Summary of Significant Accounting Policies

Principles of Consolidation

The Company consolidates its

100%

owned subsidiaries and all of its

51%

owned joint venture subsidiaries in accordance with the provisions required by the Consolidation Topic

810

of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). All significant intercompany accounts and transactions have been eliminated.

Accounting for Joint Venture

Subsidiarie

For the Company's less than wholly owned subsidiaries, the Company

first

analyzes to determine if a joint venture subsidiary is a variable interest entity (a "VIE") in accordance with ASC

810

and if so, whether the Company is the primary beneficiary requiring consolidation. A VIE is an entity that has (i) insufficient equity to permit it to finance its activities without additional subordinated financial support or (ii) equity holders that lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, which is the entity that has both the power to direct the activities that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that potentially could be significant to the entity. Variable interests in a VIE are contractual, ownership, or other financial interests in a VIE that change with changes in the fair value of the VIE's net assets. The Company continuously re-assesses at each level of the joint venture whether the entity is (i) a VIE, and (ii) if the Company is the primary beneficiary of the VIE. If it was determined that an entity in which the Company holds an interest qualified as a VIE and the Company was the primary beneficiary, it would be consolidated.

Based on the Company's analysis for each of its

51%

owned joint ventures, the Company has determined that each is a VIE and that Company is the primary beneficiary of that VIE. In addition to its controlling interest, the Company controls the proprietary information technology that is used at and is significant to each joint venture and the Company has the ability to control other key decisions. Accordingly, the Company has the power to direct key activities and the obligation to absorb losses or the right to receive benefits that could be significant and consolidates each joint venture under the VIE rules and reflects the

49%

interests in the Company's consolidated financial statements as non-controlling interests. The Company records these non-controlling interests at their initial fair value, adjusting the basis prospectively for their share of the respective consolidated investments' net income or loss or equity contributions and distributions. These non-controlling interests are

not

redeemable by the equity holders and are presented as part of permanent equity. Income and losses are allocated to the non-controlling interest holder based on its economic ownership percentage.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the amounts disclosed for contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates.

Cash Equivalents

The Company considers all highly liquid short-term investments with original maturities of

three

months or less at the time of acquisition to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value.

Concentration of Credit Risk

The Company maintains cash balances with high quality financial institutions and periodically evaluates the creditworthiness of such institutions and believes that the Company is

not

exposed to significant credit risk.

Revenue Recognition

The Company's services are provided to its clients under contracts or agreements. The Company bills its clients based upon service fee arrangements. Revenues under service fee arrangements are recognized when the service is performed. Customer deposits, which are considered advances on future work, are recorded as revenue in the period services are provided.

May 2014,

the FASB issued Accounting Standards Update

No.

2014

(Topic

606

) "Revenue from Contracts with Customers." Topic

606

supersedes the revenue recognition requirements in Topic

605

"Revenue Recognition" (Topic

605

) and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company adopted Topic

606

as of

January 1, 2018

using the modified retrospective transition method with the impact upon adoption

not

significant.

The Company records revenue from contracts with its customers through the execution of a Master Service Agreement ("MSA") that are effectuated through individual Statements of Work ("SOW" and with the applicable MSA collectively a "Contract"). The MSAs generally define the financial, service, and communication obligations between the client and SPAR while the SOWs state the project objective, scope of work, time frame, rate and driver in which SPAR will be paid. Only when the MSA and SOW are combined as a Contract can all

five

revenue standard criteria be met. The Company integrates a series of tasks promised within these Contracts into a bundle of services that represent the combined performance obligation of Merchandising Services. Such Merchandising Services are performed over the duration of the SOW. Most Merchandising Services are performed on a daily, weekly or monthly basis. Revenue from Merchandising Services are recognized as the services are performed based on a rate per driver basis (per hour, store visit or unit stocked) with services delivered as they are consumed.

All of the Company's Contracts with customers have a duration of

one

year or less, with over

90%

being completed in less than

-days, and revenue is recognized as services are performed. Given the nature of the Company's business, how the Contracts are structured and how the Company is compensated the Company has elected the right-to-invoice practical expedient allowed under the revenue standard.

Unbilled Accounts Receivable

Unbilled accounts receivable represent services performed but

not

billed and are included as accounts receivable.

