Note 4 – Acquisitions and Dispositions

Scott-Rice Telephone Co. 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 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 has 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.

The allocation of the acquisition value of Scott-Rice, as determined by an independent valuation firm, is shown below:

Current assets	$	810,927
Property, plant and equipment		23,800,000
Customer relationship intangible		13,600,000
Excess costs over net assets acquired (Goodwill)		10,097,680
Current liabilities		(370,898)
Deferred income taxes		(5,532,014)
Deferred liabilities		(264,814)
Purchase price allocation		42,140,881
Less cash acquired		(4,388)

Total Consideration for Acquisition	$	42,136,493

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 estimates of fair values. Criteria have been established in ASC 805, “Business Combinations” for determining whether intangible assets should be recognized separately from goodwill. Based upon our fair value allocation, the excess of the purchase price and acquisition costs over the fair value of the net identifiable tangible assets acquired was $23,697,680, which is not deductible for income tax purposes. The Company recorded an intangible asset related to the acquired company’s customer relationships of $13,600,000. The estimated useful life of the customer relationship intangible is fifteen years.

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 March 31, 2019 and 2018 as if the acquisition had been completed on January 1, 2018. 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 March 31,
	2019		2018

Revenue	$	15,972,418	$	15,338,582

Net Income	$	2,292,300	$	2,132,781

Basic and Diluted Net
Income Per Share	$	0.44	$	0.41