UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021March 31, 2022
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-38113
BOSTON OMAHA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| ||
Delaware |
| 27-0788438 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
1601 Dodge Street, Suite 3300, Omaha, Nebraska 68102
(Address of principal executive offices, Zip Code)
(857) 256-0079
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Class | Trading Symbol | Name of Exchange on Which Registered |
Class A common stock, |
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 28,593,95228,642,801 shares of Class A common stock and 1,055,560 shares of Class B common stock as of November 11, 2021.May 13, 2022.
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED September 30, 2021March 31, 2022
TABLE OF CONTENTS
References in this Quarterly Report on Form 10-Q to “the Company,” “our Company,” “we,” “us,” ”our” and “Boston Omaha” refer to Boston Omaha Corporation and its consolidated subsidiaries, unless otherwise noted.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Consolidated Financial Statements
Unaudited
For the NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
and SUBSIDIARIES
Consolidated Balance Sheets | |||
Unaudited |
ASSETS | ASSETS | ASSETS | ||||||||||||||
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 115,759,021 | $ | 44,665,972 | $ | 86,605,055 | $ | 72,508,528 | ||||||||
Restricted cash | 1,899 | 280,269 | ||||||||||||||
Investments held in trust - special purpose acquisition company | 138,742,756 | 138,716,226 | 0 | 138,760,121 | ||||||||||||
Accounts receivable, net | 4,478,191 | 4,041,563 | 5,153,577 | 4,468,863 | ||||||||||||
Other receivables | 5,808,864 | 0 | ||||||||||||||
Interest receivable | 15,752 | 286,768 | 66,564 | 32,235 | ||||||||||||
Short-term investments | 4,978,644 | 7,050,675 | 16,479,873 | 4,728,995 | ||||||||||||
Note receivable from affiliate | 0 | 20,000,000 | ||||||||||||||
Marketable equity securities | 80,275,103 | 64,036,482 | 47,318,028 | 70,617,497 | ||||||||||||
U. S. Treasury trading securities | 50,997,180 | 37,767,945 | 24,290,092 | 87,544,904 | ||||||||||||
Funds held as collateral assets | 8,553,485 | 10,006,075 | 15,718,591 | 9,185,872 | ||||||||||||
Prepaid expenses | 2,671,059 | 2,197,342 | 3,058,970 | 2,862,913 | ||||||||||||
Total Current Assets | 412,281,954 | 329,049,317 | 198,690,750 | 390,709,928 | ||||||||||||
Property and Equipment, net | 56,224,333 | 48,508,272 | 79,982,007 | 76,455,026 | ||||||||||||
Other Assets: | ||||||||||||||||
Goodwill | 129,357,746 | 124,446,446 | 152,090,748 | 151,336,976 | ||||||||||||
Intangible assets, net | 42,675,946 | 44,373,909 | 43,477,050 | 45,352,052 | ||||||||||||
Investments | 19,316,769 | 19,448,519 | 21,411,080 | 19,316,769 | ||||||||||||
Investments in unconsolidated affiliates | 61,869,228 | 20,913,896 | 112,239,534 | 61,660,905 | ||||||||||||
Deferred policy acquisition costs | 686,189 | 690,555 | 819,292 | 812,898 | ||||||||||||
Right of use assets | 56,125,523 | 52,849,492 | 61,002,721 | 61,252,888 | ||||||||||||
Other | 2,835,539 | 427,020 | 906,986 | 156,351 | ||||||||||||
Total Other Assets | 312,866,940 | 263,149,837 | 391,947,411 | 339,888,839 | ||||||||||||
Total Assets | $ | 781,373,227 | $ | 640,707,426 | $ | 670,620,168 | $ | 807,053,793 |
See accompanying notes to the unaudited consolidated financial statements.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Consolidated Balance Sheets (Continued) | |||
Unaudited |
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY | LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY | LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY | ||||||||||||||
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Current Liabilities: | ||||||||||||||||
Accounts payable and accrued expenses | $ | 8,814,966 | $ | 6,825,081 | $ | 8,423,979 | $ | 25,270,869 | ||||||||
Short-term payables for business acquisitions | 346,041 | 771,916 | 1,166,552 | 1,618,102 | ||||||||||||
Lease liabilities | 4,035,257 | 4,354,664 | 4,600,650 | 4,580,833 | ||||||||||||
Funds held as collateral | 8,553,485 | 10,006,075 | 15,718,591 | 9,185,872 | ||||||||||||
Unearned premiums | 4,739,170 | 3,955,363 | 5,177,851 | 4,912,538 | ||||||||||||
Current maturities of long-term debt | 1,220,005 | 1,282,504 | 1,498,670 | 1,490,427 | ||||||||||||
Deferred underwriting fee payable | 4,759,615 | 4,759,615 | 0 | 4,759,615 | ||||||||||||
Deferred revenue | 2,008,240 | 1,915,031 | 2,437,834 | 2,207,427 | ||||||||||||
Total Current Liabilities | 34,476,779 | 33,870,249 | 39,024,127 | 54,025,683 | ||||||||||||
Long-term Liabilities: | ||||||||||||||||
Asset retirement obligations | 2,161,530 | 2,282,273 | 3,212,657 | 3,162,725 | ||||||||||||
Lease liabilities | 51,196,344 | 47,581,933 | 55,764,702 | 56,032,547 | ||||||||||||
Long-term debt, less current maturities | 20,955,530 | 21,775,146 | 28,115,244 | 28,509,573 | ||||||||||||
Other long-term liabilities | 1,666,824 | 116,104 | 1,549,653 | 1,399,655 | ||||||||||||
Warrants liability | 6,391,482 | 8,431,315 | 0 | 5,576,908 | ||||||||||||
Deferred tax liability | 14,054,017 | 57,000 | 24,700,602 | 17,750,980 | ||||||||||||
Total Liabilities | 130,902,506 | 114,114,020 | 152,366,985 | 166,458,071 | ||||||||||||
Redeemable Noncontrolling Interest | 146,920,362 | 145,027,149 | 5,320,740 | 144,270,503 | ||||||||||||
Stockholders' Equity: | ||||||||||||||||
Preferred stock, $.001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding | 0 | 0 | 0 | 0 | ||||||||||||
Class A common stock, $.001 par value, 38,838,884 shares authorized, 28,520,555 and 26,175,555 shares issued and outstanding, respectively | 28,521 | 26,176 | ||||||||||||||
Class A common stock, $.001 par value, 38,838,884 shares authorized, 28,642,801 shares issued and outstanding | 28,643 | 28,643 | ||||||||||||||
Class B common stock, $.001 par value, 1,161,116 shares authorized, 1,055,560 shares issued and outstanding | 1,056 | 1,056 | 1,056 | 1,056 | ||||||||||||
Additional paid-in capital | 479,387,302 | 424,204,641 | 484,160,054 | 483,855,423 | ||||||||||||
Retained earnings (accumulated deficit) | 24,133,480 | (42,665,616 | ) | |||||||||||||
Retained earnings | 28,742,690 | 12,440,097 | ||||||||||||||
Total Stockholders' Equity | 503,550,359 | 381,566,257 | 512,932,443 | 496,325,219 | ||||||||||||
Total Liabilities, Redeemable Noncontrolling Interest, and Stockholders' Equity | $ | 781,373,227 | $ | 640,707,426 | $ | 670,620,168 | $ | 807,053,793 |
See accompanying notes to the unaudited consolidated financial statements.
and SUBSIDIARIES
Consolidated Statements of Operations | |||||||
Unaudited |
For the Three Months Ended | For the Nine Months Ended | For the Three Months Ended | ||||||||||||||||||||||
September 30, | September 30, | March 31, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Billboard rentals, net | $ | 8,023,065 | $ | 7,121,957 | $ | 23,129,582 | $ | 20,991,755 | $ | 9,138,149 | $ | 7,153,685 | ||||||||||||
Broadband services | 3,773,729 | 1,144,343 | 11,329,220 | 2,575,676 | 4,076,946 | 3,795,037 | ||||||||||||||||||
Premiums earned | 2,031,575 | 2,880,544 | 5,554,297 | 9,538,183 | 2,288,449 | 1,786,564 | ||||||||||||||||||
Insurance commissions | 584,082 | 382,493 | 1,642,962 | 1,065,013 | 697,200 | 400,177 | ||||||||||||||||||
Investment and other income | 85,696 | 77,499 | 226,986 | 338,953 | 92,203 | 69,556 | ||||||||||||||||||
Total Revenues | 14,498,147 | 11,606,836 | 41,883,047 | 34,509,580 | 16,292,947 | 13,205,019 | ||||||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||
Cost of billboard revenues (exclusive of depreciation and amortization) | 2,992,251 | 2,780,359 | 8,927,528 | 8,472,265 | 3,527,372 | 2,861,747 | ||||||||||||||||||
Cost of broadband revenues (exclusive of depreciation and amortization) | 742,082 | 129,414 | 2,352,724 | 379,073 | 910,775 | 756,213 | ||||||||||||||||||
Cost of insurance revenues (exclusive of depreciation and amortization) | 1,029,576 | 1,758,451 | 3,031,391 | 5,367,231 | 1,180,891 | 1,129,210 | ||||||||||||||||||
Employee costs | 4,544,796 | 3,311,885 | 13,312,992 | 9,542,845 | 5,424,220 | 4,242,147 | ||||||||||||||||||
Professional fees | 2,552,762 | 630,604 | 4,670,926 | 2,582,961 | 2,190,597 | 1,093,983 | ||||||||||||||||||
General and administrative | 2,497,301 | 1,649,056 | 7,136,217 | 4,978,443 | 2,579,835 | 2,227,863 | ||||||||||||||||||
Amortization | 1,137,736 | 1,031,805 | 3,508,445 | 3,012,641 | 1,193,193 | 1,165,172 | ||||||||||||||||||
Depreciation | 1,668,984 | 978,672 | 4,066,451 | 2,744,376 | 1,740,071 | 1,146,804 | ||||||||||||||||||
Loss on disposition of assets | 61,478 | 20,751 | 119,904 | 89,685 | ||||||||||||||||||||
(Gain) loss on disposition of assets | (54,203 | ) | 35,567 | |||||||||||||||||||||
Accretion | 32,179 | 36,462 | 96,717 | 105,964 | 49,932 | 32,091 | ||||||||||||||||||
Total Costs and Expenses | 17,259,145 | 12,327,459 | 47,223,295 | 37,275,484 | 18,742,683 | 14,690,797 | ||||||||||||||||||
Net Loss from Operations | (2,760,998 | ) | (720,623 | ) | (5,340,248 | ) | (2,765,904 | ) | (2,449,736 | ) | (1,485,778 | ) | ||||||||||||
Other Income (Expense): | ||||||||||||||||||||||||
Interest income | 24,839 | 104,125 | 645,741 | 884,125 | ||||||||||||||||||||
Dividend income | 106,815 | 106,716 | 322,785 | 967,864 | ||||||||||||||||||||
Equity in income of unconsolidated affiliates | 359,203 | 1,342,826 | 935,488 | 2,406,151 | ||||||||||||||||||||
Other investment income (loss) | (32,990,929 | ) | 2,845,323 | 85,694,668 | (18,717,680 | ) | ||||||||||||||||||
Interest and dividend income | 45,324 | 734,147 | ||||||||||||||||||||||
Equity in (loss) income of unconsolidated affiliates | (3,675,303 | ) | 140,297 | |||||||||||||||||||||
Other investment income | 2,615,323 | 107,308,122 | ||||||||||||||||||||||
Gain recognized on deconsolidation of special purpose acquisition company | 24,977,740 | 0 | ||||||||||||||||||||||
Remeasurement of warrant liability | (1,019,917 | ) | 0 | 2,039,835 | 0 | 1,837,211 | 2,175,824 | |||||||||||||||||
Interest expense | (233,561 | ) | (212,196 | ) | (702,546 | ) | (600,631 | ) | (301,649 | ) | (235,326 | ) | ||||||||||||
Net Income (Loss) Before Income Taxes | (36,514,548 | ) | 3,466,171 | 83,595,723 | (17,826,075 | ) | ||||||||||||||||||
Income tax benefit (provision) | 7,735,913 | 0 | (14,230,999 | ) | 0 | |||||||||||||||||||
Net Income Before Income Taxes | 23,048,910 | 108,637,286 | ||||||||||||||||||||||
Income tax provision | (6,680,139 | ) | (20,517,226 | ) | ||||||||||||||||||||
Net Income (Loss) | (28,778,635 | ) | 3,466,171 | 69,364,724 | (17,826,075 | ) | ||||||||||||||||||
Noncontrolling interest in subsidiary loss (income) | 2,502,541 | (2,500 | ) | (2,565,628 | ) | (42,184 | ) | |||||||||||||||||
Net Income | 16,368,771 | 88,120,060 | ||||||||||||||||||||||
Noncontrolling interest in subsidiary income | (66,178 | ) | (3,682,433 | ) | ||||||||||||||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | (26,276,094 | ) | $ | 3,463,671 | $ | 66,799,096 | $ | (17,868,259 | ) | ||||||||||||||
Net Income Attributable to Common Stockholders | $ | 16,302,593 | $ | 84,437,627 | ||||||||||||||||||||
Basic Net Income (Loss) per Share | $ | (0.89 | ) | $ | 0.13 | $ | 2.32 | $ | (0.71 | ) | ||||||||||||||
Basic Net Income per Share | $ | 0.55 | $ | 3.09 | ||||||||||||||||||||
Diluted Net Income (Loss) per Share | $ | (0.89 | ) | $ | 0.13 | $ | 2.32 | $ | (0.71 | ) | ||||||||||||||
Diluted Net Income per Share | $ | 0.55 | $ | 3.09 | ||||||||||||||||||||
Basic Weighted Average Class A and Class B Common Shares Outstanding | 29,576,115 | 27,231,115 | 28,751,500 | 25,145,700 | 29,698,361 | 27,299,946 | ||||||||||||||||||
Diluted Weighted Average Class A and Class B Common Shares Outstanding | 29,576,115 | 27,271,014 | 28,825,428 | 25,145,700 | 29,765,082 | 27,299,946 |
See accompanying notes to the unaudited consolidated financial statements.
and SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity | ||||||||
Unaudited |
No. of shares | ||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
Beginning Balance, December 31, 2019 | 22,455,100 | 1,055,560 | $ | 22,455 | $ | 1,056 | $ | 367,029,421 | $ | (21,811,947 | ) | $ | 345,240,985 | |||||||||||||||
Offering costs | - | - | 0 | 0 | (2,252 | ) | 0 | (2,252 | ) | |||||||||||||||||||
Decrease in redeemable noncontrolling interest due to redemption | - | - | 0 | 0 | 323,649 | 0 | 323,649 | |||||||||||||||||||||
Net loss attributable to common stockholders, March 31, 2020 | - | - | 0 | 0 | 0 | (24,734,238 | ) | (24,734,238 | ) | |||||||||||||||||||
Ending Balance, March 31, 2020 | 22,455,100 | 1,055,560 | 22,455 | 1,056 | 367,350,818 | (46,546,185 | ) | 320,828,144 | ||||||||||||||||||||
Stock issued for cash | 3,720,455 | 0 | 3,721 | 0 | 59,546,030 | 0 | 59,549,751 | |||||||||||||||||||||
Offering costs | - | - | 0 | 0 | (3,415,071 | ) | 0 | (3,415,071 | ) | |||||||||||||||||||
Net income attributable to common stockholders, June 30, 2020 | - | - | 0 | 0 | 0 | 3,402,308 | 3,402,308 | |||||||||||||||||||||
Ending Balance, June 30, 2020 | 26,175,555 | 1,055,560 | 26,176 | 1,056 | 423,481,777 | (43,143,877 | ) | 380,365,132 | ||||||||||||||||||||
Net income attributable to common stockholders, September 30, 2020 | - | - | 0 | 0 | 0 | 3,463,671 | 3,463,671 | |||||||||||||||||||||
Ending Balance, September 30, 2020 | 26,175,555 | 1,055,560 | $ | 26,176 | $ | 1,056 | $ | 423,481,777 | $ | (39,680,206 | ) | $ | 383,828,803 |
No. of shares | ||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
Beginning Balance, December 31, 2020 | 26,175,555 | 1,055,560 | $ | 26,176 | $ | 1,056 | $ | 424,204,641 | $ | (42,665,616 | ) | $ | 381,566,257 | |||||||||||||||
Offering costs | - | - | - | - | (108,863 | ) | - | (108,863 | ) | |||||||||||||||||||
Increase in redeemable noncontrolling interest | - | - | 0 | 0 | (549,989 | ) | 0 | (549,989 | ) | |||||||||||||||||||
Net income attributable to common stockholders, March 31, 2021 | - | - | - | - | - | 84,437,627 | 84,437,627 | |||||||||||||||||||||
Ending Balance, March 31, 2021 | 26,175,555 | 1,055,560 | $ | 26,176 | $ | 1,056 | $ | 423,545,789 | $ | 41,772,011 | $ | 465,345,032 |
See accompanying notes to the unaudited consolidated financial statements.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity (Continued) | ||||||||
Unaudited |
No. of shares | ||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Total | ||||||||||||||||||||||
Beginning Balance, December 31, 2020 | 26,175,555 | 1,055,560 | $ | 26,176 | $ | 1,056 | $ | 424,204,641 | $ | (42,665,616 | ) | $ | 381,566,257 | |||||||||||||||
Offering costs | - | - | 0 | 0 | (108,863 | ) | 0 | (108,863 | ) | |||||||||||||||||||
Increase in redeemable noncontrolling interest | - | - | 0 | 0 | (549,989 | ) | 0 | (549,989 | ) | |||||||||||||||||||
Net income attributable to common stockholders, March 31, 2021 | - | - | 0 | 0 | 0 | 84,437,627 | 84,437,627 | |||||||||||||||||||||
Ending Balance, March 31, 2021 | 26,175,555 | 1,055,560 | 26,176 | 1,056 | 423,545,789 | 41,772,011 | 465,345,032 | |||||||||||||||||||||
Stock issued for cash | 2,345,000 | - | 2,345 | 0 | 58,622,655 | 0 | 58,625,000 | |||||||||||||||||||||
Offering costs | - | - | 0 | 0 | (3,248,681 | ) | 0 | (3,248,681 | ) | |||||||||||||||||||
Decrease in redeemable noncontrolling interest due to redemption | - | - | 0 | 0 | 706,837 | 0 | 706,837 | |||||||||||||||||||||
Increase in redeemable noncontrolling interest | - | - | 0 | 0 | (45,920 | ) | 0 | (45,920 | ) | |||||||||||||||||||
Net income attributable to common stockholders, June 30, 2021 | - | - | 0 | 0 | 0 | 8,637,563 | 8,637,563 | |||||||||||||||||||||
Ending Balance, June 30, 2021 | 28,520,555 | 1,055,560 | 28,521 | 1,056 | 479,580,680 | 50,409,574 | 530,019,831 | |||||||||||||||||||||
Offering costs | - | - | 0 | 0 | (90,452 | ) | 0 | (90,452 | ) | |||||||||||||||||||
Increase in redeemable noncontrolling interest | - | - | 0 | 0 | (102,926 | ) | 0 | (102,926 | ) | |||||||||||||||||||
Net loss attributable to common stockholders, September 30, 2021 | - | - | 0 | 0 | 0 | (26,276,094 | ) | (26,276,094 | ) | |||||||||||||||||||
Ending Balance, September 30, 2021 | 28,520,555 | 1,055,560 | $ | 28,521 | $ | 1,056 | $ | 479,387,302 | $ | 24,133,480 | $ | 503,550,359 |
No. of shares | ||||||||||||||||||||||||||||
Class A Common Stock | Class B Common Stock | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Total | ||||||||||||||||||||||
Beginning Balance, December 31, 2021 | 28,642,801 | 1,055,560 | $ | 28,643 | $ | 1,056 | $ | 483,855,423 | $ | 12,440,097 | $ | 496,325,219 | ||||||||||||||||
Offering costs | - | - | - | - | (2,551 | ) | - | (2,551 | ) | |||||||||||||||||||
Decrease in redeemable noncontrolling interest | - | - | 0 | 0 | 307,182 | 0 | 307,182 | |||||||||||||||||||||
Net income attributable to common stockholders, March 31, 2022 | - | - | - | - | - | 16,302,593 | 16,302,593 | |||||||||||||||||||||
Ending Balance, March 31, 2022 | 28,642,801 | 1,055,560 | $ | 28,643 | $ | 1,056 | $ | 484,160,054 | $ | 28,742,690 | $ | 512,932,443 | ||||||||||||||||
See accompanying notes to the unaudited consolidated financial statements.
