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Note 5 - Credit Facilities and Other Debt | 9 Months Ended
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Sep. 30, 2018
Notes to Financial Statements |
Debt Disclosure [Text Block] | 5. Credit Facilities and Other Debt PNC Credit Facility: On January 16, 2018, the Company repaid and replaced its credit facility with a new secured revolving credit facility in the United States and Canada (as amended the "PNC Credit Facility") with PNC Bank, National Association ("PNC"). In order to obtain, document and govern the new PNC Credit Facility: SGRP and certain of its direct and indirect subsidiaries in the United States and Canada, namely SPAR Marketing Force ("SMF"), Inc., SPAR Assembly & Installation, Inc., and SPAR Canada Company (each, a "PNC Borrower" and collectively, the "PNC Borrowers"), and SPAR Canada, Inc., SPAR Acquisition, Inc., SPAR Group International, Inc., and SPAR Trademarks, Inc. (together with SGRP, each a "PNC Guarantor" and collectively, the "PNC Guarantors), entered into a Loan Agreement with PNC dated as of January 16, 2018 ( the "PNC Loan Agreement"); the PNC Borrowers issued their $9 million Committed Line Of Credit Note to PNC dated January 16, 2018 ( the "Original PNC Note"), which evidences the PNC Borrowers' loans and other obligations to PNC; the PNC Guarantors entered into a Guaranty and Suretyship Agreement with PNC dated as of January 16, 2018 ( the "PNC Guaranty"), which guaranties the PNC Borrowers' loans and other obligations to PNC; and the PNC Borrowers and PNC Guarantors (each, a "PNC Loan Party" and collectively, the "PNC Loan Parties") entered into a Security Agreement with PNC dated as of January 16, 2018 ( the "PNC Security Agreement"), which secures the obligations of the PNC Loan Parties to PNC with pledges of substantially all of the assets of the PNC Loan Parties (other than SGRP's foreign subsidiaries, certain designated domestic subsidiaries, and their respective equity and assets). On January 16, 2018, the Company drew down an initial advance under the PNC Credit Facility of approximately $7.6 million, which was used to repay the existing credit facility. An amendment to the PNC Credit Facility dated as of July 3, 2018, among other things, increased the maximum principal amount of the Revolving Loans to $9.5 million. The PNC Note currently requires the PNC Borrowers to pay interest on the loans thereunder equal to (A) the Daily LIBOR Rate (as defined therein) per annum, plus (B) two hundred fifty basis points ( 2.50% ). On September 30, 2018, the aggregate interest rate under that formula was 4.756% per annum, and the outstanding loan balance was $8.2 million. Revolving loans of up to $9.5 million are available to the Company under the PNC Credit Facility based upon the borrowing base formula defined in the PNC Loan Agreement (principally 85% of "eligible" accounts receivable less certain reserves) rendering a maximum borrowing amount of $9.1 million as of September 30, 2018. The PNC Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the PNC Loan Parties, including, maintaining a minimum Tangible Net Worth of $13.4 million and limits on capital expenditures and other investments. On September 30, 2018, the PNC Loan Parties were not in compliance with the minimum Tangible Net Worth covenant, however PNC Bank issued a waiver for the reporting period. However, there can be no assurances that the Company will not be in violation of certain covenants in the future and should the Company be in violation; there can be no assurances that PNC will issue waivers for any future violations. Subsequent to September 30, 2018, the Company is currently experiencing an unusually tight cash flow position and PNC has expressed a concern that even though the Company’s current discounted collateral value is in excess of $11.3 million they are not willing to extend the maximum borrowing capacity above the current $9.5 million limit. PNC has agreed to evaluate on a case by case basis funding its field specialist payments and Company payroll and related taxes until these short-term concerns are resolved by year end. In the meantime, the Company will be looking to secure a