		FILM NUMBER:		04992182

	BUSINESS ADDRESS:	
		STREET 1:		580 WHITE PLAINS ROAD
		CITY:			TARRYTOWN
		STATE:			NY
		ZIP:			10591
		BUSINESS PHONE:		914-332-4100

	MAIL ADDRESS:	
		STREET 1:		580 WHITE PLAINS ROAD
		CITY:			TARRYTOWN
		STATE:			NY
		ZIP:			10591

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PIA MERCHANDISING SERVICES INC
		DATE OF NAME CHANGE:	19951220
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>f10q063004.txt
<DESCRIPTION>QUARTERLY REPORT
<TEXT>

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


                                    Form 10-Q

(Mark One)
X QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934 for the second quarterly period ended June 30, 2004

                                       OR

__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT  OF  1934   for  the   transition   period   from  _____________________
to ______________________


                         Commission file number: 0-27824


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

               Delaware                            33-0684451
        State of Incorporation           IRS Employer Identification No.

                580 White Plains Road, Tarrytown, New York, 10591
          (Address of principal executive offices, including zip code)

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


Indicate by check whether the registrant  (1) has filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days: [X] Yes [ ] No


Indicate by check whether the registrant is an accelerated  filer (as defined in
Rule 12b-2 of the Exchange Act):
[ ] Yes   [X] No


   On June 30, 2004, there were 18,858,972 shares of Common Stock outstanding.

<PAGE>


                                SPAR Group, Inc.

                                      Index

<TABLE>
<CAPTION>
<S>             <C>                                                                                  <C>
PART I:         FINANCIAL INFORMATION

Item 1:               Financial Statements

                      Consolidated Balance Sheets
                      as of June 30, 2004 and December 31, 2003....................................... 3

                      Consolidated Statements of Operations for the three
                      months and six months ended June 30, 2004 and 2003...............................4

                      Consolidated Statements of Cash Flows for the
                      six months ended June 30, 2004 and 2003......................................... 5

                      Notes to Consolidated Financial Statements.......................................6

Item 2:               Management's Discussion and Analysis of Financial
                      Condition and Results of Operations.............................................16

Item 3:               Quantitative and Qualitative Disclosures About Market Risk......................28

Item 4:               Controls and Procedures.........................................................28

PART II:        OTHER INFORMATION

Item 1:               Legal Proceedings...............................................................29

Item 2:               Changes in Securities and Use of Proceeds.......................................29

Item 3:               Defaults upon Senior Securities.................................................29

Item 4:               Submission of Matters to a Vote of Security Holders.............................29

Item 5:               Other Information...............................................................29

Item 6:               Exhibits and Reports on Form 8-K................................................29

SIGNATURES............................................................................................31
</TABLE>


                                       2
<PAGE>

PART I:.FINANCIAL INFORMATION

Item 1:  Financial Statements
                                SPAR Group, Inc.

                           Consolidated Balance Sheets
                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                     June 30,    December 31,
                                                       2004         2003
                                                     --------     --------
                                                    (Unaudited)    (Note)
<S>                                                  <C>          <C>
Assets
Current assets:
   Accounts receivable, net                          $  7,743     $ 13,942
   Prepaid expenses and other current assets              310          415
   Deferred income taxes                                    -        1,305
                                                     --------     --------
Total current assets                                    8,053       15,662

Property and equipment, net                             1,751        2,099
Goodwill                                                  798        8,749
Deferred income taxes                                       -          434
Other assets                                              448          926
                                                     --------     --------
Total assets                                         $ 11,050     $ 27,870
                                                     ========     ========

Liabilities and stockholders' equity
Current liabilities:
   Accounts payable                                  $  2,083     $  1,445
   Accrued expenses and other current liabilities       1,192        4,350
   Accrued expenses, due to affiliates                  1,296          996
   Restructuring charges, current                           -          685
   Customer deposits                                      932           17
   Line of credit, short-term                           1,856        4,084
                                                     --------     --------
Total current liabilities                               7,359       11,577

Other long-term liabilities                               513          270


Commitments and contingencies

Stockholders' equity:
   Preferred stock, $.01 par value:
     Authorized shares - 3,000,000
     Issued and outstanding shares - none                   -            -
   Common stock, $.01 par value:
     Authorized shares - 47,000,000
     Issued and outstanding shares -
       18,858,972 - June 30, 2004 and
                    December 31, 2003                     189          189
   Treasury stock                                        (213)        (384)
   Accumulated other comprehensive loss                    (3)          (7)
   Additional paid-in capital                          11,197       11,249
   Accumulated (deficit) retained earnings             (7,992)       4,976
                                                     --------     --------
Total stockholders' equity                              3,178       16,023
                                                     --------     --------
Total liabilities and stockholders' equity           $ 11,050     $ 27,870
                                                     ========     ========
</TABLE>

Note: The Balance Sheet at December 31, 2003,  has been derived from the audited
      financial  statements  at  that  date  but  does  not  include  any of the
      information  and  footnotes  required by accounting  principles  generally
      accepted in the United States for complete financial statements.

See accompanying notes.


                                       3
<PAGE>

                                SPAR Group, Inc.
                      Consolidated Statements of Operations
                                   (unaudited)
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                      Three Months Ended          Six Months Ended
                                                     ---------------------     ---------------------
                                                     June 30,     June 30,     June 30,     June 30,
                                                       2004         2003         2004         2003
                                                     --------     --------     --------     --------
<S>                                                  <C>          <C>          <C>          <C>
Net revenues                                         $ 11,933     $ 17,351     $ 24,736     $ 36,090
Cost of revenues                                        8,716       11,146       17,411       22,397
                                                     --------     --------     --------     --------
Gross profit                                            3,217        6,205        7,325       13,693

Selling, general and administrative expenses            5,577        4,768       10,545        9,711
Impairment charges                                      8,141            -        8,141            -
Depreciation and amortization                             369          399          730          777
                                                     --------     --------     --------     --------
Operating (loss) income                               (10,870)       1,038      (12,091)       3,205

Interest expense                                           64           72           98          140
Other expense (income)                                      7          (10)           8           28
                                                     --------     --------     --------     --------
(Loss) income before provision for income taxes       (10,941)         976      (12,197)       3,037

Provision for income taxes                              1,236          368          771        1,151
                                                     --------     --------     --------     --------

Net (loss) income                                    $(12,177)    $    608     $(12,968)    $  1,886
                                                     ========     ========     ========     ========

Basic/diluted net (loss) income per common share:

  Net (loss) income - basic/diluted                  $  (0.65)    $   0.03     $  (0.69)    $   0.10
                                                     ========     ========     ========     ========

Weighted average common shares - basic                 18,859       18,858       18,859       18,850
                                                     ========     ========     ========     ========

Weighted average common shares - diluted               18,859       19,538       18,859       19,447
                                                     ========     ========     ========     ========
</TABLE>


See accompanying notes.

                                       4
<PAGE>

                                SPAR Group, Inc.

                      Consolidated Statements of Cash Flows
                           (unaudited) (In thousands)

<TABLE>
<CAPTION>
                                                                       Six Months Ended
                                                                    ---------------------
                                                                    June 30,     June 30,
                                                                      2004         2003
                                                                    --------     --------
<S>                                                                 <C>          <C>
Operating activities
Net (loss) income                                                   $(12,968)    $  1,886
Adjustments to reconcile net (loss) income to net cash provided
   by (used in) operating activities:
     Impairment charges                                                8,141            -
     Deferred tax asset adjustments                                      729            -
     Depreciation                                                        730          777

     Changes in operating assets and liabilities:
       Accounts receivable                                             6,199       (2,089)
       Prepaid expenses and other assets                                 515         (630)
       Accounts payable, accrued expenses, other current
         liabilities and customer deposits                              (561)        (332)
       Accrued expenses due to affiliates                                300          577
       Restructuring charges                                               -         (817)

                                                                    --------     --------
Net cash provided by (used in) operating activities                    3,085         (628)

Investing activities
Purchases of property and equipment                                     (824)        (966)
Acquisition of businesses                                               (399)        (436)
                                                                    --------     --------
Net cash used in investing activities                                 (1,223)      (1,402)

Financing activities
Net (payments) borrowings on line of credit                           (2,228)       6,500
Other long-term liabilities                                              243            -
Proceeds from employee stock purchase plan and exercised options         119           32
Payments to certain stockholders                                           -       (3,951)
Purchase of treasury stock                                                 -         (551)
Translation gain                                                           4            -
                                                                    --------     --------
Net cash (used in) provided by financing activities                   (1,862)       2,030

Net change in cash                                                         -            -
Cash at beginning of period                                                -            -
                                                                    --------     --------
Cash at end of period                                               $      -     $      -
                                                                    ========     ========

Supplemental disclosure of cash flow information
Interest paid                                                       $    103     $    111
</TABLE>

See accompanying notes.


                                       5
<PAGE>

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


1.    Basis of Presentation

      The  accompanying  unaudited,  consolidated  financial  statements of SPAR
Group, Inc., a Delaware  corporation  ("SGRP"),  and its subsidiaries  (together
with SGRP,  collectively,  the "Company" or the "SPAR Group") have been prepared
in accordance with accounting principles generally accepted in the United States
for interim  financial  information  and with the  instructions to Form 10-Q and
Article  10 of  Regulation  S-X.  Accordingly,  they do not  include  all of the
information and footnotes required by accounting  principles  generally accepted
in the United  States  for  complete  financial  statements.  In the  opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair  presentation have been included in these interim financial
statements.  However,  these  interim  financial  statements  should  be read in
conjunction with the annual consolidated  financial statements and notes thereto
for the Company as contained  in the  Company's  Annual  Report for 2003 on Form
10-K for the year ended  December 31,  2003,  as filed with the  Securities  and
Exchange  Commission on March 30, 2004 (the "Company's Annual Report for 2003 on
Form 10-K"). The Company's results of operations for the interim periods are not
necessarily indicative of its operating results for the entire year.

2.    Impairment Charges

Goodwill:

      In April 2004, the Company's  largest customer  announced that they signed
definitive  agreements for the sale of its business to two purchasers.  The sale
was completed on August 2, 2004. This customer  accounted for 35.9% and 32.7% of
the  Company's  net  revenues  for the six months  ended June 30, 2004 and 2003,
respectively and 29.9% of the Company's revenues for the year ended December 31,
2003.  This customer was the last  remaining  profitable  business that resulted
from the PIA acquisition on July 9, 1999.

      At March 31, 2004, the Company had $7.6 million of goodwill related to the
acquisition  of PIA. As a result of the loss of this major  client,  the Company
has recorded an impairment of the PIA related  goodwill  resulting in a non-cash
charge of $7.6 million to the results of operations  for the three months ending
June 30, 2004.  Also, in connection with the PIA  acquisition,  certain deferred
tax  assets  related  to PIA net  operating  loss carry  forward  benefits  were
recognized  as an  adjustment  to  goodwill.  The  Company  also  recorded as an
impairment charge, a $750,000 valuation allowance on these deferred tax assets.

      At March 31, 2004, the Company had approximately  $2.1 million accrued for
restructure  costs and PIA merger related costs. As a result of the PIA business
impairment,  the Company  evaluated these accruals and determined that only $0.4
million is required.  The Company  applied the $1.7 million ($1.4 million net of
the  tax  effect)  reduction  in PIA  related  acquisition  liabilities  against
impairment charges during the quarter ended June 30, 2004.

                                       6
<PAGE>
                                SPAR Group, Inc.
                   Notes to Consolidated Financial Statements
                             (unaudited) (continued)

       In June 2003, the Company acquired its Canadian operations. In connection
with the acquisition,  the Company recorded goodwill of $712,000. At the time of
acquisition,  it was expected that the Canadian  subsidiary would be profitable.
However,  the Canadian  subsidiary has operated at a loss since its acquisition.
It is also expected that the Canadian  subsidiary will incur a loss for the year
ending December 31, 2004. As a result of the continued losses and the failure to
attract new  customers  the Company has  recorded an  impairment  of the related
goodwill  resulting in a non-cash charge of $712,000 for the three months ending
June 30, 2004.

Capitalized Internal Use Software Development Costs:

       Historically,  the Company  has  capitalized  costs of computer  software
developed for internal use. Some of the costs  capitalized  were associated with
certain clients to whom the Company no longer provides  merchandising  services.
As a result of the loss of these  clients,  the Company  recorded an  impairment
charge  for the net  book  value  of  internally  developed  software  costs  of
approximately $442,000 for the three months ended June 30, 2004.

Other Assets:

       In addition to the above,  the Company has recorded  impairment  of other
assets totaling $68,000 for the three months ending June 30, 2004.

3.      Management's Plans Concerning Cash Flow

Management  believes  that  based upon the  Company's  cost  saving  initiatives
(outlined in Note 4 Restructuring  Charges) and the existing credit  facilities,
funding will be sufficient to support  ongoing  operations  over the next twelve
months.  The Company is and has been in  violation  of certain  covenants of its
Credit  Facility  (see  Note 6 Line of  Credit)  and  expects  to  violate  such
covenants  in  the  future.   The  Company's  bank,   Webster   Business  Credit
Corporation, has issued waivers for past covenant violations, however, there can
be no assurances that Webster will continue to issue such waivers in the future.

4.     Restructuring Charges

In 1999, in  connection  with the PIA merger,  the Company's  Board of Directors
approved  a  plan  to   restructure   the   operations  of  the  PIA  Companies.
Restructuring  costs were composed of committed  costs required to integrate the
SPAR Companies' and the PIA Companies' field organizations and the consolidation
of administrative  functions to achieve beneficial  synergies and costs savings.
(For the specific  definitions of those terms, see Item 1 - Business - GENERAL -
Continuing Operations - Merchandising  Services Division in the Company's Annual
Report for 2003 on Form 10-K.) At March 31,  2004,  the  Company had  previously
recorded  PIA related  restructuring  reserves  for  equipment  and office lease
settlements  totaling  $685,000.  At June 30, 2004,  the Company  evaluated  its
restructuring  reserves and determined that the  restructuring  reserves were no
longer necessary (See Note 2 Impairment Charges).

                                       7
<PAGE>
                                SPAR Group, Inc.
                   Notes to Consolidated Financial Statements
                             (unaudited) (continued)

       In July 2004,  as a result of the loss of several  significant  customers
and the pending sale of the Company's largest customer, the Company entered into
a plan to  restructure  and reduce  its field  force,  as well as, its  selling,
general and  administrative  cost  structure to reflect its lower  revenue base.
These reductions  consist of personnel  reductions and related expenses,  office
closings and  restructuring or abandoning of equipment leases. In July 2004, the
Company  implemented  several of the savings  initiatives  and will  continue to
implement  certain others over the next several months.  As a result of the July
restructuring,  the Company  estimates  it will incur  charges of  approximately
$200,000 for  severance  benefits and  approximately  $500,000 for equipment and
office leases that the Company will cease using in the quarter ending  September
30, 2004 or  thereafter.  The  Company  will  continue  to evaluate  cost saving
opportunities and expects to incur additional restructuring costs in the future.

5.     Earnings Per Share

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

<TABLE>
<CAPTION>
                                          Three Months Ended            Six Months Ended
                                        -----------------------      -----------------------
                                        June 30,       June 30,      June 30,       June 30,
                                          2004           2003          2004           2003
                                        --------       --------      --------       --------
<S>                                     <C>            <C>           <C>            <C>
Numerator:

   Net (loss) income                    $(12,177)      $    608      $(12,968)      $  1,886

Denominator:
   Shares used in basic earnings
   (loss) per share calculation           18,859         18,858        18,859         18,850

Effect of diluted securities:
   Employee stock options                      -            680             -            597
                                        --------       --------      --------       --------

   Shares used in diluted earnings
   (loss) per share calculation           18,859         19,538        18,859         19,447
                                        ========       ========      ========       ========

Basic and diluted earnings (loss)
per common share:

   Net (loss) income - basic and        $  (0.65)      $   0.03      $  (0.69)      $   0.10
   diluted
                                        ========       ========      ========       ========
</TABLE>

      The  computation of dilutive loss per share excluded  anti-dilutive  stock
options to purchase  370,000  shares and 795,000 shares for three months and six
months ending June 30, 2004, respectively.


                                       8
<PAGE>
                                SPAR Group, Inc.
                   Notes to Consolidated Financial Statements
                             (unaudited) (continued)


6.    Line of Credit

      In January 2003, the Company and Webster Business Credit Corporation, then
known as Whitehall  Business Credit  Corporation  ("Webster"),  entered into the
Third Amended and Restated  Revolving Credit and Security Agreement (as amended,
collectively,  the  "Credit  Facility").  The Credit  Facility  provided a $15.0
million  revolving  credit facility that matures on January 23, 2006. The Credit
Facility  allowed  the  Company  to  borrow  up to $15.0  million  based  upon a
borrowing  base  formula  as  defined  in  the  agreement  (principally  85%  of
"eligible"  accounts  receivable).  On May 17,  2004,  the Credit  Facility  was
amended to among other things,  reduce the revolving  credit facility from $15.0
million to $10.0 million, change the interest rate and increase certain reserves
against collateral.  The amendment provides for interest to be charged at a rate
based  in  part  upon  the  earnings  before  interest,  tax,  depreciation  and
amortization.  At June 30, 2004, the Credit Facility bears interest at Webster's
"Alternative  Base Rate" plus 0.75% (a total of 5.25% per annum),  or LIBOR plus
3.25%.  The Credit  Facility  is secured by all of the assets of the Company and
its  subsidiaries.  In connection  with the May 17, 2004  amendment,  Mr. Robert
Brown, a Director, the Chairman,  President, Chief Executive Officer and a major
stockholder  of the  Company  and Mr.  William  Bartels,  a  Director,  the Vice
Chairman and a major stockholder of the Company,  provided  personal  guarantees
totaling  $1.0  million to Webster.  On August 20, 2004 the Credit  Facility was
further  amended in connection  with the waiver of certain  covenant  violations
(see below).  The amendment,  among other things,  reduces the revolving  credit
facility  from $10.0 million to $7.0  million,  changes the covenant  compliance
testing for certain  covenants  from  quarterly  to monthly and reduces  certain
advance  rates.  The  amendment  does not  change the  future  covenant  levels.
Therefore,  the Company  expects to be in violation of certain  covenants in the
future. Webster has issued waivers for past covenant violations,  however, there
can be no assurances that Webster will issue such waivers in the future.

      The Credit Facility contains certain financial  covenants that must be met
by the Company on a consolidated basis, among which are a minimum "Net Worth", a
minimum "Fixed Charge Coverage  Ratio", a capital  expenditure  limitation and a
minimum EBITDA, as such terms are defined in the Credit Facility. Except for the
capital  expenditure  limitation,  the Company was not in  compliance  with such
financial  covenants  at June 30,  2004.  The  Company has secured a waiver from
Webster for those items of non-compliance (see above).

      Because of the requirement to maintain a lock box arrangement with Webster
and  Webster's  ability  to  invoke  a  subjective  acceleration  clause  at its
discretion,  borrowings  under the Credit  Facility are classified as current at
June 30, 2004, and December 31, 2003, in accordance with EITF 95-22.

      The revolving  loan balances  outstanding  under the Credit  Facility were
$1.9  million  and $4.1  million  at June  30,  2004,  and  December  31,  2003,
respectively. There were letters of credit outstanding under the Credit Facility
of $0.7 million at June 30, 2004 and December 31, 2003. As of June 30, 2004, the
SPAR Group had unused availability under the Credit Facility of $2.0 million out
of the  remaining  maximum  $4.2  million  unused  revolving  line of credit (as
adjusted by the August 20, 2004 amendment)  after reducing the borrowing base by
the outstanding loans and letters of credit.

                                       9
<PAGE>
                                SPAR Group, Inc.
                   Notes to Consolidated Financial Statements
                             (unaudited) (continued)

7.    Related-Party Transactions

      Mr.  Robert G.  Brown,  a  Director,  the  Chairman,  President  and Chief
Executive  Officer and a major  stockholder  of the Company,  and Mr. William H.
Bartels,  a Director,  the Vice Chairman and a major  stockholder of the Company
(collectively,  the  "SMS  Principals"),  are  executive  officers  and the sole
stockholders  and  directors of SPAR  Marketing  Services,  Inc.  ("SMS"),  SPAR
Management Services, Inc. ("SMSI"), and SPAR Infotech, Inc. ("SIT").

      SMS provided  approximately 99% of the Company's field  representatives in
the United States (through its  independent  contractor  field force),  and SMSI
provided  approximately  92% of the  Company's  field  management  in the United
States at June 30,  2004.  Pursuant to the Amended and  Restated  Field  Service
Agreement  dated as of  January 1, 2004 (the  "Field  Service  Agreement"),  SMS
provides  the  services  of  approximately  6,200 field  representatives  to the
Company at its  request  from time to time,  for which the Company has agreed to
reimburse SMS for all of its costs of providing  those services and to pay SMS a
premium  equal to 4% of such  costs.  Pursuant  to the terms of the  Amended and
Restated  Field  Management  Agreement  dated as of January 1, 2004 (the  "Field
Management  Agreement"),  SMSI  provides  approximately  62 full-time  national,
regional and district managers to the Company at its request, from time to time,
for which the  Company  has  agreed  to  reimburse  SMSI for all of its costs of
providing  those  services and to pay SMSI a premium  equal to 4% of such costs,
except that for 2004 SMSI agreed to concessions that reduced the Company's costs
by approximately  $89,000 and $234,000 for the three and six month periods ended
June 30, 2004,  respectively.  The SMS  Principals  are not paid any salaries as
officers of SMS or SMSI so there were no salary reimbursements for them included
in such  costs or  premium.  However,  since  SMS and SMSI  are  "Subchapter  S"
corporations,  the SMS  Principals  benefit  from any  income of such  companies
allocated to them.