Doubtful Accounts and Credit Risks

The Company continually monitors the collectability of its accounts receivable based upon current client credit information and financial condition. Balances that are deemed to be uncollectible after the Company has attempted reasonable collection efforts are written off through a charge to the bad debt allowance and a credit to accounts receivable. Accounts receivable balances, net of any applicable reserves or allowances, are stated at the amount that management expects to collect from the outstanding balances. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to bad debt allowance based in part on management's assessment of the current status of individual accounts. Based on management's assessment, the Company established an allowance for doubtful accounts of

$533,000

and

$342,000

December 31, 2018,

and

2017,

respectively. Bad debt expense was

$196,000

and

$113,000

for the years ended

December 31, 2018

and

2017,

respectively.

Property and Equipment and Depreciation

Property and equipment, including leasehold improvements, are stated at cost. Depreciation is calculated on a straight-line basis over estimated useful lives of the related assets, which range from

three

seven

years. Leasehold improvements are depreciated over the shorter of their estimated useful lives or lease term, using the straight-line method. Maintenance and minor repairs are charged to expense as incurred. Depreciation expense for the years ended

December 31, 2018

and

2017

(including amortization of capitalized software as described below) was

$1.5

million for both periods.

Internal Use Software Development Costs

The Company capitalizes certain costs associated with its internally developed software. Specifically, the Company capitalizes the costs of materials and services incurred in developing or obtaining internal use software. These costs include (but are

not

limited to) the cost to purchase software, the cost to write program code, payroll and related benefits and travel expenses for those employees who are directly involved with and who devote time to the Company's software development projects. Capitalization of such costs ceases when the project is substantially complete and ready for its intended purpose. Costs incurred during preliminary project and post-implementation stages, as well as software maintenance and training costs, are expensed in the period in which they are incurred. Capitalized software development costs are amortized over

three

years on a straight-line basis.

The Company capitalized

$1.3

and

$1.0

million of costs related to software developed for internal use in

2018

and

2017,

respectively, and recognized approximately

$1.2

million of amortization of capitalized software for both the years ended

December 31, 2018

and

2017.

Impairment of

Long-Lived

Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of the Company's property and equipment and intangible assets subjected to amortization

may

not

be recoverable. When indicators of potential impairment exist, the Company assesses the recoverability of the assets by estimating whether the Company will recover its carrying value through the undiscounted future cash flows generated by the use of the asset and its eventual disposition. Based on this analysis, if the Company does

not

believe that it will be able to recover the carrying value of the asset, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the asset. If any assumptions, projections or estimates regarding any asset change in the future, the Company

may

have to record an impairment to reduce the net book value of such individual asset.

Goodwill

may

result from our business acquisitions. Goodwill is assigned to our reporting units based on the expected benefit from the synergies arising from each business combination, determined by using certain financial metrics, including the forecast discounted cash flows associated with each reporting unit. We allocate goodwill acquired in a business combination to the appropriate reporting unit as of the acquisition date.

Goodwill is subject to annual impairment tests and interim impairment tests if impairment indicators are present. The impairment tests require the Company to

first

assess qualitative factors to determine whether it is necessary to perform a

two

-step quantitative goodwill impairment test. The Company is

not

required to calculate the fair value of a reporting unit unless it determines, based on a qualitative assessment, that it is more likely than

not

that its fair value is less than its carrying amount. If the qualitative assessment indicates a potential impairment, the Company performs the

two

step quantitative impairment test. Step

one

of the

two

step impairment test is to compare the fair value of the reporting unit with the reporting unit's carrying amount including goodwill. If the test indicates that the fair value is less than the carrying value, then step

two

is required to compare the implied fair value of the reporting unit's goodwill with the carrying amount of the reporting unit's goodwill. If the carrying amount of the goodwill exceeds its implied fair value, an impairment loss shall be recognized in an amount equal to that excess. The Company has determined that it has

two

reporting units, and that a

two

-step quantitative goodwill impairment test was

not

necessary, as of

December 31, 2018

and

2017.

Accounting for Share Based Compensation

The Company measures all employee share-based compensation awards using a fair value method and records the related expense in the financial statements over the period during which an employee is required to provide service in exchange for the award. Excess tax benefits are realized from the exercise of stock options and are reported as a financing cash inflow rather than as a reduction of taxes paid in cash flow from operations. For each award that has a graded vesting schedule, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award. Share based employee compensation expense for the years ended

December 31, 2018

and

2017

was

$221,000

and

$225,000,

respectively.