more traditional Asset Based Lending facility to take advantage of its excess collateral and thereby providing support for future growth expectations. Based on these current conditions the Company has reclassified its PNC credit facility as short-term debt for the period ended September 30, 2018. The Company believes it has adequate working capital and the ability to obtain alternate financing in order to work through these short term concerns. Fifth Third Credit Facility: On January 9, 2018, the Company completed its acquisition of a 51% interest in its new subsidiaries, Resource Plus, Inc., and related companies (collectively, "Resource Plus"). See Note 11 to the Company's Condensed Consolidated Financial Statements – Purchase of Interests in Subsidiaries – Resource Plus Acquisition , below. When acquired, Resource Plus was a party to a revolving line of credit facility it secured on May 23, 2016, ( the "Fifth Third Credit Facility") from Fifth Third Bank for $3.5 million, which was scheduled to expire on May 23, 2018. Effective April 11, 2018, the term of the Fifth Third Credit Facility was extended and is currently scheduled to become due on April 23, 2020. As there are no provisions (other than defaults) requiring the paydown of the loan until April 23, 2020, the amounts are classified as long-term debt. Revolving loans of up to $3.5 million are available to Resource Plus under the Fifth Third Credit Facility based upon the borrowing base formula defined in the agreement (principally 80% of "eligible" accounts receivable less certain reserves). As of September 30, 2018, the outstanding balance was $682,000. The Fifth Third Credit Facility is secured by substantially all assets of Resource Plus. The Fifth Third Credit Facility currently requires Resource Plus to pay interest on the loans thereunder equal to (A) the Daily LIBOR Rate (as defined in the agreement) per annum, plus (B) two hundred fifty basis points ( 2.50% ). On September 30, 2018, the aggregate interest rate under that formula was 4.725% per annum. Other Debt : Effective with the closing of the Resource Plus acquisition, the Company entered into promissory notes with the sellers totaling $2.7 million. The notes are payable in annual installments at various amounts due on December 31 st of each year starting with December 31, 2018 and continuing through December 31, 2023. As such these notes are classified as both short term and long term for the appropriate amounts. International Credit Facilities: SPARFACTS Australia Pty. Ltd. has a secured line of credit facility with National Australia Bank, effective October 31, 2017, for $800,000 (Australian) or approximately $578,000 USD (based upon the exchange rate at September 30, 2018). The facility provides for borrowing based upon a formula, as defined in the agreement (principally 80% of eligible accounts receivable less certain deductions). The outstanding balance with National Australia Bank as of September 30, 2018 was $554,000 (Australian) or $400,000 USD and is due on demand. SPAR Todopromo has obtained a temporary, interest bearing working capital loan from a shareholder for a maximum amount of 4.5 million Mexican Pesos or approximately $241,000 USD (based upon the exchange rate at September 30, 2018) effective September 14, 2018. The effective annual interest rate is 7.75%. The outstanding balance at September 30, 2018 was 3.0 million Mexican Pesos or approximately $161,000 USD. The loan was paid in full on October 2, 2018 after receiving payment for services rendered in the ordinary course of business. SPAR Todopromo has secured a line of credit facility with BBVA Bancomer Bank for 5.0 million Mexican Pesos or approximately $267,000 USD (based upon the exchange rate at September 30, 2018). The revolving line of credit was secured on March 15, 2016, and originally expired March 2018. The facility has been amended to extend the terms to March 2020. The variable interest rate is TIIE (Interbank Interest Rate) + 4%, which resulted in an annual interest rate of 12.11% as of September 30, 2018. The outstanding balance at September 30, 2018 was 3.2 million Mexican Pesos or approximately $171,000 USD. On November 29, 2016, SPAR Brazil