      SIT  provided  substantially  all of  the  Internet  computer  programming
services to the Company for the three and six month periods ended June 30, 2004.
Pursuant to the Amended and Restated  Programming and Support Agreement dated as
of January 1, 2004 (the "Programming and Support  Agreement"),  SIT continues to
provide programming  services to the Company at its request,  from time to time,
for which the  Company has agreed to pay SIT  competitive  hourly wage rates for
time  spent on  Company  matters  and to  reimburse  the  related  out-of-pocket
expenses of SIT and its personnel.  No hourly  charges or business  expenses for
the SMS  Principals  were  charged  to the  Company  for the three and six month
periods ended June 30, 2004. However, since SIT is a "Subchapter S" corporation,
the SMS Principals benefit from any income of such company allocated to them.

      Through  arrangements  with the Company,  SMS, SMSI and SIT participate in
various  benefit plans,  insurance  policies and similar group  purchases by the
Company,  for which the Company charges them their allocable shares of the costs
of those group  items and the actual  costs of all items paid  specifically  for
them.

                                       10
<PAGE>
                                SPAR Group, Inc.
                   Notes to Consolidated Financial Statements
                             (unaudited) (continued)

      The following  transactions  occurred  between the SPAR  Companies and the
above affiliates (in thousands):

<TABLE>
<CAPTION>
                                                Three Months Ended         Six Months Ended
                                               --------------------      --------------------
                                               June 30,     June 30,     June 30,    June 30,
                                                 2004         2003         2004        2003
                                               -------      -------      -------      -------
<S>                                            <C>          <C>          <C>          <C>
      Services provided by affiliates:
        SMS: Independent contractor field
           services                            $ 5,397      $ 7,257      $11,758      $14,954
                                               =======      =======      =======      =======

        SMSI: Field management services        $ 1,280      $ 1,859      $ 2,634      $ 3,775
                                               =======      =======      =======      =======

        SIT: Internet and computer
           programming services                $   334      $   476      $   715      $   882
                                               =======      =======      =======      =======

      Reimbursed costs from affiliates:        $    27      $    52      $    63      $   108
                                               =======      =======      =======      =======

              Accrued expenses due to affiliates (in thousands):

                                                  June 30,
                                            -------------------
                                              2004        2003
                                            -------      ------
                       SMS                  $ 1,296      $1,535
                                            =======      ======
</TABLE>


8.    Stock Options

      Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock  Based  Compensation,  requires  disclosure  of the fair  value  method of
accounting for stock options and other equity instruments.  Under the fair value
method,  compensation cost is measured at the grant date based on the fair value
of the award and is  recognized  over the service  period,  which is usually the
vesting period. The Company has chosen, under the provisions of SFAS No. 123, to
continue to account  for  employee  stock-based  transactions  under  Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.



                                       11
<PAGE>
                                SPAR Group, Inc.
                   Notes to Consolidated Financial Statements
                             (unaudited) (continued)

      Under the  disclosure-only  provisions  of SFAS No.  123,  Accounting  for
Stock-Based Compensation,  as amended by SFAS 148, no compensation cost has been
recognized  for the stock option  grants to Company  employees.  For  disclosure
purposes,  the  compensation  cost for the  Company's  option  grants  that were
awarded to Company  employees has been determined based on the fair value at the
grant date  consistent  with the  provisions  of SFAS No. 123, the Company's net
(loss)  income and pro forma net (loss) income per share from  operations  would
have been reduced to the adjusted amounts indicated below (in thousands,  except
per share data):

<TABLE>
<CAPTION>
                                                                   Six Months Ended
                                                                -----------------------
                                                                June 30,       June 30,
                                                                  2004           2003
                                                                --------       --------
<S>                                                             <C>            <C>
Net (loss) income, as reported                                  $(12,968)      $  1,886
                                                                --------       --------
Stock based employee compensation expense
  under the fair market value method                            $    342       $    907
                                                                --------       --------
Adjusted pro forma net (loss) income                            $(13,310)      $    979


Basic and diluted net (loss) income per share, as reported      $  (0.69)      $   0.10

Basic and diluted adjusted pro forma net (loss) income          $  (0.71)      $   0.05
  per share, after adjustment for stock based
  employee compensation expense under the fair market
  value method
</TABLE>


      The pro forma effect on net (loss) income is not representative of the pro
forma effect on net (loss)  income in future years because the options vest over
several years and additional awards may be made in the future.

      For the six months  ended June 30,  2004,  there was a recovery of amounts
previously expensed of approximately $60,000 under the provision of SFAS No. 123
dealing with stock  options to  non-employees  for stock option grants that were
awarded to the employees of the Company's affiliates resulting from the decrease
in the market price of the stock from  December  31, 2003 to June 30, 2004.  The
Company determines the fair value of the options granted to non-employees  using
the Black-Scholes  valuation model and recovers amounts  previously  expensed or
expenses that value over the service period. Until an option is vested, the fair
value of the option  continues  to be updated  through  the  vesting  date.  The
options  granted have a ten (10) year life and vest over four-year  periods at a
rate of 25% per year, beginning on the first anniversary of the date of grant.


                                       12
<PAGE>
                                SPAR Group, Inc.
                   Notes to Consolidated Financial Statements
                             (unaudited) (continued)

9.    Treasury Stock

      The Company  utilized 33,148 of repurchased  shares to issue stock for the
exercise of stock options  during the six months ended June 30, 2004. As of June
30, 2004, the Company has 42,908 shares of treasury stock,  which it acquired at
a cost of approximately $213,000. Currently, the Company has no stock repurchase
program in place.

10.   Line of Credit and Advances due from SPAR  Performance  Group,  Inc. (now
      called STIMULYS, Inc.); Inability to Consolidate under FIN 46

      In connection with the sale of SPAR Performance Group, Inc.  ("SPGI"),  on
June 30, 2002,  the Company sold all of the stock of its  subsidiary,  SPGI.  In
connection  with the sale,  SPGI  entered  into a term loan  agreement  with the
Company under which SPGI borrowed $6.0 million in term loans, which due to their
speculative nature have been fully reserved.

      Also in  connection  with the  sale,  the  Company  agreed  to  provide  a
discretionary  revolving  line of credit to SPGI not to exceed $2.0 million (the
"SPGI Revolver")  through  September 30, 2005. The SPGI Revolver is secured by a
pledge of all the assets of SPGI and is guarantied by SPGI's parent, Performance
Holdings,  Inc.  The SPGI  Revolver  provided  for  advances  in  excess  of the
borrowing  base  through  September  30, 2003.  As of October 1, 2003,  the SPGI
Revolver  was  adjusted,  as per the  agreement,  to  include a  borrowing  base
calculation  (principally 85% of "eligible" accounts  receivable).  In September
2003,  SPGI requested and the Company  agreed to provide  advances of up to $1.0
million in excess of the borrowing base through  September 30, 2004. In December
of 2003, SPGI changed its name to STIMULYS,  Inc. On April 30, 2004, as a result
of various defaults by STIMULYS,  the Company amended the discretionary  line of
credit  by  eliminating  advances  in  excess of  STIMULYS'  borrowing  base and
reducing the maximum amount of the revolving line to the greater of $1.0 million
or the borrowing base.  Under the SPGI Revolver  terms,  STIMULYS is required to
deposit all of its cash receipts to the Company's lock box.

      At June 30, 2004, there was approximately  $0.9 million advanced under the
SPGI Revolver and $70,000 in outstanding letters of credit,  while the borrowing
base was approximately  $0.9 million.  Due to the speculative nature of the SPGI
Revolver,  the Company has a reserve of approximately  $750,000 against the SPGI
Revolver at June 30, 2004.

      In accordance with FASB  Interpretation No. 46 - Consolidation of Variable
Interest  Entities  (FIN  46),  as a result  of the  term  loans  and  revolving
advances,  the  Company has  concluded  that it is the  primary  beneficiary  of
STIMULYS and is,  therefore,  required to consolidate  STIMULYS in its financial
statements.   However,  the  Company  has  been  unable  to  perform  accounting
procedures   necessary  to  include  STIMULYS  in  the  consolidated   financial
statements,  as required by FIN 46, and has been unable to obtain the  necessary
permission  from  STIMULYS  to  include  that   organization  in  the  Company's
consolidated financial statements.  At June 30, 2004, the Company's maximum loss
exposure  is  $220,000,  which  represents  the  amounts  outstanding  under the
revolving  line of credit  and the  letter  of credit in excess of the  $750,000
reserve.  The  Company's  maximum  potential  loss exposure  resulting

                                       13
<PAGE>
                                SPAR Group, Inc.
                   Notes to Consolidated Financial Statements
                             (unaudited) (continued)


from the  revolving  line of  credit  agreement  with  STIMULYS  is  limited  to
$250,000,  which is the $1.0 million  revolving line of credit less the $750,000
reserve.

11.   Income Taxes

As a result of the loss of several significant clients,  current year losses and
the lack of certainty of a return to  profitability  in the next twelve  months,
the Company has reversed the $465,000 tax benefit  recorded in the quarter ended
March 31, 2004. In addition, the Company has recorded a full valuation allowance
against its net deferred tax assets resulting in a charge totaling approximately
$729,000 for the three months ending June 30, 2004.

12.   Customer Deposits

In June 2004, the Company received a  non-refundable  deposit of $900,000 from a
customer. The deposit is to be applied to future invoices for services that will
be provided by the Company under a master service agreement through December 31,
2006. Each invoice will be reduced by 20% until the deposit is depleted.

13.   Contingencies/Joint Venture Guarantee

In May  2001,  the  Company  and  Paltac,  Inc.  ("Paltac"),  a  large  Japanese
distributor, entered into a joint venture to create a Japanese company, SPAR FM.
SPAR FM  entered  into a 300  million  Yen  Revolving  Credit  Agreement  with a
Japanese bank. The bank required Paltac guarantee the outstanding balance on the
revolving credit facility. As part of the joint venture agreement, should Paltac
be required to make a payment on its guarantee to the bank, then the Company has
agreed to remit to Paltac 50% of any such payment up to a maximum of 150 million
Yen or approximately $1.4 million. As of June 30, 2004, SPAR FM has borrowed 100
million Yen under its  Revolving  Credit  Agreement.  Therefore,  the  Company's
current exposure to Paltac  respecting  outstanding loans to SPAR FM at June 30,
2004 would be 50 million  Yen or  approximately  $0.5  million.  The Company has
recorded  approximately  $0.3 million in long-term  liabilities for its share of
the cumulative losses associated with this joint venture.

Legal Matters

On October 24, 2001,  Safeway Inc., a former  customer of the PIA  Merchandising
Co.,  Inc. and Pivotal  Sales  Company,  filed a complaint  alleging  damages of
approximately  $3.6 million plus interest and costs and alleged punitive damages
in an unspecified  amount against the Company in Alameda County  Superior Court,
California,  Case No.  2001028498  with respect to (among other things)  alleged
breach of contract. On or about December 30, 2002, the Court approved the filing
of Safeway Inc.'s Second Amended  Complaint,  which alleges causes of action for
(among other things) breach of contract against the Company,  PIA  Merchandising
Co., Inc. and Pivotal Sales Company. The Second Amended Complaint was filed with
the Court on January  13,  2003,  and does not  specify  the amount of  monetary
damages  sought.  No punitive or exemplary  damages are sought in Safeway Inc.'s
Second  Amended  Complaint.  This  case is  being  vigorously  contested  by the
Company.

                                       14
<PAGE>
                                SPAR Group, Inc.
                   Notes to Consolidated Financial Statements
                             (unaudited) (continued)

The Company is a party to various legal actions and  administrative  proceedings
arising in the normal course of business.  In the opinion of Company management,
disposition  of these  matters are not  anticipated  to have a material  adverse
effect on the  financial  position,  results of  operations or cash flows of the
Company.

14.   Geographic Data

A summary of the Company's net revenue,  operating  income and long lived assets
by geographic  area for the three and six month periods  ending June 30, 2004 is
as follows (in thousands):

                 Three Months Ending       Six Months Ending
                       --------                 --------
                       June 30,                 June 30,
                         2004                     2004
                       --------                 --------
Net revenue:
United States          $ 10,568                 $ 23,231
International          $  1,365                 $  1,505

Operating income:
United States          $(10,395)                $(11,258)
International          $   (475)                $   (833)

Long lived assets as of June 30, 2004:
United States          $  1,555
International          $    196

No one  international  geographic market is greater than 10% of consolidated net
revenue.


                                       15
<PAGE>

                                SPAR Group, Inc.


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

Forward-Looking Statements

         Statements  contained in this Quarterly Report on Form 10-Q for the six
months  ended June 30,  2004 (this  "Quarterly  Report"),  of SPAR  Group,  Inc.
("SGRP", and together with its subsidiaries, the "SPAR Group" or the "Company"),
include  "forward-looking  statements"  within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, including, in particular and
without  limitation,  the  statements  contained  in the  discussions  under the
heading "Management's Discussion and Analysis of Financial Condition and Results
of  Operations".  Forward-looking  statements  involve known and unknown  risks,
uncertainties  and other factors that could cause the Company's  actual results,
performance   and   achievements,   whether   expressed   or   implied  by  such
forward-looking  statements,  to not  occur or be  realized  or to be less  than
expected. Such forward-looking statements generally are based upon the Company's
best estimates of future results, performance or achievement, current conditions
and the most recent  results of  operations.  Forward-looking  statements may be
identified  by the use of  forward-looking  terminology  such as "may",  "will",
"expect", "intend", "believe", "estimate",  "anticipate",  "continue" or similar
terms,  variations  of those terms or the  negative of those  terms.  You should
carefully consider such risks, uncertainties and other information,  disclosures
and  discussions  which  contain  cautionary  statements  identifying  important
factors that could cause actual results to differ materially from those provided
in the forward-looking statements.

         Although  the  Company   believes  that  its  plans,   intentions   and
expectations  reflected in or suggested by such  forward-looking  statements are
reasonable, it cannot assure that such plans, intentions or expectations will be
achieved  in whole or in part.  You should  carefully  review  the risk  factors
described and any other cautionary  statements contained in the Company's Annual
Report on Form 10-K for the fiscal year ended  December 31, 2003,  as filed with
the Securities and Exchange  Commission on March 30, 2004 (the "Company's Annual
Report for 2003 on Form 10-K"), and the cautionary  statements contained in this
Quarterly Report. All forward-looking  statements attributable to the Company or
persons  acting on its behalf are  expressly  qualified by the risk factors (see
Item 1 - Certain Risk Factors) and other cautionary  statements in the Company's
Annual Report for 2003 on Form 10-K and in this  Quarterly  Report.  The Company
undertakes  no  obligation  to  publicly  update or revise  any  forward-looking
statements, whether as a result of new information, future events or otherwise.

Overview

         The  Company's   operations  are  divided  into  two   divisions:   the
Merchandising   Services   Division   and  the   International   Division.   The
Merchandising  Services  Division  provides  merchandising   services,   product
demonstrations, product sampling, database marketing, teleservices and marketing
research to manufacturers and retailers with product  distribution  primarily in
mass  merchandisers,  drug chains,  convenience stores and grocery stores in the
United States. The International  Division,  established in July 2000, currently
provides merchandising services in Japan, Canada, Turkey and South Africa.


                                       16
<PAGE>

                                SPAR Group, Inc.


Merchandising Services Division

     The Company provides nationwide  merchandising and other marketing services
to  general   merchandise,   health  and  beauty  care,   consumer  goods,  home
entertainment,  PC software and food  products  companies  in drug chains,  mass
merchandisers,  convenience  stores  and  retail  grocery  stores in the  United
States.   Merchandising   services  primarily  consist  of  regularly  scheduled
dedicated routed services and special projects provided at the store level for a
specific retailer or multiple manufacturers primarily under single or multi-year
contracts  or  agreements.   Services  also  include  stand-alone,   large-scale
implementations  such as new  store  openings,  new  product  launches,  special
seasonal  or  promotional  merchandising,  focused  product  support and product
recalls.  These services may include sales enhancing activities such as ensuring
that client products  authorized for distribution are in stock and on the shelf,
adding new products that are approved for  distribution but not presently on the
shelf,  setting category  shelves in accordance with approved store  schematics,
ensuring  that shelf tags are in place,  checking for the overall  salability of
client products,  setting new and promotional items, and placing and/or removing
point of  purchase  and  other  related  media  advertising.  Specific  in-store
services can be initiated by retailers or  manufacturers,  and include new store
openings, new product launches,  special seasonal or promotional  merchandising,
focused product support and product recalls. In 2003, the Company added in-store
product   demonstration   and  in-store   product   sampling   services  to  its
merchandising   service  offerings.   Marketing  services  consist  of  database
marketing, teleservices and marketing research.


International Division

         In July 2000,  the  Company  established  its  International  Division,
through a wholly owned subsidiary,  SPAR Group  International,  Inc. ("SGI"), to
focus on expanding its merchandising  services business worldwide.  In May 2001,
the  Company  entered  into a 50%  owned  joint  venture  with a large  Japanese
distributor  to provide  merchandising  services  in Japan.  In June  2003,  the
Company expanded its  merchandising  services into Canada through a wholly owned
subsidiary.  In July 2003,  the Company  established  a 51% owned joint  venture
based in Istanbul to provide merchandising  services throughout Turkey. In April
2004, the Company established a joint venture in South Africa. The joint venture
is headquartered  in Durban and is owned 51% by the Company.  In April 2004, the
Company  announced the  establishment  of a joint venture in India with plans to
start operations during the third quarter. The joint venture is headquartered in
New Delhi and is owned 51% by the Company.


Critical Accounting Policies

         The  Company's  critical  accounting  policies  have been  consistently
applied  in  all   material   respects  and  address  such  matters  as  revenue
recognition,   depreciation  methods,  asset  impairment  recognition,  business
combination  accounting,   and  discontinued  business  accounting.   While  the
estimates and judgments associated with the application of these policies may be
affected by  different  assumptions  or  conditions,  the Company  believes  the
estimates and judgments  associated with the reported amounts are appropriate in
the circumstances.  Three critical accounting policies are revenue  recognition,
allowance for doubtful  accounts and sales allowance,  and capitalized  internal
use software development costs:

                                       17
<PAGE>

                                SPAR Group, Inc.


         Revenue Recognition

         The Company's  services are provided under contracts or agreements that
consist primarily of service fees and per unit fee arrangements.  Revenues under
service fee  arrangements  are  recognized  when the service is  performed.  The
Company's per unit  contracts or agreements  provide for fees to be earned based
on the retail sales of client's  products to consumers.  The Company  recognizes
per unit fees in the period such amounts become determinable and are reported to
the Company.

         Allowance for Doubtful Accounts and Sales Allowance

         The Company  continually  monitors the  collectability  of its accounts
receivable based upon current customer credit  information and other information
available.  Utilizing this information, the Company has established an allowance
for doubtful accounts of $589,000 and $515,000 at June 30, 2004 and December 31,
2003,  respectively.  The Company also recorded a sales allowance of $37,000 and
$448,000  at June 30,  2004 and  December  31,  2003,  respectively,  to reflect
potential customer credits.

         Internal Use Software Development Costs

         Under  the  rules of SOP 98-1,  Accounting  for the  Costs of  Computer
Software Developed or Obtained for Internal Use, the Company capitalizes certain
costs incurred in connection with developing or obtaining internal use software.
Capitalized software development costs are amortized over three years.

         The Company  capitalized  $362,808  and  $541,042  of costs  related to
software  developed  for  internal use in the six months ended June 30, 2004 and
2003, respectively.

         The  Company  also  recorded  a net  impairment  charge of  capitalized
software  related  to  lost  clients  totaling  approximately  $442,000  in  the
three-month period ending June 30, 2004.


                                       18
<PAGE>

                                SPAR Group, Inc.

Results of Operations


Three months ended June 30, 2004, compared to three months ended June 30, 2003

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

<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                    --------------------------------------------------------------------

                                                          June 30, 2004              June 30, 2003
                                                    -----------------------     -----------------------
                                                                                                              (Decrease)
                                                     Amount           %          Amount           %            Increase %
                                                    ---------     ---------     ---------     ---------        ---------
<S>                                                  <C>              <C>        <C>              <C>            <C>
Net revenues                                         $ 11,933         100.0%     $ 17,351         100.0%         (31.2)%

Cost of revenues                                        8,716          73.0        11,146          64.2          (21.8)

Selling, general and administrative expense             5,577          46.7         4,768          27.4           17.0

Impairment charges                                      8,141          68.2             -             -              -

Depreciation and amortization                             369           3.1           399           2.3           (7.5)

Interest expense                                           64           0.6            72           0.4          (11.1)

Other expense (income)                                      7           0.1           (10)         (0.1)        (170.0)
                                                    ---------     ---------     ---------     ---------

(Loss) income before provision for income taxes       (10,941)        (91.7)          976           5.6       (1,221.0)

Provision for income tax                                1,236          10.4           368           2.1          235.9
                                                    ---------     ---------     ---------     ---------

Net (loss) income                                    $(12,177)       (102.0)%    $    608           3.5%      (2,102.8)%
                                                    =========     =========     =========     =========
</TABLE>

         Net  revenues  for the three  months  ended June 30,  2004,  were $11.9
million,  compared to $17.4  million for the three months ended June 30, 2003, a
decrease of 31.2%. The decrease in net revenues resulted  primarily from reduced
business from the Company's largest customer,  which was in the process of being
sold during the quarter, as well as the loss of two other large clients.

