OLD MARKET CAPITAL Corp (OMCC)
OLD MARKET CAPITAL Corp filed this 8-K/A on August 29, 2024, reporting on events of May 15, 2024.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
Registrant’s telephone number, including area code: (
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Explanatory Note
In conjunction with the closing of the Amplex Acquisition, the Company converted the outstanding principal and accrued interest of approximately $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the share purchase price of $1,792.55 and purchased an additional 1,674 shares of Amplex common stock at a price of $1,792.55 per share for a total of $3.0 million. These transactions concurrently executed at the Transaction Closing Date increased the Company's ownership in Amplex to 56.5%.
This Current Report on Form 8-K/A amends Item 9.01 of the Current Report on Form 8-K filed by the Company on May 6, 2024 to include the historical financial statements of Amplex and the pro forma financial information required by Item 9.01 of Form 8-K, attached hereto as Exhibits 99.1, 99.2 and 99.3. The pro forma financial information included in this Form 8- K/A has been presented for informational purposes only, as required by Form 8-K. It does not purport to represent the actual results of operations that the Company and Amplex would have achieved had the companies been combined during the periods presented in the pro forma financial information and is not intended to project the future results of operations that the combined company may achieve as a result of the Company’s acquisition of Amplex. Except as described above, all other information in the Company’s Current Report on Form 8-K filed on May 6, 2024 remains unchanged.
Item 7.01 Regulation FD.
The information in this Item 7.01, including the exhibit hereto, (x) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and (y) shall not be incorporated by reference into any filing of the Company with the Securities and Exchange Commission, whether made before or after the date hereof, regardless of any general incorporation language in such filings (unless the Company specifically states that the information or exhibit in this particular report with respect to Item 7.01 are incorporated by reference).
Item 9.01 Financial Statements and Exhibits.
The historical audited consolidated financial statements of Amplex and its subsidiaries as of October 31, 2023 and 2022 and for the years ended October 31, 2023 and 2022, including the notes related thereto and the related report of Bolinger, Segars, Gilbert & Moss, LLP, Amplex’s independent auditor, as of February 16, 2024 are filed as Exhibit 99.1 and incorporated herein by reference.
The historical unaudited interim condensed consolidated financial statements of Amplex and its subsidiaries as of April 30, 2024 and 2023 and for the six months ended April 30, 2024 and 2023, including the notes related thereto and the related review report of Bolinger, Segars, Gilbert & Moss, LLP, Amplex's independent accountants, as of August 27, 2024 are filed as Exhibit 99.2 and incorporated herein by reference.
Unaudited pro forma condensed consolidated statements of operations of the Company and Amplex for the three months ended June 30, 2024 and 2023, respectively, and the notes related thereto are filed as Exhibit 99.3 and incorporated herein by reference.
Exhibit Index
SIGNATURES
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.
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Signature |
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Title |
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Date |
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/s/ Mike Rost |
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Chief Executive Officer (Principal Executive Officer) |
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August 29, 2024 |
Mike Rost |
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/s/ Charlie Krebs |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
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August 29, 2024 |
Charlie Krebs |
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Exhibit 99.1
AMPLEX ELECTRIC, INC.
LUCKEY, OHIO
FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 2023 AND 2022
AND
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
Bolinger, Segars, Gilbert & Moss, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
LUBBOCK, TEXAS
AMPLEX ELECTRIC, INC.
LUCKEY, OHIO
FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 2023 AND 2022
AND
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
LUCKEY, OHIO
FINANCIAL STATEMENTS
FOR THE YEARS ENDED OCTOBER 31, 2023 AND 2022
TABLE OF CONTENTS
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Statement Identification |
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Page No. |
Independent Auditor’s Report |
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1 |
Financial Statements |
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Balance Sheets |
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Exhibit A |
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3 |
Statements of Income |
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Exhibit B |
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4 |
Statements of Stockholders’ Equity |
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Exhibit C |
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5 |
Statements of Cash Flows |
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Exhibit D |
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6 |
Notes to Financial Statements |
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7 |
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
Bolinger, Segars, Gilbert & Moss, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
PHONE: (806) 747-3806
FAX: (806) 747-3815)
8215 NASHVILLE AVENUE
LUBBOCK, TEXAS 79423-1954
Independent Auditor’s Report
Board of Directors
Amplex Electric, Inc.
Luckey, Ohio
Opinion
We have audited the accompanying financial statements of Amplex Electric, Inc., which comprise the balance sheets as of October 31, 2023 and 2022 and the related statements of income, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Amplex Electric, Inc. as of October 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Amplex Electric, Inc. (the Company) and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with GAAS; this includes the design, implementation, and maintenance of internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
1
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
Auditor’s Responsibility for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users made on the basis of these financial statements.
In performing an audit in accordance with GAAS, we:
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
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Certified Public Accountants |
Lubbock, Texas
February 16, 2024
2
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
Exhibit A
BALANCE SHEETS
OCTOBER 31, 2023 AND 2022
ASSETS |
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October 31, |
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2023 |
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2022 |
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CURRENT ASSETS |
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Cash and Cash Equivalents |
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$ |
369,721 |
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$ |
473,676 |
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Accounts Receivable |
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Due from Customers (Less allowance for uncollectible |
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132,663 |
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104,891 |
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Accounts Receivable - Affiliate |
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427,655 |
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150,224 |
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Materials and Supplies |
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553,545 |
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528,738 |
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Current Portion of Prepaid Fiber Lease |
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8,864 |
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8,864 |
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Prepayments |
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414,770 |
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131,038 |
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$ |
1,907,218 |
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$ |
1,397,431 |
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OTHER NONCURRENT ASSETS |
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Investments in Equity Securities |
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$ |
— |
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$ |
306,163 |
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Prepaid Fiber Lease, Less Current Portion |
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19,206 |
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28,070 |
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Intangibles, Net of Amortization |
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694,400 |
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729,992 |
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$ |
713,606 |
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$ |
1,064,225 |
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PROPERTY AND EQUIPMENT |
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Plant In Service |
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$ |
21,039,423 |
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$ |
15,781,988 |
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Plant Under Construction |
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719,936 |
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397,934 |
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$ |
21,759,359 |
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$ |
16,179,922 |
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Less: Accumulated Depreciation |
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7,351,112 |
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5,772,658 |
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$ |
14,408,247 |
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$ |
10,407,264 |
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DEFERRED CHARGES |
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$ |
19,589 |
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$ |
17,164 |
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TOTAL ASSETS |
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$ |
17,048,660 |
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$ |
12,886,084 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES |
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Current Portion of Long-Term Debt |
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$ |
535,547 |
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$ |
333,943 |
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Accounts Payable |
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1,213,749 |
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622,818 |
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Other Current Liabilities |
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6,795 |
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13,442 |
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Deferred Service Revenues |
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475,152 |
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438,156 |
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Compensated Absences |
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108,423 |
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74,497 |
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Accrued Interest Payable |
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38,525 |
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24,553 |
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$ |
2,378,191 |
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$ |
1,507,409 |
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NONCURRENT LIABILITIES |
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Long-Term Debt, Less Current Portion |
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$ |
6,627,108 |
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$ |
4,582,804 |
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Unamortized Debt Issuance Costs |
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(134,991 |
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(139,241 |
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Deferred Income Taxes |
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1,604,789 |
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1,353,672 |
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$ |
8,096,906 |
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$ |
5,797,235 |
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STOCKHOLDERS' EQUITY |
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Common Stock, 25,000 Shares Authorized, 21,000 |
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$ |
50,000 |
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$ |
50,000 |
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Retained Earnings |
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6,523,563 |
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5,531,440 |
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$ |
6,573,563 |
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$ |
5,581,440 |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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$ |
17,048,660 |
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$ |
12,886,084 |
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See accompanying notes to financial statements.
3
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
Exhibit B
STATEMENTS OF INCOME
FOR THE YEARS ENDED OCTOBER 31, 2023 AND 2022
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October 31, |
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2023 |
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2022 |
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OPERATING REVENUES |
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Wireless Internet Services |
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$ |
7,299,416 |
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$ |
7,180,643 |
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Fiber Internet Services |
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2,045,394 |
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1,315,378 |
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VoIP Services |
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534,791 |
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432,018 |
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Streaming Video Services |
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555,682 |
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354,751 |
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Miscellaneous Income |
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356,780 |
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191,005 |
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Uncollectible Recoveries (Revenues) |
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1,047 |
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(300 |
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Total Operating Revenues |
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$ |
10,793,110 |
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$ |
9,473,495 |
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OPERATING EXPENSES |
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Cost of VoIP |
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$ |
83,325 |
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$ |
76,156 |
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Cost of Internet Services |
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663,478 |
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563,730 |
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Cost of Streaming Video |
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483,104 |
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304,501 |
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Plant Specific Operations |
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1,465,057 |
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1,504,147 |
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Plant Nonspecific Operations |
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956,182 |
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612,686 |
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Depreciation and Amortization |
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1,620,197 |
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1,207,045 |
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Customer Operations |
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639,617 |
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567,239 |
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Corporate Operations |
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3,090,847 |
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2,909,060 |
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General Taxes |
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155,520 |
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144,846 |
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Total Operating Expenses |
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$ |
9,157,327 |
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$ |
7,889,410 |
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OPERATING INCOME |
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$ |
1,635,783 |
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$ |
1,584,085 |
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OTHER INCOME (EXPENSE) |
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Interest and Dividend Income |
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$ |
11,831 |
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$ |
2,326 |
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Unrealized Gains (Losses) on Equity Securities |
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(1,301 |
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Gain on Sale of Assets |
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28,186 |
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8,950 |
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Amortization of Debt Issuance Cost |
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(14,036 |
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(10,421 |
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Interest Expense |
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(417,483 |
) |
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(127,999 |
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Other, Net |
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(1,041 |
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10,422 |
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$ |
(392,543 |
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$ |
(118,023 |
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NET INCOME BEFORE INCOME TAXES |
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$ |
1,243,240 |
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$ |
1,466,062 |
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Income Tax Expense |
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251,117 |
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|
307,127 |
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NET INCOME |
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$ |
992,123 |
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$ |
1,158,935 |
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See accompanying notes to financial statements.
