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Note 6 - Business Acquisitions

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

NOTE 6. BUSINESS ACQUISITIONS

2020 Acquisitions

Broadband Acquisition

On March 10, 2020, FIF AireBeam, LLC, our wholly-owned subsidiary, acquired substantially all of the business assets of FibAire Communications, LLC, which we refer to as "FibAire", a broadband services provider, as well as other assets used in the business operations owned by entities related to FibAire. The acquisition was accounted for as a business combination under the provisions of ASC 805. Under the terms of the asset purchase agreement, all purchased assets were sold on a debt-free basis to AireBeam. The total purchase price of $13,712,491 was paid 90% in cash and the remaining 10% of the purchase price was paid by issuing to FibAire 10% of the outstanding equity of AireBeam. $1,851,186 of the cash proceeds will be held in escrow for a minimum of one year from the closing to provide indemnification for certain representations and warranties made by FibAire in the asset purchase agreement. At any time, FibAire has the option, but not the obligation, to sell AireBeam its entire ownership interest in AireBeam. AireBeam would be obligated to purchase the units and pay for the purchase over a three-year period if FibAire elects to exercise this option. At any time after December 31, 2023, AireBeam has the option, but not the obligation, to purchase FibAire’s ownership interest in AireBeam, with payment due in full upon exercise of the option. The purchase price for the units under either of these put/call options is based upon a multiple of earnings before interest, taxes, depreciation, amortization, and certain other expenses.

We are in the process of obtaining a final third-party valuation of the tangible and intangible assets, and therefore the initial allocation of the purchase price is subject to refinement. The purchase was recorded at fair value and preliminarily allocated as follows:

		*AireBeam*
Assets Acquired
Property, plant and equipment		$	3,112,459
Customer relationships			1,480,000
Permits			260,000
Trade names and trademarks			970,000
Goodwill			7,124,158
Software			990,000
Right of use assets			337,966
Other			184,737

Total Assets Acquired			14,459,320

Liabilities Assumed
Accounts payable and deferred revenue			317,768
Lease liabilities			337,966
Other			91,095

Total Liabilities Assumed			746,829

Total		$	13,712,491

AireBeam's results of operations are recognized from March 10, 2020, the date of acquisition, through September 30, 2020. Revenues for the three and nine-month periods ended September 30, 2020 were $1,144,343 and $2,575,676 respectively. Earnings for the three and nine-month periods ended September 30, 2020 were $25,006 and $421,841 respectively. Acquisition costs of $287,934 were expensed in professional fees during the year. Included in our property, plant, and equipment caption are fiber, tower, and broadband equipment assets acquired in the transaction which have useful lives ranging from five to twenty years.

2019 Acquisitions

During the year ended December 31, 2019, we completed two 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

Image Outdoor Advertising, Inc.

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 for a total purchase price of $7,625,604 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. The final purchase price allocation related to Image includes property, plant and equipment, intangibles, and goodwill of $1,544,970, $3,152,000 and $3,058,633, respectively, as well as other net liabilities of $129,999.

Alpha Displays, Inc.

On October 1, 2019, our subsidiary, LMO, acquired certain billboard assets in Missouri from Alpha Displays, Inc. The purchase price for the acquired assets was $1,337,685 and includes $380,546 that was held back by LMO and will be disbursed, subject to any claims for indemnification, over an 18 month period. The assets were acquired for the purpose of expanding our presence in the outdoor advertising market in the Midwestern United States.

Pro Forma Information

The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2019. 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,*
		*2020*				*2019*				*2020*				*2019*

Revenue		$	11,606,836			$	12,222,223			$	35,512,843			$	34,486,051

Net Income (Loss) Attributable to Common Stockholders		$	3,463,671			$	949,232			$	(17,647,527	)		$	(5,120,446	)

Basic and Diluted Income (Loss) per Share		$	0.13			$	0.04			$	(0.70	)		$	(0.23	)

Basic and Diluted Weighted Average Class A and Class B Common Shares Outstanding			27,231,115				22,833,411				25,145,700				22,598,200

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 in 2019 have been adjusted to include the stock issued in connection with the acquisition of Image.