         One customer,  a division of a major retailer,  accounted for 27.5% and
36.9% of the Company's net revenues for the three months ended June 30, 2004 and
2003,  respectively.  This customer also accounted for  approximately  18.0% and
41.2% of accounts receivable at June 30, 2004 and 2003,  respectively.  In April
2004,  the  customer's  parent  company  announced  that they signed  definitive
agreements  for the  sale

                                       19
<PAGE>

                                SPAR Group, Inc.


of this  business to two  purchasers.  The sale was completed on August 2, 2004.
The loss of this business will have a material  adverse  effect on the Company's
business, results of operations and financial condition.

         For the three months ended June 30, 2004, a second  customer  accounted
for 10.3% of net revenue.  This customer also accounted for approximately  18.9%
of accounts receivable at June 30, 2004.

         For the three months  ended June 30, 2003, a third and fourth  customer
accounted for 8.0% and 4.8%  respectively of net revenue.  The Company no longer
provides services to these customers.

         In addition,  approximately  15% of the  Company's net revenues for the
three months ended June 30, 2004 and 2003 resulted from  merchandising  services
performed  for  manufacturers  and others at Kmart.  Kmart filed for  protection
under the U.S.  Bankruptcy  Code in January 2002 and emerged from  bankruptcy in
May 2003. During its time in bankruptcy,  Kmart closed a number of stores in the
United  States.  While the Company's  customers  and the  resultant  contractual
relationships  or agreements  are with various  manufacturers  and not Kmart,  a
significant  reduction of this retailer's stores or cessation of this retailer's
business would negatively impact the Company.

         Failure to attract new large customers could  significantly  impede the
growth of the Company's revenues,  which could have a material adverse effect on
the Company's future business, results of operations and financial condition.

         Cost of revenues from  operations  consists of in-store labor and field
management  wages,  related  benefits,  travel  and other  direct  labor-related
expenses.  Cost of revenues as a  percentage  of net  revenues was 73.0% for the
three months  ended June 30, 2004,  compared to 64.2% for the three months ended
June 30, 2003. The increase is primarily a result of additional costs associated
with its per unit fee revenue  programs and reduced pricing to a large customer.
The  Company is  currently  in the process of reducing  its field  structure  to
reflect its reduction of business.

      Approximately  76.3% and 81.8% of the  Company's  cost of  revenue  in the
three months ended June 30, 2004 and 2003, respectively,  resulted from in-store
independent   contractor  and  field  management  services  purchased  from  the
Company's affiliates, SPAR Marketing Services, Inc. ("SMS"), and SPAR Management
Services, Inc. ("SMSI"), respectively (see Note 7 to the Financial Statements in
this Quarterly Report).

         Operating   expenses  include  selling,   general  and   administrative
expenses, impairment charges and depreciation and amortization. Selling, general
and  administrative  expenses include corporate  overhead,  project  management,
information technology,  executive compensation,  human resource expenses, legal
and accounting  expenses.  The following table sets forth the operating expenses
as a percentage  of net revenues for the time periods  indicated  (in  millions,
except percent data):


                                       20
<PAGE>

<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                              ---------------------------------------------------------------------------
                                                                                                             Increase
                                                    June 30, 2004                  June 30, 2003            (Decrease)
                                              ---------------------------    --------------------------    --------------
                                                Amount            %            Amount            %               %
                                                ------            -            ------            -               -
<S>                                           <C>                 <C>         <C>                <C>           <C>
Selling, general and administrative           $       5.6         46.7%       $   4.8            27.4%         17.0%
Impairment charges                                    8.1         68.2%             -               -             -
Depreciation and amortization                         0.4          3.1%           0.4             2.3%        (7.5)%
</TABLE>

         Selling,  general and administrative expenses were $5.6 million for the
three months ended June 30, 2004,  compared to $4.8 million for the three months
ended June 30, 2003, an increase of $0.8 million or 17.0%.  The increase of $0.8
million  consists  of a  one-time  charge  of $0.5  million  resulting  from the
settlement  of a client claim and  approximately  $0.6 million of  international
selling,  general and administrative  costs acquired in 2004, offset by domestic
reductions of $0.3 million.  The Company is currently in the process of reducing
its selling,  general and administrative cost structure to reflect its reduction
of business.

         Impairment  charges  were $8.1  million for the three months ended June
30, 2004.  Impairment charges consisted of $9.0 million of goodwill  impairment,
offset by  adjustments to other  liabilities  of $1.0 million and  restructuring
charges of $0.7 million,  net of a $0.3 million tax effect,  $0.4 million of net
impairment of software development costs previously capitalized and $0.1 million
for impairment of other assets.

         Depreciation  and  amortization  costs of $0.4  million  for the  three
months ended June 30, 2004, were consistent with the prior year.

Other Expense (Income)

         Other  expense  represents  the Company's  share in the Japanese  joint
venture loss totaling  approximately  $7,000 for the three months ended June 30,
2004.

Income Taxes

         The Company  recorded an income tax  provision  of $1.2 million for the
three months ended June 30, 2004.  The  provision  was primarily a result of the
establishment  of a valuation  reserve for the  deferred  tax assets  previously
recorded by the Company  totaling $0.7  million,  a reversal of the $0.5 million
tax  benefit  previously  recorded  in the  quarter  ending  March 31,  2004 and
estimated  minimum  taxes due. For the three  months  ended June 30,  2003,  the
income tax provision  represents a combined federal and state income tax rate of
38%.

Net Income

         The Company had a net loss of $12.2  million for the three months ended
June 30,  2004,  or $(0.65)  per diluted  share,  compared to net income of $0.6
million, or $0.03 per diluted share, for the corresponding period last year.


                                       21
<PAGE>

                                SPAR Group, Inc.


Results of Operations

Six months ended June 30, 2004, compared to six months ended June 30, 2003

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

<TABLE>
<CAPTION>
                                                                                   Six Months Ended
                                                   --------------------------------------------------------------------------------
                                                            June 30, 2004                     June 30, 2003
                                                                                                                         % Incr.
                                                       Amount             %              Amount              %           (Decr.)
                                                   ---------------- --------------- ----------------- -----------------
<S>                                                 <C>                 <C>         <C>                     <C>             <C>
Net revenues                                        $     24,736        100.0%      $     36,090            100.0%          (31.5)%

Cost of revenues                                          17,411         70.4             22,397             62.1           (22.3)

Selling, general, and administrative expense              10,545         42.6              9,711             26.9             8.6

Impairment charges                                         8,141         32.9                  -                -               -

Depreciation and amortization                                730          3.0                777              2.1            (6.1)

Interest expense                                              98          0.4                140              0.4           (30.0)

Other expense (income)                                         8          0.0                 28              0.1           (71.4)
                                                   ---------------- --------------- ----------------- -----------------

(Loss) income before provision for income taxes          (12,197)       (49.3)             3,037              8.4          (501.6)

Provision for income taxes                                   771          3.1              1,151              3.2            33.0
                                                   ---------------- --------------- ----------------- -----------------

Net (loss) income                                  $      (12,968)      (52.4)%     $      1,886              5.2%         (787.6)%
                                                   ================ =============== ================= =================
</TABLE>

         Net revenues  from  operations  for the six months ended June 30, 2004,
were $24.7 million,  compared to $36.1 million for the six months ended June 30,
2003, a decrease of 31.5%. The decrease in net revenues resulted  primarily from
reduced business from the Company's largest  customer,  which was in the process
of being sold, decreased project revenue from another client and the loss of two
other large clients.

         One  customer  accounted  for  35.9%  and  32.7% of the  Company's  net
revenues  for the six months  ended June 30, 2004 and 2003,  respectively.  This
customer also accounted for approximately 18.0% and 41.2% of accounts receivable
at June 30, 2004, and 2003,  respectively.  In April 2004, the customer's parent
company  announced that they signed  definitive  agreements for the sale of this
business to two

                                       22
<PAGE>

                                SPAR Group, Inc.


purchasers.  The sale was completed on August 2, 2004. The loss of this business
will have a  material  adverse  effect on the  Company's  business,  results  of
operations and financial condition.

         For the six months ended June 30, 2004, a second customer accounted for
8.4% of net revenue.  This customer also  accounted for  approximately  18.9% of
accounts  receivable at June 30, 2004. For the six months ended June 30, 2003, a
third  and  fourth  customer  accounted  for 9.8% and 5.0%  respectively  of net
revenue. The Company no longer provides services to these customers.

         Approximately  15% and 16% of the  Company's  net  revenues for the six
months ended June 30, 2004, and 2003, respectively,  resulted from merchandising
services  performed at Kmart for various  customers.  Kmart filed for protection
under the U.S.  Bankruptcy  Code in January 2002 and emerged from  bankruptcy in
May 2003. During its time in bankruptcy,  Kmart closed a number of stores in the
United  States.  While the Company's  customers  and the  resultant  contractual
relationships  or  agreements  are  with  various  manufacturers  and  not  this
retailer, a significant reduction of this retailer's stores or cessation of this
retailer's business would negatively impact the Company.

         Cost of revenues  consists of field in-store labor and field management
wages, related benefits, travel and other direct labor-related expenses. Cost of
revenues as a percentage of net revenues was 70.4% for the six months ended June
30, 2004, compared to 62.1% for the six months ended June 30, 2003. The increase
is  primarily  a result of  additional  costs  associated  with its per unit fee
revenue  programs  and  reduced  pricing  to a large  customer.  The  Company is
currently  in the  process  of  reducing  its field  structure  to  reflect  its
reduction in business.

      Approximately 82.7% and 83.6% of the Company's costs of revenue in the six
months ended June 30, 2004, and 2003, respectively, resulted from field in-store
independent   contractor  and  field  management  services  purchased  from  the
Company's affiliates,  SMS, and SMSI,  respectively (see Note 7 to the Financial
Statements in this Quarterly Report).

         Operating   expenses  include  selling,   general  and   administrative
expenses, impairment charges and depreciation and amortization. Selling, general
and  administrative  expenses include corporate  overhead,  project  management,
information technology,  executive compensation, human resources expenses, legal
and accounting  expenses.  The following table sets forth the operating expenses
as a percentage  of net revenues for the time periods  indicated  (in  millions,
except percent data):

<TABLE>
<CAPTION>
                                                                         Six Months Ended
                                              ------------------------------------------------------------------------
                                                                                                             Incr.
                                                    June 30, 2004                  June 30, 2003            (Decr.)
                                              ---------------------------    --------------------------    -----------
                                                Amount            %            Amount            %             %
                                                ------           ---           ------           ---           ---
<S>                                           <C>                <C>          <C>               <C>            <C>
Selling, general and administrative           $      10.5        42.6%        $   9.7           26.9%          8.6%
Impairment charge                                     8.1        32.9%              -              -             -
Depreciation and amortization                         0.7         3.0%            0.8            2.1%         (6.1)%
</TABLE>

         Selling, general and administrative expenses were $10.5 million for the
six months  ended June 30,  2004,  compared  to $9.7  million for the six months
ended June 30, 2003, an increase of $0.8 million or 8.6%. The increase  consists
of a one time charge of $0.5 million  resulting  from the settlement of a

                                       23
<PAGE>

                                SPAR Group, Inc.


client claim and approximately $0.7 million of international and $0.2 million of
in-store  demonstration  selling,  general and administrative  costs acquired in
2004, offset by domestic  reductions of approximately $0.6 million.  The Company
is currently in the process of reducing its selling,  general and administrative
cost structure to reflect its reduction of business.

         Impairment  charges were $8.1 million for the six months ended June 30,
2004.  Impairment  charges  consisted  of $9.0  million of goodwill  impairment,
offset by reductions to the other  liabilities  for PIA merger  related costs of
$1.0  million  and PIA  restructuring  charges  of $0.7  million,  net of a $0.3
million tax effect, $0.4 million of net impairment of software development costs
previously capitalized and $0.1 million for impairment of other assets.

         Depreciation and  amortization  costs of $0.7 million for the first six
months ended June 30, 2004,  were comparable to  depreciation  and  amortization
costs of $0.8 million for the six months ended June 30, 2003.

Other Expense (Income)

         Other  expense  represents  the Company's  share in the Japanese  joint
venture  loss  totaling  approximately  $8,000 for the six months ended June 30,
2004.

Income Taxes

         The Company  recorded an income tax  provision  of $0.8 million for the
six months  ended June 30, 2004.  The  provision  was  primarily a result of the
establishment  of a valuation  reserve for net  deferred  tax assets  previously
recorded by the  Company and  estimated  minimum  taxes due.  For the six months
ended June 30, 2003 the income tax provision  represents a combined  federal and
state income tax rate of 38%.

Net Income

         The  Company had a net loss of $13.0  million for the six months  ended
June 30,  2004,  or $(0.69)  per  diluted  share  compared to net income of $1.9
million or $0.10 per diluted share for the corresponding period last year.

Liquidity and Capital Resources

         In the six months  ended June 30,  2004,  the Company had a net loss of
$13.0  million.  Included in the net loss were non-cash  charges of $8.1 million
for impairment,  $0.7 million for deferred tax asset  valuation  adjustments and
$0.7 million for depreciation and amortization.

         Net cash provided by operating activities for the six months ended June
30, 2004,  was $3.1  million,  compared with net cash used in operations of $0.6
million for the six months ended June 30, 2003. The increase in cash provided by
operating activities was primarily a result of decreases in accounts receivable,
prepaid expenses and other assets and increases in customer deposits and accrued
expenses due to affiliates

                                       24
<PAGE>

                                SPAR Group, Inc.


significantly offset, by net operating losses, decreases in accounts
payable, accrued expenses and other current liabilities.

         Net cash  used in  investing  activities  of $1.2  million  for the six
months  ended  June 30,  2004,  was  comparable  to net cash  used in  investing
activities of $1.4 million for the six months ended June 30, 2003.

         Net cash used in financing activities for the six months ended June 30,
2004, was $1.9 million,  compared with net cash provided by financing activities
of $2.0 million for the six months ended June 30, 2003. The increase of net cash
used in financing  activities was primarily a result of net payments on the line
of credit.

         The above activity  resulted in no change in cash and cash  equivalents
for the six months ended June 30, 2004, as the Company  utilizes  excess cash to
pay down its line of credit.

         At June 30,  2004,  the Company had  positive  working  capital of $0.7
million,  as compared to a positive  working capital of $4.1 million at December
31, 2003. The decrease in working capital is due primarily to operating  losses,
decreases in accounts  receivable,  accounts payable and accrued  expenses.  The
Company's  current  ratio was 1.09 at June 30,  2004,  and 1.35 at December  31,
2003.

         In January 2003, the Company and Webster  Business Credit  Corporation,
then known as Whitehall  Business Credit Corporation  ("Webster"),  entered into
the Third  Amended and  Restated  Revolving  Credit and Security  Agreement  (as
amended,  collectively,  the "Credit Facility").  The Credit Facility provided a
$15.0 million  revolving  credit  facility that matures on January 23, 2006. The
Credit  Facility  allowed the Company to borrow up to $15.0 million based upon a
borrowing  base  formula  as  defined  in  the  agreement  (principally  85%  of
"eligible"  accounts  receivable).  On May 17,  2004,  the Credit  Facility  was
amended to among other things,  reduce the revolving  credit facility from $15.0
million to $10.0  million,  change the  interest  rate and increase the reserves
against collateral.  The amendment provides for interest to be charged at a rate
based  in  part  upon  the  earnings  before  interest,  tax,  depreciation  and
amortization.  At June 30, 2004, the Credit Facility bears interest at Webster's
"Alternative  Base Rate" plus 0.75% (a total of 5.25% per annum),  or LIBOR plus
3.25%.  The Credit  Facility  is secured by all of the assets of the Company and
its  subsidiaries.  In connection  with the May 17, 2004  amendment,  Mr. Robert
Brown, a Director,  the Chairman,  President and Chief  Executive  Officer and a
major stockholder of the Company and Mr. William Bartels,  a Director,  the Vice
Chairman and a major stockholder of the Company,  provided  personal  guarantees
totaling  $1.0  million to Webster.  On August 20, 2004 the Credit  Facility was
further  amended in connection  with the waiver of certain  covenant  violations
(see below).  The amendment,  among other things,  reduces the revolving  credit
facility  from $10.0 million to $7.0  million,  changes the covenant  compliance
testing for certain  covenants  from  quarterly  to monthly and reduces  certain
advance  rates.  The  amendment  does not  change the  future  covenant  levels.
Therefore,  the Company  expects to be in violation of certain  covenants in the
future. Webster has issued waivers for past covenant violations,  however, there
can be no assurances that Webster will issue such waivers in the future.

         The Credit Facility contains certain  financial  covenants that must be
met by the  Company on a  consolidated  basis,  among  which are a minimum  "Net
Worth",  a  minimum  "Fixed  Charge  Coverage  Ratio",  a  capital   expenditure
limitation  and a minimum  EBITDA,  as such  terms  are  defined  in the  Credit

                                       25
<PAGE>

                                SPAR Group, Inc.


Facility. Except for the capital expenditure limitation,  the Company was not in
compliance  with such  financial  covenants  at June 30,  2004.  The Company has
secured a waiver from Webster for those items of non-compliance (see above).

         Because of the  requirement  to  maintain a lock box  arrangement  with
Webster and Webster's ability to invoke a subjective  acceleration clause at its
discretion,  borrowings  under the Credit  Facility are classified as current at
June 30, 2004, and December 31, 2003, in accordance with EITF 95-22.

         The revolving loan balances  outstanding under the Credit Facility were
$1.9  million  and  $4.1  million  at June  30,  2004  and  December  31,  2003,
respectively. There were letters of credit outstanding under the Credit Facility
of $0.7  million at June 30, 2004,  and December 31, 2003.  As of June 30, 2004,
the SPAR Group had unused availability under the Credit Facility of $2.0 million
out of the remaining  maximum $4.2 million  unused  revolving line of credit (as
adjusted by the August 20, 2004 amendment)  after reducing the borrowing base by
outstanding loans and letters of credit.

         Management   believes  that  based  upon  the  Company's   cost  saving
initiatives  and the existing credit  facilities,  funding will be sufficient to
support  ongoing  operations  over the next twelve  months.  However,  delays in
collection of  receivables  due from any of the Company's  major  clients,  or a
significant reduction in business from such clients, or the inability to acquire
new  clients,  or the  Company's  inability to return to  profitability,  or the
inability to obtain bank  waivers for future  covenant  violations  could have a
material  adverse effect on the Company's cash resources and its ongoing ability
to fund operations.

         In  connection  with  the sale of SPGI on June 30,  2002,  the  Company
agreed to provide a discretionary revolving line of credit to SPGI not to exceed
$2.0 million (the "SPGI Revolver") through September 30, 2005. The SPGI Revolver
is  secured by a pledge of all the  assets of SPGI and is  guarantied  by SPGI's
parent,  Performance  Holdings,  Inc. The SPGI Revolver provided for advances in
excess of the borrowing base through  September 30, 2003. As of October 1, 2003,
the SPGI Revolver was  adjusted,  as per the  agreement,  to include a borrowing
base  calculation  (principally  85%  of  "eligible"  accounts  receivable).  In
September 2003, SPGI requested and the Company agreed to provide  advances of up
to $1.0 million in excess of the borrowing  base through  September 30, 2004. In
December 2003,  SPGI changed its name to STIMULYS,  Inc. On April 30, 2004, as a
result of various  defaults by STIMULYS,  the Company amended the  discretionary
line of credit by eliminating advances in excess of STIMULYS' borrowing base and
reducing the maximum amount of the revolving line to the greater of $1.0 million
or the borrowing base. At June 30, 2004,  there was  approximately  $0.9 million
borrowed under the SPGI Revolver and $70,000 in  outstanding  letters of credit.
Under the SPGI Revolver  terms,  STIMULYS is required to deposit all of its cash
receipts to the Company's lock box.

                                       26
<PAGE>

                                SPAR Group, Inc.


Certain Contractual Obligations

         The  following  table  contains a summary  of certain of the  Company's
contractual obligations by category as of June 30, 2004 (in thousands).

<TABLE>
<CAPTION>
          Contractual Obligations                                   Payments due by Period

                                               Total       Less than 1    1-3 years     3-5 years     More than 5
                                                              year                                       years
- --------------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>        <C>              <C>             <C>
Credit Facility                                 $1,856        $1,856          $  -         $   -          $    -
- --------------------------------------------------------------------------------------------------------------------
Operating Lease Obligations                      1,751           828           884            39               -
- --------------------------------------------------------------------------------------------------------------------
Total                                           $3,607        $2,684          $884         $  39          $    -
- --------------------------------------------------------------------------------------------------------------------
</TABLE>


         In  addition  to the above  table,  the Company had agreed to provide a
discretionary  line of credit to  STIMULYS  not to exceed  the  greater  of $1.0
million or the borrowing base through  September 30, 2005.  Outstanding loans to
SPGI under the discretionary  line of credit totaled  approximately $0.9 million
at June 30, 2004.

         The Company also had $0.7 in outstanding  Letters of Credit at June 30,
2004.

         In May 2001, the Company and Paltac, Inc. ("Paltac"),  a large Japanese
distributor, entered into a joint venture to create a Japanese company, SPAR FM.
SPAR FM  entered  into a 300  million  Yen  Revolving  Credit  Agreement  with a
Japanese bank. The bank required Paltac guarantee the outstanding balance on the
revolving credit facility. As part of the joint venture agreement, should Paltac
be  required  to make a payment on its  guarantee  to the bank,  the Company has
agreed to remit to Paltac 50% of any such payment up to a maximum of 150 million
Yen or approximately $1.4 million. As of June 30, 2004, SPAR FM has borrowed 100
million Yen under its  Revolving  Credit  Agreement.  Therefore,  the  Company's
current exposure to Paltac  respecting  outstanding loans to SPAR FM at June 30,
2004, would be 50 million Yen or approximately $0.5 million.