4
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
Exhibit C
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 2023 AND 2022
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Common Stock |
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Retained |
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Shares |
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Cost |
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Earnings |
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Total |
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Balance, November 1, 2021 |
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21,000 |
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$ |
50,000 |
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$ |
4,372,505 |
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$ |
4,422,505 |
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Net Income |
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1,158,935 |
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1,158,935 |
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Balance, October 31, 2022 |
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21,000 |
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$ |
50,000 |
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$ |
5,531,440 |
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$ |
5,581,440 |
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Net Income |
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992,123 |
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992,123 |
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Balance, October 31, 2023 |
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21,000 |
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$ |
50,000 |
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$ |
6,523,563 |
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$ |
6,573,563 |
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See accompanying notes to financial statements.
5
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
Exhibit D
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 2023 AND 2022
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October 31, |
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2023 |
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2022 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net Income |
$ |
992,123 |
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$ |
1,158,935 |
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Adjustments to Reconcile Net Income to Net Cash from Operating Activities: |
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Depreciation |
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1,584,605 |
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1,171,452 |
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Amortization of Intangibles |
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35,592 |
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35,593 |
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Amortization of Debt Issuance Costs |
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14,036 |
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10,421 |
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Deferred Income Taxes |
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251,117 |
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|
307,127 |
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Gain on Sale of Assets |
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(28,186 |
) |
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(8,950 |
) |
Unrealized Loss on Equity Securities |
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1,301 |
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Receivables |
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(305,203 |
) |
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(71,688 |
) |
Materials and Supplies |
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(24,807 |
) |
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(124,265 |
) |
Prepayments |
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(283,732 |
) |
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|
11,087 |
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Prepaid Fiber Lease |
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8,864 |
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8,864 |
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Accounts Payable |
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590,931 |
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(43,727 |
) |
Deferred Service Revenues |
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36,996 |
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(33,208 |
) |
Deferred Charges |
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(2,425 |
) |
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(17,164 |
) |
Other Current Liabilities |
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41,251 |
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|
36,757 |
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Net Cash from Operating Activities |
$ |
2,911,162 |
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$ |
2,442,535 |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Additions to Telecommunications Plant |
$ |
(5,557,402 |
) |
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$ |
(5,206,151 |
) |
Sales of Equity Securities |
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301,163 |
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Purchases of Equity Securities |
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(300,250 |
) |
Net Cash from Investing Activities |
$ |
(5,256,239 |
) |
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$ |
(5,506,401 |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from Long-Term Borrowing |
$ |
2,413,605 |
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$ |
3,043,897 |
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Debt Issuance Costs |
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(9,786 |
) |
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|
(79,385 |
) |
Repayment of Long-Term Debt |
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(167,697 |
) |
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|
(130,951 |
) |
Net Cash from Financing Activities |
$ |
2,236,122 |
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$ |
2,833,561 |
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|
|
|
|
|
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
$ |
(108,955 |
) |
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$ |
(230,305 |
) |
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|
|
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CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR |
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473,676 |
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|
|
703,981 |
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|
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CASH AND CASH EQUIVALENTS - END OF YEAR |
$ |
369,721 |
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$ |
473,676 |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
Cash Paid During the Year for: |
|
|
|
|
|
|
|
Interest |
$ |
417,483 |
|
|
$ |
127,999 |
|
Income Taxes |
$ |
0 |
|
|
$ |
0 |
|
See accompanying notes to financial statements.
6
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIAL STATEMENTS
Nature of Operations
Amplex Electric, Inc. (the Company) is a provider of broadband internet, voice over internet protocol (VOIP), and video services within a service area located primarily in Northwest and Northcentral Ohio.
System of Accounts
The accounting records of the Company conform to the Uniform System of Accounts prescribed by the Federal Communications Commission for telephone companies.
Revenue Recognition
Monthly service plan revenues derived from VOIP and internet service are billed for services to be provided in the future. The portion of the revenues identified as out of period are deferred as service revenues at the end of each month.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, Topic 606, which provides a new framework for the recognition of revenue.
All revenues are accounted for under ASC 606 because all operating revenues are considered to be contracts with customers.
Generally, revenues that are derived from customers are cancellable on a short-term basis and are billed monthly and recognized as revenue in the month that the performance obligation is fulfilled.
Sales of equipment and other services that are provided are considered to be a separate performance obligation. When equipment and installation is a distinct performance obligation, the Company records the sale of the equipment when the customer takes possession of the products and services are accepted by the customer.
Revenue recognized from fixed term contracts that bundle services or equipment is allocated based on the standalone selling price of all required performance obligations of the contract and any discounts are recognized over the contract term. Promotional discounts relating to bundled services are attributed to each required component of the bundled services. There were no material costs to acquire customer contracts that would be required to be deferred and amortized over the contract period.
Deferred service revenues represent amounts billed to customers for internet services not performed as of the years ended October 31, 2023 and 2022.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
7
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIAL STATEMENTS
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers cash and working funds to be cash and cash equivalents.
Concentrations of Credit Risk
Although the Company maintains their deposits in federally insured institutions, deposits may at times exceed insured amounts. Deposit accounts are insured up to $250,000.
Investments
The Company has adopted FASB ASU 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities, Topic 321, which provides guidance for the initial and subsequent recognition of financial assets.
Topic 321 eliminates the distinction between trading and available for sale equity securities. Equity investments are valued at fair value with unrealized gains or losses recognized in net income. Prior amounts that were classified in Other Comprehensive Income are presented as a cumulative effect of the adoption of ASC 321 and are recorded in retained earnings.
Investment levels are based on inputs used to calculate fair market value of investments. Those inputs are defined for each level as follows:
Level 1 – Inputs include quoted prices in active markets for identical assets.
Level 2 – Inputs include available indirect information, such as quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active.
Level 3 – Inputs are subjective and generally based on the entity’s own assumptions on how knowledgeable parties would price assets and are developed using the best information available in the circumstances.
Securities transactions are recognized on the trade date (the date the order to buy or sell is executed). Income from investments is recorded as earned on an accrual basis.
Materials and Supplies
Materials and supplies are stated at the lower of cost or net realizable value.
Advertising Costs
The Company’s policy is to directly expense all nondirect-response advertising costs as incurred. The total advertising costs for the years ended October 31, 2023 and 2022 were $159,531 and $130,036, respectively.
8
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIAL STATEMENTS
Trade Accounts Receivable
In the normal course of business, the Company recognizes accounts receivable for services billed. Accounts receivable are ordinarily due 30 days after the issuance of the invoice. Accounts past due more than 45 days are considered delinquent. No interest is accrued on delinquent outstanding balances. The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions.
Intangible Assets
Intangible assets with finite lives are being amortized on the straight-line basis over five years. Such assets are periodically evaluated as to the recoverability of carrying values.
Reclassifications
Certain amounts in the prior year financial statements have been reclassified for comparative purpose to conform to the presentation in the current year’s financial statements.
The cost and fair value of equity securities as of October 31, 2022 are as follows:
|
October 31, 2022 |
|
|
|
|
||||||||||
|
|
|
Cost |
|
|
|
Unrealized Gain |
|
|
|
Fair Value |
|
|
Investment Level |
|
Marketable Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multisector Bond Mutual Funds |
|
$ |
303,179 |
|
|
$ |
2,984 |
|
|
$ |
306,163 |
|
|
1 |
|
Unrealized holding gains and losses on such securities are included as a component of non-operating income. During the year ended October 31, 2023 the Company converted all investments into cash and cash equivalents.
