10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_________________

FORM 10-Q

 (Mark One)

S    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:

For the quarterly period ended September 30, 2018

£     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:

For the transition period from_____to_____.

Commission File Number  0-3024

NUVERA COMMUNICATIONS, INC.

(Exact name of Registrant as specified in its charter)

Minnesota (State or other jurisdiction of incorporation or organization) 41-0440990 (I.R.S. Employer Identification No.)

27 North Minnesota Street

New Ulm, Minnesota  56073

(Address of principal executive offices)

Registrant’s telephone number, including area code: (507) 354-4111

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  £   No  S

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes S  No  £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes S No  £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”, “accelerated filer”, “non-accelerated filer,” “smaller reporting company” or “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 

£ Large accelerated filer	£ Accelerated filer
£ Non-accelerated filer	S Smaller reporting company	£ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes £  No S

The total number of shares of the registrant’s common stock outstanding as of November 14, 2018: 5,175,258.

1

table of contents

PART I – FINANCIAL INFORMATION
Item 1	Financial Statements	3-8
	Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2018 and 2017	3
	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2018 and 2017	4
	Consolidated Balance Sheets (unaudited) as of September 30, 2018 and December 31, 2017	5-6
	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2018 and 2017	7
	Consolidated Statements of Stockholders’ Equity (unaudited) for the Year Ended December 31, 2017 and for the Nine Months ended September 30, 2018	8
	Condensed Notes to Consolidated Financial Statements (unaudited)	9-29
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29-40
Item 3	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4	Controls and Procedures	40
PART II – OTHER INFORMATION
Item 1	Legal Proceedings	40
Item 1A	Risk Factors	40
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3	Defaults Upon Senior Securities	41
Item 4	Mine Safety Disclosures	41
Item 5	Other Information	41
Item 6	Exhibits Listing	41
	Signatures	42
	Exhibits

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NUVERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
OPERATING REVENUES:
Local Service	$	1,743,631	$	1,463,734	$	4,440,861	$	4,422,480
Network Access		1,810,625		1,809,143		5,106,277		5,197,332
Video		3,008,856		2,444,849		8,022,361		7,234,486
Data		4,466,224		2,992,250		10,777,986		9,083,545
A-CAM/FUSF		5,035,669		1,961,457		8,943,099		6,011,779
Other Non-Regulated		1,148,742		1,178,600		3,244,790		3,245,532
Total Operating Revenues		17,213,747		11,850,033		40,535,374		35,195,154
OPERATING EXPENSES:
Plant Operations (Excluding Depreciation     and Amortization)		2,434,225		2,008,823		6,535,140		6,045,984
Cost of Video		2,484,591		2,009,678		6,913,294		6,110,767
Cost of Data		614,477		566,843		1,750,985		1,665,019
Cost of Other Nonregulated Services		581,184		592,393		1,681,489		1,600,113
Depreciation and Amortization		2,752,813		2,414,445		7,289,015		7,281,747
Selling, General and Administrative		3,066,792		1,660,991		7,228,638		5,346,808
Total Operating Expenses		11,934,082		9,253,173		31,398,561		28,050,438
OPERATING INCOME		5,279,665		2,596,860		9,136,813		7,144,716
OTHER (EXPENSE) INCOME
Interest Expense		(744,177)		(288,258)		(1,317,116)		(910,024)
Interest/Dividend Income		55,284		22,283		196,801		95,401
Interest During Construction		20,845		16,880		89,603		48,302
CoBank Patronage Dividends		53,136		-		344,031		337,137
Other Investment Income		92,544		93,626		237,765		255,742
Total Other Income (Expense)		(522,368)		(155,469)		(448,916)		(173,442)
INCOME BEFORE INCOME TAXES		4,757,297		2,441,391		8,687,897		6,971,274
INCOME TAXES		1,332,034		1,025,382		2,432,604		2,927,937
NET INCOME	$	3,425,263	$	1,416,009	$	6,255,293	$	4,043,337
BASIC AND DILUTED
NET INCOME PER SHARE	$	0.66	$	0.27	$	1.21	$	0.78
DIVIDENDS PER SHARE	$	0.1200	$	0.1000	$	0.3400	$	0.2950
WEIGHTED AVERAGE SHARES OUTSTANDING		5,175,258		5,158,830		5,169,441		5,151,417
The accompanying notes are an integral part of these consolidated financial statements.

3

NUVERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Net Income	$	3,425,263	$	1,416,009	$	6,255,293	$	4,043,337
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Interest Rate Swaps		(79,696)		(1,256)		(107,874)		41,672
Income Tax Benefit (Expense) Related to Unrealized
Gains (Losses) on Interest Rate Swaps		22,745		508		30,788		(16,865)
Other Comprehensive Income (Loss):		(56,951)		(748)		(77,086)		24,807
Comprehensive Income	$	3,368,312	$	1,415,261	$	6,178,207	$	4,068,144
The accompanying notes are an integral part of these consolidated financial statements.

4

NUVERA COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS
	September 30, 2018		December 31, 2017
CURRENT ASSETS:
Cash	$	3,015,627	$	1,842,092
Receivables, Net of Allowance for Doubtful Accounts of $105,000 and $83,000		3,475,214		1,944,501
Materials, Supplies, and Inventories		2,308,351		2,075,199
Financial Derivative Instruments		-		28,178
Prepaid Expenses		1,036,747		823,310
Total Current Assets		9,835,939		6,713,280
INVESTMENTS & OTHER ASSETS:
Goodwill		54,741,153		39,805,349
Intangibles		30,884,245		16,257,156
Other Investments		7,823,168		7,521,389
Deferred Charges and Other Assets		17,176		52,596
Total Investments and Other Assets		93,465,742		63,636,490
PROPERTY, PLANT & EQUIPMENT:
Telecommunications Plant		141,687,386		127,634,435
Other Property & Equipment		19,723,689		17,750,364
Video Plant		10,506,495		10,440,379
Total Property, Plant and Equipment		171,917,570		155,825,178
Less Accumulated Depreciation		118,887,384		113,875,345
Net Property, Plant & Equipment		53,030,186		41,949,833
TOTAL ASSETS	$	156,331,867	$	112,299,603
The accompanying notes are an integral part of these consolidated financial statements.

5

NUVERA COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (continued) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
	September 30, 2018		December 31, 2017
CURRENT LIABILITIES:
Current Portion of Long-Term Debt, Net of     Unamortized Loan Fees	$	5,664,444	$	3,315,822
Accounts Payable		2,114,947		2,079,470
Accrued Income Taxes		738,049		676,508
Other Accrued Taxes		288,829		166,249
Deferred Compensation		55,705		57,216
Accrued Compensation		2,344,884		1,825,761
Other Accrued Liabilities		915,487		403,964
Total Current Liabilities		12,122,345		8,524,990
LONG-TERM DEBT, Net of Unamortized
Loan Fees		58,212,091		24,022,465
NONCURRENT LIABILITIES:
Loan Guarantees		131,451		158,043
Deferred Income Taxes		11,755,622		10,318,689
Other Accrued Liabilities		245,551		194,458
Financial Derivative Instruments		79,696		-
Deferred Compensation		590,833		632,225
Total Noncurrent Liabilities		12,803,153		11,303,415
COMMITMENTS AND CONTINGENCIES:		-		-
STOCKHOLDERS' EQUITY:
Preferred Stock - $1.66 Par Value, 10,000,000 Shares     Authorized, None Issued		-		-
Common Stock - $1.66 Par Value, 90,000,000 Shares     Authorized, 5,175,258 and 5,160,065 Shares Issued     and Outstanding		8,625,430		8,600,108
Accumulated Other Comprehensive Income		(56,951)		20,135
Unearned Compensation		68,406		13,620
Retained Earnings		64,557,393		59,814,870
Total Stockholders' Equity		73,194,278		68,448,733
TOTAL LIABILITIES AND         STOCKHOLDERS' EQUITY	$	156,331,867	$	112,299,603
The accompanying notes are an integral part of these consolidated financial statements.

6

NUVERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Nine Months Ended
	September 30, 2018		September 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	6,255,293	$	4,043,337
Adjustments to Reconcile Net Income to Net Cash     Provided by Operating Activities:
Depreciation and Amortization		7,339,962		7,326,131
Undistributed Earnings of Other Equity Investments		(198,886)		(168,797)
Noncash Patronage Refund		(76,485)		(105,145)
Distributions from Equity Investments		200,000		400,000
Stock Issued in Lieu of Cash Payment		206,220		147,351
Stock-based Compensation		54,786		5,448
Changes in Assets and Liabilities:
Receivables		(1,205,378)		(38,201)
Income Taxes Receivable		-		(541,087)
Inventories		196,585		(53,379)
Prepaid Expenses		(85,150)		183,667
Deferred Charges		23,000		10,753
Accounts Payable		(85,501)		(998,611)
Accrued Income Taxes		61,541		-
Other Accrued Taxes		104,146		(44,738)
Other Accrued Liabilities		737,886		(129,999)
Deferred Compensation		(42,903)		(53,771)
Net Cash Provided by Operating Activities		13,485,116		9,982,959
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant, and Equipment, Net		(4,647,162)		(3,257,853)
Grants Received for Construction of Plant		323,319		108,624
Purchase of Intangible		(283,689)		-
Purchase of Scott Rice Telephone Co., Net of Cash Acquired		(42,180,283)		-
Other, Net		(253,000)		(103,000)
Net Cash Used in Investing Activities		(47,040,815)		(3,252,229)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments of Long-Term Debt		(27,575,000)		(2,025,000)
Issuance of Long-Term Debt		64,550,000		-
Loan Origination Fees		(487,698)		-
Changes in Revolving Credit Facility		-		(1,634,778)
Dividends Paid		(1,758,068)		(1,519,885)
Net Cash Provided by (Used in) Financing Activities		34,729,234		(5,179,663)
NET INCREASE IN CASH		1,173,535		1,551,067
CASH at Beginning of Period		1,842,092		616,114
CASH at End of Period	$	3,015,627	$	2,167,181
Supplemental cash flow information:
Cash paid for interest	$	1,153,798	$	897,301
Net cash paid for income taxes	$	2,371,000	$	3,469,100
Certain historical numbers have been changed to conform to the current year's presentation.
The accompanying notes are an integral part of these consolidated financial statements.

7

NUVERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
YEAR ENDED DECEMBER 31, 2017 AND NINE MONTHS ENDED SEPTEMBER 30, 2018
				Accumulated Other Comprehensive Income (Loss)
	Common Stock					Unearned Compensation		Retained Earnings		Total Equity
	Shares	Amount
BALANCE on December 31, 2016	5,139,375	$	8,565,625	$	(13,580)	$	-	$	51,706,451	$	60,258,496
Director's Stock Plan	12,668		21,113						128,840		149,953
Employee Stock Plan	8,022		13,370						61,235		74,605
Restricted Stock Grants							13,620				13,620
Net Income									9,954,236		9,954,236
Dividends									(2,035,892)		(2,035,892)
Unrealized Gain on Interest Rate Swap					33,715						33,715
BALANCE on December 31, 2017	5,160,065		8,600,108		20,135		13,620		59,814,870		68,448,733
Director's Stock Plan	10,984		18,307						181,602		199,909
Employee Stock Plan	4,209		7,015						63,696		70,711
Restricted Stock Grants							54,786				54,786
Net Income									6,255,293		6,255,293
Dividends									(1,758,068)		(1,758,068)
Unrealized Loss on Interest Rate Swap					(77,086)						(77,086)
BALANCE on September 30, 2018	5,175,258	$	8,625,430	$	(56,951)	$	68,406	$	64,557,393	$	73,194,278
The accompanying notes are an integral part of these consolidated financial statements.

8

NUVERA COMMUNICATIONS, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2018 (Unaudited)

Note 1 – Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements of Nuvera Communications, Inc. and its subsidiaries (Nuvera) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, rules and regulations of the Securities and Exchange Commission (SEC) and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring accruals) considered necessary for the fair presentation of the financial statements and present fairly the results of operations, financial position and cash flows for the interim periods presented as required by Regulation S-X, Rule 10-01. These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2017.

The preparation of our financial statements requires our management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. Actual results may differ from these estimates. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period.

Our consolidated financial statements report the financial condition and results of operations for Nuvera and its subsidiaries in one business segment: the Telecom Segment. Inter-company transactions have been eliminated from the consolidated financial statements.

Revenue Recognition

See Note 2 – “Revenue Recognition” for a discussion of our revenue recognition policies.

Cost of Services (excluding depreciation and amortization)

Cost of services includes all costs related to delivery of communication services and products. These operating costs include all costs of performing services and providing related products including engineering, network monitoring and transport cost.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include direct and indirect selling expenses, customer service, billing and collections, advertising and all other general and administrative costs associated with the operations of the business.

Depreciation and Amortization Expense

We use the group life method (mass asset accounting) to depreciate the assets of our telephone companies. Telephone plant acquired in a given year is grouped into similar categories and depreciated over the remaining estimated useful life of the group. When an asset is retired, both the asset and the accumulated depreciation associated with that asset are removed from the books. Due to rapid changes in technology, selecting the estimated economic life of telecommunications plant and equipment requires a significant amount of judgment. We periodically review data on expected utilization of new equipment, asset retirement activity and net salvage values to determine adjustments to our depreciation rates. Depreciation expense was $5,332,415 and $5,429,935 for the nine months ended September 30, 2018 and 2017. We amortize our definite-lived intangible assets over their estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment.

9

Income Taxes

The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Significant components of our deferred taxes arise from differences (i) in the basis of property, plant and equipment due to the use of accelerated depreciation methods for tax purposes, as well as (ii) in partnership investments and intangible assets due to the difference between book and tax basis. Our effective income tax rate is normally higher than the United States tax rate due to state income taxes and permanent differences. 

We account for income taxes in accordance with GAAP, which requires an asset and liability approach to financial accounting and reporting for income taxes. As required by GAAP, we recognize the financial statement benefit of tax positions only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

As of September 30, 2018 and December 31, 2017 we had no unrecognized tax benefits.    

We are primarily subject to United States, Minnesota, Iowa, Nebraska, Wisconsin and North Dakota income taxes. Tax years subsequent to 2013 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. As of September 30, 2018 and December 31, 2017 we had no interest or penalties accrued that related to income tax matters.

On December 22, 2017, the President of the United States signed into law, the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant changes in United States tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the United States corporate tax rate from 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the 21% rate in the 4^th quarter of 2017.

Recent Accounting Developments

In August, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2017-12 (ASU 2017-12), “Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends current guidance on accounting for hedges mainly to align more closely an entity’s risk management activities and financial reporting relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. In addition, amendments in ASU 2017-12 simplify the application of hedge accounting by allowing more time to prepare hedge documentation and allowing effectiveness assessments to be performed on a qualitative basis after hedge inception. The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We plan to adopt ASU 2017-12 as of January 1, 2019 and are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures.

10

In May 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting.” ASU 2017-09 clarifies the modification accounting guidance for stock compensation included in Topic 718, “Compensation – Stock Compensation.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award must be accounted for as a modification under Topic 718. The new guidance is effective prospectively for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We adopted this update effective January 1, 2018 and are applying this guidance to applicable transactions.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and other (Topic 350).” ASU 2017-04 simplifies the accounting for goodwill impairment and removes Step 2 of the goodwill impairment test. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value limited to the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. The amendments in this update should be applied on a prospective basis. ASU 2017-04 is effective for the Company beginning January 1, 2021. Early adoption is permitted. Management is evaluating the impact the adoption of ASU 2017-04 will have on the Company’s financial statements (if any).

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requires additional disclosures relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances. Nuvera is required to adopt ASU 2016-13 on January 1, 2020. Early adoption as of January 1, 2019 is permitted. We are evaluating the effects that adoption of ASU 2016-13 will have on our financial position, results of operations and disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. This change will result in an increase to recorded assets and liabilities on lessees’ financial statements, as well as changes in the categorization of rental costs, from rent expense to interest and depreciation expense. Other effects may occur depending on the types of leases and the specific terms of them utilized by particular lessees. The ASU is effective for the Company on January 1, 2019, and early application is permitted. Modified retrospective application is required. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.  

We have reviewed all other significant newly issued accounting pronouncements and determined that they are either not applicable to our business or that no material effect is expected on our financial position and results of operations.

11

Note 2 – Revenue Recognition

Change in Accounting Policy

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606) (Accounting Standards Codification (ASC) 606),” which is a comprehensive revenue recognition standard that supersedes nearly all existing revenue recognition guidance under GAAP. ASU 2014-09 provides a single principles-based, five-step model to be applied to all contracts with customers, which steps are to (1) identify the contact(s) with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when each performance obligation is satisfied. As amended, the new standard was effective for the Company on January 1, 2018, using either a retrospective basis or a modified retrospective basis with early adoption permitted. 

We adopted ASU 2014-09 as of January 1, 2018 using the modified retrospective method for open contracts. Under this transition method, the accounting change is applied to the current period with a cumulative effect adjustment recorded to opening retained earnings. Previously reported results will not be restated under this transition method. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting practices under ASC 605 (legacy GAAP). The adoption of ASU 2014-09 did not have a material impact to our systems, processes, internal controls or our financial position and results of operations. In addition, the Company did not have any material cumulative-effect adjustments that would have affected its January 1, 2018 assets, liabilities or retained earnings. The adoption of this new standard by the Company did result in additional disclosures around the nature and timing of the Company’s performance obligations, deferred revenue contract liabilities, deferred contract cost assets, as well as significant judgements and practical expedients used by the Company in applying the new five-step revenue model.  

Our revenue contracts with customers may include a promise or promises to deliver services such as broadband, video or voice services. Promised services are considered distinct as the customer can benefit from the services either on their own or together with other resources that are readily available to the customer and the Company’s promise to transfer service to the customer is separately identifiable from other promises in the contract. The Company accounts for services as separate performance obligations. Each service is considered a single performance obligation as it is providing a series of distinct services that are substantially the same and have the same pattern of transfer.

The transaction price is determined at contract inception and reflects the amount of consideration to which we expect to be entitled in exchange for transferring service to the customer. This amount is generally equal to the market price of the services promised in the contract and may include promotional discounts. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees. Conversely, nonrefundable up-front fees, such as service activation and set-up fees, which are immaterial to our overall revenues, are included in the transaction price. In determining the transaction price, we consider our enforceable rights and obligations within the contract. We do not consider the possibility of a contract being cancelled, renewed or modified, which is consistent with ASC 606-10-32-4.

The transaction price is allocated to each performance obligation based on the standalone selling price of the service, net of the related discount, as applicable.

Revenue is recognized when performance obligations are satisfied by transferring service to the customer as described below.

12

Significant Judgments

The Company often provides multiple services to a customer. Provision of customer premise equipment (CPE) and additional service tiers may have a significant level of integration and interdependency with the subscription voice, video, Internet, or connectivity services. Judgement is required to determine whether provision of CPE, installation services, and additional service tiers are considered distinct and accounted for separately, or not distinct and accounted for together with the subscription services.

Allocation of the transaction price to the distinct performance obligations in bundled service subscriptions requires judgement. The transaction price for a bundle of services is frequently less than the sum of standalone selling prices of each individual service. Standalone selling prices for the Company’s services are directly observable.

