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Note 6 - Business Acquisitions

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

NOTE 6. BUSINESS ACQUISITIONS

2022 Acquisitions

InfoWest & Go Fiber

On April 1, 2022, FIF St George, LLC, our wholly-owned subsidiary, acquired substantially all of the business assets of InfoWest, Inc. (“InfoWest”) and Go Fiber LLC (“Go Fiber”), who are fiber and fixed wireless internet service providers located in St. George, Utah. The InfoWest and Go Fiber businesses together provide high-speed internet services to over 20,000 customers throughout Southern and Central Utah, Northern Arizona and Moapa Valley, Nevada.

Under the terms of the Agreement, FIF St George, LLC will assume only certain liabilities of InfoWest and Go Fiber. The total purchase price of $48,573,149 was paid 80% in cash, and the remaining 20% of the purchase price was paid by issuing to InfoWest and Go Fiber 20% of the outstanding equity of FIF St George, LLC. 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 InfoWest and Go Fiber under the Agreement. At any time, InfoWest and Go Fiber have the option, but not the obligation, to sell FIF St George, LLC its entire ownership interest in FIF St George, LLC. FIF St George, LLC would be obligated to purchase the units and pay for the purchase over a three-year period if InfoWest and Go Fiber elect to exercise this option. Subject to the occurrence of certain future events, FIF St George, LLC has the option, but not the obligation, to purchase InfoWest and Go Fiber’s ownership interest in FIF St George, LLC, 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.

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 InfoWest and Go Fiber and fair value allocation benchmarks from similar completed transactions. We are currently in the process of assessing InfoWest and Go Fiber’s documentation of contracts related to customer relationships and operating leases. Additionally, we are in the process of obtaining a final third-party valuation of InfoWest’s tangible and intangible assets, and therefore the initial allocation of the purchase price is subject to refinement.

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

		*InfoWest & Go Fiber*
Assets Acquired
Property, plant and equipment		$	5,570,628
Trade names and trademarks			7,300,000
Customer relationships			17,100,000
Goodwill			18,599,977
Right of use assets			3,155,434
Other			358,614

Total Assets Acquired			52,084,653

Liabilities Assumed
Lease liabilities			3,149,194
Other			362,310

Total Liabilities Assumed			3,511,504

Total		$	48,573,149

InfoWest and Go Fiber’s results of operations for the three month period ended June 30, 2022 are recognized from April 1, 2022, the date of acquisition, through June 30, 2022. During this period, revenues and earnings were $4,043,940 and $818,666, respectively. Acquisition costs, incurred primarily in the fourth quarter of 2021 and the first quarter of 2022, of $746,159 were expensed in professional fees. The intangible assets include customer relationships and trade names and trademarks which have useful lives of ten years and twenty years, respectively.

2021 Acquisitions

During the year ended December 31, 2021, we completed three acquisitions of outdoor advertising businesses and related assets as well as the acquisition of a surety brokerage company. The outdoor advertising businesses were acquired for the purpose of expanding our presence in the outdoor advertising market in the Midwestern United States. The membership units of the surety brokerage company were acquired for the purpose of expanding our presence in the surety and fidelity insurance business in the United States. These acquisitions were accounted for as business combinations under the provisions of ASC 805. A summary of the acquisitions is provided below.

Insurance Acquisition

American Contracting Services

On April 1, 2021, our subsidiary, GIG, acquired 100% of the stock of American Contracting Services, Inc., which we refer to as "ACS," a surety brokerage company located in Ohio, for a purchase price of $3,455,000. The total purchase price consists of $2,225,000 of cash, ten percent of which was held back by GIG and will be disbursed, subject to any claims for indemnification, over an 18-month period, and $1,230,000 in contingent consideration. The fair value of the contingent consideration, classified in other current liabilities in the consolidated balance sheet, is dependent on the probability of ACS achieving certain financial performance targets. The contingent consideration ranges between zero and $1,275,000 and is payable twenty-four months following the closing date. Our purchase price allocation related to ACS includes property, plant and equipment, intangibles, and goodwill of $87,780, $970,000 and $2,605,844, respectively, as well as other net liabilities of $208,624. The intangible assets include customer relationships and trade names and trademarks, each of which have a fifteen year useful life.

2021 Acquisitions

Outdoor Advertising Acquisitions

Thomas Outdoor

On January 26, 2021, our subsidiary, LMO, acquired from Thomas Outdoor Advertising, Inc., 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. Our 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. The intangible assets include customer relationships and permits which have useful lives of fifteen years and ten years, respectively.

Keleher

On November 19, 2021, Link Billboards Oklahoma, LLC, our wholly-owned subsidiary, which we refer to as "LBO", purchased the outdoor advertising assets of Keleher Outdoor Advertising, Inc. and Keleher Enterprises, Inc. (together "Keleher"), based in Bartlesville, OK for a purchase price of $12,220,000. Keleher was founded in 1975 and operates over 600 billboard faces in Oklahoma and southeast Kansas.

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

		*Keleher*
Assets Acquired
Property, plant and equipment		$	3,276,245
Customer relationships			996,000
Permits			179,257
Goodwill			8,065,314
Right of use assets			1,634,263
Other			199,329

Total Assets Acquired			14,350,408

Liabilities Assumed
Lease liabilities			1,634,263
Other			496,145

Total Liabilities Assumed			2,130,408

Total		$	12,220,000

The intangible assets include customer relationships and permits which have useful lives of fifteen years and ten years, respectively.

2021 Acquisitions

Missouri Neon

On December 30, 2021, LBO purchased the outdoor advertising assets of Missouri Neon Outdoor, based in Springfield, MO. At the time of the asset purchase, Missouri Neon Outdoor operated over 800 billboard faces in Missouri, Oklahoma and Arkansas.

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

		*Neon*
Assets Acquired
Property, plant and equipment		$	8,419,759
Customer relationships			1,174,000
Permits			422,177
Goodwill			12,701,472
Right of use assets			4,093,478
Other			205,272

Total Assets Acquired			27,016,158

Liabilities Assumed
Lease liabilities			4,093,478
Other			777,332

Total Liabilities Assumed			4,870,810

Total		$	22,145,348

The intangible assets include customer relationships and permits which have useful lives of fifteen years and ten years, respectively.

Pro Forma Information

The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2021. 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 Six Months Ended*
		*June 30,*								*June 30,*
		*2022*				*2021*				*2022*				*2021*

Revenue		$	25,249,600			$	23,419,291			$	41,542,547			$	38,817,509

Net (Loss) Income Attributable to Common Stockholders		$	(10,436,006	)		$	10,808,261			$	5,866,587			$	95,429,755

Basic Net (Loss) Income per Share		$	(0.35	)		$	0.37			$	0.20			$	3.35

Diluted Net (Loss) Income per Share		$	(0.35	)		$	0.37			$	0.20			$	3.34

Basic Weighted Average Class A and Class B Common Shares Outstanding			29,698,361				29,421,500				29,698,361				28,474,872

Diluted Weighted Average Class A and Class B Common Shares Outstanding			29,698,361				29,492,765				29,761,369				28,545,034

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