and SUBSIDIARIES
Consolidated Statements of Cash Flows | |||
Unaudited |
For the Nine Months Ended | For the Three Months Ended | |||||||||||||||
September 30, | March 31, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||
Net Income (Loss) | $ | 69,364,724 | $ | (17,826,075 | ) | |||||||||||
Net Income | $ | 16,368,771 | $ | 88,120,060 | ||||||||||||
Adjustments to reconcile net loss to cash provided by operating activities: | ||||||||||||||||
Amortization of right of use assets | 3,295,966 | 2,977,876 | 1,258,464 | 1,115,663 | ||||||||||||
Depreciation, amortization, and accretion | 7,671,614 | 5,862,981 | 2,983,196 | 2,344,067 | ||||||||||||
Deferred income taxes | 13,997,017 | 0 | 6,680,139 | 20,517,226 | ||||||||||||
Loss on disposition of assets | 119,904 | 89,685 | ||||||||||||||
(Gain) Loss on disposition of assets | (54,203 | ) | 35,567 | |||||||||||||
Bad debt expense | 13,981 | 322,483 | 9,886 | 60,183 | ||||||||||||
Gain on deconsolidation - special purpose acquisition company | (24,977,740 | ) | 0 | |||||||||||||
Equity in earnings of unconsolidated affiliates | (935,488 | ) | (2,406,151 | ) | 3,675,303 | (140,297 | ) | |||||||||
Remeasurement of warrant liability | (2,039,835 | ) | 0 | (1,837,211 | ) | (2,175,824 | ) | |||||||||
Other investment (income) loss | (85,694,668 | ) | 18,717,680 | (2,615,323 | ) | (107,308,122 | ) | |||||||||
Changes in operating assets and liabilities exclusive of the effects of business combinations: | ||||||||||||||||
Accounts receivable | (34,060 | ) | 282,094 | (696,784 | ) | 392,013 | ||||||||||
Interest receivable | 271,016 | 391,935 | (34,329 | ) | 277,530 | |||||||||||
Prepaid expenses | (380,893 | ) | (435,830 | ) | (494,414 | ) | (49,284 | ) | ||||||||
Distributions from unconsolidated affiliates | 2,100,010 | 326,144 | 154,143 | 1,598,623 | ||||||||||||
Deferred policy acquisition costs | 4,366 | 1,374,423 | (6,394 | ) | 25,573 | |||||||||||
Other assets | (67,831 | ) | (24,730 | ) | (8,000 | ) | (3,007 | ) | ||||||||
Accounts payable and accrued expenses | 1,216,305 | (40,677 | ) | (15,323,889 | ) | 232,627 | ||||||||||
Lease liabilities | (3,159,047 | ) | (3,082,000 | ) | (1,254,890 | ) | (1,067,943 | ) | ||||||||
Unearned premiums | 783,807 | (3,260,593 | ) | 265,313 | (170,499 | ) | ||||||||||
Deferred revenue | 93,209 | 222,761 | 230,407 | 225,828 | ||||||||||||
Net Cash Provided by Operating Activities | 6,620,097 | 3,492,006 | ||||||||||||||
Net Cash (Used in) Provided by Operating Activities | (15,677,555 | ) | 4,029,984 | |||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||
Payments on short-term payables for business acquisitions | (425,875 | ) | (500 | ) | (451,550 | ) | (407,500 | ) | ||||||||
Principal payments received on note receivable from affiliate | 20,000,000 | 0 | 0 | 20,000,000 | ||||||||||||
Purchase of preferred units of affiliate | (55,000,000 | ) | 0 | |||||||||||||
Business acquisitions, net of cash acquired | (8,020,702 | ) | (12,341,242 | ) | 0 | (6,102,508 | ) | |||||||||
Proceeds from redemption of preferred units | 0 | 12,000,000 | ||||||||||||||
Proceeds from sale of investments - special purpose acquisition company | 130,190,277 | 0 | ||||||||||||||
Investment in unconsolidated affiliate | 0 | (3,175,000 | ) | (45,000,000 | ) | 0 | ||||||||||
Capital expenditures | (11,464,662 | ) | (6,299,968 | ) | (5,993,790 | ) | (2,624,259 | ) | ||||||||
Proceeds from sales of investments | 1,307,562,579 | 420,522,907 | 109,742,332 | 543,408,036 | ||||||||||||
Purchase of investments | (1,242,087,233 | ) | (448,185,708 | ) | (30,496,420 | ) | (518,225,946 | ) | ||||||||
Net Cash Provided by (Used in) Investing Activities | 10,564,107 | (37,479,511 | ) | |||||||||||||
Net Cash Provided by Investing Activities | 157,990,849 | 36,047,823 |
See accompanying notes to the unaudited consolidated financial statements.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued) | |||
Unaudited |
For the Nine Months Ended | For the Three Months Ended | |||||||||||||||
September 30, | March 31, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||
Proceeds from issuance of stock | $ | 58,625,000 | $ | 59,549,751 | ||||||||||||
Proceeds from issuance of long-term debt | 0 | 5,500,000 | ||||||||||||||
Contributions from noncontrolling interest | 0 | 248,229 | ||||||||||||||
Purchase of non-controlling interest in subsidiary | (664,414 | ) | (1,406,409 | ) | ||||||||||||
Collateral release | (1,452,590 | ) | 0 | |||||||||||||
Redemption of non-controlling interest - special purpose acquisition company | $ | (123,068,515 | ) | $ | 0 | |||||||||||
Payment of deferred underwriting fee - special purpose acquisition company | (4,759,615 | ) | 0 | |||||||||||||
Collateral receipt (release) | 6,532,719 | (102,461 | ) | |||||||||||||
Principal payments of long-term debt | (882,115 | ) | (206,998 | ) | (386,086 | ) | (294,375 | ) | ||||||||
Offering costs | (3,447,996 | ) | (3,417,323 | ) | (2,551 | ) | (108,863 | ) | ||||||||
Net Cash Provided by Financing Activities | 52,177,885 | 60,267,250 | ||||||||||||||
Net Cash Used in Financing Activities | (121,684,048 | ) | (505,699 | ) | ||||||||||||
Net Increase in Cash, Cash Equivalents, and Restricted Cash | 69,362,089 | 26,279,745 | 20,629,246 | 39,572,108 | ||||||||||||
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period | 54,952,316 | 16,372,032 | 81,694,400 | 54,952,316 | ||||||||||||
Cash, Cash Equivalents, and Restricted Cash, End of Period | $ | 124,314,405 | $ | 42,651,777 | $ | 102,323,646 | $ | 94,524,424 | ||||||||
Interest Paid in Cash | $ | 697,699 | $ | 585,534 | $ | 282,099 | $ | 232,212 | ||||||||
Income Taxes Paid in Cash | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
See accompanying notes to the unaudited consolidated financial statements.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued) | |||
Supplemental Schedules of Non-cash Investing and Financing Activities | |||
Unaudited |
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2021 | 2020 | |||||||
Increase in redeemable noncontrolling interest of broadband subsidiary | $ | 698,835 | $ | 1,371,249 | ||||
Decrease in redeemable noncontrolling interest of broadband subsidiary due to redemption | (706,837 | ) | 0 | |||||
Contingent consideration associated with business acquisition | 1,230,000 | 0 | ||||||
Payable as consideration for business acquisition | 222,500 | 0 | ||||||
Decrease in redeemable noncontrolling interest of insurance subsidiary due to redemption | 0 | (323,649 | ) |
For the Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
(Decrease) Increase in redeemable noncontrolling interest of broadband subsidiary | $ | (307,182 | ) | $ | 549,989 | |||
See accompanying notes to the unaudited consolidated financial statements.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30,March 31, 2022 and 2021 and 2020
NOTE 1. ORGANIZATION AND BACKGROUND
Boston Omaha was organized on August 11, 2009 with present management taking over operations in February 2015. Our operations include (i) our outdoor advertising business with multiple billboards across Alabama, Arkansas, Florida, Georgia, Illinois, Iowa, Kansas, Missouri, Nebraska, Oklahoma, Nevada, Virginia, West Virginia, and Wisconsin; (ii) our insurance business that specializes in surety bond underwriting and brokerage; (iii) our broadband business that provides high-speed broadband services to its customers, and (iv) our minority investments primarily in real estate services, homebuilding, and banking. Our billboard operations are conducted through our subsidiary, Link Media Holdings, LLC, our insurance operations are conducted through our subsidiary, General Indemnity Group, LLC, and our broadband operations are conducted through our subsidiary, Fiber is Fast, LLC.
We completed an acquisition of an outdoor advertising business and entered the outdoor advertising industry on June 19, 2015. From 2015 through 2021, we have completed eighteentwenty additional acquisitions of outdoor advertising businesses.
On April 20, 2016, we completed an acquisition of a surety bond brokerage business. On December 7, 2016, we acquired a fidelity and surety bond insurance company. From 2017 through 2021, we completed four additional acquisitions of surety brokerage businesses.
On March 10, 2020, we completed the acquisition of a rural broadband internet provider located in Arizona. On December 29, 2020, we completed the acquisition of a second broadband internet provider located in Utah.
In our opinion, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of unaudited consolidated financial position and the unaudited consolidated results of operations for interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the interim unaudited consolidated financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the years ended December 31, 20202021 and 20192020 as reported in our Annual Report on Form 10-K/A,-K, filed with the Securities and Exchange Commission, which we refer to as the “SEC,” on May 24, 2021,March 28, 2022, have been omitted.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
The financial statements of Boston Omaha Corporation include the accounts of the Company and our consolidated subsidiaries, which are comprised of voting interest entities in which we have a controlling financial interest and variable interest entities in which we are the primary beneficiary in accordance with ASC 810, Consolidation. The equity attributable to non-controlling interests in subsidiaries is shown separately in the accompanying consolidated balance sheets. All significant intercompany profits, losses, transactions and balances have been eliminated in consolidation.
Our consolidated subsidiaries at September 30, 2021March 31, 2022 include:
Link Media Holdings, LLC which we refer to as “LMH”
Link Media Alabama, LLC which we refer to as “LMA”
Link Media Florida, LLC which we refer to as “LMF”
Link Media Wisconsin, LLC which we refer to as “LMW”
Link Media Georgia, LLC which we refer to as “LMG”
Link Media Midwest, LLC which we refer to as “LMM”
Link Media Omaha, LLC which we refer to as “LMO”
Link Media Properties, LLC which we refer to as “LMP”
Link Media Southeast, LLC which we refer to as “LMSE”
Link Media Services, LLC which we refer to as “LMS”
Link Billboards Oklahoma, LLC which we refer to as "LBO"
General Indemnity Group, LLC which we refer to as “GIG”
American Contracting Services, Inc. which we refer to as "ACS"
The Warnock Agency, Inc. which we refer to as “Warnock”
United Casualty and Surety Insurance Company which we refer to as “UCS”
Surety Support Services, Inc. which we refer to as “SSS”
South Coast Surety Insurance Services, LLC which we refer to as “SCS”
Boston Omaha Investments, LLC which we refer to as “BOIC”
Boston Omaha Asset Management, LLC which we refer to as “BOAM”
BOAM BFR LLC which we refer to as "BOAM BFR"
BOC DFH, LLC which we refer to as “BOC DFH”
BOC OPS LLC which we refer to as "BOC OPS"
BOC Yellowstone LLC which we refer to as "BOC Yellowstone"
BOC Yellowstone II LLC which we refer to as “BOC Yellowstone II”
BOC YAC Funding LLC which we refer to as "BOC YAC"
Fiber is Fast, LLC which we refer to as "FIF"
FIF AireBeam LLC which we refer to as “AireBeam”
Fiber Fast Homes, LLC which we refer to as "FFH"
FIF Utah LLC which we refer to as “FIF Utah”
Fiber Fast Homes,FIF St George, LLC which we refer to as "FFH"
Yellowstone Acquisition Company which we refer to as "Yellowstone"
American Contracting Services, Inc. which we refer to as "ACS""FIF St George"
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reclassifications
Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current year financial statements.
Revenues
The majority of our advertising revenues are derived from contracts for advertising space on billboard structures and are accounted for under Financial Accounting Standards Board, which we refer to as the “FASB,” Accounting Standards Codification, which we refer to as “ASC,” 606, Revenue from Contracts with Customers.
Premium revenues derived from our insurance operations are subject to ASC 944, Financial Services – Insurance.
Revenue Recognition
Billboard Rentals
We generate revenue from outdoor advertising through the leasing of advertising space on billboards. The terms of the contracts range from less than one month to three years and are generally billed monthly. Revenue for advertising space rental is recognized on a straight-line basis over the term of the contract. Advertising revenue is reported net of agency commissions. Agency commissions are calculated based on a stated percentage applied to gross billing revenue for operations. Payments received in advance of being earned are recorded as deferred revenue.
Another component of billboard rentals consists of production services which include creating and printing advertising copy. Contract revenues for production services are accounted for under ASC 606, Revenue from Contracts with Customers. Revenues are recognized at a point in time upon satisfaction of the contract, which is typically less than one week.
Deferred Revenues
We record deferred revenues when cash payments are received in advance of being earned or when we have an unconditional right to consideration before satisfying our performance obligation. The term between invoicing and when a payment is due is not significant. For certain services we require payment before the product or services are delivered to the customer. The balance of deferred revenue is considered short-term and will be recognized in revenue within twelve months.
Premiums and Unearned Premium Reserves
Premiums written are recognized as revenues based on a pro-rata daily calculation over the respective terms of the policies in-force. The cost of reinsurance ceded is initially written as prepaid reinsurance premiums and is amortized over the reinsurance contract period in proportion to the amount of insurance protection provided. Premiums ceded of $353,813$187,143 and $300,679$152,255 for the ninethree months ended September 30, 2021March 31, 2022 and 20202021, respectively, are included within “Premiums earned” in our consolidated statements of operations.
Commissions
We generate revenue from commissions on surety bond sales and account for commissions under ASC 606. Insurance commissions are earned from various insurance companies based upon our agency agreements with them. We arrange with various insurance companies for the provision of a surety bond for entities that require a surety bond. The insurance company sets the price of the bond. The contract with the insurance company is fulfilled when the bond is issued by the insurance agency on behalf of the insurance company. The insurance commissions are calculated based upon a stated percentage applied to the gross premiums on bonds. Commissions are recognized at a point in time, on a bond-by-bond basis as of the policy effective date and are generally nonrefundable.
Broadband Revenues
Broadband revenue is derived principally from internet services and is recognized on a straight-line basis over the term of the contract in the period the services are rendered. Revenue received or receivable in advance of the delivery of services is included in deferred revenue.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss and Loss Adjustment Expenses
Unpaid losses and loss adjustment expenses represent estimates for the ultimate cost of unpaid reported and unreported claims incurred and related expenses. Estimates for losses and loss adjustment expenses are based on past experience of investigating and adjusting claims and consideration of the level of premiums written during the current and prior year. Since the reserves are based on estimates, the ultimate liability may differ from the estimated reserve. The effects of changes in estimated reserves are included within cost of insurance revenues in our results of operations in the period in which the estimates are updated. The reserves are included within accounts payable and accrued expenses in our consolidated balance sheets.
Variable Interest Entities (VIEs)
We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. Our determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.
We analyze any investments in VIEs to determine if we are the primary beneficiary. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE. Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative approach focused on identifying which reporting entity has both: (i) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.
We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct operating decisions and activities. In addition, we consider the rights of other investors to participate in those decisions. We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion continually. We consolidate any VIE of which we are the primary beneficiary.
Income Taxes
We compute our year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjust the provision for discrete tax items recorded in the period.
Class A Common Stock SubjectThe realization of deferred tax assets, including net operating loss carryforwards, is dependent on the generation of future taxable income sufficient to Possible Redemptionrealize the tax deductions, carryforwards and credits. Valuation allowances on deferred tax assets are recognized if it is determined that it is more likely than not that the asset will not be realized. During the year ended December 31, 2021, we reversed the overall valuation allowance previously recorded against our net deferred tax asset and recorded a valuation allowance against certain deferred tax assets that we have determined are not more-likely-than-not realizable.
As discussed in NotePursuant to Section 17,382 all of the 13,598,898 Class A Common Stock soldInternal Revenue Code of 1986, as partamended, annual use of the Unitsour net operating losses may be limited if it is determined that an ownership shift has occurred. An ownership shift is generally defined as a cumulative change in Yellowstone's Public Offering containequity ownership by ‘‘5% shareholders’’ that exceeds 50 percentage points over a redemption feature which allows for the redemption of such public shares in connection with the Yellowstone's liquidation, if there isrolling three-year period. At this time, a stockholder vote or tender offer in connection with the business combination and in connection with certain amendments to Yellowstone'sSection second382 amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, whichstudy has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subjectbeen performed to redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480.
Yellowstone recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are effected by charges against additional paid in capital and accumulated deficit. Yellowstone's Class A Common Stock subject to redemption is included within "Redeemable Noncontrolling Interest" within our consolidated Balance Sheets.determine if such an ownership shift has occurred.
Warrants Liability
We account for warrants for shares of Yellowstone's common stock that are not indexed to Yellowstone's own stock as liabilities at fair value on the balance sheet. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized in our statement of operations. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the Public Warrants issued in connection with Yellowstone's Public Offering has been measured based on the listed market price of such Warrants (see Note 9).
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 3. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Restricted cash consists of the following:
September 30, | December 31, | |||||||
2021 | 2020 | |||||||
Insurance premium escrow | $ | 0 | $ | 280,269 | ||||
Cash held in trust | 1,899 | 0 | ||||||
Total Restricted Cash | $ | 1,899 | $ | 280,269 |
The following table sets forth a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated statements of cash flows that agrees to the total of those amounts as presented in the consolidated statements of cash flows.
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Cash and cash equivalents | $ | 115,759,021 | $ | 44,665,972 | $ | 86,605,055 | $ | 72,508,528 | ||||||||
Funds held as collateral | 8,553,485 | 10,006,075 | 15,718,591 | 9,185,872 | ||||||||||||
Restricted cash | 1,899 | 280,269 | ||||||||||||||
Total Cash, Cash Equivalents, and Restricted Cash as Presented in the Consolidated Statement of Cash Flows | $ | 124,314,405 | $ | 54,952,316 | $ | 102,323,646 | $ | 81,694,400 |
NOTE 4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Trade accounts | $ | 3,842,133 | $ | 3,537,864 | $ | 4,482,671 | $ | 3,688,116 | ||||||||
Premiums | 785,252 | 832,221 | 779,770 | 901,769 | ||||||||||||
Allowance for doubtful accounts | (149,194 | ) | (328,522 | ) | (108,864 | ) | (121,022 | ) | ||||||||
Total Accounts Receivable, net | $ | 4,478,191 | $ | 4,041,563 | $ | 5,153,577 | $ | 4,468,863 |
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Structures and displays | $ | 45,132,713 | $ | 42,858,525 | $ | 56,740,519 | $ | 56,087,039 | ||||||||
Fiber, towers, and broadband equipment | 17,861,911 | 11,358,650 | 24,512,618 | 20,637,161 | ||||||||||||
Land | 7,196,256 | 7,035,274 | ||||||||||||||
Vehicles and equipment | 3,646,803 | 2,522,810 | 4,883,174 | 4,419,615 | ||||||||||||
Office furniture and equipment | 3,889,367 | 2,150,729 | 4,107,642 | 4,006,032 | ||||||||||||
Accumulated depreciation | (14,306,461 | ) | (10,382,442 | ) | (17,458,202 | ) | (15,730,095 | ) | ||||||||
Total Property and Equipment, net | $ | 56,224,333 | $ | 48,508,272 | $ | 79,982,007 | $ | 76,455,026 |
Depreciation expense for the ninethree months ended September 30, 2021March 31, 2022 and 20202021 was $4,066,451$,1,740,071 and $2,744,376,$1,146,804, respectively. For the ninethree months ended September 30, 2021March 31, 2022 and 20202021, we realized (gains) losses on the disposition of assets in the amount of $119,904($54,203) and $89,685,$35,567, respectively.
NOTE 6. BUSINESS ACQUISITIONS
2021 Acquisitions
During the year ended firstDecember 31, 2021, nine months of 2021,we completed the acquisitionthree acquisitions of billboardoutdoor advertising businesses and related assets located in Kansas 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 locatedwere acquired for the purpose of expanding our presence in Ohio, boththe surety and fidelity insurance business in the United States. These acquisitions were accounted for as a business combinations under the provisions of ASC 805. A summary of the acquisitions is provided below.
BillboardInsurance Acquisition
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. 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. The intangible assets include customer relationships and permits which have useful lives of fifteen years and ten years, respectively.
Insurance AcquisitionAmerican 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","ACS," a surety brokerage company located in Ohio, for a purchase price of $3,455,000. The membership units were acquired for the purpose of expanding our presence in the surety and fidelity insurance business in the United States. The total purchase price consists of $2,225,000 of cash, 10ten percent of which was held back by GIG and will be disbursed, subject to any claims for indemnification, over an 18-month18-month period, and $1,230,000 in contingent consideration. The fair value of the contingent consideration, classified in other long-term 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.
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 ACS and fair value allocation benchmarks from similar completed transactions. We are currently in the process of assessing ACS's documentation of contracts related to customer relationships; and therefore the initial allocation of the purchase price is subject to refinement. Our preliminary purchase price allocation related to ACS includes property, plant and equipment, intangibles, and goodwill of $87,780, $970,000 and $2,339,628,$2,605,844, respectively, as well as other net assetsliabilities of $57,592.$208,624. The intangible assets include customer relationships and trade names and trademarks, each of which have a fifteen year useful life.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 6. BUSINESS ACQUISITIONS (Continued)
20202021 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.
BroadbandOutdoor Advertising Acquisitions
FIF AireBeamThomas Outdoor
On March 10, 2020,January 26, 2021, FIF AireBeam, LLC, our wholly-owned subsidiary, LMO, acquired substantially all of the business assets of FibAire Communications, LLC,from Thomas Outdoor Advertising, Inc., which we refer to as "FibAire",“Thomas,” 238 billboard structures and related assets located in Kansas for a broadband services provider,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 usedof $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 the business operations owned by entities related to FibAire. The acquisition was accountedBartlesville, OK 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$12,220,000. Keleher was paid 90%founded in cash1975 and operates over 600 billboard faces in Oklahoma and southeast Kansas. Due to the remaining 10%timing of the transaction, the initial accounting for the business combination is incomplete. We are still in the process of obtaining and assessing documentation of the contracts for customer relationships and detailed reports for structures and permits. The provisional purchase price was paid by issuing to FibAire 10% ofallocation is based on internal information derived from our previous acquisitions in the outstanding equity of AireBeam. During the second quarter of 2021, we purchased the non-controlling interest in AireBeam from the non-controlling owner for $664,414. The 10% interest previously owned by FibAire is included within "Redeemable Noncontrolling interest" in our consolidated Balance Sheets as of December 31, 2020. Midwestern United States.
The following is a summary of the preliminary allocation of the purchase price, which includes the final fair value allocation of the assets acquired and liabilities assumed:
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 |
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 |
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 6. BUSINESS ACQUISITIONS (Continued)
FIF Utah2021 Acquisitions
Missouri Neon
On December 29, 2020,30, 2021, FIF Utah, our wholly-owned subsidiary, acquired substantially all ofLBO purchased the businessoutdoor advertising assets of Utah Broadband, LLC, a broadband services provider, which we refer to as “UBB”, as well as other assets usedMissouri Neon Outdoor, based 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%Springfield, MO. Missouri Neon Outdoor previously operated over 800 billboard faces in cashMissouri, Oklahoma 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 was 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.
Arkansas. 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 currentlystill in the process of obtaining and assessing UBB’s documentation of the contracts related tofor customer relationships and also assessingdetailed reports for structures and permits. The provisional purchase price allocation is based on internal information derived from our previous acquisitions in the fair valueMidwestern United States.
The following is a summary of the 20% interest issued to UBB; and therefore the initialpreliminary allocation of the purchase price, is subject to refinement.