13

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the quarters ended September 30, 2018 and 2017:

	Three Months Ended September 30,
	2018		2017
Voice services¹	$	1,922,686	$	1,657,758
Network access¹		1,738,866		1,874,287
Video ¹		3,004,767		2,441,209
Data ¹		4,036,071		2,636,745
Directory²		205,789		182,504
Cellular³		129,799		121,765
Other contracted revenue4		513,651		432,138
Other5		317,417		310,988
Revenue from customers		11,869,046		9,657,394
Subsidy and other revenue outside scope of ASC 6066		5,344,701		2,192,639
Total revenue	$	17,213,747	$	11,850,033
¹ Month-to-Month contracts billed and consumed in the same month.
² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.
³ Approximately 90.53% of the revenue in this category is earned through a monthly commission from the network provider for a billing and collecting arrangement with the network provider. We do not receive revenue from the end-user customer, but instead receive a monthly commission from the provider. Other revenue in this category includes phone and equipment sales and represents approximately 0.75% of our total revenue.
4This includes long-term contracts where the revenue is recognized monthly over the term of the contract.
5This includes CPE and other equipment sales.
6This includes governmental subsidies and lease revenue outside the scope of ASC 606.

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The following table summarizes revenue from contracts with customers for the nine months ended September 30, 2018 and 2017:

	Nine Months Ended September 30,
	2018		2017
Voice services¹	$	5,005,074	$	4,933,868
Network access¹		5,251,706		5,475,395
Video ¹		8,010,113		7,224,333
Data ¹		9,580,011		7,765,135
Directory²		556,614		539,520
Cellular³		381,478		335,807
Other contracted revenue4		1,411,979		1,518,447
Other5		740,761		682,709
Revenue from customers		30,937,736		28,475,214
Subsidy and other revenue outside scope of ASC 6066		9,597,638		6,719,940
Total revenue	$	40,535,374	$	35,195,154
¹ Month-to-Month contracts billed and consumed in the same month.
² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.
³ Approximately 89.05% of the revenue in this category is earned through a monthly commission from the network provider for a billing and collecting arrangement with the network provider. We do not receive revenue from the end-user customer, but instead receive a monthly commission from the provider. Other revenue in this category include phone and equipment sales and represents approximately 0.94% of our total revenue.
4This includes long-term contracts where the revenue is recognized monthly over the term of the contract.
5This includes CPE and other equipment sales.
6This includes governmental subsidies and lease revenue outside the scope of ASC 606.

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For the three months ended September 30, 2018 and 2017, approximately 67.11% of our total revenue is from month-to-month and other contracted revenue from customers. Approximately 31.05% of our total revenue is from revenue sources outside of the scope of ASC 606. The remaining 1.84% of total revenue is from other sources including CPE and equipment sales and installation.

For the nine months ended September 30, 2018 and 2017, approximately 74.49% of our total revenue is from month-to-month and other contracted revenue from customers. Approximately 23.68% of our total revenue is from revenue sources outside of the scope of ASC 606. The remaining 1.83% of total revenue is from other sources including CPE and equipment sales and installation.

A significant portion of our revenue is derived from customers who may generally cancel their subscriptions at any time without penalty. As such, the amount of revenue related to unsatisfied performance obligations is not necessarily indicative of the future revenue to be recognized from our existing customer base. Revenue from customers with a contractually specified term and non-cancelable service period will be recognized over the term of such contracts, which is generally 3 to 10 years for these types of contracts.

Nature of Services

Revenues are earned from our customers primarily through the connection to our networks, digital and commercial television (TV) programming, Internet services (high-speed broadband), and hosted and managed services. Revenues for these services are billed based on set rates for monthly service or based on the amount of time the customer is utilizing our facilities. The revenue for these services is recognized when the service is rendered.

Revenues earned from interexchange carriers (IXCs) accessing our network are based on the utilization of our network by these carriers as measured by minutes of use on the network or special access to the network by the individual carriers. Revenues are billed at tariffed access rates for both interstate and intrastate calls. Revenues for these services are recognized based on the period the access is provided.

Voice Services – We receive recurring revenue for basic local services that enable end-user customers to make and receive telephone calls within a defined local calling area for a flat monthly fee. In addition to subscribing to basic local telephone services, our customers may choose from a variety of custom calling features such as call waiting, call forwarding, caller identification and voicemail. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

Network Access – We provide access services to other telecommunication carriers for the use of our facilities to terminate or originate long distance calls on our network. Additionally, we bill monthly subscriber line charges (SLCs) to substantially all of our customers for access to the public switched network. These SLCs are regulated and approved by the Federal Communications Commission (FCC). In addition, network access revenue is derived from several federally administered pooling arrangements designed to provide support and distribute funding to us.

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Revenues earned from other telecommunication carriers accessing our network are based on the utilization of our network by these carriers as measured by minutes of use on the network or special access to the network by the individual carriers on monthly basis. Revenues are billed at tariffed access rates for both interstate and intrastate calls and are recognized into revenue monthly based on the period the access was provided.

The National Exchange Carriers Association (NECA) pools and redistributes the SLCs to various telecommunication providers through the Connect America Fund (CAF). These revenues are earned and recognized into revenue on a monthly basis. Any adjustments to these amounts received by NECA are adjusted for in revenue upon receipt of the adjustment.

Video – We provide a variety of enhanced video services on a monthly recurring basis to our customers. We also receive monthly recurring revenue from our subscribers for providing commercial TV programming. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

Data – We provide high speed Internet to business and residential customers. Our revenue is earned based on the offering of various flat packages based on the level of service, data speeds and features. We also provide e-mail; web hosting and design, on-line file back up and on-line file storage. Data customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

Directory – Our directory publishing revenue in our telephone directories recurs monthly and is recognized into revenue on a monthly basis. 

Cellular – We provide retail sales and service of cellular phones and accessories through Telespire, a national wireless provider. We resell these wireless services as Nuvera Wireless, our branded product. We receive both recurring revenue for our wireless services, as well as revenue collected for the sale of wireless phones and accessories. The majority of the revenue in this category is earned through a monthly commission from Telespire for a billing and collecting arrangement with Telespire. We do not receive revenue from the end-user customer, but instead receive a monthly commission from Telespire. Other revenue in this category is immaterial to our overall revenues. 

Other Contracted Revenue - Managed services and certain other data customers include fiber-delivered communications and managed information technology solutions to mainly business customers, as well as high-capacity last-mile data connectivity services to wireless and wireline carriers. Services are primarily offered on a subscription basis with a contractually specified and non-cancelable service period. The non-cancelable contract terms for these customers generally range from 3 to 10 years. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized ratably over the contract period as the subscription services are delivered. These services are billed as monthly recurring charges to customers. 

Other – We also generate revenue from the sales, service and installation of CPE and other services. Sales and service of CPE are billed and recognized into revenue once the sale or service is complete or delivered. These sales and services are generally short-term in nature and are completed within one month. Other revenues are immaterial to our total revenues.

Subsidy and Other Revenue outside the Scope of ASC 606 – We receive subsidies from governmental entities to operate and expand our networks. In addition, we have revenue from leasing arrangements. Both of these revenue streams are outside of the scope of ASC 606. 

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Interstate access rates are established by a nationwide pooling of companies known as the NECA. The FCC established NECA in 1983 to develop and administer interstate access service rates, terms and conditions. Revenues are pooled and redistributed on the basis of a company's actual or average costs. There has been a change in the composition of interstate access charges in recent years, shifting more of the charges to the end user and reducing the amount of access charges paid by IXC’s. We believe this trend will continue.

Intrastate access rates are filed with state regulatory commissions in Minnesota and Iowa.

From January 1, 2017 through July 31, 2018 we did not receive funding from the Federal Universal Service Fund (FUSF) based on the pooling and redistribution of revenues based on a company's actual or average costs as described above, but instead, elected to receive funding based on the Alternative Connect America Cost Model (A-CAM) as described below.

With the acquisition of Scott-Rice Telephone Company (Scott-Rice) on July 31, 2018, see Note 3 – “Acquisitions and Dispositions,” Nuvera now receives FUSF support for Scott-Rice. The remainder of the Company receives funding from A-CAM as mentioned below. Scott-Rice’s settlements from the pools are based on nationwide average schedules.

A-CAM

The FUSF was established as part of the Telecommunications Act of 1996 and provides subsidies to telecommunications providers as means of increasing the availability and affordability of advanced telecommunications services. In 2011, significant reform was introduced, including the creation of the CAF, to help modernize the FUSF and promote support of these telecom services in the nation’s high cost areas. In 2016, the FCC announced additional reform to further transition the CAF from supporting the provision of voice services to the provision of broadband services. On March 30, 2016, the FCC issued a Report and Order (2016 Order) that adopts the following changes to the FUSF for rate-of-return carriers:

·Establishes a voluntary cost model;   

·Creates specific broadband deployment obligations; 

·Provides a mechanism for support of broadband-only deployment; 

·Gradually reduces the authorized rate-of-return from 11.25 percent to 9.75 percent;

·Eliminates support in those local areas served by unsubsidized competitors;

·Establishes “glide-path” transition periods for all the new changes; and

·Maintains the $2 billion budget established by the 2011 Transformation Order.

While the 2011 FUSF Transformation Order established CAF Phase I and CAF Phase II as high cost support mechanisms for the price cap carriers (i.e., the larger, national local exchange carriers (LECs) such as Verizon and AT&T), it was not as specific about how subsidies would change for the rate-of-return carriers (i.e., the smaller LECs, including all rural LECs). In contrast, the 2016 Order focused on the rate-of-return carriers, announced specific changes to existing funding mechanisms as well as a new funding mechanism, and provided rural telecommunications providers with greater certainty about future support.

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One of the major changes introduced by the 2016 Order was the creation of the A-CAM, a new CAF support mechanism for rate-of-return carriers. Utilization of the A-CAM was voluntary; and rate-of-return carriers may have instead chose to continue relying on the legacy support mechanism known as interstate common line support (ICLS), but then modified and renamed CAF Broadband Loop Support. Each carrier needed to decide which support mechanism to elect, and then choose one or the other, per state.

In our Form 10-Q for the quarter ended September 30, 2016, Nuvera disclosed that we had elected the A-CAM for our Minnesota and Iowa operations, replacing our former ICLS. Nuvera will receive A-CAM support for a period of ten years in exchange for meeting defined broadband build-out requirements. At the time of Nuvera’s election, the FCC had not yet determined the final award numbers. 

Consistent with the stated disclosure in our Form 10-Q, Nuvera notified the FCC that we would continue to elect the A-CAM program. Under the report that accompanied the FCC December 20, 2016 Public Notice, Nuvera would annually receive (i) $391,896 for our Iowa operations and (ii) $6,118,567 for our Minnesota operations. The Company will use the annual $6.5 million that we receive through the A-CAM program to meet our defined broadband build-out obligations. The A-CAM payments will replace the Company’s former ICLS payments.

On May 7, 2018, the FCC issued Public Notice DA 18-465, which contained revised offers of A-CAM support and associated revised service deployment obligations.

On May 23, 2018, the Company’s Board of Directors (BOD) authorized and directed the Company to accept the FCC’s revised offer of A-CAM support and the revised associated service deployment obligations. Under the revised FCC offer Notice, the Company will be entitled to annually receive (i) $489,870 for its Iowa operations, which is a $97,974 increase per year and (ii) $7,648,208 for its Minnesota operations, which is a $1,529,641 increase per year. The Company will use the additional support that it receives through the A-CAM program to continue to meet its defined broadband build-out obligations. A letter of acceptance to elect the revised A-CAM support was filed by the Company with the FCC on May 24, 2018. The FCC accepted the Company’s letter on May 30, 2018. On August 31, 2018 the Company received approximately $3.12 million for the revised A-CAM support. This represented an 18-month true-up for support back to the original election date, and an increased monthly payment representing the new revised A-CAM support offer.

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The following table provides information about our receivables, contracts assets and contract liabilities from revenue contracts with our customers:

	January 1, 2018		September 30, 2018		Increase/ (Decrease)
Contract Assets:
Short-term contract assets	$	-	$	-	$	-
Long-term contract assets	$	-	$	-	$	-
Contract Liabilities:
Short-term contract liabilities	$	93,656	$	334,280	$	240,624	¹
Long-term contract liabilities	$	194,458	$	167,941	$	(26,517)
Receivables:
Receivables accounted for under ASC 606	$	1,431,558	$	2,814,216	$	1,382,658	²
Subsidy Receivables not accounted for under ASC 606	$	542,539	$	678,174	$	135,635	³
¹ The difference is due to the timing of the contract billings and the acquisition of Scott-Rice.
² The increase in accounts receivable is due to the timing of receipts and the acquisition of Scott-Rice.
³ The difference is due to the increase in A-CAM funding and the acquisition of Scott-Rice.

Contract Assets

Contract assets arise from costs that are incremental to the acquisition of a contract. Incremental costs are those that result directly from obtaining a contract or costs that would not have been incurred if the contract had not been obtained, which primarily relates to sales commissions. Overall commissions paid to our sales representatives are immaterial based on our current commission structure. Due to the immaterial amount of commissions paid and the fact that most of our customers are billed under month-to-month service agreements that generally have no penalties associated with them if canceled by the customer, the Company has applied the practical expedient that allow customer acquisition costs to be expensed as incurred. 

Contract Liabilities

Short-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the current portion of the deferred revenues that will be recognized monthly within one year. Long-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the portion longer than one year and the corresponding deferred revenues are recognized into revenue on a monthly basis based of the term of the contract.  

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Receivables

A receivable is recognized in the period the Company provides goods and services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are generally 30-60 days.

Note 3 – Acquisitions and Dispositions

Scott-Rice Acquisition

On July 31, 2018, the Company announced that it had completed its acquisition of Scott-Rice from Allstream Business U.S., LLC, an affiliate of Zayo Group Holdings, Inc. (Zayo) for approximately $42 million in cash. Scott-Rice provides phone, video and internet services with more than 18,000 connections, serving the communities of Prior Lake, Savage, Elko and New Market, Minnesota. The combined Nuvera/Scott-Rice Company will have approximately 66,000 connections. Nuvera financed the acquisition with its principal lender, CoBank, ACB (CoBank). Further information regarding the CoBank loan terms and amounts can be found on the Company’s 8-K filed with the SEC on August 3, 2018.

The preliminary allocation of the acquisition value of Scott-Rice is shown below:

Current assets	$	810,927
Property, plant and equipment		12,320,410
Customer relationship intangible		16,300,000
Excess costs over net assets acquired (Goodwill)		14,935,804
Current liabilities		(449,938)
Deferred income taxes		(1,467,719)
Deferred liabilities		(264,813)
Purchase price allocation		42,184,671
Less cash acquired		(4,388)
Total Consideration for Acquisition	$	42,180,283

The acquisition has been accounted for using the acquisition method of accounting in accordance with current standards. As a result, the fair value of the consideration paid, which consists of approximately $42 million in cash, has been allocated to the fair value of the assets and liabilities received. The allocation of the purchase price to Scott-Rice’s assets and liabilities has been based on preliminary estimates of fair values. This allocation is preliminary and further refinements are likely to be made. Criteria have been established in ASC 805, “Business Combinations” for determining whether intangible assets should be recognized separately from goodwill. Based upon our preliminary value allocation, the excess of the purchase price and acquisition costs over the fair value of the net identifiable tangible assets acquired was $31,235,804, which is not deductible for income tax purposes. The Company recorded an intangible asset related to the acquired company’s customer relationships of $16,300,000. The estimated useful life of the customer relationship intangible is 15 years.

The preliminary valuation allocation is subject to change based on the completion of a valuation being conducted by an independent valuation firm and pending operational true-ups related to a working capital true-up.

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Pro Forma Financial Information

On July 31, 2018, Nuvera completed the acquisition of Scott-Rice. The following pro forma results presented are for the three months ended September 30, 2018 and 2017, and the nine months ended September 30, 2018 and 2017 as if the acquisition had been completed on January 1, 2017. The Company has provided this pro forma condensed Statement of Income to facilitate analysis of the Statement of Income. The pro forma statements do not reflect any effect of operating efficiencies, cost savings and other benefits anticipated by the Company’s management as a result of the acquisition.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Revenue	$	18,411,062	$	15,779,409	$	49,203,865	$	46,676,925
Net Income	$	3,449,095	$	1,231,510	$	7,144,076	$	3,312,397
Basic and Diluted Net
Income Per Share	$	0.67	$	0.24	$	1.38	$	0.64

Note 4 – Fair Value Measurements

We have adopted the rules prescribed under GAAP for our financial assets and liabilities. GAAP includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:

         Level 1:   Inputs are quoted prices in active markets for identical assets or liabilities.

        Level 2: Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs that are derived principally from or corroborated by observable market data.

         Level 3:   Inputs are derived from valuation techniques where one or more significant inputs or value drivers are unobservable.

We use financial derivative instruments to manage our overall cash flow exposure to fluctuations in interest rates. We account for derivative instruments in accordance with GAAP that requires derivative instruments to be recorded on the balance sheet at fair value. Changes in fair value of derivative instruments must be recognized in earnings unless specific hedge accounting criteria are met, in which case, the gains and losses are included in other comprehensive income rather than in earnings.

We have entered into an interest rate swap agreement (IRSA) with our lender, CoBank, to manage our cash flow exposure to fluctuations in interest rates. This instrument is designated as a cash flow hedge and is effective at mitigating the risk of fluctuations on interest rates in the market place. Any gains or losses related to changes in the fair value of this derivative are accounted for as a component of accumulated other comprehensive income (loss) for as long as the hedge remains effective.

The fair value of our IRSA is discussed in Note 7 – “Interest Rate Swaps”. The fair value of our swap agreement was determined based on Level 2 inputs.

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Other Financial Instruments

Other Investments - It is difficult to estimate a fair value for equity investments in companies carried on the equity or cost basis due to a lack of quoted market prices. We conducted an evaluation of our investments in all of our companies in connection with the preparation of our audited financial statements at December 31, 2017. We believe the carrying value of our investments is not impaired.

Debt – We estimate the fair value of our long-term debt based on the discounted future cash flows we expect to pay using current rates of borrowing for similar types of debt. Fair value of the debt approximates carrying value.

Other Financial Instruments - Our financial instruments also include cash equivalents, trade accounts receivable and accounts payable where the current carrying amounts approximate fair market value.

Note 5 – Goodwill and Intangibles

We account for goodwill and other intangible assets under GAAP. Under GAAP, goodwill and intangible assets with indefinite useful lives are not amortized, but are instead tested for impairment (i) on at least an annual basis and (ii) when changes in circumstances indicate that the fair value of goodwill may be below its carrying value. Our goodwill totaled $54,741,153 and $39,805,349 at September 30, 2018 and December 31, 2017, respectively. The increase in goodwill at September 30, 2018 compared to December 31, 2017 was due to the acquisition of Scott-Rice.      

As required by GAAP, we do not amortize goodwill and other intangible assets with indefinite lives, but test for impairment on an annual basis or earlier if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying amount. These circumstances include, but are not limited to (i) a significant adverse change in the business climate, (ii) unanticipated competition or (iii) an adverse action or assessment by a regulator. Determining impairment involves estimating the fair value of a reporting unit using a combination of (i) the income or discounted cash flows approach and (ii) the market approach that utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds its fair value, the amount of the impairment loss must be measured. The impairment loss is calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied value of goodwill. We recognize impairment loss when the carrying amount of goodwill exceeds its implied fair value.

In 2017 and 2016, we engaged an independent valuation firm to complete our annual impairment testing for existing goodwill. For 2017 and 2016, the testing results indicated no impairment charge to goodwill as the determined fair value was sufficient to pass the first step of the impairment test.  

