BOSTON OMAHA CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED ENDSEPTEMBER 30ED March 31, 2021, 2017

TABLE OF CONTENTS

References in this Quarterly Report on Form 10-Q to “the “Company” Company,” “our Company,” “we,” “us,” ”our”and “Boston Omaha” refer to Boston Omaha Corporation and its consolidated subsidiaries, unless otherwise noted.

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

Consolidated Financial Statements

Unaudited

For the Three and Nine Months Ended September 30, 2017 and 2016

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

Consolidated Balance SheetsFinancial Statements

Unaudited

ASSETSFor the Three Months Ended March 31, 2021 and 2020

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

See accompanying notes to the unaudited consolidated financial statements.

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

See accompanying notes to the unaudited consolidated financial statements.

Unaudited

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

See accompanying notes to the unaudited consolidated financial statements.LIABILITIES AND STOCKHOLDERS' EQUITY

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

See accompanying notes to the unaudited consolidated financial statements.

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

See accompanying notes to the unaudited consolidated financial statements.

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

See accompanying notes to the unaudited consolidated financial statements.

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

Consolidated Statements of Operations

See accompanying notes to the unaudited consolidated financial statements.

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

See accompanying notes to the unaudited consolidated financial statements.

BOSTON OMAHA CORPORATION

and SUBSIDIARIES

Consolidated Statements of Cash Flows

Unaudited

Notes to Unaudited Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2017March 31, 2021 and 2020

NOTE 1.     ORGANIZATION AND BACKGROUND

Boston Omaha was organized on August 11, 2009 with present management taking over operations in February 2015. Our operations include (i) our outdoor advertising business with multiple billboards across Alabama, Florida, Georgia, Illinois, Iowa, Kansas, Missouri, Nebraska, Nevada, Virginia, West Virginia, and Wisconsin; (ii) our insurance business that specializes in surety bond underwriting and brokerage,brokerage; (iii) our broadband business that provides high-speed broadband services to its customers, and (iii) equity method(iv) our minority investments primarily in several real estate services, homebuilding, and real estate service companies.banking. Our billboard operations are conducted through our subsidiary, Link Media Holdings, LLC, and our insurance operations are conducted through our subsidiary, General Indemnity Group, LLC, and our broadband operations are conducted through our subsidiary, Fiber is Fast, LLC.

We completed an acquisition of an outdoor advertising business and entered the outdoor advertising industry on June 19, 2015. During From 2015 and 2016, through 2021, we have completed fiveeighteen additional acquisitions of outdoor advertising businesses. From January through September 2017, we completed six more acquisitions of outdoor advertising businesses.

On April 20, 2016, we completed an acquisition of a surety bond brokerage business. On December 7, 2016, we acquired a fidelityfidelity and surety bond business; and, on insurance company. From July 11,through November 2017 we completed anthe acquisition of anothertwo surety brokerage businesses and acquired a majority stake in a third surety brokerage business, thus expanding our operations in insurance. During the first quarter of 2020, we purchased the non-controlling interest in our third surety brokerage business from the non-controlling owner.

On March 10, 2020, we completed the acquisition of a rural broadband internet provider located in Arizona.  On December 29, 2020, we completed the acquisition of a second broadband internet provider located in Utah.

In our opinion, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of unaudited consolidated financial position and the unaudited consolidated results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the interim unaudited consolidated financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the years ended December 31, 2016 2020 and 20152019 as reported in our Annual Report on Form 10-K,10-K, filed with the Securities and Exchange Commission, which we refer to as the “SEC,” on March 24, 2017, 29, 2021, have been omitted.

NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy

The financial statements of Boston Omaha Corporation include the accounts of the Company and its wholly-ownedour consolidated subsidiaries, as follows:which are comprised of voting interest entities in which we have a controlling financial interest and variable interest entities in which we are the primary beneficiary in accordance with ASC 810,Consolidation. The equity attributable to non-controlling interests in subsidiaries is shown separately in the accompanying consolidated balance sheets.