The purchase was recorded at fair value and allocated as follows:
UBB | ||||
Assets Acquired | ||||
Property, plant and equipment | $ | 7,319,000 | ||
Customer relationships | 6,800,000 | |||
Trade names and trademarks | 1,910,000 | |||
Goodwill | 10,811,000 | |||
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 |
During the third quarter of 2021, measurement-period adjustments were recorded to increasewhich includes the fair value assigned to UBB’s property, plantallocation of the assets acquired and equipment by $1,149,000 and to reduce the values assigned to intangible assets and goodwill by $930,000 and $219,000, respectively. Depreciation and amortization expense were not materially impacted by the change.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 |
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 yearwhich have useful life)lives of fifteen years and trade names and trademarks (twenty year useful life). ten years, respectively.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 6. BUSINESS ACQUISITIONS (Continued)
Pro Forma Information
The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2020.2021. 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 Nine Months Ended | For the Three Months Ended | ||||||||||||||||||||||
September 30, | September 30, | March 31, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
Revenue | $ | 14,498,147 | $ | 15,169,813 | $ | 42,790,250 | $ | 46,201,767 | $ | 16,292,947 | $ | 15,398,218 | ||||||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | (26,276,094 | ) | $ | 4,123,386 | $ | 66,755,499 | $ | (15,668,384 | ) | ||||||||||||||
Net Income Attributable to Common Stockholders | $ | 16,302,593 | $ | 84,621,494 | ||||||||||||||||||||
Basic Net Income (Loss) per Share | $ | (0.89 | ) | $ | 0.15 | $ | 2.32 | $ | (0.62 | ) | ||||||||||||||
Basic Net Income per Share | $ | 0.55 | $ | 3.10 | ||||||||||||||||||||
Diluted Net Income (Loss) per Share | $ | (0.89 | ) | $ | 0.15 | $ | 2.32 | $ | (0.62 | ) | ||||||||||||||
Diluted Net Income per Share | $ | 0.55 | $ | 3.10 | ||||||||||||||||||||
Basic Weighted Average Class A and Class B Common Shares Outstanding | 29,576,115 | 27,231,115 | 28,751,500 | 25,145,700 | 29,698,361 | 27,299,946 | ||||||||||||||||||
Diluted Weighted Average Class A and Class B Common Shares Outstanding | 29,576,115 | 27,271,014 | 28,825,428 | 25,145,700 | 29,765,082 | 27,299,946 |
The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 7. INTANGIBLE ASSETS
Intangible assets consist of the following:
September 30, 2021 | December 31, 2020 | March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Accumulated | Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
Cost | Amortization | Balance | Cost | Amortization | Balance | Cost | Amortization | Balance | Cost | Amortization | Balance | |||||||||||||||||||||||||||||||||||||
Customer relationships | $ | 48,283,484 | $ | (22,943,605 | ) | $ | 25,339,879 | $ | 46,740,483 | $ | (20,558,751 | ) | $ | 26,181,732 | $ | 48,758,977 | $ | (24,399,908 | ) | $ | 24,359,069 | $ | 49,535,976 | $ | (23,611,856 | ) | $ | 25,924,120 | ||||||||||||||||||||
Permits, licenses, and lease acquisition costs | 10,948,673 | (3,159,510 | ) | 7,789,163 | 11,053,673 | (2,412,313 | ) | 8,641,360 | 11,562,131 | (3,676,181 | ) | 7,885,950 | 11,560,896 | (3,413,876 | ) | 8,147,020 | ||||||||||||||||||||||||||||||||
Site location | 849,347 | (235,813 | ) | 613,534 | 849,347 | (193,462 | ) | 655,885 | 849,347 | (264,047 | ) | 585,300 | 849,347 | (250,085 | ) | 599,262 | ||||||||||||||||||||||||||||||||
Noncompetition agreements | 626,000 | (463,884 | ) | 162,116 | 626,000 | (386,934 | ) | 239,066 | 626,000 | (511,866 | ) | 114,134 | 626,000 | (488,134 | ) | 137,866 | ||||||||||||||||||||||||||||||||
Technology | 1,128,000 | (286,296 | ) | 841,704 | 1,128,000 | (212,250 | ) | 915,750 | 1,128,000 | (335,661 | ) | 792,339 | 1,128,000 | (311,250 | ) | 816,750 | ||||||||||||||||||||||||||||||||
Trade names and trademarks | 3,852,200 | (533,739 | ) | 3,318,461 | 3,602,202 | (369,175 | ) | 3,233,027 | 3,852,200 | (646,195 | ) | 3,206,005 | 3,852,200 | (590,575 | ) | 3,261,625 | ||||||||||||||||||||||||||||||||
Nonsolicitation agreement | 28,000 | (28,000 | ) | 0 | 28,000 | (28,000 | ) | 0 | 28,000 | (28,000 | ) | 0 | 28,000 | (28,000 | ) | 0 | ||||||||||||||||||||||||||||||||
Capitalized contract costs | 1,018,600 | (41,833 | ) | 976,767 | 1,018,600 | (16,717 | ) | 1,001,883 | ||||||||||||||||||||||||||||||||||||||||
Easements | 4,611,089 | 0 | 4,611,089 | 4,507,089 | 0 | 4,507,089 | 5,557,486 | 0 | 5,557,486 | 5,463,526 | 0 | 5,463,526 | ||||||||||||||||||||||||||||||||||||
Total | $ | 70,326,793 | $ | (27,650,847 | ) | $ | 42,675,946 | $ | 68,534,794 | $ | (24,160,885 | ) | $ | 44,373,909 | $ | 73,380,741 | $ | (29,903,691 | ) | $ | 43,477,050 | $ | 74,062,545 | $ | (28,710,493 | ) | $ | 45,352,052 |
Future Amortization
The future amortization associated with the intangible assets is as follows:
September 30, | March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | |||||||||||||||||||||||||||||||||||||||||||
Customer relationships | $ | 3,218,366 | $ | 3,218,366 | $ | 3,218,366 | $ | 3,218,366 | $ | 3,218,366 | $ | 9,248,049 | $ | 25,339,879 | $ | 3,193,399 | $ | 3,193,399 | $ | 3,193,399 | $ | 3,193,399 | $ | 3,190,151 | $ | 8,395,322 | $ | 24,359,069 | ||||||||||||||||||||||||||||
Permits, licenses, and lease acquisition costs | 1,002,448 | 1,002,448 | 1,002,448 | 995,796 | 968,813 | 2,817,210 | 7,789,163 | 1,063,793 | 1,063,793 | 1,063,793 | 1,043,647 | 1,017,039 | 2,633,885 | 7,885,950 | ||||||||||||||||||||||||||||||||||||||||||
Site location | 56,623 | 56,623 | 56,623 | 56,623 | 56,623 | 330,419 | 613,534 | 56,623 | 56,623 | 56,623 | 56,623 | 56,623 | 302,185 | 585,300 | ||||||||||||||||||||||||||||||||||||||||||
Noncompetition agreements | 95,208 | 64,903 | 2,005 | 0 | 0 | 0 | 162,116 | 83,451 | 29,843 | 840 | 0 | 0 | 0 | 114,134 | ||||||||||||||||||||||||||||||||||||||||||
Technology | 99,000 | 99,000 | 99,000 | 99,000 | 99,000 | 346,704 | 841,704 | 99,000 | 99,000 | 99,000 | 99,000 | 99,000 | 297,339 | 792,339 | ||||||||||||||||||||||||||||||||||||||||||
Trade names and trademarks | 225,567 | 225,567 | 225,567 | 225,567 | 225,567 | 2,190,626 | 3,318,461 | 225,567 | 225,567 | 225,567 | 225,567 | 209,564 | 2,094,173 | 3,206,005 | ||||||||||||||||||||||||||||||||||||||||||
Capitalized contract costs | 101,860 | 101,860 | 101,860 | 101,860 | 101,860 | 467,467 | 976,767 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 4,697,212 | $ | 4,666,907 | $ | 4,604,009 | $ | 4,595,352 | $ | 4,568,369 | $ | 14,933,008 | $ | 38,064,857 | $ | 4,823,693 | $ | 4,770,085 | $ | 4,741,082 | $ | 4,720,096 | $ | 4,674,237 | $ | 14,190,371 | $ | 37,919,564 |
Amortization expense for the ninethree months ended September 30, 2021March 31, 2022 and 20202021 was $3,508,445$1,193,193 and $3,012,641,$1,165,172, respectively.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 7. INTANGIBLE ASSETS (Continued)
The weighted average amortization period, in months, for intangible assets is as follows:
Customer relationships | ||||
Permits, licenses, and lease acquisition costs | ||||
Site location | ||||
Noncompetition agreements | ||||
Technology | ||||
Trade names and trademarks | ||||
Capitalized contract costs | 115 |
NOTE 8. INVESTMENTS, INCLUDING INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Short-term Investments
Short-term investments consist of certificates of deposit, U.S. Treasury securities, and corporate bonds. Certificates of deposit,common stock warrants. The U.S. Treasury securities and corporate bondsare held by UCS, are classified as held to maturity, mature in less than twelve months, and are reported at amortized cost which approximates fair value. Other corporate bondsOur common stock warrants of Sky Harbour Group Corporation are classified as trading and reportedmeasured at fair value, with any unrealized holding gains and losses during the period included in earnings. For the ninethree months ended September 30, March 31, 2022 and 2021, losses on redemptions of U.S. Treasury securities held to maturity were $63,994. For the nine months ended September 30, 2020, gains on redemptions of U.S. Treasury securities held to maturity were $7,318.$39,763 and $23,904.
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Certificates of deposit | $ | 310,044 | $ | 1,035,827 | $ | 310,505 | $ | 310,276 | ||||||||
Corporate bonds classified as trading | 0 | 1,020,000 | ||||||||||||||
U.S. Treasury notes and corporate bond held to maturity | 4,668,600 | 4,994,848 | ||||||||||||||
U.S. Treasury notes held to maturity | 4,512,502 | 4,418,719 | ||||||||||||||
Common stock warrants of Sky Harbour Group Corporation | 11,656,866 | 0 | ||||||||||||||
Total | $ | 4,978,644 | $ | 7,050,675 | $ | 16,479,873 | $ | 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, 2021March 31, 2022 and December 31, 2020 2021are as follows:
Gross | ||||||||||||
Unrealized | Fair | |||||||||||
Cost | Gain (Loss) | Value | ||||||||||
Marketable equity securities, September 30, 2021 | $ | 31,321,031 | $ | 48,954,072 | $ | 80,275,103 | ||||||
Marketable equity securities, December 31, 2020 | $ | 68,205,548 | $ | (4,169,066 | ) | $ | 64,036,482 |
Gross | ||||||||||||
Unrealized | Fair | |||||||||||
Cost | Gain (Loss) | Value | ||||||||||
Marketable equity securities, March 31, 2022 | $ | 17,774,465 | $ | 29,543,563 | $ | 47,318,028 | ||||||
Marketable equity securities, December 31, 2021 | $ | 20,893,647 | $ | 49,723,850 | $ | 70,617,497 |
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 8. INVESTMENTS, INCLUDING INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (Continued)
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, 2021March 31, 2022 and December 31, 20202021 are as follows:
Gross | ||||||||||||
Unrealized | Fair | |||||||||||
Cost | Gain (Loss) | Value | ||||||||||
U.S. Treasury trading securities, September 30, 2021 | $ | 50,995,742 | $ | 1,438 | $ | 50,997,180 | ||||||
U.S. Treasury trading securities, December 31, 2020 | $ | 37,766,133 | $ | 1,812 | $ | 37,767,945 |
U.S. Treasury Securities held in Trust
Yellowstone's U.S. treasury securities held in the Trust Account 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.
Gross | ||||||||||||
Unrealized | Fair | |||||||||||
Cost | Gain (Loss) | Value | ||||||||||
U.S. Treasury trading securities, March 31, 2022 | $ | 24,444,170 | $ | (154,078 | ) | $ | 24,290,092 | |||||
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 20222023 to 2023.2024. 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, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
U.S. Treasury securities, held to maturity | $ | 154,265 | $ | 286,015 | $ | 2,248,576 | $ | 154,265 | ||||||||
Preferred stock | 104,019 | 104,019 | 104,019 | 104,019 | ||||||||||||
Voting common stock of CBT Holding Corporation | 19,058,485 | 19,058,485 | ||||||||||||||
Voting common stock of CB&T Holding Corporation | 19,058,485 | 19,058,485 | ||||||||||||||
Total | $ | 19,316,769 | $ | 19,448,519 | $ | 21,411,080 | $ | 19,316,769 |
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 8. INVESTMENTS, INCLUDING INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (Continued)
Equity Investments
During May 2018, we invested $19,058,485 in voting common stock of CB&T Holding Corporation, which we refer to as “CBT,“CB&T,” the privately held parent company of Crescent Bank & Trust. Our investment represents 14.99%15.60% of CBT’sCB&T’s outstanding common stock. CBTCB&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 $.2665$.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, 2021March 31, 2022 and concluded that 0 impairment to the carrying value was required.
Investment in Unconsolidated Affiliates
We have various investments in equity method affiliates, whose businesses are in home building, real estate, real estate services, and asset management. Our interest in these affiliates ranges from 5.6% to 49.9%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 $781,970$869,679 as of September 30, 2021March 31, 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.
In May 2019, our subsidiary BOC DFH, LLC invested an additional $12 million in DFH through the purchase of preferred units. DFH was required to pay to us a mandatory preferred return of at least 14% per annum on such preferred units and 25% of our preferred units were convertible, at our option, into non-voting common units after May 29, 2020 and the remaining preferred units were convertible, at our option, into non-voting common units after May 29, 2021. The mandatory 14% preferred return increased if the preferred units purchased were not redeemed or converted within one year of purchase. Also, we obtained additional beneficial conversion terms if the preferred units were not redeemed by May 29, 2021. During 2020, DFH redeemed all $12 million of the preferred units purchased in May 2019.
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 March 31, 2022, we held 1,997,495 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 will focus on opportunities within secured lending and direct investments in commercial real estate.
Sky Harbour LLCGroup 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, (“SHG”). Uponwhich we refer to as “SHG.” Following the successful consummation of the proposed business combination between Yellowstone Acquisition Company and SHG which occurred on January 25, 2022, these units will convertconverted into 5,500,000 shares of the post-combination public company’sSky 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.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 8. INVESTMENTS, INCLUDING INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (Continued)
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, | March 31, | December 31, | |||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Beginning of period | $ | 20,913,896 | $ | 771,805 | $ | 61,660,905 | $ | 20,913,896 | ||||||||
Additional investment in unconsolidated affiliates | 55,000,000 | 16,000,000 | ||||||||||||||
Additional investment in unconsolidated affiliate | 45,000,000 | 55,000,000 | ||||||||||||||
Distributions received | (2,100,010 | ) | (1,433,480 | ) | (154,143 | ) | (2,251,766 | ) | ||||||||
Reclassification of marketable securities to investment in affiliate | 23,483 | 0 | ||||||||||||||
Reclassification of investment in affiliate to marketable securities | (12,880,146 | ) | 0 | 0 | (12,880,146 | ) | ||||||||||
Equity in income of unconsolidated affiliates | 935,488 | 5,575,571 | ||||||||||||||
Transfer of interest | (625,498 | ) | 0 | |||||||||||||
Gain on retained interest of deconsolidated affiliate | 10,010,090 | 0 | ||||||||||||||
Equity in (loss) income of unconsolidated affiliates | (3,675,303 | ) | 878,921 | |||||||||||||
End of period | $ | 61,869,228 | $ | 20,913,896 | $ | 112,239,534 | $ | 61,660,905 |
Combined summarized financial data for these affiliates is as follows:
For the Three Months Ended | For the Nine Months Ended | For the Three Months Ended | ||||||||||||||||||||||
September 30, | September 30, | March 31, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
Revenue | $ | 7,055,929 | $ | 288,403,203 | $ | 24,854,881 | $ | 676,336,442 | $ | 6,612,827 | $ | 9,416,765 | ||||||||||||
Gross profit | 2,464,195 | 44,856,872 | 12,467,729 | 99,618,080 | 3,261,322 | 6,637,948 | ||||||||||||||||||
Income from continuing operations | (2,293,107 | ) | 23,983,417 | (4,687,712 | ) | 41,911,245 | (5,134,293 | ) | 20,713 | |||||||||||||||
Net income | (2,538,089 | ) | 23,429,704 | (6,167,189 | ) | 41,162,122 | (18,695,284 | ) | (453,471 | ) |
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.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 9. FAIR VALUE
The fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three broad levels:
Level 1 — Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs other than quoted prices in active markets that are observable either directly or indirectly, including: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market data and require the reporting entity to develop its own assumptions.
At September 30, 2021March 31, 2022 and December 31, 20202021, our financial instruments included cash, cash equivalents, restricted cash, receivables, marketable securities, investments, accounts payable, and long-term debt. The carrying value of cash, cash equivalents, restricted cash, receivables, and accounts payable approximates fair value due to the short-term nature of the instruments. The fair value of long-term debt is estimated using quoted prices for similar debt (level 2 in the fair value hierarchy). At September 30, 2021, the estimated fair value ofAs our long-term debt was $22,938,150 which exceedsmodified during the carrying amountfourth quarter of $22,175,535.2021, its interest rate is considered to approximate market rates at March 31, 2022. If our debt was measured at fair value within our consolidated balance sheets, it would have been classified as level 2 in the fair value hierarchy.
Warrants
We have determined that the Public Warrants issued in connection with Yellowstone's initial public offering in October 2020 are subject to treatment as a liability. We utilized a binomial lattice modelPrior to value the warrants asdeconsolidation of their issuance date, and subsequently mark themYellowstone which occurred on January 25, 2022, we marked the Public Warrants to market based upon their observable trading price with changes in fair value recognized in the statement of operations. Our re-measurement of the Public Warrants from December 31, 2020January 1, 2022 to September 30,January 25, 2022, and January 1, 2021to March 31, 2021, resulted in a gain of $2,039,835$1,837,211 and $2,175,824, respectively, which is included within "Remeasurement of warrant liability" within our Consolidated Statements of Operations. The Public Warrants were classified as Level 1 as of September 30, 2021 and December 31, 2020.2021.
Following the business combination between Yellowstone Acquisition Company and SHG which occurred on January 25, 2022, we no longer eliminate our investment in the Private Placement Warrants. Our Private Placement warrants related to Sky Harbour are considered level 2 and measured at fair value using observable inputs for similar assets in an active market.
Marketable Equity Securities
During the second quarter of 2021, we removed the discount previously placed on our shares of DFH's Class A Common Stock for the lack of marketability related to our lock-up period pursuant to Rule 144 of the Securities Act of 1933. Our shares of DFH's Class A Common Stock are included within "Marketable equity securities" within our September 30, 2021 Consolidated Balance Sheet.
On an investment life-to-date basis, we have realized net gains on the sale of equity securities within the marketable equity portfolio held at Boston Omaha of approximately $39,000,000.$61,000,000. Of this amount, approximately $34,000,000$15,000,000 and $5,000,000$3,000,000 were realized during the ninethree months ended September 30, 2021March 31, 2022 and 20202021, respectively. These amounts exclude any realized gains on equity securities held within the marketable equity portfolio managed by UCS.
Investments Held in Trust - Special Purpose Acquisition Company
Assets held in the Trust Account related to Yellowstone are comprised of $138,742,756 of marketable U.S. treasury securities, all of which are classified as Level 1 within the fair value hierarchy.
Contingent Consideration associated with Business Combination
The contingent consideration recorded in conjunction with our acquisition of ACS as discussed further in Note 6 was classified as Level 3 in the fair value hierarchy as the calculation is dependent upon projected company specific inputs using a Monte Carlo simulation. In future reporting periods, we will remeasure the estimated fair value of the contingent consideration liability until settled, with subsequent changes in value reported in earnings for the respective period.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 9. FAIR VALUE (Continued)
Marketable Equity Securities, U.S. Treasury Trading Securities, and Corporate Bonds
Marketable equity securities and U.S. Treasury trading securities are reported at fair values. Substantially all of the fair value is determined using observed prices of publicly traded securities, level 1 in the fair value hierarchy.
Total Carrying Amount in Consolidated Balance Sheet September 30, 2021 | Quoted Prices in Active Markets for Identical Assets | Realized Gains and (Losses) | Total Changes in Fair Values Included in Current Period Earnings (Loss) | |||||||||||||
Marketable equity securities and U.S. Treasury trading securities | $ | 131,272,283 | $ | 131,272,283 | $ | 37,854,470 | $ | 47,904,192 |
Total Carrying Amount in Consolidated Balance Sheet March 31, 2022 | Quoted Prices in Active Markets for Identical Assets | Realized Gains and (Losses) | Total Changes in Fair Values Included in Current Period Earnings (Loss) | |||||||||||||
Marketable equity securities and U.S. Treasury trading securities | $ | 71,608,120 | $ | 71,608,120 | $ | 884,303 | $ | 1,770,783 |
NOTE 10. ASSET RETIREMENT OBLIGATIONS
Our asset retirement obligations include the costs associated with the removal of structures, resurfacing of the land and retirement cost, if applicable, related to our outdoor advertising and broadband assets. The following table reflects information related to our asset retirement obligations:
Balance, December 31, 2020 | $ | 2,282,273 | ||||||
Balance, December 31, 2021 | $ | 3,162,725 | ||||||
Additions | 93,775 | 0 | ||||||
Liabilities settled | (311,235 | ) | 0 | |||||
Accretion expense | 96,717 | 49,932 | ||||||
Balance, September 30, 2021 | $ | 2,161,530 | ||||||
Balance, March 31, 2022 | $ | 3,212,657 |
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 11. CAPITAL STOCK
On May 28, 2020, we entered into an underwriting agreement, which we refer to as the “underwriting agreement,” with Wells Fargo Securities, LLC and Cowen and Company, LLC, as joint lead book-running managers for a public offering of 3,200,000 shares, which we refer to as the “firm shares,” of our Class A common stock at a public offering price of $16.00 per share. Under the terms of the underwriting agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 480,000 shares of Class A common stock at the public offering price less underwriting discounts and commissions, which we refer to as the “option shares.” Adam Peterson and Alex Rozek, our Co-Chairmen, together with another member of our board of directors and another employee, purchased, directly or through their affiliates, an aggregate of 39,375 shares of Class A common stock in the offering at the public offering price. On June 2, 2020, we announced the completion of the public offering for a total of 3,680,000 shares, including both the firm shares and all of the option shares issued as a result of the underwriters’ exercise in full of their over-allotment option, resulting in total gross proceeds to us of approximately $58.9 million. We raised this capital to fund the planned expansion of our recently acquired fiber-to-the-home broadband, telecommunication business, to seek to grow our Link billboard business through the acquisitions of additional billboard businesses, and for general corporate purposes. We did not have current agreements, commitments or understandings for any specific material acquisitions at that time. The shares were sold in the offering pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-222853) that was declared effective on February 9, 2018, as supplemented by a prospectus supplement dated May 28, 2020.
On March 30, 2021, we filed a new shelf registration statement on Form S-3ASR (Registration No. 333-254870) which was effective upon filing with the SEC. We may, from time to time,This shelf registration expired in oneMarch 2022 or more offerings, offer and sell Class A common stock or preferred stock, various series of debt securities and/or warrants. Thewe have subsequently filed a new shelf registration statementin mayApril 2022, also be usedwhich was declared effective by the SEC on oneMay 11, 2022, as described in Note 18. or more selling security holders, to be identified in the future, of our securities. We or any selling security holders may offer these securities from time to time in amounts, at prices and on terms determined at the time of offering. We may sell these securities to or through one or more underwriters, dealers or agents or directly to purchasers on a delayed or continuous basis. Unless otherwise set forth in an applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities that we offer for general corporate purposes, including, but not limited to, financing our existing businesses and operations, and expanding our businesses and operations through additional hires, strategic alliances and acquisitions. Unless otherwise set forth in a prospectus supplement, we will not receive any proceeds from the sale of securities by any selling stockholders.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 11. CAPITAL STOCK (Continued)
On April 6, 2021, we sold 2,645,000 shares of our Class A common stock, par value $.001 per share, at a price of $25.00 per share, of which 2,345,000 shares were sold by us through Wells Fargo Securities acting as the sole book running manager of the public offering. Shares sold included 345,000 shares issued as a result of the underwriters’ exercise in full of their option to purchase additional shares, and 300,000 shares were sold by a selling stockholder. The offering resulted in total gross proceeds to us of $58,625,000. We did not receive any of the proceeds from the sale of shares by the selling stockholder. The compensation to Wells Fargo Securities for sales of Class A common stock sold pursuant to the Sales Agreement was an amount equal to 5.5% of the gross proceeds. Net proceeds to us after underwriting commissions were $55,400,625. Other offering costs incurred were $133,169. The shares were sold in the offering pursuant to an automatically effective shelf registration statement that was filed with the SEC on March 30, 2021.
At September 30, 2021March 31, 2022, there were 104,772 outstanding warrants for our Class B common stock and 784 outstanding warrants for our Class A common stock. Each share of Class B common stock is identical to the Class A common stock in liquidation, dividend and similar rights. The only differences between our Class B common stock and our Class A common stock is that each share of Class B common stock has 10 votes for each share held, while the Class A common stock has a single vote per share, and certain actions cannot be taken without the approval of the holders of the Class B common stock.
A summary of warrant activity for the ninethree months ended September 30, March 31, 2022 and 2021is presented in the following table.
Shares Under Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value of Vested Warrants | Shares Under Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value of Vested Warrants | |||||||||||||||||||||||||
Outstanding as of December 31, 2020 | 105,556 | $ | 9.95 | 4.50 | $ | 1,868,341 | ||||||||||||||||||||||||||
Outstanding as of December 31, 2021 | 105,556 | $ | 9.95 | 3.50 | $ | 1,982,342 | ||||||||||||||||||||||||||
Issued | 0 | 0 | ||||||||||||||||||||||||||||||
Exercised | 0 | 0 | ||||||||||||||||||||||||||||||
Expired | 0 | 0 | ||||||||||||||||||||||||||||||
Outstanding as of September 30, 2021 | 105,556 | $ | 9.95 | 3.75 | $ | 3,043,179 | ||||||||||||||||||||||||||
Outstanding as of March 31, 2022 | 105,556 | $ | 9.95 | 3.25 | $ | 1,627,674 |
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 12. LONG-TERM DEBT
On August 12, 2019, Link Media Holdings, Inc., (“Link”), a wholly owned subsidiary of Boston Omaha Corporation (“BOC”), which owns and operates BOC’s billboard businesses, entered into a Credit Agreement (the “Credit Agreement”) with First National Bank of Omaha (the “Lender”) under which Link could borrow up to $23,560,000 under the term loan portion of the facility and $5,000,000 under the revolving credit line of the facility (the “Credit Facility”). The Credit Agreement provides for an initial term loan (“Term Loan 1”), an incremental term loan (“Term Loan 2”) and a revolving line of credit. These loans are secured by all assets of Link and its operating subsidiaries, including a pledge of equity interests inof each of Link’s subsidiaries. In addition, each of Link’s subsidiaries has joined as a guarantor to the obligations under the Credit Agreement. These loans are not guaranteed by BOC or any of BOC’s non-billboard businesses.