Our intangible assets subject to amortization consist of acquired customer relationships, regulatory rights and trade names. We amortize intangible assets with finite lives over their respective estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment. In addition, we periodically reassess the carrying value, useful lives and classifications of our identifiable intangible assets.

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The components of our identified intangible assets are as follows:

		September 30, 2018				December 31, 2017
		Gross Carrying Amount				Gross Carrying Amount
	Useful Lives			Accumulated Amortization				Accumulated Amortization
Definite-Lived Intangible Assets
Customers Relationships	14-15 yrs	$	45,578,445	$	19,102,071	$	29,278,445	$	17,354,646
Regulatory Rights	15 yrs		4,000,000		2,866,641		4,000,000		2,666,643
Trade Name	3-5 yrs		853,689		579,177		570,000		570,000
Indefinitely-Lived Intangible Assets
Video Franchise			3,000,000		-		3,000,000		-
Total		$	53,432,134	$	22,547,889	$	36,848,445	$	20,591,289
Net Identified Intangible Assets				$	30,884,245			$	16,257,156

Amortization expense related to the definite-lived intangible assets was $1,956,600 and $1,851,812 for the nine months ended September 30, 2018 and 2017. Amortization expense for the remaining three months of 2018 and the five years subsequent to 2018 is estimated to be:

·	(October 1 – December 31)	$	874,867
·	2019	$	3,498,488
·	2020	$	3,498,488
·	2021	$	3,498,443
·	2022	$	2,127,093
·	2023	$	2,103,486

Note 6 – Secured Credit Facility

We have a credit facility with CoBank. Under the credit facility, we entered into a master loan agreement (MLA) and a series of supplements to the respective MLA. On July 31, 2018, we entered into an Amended and Restated MLA with CoBank. The MLA refinances and replaces the existing credit facility between CoBank and Nuvera and its subsidiaries.

Nuvera and its respective subsidiaries also have entered into security agreements under which substantially all the assets of Nuvera and its respective subsidiaries have been pledged to CoBank as collateral. In addition, Nuvera and its respective subsidiaries have guaranteed all the obligations under the credit facility. These mortgage notes are required to be paid in quarterly installments covering principal and interest, beginning in the year of issue and maturing on July 31, 2025.

Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends (a) (i) in an amount up to $2,700,000 in any year if our “Total Leverage Ratio,” that is, the ratio of our “Indebtedness” to “EBITDA” (earnings before interest, taxes, depreciation and amortization – as defined in the loan documents) is greater than 2.00 to 1.00, and (ii) in any amount if our Total Leverage Ratio is less than 2.00 to 1.00, and (b) in either case, if we are not in default or potential default under the loan agreements. Our current Total Leverage Ratio at September 30, 2018 is 2.84. 

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Our credit facility requires us to comply with specified financial ratios and tests. These financial ratios include total leverage ratio, debt service coverage ratio, equity to total assets ratio and annual maximum aggregate capital expenditures. At September 30, 2018 we were in compliance with all the stipulated financial ratios in our loan agreements.

There are security and loan agreements underlying our current CoBank credit facility that contain restrictions on our distributions to stockholders and investment in, or loans, to others. Also, our credit facility contains restrictions that, among other things, limits or restricts our ability to enter into guarantees and contingent liabilities, incur additional debt, issue stock, transact asset sales, transfers or dispositions, and engage in mergers and acquisitions, without CoBank approval.  

As described in Note 7 – “Interest Rate Swaps,” we have entered into an IRSA that effectively fixes our interest rates and covers 25 percent of our existing outstanding debt balance or $16,137,500 as of August 1, 2018. The IRSA matures on July 31, 2025. As of September 30, 2018, our IRSA covered $15,849,350, with a weighted average rate of 6.27%. Our remaining debt of $58.7 million ($10.0 million available under the revolving credit facilities and $48.7 million currently outstanding) remains subject to variable interest rates at an effective weighted average interest rate of 5.47%, as of September 30, 2018.   

Note 7 – Interest Rate Swaps

We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities.

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facility with CoBank required that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

To meet this objective, on August 1, 2018 we entered into an IRSA with CoBank covering 25 percent of our existing outstanding debt balance or $16,137,500 of our aggregate indebtedness to CoBank at August 1, 2018. This swap effectively locks in the interest rate on 25 percent of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the LIBOR variable rate payment is below a contractual rate or (ii) receive a payment if the LIBOR variable rate payment is above the contractual rate.

Each month, we make interest payments to CoBank under its loan agreements based on the current applicable LIBOR Rate plus the contractual LIBOR margin then in effect with respect to the loan, without reflecting our IRSA. At the end of each calendar month, CoBank adjusts our aggregate interest payments based on the difference, if any, between the amounts paid by us during the month and the current effective interest rate. Net interest payments are reported in our consolidated income statement as interest expense.

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As of September 30, 2018 we have the following IRSA in effect.

Loan #	Maturity Date	Notional Amount	Effective Interest Rate (1)
RX0583-T4	07/31/2025	$15,849,350	6.27% (LIBOR Rate of 3.02% plus 3.25% LIBOR Margin)

(1) The note above initially bears interest at a LIBOR rate determined by the maturity of the note, plus a “LIBOR Margin” rate equal to 3.25% according to the individual secured credit facility. The LIBOR Margin decreases as the borrower’s “Leverage Ratio” decreases. The “Current Effective Interest Rate” in the table reflects the rate we pay giving effect to the swaps.

Our IRSA under our credit facilities qualifies as a cash flow hedge for accounting purposes under GAAP. We reflect the effect of this hedging transaction in the financial statements. The unrealized gain/loss is reported in other comprehensive income. If we terminate our IRSA, the cumulative change in fair value at the date of termination will be reclassified from accumulated other comprehensive income, which is classified in stockholders’ equity, into earnings on the consolidated statements of income.

The fair value of the Company’s IRSA is determined based on valuations received from CoBank and are based on the present value of expected future cash flows using discount rates appropriate with the terms of the IRSA. The fair value indicates an estimated amount we would be required to pay if the contracts were canceled or transferred to other parties. At September 30, 2018, the fair value liability of the swap was $79,696, which has been recorded net of deferred tax benefit of $22,745, for the $56,951 in accumulated other comprehensive loss.

Note 8 – Other Investments 

We are a co-investor with other rural telephone companies in several partnerships and limited liability companies. These joint ventures make it possible to offer services to customers, including digital video services and fiber-optic transport services that we would have difficulty offering on our own. These joint ventures also make it possible to invest in new technologies with a lower level of financial risk. We recognize income and losses from these investments on the equity method of accounting. For a listing of our investments, see Note 12 – “Segment Information”.

Note 9 – Guarantees

Nuvera has guaranteed a ten-year loan owed by FiberComm, LC, originally set to mature on September 30, 2021. As of September 30, 2018, we have recorded a liability of $131,451 in connection with the guarantee on this loan. This guarantee may be exercised if FiberComm, LC does not make its required payments on this note.

On September 14, 2018, FiberComm, LC opened a new construction loan on which it may draw funds, up to $4 million, to complete the construction of a data center/carrier hotel in downtown Sioux City, Iowa. The draw period for this loan will remain open until March 31, 2019. On March 31, 2019, the remaining balance of the existing ten-year loan, with an original maturity date of September 30, 2021, will be combined with the amount of funds drawn on the new construction loan into one note, maturing on April 30, 2026. This new note will be a seven-year note, utilizing a ten-year amortization schedule, with a balloon payment due in April 2026. Nuvera has guaranteed a 50% pro rata portion (existing 20% ownership) of the new construction loan. Nuvera’s maximum additional liability in relation to this new loan is $400,000.

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Note 10 – Deferred Compensation

As of September 30, 2018 and December 31, 2017, we have recorded other deferred compensation relating to executive compensation payable to certain former executives of past acquisitions.  

Note 11 – Restricted Stock Units (RSU)

On February 24, 2017, our BOD adopted the 2017 Omnibus Stock Plan (2017 Plan) effective May 25, 2017. The shareholders of the Company approved the 2017 Plan at the May 25, 2017 Annual Meeting of Shareholders. The purpose of the 2017 Plan was to enable Nuvera and its subsidiaries to attract and retain talented and experienced people, closely link employee compensation with performance realized by shareholders, and reward long-term results with long-term compensation. The 2017 Plan enables us to grant stock incentive awards to current and new employees, including officers, and to Board members and service providers. The 2017 Plan permits stock incentive awards in the form of options (incentive and non-qualified), stock appreciation rights, restricted stock, RSUs, performance stock, performance units, and other awards in stock or cash. The 2017 Plan permits the issuance of up to 625,000 shares of our Common Stock in any of the above stock awards.

On July 25, 2017, our BOD granted 6,077 shares of RSUs in the Common Stock of the Company to its executive officers under the 2017 Plan. We recognize share-based compensation expense for these RSUs over the vesting period of the RSUs, which was determined by our BOD. The 2017 RSUs will vest on December 31, 2019, at which point, the executives will be able to receive Common Stock in the Company in exchange for the RSUs.

On March 23, 2018, our BOD and Compensation Committee granted awards to the Company’s executive officers under the 2017 Plan. We recognize share-based compensation expense for these RSU’s over the vesting period of the RSUs’ which was determined by our BOD. Each executive officer received a time-based RSU and a performance-based RSU. The time-based RSUs were computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock of $17.00 on March 26, 2018. 4,044 RSU’s were granted and the RSU’s will vest 100% on December 31, 2020, at which point, the executive officers will be able to receive Common Stock in the Company in exchange for the RSUs. The performance-based RSUs were computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock of $17.00 on March 26, 2018. The RSU’s will vest based on the Company’s average Return on Invested Capital (ROIC) for the three years ended December 31, 2020. 5,750 RSU’s were granted as a target and the RSU’s will vest 100% on December 31, 2020 if ROIC levels are attained, at which point, the executive officers will be able to receive Common Stock in the Company in exchange for the RSUs. The executive officers may earn more or less RSU’s based on if the actual ROIC over the time period is more or less than target.

Note 12 – Segment Information 

We operate in the Telecom Segment and have no other significant business segments. The Telecom Segment consists of voice, data and video communication services delivered to the customer over our local communications network. No single customer accounted for a material portion of our consolidated revenues. The Telecom Segment operates the following incumbent local exchange carriers (ILECs) and competitive local exchange carriers (CLECs) and has investment ownership interests as follows:

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Telecom Segment

● ILECs:

▪ Nuvera Communications, Inc., the parent company;

▪ Hutchinson Telephone Company, a wholly-owned subsidiary of Nuvera;

▪ Peoples Telephone Company, a wholly-owned subsidiary of Nuvera;

▪ Scott-Rice Telephone Company, a wholly-owned subsidiary of Nuvera;

▪ Sleepy Eye Telephone Company, a wholly-owned subsidiary of Nuvera;

▪ Western Telephone Company, a wholly-owned subsidiary of Nuvera.

● CLECs:

▪ Nuvera, located in Redwood Falls, Minnesota; 

▪ Hutchinson Telecommunications, Inc., a wholly-owned subsidiary of Hutchinson Telephone Company, located in Litchfield and Glencoe, Minnesota;

● Our investments and interests in the following entities include some management responsibilities:

▪ FiberComm, LC – 20.00% subsidiary equity ownership interest. FiberComm, LC is located in Sioux City, Iowa;

▪ Broadband Visions, LLC (BBV) – 24.30% subsidiary equity ownership interest. BBV provides video headend and Internet services;

▪ Independent Emergency Services, LLC (IES) – 14.29% subsidiary equity ownership interest. IES is a provider of E-911 services to the State of Minnesota as well as a number of counties located in Minnesota;

▪ SM Broadband, LLC (SMB) – 12.50% subsidiary equity ownership interest. SMB provides network connectivity for regional businesses.

Note 13 – Commitments and Contingencies

We are involved in certain contractual disputes in the ordinary course of business. We do not believe the ultimate resolution of any of these existing matters will have a material adverse effect on our financial position, results of operations or cash flows. We did not experience any changes to material contractual obligations in the first nine months of 2018. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for the discussion relating to commitments and contingencies.

Note 14 – Broadband Grants

In January 2017, the Company was awarded a broadband grant from the Minnesota Department of Employment and Economic Development (DEED). The grant provided up to 45% of the total cost of building fiber connections to homes and businesses for improved high-speed internet in unserved or underserved communities and businesses in the Company’s service area. The Company will receive $850,486 of the $1,889,968 total project costs. The Company will provide the remaining 55% matching funds. At September 30, 2018, the Company has received $374,543. These projects have been completed and final documentation was provided to the DEED office in October 2018. We expect to receive final grant funds from the state in the fourth quarter of 2018.

In November 2017, the Company was awarded a broadband grant from the DEED. The grant provided up to 42.6% of the total cost of building fiber connections to homes and businesses for improved high-speed internet in unserved or underserved communities and businesses in the Company’s service area. The Company will receive $736,598 of the $1,727,998 total project costs. The Company will provide the remaining 57.4% matching funds. Construction and expenditures for these projects began in the summer of 2018. We have not yet received any funds for these projects as of September 30, 2018.

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Note 15 – Subsequent Events

We have evaluated and disclosed subsequent events through the filing date of this Quarterly Report on Form 10-Q.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. Certain statements in this Quarterly Report on Form 10-Q, including those relating to the impact on future revenue sources, pending and future regulatory orders, continued expansion of the telecommunications network and expected changes in the sources of our revenue and cost structure resulting from our entrance into new communications markets, are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. The Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. This Quarterly Report on Form 10-Q may include forward-looking statements. These statements may include, without limitation, statements with respect to anticipated future operating and financial performance, growth opportunities and growth rates, acquisition and divestiture opportunities, business strategies, business and competitive outlook, and other similar forecasts and statements of expectation. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “targets”, “projects”, “will”, “may”, “continues” and “should”, and variations of these words and similar expressions, are intended to identify these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from such statements. 

Because of these risks, uncertainties and assumptions and the fact that any forward-looking statements made by us and our management are based on estimates, projections, beliefs and assumptions of management, they are not guarantees of future performance and you should not place undue reliance on them. In addition, forward-looking statements speak only as of the date they are made, which is the filing date of this Form 10-Q. With the exception of the requirements set forth in the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations stated in this Form 10-Q, are based upon Nuvera’s consolidated unaudited financial statements that have been prepared in accordance with GAAP and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities. We presently give accounting recognition to the actions of regulators where appropriate. The preparation of our financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. Our senior management has discussed the development and selection of accounting estimates and the related Management Discussion and Analysis disclosure with our Audit Committee. For a summary of our significant accounting policies, see Note 1 – “Summary of Significant Accounting Policies” to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2017, which is incorporated herein by reference.

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Results of Operations

Overview

Nuvera has a state-of-the-art; fiber-rich communications network and offers a diverse array of communications products and services. Our businesses provide local telephone service and network access to other telecommunications carriers for connections to our networks. In addition, we provide long distance service, broadband Internet access, video services, and managed and hosted solutions services.

Our operations consist primarily of providing services to customers for a monthly charge. Because many of these services are recurring in nature, backlog orders and seasonality are not significant factors. Our working capital requirements include financing the construction of our networks, which consists of switches and cable, data, Internet protocol (IP) and digital TV. We also require capital to maintain our networks and infrastructure; fund the payroll costs of our highly skilled labor force; maintain inventory to service capital projects, our network and our telephone equipment customers; and pay dividends and provide for the carrying value of trade accounts receivable, some of which may take several months to collect in the normal course of business.

Executive Summary

Highlights:

·Effective June 4, 2018, New Ulm Telecom, Inc. changed its name to Nuvera Communications, Inc. The Company had announced the pending name change at its 2018 Annual Meeting of Shareholders held on May 24, 2018. Concurrent with the June 4, 2018 name change, the ticker symbol for the Company’s common stock on the OTCQB Marketplace became NUVR. 

·On July 31, 2018, the Company announced that it had completed its acquisition of Scott-Rice from Zayo for approximately $42 million in cash. Scott-Rice provides voice, video and internet services with more than 18,000 connections, serving the communities of Prior Lake, Savage, Elko and New Market, Minnesota. The combined Nuvera-Scott-Rice company will have approximately 66,000 connections. Nuvera financed the acquisition with its principal lender, CoBank. Further information regarding the CoBank loan terms and amounts can be found on the Company’s 8-K filed with the SEC on August 3, 2018.

·On November 24, 2017 the DEED announced Nuvera as one of the companies that will receive state grants for broadband development. Nuvera received two of the thirty-nine grants announced by Lieutenant Governor Tina Smith. A total of $26.4 million was awarded by the DEED with the aim of providing reliable, affordable high-speed internet to nearly 10,000 households, more than 2,000 businesses and more than 60 community institutions throughout the state. Nuvera will receive $736,598 of the $1,727,998, or 42.6%, of the total project costs to build fiber connections to homes and businesses in the rural areas of Hanska and White Rock, Minnesota. Construction on the projects began in the summer of 2018. Grant funds will be received by Nuvera as work progresses and costs are provided to the DEED. As of September 30, 2018, we have not yet received any funds on these projects.

·On January 12, 2017 the DEED announced Nuvera as one of the companies that will receive state grants for broadband development. Nuvera received three of the forty-two grants announced by Lieutenant Governor Tina Smith. A total of $34 million was awarded by the DEED with the aim of providing reliable, affordable high-speed internet to more than 16,000 households, more than 2,000 businesses and more than 70 community institutions throughout the state. Nuvera will receive $850,486 of the $1,889,968, or 45%, of the total project costs to build fiber connections to homes and businesses in the rural areas of Hanska and Mazeppa and in and around Bellechester. Construction on one of the projects began in the spring of 2017 and the construction on the other two projects began in the summer of 2017. Grant funds will be received by Nuvera as work progresses and costs are provided to the DEED. At September 30, 2018, we have received $374,543 from this grant. These projects were completed and final documentation was provided to the DEED office in October 2018. We expect to receive the final grant funds from the state in the fourth quarter of 2018.

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·Net income for the third quarter of 2018 totaled $3,425,263 which was a $2,009,254, or 141.90% increase compared to the third quarter of 2017. This increase was primarily due to the receipt of additional A-CAM funding and the acquisition of Scott-Rice.

·Revenue for the third quarter of 2018 totaled $17,213,747, which was a $5,363,714 or 45.26% increase compared to the third quarter of 2017. This increase was primarily due to the receipt of additional A-CAM funding and the acquisition of Scott-Rice.

Business Trends

Included below is a synopsis of business trends management believes will continue to affect our business in 2018. 

Voice and switched access revenues are expected to continue to be adversely impacted by future declines in access lines due to competition in the telecommunications industry from cable television providers (CATV), Voice over Internet Protocol (VoIP) providers, wireless, other competitors and emerging technologies. As we experience access line losses, our switched access revenue will continue to decline consistent with industry-wide trends. A combination of changing minutes of use, carriers optimizing their network costs and lower demand for dedicated lines may affect our future voice and switched access revenues. Without the acquisition of Scott-Rice, access line losses would have totaled 1,376 or 6.28% for the twelve months ended September 30, 2018 due to the reasons mentioned above. With the acquisition of Scott-Rice, access lines increased 5,451 or 24.88% for the twelve months ended September 30, 2018. 

The expansion of our state-of-the-art; fiber-rich communications network, growth in broadband customer sales along with continued migration to higher connectivity speeds and the sales of Internet value-added services such as on-line data backup, and hosted and managed service solutions are expected to continue to offset the revenue declines from the access line trends discussed above.