Prepaid fiber leases consist of Indefeasible Right of Use (IRU) for portions of dark fiber with a telecommunications carrier. The Company made payment to the carrier and recognizes the expense over a period equal to the term of the IRU agreement. Prepaid fiber lease expenses as of October 31, 2023 are expected to be recognized as follows:
2024 |
|
$ |
8,864 |
|
2025 |
|
|
8,864 |
|
2026 |
|
|
8,864 |
|
2027 |
|
|
1,478 |
|
|
|
$ |
28,070 |
|
9
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIAL STATEMENTS
The carrying basis and accumulated amortization of recognized intangible assets at October 31, 2023 and 2022, were:
|
|
|
October 31, |
|
||||
|
|
|
2023 |
|
|
|
2022 |
|
Amortized Intangible Assets |
|
|
|
|
|
|
|
|
Internal Use Software |
|
$ |
177,962 |
|
|
$ |
177,962 |
|
Accumulated Amortization |
|
|
(109,542 |
) |
|
|
(73,950 |
) |
|
|
$ |
68,420 |
|
|
$ |
104,012 |
|
Unamortized Intangible Assets |
|
|
|
|
|
|
|
|
ARIN allocated IPv4 Licenses |
|
$ |
46,080 |
|
|
$ |
46,080 |
|
FCC CBRS Licenses |
|
|
579,900 |
|
|
|
579,900 |
|
|
|
$ |
625,980 |
|
|
$ |
625,980 |
|
Total |
|
$ |
694,400 |
|
|
$ |
729,992 |
|
The Company’s future cash flows are not materially impacted by its ability to extend or renew agreements related to its amortizable intangible assets.
Amortization expense for the years ended October 31, 2023 and 2022, was $35,592 and $35,593, respectively. Estimated amortization expense for each of the following two years is:
2024 |
|
$ |
35,592 |
|
2025 |
|
|
32,828 |
|
Plant in service is stated at original cost. Upon sale or retirement of an asset, the related costs and accumulated depreciation are removed from the accounts, and any gain or loss is recognized and included in gain (loss) on disposal of assets. The cost of maintenance and repairs is charged to operating expenses. The Company provides for depreciation on a straight-line basis at annual rates which will depreciate the property and equipment over its estimated useful life. Following are the major classes of property and equipment in service as of October 31, 2023 and 2022:
|
|
Original Cost |
|
|
|
|
Accumulated Depreciation |
|||||||||||
|
|
October 31, |
|
|
Depreciable |
|
|
October 31, |
|
|||||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
Life in Years |
|
|
2023 |
|
|
|
2022 |
|
Vehicles and Work Equipment |
|
$ |
1,361,184 |
|
|
$ |
1,228,233 |
|
|
5 - 7 |
|
$ |
1,138,960 |
|
|
$ |
975,599 |
|
Construction Equipment |
|
|
312,219 |
|
|
|
301,686 |
|
|
5 - 10 |
|
|
116,138 |
|
|
|
68,310 |
|
Leasehold Improvements |
|
|
176,613 |
|
|
|
175,953 |
|
|
15 |
|
|
35,863 |
|
|
|
23,123 |
|
Furniture and Fixtures |
|
|
316,282 |
|
|
|
244,834 |
|
|
5 |
|
|
199,992 |
|
|
|
160,458 |
|
Network Equipment |
|
|
4,849,570 |
|
|
|
4,391,578 |
|
|
5 - 7 |
|
|
3,142,085 |
|
|
|
2,329,500 |
|
Fiber Plant |
|
|
11,444,284 |
|
|
|
7,171,367 |
|
|
15 - 30 |
|
|
706,930 |
|
|
|
381,957 |
|
Customer Premise Equipment |
|
|
2,528,971 |
|
|
|
2,221,827 |
|
|
4 - 5 |
|
|
1,991,017 |
|
|
|
1,820,918 |
|
Video Equipment |
|
|
14,985 |
|
|
|
14,985 |
|
|
5 - 7 |
|
|
6,411 |
|
|
|
4,091 |
|
Towers |
|
|
35,315 |
|
|
|
31,525 |
|
|
5 - 10 |
|
|
13,716 |
|
|
|
8,702 |
|
|
|
$ |
21,039,423 |
|
|
$ |
15,781,988 |
|
|
|
|
$ |
7,351,112 |
|
|
$ |
5,772,658 |
|
The Company recognized depreciation expense of $1,584,605 and $1,171,452 for the years ended October 31, 2023 and 2022, respectively.
10
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIAL STATEMENTS
The Company uses the asset and liability method of accounting for income taxes. The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary difference between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Income taxes are provided for tax effects of transactions reported in the financial statements and consist of taxes currently due, plus deferred taxes related primarily to accelerated depreciation and net operating loss (NOL) carryovers. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will result in a tax expense or benefit when recognized.
Any net operating losses incurred and not utilized are either carried back to offset prior taxable income or carried forward to offset future taxable income, depending on the taxing jurisdiction. Generally, federal net operating losses may be carried forward to offset future taxable income for a period not exceeding 20 years; however, beginning in 2018, net operating losses that are incurred may be carried forward indefinitely. At October 31, 2023, the Company has federal net operating loss carryovers of $1,336,357 available for carryover. In accordance with ASU No. 2015-17 Income Taxes, the Company classifies all deferred taxes as noncurrent. The net deferred tax liability in the accompanying balance sheet include the following components at October 31, 2023 and 2022:
|
|
|
October 31, |
|
||||
|
|
|
2023 |
|
|
|
2022 |
|
Deferred Income Taxes |
|
|
|
|
|
|
|
|
Deferred Federal Tax Assets |
|
$ |
30,476 |
|
|
$ |
20,494 |
|
Deferred Tax Assets - NOL |
|
|
1,246,712 |
|
|
|
280,608 |
|
Deferred Federal Tax Liabilities |
|
|
(2,881,977) |
|
|
|
(1,654,774) |
|
|
|
$ |
(1,604,789) |
|
|
$ |
(1,353,672) |
|
Income taxes reflected in the statements of income consist of the following:
|
|
|
October 31, |
|
||||
|
|
|
2023 |
|
|
|
2022 |
|
Federal Income Taxes |
|
|
|
|
|
|
|
|
Deferred Tax Expense |
|
$ |
251,117 |
|
|
$ |
307,127 |
|
Income Tax Expense |
|
$ |
251,117 |
|
|
$ |
307,127 |
|
During the years ended October 31, 2023 and 2022, the cash paid for income taxes was $0 and $0, respectively.
The Company adheres to the “uncertain tax positions” provisions of accounting principles generally accepted in the United States of America. The Company determined that it is more likely than not that its tax positions will be sustained upon examination by the Internal Revenue Service (IRS) or other State taxing authority and that all tax benefits are likely to be realized upon settlement with taxing authorities.
The Company files income tax returns in the U.S. federal jurisdiction and in the State of Ohio. The Company is no longer subject to U.S. federal and state income tax examinations by federal and state taxing authorities for years before 2019 and 2018.
11
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIAL STATEMENTS
Long-term debt consists of:
|
|
|
October 31, |
|
||||
|
|
|
2023 |
|
|
|
2022 |
|
Various Vehicle Notes, 3.75% to 4.99% |
|
$ |
179,850 |
|
|
$ |
604,245 |
|
Live Oak Bank Commercial Note, 7.25% |
|
|
5,000,000 |
|
|
|
2,416,624 |
|
Live Oak Bank Commercial Note, 5.00% |
|
|
1,721,261 |
|
|
|
1,789,869 |
|
Live Oak Bank Commercial Note, 5.00% |
|
|
114,536 |
|
|
|
|
|
Huntington Bank Commercial Note, 3.75% |
|
|
147,008 |
|
|
|
106,009 |
|
|
|
$ |
7,162,655 |
|
|
$ |
4,916,747 |
|
Less Current Portion |
|
|
535,547 |
|
|
|
333,943 |
|
|
|
$ |
6,627,108 |
|
|
$ |
4,582,804 |
|
As of October 31, 2023 the annual requirements for principal payments on long-term debt for the next five years are as follows:
2024 |
|
$ |
535,547 |
|
2025 |
|
|
527,852 |
|
2026 |
|
|
638,966 |
|
2027 |
|
|
550,492 |
|
2028 |
|
|
554,690 |
|
Thereafter |
|
|
4,355,107 |
|
|
|
$ |
7,162,654 |
|
The Company has entered into a commercial lending agreement with Live Oak Banking Company under the Small Business Administration (SBA) loan program. The note is for $2,825,000 and holds a variable interest rate of prime plus 1.75%. The loan is to be repaid over a period of 15 years, consisting of 30 monthly installment payments covering interest only and 150 monthly installment payments covering principal and interest. The payments will be completed in June 2034.
The Company has guaranteed the loan, along with its related party, Redbug Properties, LLC (Redbug Properties). The loan funds are to be used for upgrade and expansion of the existing telecommunications network and refinancing of the current land and building loan held by the related party, Redbug Properties. Loan funds, and the related liabilities, are recorded on the Company which holds the physical assets related to the borrowing.
Substantially all assets of the Company are pledged as security for the long-term debt under certain loan agreements with the Live Oak Banking Company.
During the years ended October 31, 2023 and 2022, the cash paid for interest on notes payable was $417,483 and $127,999, respectively.