As ofOn September 30,December 6, 2021,, Link has borrowed $18,060,000 through Term Loan 1 and $5,500,000 through Term Loan 2 underentered into a Fourth Amendment to the Credit Facility. PrincipalAgreement with the Lender which modified the original Credit Agreement by merging all outstanding principal amounts under each ofboth Term Loan 1 and Term Loan 2 into one term loan (the "Term Loan") having a fixed interest rate of 4.00% per annum, and increasing the total Term Loan borrowing limit to $30,000,000.
As of March 31, 2022, Link has borrowed $30,000,000 through the Term Loan under the Credit Facility. Principal amounts under the Term Loan are payable in monthly installments according to a 15-year amortization schedule. These principalPrincipal payments commenced on July 1, 2020 for amounts previously borrowed under Term Loan 1 and October 1, 2020 for amounts previously borrowed under Term Loan 2. Both term loans areThe Term Loan is payable in full on August 12, 2026. December 6, 2028.Term Loan 1 and Term Loan 2 have fixed interest rates of 4.25% and 3.375%, respectively, per annum.
The revolving line of credit loan facility has a $5,000,000 maximum availability. Interest payments are based on the30-day U.S. Prime Rate minus an applicable margin ranging between 0.65% and 1.15% dependent on Link’s consolidated leverage ratio. The revolving line of credit is due and payable on August 12, 20232023..
Long-term debt included within our consolidated balance sheet as of September 30, 2021March 31, 2022 consists of Term Loan 1 and Term Loan 2borrowings of $22,175,535,$29,613,914, of which $1,220,005$1,498,670 is classified as current. There were 0 amounts outstanding related to the revolving line of credit as of September 30, 2021March 31, 2022.
During the term of the Credit Facility, Link is required to comply with the following financial covenants: A consolidated leverage ratio for any test period ending on the last day of any fiscal quarter of Link (a) beginning with the fiscal quarter ended December 31, 20192021 of not greater than 3.50 to 1.00, (b) beginning with the fiscal quarter endedending December 31, 20202022 of not greater than 3.25 to 1.00, and (c) beginning with the fiscal quarter ending December 31, 20212023 and thereafter, of not greater than 3.00 to 1.0;1.0, and a minimum consolidated fixed charge coverage ratio of not less than 1.15 to 1.00 measured quarterly, based on a rolling four quarters, with testing that commenced as of December 31, 2019 based on the December 31, 2019 audited financial statements.quarters. The Company was in compliance with these covenants as of September 30, 2021March 31, 2022.
The Credit Agreement includes representations and warranties, reporting covenants, affirmative covenants, negative covenants, financial covenants and events of default customary for financings of this type. Upon the occurrence of an event of default the Lender may accelerate the loans. Upon the occurrence of certain insolvency and bankruptcy events of default the loans will automatically accelerate.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 13. LEASES
We enter into operating lease contracts primarily for land and office space. Arrangements are evaluated at inception to determine whether such arrangements contain a lease. Operating leases include land lease contracts and contracts for the use of office space.
Right of use assets, which we refer to as “ROU assets,” represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term.
Certain of our operating lease agreements include rental payments based on a percentage of revenue and others include rental payments adjusted periodically for inflationary changes. Percentage rent contracts, in which lease expense is calculated as a percentage of advertising revenue, and payments due to changes in inflationary adjustments are included within variable rent expense, which is accounted for separately from periodic straight-line lease expense.
Many of our leases entered into in connection with land provide options to extend the terms of the agreements. Generally, renewal periods are included in minimum lease payments when calculating the lease liabilities as, for most leases, we consider exercise of such options to be reasonably certain. As a result, optional terms and payments are included within the lease liability. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The implicit rate within our lease agreements is generally not determinable. As such, we use the incremental borrowing rate, which we refer to as "IBR," to determine the present value of lease payments at the commencement of the lease. The IBR, as defined in ASC 842, is "the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment."
Operating Lease Cost
Operating lease cost for the three and ninemonths ended September 30, 2021March 31 is as follows:
For the Three Months Ended | For the Nine Months Ended | For the Three Months Ended | ||||||||||||||||||||||||
September 30, | September 30, | March 31, | ||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | Statement of Operations Classification | 2022 | 2021 | Statement of Operations Classification | |||||||||||||||||||
Lease cost | $ | 1,675,707 | $ | 1,574,042 | $ | 5,196,936 | $ | 4,758,399 | Cost of billboard revenues and general and administrative | $ | 1,937,096 | $ | 1,747,633 | Cost of billboard revenues and general and administrative | ||||||||||||
Variable and short-term lease cost | 131,409 | 41,865 | 413,555 | 328,610 | Cost of billboard revenues and general and administrative | 331,028 | 97,046 | Cost of billboard revenues and general and administrative | ||||||||||||||||||
Total Lease Cost | $ | 1,807,116 | $ | 1,615,907 | $ | 5,610,491 | $ | 5,087,009 | $ | 2,268,124 | $ | 1,844,679 |
Supplemental cash flow information related to operating leases is as follows:
For the Three Months Ended | For the Nine Months Ended | For the Three Months Ended | ||||||||||||||||||||||
September 30, | September 30, | March 31, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | |||||||||||||||||||
Cash payments for operating leases | $ | 1,507,763 | $ | 1,477,218 | $ | 5,060,018 | $ | 4,862,521 | $ | 1,933,522 | $ | 1,699,913 | ||||||||||||
New operating lease assets obtained in exchange for operating lease liabilities | $ | 74,915 | $ | 79,451 | $ | 7,978,907 | $ | 744,397 | $ | 622,600 | $ | 7,553,810 |
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 13. LEASES (Continued)
Operating Lease Assets and Liabilities
September 30, 2021 | December 31, 2020 | Balance Sheet Classification | March 31, 2022 | December 31, 2021 | Balance Sheet Classification | |||||||||||||
Lease assets | $ | 56,125,523 | $ | 52,849,492 | Other Assets: Right of use assets | $ | 61,002,721 | $ | 61,252,888 | Other Assets: Right of use assets | ||||||||
Current lease liabilities | $ | 4,035,257 | $ | 4,354,664 | Current Liabilities: Lease liabilities | $ | 4,600,650 | $ | 4,580,833 | Current Liabilities: Lease liabilities | ||||||||
Noncurrent lease liabilities | 51,196,344 | 47,581,933 | Long-term Liabilities: Lease liabilities | 55,764,702 | 56,032,547 | Long-term Liabilities: Lease liabilities | ||||||||||||
Total Lease Liabilities | $ | 55,231,601 | $ | 51,936,597 | $ | 60,365,352 | $ | 60,613,380 |
Maturity of Operating Lease Liabilities
September 30, 2021 | March 31, 2022 | |||||||
2022 | $ | 6,448,076 | ||||||
2023 | 6,216,628 | $ | 7,201,274 | |||||
2024 | 5,788,790 | 6,896,769 | ||||||
2025 | 5,482,027 | 6,338,157 | ||||||
2026 | 5,269,527 | 6,146,683 | ||||||
2027 | 5,773,220 | |||||||
Thereafter | 54,161,535 | 58,423,734 | ||||||
Total lease payments | 83,366,583 | 90,779,837 | ||||||
Less imputed interest | (28,134,982 | ) | (30,414,485 | ) | ||||
Present Value of Lease Liabilities | $ | 55,231,601 | $ | 60,365,352 |
As of September 30, 2021March 31, 2022, our operating leases have a weighted-average remaining lease term of 17.5817.64 years and a weighted-average discount rate of 4.67%4.64%.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 14. INDUSTRY SEGMENTS
This summary presents our current segments, as described below.
General Indemnity Group, LLC
GIG conducts our insurance operations through its subsidiaries, Warnock, SSS, SCS, ACS and UCS. SSS clients are multi-state and UCS, SCS, ACS and Warnock clients are nationwide. Revenue consists of surety bond sales and insurance commissions. Currently, GIG’s corporate resources are used to support Warnock, SSS, SCS, ACS and UCS and to make additional business acquisitions in the insurance industry.
Link Media Holdings, LLC
LMH conducts our billboard rental operations. LMH billboards are located in Alabama, Arkansas, Florida, Georgia, Illinois, Iowa, Kansas, Missouri, Nebraska, Nevada, Oklahoma, Virginia, West Virginia, and Wisconsin.
Fiber is Fast, LLC
FIF conducts our broadband operations. FIF provides high-speed broadband services to its customers located in Arizona, Florida and Utah.
Total | Total | |||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2021 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2022 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||||||||||||||||||||||
Revenue | $ | 2,701,353 | $ | 8,023,065 | $ | 3,773,729 | $ | 0 | $ | 14,498,147 | $ | 3,077,852 | $ | 9,138,149 | $ | 4,076,946 | $ | 0 | $ | 16,292,947 | ||||||||||||||||||||
Segment gross profit | 1,671,777 | 5,030,814 | 3,031,647 | 0 | 9,734,238 | 1,896,961 | 5,610,777 | 3,166,171 | 0 | 10,673,909 | ||||||||||||||||||||||||||||||
Segment income (loss) from operations | (358,963 | ) | 973,146 | 54,240 | (3,429,421 | ) | (2,760,998 | ) | (194,182 | ) | 1,009,980 | (423,701 | ) | (2,841,833 | ) | (2,449,736 | ) | |||||||||||||||||||||||
Capital expenditures | 0 | 374,419 | 2,147,334 | 2,239,461 | 4,761,214 | 105,147 | 799,241 | 5,080,919 | 160,983 | 6,146,290 | ||||||||||||||||||||||||||||||
Depreciation and amortization | 54,865 | 1,771,135 | 953,437 | 27,283 | 2,806,720 | 54,865 | 1,993,795 | 857,567 | 27,037 | 2,933,264 |
Total | Total | |||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2021 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||||||||||||||||||||||
Revenue | $ | 3,340,536 | $ | 7,121,957 | $ | 1,144,343 | $ | 0 | $ | 11,606,836 | $ | 2,256,297 | $ | 7,153,685 | $ | 3,795,037 | $ | 0 | $ | 13,205,019 | ||||||||||||||||||||
Segment gross profit | 1,582,085 | 4,341,598 | 1,014,929 | 0 | 6,938,612 | 1,127,087 | 4,291,938 | 3,038,824 | 0 | 8,457,849 | ||||||||||||||||||||||||||||||
Segment income (loss) from operations | (100,811 | ) | 323,815 | 26,600 | (970,227 | ) | (720,623 | ) | (787,487 | ) | 106,049 | 777,426 | (1,581,766 | ) | (1,485,778 | ) | ||||||||||||||||||||||||
Capital expenditures | 0 | 604,990 | 1,400,310 | 160,215 | 2,165,515 | 0 | 6,563,517 | 2,040,190 | 123,059 | 8,726,766 | ||||||||||||||||||||||||||||||
Depreciation and amortization | 129,497 | 1,671,045 | 209,935 | 0 | 2,010,477 | 40,378 | 1,697,028 | 559,755 | 14,815 | 2,311,976 |
Total | ||||||||||||||||||||
Nine Months Ended September 30, 2021 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||
Revenue | $ | 7,424,245 | $ | 23,129,582 | $ | 11,329,220 | $ | 0 | $ | 41,883,047 | ||||||||||
Segment gross profit | 4,392,854 | 14,202,054 | 8,976,496 | 0 | 27,571,404 | |||||||||||||||
Segment income (loss) from operations | (1,578,567 | ) | 1,945,573 | 1,320,097 | (7,027,351 | ) | (5,340,248 | ) | ||||||||||||
Capital expenditures | 3,044,246 | 7,777,058 | 7,203,743 | 2,912,817 | 20,937,864 | |||||||||||||||
Depreciation and amortization | 151,358 | 5,224,098 | 2,132,012 | 67,428 | 7,574,896 |
Total | ||||||||||||||||||||
Nine Months Ended September 30, 2020 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||
Revenue | $ | 10,942,149 | $ | 20,991,755 | $ | 2,575,676 | $ | 0 | $ | 34,509,580 | ||||||||||
Segment gross profit | 5,574,918 | 12,519,490 | 2,196,603 | 0 | 20,291,011 | |||||||||||||||
Segment income (loss) from operations | 14,841 | 277,440 | 423,435 | (3,481,620 | ) | (2,765,904 | ) | |||||||||||||
Capital expenditures | 0 | 3,760,171 | 16,252,283 | 160,215 | 20,172,669 | |||||||||||||||
Depreciation and amortization | 413,693 | 4,960,939 | 382,385 | 0 | 5,757,017 |
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 14. INDUSTRY SEGMENTS (Continued)
Total | ||||||||||||||||||||||||||||||||||||||||
As of September 30, 2021 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||||||||||||||||||||||
As of March 31, 2022 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||||||||||||||||||||||
Accounts receivable, net | $ | 1,597,855 | $ | 2,621,865 | $ | 258,471 | $ | 0 | $ | 4,478,191 | $ | 1,433,915 | $ | 3,528,242 | $ | 191,420 | $ | 0 | $ | 5,153,577 | ||||||||||||||||||||
Goodwill | 11,058,922 | 100,363,666 | 17,935,158 | 0 | 129,357,746 | 11,325,138 | 121,130,452 | 19,635,158 | 0 | 152,090,748 | ||||||||||||||||||||||||||||||
Total assets | 56,115,005 | 226,389,587 | 69,209,029 | 429,659,606 | 781,373,227 | 62,797,839 | 275,751,252 | 70,944,374 | 261,126,703 | 670,620,168 |
Total | Total | |||||||||||||||||||||||||||||||||||||||
As of December 31, 2020 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||||||||||||||||||||||
As of December 31, 2021 | GIG | LMH | FIF | Unallocated | Consolidated | |||||||||||||||||||||||||||||||||||
Accounts receivable, net | $ | 1,160,424 | $ | 2,633,711 | $ | 247,428 | $ | 0 | $ | 4,041,563 | $ | 1,495,664 | $ | 2,770,428 | $ | 202,771 | $ | 0 | $ | 4,468,863 | ||||||||||||||||||||
Goodwill | 8,719,294 | 97,572,994 | 18,154,158 | 0 | 124,446,446 | 11,058,922 | 120,642,896 | 19,635,158 | 0 | 151,336,976 | ||||||||||||||||||||||||||||||
Total assets | 54,536,523 | 219,607,150 | 48,496,371 | 318,067,382 | 640,707,426 | 57,150,042 | 276,266,829 | 69,113,699 | 404,523,223 | 807,053,793 |
NOTE 15. RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses ("LAE") for the ninethree months ended September 30:March 31:
2021 | 2020 | 2022 | 2021 | |||||||||||||
Losses and LAE at January 1 | $ | 2,492,334 | $ | 1,203,493 | $ | 1,381,526 | $ | 2,492,334 | ||||||||
Provision for losses and LAE claims arising in: | ||||||||||||||||
Current year | 693,750 | 1,182,651 | 201,795 | 249,778 | ||||||||||||
Prior year | 578,302 | 1,054,890 | 535,001 | 340,087 | ||||||||||||
Total incurred | 1,272,052 | 2,237,541 | 736,796 | 589,865 | ||||||||||||
Losses and LAE payments for claims arising in: | ||||||||||||||||
Current year | 1,065,955 | 594,600 | 33,550 | 228,305 | ||||||||||||
Prior years | 691,410 | 431,821 | 193,766 | 310,553 | ||||||||||||
Total payments | 1,757,365 | 1,026,421 | 227,316 | 538,858 | ||||||||||||
Losses and LAE at September 30 | $ | 2,007,021 | $ | 2,414,613 | ||||||||||||
Less reinsurance recoverable | 315,000 | 0 | ||||||||||||||
Losses and LAE at March 31 | $ | 1,576,006 | $ | 2,543,341 |
For the ninethree months ended September 30, 2021March 31, 2022, $691,410$193,766 was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There has been a $489,424 favorable$24,526 unfavorable prior year development during the ninethree months ended September 30, 2021March 31, 2022. Reserves remaining as of September 30, 2021March 31, 2022 for prior years are $578,302$535,001 as a result of re-estimation of unpaid losses and loss adjustment expenses. For the ninethree months ended September 30, 2020March 31, 2021, , $431,821$310,553 was paid for incurred claims and claim adjustment expenses attributable to insured events of prior years. There was a $80,600$190,553 unfavorable prior year development during the ninethree months ended September 30, 2020March 31, 2021. .
Reserves remaining as of September 30, 2020March 31, 2021 for prior years were $1,054,890$340,087 as a result of re-estimation of unpaid losses and loss adjustment expenses. In both periods, the prior years' loss development was the result of a re-estimation of amounts ultimately to be paid on prior year losses and loss adjustment expense. Original estimates are increased or decreased as additional information becomes known regarding individual claims. Reinsurance recoverables were $315,000 as of March 31, 2022. At September 30,March 31, 2021, we did not have any reinsurance recoverables recorded. Reinsurance recoverables were $120,000 as of September 30, 2020.
NOTE 16. CUSTODIAL RISK
As of September 30, 2021March 31, 2022, we had approximately $92,800,945$97,626,437 in excess of federally insured limits on deposit with financial institutions.
BOSTON OMAHA CORPORATION
and SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the NineThree Months Ended September 30, 2021March 31, 2022 and 20202021
NOTE 17. SPECIAL PURPOSE ACQUISITION COMPANY
In October 2020, our subsidiary BOC Yellowstone LLC, which we refer to as “BOC Yellowstone,” served as sponsor for the underwritten initial public offering of a special purpose acquisition company named Yellowstone Acquisition Company, which we refer to as “Yellowstone.” Yellowstone sold in its public offering 13,598,898 units at a price of $10.00 per unit, each unit consisting of one share of Class A common stock and a redeemable warrant to purchase one-half of a share of Class A common stock at an exercise price of $11.50 per share. Between August and November 2020, we invested, through BOC Yellowstone, approximately $7.8 million through the purchase of 3,399,724 shares of Class B common stock and 7,719,779 non-redeemable private placement warrants, each warrant entitling us to purchase 1 share of Class A common stock at $11.50 per share. BOC Yellowstone, as the sponsor of Yellowstone and under the terms of the public offering, ownsowned approximately 20% of Yellowstone's issued and outstanding common stock. The purpose of the offering iswas to pursue a business combination in an industry other than the three industries in which we currently own and operate businesses: outdoor advertising, surety insurance and broadband services businesses. Yellowstone allows us to pursue a minority interest in larger companies in other industries without diluting the equity interests of our Boston Omaha shareholders. Yellowstone is currently focusing on acquisition candidates in the homebuilding, home materials, financial services and commercial real estate management industries but is also able to pursue acquisition opportunities in other industries. The Units were sold at a price of $10.00 per unit, generating gross proceeds to Yellowstone of $125,000,000, and tradetraded on the NASDAQ Stock Market, LLC under the ticker symbol “YSACU”. After the securities comprising the units began separate trading, the shares of Class A common stock and warrants were listed on NASDAQ under the symbols “YSAC” and “YSACW,” respectively.
On November 16, 2020, BOC Yellowstone transferred to BOC Yellowstone II LLC, which we refer to as “BOC Yellowstone II”, 206,250 shares of Class B common stock for no consideration. All other shares of Class B common stock are owned by BOC Yellowstone. BOC Yellowstone sold to the lead investor in Yellowstone’s IPO a membership interest in BOC Yellowstone II for a purchase price of $309,375. Upon the completion of any business combination, BOC Yellowstone has agreed to transfer the 206,250 shares of Class B common stock to this investor. Any Class B common stock ultimately distributed to the investor is subject to all restrictions imposed on BOC Yellowstone, including but not limited to, waiver of redemption rights in connection with completion of any initial business combination and rights to liquidating distributions from Yellowstone's trust account if Yellowstone fails to complete an initial business combination. Any shares held by such investor will be subject to the anti-dilution provisions for the Class B common stock and the impact thereof. BOC Yellowstone is the sole managing member of BOC Yellowstone II.
On August 1, 2021, Yellowstone entered into a business combination agreement with Sky Harbour LLC (“SHG”), a developer of private aviation infrastructure focused on building, leasing and managing business aviation hangars. Upon closing of the business combination, which is subject to a number of closing conditions, including but limited to approval of the transaction by Yellowstone’s shareholders, SHG will become a publicly traded company, and it is expected that its common stock will be listed on the NASDAQ exchange. It is currently anticipated that the combined company will have an implied pro forma equity market value of approximately $777 million at closing, assuming none of Yellowstone’s public shareholders request that their shares be redeemed.
On September 14, 2021, our subsidiary BOC YAC Funding LLC completed the previously-announced investment of $55 million in Series B Preferred unitsUnits of SHG. Upon the successful consummation of the business combination, these units will convert into 5,500,000 shares of the post-combination public company’s Class A common stock, at a price of $10 per share. In addition, the parties will seek to raise additional funding to support the business combination through a private placement investment (“PIPE”) to be consummated at the closing of the transaction of $100 million. In addition to our $55 million investment, we have also agreed to provide to SHG a backstop valued at up to an additional $45 million through the purchase of additional shares of Yellowstone Class A common stock at a price of $10 per share if needed to meetthrough a private placement investment (“PIPE”).
On January 25, 2022, Yellowstone completed the minimum investment conditionpreviously announced proposed business combination with SHG following stockholder approval. Following the consummation of $150 million in cash and securities to SHG at the closing. In the event the business combination, SHG became a consolidated subsidiary of Yellowstone and Yellowstone was renamed Sky Harbour Group Corporation, shares of which are now listed for trading on the New York Stock Exchange under the symbol “SKYH” and Sky Harbour warrants are also listed for trading on the New York Stock Exchange under the symbol "SKYH.WS". Also in connection with the business combination, we entered into a subscription agreement with Sky Harbour, pursuant to which Sky Harbour sold to us at the closing of the business combination 4,500,000 shares of Class A common stock at a price of $10 per share, for total cash consideration of $45,000,000.
In connection with the business combination, we recognized a non-cash gain of $24,977,740 related to our deconsolidation of Yellowstone, which is not consummated,included within other income on our Consolidated Statement of Operations. Of the total gain recognized on deconsolidation, approximately $10,000,000 relates to the remeasurement of our retained investment will remain asin Sky Harbour via the Sponsor shares, Series B Preferred unitsPerferred Units, and PIPE investment, each of SHG.
which converted into shares of Sky Harbour's Class A common stock on the transaction date, and approximately $15,000,000 relates to the deconsolidation of Yellowstone's assets and liabilities as of the transaction date. The combined company expects to receive up to $238 millionfair value of our retained investment at the deconsolidation date was measured based upon the observable trading price of Sky Harbour's Class A common stock. Following the business combination, we account for our 22.96% investment in gross proceeds, assuming no redemptions of Yellowstone’s existing public stockholders. This amount assumes an additional $45 million is raised inSky Harbour's Class A common stock under the PIPE. All SHG equityholders are retaining 100% of their equity in the combined company. The cash proceeds are expected to be used to fund the completion of four initial airport hangar campuses in addition to expansion at SHG’s location currently in operation.
