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Note 3 - Related Party Transactions
 12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]

Note 3 – Related Party Transactions

 

Prior to entering into a new related party transaction which is disclosable, the Audit Committee reviews and monitors all relevant information available. In addition, the Audit Committee reviews a summary of related parties and related party transactions on a quarterly basis. The Audit Committee, in its sole discretion,  may approve the related party transaction only if it determines, in good faith and under all circumstances, that the transaction is in the best interests of the Company and its shareholders. The Audit Committee, in its sole discretion,  may also impose conditions as it deems appropriate on the Company or the related party in connection with the approval of the related party transaction.

 

Several significant shareholders and directors of HQI own portions of Jackson Insurance Agency, Bass Underwriters, Inc., Insurance Technologies, Inc., and a number of our franchisees (in whole or in part).

 

Jackson Insurance Agency ("Jackson Insurance") and Bass Underwriters, Inc. ("Bass")

Edward Jackson, a member of our Board and significant stockholder, and a member of Mr. Jackson’s immediate family own Jackson Insurance. Mr. Jackson, Richard Hermanns, our CEO, Chairman of our Board, and most significant stockholder, and irrevocable trusts set up by each of them, collectively own a majority of Bass, a large managing general agent.

 

Jackson Insurance and Bass brokered property, casualty, general liability, and cybersecurity insurance for a series of predecessor entities (“Legacy HQ”) prior to the merger with Command Center in 2019. Since  July 15, 2019, they have continued to broker these same policies for HQI. Jackson Insurance also brokers certain insurance policies on behalf of some of our franchisees, including the Worlds Franchisees (defined below).

 

During the year ended  December 31, 2023 and  December 31, 2022, Jackson Insurance and Bass invoiced HQI approximately $1.7 million and $336 thousand, respectively, for premiums, taxes, and fees related to these insurance policies. Jackson Insurance and Bass retain a commission of approximately 9% - 15% of premiums. As of December 31, 2023 and  December 31, 2022, Jackson Insurance and Bass was owed $-0-. 

 

Insurance Technologies, Inc. ("Insurance Technologies")

Mr. Jackson, Mr. Hermanns, and irrevocable trusts set up by each of them, collectively own a majority of Insurance Technologies, an IT development and security firm. On  October 24, 2019, HQI entered into an agreement with Insurance Technologies to add certain cybersecurity protections to our existing information technology systems and to assist in developing future information technology systems within our HQ WebConnect software. In addition, Insurance Technologies assisted with the IT diligence and integration process with respect to the Snelling and LINK acquisitions.

 

During the year ended  December 31, 2023 and  December 31, 2022, Insurance Technologies invoiced HQI approximately $443 thousand and $245 thousand, respectively, for services provided pursuant to this agreement. As of December 31, 2023 and  December 31, 2022, Insurance Technologies was owed $-0- and $35 thousand, respectively. 

 

The Worlds Franchisees

Mr. Hermanns' children and Mr. Jackson have direct or indirect ownership interests in certain of our franchisees (the “Worlds Franchisees”). There were 34 Worlds Franchisees at December 31, 2023 that operated 70 of our 427 offices. There were 27 Worlds Franchisees that operated 67 of our 435 offices at December 31, 2022.

 

Balances regarding the Worlds Franchisees are summarized below:

 

  

December 31,

  

December 31,

 
  

2023

  

2022

 

Due to franchisee

 $2,677  $1,154 

Risk management incentive program liability

  267   234 

 

Transactions regarding the Worlds Franchisees are summarized below:

 

  

Year ended

 
  

December 31,

  

December 31,

 
  

2023

  

2022

 

Franchisee royalties

 $9,577  $8,676