The Company rents its office facilities and certain transmission space from a company owned by the Company’s majority shareholders. The Company is on an annual rental agreement. During the years ended October 31, 2023 and 2022 amounts paid for rent were $150,000 and $157,650, respectively.
12
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIAL STATEMENTS
The Company has entered into a debt agreement with Live Oak Bank to borrow funds. The Company has guaranteed the loan, along with its related party, Redbug Properties. The Company received funds in the amount of $958,208 on this loan that relate to refinancing of debt held by Redbug Properties. The loan funds, and the related liabilities were transferred to Redbug Properties, which holds the physical assets related to the debt refinanced.
Amounts receivable from and payable to affiliated companies as of October 31, 2023 and 2022, are as follows:
|
|
October 31, |
||||||
|
|
|
2023 |
|
|
|
2022 |
|
Accounts Receivable from Red Bug, LLC |
|
$ |
294,722 |
|
|
$ |
121,427 |
|
Accounts Receivable from Red Bug Properties, LLC |
|
|
132,933 |
|
|
|
28,797 |
|
Net Accounts Receivable - Affiliates |
|
$ |
427,655 |
|
|
$ |
150,224 |
|
As of October 31, 2023, there were no claims, assessments, or pending litigation of a material nature against the Company.
During 2023, the Company received approval for funding through RUS ReConnect Program for a total amount of $21,341,792 in order to serve certain census blocks in rural Northwest Ohio. The Company is required to provide service in these areas for 28 years, which is the composite economic life of the assets funded by the ReConnect loan.
During October 2023, the Company entered into a commercial lending agreement with Live Oak Banking Company. The note is for $900,000 and holds a variable interest rate of prime plus 1.05%. The loan is to be repaid over a period of 7 years, consisting of 24 monthly installment payments covering interest only and 60 monthly installment payments covering principal and interest. The payments began on December 2023 and will be completed in October 2030.
The Company’s management has evaluated the subsequent events through February 16, 2024, the date the financial statements were available for issue.
13
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
Exhibit 99.2
AMPLEX ELECTRIC, INC.
LUCKEY, OHIO
FINANCIAL STATEMENTS
BALANCE SHEET DATES AS OF APRIL 30, 2024 AND OCTOBER 31, 2023
AND INCOME STATEMENTS AND CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2024 AND 2023
AND
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
Bolinger, Segars, Gilbert & Moss, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
LUBBOCK, TEXAS
AMPLEX ELECTRIC, INC.
LUCKEY, OHIO
FINANCIAL STATEMENTS
BALANCE SHEET DATES AS OF APRIL 30, 2024 AND OCTOBER 31, 2023
AND INCOME STATEMENTS AND CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2024 AND 2023
AND
REVIEW REPORT OF INDEPENDENT ACCOUNTANTS
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
AMPLEX ELECTRIC, INC.
LUCKEY, OHIO
FINANCIAL STATEMENTS
BALANCE SHEET DATES AS OF APRIL 30, 2024 AND OCTOBER 31, 2023 AND INCOME STATEMENTS AND CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2024 AND 2023
TABLE OF CONTENTS
|
|
Statement |
|
Page |
|
|
Identification |
|
No. |
|
|
|
|
|
Review Report of Independent Accountants |
|
|
|
1 |
|
|
|
|
|
Financial Statements |
|
|
|
|
|
|
|
|
|
Balance Sheets |
|
Exhibit A |
|
2 |
|
|
|
|
|
Statements of Income and Retained Earnings |
|
Exhibit B |
|
3 |
|
|
|
|
|
Statements of Cash Flows |
|
Exhibit D |
|
4 |
|
|
|
|
|
Notes to Financial Statements |
|
|
|
5 |
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
Bolinger, Segars, Gilbert & Moss, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
PHONE: (806) 747-3806
FAX: (806) 747-3815
8215 Nashville Avenue
Lubbock, Texas 79423-1954
Independent Accountant’s Review Report
Board of Directors
Amplex Electric, Inc.
Luckey, Ohio
We have reviewed the accompanying financial statements of Amplex Electric, Inc., which comprise the balance sheets as of April 30, 2024 and October 31, 2023, and the related statements of income and retained earnings and cash flows for the six months ended April 30 2024 and 2023, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management's financial data and making inquiries of management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement whether due to fraud or error.
Accountant’s Responsibility
Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.
Accountant’s Conclusion
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.
|
Certified Public Accountants |
Lubbock, Texas
August 27, 2024
-1-
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
-2-
AMPLEX ELECTRIC, INC.
Exhibit A
BALANCE SHEETS
APRIL 30, 2024 AND OCTOBER 31, 2023
ASSETS |
||||||||
|
|
April 30, |
|
October 31, |
||||
|
|
2024 |
|
2023 |
||||
CURRENT ASSETS |
|
|
|
|
|
|
||
Cash and Cash Equivalents |
|
$ |
283,210 |
|
|
$ |
369,721 |
|
Accounts Receivable Due from Customers (Less allowance for credit losses of $900 in 2024 and $1,600 in 2023) |
|
|
121,310 |
|
|
|
132,663 |
|
Accounts Receivable - Affiliate |
|
|
383,530 |
|
|
|
427,655 |
|
Materials and Supplies |
|
|
507,184 |
|
|
|
553,545 |
|
Current Portion of Prepaid Fiber Lease |
|
|
8,864 |
|
|
|
8,864 |
|
Prepayments |
|
|
508,046 |
|
|
|
414,770 |
|
|
|
$ |
1,812,144 |
|
|
$ |
1,907,218 |
|
OTHER NONCURRENT ASSETS |
|
|
|
|
|
|
||
Prepaid Fiber Lease, Less Current Portion |
|
$ |
14,774 |
|
|
$ |
19,206 |
|
Intangibles, Net of Amortization |
|
|
676,603 |
|
|
|
694,400 |
|
|
|
$ |
691,377 |
|
|
$ |
713,606 |
|
PROPERTY AND EQUIPMENT |
|
|
|
|
|
|
||
Plant In Service |
|
$ |
23,090,959 |
|
|
$ |
21,039,423 |
|
Plant Under Construction |
|
|
1,223,837 |
|
|
|
719,936 |
|
|
|
$ |
24,314,796 |
|
|
$ |
21,759,359 |
|
Less: Accumulated Depreciation |
|
|
8,138,666 |
|
|
|
7,351,112 |
|
|
|
$ |
16,176,130 |
|
|
$ |
14,408,247 |
|
|
|
|
|
|
|
|
||
DEFERRED CHARGES |
|
$ |
8,146 |
|
|
$ |
19,589 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
18,687,797 |
|
|
$ |
17,048,660 |
|
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
|
||||||||
CURRENT LIABILITIES |
|
|
|
|
|
|
||
Current Portion of Long-Term Debt |
|
$ |
1,026,231 |
|
|
$ |
535,547 |
|
Accounts Payable |
|
|
1,423,788 |
|
|
|
1,213,749 |
|
Other Current Liabilities |
|
|
8,600 |
|
|
|
6,795 |
|
Deferred Service Revenues |
|
|
77,333 |
|
|
|
475,152 |
|
Compensated Absences |
|
|
108,423 |
|
|
|
108,423 |
|
Accrued Interest Payable |
|
|
46,219 |
|
|
|
38,525 |
|
|
|
$ |
2,690,594 |
|
|
$ |
2,378,191 |
|
|
|
|
|
|
|
|
||
NONCURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Long-Term Debt, Less Current Portion |
|
$ |
7,208,256 |
|
|
$ |
6,627,108 |
|
Unamortized Debt Issuance Costs |
|
|
(127,076 |
) |
|
|
(134,991 |
) |
Deferred Income Taxes |
|
|
1,756,344 |
|
|
|
1,604,789 |
|
|
|
$ |
8,837,524 |
|
|
$ |
8,096,906 |
|
|
|
|
|
|
|
|
||
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
Common Stock, 25,000 Shares Authorized, 21,000 |
|
$ |
50,000 |
|
|
$ |
50,000 |
|
Retained Earnings |
|
|
7,109,679 |
|
|
|
6,523,563 |
|
|
|
$ |
7,159,679 |
|
|
$ |
6,573,563 |
|
|
|
|
|
|
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
18,687,797 |
|
|
$ |
17,048,660 |
|
See accompanying notes to financial statements.
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
-3-
AMPLEX ELECTRIC, INC.