We have determined that (i) Yellowstone is a Variable Interest Entity, (ii) we are the primary beneficiary, and (iii) it is appropriate to consolidate Yellowstone under applicable accounting guidance outlined within ASC 810, Consolidation. As a result, both the Founders Shares and Private Placement Warrants are eliminated in consolidation.
method.
NOTE 18.INCOME TAXES
In the first quarter 2021, management considered new evidence, both positive and negative that could affect its view of the future realization of deferred tax assets. At March 31, 2021 we released the valuation allowance against our U.S. federal and state deferred tax assets, resulting in a non-cash benefit to income tax expense of approximately $7,171,096. In making the determination to release the valuation allowance against U.S. federal and state deferred tax assets, we considered our movement into a cumulative income position for the most recent three-year period when considering Q12021 income as well as tax planning strategies available to us specific to unrealized gains in our marketable equity portfolio.
NOTE 1918. SUBSEQUENT EVENTS
SubsequentOn 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 September 30, 2021, 20,000Boston Omaha Corporation sold approximately $17.1 million 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 $48,700,000 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 marketable equity securities. 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.
SubsequentIn April 2022, we filed a shelf Registration Statement on Form S-3 (File No.333-264470) that was declared effective on May 11, 2022, relating to September 30, 2021, the offering of Class A common stock, preferred stock, par value $0.001 per share, which we sold 73,397refer to as “preferred stock,” debt securities and warrants of the Company for up to $500,000,000. In addition, certain selling shareholders have the right to register in a prospectus supplement or supplements, which may be filed, from time to time, up to 8,297,093 shares of Class A common stock held by them. We will not receive any proceeds from the sale of Class A common stock by the selling shareholders. Currently, the selling stockholders are the Massachusetts Institute of Technology, or “MIT”, as well as 238 Plan Associates LLC, an MIT pension and benefit fund and a limited partnership holding our Class A common stock through ourfor the economic benefit of MIT. No officer or director has any beneficial interest in any shares eligible for resale by the selling shareholders. We may, from time to time, in one or more offerings, offer and sell Class A common stock or preferred stock, various series of debt securities and/or warrants. We or any selling security holders may offer these securities from time to time in amounts, at prices and on terms determined at the market equity offering program with Wells Fargo Securities, resultingtime of offering. We may sell these securities to or through one or more underwriters, dealers or agents or directly to purchasers on a delayed or continuous basis. Unless otherwise set forth in an applicable prospectus supplement, we intend to use the net proceeds from the sale of approximately $2.7 million.the securities that we offer for general corporate purposes, including, but not limited to, financing our existing businesses and operations, and expanding our businesses and operations through additional hires, strategic alliances and acquisitions. Unless otherwise set forth in a prospectus supplement, we will not receive any proceeds from the sale of securities by any selling stockholders.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and other federal securities laws, PARTICULARLY THOSE ANTICIPATING FUTURE FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, GROWTH, OPERATING STRATEGIES AND SIMILAR MATTERS, INCLUDING WITHOUT LIMITATION, STATEMENTS CONCERNING THE IMPACTS OF THE COVID-19 PANDEMIC ON OUR BUSINESS, OPERATIONS, RESULTS OF OPERATIONS, LIQUIDITY, INVESTMENTS AND FINANCIAL CONDITION. We have based these forward-looking statements on our current intent, expectations and projections about future events, and these forward-looking statements are not guaranteed to occur and may not occur. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “intend,” “project,” “contemplate,” “potential,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. These statements are only predictions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission filings.
THE OUTCOME OF THE EVENTS DESCRIBED IN THIS REPORT ALSO CONTAINS STATISTICAL AND OTHER INDUSTRY AND MARKET DATA RELATED TO OUR BUSINESS AND INDUSTRY THAT WE OBTAINED FROM INDUSTRY PUBLICATIONS AND RESEARCH, SURVEYS AND STUDIES CONDUCTED BY US AND THIRD PARTIES, AS WELL AS OUR ESTIMATES OF POTENTIAL MARKET OPPORTUNITIES. INDUSTRY PUBLICATIONS, THIRD-PARTY AND OUR OWN RESEARCH, SURVEYS AND STUDIES GENERALLY INDICATE THAT THEIR INFORMATION HAS BEEN OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE ALTHOUGH THEY DO NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. THIS MARKET DATA INCLUDES PROJECTIONS THAT ARE BASED ON A NUMBER OF ASSUMPTIONS. IF THESE ASSUMPTIONS TURN OUT TO BE INCORRECT, ACTUAL RESULTS MAY DIFFER FROM THE PROJECTIONS BASED ON THESE ASSUMPTIONS. AS A RESULT, OUR MARKETS MAY NOT GROW AT THE RATES PROJECTED BY THIS DATA, OR AT ALL. THE FAILURE OF THESE MARKETS TO GROW AT THESE PROJECTED RATES MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION AND THE MARKET PRICE OF OUR COMMON STOCK.
The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report. Any of the forward-looking statements that we make in this quarterly report on Form 10-Q and in other public reports and statements we make may turn out to be inaccurate as a result of our beliefs and assumptions we make in connection with the factors set forth above or because of other unidentified and unpredictable factors. IN ADDITION, OUR BUSINESS AND FUTURE RESULTS ARE SUBJECT TO A NUMBER OF OTHER FACTORS, INCLUDING THOSE FACTORS SET FORTH IN THE “risk factors” SECTION OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED December 31, 20202021 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") ON MARCH 29, 2021, AS AMENDED ON FORM 10-K/A AS FILED WITH THE SEC ON MAY 24, 2021.28, 2022. Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements and you should not rely on such statements. We undertake no obligation to publish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof. These risks could cause our actual results for 20212022 and beyond to differ materially from those expressed in any forward-looking statements by or on behalf of us, and could negatively affect our financial condition, liquidity and operating and stock price performance.
Overview
We are currently engaged in outdoor billboard advertising, broadband services, surety insurance and related brokerage businesses and broadband services businesses.an asset management business. In addition, we hold minority investments in commercial real estate management and brokerage services, a bank focused on servicing the automotive loan market, a homebuilding company and serve as sponsora developer of Yellowstone Acquisition Company ("Yellowstone"), a publicly-traded special purpose acquisition company ("SPAC").private aviation infrastructure focused on building, leasing and managing business aviation hangars.
Billboards: In June 2015, we commenced our billboard business operations through acquisitions by Link, our wholly-owned subsidiary, of smaller billboard companies located in the Southeast United States and Wisconsin. During July and August 2018, we acquired the membership interest or assets of three larger billboard companies which increased our overall billboard count to approximately 2,900 billboards. In addition, we have made additionala number of billboard acquisitions on a smaller scale since that date. We believe that we are a leading outdoor billboard advertising company in the markets we serve in the Midwest. As of September 30, 2021,March 31, 2022, we operate approximately 3,2003,900 billboards with approximately 6,0007,400 advertising faces. One of our principal business objectives is to continue to acquire additional billboard assets through acquisitions of existing billboard businesses in the United States when they can be made at what we believe to be attractive prices relative to other opportunities generally available to us.
Surety Insurance: In September 2015, we established an insurance subsidiary, GIG, designed to own and operate insurance businesses generally handling high volume, lower policy limit commercial lines of property and casualty insurance. In April 2016, our surety insurance business commenced with the acquisition of a surety insurance brokerage business with a national internet-based presence. In December 2016, we completed the acquisition of UCS, a surety insurance company, which at that time was licensed to issue surety bonds in only nine states. UCS now has licenses to operate in all 50 states and the District of Columbia. In addition, over the last fourseveral years, we have also acquired additional surety insurance brokerage businesses located in various regions of the United States. We may in the future expand the reach of our insurance activities to other forms of insurance which may have similar characteristics to surety, such as high volume and low average policy premium insurance businesses which historically have similar economics.
Broadband Services: In March 2020, we commenced our broadband services business with the acquisition of substantially all of the business assets of FibAire, a rural broadband internet provider that serves over 8,000 customers in communities in southern Arizona with a high-speed fixed wireless internet service and provide these services to over 7,000 customers locatedis building an all fiber-to-the-home network in Arizona. Onselect Arizona markets. In December 29, 2020, we acquired substantially all of the business assets of UBB, and providea broadband servicesinternet provider that provides high-speed internet to over 10,000 subscriberscustomers throughout Utah. In September 2021, we announced the launch of Fiber Fast Homes, LLC ("FFH"), which partners with builders, developers and build-to-rent communities to build fiber-to-the-home infrastructure and provide fiber internet service to residents. In April 2022, we acquired substantially all of the business assets of InfoWest and Go Fiber, which are fiber and fixed wireless internet service providers with over 20,000 customers throughout Southern and Central Utah, Northern Arizona and Moapa Valley, Nevada. We hope to continue to expand in Arizona, Nevada, Utah, and other locales.
Investments:
● | Since September 2015, we have made a series of investments in commercial real estate, a commercial real estate management, brokerage and related services business as well as an asset management business. We currently own 30% of Logic and approximately 49.9% of 24th Street Holding Co., both directly and indirectly through our ownership in Logic. In addition, we have invested, through one of our subsidiaries, an aggregate of $6 million in 24th Street Fund I, LLC and 24th Street Fund II, LLC. These funds are managed by 24th Street Asset Management, LLC, a subsidiary of 24th Street Holding Co. and |
● | In December 2017, we invested $10 million in common units of |
● | In May 2018, we invested, through one of our subsidiaries, approximately $19 million through the purchase of common stock of CB&T Holding Corporation, the privately-held parent company of Crescent Bank & Trust, Inc. Our investment now represents 15.6% of CB&T's outstanding common stock. Crescent is located in New Orleans and generates the majority of its revenues from indirect subprime automobile lending across the United States. |
● | In October 2020, our subsidiary BOC Yellowstone, served as sponsor for the underwritten initial public offering of a special purpose acquisition company named Yellowstone. Yellowstone sold in its public offering 13,598,898 units at a price of $10.00 per unit, each unit consisting of one share of Class A common stock and a redeemable warrant to purchase one-half of a share of Class A common stock at an exercise price of $11.50 per share. Between August and November 2020, we invested, through BOC Yellowstone, approximately $7.8 million through the purchase of 3,399,724 shares of Class B common stock and 7,719,779 non-redeemable private placement warrants, each warrant entitling us to purchase one share of Class A common stock at $11.50 per share. |
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● | We recently established a subsidiary within |
In each of our businesses, we hope to expand our geographic reach and market share and seek to develop a competitive advantage and/or brand name for our services, which we hope will be a differentiating factor for customers. Our insurance market primarily services small contractors, small and medium-sized businesses and individuals required to provide surety bonds (i) in connection with their work for government agencies and others, (ii) in connection with contractual obligations, or (iii) to meet regulatory requirements and other needs. We have expanded the licensing of the UCS business to all 50 states and the District of Columbia. In outdoor advertising, our plan is to continue to grow this business through acquisitions of billboard assets. We also expect to expand our broadband services in Arizona, Utah and in other locations. We also expect to continue to make additional investments in real estate management service businesses, as well as in other businesses. In the future, we expect to expand the range of services we provide in the insurance sector, seek to continue to expand our billboard operations and broadband services and to possibly consider acquisitions of other businesses, as well as investments, in other sectors. Our decision to expand outside of these current business sectors we serve or in which we have made investments will be based on the opportunity to acquire businesses which we believe provide the potential for sustainable earnings at an attractive level relative to capital employed and, with regard to investment, we believe have the potential to provide attractive returns.
We seek to enter markets where we believe demand for our services will grow in the coming years due to certain barriers to entry and/or to anticipated long-term demand for these services. In the outdoor billboard business, government restrictions often limit the number of additional billboards that may be constructed. At the same time, advances in billboard technology provide the opportunity to improve revenues through the use of digital display technologies and other new technologies. In the surety insurance business, new insurance companies must be licensed by state agencies that impose capital, management and other strict requirements on these insurers. These hurdles are at the individual state level, with statutes often providing wide latitude to regulators to impose judgmental requirements upon new entrants. In addition, new distribution channels in certain areas of surety may provide a new opportunity. In the real estate management services market, we believe the continued growth of commercial real estate in many sections of the United States will provide opportunities for management services for the foreseeable future. We also believe our investment in both CBTCB&T and SHGSky Harbour provides the opportunity for each company to significantly grow its business. We invest our available capital and the surplus capital from UCS in a wide range of securities, including equity securities of large cap public companies, various corporate and government bonds and U.S. treasuries. In broadband services, we believe that our Fiberfiber to the Home, which we refer to as "FTTH",home services can compete with traditional cable operators as broadband provides higher rates of transmission and improved speed to consumers and that, once built, other competitors may be less willing to compete in communities which we serve.
Impact of the COVID-19 Pandemic
The unprecedented and rapid spread of COVID-19 has to date generally had limited or no material adverse impact on our billboard and broadband businesses. Specifically, the COVID-19 pandemic has impacted different parts of our business in different ways:
● | Our billboard business incurred some overall reductions in revenue during the first half of fiscal 2020 but has returned to more normal levels in fiscal 2021 and continues to grow during the first |
● | Our broadband business was generally unaffected by COVID-19 and we continued to expand that business through the |
● | Our surety insurance business was primarily impacted by the decision we implemented in the second quarter of fiscal 2020 to cease issuing rental insurance bonds and increase our loss reserves related to these bonds. We made this decision due to concern about the potential for increasing default rates by residential tenants. |
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We have observed an improvement in business activity beginning in the second half of 2020 and accelerating inthroughout fiscal 2021 and the first three months of fiscal 2022 as government-imposed restrictions on travel were relaxed, businesses which were temporarily closed or limited are fully reopening, more of the population has been vaccinated and unemployment rates are dropping. Accordingly, we are not actively pursuing additional cost saving measures, and are resuming acquisition activities and spending on capital projects.
We cannot predict the length or strength of the recovery in demand for our billboard, surety insurance and broadband businesses due to continued impact of the pandemic on the U.S. economy. Any significant resurgence of the pandemic could adversely impact our business in the future. We will continue to evaluate the impact of the COVID-19 pandemic on our business and we may access the debt and/or equity capital markets for additional liquidity, if necessary. We continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and customers.
How We Generate Our Revenues and Evaluate Our Business
We currently generate revenues primarily through billboard advertising and related services, from the sale of surety insurance and related brokerage activities and by providing high-speed broadband services. Revenue for outdoor advertising space rental is recognized on a straight-line basis over the term of the contract and advertising revenue is reported net of agency commissions. Payments received in advance of being earned are recorded as deferred revenue. In our surety insurance business, premiums written are recognized as revenues based on a pro rata daily calculation over the respective terms of the policies in-force. Unearned premiums represent the portion of premiums written applicable to the unexpired term of the policies in-force. In connection with our surety agency business, insurance commissions are recognized at a point in time, on a bond-by-bond basis as of the policy effective date and are generally nonrefundable. In our broadband business, revenue is derived principally from internet services and is recognized on a straight-line basis over the term of the contract in the period the services are rendered. Revenue received or receivable in advance of the delivery of services is included in deferred revenue.
Segment gross profit is a key metric that we use to evaluate segment operating performance and to determine resource allocation between segments. We define segment gross profit as segment revenues less segment direct cost of services. In our billboard business, direct cost of services includes land leases, utilities, repairs and maintenance of equipment, sales commissions, contract services, and other billboard level expenses. In our surety business, direct cost of services includes commissions, premium taxes, fees and assessments, and losses and loss adjustment expenses. In our broadband business, direct costs of services includes network operations and data costs, programming costs, cell site rent and utilities, and other broadband level expenses.
Results of Operations
Three Months Ended September 30, 2021March 31, 2022 Compared to Three Months Ended September 30, 2020March 31, 2021
The following is a comparison of our results of operations for the three months ended September 30,March 31, 2022, which we refer to as the “first quarter of fiscal 2022,” compared to the three months ended March 31, 2021, which we refer to as the “third“first quarter of fiscal 2021,” compared to the three months ended September 30, 2020, which we refer to as the “third quarter of fiscal 2020.2021.”
Revenues. For the thirdfirst quarter of fiscal 20212022 and the thirdfirst quarter of fiscal 2020,2021, our revenues in dollars and as a percentage of total revenues were as follows:
For the Three Months Ended September 30, | For the Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 vs 2020 | 2022 | 2021 | 2022 vs 2021 | |||||||||||||||||||||||||||||||||
As a % of | As a % of | As a % of | As a % of | |||||||||||||||||||||||||||||||||||
Total | Total | Total | Total | |||||||||||||||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | $ Variance | Amount | Revenues | Amount | Revenues | $ Variance | |||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||
Billboard rentals, net | $ | 8,023,065 | 55.4% | $ | 7,121,957 | 61.3% | $ | 901,108 | $ | 9,138,149 | 56.1% | $ | 7,153,685 | 54.2% | $ | 1,984,464 | ||||||||||||||||||||||
Broadband services | 3,773,729 | 26.0% | 1,144,343 | 9.9% | 2,629,386 | 4,076,946 | 25.0% | 3,795,037 | 28.8% | 281,909 | ||||||||||||||||||||||||||||
Premiums earned | 2,031,575 | 14.0% | 2,880,544 | 24.8% | (848,969 | ) | 2,288,449 | 14.0% | 1,786,564 | 13.5% | 501,885 | |||||||||||||||||||||||||||
Insurance commissions | 584,082 | 4.0% | 382,493 | 3.3% | 201,589 | 697,200 | 4.3% | 400,177 | 3.0% | 297,023 | ||||||||||||||||||||||||||||
Investment and other income | 85,696 | 0.6% | 77,499 | 0.7% | 8,197 | 92,203 | 0.6% | 69,556 | 0.5% | 22,647 | ||||||||||||||||||||||||||||
Total Revenues | $ | 14,498,147 | 100.0% | $ | 11,606,836 | 100.0% | $ | 2,891,311 | $ | 16,292,947 | 100.0% | $ | 13,205,019 | 100.0% | $ | 3,087,928 |
We realized total revenues of $14,498,147$16,292,947 during the thirdfirst quarter of fiscal 2021,2022, an increase of 24.9%23.4% over revenues of $11,606,836$13,205,019 during the thirdfirst quarter of fiscal 2020. The increase2021. Revenues increased within each of our businesses in total revenues was largely driven by our acquisition of UBB in December 2020 and growth within our billboard business after being negatively impacted from the COVID-19 pandemic during the thirdfirst quarter of fiscal 2020. These increases in revenue were partially offset by lower revenue within our UCS insurance subsidiary, mainly due2022 when compared to the suspensionfirst quarter of its rental guarantee bond program. Due tofiscal 2021. The key factors impacting revenue across each of our businesses during the disruption in this market, we have suspended issuing new rental guarantee bonds, which could reduce future revenues at UCS. We recognize revenues for written premium over the lifefirst quarter of the surety bond and,fiscal 2022 were as a result, increased sales activities are not fully reflected in the quarter in which the surety bond is issued.follows:
● | Net billboard rentals in the |
● | Revenue from broadband services in the |
● | Premiums earned from our UCS insurance subsidiary |
● | Revenue from insurance commissions generated by our surety brokerage operations increased by |
● | Investment and other income at UCS increased |
Expenses. For the thirdfirst quarter of fiscal 20212022 and the thirdfirst quarter of fiscal 2020,2021, our expenses, in dollars, and as a percentage of total revenues, were as follows:
For the Three Months Ended September 30, | For the Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 vs 2020 | 2022 | 2021 | 2022 vs 2021 | |||||||||||||||||||||||||||||||||
As a % of | As a % of | As a % of | As a % of | |||||||||||||||||||||||||||||||||||
Total | Total | Total | Total | |||||||||||||||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | $ Variance | Amount | Revenues | Amount | Revenues | $ Variance | |||||||||||||||||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||||||||||||||||
Cost of billboard revenues | $ | 2,992,251 | 20.6% | $ | 2,780,359 | 24.0% | $ | 211,892 | $ | 3,527,372 | 21.7 | % | $ | 2,861,747 | 21.7 | % | $ | 665,625 | ||||||||||||||||||||
Cost of broadband revenues | 742,082 | 5.1% | 129,414 | 1.1% | 612,668 | 910,775 | 5.6 | % | 756,213 | 5.7 | % | 154,562 | ||||||||||||||||||||||||||
Cost of insurance revenues | 1,029,576 | 7.1% | 1,758,451 | 15.2% | (728,875 | ) | 1,180,891 | 7.2 | % | 1,129,210 | 8.6 | % | 51,681 | |||||||||||||||||||||||||
Employee costs | 4,544,796 | 31.4% | 3,311,885 | 28.5% | 1,232,911 | 5,424,220 | 33.3 | % | 4,242,147 | 32.1 | % | 1,182,073 | ||||||||||||||||||||||||||
Professional fees | 2,552,762 | 17.6% | 630,604 | 5.4% | 1,922,158 | 2,190,597 | 13.4 | % | 1,093,983 | 8.3 | % | 1,096,614 | ||||||||||||||||||||||||||
Depreciation | 1,668,984 | 11.5% | 978,672 | 8.4% | 690,312 | 1,740,071 | 10.7 | % | 1,146,804 | 8.7 | % | 593,267 | ||||||||||||||||||||||||||
Amortization | 1,137,736 | 7.9% | 1,031,805 | 8.9% | 105,931 | 1,193,193 | 7.3 | % | 1,165,172 | 8.8 | % | 28,021 | ||||||||||||||||||||||||||
General and administrative | 2,497,301 | 17.2% | 1,649,056 | 14.2% | 848,245 | 2,579,835 | 15.8 | % | 2,227,863 | 16.9 | % | 351,972 | ||||||||||||||||||||||||||
Loss on disposition of assets | 61,478 | 0.4% | 20,751 | 0.2% | 40,727 | |||||||||||||||||||||||||||||||||
Loss (gain) on disposition of assets | (54,203 | ) | (0.3 | %) | 35,567 | 0.3 | % | (89,770 | ) | |||||||||||||||||||||||||||||
Accretion | 32,179 | 0.2% | 36,462 | 0.3% | (4,283 | ) | 49,932 | 0.3 | % | 32,091 | 0.2 | % | 17,841 | |||||||||||||||||||||||||
Total Costs and Expenses | $ | 17,259,145 | 119.0% | $ | 12,327,459 | 106.2% | $ | 4,931,686 | $ | 18,742,683 | 115.0 | % | $ | 14,690,797 | 111.3 | % | $ | 4,051,886 |
During the thirdfirst quarter of fiscal 2021,2022, we had total costs and expenses of $17,259,145,$18,742,683, as compared to total costs and expenses of $12,327,459$14,690,797 in the thirdfirst quarter of fiscal 2020.2021. Total costs and expenses as a percentage of total revenues increased from 106.2%111.3% in the thirdfirst quarter of fiscal 20202021 to 119.0%115.0% in the thirdfirst quarter of fiscal 2021,2022, mainly due to a higher level of professional fees associated with Yellowstone entering into afinalizing its business combination agreement with SHG as well as Boston Omaha's $55 million Sky Series B Preferred Units investment. In the thirdInfoWest and Go Fiber acquisitions completed in April 2022. The key factors impacting costs and expenses across each of our businesses during the first quarter of fiscal 2021, cost of billboard revenues, cost of insurance revenues and amortization decreased2022 were as a percentage of total revenues as compared to the third quarter of fiscal 2020. Cost of broadband revenues, employee costs, depreciation, and general and administrative expenses increased as a percentage of total revenues mainly due to the acquisition of UBB in December 2020. Loss on disposition of assets and accretion, primarily associated with our billboard and broadband services businesses, remained relatively constant as a percentage of total revenues.follows:
● | Cost of billboard revenues decreased as a percentage of billboard revenues from |
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● | Cost of insurance revenues decreased |
● | Employee costs increased |
● | Professional fees in the |
● | General and administrative expenses increased from |
● | Non-cash expenses in the |
Net Loss from Operations. Net loss from operations for the thirdfirst quarter of fiscal 20212022 was $2,760,998,$2,449,736, or 19.0%15.0% of total revenues, as compared to a net loss from operations of $720,623,$1,485,778, or 6.2%11.3% of total revenues, in the thirdfirst quarter of fiscal 20202021. The increase in net loss from operations in dollars was primarily due to costs associated with Yellowstone entering into afinalizing its business combination agreement with SHG, as well as Boston Omaha's $55 million Sky Series B Preferred Units investment, decreased revenue withinthe InfoWest and Go Fiber acquisitions completed in April 2022, and our insurance operations, and an increase in other corporate related expensesFFH business, which launched during the third quarter of fiscal 2021. These cost increases were partially offset by improved operations within our billboard business and the addition of our broadband services operations.insurance business. Our net loss from operations included $2,838,899$2,983,196 from non-cash depreciation, amortization depreciation and accretion expenses in the thirdfirst quarter of fiscal 2021,2022, as compared to $2,046,939$2,344,067 in the thirdfirst quarter of fiscal 2020.2021.