To be competitive, we continue to emphasize the bundling of our products and services. Our customers have the option to bundle local phone, high-speed Internet, long distance and video services. These bundles provide our customers with one convenient location to obtain all of their communications and entertainment options, a convenient billing solution and bundle discounts. We believe that product bundles positively impact our customer retention, and the associated discounts provide our customers the best value for their communications and entertainment options. We have a state-of-the-art, fiber-rich broadband network, which, along with the bundling of our voice, Internet and video services allows us to meet customer demands for products and services. We continue to focus on the research and deployment of advanced technological products that include broadband services, wireless services, private line, VoIP, digital video, IPTV and hosted and managed services.

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We continue to evaluate our operating structure to identify opportunities for increased operational efficiencies and effectiveness. This involves evaluating opportunities for task automation, network efficiency and the balancing of our workforce based on the current needs of our customers.

Financial results for the Telecom Segment are included below:

Telecom Segment
	Three Months Ended September 30,
	2018		2017		Increase (Decrease)
Operating Revenues
Local Service	$	1,743,631	$	1,463,734	$	279,897	19.12%
Network Access		1,810,625		1,809,143		1,482	0.08%
Video		3,008,856		2,444,849		564,007	23.07%
Data		4,466,224		2,992,250		1,473,974	49.26%
A-CAM/FUSF		5,035,669		1,961,457		3,074,212	156.73%
Other Non-Regulated		1,148,742		1,178,600		(29,858)	-2.53%
Total Operating Revenues		17,213,747		11,850,033		5,363,714	45.26%
Cost of Services, Excluding Depreciation    and Amortization		6,114,477		5,177,737		936,740	18.09%
Selling, General and Administrative		3,066,792		1,660,991		1,405,801	84.64%
Depreciation and Amortization Expenses		2,752,813		2,414,445		338,368	14.01%
Total Operating Expenses		11,934,082		9,253,173		2,680,909	28.97%
Operating Income	$	5,279,665	$	2,596,860	$	2,682,805	103.31%
Net Income	$	3,425,263	$	1,416,009	$	2,009,254	141.90%
Capital Expenditures	$	1,643,617	$	1,583,945	$	59,672	3.77%

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Telecom Segment
	Nine Months Ended September 30,
	2018		2017		Increase (Decrease)
Operating Revenues
Local Service	$	4,440,861	$	4,422,480	$	18,381	0.42%
Network Access		5,106,277		5,197,332		(91,055)	-1.75%
Video		8,022,361		7,234,486		787,875	10.89%
Data		10,777,986		9,083,545		1,694,441	18.65%
A-CAM/FUSF		8,943,099		6,011,779		2,931,320	48.76%
Other		3,244,790		3,245,532		(742)	-0.02%
Total Operating Revenues		40,535,374		35,195,154		5,340,220	15.17%
Cost of Services, Excluding Depreciation     and Amortization		16,880,908		15,421,883		1,459,025	9.46%
Selling, General and Administrative		7,228,638		5,346,808		1,881,830	35.20%
Depreciation and Amortization Expenses		7,289,015		7,281,747		7,268	0.10%
Total Operating Expenses		31,398,561		28,050,438		3,348,123	11.94%
Operating Income	$	9,136,813	$	7,144,716	$	1,992,097	27.88%
Net Income	$	6,255,293	$	4,043,337	$	2,211,956	54.71%
Capital Expenditures	$	4,647,162	$	3,257,853	$	1,389,309	42.64%
Key metrics
Access Lines		27,364		21,913		5,451	24.88%
Video Customers		12,372		10,357		2,015	19.46%
Broadband Customers		25,694		16,236		9,458	58.25%

Revenue

Local Service – We receive recurring revenue for basic local services that enable customers to make and receive telephone calls within a defined local calling area for a flat monthly fee. In addition to subscribing to basic local telephone services, our customers may choose from a variety of custom calling features such as call waiting, call forwarding, caller identification and voicemail. Local service revenue was $1,743,631, which is $279,897 or 19.12% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $4,440,861, which is $18,381 or 0.42% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due the acquisition of Scott-Rice.

Without the acquisition of Scott-Rice, the number of access lines we serve as a company have been decreasing, which is consistent with a general industry trend, as customers are increasingly utilizing other technologies, such as wireless phones and IP services. To help offset declines in local service revenue, we implemented an overall strategy that continues to focus on selling a competitive bundle of services. Our focus on marketing competitive service bundles to our customers creates value for the customer and aids in the retention of our voice lines. 

Network Access – We provide access services to other telecommunications carriers for the use of our facilities to terminate or originate traffic on our network. Additionally, we bill SLCs to substantially all of our customers for access to the public switched network. These monthly SLCs are regulated and approved by the FCC. In addition, network access revenue was derived from several federally administered pooling arrangements designed to provide network support and distribute funding to ILECs. Network access revenue was $1,810,625, which is $1,482 or 0.08% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017. This increase for the three months ended September 30, 2018 was primarily due to the acquisition of Scott-Rice, partially offset by lower minutes of use on our network. Network access revenue was $5,106,277, which is $91,055 or 1.75% lower in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. This decrease for the nine months ended September 30, 2018 was primarily due to lower minutes of use on our network, partially offset by increased revenues from the acquisition of Scott-Rice.  

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In recent years, IXCs and others have become more aggressive in disputing both interstate carrier access charges and the applicability of access charges to their network traffic. We believe that long distance and other communication providers will continue to challenge the applicability of access charges either before the FCC or directly with the LECs. We cannot predict the likelihood of future claims and cannot estimate the impact.

Video – We receive monthly recurring revenue from our subscribers for providing commercial TV programming in competition with local CATV, satellite dish TV and off-air TV service providers. We serve twenty-two communities with our IPTV services and five communities with our CATV services. Video revenue was $3,008,856, which is $564,007 or 23.07% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $8,022,361, which is $787,875 or 10.89% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due to the acquisition of Scott-Rice and a combination of rate increases introduced into several of our markets over the course of the last several years.

Data – We provide high speed Internet to business and residential customers. Our revenue is earned based on the offering of various flat rate packages based on the level of service, data speeds and features. We also provide e-mail and managed services, such as web hosting and design, on-line file back up and on-line file storage. Data revenue was $4,466,224, which is $1,473,974 or 49.26% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $10,777,986, which is $1,694,441 or 18.65% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due the acquisition of Scott-Rice and an increase in data customers. We expect continued growth in this area will be driven by expansion of service areas, our aggressive packaging of service bundles and marketing managed service solutions to businesses.

A-CAM/FUSF – Prior to 2017, the Company received support from the FUSF based on the pooling and redistribution of revenues based on a company’s actual or average costs. With the acquisition of Scott-Rice, the company now receives FUSF for Scott-Rice based on their average costs. See Note 2 – “Revenue Recognition” for a discussion regarding FUSF.

From January 1, 2017 through July 31, 2018, we did not receive support from the FUSF, but have instead, elected to receive support based on the A-CAM. With the acquisition of Scott-Rice, the company now receives FUSF for Scott-Rice based on their average costs. The remainder of the Company receives A-CAM support. See Note 2 – “Revenue Recognition” for a discussion regarding the A-CAM. A-CAM/FUSF support totaled $5,035,669, which is $3,074,212 or 156.73% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017. A-CAM/FUSF support totaled $8,943,099, which is $2,931,320 or 48.76% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due to the receipt of additional A-CAM funds.

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Other Revenue – Our customers are billed for toll and long-distance services on either a per call or flat-rate basis. This also includes the offering of directory assistance, operator service and long distance private lines. We also generate revenue from directory publishing, sales and service of CPE, bill processing and other customer services. Our directory publishing revenue in our telephone directories recurs monthly. We also provide retail sales and service of cellular phones and accessories through Telespire, a national wireless provider. We resell these wireless services as Nuvera Wireless, our branded product. We receive both recurring revenue for our wireless services, as well as revenue collected for the sales of wireless phones and accessories. Other revenue was $1,148,742, which is $29,858 or 2.53% lower in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $3,244,790, which is $742 or 0.02% lower in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These decreases were primarily due to decreases in the sales and installation of CPE, partially offset by increases in the sales of wireless services and the acquisition of Scott-Rice.    

Cost of Services (excluding Depreciation and Amortization)

Cost of services (excluding depreciation and amortization) was $6,114,477, which is $936,740 or 18.09% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $16,880,908, which is $1,459,025 or 9.46% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due to the acquisition of Scott-Rice, higher programming costs from video content providers and higher costs associated with increased maintenance and support agreements on our equipment and software.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $3,066,792, which is $1,405,801 or 86.64% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $7,228,638, which is $1,881,830 or 35.2% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due to one-time charges associated with the acquisition of Scott-Rice.  

Depreciation and Amortization

Depreciation and amortization was $2,752,813, which is $338,368 or 14.01% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $7,289,015, which is $7,268 or 0.10% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due to the acquisition of Scott-Rice assets and increases in our broadband property, plant and equipment, reflecting our continual investment in technology and infrastructure in order to meet our customers’ demands for products and services.      

Operating Income

Operating income was $5,279,665, which is $2,682,805 or 103.31% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017. Operating income was $9,136,813, which is $1,992,097 or 27.88% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due to an increase in revenues, partially offset by an increase in expenses, all of which are described above.  

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See Consolidated Statements of Income on Page 3 (for discussion below)

Other Income (Expense) and Interest Expense 

Interest expense was $744,177, which is $455,919 or 158.16% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $1,317,116, which is $407,092 or 44.73% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due to higher outstanding debt balances associated with the new loan we obtained to finance the Scott-Rice acquisition.     

Interest and dividend income was $55,284, which is $33,001 or 148.10% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $196,801, which is $101,400 or 106.29% higher in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. These increases were primarily due to an increase in dividend income earned on our investments and increased interest income earned on our increased cash balances.

Other income for the nine months ended September 30, 2018 and 2017 included a patronage credit earned with CoBank as a result of our debt agreements with them. The patronage credit allocated and received in March 2018 was $290,895, compared to $337,137 allocated and received in March 2017. CoBank determines and pays the patronage credit annually, generally in the first quarter of the calendar year, based on its results from the prior year. In addition to its annual allocation, CoBank also paid a cash patronage of $53,136, which was distributed on September 14, 2018. CoBank cited the change in the federal tax rates from the federal tax reform legislation passed at the end 2017 as the reason for the additional payout in 2018. We record these patronage credits as income when they are received.

Other investment income was $92,544, which is $1,082 or 1.16% lower in the three months ended September 30, 2018 compared to the three months ended September 30, 2017 and was $237,765, which is $17,977 or 7.03% lower in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. Other investment income is primarily from our equity ownership in several partnerships and limited liability companies.

Income Taxes

Income tax expense was $1,332,034, which is $306,652 or 29.91% higher in the three months ended September 30, 2018 compared to the three months ended September 30, 2017. This increase was primarily due to the receipt of additional A-CAM funds and the acquisition of Scott-Rice, partially offset by lower federal tax rates associated with the 2017 Tax Cuts and Jobs Act tax reform legislation enacted on December 22, 2017. Income tax expense was $2,432,604, which is $495,333 or 16.92% lower in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. This decrease was primarily due to the lower federal tax rates associated with the 2017 Tax Cuts and Jobs tax reform legislation enacted on December 22, 2017, partially offset by the receipt of additional A-CAM funds and the acquisition of Scott-Rice. The effective income tax rate for the nine months ending September 30, 2018 and 2017 was approximately 28.0% and 42.0%, respectively. The effective income tax rate differs from the federal statutory income tax rate primarily due to state income taxes and other permanent differences.

36

Liquidity and Capital Resources

Capital Structure

Nuvera’s total capital structure (long-term and short-term debt obligations, net of unamortized loan fees plus stockholders’ equity) was $137,070,813 at September 30, 2018, reflecting 53.4% equity and 46.6% debt. This compares to a capital structure of $95,787,020 at December 31, 2017, reflecting 71.5% equity and 28.5% debt. In the telecommunications industry, debt financing is most often based on operating cash flows. Specifically, our current use of our credit facilities is in a ratio of approximately 2.84 times debt to EBITDA (as defined in the loan documents), which is well within acceptable limits for our agreements and our industry. Our management believes adequate operating cash flows and other internal and external resources, such as our cash on hand and revolving credit facility, are available to finance ongoing operating requirements, including capital expenditures, business development, debt service, temporary financing of trade accounts receivable and dividends.

Liquidity Outlook

Our short-term and long-term liquidity needs arise primarily from (i) capital expenditures; (ii) working capital requirements needed to support the growth of our business; (iii) debt service; (iv) dividend payments on our stock and (v) potential acquisitions.

Our primary sources of liquidity for the nine months ended September 30, 2018 were proceeds from cash generated from operations and cash reserves held at the beginning of the period. At September 30, 2018 we had a working capital deficit of $2,286,406. In addition, at September 30, 2018, we also had approximately $10.0 million available under our revolving credit facility to fund any short-term working capital needs. The decrease in working capital as of September 30, 2018 was primarily the result of utilization of operating cash flows to fund operations, purchase capital equipment in lieu of using our revolving credit facility and servicing debt, partially offset by increased cash balances.

Cash Flows

We expect our liquidity needs to include capital expenditures, payment of interest and principal on our indebtedness, income taxes and dividends. We use our cash inflow to manage the temporary increases in cash demand and utilize our revolving credit facility to manage more significant fluctuations in liquidity caused by growth initiatives.

While it is often difficult for us to predict the impact of general economic conditions on our business, we believe that we will be able to meet our current and long-term cash requirements primarily through our operating cash flows, and anticipate that we will be able to plan for and match future liquidity needs with future internal and available external resources. 

We periodically seek to add growth initiatives by either expanding our network or our markets through organic or internal investments or through strategic acquisitions. We believe we can adjust the timing or the number of our initiatives according to any limitations which may be imposed by our capital structure or sources of financing. At this time, we do not anticipate our capital structure will limit our growth initiatives over the next twelve months.

37

The following table summarizes our cash flow:

	Nine Months Ended September 30,
	2018		2017
Net cash provided by (used in):
Operating activities	$	13,485,116	$	9,982,959
Investing activities		(47,040,815)		(3,252,229)
Financing activities		34,729,234		(5,179,663)
Increase in cash	$	1,173,535	$	1,551,067

Cash Flows from Operating Activities

Cash generated by operations in the first nine months of 2018 was $13,485,116, compared to cash generated by operations of $9,982,959 in the first nine months of 2017. The increase in cash from operating activities in 2018 was primarily due to increased net income from the receipt of additional A-CAM funds. These increases were partially offset by decreases from the timing of the receipts of receivables and prepaid expenses.

Cash generated by operations continues to be our primary source of funding for existing operations, capital expenditures, debt service and dividend payments to stockholders. Cash at September 30, 2018 was $3,015,627 compared to $1,842,092 at December 31, 2017.

Cash Flows Used in Investing Activities

We operate in a capital intensive business. We continue to upgrade our local networks for changes in technology to provide advanced services to our customers.

Cash flows used in investing activities was $47,040,815 for the first nine months of 2018 compared to $3,252,229 for the first nine months of 2017, primarily as a result of the acquisition of Scott-Rice. Capital expenditures relating to on-going operations were $4,647,162 for the nine months ended September 30, 2018 compared to $3,257,853 for the nine months ended September 30, 2017. We expect total plant additions in 2018 to be approximately $7.5 million, net of broadband grants awarded by the State of Minnesota. Our investing expenditures, excluding the Scott-Rice acquisition, are financed with cash flows from our current operations and advances on our line of credit. We believe that our current operations will provide adequate cash flows to fund our plant additions for the remainder of this year; however, funding from our revolving credit facility is available if the timing of our cash flows from operations does not match our cash flow requirements. As of September 30, 2018, we had approximately $10.0 million available under our existing credit facility to fund capital expenditures and other operating needs.

Cash Flows Used in Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2018 was $34,729,234. This included long-term debt repayments of $27,575,000, issuance of long-term debt of $64,550,000, loan origination fees of 487,698 and the distribution of $1,758,068 of dividends to stockholders. Cash used in financing activities for the nine months ended September 30, 2017 was $5,179,663. This included long-term debt repayments of $2,025,000, net payments on our revolving credit facility of $1,634,778 and the distribution of $1,519,885 of dividends to our stockholders.

38

Working Capital

We had a working capital deficit (i.e. current assets minus current liabilities) of $2,286,406 as of September 30, 2018, with current assets of approximately $9.8 million and current liabilities of approximately $12.1 million, compared to a working capital deficit of $1,811,710 as of December 31, 2017. The ratio of current assets to current liabilities was 0.81 and 0.79 as of September 30, 2018 and December 31, 2017. The working capital deficit at September 30, 2018 was primarily the result of the increased current portion of long-term debt, accrued compensation and other accrued liabilities, partially offset by increased cash balances and higher receivable balances at September 30, 2018. These changes were primarily the result of the acquisition of Scott-Rice. In addition, if it becomes necessary, we will have sufficient availability under our revolving credit facility to fund any fluctuations in working capital and other cash needs.

At September 30, 2018 and December 31, 2017 we were in compliance with all stipulated financial ratios in our loan agreements.

Dividends and Restrictions

We declared a quarterly dividend of $.12 per share for the second and third quarters of 2018 and $.10 per share for the first quarter of 2018, which totaled approximately $621,030 per quarter for both the second and third quarters, and $516,007 for the first quarter. We declared a quarterly dividend of $.10 per share for both the second and third quarters of 2017 and $.095 per share for the first quarter of 2017, which totaled $516,007 for the third quarter, $515,636 for the second quarter and $488,242 for the first quarter.

We expect to continue to pay quarterly dividends during 2018, but only if and to the extent declared by our BOD on a quarterly basis and subject to various restrictions on our ability to do so (described below). Dividends on our common stock are not cumulative. 

There are security and loan agreements underlying our current CoBank credit facility that contain restrictions on our distributions to stockholders and investment in, or loans, to others. See below and Note 6 – “Secured Credit Facility” for additional information.

Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends (a) (i) in an amount up to $2,700,000 in any year if our “Total Leverage Ratio,” that is, the ratio of our “Indebtedness” to “EBITDA” (earnings before interest, taxes, depreciation and amortization – as defined in the loan documents) is greater than 2.00 to 1.00, and (ii) in any amount if our Total Leverage Ratio is less than 2.00 to 1.00, and (b) in either case, if we are not in default or potential default under the loan agreements. Our current Total Leverage Ratio at September 30, 2018 is 2.84. 

Our BOD reviews quarterly dividend declarations based on our anticipated earnings, capital requirements and our operating and financial conditions. The cash requirements of our current dividend payment practices are in addition to our other expected cash needs. Should our BOD determine a dividend will be declared, we expect we will have sufficient availability from our current cash flows from operations to fund our existing cash needs and the payment of our dividends. In addition, we expect we will have sufficient availability under our revolving credit facility to fund dividend payments in addition to any fluctuations in working capital and other cash needs.

Long-Term Debt

See Note 6 – “Secured Credit Facility” for information pertaining to our long-term debt.

39

Recent Accounting Developments 

See Note 1 – “Basis of Presentation and Consolidation” for a discussion of recent accounting developments.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for a smaller reporting company.

Item 4. Controls and Procedures

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e) or Rule 15d-15(e), as of the end of the period subject to this Report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

As of the end of the period covered by this Quarterly Report on Form 10-Q (the Evaluation Date), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of the end of the period covered by this Quarterly Report, that our disclosure controls and procedures ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. 

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Other than the litigation incidental to our business, there are no pending material legal proceedings to which we are a party or to which any of our property is subject. 

Item 1A. Risk Factors.