Exhibit B
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED APRIL 30, 2024 AND 2023
|
|
April 30, |
||||||
|
|
2024 |
|
|
2023 |
|||
|
|
|
|
|
|
|
|
|
OPERATING REVENUES |
|
|
|
|
|
|
|
|
Wireless Internet Services |
|
$ |
3,524,411 |
|
|
$ |
3,610,191 |
|
Fiber Internet Services |
|
|
1,272,477 |
|
|
|
917,450 |
|
VoIP Services |
|
|
247,931 |
|
|
|
239,833 |
|
Streaming Video Services |
|
|
326,590 |
|
|
|
266,386 |
|
Miscellaneous Income |
|
|
289,105 |
|
|
|
261,400 |
|
Uncollectible Recoveries (Revenues) |
|
|
225 |
|
|
|
(2,877 |
) |
Total Operating Revenues |
|
$ |
5,660,739 |
|
|
$ |
5,292,383 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Cost of VoIP |
|
$ |
44,270 |
|
|
$ |
41,146 |
|
Cost of Internet Services |
|
|
310,079 |
|
|
|
305,088 |
|
Cost of Streaming Video |
|
|
316,140 |
|
|
|
227,281 |
|
Plant Specific Operations |
|
|
724,025 |
|
|
|
729,976 |
|
Plant Nonspecific Operations |
|
|
453,468 |
|
|
|
494,372 |
|
Depreciation and Amortization |
|
|
786,671 |
|
|
|
892,341 |
|
Customer Operations |
|
|
341,913 |
|
|
|
299,287 |
|
Corporate Operations |
|
|
1,597,007 |
|
|
|
1,445,222 |
|
General Taxes |
|
|
60,271 |
|
|
|
81,729 |
|
Total Operating Expenses |
|
$ |
4,633,844 |
|
|
$ |
4,516,442 |
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
$ |
1,026,895 |
|
|
$ |
775,941 |
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
Interest and Dividend Income |
|
$ |
177 |
|
|
$ |
4,355 |
|
Gain on Sale of Assets |
|
|
1,200 |
|
|
|
|
|
Amortization of Debt Issuance Cost |
|
|
(7,915 |
) |
|
|
(6,936 |
) |
Interest Expense |
|
|
(282,863 |
) |
|
|
(185,470 |
) |
Other, Net |
|
|
177 |
|
|
|
(6,195 |
) |
|
|
$ |
(289,224 |
) |
|
$ |
(194,246 |
) |
|
|
|
|
|
|
|
|
|
NET INCOME BEFORE INCOME TAXES |
|
$ |
737,671 |
|
|
$ |
581,695 |
|
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
|
151,555 |
|
|
|
247,390 |
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
586,116 |
|
|
$ |
334,305 |
|
|
|
|
|
|
|
|
|
|
RETAINED EARNINGS - NOVEMBER 1, |
|
|
6,523,563 |
|
|
|
5,531,440 |
|
|
|
|
|
|
|
|
|
|
RETAINED EARNINGS - APRIL 30, |
|
$ |
7,109,679 |
|
|
$ |
5,865,745 |
|
See accompanying notes to financial statements.
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
-4-
AMPLEX ELECTRIC, INC.
Exhibit C
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2024 AND 2023
|
|
April 30, |
||||||
|
|
2024 |
|
2023 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net Income |
|
$ |
586,116 |
|
|
$ |
334,305 |
|
Adjustments to Reconcile Net Income to Net Cash from Operating Activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
751,079 |
|
|
|
892,341 |
|
Amortization of Intangibles |
|
|
17,796 |
|
|
|
17,796 |
|
Amortization of Debt Issuance Costs |
|
|
7,915 |
|
|
|
6,936 |
|
Deferred Income Taxes |
|
|
151,555 |
|
|
|
247,390 |
|
Gain on Sale of Assets |
|
|
(1,200 |
) |
|
|
|
|
Receivables |
|
|
55,478 |
|
|
|
(57,453 |
) |
Materials and Supplies |
|
|
46,360 |
|
|
|
(50,358 |
) |
Prepayments |
|
|
(93,275 |
) |
|
|
(76,112 |
) |
Prepaid Fiber Lease |
|
|
4,432 |
|
|
|
4,432 |
|
Accounts Payable |
|
|
(257,677 |
) |
|
|
35,665 |
|
Other Current Liabilities |
|
|
2,063 |
|
|
|
(77,536 |
) |
Deferred Service Revenues |
|
|
77,333 |
|
|
|
27,231 |
|
Deferred Charges |
|
|
11,443 |
|
|
|
(8,208 |
) |
Net Cash from Operating Activities |
|
$ |
1,359,418 |
|
|
$ |
1,296,429 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Additions to Telecommunications Plant |
|
$ |
(2,517,762 |
) |
|
$ |
(2,815,773 |
) |
Net Activity on Equity Securities |
|
|
|
|
|
|
455 |
|
Net Cash from Investing Activities |
|
$ |
(2,517,762 |
) |
|
$ |
(2,815,773 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from Long-Term Borrowing |
|
$ |
1,481,587 |
|
|
$ |
1,467,056 |
|
Repayment of Long-Term Debt |
|
|
(409,754 |
) |
|
|
(109,183 |
) |
Net Cash from Financing Activities |
|
$ |
1,071,833 |
|
|
$ |
1,357,873 |
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
$ |
(86,511 |
) |
|
$ |
(161,471 |
) |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - OCTOBER 31, |
|
|
369,721 |
|
|
|
473,676 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - APRIL 30, |
|
$ |
283,210 |
|
|
$ |
312,205 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
Cash Paid During the Year for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
282,863 |
|
|
$ |
185,470 |
|
Income Taxes |
|
$ |
0 |
|
|
$ |
0 |
|
See accompanying notes to financial statements.
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
-5-
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIALSTATEMENTS
Nature of Operations
Amplex Electric, Inc. (the Company) is a provider of broadband internet, Voice Over Internet Protocol (VOIP), and video services within a service area located primarily in Northwest and Northcentral Ohio.
System of Accounts
The accounting records of the Company conform to the Uniform System of Accounts prescribed by the Federal Communications Commission for telephone companies.
Revenue Recognition
Monthly service plan revenues derived from VOIP and internet service are billed for services to be provided in the future. The portion of the revenues identified as out of period are deferred as service revenues at the end of each month.
The FASB issued ASU 2014-09, Revenue from Contracts with Customers, Topic 606, which provides a new framework for the recognition of revenue.
All revenues are accounted for under ASC 606 because all operating revenues are considered to be contracts with customers.
Generally, revenues that are derived from customers are cancellable on a short-term basis and are billed monthly and recognized as revenue in the month that the performance obligation is fulfilled.
Sales of equipment and other services that are provided are considered to be a separate performance obligation. When equipment and installation is a distinct performance obligation, the Company records the sale of the equipment when the customer takes possession of the products and services are accepted by the customer.
Revenue recognized from fixed term contracts that bundle services or equipment is allocated based on the standalone selling price of all required performance obligations of the contract and any discounts are recognized over the contract term. Promotional discounts relating to bundled services are attributed to each required component of the bundled services. There were no material costs to acquire customer contracts that would be required to be deferred and amortized over the contract period.
Deferred service revenues represent amounts billed to customers for internet services not performed as of April 30, 2024 and October 31, 2023.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers cash and working funds to be cash and cash equivalents.
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
-6-
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIALSTATEMENTS
Concentrations of Credit Risk
Although the Company maintains their deposits in federally insured institutions, deposits may at times exceed insured amounts. Deposit accounts are insured up to $250,000.
Investments
The Company has adopted FASB ASU 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities, Topic 321, which provides guidance for the initial and subsequent recognition of financial assets. Topic 321 eliminates the distinction between trading and available for sale equity securities. Equity investments are valued at fair value with unrealized gains or losses recognized in net income. Prior amounts that were classified in Other Comprehensive Income are presented as a cumulative effect of the adoption of ASC 321 and are recorded in retained earnings.
Investment levels are based on inputs used to calculate fair market value of investments. Those inputs are defined for each level as follows:
Level 1 – Inputs include quoted prices in active markets for identical assets.
Level 2 – Inputs include available indirect information, such as quoted prices for similar assets in active markets, or quoted prices for identical or similar assets in markets that are not active.
Level 3 – Inputs are subjective and generally based on the entity’s own assumptions on how knowledgeable parties would price assets and are developed using the best information available in the circumstances.
Securities transactions are recognized on the trade date (the date the order to buy or sell is executed). Income from investments is recorded as earned on an accrual basis.
Materials and Supplies
Materials and supplies are stated at the lower of cost or net realizable value.
Advertising Costs
The Company’s policy is to directly expense all nondirect-response advertising costs as incurred. The total advertising costs for the six months ended April 30, 2024 and 2023 were $78,646 and $76,144, respectively.
Trade Accounts Receivable
In the normal course of business, the Company recognizes accounts receivable for services billed. Accounts receivable are ordinarily due 30 days after the issuance of the invoice. Accounts past due more than 45 days are considered delinquent. No interest is accrued on delinquent outstanding balances. The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions.
Intangible Assets
Intangible assets with finite lives are being amortized on the straight-line basis over five years. Such assets are periodically evaluated as to the recoverability of carrying values.
Reclassifications
Certain amounts in the prior year financial statements have been reclassified for comparative purpose to conform to the presentation in the current year’s financial statements.