Other Income (Expense). During the thirdfirst quarter of fiscal 2022, we had net other income of $25,498,646. Net other income included a gain of $24,977,740 related to the deconsolidation of Yellowstone (see Note 17 to the consolidated financial statements for further discussion), $2,615,323 in other investment income related to public securities mainly held by Boston Omaha, $1,837,211 related to the remeasurement of Yellowstone's public warrants from January 1, 2022 to January 25, 2022, and interest and dividend income of $45,324. These items were partially offset by a loss of $3,675,303 mainly related to our equity method position in Sky Harbour and interest expense of $301,649 mainly incurred under Link's term loan. During the first quarter of fiscal 2021, we had net other expense of $33,753,550. Net other expense included $32,990,929 in other investment losses related to public equity securities mainly held by Boston Omaha, $1,019,917 related to the remeasurement of Yellowstone's public warrants, and interest expense of $233,561 mainly incurred under Link's term loans. These items were partially offset by $359,203 in equity in income of unconsolidated affiliates, $106,815 in dividend income mainly from public equity securities held by Boston Omaha, and interest income of $24,839. During the third quarter of fiscal 2020, we had net other income of $4,186,794,$110,123,064, which included $2,845,323$107,308,122 in other investment income related to public equity securities mainly held by Boston Omaha, $1,342,826$2,175,824 related to the remeasurement of Yellowstone's public warrants, interest and dividend income of $734,147, $140,297 in equity in income of unconsolidated affiliates $106,716 in dividend income, $104,125 in interest income, and interest expense of $212,196$235,326 mainly incurred under Link's term loansloan.
As a result of a change in GAAP effective in 2018, we are required to include the unrealized changes in market prices of investments in public equity securities in our reported earnings. While we intend to hold our current securities for the longer term, we may in the future choose to sell them for a variety of reasons resulting in realized losses or gains.
Net Income (Loss) Attributable to Common Stockholders. We had a net lossincome attributable to common stockholders in the amount of $26,276,094 $16,302,593 in the thirdfirst quarter of fiscal 20212022, or lossincome per share of $0.89, based on 29,576,115 diluted$0.55, based on 29,765,082 diluted weighted average shares outstanding. This is compared to net income attributable to common stockholders of $3,463,671$84,437,627 in the thirdfirst quarter of fiscal 20202021, or income per share of $0.13,$3.09, based on 27,271,01427,299,946 diluted weighted average shares outstanding.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
The following is a comparison of our results of operations for the nine months ended September 30, 2021, which we refer to as the “first nine months of fiscal 2021,” compared to the nine months ended September 30, 2020, which we refer to as the “first nine months of fiscal 2020.”
Revenues. For the first nine months of fiscal 2021 and the first nine months of fiscal 2020, our revenues in dollars and as a percentage of total revenues were as follows:
For the Nine Months Ended September 30, | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
2021 | 2020 | 2021 vs 2020 | ||||||||||||||||
As a % of | As a % of | |||||||||||||||||
Total | Total | |||||||||||||||||
Amount | Revenues | Amount | Revenues | $ Variance | ||||||||||||||
Revenues: | ||||||||||||||||||
Billboard rentals, net | $ | 23,129,582 | 55.2% | $ | 20,991,755 | 60.8% | $ | 2,137,827 | ||||||||||
Broadband services | 11,329,220 | 27.1% | 2,575,676 | 7.5% | 8,753,544 | |||||||||||||
Premiums earned | 5,554,297 | 13.3% | 9,538,183 | 27.6% | (3,983,886 | ) | ||||||||||||
Insurance commissions | 1,642,962 | 3.9% | 1,065,013 | 3.1% | 577,949 | |||||||||||||
Investment and other income | 226,986 | 0.5% | 338,953 | 1.0% | (111,967 | ) | ||||||||||||
Total Revenues | $ | 41,883,047 | 100.0% | $ | 34,509,580 | 100.0% | $ | 7,373,467 |
We realized total revenues of $41,883,047 during the first nine months of fiscal 2021, an increase of 21.4% over revenues of $34,509,580 during the first nine months of fiscal 2020. The increase in total revenues was largely driven by our acquisition of FibAire in March 2020, our acquisition of UBB in December 2020, and growth within our billboard business after being negatively impacted from the COVID-19 pandemic during the first nine months of fiscal 2020. These increases in revenue were partially offset by lower revenue within our UCS insurance subsidiary, mainly due to the suspension of its rental guarantee bond program. Due to the disruption in this market, we have suspended issuing new rental guarantee bonds, which could reduce future revenues at UCS. We recognize revenues for written premium over the life of the surety bond and, as a result, increased sales activities are not fully reflected in the quarter in which the surety bond is issued.
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Expenses.For the first half of fiscal 2021 and the first half of fiscal 2020, our expenses, in dollars, and as a percentage of total revenues, were as follows:
For the Nine Months Ended September 30, | ||||||||||||||||||
(unaudited) | ||||||||||||||||||
2021 | 2020 | 2021 vs 2020 | ||||||||||||||||
As a % of | As a % of | |||||||||||||||||
Total | Total | |||||||||||||||||
Amount | Revenues | Amount | Revenues | $ Variance | ||||||||||||||
Costs and Expenses: | ||||||||||||||||||
Cost of billboard revenues | $ | 8,927,528 | 21.3% | $ | 8,472,265 | 24.5% | $ | 455,263 | ||||||||||
Cost of broadband revenues | 2,352,724 | 5.6% | 379,073 | 1.1% | 1,973,651 | |||||||||||||
Cost of insurance revenues | 3,031,391 | 7.3% | 5,367,231 | 15.6% | (2,335,840 | ) | ||||||||||||
Employee costs | 13,312,992 | 31.8% | 9,542,845 | 27.6% | 3,770,147 | |||||||||||||
Professional fees | 4,670,926 | 11.2% | 2,582,961 | 7.5% | 2,087,965 | |||||||||||||
Depreciation | 4,066,451 | 9.7% | 2,744,376 | 8.0% | 1,322,075 | |||||||||||||
Amortization | 3,508,445 | 8.4% | 3,012,641 | 8.7% | 495,804 | |||||||||||||
General and administrative | 7,136,217 | 17.0% | 4,978,443 | 14.4% | 2,157,774 | |||||||||||||
Loss on disposition of assets | 119,904 | 0.3% | 89,685 | 0.3% | 30,219 | |||||||||||||
Accretion | 96,717 | 0.2% | 105,964 | 0.3% | (9,247 | ) | ||||||||||||
Total Costs and Expenses | $ | 47,223,295 | 112.8% | $ | 37,275,484 | 108.0% | $ | 9,947,811 |
During the first nine months of fiscal 2021, we had total costs and expenses of $47,223,295, as compared to total costs and expenses of $37,275,484 in the first nine months of fiscal 2020. Total costs and expenses as a percentage of total revenues increased from 108.0% in the first nine months of fiscal 2020 to 112.8% in the first nine months of fiscal 2021, mainly due to a higher level of professional fees associated with Yellowstone entering into a business combination agreement with SHG as well as Boston Omaha's $55 million Sky Series B Preferred Units investment. In the first nine months of fiscal 2021, cost of billboard revenues and cost of insurance revenues decreased as a percentage of total revenues as compared to the first nine months of fiscal 2020. Cost of broadband revenues, employee costs, depreciation and general and administrative expenses increased as a percentage of total revenues mainly due to the FibAire acquisition in March 2020, the UBB acquisition in December 2020, and the consolidation of Yellowstone. Amortization, loss on disposition of assets and accretion, primarily associated with our billboard and broadband services businesses, remained relatively constant as a percentage of total revenues.
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Net Loss from Operations. Net loss from operations for the first nine months of fiscal 2021 was $5,340,248, or 12.8% of total revenues, as compared to a net loss from operations of $2,765,904, or 8.0% of total revenues, in the first nine months of fiscal 2020. The increase in net loss from operations in dollars was primarily due to costs associated with Yellowstone entering into a business combination agreement with SHG as well as Boston Omaha's $55 million Sky Series B Preferred Units investment, decreased revenue within our insurance operations, and an increase in other corporate related expenses which were partially offset by improved operations within our billboard business and the addition of our broadband services operations. Our net loss from operations included $7,671,613 from non-cash amortization, depreciation and accretion expenses in the first nine months of fiscal 2021, as compared to $5,862,981 in the first nine months of fiscal 2020.
Other Income (Expense). During the first nine months of fiscal 2021, we had net other income of $88,935,971. Net other income included $85,694,668 from in other investment income related to public equity securities mainly held by Boston Omaha, $2,039,835 related to the remeasurement of Yellowstone's public warrants, $935,488 in equity in income of unconsolidated affiliates, interest income of $645,741 primarily derived from our short term loan to DFH, and $322,785 in dividend income mainly from public equity securities held by Boston Omaha. These items were partially offset by interest expense of $702,546 mainly incurred under Link's term loans. During the first nine months of fiscal 2020, we had net other expense of $15,060,171, which included $18,717,680 in other investment losses related to public equity securities mainly held by Boston Omaha, $2,406,151 in equity in income of unconsolidated affiliates, $967,864 in dividend income, $884,125 in interest income, and interest expense of $600,631 mainly incurred under Link's term loans.
As a result of a change in GAAP effective in 2018, we are required to include the unrealized changes in market prices of investments in public equity securities in our reported earnings. While we intend to hold our current securities for the longer term, we may in the future choose to sell them for a variety of reasons resulting in realized losses or gains.
Net Income (Loss) Attributable to Common Stockholders. We had net income attributable to common stockholders in the amount of $66,799,096 in the first nine months of fiscal 2021, or income per share of $2.32, based on 28,825,428 diluted weighted average shares outstanding. This is compared to a net loss attributable to common stockholders of $17,868,259 in the first nine months of fiscal 2020, or a loss per share of $0.71, based on 25,145,700 diluted weighted average shares outstanding.
Results of Operations by Segment
The following tables report results for the following three segments in which we operate, billboards, insurance and broadband, for the thirdfirst quarter of fiscal 20212022 and the thirdfirst quarter of fiscal 2020:2021:
Results of Billboard Operations
For the Three Months Ended September 30, | For the Three Months Ended March 31, | |||||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||||||||||||||
As a % of | As a % of | As a % of | As a % of | |||||||||||||||||||||||||
Segment | Segment | Segment | Segment | |||||||||||||||||||||||||
Operating | Operating | Operating | Operating | |||||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | Amount | Revenues | Amount | Revenues | |||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||
Billboard rentals, net | $ | 8,023,065 | 100.0% | $ | 7,121,957 | 100.0% | $ | 9,138,149 | 100.0% | $ | 7,153,685 | 100.0% | ||||||||||||||||
Cost of Revenues | ||||||||||||||||||||||||||||
Ground rents | 1,587,875 | 19.8% | 1,479,596 | 20.8% | 1,963,020 | 21.5% | 1,557,858 | 21.8% | ||||||||||||||||||||
Utilities | 307,646 | 3.8% | 297,782 | 4.2% | 404,136 | 4.4% | 313,140 | 4.4% | ||||||||||||||||||||
Commissions paid | 755,323 | 9.4% | 688,780 | 9.6% | 730,115 | 8.0% | 698,799 | 9.8% | ||||||||||||||||||||
Other costs of revenues | 341,407 | 4.3% | 314,201 | 4.4% | 430,101 | 4.7% | 291,950 | 4.0% | ||||||||||||||||||||
Total cost of revenues | 2,992,251 | 37.3% | 2,780,359 | 39.0% | 3,527,372 | 38.6% | 2,861,747 | 40.0% | ||||||||||||||||||||
Gross margin | 5,030,814 | 62.7% | 4,341,598 | 61.0% | 5,610,777 | 61.4% | 4,291,938 | 60.0% | ||||||||||||||||||||
Other Operating Expenses | ||||||||||||||||||||||||||||
Employee costs | 1,410,669 | 17.6% | 1,364,457 | 19.2% | 1,743,223 | 19.1% | 1,478,572 | 20.6% | ||||||||||||||||||||
Professional fees | 112,773 | 1.4% | 202,027 | 2.8% | 116,508 | 1.3% | 211,547 | 3.0% | ||||||||||||||||||||
Depreciation | 910,845 | 11.3% | 843,575 | 11.9% | 1,101,356 | 12.0% | 859,927 | 12.0% | ||||||||||||||||||||
Amortization | 860,290 | 10.7% | 827,470 | 11.6% | 892,439 | 9.8% | 837,101 | 11.7% | ||||||||||||||||||||
General and administrative | 673,286 | 8.4% | 736,763 | 10.4% | 805,135 | 8.8% | 737,753 | 10.3% | ||||||||||||||||||||
Accretion | 28,712 | 0.4% | 34,740 | 0.5% | 46,535 | 0.5% | 28,694 | 0.4% | ||||||||||||||||||||
Loss on disposition of assets | 61,093 | 0.8% | 8,751 | 0.1% | ||||||||||||||||||||||||
Loss (gain) on disposition of assets | (104,399 | ) | (1.1%) | 32,295 | 0.5% | |||||||||||||||||||||||
Total expenses | 4,057,668 | 50.6% | 4,017,783 | 56.4% | 4,600,797 | 50.4% | 4,185,889 | 58.5% | ||||||||||||||||||||
Segment Income from Operations | 973,146 | 12.1% | 323,815 | 4.6% | 1,009,980 | 11.0% | 106,049 | 1.5% | ||||||||||||||||||||
Interest expense, net | (226,560 | ) | (2.8%) | (209,432 | ) | (3.0%) | (286,858 | ) | (3.1%) | (229,280 | ) | (3.2%) | ||||||||||||||||
Net Income Attributable to Common Stockholders | $ | 746,586 | 9.3% | $ | 114,383 | 1.6% | ||||||||||||||||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | 723,122 | 7.9% | $ | (123,231 | ) | (1.7%) |
Comparison of the ThirdFirst Quarter of Fiscal 20212022 to the ThirdFirst Quarter of Fiscal 2020.2021. In the thirdfirst quarter of fiscal 2021,2022, there was a 12.7%27.7% increase in net billboard revenues from the thirdfirst quarter of fiscal 2020,2021, reflecting an improvement in rental and occupancy rates across a number of our markets after being negatively impacted by the COVID-19 pandemic in 2020. In addition,as well as the acquisition of billboards from ThomasKeleher and Missouri Neon in the fourth quarter of fiscal 2021, which accounted for approximately 13.8% of our billboard revenues in the first quarter of fiscal 2021 accounted for approximately 3.6% of our billboard revenues in the third quarter of fiscal 2021.2022. The key factors affecting our billboard operations results during the thirdfirst quarter of fiscal 20202022 were as follows:
● | Ground rent expense decreased as a percentage of total segment operating revenues from |
● | Commissions paid as a percentage of total segment operating revenues decreased |
● | Employee costs as a percentage of total segment operating revenues decreased from |
● | General and administrative expenses decreased as a percentage of total segment operating revenues from |
● | Depreciation and amortization expense increased by |
● | Net interest expense of |
Results of Broadband Operations
For the Three Months Ended March 31, | ||||||||||||||||
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As a % of | As a % of | |||||||||||||||
Segment | Segment | |||||||||||||||
Operating | Operating | |||||||||||||||
Amount | Revenues | Amount | Revenues | |||||||||||||
Operating Revenues | ||||||||||||||||
Broadband revenues | $ | 4,076,946 | 100.0 | % | $ | 3,795,037 | 100.0 | % | ||||||||
Cost of Revenues | ||||||||||||||||
Network operations and data costs | 505,068 | 12.4 | % | 503,334 | 13.2 | % | ||||||||||
Programming costs | 16,091 | 0.4 | % | 26,087 | 0.7 | % | ||||||||||
Cell site rent and utilities | 176,049 | 4.3 | % | 138,918 | 3.7 | % | ||||||||||
Other costs of revenues | 213,567 | 5.2 | % | 87,874 | 2.3 | % | ||||||||||
Total cost of revenues | 910,775 | 22.3 | % | 756,213 | 19.9 | % | ||||||||||
Gross margin | 3,166,171 | 77.7 | % | 3,038,824 | 80.1 | % | ||||||||||
Other Operating Expenses | ||||||||||||||||
Employee costs | 1,817,299 | 44.6 | % | 1,218,732 | 32.1 | % | ||||||||||
Professional fees | 206,359 | 5.1 | % | 58,520 | 1.6 | % | ||||||||||
Depreciation | 603,875 | 14.8 | % | 266,329 | 7.0 | % | ||||||||||
Amortization | 253,692 | 6.2 | % | 293,426 | 7.7 | % | ||||||||||
General and administrative | 655,054 | 16.1 | % | 417,722 | 11.0 | % | ||||||||||
Accretion | 3,397 | 0.1 | % | 3,397 | 0.1 | % | ||||||||||
Loss on disposition of assets | 50,196 | 1.2 | % | 3,272 | 0.1 | % | ||||||||||
Total expenses | 3,589,872 | 88.1 | % | 2,261,398 | 59.6 | % | ||||||||||
Segment Income (Loss) from Operations | (423,701 | ) | (10.4 | %) | 777,426 | 20.5 | % | |||||||||
Interest expense, net | (4,171 | ) | (0.1 | %) | (2,103 | ) | (0.1 | %) | ||||||||
Noncontrolling interest in subsidiary income | (66,178 | ) | (1.6 | %) | (138,263 | ) | (3.6 | %) | ||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | (494,050 | ) | (12.1 | %) | $ | 637,060 | 16.8 | % |
Comparison of the First Quarter of Fiscal 2022 to the First Quarter of Fiscal 2021. In the first quarter of fiscal 2022, total operating revenues increased by 7.4% when compared to the first quarter of fiscal 2021 mainly due to customer growth and rate improvement within our AireBeam business. The key factors affecting our broadband operations results during the first quarter of fiscal 2022 were as follows:
● | Total cost of revenues increased as a percentage of total segment operating revenues from 19.9% in the first quarter of fiscal 2021 to 22.3% in the first quarter of fiscal 2022. The increase is mainly due to our FFH business, which launched during the third quarter of fiscal 2021. |
● | Employee costs in the first quarter of fiscal 2022 increased by 49.1% from the first quarter of fiscal 2021. The increase is mainly due to hiring within our FFH business. |
● | Professional fees as a percentage of total segment operating revenues increased from 1.6% in the first quarter of fiscal 2021 |
● | General and administrative expeneses as a percentage of total segment operating revenues increased from 11.0% in the first quarter of fiscal 2021 to 16.1% in the first quarter of fiscal 2022. The increase is mainly due to our FFH business, which launched during the third quarter of fiscal |
● | Depreciation expense |
Results of Insurance Operations
For the Three Months Ended September 30, | For the Three Months Ended March 31, | |||||||||||||||||||||||||||
(unaudited) | (unaudited) | |||||||||||||||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||||||||||||||
As a % of | As a % of | As a % of | As a % of | |||||||||||||||||||||||||
Segment | Segment | Segment | Segment | |||||||||||||||||||||||||
Operating | Operating | Operating | Operating | |||||||||||||||||||||||||
Amount | Revenues | Amount | Revenues | Amount | Revenues | Amount | Revenues | |||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||||||||||
Premiums earned | $ | 2,031,575 | 75.2% | $ | 2,880,544 | 86.2% | $ | 2,288,449 | 74.3% | $ | 1,786,564 | 79.2% | ||||||||||||||||
Insurance commissions | 584,082 | 21.6% | 382,493 | 11.5% | 697,200 | 22.7% | 400,177 | 17.7% | ||||||||||||||||||||
Investment and other income | 85,696 | 3.2% | 77,499 | 2.3% | 92,203 | 3.0% | 69,556 | 3.1% | ||||||||||||||||||||
Total operating revenues | 2,701,353 | 100.0% | 3,340,536 | 100.0% | 3,077,852 | 100.0% | 2,256,297 | 100.0% | ||||||||||||||||||||
Cost of Revenues | ||||||||||||||||||||||||||||
Commissions paid | 602,180 | 22.3% | 845,380 | 25.3% | 680,398 | 22.1% | 464,654 | 20.6% | ||||||||||||||||||||
Premium taxes, fees, and assessments | 61,735 | 2.3% | 98,243 | 2.9% | 48,063 | 1.6% | 74,673 | 3.3% | ||||||||||||||||||||
Losses and loss adjustment expense | 365,661 | 13.5% | 814,828 | 24.4% | 452,430 | 14.7% | 589,883 | 26.1% | ||||||||||||||||||||
Total cost of revenues | 1,029,576 | 38.1% | 1,758,451 | 52.6% | 1,180,891 | 38.4% | 1,129,210 | 50.0% | ||||||||||||||||||||
Gross margin | 1,671,777 | 61.9% | 1,582,085 | 47.4% | 1,896,961 | 61.6% | 1,127,087 | 50.0% | ||||||||||||||||||||
Other Operating Expenses | ||||||||||||||||||||||||||||
Employee costs | 1,304,238 | 48.3% | 1,072,551 | 32.1% | 1,393,501 | 45.3% | 1,185,051 | 52.5% | ||||||||||||||||||||
Professional fees | 65,363 | 2.4% | 69,507 | 2.1% | 72,671 | 2.4% | 112,585 | 5.0% | ||||||||||||||||||||
Depreciation | 7,804 | 0.3% | 5,835 | 0.2% | 7,803 | 0.3% | 5,733 | 0.3% | ||||||||||||||||||||
Amortization | 47,061 | 1.8% | 123,662 | 3.7% | 47,062 | 1.5% | 34,645 | 1.6% | ||||||||||||||||||||
General and administrative | 606,274 | 22.4% | 411,341 | 12.3% | 570,106 | 18.4% | 576,560 | 25.5% | ||||||||||||||||||||
Total expenses | 2,030,740 | 75.2% | 1,682,896 | 50.4% | 2,091,143 | 67.9% | 1,914,574 | 84.9% | ||||||||||||||||||||
Segment Loss from Operations | (358,963 | ) | (13.3%) | (100,811 | ) | (3.0%) | (194,182 | ) | (6.3%) | (787,487 | ) | (34.9%) | ||||||||||||||||
Interest income, net | 5 | 0.0% | 5 | 0.0% | ||||||||||||||||||||||||
Interest expense, net | - | - | (1,998 | ) | (0.1%) | |||||||||||||||||||||||
Other investment income (loss) | (1,687,112 | ) | (62.4%) | 1,773,862 | 53.1% | (1,099,544 | ) | (35.7%) | 3,155,347 | 139.9% | ||||||||||||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | (2,046,070 | ) | (75.7%) | $ | 1,673,056 | 50.1% | $ | (1,293,726 | ) | (42.0%) | $ | 2,365,862 | 104.9% |
Comparison of the ThirdFirst Quarter of Fiscal 20212022 to the ThirdFirst Quarter of Fiscal 2020.2021. In the thirdfirst quarter of fiscal 2022, total operating revenues increased by 36.4% when compared to the first quarter of fiscal 2021, total operating revenues declined by 19.1% as compared to the third quarter of fiscal 2020, mainly due to increased earned premium at our UCS insurance subsidiary, the suspension of UCS's rental guarantee bond program.ACS acquisition completed in April 2021, and increased production at our brokerage operations overall. The key factors affecting our insurance operations results during the thirdfirst quarter of fiscal 20212022 were as follows:
● | Premiums earned from our UCS insurance subsidiary in the |
● | Our brokerage operations realized |
● | Commissions paid as a percentage of total segment operating revenues increased from 20.6% in the |
● | Losses and loss adjustment |
● | Employee costs in the |
● | General and administrative expenses in the |
● | During the |
Results of Broadband Operations
For the Three Months Ended September 30, | ||||||||||||||
(unaudited) | ||||||||||||||
2021 | 2020 | |||||||||||||
As a % of | As a % of | |||||||||||||
Segment | Segment | |||||||||||||
Operating | Operating | |||||||||||||
Amount | Revenues | Amount | Revenues | |||||||||||
Operating Revenues | ||||||||||||||
Broadband revenues | $ | 3,773,729 | 100.0% | $ | 1,144,343 | 100.0% | ||||||||
Cost of Revenues | ||||||||||||||
Network operations and data costs | 438,640 | 11.6% | 64,913 | 5.7% | ||||||||||
Programming costs | 31,283 | 0.8% | 23,336 | 2.0% | ||||||||||
Cell site rent and utilities | 152,498 | 4.1% | 12,275 | 1.1% | ||||||||||
Other costs of revenues | 119,661 | 3.2% | 28,890 | 2.5% | ||||||||||
Total cost of revenues | 742,082 | 19.7% | 129,414 | 11.3% | ||||||||||
Gross margin | 3,031,647 | 80.3% | 1,014,929 | 88.7% | ||||||||||
Other Operating Expenses | ||||||||||||||
Employee costs | 1,402,777 | 37.2% | 557,096 | 48.7% | ||||||||||
Professional fees | 42,541 | 1.1% | 10,343 | 0.9% | ||||||||||
Depreciation | 723,052 | 19.2% | 129,262 | 11.3% | ||||||||||
Amortization | 230,385 | 6.1% | 80,673 | 7.1% | ||||||||||
General and administrative | 574,800 | 15.2% | 197,233 | 17.2% | ||||||||||
Accretion | 3,467 | 0.1% | 1,722 | 0.2% | ||||||||||
Loss on disposition of assets | 385 | 0.0% | 12,000 | 1.0% | ||||||||||
Total expenses | 2,977,407 | 78.9% | 988,329 | 86.4% | ||||||||||
Segment Income from Operations | 54,240 | 1.4% | 26,600 | 2.3% | ||||||||||
Interest expense, net | (3,324 | ) | (0.1%) | (1,596 | ) | (0.1%) | ||||||||
Noncontrolling interest in subsidiary income | (70,674 | ) | (1.8%) | (2,500 | ) | (0.2%) | ||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | (19,758 | ) | (0.5%) | $ | 22,504 | 2.0% |
Comparison of the Third Quarter of Fiscal 2021 to the Third Quarter of Fiscal 2020. In March 2020, we commenced our broadband services business with the acquisition of substantially all of the assets of FibAire. In December 2020, we acquired substantially all of the business assets of UBB. Therefore, comparisons of our broadband results for the third quarter of fiscal 2021 to the third quarter of fiscal 2020 may not be meaningful.
