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Note 6 - Business Acquisitions

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

NOTE 6. BUSINESS ACQUISITIONS

2021 Acquisitions

During the first quarter of 2021, we completed one acquisition of billboard assets accounted for as a business combination under the provisions of ASC 805. A summary of the acquisition is provided below.

Billboard Acquisition

On January 26, 2021, our subsidiary, LMH, acquired from Thomas Outdoors, LLC, which we refer to as “Thomas”, 238 billboard structures and related assets located in Kansas for a purchase price of $6,102,508 paid in cash. The acquisition was completed for the purpose of expanding our presence in the outdoor advertising market in the Midwestern United States. 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 Midwestern 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 Thomas includes property, plant and equipment, intangibles and goodwill of $1,706,708, $1,551,000 and $2,618,431, respectively, as well as other net assets of $226,369.

2020 Acquisitions

During the year ended December 31, 2020, we completed two acquisitions of broadband service providers 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.

Broadband Acquisitions

FIF AireBeam

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. The 10% interest outstanding owned by FibAire is included within "Redeemable Noncontrolling interest" in our consolidated Balance Sheets.

The following is a summary of the allocation of the purchase price, which includes the final fair value allocation of the assets acquired and liabilities assumed:

		December 31, 2020
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 for the three month period ended March 31, 2020 are recognized from March 10, 2020, the date of acquisition, through March 31, 2020. During this period, revenues and earnings were $267,251 and $65,410, respectively. Acquisition costs of $287,934 were expensed in professional fees during the same period. 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. The intangible assets include customer relationships and permits (ten year useful life) and trade names and trademarks (twenty year useful life).

FIF Utah

On December 29, 2020, FIF Utah, our wholly-owned subsidiary, acquired substantially all of the business assets of Utah Broadband, LLC, which we refer to as “UBB”, a broadband services provider, as well as other assets used in the business operations owned by entities related to UBB. Under the terms of the Agreement, FIF Utah will assume only certain liabilities of UBB. The total purchase price of $26,603,700 was paid 80% in cash and the remaining 20% of the purchase price was paid by issuing to UBB 20% of the outstanding equity of FIF Utah. A portion of the cash purchase price will be held in escrow to provide a source of indemnification for any breaches of the representations and warranties, covenants and other obligations of UBB under the Agreement. At any time, UBB has the option, but not the obligation, to sell FIF Utah its entire ownership interest in FIF Utah. FIF Utah would be obligated to purchase the units and pay for the purchase over a three-year period if UBB elects to exercise this option. Subject to the occurrence of certain future events, FIF Utah has the option, but not the obligation, to purchase UBB’s ownership interest in FIF Utah, 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. The 20% interest outstanding owned by UBB is included within "Redeemable Noncontrolling interest" in our consolidated Balance Sheets.

Due to the timing of the transaction, the initial accounting for the business combination is incomplete. In order to develop our preliminary fair values, we utilized asset information received from UBB and fair value allocation benchmarks from similar completed transactions. We are currently in the process of assessing UBB’s documentation of contracts related to customer relationships, detailed structure reports, operating leases, and asset retirement obligations, and also assessing the fair value of the 20% interest issued to UBB; 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:

		December 31, 2020
Assets Acquired
Property, plant and equipment		$	6,170,000
Customer relationships			7,400,000
Permits			330,000
Trade names and trademarks			1,910,000
Goodwill			11,030,000
Right of use assets			3,226,355
Other			201,000

Total Assets Acquired			30,267,355

Liabilities Assumed
Accounts payable and deferred revenue			437,300
Lease liabilities			3,226,355

Total Liabilities Assumed			3,663,655

Total		$	26,603,700

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. The intangible assets include customer relationships and permits (ten year useful life) and trade names and trademarks (twenty year useful life).

Pro Forma Information

The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2020. 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*
		*March 31,*
		*2021*				*2020*

Revenue		$	13,285,225			$	14,992,668

Net Income (Loss) Attributable to Common Stockholders		$	84,462,282			$	(23,861,040	)

Basic and Diluted Earnings (Loss) per Share		$	3.09			$	(1.01	)

Basic and Diluted Weighted Average Class A and Class B Common Shares Outstanding			27,299,946				23,510,660

The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses.