Note 10 - Purchase of Interests in Subsidiaries

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Business Combination Disclosure [Text Block]

10. Purchase of Interests in Subsidiaries

After acquiring SGRP Brasil Participações Ltda. ("SGRP Holdings"), a Brazilian limitada (which is a form of limited liability company), and establishing SPAR Brasil Serviços de Merchandising e Tecnologia S.A., a Brazilian corporation ("SPAR BSMT"), in a series of related party transactions (See Note 5 to Condensed Consolidated Financial Statements - Related Party Transactions, above), SGRP Holdings and SPAR BSMT (the "Purchasers") entered into a Quota Purchase Agreement dated September 13, 2016 (the "NM QPA"), with Interservice Publicidade Sociedade Ltda., a Brazilian limitada, Momentum Promoções Ltda., a Brazilian limitada, and IPG Nederland B.V., a Netherlands company (collectively, the "Sellers"). The Sellers are subsidiaries of The Interpublic Group of Companies, Inc., a Delaware corporation ("Interpublic"), which is a global provider of advertising, media and other business services. The NM QPA provided for the acquisition by the Purchasers from the Sellers (the "NM Acquisition") of all of the equity shares (called "quotas") in New Momentum Ltda., a Brazilian limitada, and New Momentum Serviços Temporários Ltda., a Brazilian limitada (each a "NM Company" or collectively “the new Companies”), two of Interpublic's "In Store" companies in Brazil. SPAR BSMT acquired 99% of the quotas issued by each NM Company and SGRP Holdings acquired 1% of the quotas issued by each NM Company pursuant to the NM QPA. The closing of the acquisition of the NM Companies was completed with the disbursement of the purchase price to the Sellers on September 19, 2016, effective as of September 13, 2016.

The preliminary purchase price at closing for the NM Companies was R$1,163,263 (approximately US$358,000), based on a preliminary balance sheet as of July 31, 2016 which is subject to adjustment (upward or downward) based on the final closing balance sheet as of September 13, 2016. The Sellers have until December 12, 2016 to present the final closing balance sheet to the Company.

Momentum Promoções Ltda., one of the Sellers, also agreed to provide certain transition services and continued use of certain existing office space to SPAR BSMT and each of the NM Companies (collectively, "SPAR Brazil"), pursuant to a Transition Services Agreement dated September 13, 2016 (the "Transition Agreement"), and a Sublease Agreement dated September 13, 2016 (the "Sublease"), respectively. The Sublease has an initial term of 12 months and requires monthly rent and back office support payments of R$205,417 (approximately US$65,700). The Transition Agreement has an initial term ending December 31, 2016, and requires various monthly service payments estimated to be in total R$74,534 (approximately US$23,850).

The Company has completed its preliminary calculation of the estimated fair value and related allocation of assets between goodwill and other. This valuation may be subject to change upon receipt of the final closing balance sheet as of September 13, 2016, which is expected by the end of this year at which time the Company will update its fair value allocation analysis. The Company expects to finalize the purchase price allocation as soon as practical, but no later than one year from acquisition date. A summary of assets acquired, goodwill and liabilities assumed and net of purchase price are as follows (in thousands);

Cash	$	52
Net Working Capital, net of cash		222
Fixed Assets		23
Non-operating Assets		11
Goodwill		457
Assumed Liabilities		(407	)
Net Fair Value of Assets Acquired	$	358

The following table includes the amount of Brazil’s revenue and earnings included in the Company’s consolidated statement of income for the quarter ended September 30, 2016, and a pro forma calculation of the amounts that would have been included in the Company’s consolidated statements of income for the three and nine month periods ended September 30, 2016 and 2015 had the Brazil acquisition date been January 1, 2015, instead of September 14, 2016 (in thousands):

	Revenue		Net (Loss)
Actual New Momentum Companies from Sept. 14 to Sept. 30, 2016	$	1,850	$	(43	)
Consolidated supplemental pro forma, July 1 to September 30, 2016	$	40,679	$	(151	)
Consolidated supplemental pro forma, July 1 to September 30, 2015	$	35,301	$	(338	)
Consolidated supplemental pro forma, January 1 to September 30, 2016	$	111,907	$	(161	)
Consolidated supplemental pro forma, January 1 to September 30, 2015	$	111,209	$	(594	)