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Note 8 - Investments, Including Investments Accounted for Using the Equity Method | 9 Months Ended
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Sep. 30, 2022
Notes to Financial Statements |
Investment [Text Block] | NOTE 8. I NVESTMENTS, INCLUDING INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Short-term Investments Short-term investments consist of certificates of deposit, U.S. Treasury securities, and common stock warrants. The U.S. Treasury securities are held by UCS, classified as held to maturity, mature in less than twelve months, and are reported at amortized cost which approximates fair value. Our common stock warrants of Sky Harbour Group Corporation are measured at fair value, with any unrealized holding gains and losses during the period included in earnings.
|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Certificates of deposit |  | $ | 310,975 |  |  | $ | 310,276 |
U.S. Treasury notes held to maturity |  |  | 4,759,202 |  |  |  | 4,418,719 |
Common stock warrants of Sky Harbour Group Corporation |  |  | 2,837,019 |  |  |  | - |
Total |  | $ | 7,907,196 |  |  | $ | 4,728,995 |
Marketable Equity Securities Our marketable equity securities are publicly traded stocks measured at fair value using quoted prices for identical assets in active markets and classified as Level 1 within the fair value hierarchy. Our marketable equity securities are held by UCS and Boston Omaha. Marketable equity securities as of September 30, 2022 and December 31, 2021 are as follows:
|  |  |  |  |  | Gross |  |  |  |  |
|  |  |  |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gain (Loss) |  |  | Value |
Marketable equity securities, September 30, 2022 |  | $ | 10,920,696 |  |  | $ | 2,413,498 |  |  | $ | 13,334,194 |
Marketable equity securities, December 31, 2021 |  | $ | 20,893,647 |  |  | $ | 49,723,850 |  |  | $ | 70,617,497 |
U.S. Treasury Trading Securities We classify our investments in debt securities that are bought and held principally for the purpose of selling them in the near term as trading securities. Our debt securities classified as trading are carried at fair value in the consolidated balance sheets, with the change in fair value during the period included in earnings. Interest income is recognized at the coupon rate. Debt securities classified as trading as of September 30, 2022 and December 31, 2021 are as follows:
|  |  |  |  |  | Gross |  |  |  |  |
|  |  |  |  |  | Unrealized |  |  | Fair |
|  | Cost |  |  | Gain (Loss) |  |  | Value |
U.S. Treasury trading securities, September 30, 2022 |  | $ | 38,337,604 |  |  | $ | (470,763 | ) |  | $ | 37,866,841 |
U.S. Treasury trading securities, December 31, 2021 |  | $ | 87,541,764 |  |  | $ | 3,140 |  |  | $ | 87,544,904 |
Long-term Investments Long-term investments consist of U.S. Treasury securities and certain equity investments. We have the intent and the ability to hold the U.S. Treasury securities to maturity, which ranges from 2023 to 2024. Our U.S. Treasury securities are stated at amortized cost which approximates fair value and are held by UCS. Long-term investments consist of the following:
|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
U.S. Treasury securities, held to maturity |  | $ | 1,972,606 |  |  | $ | 154,265 |
Preferred stock |  |  | 348,695 |  |  |  | 104,019 |
Voting common stock of CB&T Holding Corporation |  |  | 19,058,485 |  |  |  | 19,058,485 |
Total |  | $ | 21,379,786 |  |  | $ | 19,316,769 |
Equity Investments During May 2018, we invested $19,058,485 in voting common stock of CB&T Holding Corporation, which we refer to as “CB&T,” the privately held parent company of Crescent Bank & Trust. Our investment represents 15.60% of CB&T’s outstanding common stock. CB&T is a closely held corporation, whose majority ownership rests with one family. During January 2018, we exchanged our convertible note receivable from Breezeway Homes, Inc., which we refer to as “Breezeway,” for 31,227 shares of preferred stock. The preferred stock is noncumulative and has a dividend rate of $.2665 per share, should dividends be declared. The preferred stock has one vote per share and is convertible into whole shares of common stock, determined according to the conversion formula contained in Breezeway’s amended and restated articles of incorporation. In addition, our investment provides us with a multi-year right to sell insurance and/or warranty products through Breezeway's software platform to its customers. We reviewed our investments as of September 30, 2022 and concluded that no impairment to the carrying value was required. Investment in Unconsolidated Affiliates We have various investments in equity method affiliates, whose businesses are in real estate, real estate services, private aviation infrastructure, and asset management. Our interest in these affiliates ranges from approximately 16% to 30%. Two of the investments in affiliates, Logic Real Estate Companies, LLC, which we refer to as “Logic”, and 24th Street Holding Company, LLC, having a combined carrying amount of $845,233 as of September 30, 2022, are managed by an entity controlled by a member of our board of directors. Dream Finders Homes, Inc. In late December 2017, we invested $10 million in non-voting common units of Dream Finders Holdings LLC, which we refer to as “DFH”, the parent company of Dream Finders Homes, LLC, a national home builder with operations in Colorado, Florida, Georgia, Maryland, North Carolina, South Carolina, Texas and northern Virginia. During the first quarter of 2020, we obtained additional non-voting shares of DFH which increased our ownership in the company to approximately 5.6%. As a result, we began applying the equity method of accounting for our investment in DFH prospectively from January 1, 2020, the date we obtained the additional shares. On January 20, 2021, Dream Finders Homes, Inc. announced the pricing of its initial public offering of 9,600,000 shares of Class A common stock at the initial public offering price of $13.00 per share. Shares of Class A common stock began trading on the NASDAQ Global Select Market under the symbol “DFH” on Thursday, January 21, 2021. Concurrent with the closing of the initial public offering, all of the outstanding non-voting common units and Series A preferred units of DFH were converted into shares of Class A common stock of Dream Finders Homes, Inc., and all of the outstanding common units of DFH LLC were converted into shares of Class B common stock of Dream Finders Homes, Inc. As a result, our previous equity interest in DFH was converted into 4,681,099 shares of DFH Class A common stock, which are no longer accounted for under the equity method but marked to market each reporting period consistent with the other publicly traded equity securities we hold. In addition, one of our subsidiaries purchased 120,000 shares of DFH Class A common stock at $13.00 per share in the initial public offering. At September 30, 2022, we held 456,328 shares of DFH Class A common stock. 24th Street Fund I & 24th Street Fund II During 2020, we invested a total of $6,000,000 in two funds, 24th Street Fund I, LLC, and 24th Street Fund II, LLC, that are managed by 24th Street Asset Management LLC, a subsidiary of 24th Street Holding Company, LLC, which we currently own approximately 49.9% of both directly and indirectly through our ownership in Logic. The funds focus on opportunities within secured lending and direct investments in commercial real estate. Sky Harbour Group Corporation On September 14, 2021, our subsidiary BOC YAC Funding LLC completed the previously-announced investment of $55 million in Series B Preferred units of Sky Harbour LLC, which we refer to as “SHG.” Following the business combination between Yellowstone Acquisition Company and SHG which occurred on January 25, 2022, these units converted into 5,500,000 shares of Sky Harbour Group Corporation, which we refer to as "Sky Harbour", Class A common stock, at a price of $10 per share. Also, in connection with the business combination, we entered into a subscription agreement with Sky Harbour, pursuant to which Sky Harbour sold to us 4,500,000 shares of Class A common stock at a price of $10 per share, for total cash consideration of $45,000,000. See further discussion within Note 17. The following table is a reconciliation of our investments in equity affiliates as presented in investments in unconsolidated affiliates on our consolidated balance sheets, together with combined summarized financial data related to the unconsolidated affiliates:
|  | September 30, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Beginning of period |  | $ | 61,660,905 |  |  | $ | 20,913,896 |
Additional investment in unconsolidated affiliate |  |  | 45,000,000 |  |  |  | 55,000,000 |
Distributions received |  |  | (436,907 | ) |  |  | (2,251,766 | )
Reclassification of marketable securities to investment in affiliate |  |  | 23,483 |  |  |  | - |
Reclassification of investment in affiliate to marketable securities |  |  | - |  |  |  | (12,880,146 | )
Transfer of interest |  |  | (625,498 | ) |  |  | - |
Gain on retained interest of deconsolidated affiliate |  |  | 10,010,090 |  |  |  | - |
Equity in (loss) income of unconsolidated affiliates |  |  | (852,807 | ) |  |  | 878,921 |
End of period |  | $ | 114,779,266 |  |  | $ | 61,660,905 |
Combined summarized financial data for these affiliates is as follows:
|  | For the Three Months Ended |  |  | For the Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Revenue |  | $ | 6,434,626 |  |  | $ | 7,055,929 |  |  | $ | 19,838,758 |  |  | $ | 24,854,881 |
Gross profit |  |  | 3,100,040 |  |  |  | 2,464,195 |  |  |  | 9,284,767 |  |  |  | 12,467,729 |
(Loss) income from continuing operations |  |  | (5,130,468 | ) |  |  | (2,293,107 | ) |  |  | (15,216,375 | ) |  |  | (4,687,712 | )
Net income (loss) |  |  | 2,319,035 |  |  |  | (2,538,089 | ) |  |  | (6,062,348 | ) |  |  | (6,167,189 | )
Note Receivable from Affiliate On October 2, 2020, we provided an unsecured term loan of $20,000,000 to Dream Finders Holdings, LLC to be used in expanding DFH's footprint in the Southeast United States. The effective interest rate on the term loan was approximately 14% with a scheduled maturity of May 1, 2021. Monthly interest payments began on November 1, 2020 and were scheduled to continue on the first day of each month until May 1, 2021. On January 25, 2021, DFH repaid the note receivable in full including the future scheduled interest payments prior to the maturity of the note. The total prepayment, including future scheduled interest, was $20,567,776.

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