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Note 6 - Business Acquisitions | 6 Months Ended
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Jun. 30, 2018
Notes to Financial Statements |
Mergers, Acquisitions and Dispositions Disclosures [Text Block] |
NOTE 6. | BUSINESS ACQUISITIONS
There were no business acquisitions during the six months ended June 30, 2018. During the six months ended June 30, 2017, we had net cash outflows of $9,940,794, related to business acquisitions. 2017 Acquisitions During the year ended December 31, 2017, we completed six business acquisitions of billboards and related assets and three insurance company acquisitions. These acquisitions were accounted for as business combinations under the provisions of ASC 805. A summary of the acquisitions is provided below. A summary of the revenues and earnings of each since the acquisition dates included in the consolidated statements of operations for the three months and six months ended June 30, 2017 is provided in the tables below. Billboard Acquisitions Clear Channel Outdoor, Inc. On January 9, 2017, our subsidiary, LMG, entered into a purchase agreement with Clear Channel Outdoor, Inc., which we refer to as “CCO,” for the purchase of over thirty billboard structures and related assets. The assets acquired are located in Georgia. The cash purchase price for the acquired business was $2,983,444, of which $2,950,000 had been deposited into the seller’s escrow account in November 2016 and was subsequently applied to the purchase price. The assets were acquired for the purpose of expanding our presence in the outdoor advertising market. The purchase price allocation is based on an appraisal by an independent third party valuation firm. Finite-lived intangible assets consist of customer relationships and permits. Amortization is computed over the average period of expected benefit, determined from internal information. Hartlind Outdoor, LLC On January 31, 2017, our subsidiary, LMW, entered into a purchase agreement with Hartlind Outdoor, LLC, which we refer to as “Hartlind,” for the purchase of over ninety billboard structures and related assets. The assets acquired are located in Wisconsin. The cash purchase price for the acquired business was $2,817,000. The assets were acquired for the purpose of expanding our presence in the outdoor advertising market. The purchase price allocation is based on an appraisal by an independent third party valuation firm. Finite-lived intangible assets consist of customer relationships, permits, and a noncompetition agreement. We amortize the noncompetition agreement according to the terms of the asset purchase agreement. Amortization of the other finite-lived intangible assets is computed over the average period of expected benefit, determined from internal information. We also acquired six easements. The easements are permanent easements which grant us the right to use real property not owned by us. Since these rights are perpetual, they are not amortized. Southeastern United States Subsequent to the CCO business acquisition, we made additional business acquisitions in the Southeastern United States as presented below. Corey Companies, Inc. On June 8, 2017, our subsidiaries, LMG and LMA, entered into a purchase agreement with Corey Companies, Inc., which we refer to as “Corey,” for the purchase of approximately thirty billboard structures, a fifty percent interest in three billboard structures, and related assets. The assets acquired are located in Georgia and Alabama. The cash purchase price for the acquired business was $2,991,314. The assets were acquired for the purpose of expanding our presence in the outdoor advertising market in the Southeastern United States. The purchase price allocation for the structures, faces and permits is based on internal information derived from our previous acquisitions in Alabama and Georgia. The purchase price allocation for customer relationships is based on an appraisal by an independent third party valuation firm. The independent appraisal resulted in a decrease in customer relationships of $314,000 and an increase in goodwill of $314,000. The related decrease in amortization expense for the six months ended June 30, 2018 was $64,965. Finite lived intangible assets consist of customer relationships and permits. Amortization of the finite-lived intangible assets is computed over the average period of expected benefit, determined from internal information. Vision Outdoor Media, LLC On June 16, 2017, our subsidiary, LMG, entered into a purchase agreement with Vision Outdoor Media, LLC, which we refer to as “Vision,” for the purchase of three billboard structures and related assets. The assets acquired are located in Georgia. The assets were acquired for the purpose of expanding our presence in the outdoor advertising market in the Southeastern United States. The cash purchase price for the acquired business was $3,199,036. The purchase price allocation is based on internal information derived from our previous acquisitions in Alabama and Georgia. Finite-lived intangible assets consist of customer relationships and permits. Amortization of the finite-lived intangible assets is computed over the average period of expected benefit, determined from internal information. View Media, LLC On July 11, 2017, our subsidiary, LMG, entered into a purchase agreement for the purchase of one billboard structure and related assets. The assets acquired are located in Georgia. The cash purchase price of the acquisition was $623,596. The assets were acquired for the purpose of expanding our presence in the outdoor advertising market in the Southeastern United States. The purchase price