Results of Billboard Operations
For the Nine Months Ended September 30, | ||||||||||||||
(unaudited) | ||||||||||||||
2021 | 2020 | |||||||||||||
As a % of | As a % of | |||||||||||||
Segment | Segment | |||||||||||||
Operating | Operating | |||||||||||||
Amount | Revenues | Amount | Revenues | |||||||||||
Operating Revenues | ||||||||||||||
Billboard rentals, net | $ | 23,129,582 | 100.0% | $ | 20,991,755 | 100.0% | ||||||||
Cost of Revenues | ||||||||||||||
Ground rents | 4,766,504 | 20.6% | 4,592,406 | 21.9% | ||||||||||
Utilities | 932,028 | 4.0% | 929,397 | 4.4% | ||||||||||
Commissions paid | 2,216,400 | 9.6% | 2,018,314 | 9.6% | ||||||||||
Other costs of revenues | 1,012,596 | 4.4% | 932,148 | 4.5% | ||||||||||
Total cost of revenues | 8,927,528 | 38.6% | 8,472,265 | 40.4% | ||||||||||
Gross margin | 14,202,054 | 61.4% | 12,519,490 | 59.6% | ||||||||||
Other Operating Expenses | ||||||||||||||
Employee costs | 4,334,412 | 18.7% | 4,313,414 | 20.6% | ||||||||||
Professional fees | 420,046 | 1.8% | 464,565 | 2.2% | ||||||||||
Depreciation | 2,666,167 | 11.5% | 2,498,514 | 11.9% | ||||||||||
Amortization | 2,557,931 | 11.1% | 2,462,425 | 11.7% | ||||||||||
General and administrative | 2,075,259 | 9.0% | 2,321,205 | 11.0% | ||||||||||
Accretion | 86,419 | 0.4% | 104,242 | 0.5% | ||||||||||
Loss on disposition of assets | 116,247 | 0.5% | 77,685 | 0.4% | ||||||||||
Total expenses | 12,256,481 | 53.0% | 12,242,050 | 58.3% | ||||||||||
Segment Income from Operations | 1,945,573 | 8.4% | 277,440 | 1.3% | ||||||||||
Interest expense, net | (683,858 | ) | (3.0%) | (595,088 | ) | (2.8%) | ||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | 1,261,715 | 5.4% | $ | (317,648 | ) | (1.5%) |
Comparison of the First Nine Months of Fiscal 2021 to the First Nine Months of Fiscal 2020. In the first nine months of fiscal 2021, there was an 10.2% increase in net billboard revenues from the first nine months of fiscal 2020, reflecting an improvement in rental and occupancy rates across a number of our markets after being negatively impacted by the COVID-19 pandemic in 2020. In addition, the acquisition of billboards from Thomas in the first quarter of fiscal 2021 accounted for approximately 3.3% of our billboard revenues in the first nine months of fiscal 2021. The key factors affecting our billboard operations results during the first nine months of fiscal 2020 were as follows:
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Results of Insurance Operations
For the Nine Months Ended September 30, | ||||||||||||||
(unaudited) | ||||||||||||||
2021 | 2020 | |||||||||||||
As a % of | As a % of | |||||||||||||
Segment | Segment | |||||||||||||
Operating | Operating | |||||||||||||
Amount | Revenues | Amount | Revenues | |||||||||||
Operating Revenues | ||||||||||||||
Premiums earned | $ | 5,554,297 | 74.8% | $ | 9,538,183 | 87.2% | ||||||||
Insurance commissions | 1,642,962 | 22.1% | 1,065,013 | 9.7% | ||||||||||
Investment and other income | 226,986 | 3.1% | 338,953 | 3.1% | ||||||||||
Total operating revenues | 7,424,245 | 100.0% | 10,942,149 | 100.0% | ||||||||||
Cost of Revenues | ||||||||||||||
Commissions paid | 1,559,222 | 21.0% | 2,884,197 | 26.4% | ||||||||||
Premium taxes, fees, and assessments | 200,115 | 2.7% | 244,956 | 2.2% | ||||||||||
Losses and loss adjustment expense | 1,272,054 | 17.1% | 2,238,078 | 20.5% | ||||||||||
Total cost of revenues | 3,031,391 | 40.8% | 5,367,231 | 49.1% | ||||||||||
Gross margin | 4,392,854 | 59.2% | 5,574,918 | 50.9% | ||||||||||
Other Operating Expenses | ||||||||||||||
Employee costs | 3,751,084 | 50.5% | 3,286,309 | 30.0% | ||||||||||
Professional fees | 250,712 | 3.4% | 428,922 | 3.9% | ||||||||||
Depreciation | 21,340 | 0.3% | 17,240 | 0.2% | ||||||||||
Amortization | 130,018 | 1.8% | 396,453 | 3.6% | ||||||||||
General and administrative | 1,818,267 | 24.5% | 1,431,153 | 13.1% | ||||||||||
Total expenses | 5,971,421 | 80.5% | 5,560,077 | 50.8% | ||||||||||
Segment Income (Loss) from Operations | (1,578,567 | ) | (21.3%) | 14,841 | 0.1% | |||||||||
Interest expense, net | (1,991 | ) | (0.0%) | (365 | ) | (0.0%) | ||||||||
Other investment income (loss) | 2,219,102 | (29.9%) | (2,184,391 | ) | (19.9%) | |||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | 638,544 | 8.6% | $ | (2,169,915 | ) | (19.8%) |
Comparison of the First Nine Months of Fiscal 2021 to the First Nine Months of Fiscal 2020. In the first nine months of fiscal 2021, total operating revenues declined by 32.2% as compared to the first nine months of fiscal 2020, mainly due to the suspension of UCS's rental guarantee bond program. The key factors affecting our insurance operations results during the first nine months of fiscal 2021 were as follows:
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Results of Broadband Operations
For the Nine Months Ended September 30, | ||||||||||||||
(unaudited) | ||||||||||||||
2021 | 2020 | |||||||||||||
As a % of | As a % of | |||||||||||||
Segment | Segment | |||||||||||||
Operating | Operating | |||||||||||||
Amount | Revenues | Amount | Revenues | |||||||||||
Operating Revenues | ||||||||||||||
Broadband revenues | $ | 11,329,220 | 100.0% | $ | 2,575,676 | 100.0% | ||||||||
Cost of Revenues | ||||||||||||||
Network operations and data costs | 1,528,584 | 13.5% | 172,704 | 6.7% | ||||||||||
Programming costs | 87,081 | 0.8% | 51,871 | 2.0% | ||||||||||
Cell site rent and utilities | 432,116 | 3.8% | 42,724 | 1.7% | ||||||||||
Other costs of revenues | 304,943 | 2.7% | 111,774 | 4.3% | ||||||||||
Total cost of revenues | 2,352,724 | 20.8% | 379,073 | 14.7% | ||||||||||
Gross margin | 8,976,496 | 79.2% | 2,196,603 | 85.3% | ||||||||||
Other Operating Expenses | ||||||||||||||
Employee costs | 3,911,189 | 34.5% | 1,021,554 | 39.6% | ||||||||||
Professional fees | 125,175 | 1.1% | 25,146 | 1.0% | ||||||||||
Depreciation | 1,311,516 | 11.6% | 228,622 | 8.9% | ||||||||||
Amortization | 820,496 | 7.2% | 153,763 | 5.9% | ||||||||||
General and administrative | 1,474,068 | 13.0% | 330,361 | 12.8% | ||||||||||
Accretion | 10,298 | 0.1% | 1,722 | 0.1% | ||||||||||
Loss on disposition of assets | 3,657 | 0.0% | 12,000 | 0.5% | ||||||||||
Total expenses | 7,656,399 | 67.5% | 1,773,168 | 68.8% | ||||||||||
Segment Income from Operations | 1,320,097 | 11.7% | 423,435 | 16.5% | ||||||||||
Interest expense, net | (8,293 | ) | (0.1%) | (1,594 | ) | (0.1%) | ||||||||
Noncontrolling interest in subsidiary income | (325,135 | ) | (2.9%) | (42,184 | ) | (1.7%) | ||||||||
Net Income Attributable to Common Stockholders | $ | 986,669 | 8.7% | $ | 379,657 | 14.7% |
Comparison of the First Nine Months of Fiscal 2021 to the First Nine Months of Fiscal 2020. In March 2020, we commenced our broadband services business with the acquisition of substantially all of the assets of FibAire. In December 2020, we acquired substantially all of the business assets of UBB. Therefore, comparisons of our broadband results for the first nine months of fiscal 2021 to the first nine months of fiscal 2020 may not be meaningful.
Cash Flows
Cash Flows for the First NineThree Months of Fiscal 20212022 compared to the First NineThree Months of Fiscal 20202021
The table below summarizes our cash flows, in dollars, for the first ninethree months of fiscal 20212022 and the first ninethree months of fiscal 2020:2021:
Nine Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2021 | September 30, 2020 | |||||||
(unaudited) | (unaudited) | |||||||
Net cash provided by operating activities | $ | 6,620,097 | $ | 3,492,006 | ||||
Net cash provided by (used in) investing activities | 10,564,107 | (37,479,511 | ) | |||||
Net cash provided by financing activities | 52,177,885 | 60,267,250 | ||||||
Net increase in cash, cash equivalents, and restricted cash | $ | 69,362,089 | $ | 26,279,745 |
Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, 2022 | March 31, 2021 | |||||||
(unaudited) | (unaudited) | |||||||
Net cash (used in) provided by operating activities | $ | (15,677,555 | ) | $ | 4,029,984 | |||
Net cash provided by investing activities | 157,990,849 | 36,047,823 | ||||||
Net cash used in financing activities | (121,684,048 | ) | (505,699 | ) | ||||
Net increase in cash, cash equivalents, and restricted cash | $ | 20,629,246 | $ | 39,572,108 |
Net Cash (Used in) Provided by Operating Activities. Net cash used in operating activities was $15,677,555 for the first three months of fiscal 2022 compared to net cash provided by operating activities was $6,620,097of $4,029,984 for the first ninethree months of fiscal 2021 compared to a $3,492,006 for the first nine months of fiscal 2020.2021. The increasedecrease in net cash provided by operating activities was primarily due tomainly driven by the additionbonus payments under our Management Incentive Bonus Plan, which totaled $15,000,000 and were accrued for in the fourth quarter of fiscal 2021 but paid in January 2022, and operating costs within our broadband servicesFFH business, which launched during the third quarter of fiscal 2021. These items were partially offset by increased cash flow generation within our billboard business, increased distributions from unconsolidated affiliates, and favorable working capital fluctuations, which was partially offset by the decline in operating results within our insurance business as well as costs associated with Yellowstone.business.
Net Cash Provided by (Used in) Investing Activities. Net cash provided by investing activities was $10,564,107 forwas $157,990,849 for the first ninethree months of fiscal 20212022 as compared with net cash used inprovided by investing activities of $37,479,511$36,047,823 for the first ninethree months of fiscal 2020.2021. The increase in net cash provided by investing activities is primarily attributable to $130,190,277 in proceeds from the sale of investments in Yellowstone's trust account related to Yellowstone's business combination with Sky Harbour as well as $79,245,912 in net proceeds of $65,475,346 related tomainly from the sale or maturity of marketable securities and U.S. Treasury trading securities and marketable securities held at Boston Omaha and the receipt of $20,000,000 of principal payments on our note receivable from DFH. Partially offsetting the increase inOmaha. These items were partially offset by net cash inflows wasoutflows related to our $55,000,000$45,000,000 PIPE investment in Sky Series B Preferred Units investment.Harbour and capital expenditures of $5,993,790.
Net Cash Provided byUsed in Financing Activities. Net cash provided byused in financing activities was $52,177,885 during$121,684,048 during the first ninethree months of fiscal 20212022 as compared to net cash provided byused in financing activities of $60,267,250$505,699 during the first ninethree months of fiscal 2020.2021. During the first ninethree months of fiscal 2021,2022, net cash provided byused in financing activities mainly consisted of $58,625,000 $123,068,515 in gross proceeds raised through our public offering of Class A common stock on April 1, 2021, offset primarily by offering costs of $3,447,996redemptions and net returns of funds held ascash outflows from Yellowstone's trust account related to Yellowstone's business combination with Sky Harbour, partially offset by $6,532,719 in collateral in the amount of $1,452,590.received at UCS.
Liquidity and Capital Resources
Currently, we own billboards in Alabama, Arkansas, Florida, Georgia, Illinois, Iowa, Kansas, Missouri, Nebraska, Nevada, Oklahoma, Virginia, West Virginia and Wisconsin, a surety insurance company we acquired in December 2016, surety insurance brokerage firms we acquired in 2016, 2017 and 2021, a surety insurance company we acquired in December 2016, broadband services providers whose assets we acquired in March 2020, and December 2020 and April 2022, and minority investments in severalcommercial real estate management entitiesand brokerage services, a bank focused on servicing the automotive loan market, a homebuilding company and a bank holding entity whose primary sourcedeveloper of revenue is in subprime automobile lending.private aviation infrastructure focused on building, leasing and managing business aviation hangars. At September 30, 2021,March 31, 2022, we had approximately $116$87 million in unrestricted cash and approximately $51$24 million in U.S. Treasury trading securities. Our strategy is to continue to acquire other billboard locations, insurance businesses, and broadband service providers as well as acquire other businesses and open new businesses which we believe have the potential to generate positive cash flows and when made at what we believe to be attractive prices relative to other opportunities generally available to us. We currently expect to finance any future acquisitions and investments with cash, debt and seller or third-party financing. In the future, we may satisfy all or a portion of the purchase price for an acquisition with our equity securities. In addition, we have made investments in several companies and expect to continue to make investments in the securities of both publicly traded and privately held companies.
There can be no assurance that we will consummate any subsequent acquisitions. Furthermore, our acquisitions are subject to a number of risks and uncertainties, including as to when, whether and to what extent the anticipated benefits and cost savings of a particular acquisition will be realized. Our failure to successfully identify and complete future acquisitions of assets or businesses could reduce future potential earnings, available cash and slow our anticipated growth. Although we have and continue to enter into non-binding letters of intent to acquire businesses on a regular basis, we do not have current agreements, commitments or understandings for any specific material acquisitions which are probable to be consummated at this time.
To date, we have raised funds through the sale of our Common Stock in public offerings, sales of our Common Stock in “at the market” programs, term loan financing through our Link subsidiary, proceeds from the sale of publicly traded securities held by us, cash flow from operations, and, prior to 2019, through private placements of our Common Stock.
2020 and 2021 Underwritten Public Offerings
On May 28, 2020, we entered into an underwriting agreement, (thewhich we refer to as the “2020 Underwriting Agreement”)Agreement,” with Wells Fargo Securities, LLC, (“WFS”)which we refer to as “WFS,” and Cowen and Company, LLC, as joint lead book-running managers for a public offering of 3,200,000 shares, which we refer to as the “firm“2020 firm shares,” of our Class A common stock at a public offering price of $16.00 per share. Under the terms of the underwriting agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 480,000 shares of Class A common stock at the public offering price less underwriting discounts and commissions, which we refer to as the “option shares.” On June 2, 2020, we completed the public offering selling a total of 3,680,000 shares, including both the 2020 firm shares and all of the 2020 option shares, resulting in total gross proceeds to us of $58.9 million. The shares were sold in the offering pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-222853) that was declared effective on February 9, 2018, as supplemented by a prospectus supplement dated May 28, 2020, (thewhich we refer to as the “2018 Shelf Registration Statement”).Statement.”
On March 31, 2021, we entered into an underwriting agreement, (thewhich we refer to as the “2021 Underwriting Agreement”)Agreement,” with WFS for a public offering of 2,300,000 shares, which we refer to as the “firm“2021 firm shares,” of our Class A common stock, of which 2,000,000 shares were sold by Boston Omaha and 300,000 shares were sold by a selling stockholder, at a public offering price of $25.00 per share. Under the terms of the 2021 Underwriting Agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 345,000 shares of Class A common stock at the public offering price less underwriting discounts and commissions, which we refer to as the “option“2021 option shares.” On April 6, 2021, we announced the completion of the public offering consisting of 2,345,000 shares, including both the 2021 firm shares and all of the 2021 option shares issued as a result of the underwriters’ exercise in full of their over-allotment option, resulting in total gross proceeds to us of $58.6 million. We raised this capital to fund the planned expansion of our fiber-to-the-home broadband business, to seek to grow our Link billboard business through the acquisitions of additional billboard businesses, and for general corporate purposes. The shares were sold in the offering pursuant to the Company’s universal shelf registration statement on Form S-3ASR (File No. 333-254870) that was declared effective on March 30, 2021, (thewhich we refer to as the “2021 Shelf Registration Statement”).
We may, from timeStatement.” The 2021 Shelf Registration Statement expired on March 28, 2022 upon the filing of our 2021 Annual Report on Form 10-K as we no longer qualified as a well-known seasoned issuer. In April 2022, we filed a shelf Registration Statement on Form S-3 (File No. 333-264470) that was declared effective on May 11, 2022, relating to time, in one or more offerings, offer and sell an indeterminate amount of any combinationthe offering of Class A common stock, or preferred stock, various series ofpar value $0.001 per share, which we refer to as “preferred stock,” debt securities and/or warrants. The shelf registration statement may also be used by one or more selling security holders to be identified in the future of our securities. We or any selling security holders may offer these securities from time to time in amounts, at prices and on terms determined at the time of offering. We may sell these securities to or through one or more underwriters, dealers or agents or directly to purchasers on a delayed or continuous basis. Unless otherwise set forth in an applicable prospectus supplement, we intend to use the net proceeds from the salewarrants of the securities that we offerCompany for general corporate purposes, including, but not limitedup to financing our existing businesses and operations, and expanding our businesses and operations through additional hires, strategic alliances and acquisitions.$500,000,000.
At The Market Offering Programs
Starting in March 2018, we utilized our at the market offering that was part of our 2018 Shelf Registration Statement. This 2018 Shelf Registration Statement, which authorized us to sell up to $200 million through the sales of securities to the public, expired in February 2021 and was superseded by the 2021 Shelf Registration Statement. We sold a total of 2,630,787 shares of Class A common stock and raisedresulting in gross proceeds of $60.1 million under the 2018 Shelf Registration Statement.
On September 29, 2021, we entered into an at the market equity offering program (the “ATM Program”) pursuant to a Sales Agreement (the “Sales Agreement”) by and between us and WFS. This ATM Program is consistent with our historical practice of having available to management the option to issue stock from time to time in order to continue to fund the growth of its fiber to the home rural broadband business, acquire additional billboards, and make other such investments in assets as needed to seek to grow intrinsic value per share. Our general preference is always to have options available to us from a capital allocation perspective which includes, but is not limited to, having a regularly filed ATM program as well as an authorized share repurchase program.
Pursuant to the terms of the Sales Agreement, we maycould sell, from time to time, shares (collectively, the “Placement Shares”) of our Class A common stock, with an aggregate sales price of up to $100 million through WFS, in transactions that are deemed to be at the market offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”). AsThe 2021 Shelf Registration Statement expired on March 28, 2022 upon the filing of the dateour 2021 Annual Report on Form 10-K as we no longer qualified as a well-known seasoned issuer. We sold a total of this Report, we have sold 73,397122,246 shares of our Class A common stock resulting in netgross proceeds of approximately $2.7 million.
Upon delivery of a placement notice (a “Placement Notice”) and upon$4.2 million under the terms and subject to the conditions of the Sales Agreement, WFS will use reasonable efforts consistent with its normal trading and sales practices, applicable laws and the rules of the NASDAQ Capital Market (“NASDAQ”) to sell the Placement Shares from time to time based upon our instructions for the sales, including price, time or size limits specified, and otherwise in accordance with, the terms of such Placement Notice. Pursuant to the Sales Agreement, WFS may sell Placement Shares by any method permitted by law deemed to be an at the market offering as defined in Rule 415 of the Securities Act. WFS may not purchase Placement Shares for its own account as principal unless expressly authorized to do so by us.
We intend to use the net proceeds from the sale of Placement Shares, after deducting WFS’ commissions and our offering expenses, for general corporate purposes, which may include financing its existing businesses and operations, and expanding its businesses and operations through additional acquisitions, minority investments and additional hires. To the extent that we raise additional funds by issuing equity or other securities, our shareholders may experience additional dilution. In the event we are required to obtain additional funds, there is no guarantee that we will be able to raise or obtain the additional funds or that the funds will be available on favorable terms to us.2021 Shelf Registration Statement.
