Note 11 - Acquisition and Purchase of Interest in Subsidiaries

3 Months Ended

Jun. 30, 2011

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

11.           Acquisition and Purchase of Interest in Subsidiaries

In March 2010, the Company established a new Canadian subsidiary, SPAR Wings & Ink Company ("SWI") specifically to expand its merchandising and marketing services throughout Canada. On April 1, 2010, with the approval of SGRP’s directors, SWI acquired substantially all of the business, customer contracts, receivables, work-in progress, other assets and certain liabilities of 2078281 Ontario Limited, an Ontario merchandising and marketing company doing business as Wings & Ink (the "Seller"). The Company, at closing, also hired substantially all of the Seller’s employees including offering consulting contracts to the principals of the Seller.

In return for the purchase of such assets and assumed liabilities, at closing SWI compensated the Seller through 1) a cash payment of $500,000 Canadian dollars (“CAD”), 2) issued a $75,000 CAD interest bearing promissory note payable over an 18 month period and 3) placed $50,000 in escrow for a 12 month period and 4) assumed $446,000 CAD of liabilities.

The Company has completed its valuation of the fair value and allocation for the assets acquired and liabilities assumed and has recorded the following (in US dollars):

Accounts Receivable	$	644,000
Equipment		2,000
Customer contracts		426,000
	$	1,072,000

The Company is amortizing the customer contracts of $426,000 on a straight line basis over 5 years.  The net book value at June 30, 2011, and December 31, 2010 was approximately $333,000 and $362,000, respectively.  Amortization expense for the six months ending June 30, 2011, was approximately $29,000.

            SWI also agreed to pay an earn out to the principals of the Seller based on SWI achieving certain revenue and gross profit margin levels of the acquired business for each of the next two 12 month periods. The earn out is based on revenue and gross profit margins exceeding certain agreed upon base levels, if achieved, the principles will be paid one third of the excess gross profit dollars in each of the two 12 month periods.  The Company has not recorded a contingent liability as it is unlikely these revenue and gross margin targets will be met.

On September 27, 2010, the Company purchased the remaining 49% ownership in its India subsidiary at a cost of $90,000.  In June 2011, effective for July 2011, the Company entered into an agreement with Krognos Integrated Marketing Services Private Limited, to sell 49% of its ownership in this subsidiary at a price of $90,000.