Our consolidated subsidiaries include:

Link Media Holdings, LLC which we refer to as “LMH”

Link Media Alabama, LLC which we refer to as “LMA”

Link Media Florida, LLC which we refer to as “LMF”

Link Media Wisconsin, LLC which we refer to as “LMW”

Link Media Georgia, LLC which we refer to as “LMG”

Link Media Midwest, LLC which we refer to as “LMM”

Link Media Omaha, LLC which we refer to as “LMO”

Link Media Properties, LLC which we refer to as “LMP”

Link Media Southeast, LLC which we refer to as “LMSE”

Link Media Services, LLC which we refer to as “LMS”

General Indemnity Group, LLC which we refer to as “GIG”

General Indemnity Direct Insurance Services, LLC which we refer to as “GIDIS”

General Indemnity Insurance Company PCC, LLC which we refer to as “GIIC”

The Warnock Agency, Inc. which we refer to as “Warnock”

United Casualty and Surety Insurance Company which we refer to as “UC&S”“UCS”

Surety Support Services, Inc. which we refer to as “SSS”

South Coast Surety Insurance Services, LLC which we refer to as “SCS”

All significant intercompany profits, losses, transactions and balances have been eliminated in consolidation.Boston Omaha Investments, LLC which we refer to as “BOIC”

Boston Omaha Asset Management, LLC which we refer to as “BOAM”

BOAM BFR LLC which we refer to as "BOAM BFR"

BOC DFH, LLC which we refer to as “BOC DFH”

BOC OPS LLC which we refer to as "BOC OPS"

BOC Yellowstone which we refer to as "BOC Yellowstone"

BOC Yellowstone II LLC which we refer to as “BOC Yellowstone II”

Fiber is Fast, LLC which we refer to as "FIF"

FIF AireBeam LLC, which we refer to as “AireBeam”

FIF Utah LLC, which we refer to as “FIF Utah”

Yellowstone Acquisition Company, which we refer to as "Yellowstone"

BOSTON OMAHA CORPORATION
and SUBSIDIARIES

And SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2017March 31, 2021 and 2020

NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reclassifications

Revenues

Certain accountsThe majority of our advertising revenues are derived from contracts for advertising space on billboard structures and are accounted for under Financial Accounting Standards Board, which we refer to as the “FASB,” Accounting Standards Codification, which we refer to as “ASC,” 606,Revenuefrom Contracts with Customers. 

Premium revenues derived from our insurance operations are subject to ASC 944,Financial Services – Insurance.

Revenue Recognition

Billboard Rentals

We generate revenue from outdoor advertising through the leasing of advertising space on billboards. The terms of the contracts range from less than one month to three years and are generally billed monthly. Revenue for advertising space rental is recognized on a straight-line basis over the term of the contract. Advertising revenue is reported net of agency commissions. Agency commissions are calculated based on a stated percentage applied to gross billing revenue for operations. Payments received in advance of being earned are recorded as deferred revenue.    

Another component of billboard rentals consists of production services which include creating and printing advertising copy. Contract revenues for production services are accounted for under ASC 606,Revenuefrom Contracts with Customers. Revenues are recognized at a point in time upon satisfaction of the contract, which is typically less than one week. 

Deferred Revenues

We record deferred revenues when cash payments are received in advance of being earned or when we have an unconditional right to consideration before satisfying our performance obligation. The term between invoicing and when a payment is due is not significant. For certain services we require payment before the product or services are delivered to the customer. The balance of deferred revenue is considered short-term and will be recognized in revenue within twelve months.

Premiums and Unearned Premium Reserves

Premiums written are recognized as revenues based on a pro-rata daily calculation over the respective terms of the policies in-force. The cost of reinsurance ceded is initially written as prepaid reinsurance premiums and is amortized over the reinsurance contract period in proportion to the amount of insurance protection provided. Premiums ceded of $152,255 and $100,114 for the three months ended March 31, 2021 and 2020, respectively, are included within “Premiums earned” in our consolidated statements of operations.

Commissions

We generate revenue from commissions on surety bond sales and account for commissions under ASC 606. Insurance commissions are earned from various insurance companies based upon our agency agreements with them. We arrange with various insurance companies for the provision of a surety bond for entities that require a surety bond. The insurance company sets the price of the bond. The contract with the insurance company is fulfilled when the bond is issued by the insurance agency on behalf of the insurance company. The insurance commissions are calculated based upon a stated percentage applied to the gross premiums on bonds. Commissions are recognized at a point in time, on a bond-by-bond basis as of the policy effective date and are generally nonrefundable.

Broadband Revenues

Broadband revenue is derived principally from internet services and is recognized on a straight-line basis over the term of the contract in the prior period financial statements have been reclassified for comparative purposesthe services are rendered.  Revenue received or receivable in advance of the delivery of services is included in deferred revenue.

