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Note 13 - Notes Receivable

12 Months Ended

Dec. 31, 2021

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 13 – Notes Receivable

Some franchisees, as well as the purchaser of our previously owned California operations, have borrowed funds from us primarily to finance the initial purchase price of office assets. In March of 2021, we sold approximately $5.3 million of notes receivable to Bass, a related party. Virtually all of the notes sold to Bass originated from the sale of branch locations acquired in the Merger. These notes were sold without recourse at their current outstanding principal value. The proceeds from the sale of these notes were used to finance the Snelling and Link transaction. Notes outstanding net of allowance for losses were approximately $4.2 million and $8.1 million as of December 31, 2021 and December 31, 2020, respectively.

Notes receivable bear interest at a fixed rate between 6.0% and 10.0%. Notes are generally secured by the assets of each location and the ownership interests in the franchisee. Interest income on franchisee notes is reported in other miscellaneous income in our consolidated statements of operations and was approximately $412,000 and $712,000 in the years ended December 31, 2021 and December 31, 2020, respectively.

We estimate the allowance for losses for franchisees separately from the allowance for losses from non-franchisees because of the level of detailed sales information available to us with respect to the former.

Notes Receivable from Franchisees

Based on our review of the financial condition of the borrowers, the underlying collateral value, and the potential future impact of COVID-19 on certain borrowers’ economic performance and estimated future cash flows, we have established an allowance of approximately $1.9 million and $1.6 million as of December 31, 2021 and December 31, 2020, respectively, for potentially uncollectible notes receivable.

The following table summarizes changes in our notes receivable balance to franchisees:

	*December 31, 2021*			*December 31, 2020*
Note receivable	$	4,432,698		$	8,023,807
Allowance for losses		(405,313	)		(405,313	)
Notes receivable, net	$	4,027,385		$	7,618,494

Notes Receivable from Non-Franchisees

During 2020, our non-franchisee note holder experienced significant economic hardships due to the impacts of COVID-19. As a result, we restructured one note receivable in an effort to increase the probability of repayment. We granted near-term payment concessions to help the debtor attempt to improve its financial condition so it may eventually be able to repay the amount due. We received and recognized interest income of approximately $125,000 and $174,000 during the years ended December 31, 2021 and December 31, 2020, respectively.

The following table summarizes changes in our notes receivable balance that have been deemed impaired:

	*December 31, 2021*			*December 31, 2020*
Note receivable	$	1,640,393		$	1,640,393
Allowance for losses		(1,500,799	)		(1,193,359	)
Notes receivable, net	$	139,594		$	447,034