Fair Value Measurements

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The generally accepted accounting principles fair value framework uses a

three

-tiered approach. Fair value measurements are classified and disclosed in

one

of the following

three

categories:

●

Level

– Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

●

Level

– Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are

not

active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

●

Level

– Prices or valuation techniques where little or

market data is available that requires inputs that are significant to the fair value measurement and unobservable.

If the inputs used to measure the fair value fall within different levels of the hierarchy, the fair value is determined based upon the lowest level input that is significant to the fair value measurement. Whenever possible, the Company uses quoted market prices to determine fair value. In the absence of quoted market prices, the Company uses independent sources and data to determine fair value. Due to their short maturity, the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximated the fair values (Level

) at

December 31, 2018

and

2017.

The carrying value of the Company's long-term debt with variable interest rates approximates fair value based on instruments with similar terms (Level

Accounting for Income Taxes

Income tax provisions and benefits are made for taxes currently payable or refundable, and for deferred income taxes arising from future tax consequences of events that were recognized in the Company's financial statements or tax returns and tax credit carry forwards. The effects of income taxes are measured based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. If necessary, a valuation allowance is established to reduce deferred income tax assets to an amount that will more likely than

not

be realized.

The calculation of income taxes involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on a

two

-step process. The

first

step involves evaluating the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than

not

that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The

second

step involves estimating and measuring the tax benefit as the largest amount that is more than

50%

likely to be realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as the Company has to determine the probability of various possible outcomes. Our evaluation of uncertain tax positions is based on factors including, but

not

limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

The Tax Cuts and Jobs Act ("the Tax Act") signed into law what is a comprehensive U.S. tax reform package that, effective

January 1, 2018,

among other things, lowered the corporate income tax rate from

35%

21%

and moved the country towards a territorial tax system with a

one

-time mandatory tax on previously deferred foreign earnings of foreign subsidiaries. See Note

to the Company's Consolidated Financial Statements –

Income Taxes

, below, for further information on the tax impacts of the Tax Act.

Net Income Per Share

Basic net income per share amounts are based upon the weighted average number of common shares outstanding. Diluted net income per share amounts are based upon the weighted average number of common and potential common shares outstanding except for periods in which such potential common shares are anti-dilutive. Potential common shares outstanding include stock options and restricted stock and are calculated using the treasury stock method.

Translation of Foreign Currencies

The financial statements of the foreign entities consolidated into the Company's consolidated financial statements were translated into United States dollar equivalents at exchange rates as follows: balance sheet accounts for assets and liabilities were converted at year-end rates, equity at historical rates and income statement accounts at average exchange rates for the year. The resulting translation gains and losses are reflected in accumulated other comprehensive income or loss in the consolidated statements of equity.

New

Accounting Pronouncements

August 2018,

the Financial Accounting Standards Board ("FASB") issued ASU

2018

15,

which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The ASU is effective for annual reporting periods beginning after

December 15, 2019,

including interim reporting periods within those annual periods, with early adoption permitted. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements and related disclosures.

August 2018,

the FASB issued ASU

2018

which eliminates, adds and modifies certain fair value measurement disclosures. The ASU is effective for annual reporting periods beginning after

December 15, 2019,

including interim reporting periods within those annual periods, with early adoption permitted. The Company does

not

expect the adoption of this standard to have a material impact to the consolidated financial statements.

June 2018,

the FASB issued ASU

2018

simplifying the accounting for nonemployee share-based payment awards by expanding the scope of ASC Topic

718,

Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. Under the new standard, most of the guidance on stock compensation payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The ASU is effective for annual reporting periods beginning after

December 15, 2018,

including interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements and related disclosures.

February 2018,

the FASB issued ASU

2018

allowing reclassification from accumulated other comprehensive income (loss) to retained earnings for the income tax effects resulting from the Act enacted by the U.S. federal government in

December 2017.

The new guidance eliminates the stranded tax effects resulting from the Act and will improve the usefulness of information reported to financial statement users. It also requires certain disclosures about stranded tax effects. ASU

2018

relates only to the reclassification of the income tax effects of the Act and does

not

change the underlying guidance requiring that the effect of a change in tax laws or rates be included in income from continuing operations. The ASU is effective for annual periods, and interim periods within those annual periods, beginning after

December 15, 2018.

It should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on the consolidated financial statements and related disclosures.