Not required for a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

40

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit

Number           Description

31.1                 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2                 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1                 Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2                 Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS          XBRL Instance Document

101.SCH        XBRL Taxonomy Extension Schema Document

101.CAL        XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF         XBRL Taxonomy Extension Definition Linkbase Document

101.LAB         XBRL Taxonomy Extension Label Linkbase Document

101.PRE        XBRL Taxonomy Extension Presentation Linkbase Document

41

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	NUVERA COMMUNICATIONS, INC.
Dated:  November 14, 2018		By   /s/ Bill D. Otis
		Bill D. Otis, President and Chief Executive Officer
Dated:  November 14, 2018		By   /s/ Curtis O. Kawlewski
		Curtis O. Kawlewski, Chief Financial Officer

42

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER UNDER RULE 13a-14(a) ADOPTED

 PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bill D. Otis, President and Chief Executive Officer of Nuvera Communications, Inc., certify that:

1.      I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2018 of Nuvera Communications, Inc.;

2.      Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.      Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.      The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

               a)          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

               b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

               c)          Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

               d)          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent functions):

               a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

               b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 14, 2018	By	/s/ Bill D. Otis
		Bill D. Otis
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER UNDER RULE 13a-14(a) ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Curtis O. Kawlewski, Chief Financial Officer of Nuvera Communications, Inc., certify that:

1.     I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2018 of Nuvera Communications, Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

                   a)      Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

                   b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

                   c)      Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

                   d)      Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

                   a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

                   b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2018	/s/ Curtis O. Kawlewski
	Curtis O. Kawlewski
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

UNDER 18 U.S.C. SECTION 1350

PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Nuvera Communications, Inc. on Form 10-Q for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bill D. Otis, President and Chief Executive Officer of the Company, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Nuvera Communications, Inc.

Date: November 14, 2018	/s/ Bill D. Otis
	Bill D. Otis
	President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

UNDER 18 U.S.C. 1350

PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Nuvera Communications, Inc. on Form 10-Q for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Curtis O. Kawlewski, Chief Financial Officer of the Company, hereby certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ,that, to my knowledge:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Nuvera Communications, Inc.

Date: November 14, 2018	/s/ Curtis O. Kawlewski
	Curtis O. Kawlewski
	Chief Financial Officer

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 14, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	NUVERA COMMUNICATIONS, INC.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		5,175,258
Amendment Flag	false
Entity Central Index Key	0000071557
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false

XML

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
OPERATING REVENUES:
Operating Revenues	$ 17,213,747	$ 11,850,033	$ 40,535,374	$ 35,195,154
OPERATING EXPENSES:
Cost of Other Nonregulated Services	581,184	592,393	1,681,489	1,600,113
Depreciation and Amortization	2,752,813	2,414,445	7,289,015	7,281,747
Selling, General and Administrative	3,066,792	1,660,991	7,228,638	5,346,808
Total Operating Expenses	11,934,082	9,253,173	31,398,561	28,050,438
OPERATING INCOME	5,279,665	2,596,860	9,136,813	7,144,716
OTHER (EXPENSE) INCOME
Interest Expense	(744,177)	(288,258)	(1,317,116)	(910,024)
Interest/Dividend Income	55,284	22,283	196,801	95,401
Interest During Construction	20,845	16,880	89,603	48,302
CoBank Patronage Dividends	53,136		344,031	337,137
Other Investment Income	92,544	93,626	237,765	255,742
Total Other Income (Expense)	(522,368)	(155,469)	(448,916)	(173,442)
INCOME BEFORE INCOME TAXES	4,757,297	2,441,391	8,687,897	6,971,274
INCOME TAXES	1,332,034	1,025,382	2,432,604	2,927,937
NET INCOME	$ 3,425,263	$ 1,416,009	$ 6,255,293	$ 4,043,337
BASIC AND DILUTED
NET INCOME PER SHARE (in Dollars per share)	$ 0.66	$ 0.27	$ 1.21	$ 0.78
DIVIDENDS PER SHARE (in Dollars per share)	$ 0.1200	$ 0.1000	$ 0.3400	$ 0.2950
WEIGHTED AVERAGE SHARES OUTSTANDING (in Shares)	5,175,258	5,158,830	5,169,441	5,151,417
Service [Member]
OPERATING REVENUES:
Operating Revenues	$ 1,743,631	$ 1,463,734	$ 4,440,861	$ 4,422,480
Network Access [Member]
OPERATING REVENUES:
Operating Revenues	1,810,625	1,809,143	5,106,277	5,197,332
Video [Member]
OPERATING REVENUES:
Operating Revenues	3,008,856	2,444,849	8,022,361	7,234,486
OPERATING EXPENSES:
Cost	2,484,591	2,009,678	6,913,294	6,110,767
Data [Member]
OPERATING REVENUES:
Operating Revenues	4,466,224	2,992,250	10,777,986	9,083,545
OPERATING EXPENSES:
Cost	614,477	566,843	1,750,985	1,665,019
A-CAM/FUSF [Member]
OPERATING REVENUES:
Operating Revenues	5,035,669	1,961,457	8,943,099	6,011,779
Other Non Regulated [Member]
OPERATING REVENUES:
Operating Revenues	1,148,742	1,178,600	3,244,790	3,245,532
Plant Operations [Member]
OPERATING EXPENSES:
Cost	$ 2,434,225	$ 2,008,823	$ 6,535,140	$ 6,045,984

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Net Income	$ 3,425,263	$ 1,416,009	$ 6,255,293	$ 4,043,337
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on Interest Rate Swaps	(79,696)	(1,256)	(107,874)	41,672
Income Tax Benefit (Expense) Related to Unrealized Gains (Losses) on Interest Rate Swaps	22,745	508	30,788	(16,865)
Other Comprehensive Income (Loss):	(56,951)	(748)	(77,086)	24,807
Comprehensive Income	$ 3,368,312	$ 1,415,261	$ 6,178,207	$ 4,068,144

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
CURRENT ASSETS:
Cash	$ 3,015,627	$ 1,842,092
Receivables, Net of Allowance for Doubtful Accounts of $105,000 and $83,000	3,475,214	1,944,501
Materials, Supplies, and Inventories	2,308,351	2,075,199
Financial Derivative Instruments		28,178
Prepaid Expenses	1,036,747	823,310
Total Current Assets	9,835,939	6,713,280
INVESTMENTS & OTHER ASSETS:
Goodwill	54,741,153	39,805,349
Intangibles	30,884,245	16,257,156
Other Investments	7,823,168	7,521,389
Deferred Charges and Other Assets	17,176	52,596
Total Investments and Other Assets	93,465,742	63,636,490
PROPERTY, PLANT & EQUIPMENT:
Telecommunications Plant	141,687,386	127,634,435
Other Property & Equipment	19,723,689	17,750,364
Video Plant	10,506,495	10,440,379
Total Property, Plant and Equipment	171,917,570	155,825,178
Less Accumulated Depreciation	118,887,384	113,875,345
Net Property, Plant & Equipment	53,030,186	41,949,833
TOTAL ASSETS	156,331,867	112,299,603
CURRENT LIABILITIES:
Current Portion of Long-Term Debt, Net of Unamortized Loan Fees	5,664,444	3,315,822
Accounts Payable	2,114,947	2,079,470
Accrued Income Taxes	738,049	676,508
Other Accrued Taxes	288,829	166,249
Deferred Compensation	55,705	57,216
Accrued Compensation	2,344,884	1,825,761
Other Accrued Liabilities	915,487	403,964
Total Current Liabilities	12,122,345	8,524,990
LONG-TERM DEBT, Net of Unamortized Loan Fees	58,212,091	24,022,465
NONCURRENT LIABILITIES:
Loan Guarantees	131,451	158,043
Deferred Income Taxes	11,755,622	10,318,689
Other Accrued Liabilities	245,551	194,458
Financial Derivative Instruments	79,696
Deferred Compensation	590,833	632,225
Total Noncurrent Liabilities	12,803,153	11,303,415
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' EQUITY:
Preferred Stock - $1.66 Par Value, 10,000,000 Shares Authorized, None Issued
Common Stock - $1.66 Par Value, 90,000,000 Shares Authorized, 5,175,258 and 5,160,065 Shares Issued and Outstanding	8,625,430	8,600,108
Accumulated Other Comprehensive Income	(56,951)	20,135
Unearned Compensation	68,406	13,620
Retained Earnings	64,557,393	59,814,870
Total Stockholders' Equity	73,194,278	68,448,733
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 156,331,867	$ 112,299,603

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parentheticals) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Allowance for Doubtful Accounts (in Dollars)	$ 105,000	$ 83,000
Preferred stock par value (in Dollars per share)	$ 1.66	$ 1.66
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Common stock par value (in Dollars per share)	$ 1.66	$ 1.66
Common stock, shares authorized	90,000,000	90,000,000
Common stock, shares issued	5,175,258	5,160,065
Common stock, shares outstanding	5,175,258	5,160,065

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$ 6,255,293	$ 4,043,337
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization	7,339,962	7,326,131
Undistributed Earnings of Other Equity Investments	(198,886)	(168,797)
Noncash Patronage Refund	(76,485)	(105,145)
Distributions from Equity Investments	200,000	400,000
Stock Issued in Lieu of Cash Payment	206,220	147,351
Stock-based Compensation	54,786	5,448
Changes in Assets and Liabilities:
Receivables	(1,205,378)	(38,201)
Income Taxes Receivable		(541,087)
Inventories	196,585	(53,379)
Prepaid Expenses	(85,150)	183,667
Deferred Charges	23,000	10,753
Accounts Payable	(85,501)	(998,611)
Accrued Income Taxes	61,541
Other Accrued Taxes	104,146	(44,738)
Other Accrued Liabilities	737,886	(129,999)
Deferred Compensation	(42,903)	(53,771)
Net Cash Provided by Operating Activities	13,485,116	9,982,959
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant, and Equipment, Net	(4,647,162)	(3,257,853)
Grants Received for Construction of Plant	323,319	108,624
Purchase of Intangible	(283,689)
Purchase of Scott Rice Telephone Co., Net of Cash Acquired	(42,180,283)
Other, Net	(253,000)	(103,000)
Net Cash Used in Investing Activities	(47,040,815)	(3,252,229)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments of Long-Term Debt	(27,575,000)	(2,025,000)
Issuance of Long-Term Debt	64,550,000
Loan Origination Fees	(487,698)
Changes in Revolving Credit Facility		(1,634,778)
Dividends Paid	(1,758,068)	(1,519,885)
Net Cash Provided by (Used in) Financing Activities	34,729,234	(5,179,663)
NET INCREASE IN CASH	1,173,535	1,551,067
CASH at Beginning of Period	1,842,092	616,114
CASH at End of Period	3,015,627	2,167,181
Supplemental cash flow information:
Cash paid for interest	1,153,798	897,301
Net cash paid for income taxes	$ 2,371,000	$ 3,469,100

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS` EQUITY (Unaudited) - USD ($)	Common Stock [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Unearned Compensation [Member]	Total
BALANCE at Dec. 31, 2016	$ 8,565,625	$ (13,580)	$ 51,706,451		$ 60,258,496
BALANCE (in Shares) at Dec. 31, 2016	5,139,375
Director's Stock Plan	$ 21,113		128,840		149,953
Director's Stock Plan (in Shares)	12,668
Employee Stock Plan	$ 13,370		61,235		74,605
Employee Stock Plan (in Shares)	8,022
Restricted Stock Grants				$ 13,620	13,620
Net Income			9,954,236		9,954,236
Dividends			(2,035,892)		(2,035,892)
Unrealized Gain (Loss) on Interest Rate Swap		33,715			33,715
BALANCE at Dec. 31, 2017	$ 8,600,108	20,135	59,814,870	13,620	68,448,733
BALANCE (in Shares) at Dec. 31, 2017	5,160,065
Director's Stock Plan	$ 18,307		181,602		199,909
Director's Stock Plan (in Shares)	10,984
Employee Stock Plan	$ 7,015		63,696		70,711
Employee Stock Plan (in Shares)	4,209
Restricted Stock Grants				54,786	54,786
Net Income			6,255,293		6,255,293
Dividends			(1,758,068)		(1,758,068)
Unrealized Gain (Loss) on Interest Rate Swap		(77,086)			(77,086)
BALANCE at Sep. 30, 2018	$ 8,625,430	$ (56,951)	$ 64,557,393	$ 68,406	$ 73,194,278
BALANCE (in Shares) at Sep. 30, 2018	5,175,258

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Basis of Presentation and Consolidation

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

Note 1 – Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements of Nuvera Communications, Inc. and its subsidiaries (Nuvera) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, rules and regulations of the Securities and Exchange Commission (SEC) and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring accruals) considered necessary for the fair presentation of the financial statements and present fairly the results of operations, financial position and cash flows for the interim periods presented as required by Regulation S-X, Rule 10-01. These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2017.

The preparation of our financial statements requires our management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. Actual results may differ from these estimates. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period.

Our consolidated financial statements report the financial condition and results of operations for Nuvera and its subsidiaries in one business segment: the Telecom Segment. Inter-company transactions have been eliminated from the consolidated financial statements.

Revenue Recognition

See Note 2 – “Revenue Recognition” for a discussion of our revenue recognition policies.

Cost of Services (excluding depreciation and amortization)

Cost of services includes all costs related to delivery of communication services and products. These operating costs include all costs of performing services and providing related products including engineering, network monitoring and transport cost.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include direct and indirect selling expenses, customer service, billing and collections, advertising and all other general and administrative costs associated with the operations of the business.

Depreciation and Amortization Expense

We use the group life method (mass asset accounting) to depreciate the assets of our telephone companies. Telephone plant acquired in a given year is grouped into similar categories and depreciated over the remaining estimated useful life of the group. When an asset is retired, both the asset and the accumulated depreciation associated with that asset are removed from the books. Due to rapid changes in technology, selecting the estimated economic life of telecommunications plant and equipment requires a significant amount of judgment. We periodically review data on expected utilization of new equipment, asset retirement activity and net salvage values to determine adjustments to our depreciation rates. Depreciation expense was $5,332,415 and $5,429,935 for the nine months ended September 30, 2018 and 2017. We amortize our definite-lived intangible assets over their estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment.

Income Taxes

The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Significant components of our deferred taxes arise from differences (i) in the basis of property, plant and equipment due to the use of accelerated depreciation methods for tax purposes, as well as (ii) in partnership investments and intangible assets due to the difference between book and tax basis. Our effective income tax rate is normally higher than the United States tax rate due to state income taxes and permanent differences. 

We account for income taxes in accordance with GAAP, which requires an asset and liability approach to financial accounting and reporting for income taxes. As required by GAAP, we recognize the financial statement benefit of tax positions only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

As of September 30, 2018 and December 31, 2017 we had no unrecognized tax benefits.    

We are primarily subject to United States, Minnesota, Iowa, Nebraska, Wisconsin and North Dakota income taxes. Tax years subsequent to 2013 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. As of September 30, 2018 and December 31, 2017 we had no interest or penalties accrued that related to income tax matters.

On December 22, 2017, the President of the United States signed into law, the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant changes in United States tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the United States corporate tax rate from 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the 21% rate in the 4^th quarter of 2017.

Recent Accounting Developments

In August, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2017-12 (ASU 2017-12), “Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends current guidance on accounting for hedges mainly to align more closely an entity’s risk management activities and financial reporting relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. In addition, amendments in ASU 2017-12 simplify the application of hedge accounting by allowing more time to prepare hedge documentation and allowing effectiveness assessments to be performed on a qualitative basis after hedge inception. The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We plan to adopt ASU 2017-12 as of January 1, 2019 and are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures.

In May 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting.” ASU 2017-09 clarifies the modification accounting guidance for stock compensation included in Topic 718, “Compensation – Stock Compensation.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award must be accounted for as a modification under Topic 718. The new guidance is effective prospectively for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We adopted this update effective January 1, 2018 and are applying this guidance to applicable transactions.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and other (Topic 350).” ASU 2017-04 simplifies the accounting for goodwill impairment and removes Step 2 of the goodwill impairment test. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value limited to the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. The amendments in this update should be applied on a prospective basis. ASU 2017-04 is effective for the Company beginning January 1, 2021. Early adoption is permitted. Management is evaluating the impact the adoption of ASU 2017-04 will have on the Company’s financial statements (if any).

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requires additional disclosures relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances. Nuvera is required to adopt ASU 2016-13 on January 1, 2020. Early adoption as of January 1, 2019 is permitted. We are evaluating the effects that adoption of ASU 2016-13 will have on our financial position, results of operations and disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. This change will result in an increase to recorded assets and liabilities on lessees’ financial statements, as well as changes in the categorization of rental costs, from rent expense to interest and depreciation expense. Other effects may occur depending on the types of leases and the specific terms of them utilized by particular lessees. The ASU is effective for the Company on January 1, 2019, and early application is permitted. Modified retrospective application is required. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.  

We have reviewed all other significant newly issued accounting pronouncements and determined that they are either not applicable to our business or that no material effect is expected on our financial position and results of operations.

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Revenue Recognition

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

Note 2 – Revenue Recognition

Change in Accounting Policy

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606) (Accounting Standards Codification (ASC) 606),” which is a comprehensive revenue recognition standard that supersedes nearly all existing revenue recognition guidance under GAAP. ASU 2014-09 provides a single principles-based, five-step model to be applied to all contracts with customers, which steps are to (1) identify the contact(s) with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when each performance obligation is satisfied. As amended, the new standard was effective for the Company on January 1, 2018, using either a retrospective basis or a modified retrospective basis with early adoption permitted. 

We adopted ASU 2014-09 as of January 1, 2018 using the modified retrospective method for open contracts. Under this transition method, the accounting change is applied to the current period with a cumulative effect adjustment recorded to opening retained earnings. Previously reported results will not be restated under this transition method. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting practices under ASC 605 (legacy GAAP). The adoption of ASU 2014-09 did not have a material impact to our systems, processes, internal controls or our financial position and results of operations. In addition, the Company did not have any material cumulative-effect adjustments that would have affected its January 1, 2018 assets, liabilities or retained earnings. The adoption of this new standard by the Company did result in additional disclosures around the nature and timing of the Company’s performance obligations, deferred revenue contract liabilities, deferred contract cost assets, as well as significant judgements and practical expedients used by the Company in applying the new five-step revenue model.  

Our revenue contracts with customers may include a promise or promises to deliver services such as broadband, video or voice services. Promised services are considered distinct as the customer can benefit from the services either on their own or together with other resources that are readily available to the customer and the Company’s promise to transfer service to the customer is separately identifiable from other promises in the contract. The Company accounts for services as separate performance obligations. Each service is considered a single performance obligation as it is providing a series of distinct services that are substantially the same and have the same pattern of transfer.

The transaction price is determined at contract inception and reflects the amount of consideration to which we expect to be entitled in exchange for transferring service to the customer. This amount is generally equal to the market price of the services promised in the contract and may include promotional discounts. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees. Conversely, nonrefundable up-front fees, such as service activation and set-up fees, which are immaterial to our overall revenues, are included in the transaction price. In determining the transaction price, we consider our enforceable rights and obligations within the contract. We do not consider the possibility of a contract being cancelled, renewed or modified, which is consistent with ASC 606-10-32-4.

The transaction price is allocated to each performance obligation based on the standalone selling price of the service, net of the related discount, as applicable.

Revenue is recognized when performance obligations are satisfied by transferring service to the customer as described below.

