Note 3 - Business Combination

6 Months Ended

Sep. 30, 2025

Notes to Financial Statements

Business Combination [Text Block]

Note 3. Business Combination

On June 15, 2024 (the "Closing Date"), the Company completed the Amplex Acquisition and closed on a share purchase agreement to acquire a majority interest in Amplex from the shareholders of Amplex (the “Sellers”), pursuant to which the Sellers agreed to sell, and the Company agreed to purchase 51% of the issued and outstanding common shares, no par value per share, of Amplex and the Company agreed to make payment to the holders of options for Amplex’s common shares in consideration of cancellation of such options for total purchase consideration of $18.4 million, which was paid in cash on the Closing Date. Amplex is an Ohio-based provider of rural broadband services to business and residential customers. The Company acquired a majority interest in Amplex in an attempt to provide better shareholder value over time. The financial results of Amplex have been included within the condensed consolidated financial statements since the Closing Date.

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 Holdings common stock at the per share purchase price of $1,792.55 and in June 2024 purchased an additional 1,674 shares of Amplex Holdings common stock at a price of $1,792.55 per share for a total of $3.0 million. These transactions, concurrently executed on the Closing Date, increased the Company's ownership in Amplex Holdings to 56.5%. In December 2024, the Company entered into a Subscription Agreement whereby the Company invested an additional $4.5 million into Amplex Holdings, for 2,583 shares, at the purchase price of $1,742.16 per share, increasing the Company's ownership percentage to 60.9% of Amplex Holdings. In July 2025, the Company entered into an additional Subscription Agreement whereby the Company invested another $4.5 million into Amplex for 4,120 shares at $1,092.26 per share, further increasing the Company's ownership percentage to 66.4% of Amplex Holdings.

In accordance with ASC 805, Business Combinations, the Amplex Acquisition was accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the Closing Date. Goodwill is calculated as the excess of the purchase price for the acquired business over the fair value of net assets acquired, including the liabilities assumed, from the Amplex Acquisition.  Goodwill represents the value the Company expects to achieve through the implementation of operational synergies, the expansion of the business into new or growing segments of the industry, and other intangible assets acquired that do not qualify for separate recognition, including an assembled workforce. None of the goodwill recognized was deductible for income tax purposes.

The allocation of the purchase price to the assets acquired and liabilities assumed was finalized as of March 31, 2025 using the purchase method of accounting in accordance with ASC 805.

The fair value of the subscriber relationships was determined using the multi-period excess earnings method (“MPEEM”) under the income approach. This method reflects the present value of the operating cash flows generated by this asset after taking into account the cost to realize the revenue, and an appropriate discount rate to reflect the time value and risk associated with the invested capital. The Company utilized the relief-from-royalty method, a form of both the market and income approach, to determine the fair value of the trade names. Under this method, it is assumed that if the Company did not own the intangible asset, it would be willing to pay a royalty for its use. Internally developed software was valued using a cost approach, specifically the cost to re-create method. The cost to re-create method considers the cost required to recreate an identical asset considering current prices of direct and indirect costs. These costs are then adjusted for the developers’ profit, which reflects the expected return on the direct and indirect costs, and opportunity cost, which represents the forgone returns during the period when the asset is being developed. The Citizens Broadband Radio Service FCC license ("CBRS FCC license") was valued using a cost approach, specifically, the cost incurred by the business in acquiring the CBRS FCC license. In determining the fair value of the property, plant, and equipment, the Company used a combination of various valuation techniques including the income approach, the cost approach, and the market approach.