                                       27
<PAGE>

                                SPAR Group, Inc.


Item 3.  Quantitative and Qualitative Disclosures about Market Risk

         The Company is exposed to market risk related to the variable  interest
rate  on the  line of  credit  and the  variable  yield  on its  cash  and  cash
equivalents.  The Company's  accounting  policies for financial  instruments and
disclosures  relating  to  financial  instruments  require  that  the  Company's
consolidated  balance sheets include the following financial  instruments:  cash
and cash equivalents,  accounts receivable, accounts payable and long term debt.
The Company considers  carrying amounts of current assets and liabilities in the
consolidated  financial  statements  to  approximate  the fair  value  for these
financial  instruments  because of the  relatively  short period of time between
origination  of the  instruments  and their  expected  realization.  The Company
monitors the risks  associated  with  interest  rates and  financial  instrument
positions.  The Company's  investment policy objectives require the preservation
and safety of the principal,  and the  maximization  of the return on investment
based upon the safety and liquidity objectives.

         Currently,  the Company  does not  believe the risk  related to foreign
currency exchange rates is material.

         The Company  has no  derivative  financial  instruments  or  derivative
commodity  instruments in its cash and cash equivalents and investments.  Excess
cash is normally used to pay down its revolving line of credit.


Item 4.  Controls and Procedures


         The  Company's  Chief  Executive  Officer and Chief  Financial  Officer
evaluated the effectiveness of the Company's  disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) as of the end of the period
covering this report. Based on this evaluation,  the Chief Executive Officer and
Chief Financial  Officer  concluded that the Company's  disclosure  controls and
procedures  are  effective  to provide  reasonable  assurance  that  information
required to be  disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods specified by the Securities and Exchange Commission's rules and
forms.  There were no material  changes in the Company's  internal  control over
financial reporting during the second quarter of 2004.


                                       28
<PAGE>

                                SPAR Group, Inc.


PART II:  OTHER INFORMATION

Item 1.        Legal Proceedings

               No change.

Item 2:        Changes in Securities and Use of Proceeds

               Item 2(a): Not applicable

               Item 2(b): Not applicable

               Item 2(c): Not applicable

               Item 2(d): Not applicable

Item 3:        Defaults upon Senior Securities

               Item 3(a):  Defaults under Indebtedness:  None.
               Item 3(b):  Defaults under Preferred Stock:  Not applicable.

Item 4:        Submission of Matters to a Vote of Security Holders

               Not applicable.

Item 5:        Other Information

               Not applicable.


Item 6:        Exhibits And Reports On Form 8-K

       Exhibits.

         10.1     Waiver  and  Amendment  No. 5 to Third  Amended  and  Restated
                  Revolving Credit and Security Agreement among Webster Business
                  Credit  Corporation,  SPAR  Group,  Inc.,  and  certain of its
                  subsidiaries dated as of August 20, 2004, as filed herewith.

         10.2     Change in Control Severance  Agreement between Kori Belzer and
                  SPAR  Group,  Inc.,  dated as of  August  12,  2004,  as filed
                  herewith.

         10.3     Change in Control Severance  Agreement between Patricia Franco
                  and SPAR Group,  Inc.,  dated as of August 12, 2004,  as filed
                  herewith.

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

                                       29
<PAGE>

                                SPAR Group, Inc.


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

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

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

       Reports On Form 8-K

         1.       Periodic Report on Form 8-K, dated March 26, 2004,  filed with
                  the U.S.  Securities and Exchange  Commission on May 26, 2004,
                  respecting the Waiver And Amendment No. 3 To Third Amended And
                  Restated  Revolving Credit And Security Agreement entered into
                  as of March 26, 2004,  and the Joinder,  Waiver And  Amendment
                  No. 4 to Third  Amended  and  Restated  Revolving  Credit  And
                  Security Agreement entered into as of May 17, 2004.

         2.       Periodic  Report on Form 8-K,  dated May 18, 2004,  filed with
                  the U.S.  Securities and Exchange  Commission on May 27, 2004,
                  respecting  the  adoption  of  each  of (i)  the  Amended  and
                  Restated By-Laws of the Company; (ii) the Amended and Restated
                  Charter of the Audit  Committee  of the Board of  Directors of
                  the Company;  (iii) the Charter of the Compensation  Committee
                  of the Board of Directors of the Company;  (iv) the Charter of
                  the  Governance  Committee  of the Board of  Directors  of the
                  Company;   (v)  the  SPAR  Group,  Inc.  Statement  of  Policy
                  Respecting Stockholder Communications with Directors; and (vi)
                  the SPAR Group,  Inc.  Statement of Policy Regarding  Director
                  Qualifications and Nominations.

         3.       Periodic Report on Form 8-K, dated August 23, 2004, filed with
                  the U.S.  Securities  and  Exchange  Commission  on August 23,
                  2004,  respecting  the earnings  press  release for the second
                  quarter ended June 30, 2004.


                                       30
<PAGE>

                                SPAR Group, Inc.



                                   SIGNATURES



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





         Date:  August 23, 2004      SPAR Group, Inc., Registrant


                                     By: /s/ Charles Cimitile
                                         ---------------------------------------
                                         Charles Cimitile
                                         Chief Financial Officer and duly
                                         authorized signatory



                                       31

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>ex10_1-f10q063004.txt
<DESCRIPTION>EX-10.1; WAIVER AND AMENDMENT
<TEXT>

                                                                    EXHIBIT 10.1

                           WAIVER AND AMENDMENT NO. 5
                          TO THIRD AMENDED AND RESTATED
                     REVOLVING CREDIT AND SECURITY AGREEMENT


         THIS WAIVER AND AMENDMENT NO. 5 (this  "Agreement")  is entered into as
of August 20, 2004, by and among SPAR MARKETING FORCE, INC. ("SMF"),  SPAR, INC.
("SPAR"), SPAR/BURGOYNE RETAIL SERVICES, INC ("SBRS"), SPAR GROUP, INC. ("SGI"),
SPAR INCENTIVE  MARKETING,  INC. ("SIM"),  SPAR TRADEMARKS,  INC. ("STM"),  SPAR
MARKETING,  INC. (DE)  ("SMIDE"),  SPAR  MARKETING,  INC. (NV)  ("SMINV"),  SPAR
ACQUISITION,  INC. ("SAI"), SPAR TECHNOLOGY GROUP, INC. ("STG"), SPAR/PIA RETAIL
SERVICES, INC. ("Pia Retail"), RETAIL RESOURCES, INC. ("Retail"),  PIVOTAL FIELD
SERVICES,  INC. ("Pivotal Field"), PIA MERCHANDISING CO., INC. ("PIA"),  PACIFIC
INDOOR  DISPLAY CO.  ("Pacific"),  PIVOTAL SALES COMPANY  ("Pivotal"),  SPAR ALL
STORE MARKETING SERVICES,  INC., ("SAS") and SPAR BERT FIFE, INC. ("SBFI") (each
a  "Borrower"  and   collectively   "Borrowers")  and  WEBSTER  BUSINESS  CREDIT
CORPORATION   (formerly  known  as  Whitehall   Business   Credit   Corporation)
("Lender").

                                   BACKGROUND

         The  Borrowers and Lender are parties to that certain Third Amended and
Restated  Revolving  Credit and Security  Agreement  dated  January 24, 2003 (as
amended,  restated,  supplemented  or otherwise  modified from time to time, the
"Loan  Agreement")  pursuant to which Lender provides the Borrowers with certain
financial accommodations.

         The Borrowers have violated certain covenants and have requested Lender
waive the  resulting  Events  of  Default  and  Lender  is  willing  to do so in
connection with making certain amendments to the Loan Agreement.

         NOW,  THEREFORE,  in  consideration  of any loan or advance or grant of
credit  heretofore  or  hereafter  made to or for the  account of  Borrowers  by
Lender,  and  for  other  good  and  valuable  consideration,  the  receipt  and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

1.  Definitions.  All capitalized  terms not otherwise defined or amended herein
shall have the meanings given to them in the Loan Agreement.

2. Waivers. Subject to the satisfaction of Section 4 below, Lender hereby waives
the Event of Default  which has occurred as a result  Borrowers'  non-compliance
with (i) Section  12(o) with respect to the fiscal  quarter  ended June 30, 2004
due to Borrowers'  failure to maintain its required Net Worth at the end of such
fiscal quarter,  (ii) Section 12(p) and Section 12(r) with respect to the fiscal
quarter ending June 30, 2004 due to Borrowers' failure to maintain the requisite
Fixed Charge  Coverage Ratio and EBITDA

<PAGE>

level for the four fiscal  quarters  then ended and (iii)  Section  12(x) due to
Borrowers'  failure  to  retain a  consultant  by June 15,  2004 and  Borrowers'
failure to deliver a copy of a  consultant's  report to Lender by June 30, 2004.
Notwithstanding  the  foregoing,  the waivers of the Events of Default set forth
above do not  establish  a course of conduct  between  Borrowers  and Lender and
Borrowers  hereby agree that Lender is not  obligated to waive any future Events
of Default under the Loan Agreement.

3. Amendment. Subject to the satisfaction of Section 5 below, the Loan Agreement
is hereby amended as follows:

         (a)      Section 1(A) is hereby amended as follows:

                  (i)      The  definition  of  "Maximum  Revolving  Amount"  is
                           hereby   amended  by   deleting   "$10,000,000"   and
                           inserting "$7,000,000" in its place and stead.

                  (ii)     The definition of "Unbilled Receivables Availability"
                           is hereby  amended by  deleting  "70%" and  inserting
                           "60%" in its place and stead.

                  (iii)    The following new definitions are hereby added in the
                           appropriate alphabetical order.

                                    "Amendment No. 5" means Waiver and Amendment
                                    No. 5 dated  as of  August  20,  2004 by and
                                    among Borrowers and Lender.

                                    "Amendment No. 5 Effective  Date" shall mean
                                    the  date  on  which  all of the  conditions
                                    precedent   set   forth  in   Section  4  of
                                    Amendment No. 5 have been satisfied.

         (b) Section 12(n)(v)(F) is hereby amended in its entirety to provide as
         follows:

                                    "(F)  any  investment  (net  of all  related
                                    repayments  and returns of capital)  made by
                                    any Borrower in any Unrestricted Subsidiary,
                                    in  the  form  of  a  capitalized   expense,
                                    capital  contribution  or loan, for purposes
                                    of  investing  in, or investing in an entity
                                    which   is   investing   in,   entities   or
                                    participating in joint ventures formed under
                                    the laws of a foreign country, provided that
                                    such investment, together with the Aggregate
                                    Consideration, shall not exceed (x) $150,000
                                    in   the   aggregate   during   the   period
                                    commencing  on the date  Amendment  No. 5 is
                                    executed  through December 31, 2004, and (y)
                                    $250,000    during   each    calendar   year
                                    thereafter."

         (c)  Section  12(r) is hereby  amended  in its  entirety  to provide as
         follows:

                                       2
<PAGE>

                                    "(r) The Borrowers shall maintain EBITDA for
                                    the  months  set forth  below  ending on the
                                    last day of such month in an amount not less
                                    than the amount set forth below:


<TABLE>
<CAPTION>
                 Month ended                    Minimum EBITDA              Cumulative Minimum EBITDA
                                                for the month               from August 1, 2004 through
                                                then ended                  the month then ended

<S>      <C>                                    <C>                         <C>
         August 31, 2004                        $(100,000)                   $(100,000)
         September 30, 2004                     $ 260,000                    $ 160,000
         October 31, 2004                       $ 185,000                    $ 345,000
         November 30, 2004                      $ 225,000                    $ 570,000
         December 31, 2004                      $ 360,000                    $ 930,000
</TABLE>


                                    Thereafter,   commencing   with  the  fiscal
                                    quarter ending March 31, 2005, the Borrowers
                                    shall  maintain  EBITDA  of  not  less  than
                                    $7,750,000 at the end of each fiscal quarter
                                    with respect to the four (4) fiscal quarters
                                    then ended;"

         (d)  Section  12(x) is hereby  amended  in its  entirety  to provide as
         follows:

                                    "(x) On or before August 31, 2004, Borrowers
                                    shall retain a consultant  to be selected by
                                    Borrowing  Agent but who is  satisfactory to
                                    Lender. The terms of the engagement shall be
                                    subject to a satisfactory  review by Lender.
                                    The   consultant   shall  prepare  a  report
                                    analyzing  the  contingency   scenarios  and
                                    Lender  shall  have  received a copy of such
                                    report on or before  September  30, 2004. In
                                    addition,  on or before  September 30, 2004,
                                    Borrowers  shall  deliver to Lender  revised
                                    month by month  projected  operating  budget
                                    and cash flow for the twelve  months  ending
                                    December 31, 2004"

4. Conditions of Effectiveness.  This Agreement shall become effective as of the
date hereof,  provided that the following  conditions shall have been satisfied:
Lender shall have received (i) four (4) copies of this Agreement executed by the
Borrowers  and the  limited  guarantors  (each a  "Limited  Guarantor")  and the
guarantor  ("Guarantor")  listed on the signature page hereto, and, (ii) payment
of a waiver and  amendment  fee in the sum of $25,000 which fee shall be charged
by Lender to Borrowers'  loan account as a Revolving  Advance,  (iii) a draft of
Borrowers'  financial statements for the two fiscal quarters ended June 30, 2004
showing all write-off's during such period, (iv) a draft of Borrowers' financial
statements  for the month ended July 31, 2004  showing  that EBITDA was not less
than $(350,000) for such period and (v) a compliance certificate

                                       3
<PAGE>

executed by the chief financial  officer of Borrowers in substantially  the form
of  Exhibit  A to  this  Agreement  and a  report  setting  forth  the  covenant
calculations,  each as of June 30,  2004,  (including  advances to  Unrestricted
Subsidiaries).

5.  Representations,  Warranties  and  Covenants.  Each of the Borrowers  hereby
represents, warrants and covenants as follows:

         (a) This Agreement and the Loan Agreement  constitute legal,  valid and
binding obligations of each of the Borrowers and are enforceable against each of
the Borrowers in accordance with their respective terms.

         (b) Upon the  effectiveness  of this  Agreement,  each of the Borrowers
hereby reaffirms all covenants,  representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and agrees that all such
covenants, representations and warranties shall be deemed to have been remade as
of the effective date of this Agreement.

         (c) No Borrower has any defense, counterclaim or offset with respect to
the Loan Agreement or the Obligations.

6.       Effect on the Loan Agreement.

         (a) Except as specifically amended herein, the Loan Agreement,  and all
other  documents,  instruments  and  agreements  executed  and/or  delivered  in
connection  therewith,  shall  remain in full force and  effect,  and are hereby
ratified and confirmed.

         (b) Except as set forth in Section 2 hereof,  the  execution,  delivery
and  effectiveness of this Agreement shall not operate as a waiver of any right,
power or remedy of Lender,  nor constitute a waiver of any provision of the Loan
Agreement,  or any other  documents,  instruments or agreements  executed and/or
delivered under or in connection therewith.

7.       Governing  Law. This  Agreement  shall be binding upon and inure to the
benefit of the parties  hereto and their  respective  successors and assigns and
shall be governed by and construed in  accordance  with the laws of the State of
New York  (other  than  those  conflict  of law rules  that  would  defer to the
substantive law of another jurisdiction).

8.       Release.  Borrowers and Guarantors hereby release,  remise,  acquit and
forever  discharge  Lender,   Lender's   employees,   agents,   representatives,
consultants,    attorneys,    fiduciaries,    officers,   directors,   partners,
predecessors,   successors   and  assigns,   subsidiary   corporations,   parent
corporations,  and related corporate divisions (all of the foregoing hereinafter
called the "Released  Parties"),  from any and all actions and causes of action,
judgments, executions, suits, debts, claims, demands, liabilities,  obligations,
damages and expenses of any and every character, known or unknown, direct and/or
indirect,  at law or in equity, of whatsoever kind or nature,  for or because of
any matter or things done, omitted or suffered to be done by any of the Released
Parties  prior to and  including  the date of execution  hereof,  and in any way
directly or indirectly  arising out of or in any way connected to this Amendment
or the  Ancillary  Agreements  (all  of the  foregoing

                                       4
<PAGE>

hereinafter  called the  "Released  Matters").  Borrowers  acknowledge  that the
agreements in this Section are intended to be in full satisfaction of all or any
alleged injuries or damages arising in connection with the Released Matters.

9.       Headings.  Section  headings in this Agreement are included  herein for
convenience  of reference only and shall not constitute a part of this Agreement
for any other purpose.

10.      Counterparts;  Facsimile Signatures.  This Agreement may be executed by
the parties hereto in one or more  counterparts of the entire document or of the
signature  pages  hereto,  each of which shall be deemed an original  and all of
which taken together shall constitute one and the same agreement.  Any signature
received by facsimile transmission shall be deemed an original signature hereto.



                  [Remainder of page intentionally left blank]



                                       5
<PAGE>

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first written above.

                                       SPAR MARKETING FORCE, INC.
                                       SPAR, INC.
                                       SPAR/BURGOYNE RETAIL    SERVICES, INC.
                                       SPAR GROUP, INC.
                                       SPAR INCENTIVE MARKETING, INC.
                                       SPAR TRADEMARKS, INC.
                                       SPAR MARKETING, INC. (DE)
                                       SPAR MARKETING, INC. (NV)
                                       SPAR ACQUISITION, INC.
                                       SPAR TECHNOLOGY GROUP, INC.
                                       SPAR/PIA RETAIL SERVICES, INC.
                                       RETAIL RESOURCES, INC.
                                       PIVOTAL FIELD SERVICES, INC.
                                       PIA MERCHANDISING CO., INC.
                                       PACIFIC INDOOR DISPLAY CO.
                                       PIVOTAL SALES COMPANY
                                       SPAR GROUP, INC.
                                       SPAR ALL STORE MARKETING SERVICES, INC.
                                       SPAR BERT FIFE, INC.

                                       By:
                                          --------------------------------------
                                          Name:  Charles Cimitile
                                          Title: Chief Financial Officer of
                                                 each of the foregoing entities


                                       WEBSTER BUSINESS CREDIT CORPORATION

                                       By:
                                          --------------------------------------
                                          Name:
                                          Its:



                    [SIGNATURES CONTINUED ON FOLLOWING PAGE]


<PAGE>



CONSENTED AND AGREED TO BY:


- ------------------------------
WILLIAM H. BARTELS, Limited Guarantor


- ------------------------------
ROBERT G. BROWN, Limited Guarantor


PIA Merchandising Limited, Guarantor

By:
   ---------------------------
Name:
Its:

<PAGE>

                                    EXHIBIT A

                                     FORM OF
                             COMPLIANCE CERTIFICATE


         I, Charles  Cimitile,  in my capacity as the Chief Financial Officer of
SPAR Group,  Inc.,  hereby  certify that,  with respect to the Third Amended and
Restated  Revolving Credit and Security  Agreement dated January 24, 2004 (as it
may be amended,  modified,  extended or restated from time to time,  the "Credit
Agreement";  capitalized  terms not otherwise  defined in this Certificate shall
have the meaning  given to them in the Credit  Agreement)  among SPAR  MARKETING
FORCE, INC., SPAR, INC.,  SPAR/BURGOYNE RETAIL SERVICES, INC., SPAR GROUP, INC.,
SPAR INCENTIVE  MARKETING,  INC., SPAR  TRADEMARKS,  INC., SPAR MARKETING,  INC.
(DE), SPAR MARKETING, INC. (NV), SPAR ACQUISITION,  INC., SPAR TECHNOLOGY GROUP,
INC.,  SPAR/PIA RETAIL SERVICES,  INC.,  RETAIL RESOURCES,  INC.,  PIVOTAL FIELD
SERVICES, INC., PIA MERCHANDISING CO., INC., PACIFIC INDOOR DISPLAY CO., PIVOTAL
SALES COMPANY, SPAR ALL STORE MARKETING SERVICES, INC., and SPAR BERT FIFE, INC.
(each of the  foregoing a "Borrower"  and  collectively  the  "Borrowers"),  and
WEBSTER BUSINESS CREDIT CORPORATION (formerly known as Whitehall Business Credit
Corporation)("Lender"):

         1. Attached hereto are the financial  statements  required  pursuant to
Section 11 of the Credit  Agreement  for the  [month]  [quarter]  [year]  ending
_________________.


         2.  With  respect  to any  quarterly  or annual  financial  statements,
attached hereto as Schedule 1 are detailed calculations demonstrating compliance
with the financial  covenants  contained in Sections 12(o),  (p), (q) and (r) of
the Credit Agreement.  Borrowers are in compliance with such covenants as of the
date hereof.

         3. [Based on an examination  by the company  sufficient to enable it to
make an  informed  statement,  the company  does not  believe  that any Event of
Default exists which has not been previously  disclosed in writing to Lender] or
[Since the last  Compliance  Certificate,  one or more  Events of  Default  have
occurred as more fully  described on Schedule 2, which sets forth the nature and
extent of such Events of Default,  a description of the corrective  action taken
or proposed to be taken with respect  thereto].  [If Applicable add - Schedule 2
sets forth the actions,  if any,  taken with respect to Events of Default  since
the prior Compliance Certificate.

Dated this ____ day of ___________, 200_.

                                              SPAR Group, Inc.