Significant Judgments

The Company often provides multiple services to a customer. Provision of customer premise equipment (CPE) and additional service tiers may have a significant level of integration and interdependency with the subscription voice, video, Internet, or connectivity services. Judgement is required to determine whether provision of CPE, installation services, and additional service tiers are considered distinct and accounted for separately, or not distinct and accounted for together with the subscription services.

Allocation of the transaction price to the distinct performance obligations in bundled service subscriptions requires judgement. The transaction price for a bundle of services is frequently less than the sum of standalone selling prices of each individual service. Standalone selling prices for the Company’s services are directly observable.

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the quarters ended September 30, 2018 and 2017:

	Three Months Ended September 30,
	2018		2017
Voice services¹	$	1,922,686	$	1,657,758
Network access¹		1,738,866		1,874,287
Video ¹		3,004,767		2,441,209
Data ¹		4,036,071		2,636,745
Directory²		205,789		182,504
Cellular³		129,799		121,765
Other contracted revenue4		513,651		432,138
Other5		317,417		310,988
Revenue from customers		11,869,046		9,657,394
Subsidy and other revenue outside scope of ASC 6066		5,344,701		2,192,639
Total revenue	$	17,213,747	$	11,850,033
¹ Month-to-Month contracts billed and consumed in the same month.
² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.
³ Approximately 90.53% of the revenue in this category is earned through a monthly commission from the network provider for a billing and collecting arrangement with the network provider. We do not receive revenue from the end-user customer, but instead receive a monthly commission from the provider. Other revenue in this category includes phone and equipment sales and represents approximately 0.75% of our total revenue.
4This includes long-term contracts where the revenue is recognized monthly over the term of the contract.
5This includes CPE and other equipment sales.
6This includes governmental subsidies and lease revenue outside the scope of ASC 606.

The following table summarizes revenue from contracts with customers for the nine months ended September 30, 2018 and 2017:

	Nine Months Ended September 30,
	2018		2017
Voice services¹	$	5,005,074	$	4,933,868
Network access¹		5,251,706		5,475,395
Video ¹		8,010,113		7,224,333
Data ¹		9,580,011		7,765,135
Directory²		556,614		539,520
Cellular³		381,478		335,807
Other contracted revenue4		1,411,979		1,518,447
Other5		740,761		682,709
Revenue from customers		30,937,736		28,475,214
Subsidy and other revenue outside scope of ASC 6066		9,597,638		6,719,940
Total revenue	$	40,535,374	$	35,195,154
¹ Month-to-Month contracts billed and consumed in the same month.
² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.
³ Approximately 89.05% of the revenue in this category is earned through a monthly commission from the network provider for a billing and collecting arrangement with the network provider. We do not receive revenue from the end-user customer, but instead receive a monthly commission from the provider. Other revenue in this category include phone and equipment sales and  represents approximately 0.94% of our total revenue.
4This includes long-term contracts where the revenue is recognized monthly over the term of the contract.
5This includes CPE and other equipment sales.
6This includes governmental subsidies and lease revenue outside the scope of ASC 606.

For the three months ended September 30, 2018 and 2017, approximately 67.11% of our total revenue is from month-to-month and other contracted revenue from customers. Approximately 31.05% of our total revenue is from revenue sources outside of the scope of ASC 606. The remaining 1.84% of total revenue is from other sources including CPE and equipment sales and installation.

For the nine months ended September 30, 2018 and 2017, approximately 74.49% of our total revenue is from month-to-month and other contracted revenue from customers. Approximately 23.68% of our total revenue is from revenue sources outside of the scope of ASC 606. The remaining 1.83% of total revenue is from other sources including CPE and equipment sales and installation.

A significant portion of our revenue is derived from customers who may generally cancel their subscriptions at any time without penalty. As such, the amount of revenue related to unsatisfied performance obligations is not necessarily indicative of the future revenue to be recognized from our existing customer base. Revenue from customers with a contractually specified term and non-cancelable service period will be recognized over the term of such contracts, which is generally 3 to 10 years for these types of contracts.

Nature of Services

Revenues are earned from our customers primarily through the connection to our networks, digital and commercial television (TV) programming, Internet services (high-speed broadband), and hosted and managed services. Revenues for these services are billed based on set rates for monthly service or based on the amount of time the customer is utilizing our facilities. The revenue for these services is recognized when the service is rendered.

Revenues earned from interexchange carriers (IXCs) accessing our network are based on the utilization of our network by these carriers as measured by minutes of use on the network or special access to the network by the individual carriers. Revenues are billed at tariffed access rates for both interstate and intrastate calls. Revenues for these services are recognized based on the period the access is provided.

Voice Services – We receive recurring revenue for basic local services that enable end-user customers to make and receive telephone calls within a defined local calling area for a flat monthly fee. In addition to subscribing to basic local telephone services, our customers may choose from a variety of custom calling features such as call waiting, call forwarding, caller identification and voicemail. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

Network Access – We provide access services to other telecommunication carriers for the use of our facilities to terminate or originate long distance calls on our network. Additionally, we bill monthly subscriber line charges (SLCs) to substantially all of our customers for access to the public switched network. These SLCs are regulated and approved by the Federal Communications Commission (FCC). In addition, network access revenue is derived from several federally administered pooling arrangements designed to provide support and distribute funding to us.

Revenues earned from other telecommunication carriers accessing our network are based on the utilization of our network by these carriers as measured by minutes of use on the network or special access to the network by the individual carriers on monthly basis. Revenues are billed at tariffed access rates for both interstate and intrastate calls and are recognized into revenue monthly based on the period the access was provided.

The National Exchange Carriers Association (NECA) pools and redistributes the SLCs to various telecommunication providers through the Connect America Fund (CAF). These revenues are earned and recognized into revenue on a monthly basis. Any adjustments to these amounts received by NECA are adjusted for in revenue upon receipt of the adjustment.

Video – We provide a variety of enhanced video services on a monthly recurring basis to our customers. We also receive monthly recurring revenue from our subscribers for providing commercial TV programming. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

Data – We provide high speed Internet to business and residential customers. Our revenue is earned based on the offering of various flat packages based on the level of service, data speeds and features. We also provide e-mail; web hosting and design, on-line file back up and on-line file storage. Data customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

Directory – Our directory publishing revenue in our telephone directories recurs monthly and is recognized into revenue on a monthly basis. 

Cellular – We provide retail sales and service of cellular phones and accessories through Telespire, a national wireless provider. We resell these wireless services as Nuvera Wireless, our branded product. We receive both recurring revenue for our wireless services, as well as revenue collected for the sale of wireless phones and accessories. The majority of the revenue in this category is earned through a monthly commission from Telespire for a billing and collecting arrangement with Telespire. We do not receive revenue from the end-user customer, but instead receive a monthly commission from Telespire. Other revenue in this category is immaterial to our overall revenues. 

Other Contracted Revenue - Managed services and certain other data customers include fiber-delivered communications and managed information technology solutions to mainly business customers, as well as high-capacity last-mile data connectivity services to wireless and wireline carriers. Services are primarily offered on a subscription basis with a contractually specified and non-cancelable service period. The non-cancelable contract terms for these customers generally range from 3 to 10 years. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized ratably over the contract period as the subscription services are delivered. These services are billed as monthly recurring charges to customers. 

Other – We also generate revenue from the sales, service and installation of CPE and other services. Sales and service of CPE are billed and recognized into revenue once the sale or service is complete or delivered. These sales and services are generally short-term in nature and are completed within one month. Other revenues are immaterial to our total revenues.

Subsidy and Other Revenue outside the Scope of ASC 606 – We receive subsidies from governmental entities to operate and expand our networks. In addition, we have revenue from leasing arrangements. Both of these revenue streams are outside of the scope of ASC 606. 

Interstate access rates are established by a nationwide pooling of companies known as the NECA. The FCC established NECA in 1983 to develop and administer interstate access service rates, terms and conditions. Revenues are pooled and redistributed on the basis of a company's actual or average costs. There has been a change in the composition of interstate access charges in recent years, shifting more of the charges to the end user and reducing the amount of access charges paid by IXC’s. We believe this trend will continue.

Intrastate access rates are filed with state regulatory commissions in Minnesota and Iowa.

From January 1, 2017 through July 31, 2018 we did not receive funding from the Federal Universal Service Fund (FUSF) based on the pooling and redistribution of revenues based on a company's actual or average costs as described above, but instead, elected to receive funding based on the Alternative Connect America Cost Model (A-CAM) as described below.

With the acquisition of Scott-Rice Telephone Company (Scott-Rice) on July 31, 2018, see Note 3 – “Acquisitions and Dispositions,” Nuvera now receives FUSF support for Scott-Rice. The remainder of the Company receives funding from A-CAM as mentioned below. Scott-Rice’s settlements from the pools are based on nationwide average schedules.

A-CAM

The FUSF was established as part of the Telecommunications Act of 1996 and provides subsidies to telecommunications providers as means of increasing the availability and affordability of advanced telecommunications services. In 2011, significant reform was introduced, including the creation of the CAF, to help modernize the FUSF and promote support of these telecom services in the nation’s high cost areas. In 2016, the FCC announced additional reform to further transition the CAF from supporting the provision of voice services to the provision of broadband services. On March 30, 2016, the FCC issued a Report and Order (2016 Order) that adopts the following changes to the FUSF for rate-of-return carriers:

•   Establishes a voluntary cost model;

•   Creates specific broadband deployment obligations;

•   Provides a mechanism for support of broadband-only deployment;

•   Gradually reduces the authorized rate-of-return from 11.25 percent to 9.75 percent;

•   Eliminates support in those local areas served by unsubsidized competitors;

•   Establishes “glide-path” transition periods for all the new changes; and

•   Maintains the $2 billion budget established by the 2011 Transformation Order.

While the 2011 FUSF Transformation Order established CAF Phase I and CAF Phase II as high cost support mechanisms for the price cap carriers (i.e., the larger, national local exchange carriers (LECs) such as Verizon and AT&T), it was not as specific about how subsidies would change for the rate-of-return carriers (i.e., the smaller LECs, including all rural LECs). In contrast, the 2016 Order focused on the rate-of-return carriers, announced specific changes to existing funding mechanisms as well as a new funding mechanism, and provided rural telecommunications providers with greater certainty about future support.

One of the major changes introduced by the 2016 Order was the creation of the A-CAM, a new CAF support mechanism for rate-of-return carriers. Utilization of the A-CAM was voluntary; and rate-of-return carriers may have instead chose to continue relying on the legacy support mechanism known as interstate common line support (ICLS), but then modified and renamed CAF Broadband Loop Support. Each carrier needed to decide which support mechanism to elect, and then choose one or the other, per state.

In our Form 10-Q for the quarter ended September 30, 2016, Nuvera disclosed that we had elected the A-CAM for our Minnesota and Iowa operations, replacing our former ICLS. Nuvera will receive A-CAM support for a period of ten years in exchange for meeting defined broadband build-out requirements. At the time of Nuvera’s election, the FCC had not yet determined the final award numbers. 

Consistent with the stated disclosure in our Form 10-Q, Nuvera notified the FCC that we would continue to elect the A-CAM program. Under the report that accompanied the FCC December 20, 2016 Public Notice, Nuvera would annually receive (i) $391,896 for our Iowa operations and (ii) $6,118,567 for our Minnesota operations. The Company will use the annual $6.5 million that we receive through the A-CAM program to meet our defined broadband build-out obligations. The A-CAM payments will replace the Company’s former ICLS payments.

On May 7, 2018, the FCC issued Public Notice DA 18-465, which contained revised offers of A-CAM support and associated revised service deployment obligations.

On May 23, 2018, the Company’s Board of Directors (BOD) authorized and directed the Company to accept the FCC’s revised offer of A-CAM support and the revised associated service deployment obligations. Under the revised FCC offer Notice, the Company will be entitled to annually receive (i) $489,870 for its Iowa operations, which is a $97,974 increase per year and (ii) $7,648,208 for its Minnesota operations, which is a $1,529,641 increase per year. The Company will use the additional support that it receives through the A-CAM program to continue to meet its defined broadband build-out obligations. A letter of acceptance to elect the revised A-CAM support was filed by the Company with the FCC on May 24, 2018. The FCC accepted the Company’s letter on May 30, 2018. On August 31, 2018 the Company received approximately $3.12 million for the revised A-CAM support. This represented an 18-month true-up for support back to the original election date, and an increased monthly payment representing the new revised A-CAM support offer.

The following table provides information about our receivables, contracts assets and contract liabilities from revenue contracts with our customers:

	January 1, 2018		September 30, 2018		Increase/ (Decrease)
Contract Assets:
Short-term contract assets	$	-	$	-	$	-
Lont-term contract assets	$	-	$	-	$	-
Contract Liabilities:
Short-term contract liabilities	$	93,656	$	334,280	$	240,624	¹
Long-term contract liabilities	$	194,458	$	167,941	$	(26,517)
Receivables:
Receivables accounted for under ASC 606	$	1,431,558	$	2,814,216	$	1,382,658	²
Subsidy Receivables not accounted for under ASC 606	$	542,539	$	678,174	$	135,635	³
¹ The difference is due to the timing of the contract billings and the acquisition of Scott-Rice.
² The increase in accounts receivable is due to the timing of receipts and the acquisition of Scott-Rice.
³The difference is due to the increase in A-CAM funding and the acquisition of Scott-Rice.

Contract Assets

Contract assets arise from costs that are incremental to the acquisition of a contract. Incremental costs are those that result directly from obtaining a contract or costs that would not have been incurred if the contract had not been obtained, which primarily relates to sales commissions. Overall commissions paid to our sales representatives are immaterial based on our current commission structure. Due to the immaterial amount of commissions paid and the fact that most of our customers are billed under month-to-month service agreements that generally have no penalties associated with them if canceled by the customer, the Company has applied the practical expedient that allow customer acquisition costs to be expensed as incurred. 

Contract Liabilities

Short-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the current portion of the deferred revenues that will be recognized monthly within one year. Long-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the portion longer than one year and the corresponding deferred revenues are recognized into revenue on a monthly basis based of the term of the contract.  

Receivables

A receivable is recognized in the period the Company provides goods and services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are generally 30-60 days.

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Acquisitions and Dispositions

9 Months Ended

Sep. 30, 2018

Disclosure Text Block Supplement [Abstract]

Business Acquisition, Integration, Restructuring and Other Related Costs [Text Block]

Note 3 – Acquisitions and Dispositions

Scott-Rice Acquisition

On July 31, 2018, the Company announced that it had completed its acquisition of Scott-Rice from Allstream Business U.S., LLC, an affiliate of Zayo Group Holdings, Inc. (Zayo) for approximately $42 million in cash. Scott-Rice provides phone, video and internet services with more than 18,000 connections, serving the communities of Prior Lake, Savage, Elko and New Market, Minnesota. The combined Nuvera/Scott-Rice Company will have approximately 66,000 connections. Nuvera financed the acquisition with its principal lender, CoBank, ACB (CoBank). Further information regarding the CoBank loan terms and amounts can be found on the Company’s 8-K filed with the SEC on August 3, 2018.

The preliminary allocation of the acquisition value of Scott-Rice is shown below:

Current assets	$	810,927
Property, plant and equipment		12,320,410
Customer relationship intangible		16,300,000
Excess costs over net assets acquired (Goodwill)		14,935,804
Current liabilities		(449,938)
Deferred income taxes		(1,467,719)
Deferred liabilities		(264,813)
Purchase price allocation		42,184,671
Less cash acquired		(4,388)
Total Consideration for Acquisition	$	42,180,283

The acquisition has been accounted for using the acquisition method of accounting in accordance with current standards. As a result, the fair value of the consideration paid, which consists of approximately $42 million in cash, has been allocated to the fair value of the assets and liabilities received. The allocation of the purchase price to Scott-Rice’s assets and liabilities has been based on preliminary estimates of fair values. This allocation is preliminary and further refinements are likely to be made. Criteria have been established in ASC 805, “Business Combinations” for determining whether intangible assets should be recognized separately from goodwill. Based upon our preliminary value allocation, the excess of the purchase price and acquisition costs over the fair value of the net identifiable tangible assets acquired was $31,235,804, which is not deductible for income tax purposes. The Company recorded an intangible asset related to the acquired company’s customer relationships of $16,300,000. The estimated useful life of the customer relationship intangible is 15 years.

The preliminary valuation allocation is subject to change based on the completion of a valuation being conducted by an independent valuation firm and pending operational true-ups related to a working capital true-up.

Pro Forma Financial Information

On July 31, 2018, Nuvera completed the acquisition of Scott-Rice. The following pro forma results presented are for the three months ended September 30, 2018 and 2017, and the nine months ended September 30, 2018 and 2017 as if the acquisition had been completed on January 1, 2017. The Company has provided this pro forma condensed Statement of Income to facilitate analysis of the Statement of Income. The pro forma statements do not reflect any effect of operating efficiencies, cost savings and other benefits anticipated by the Company’s management as a result of the acquisition.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Revenue	$	18,411,062	$	15,779,409	$	49,203,865	$	46,676,925
Net Income	$	3,449,095	$	1,231,510	$	7,144,076	$	3,312,397
Basic and Diluted Net
Income Per Share	$	0.67	$	0.24	$	1.38	$	0.64

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Fair Value Measurements

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 4 – Fair Value Measurements

We have adopted the rules prescribed under GAAP for our financial assets and liabilities. GAAP includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:

         Level 1:   Inputs are quoted prices in active markets for identical assets or liabilities.

         Level 2:   Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs that are derived principally from or corroborated by observable market data.

         Level 3:   Inputs are derived from valuation techniques where one or more significant inputs or value drivers are unobservable.

We use financial derivative instruments to manage our overall cash flow exposure to fluctuations in interest rates. We account for derivative instruments in accordance with GAAP that requires derivative instruments to be recorded on the balance sheet at fair value. Changes in fair value of derivative instruments must be recognized in earnings unless specific hedge accounting criteria are met, in which case, the gains and losses are included in other comprehensive income rather than in earnings.

We have entered into an interest rate swap agreement (IRSA) with our lender, CoBank, to manage our cash flow exposure to fluctuations in interest rates. This instrument is designated as a cash flow hedge and is effective at mitigating the risk of fluctuations on interest rates in the market place. Any gains or losses related to changes in the fair value of this derivative are accounted for as a component of accumulated other comprehensive income (loss) for as long as the hedge remains effective.

The fair value of our IRSA is discussed in Note 7 – “Interest Rate Swaps”. The fair value of our swap agreement was determined based on Level 2 inputs.

Other Financial Instruments

Other Investments - It is difficult to estimate a fair value for equity investments in companies carried on the equity or cost basis due to a lack of quoted market prices. We conducted an evaluation of our investments in all of our companies in connection with the preparation of our audited financial statements at December 31, 2017. We believe the carrying value of our investments is not impaired.

Debt – We estimate the fair value of our long-term debt based on the discounted future cash flows we expect to pay using current rates of borrowing for similar types of debt. Fair value of the debt approximates carrying value.

Other Financial Instruments - Our financial instruments also include cash equivalents, trade accounts receivable and accounts payable where the current carrying amounts approximate fair market value.

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Goodwill and Intangibles

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Note 5 – Goodwill and Intangibles

We account for goodwill and other intangible assets under GAAP. Under GAAP, goodwill and intangible assets with indefinite useful lives are not amortized, but are instead tested for impairment (i) on at least an annual basis and (ii) when changes in circumstances indicate that the fair value of goodwill may be below its carrying value. Our goodwill totaled $54,741,153 and $39,805,349 at September 30, 2018 and December 31, 2017, respectively. The increase in goodwill at September 30, 2018 compared to December 31, 2017 was due to the acquisition of Scott-Rice.      

