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Note 3 - Debt | 3 Months Ended
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Mar. 31, 2024
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. On March 27, 2024, the NM Loan Parties and NM executed and delivered a Seventh Modification Agreement, effective immediately (the "Seventh Modification Agreement"), pursuant to which the NM Loan Parties and NM agreed to extend the NM Credit Facility from October 10, 2024 to October 10, 2025. 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. As of March 31, 2024, the aggregate interest rate was 10.32% per annum and the aggregate outstanding loan balance was approximately $14.6 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 $13.7 million; and (ii) the outstanding loan balance under the Canada Revolving Credit Facility was approximately $0.9 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, capital expenditures and certain other investments. The NM Loan Parties were in compliance with such covenants as of March 31, 2024. 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. International Credit Facilities In December 2020, SPAR China secured a loan with Industrial Bank for 2.0 million Chinese Yuan. The loan was renewed in December 2023 and expires in December 2024. The annual interest rate was 3.56% as of March 31, 2024. As of March 31, 2024, the outstanding balance was approximately $0.3 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 November 2024. The annual interest rate was 4.0% as of March 31, 2024. As of March 31, 2024, 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 105 million South African Rand which expires July 2025. This loan is secured by the Company's available cash and Accounts Receivable and is being repaid in monthly installments commensurate with an amortization schedule. The interest rate of 11.75% is calculated based on the South African Prime rate. As part of the agreement, SGRP Meridian is subject to covenant restrictions that mandate minimum levels of Debt to EBITDA, Asset and Accounts Receivable balances, and coverage ratios. SGRP Meridian is in compliance with these covenants as of March 31, 2024. 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 |
|  | March 31, 2024 |  |  | March 31, 2024 |  |  | December 31, 2023 |  |  | December 31, 2023 |
USA / Canada - North Mill Capital |  |  | 10.40 | % |  |  | 14,605 |  |  |  | 10.40 | % |  |  | 12,475 |
USA - Resource Plus Seller Notes |  |  | N/A |  |  |  | - |  |  |  | 1.85 | % |  |  | 1,120 |
China - Industrial Bank |  |  | 3.56 | % |  |  | 277 |  |  |  | 3.56 | % |  |  | 283 |
China - Industrial and Commercial Bank of China |  |  | 4.00 | % |  |  | 277 |  |  |  | 4.00 | % |  |  | 283 |
South Africa - Investec Bank Ltd. |  |  | N/A |  |  |  | - |  |  |  | 11.75 | % |  |  | 3,369 |
Total |  |  |  |  |  | $ | 15,159 |  |  |  |  |  |  | $ | 17,530 |
Summary of the Company’s Long- term debt (dollars in thousands):
|  | Interest Rate |  |  | Balance |  |  | Interest Rate |  |  | Balance |
|  | as of |  |  | as of |  |  | as of |  |  | as of |
|  | March 31, 2024 |  |  | March 31, 2024 |  |  | December 31, 2023 |  |  | December 31, 2023 |
Brazil - Banco Santander |  |  | 10.75 | % |  | $ | 8,292 |  |  |  | N/A |  |  | $ | - |
South Africa - Investec Bank Ltd. |  |  | N/A |  |  |  | - |  |  |  | 11.75 | % |  |  | 310 |
|  |  |  |  |  | $ | 8,292 |  |  |  |  |  |  | $ | 310 |
Summary of Unused Company Credit and Other Debt Facilities (in thousands):
|  | March 31, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
Unused Availability: |  |  |  |  |  |  |  |
United States / Canada |  | $ | 4,395 |  |  | $ | 6,525 |
South Africa |  |  | - |  |  |  | 2,064 |
Total Unused Availability |  | $ | 4,395 |  |  | $ | 8,589 |

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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://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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