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v3.23.2

Note 3 - Debt | 6 Months Ended
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Jun. 30, 2023
Notes to Financial Statements |
Debt Disclosure [Text Block] |
3. | Debt
North Mill Capital Credit Facility The Company, through SPAR Marketing Force, Inc. ("SMF") and SPAR Canada Company ULC ("SCC", and collectively with SMF, the “NM Borrowers”), has a secured revolving credit facility in the United States (the "US Revolving Credit Facility") and Canada (the "Canada Revolving Credit Facility", and collectively with the US Revolving Credit Facility, the "NM Credit Facility") with North Mill Capital, LLC, d/b/a SLR Business Credit ("NM"). In order to obtain, document and govern the NM Credit Facility, SMF, SCC, SGRP and certain of SGRP's direct and indirect subsidiaries in the United States and Canada (including SMF and SCC as borrowers and SGRP as a guarantor, collectively, the "NM Loan Parties") entered into a Loan and Security Agreement with NM dated as of April 10, 2019, which, as amended from time to time (as amended, the "NM Loan Agreement"), governs the NM Credit Facility. Pursuant to the NM Loan Agreement, the NM Borrowers agreed to reimburse NM for legal and documentation fees incurred in connection with the NM Loan Agreement and such amendments. On July 1, 2022, the NM Loan Parties and NM executed and delivered a Fourth Modification Agreement, effective as of June 30, 2022 (the "Fourth Modification Agreement"), pursuant to which the NM Loan Parties and NM agreed to extend the NM Credit Facility from October 10, 2023, to October 10, 2024, and increased the amount of the US Revolving Credit Facility to $17.5 million while the Canada Revolving Credit Facility remained at CDN$1.5 million. In addition, the Fourth Modification Agreement permanently increased SMF's borrowing base availability for billed receivables to up to 90% from 85%, and unbilled receivables to up to 80% from 70%, and increased the cap on unbilled accounts for SMF to $6.5 million from $5.5 million. On August 9, 2022, the NM Loan Parties and NM executed and delivered a Fifth Modification Agreement, effective immediately (the "Fifth Modification Agreement"), pursuant to which the NM Loan Parties and NM agreed to temporarily increase the borrowing base availability under the NM Credit Facility, and the NM Borrowers agreed to pay certain additional fees. On February 1, 2023, the NM Loan Parties and NM executed and delivered a Sixth Modification Agreement, effective immediately (the "Sixth Modification Agreement"), pursuant to which the NM Loan Parties and NM agreed to increase the amount of the US Revolving Credit Facility to $28.0 million and increase the Canada Revolving Credit Facility to CDN$2.0 million. In addition, the Sixth Modification Agreement increased the cap on unbilled accounts in the borrowing base for SMF to $7.0 million from $6.5 million. The Restated US Note and Restated Canadian Note (together, the "NM Notes") and the NM Loan Agreement together require the NM Borrowers to pay interest on the loans thereunder equal to: (i) the Prime Rate designated from time to time by Wells Fargo Bank; plus (ii) one and nine-tenths percentage points (1.90%) or an aggregate minimum of 6.75% per annum. In addition, the NM Borrowers are paying a facility fee to NM in an amount equal to: (i) for the year commencing on October 10, 2022, approximately $0.1 million plus 0.80% of the amount of any advances other than under the US Revolving Credit Facility plus an additional facility fee of $15,000 for every incremental $1.0 million of loan balance in excess of $21.0 million, and (ii) for the year commencing on October 10, 2023, approximately $0.2 million plus 0.80% of the amount of any advances other than under the US Revolving Credit Facility plus an additional facility fee of $15,000 for every incremental $1.0 million of loan balance in excess of $21.0 million. For the Sixth Modification Agreement, the NM Borrowers paid NM a fee of approximately $28,000 for the US and $3,000 for Canada. As of June 30, 2023, the aggregate interest rate was 10.15% per annum and the aggregate outstanding loan balance was approximately $11.9 million, which is included within lines of credit and short-term loans in the unaudited condensed consolidated balance sheets. The aggregate outstanding loan balance is divided between the US Revolving Credit Facility and the Canada Revolving Credit Facility as follows: (i) the outstanding loan balance under the US Revolving Credit Facility was approximately $10.8 million; and (ii) the outstanding loan balance under the Canada Revolving Credit Facility was approximately $1.1 million. The NM Credit Facility contains certain financial and other restrictive covenants and also limits certain expenditures by the NM Loan Parties, including maintaining a positive trailing EBITDA for each the NM Borrowers (i.e., SMF and SCC) and imposes limits on all of the NM Loan Parties (including SGRP) on non-ordinary course payments and transactions, incurring