As required by GAAP, we do not amortize goodwill and other intangible assets with indefinite lives, but test for impairment on an annual basis or earlier if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying amount. These circumstances include, but are not limited to (i) a significant adverse change in the business climate, (ii) unanticipated competition or (iii) an adverse action or assessment by a regulator. Determining impairment involves estimating the fair value of a reporting unit using a combination of (i) the income or discounted cash flows approach and (ii) the market approach that utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds its fair value, the amount of the impairment loss must be measured. The impairment loss is calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied value of goodwill. We recognize impairment loss when the carrying amount of goodwill exceeds its implied fair value.

In 2017 and 2016, we engaged an independent valuation firm to complete our annual impairment testing for existing goodwill. For 2017 and 2016, the testing results indicated no impairment charge to goodwill as the determined fair value was sufficient to pass the first step of the impairment test.  

Our intangible assets subject to amortization consist of acquired customer relationships, regulatory rights and trade names. We amortize intangible assets with finite lives over their respective estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment. In addition, we periodically reassess the carrying value, useful lives and classifications of our identifiable intangible assets.

The components of our identified intangible assets are as follows:

		September 30, 2018				December 31, 2017
		Gross Carrying Amount				Gross Carrying Amount
	Useful Lives			Accumulated Amortization				Accumulated Amortization
Definite-Lived Intangible Assets
Customers Relationships	14-15 yrs	$	45,578,445	$	19,102,071	$	29,278,445	$	17,354,646
Regulatory Rights	15 yrs		4,000,000		2,866,641		4,000,000		2,666,643
Trade Name	3-5 yrs		853,689		579,177		570,000		570,000
Indefinitely-Lived Intangible Assets
Video Franchise			3,000,000		-		3,000,000		-
Total		$	53,432,134	$	22,547,889	$	36,848,445	$	20,591,289
Net Identified Intangible Assets				$	30,884,245			$	16,257,156

Amortization expense related to the definite-lived intangible assets was $1,956,600 and $1,851,812 for the nine months ended September 30, 2018 and 2017. Amortization expense for the remaining three months of 2018 and the five years subsequent to 2018 is estimated to be:

●    (October 1 – December 31)	$	874,867
●    2019	$	3,498,488
●    2020	$	3,498,488
●    2021	$	3,498,443
●    2022	$	2,127,093
●    2023	$	2,103,486

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Secured Credit Facility

9 Months Ended

Sep. 30, 2018

Secured Credit Facility [Abstract]

Secured Credit Facility [Text Block]

Note 6 – Secured Credit Facility

We have a credit facility with CoBank. Under the credit facility, we entered into a master loan agreement (MLA) and a series of supplements to the respective MLA. On July 31, 2018, we entered into an Amended and Restated MLA with CoBank. The MLA refinances and replaces the existing credit facility between CoBank and Nuvera and its subsidiaries.

Nuvera and its respective subsidiaries also have entered into security agreements under which substantially all the assets of Nuvera and its respective subsidiaries have been pledged to CoBank as collateral. In addition, Nuvera and its respective subsidiaries have guaranteed all the obligations under the credit facility. These mortgage notes are required to be paid in quarterly installments covering principal and interest, beginning in the year of issue and maturing on July 31, 2025.

Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends (a) (i) in an amount up to $2,700,000 in any year if our “Total Leverage Ratio,” that is, the ratio of our “Indebtedness” to “EBITDA” (earnings before interest, taxes, depreciation and amortization – as defined in the loan documents) is greater than 2.00 to 1.00, and (ii) in any amount if our Total Leverage Ratio is less than 2.00 to 1.00, and (b) in either case, if we are not in default or potential default under the loan agreements. Our current Total Leverage Ratio at September 30, 2018 is 2.84. 

Our credit facility requires us to comply with specified financial ratios and tests. These financial ratios include total leverage ratio, debt service coverage ratio, equity to total assets ratio and annual maximum aggregate capital expenditures. At September 30, 2018 we were in compliance with all the stipulated financial ratios in our loan agreements.

There are security and loan agreements underlying our current CoBank credit facility that contain restrictions on our distributions to stockholders and investment in, or loans, to others. Also, our credit facility contains restrictions that, among other things, limits or restricts our ability to enter into guarantees and contingent liabilities, incur additional debt, issue stock, transact asset sales, transfers or dispositions, and engage in mergers and acquisitions, without CoBank approval.  

As described in Note 7 – “Interest Rate Swaps,” we have entered into an IRSA that effectively fixes our interest rates and covers 25 percent of our existing outstanding debt balance or $16,137,500 as of August 1, 2018. The IRSA matures on July 31, 2025. As of September 30, 2018, our IRSA covered $15,849,350, with a weighted average rate of 6.27%. Our remaining debt of $58.7 million ($10.0 million available under the revolving credit facilities and $48.7 million currently outstanding) remains subject to variable interest rates at an effective weighted average interest rate of 5.47%, as of September 30, 2018.   

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Interest Rate Swaps

9 Months Ended

Sep. 30, 2018

Disclosure Text Block Supplement [Abstract]

Financial Instruments Disclosure [Text Block]

Note 7 – Interest Rate Swaps

We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities.

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facility with CoBank required that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

To meet this objective, on August 1, 2018 we entered into an IRSA with CoBank covering 25 percent of our existing outstanding debt balance or $16,137,500 of our aggregate indebtedness to CoBank at August 1, 2018. This swap effectively locks in the interest rate on 25 percent of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the LIBOR variable rate payment is below a contractual rate or (ii) receive a payment if the LIBOR variable rate payment is above the contractual rate.

Each month, we make interest payments to CoBank under its loan agreements based on the current applicable LIBOR Rate plus the contractual LIBOR margin then in effect with respect to the loan, without reflecting our IRSA. At the end of each calendar month, CoBank adjusts our aggregate interest payments based on the difference, if any, between the amounts paid by us during the month and the current effective interest rate. Net interest payments are reported in our consolidated income statement as interest expense.

As of September 30, 2018 we have the following IRSA in effect.

Loan #	Maturity Date	Notional Amount	Effective Interest Rate (1)
RX0583-T4	07/31/2025	$15,849,350	6.27% (LIBOR Rate of 3.02% plus 3.25% LIBOR Margin)

(1) The note above initially bears interest at a LIBOR rate determined by the maturity of the note, plus a “LIBOR Margin” rate equal to 3.25% according to the individual secured credit facility. The LIBOR Margin decreases as the borrower’s “Leverage Ratio” decreases. The “Current Effective Interest Rate” in the table reflects the rate we pay giving effect to the swaps.

Our IRSA under our credit facilities qualifies as a cash flow hedge for accounting purposes under GAAP. We reflect the effect of this hedging transaction in the financial statements. The unrealized gain/loss is reported in other comprehensive income. If we terminate our IRSA, the cumulative change in fair value at the date of termination will be reclassified from accumulated other comprehensive income, which is classified in stockholders’ equity, into earnings on the consolidated statements of income.

The fair value of the Company’s IRSA is determined based on valuations received from CoBank and are based on the present value of expected future cash flows using discount rates appropriate with the terms of the IRSA. The fair value indicates an estimated amount we would be required to pay if the contracts were canceled or transferred to other parties. At September 30, 2018, the fair value liability of the swap was $79,696, which has been recorded net of deferred tax benefit of $22,745, for the $56,951 in accumulated other comprehensive loss.

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Other Investments

9 Months Ended

Sep. 30, 2018

Other Investments [Abstract]

Other Investments [Text Block]

Note 8 – Other Investments 

We are a co-investor with other rural telephone companies in several partnerships and limited liability companies. These joint ventures make it possible to offer services to customers, including digital video services and fiber-optic transport services that we would have difficulty offering on our own. These joint ventures also make it possible to invest in new technologies with a lower level of financial risk. We recognize income and losses from these investments on the equity method of accounting. For a listing of our investments, see Note 12 – “Segment Information”.

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Guarantees

9 Months Ended

Sep. 30, 2018

Guarantees [Abstract]

Guarantees [Text Block]

Note 9 – Guarantees

Nuvera has guaranteed a ten-year loan owed by FiberComm, LC, originally set to mature on September 30, 2021. As of September 30, 2018, we have recorded a liability of $131,451 in connection with the guarantee on this loan. This guarantee may be exercised if FiberComm, LC does not make its required payments on this note.

On September 14, 2018, FiberComm, LC opened a new construction loan on which it may draw funds, up to $4 million, to complete the construction of a data center/carrier hotel in downtown Sioux City, Iowa. The draw period for this loan will remain open until March 31, 2019. On March 31, 2019, the remaining balance of the existing ten-year loan, with an original maturity date of September 30, 2021, will be combined with the amount of funds drawn on the new construction loan into one note, maturing on April 30, 2026. This new note will be a seven-year note, utilizing a ten-year amortization schedule, with a balloon payment due in April 2026. Nuvera has guaranteed a 50% pro rata portion (existing 20% ownership) of the new construction loan. Nuvera’s maximum additional liability in relation to this new loan is $400,000.

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Deferred Compensation

9 Months Ended

Sep. 30, 2018

Disclosure Text Block Supplement [Abstract]

Compensation and Employee Benefit Plans [Text Block]

Note 10 – Deferred Compensation

As of September 30, 2018 and December 31, 2017, we have recorded other deferred compensation relating to executive compensation payable to certain former executives of past acquisitions.  

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Restricted Stock Units (RSU)

9 Months Ended

Sep. 30, 2018

Restricted Stock Unit [Abstract]

Restricted Stock Unit [Text Block]

Note 11 – Restricted Stock Units (RSU)

On February 24, 2017, our BOD adopted the 2017 Omnibus Stock Plan (2017 Plan) effective May 25, 2017. The shareholders of the Company approved the 2017 Plan at the May 25, 2017 Annual Meeting of Shareholders. The purpose of the 2017 Plan was to enable Nuvera and its subsidiaries to attract and retain talented and experienced people, closely link employee compensation with performance realized by shareholders, and reward long-term results with long-term compensation. The 2017 Plan enables us to grant stock incentive awards to current and new employees, including officers, and to Board members and service providers. The 2017 Plan permits stock incentive awards in the form of options (incentive and non-qualified), stock appreciation rights, restricted stock, RSUs, performance stock, performance units, and other awards in stock or cash. The 2017 Plan permits the issuance of up to 625,000 shares of our Common Stock in any of the above stock awards.

On July 25, 2017, our BOD granted 6,077 shares of RSUs in the Common Stock of the Company to its executive officers under the 2017 Plan. We recognize share-based compensation expense for these RSUs over the vesting period of the RSUs, which was determined by our BOD. The 2017 RSUs will vest on December 31, 2019, at which point, the executives will be able to receive Common Stock in the Company in exchange for the RSUs.

On March 23, 2018, our BOD and Compensation Committee granted awards to the Company’s executive officers under the 2017 Plan. We recognize share-based compensation expense for these RSU’s over the vesting period of the RSUs’ which was determined by our BOD. Each executive officer received a time-based RSU and a performance-based RSU. The time-based RSUs were computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock of $17.00 on March 26, 2018. 4,044 RSU’s were granted and the RSU’s will vest 100% on December 31, 2020, at which point, the executive officers will be able to receive Common Stock in the Company in exchange for the RSUs. The performance-based RSUs were computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock of $17.00 on March 26, 2018. The RSU’s will vest based on the Company’s average Return on Invested Capital (ROIC) for the three years ended December 31, 2020. 5,750 RSU’s were granted as a target and the RSU’s will vest 100% on December 31, 2020 if ROIC levels are attained, at which point, the executive officers will be able to receive Common Stock in the Company in exchange for the RSUs. The executive officers may earn more or less RSU’s based on if the actual ROIC over the time period is more or less than target.

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Segment Information

9 Months Ended

Sep. 30, 2018

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 12 – Segment Information 

We operate in the Telecom Segment and have no other significant business segments. The Telecom Segment consists of voice, data and video communication services delivered to the customer over our local communications network. No single customer accounted for a material portion of our consolidated revenues.

The Telecom Segment operates the following incumbent local exchange carriers (ILECs) and competitive local exchange carriers (CLECs) and has investment ownership interests as follows:

Telecom Segment

● ILECs:

▪ Nuvera Communications, Inc., the parent company;

▪ Hutchinson Telephone Company, a wholly-owned subsidiary of Nuvera;

▪ Peoples Telephone Company, a wholly-owned subsidiary of Nuvera;

▪ Scott-Rice Telephone Company, a wholly-owned subsidiary of Nuvera;

▪ Sleepy Eye Telephone Company, a wholly-owned subsidiary of Nuvera;

▪ Western Telephone Company, a wholly-owned subsidiary of Nuvera.

● CLECs:

▪ Nuvera, located in Redwood Falls, Minnesota; 

▪ Hutchinson Telecommunications, Inc., a wholly-owned subsidiary of Hutchinson Telephone Company, located in Litchfield and Glencoe, Minnesota;

● Our investments and interests in the following entities include some management responsibilities:

▪ FiberComm, LC – 20.00% subsidiary equity ownership interest. FiberComm, LC is located in Sioux City, Iowa;

▪ Broadband Visions, LLC (BBV) – 24.30% subsidiary equity ownership interest. BBV provides video headend and Internet services;

▪ Independent Emergency Services, LLC (IES) – 14.29% subsidiary equity ownership interest. IES is a provider of E-911 services to the State of Minnesota as well as a number of counties located in Minnesota;

▪ SM Broadband, LLC (SMB) – 12.50% subsidiary equity ownership interest. SMB provides network connectivity for regional businesses.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 13– Commitments and Contingencies

We are involved in certain contractual disputes in the ordinary course of business. We do not believe the ultimate resolution of any of these existing matters will have a material adverse effect on our financial position, results of operations or cash flows. We did not experience any changes to material contractual obligations in the first nine months of 2018. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for the discussion relating to commitments and contingencies.

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Broadband Grants

9 Months Ended

Sep. 30, 2018

Broadband Grants [Abstract]

Broadband Grants [Text Block]

Note 14 – Broadband Grants

In January 2017, the Company was awarded a broadband grant from the Minnesota Department of Employment and Economic Development (DEED). The grant provided up to 45% of the total cost of building fiber connections to homes and businesses for improved high-speed internet in unserved or underserved communities and businesses in the Company’s service area. The Company will receive $850,486 of the $1,889,968 total project costs. The Company will provide the remaining 55% matching funds. At September 30, 2018, the Company has received $374,543. These projects have been completed and final documentation was provided to the DEED office in October 2018. We expect to receive final grant funds from the state in the fourth quarter of 2018.

In November 2017, the Company was awarded a broadband grant from the DEED. The grant provided up to 42.6% of the total cost of building fiber connections to homes and businesses for improved high-speed internet in unserved or underserved communities and businesses in the Company’s service area. The Company will receive $736,598 of the $1,727,998 total project costs. The Company will provide the remaining 57.4% matching funds. Construction and expenditures for these projects began in the summer of 2018. We have not yet received any funds for these projects as of September 30, 2018.  

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Subsequent Events

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 15 – Subsequent Events

We have evaluated and disclosed subsequent events through the filing date of this Quarterly Report on Form 10-Q.

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Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

See Note 2 – “Revenue Recognition” for a discussion of our revenue recognition policies.

Cost of Sales, Policy [Policy Text Block]

Cost of Services (excluding depreciation and amortization)

Cost of services includes all costs related to delivery of communication services and products. These operating costs include all costs of performing services and providing related products including engineering, network monitoring and transport cost.

Selling, General and Administrative Expenses, Policy [Policy Text Block]

Selling, General and Administrative Expenses

Selling, general and administrative expenses include direct and indirect selling expenses, customer service, billing and collections, advertising and all other general and administrative costs associated with the operations of the business.

Depreciation, Depletion, and Amortization [Policy Text Block]

Depreciation and Amortization Expense

We use the group life method (mass asset accounting) to depreciate the assets of our telephone companies. Telephone plant acquired in a given year is grouped into similar categories and depreciated over the remaining estimated useful life of the group. When an asset is retired, both the asset and the accumulated depreciation associated with that asset are removed from the books. Due to rapid changes in technology, selecting the estimated economic life of telecommunications plant and equipment requires a significant amount of judgment. We periodically review data on expected utilization of new equipment, asset retirement activity and net salvage values to determine adjustments to our depreciation rates. Depreciation expense was $5,332,415 and $5,429,935 for the nine months ended September 30, 2018 and 2017. We amortize our definite-lived intangible assets over their estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment.

Income Tax, Policy [Policy Text Block]

Income Taxes

The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Significant components of our deferred taxes arise from differences (i) in the basis of property, plant and equipment due to the use of accelerated depreciation methods for tax purposes, as well as (ii) in partnership investments and intangible assets due to the difference between book and tax basis. Our effective income tax rate is normally higher than the United States tax rate due to state income taxes and permanent differences. 

We account for income taxes in accordance with GAAP, which requires an asset and liability approach to financial accounting and reporting for income taxes. As required by GAAP, we recognize the financial statement benefit of tax positions only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

As of September 30, 2018 and December 31, 2017 we had no unrecognized tax benefits.    

We are primarily subject to United States, Minnesota, Iowa, Nebraska, Wisconsin and North Dakota income taxes. Tax years subsequent to 2013 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. As of September 30, 2018 and December 31, 2017 we had no interest or penalties accrued that related to income tax matters.

On December 22, 2017, the President of the United States signed into law, the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant changes in United States tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the United States corporate tax rate from 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the 21% rate in the 4^th quarter of 2017.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Developments

In August, 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2017-12 (ASU 2017-12), “Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends current guidance on accounting for hedges mainly to align more closely an entity’s risk management activities and financial reporting relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. In addition, amendments in ASU 2017-12 simplify the application of hedge accounting by allowing more time to prepare hedge documentation and allowing effectiveness assessments to be performed on a qualitative basis after hedge inception. The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We plan to adopt ASU 2017-12 as of January 1, 2019 and are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures.

In May 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting.” ASU 2017-09 clarifies the modification accounting guidance for stock compensation included in Topic 718, “Compensation – Stock Compensation.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award must be accounted for as a modification under Topic 718. The new guidance is effective prospectively for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We adopted this update effective January 1, 2018 and are applying this guidance to applicable transactions.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and other (Topic 350).” ASU 2017-04 simplifies the accounting for goodwill impairment and removes Step 2 of the goodwill impairment test. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value limited to the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying amounts. The amendments in this update should be applied on a prospective basis. ASU 2017-04 is effective for the Company beginning January 1, 2021. Early adoption is permitted. Management is evaluating the impact the adoption of ASU 2017-04 will have on the Company’s financial statements (if any).

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requires additional disclosures relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances. Nuvera is required to adopt ASU 2016-13 on January 1, 2020. Early adoption as of January 1, 2019 is permitted. We are evaluating the effects that adoption of ASU 2016-13 will have on our financial position, results of operations and disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. This change will result in an increase to recorded assets and liabilities on lessees’ financial statements, as well as changes in the categorization of rental costs, from rent expense to interest and depreciation expense. Other effects may occur depending on the types of leases and the specific terms of them utilized by particular lessees. The ASU is effective for the Company on January 1, 2019, and early application is permitted. Modified retrospective application is required. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.  

We have reviewed all other significant newly issued accounting pronouncements and determined that they are either not applicable to our business or that no material effect is expected on our financial position and results of operations.