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
-7-
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIALSTATEMENTS
Prepaid fiber leases consist of Indefeasible Right of Use (IRU) for portions of dark fiber with a telecommunications carrier. The Company made payment to the carrier and recognizes the expense over a period equal to the term of the IRU agreement. Prepaid fiber lease expenses expected to be recognized as follows:
May 1, 2024 thru April 30, 2025 |
|
$ |
8,864 |
|
May 1, 2025 thru April 30, 2026 |
|
|
8,864 |
|
May 1, 2026 thru April 30, 2027 |
|
|
5,910 |
|
|
|
$ |
23,638 |
|
The carrying basis and accumulated amortization of recognized intangible assets at April 30, 2024 and October 31, 2023, were:
|
|
April 30, 2024 |
|
October 31, 2023 |
||||
Amortized Intangible Assets |
|
|
|
|
|
|
|
|
Internal Use Software |
|
$ |
177,962 |
|
|
$ |
177,962 |
|
Goodwill - Xakbee |
|
|
30,584 |
|
|
|
|
|
Accumulated Amortization |
|
|
(157,923 |
) |
|
|
(109,542 |
) |
|
|
$ |
50,623 |
|
|
$ |
68,420 |
|
Unamortized Intangible Assets |
|
|
|
|
|
|
|
|
ARIN allocated IPv4 Licenses |
|
$ |
46,080 |
|
|
$ |
46,080 |
|
FCC CBRS Licenses |
|
|
579,900 |
|
|
|
579,900 |
|
|
|
$ |
625,980 |
|
|
$ |
625,980 |
|
Total |
|
$ |
676,603 |
|
|
$ |
694,400 |
|
The Company’s future cash flows are not materially impacted by its ability to extend or renew agreements related to its amortizable intangible assets.
Amortization expense for the six months ended April 30, 2024 and 2023, was $17,796 and $17,796, respectively. Estimated amortization expense for each of the following two years is:
May 1, 2024 thru April 30, 2025 |
|
$ |
35,592 |
May 1, 2025 thru April 30, 2026 |
|
|
15,031 |
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
-8-
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIALSTATEMENTS
Plant in service is stated at original cost. Upon sale or retirement of an asset, the related costs and accumulated depreciation are removed from the accounts, and any gain or loss is recognized and included in gain (loss) on disposal of assets. The cost of maintenance and repairs is charged to operating expenses. The Company provides for depreciation on a straight-line basis at annual rates which will depreciate the property and equipment over its estimated useful life. Following are the major classes of property and equipment in service as of April 30, 2024 and October 31, 2023:
|
|
Original Cost |
|
|
|
|
Accumulated Depreciation |
|||||||||||
|
|
|
April 30, |
|
|
|
October 31, |
|
|
Depreciable |
|
|
April 30, |
|
|
|
October 31, |
|
|
|
|
2024 |
|
|
|
2023 |
|
|
Life in Years |
|
|
2024 |
|
|
|
2023 |
|
Vehicles and Work Equipment |
|
$ |
1,479,339 |
|
|
$ |
1,361,184 |
|
|
5 - 7 |
|
$ |
1,172,468 |
|
|
$ |
1,138,960 |
|
Construction Equipment |
|
|
312,219 |
|
|
|
312,219 |
|
|
5 - 10 |
|
|
138,439 |
|
|
|
116,138 |
|
Leasehold Improvements |
|
|
210,841 |
|
|
|
176,613 |
|
|
15 |
|
|
42,353 |
|
|
|
35,863 |
|
Furniture and Fixtures |
|
|
320,896 |
|
|
|
316,282 |
|
|
5 |
|
|
213,077 |
|
|
|
199,992 |
|
Network Equipment |
|
|
4,913,109 |
|
|
|
4,849,570 |
|
|
5 - 7 |
|
|
3,557,722 |
|
|
|
3,142,085 |
|
Fiber Plant |
|
|
13,228,503 |
|
|
|
11,444,284 |
|
|
15 - 30 |
|
|
909,843 |
|
|
|
706,930 |
|
Customer Premise Equipment |
|
|
2,575,752 |
|
|
|
2,528,971 |
|
|
4 - 5 |
|
|
2,081,045 |
|
|
|
1,991,017 |
|
Video Equipment |
|
|
14,985 |
|
|
|
14,985 |
|
|
5 - 7 |
|
|
7,481 |
|
|
|
6,411 |
|
Towers |
|
|
35,315 |
|
|
|
35,315 |
|
|
5 - 10 |
|
|
16,238 |
|
|
|
13,716 |
|
|
|
$ |
23,090,959 |
|
|
$ |
21,039,423 |
|
|
|
|
$ |
8,138,666 |
|
|
$ |
7,351,112 |
|
The Company recognized depreciation expense of $751,079 and $892,341 for the six months ended April 30, 2024 and 2023, respectively.
The Company uses the asset and liability method of accounting for income taxes. The objective of the asset and liability method is to establish deferred tax assets and liabilities for the temporary difference between the financial reporting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Income taxes are provided for tax effects of transactions reported in the financial statements and consist of taxes currently due, plus deferred taxes related primarily to accelerated depreciation and net operating loss (NOL) carryovers. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will result in a tax expense or benefit when recognized.
Any net operating losses incurred and not utilized are either carried back to offset prior taxable income or carried forward to offset future taxable income, depending on the taxing jurisdiction. Generally, federal net operating losses may be carried forward to offset future taxable income for a period not exceeding 20 years; however, beginning in 2018, net operating losses that are incurred may be carried forward indefinitely. At April 30, 2024, the Company has federal net operating loss carryovers of $5,806,109 available for carryover. In accordance with ASU No. 2015-17 Income Taxes, the Company classifies all deferred taxes as noncurrent. The net deferred tax liability in the accompanying balance sheet include the following components at April 30, 2024 and October 31, 2023:
|
|
|
April 30, 2024 |
|
|
|
October 31, 2023 |
|
Deferred Income Taxes |
|
|
|
|
|
|
|
|
Deferred Federal Tax Assets |
|
$ |
31,061 |
|
|
$ |
30,476 |
|
Deferred Tax Assets - NOL |
|
|
1,219,283 |
|
|
|
1,246,712 |
|
Deferred Federal Tax Liabilities |
|
|
(3,006,688 |
) |
|
|
(2,881,977 |
) |
|
|
$ |
(1,756,344 |
) |
|
$ |
(1,604,789 |
) |
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
-9-
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIALSTATEMENTS
Income taxes reflected in the statements of income consist of the following:
|
|
|
April 30, |
|
||||
|
|
|
2024 |
|
|
|
2023 |
|
Federal Income Taxes |
|
|
|
|
|
|
|
|
Deferred Tax Expense |
|
$ |
151,555 |
|
|
$ |
247,390 |
|
Income Tax Expense |
|
$ |
151,555 |
|
|
$ |
247,390 |
|
During the six months ended April 30, 2024 and 2023, the cash paid for income taxes was $0 and $0, respectively.
The Company adheres to the “uncertain tax positions” provisions of accounting principles generally accepted in the United States of America. The Company determined that it is more likely than not that its tax positions will be sustained upon examination by the Internal Revenue Service (IRS) or other State taxing authority and that all tax benefits are likely to be realized upon settlement with taxing authorities.
The Company files income tax returns in the U.S. federal jurisdiction and in the State of Ohio. The Company is no longer subject to U.S. federal and state income tax examinations by federal and state taxing authorities for years before 2020 and 2019.
Long-term debt consists of:
|
|
|
April 30, 2024 |
|
|
October 31, 2023 |
Various Vehicle Notes, 3.75% to 4.99% |
|
$ |
237,190 |
|
$ |
179,850 |
Live Oak Bank Commercial Note, 7.25% |
|
|
4,810,129 |
|
|
5,000,000 |
Live Oak Bank Commercial Note, 5.00% |
|
|
1,684,004 |
|
|
1,721,261 |
Live Oak Bank Commercial Note, 5.00% |
|
|
900,000 |
|
|
114,536 |
Nicholas Financial Note, 9.55% |
|
|
494,000 |
|
|
|
Huntington Bank Commercial Note, 3.75% |
|
|
109,164 |
|
|
147,008 |
|
|
$ |
8,234,487 |
|
$ |
7,162,655 |
Less Current Portion |
|
|
1,026,231 |
|
|
535,547 |
|
|
$ |
7,208,256 |
|
$ |
6,627,108 |
As of April 30, 2024 the annual requirements for principal payments on long-term debt for the next five years are as follows:
2024 |
|
$ |
1,026,231 |
2025 |
|
|
605,841 |
2026 |
|
|
725,253 |
2027 |
|
|
740,992 |
2028 |
|
|
765,957 |
Thereafter |
|
|
4,370,213 |
|
|
$ |
8,234,487 |
Substantially all assets of the Company are pledged as security for the long-term debt under certain loan agreements with the Live Oak Banking Company.
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
-10-
AMPLEX ELECTRIC, INC.
NOTES TO FINANCIALSTATEMENTS
During the six months ended April 30, 2024 and 2023, the cash paid for interest on notes payable was $282,863 and $185,470, respectively.
The Company rents its office facilities and certain transmission space from a company owned by the Company’s majority shareholders. The Company is on an annual rental agreement. During the six months ended April 30, 2024 and 2023 amounts paid for rent were $165,000 and $75,000, respectively.