allocation is based on internal information derived from our previous acquisitions in Alabama and Georgia. Finite-lived intangible assets consist of customer relationships and permits. Amortization of the finite-lived intangible assets is computed over the average period of expected benefit, determined from internal information. In addition, we also made a small acquisition for a cash purchase price of $900,000. Insurance Acquisitions Surety Support Services, Inc. On July 11, 2017, our subsidiary, GIG, entered into a purchase agreement for the purchase of 100% of the stock of an insurance brokerage company, Surety Support Services, Inc., which we refer to as “SSS.” The purchase price of the stock was $450,000, of which $22,500 was paid at closing, with $427,500 due in 2018, and is included in the caption “Short-term payables for acquisitions” on our consolidated balance sheets as of June 30, 2018 and December 31, 2017, respectively. During the six months ended June 30, 2018, we made a payment of $360,000 on the short-term payable for acquisition. The stock was acquired for the purpose of expanding our presence in the insurance market in the United States. The purchase price allocation is based on internal information derived from our previous insurance brokerage company acquisitions. Finite-lived intangible assets consist of customer relationships and a non-competition agreement. We amortize the non-competition agreement according to the terms of the asset purchase agreement. For other finite-lived assets, amortization is computed over the average period of expected benefit determined from internal information. South Coast Surety Insurance Services, LLC On October 31, 2017, our subsidiary, GIG, entered into a purchase agreement for the purchase of 70% of the membership units of an insurance brokerage company, South Coast Insurance Services, LLC, which we refer to as “SCS.” The cash purchase price of the units was $2,908,581, and was paid at closing. The units were acquired for the purpose of expanding our presence in the insurance market in the United States. The provisional purchase price allocation is based on internal information and will be revised when an independent appraisal has been completed. Due to the timing and complexity of the transaction, the initial accounting for the business combination is incomplete. We are still in the process of obtaining and assessing documentation of the contracts and relationships as well as assessing the initial valuation of the noncontrolling interest. The seller has agreed to remain as a principal of SCS. The purchase agreement contains an option for the seller to sell us the remaining units (a “put” option). The purchase agreement also contains an option for us to purchase the remaining units (a “call” option) upon the death, incapacitation, or termination of the seller’s employment. Upon exercise of the options by the seller or by us, the purchase price of the remaining units is to be calculated by a formula contained in the purchase agreement. Both the put and the call options are embedded in the purchase agreement, and are not legally detachable or separately exercisable. At any time following the closing date of our purchase, the seller has the option (the put option), but not the obligation to sell us all of the remaining 30% of the membership units. Should the seller exercise his option, we are obligated to purchase all of the remaining units (“redeemable NCI”). Since the put option is currently redeemable, in accordance with the guidance of ASC 480 - 10 (Subtopic- S99 - 30 ), Distinguishing Liabilities from Equity Overall, the redeemable NCI is presented on our consolidated balance sheet between liabilities and equity. Additionally, we are required to re-measure the value of the redeemable NCI as of the date of each balance sheet presented. We have calculated the value of the redeemable NCI based upon the redemption formula contained in the purchase agreement, and have determined that no adjustment is necessary as of June 30, 2018 and December 31, 2017, respectively. Finite-lived intangible assets consist of customer relationships, trade names and trademarks, and a noncompetition agreement. We amortize the noncompetition agreement according to the terms of the asset purchase agreement. For other finite-lived assets, amortization is computed over the average period of expected benefit determined from internal information. Freestate Bonds, Inc. On November 30, 2017, our subsidiary, Warnock entered into a purchase agreement for the purchase of 100% of the stock of an insurance brokerage company, Freestate Bonds, Inc., which we refer to as “Freestate.” The purchase price of the stock was $293,000, of which $223,500 was paid at closing, with $69,500 due on November 30, 2018, and is included in the caption “Short-term payables for acquisitions” on our consolidated balance sheets as of June 30, 2018 and December 31, 2017. The stock was acquired for the purpose of expanding our presence in the insurance market in the United States. The purchase price allocation is based on internal information derived from our previous insurance brokerage company acquisitions. During May 2018, Freestate was reorganized into Warnock and Freestate was subsequently dissolved. The following tables present information for the 2017 business acquisitions for the six months ended June 30, 2017, including amortization of finite intangible assets, revenues and earnings included in consolidated net loss for the three months and six months ended June 30, 2017, and the costs of acquisition included in professional fees on our consolidated statement of operations for the three and six months ended June 30, 2017.