                                              By:
                                                  ------------------------------
                                                  Name:  Charles Cimitile
                                                  Title: Chief Financial Officer



<PAGE>


                                   SCHEDULE 1

                               Financial Covenants


<TABLE>
<CAPTION>
<S>                                                                       <C>
         A.       Minimum Consolidated Net Worth

           Consolidated Net Worth as of [current fiscal quarter           $_____________
           end]

           Consolidated Net Worth as of [prior fiscal quarter end]        $_____________

           Covenant Requirement - at least $100,000 greater than          $_____________
           the consolidated net worth as of the end of the prior
           fiscal quarter
</TABLE>

         B. Minimum Fixed Charge  Coverage  Ratio:  (a) EDITDA of Borrowers on a
consolidated basis minus Non-Financed Capital Expenditures to (b) Fixed Charges

1.       EBITDA calculations for any period:

                (i)      net income (or loss) of             $_____________
                         Borrowers on consolidated basis
                         for such period (excluding
                         extraordinary gains and
                         extraordinary losses per GAAP),
                         plus
                         ----

                (ii)     all interest expense of             $_____________
                         Borrowers on an unsolicited
                         basis for such period, plus

                (iii)    all charges against income of       $_____________
                         Borrowers on a consolidated
                         basis for such period for
                         federal, estate and local
                         taxes, plus

                                        9
<PAGE>
                (iv)     depreciation expenses of            $_____________
                         Borrowers on a consolidated
                         basis for such period, minus


                (v)      amortization expenses of            $_____________
                         Borrowers on a consolidated
                         basis for such period minus

                (vi)     Capitalized cash expenses of        $_____________
                         any Borrower which for expenses
                         were previously deducted from
                         net income in calculating (i)
                         through (iii) above, minus

                (vii)    Non-Financed Capital                $_____________
                         Expenditures for such
                         $_____________ period.



           Total (EBITDA minus Non-Financed Capital
           Expenditures)                                    $
                                                             =============





2.       Fixed Charges calculation for any period:

                 (i)      all interest payments made on     $_____________
                          the Loans, plus



                 (ii)     All dividends or other            $_____________
                          distributions to stockholders
                          and other payments made or paid
                          with respect to any
                          indebtedness for money borrowed
                          (excluding the principal amount
                          of Revolving Advances but
                          including all payments made on
                          capitalized leases) during such
                          period (including, without
                          limitation, payments permitted
                          under Section 12(n)(iii)),



                                       10
<PAGE>
                          plus

                 (iii)    Income or franchise taxes paid   $_____________
                          in cash during such period,
                          plus

                 (iv)     Payments on the Shareholders     $_____________
                          Notes during such period under
                          Section 12(n)(iv) of the Credit
                          Agreement, plus

                 (v)      PIA and SPAR Merger Payments
                          made during _ such period.

                          Total Fixed Charges

                          Fixed Charge Coverage Ratio:       _____:1.00
                          EBITDA to Fixed Charges

                          Covenant Requirement

                                                             Greater than or
                                                             equal to 1.10 to
                                                             1.00


        C. Minimum EBITDA



                  EBITDA (calculated in accordance with    $_____________
                  (B)(1)(i)-(vi)) above

                  Covenant Requirement                     $_____________



                                       11


        D. Maximum Capital Expenditures [Annual test]


            Capital Expenditures for fiscal year           $_____________


            Covenant Requirement                           $2,000,000

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>ex10_2-f10q063004.txt
<DESCRIPTION>EX-10.2;  CHANGE IN CONTROL SEVERANCE AGREEMENT
<TEXT>
                                                                    Exhibit 10.2

                      CHANGE IN CONTROL SEVERANCE AGREEMENT

      This  Change in  Control  Severance  Agreement  (as  modified,  amended or
restated from time to time in the manner provided herein,  this  "Agreement") is
by and between the  undersigned  individual  employee (the  "Employee") and SPAR
Group,  Inc.  (the  "Company").  The Employee and the Company may be referred to
individually as a "Party" and collectively as the "Parties".

      In  consideration of past,  present and future  employment by the Company,
the  mutual  covenants  below and other  good and  valuable  consideration  (the
receipt and adequacy of which are hereby acknowledged), the Employee and Company
hereby agree as follows:

      Section 1. Introduction.  The Employee is an officer of the Company or one
of the SPAR  Affiliates (as hereinafter  defined).  The Employee and the Company
have entered into this Agreement in order to provide severance payments from the
Company to the Employee under certain  circumstances  if, pending or following a
Change in Control,  the Employee  leaves for Good Reason or is terminated  other
than in a  Termination  For  Cause  (as such  terms  are  hereinafter  defined).
However,  this Agreement is not intended,  and shall not be deemed or construed,
to create any employment term or period, and except as otherwise provided in any
other written agreement with the Employee,  the Employee acknowledges and agrees
that the Employee's employment is "at will" and modifiable from time to time and
terminable  at any time,  for any reason or no  reason,  and  without  notice or
benefit of any kind.

      Section 2. Certain Definitions. Definitions shall be applicable equally to
the  singular  and  plural  forms of the  terms  defined,  each use of a neuter,
masculine,  feminine or plural  pronoun  shall be deemed to refer to the form of
pronoun  appropriate  to the  circumstance,  and each other  reference  to or by
gender shall include reference to each other or neuter gender appropriate to the
circumstance, in each case as the context may permit or require. As used in this
Agreement, the following capitalized terms and non-capitalized words and phrases
shall have the meanings respectively assigned to them:

      (a)  "Authorized  Representative"  shall mean, for the Company or any SPAR
Affiliate for whom the Employee works, any of (i) the Board,  (ii) the Chairman,
(iii) any other  executive  officer of the Company or applicable  SPAR Affiliate
who directly or indirectly supervises or is responsible for the Employee or (iv)
any other  Representative  of the  Company  or  applicable  SPAR  Affiliate  who
directly or  indirectly  supervises  or is  responsible  for the Employee and is
authorized to do so by the Board, the Chairman or any such executive officer, in
each case other than the Employee.

      (b) "Beneficial Owner" shall mean any person who beneficially owns (within
the  meaning of Rule  13d-3  promulgated  under the  Securities  Exchange  Act),
securities  issued  by the  referenced  corporation  or  other  entity,  whether
directly  or  indirectly,  and  whether  individually,  jointly  with any  other
person(s) or otherwise.

      (c) "Board"  shall mean the Board of  Directors  of the Company or (except
for purposes of a Change in Control) the applicable SPAR Affiliate.

      (d) "Chairman"  shall mean the Chairman of the Company or applicable  SPAR
Affiliate.

     (e) "Change in Control" shall mean any of the following:

(i)   when any  "person" or "group"  (as  contemplated  in Sections  3(a)(9) and
      13(d)(3),  respectively,  of  the  Securities  Exchange  Act),  becomes  a
      Beneficial Owner of a Majority of Voting Securities issued by the Company,
      in each case other than any  acquisition of Company  Securities (A) in any
      transaction  covered by or exempted under clause (iii) of this definition,
      (B) by the  Employee or any group of which the Employee  voluntarily  is a
      member,  (C) by any employee  benefit plan (or related trust) sponsored or
      maintained by the Company or any SPAR Affiliate or (D) by any  corporation
      or other entity if, immediately following such acquisition, the Beneficial
      Owners of a Majority of Voting Securities of the acquirer (or its ultimate
      parent)  outstanding  immediately  after  such  event are  either  (1) the
      persons who were the Beneficial  Owners of all or substantially all of the
      voting Company  Securities  immediately  prior to such  acquisition and in
      substantially the same proportions as their ownership immediately prior to
      such event, or (2) by Robert G. Brown and/or William H. Bartels;

(ii)  when individuals who are members of the Board as of the date hereof or who
      are added as hereinafter  provided (the  "Incumbent  Board") cease for any
      reason to constitute at least a majority of the Board; provided,  however,
      that any  individual  becoming a director  subsequent  to the date  hereof
      whose election, or nomination for election by the Company's  stockholders,
      was approved by a vote of at least a majority of the then Incumbent  Board
      shall  thereafter  be added (for the  purposes  hereof) as a member of the
      Incumbent  Board,  but excluding,  for this purpose,  any such  individual
      whose initial  assumption of office occurs as a result of either an actual
      or threatened  solicitation  of proxies or consents not by or on behalf of
      at least a majority of the then Incumbent Board;

                                      -1-
<PAGE>
(iii) any  reorganization,  merger or consolidation of the Company or any of its
      subsidiaries, in each case other than (A) any merger of any SPAR Affiliate
      (other than the Company)  into the Company or any of its  subsidiaries  as
      the surviving  entity, or (B) one in which all or substantially all of the
      Beneficial Owners' of the voting Company  Securities  immediately prior to
      such event are, immediately  following such event,  Beneficial Owners of a
      Majority  of Voting  Securities  of either the  Company  or the  surviving
      entity of a merger with the Company (or its ultimate parent),  as the case
      may be, outstanding  immediately after such event and in substantially the
      same proportions as their ownership immediately prior to such event;

(iv)  the approval by the Company's  Board or stockholders of a plan of complete
      liquidation of the Company; or

(v)   any sale or other  disposition by the Company of all or substantially  all
      of its assets , in each case other  than (A) any  assignment  or pledge of
      all or  substantially  all of the respective  assets and properties of the
      Company and its  subsidiaries to one or more lenders as security for their
      respective credit, indebtedness and guaranties, (B) any acquisition by the
      Company or any of its  subsidiaries  of the  assets of any SPAR  Affiliate
      (whether by assignment,  merger,  liquidation  or  otherwise),  or (C) any
      transaction in which all or substantially all of the Beneficial Owners' of
      the  voting  Company  Securities  immediately  prior  to such  event  are,
      immediately  following  such  event,  Beneficial  Owners of a Majority  of
      Voting  Securities  of both the Company and the  acquiring  entity (or its
      ultimate  parent)   outstanding   immediately  after  such  event  and  in
      substantially the same proportions as their ownership immediately prior to
      such event;

provided,  however,  that it shall not constitute a Change in Control if and for
so long as Robert G. Brown  retains  effective  control of the Company and shall
continue to be the  chairman or the chief (or most senior,  however  designated)
executive officer of the Company.

      (f) "Company  Securities" shall mean any securities issued by the Company,
whether acquired directly from the Company, in the marketplace or otherwise.

      (g)  "Good  Reason"  shall  mean the  occurrence  of any of the  following
events:

(i)   the failure to elect or appoint,  or re-elect or re-appoint,  the Employee
      to, or removal or  attempted  removal of the Employee  from,  his position
      positions  with the  Company  or  applicable  SPAR  Affiliate  (except  in
      connection with the proper termination of the Employee's employment by the
      Company by reason of death, disability or Termination For Cause);

(ii)  the assignment to the Employee of any duties  inconsistent with the status
      of the Employee's office and/or position with the Company;

(iii) any adverse  change in the  Employee's  title or in the nature or scope of
      the Employee's authorities, powers, functions or duties of the position(s)
      with the Company or applicable SPAR Affiliate;

(iv)  the willful  delay by the Company or  applicable  SPAR  Affiliate for more
      than ten (10) business  days in the payment to the Employee,  when due, of
      any part of his or her compensation;

(v)   a  reduction  in  the  Employee's   salary  or  benefits   (other  than  a
      discretionary bonus);

(vi)  a failure by the Company to obtain the  assumption  of, and  agreement  to
      perform, this Agreement by any successor to the Company; or

(vii) a change in the  location  at which  substantially  all of the  Employee's
      duties with the Company are to be  performed  from the county and state in
      which the Employee is currently performing substantially all of his or her
      duties (excluding those duties performed at home or on the road.

      (h)  "Majority  of  Voting   Securities"  shall  mean  securities  of  the
referenced  person  representing  more than fifty  percent (50%) of the combined
voting power of the referenced  person's then outstanding  securities having the
right  to  vote  generally  in  the  election  of  directors,  managers  or  the
equivalent.

(i)      "Representative"  shall mean any  subsidiary or other  affiliate of the
         referenced person or any shareholder,  partner,  equity holder, member,
         director,  officer,  manager,  employee,  consultant,  agent, attorney,
         accountant, financial advisor or other representative of the referenced
         person or of any of its subsidiaries or other affiliates,  in each case
         other than the Employee.

      (j)  "Securities  Exchange Act" shall mean the Securities  Exchange Act of
1934,  as  amended,  or  any  corresponding  or  succeeding  provisions  of  any
applicable law (including those of any state or foreign  jurisdiction),  and the
rules and regulations promulgated thereunder,  in each case as the same may have
been and hereafter may be adopted, supplemented,  modified, amended, restated or
replaced from time to time.

                                      -2-
<PAGE>
      (k)  "SPAR   Affiliate"  shall  mean  and  currently   includes   (without
limitation) each of the Company's direct and indirect  subsidiaries  (including,
without limitation, SPAR Acquisition,  Inc., SPAR Marketing, Inc., SPAR/Burgoyne
Retail Services,  Inc., SPAR, Inc., SPAR Marketing Force, Inc., SPAR Trademarks,
Inc.,  SPAR Group  International,  Inc.,  SPAR/PIA Retail  Services,  Inc., SPAR
Technology Group,  Inc., SPAR All Store Marketing  Services,  Inc., SPAR Canada,
Inc., SPAR Canada Company, Retail Resources, Inc., Pivotal Field Services, Inc.,
PIA Merchandising  Co., Inc., Pacific Indoor Display Co. d/b/a Retail Resources,
Pivotal Sales Company,  and PIA  Merchandising  Ltd.), the Company's  affiliates
(including,  without  limitation,  SPAR Marketing Services Inc., SPAR Management
Services,  Inc.,  and SPAR  InfoTech,  Inc.),  and each other  entity  under the
control of or common  control with any of the foregoing  entities,  in each case
whether now existing or hereafter acquired, organized or existing.

      (l) "SPAR Group" shall mean the Company and all of the SPAR Affiliates.

      (m) "Termination For Cause" shall mean any termination of the Employee for
any of the following reasons: (i) the Employee's willful,  negligent or repeated
breach of, or the  Employee's  willful,  negligent  or repeated  nonperformance,
misperformance  or dereliction of any of his or her duties and  responsibilities
under,  (A) any  employment  agreement  or  confidentiality  agreement  with the
Company or any Spar Affiliate, (B) the directives of the Board or any Authorized
Representative,  or (C) the Company's  policies and procedures  governing his or
her employment;  (ii) the gross or repeated disparagement by the Employee of the
business  or  affairs  of the  Company,  any  SPAR  Affiliate  or  any of  their
Representatives  that in the  reasonable  judgment  of the  Company  or SGRP has
adversely  affected  or would be  reasonably  likely  to  adversely  affect  the
operations  or  reputation  of any such person;  (iii) any resume,  application,
report or other information furnished to the Company or any SPAR Affiliate by or
on behalf of the Employee shall be in any material respect untrue, incomplete or
otherwise  misleading  when made or deemed  made;  (iv) the Employee is indicted
for,  charged  with,  admits or confesses  to,  pleads  guilty or no contest to,
adversely  settles  respecting or is convicted of (A) any willful  dishonesty or
fraud  (whether or not related to the  Company or any SPAR  Affiliate),  (B) any
theft or  embezzlement  by the Employee of any asset or property of the Company,
any SPAR  Affiliate  or any of their  respective  Representatives,  customers or
vendors, (C) any other misdemeanor  involving moral turpitude,  or (D) any other
felony;  (vi) alcohol or drug abuse by the  Employee;  or (v) any other event or
circumstance  that  constitutes  cause  for  termination  of an  employee  under
applicable law and is not described in another clause of this subsection.

      Section 3. Severance.  (a) Lump Sum Payment. If the Employee's  employment
with the Company or applicable SPAR affiliate (or their respective successors in
any Change in Control,  as applicable) shall be terminated pending or within the
twenty-four-month  period following any Change in Control by (i) the Company for
any  reason  other  than the  Employee's  death  or  permanent  disability  or a
Termination  For Cause, or (ii) by the Employee for Good Reason (either of which
will be  referred  to as a  "Severance  Termination"),  then the  Company  shall
promptly  (but not later than the tenth  business day following  such  Severance
Termination) pay (or cause the applicable SPAR Affiliate to promptly pay) to the
Employee severance pay (in a lump sum) in an amount equal to the sum of:

(i)   the  Employee's  annual  salary  rate in effect  immediately  prior to his
      cessation of such employment (or, if greater, at the highest annual salary
      rate in effect at any time during the one-year  period  preceding the date
      of such termination),  times a multiple (calculated to two decimal places)
      equal to the remainder of (i) 24 months (i.e., the number of months in the
      period referred to in the  introduction to this subsection  Section 3(a)),
      minus (ii) the number of months (to two decimal places,  but not less than
      zero) by which the Severance  Termination date followed the effective date
      of the Change in Control; and

(ii)  the  maximum  bonus that  would have been paid or payable to the  Employee
      under the  Company's  bonus  proposal to the Employee for the full year of
      the Severance  Termination as if all  performance  criteria had been fully
      satisfied, but in any event not to exceed twenty-five percent (25%) of the
      Employee's annual salary rate referred to above.

      (b) Vacation  Days. In addition and in any event,  promptly (but not later
than  the  tenth  business  day)  following  the  date  of  any  termination  or
resignation pending or following a Change in Control,  the Company shall pay (or
cause the  applicable  SPAR Affiliate to pay) to the Employee an amount equal to
his or her accrued and unused vacation days,  computed at the Employee's  annual
salary rate in effect immediately prior to his cessation of such employment (or,
if greater,  at the highest  annual salary rate in effect at any time during the
one-year period  preceding the date of such  termination) and in accordance with
the  applicable  policy of the  Company  (or if changed  pending or  following a
Change in Control,  in  accordance  with the  immediately  preceding  applicable
policy of the Company).

      (c)  Insurance.  In addition,  during the two-year  period  following  the
effective date of any Change in Control,  the Employee and his dependents  shall
continue to receive the insurance benefits received during the preceding year as
well as any  additional  insurance  benefits  as may be  provided  to  executive
officers or their dependents during such period in accordance with the Company's
policies and practices.  The Employee's  required  co-payments  shall not exceed
those payable by the other executive officers of the SPAR Group.

                                      -3-
<PAGE>
      (d) Stock Options. Each stock option granted to the Employee that has not,
by its express  terms,  vested shall be deemed to have vested on the date of any
Severance  Termination,  and shall  thereafter  be  exercisable  for the maximum
period of time  allowed for  exercise  thereof  under the terms of such  option,
assuming that the Employee's  employment with the Company had been terminated by
the Company other than Termination For Cause or by the Employee for Good Reason.
An election by the Employee to terminate his or her  employment  for Good Reason
pending  or  following  a Change  in  Control  shall not  otherwise  be deemed a
voluntary  termination  of  employment  of  the  Employee  for  the  purpose  of
interpreting  the  provisions of any of the Company's  employee  benefit  plans,
programs, or policies.

      (e) 401k. The Employee  shall be entitled to a 401k matching  contribution
for the year of his Severance Termination,  which the Company shall pay into the
Employee's  401k (or  deliver to the  Employee  for  deposit  into any  rollover
account  respecting  such  401k) at the same  time  for  such  year as  matching
contributions are made to the 401k plans of other executive officers.

      (f) Illness not affecting Good Reason.  The Employee's  right to terminate
his  employment  for Good Reason  pending or following a Change in Control shall
not be affected by his illness or incapacity, whether physical or mental, unless
the Company shall at the time be entitled to terminate his or her  employment by
reason thereof.

      (g)  Parachute  Payments.  Notwithstanding  any  other  provision  of this
Section 3, if it is determined that part or all of the  compensation or benefits
to be  paid  to the  Employee  under  this  Agreement  in  connection  with  the
Employee's  Severance  Termination  , or under any other  plan,  arrangement  or
agreement,  constitutes a "parachute  payment"  under section  280G(b)(2) of the
Internal  Revenue  Code of 1986,  as  amended,  then the amount  constituting  a
parachute  payment that would  otherwise be payable to or for the benefit of the
Employee  first shall be deferred  (to the  greatest  extent  permitted  by such
applicable  law),  and to the  extent  not so  deferred,  shall be  reduced  (if
required under such applicable law), but only to the extent  necessary,  so that
such amount would not constitute a parachute  payment.  Any determination that a
payment constitutes a parachute payment shall be made as promptly as practicable
following the Employee's  termination of employment (but not later than the date
payment is required  under  subsection  (a) of this Section) by the  independent
public  accountants  that audited the  Company's  financial  statements  for the
fiscal  year  preceding  the  year  in  which  the  Employee's   employment  was
terminated,  whose determination shall be final and binding in all cases. Unless
the  Employee is given  notice that a payment (or  payments)  will  constitute a
parachute  payment  prior to the earlier of (1) receipt of such  payments or (2)
the tenth  business day following his or her Severance  Termination,  no payment
(or  payments)  shall be  deemed  to  constitute  a  parachute  payment.  If the
determination  made pursuant to this  subsection  would result in a deferral (to
the greatest  extent  permitted under such applicable law) and to the extent not
so deferred, a reduction (to the minimum extent required by such applicable law)
of the payments that would  otherwise be paid to the Employee,  the Employee may
elect, in his sole discretion,  which and how much of any particular entitlement
shall be so deferred or reduced (giving effect to any payments and benefits that
may have been received prior to such  termination)  and shall advise the Company
in writing of his election within 10 days of the  determination  of the deferral
or  reduction in payments.  If no such  election is made by the Employee  within
such  10-day  period,  the  Company  shall  determine  which and how much of any
entitlement  shall be deferred  (to the  greatest  extent  permitted  under such
applicable  law) and,  to the extent  not so  deferred,  reduced  (to the extent
required under such  applicable  law) and shall notify the Employee  promptly of
such  determination.  The  Company  shall (or shall  cause the  applicable  SPAR
Affiliate  to) pay to, or distribute to or for the benefit of, the Employee such
amounts as are then due to the Employee  under this  Agreement  and shall timely
pay to, or  distribute to or for the benefit of, the Employee in the future such
amounts as become due to the Employee under this Agreement.