The Company has entered into a debt agreement with Live Oak Bank to borrow funds. The Company has guaranteed the loan, along with its related party, Redbug Properties. The Company received funds in the amount of $958,208 on this loan that relate to refinancing of debt held by Redbug Properties. The loan funds, and the related liabilities were transferred to Redbug Properties, which holds the physical assets related to the debt refinanced.
Amounts receivable from and payable to affiliated companies as of April 30, 2024 and October 31, 2023, are as follows:
|
|
April 30, |
|
October 31, |
||||
|
|
2024 |
|
2023 |
||||
Accounts Receivable from Red Bug, LLC |
|
$ |
250,597 |
|
|
$ |
294,722 |
|
Accounts Receivable from Red Bug Properties, LLC |
|
|
132,933 |
|
|
|
132,933 |
|
Net Accounts Receivable - Affiliates |
|
$ |
383,530 |
|
|
$ |
427,655 |
|
As of April 30, 2024, there were no claims, assessments, or pending litigation of a material nature against the Company.
During 2023, the Company received approval for funding through RUS ReConnect Program for a total amount of $21,341,792 in order to serve certain census blocks in rural Northwest Ohio. The Company is required to provide service in these areas for 28 years, which is the composite economic life of the assets funded by the ReConnect loan.
On December 31, 2022 the Company has granted options to purchase 90 shares of common stock to specified employees at a price per share of $742.86. As of April 30, 2024, none of the options have been exercised.
The Company’s management has evaluated the subsequent events through August 27, 2024, the date the financial statements were available for issue.
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS
EXHIBIT 99.3
NICHOLAS FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
Summary of Transaction
On June 15, 2024, Nicholas Financial, Inc. (the “Company”) closed the Share Purchase Agreement to acquire (the “Acquisition”) a majority ownership interest in Amplex Electric, Inc. ("Amplex”), which the sellers have agreed to sell, and the Company has agreed to purchase, 51% of the issued and outstanding common shares, no par value per share, of Amplex.
In conjunction with the closing of the Amplex Acquisition, the Company converted the outstanding principal and accrued interest of approximately $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the share purchase price of $1,792.55 and purchased an additional 1,674 shares of Amplex common stock at a price of $1,792.55 per share for a total of $3.0 million. These transactions concurrently executed at the Transaction Closing Date increased the Company's ownership in Amplex to 56.5%.
The foregoing description of the Acquisition is qualified in its entirety by reference to the full text of the Share Purchase Agreement, which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K on May 6, 2024.
Pro Forma Information
The unaudited pro forma condensed combined statements of operations for the three months ended June 30, 2024 and June 30, 2023 combine the historical consolidated statements of operations of the Company and Amplex, giving effect to the Acquisition as if it had occurred on April 1, 2024 and April 1, 2023, respectively.
The unaudited pro forma condensed combined financial information (“pro forma information”) is based on, and should be read in conjunction with, the unaudited historical condensed consolidated financial statements of the Company as of June 30, 2024. The unaudited historical condensed combined financial statements of the Company as of June 30, 2024 include discontinued operations presentation related to the Company’s historical consumer finance business for which the historical assets were sold to Westlake Services, LLC dba Westlake Financial, a California limited liability company ("Westlake Financial"), as disclosed in the Company’s Current Report on Form 8-K on May 1, 2024.
The historical consolidated financial information has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the Acquisition, factually supportable, and with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results of operations of more than one year.
The pro forma information has been prepared using the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America. The acquisition method of accounting is dependent upon certain valuations that are provisional and subject to change. The pro forma adjustments are based on the assumptions and information available at the time of the filing of this Form 8-K/A. The Company will finalize the acquisition accounting within the required measurement period, but no later than June 15, 2025.
1
The unaudited pro forma condensed combined statements of operations do not reflect any potential cost savings or synergies that may be realized as a result of the Acquisition and also do not reflect any integration-related costs to achieve those potential cost savings or synergies. The integration-related costs will continue to be expensed as incurred in the appropriate accounting periods following completion of the Acquisition. For a detailed discussion of these risk factors, please refer to the risk, uncertainties and other factors described in the Company’s filings with the Securities and Exchange Commission.
The pro forma information should be read in conjunction with the accompanying notes to the pro forma information. The pro forma information is not necessarily indicative of what the financial position or results of operations would have been had the Acquisition occurred as of the dates indicated nor does it project the future financial position or operating results of the combined company.
2
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2024
|
NICK (Historical) |
|
|
Amplex (Historical) |
|
|
Transaction Accounting Adjustments |
|
Notes |
Pro Forma Condensed Combined |
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
||||
Wireless internet services |
$ |
319 |
|
|
$ |
1,764 |
|
|
$ |
(319 |
) |
A |
$ |
1,764 |
|
Fiber internet services |
|
106 |
|
|
|
713 |
|
|
|
(106 |
) |
A |
|
713 |
|
Other revenue |
|
64 |
|
|
|
426 |
|
|
|
(64 |
) |
A |
|
426 |
|
Total revenue: |
|
489 |
|
|
|
2,903 |
|
|
|
(489 |
) |
|
|
2,903 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of wireless and fiber internet services |
|
30 |
|
|
|
167 |
|
|
|
(30 |
) |
A |
|
167 |
|
Cost of other revenue |
|
36 |
|
|
|
196 |
|
|
|
(36 |
) |
A |
|
196 |
|
Plant specific operations |
|
74 |
|
|
|
316 |
|
|
|
(74 |
) |
A |
|
316 |
|
Plant nonspecific operations |
|
38 |
|
|
|
218 |
|
|
|
(38 |
) |
A |
|
218 |
|
General and administrative |
|
3,764 |
|
|
|
2,272 |
|
|
|
(831 |
) |
A |
|
4,105 |
|
|
|
|
|
|
|
|
|
(1,100 |
) |
C |
|
|
|||
Depreciation and amortization |
|
94 |
|
|
|
437 |
|
|
|
(80 |
) |
A |
|
597 |
|
|
|
|
|
|
|
|
|
146 |
|
B |
|
|
|||
Total operating expenses |
|
4,036 |
|
|
|
3,606 |
|
|
|
(2,043 |
) |
|
|
5,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income from operations |
|
(3,547 |
) |
|
|
(703 |
) |
|
|
1,554 |
|
|
|
(2,696 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
- |
|
|
|
(300 |
) |
|
|
300 |
|
E |
|
- |
|
Other income (expense) |
|
- |
|
|
|
50 |
|
|
|
- |
|
|
|
50 |
|
Gain on sale of assets |
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
1 |
|
Income from cash equivalents |
|
411 |
|
|
|
- |
|
|
|
- |
|
|
|
411 |
|
Emigration tax expense |
|
(1,711 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,711 |
) |
Loss on dissenting shareholders' liability |
|
(829 |
) |
|
|
- |
|
|
|
- |
|
|
|
(829 |
) |
Total other expense, net |
|
(2,129 |
) |
|
|
(249 |
) |
|
|
300 |
|
|
|
(2,078 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income before income taxes |
|
(5,676 |
) |
|
|
(952 |
) |
|
|
1,854 |
|
|
|
(4,774 |
) |
Income tax expense (benefit) |
|
(128 |
) |
|
|
- |
|
|
|
128 |
|
|
|
- |
|
(Loss) income from continuing operations |
|
(5,548 |
) |
|
|
(952 |
) |
|
|
1,726 |
|
|
|
(4,774 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from continuing operations attributable to noncontrolling interest |
|
(1 |
) |
|
|
- |
|
|
|
(13 |
) |
D |
|
(14 |
) |
Loss from continuing operations attributable to redeemable noncontrolling interest |
|
(210 |
) |
|
|
- |
|
|
|
(180 |
) |
D |
|
(390 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income from continuing operations attributable to common shareholders |
$ |
(5,337 |
) |
|
$ |
(952 |
) |
|
$ |
1,919 |
|
|
$ |
(4,370 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share attributable to common shareholders from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
$ |
(0.79 |
) |
|
|
|
|
|
|
|
$ |
(0.65 |
) |
||
Diluted |
$ |
(0.79 |
) |
|
|
|
|
|
|
|
$ |
(0.65 |
) |
||
3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2023
|
NICK (Historical) |
|
|
Amplex (Historical) |
|
|
Transaction Accounting Adjustments |
|
Notes |
|
Pro Forma Condensed Combined |
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wireless internet services |
$ |
- |
|
|
$ |
1,826 |
|
|
$ |
- |
|
|
|
$ |
1,826 |
|
Fiber internet services |
|
- |
|
|
|
468 |
|
|
|
- |
|
|
|
|
468 |
|
Other revenue |
|
- |
|
|
|
362 |
|
|
|
- |
|
|
|
|
362 |
|
Total revenue: |
|
- |
|
|
|
2,656 |
|
|
|
- |
|
|
|
|
2,656 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of wireless and fiber internet services |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Cost of other revenue |
|
- |
|
|
|
147 |
|
|
|
- |
|
|
|
|
147 |
|
Plant specific operations |
|
- |
|
|
|
349 |
|
|
|
- |
|
|
|
|
349 |
|
Plant nonspecific operations |
|
- |
|
|
|
219 |
|
|
|
- |
|
|
|
|
219 |
|
Fair value and other adjustments, net |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
General and administrative |
|
1,478 |
|
|
|
1,023 |
|
|
|
- |
|
|
|
|
2,501 |
|
Depreciation and amortization |
|
22 |
|
|
|
404 |
|
|
|
170 |
|
F |
|
|
596 |
|
Total operating expenses |
|
1,500 |
|
|
|
2,142 |
|
|
|
170 |
|
|
|
|
3,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income from operations |
|
(1,500 |
) |
|
|
514 |
|
|
|
(170 |
) |
|
|
|
(1,156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
- |
|
|
|
(134 |
) |
|
|
134 |
|
H |
|
|
- |
|
Other income |
|
12 |
|
|
|
1 |
|
|
|
- |
|
|
|
|
13 |
|
Gain on sale of assets |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Income from cash equivalents |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Emigration tax expense |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Loss on dissenting shareholders' liability |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Other income |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
Total other income (expense), net |
|
12 |
|
|
|
(133 |
) |
|
|
134 |
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income before income taxes |
|
(1,488 |
) |
|
|
381 |
|
|
|
(36 |
) |
|
|
|
(1,143 |
) |
Income tax expense (benefit) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
(Loss) income from continuing operations |
|
(1,488 |
) |
|
|
381 |
|
|
|
(36 |
) |
|
|
|
(1,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss from continuing operations attributable to noncontrolling interest |
|
- |
|
|
|
|
|
|
(8 |
) |
G |
|
|
(8 |
) |
|
Income from continuing operations attributable to redeemable noncontrolling interest |
|
- |
|
|
|
|
|
|
112 |
|
G |
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) income from continuing operations attributable to common shareholders |
$ |
(1,488 |
) |
|
$ |
381 |
|
|
$ |
(140 |
) |
|
|
$ |
(1,247 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share attributable to common shareholders from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
$ |
(0.17 |
) |
||
Diluted |
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
$ |
(0.17 |
) |
||
4
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1 – Description of Transaction
On June 15, 2024, the Company closed upon the acquisition of 51% of the issued and outstanding common shares of Amplex for a total purchase consideration of $18.4 million, which was paid in cash pursuant to the terms and conditions of the Share Purchase Agreement dated as of June 15, 2024. Amplex is an Ohio-based provider of rural broadband services to business and residential customers. The Company acquired Amplex in order to provide better shareholder value over time.