The Company's final allocation of the purchase price to the assets acquired, liabilities assumed, and noncontrolling interest recognized and redeemable as of the Closing Date were as follows:

(In thousands)
Cash and cash equivalents	$	221
Accounts receivable		116
Materials and supplies		537
Operating lease right-of-use		3,063
Prepaid expenses and other assets		265
Property, plant, and equipment		24,584
Intangible assets		4,133
Goodwill		12,280
Total assets acquired		45,199
Accounts payable		1,252
Accrued expenses and other liabilities		112
Lease liabilities		3,063
Deferred income taxes		4,208
Deferred revenue		556
Total liabilities assumed		9,191
Total fair value of net assets acquired		36,008
Less: redeemable noncontrolling interest		(17,644	)
Total Adjusted Base Purchase Price	$	18,364

The Company incurred $1.1 million of transaction costs related to the Amplex Acquisition during the fiscal year ended March 31, 2025. These costs are classified as general and administrative expenses in the Company's condensed consolidated statements of operations. The Company recorded a measurement period adjustment during the fourth fiscal quarter of 2025 that decreased the value of finite lived intangible assets acquired in the transaction by $7.0 million, increased the value of property, plant, and equipment by $4.5 million, increased cash acquired by $0.2 million, and decreased total liabilities by $0.5 million (which is almost entirely attributable to a decrease in deferred income taxes). These adjustments had the net effect of increasing goodwill by $1.8 million.

The measurement period adjustments for the fair value of the assets acquired and liabilities assumed, as described above, were recognized during the fiscal year ended March 31, 2025, of which the final purchase price allocation adjustments were determined and calculated as if the accounting had been completed as of  the Closing Date. As a result of the final revised estimates in the fair values determined for the finite lived intangible assets, property, plant, and equipment, and their related estimated useful lives, there also was a corresponding adjustment to the income effects that would have been recognized for depreciation expense and amortization expense.

Of the $0.5 million of amortization expense recorded during the year ended March 31, 2025 for the finite lived intangible assets acquired, approximately $170 thousand would have been recognized through the second quarter ended September 30, 2024, which represents a $39 thousand decrease in amortization expense from the $208 thousand that was previously estimated using the provisional amounts of finite lived intangible assets as presented in previous filings.

Of the $1.5 million of depreciation expense recorded during the year ended March 31, 2025 for the property, plant, and equipment acquired, approximately $544 thousand would have been recognized through the second quarter ended September 30, 2024, which represents a $207 thousand increase in depreciation expense from the $337 thousand that was previously estimated using the provisional amounts of property, plant, and equipment as presented in previous filings.

The following is the net impact of the Amplex Acquisition on the Company's condensed consolidated statements of operations for the three and six months ended September 30, 2025 and 2024:

	(In thousands)				(In thousands)
	Three Months Ended September 30,				Six Months Ended September 30,
	2025		2024		2025		2024
Total revenue	$	3,159	$	2,958	$	6,193	$	3,447
Net income (loss) from continuing operations	$	313	$	410	$	387	$	(190	)

The following table represents the supplemental consolidated financial results of the Company on an unaudited pro forma basis, as if the acquisition had been consummated on April 1, 2024.

	(In thousands)
	Three Months Ended September 30,						Six Months Ended September 30,
	2025 (Actual)			2024 (Actual)			2025 (Actual)			2024 (Pro Forma)
Revenue	$	3,159		$	2,958		$	6,193		$	5,858
Net loss from continuing operations attributable to common shareholders		(802	)		(1,482	)		(1,588	)		(7,593	)
Net income from discontinued operations attributable to common shareholders		50			801			88			2,860
Net loss attributable to common shareholders	$	(752	)	$	(681	)	$	(1,500	)	$	(4,733	)

The following table represents the supplemental schedule of noncash investing and financing activities related to the Amplex acquisition:

	(In thousands)				(In thousands)
	Three Months Ended September 30,				Six Months Ended September 30,
	2025		2024		2025		2024
Supplemental schedule of noncash investing and financing activities
Fair value of Amplex assets acquired	$	-	$	-	$	-	$	45,199
Less: redeemable noncontrolling interest		-		-		-		(17,644	)
Less: cash paid for Amplex common stock		-		-		-		(18,364	)
Amplex liabilities assumed	$	-	$	-	$	-	$	9,191