|  | Billboards |
|  | CCO |  |  | Hartlind |  |  | Southeastern US |  |  | Subtotal |
Amortization of intangible assets acquired for the three months ended June 30, 2017 |  | $ | 70,846 |  |  | $ | 45,770 |  |  | $ | 38,181 |  |  | $ | 154,797 |
Revenues since the acquisition date included in the consolidated statement of operations for the three months ended June 30, 2017 |  | $ | 204,093 |  |  | $ | 99,665 |  |  | $ | 5,320 |  |  | $ | 309,078 |
Earnings since the acquisition date included in the consolidated statement of operations for the three months ended June 30, 2017 |  | $ | (21,391 | ) |  | $ | 38,431 |  |  | $ | (54,043 | ) |  | $ | (37,003 | )
Costs of acquisition included in professional fees in the consolidated statement of operations for the three months ended June 30, 2017 |  | $ | - |  |  | $ | 831 |  |  | $ | 21,563 |  |  | $ | 22,394 |
Amortization of intangible assets acquired for the six months ended June 30, 2017 |  | $ | 141,693 |  |  | $ | 76,284 |  |  | $ | 38,181 |  |  | $ | 256,158 |
Revenues since the acquisition date included in the consolidated statement of operations for the six months ended June 30, 2017 |  | $ | 359,076 |  |  | $ | 152,776 |  |  | $ | 5,320 |  |  | $ | 517,172 |
Earnings since the acquisition date included in the consolidated statement of operations for the six months ended June 30, 2017 |  | $ | (41,755 | ) |  | $ | 55,729 |  |  | $ | (54,043 | ) |  | $ | (40,069 | )
Costs of acquisition included in professional fees in the consolidated statement of operations for the six months ended June 30, 2017 |  | $ | 14,468 |  |  | $ | 8,645 |  |  | $ | 21,563 |  |  | $ | 44,676 |
|  | Insurance |  |  |  |  |  |  |  |  |
|  | SSS |  |  | SCS |  |  | Freestate |  |  | Subtotal |  |  | Total |
Amortization of intangible assets acquired for the three months ended June 30, 2017 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 154,797 |
Revenues since the acquisition date included in the consolidated statement of operations for the three months ended June 30, 2017 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 309,078 |
Earnings since the acquisition date included in the consolidated statement of operations for the three months ended June 30, 2017 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | (37,003 | )
Costs of acquisition included in professional fees in the consolidated statement of operations for the three months ended June 30, 2017 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 22,394 |
Amortization of intangible assets acquired for the six months ended June 30, 2017 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 256,158 |
Revenues since the acquisition date included in the consolidated statement of operations for the six months ended June 30, 2017 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 517,172 |
Earnings since the acquisition date included in the consolidated statement of operations for the six months ended June 30, 2017 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | (40,069 | )
Costs of acquisition included in professional fees in the consolidated statement of operations for the six months ended June 30, 2017 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 44,676 |
P ro Forma Information The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2017. For all of the business acquisitions depreciation and amortization have been included in the calculation of the below pro forma information based upon the actual acquisition costs. Depreciation is computed on the straight-line method over the estimated remaining economic lives of the assets, ranging from two years to fifteen years. Amortization is computed on the straight-line method over the estimated useful lives of the assets ranging from two to fifty years. Since there were no acquisitions during the three months and six months ended June 30, 2018, no pro forma results are included.
|  | Three Months Ended June 30, 2017 |  |  | Six Months Ended June 30, 2017 |
Revenue |  | $ | 2,960,519 |  |  | $ | 5,666,907 |
Net Loss Attributable to Common Stockholders |  | $ | (1,460,839 | ) |  | $ | (2,651,967 | )
Basic and Diluted Loss per Share |  | $ | (0.19 | ) |  | $ | (0.37 | )
Basic and Diluted Weighted Average Class A and Class B Common Shares Outstanding |  |  | 7,594,585 |  |  |  | 7,247,906 |
The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses. With respect to CCO, Corey, Vision, and View, the above pro forma does not contain allocation of management overhead and other shared expenses for lines of business under common ownership, that were not acquired.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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