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Note 6 - Business Acquisitions

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

NOTE 6. BUSINESS ACQUISITIONS

2023 Acquisitions

24th Street Asset Management

On May 1, 2023, Boston Omaha Asset Management, LLC, our wholly-owned subsidiary, acquired 100% of the membership interests in 24th Street Asset Management LLC, from the members of 24th Street for cash and BOC Class A common stock valued at $5,016,494 in the aggregate. Prior to the transaction, BOAM indirectly owned 48% of the membership interests of 24th Street.

The consideration consisted of $2,759,072 in cash paid at closing, an additional $1,254,102 in cash subject to holdback, and 45,644 shares of BOC Class A common stock (the “BOC Shares”). In the event that distributions are paid to 24th Street pursuant to 24th Street’s gross profits interest (carried interest) held in certain entities (including the 24th Street Funds), minus certain compensation bonuses payable (such net amount, the “Net Promote Amount”), that exceed $7,226,672 but are less than or equal to $9,635,562, the Sellers will receive, as a release from the Holdback Amount, 52% of such excess, such that if the Net Promote Amount equals $9,635,562 (the “Earn-Out Threshold”), the full Holdback Amount will have been released to the Sellers. Furthermore, to the extent that such Net Promote Amount exceeds the Earn-Out Threshold, the Sellers will receive 25% of the amount of such excess (the “Earn-Out”) until the 24th Street Funds are liquidated or dissolved at which point Sellers’ right to any Earn-Out payment will be extinguished, and the Holdback shall expire.

Our preliminary purchase price allocation related to 24th Street Asset Management includes carried interest and goodwill of $9,110,478 and $536,626, respectively. Because the carried interest represents an intercompany receivable from the 24th Street Funds, which we also consolidate, we eliminate the carried interest balance in consolidation. The purchase price related to 24th Street Asset Management primarily represents our estimate of the carried interest in the 24th Street Funds that the Company will receive if and when the underlying investments in the 24th Street Funds are sold.

Broadband Acquisition

On June 16, 2023, our subsidiary, FIF St. George, acquired from Pro Communication and Construction Services, LLC, which we refer to as “ProComm,” broadband construction equipment and related assets for a purchase price of $2,881,000 paid in cash. The acquisition was completed for the purpose of expanding our broadband presence 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 equipment and permits. Our preliminary purchase price allocation related to ProComm includes property, plant and equipment, intangibles, and goodwill of $844,500, $1,046,000 and $990,500, respectively. The intangible assets primarily include customer relationships which have a useful life of fifteen years.

2022 Acquisitions

During the year ended December 31, 2022, we completed the acquisition of a broadband service provider and its related assets as well as an outdoor advertising business and its related assets. These acquisitions were accounted for as business combinations under the provisions of ASC 805. A summary of the acquisitions is provided below.

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 assumed 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. 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. The 20% interest owned by InfoWest and Go Fiber 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:

		*InfoWest & Go Fiber*
Assets Acquired
Property, plant and equipment		$	5,983,410
Trade names and trademarks			7,300,000
Customer relationships			16,900,000
Goodwill			18,071,004
Right of use assets			3,155,434
Other			358,614

Total Assets Acquired			51,768,462

Liabilities Assumed
Lease liabilities			3,149,194
Other			46,119

Total Liabilities Assumed			3,195,313

Total		$	48,573,149

The intangible assets include customer relationships and trade names and trademarks which have useful lives of ten years and twenty years, respectively.

Elevation

On November 21, 2022, our subsidiary, LMO, purchased the outdoor advertising assets of Elevation Outdoor Advertising, which we refer to as “Elevation,” based in Knoxville, TN for a purchase price of $14,239,257. Elevation was founded in 2002 and operates over 265 billboard faces, including 8 digital displays, in Knoxville and East Tennessee.

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:

		Elevation
Assets Acquired
Property, plant and equipment		$	3,717,734
Customer relationships			2,484,000
Goodwill			8,017,554
Right of use assets			2,098,194
Other			310,794

Total Assets Acquired			16,628,276

Liabilities Assumed
Accounts payable and other			290,825
Lease liabilities			2,098,194

Total Liabilities Assumed			2,389,019

Total		$	14,239,257

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

Pro Forma Information

The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2022. 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,*
		*2023*				*2022*				*2023*				*2022*

Revenue		$	24,548,101			$	22,336,346			$	72,481,170			$	65,641,270

Net (Loss) Income Attributable to Common Stockholders		$	(1,642,506	)		$	(1,106,387	)		$	(3,156,858	)		$	5,359,739

Basic Net (Loss) Income per Share		$	(0.05	)		$	(0.04	)		$	(0.10	)		$	0.18

Diluted Net (Loss) Income per Share		$	(0.05	)		$	(0.04	)		$	(0.10	)		$	0.18

Basic Weighted Average Class A and Class B Common Shares Outstanding			31,370,760				29,698,361				31,021,126				29,698,361

Diluted Weighted Average Class A and Class B Common Shares Outstanding			31,370,760				29,698,361				31,021,126				29,763,333

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