In conjunction with the closing of the Amplex Acquisition, the Company converted the outstanding principal and accrued interest of approximately $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the share purchase price of $1,792.55 and purchased an additional 1,674 shares of Amplex common stock at a price of $1,792.55 per share for a total of $3.0 million. These transactions concurrently executed at the Transaction Closing Date increased the Company's ownership in Amplex to 56.5%.
The foregoing description of the Acquisition is qualified in its entirety by reference to the full text of the Share Purchase Agreement, which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K on May 6, 2024.
Note 2 – Basis of Presentation
Pro Forma Presentation
The unaudited pro forma condensed combined financial information (“pro forma information”) has been prepared in accordance with Article 11, Pro Forma Financial Information, under Regulation S-X of the Securities and Exchange Act of 1934 (the “Exchange Act”), and is for informational purposes only.
The unaudited pro forma condensed combined statements of operations for the three months ended June 30, 2024 and 2023 combine the historical consolidated statements of operations of the Company and Amplex, giving effect to the Acquisition as if it had occurred on April 1, 2024 and 2023, respectively.
The historical consolidated financial information has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the Acquisition, factually supportable, and with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the results of operations of the combined company of more than one year.
The pro forma information has been prepared using the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America. Under the acquisition method of accounting, the Acquisition is accounted for by recognizing the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition-date fair values. Any excess of the purchase consideration over the acquisition-date fair values of these identifiable assets and liabilities is recognized as goodwill. The pro forma adjustments are based upon the assumptions and information available at the time of the preparation of this Form 8-K/A and may be subject to change. The Company will finalize the acquisition accounting within the required measurement period, but no later than June 15, 2025. Differences between these estimates of fair value and the final acquisition accounting may occur, and those differences could have a material impact on the pro forma information and the combined company’s future results of operations and financial position. At the time of the filing of this Form 8-K/A, the Company does not expect material changes to the assets acquired or liabilities assumed.
5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined statements of operations do not reflect any potential cost savings or synergies that may be realized as a result of the Acquisition and also do not reflect any integration-related costs to achieve those potential cost savings or synergies. Integration-related costs will continue to be expensed as incurred in the appropriate accounting periods following completion of the Acquisition. Although the Company projects that cost savings and synergies will result from the Acquisition, there can be no assurance that they will be achieved and such potential cost savings or synergies are subject to risks, uncertainties and other factors. For a detailed discussion of these risk factors, please refer to the risk, uncertainties and other factors described in the Company’s filings with the Securities and Exchange Commission.
Accounting policies
As part of preparing these unaudited pro forma condensed combined financial statements, certain reclassifications were made to align the Company and Amplex’s financial statement presentation. Upon consummation of the Transaction, management performed a comprehensive review of the two entities’ accounting policies and concluded that the differences between the accounting policies of the two companies are not material. The accounting policies used in the presentation of the pro forma information are those disclosed in the Company’s unaudited condensed consolidated financial statements for the three months ended June 30, 2024 and 2023, respectively.
Note 3 – Estimated Fair Value of Assets Acquired and Liabilities Assumed
The unaudited pro forma condensed combined financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and liabilities assumed from Amplex based on management's best estimates of fair value. The final purchase price allocation may vary based on final valuations and analyses of the fair value of the acquired assets and assumed liabilities. Accordingly, the pro forma adjustments are preliminary.
The following table shows the preliminary allocation of the purchase price for Amplex to the acquired identifiable assets, assumed liabilities and pro forma goodwill.
(In thousands) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
32 |
|
|
Accounts receivable |
|
124 |
|
|
Materials and supplies |
|
538 |
|
|
Operating lease right-of-use |
|
502 |
|
|
Prepaid expenses and other assets |
|
266 |
|
|
Property, plant, and equipment |
|
|
23,750 |
|
Intangible assets |
|
|
11,130 |
|
Goodwill |
|
|
10,434 |
|
Total assets acquired |
|
|
46,776 |
|
|
|
|
|
|
Accounts payable |
|
|
1,260 |
|
Accrued expenses and other liabilities |
|
231 |
|
|
Lease liabilities |
|
502 |
|
|
Deferred income taxes |
|
|
4,668 |
|
Deferred revenue |
|
556 |
|
|
Total liabilities assumed |
|
|
7,217 |
|
|
|
|
|
|
Total fair value of net assets acquired |
|
|
39,559 |
|
Less: redeemable noncontrolling interest |
|
|
(17,644 |
) |
Less: noncontrolling interest |
|
|
(3,551 |
) |
Total purchase price |
$ |
|
18,364 |
|
6
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 4 – Statements of Operations Pro Forma Adjustments
Adjustments included in the columns under the heading “Notes” represent the following for the three months ended June 30, 2024:
|
Three Months Ended June 30, 2024 |
|
|
Quarterly depreciation after purchase price allocation |
$ |
447 |
|
Less: historical depreciation previously recorded |
|
(428 |
) |
Quarterly amortization after purchase price allocation |
|
136 |
|
Less: historical amortization previously recorded |
|
(9 |
) |
Total |
$ |
146 |
|
Adjustments included in the columns under the heading “Notes” represent the following for the three months ended June 30, 2023:
|
Three Months Ended June 30, 2023 |
|
|
Quarterly depreciation after purchase price allocation |
$ |
447 |
|
Less: historical depreciation previously recorded |
|
(404 |
) |
Quarterly amortization after purchase price allocation |
|
136 |
|
Less: historical amortization previously recorded |
|
(9 |
) |
Total |
$ |
170 |
|
7
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 5 – Earnings per Share
The components of basic and diluted earnings per share were as follows:
|
Three months ended June 30, |
|
||||||
|
(In thousands, except per share amounts) |
|
||||||
|
|
2024 |
|
|
2023 |
|
||
Numerator |
|
|
|
|
|
|||
Loss from continuing operations attributable to common shareholders |
|
$ |
(4,370 |
) |
|
$ |
(1,247 |
) |
|
|
|
|
|
|
|
||
Denominator |
|
|
|
|
|
|
||
Denominator for basic loss per share - weighted-average shares outstanding |
|
|
6,749 |
|
|
|
7,279 |
|
Dilutive effect of stock options |
|
5 |
|
|
10 |
|
||
Denominator for diluted earnings per share |
|
$ |
6,754 |
|
|
$ |
7,289 |
|
|
|
|
|
|
|
|
||
Per share loss attributable to common shareholders from continuing operations |
|
|
|
|
|
|
||
Basic |
|
$ |
(0.65 |
) |
|
$ |
(0.17 |
) |
Diluted |
|
$ |
(0.65 |
) |
|
$ |
(0.17 |
) |
8
