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Note 8 - Related Party Transactions
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]

8.

Related Party Transactions

 

Domestic Related Party Transactions

 

Change of Control, Voting and Restricted Stock Agreement

 

The Change of Control, Voting and Restricted Stock Agreement (the "CIC Agreement") became effective on January 28, 2022, when signed by the Company and Mr. Robert G. Brown, ("Mr. Brown"), Mr. William H. Bartels ("Mr. Bartels"), SPAR Administrative Services, Inc. ("SAS"), and SPAR Business Service, Inc. ("SBS"). Mr. Brown, Mr. Bartels, SAS and SBS may be referred to collectively as the "Majority Stockholders".

 

Pursuant to the CIC Agreement, the Corporation issued to the Majority Stockholders 2,000,000 restricted shares of Series B Preferred Stock, which converted into 3,000,000 SGRP Shares pursuant to the 1:1.5 conversion ratio set forth in the CIC Agreement. The final shares under the CIC Agreement vested on November 10, 2023, and all of the corresponding SGRP Shares had been issued or were in the process of being issued by December 31, 2023.

 

Pursuant to the CIC Agreement, all actions, claims and demands between the Majority Stockholders and the Corporation were resolved; and the Majority Stockholders and their affiliates during the five-year term of the CIC Agreement, ending on June 25, 2027, have agreed to give up certain rights with respect to the management of the Corporation.  

 

Bartels' Retirement and Director Compensation

 

Mr. William H. Bartels retired as an employee of the Company as of January 1, 2020 but continues to serve as a member of SPAR's Board. Mr. Bartels is also one of the founders and a significant stockholder of SGRP. Effective January 18, 2020, SPAR's Governance Committee proposed and unanimously approved retirement benefits for the five-year period commencing January 1, 2020, and ending December 31, 2024 (the "Five-Year Period"), for Mr. Bartels. The aggregate value of benefits payable to Mr. Bartels is approximately $0.2 million per year and a total of $1.1 million for the Five-Year Period.

 

As of September 30, 2024, there are approximately $58 thousand of benefits payable, which are included in accrued expenses and other current liabilities in the unaudited condensed consolidated balance sheets.

 

Other Related Party Transactions and Arrangements 

 

On  April 18, 2024, the Company entered into a Securities Purchase Agreement to buy from Mr. Richard Justus the remaining minority joint venture interests of Resource Plus and its sister companies, Mobex of North Florida, Inc., and Leasex, LLC. Based on the terms set in the original joint venture agreement, the Company will pay a total of $3 million in annual payments over a  five-year period. $250,000 was paid within  five business days of closing, and the remaining $2,750,000 will be paid pursuant to a Secured Promissory Note. The agreement resulted in the termination of all relevant shareholder and operating agreements, although specific confidentiality obligations remain effective for  three years post-closing and specific mutual releases were provided. The purchase was closed and completed on  May 1, 2024.  As of September 30, 2024, $250,000 has been paid and the remaining $2,750,000 Promissory Note is outstanding.

 

On  December 1, 2021, the Corporation entered into the Agreement for Marketing and Advertising Services (the "WB Agreement") with WB Marketing, Inc. (the "Agent", and together with the Company, the "Parties"). The Agent is an entity owned and controlled by Mrs. Jean Matacunas who is the wife of President and Chief Executive Officer, Michael R. Matacunas.  During the first nine months of 2024, the company his recognized approximately $101,000 in expenses under this agreement.

 

SBS and Infotech are related parties and affiliates of SGRP, but are not under the control or part of the consolidated Company. See Change of Controls, Voting and Restricted Stock Agreement, above. In July 1999 the Company, SBS and Infotech entered into a perpetual software ownership agreement providing that each party independently owned an undivided share of and has the right to unilaterally license and exploit certain portions of the Company's proprietary scheduling, tracking, coordination, reporting and expense software are co-owned with SBS and Infotech, and each entered into a non-exclusive royalty-free license from the Company to use certain "SPAR" trademarks in the United States. 

 

On May 13, 2024, SGRP privately repurchased 1,000,000 shares of SGRP's Common Stock from William H. Bartels, effective as of April 30, 2024, at a purchase price of $1.80 per share (the Nasdaq closing price on April 29, 2024). 

 

International Joint Venture Transactions

 

Agreement to sell the Company’s ownership interest in its South African Joint Venture

 

Prior to  March 31, 2024, SGRP Meridian Proprietary Limited ("Meridian") was a consolidated international subsidiary of the Company and was owned 51% by the Company and 49% by Friedshelf (Pty) Ltd., Lindicom Proprietary Limited, and Lindicom Empowerment Holdings Proprietary Limited ("Local Owners"). 

 

On   February 7, 2024, the Company entered into an agreement to sell its 51% ownership interest in Meridian to the Local Owners for 180,700,000 South African Rand, 80% of which would be paid upon closing. 

 

The closing conditions under that agreement were satisfied in all material respects by  March 31, 2024. and on  April 29, the Company received 144,560,000 South African Rand from the Local Buyers (or approximately $7.7 million). The remaining purchase price will be paid on  December 31, 2024 or 2025, depending on certain financial triggers, and its payment is secured by an irrevocable unconditional guarantee from Investec Bank Limited.  The Company has also licensed certain technology (including SPARView) and trademarks to Meridian in connection with the sale.  The Company has recognized a gain of $7.2 million in the first quarter of 2024 as a result of this transaction.

 

Agreement to sell the Company’s ownership interest in its Chinese Joint Venture

 

On  February 23, 2024, the Company entered into an agreement to sell its 51% ownership interest in SPAR (Shanghai) Marketing Management Co., Ltd. to Shanghai Jingbo Enterprise Consulting Co., Ltd. and Shanghai Wedone Marketing Management Co. Ltd.  The total price to be paid to the Company is $200,000.  The sale was completed in of  April 2024.

 

Agreement to sell the Company’s Brazilian subsidiary that owns its interest in its Brazilian Joint Venture

 

On   March 26, 2024, the Company signed a share purchase agreement with JK Consultoria Empresarial Ltda. ("JKC") for JKC to acquire the Company's Brazilian holding company (which in turn owns the Company's 51 percent interest in its Brazilian joint venture subsidiary) for BRL 58.9 million or approximately $11.8 million.  Closing of the sale occurred in June 2024.

 

Agreement to sell SPAR's 100% ownership interest in SPAR Japan

 

On July 23, 2024, the Company entered into an agreement to sell its 100% ownership interest in SPAR Japan for $500,000.  The sale closed on August 30, 2024.

 

Agreement to sell SPAR's 51% ownership interest in its Indian Joint Venture

 

On September 25, 2024, the Company closed on an agreement to sell its 51% ownership interest in its Indian Joint venture for $500,000, effective as of August 31, 2024.

 

Summary of Certain Related Party Transactions

 

Due to related parties consists of the following as of the periods presented (in thousands):

 

Due to affiliates consists of the following (in thousands):

 September 30,  December 31, 
  

2024

  

2023

 

Loans from local investors:(1)

        

Mexico

 $623  $623 

China

  -   2,316 

Resource Plus

  -   266 

Total due to affiliates

 $623  $3,205 

 

(1)

Represent loans due from the local investors into the Company's subsidiaries (representing their proportionate share of working capital loans). The loans have no payment terms, are due on demand, and are classified as current liabilities in the unaudited condensed consolidated balance sheets.