May 2017,

the FASB issued ASU

2017

clarifying when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. It does

not

change the accounting for modifications. The ASU was effective prospectively for reporting periods beginning after

December 15, 2017,

with early adoption permitted, including adoption in any interim period for which financial statements have

not

yet been issued. The adoption of this ASU did

not

have an impact on the Company's consolidated financial statements.

January 2017,

the FASB issued ASU

2017

simplifying the accounting for goodwill impairment for all entities. The new guidance eliminates the requirement to calculate the implied fair value of goodwill (Step

of the current

two

-step goodwill impairment test under ASC

350

). Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (Step

of the current

two

-step goodwill impairment test). The ASU is effective prospectively for reporting periods beginning after

December 15, 2019,

with early adoption permitted for annual and interim goodwill impairment testing dates after

January 1, 2017.

The Company elected to early adopt ASU

2017

as of year-end

2018

and the adoption of this ASU did

not

have an impact on our goodwill impairment testing process or our consolidated financial statements.

November 2016,

the FASB issued ASU

2016

amending the presentation of restricted cash within the statement of cash flows. The new guidance requires that restricted cash be included within cash and cash equivalents on the statement of cash flows. The ASU was effective retrospectively for reporting periods beginning after

December 15, 2017,

with early adoption permitted. The Company adopted this guidance effective

January 1, 2018.

See the consolidated statement of cash flows for the impact of this standard. The adoption of this standard did

not

have a material impact on the consolidated financial statements.

August 2016,

the FASB issued ASU

2016

clarifying how entities should classify certain cash receipts and payments on the statement of cash flows. The new guidance addresses classification of cash flows related to the following transactions:

) debt prepayment or debt extinguishment costs;

) settlement of

zero

-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing;

) contingent consideration payments made after a business combination;

) proceeds from the settlement of insurance claims;

) proceeds from the settlement of corporate-owned life insurance policies;

) distributions received from equity method investees; and

) beneficial interests in securitization transactions. ASU

2016

also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than

one

class of cash flows. This ASU was effective for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017

and required retrospective application. Early adoption was permitted. The Company adopted this guidance effective

January 1, 2018

and the impact related to this implementation was immaterial.

June 2016,

the FASB issued ASU

2016

amending how entities will measure credit losses for most financial assets and certain other instruments that are

not

measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions and forecasted information rather than the current methodology of delaying recognition of credit losses until it is probable a loss has been incurred. This ASU is effective for interim and annual reporting periods beginning after

December 15, 2019

with early adoption permitted for annual reporting periods beginning after

December 15, 2018.

The Company is currently evaluating the impact of the new guidance on our consolidated financial statements and related disclosures. This ASU applies to trade accounts receivable and

may

have an impact on the calculation of the allowance for uncollectible accounts receivable.

February 2016,

the FASB issued ASU

2016

amending the existing accounting standards for lease accounting and requiring lessees to recognize lease assets and lease liabilities for all leases with lease terms of more than

months, including those classified as operating leases. Both the asset and liability will initially be measured at the present value of the future minimum lease payments, with the asset being subject to adjustments such as initial direct costs. Consistent with current U.S. GAAP, the presentation of expenses and cash flows will depend primarily on the classification of the lease as either a finance or an operating lease. The new standard also requires additional quantitative and qualitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases in order to provide additional information about the nature of an organization's leasing activities. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after

December 15, 2018

and requires modified retrospective application. In

July 2018,

the FASB issued ASU

2018

11,

which provided entities with an additional optional transition method to adopt the new lease standard at the adoption date, as compared to the beginning of the earliest period presented, and recognize a cumulative-effect adjustment to the beginning balance of retained earnings in the period of adoption. The Company will elect the optional transition method at the adoption date. In addition, the Company will elect the package of practical expedients permitted under the transition guidance, which allows us to carry forward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. The Company will also elect to combine lease and non-lease components and to keep leases with an initial term of

months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of earnings on a straight-line basis over the lease term.

The Company continues to evaluate and is finalizing its documentation of the impact of the pending adoption of the new standard on its consolidated financial position, disclosures and/or internal controls process. The Company does

not

expect material changes to the recognition of operating lease expense in our consolidated statements of loss. The Company believes the adoption of Topic

842

will have a material impact on the consolidated balance sheets upon the recognition of right-of-use assets and liabilities for leases currently classified as operating leases, along with enhanced disclosures of lease activity. The Company is in the process of finalizing its calculation of the present value of its current lease obligations.

Management has evaluated other recently issued accounting pronouncements and does

not

believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.