or guaranteeing indebtedness, increases in executive, officer or director compensation, capital expenditures and certain other investments. The NM Loan Parties were in compliance with such covenants as of June 30, 2023. The obligations of the NM Borrowers are secured by the receivables and other assets of the NM Borrowers and substantially all of the assets of the other NM Loan Parties, however, the obligations are not secured by any equity in, financial asset respecting or asset of any Excluded Subsidiary (as such term is defined in the NM Loan Agreement). Pursuant to the NM Loan Agreement, Excluded Subsidiary means each of the following direct or indirect subsidiaries of SGRP: (i) Resource Plus of North Florida, Inc. (“Resource Plus”), Mobex of North Florida, Inc., and Leasex, LLC, and their respective subsidiaries; (ii) NMS Retail Services ULC, which is an inactive Nova Scotia ULC; (iii) SPAR Group International, Inc.; (iv) SPAR FM Japan, Inc.; (v) SPAR International, Ltd.; (vi) each other subsidiary formed outside of the United States or Canada; and (vii) any other entity in which any such subsidiary is a partner, joint venture or other equity investor. Resource Plus Seller Notes Effective with the closing of the Company's acquisition of Resource Plus in 2018, the Company issued promissory notes to the sellers of $2.3 million. The promissory notes are payable at annual installments in various amounts on December 31 of each year, starting with December 31, 2018 and continuing through December 31, 2023. As of June 30, 2023, the annual interest rate was 1.85% and the balance outstanding under the promissory notes was approximately $0.7 million, which is included in lines of credit and short-term loans in the unaudited condensed consolidated balance sheets. International Credit Facilities In October 2017, SPARFACTS Australia Pty. Ltd. secured a line of credit facility with National Australia Bank for AUD$0.8 million. The facility provides for borrowing based upon a formula, as defined in the applicable loan agreement (principally 80% of eligible accounts receivable less certain deductions). The annual interest rate was 12.1% as of June 30, 2023. As of June 30, 2023, the outstanding balance was approximately $0.1 million, and was due on demand. In December 2020, SPAR China secured a loan with Industrial Bank for 3.0 million Chinese Yuan. The loan will expire in July 2023. The annual interest rate was 4.0% as of June 30, 2023. As of June 30, 2023, the outstanding balance was approximately $0.4 million, and was due on demand. In December 2021, SPAR China secured a loan with Industrial and Commercial Bank of China for 2.0 million Chinese Yuan. The loan will expire in December 2023. The annual interest rate was 4.15% as of June 30, 2023. As of June 30, 2023, the outstanding balance was approximately $0.3 million, and was due on demand. In March 2022, SGRP Meridian (Pty), Ltd. secured loans with Investec Bank Ltd, for 100.5 million South African Rand; of which 25.0 million South African Rand is due July 2023. The annual interest rate was 11.75% as of June 30, 2023. As of June 30, 2023, the outstanding balance was approximately $3.6 million. Summary of the Company’s lines of credit and short-term loans (in thousands):
|  | Interest Rate |  |  | Balance |  |  | Interest Rate |  |  | Balance |
|  | as of |  |  | as of |  |  | as of |  |  | as of |
|  | June 30, 2023 |  |  | June 30, 2023 |  |  | December 31, 2022 |  |  | December 31, 2022 |
Australia - National Australia Bank |  |  | 12.10 | % |  | $ | 80 |  |  |  | 10.60 | % |  | $ | 156 |
China- Construction Bank |  |  | 4.15 | % |  |  | 276 |  |  |  | 4.15 | % |  |  | 290 |
China- Industrial Bank |  |  | 4.00 | % |  |  | 413 |  |  |  | 4.00 | % |  |  | 435 |
South Africa - Investec Bank Ltd. |  |  | 11.75 | % |  |  | 2,542 |  |  |  | 10.50 | % |  |  | 1,700 |
USA - North Mill Capital |  |  | 10.15 | % |  |  | 11,895 |  |  |  | 5.25 | % |  |  | 14,399 |
USA - Resource Plus Seller Notes |  |  | 1.85 | % |  |  | 700 |  |  |  | 1.85 | % |  |  | 1,000 |
Total |  |  |  |  |  | $ | 15,906 |  |  |  |  |  |  | $ | 17,980 |
Summary of the Company’s Long- term debt (dollars in thousands):
|  | Interest Rate as of |  |  | Balance Outstanding |  |  | Interest Rate as of |  |  | Balance Outstanding |
|  | June 30, 2023 |  |  | June 30, 2023 |  |  | December 31, 2022 |  |  | December 31, 2022 |
South Africa - Investec Bank Ltd. |  |  | 11.75 | % |  | $ | 1,033 |  |  |  | 10.50 | % |  | $ | 1,376 |
Total |  |  |  |  |  | $ | 1,033 |  |  |  |  |  |  | $ | 1,376 |
Summary of Unused Company Credit and Other Debt Facilities (in thousands):
|  | June 30, |  |  | December 31, |
|  | 2023 |  |  | 2022 |
Unused Availability: |  |  |  |  |  |  |  |
United States / Canada |  | $ | 6,498 |  |  | $ | 4,601 |
Australia |  |  | 451 |  |  | 390 |
South Africa |  |  | 1,996 |  |  | 454 |
Mexico |  |  | - |  |  | - |
China |  |  | - |  |  | - |
Total Unused Availability |  | $ | 8,945 |  |  | $5,446 |

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