BOSTON OMAHA CORPORATION
and SUBSIDIARIES

Notes to conform withUnaudited Consolidated Financial Statements

For the presentation in the current period financial statements.Three Months Ended March 31, 2021 and 2020

NOTE 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss and Loss Adjustment Expenses

Unpaid losses and loss adjustment expenses represent estimates for the ultimate cost of unpaid reported and unreported claims incurred and related expenses. Estimates for losses and loss adjustment expenses are based on past experience of investigating and adjusting claims and consideration of the level of premiums written during the current and prior year. Since the reserves are based on estimates, the ultimate liability may differ from the estimated reserve. The effects of changes in estimated reserves are included within cost of insurance revenues in our results of operations in the period in which the estimates are updated. The reserves are included within accounts payable and accrued expenses in our consolidated balance sheets.

Variable Interest Entities (VIEs)

We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. Our determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

We analyze any investments in VIEs to determine if we are the primary beneficiary. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE. Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative approach focused on identifying which reporting entity has both: (i) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.

We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct operating decisions and activities. In addition, we consider the rights of other investors to participate in those decisions. We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion continually. We consolidate any VIE of which we are the primary beneficiary.

Income Taxes

We compute our year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjust the provision for discrete tax items recorded in the period.

Class A Common Stock Subject to Possible Redemption

As discussed in Note 18, all of the 13,598,898 Class A Common Stock sold as part of the Units in Yellowstone's Public Offering contain a redemption feature which allows for the redemption of such public shares in connection with the Yellowstone's liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to Yellowstone's second amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480.

Yellowstone recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit. Yellowstone's Common A Common Stock subject to redemption is included within "Redeemable Noncontrolling Interest" within our consolidated Balance Sheets. 

Warrants Liability

We account for warrants for shares of Yellowstone's common stock that are not indexed to Yellowstone's own stock as liabilities at fair value on the balance sheet. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized in our statement of operations. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the Public Warrants issued in connection with Yellowstone's Public Offering has been measured based on the listed market price of such Warrants (see Note 9).

BOSTON OMAHA CORPORATION
and SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

For the Three Months Ended March 31, 2021 and 2020

NOTE 3.     RESTRICTED CASH

Restricted cash consists of the following:

At December 31, 2016, deposit on business acquisition consistsThe following table sets forth a reconciliation of $2,950,000 depositedcash, cash equivalents, and restricted cash reported in the consolidated statements of cash flows that agrees to the seller’s escrow account fortotal of those amounts as presented in the acquisitionconsolidated statements of billboard structures and related assets from Clear Channel Outdoor, Inc. (See Note 6.)cash flows.

NOTE 4.     ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

BOSTON OMAHA CORPORATION
and SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

For the Three Months Ended March 31, 2021 and 2020

NOTE 5.     PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

BOSTON OMAHA CORPORATION

And SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

Depreciation expense for the three months ended March 31, 2021 and 2020 was $1,146,804 and $831,510, respectively. For the Three three months ended March 31, 2021 and Nine Months Ended September 30, 2017

NOTE 5.     PROPERTY AND EQUIPMENT (Continued)

Through the third quarter of 2017, our subsidiary, LMH recorded a $361,326 loss2020, we realized losses on the disposition of assets. The loss on disposition wasassets in relation to the replacementamount of three digital billboards which required replacement ahead of schedule, the removal of three billboard structures,$35,567 and the sale of vehicles and equipment which were from JAG, for a $38,000 note receivable.$18,919 , respectively.

NOTE 6.BUSINESS ACQUISITIONS

NOTE 6.     2021 AcquisitionsBUSINESS ACQUISITIONS

2017 Acquisitions

During the nine months ended September 2017,first quarter of 2021, we completed six business acquisitionsone acquisition of billboards and relatedbillboard assets and one insurance company acquisition. These acquisitions were accounted for as a business combinationscombination under the provisions of ASC 805. A summary of the acquisitions and revenues and earnings of each since the acquisition dates included in the consolidated statements of operations for the three months and nine months ended September 30, 2017 is provided in the table below.

Clear Channel Outdoor, Inc.Billboard Acquisition

On January 9, 2017, 26, 2021, our subsidiary, LMG entered into a purchase agreement with Clear Channel Outdoor, Inc., which we refer to as “CCO” for the purchase of thirty-seven billboard structures and related assets. The assetsLMH, acquired are located in Georgia. The cash purchase price for the acquired business was $2,983,444, of which $2,950,000 had been deposited into the seller’s escrow account in November 2016 and was subsequently applied to the purchase price. The assets were acquired for the purpose of expanding our presence in the outdoor advertising market. The preliminary purchase price allocation is based on internal information and will be revised when an independent appraisal has been completed. Finite-lived intangible assets consist of customer relationships and permits. Amortization is computed over the average period of expected benefit, determined from internal information.