established a line of credit facility with Itau Bank for 4.0 million Brazilian Real or approximately $987,000 USD (based upon the exchange rate at September 30, 2018). The facility provides for borrowing with no formal guarantees. The agreement is from month to month at the Company's request. As of September 30, 2018, there was no outstanding balance. On December 26, 2016, SPAR Brazil secured a line of credit facility with Daycoval Bank for 5.0 million Brazilian Real or approximately $1.2 million USD (based upon the exchange rate at September 30, 2018). The facility provides for borrowing based upon a formula, as defined in the agreement (principally 80% of eligible accounts receivable less certain deductions). The agreement is from month to month at the Company's request. As of September 30, 2018, 2.0 million Brazilian Real or $483,000 USD was outstanding. On May 29, 2018, SPAR Brazil established a line of credit facility with Banco Bradesco for 1.2 million Brazilian Real or approximately $296,000 USD (based upon the exchange rate at September 30, 2018). The facility provides for borrowing with no formal guarantees. The agreement expires on November 29, 2019. The outstanding balance at September 30, 2018, was approximately 168,000 Brazilian Real or approximately $41,000 USD. On May 25, 2018, SPAR Brazil established a temporary line of credit facility with Banco Safra for 3.0 million Brazilian Real or approximately $741,000 USD (based upon the exchange rate at September 30, 2018). The agreement was from month to month at the Company’s request. As of September 30, 2018, there was no outstanding balance and the loan was closed. The Company had scheduled future maturities of loans as of September 30, 2018, approximately as follows (dollars in thousands):
|  | Interest Rate as of September 30 , 2018 |  |  | 2018 |  |  | 2019 |  |  | 2020 |  |  | 2021 |  |  | 2022 |  |  | 2023 |
USA - PNC Bank |  |  |  | 4.756% |  |  |  | $ | 8,217 |  |  | $ | – |  |  | $ | – |  |  | $ | – |  |  | $ | – |  |  | $ | – |
USA – Fifth Third Bank |  |  |  | 4.725% |  |  |  |  | – |  |  |  | – |  |  |  | 682 |  |  |  | – |  |  |  | – |  |  |  | – |
USA – Resource Plus Seller Notes |  |  |  | 1.85% |  |  |  |  | 333 |  |  |  | 333 |  |  |  | 334 |  |  |  | 300 |  |  |  | 300 |  |  |  | 1,100 |
Australia - National Australia Bank |  |  |  | 6.6% |  |  |  |  | 400 |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |
Mexico – Bancomer and shareholder |  |  | 7.75 | – | 12.11% |  |  |  | 161 |  |  |  | – |  |  |  | 171 |  |  |  | – |  |  |  | – |  |  |  | – |
Brazil – Various Banks |  |  | 11.04 | – | 14.28% |  |  |  | 524 |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |
Total |  |  |  |  |  |  |  | $ | 9,635 |  |  | $ | 333 |  |  | $ | 1,187 |  |  | $ | 300 |  |  | $ | 300 |  |  | $ | 1,100 |
Summary of Unused Company Credit and Other Debt Facilities (in thousands):
|  | September 30, 2018 |  |  | December 31, 2017 |
Unused Availability: |  |  |  |  |  |  |  |
United States |  | $ | 3,694 |  |  | $ | 3,530 |
Australia |  |  | 178 |  |  |  | 731 |
Mexico |  |  | 177 |  |  |  | 254 |
Brazil |  |  | 1,994 |  |  |  | 1,554 |
Total Unused Availability |  | $ | 6,043 |  |  | $ | 6,069 |
Management believes that based upon the continuation of the Company's existing credit facilities, projected results of operations, vendor payment requirements and other financing available to the Company (including amounts due to affiliates), sources of cash availability while extremely tight through the balance of the year, should be manageable and sufficient to support ongoing operations into next year as the Company pursues a more traditional Asset Based Lending facility. However, delays in collection of receivables due from any of the Company's major clients, or a significant reduction in business from such clients, and possible litigation expenses could have a material adverse effect on the Company's cash resources and its ongoing ability to fund operations. See Note 9 to the Company's Condensed Consolidated Financial Statements – Commitments and Contingencies – Legal Matters , below .

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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