      (h) Extension of Benefits: Any extension of benefits following a Severance
Termination shall be deemed to be in addition to, and not in lieu of, any period
for benefits continuation  provided for by applicable law at the Company's,  the
Employee's or his dependents' expense, as applicable.

      (i) Temporary Suspension of Section's Benefits.  Notwithstanding any other
provision of this Section 3, in the event that the  Employee's  Termination  For
Cause  pending or  following a Change in Control is solely based on the Employee
having been indicted for or charged with any one or more of the deeds  described
in clause (iv) of the definition of Termination For Cause,  the benefits of this
Section 3 (other than those under subsections (b), (c) and (h) hereof respecting
vacation pay,  insurance and the like) shall be temporarily  withheld until such
time as either:

(i)   the  first to  occur  of (A) the  final  determination  by an  appropriate
      authority  (including an arbitrator) that the Employee is not guilty or is
      acquitted of such deed(s), (B) the Company's written  acknowledgement that
      the Employee is not guilty or acquitted of such deed(s) or the substantive
      equivalent or any settlement with the Employee to any such effect,  or (C)
      the passage of twelve months following such  termination  without the good
      faith  prosecution  (criminal or civil) of the Employee for or arbitration
      of such  deed(s),  in any  which  case the  termination  shall be deemed a
      Severance  Termination  and the Employee shall be entitled at such time to
      (x) all the

                                      -4-
<PAGE>
      benefits of this  Section 3 as of such first to occur  date,  plus (y) the
      Employee's  salary and maximum  bonuses  for the period  from  termination
      through the date  severance is actually paid under  subsection (a) of this
      Section  3  (the  "Resolution  Period"),  plus  (z)  an  extension  of the
      Employees  benefit periods under subsections (c) and (h) of this Section 3
      and stock option exercise period(s) under subsection (d) of this Section 3
      equal to the length of the Resolution Period; or

(ii)  the  Employee  admits or  confesses  to,  pleads  guilty or no contest to,
      adversely settles respecting or is convicted of such deed(s), in any which
      case the  Employee  shall not be entitled  to any of the  benefits of this
      Section  3, any salary or bonus  pending  such  resolution,  or any of the
      benefits of subsection (b) hereof.

      (j)  Employee's  Estate.  In the  event  the  Employee  shall  die after a
Severance  Termination  (including,  without  limitation,  during the Resolution
Period),  this  Agreement  and the benefits of this Section 3 shall inure to the
benefits of the estate, heirs and legal representatives of the deceased Employee
in accordance with his or her will or applicable law, as the case may be.

      Section  4.  Waivers  of  Notice,   Etc.  Each  Party  hereby  absolutely,
unconditionally,  irrevocably  and expressly  waives forever each and all of the
following:  (a) acceptance and notice of any acceptance of this  Agreement;  (b)
notice of any  action  taken or omitted in  reliance  hereon;  (c) notice of any
nonpayment or other event that constitutes,  or with the giving of notice or the
passage of time (or both)  would  constitute,  any  nonpayment,  nonperformance,
misrepresentation or other breach or default under this Agreement; (d) notice of
any material and adverse effect, whether individually or in the aggregate,  upon
the assets,  business,  cash flow, expenses,  income,  liabilities,  operations,
properties,  prospects,  reputation  or condition  (financial or otherwise) of a
Party, its Representative or any other person,;  and (e) any other proof, notice
or  demand  of any  kind  whatsoever  with  respect  to any or all of a  Party's
obligations or promptness in making any claim or demand under this Agreement.

      Section 5. Consent to Exclusive New York Jurisdiction and Venue, Waiver of
Personal  Service,  Etc. Each Party hereby  consents and agrees that the Supreme
Court of the State of New York for the  County  of  Westchester  and the  United
States  District  Court for the  Southern  District  of New York each shall have
exclusive  personal  jurisdiction  and proper venue with respect to any claim or
dispute  under this  Agreement  between  the  Employee  and the  Company or SPAR
Affiliate  or any other  aspect of their  employment  relationship;  In any such
claim or dispute between the Employee and the Company or any SPAR Affiliate,  no
Party  will  raise,   and  each  Party   hereby   absolutely,   unconditionally,
irrevocably,  expressly and forever waives, any objection or defense to any such
jurisdiction  as  an   inconvenient   forum.   Each  Party  hereby   absolutely,
unconditionally,  irrevocably,  expressly and forever waives personal service of
any summons,  complaint or other process on such Party or any  authorized  agent
for  service  of such  Party  in any  claim  or  dispute  under  this  Agreement
(irrespective  of whether more parties may be involved).  Each Party each hereby
acknowledges and agrees with the other Party that service of process may be made
in any such  claim or  dispute  under  this  Agreement  upon  such  Party by (i)
delivery  pursuant  to Section 7 hereof or (ii) any manner of service  available
under the applicable law at address referenced in Section 7 hereof.

      Section 6.  Arbitration.  (a) Arbitration  Generally.  Except as otherwise
provided in this Section,  any unresolved dispute or controversy with respect to
this Agreement  shall be settled  exclusively  by  arbitration  conducted by the
American  Arbitration  Association  (including  any  successor  body of  similar
function,  "AAA") in accordance with the AAA's Commercial Arbitration Rules then
in effect  ("AAA  Rules")  and held in  Westchester  County,  New  York.  In any
arbitration,   no  Party  will  raise,  and  each  Party  hereby  expressly  and
irrevocably waives, any objection or defense to such location as an inconvenient
forum.  To  commence  an  arbitration,  the  aggrieved  Party  shall  submit  an
arbitration  notice  (including  a  copy  of  this  Agreement  and a  reasonable
description of its claims) to the AAA at its headquarters in New York, New York,
and  request  a list of  qualified  arbitrators.  The  Parties  agree  that each
arbitrator  must have  significant  experience  and knowledge in the  applicable
field of endeavor and (to the extent  applicable)  in the  accounting  field and
GAAP.

      (b) Arbitrator Selection.  Unless the Parties agree in writing to a single
arbitrator  prior to selection and a mechanism for his or her  selection,  three
arbitrators  shall be chosen by the Parties  from the list  submitted by the AAA
within ten  business  days of  receiving  such list (or any  subsequent  list if
applicable).  Either Party may object to any proposed  arbitrator  that does not
reasonably  appear to have the  required  experience  and  knowledge or does not
reasonably  appear to be a disinterested,  unrelated third party. If the Parties
cannot  agree  on the  three  arbitrators,  each  Party  shall  select  a single
disinterested  arbitrator from the AAA's list with such  qualifications  and the
two  arbitrators  so selected by the Parties  shall select the third  arbitrator
with such qualifications in accordance with the AAA Rules. The arbitration shall
begin within 30 business  days of such  appointment  unless  another date and/or
place is otherwise agreed upon in writing by the Parties.

      (c) Arbitrator's  Limited Authority.  The arbitrator(s) shall not have the
authority to add to,  detract from,  or modify any provision of this  Agreement.
The Parties hereby instruct and direct the arbitrator to determine each claim or
severable  part  thereof in  accordance  with the terms and  provisions  of this
Agreement,  and the  arbitrator(s)  shall not "split the  difference"  or employ

                                      -5-
<PAGE>
other equitable principles of allocation.  Discovery will be strictly limited to
documents  of the parties  specifically  applicable  to the  claims,  excluding,
however,   those  items  protected  by  attorney/client,   accountant  or  other
professional or work product  privilege (which the parties hereby agree have not
been waived by the Parties hereto or other applicable Persons).  No depositions,
interrogatories  or  other  prescreening  of a Party or its  Representatives  or
expert  witnesses  will be  permitted.  No  punitive,  consequential  or similar
damages shall be awarded by the arbitrator(s).

      (d) Arbitrator's  Decision.  The arbitrator(s) shall render a decision and
award within sixty (60) days after the  commencement  of the  arbitration.  Such
decision  and award shall be in writing,  shall be  delivered  to each Party and
shall be  conclusive  and binding on the Parties.  Judgment on such decision and
award may be entered in any court of competent jurisdiction.

      (e) Arbitrator's Fees and Expenses.  Except as otherwise  provided in this
Agreement,  each  Party  shall  pay (i) the  fees and  disbursements  of its own
attorneys and the expenses of its proof,  and (ii) half of the fees and expenses
of the AAA and the arbitrator(s), in each case irrespective of outcome.

      Section 7.  Notice.  Any notice,  request,  demand,  service of process or
other  communication  permitted  or  required  to be given to a Party under this
Agreement  shall be in writing and shall be sent to the applicable  Party at the
address set forth on the signature page below (or at such other address as shall
be  designated  by notice to the other  Party  and  Persons  receiving  copies),
effective upon actual  receipt (or refusal to accept  delivery) by the addressee
on any  business  day during  normal  business  hours or the first  business day
following   receipt  after  the  close  of  normal  business  hours  or  on  any
non-business  day, by (a) FedEx (or other  equivalent  national or international
overnight  courier) or United States Express Mail,  (b)  certified,  registered,
priority or express United States mail, return receipt requested,  (c) telecopy,
or (d) messenger,  by hand or any other means of actual  delivery.  The Employee
also may use and rely on the  accuracy of the address of the Company  designated
as its executive office in its most recent filing under the Securities  Exchange
Act. The Parties acknowledge and agree that such actual receipt will be presumed
with, among other things,  evidence of the signature by a Representative  of, or
adult in the same household as, the receiving Party on a return receipt, courier
manifest or other courier's acknowledgment of delivery or receipt.

      Section 8. Interpretation,  Headings, Severability,  Reformation, Etc. The
Parties agree that the provisions of this Agreement have been negotiated,  shall
be construed fairly as to all Parties, and shall not be construed in favor of or
against any Party.  The section  headings in this  Agreement  are for  reference
purposes  only and  shall not  affect  the  meaning  or  interpretation  of this
Agreement.  The term "including"  shall mean "including  (without  limitation)",
whether or not so stated.  The terms  "including",  "including,  but not limited
to",  "including  (without  limitation)"  and similar  phrases (i) mean that the
items  specifically  listed  after  such  term  are  examples  of the  provision
preceding such term and are not intended to be all inclusive,  (ii) shall not in
any way limit  (or be  deemed or  construed  to  limit)  the  generality  of the
provision  preceding  such term,  and (iii) shall not in any way preclude (or be
deemed or construed to preclude) any other  applicable  item  encompassed by the
general  provision  preceding such term. In the event that any provision of this
Agreement   shall  be  determined  to  be   superseded,   invalid,   illegal  or
unenforceable  pursuant to  applicable  law by a  governmental  authority,  that
determination   shall  not  impair  or  affect   the   validity,   legality   or
enforceability  (a) by  that  authority  of the  remaining  provisions  of  this
Agreement,  which  shall be  enforced  as if the  unenforceable  provision  were
deleted or reduced or (b) by any other  authority  of any of the  provisions  of
this Agreement.  If any provision of this Agreement is held to be  unenforceable
because of the scope or duration of any such  provision,  the Parties agree that
any  court  making  such  determination  shall  have the  power,  and is  hereby
requested by the Parties,  to reduce the scope or duration of such  provision to
the maximum  permissible  under  applicable law so that said provision  shall be
enforceable in such reduced form.

      Section 9.  Successors and Assigns;  Assignment;  Intended  Beneficiaries.
Whenever in this Agreement reference is made to any person, such reference shall
be deemed to include the successors,  assigns, and legal Representatives of such
person,   and,   without   limiting  the  generality  of  the   foregoing,   all
representations, warranties, covenants and other agreements made by or on behalf
of the Employee in this  Agreement  shall inure to the benefit of the successors
and assigns of the  Company and the SPAR  Affiliates;  provided,  however,  that
nothing herein shall be deemed to authorize or permit the Employee to assign any
rights or obligations under this Agreement to any other person, and the Employee
agrees to not make any such  assignment.  Without limiting the generality of the
foregoing, the Employee acknowledges and agrees that the Company may pledge this
Agreement  and  all  rights  and  interest  arising  hereunder  to one  or  more
lender(s),  such lender(s) shall be entitled upon default to enforce any and all
of the rights, powers,  privileges,  remedies and interests of the Company as so
assigned in accordance  with the this  Agreement,  the applicable loan documents
and applicable  law, and such  lender(s)  shall not be responsible or liable for
any of the acts,  omissions,  duties,  liabilities or obligations of the Company
hereunder or  otherwise.  The  representations,  agreements  and other terms and
provisions of this Agreement are for the exclusive benefit of the Parties hereto
and the SPAR Affiliates,  and, except as otherwise expressly provided herein, no
other person shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those  provisions  against any
Party.  The provisions of this Agreement are expressly  intended to benefit each
of the members of the SPAR Group, who may enforce any such provisions  directly,
irrespective of whether the Company  participates in such enforcement.  However,
no SPAR  Affiliate  shall have,  or shall be deemed or  construed  to have,  any
obligation or liability to the Employee under this Agreement or otherwise.

                                      -6-
<PAGE>
      Section 10. Survival of Agreements,  Etc. Each of the  representations and
warranties (as of the date(s) made or deemed made), covenants, waivers, releases
and other  agreements and obligations of each Party contained in this Agreement:
(a) shall be absolute,  irrevocable  and  unconditional,  irrespective of (among
other things) (i) the validity,  legality,  binding effect or  enforceability of
any of the other terms and provisions of this  Agreement or any other  agreement
(if any) between the Parties, or (ii) any other act, circumstance or other event
described  in this  Section;  (b) shall  survive and remain and continue in full
force and  effect in  accordance  with  their  respective  terms and  provisions
following and without regard to (i) the execution and delivery of this Agreement
and each other agreement (if any) between the Parties and the performance of any
obligation of such Party hereunder or thereunder, (ii) any waiver, modification,
amendment or restatement of any other term or provision of this Agreement or any
other  agreement  (if any)  between  the  Parties  (except  as and to the extent
expressly modified by the terms and provisions of any such waiver, modification,
amendment or restatement), (iii) any full, partial or non-exercise of any of the
rights,  powers,  privileges,  remedies  and  interests  of a Party  or any SPAR
Affiliate under this Agreement, any other agreement (if any) between the Parties
or  applicable  law against such other Party or any other person or with respect
to any obligation of such Party,  which exercise or enforcement  may be delayed,
discontinued  or  otherwise  not  pursued  or  exhausted  for  any or no  reason
whatsoever,  or which may be  waived,  omitted or  otherwise  not  exercised  or
enforced  (whether  intentionally  or  otherwise),  (iv)  any  extension,  stay,
moratorium  or  statute of  limitations  or similar  time  constraint  under any
applicable law, (v) any pledge,  assignment,  sale, conveyance or other transfer
by the Company (in whole or in part) to any other  person of this  Agreement  or
any other  agreement  (if any)  between  the  Parties  or any one or more of the
rights, powers,  privileges,  remedies or interests of the Company therein, (vi)
any act or omission on the part of the Company, any SPAR Affiliate, any of their
respective  Representatives or any other person,  (vii) any termination or other
departure  of the  Employee  from his or her  employment,  whether  for cause or
otherwise, or any dispute involving any aspect of such employment; or (viii) any
other act,  event, or  circumstance  that otherwise might  constitute a legal or
equitable counterclaim, defense or discharge of a contracting party, co-obligor,
guarantor,  pledgor or surety;  in each case without notice to or further assent
from the  Employee or any other  person  (except for such notices or consents as
may be expressly  required to be given to such Party under this Agreement or any
other  agreement (if any) between the Parties);  (c) shall not be subject to any
defense,  counterclaim,  setoff,  right of recoupment,  abatement,  reduction or
other claim or determination that the Employee may have against the Company, any
SPAR Affiliate, any of their respective Representatives or any other person; (d)
shall not be  diminished  or  qualified by the death,  disability,  dissolution,
reorganization,  insolvency, bankruptcy,  custodianship or receivership of Party
or any other person, or the inability of any of them to pay its debts or perform
or  otherwise  satisfy  its  obligations  as they  become  due  for  any  reason
whatsoever;  and (e) with respect to any provision expressly limited to a period
of time,  shall  remain and  continue  in full force and effect (i)  through the
specific  time  period(s)  and  (ii)   thereafter  with  respect  to  events  or
circumstances occurring prior to the end of such time period(s).

      Section 11. No Waiver by Action,  Cumulative  Rights,  Etc.  Any waiver or
consent  from a Party  respecting  any  provision  of this  Agreement  shall  be
effective only in the specific instance for which given and shall not be deemed,
regardless of frequency given, to be a further or continuing  waiver or consent.
The  failure  or delay of a Party at any time to require  performance  of, or to
exercise or enforce its rights or remedies  with  respect to, any  provision  of
this Agreement shall not affect the Party's right at a later time to exercise or
enforce any such  provision.  Any  acceptance  by or on behalf of a Party of any
partial or late payment,  reimbursement  or performance of any obligation of the
other Party shall not constitute a  satisfaction  or waiver of the obligation of
such other Party then due or the resulting default,  and any acceptance by or on
behalf of a Party of any payment, reimbursement or performance of any obligation
of such other Party during the  continuance  of any default under this Agreement
or any other  agreement  (if any)  between the Parties  shall not  constitute  a
waiver or cure  thereof,  and a Party or its  designee  may accept or reject any
such payment,  reimbursement or performance without affecting any of its rights,
powers,  privileges,  remedies and other interests  under this Agreement,  other
agreements  (if any)  between the Parties  and  applicable  law. No notice to or
demand on a Party shall  entitle  such Party to any other or notice or demand in
similar or other circumstances.  All rights, remedies and other interests of the
Parties and the SPAR Affiliates  hereunder are cumulative and not  alternatives,
and they are in  addition  to (and shall not limit) any other  right,  remedy or
other  interest of the Employee  under this Agreement or the Company or any SPAR
Affiliate under this Agreement, the rules, policies or procedures of the Company
or applicable law.

      Section  12.  Counterparts;  New  York  Governing  Law;  Amendments,  This
Agreement  shall be effective as of the date written  below when executed by the
Employee.  This  Agreement  may have been  executed  in two or more  counterpart
copies of the entire  document or signatures  pages hereto,  all of which,  when
taken  together,  shall  constitute a single  agreement  binding upon all of the
Parties  hereto.  This  Agreement  and  all  other  aspects  of  the  Employee's
employment  shall be governed by and construed in accordance with the applicable
laws pertaining in the State of New York, other than those conflict of law rules
that would defer to the substantive laws of another jurisdiction. Each and every
modification  and amendment of this Agreement  shall be in writing and signed by
all of the  Parties  hereto,  and each and every  waiver  of, or  consent to any
departure  from, any  representation,  warranty,  covenant or other provision of
this Agreement shall be in writing and signed by each affected Party hereto.

                                      -7-
<PAGE>
      Section 13. Waiver of Jury Trial; All Waivers Knowing,  Intentional,  Etc.
In any  action,  suit or  proceeding  in any  jurisdiction  brought  against the
Employee by the Company or any SPAR Affiliate,  or vice versa, each Party hereby
absolutely,  unconditionally,  irrevocably and expressly waives forever trial by
jury. This waiver of jury trial by the Parties, and each other waiver,  release,
relinquishment  or similar  surrender of rights  (however  expressed)  made by a
Party in this  Agreement,  has been  absolutely,  unconditionally,  irrevocably,
knowingly and intentionally made by such Party.

      Section 14. Entire Agreement. No Party or Representative of such Party has
made, accepted or acknowledged any representation, warranty, promise, assurance,
agreement,  obligation or understanding  (oral or otherwise) to, with or for the
benefit  of the other  Party  with  respect  to the  matters  contained  in this
Agreement other than as expressly set forth herein.  This Agreement contains the
entire  agreement of the Parties,  and supersedes  and  completely  replaces all
prior  and  other   communications,   discussions  and  other   representations,
warranties,  promises,  assurances,   agreements  and  understandings  (oral  or
otherwise)  between the Parties,  with respect to the matters  contained in this
Agreement.

      In Witness  Whereof,  the Parties  hereto have executed and delivered this
Agreement as of the last date written below:

COMPANY:                                         EMPLOYEE:
SPAR Group, Inc.

                                                 /s/ Kori G. Belzer
By:  /s/ Robert G. Brown                         --------------------------
     --------------------------                  Employee's Signature
     Officer's Signature
                                                 --------------------------
Company's Current Address:                             Kori G. Belzer
         SPAR Group, Inc.
         580 White Plains Road
         Tarrytown, New York  10591              Employee's Current Address:
                                                 --------------------------
Dated as of:   August 12, 2004                   --------------------------
                                                 --------------------------
                                                 Dated as of:  August 12, 2004





                                      -8-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>ex10_3-f10q063004.txt
<DESCRIPTION>EX-10.3; CHANGE IN CONTROL SEVERANCE AGREEMENT
<TEXT>
                                                                    EXHIBIT 10.3


                      CHANGE IN CONTROL SEVERANCE AGREEMENT

      This  Change in  Control  Severance  Agreement  (as  modified,  amended or
restated from time to time in the manner provided herein,  this  "Agreement") is
by and between the  undersigned  individual  employee (the  "Employee") and SPAR
Group,  Inc.  (the  "Company").  The Employee and the Company may be referred to
individually as a "Party" and collectively as the "Parties".

      In  consideration of past,  present and future  employment by the Company,
the  mutual  covenants  below and other  good and  valuable  consideration  (the
receipt and adequacy of which are hereby acknowledged), the Employee and Company
hereby agree as follows:

      Section 1. Introduction.  The Employee is an officer of the Company or one
of the SPAR  Affiliates (as hereinafter  defined).  The Employee and the Company
have entered into this Agreement in order to provide severance payments from the
Company to the Employee under certain  circumstances  if, pending or following a
Change in Control,  the Employee  leaves for Good Reason or is terminated  other
than in a  Termination  For  Cause  (as such  terms  are  hereinafter  defined).
However,  this Agreement is not intended,  and shall not be deemed or construed,
to create any employment term or period, and except as otherwise provided in any
other written agreement with the Employee,  the Employee acknowledges and agrees
that the Employee's employment is "at will" and modifiable from time to time and
terminable  at any time,  for any reason or no  reason,  and  without  notice or
benefit of any kind.

      Section 2. Certain Definitions. Definitions shall be applicable equally to
the  singular  and  plural  forms of the  terms  defined,  each use of a neuter,
masculine,  feminine or plural  pronoun  shall be deemed to refer to the form of
pronoun  appropriate  to the  circumstance,  and each other  reference  to or by
gender shall include reference to each other or neuter gender appropriate to the
circumstance, in each case as the context may permit or require. As used in this
Agreement, the following capitalized terms and non-capitalized words and phrases
shall have the meanings respectively assigned to them:

      (a)  "Authorized  Representative"  shall mean, for the Company or any SPAR
Affiliate for whom the Employee works, any of (i) the Board,  (ii) the Chairman,
(iii) any other  executive  officer of the Company or applicable  SPAR Affiliate
who directly or indirectly supervises or is responsible for the Employee or (iv)
any other  Representative  of the  Company  or  applicable  SPAR  Affiliate  who
directly or  indirectly  supervises  or is  responsible  for the Employee and is
authorized to do so by the Board, the Chairman or any such executive officer, in
each case other than the Employee.

      (b) "Beneficial Owner" shall mean any person who beneficially owns (within
the  meaning of Rule  13d-3  promulgated  under the  Securities  Exchange  Act),
securities  issued  by the  referenced  corporation  or  other  entity,  whether
directly  or  indirectly,  and  whether  individually,  jointly  with any  other
person(s) or otherwise.

      (c) "Board"  shall mean the Board of  Directors  of the Company or (except
for purposes of a Change in Control) the applicable SPAR Affiliate.

      (d) "Chairman"  shall mean the Chairman of the Company or applicable  SPAR
Affiliate.

      (e) "Change in Control" shall mean any of the following:

(i)   when any  "person" or "group"  (as  contemplated  in Sections  3(a)(9) and
      13(d)(3),  respectively,  of  the  Securities  Exchange  Act),  becomes  a
      Beneficial Owner of a Majority of Voting Securities issued by the Company,
      in each case other than any  acquisition of Company  Securities (A) in any
      transaction  covered by or exempted under clause (iii) of this definition,
      (B) by the  Employee or any group of which the Employee  voluntarily  is a
      member,  (C) by any employee  benefit plan (or related trust) sponsored or
      maintained by the Company or any SPAR Affiliate or (D) by any  corporation
      or other entity if, immediately following such acquisition, the Beneficial
      Owners of a Majority of Voting Securities of the acquirer (or its ultimate
      parent)  outstanding  immediately  after  such  event are  either  (1) the
      persons who were the Beneficial  Owners of all or substantially all of the
      voting Company  Securities  immediately  prior to such  acquisition and in
      substantially the same proportions as their ownership immediately prior to
      such event, or (2) by Robert G. Brown and/or William H. Bartels;

(ii)  when individuals who are members of the Board as of the date hereof or who
      are added as hereinafter  provided (the  "Incumbent  Board") cease for any
      reason to constitute at least a majority of the Board; provided,  however,
      that any  individual  becoming a director  subsequent  to the date  hereof
      whose election, or nomination for election by the Company's  stockholders,
      was approved by a vote of at least a majority of the then Incumbent  Board
      shall  thereafter  be added (for the  purposes  hereof) as a member of the
      Incumbent  Board,  but excluding,  for this purpose,  any such  individual
      whose initial  assumption of office occurs as a result of either an actual
      or threatened  solicitation  of proxies or consents not by or on behalf of
      at least a majority of the then Incumbent Board;

                                      -1-
<PAGE>
(iii) any  reorganization,  merger or consolidation of the Company or any of its
      subsidiaries, in each case other than (A) any merger of any SPAR Affiliate
      (other than the Company)  into the Company or any of its  subsidiaries  as
      the surviving  entity, or (B) one in which all or substantially all of the
      Beneficial Owners' of the voting Company  Securities  immediately prior to
      such event are, immediately  following such event,  Beneficial Owners of a
      Majority  of Voting  Securities  of either the  Company  or the  surviving
      entity of a merger with the Company (or its ultimate parent),  as the case
      may be, outstanding  immediately after such event and in substantially the
      same proportions as their ownership immediately prior to such event;

(iv)  the approval by the Company's  Board or stockholders of a plan of complete
      liquidation of the Company; or

(v)   any sale or other  disposition by the Company of all or substantially  all
      of its assets , in each case other  than (A) any  assignment  or pledge of
      all or  substantially  all of the respective  assets and properties of the
      Company and its  subsidiaries to one or more lenders as security for their
      respective credit, indebtedness and guaranties, (B) any acquisition by the
      Company or any of its  subsidiaries  of the  assets of any SPAR  Affiliate
      (whether by assignment,  merger,  liquidation  or  otherwise),  or (C) any
      transaction in which all or substantially all of the Beneficial Owners' of
      the  voting  Company  Securities  immediately  prior  to such  event  are,
      immediately  following  such  event,  Beneficial  Owners of a Majority  of
      Voting  Securities  of both the Company and the  acquiring  entity (or its
      ultimate  parent)   outstanding   immediately  after  such  event  and  in
      substantially the same proportions as their ownership immediately prior to
      such event;

provided  however that it shall not constitute a Change in Control if and for so
long as Robert G.  Brown  retains  effective  control of the  Company  and shall
continue to be the  chairman or the chief (or most senior,  however  designated)
executive officer of the Company.

      (f) "Company  Securities" shall mean any securities issued by the Company,
whether acquired directly from the Company, in the marketplace or otherwise.

      (g)  "Good  Reason"  shall  mean the  occurrence  of any of the  following
events:

(i)   the failure to elect or appoint,  or re-elect or re-appoint,  the Employee
      to, or removal or  attempted  removal of the Employee  from,  his position
      positions  with the  Company  or  applicable  SPAR  Affiliate  (except  in
      connection with the proper termination of the Employee's employment by the
      Company by reason of death, disability or Termination For Cause);

(ii)  the assignment to the Employee of any duties  inconsistent with the status
      of the Employee's office and/or position with the Company;

(iii) any adverse  change in the  Employee's  title or in the nature or scope of
      the Employee's authorities, powers, functions or duties of the position(s)
      with the Company or applicable SPAR Affiliate;

(iv)  the willful  delay by the Company or  applicable  SPAR  Affiliate for more
      than ten (10) business  days in the payment to the Employee,  when due, of
      any part of his or her compensation;

(v)   a  reduction  in  the  Employee's   salary  or  benefits   (other  than  a
      discretionary bonus);

(vi)  a failure by the Company to obtain the  assumption  of, and  agreement  to
      perform, this Agreement by any successor to the Company; or

(vii) a change in the  location  at which  substantially  all of the  Employee's
      duties with the Company are to be  performed  from the county and state in
      which the Employee is currently performing substantially all of his or her
      duties (excluding those duties performed at home or on the road.

      (h)  "Majority  of  Voting   Securities"  shall  mean  securities  of  the
referenced  person  representing  more than fifty  percent (50%) of the combined
voting power of the referenced  person's then outstanding  securities having the
right  to  vote  generally  in  the  election  of  directors,  managers  or  the
equivalent.

      (i)  "Representative"  shall mean any subsidiary or other affiliate of the
referenced person or any shareholder,  partner, equity holder, member, director,
officer, manager, employee, consultant, agent, attorney,  accountant,  financial
advisor  or  other  representative  of the  referenced  person  or of any of its
subsidiaries or other affiliates, in each case other than the Employee.

      (j)  "Securities  Exchange Act" shall mean the Securities  Exchange Act of
1934,  as  amended,  or  any  corresponding  or  succeeding  provisions  of  any
applicable law (including those of any state or foreign  jurisdiction),  and the
rules and regulations promulgated thereunder,  in each case as the same may have
been and hereafter may be adopted, supplemented,  modified, amended, restated or
replaced from time to time.

                                      -2-
<PAGE>
      (k)  "SPAR   Affiliate"  shall  mean  and  currently   includes   (without
limitation) each of the Company's direct and indirect  subsidiaries  (including,
without limitation, SPAR Acquisition,  Inc., SPAR Marketing, Inc., SPAR/Burgoyne
Retail Services,  Inc., SPAR, Inc., SPAR Marketing Force, Inc., SPAR Trademarks,
Inc.,  SPAR Group  International,  Inc.,  SPAR/PIA Retail  Services,  Inc., SPAR
Technology Group,  Inc., SPAR All Store Marketing  Services,  Inc., SPAR Canada,
Inc., SPAR Canada Company, Retail Resources, Inc., Pivotal Field Services, Inc.,
PIA Merchandising  Co., Inc., Pacific Indoor Display Co. d/b/a Retail Resources,
Pivotal Sales Company,  and PIA  Merchandising  Ltd.), the Company's  affiliates
(including,  without  limitation,  SPAR Marketing Services Inc., SPAR Management
Services,  Inc.,  and SPAR  InfoTech,  Inc.),  and each other  entity  under the
control of or common  control with any of the foregoing  entities,  in each case
whether now existing or hereafter acquired, organized or existing.

      (l) "SPAR Group" shall mean the Company and all of the SPAR Affiliates.

      (m) "Termination For Cause" shall mean any termination of the Employee for
any of the following reasons: (i) the Employee's willful,  negligent or repeated
breach of, or the  Employee's  willful,  negligent  or repeated  nonperformance,
misperformance  or dereliction of any of his or her duties and  responsibilities
under,  (A) any  employment  agreement  or  confidentiality  agreement  with the
Company or any Spar Affiliate, (B) the directives of the Board or any Authorized
Representative,  or (C) the Company's  policies and procedures  governing his or
her employment;  (ii) the gross or repeated disparagement by the Employee of the
business  or  affairs  of the  Company,  any  SPAR  Affiliate  or  any of  their
Representatives  that in the  reasonable  judgment  of the  Company  or SGRP has
adversely  affected  or would be  reasonably  likely  to  adversely  affect  the
operations  or  reputation  of any such person;  (iii) any resume,  application,
report or other information furnished to the Company or any SPAR Affiliate by or
on behalf of the Employee shall be in any material respect untrue, incomplete or
otherwise  misleading  when made or deemed  made;  (iv) the Employee is indicted
for,  charged  with,  admits or confesses  to,  pleads  guilty or no contest to,
adversely  settles  respecting or is convicted of (A) any willful  dishonesty or
fraud  (whether or not related to the  Company or any SPAR  Affiliate),  (B) any
theft or  embezzlement  by the Employee of any asset or property of the Company,
any SPAR  Affiliate  or any of their  respective  Representatives,  customers or
vendors, (C) any other misdemeanor  involving moral turpitude,  or (D) any other
felony;  (vi) alcohol or drug abuse by the  Employee;  or (v) any other event or
circumstance  that  constitutes  cause  for  termination  of an  employee  under
applicable law and is not described in another clause of this subsection.

      Section 3. Severance.  (a) Lump Sum Payment. If the Employee's  employment
with the Company or applicable SPAR affiliate (or their respective successors in
any Change in Control,  as applicable) shall be terminated pending or within the
twenty-four-month  period following any Change in Control by (i) the Company for
any  reason  other  than the  Employee's  death  or  permanent  disability  or a
Termination  For Cause, or (ii) by the Employee for Good Reason (either of which
will be  referred  to as a  "Severance  Termination"),  then the  Company  shall
promptly  (but not later than the tenth  business day following  such  Severance
Termination) pay (or cause the applicable SPAR Affiliate to promptly pay) to the
Employee severance pay (in a lump sum) in an amount equal to the sum of:

(i)   the  Employee's  annual  salary  rate in effect  immediately  prior to his
      cessation of such employment (or, if greater, at the highest annual salary
      rate in effect at any time during the one-year  period  preceding the date
      of such termination),  times a multiple (calculated to two decimal places)
      equal to the remainder of (i) 24 months (i.e., the number of months in the
      period referred to in the  introduction to this subsection  Section 3(a)),
      minus (ii) the number of months (to two decimal places,  but not less than
      zero) by which the Severance  Termination date followed the effective date
      of the Change in Control; and

(ii)  the  maximum  bonus that  would have been paid or payable to the  Employee
      under the  Company's  bonus  proposal to the Employee for the full year of
      the Severance  Termination as if all  performance  criteria had been fully
      satisfied, but in any event not to exceed twenty-five percent (25%) of the
      Employee's annual salary rate referred to above.

      (b) Vacation  Days. In addition and in any event,  promptly (but not later
than  the  tenth  business  day)  following  the  date  of  any  termination  or
resignation pending or following a Change in Control,  the Company shall pay (or
cause the  applicable  SPAR Affiliate to pay) to the Employee an amount equal to
his or her accrued and unused vacation days,  computed at the Employee's  annual
salary rate in effect immediately prior to his cessation of such employment (or,
if greater,  at the highest  annual salary rate in effect at any time during the
one-year period  preceding the date of such  termination) and in accordance with
the  applicable  policy of the  Company  (or if changed  pending or  following a
Change in Control,  in  accordance  with the  immediately  preceding  applicable
policy of the Company).

      (c)  Insurance.  In addition,  during the two-year  period  following  the
effective date of any Change in Control,  the Employee and his dependents  shall
continue to receive the insurance benefits received during the preceding year as
well as any  additional  insurance  benefits  as may be  provided  to  executive
officers or their dependents during such period in accordance with the Company's
policies and practices.  The Employee's  required  co-payments  shall not exceed
those payable by the other executive officers of the SPAR Group.

                                      -3-
<PAGE>
      (d) Stock Options. Each stock option granted to the Employee that has not,
by its express  terms,  vested shall be deemed to have vested on the date of any
Severance  Termination,  and shall  thereafter  be  exercisable  for the maximum
period of time  allowed for  exercise  thereof  under the terms of such  option,
assuming that the Employee's  employment with the Company had been terminated by
the Company other than Termination For Cause or by the Employee for Good Reason.
An election by the Employee to terminate his or her  employment  for Good Reason
pending  or  following  a Change  in  Control  shall not  otherwise  be deemed a
voluntary  termination  of  employment  of  the  Employee  for  the  purpose  of
interpreting  the  provisions of any of the Company's  employee  benefit  plans,
programs, or policies.

      (e) 401k. The Employee  shall be entitled to a 401k matching  contribution
for the year of his Severance Termination,  which the Company shall pay into the
Employee's  401k (or  deliver to the  Employee  for  deposit  into any  rollover
account  respecting  such  401k) at the same  time  for  such  year as  matching
contributions are made to the 401k plans of other executive officers.

      (f) Illness not affecting Good Reason.  The Employee's  right to terminate
his  employment  for Good Reason  pending or following a Change in Control shall
not be affected by his illness or incapacity, whether physical or mental, unless
the Company shall at the time be entitled to terminate his or her  employment by
reason thereof.

      (g)  Parachute  Payments.  Notwithstanding  any  other  provision  of this
Section 3, if it is determined that part or all of the  compensation or benefits
to be  paid  to the  Employee  under  this  Agreement  in  connection  with  the
Employee's  Severance  Termination  , or under any other  plan,  arrangement  or
agreement,  constitutes a "parachute  payment"  under section  280G(b)(2) of the
Internal  Revenue  Code of 1986,  as  amended,  then the amount  constituting  a
parachute  payment that would  otherwise be payable to or for the benefit of the
Employee  first shall be deferred  (to the  greatest  extent  permitted  by such
applicable  law),  and to the  extent  not so  deferred,  shall be  reduced  (if
required under such applicable law), but only to the extent  necessary,  so that
such amount would not constitute a parachute  payment.  Any determination that a
payment constitutes a parachute payment shall be made as promptly as practicable
following the Employee's  termination of employment (but not later than the date
payment is required  under  subsection  (a) of this Section) by the  independent
public  accountants  that audited the  Company's  financial  statements  for the
fiscal  year  preceding  the  year  in  which  the  Employee's   employment  was
terminated,  whose determination shall be final and binding in all cases. Unless
the  Employee is given  notice that a payment (or  payments)  will  constitute a
parachute  payment  prior to the earlier of (1) receipt of such  payments or (2)
the tenth  business day following his or her Severance  Termination,  no payment
(or  payments)  shall be  deemed  to  constitute  a  parachute  payment.  If the
determination  made pursuant to this  subsection  would result in a deferral (to
the greatest  extent  permitted under such applicable law) and to the extent not
so deferred, a reduction (to the minimum extent required by such applicable law)
of the payments that would  otherwise be paid to the Employee,  the Employee may
elect, in his sole discretion,  which and how much of any particular entitlement
shall be so deferred or reduced (giving effect to any payments and benefits that
may have been received prior to such  termination)  and shall advise the Company
in writing of his election within 10 days of the  determination  of the deferral
or  reduction in payments.  If no such  election is made by the Employee  within
such  10-day  period,  the  Company  shall  determine  which and how much of any
entitlement  shall be deferred  (to the  greatest  extent  permitted  under such
applicable  law) and,  to the extent  not so  deferred,  reduced  (to the extent
required under such  applicable  law) and shall notify the Employee  promptly of
such  determination.  The  Company  shall (or shall  cause the  applicable  SPAR
Affiliate  to) pay to, or distribute to or for the benefit of, the Employee such
amounts as are then due to the Employee  under this  Agreement  and shall timely
pay to, or  distribute to or for the benefit of, the Employee in the future such
amounts as become due to the Employee under this Agreement.

      (h) Extension of Benefits: Any extension of benefits following a Severance
Termination shall be deemed to be in addition to, and not in lieu of, any period
for benefits continuation  provided for by applicable law at the Company's,  the
Employee's or his dependents' expense, as applicable.

      (i) Temporary Suspension of Section's Benefits.  Notwithstanding any other
provision of this Section 3, in the event that the  Employee's  Termination  For
Cause  pending or  following a Change in Control is solely based on the Employee
having been indicted for or charged with any one or more of the deeds  described
in clause (iv) of the definition of Termination For Cause,  the benefits of this
Section 3 (other than those under subsections (b), (c) and (h) hereof respecting
vacation pay,  insurance and the like) shall be temporarily  withheld until such
time as either:

(i)   the  first to  occur  of (A) the  final  determination  by an  appropriate
      authority  (including an arbitrator) that the Employee is not guilty or is
      acquitted of such deed(s), (B) the Company's written  acknowledgement that
      the Employee is not guilty or acquitted of such deed(s) or the substantive
      equivalent or any settlement with the Employee to any such effect,  or (C)
      the passage of twelve months following such  termination  without the good
      faith  prosecution  (criminal or civil) of the Employee for or arbitration
      of such  deed(s),  in any  which  case the  termination  shall be deemed a
      Severance

                                      -4-
<PAGE>
      Termination and the Employee shall be entitled at such time to (x) all the
      benefits of this  Section 3 as of such first to occur  date,  plus (y) the
      Employee's  salary and maximum  bonuses  for the period  from  termination
      through the date  severance is actually paid under  subsection (a) of this
      Section  3  (the  "Resolution  Period"),  plus  (z)  an  extension  of the
      Employees  benefit periods under subsections (c) and (h) of this Section 3
      and stock option exercise period(s) under subsection (d) of this Section 3
      equal to the length of the Resolution Period; or

(ii)  the  Employee  admits or  confesses  to,  pleads  guilty or no contest to,
      adversely settles respecting or is convicted of such deed(s), in any which
      case the  Employee  shall not be entitled  to any of the  benefits of this
      Section  3, any salary or bonus  pending  such  resolution,  or any of the
      benefits of subsection (b) hereof.

      (j)  Employee's  Estate.  In the  event  the  Employee  shall  die after a
Severance  Termination  (including,  without  limitation,  during the Resolution
Period),  this  Agreement  and the benefits of this Section 3 shall inure to the
benefits of the estate, heirs and legal representatives of the deceased Employee
in accordance with his or her will or applicable law, as the case may be.

      Section  4.  Waivers  of  Notice,   Etc.  Each  Party  hereby  absolutely,
unconditionally,  irrevocably  and expressly  waives forever each and all of the
following:  (a) acceptance and notice of any acceptance of this  Agreement;  (b)
notice of any  action  taken or omitted in  reliance  hereon;  (c) notice of any
nonpayment or other event that constitutes,  or with the giving of notice or the
passage of time (or both)  would  constitute,  any  nonpayment,  nonperformance,
misrepresentation or other breach or default under this Agreement; (d) notice of
any material and adverse effect, whether individually or in the aggregate,  upon
the assets,  business,  cash flow, expenses,  income,  liabilities,  operations,
properties,  prospects,  reputation  or condition  (financial or otherwise) of a
Party, its Representative or any other person,;  and (e) any other proof, notice
or  demand  of any  kind  whatsoever  with  respect  to any or all of a  Party's
obligations or promptness in making any claim or demand under this Agreement.