Hartlind Outdoor, LLC

On January 31, 2017, our subsidiary, LMW entered into a purchase agreement with Hartlind Outdoor, LLC, which we refer to as “Hartlind” for the purchase of ninety-one billboard structures and related assets. The assets acquired are located in Wisconsin. The cash purchase price for the acquired business was $2,817,000. The assets were acquired for the purpose of expanding our presence in the outdoor advertising market. The preliminary purchase price allocation is based on internal information and will be revised when an independent appraisal has been completed. Finite-lived intangible assets consist of customer relationships, permits, and a noncompetition agreement. We amortize the noncompetition agreement according to the terms of the asset purchase agreement. Amortization of the other finite-lived intangible assets is computed over the average period of expected benefit, determined from internal information. We also acquired six easements. The easements are permanent easements which grant us the right to use real property not owned by us. Since these rights are perpetual, they are not amortized.

Southeastern United States

Subsequent to the CCO business acquisition, we made additional business acquisitions in the Southeastern United States as presented below.

BOSTON OMAHA CORPORATION

And SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2017

NOTE 6.     BUSINESS ACQUISITIONS (Continued)

2017 Acquisitions (Continued)

Corey Companies, Inc.

On June 8, 2017, our subsidiaries, LMG and LMA entered into a purchase agreement with Corey Companies, Inc., which we refer to as “Corey,” for the purchase of thirty billboard structures, a fifty percent interest in three billboard structures, and related assets. The assets acquired are located in Georgia and Alabama. The cash purchase price for the acquired business was $2,991,314. The assets were acquired for the purpose of expanding our presence in the outdoor advertising market. The preliminary purchase price allocation is based on internal information and will be revised when an independent appraisal has been completed. Finite-lived intangible assets consist of customer relationships and permits. Amortization of the finite-lived intangible assets is computed over the average period of expected benefit, determined from internal information.

Vision Outdoor Media, LLC

On June 16, 2017, our subsidiary, LMG entered into a purchase agreement with Vision Outdoor Media,Thomas Outdoors, LLC, which we refer to as “Vision,” for the purchase of three“Thomas”, 238 billboard structures and related assets. The assets acquired are located in Georgia. The assets were acquiredKansas for the purpose of expanding our presence in the outdoor advertising market. The cash purchase price for the acquired business was $3,199,036. The preliminary purchase price allocation is based on internal information and will be revised when an independent appraisal has been completed. Finite-lived intangible assets consist of customer relationships and permits. Amortization of the finite-lived intangible assets is computed over the average period of expected benefit, determined from internal information.

View Media, LLC

On July 11, 2017, our subsidiary, LMG entered into a purchase agreement for the purchase of certain billboard assets. The cash purchase price of the$6,102,508 paid in cash. The acquisition was $623,596. The assets were acquiredcompleted for the purpose of expanding our presence in the outdoor advertising market in the SoutheasternMidwestern United States.The preliminary purchase price allocation is based on internal information and will be revised when an independent appraisal has been completed. Finite-lived intangible assets consist of customer relationships and permits. Amortization of the finite-lived intangible assets is computed over the average period of expected benefit, determined from internal information.

In addition, we also made a small acquisition for a cash purchase price of $900,000.

BOSTON OMAHA CORPORATION

And SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2017

NOTE 6.     BUSINESS ACQUISITIONS (Continued)

2017 Acquisitions (Continued)

Insurance Acquisition

Surety Support Services, Inc.

On July 11, 2017, our subsidiary, GIG entered into a purchase agreement for the purchase of 100% of the stock of an insurance brokerage company. The purchase price of the stock was $450,000, of which $22,500 was paid at closing, with $427,500 due in 2018. The stock was acquired for the purpose of expanding our presence in the insurance market in the United States. The purchase price allocation is based on internal information.

Finite-lived intangible assets consist of customer relationships and a non-competition agreement. We amortize the non-competition agreement according to the terms of the asset purchase agreement. For other finite-lived assets, amortization is computed over the average period of expected benefit determined from internal information.

The following tables present the 2017 business acquisitions for the nine months ended September 30, 2017, amortization of finite intangible assets, revenues and earnings included in consolidated net loss for the three months and nine months ended September 30, 2017, and the costs of acquisition included in professional fees on our consolidated statement of operations for the three months and nine months ended September 30, 2017.