For sales of Placement Shares through WFS, we will paypaid WFS a commission at a mutually agreed rate of 3% of the gross sales price per Placement Share. In addition, we have agreed to pay certain expenses incurred by WFS in connection with the offering. We have no obligation to sell any shares under the Sales Agreement, and may at any time suspend the offering of Placement Shares under the Sales Agreement.
The Sales Agreement contains customary representations and warranties of the parties and indemnification and contribution provisions under which we and WFS have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. The ATM Program pursuant
In April 2022, we filed a shelf Registration Statement on Form S-3 (File No. 333-264470) that was declared effective on May 11, 2022, relating to the Sales Agreementoffering of Class A common stock, preferred stock, debt securities and warrants of the Company for up to $500,000,000. In addition, certain selling shareholders have the right to register in a prospectus supplement or supplements, which may be filed, from time to time, up to 8,297,093 shares of Class A common stock held by them. We will automatically terminate uponnot receive any proceeds from the issuance and sale of allClass A common stock by the selling shareholders. Currently, the selling stockholders are the Massachusetts Institute of Technology, or “MIT”, as well as 238 Plan Associates LLC, an MIT pension and benefit fund and a limited partnership holding our Class A common stock for the economic benefit of MIT. No officer or director has any beneficial interest in any shares eligible for resale by the selling shareholders. We may, from time to time, in one or more offerings, offer and sell Class A common stock or preferred stock, various series of debt securities, and/or warrants. The shelf registration statement may also be used by one or more selling security holders, to be identified in the future, of our securities. We or any selling security holders may offer these securities from time to time in amounts, at prices and on terms determined at the time of offering. We may sell these securities to or through one or more underwriters, dealers or agents or directly to purchasers on a delayed or continuous basis. Unless otherwise set forth in an applicable prospectus supplement, we intend to use the net proceeds from the sale of the Placement Sharessecurities that we offer for general corporate purposes, including, but not limited to, financing our existing businesses and operations, and expanding our businesses and operations through WFS.
The Placement Shares will be offeredadditional hires, strategic alliances and sold pursuant to the 2021 Shelf Registration Statement andacquisitions. Unless otherwise set forth in a related prospectus supplement, dated September 29, 2021 and filed withwe will not receive any proceeds from the SEC on the same date.
The foregoing descriptionsale of the Sales Agreement is not complete and is qualified in its entiretysecurities by reference to the full text of the Sales Agreement, a copy of which is filed as Exhibit 1.1 to the Current Report on Form 8-K as filed with the SEC on September 29, 2021.any selling stockholders.
Link Credit Agreement
On August 12, 2019, Link entered into a Credit Agreement (the “Credit Agreement”) with First National Bank of Omaha (the “Lender”) under which Link maycould borrow up to $40 million$40,000,000 (the “Credit Facility”). The Credit Agreement providesprovided for an initial term loan (“Term Loan 1”), an incremental term loan (“Term Loan 2”) and a revolving line of credit. These loans areLink initially borrowed approximately $18 million under Term Loan 1 and $5.5 million under Term Loan 2. On December 6, 2021, Link entered into a Fourth Amendment to Credit Agreement (the "Fourth Amendment"), which modified the Credit Agreement by increasing the borrowing limit to $30,000,000 and combining the outstanding balances under Term Loan 1 and Term Loan 2 as well as any incremental borrowings into a term loan ("Term Loan"). The Term Loan is secured by all assets of Link and its operating subsidiaries, including a pledge of equity interests of each of Link’s subsidiaries. In addition, each of Link’s subsidiaries has joined as a guarantor to the obligations under the Credit Agreement. These loans areThe loan is not guaranteed by BOCBoston Omaha or any of BOC’sour non-billboard businesses. Link initially borrowed approximately $18 million under Term Loan 1 and $5.5 million under Term Loan 2. Link may not borrow additional funds under the term loan provisions of the Credit Facility. Long-term debt included within our consolidated balance sheet as of September 30, 2021March 31, 2022 consists of Link’s Term Loan 1 and Term Loan 2 borrowings of $22,175,535,$29,613,914, of which $1,220,005$1,498,670 is classified as current. There were no amounts outstanding related to the revolving line of credit as of September 30, 2021.March 31, 2022.
Principal amounts under each ofthe Term Loan 1 and Term Loan 2 are payable in monthly installments according to a 15-year amortization schedule. Theseschedule with principal payments commencedcommencing on JulyJanuary 1, 2020 for2022. The Term Loan 1 and on October 1, 2020 for Term Loan 2. Both term loans areis payable in full on August 12, 2026.December 6, 2028. During the first three years of the term loans,Term Loan, Link may prepay up to 10% of the loan principal in each year without paying any prepayment penalty. Otherwise, there is a prepayment penalty ranging between 2.0%3.0% and 0.5%. After three years, there is no prepayment penalty. The Term Loan 1 and Term Loan 2 havehas a fixed interest ratesrate of 4.25% and 3.375%, respectively,4.00% per annum. The revolving line of credit loan facility has a $5 million$5,000,000 maximum availability. Interest payments are based on the U.S. Prime Rate rate minus an applicable margin ranging between 0.65% and 1.15% dependent on Link’s consolidated leverage ratio. The revolving line of credit is due and payable on August 12, 2023.
DuringUnder the term of the Credit Facility,Term Loan, Link is required to comply with the following financial covenants: A consolidated leverage ratio for any test period ending on the last day of any fiscal quarter of Link (a) beginning with the fiscal quarter ended December 31, 20202021 of not greater than 3.253.50 to 1.00, and (b) beginning with the fiscal quarter ending December 31, 20212022 of not greater than 3.25 to 1.00 and (c) beginning with the fiscal quarter ending December 31, 2023 and thereafter of not greater than 3.00 to 1.0;1.00, and a minimum consolidated fixed charge coverage ratio of not less than 1.15 to 1.00 measured quarterly, based on rolling four quarters. The Company was in compliance with these covenants as of September 30, 2021.March 31, 2022.
The Credit Agreement includes representations and warranties, reporting covenants, affirmative covenants, negative covenants, financial covenants and events of default customary for financings of this type. Upon the occurrence of an event of default the Lender may accelerate the loans.loan. Upon the occurrence of certain insolvency and bankruptcy events of default the loansloan will automatically accelerate. The foregoing summary of the Credit Agreement and the transactions contemplated thereby does not purport to be a complete description and is qualified in its entirety by reference to the terms and conditions of the Credit Agreement and Security Agreement, copies of which are attached as Exhibit 10.1 and Exhibit 10.2, respectively to our Form 8-K as filed with the SEC on August 13, 2019, a First Amendment to Credit Agreement, a copy of which is attached as Exhibit 10.1 to our Form 8-K as filed with the SEC on October 29, 2019, a Second Amendment to Credit Agreement, a copy of which is attached as Exhibit 10.1 to our Form 8-K as filed with the SEC on June 30, 2020, and a Third Amendment to Credit Agreement (the “Third Amendment”) with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on August 24, 2021, and a Fourth Amendment to Credit Agreement with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on December 9, 2021.
Loan to Dream Finders Homes
On October 2, 2020, we provided a term loan of $20 million to Dream Finders Holdings, LLC to be used in expanding DFH's footprint in the Southeast United States. The effective interest rate on this term loan is approximately 14% and matured on May 1, 2021. This loan was repaid with interest in early 2021.
Investments in Yellowstone Acquisition Company and Sky Harbour LLCGroup Corporation
Between August and NovemberIn 2020, we invested, through BOCacted as the sponsor for the initial public offering of Yellowstone approximately $7.8 million through the purchase ofand purchased 3,399,724 shares of Yellowstone Class B common stock and 7,719,799 private placement warrants to purchase 7,719,779 shares of Class A common stock of Yellowstone. BOC Yellowstone is the sponsor of Yellowstone and under the terms of Yellowstone’s initial public offering completed in October 2020, which we refer to as the “Yellowstone IPO”, owns approximately 20% of Yellowstone’s issued and outstanding common stock. On September 27, 2021, Yellowstone borrowed $1 million from us which amount, at our option is, payable upon the closing of the business consummation, to purchase additional private placement warrants upon the same terms and conditions as the currently outstanding private placement warrants, or a combination of cash and warrants.
On August 1, 2021, Yellowstone entered into a business combination agreement with Sky Harbour LLC (“SHG”), a developer of private aviation infrastructure focused on building, leasing and managing business aviation hangars. Upon closing of the business combination, SHG will become a publicly traded company, and it is expected that its common stock will be listed on the NASDAQ exchange. The combined company will have an implied pro forma equity market valuecost of approximately $777 million at closing.
$7.8 million. On August 1, 2021, we entered into an equity purchase agreement with Sky Harbour LLC by which Sky Harbour LLC unitholders would acquire a majority interest in the combined businesses following the completion of a business combination. As part of the equity purchase agreement, and immediately prior to the completion by Sky Harbour LLC of a private activity bond financing raising $160 million in proceeds in September 2021, we purchased Class B Preferred Units in Sky Harbour LLC for a purchase price of $55 million, Serieswhich Class B Preferred Unit Purchase Agreement (the “Series B Purchase Agreement”Units converted to 5,500,000 shares of Sky Harbour Group Corporation (“Sky Harbour”) with SHG. On September 14, 2021, we completed the $55 million transaction, purchasing the Series B Preferred Units. This additional equity investment was made directly into SHG, andClass A common stock upon the successful consummationclosing of the Sky Harbour business combination on January 25, 2022. Also, upon the closing of the business combination, will convert into 5,500,000we purchased an additional 4,500,000 shares of the post-combination public company’sSky Harbour Class A common stock atfor a purchase price of $10 per share. In the event the business combination is not consummated, our investment will remain as Series B Preferred Units of SHG. In addition, the parties will seek to raise additional funding to support the business combination through a private placement investment (“PIPE”) to be consummated at the closing of the transaction of $100$45 million. In addition to the $55 million of financing support, we have also agreed to provide to SHG a backstop valued at up to an additional $45 million through the purchase of additional shares of Yellowstone Class A common stock at a price of $10 per share if needed to meet the minimum investment condition of $150 million. This backstop financing is payable in any combination of cash and public securities at our option.
The transaction is subject to the satisfaction of customary closing conditions, including the approval of the shareholders of Yellowstone. As part of its overall financing strategy, on September 14, 2021, SHG completed a private activity tax-exempt bond financing which raised $166 million in gross proceeds in long term debt. The combined company expects to receive up to $238 million in gross proceeds, assuming no redemptions by Yellowstone’s existing public stockholders. This amount excludes additional funds which may be raised in the PIPE. All SHG equityholders are retaining 100% of their equity in the combined company. The cash proceeds are expected to be used to fund the completion of four new airport hangar campuses in addition to expansion at SHG’s location currently in operation.
● | Upon the closing of the Sky Harbour business combination, our Class B common stock converted to Class A common stock of Sky Harbour and our private placement warrants are now exercisable to purchase 7,719,779 shares of Class A common stock of Sky Harbour (the "Sky Harbour Warrants"). |
● | Each Sky Harbour Warrant is exercisable for one share of Class A common stock at a price of $11.50 per share, subject to adjustment, with each Sky Harbour Warrant being exercisable through January 25, 2026. Unlike Sky Harbour’s publicly traded warrants, these warrants are not redeemable by Sky Harbour as long as we or permitted transferees hold these warrants. The Sky Harbour Warrants are also exercisable on a cashless basis. |
The foregoing summary of the Series B Purchase Agreement and the transactions contemplated thereby does not purport to be a complete description and is qualified in its entirety by reference to the terms and conditions of the Series B Purchase Agreement, a copy of which is attached as Exhibit 10.1 to a Form 8-K as filed with the SEC on August 3, 2021. Capitalized terms used herein have the meaning given to such terms in the Series B Purchase Agreement, as applicable.
● | Our Sky Harbour Class A common stock and the Sky Harbour Warrants and the shares underlying the warrants remain subject to a lockup, which we refer to as the "Sky Lockup Period," for a period of at least the first to occur of (a) January 25, 2023, (b) if the last sale price of Sky Harbour's Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after January 25, 2022, or (c) the date on which Sky Harbour completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Sky Harbour stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property. |
● | Subsequent to the closing of the Sky Harbour business combination, we distributed 75,000 shares of Sky Harbour Class A common stock to the outside directors of Yellowstone and 206,250 shares of Sky Harbour Class A common stock to an investor in the Yellowstone IPO. As of May 13, 2022, we hold 13,118,474 shares of Sky Harbour Class A common stock and 7,719,779 Sky Harbour Warrants. |
● | In addition to the lock-up restrictions described above, our ownership of Sky Harbour Class A common stock is currently unregistered but our Sky Harbour Warrants and the shares underlying the warrants are now registered. Under the terms of various registration rights agreements with Sky Harbour, Sky Harbour is required to use its reasonable best efforts to register the Sky Harbour Class A common stock we acquired upon the termination of the Sky Lockup Period. |
● | Depending upon a number of factors, we could be deemed to be an affiliate of Sky Harbour for purposes of Rule 144, and our ability to liquidate all or a portion of our holdings in Sky Harbour, if we are deemed to be an affiliate and in the absence of an effective registration statement for our shares, would be subject to the volume trading limitations contained in Rule 144, which generally limits our ability to sell shares in any one quarter to the greater of 1% of the issued and outstanding shares of Class A common stock or the average weekly trading volume of such shares over the four weeks preceding the date of the sale. |
We believe that our existing cash and short-term investments, funds available through the Credit Agreement Link entered into on August 12, 2019, as amended, any proceeds from the Salefuture sale of Placement Shares,our Class A common stock under the 2022 shelf registraion statement, and any funds that we may receive from cash flows from operations will be sufficient to meet working capital requirements and anticipated capital expenditures for the next 12 months. At September 30, 2021,March 31, 2022, we had approximately $116$87 million in unrestricted cash, $51$24 million in U.S. treasury trading securities, and $80$47 million in marketable equity securities.
If future additional significant acquisition opportunities as well as expansion opportunities within our billboard and broadband services businesses, and possible further development under our build for rent business become available in excess of our currently available cash and U.S. Treasury and marketable equity securities, we may need to seek additional capital through long term debt borrowings, the sale of our securities, and/or other financing options and we may not be able to obtain such debt or equity financing on terms favorable to us or at all. In the future, we may use a number of different sources to finance our acquisitions and operations, including current cash on hand, potential future cash flows from operations, seller financing, debt financings including but not limited to long-term debt and line of credit facilities, including additional credit facilities which may or may not be secured by our assets or those of our operating subsidiaries, additional common or preferred equity issuances or any combination of these sources, to the extent available to us, or other sources that may become available from time to time, which could include asset sales and issuance of debt securities. In addition to Link’s current credit facility, any future debt that we incur may be recourse or non-recourse and may be secured or unsecured. Link's existing credit facility imposes restrictions on Link that could increase our vulnerability to general adverse economic and industry conditions by limiting our flexibility in planning for and reacting to changes in our billboard, insurance and broadband businesses. Specifically, these restrictions place limits on Link and its subsidiaries' ability to, among other things, incur additional indebtedness, make additional acquisitions and investments, pay dividends, repurchase stock, create liens, enter into transactions with affiliates, merge or consolidate or transfer or sell our billboard assets. Link’s credit facility requires it to meet a fixed charge coverage ratio and other financial covenants. Link’s ability to comply with these loan covenants may be affected by factors beyond its control and a breach of any loan covenants would likely result in an event of default under the Credit Agreement, which would permit the Lender to declare all amounts incurred thereunder to be immediately due and payable and to terminate their commitment to make future extensions of credit. We also may take advantage of joint venture or other partnering opportunities as such opportunities arise in order to acquire properties that would otherwise be unavailable to us. Any future credit facilities which we or any of our subsidiaries may enter into would likely impose similar restrictions and risks.
We may use the proceeds of any future borrowings to acquire assets or for general corporate purposes. In determining when to use leverage, we will assess the appropriateness of new equity or debt capital based on market conditions, including assumptions regarding future cash flow, the creditworthiness of customers and future rental rates.
We conduct and plan to continue to conduct our activities in such a manner as not to be deemed an investment company under the Investment Company Act. Therefore, no more than 40% of our total assets can be invested in investment securities, as such term is defined in the Investment Company Act. In addition, we do not invest or intend to invest in securities as our primary business. We run the risk of inadvertently being deemed to be an investment company that is required to register under the Investment Company Act of 1940 (the “Investment Company Act”) because a significant portion of our assets consists of investments in companies in which we own less than a majority interest. The risk varies depending on events beyond our control, such as significant appreciation or depreciation in the market value of certain of our publicly traded holdings, adverse developments with respect to our ownership of certain of our subsidiaries, and transactions involving the sale of certain assets. If we are deemed to be an inadvertent investment company, we may seek to rely on a safe-harbor under the Investment Company Act that would provide us a one-year grace period to take steps to avoid being deemed to be an investment company. In order to ensure we avoid being deemed an investment company, we have taken, and may need to continue to take, steps to reduce the percentage of our assets that constitute investments assets under the Investment Company Act. These steps have included, among others, selling marketable securities that we might otherwise hold for the long-term and deploying our cash in non-investment assets. We have recently sold marketable securities, including at times at a loss, and we may be forced to sell our investment assets at unattractive prices or to sell assets that we otherwise believe benefit our business in the future to remain below the requisite threshold. We may also seek to acquire additional non-investment assets to maintain compliance with the Investment Company Act, and we may need to incur debt, issue additional equity or enter into other financing arrangements that are not otherwise attractive to our business. Any of these actions could have a material adverse effect on our results of operations and financial condition. Moreover, we can make no assurance that we would successfully be able to take the necessary steps to avoid being deemed to be an investment company in accordance with the safe-harbor. If we were unsuccessful, then we would have to register as an investment company, and we would be unable to operate our business in its current form. We would be subject to extensive, restrictive, and potentially adverse statutory provisions and regulations relating to, among other things, operating methods, management, capital structure, indebtedness, dividends, and transactions with affiliates. If we were deemed to be an investment company and did not register as an investment company when required to do so, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, that we would be unable to enforce contracts with third parties, and/or that third parties could seek to obtain rescission of transactions with us undertaken during the period in which we were deemed to be an unregistered investment company.
Our certificate of incorporation and bylaws do not limit the amount of debt that we may incur. Our Board of Directors has not adopted a policy limiting the total amount of debt that we may incur. Our Board of Directors will consider a number of factors in evaluating the amount of debt that we may incur. If we adopt a debt policy, our Board of Directors may from time to time modify such policy in light of then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general conditions in the markets for debt and equity securities, fluctuations in the market price of our Class A common stock if then trading on any exchange, growth and acquisition opportunities and other factors. Our decision to use leverage in the future to finance our assets will be at our discretion and will not be subject to the approval of our stockholders, and we are not restricted by our governing documents or otherwise in the amount of leverage that we may use.
Off-Balance Sheet Arrangements
Except for our normal operating leases, we do not have any off-balance sheet financing arrangements, transactions or special purpose entities.
Quantitative and Qualitative Disclosures About Market Risk
At September 30, 2021,March 31, 2022, we held no significant derivative instruments that materially increased our exposure to market risks for interest rates, foreign currency rates, commodity prices or other market price risks. Our operations are currently conducted entirely within the U.S.; therefore, we had no significant exposure to foreign currency exchange rate risk.
Critical Accounting
The preparation of the consolidated financial statements and related notes to the consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions including the impact of the COVID-19 pandemic, believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates. Information with respect to our critical accounting policies that we believe could have the most significant effect on our reported results or require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in the Notes to the Consolidated Financial Statements each in our Annual Report on Form 10-K/A10-K for the fiscal year ended December 31, 2020,2021, as filed with the SEC on May 24, 2021.March 28, 2022. We believe that at September 30, 2021,March 31, 2022, there has been no material change to this information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable as we are a “smaller reporting company.”
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
DisclosureOur management, with the participation of our principal executive officers and principal financial and accounting officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officers and principal financial and accounting officer each concluded that, as of March 31, 2022, our disclosure controls and procedures are controlseffective and other procedures that are designed to ensure that the information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the requisite time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Co-Chief Executive Officers and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Co-Chief Executive Officers and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2021 because of the material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, management determined that its disclosure controls and procedures and internal control over financial reporting were not effective as of December 31, 2020 related to its risk assessment of the formation of Yellowstone Acquisition Company. Specifically, the Company did not design and implement effective controls addressing the technical accounting complexities associated with SPAC formations. This material weakness resulted in the restatement of our financial statements for the year ended December 31, 2020. Additionally, this material weakness could result in a misstatement of the recorded warrant liability, Yellowstone's Class A common stock and related accounts and disclosures that would result in a material misstatement of the financial statements that would not be prevented or detected on a timely basis.
Remediation Plan
Management has been implementing and continues to implement measures designed to remediate the control deficiencies contributing to the material weakness, such that these controls are designed, implemented and operating effectively. The remediation actions include performing an assessment of risks of material misstatement associated with the accounting and financial reporting for the special purpose acquisition company, evaluating the assignment of responsibilities associated with the accounting for the Company's investment in Yellowstone, including considering hiring additional resources and providing additional training to existing resources.
Management believes that these actions, and the improvements achieved as a result, will effectively remediate the material weaknesses. However, the material weaknesses in our internal control over financial reporting will not be considered remediated until the remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.periods.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the fiscal quarter ended September 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our management, including our principal executive officers and principal financial and accounting officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
Due to the nature of our business, we are, from time to time and in the ordinary course of business, involved in routine litigation or subject to disputes or claims related to our business activities, including, without limitation, workers’ compensation claims and employment-related disputes. In the opinion of our management, none of the pending litigation, disputes or claims against us, if decided adversely, will have a material adverse effect individually or in the aggregate on our financial condition, cash flows or results of operations.
Not applicable as we are a “smaller reporting company.” For a list of risk factors, please refer to our Annual Report on Form 10-K/A10-K for the year ended December 31, 2020,2021, as filed with the SEC on May 24, 2021.March 28, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
None.
The exhibits listed in the following Exhibit Index are incorporated herein by reference.
Exhibit No. | Exhibit Description |
|
3.1 (*) |
3.2 (*) |
3.4 (*) |
3.5 (*) | Amended and Restated Bylaws of the Company, as amended, filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 1, 2020. |
31.2 (#) | Certification of Co-Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
31.3 (#) | Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
32.1 (#)(##) |
32.2 (#)(##) |
32.3 (#)(##) |
101.INS (#) | Inline XBRL Instance Document. |
101.SCH (#) | Inline XBRL Taxonomy Extension Schema Document. |
101.CAL (#) | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF (#) | Inline XBRL Taxonomy Extension Definition. |
101.LAB (#) | Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE (#) | Inline XBRL Taxonomy Presentation Linkbase Document. |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
(*) | Incorporated by reference to the filing indicated. |
(#) | Filed herewith. |
(##) | The certifications attached as Exhibits 32.1, 32.2, and 32.3 that accompany this Report, are not deemed filed with the SEC and are not to be incorporated by reference into any filing of Boston Omaha Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report irrespective of any general incorporation language contained in such filing. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BOSTON OMAHA CORPORATION
(Registrant)
By: /s/ Alex B. Rozek
Alex B. Rozek
Co-President (Principal Executive Officer)
November 12, 2021May 13, 2022
By: /s/ Adam K. Peterson
Adam K. Peterson
Co-President (Principal Executive Officer)
November 12, 2021May 13, 2022
By: /s/ Joshua P. Weisenburger
Joshua P. Weisenburger
Chief Financial Officer
(Principal Financial and Accounting Officer)
November 12, 2021May 13, 2022