      Section 5. Consent to Exclusive New York Jurisdiction and Venue, Waiver of
Personal  Service,  Etc. Each Party hereby  consents and agrees that the Supreme
Court of the State of New York for the  County  of  Westchester  and the  United
States  District  Court for the  Southern  District  of New York each shall have
exclusive  personal  jurisdiction  and proper venue with respect to any claim or
dispute  under this  Agreement  between  the  Employee  and the  Company or SPAR
Affiliate  or any other  aspect of their  employment  relationship;  In any such
claim or dispute between the Employee and the Company or any SPAR Affiliate,  no
Party  will  raise,   and  each  Party   hereby   absolutely,   unconditionally,
irrevocably,  expressly and forever waives, any objection or defense to any such
jurisdiction  as  an   inconvenient   forum.   Each  Party  hereby   absolutely,
unconditionally,  irrevocably,  expressly and forever waives personal service of
any summons,  complaint or other process on such Party or any  authorized  agent
for  service  of such  Party  in any  claim  or  dispute  under  this  Agreement
(irrespective  of whether more parties may be involved).  Each Party each hereby
acknowledges and agrees with the other Party that service of process may be made
in any such  claim or  dispute  under  this  Agreement  upon  such  Party by (i)
delivery  pursuant  to Section 7 hereof or (ii) any manner of service  available
under the applicable law at address referenced in Section 7 hereof.

      Section 6.  Arbitration.  (a) Arbitration  Generally.  Except as otherwise
provided in this Section,  any unresolved dispute or controversy with respect to
this Agreement  shall be settled  exclusively  by  arbitration  conducted by the
American  Arbitration  Association  (including  any  successor  body of  similar
function,  "AAA") in accordance with the AAA's Commercial Arbitration Rules then
in effect  ("AAA  Rules")  and held in  Westchester  County,  New  York.  In any
arbitration,   no  Party  will  raise,  and  each  Party  hereby  expressly  and
irrevocably waives, any objection or defense to such location as an inconvenient
forum.  To  commence  an  arbitration,  the  aggrieved  Party  shall  submit  an
arbitration  notice  (including  a  copy  of  this  Agreement  and a  reasonable
description of its claims) to the AAA at its headquarters in New York, New York,
and  request  a list of  qualified  arbitrators.  The  Parties  agree  that each
arbitrator  must have  significant  experience  and knowledge in the  applicable
field of endeavor and (to the extent  applicable)  in the  accounting  field and
GAAP.

      (b) Arbitrator Selection.  Unless the Parties agree in writing to a single
arbitrator  prior to selection and a mechanism for his or her  selection,  three
arbitrators  shall be chosen by the Parties  from the list  submitted by the AAA
within ten  business  days of  receiving  such list (or any  subsequent  list if
applicable).  Either Party may object to any proposed  arbitrator  that does not
reasonably  appear to have the  required  experience  and  knowledge or does not
reasonably  appear to be a disinterested,  unrelated third party. If the Parties
cannot  agree  on the  three  arbitrators,  each  Party  shall  select  a single
disinterested  arbitrator from the AAA's list with such  qualifications  and the
two  arbitrators  so selected by the Parties  shall select the third  arbitrator
with such qualifications in accordance with the AAA Rules. The arbitration shall
begin within 30 business  days of such  appointment  unless  another date and/or
place is otherwise agreed upon in writing by the Parties.

      (c) Arbitrator's  Limited Authority.  The arbitrator(s) shall not have the
authority to add to,  detract from,  or modify any provision of this  Agreement.
The Parties hereby instruct and direct the arbitrator to determine each claim or
severable  part  thereof in  accordance  with the terms and  provisions  of this
Agreement,  and the  arbitrator(s)  shall not "split the  difference"  or employ

                                      -5-
<PAGE>
other equitable principles of allocation.  Discovery will be strictly limited to
documents  of the parties  specifically  applicable  to the  claims,  excluding,
however,   those  items  protected  by  attorney/client,   accountant  or  other
professional or work product  privilege (which the parties hereby agree have not
been waived by the Parties hereto or other applicable Persons).  No depositions,
interrogatories  or  other  prescreening  of a Party or its  Representatives  or
expert  witnesses  will be  permitted.  No  punitive,  consequential  or similar
damages shall be awarded by the arbitrator(s).

      (d) Arbitrator's  Decision.  The arbitrator(s) shall render a decision and
award within sixty (60) days after the  commencement  of the  arbitration.  Such
decision  and award shall be in writing,  shall be  delivered  to each Party and
shall be  conclusive  and binding on the Parties.  Judgment on such decision and
award may be entered in any court of competent jurisdiction.

      (e) Arbitrator's Fees and Expenses.  Except as otherwise  provided in this
Agreement,  each  Party  shall  pay (i) the  fees and  disbursements  of its own
attorneys and the expenses of its proof,  and (ii) half of the fees and expenses
of the AAA and the arbitrator(s), in each case irrespective of outcome.

      Section 7.  Notice.  Any notice,  request,  demand,  service of process or
other  communication  permitted  or  required  to be given to a Party under this
Agreement  shall be in writing and shall be sent to the applicable  Party at the
address set forth on the signature page below (or at such other address as shall
be  designated  by notice to the other  Party  and  Persons  receiving  copies),
effective upon actual  receipt (or refusal to accept  delivery) by the addressee
on any  business  day during  normal  business  hours or the first  business day
following   receipt  after  the  close  of  normal  business  hours  or  on  any
non-business  day, by (a) FedEx (or other  equivalent  national or international
overnight  courier) or United States Express Mail,  (b)  certified,  registered,
priority or express United States mail, return receipt requested,  (c) telecopy,
or (d) messenger,  by hand or any other means of actual  delivery.  The Employee
also may use and rely on the  accuracy of the address of the Company  designated
as its executive office in its most recent filing under the Securities  Exchange
Act. The Parties acknowledge and agree that such actual receipt will be presumed
with, among other things,  evidence of the signature by a Representative  of, or
adult in the same household as, the receiving Party on a return receipt, courier
manifest or other courier's acknowledgment of delivery or receipt.

      Section 8. Interpretation,  Headings, Severability,  Reformation, Etc. The
Parties agree that the provisions of this Agreement have been negotiated,  shall
be construed fairly as to all Parties, and shall not be construed in favor of or
against any Party.  The section  headings in this  Agreement  are for  reference
purposes  only and  shall not  affect  the  meaning  or  interpretation  of this
Agreement.  The term "including"  shall mean "including  (without  limitation)",
whether or not so stated.  The terms  "including",  "including,  but not limited
to",  "including  (without  limitation)"  and similar  phrases (i) mean that the
items  specifically  listed  after  such  term  are  examples  of the  provision
preceding such term and are not intended to be all inclusive,  (ii) shall not in
any way limit  (or be  deemed or  construed  to  limit)  the  generality  of the
provision  preceding  such term,  and (iii) shall not in any way preclude (or be
deemed or construed to preclude) any other  applicable  item  encompassed by the
general  provision  preceding such term. In the event that any provision of this
Agreement   shall  be  determined  to  be   superseded,   invalid,   illegal  or
unenforceable  pursuant to  applicable  law by a  governmental  authority,  that
determination   shall  not  impair  or  affect   the   validity,   legality   or
enforceability  (a) by  that  authority  of the  remaining  provisions  of  this
Agreement,  which  shall be  enforced  as if the  unenforceable  provision  were
deleted or reduced or (b) by any other  authority  of any of the  provisions  of
this Agreement.  If any provision of this Agreement is held to be  unenforceable
because of the scope or duration of any such  provision,  the Parties agree that
any  court  making  such  determination  shall  have the  power,  and is  hereby
requested by the Parties,  to reduce the scope or duration of such  provision to
the maximum  permissible  under  applicable law so that said provision  shall be
enforceable in such reduced form.

      Section 9.  Successors and Assigns;  Assignment;  Intended  Beneficiaries.
Whenever in this Agreement reference is made to any person, such reference shall
be deemed to include the successors,  assigns, and legal Representatives of such
person,   and,   without   limiting  the  generality  of  the   foregoing,   all
representations, warranties, covenants and other agreements made by or on behalf
of the Employee in this  Agreement  shall inure to the benefit of the successors
and assigns of the  Company and the SPAR  Affiliates;  provided,  however,  that
nothing herein shall be deemed to authorize or permit the Employee to assign any
rights or obligations under this Agreement to any other person, and the Employee
agrees to not make any such  assignment.  Without limiting the generality of the
foregoing, the Employee acknowledges and agrees that the Company may pledge this
Agreement  and  all  rights  and  interest  arising  hereunder  to one  or  more
lender(s),  such lender(s) shall be entitled upon default to enforce any and all
of the rights, powers,  privileges,  remedies and interests of the Company as so
assigned in accordance  with the this  Agreement,  the applicable loan documents
and applicable  law, and such  lender(s)  shall not be responsible or liable for
any of the acts,  omissions,  duties,  liabilities or obligations of the Company
hereunder or  otherwise.  The  representations,  agreements  and other terms and
provisions of this Agreement are for the exclusive benefit of the Parties hereto
and the SPAR Affiliates,  and, except as otherwise expressly provided herein, no
other person shall have any right or claim against any Party by reason of any of
those provisions or be entitled to enforce any of those  provisions  against any
Party.  The provisions of this Agreement are expressly  intended to benefit each
of the members of the SPAR Group, who may enforce any such provisions  directly,
irrespective of whether the Company  participates in such enforcement.  However,
no SPAR  Affiliate  shall have,  or shall be deemed or  construed  to have,  any
obligation or liability to the Employee under this Agreement or otherwise.

                                      -6-
<PAGE>
      Section 10. Survival of Agreements,  Etc. Each of the  representations and
warranties (as of the date(s) made or deemed made), covenants, waivers, releases
and other  agreements and obligations of each Party contained in this Agreement:
(a) shall be absolute,  irrevocable  and  unconditional,  irrespective of (among
other things) (i) the validity,  legality,  binding effect or  enforceability of
any of the other terms and provisions of this  Agreement or any other  agreement
(if any) between the Parties, or (ii) any other act, circumstance or other event
described  in this  Section;  (b) shall  survive and remain and continue in full
force and  effect in  accordance  with  their  respective  terms and  provisions
following and without regard to (i) the execution and delivery of this Agreement
and each other agreement (if any) between the Parties and the performance of any
obligation of such Party hereunder or thereunder, (ii) any waiver, modification,
amendment or restatement of any other term or provision of this Agreement or any
other  agreement  (if any)  between  the  Parties  (except  as and to the extent
expressly modified by the terms and provisions of any such waiver, modification,
amendment or restatement), (iii) any full, partial or non-exercise of any of the
rights,  powers,  privileges,  remedies  and  interests  of a Party  or any SPAR
Affiliate under this Agreement, any other agreement (if any) between the Parties
or  applicable  law against such other Party or any other person or with respect
to any obligation of such Party,  which exercise or enforcement  may be delayed,
discontinued  or  otherwise  not  pursued  or  exhausted  for  any or no  reason
whatsoever,  or which may be  waived,  omitted or  otherwise  not  exercised  or
enforced  (whether  intentionally  or  otherwise),  (iv)  any  extension,  stay,
moratorium  or  statute of  limitations  or similar  time  constraint  under any
applicable law, (v) any pledge,  assignment,  sale, conveyance or other transfer
by the Company (in whole or in part) to any other  person of this  Agreement  or
any other  agreement  (if any)  between  the  Parties  or any one or more of the
rights, powers,  privileges,  remedies or interests of the Company therein, (vi)
any act or omission on the part of the Company, any SPAR Affiliate, any of their
respective  Representatives or any other person,  (vii) any termination or other
departure  of the  Employee  from his or her  employment,  whether  for cause or
otherwise, or any dispute involving any aspect of such employment; or (viii) any
other act,  event, or  circumstance  that otherwise might  constitute a legal or
equitable counterclaim, defense or discharge of a contracting party, co-obligor,
guarantor,  pledgor or surety;  in each case without notice to or further assent
from the  Employee or any other  person  (except for such notices or consents as
may be expressly  required to be given to such Party under this Agreement or any
other  agreement (if any) between the Parties);  (c) shall not be subject to any
defense,  counterclaim,  setoff,  right of recoupment,  abatement,  reduction or
other claim or determination that the Employee may have against the Company, any
SPAR Affiliate, any of their respective Representatives or any other person; (d)
shall not be  diminished  or  qualified by the death,  disability,  dissolution,
reorganization,  insolvency, bankruptcy,  custodianship or receivership of Party
or any other person, or the inability of any of them to pay its debts or perform
or  otherwise  satisfy  its  obligations  as they  become  due  for  any  reason
whatsoever;  and (e) with respect to any provision expressly limited to a period
of time,  shall  remain and  continue  in full force and effect (i)  through the
specific  time  period(s)  and  (ii)   thereafter  with  respect  to  events  or
circumstances occurring prior to the end of such time period(s).

      Section 11. No Waiver by Action,  Cumulative  Rights,  Etc.  Any waiver or
consent  from a Party  respecting  any  provision  of this  Agreement  shall  be
effective only in the specific instance for which given and shall not be deemed,
regardless of frequency given, to be a further or continuing  waiver or consent.
The  failure  or delay of a Party at any time to require  performance  of, or to
exercise or enforce its rights or remedies  with  respect to, any  provision  of
this Agreement shall not affect the Party's right at a later time to exercise or
enforce any such  provision.  Any  acceptance  by or on behalf of a Party of any
partial or late payment,  reimbursement  or performance of any obligation of the
other Party shall not constitute a  satisfaction  or waiver of the obligation of
such other Party then due or the resulting default,  and any acceptance by or on
behalf of a Party of any payment, reimbursement or performance of any obligation
of such other Party during the  continuance  of any default under this Agreement
or any other  agreement  (if any)  between the Parties  shall not  constitute  a
waiver or cure  thereof,  and a Party or its  designee  may accept or reject any
such payment,  reimbursement or performance without affecting any of its rights,
powers,  privileges,  remedies and other interests  under this Agreement,  other
agreements  (if any)  between the Parties  and  applicable  law. No notice to or
demand on a Party shall  entitle  such Party to any other or notice or demand in
similar or other circumstances.  All rights, remedies and other interests of the
Parties and the SPAR Affiliates  hereunder are cumulative and not  alternatives,
and they are in  addition  to (and shall not limit) any other  right,  remedy or
other  interest of the Employee  under this Agreement or the Company or any SPAR
Affiliate under this Agreement, the rules, policies or procedures of the Company
or applicable law.

      Section  12.  Counterparts;  New  York  Governing  Law;  Amendments,  This
Agreement  shall be effective as of the date written  below when executed by the
Employee.  This  Agreement  may have been  executed  in two or more  counterpart
copies of the entire  document or signatures  pages hereto,  all of which,  when
taken  together,  shall  constitute a single  agreement  binding upon all of the
Parties  hereto.  This  Agreement  and  all  other  aspects  of  the  Employee's
employment  shall be governed by and construed in accordance with the applicable
laws pertaining in the State of New York, other than those conflict of law rules
that would defer to the substantive laws of another jurisdiction. Each and every
modification  and amendment of this Agreement  shall be in writing and signed by
all of the  Parties  hereto,  and each and every  waiver  of, or  consent to any
departure  from, any  representation,  warranty,  covenant or other provision of
this Agreement shall be in writing and signed by each affected Party hereto.

                                      -7-
<PAGE>
      Section 13. Waiver of Jury Trial; All Waivers Knowing,  Intentional,  Etc.
In any  action,  suit or  proceeding  in any  jurisdiction  brought  against the
Employee by the Company or any SPAR Affiliate,  or vice versa, each Party hereby
absolutely,  unconditionally,  irrevocably and expressly waives forever trial by
jury. This waiver of jury trial by the Parties, and each other waiver,  release,
relinquishment  or similar  surrender of rights  (however  expressed)  made by a
Party in this  Agreement,  has been  absolutely,  unconditionally,  irrevocably,
knowingly and intentionally made by such Party.

      Section 14. Entire Agreement. No Party or Representative of such Party has
made, accepted or acknowledged any representation, warranty, promise, assurance,
agreement,  obligation or understanding  (oral or otherwise) to, with or for the
benefit  of the other  Party  with  respect  to the  matters  contained  in this
Agreement other than as expressly set forth herein.  This Agreement contains the
entire  agreement of the Parties,  and supersedes  and  completely  replaces all
prior  and  other   communications,   discussions  and  other   representations,
warranties,  promises,  assurances,   agreements  and  understandings  (oral  or
otherwise)  between the Parties,  with respect to the matters  contained in this
Agreement.

      In Witness  Whereof,  the Parties  hereto have executed and delivered this
Agreement as of the last date written below:

COMPANY:                                         EMPLOYEE:
SPAR Group, Inc.

                                                 /s/ Patricia Franco
By:  /s/ Robert G. Brown                         --------------------------
     --------------------------                  Employee's Signature
     Officer's Signature
                                                 --------------------------
Company's Current Address:                            Patricia Franco
         SPAR Group, Inc.
         580 White Plains Road
         Tarrytown, New York  10591              Employee's Current Address:
                                                 --------------------------
Dated as of:   August 12, 2004                   --------------------------
                                                 --------------------------
                                                 Dated as of:  August 12, 2004


                                      -8-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>5
<FILENAME>ex31_1-f10q063004.txt
<DESCRIPTION>EX-31.1; CERTIFICATION OF CEO
<TEXT>

                                SPAR Group, Inc.



                                                                    Exhibit 31.1

              CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

        I, Robert G. Brown, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the three-month period
ended June 30, 2004 (this "report"), of SPAR Group, Inc. (the "registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact  necessary to make the statements
made, in light of the  circumstances  under which such statements were made, not
misleading with respect to the period covered by this report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The  registrant's  other  certifying  officer(s)  and I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

        (a) Designed such  disclosure  controls and  procedures,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

        (b) Evaluated the effectiveness of the registrant's  disclosure controls
and  procedures  and  presented  in  this  report  our  conclusions   about  the
effectiveness  of the disclosure  controls and procedures,  as of the end of the
period covered by this report based on such evaluation; and

        (c)  Disclosed  in this report any change in the  registrant's  internal
control over financial  reporting  that occurred  during the  registrant's  most
recent fiscal quarter (the registrant's  fourth fiscal quarter in the case of an
annual  report)  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5. The registrant's other certifying  officer(s) and I have disclosed,  based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

        (a) All significant  deficiencies and material  weaknesses in the design
or operation of internal  control over financial  reporting which are reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

        (b) Any fraud,  whether or not  material,  that  involves  management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: August 23, 2004                   /s/ Robert G. Brown
                                        -------------------
                                        Robert G. Brown, Chairman, President and
                                        Chief Executive Officer

                                      Ex-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>6
<FILENAME>ex31_2-f10q063004.txt
<DESCRIPTION>EX-31.2; CERTIFICATION OF CFO
<TEXT>

                                SPAR Group, Inc.


                                                                    Exhibit 31.2

              CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

        I, Charles Cimitile, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the three-month period
ended June 30, 2004 (this "report"), of SPAR Group, Inc. (the "registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact  necessary to make the statements
made, in light of the  circumstances  under which such statements were made, not
misleading with respect to the period covered by this report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The  registrant's  other  certifying  officer(s)  and I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

        (a) Designed such  disclosure  controls and  procedures,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

        (b) Evaluated the effectiveness of the registrant's  disclosure controls
and  procedures  and  presented  in  this  report  our  conclusions   about  the
effectiveness  of the disclosure  controls and procedures,  as of the end of the
period covered by this report based on such evaluation; and

        (c)  Disclosed  in this report any change in the  registrant's  internal
control over financial  reporting  that occurred  during the  registrant's  most
recent fiscal quarter (the registrant's  fourth fiscal quarter in the case of an
annual  report)  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5. The registrant's other certifying  officer(s) and I have disclosed,  based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

        (a) All significant  deficiencies and material  weaknesses in the design
or operation of internal  control over financial  reporting which are reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

        (b) Any fraud,  whether or not  material,  that  involves  management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: August 23, 2004                 /s/ Charles Cimitile
                                      ------------------------------------------
                                      Charles Cimitile, Chief Financial Officer,
                                      Treasurer and Secretary


                                      Ex-2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>7
<FILENAME>ex32_1-f10q063004.txt
<DESCRIPTION>EX-32.2; CERTIFICATION OF CEO
<TEXT>

                                SPAR Group, Inc.


                                                                    EXHIBIT 32.1


              Certification of Chief Executive Officer Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly  report on Form 10-Q for the three month period
ended June 30, 2004 (this "report"), of SPAR Group, Inc. (the "registrant"), the
undersigned hereby certifies that, to his knowledge:

1. The report fully complies with the  requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, and

2. The  information  contained in the report  fairly  presents,  in all material
respects, the financial condition and results of operations of the registrant.



                                 /s/ Robert G. Brown
                                 -----------------------------------------------
                                 Robert G. Brown
                                 Chairman, President and Chief Executive Officer

                                  August 23, 2004

A signed  original of this  written  statement  required by Section 906 has been
provided to SPAR Group,  Inc.  and will be  retained  by SPAR Group,  Inc.,  and
furnished to the Securities and Exchange Commission or its staff upon request.


                                      Ex-3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>8
<FILENAME>ex32_2-f10q063004.txt
<DESCRIPTION>EX-32.2; CERTIFICATION OF CFO
<TEXT>

                                SPAR Group, Inc.


                                                                    EXHIBIT 32.2


              Certification of Chief Financial Officer Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly  report on Form 10-Q for the three month period
ended June 30, 2004 (this "report"), of SPAR Group, Inc. (the "registrant"), the
undersigned hereby certifies that, to his knowledge:

1. The report fully complies with the  requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, and

2. The  information  contained in the report  fairly  presents,  in all material
respects, the financial condition and results of operations of the registrant.




                                /s/ Charles Cimitile
                                ------------------------------------------------
                                Charles Cimitile
                                Chief Financial Officer, Treasurer and Secretary

                                August 23, 2004


A signed  original of this  written  statement  required by Section 906 has been
provided to SPAR Group,  Inc.  and will be  retained  by SPAR Group,  Inc.,  and
furnished to the Securities and Exchange Commission or its staff upon request.


                                      Ex-4

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