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Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2018

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue [Table Text Block]

	Three Months Ended September 30,
	2018		2017
Voice services¹	$	1,922,686	$	1,657,758
Network access¹		1,738,866		1,874,287
Video ¹		3,004,767		2,441,209
Data ¹		4,036,071		2,636,745
Directory²		205,789		182,504
Cellular³		129,799		121,765
Other contracted revenue4		513,651		432,138
Other5		317,417		310,988
Revenue from customers		11,869,046		9,657,394
Subsidy and other revenue outside scope of ASC 6066		5,344,701		2,192,639
Total revenue	$	17,213,747	$	11,850,033
¹ Month-to-Month contracts billed and consumed in the same month.
² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.
³ Approximately 90.53% of the revenue in this category is earned through a monthly commission from the network provider for a billing and collecting arrangement with the network provider. We do not receive revenue from the end-user customer, but instead receive a monthly commission from the provider. Other revenue in this category includes phone and equipment sales and represents approximately 0.75% of our total revenue.
4This includes long-term contracts where the revenue is recognized monthly over the term of the contract.
5This includes CPE and other equipment sales.
6This includes governmental subsidies and lease revenue outside the scope of ASC 606.

	Nine Months Ended September 30,
	2018		2017
Voice services¹	$	5,005,074	$	4,933,868
Network access¹		5,251,706		5,475,395
Video ¹		8,010,113		7,224,333
Data ¹		9,580,011		7,765,135
Directory²		556,614		539,520
Cellular³		381,478		335,807
Other contracted revenue4		1,411,979		1,518,447
Other5		740,761		682,709
Revenue from customers		30,937,736		28,475,214
Subsidy and other revenue outside scope of ASC 6066		9,597,638		6,719,940
Total revenue	$	40,535,374	$	35,195,154
¹ Month-to-Month contracts billed and consumed in the same month.
² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.
³ Approximately 89.05% of the revenue in this category is earned through a monthly commission from the network provider for a billing and collecting arrangement with the network provider. We do not receive revenue from the end-user customer, but instead receive a monthly commission from the provider. Other revenue in this category include phone and equipment sales and  represents approximately 0.94% of our total revenue.
4This includes long-term contracts where the revenue is recognized monthly over the term of the contract.
5This includes CPE and other equipment sales.
6This includes governmental subsidies and lease revenue outside the scope of ASC 606.

Contract with Customer, Asset and Liability [Table Text Block]

	January 1, 2018		September 30, 2018		Increase/ (Decrease)
Contract Assets:
Short-term contract assets	$	-	$	-	$	-
Lont-term contract assets	$	-	$	-	$	-
Contract Liabilities:
Short-term contract liabilities	$	93,656	$	334,280	$	240,624	¹
Long-term contract liabilities	$	194,458	$	167,941	$	(26,517)
Receivables:
Receivables accounted for under ASC 606	$	1,431,558	$	2,814,216	$	1,382,658	²
Subsidy Receivables not accounted for under ASC 606	$	542,539	$	678,174	$	135,635	³
¹ The difference is due to the timing of the contract billings and the acquisition of Scott-Rice.
² The increase in accounts receivable is due to the timing of receipts and the acquisition of Scott-Rice.
³The difference is due to the increase in A-CAM funding and the acquisition of Scott-Rice.

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Acquisitions and Dispositions (Tables)

9 Months Ended

Sep. 30, 2018

Disclosure Text Block Supplement [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Current assets	$	810,927
Property, plant and equipment		12,320,410
Customer relationship intangible		16,300,000
Excess costs over net assets acquired (Goodwill)		14,935,804
Current liabilities		(449,938)
Deferred income taxes		(1,467,719)
Deferred liabilities		(264,813)
Purchase price allocation		42,184,671
Less cash acquired		(4,388)
Total Consideration for Acquisition	$	42,180,283

Business Acquisition, Pro Forma Information [Table Text Block]

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Revenue	$	18,411,062	$	15,779,409	$	49,203,865	$	46,676,925
Net Income	$	3,449,095	$	1,231,510	$	7,144,076	$	3,312,397
Basic and Diluted Net
Income Per Share	$	0.67	$	0.24	$	1.38	$	0.64

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Goodwill and Intangibles (Tables)

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

		September 30, 2018				December 31, 2017
		Gross Carrying Amount				Gross Carrying Amount
	Useful Lives			Accumulated Amortization				Accumulated Amortization
Definite-Lived Intangible Assets
Customers Relationships	14-15 yrs	$	45,578,445	$	19,102,071	$	29,278,445	$	17,354,646
Regulatory Rights	15 yrs		4,000,000		2,866,641		4,000,000		2,666,643
Trade Name	3-5 yrs		853,689		579,177		570,000		570,000
Indefinitely-Lived Intangible Assets
Video Franchise			3,000,000		-		3,000,000		-
Total		$	53,432,134	$	22,547,889	$	36,848,445	$	20,591,289
Net Identified Intangible Assets				$	30,884,245			$	16,257,156

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

●    (October 1 – December 31)	$	874,867
●    2019	$	3,498,488
●    2020	$	3,498,488
●    2021	$	3,498,443
●    2022	$	2,127,093
●    2023	$	2,103,486

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Basis of Presentation and Consolidation (Details)		9 Months Ended		12 Months Ended
	Dec. 22, 2017	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Dec. 21, 2017	Dec. 31, 2017 USD ($)
Accounting Policies [Abstract]
Number of Reportable Segments		1
Depreciation		$ 5,332,415	$ 5,429,935
Effective Income Tax Rate Reconciliation, Percent	21.00%			35.00%
Unrecognized Tax Benefits		$ 0			$ 0

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Revenue Recognition (Details) - USD ($)			9 Months Ended
	Aug. 31, 2018	May 23, 2018	Sep. 30, 2018	Sep. 30, 2017
A-CAM [Member]
Revenue Recognition (Details) [Line Items]
Proceeds From Contracts	$ 3,120,000		$ 6,500,000
Iowa Operations [Member]
Revenue Recognition (Details) [Line Items]
Contract Receivable		$ 489,870	391,896
Increase (Decrease) in Contract Receivables, Net		97,974
Minnesota Operations [Member]
Revenue Recognition (Details) [Line Items]
Contract Receivable		7,648,208	$ 6,118,567
Increase (Decrease) in Contract Receivables, Net		$ 1,529,641
Minimum [Member]
Revenue Recognition (Details) [Line Items]
Contract Term			3 years
Payment Term			30 days
Maximum [Member]
Revenue Recognition (Details) [Line Items]
Contract Term			10 years
Payment Term			60 days
2018-07-01 [Member] | Outside Of The Scope Of AS C606 [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Percentage			31.05%
2018-07-01 [Member] | CPE And Equipment Sales And Installation [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Percentage			1.84%
2018-01-01 [Member] | Outside Of The Scope Of AS C606 [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Percentage			23.68%
2018-01-01 [Member] | CPE And Equipment Sales And Installation [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Percentage			1.83%
Month To Month And Other Contracted Revenue [Member] | 2018-07-01 [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Percentage			67.11%	67.11%
Month To Month And Other Contracted Revenue [Member] | 2018-01-01 [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Percentage			74.49%	74.49%
Voice Services [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period			1 month
Video [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period			1 month
Data [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period			1 month
Other Contracted Revenue [Member] | Minimum [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period			3 years
Other Contracted Revenue [Member] | Maximum [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period			10 years
Product and Service, Other [Member]
Revenue Recognition (Details) [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period			1 month

XML

Revenue Recognition (Details) - Revenue from contracts with customers - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Disaggregation of Revenue [Line Items]
Revenue From Customers	$ 11,869,046	$ 9,657,394	$ 30,937,736	$ 28,475,214
Subsidy and other revenue outside scope of ASC 6066	5,344,701	2,192,639	9,597,638	6,719,940
Total revenue	17,213,747	11,850,033	40,535,374	35,195,154
Voice Services [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	1,922,686	1,657,758	5,005,074	4,933,868
Network Access [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	1,738,866	1,874,287	5,251,706	5,475,395
Total revenue	1,810,625	1,809,143	5,106,277	5,197,332
Video [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	3,004,767	2,441,209	8,010,113	7,224,333
Total revenue	3,008,856	2,444,849	8,022,361	7,234,486
Data [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	4,036,071	2,636,745	9,580,011	7,765,135
Total revenue	4,466,224	2,992,250	10,777,986	9,083,545
Directory [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	205,789	182,504	556,614	539,520
Cellular [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	129,799	121,765	381,478	335,807
Other Contracted Revenue [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	513,651	432,138	1,411,979	1,518,447
Product and Service, Other [Member]
Disaggregation of Revenue [Line Items]
Revenue From Customers	$ 317,417	$ 310,988	$ 740,761	$ 682,709

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Revenue Recognition (Details) - Receivables, contracts assets and contract liabilities from revenue contracts with customers - USD ($)	Sep. 30, 2018	Jan. 01, 2018
Contract Assets:
Short-term contract assets
Lont-term contract assets
Contract Liabilities:
Short-term contract liabilities	334,280	93,656
Long-term contract liabilities	167,941	194,458
Receivables:
Receivables accounted for under ASC 606	2,814,216	1,431,558
Subsidy Receivables not accounted for under ASC 606	678,174	$ 542,539
Difference between Revenue Guidance in Effect before and after Topic 606 [Member]
Contract Assets:
Short-term contract assets
Lont-term contract assets
Contract Liabilities:
Short-term contract liabilities	240,624
Long-term contract liabilities	(26,517)
Receivables:
Receivables accounted for under ASC 606	1,382,658
Subsidy Receivables not accounted for under ASC 606	$ 135,635

XML

Acquisitions and Dispositions (Details) - USD ($)	1 Months Ended	9 Months Ended
	Jul. 31, 2018	Sep. 30, 2018	Sep. 30, 2017
Disclosure Text Block Supplement [Abstract]
Payments to Acquire Businesses, Gross	$ 42,000,000	$ 42,180,283
Business Combination Recognized Identifiable Assets Acquired And Liabilities Goodwill And Assumed Intangible Assets Other Than Goodwill	31,235,804
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles	$ 16,300,000
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	15 years

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Acquisitions and Dispositions (Details) - Allocation of the acquisition value of Scott-Rice - USD ($)	1 Months Ended
	Jul. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Allocation of the acquisition value of Scott-Rice [Abstract]
Current assets	$ 810,927
Property, plant and equipment	12,320,410
Customer relationship intangible	16,300,000
Excess costs over net assets acquired (Goodwill)	14,935,804	$ 54,741,153	$ 39,805,349
Current liabilities	(449,938)
Deferred income taxes	(1,467,719)
Deferred liabilities	(264,813)
Purchase price allocation	42,184,671
Less cash acquired	(4,388)
Total Consideration for Acquisition	$ 42,180,283

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Acquisitions and Dispositions (Details) - Pro forma statements - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Pro forma statements [Abstract]
Revenue	$ 18,411,062	$ 15,779,409	$ 49,203,865	$ 46,676,925
Net Income	$ 3,449,095	$ 1,231,510	$ 7,144,076	$ 3,312,397
Basic and Diluted Net
Income Per Share (in Dollars per share)	$ 0.67	$ 0.24	$ 1.38	$ 0.64

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Goodwill and Intangibles (Details) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jul. 31, 2018	Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 54,741,153		$ 14,935,804	$ 39,805,349
Amortization of Intangible Assets	$ 1,956,600	$ 1,851,812

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Goodwill and Intangibles (Details) - Components of identified intangible assets - USD ($)	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Definite-Lived Intangible Assets
Gross Carrying Amount	$ 53,432,134	$ 36,848,445
Accumulated Amortization	22,547,889	20,591,289
Net Identified Intangible Assets	30,884,245	16,257,156
Customer Relationships [Member]
Definite-Lived Intangible Assets
Gross Carrying Amount	45,578,445	29,278,445
Accumulated Amortization	$ 19,102,071	17,354,646
Customer Relationships [Member] | Minimum [Member]
Definite-Lived Intangible Assets
Useful Lives	14 years
Customer Relationships [Member] | Maximum [Member]
Definite-Lived Intangible Assets
Useful Lives	15 years
Regulatory Rights [Member]
Definite-Lived Intangible Assets
Useful Lives	15 years
Gross Carrying Amount	$ 4,000,000	4,000,000
Accumulated Amortization	2,866,641	2,666,643
Trade Names [Member]
Definite-Lived Intangible Assets
Gross Carrying Amount	853,689	570,000
Accumulated Amortization	$ 579,177	570,000
Trade Names [Member] | Minimum [Member]
Definite-Lived Intangible Assets
Useful Lives	3 years
Trade Names [Member] | Maximum [Member]
Definite-Lived Intangible Assets
Useful Lives	5 years
Franchise Rights [Member]
Definite-Lived Intangible Assets
Gross Carrying Amount	$ 3,000,000	3,000,000
Accumulated Amortization

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Goodwill and Intangibles (Details) - Summary of Future Amortization Expense	Sep. 30, 2018 USD ($)
Summary of Future Amortization Expense [Abstract]
● (October 1 – December 31)	$ 874,867
● 2019	3,498,488
● 2020	3,498,488
● 2021	3,498,443
● 2022	2,127,093
● 2023	$ 2,103,486

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Secured Credit Facility (Details)		9 Months Ended
	Aug. 01, 2018 USD ($)	Sep. 30, 2018 USD ($)
Secured Debt [Member]
Secured Credit Facility (Details) [Line Items]
Debt Instrument, Covenant Description		Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends (a) (i) in an amount up to $2,700,000 in any year if our “Total Leverage Ratio,” that is, the ratio of our “Indebtedness” to “EBITDA” (earnings before interest, taxes, depreciation and amortization – as defined in the loan documents) is greater than 2.00 to 1.00, and (ii) in any amount if our Total Leverage Ratio is less than 2.00 to 1.00, and (b) in either case, if we are not in default or potential default under the loan agreements
Debt Instrument, Threshold Amount, Dividends		$ 2,700,000
Ratio of Indebtedness to Net Capital		2.84
Debt Instrument, Covenant Compliance		Our credit facility requires us to comply with specified financial ratios and tests. These financial ratios include total leverage ratio, debt service coverage ratio, equity to total assets ratio and annual maximum aggregate capital expenditures
Long-term Line of Credit		$ 48,700,000
Secured Credit Facility [Member]
Secured Credit Facility (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 58,700,000
Debt, Weighted Average Interest Rate		5.47%
Revolving Credit Facility [Member]
Secured Credit Facility (Details) [Line Items]
Line of Credit Facility, Current Borrowing Capacity		$ 10,000,000
Interest Rate Swap [Member]
Secured Credit Facility (Details) [Line Items]
Aggregate Indebtedness	$ 16,137,500
Derivative, Maturity Date	Jul. 31, 2025
Interest Rate Swap [Member] | Secured Credit Facility [Member]
Secured Credit Facility (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 15,849,350
Debt, Weighted Average Interest Rate		6.27%

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Interest Rate Swaps (Details) - USD ($)	9 Months Ended
	Sep. 30, 2018	Aug. 01, 2018	Dec. 31, 2017
Interest Rate Swaps (Details) [Line Items]
Derivative Liability, Noncurrent	$ 79,696
Accumulated Other Comprehensive Income (Loss), Net of Tax	$ (56,951)		$ 20,135
Secured Credit Facility [Member]
Interest Rate Swaps (Details) [Line Items]
Debt, Weighted Average Interest Rate	5.47%
Interest Rate Swap [Member]
Interest Rate Swaps (Details) [Line Items]
Aggregate Indebtedness		$ 16,137,500
Derivative Liability, Noncurrent	$ 79,696
Deferred Income Tax Expense (Benefit)	22,745
Accumulated Other Comprehensive Income (Loss), Net of Tax	$ 56,951
Interest Rate Swap [Member] | Secured Credit Facility [Member]
Interest Rate Swaps (Details) [Line Items]
Debt, Weighted Average Interest Rate	6.27%
Interest Rate Swap Loan RX0583T4 [Member]
Interest Rate Swaps (Details) [Line Items]
Derivative Instrument Maturity Date	Jul. 31, 2025
Derivative, Notional Amount	$ 15,849,350
Base Rate [Member]
Interest Rate Swaps (Details) [Line Items]
Derivative, Variable Interest Rate	3.02%
London Interbank Offered Rate (LIBOR) [Member]
Interest Rate Swaps (Details) [Line Items]
Derivative, Variable Interest Rate	3.25%
London Interbank Offered Rate (LIBOR) [Member] | Secured Credit Facility [Member]
Interest Rate Swaps (Details) [Line Items]
Derivative, Variable Interest Rate	3.25%

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Guarantees (Details) - USD ($)	Sep. 14, 2018	Sep. 30, 2018
Guarantees (Details) [Line Items]
Guaranty Liabilities		$ 131,451
Fiber Comm LC [Member]
Guarantees (Details) [Line Items]
Guarantor Obligations, Related Party Disclosure	Nuvera has guaranteed a 50% pro rata portion (existing 20% ownership) of the new construction loan
Liabilities for Guarantees on Long-Duration Contracts, Guaranteed Benefit Liability, Gross	$ 400,000

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Restricted Stock Units (RSU) (Details) - $ / shares	Mar. 23, 2018	Jul. 25, 2017	Mar. 26, 2018	Feb. 24, 2017
Restricted Stock Units (RSUs) [Member]
Restricted Stock Units (RSU) (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				625,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		6,077
Share-based Compensation Arrangement By Share-Based Payment Award, Vesting Date		Dec. 31, 2019
Time Based RS Us [Member]
Restricted Stock Units (RSU) (Details) [Line Items]
Share-based Compensation Arrangement By Share-Based Payment Award, Vesting Date	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	4,044
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	100.00%
Performance Based RS Us [Member]
Restricted Stock Units (RSU) (Details) [Line Items]
Share-based Compensation Arrangement By Share-Based Payment Award, Vesting Date	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	5,750
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	100.00%
Common Stock [Member] | Time Based RS Us [Member]
Restricted Stock Units (RSU) (Details) [Line Items]
Share Price (in Dollars per share)			$ 17.00
Common Stock [Member] | Performance Based RS Us [Member]
Restricted Stock Units (RSU) (Details) [Line Items]
Share Price (in Dollars per share)			$ 17.00

XML

Segment Information (Details)	Sep. 30, 2018
Fiber Comm LC [Member]
Segment Information (Details) [Line Items]
Equity Method Investment, Ownership Percentage	20.00%
Broadband Visions LLC [Member]
Segment Information (Details) [Line Items]
Equity Method Investment, Ownership Percentage	24.30%
Independent Emergency Services LLC [Member]
Segment Information (Details) [Line Items]
Equity Method Investment, Ownership Percentage	14.29%
SM Broadband LLC [Member]
Segment Information (Details) [Line Items]
Equity Method Investment, Ownership Percentage	12.50%

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Broadband Grants (Details) - USD ($)	1 Months Ended		9 Months Ended
	Nov. 30, 2017	Jan. 31, 2017	Sep. 30, 2018
January 2017 Grant [Member]
Broadband Grants (Details) [Line Items]
Grants, Percentage		45.00%
Grants Receivable			$ 850,486
Project Cost			$ 1,889,968
Matching Fund Percentage Provided by Grantee			55.00%
Proceeds from Grants			$ 374,543
November 2017 Grant [Member]
Broadband Grants (Details) [Line Items]
Grants, Percentage	42.60%
Grants Receivable			736,598
Project Cost			$ 1,727,998
Matching Fund Percentage Provided by Grantee			57.40%