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Note 6 - Business Acquisitions | 9 Months Ended
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Sep. 30, 2019
Notes to Financial Statements |
Mergers, Acquisitions and Dispositions Disclosures [Text Block] | NOTE 6. BUSINESS ACQUISITIONS 2019 Acquisitions On August 30, 2019, our subsidiary, LMSE, acquired from Image Outdoor Advertising, LLC, which we refer to as “Image”, 61 billboard structures and related assets located in West Virginia. The acquisition was completed for the purpose of expanding our presence in the outdoor advertising market in the Southeastern United States. The purchase price consisted of $6,915,501 in cash, net of adjustments, and 34,673 shares of our Class A common stock and includes $398,750 that was held back by LMSE and will be disbursed, subject to any claims for indemnification, over an 18 month period. Due to the timing of the transaction, the initial accounting for the business combination is incomplete. The provisional purchase price allocation is based on internal information derived from our previous acquisitions in the Southeastern United States. We are still in the process of obtaining and assessing documentation of the contracts for customer relationships and detailed reports for structures and permits. Our preliminary purchase price allocation related to Image includes property, plant and equipment, intangibles and goodwill of $1,565,065, $3,145,000 and $3,045,538, respectively, as well as other net liabilities of $129,999. 2018 Acquisitions During the year ended December 31, 2018 , we completed three acquisitions of billboards and related assets. These acquisitions were accounted for as business combinations under the provisions of ASC 805. A summary of the acquisitions is provided below. Billboard Acquisitions Tammy Lynn Outdoor, LLC On July 31, 2018, our subsidiary, LMSE, acquired from Tammy Lynn Outdoor, LLC, which we refer to as “Tammy Lynn,” billboard structures and related assets primarily located in West Virginia with additional acquired assets located in Virginia. The acquisition was completed for the purpose of expanding our presence in the outdoor advertising market in the Southeastern United States. The purchase price consisted of $14,763,261 in cash, net of adjustments, and 85,170 shares of our Class A common stock. There were no adjustments made to the purchase price allocation recorded as of December 31, 2018. Finite-lived intangible assets consist of customer relationships, permits, favorable leases, and a five year 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. For the three and nine month periods ended September 30, 2018, revenues and earnings recognized from the date of acquisition in our consolidated statement of operations were $340,006 and ( $54,969 ), respectively. Acquisition costs of $113,679 were expensed in professional fees during the same period. Key Outdoor, Inc. On August 22, 2018, our subsidiary, LMM acquired from Key Outdoor, Inc., which we refer to as “Key,” over 700 billboard structures and related assets. The billboards and related assets are located in Illinois, Iowa and Missouri. The purchase price for the acquired assets was $38,000,000, subject to certain post-closing adjustments, which totaled $233,894. A portion of the purchase price equal to $1,900,000 was held back by LMM to be disbursed, subject to any claims for indemnification, over a 12 month period. Another $329,467 was held back as required consent holdback. Both holdbacks, net of 2018 payments, are included in the caption “Short-term payables for business acquisitions” on our consolidated balance sheet as of December 31, 2018 . Each of Key and Angela K. Dahl and Robert A. Dahl, Key's principals, entered into five year noncompetition and nonsolicitation agreements in connection with the acquisition. Total cash paid at closing was $36,004,427. During the nine months ended September 30, 2019 , we made payments of $1,964,990 on the short-term payable for business acquisitions. During the third quarter of 2019, we completed our review of customer relationships, structures, permits, and lease contracts which allowed us to finalize the preliminary purchase price allocation. Finite-lived intangible assets consist of customer relationships, permits, and five year noncompetition and nonsolicitation agreements. We amortize the noncompetition and nonsolicitation agreements 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. The final purchase price allocation, including current measurement-period adjustments, was recorded as follows:
|  |  |  |  |  | Key |  |  |  |  |
|  | Sep. 30, 2019 |  |  | Adjustments |  |  | Dec. 31, 2018 |
Assets Acquired |  |  |  |  |  |  |  |  |  |  |  |
Property and Equipment: |  |  |  |  |  |  |  |  |  |  |  |
Structures and displays |  | $ | 6,927,808 |  |  | $ | (2,676,030 | ) |  | $ | 9,603,838 |
Intangible Assets: |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  |  | 8,627,000 |  |  |  | 935,000 |  |  |  | 7,692,000 |
Permits, licenses, and lease acquisition costs |  |  | 1,167,000 |  |  |  | (17,000 | ) |  |  | 1,184,000 |
Easements |  |  | - |  |  |  | - |  |  |  | - |
Favorable leases |  |  | - |  |  |  | - |  |  |  | - |
Noncompetition and non-solicitation agreements |  |  | 100,000 |  |  |  | - |  |  |  | 100,000 |
Goodwill |  |  | 21,257,030 |  |  |  | 1,758,030 |  |  |  | 19,499,000 |
Total Intangible Assets |  |  | 31,151,030 |  |  |  | 2,676,030 |  |  |  | 28,475,000 |
Other Assets: |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  |  | - |  |  |  | - |  |  |  | - |
Prepaid expenses |  |  | 233,894 |  |  |  | - |  |  |  | 233,894 |
Total Other Assets |  |  | 233,894 |  |  |  | - |  |  |  | 233,894 |
Total Assets Acquired |  |  | 38,312,732 |  |  |  | - |  |  |  | 38,312,732 |
Liabilities Assumed |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  |  | - |  |  |  | - |  |  |  | - |
Asset retirement obligations |  |  | (78,838 | ) |  |  | - |  |  |  | (78,838 | )
Other long-term liabilities |  |  | - |  |  |  | - |  |  |  | - |
Total Liabilities Assumed |  |  | (78,838 | ) |  |  | - |  |  |  | (78,838 | )
Total |  | $ | 38,233,894 |  |  | $ | - |  |  | $ | 38,233,894 |
Amortization expense for the three and nine month periods ended September 30, 2019, is increased by $335,797 to reflect the effect on earnings as a result of the above adjustments to the provisional amounts recognized. Depreciation expense for the same periods is decreased by $193,269 as a result of the adjustments. For the three and nine month periods ended September 30, 2018, revenues and earnings recognized from the date of acquisition in our consolidated statement of operations were $555,992 and ( $6,756 ), respectively. Acquisition costs of $121,469 were expensed in professional fees during the same period. Waitt Outdoor, LLC On August 31, 2018, our subsidiary, LMO acquired from Waitt Outdoor, LLC, which we refer to as “Waitt,” over 1,600 billboard structures and related assets. The billboards and related assets are located in Kansas, Illinois, Iowa, Missouri and Nebraska. The purchase price for the acquired assets was $82,000,000, subject to certain post-closing adjustments, which totaled $2,031,262, resulting in a total purchase price of $84,031,262. Cash paid at closing was $84,031,262 of which $4,102,500 was initially held in escrow, subject to any claims for indemnification, and subsequently released to Waitt during the third quarter of 2019. Waitt, WaittCorp Investments, LLC, and Mr. Michael J. Delich, the principal of Waitt, have also entered into five year noncompetition and nonsolicitation agreements in connection with the acquisition. During the third quarter of 2019, we completed our review of customer relationships, structures, permits, easements and lease contracts which allowed us to finalize the preliminary purchase price allocation. Finite-lived intangible assets consist of customer relationships, permits, and noncompetition and nonsolicitation agreements. We amortize the noncompetition and nonsolicitation agreements 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. We also acquired several easements. The easements are permanent easements which grant us the right to use real property not owned by us. Since the easements are perpetual, they are not amortized. The final purchase price allocation, including current measurement-period adjustments, was recorded as follows:
|  |  |  |  |  | Waitt |  |  |  |  |
|  | Sep. 30, 2019 |  |  | Adjustments |  |  | Dec. 31, 2018 |
Assets Acquired |  |  |  |  |  |  |  |  |  |  |  |
Property and Equipment: |  |  |  |  |  |  |  |  |  |  |  |
Structures and displays |  | $ | 16,220,375 |  |  | $ | (3,503,529 | ) |  | $ | 19,723,904 |
Intangible Assets: |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  |  | 13,984,000 |  |  |  | 1,288,000 |  |  |  | 12,696,000 |
Permits, licenses, and lease acquisition costs |  |  | 5,288,000 |  |  |  | (53,000 | ) |  |  | 5,341,000 |
Easements |  |  | 454,563 |  |  |  | - |  |  |  | 454,563 |
Favorable leases |  |  | - |  |  |  | - |  |  |  | - |
Noncompetition and non-solicitation agreements |  |  | 219,000 |  |  |  | - |  |  |  | 219,000 |
Goodwill |  |  | 48,650,475 |  |  |  | 2,268,529 |  |  |  | 46,381,946 |
Total Intangible Assets |  |  | 68,596,038 |  |  |  | 3,503,529 |  |  |  | 65,092,509 |
Other Assets: |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  |  | 1,239,457 |  |  |  | - |  |  |  | 1,239,457 |
Prepaid expenses |  |  | 1,551,084 |  |  |  | - |  |  |  | 1,551,084 |
Total Other Assets |  |  | 2,790,541 |  |  |  | - |  |  |  | 2,790,541 |
Total Assets Acquired |  |  | 87,606,954 |  |  |  | - |  |  |  | 87,606,954 |
Liabilities Assumed |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  |  | (761,779 | ) |  |  | - |  |  |  | (761,779 | )
Asset retirement obligations |  |  | (1,497,913 | ) |  |  | - |  |  |  | (1,497,913 | )
Other long-term liabilities |  |  | (1,316,000 | ) |  |  | - |  |  |  | (1,316,000 | )
Total Liabilities Assumed |  |  | (3,575,692 | ) |  |  | - |  |  |  | (3,575,692 | )
Total |  | $ | 84,031,262 |  |  | $ | - |  |  | $ | 84,031,262 |
Amortization expense for the three and nine month periods ended September 30, 2019, is increased by $459,369 to reflect the effect on earnings as a result of the above adjustments to the provisional amounts recognized. Depreciation expense for the same periods is decreased by $253,033 as a result of the adjustments. For the three and nine month periods ended September 30, 2018, revenues and earnings recognized from the date of acquisition in our consolidated statement of operations were $1,117,509 and $32,312, respectively. Acquisition costs of $140,165 were expensed in professional fees during the same period. Pro Forma Information The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2018. For all of the business acquisitions depreciation and amortization have been included in the calculation of the pro forma information provided below, 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.
|  | For the Three Months Ended |  |  | For the Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Revenue |  | $ | 11,037,522 |  |  | $ | 8,699,175 |  |  | $ | 30,931,950 |  |  | $ | 25,705,507 |
Net Income (Loss) Attributable to Common Stockholders |  | $ | 487,184 |  |  | $ | (3,399,022 | ) |  | $ | (6,148,998 | ) |  | $ | (10,045,212 | )
Basic and Diluted Income (Loss) per Share |  | $ | 0.02 |  |  | $ | (0.15 | ) |  | $ | (0.27 | ) |  | $ | (0.52 | )
Basic and Diluted Weighted Average Class A and Class B Common Shares Outstanding |  |  | 22,833,411 |  |  |  | 22,094,087 |  |  |  | 22,594,263 |  |  |  | 19,313,588 |
The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses. The pro forma amounts above for basic and diluted weighted average shares outstanding have been adjusted to include the stock issued in connection with the acquisition of Tammy Lynn and Image.

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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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