ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward- Looking Statements
Certain statements in this Annual Report, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, constitute forward-looking statements. See “Forward-Looking Statements” immediately prior to Item 1 of Part I of this Annual Report for factors relating to these statements and “Risk Factors” in Item 1A of Part I of this Annual Report for a discussion of certain risk factors applicable to our business, financial condition, results of operations, liquidity or prospects
Any forward-looking statements made by us in this document speak only as of the date on which they are made. We are under no obligation, and expressly disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.
The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our consolidated financial statements and accompanying notes included in this Annual Report and the audited consolidated financial statements and notes thereto as of and for the year ended March 31, 2025, and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our 2025. Our results of operations for the fiscal year ended March 31, 2025, may not be indicative of our future results.
Overview
The Company was previously a specialized consumer finance company focused on subprime auto lending. After the Company announced the restructuring of operations in November 2023, the Company now operates as a holding company which owns an indirect controlling interest in Amplex, a broadband company located in northwest Ohio. The Company, which is based in Omaha, Nebraska, continues to pursue additional controlling interests in other companies and sectors yet to be determined.
Change in Operating Strategy
On November 13, 2023, the Company entered into the Westlake Purchase Agreement pursuant to which the Company has agreed to sell substantially all of the Company's finance receivables and all of its repossessed assets to Westlake Financial. On April 26, 2024, the transactions contemplated by the Westlake Purchase Agreement closed.
On June 15, 2024, the Company closed upon the acquisition of 51% of the issued and outstanding common shares of Amplex, which was placed into a newly formed entity Amplex Holdings. Amplex is a provider of broadband internet, voice over internet protocol (VOIP), and video services within service areas located primarily in Northwest and North Central Ohio. As of March 31, 2025, Amplex had approximately 13,000 broadband customers (4,400 fiber subscribers) and over 13,000 fiber passings completed.
Concurrently, on June 15, 2024, the Company converted the outstanding principal of $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the Share Purchase Price of $1,792.55 and purchased 1,674 shares of Amplex common stock at the same Share Purchase Price for a purchase price of $3.0 million. These transactions concurrently executed at the Transaction Closing Date increased the Company's ownership in Amplex to 56.5%. During
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the year ended March 31, 2025, the Company entered into a Subscription Agreement whereby the Company invested an additional $4.5 million into Amplex, increasing the Company's ownership percentage to 61%.
How We Generate Revenues and Evaluate our Business
The Company generates revenues primarily its equity interest in Amplex Holdings, which derives its revenues from Amplex's operations. Amplex generates revenues through customer contracts and provides wireless internet services, fiber internet services, video, and other services including voice over internet protocol (VoIP) services. Amplex fulfills obligations and recognizes revenue under a contract with a customer by transferring products and services in exchange for consideration from the customer. Payments received or consideration billed in advance are recorded as deferred revenue. Further, Amplex records accounts receivable for services billed in advance.
Operating income (loss) is a key metric that we use to evaluate segment operating performance and to determine resource allocation between segments. We define operating income (loss) as revenues less operating expenses. Operating expenses for Amplex include the cost of wireless and fiber internet services, cost of other revenue, plant specific and nonspecific operations expenses, general and administrative expenses, and depreciation and amortization expenses.
Result of Operations
Fiscal Year Ended March 31, 2025 compared to Fiscal Year Ended March 31, 2024
Revenues of Continuing Operations
For the fiscal year ended March 31, 2025 and 2024, our revenues in dollars and as a percentage of total revenues were as follows:
For the Year Ended March 31, Variance
(In thousands) 2025 2024 $ Change % Change
Revenue
Revenue totaled $9.4 million for the fiscal year ended March 31, 2025, compared to $0 for the fiscal year ended March 31, 2024. The increase in revenue for the fiscal year ended March 31, 2025 is primarily due to revenue now received by the Company from additional services now now provided by Amplex that were not provided in the prior period. Through acquiring a majority interest in Amplex Holdings, which holds 100% of Amplex, the Company now indirectly through Amplex provides wireless internet services, fiber internet services, and other services including VOIP telephone and video streaming. Further, as a result of the Westlake Purchase Agreement in April of 2024 and the Amplex Acquisition in June of 2024, the Company's revenue is not comparable on a year-over-year basis.
Expenses of Continuing Operations
For the fiscal years ended March 31, 2025 and 2024, our expenses in dollars and as a percentage of total expenses were as follows:
For the Year Ended March 31, Variance
(In thousands) 2025 2024 $ Change % Change
Operating expenses
Cost of wireless and fiber internet services 548 - 548 100 %
Cost of Wireless and Fiber Internet Services and Cost of Other Revenue of Continuing Operations
Cost of wireless and fiber internet services totaled $0.5 million for the fiscal year ended March 31, 2025, compared to $0 for the fiscal year ended March 31, 2024. In addition, cost of other revenue totaled $0.6 million for the fiscal year ended March 31, 2025 compared to $0 for the fiscal year ended March 31, 2024. As discussed above, the Company now indirectly
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through Amplex provides wireless internet, fiber internet, and other services in conjunction with its acquisition of a majority interest in Amplex Holdings, which holds 100% of Amplex. Therefore, the cost of wireless and fiber internet services and cost of other revenue increased during the fiscal year ended March 31, 2025 and when compared to the prior period. As a result of the Westlake Purchase Agreement in April of 2024 and the Amplex Acquisition in June of 2024, the Company's cost of wireless and fiber internet services and cost of other revenue is not comparable on a year-over-year basis.
Plant Specific and Plant Nonspecific Operations of Continuing Operations
Plant specific and plant nonspecific operations expenses totaled $2.0 million for the fiscal year ended March 31, 2025, compared to $0 for the fiscal year ended March 31, 2024. Due to the Amplex Acquisition, the Company began providing additional services during the fiscal year ended March 31, 2025 that were not provided in prior periods. Therefore, plant specific and nonspecific operations expenses increased for the fiscal year ended March 31, 2025 when compared to the prior period. As a result of the Westlake Purchase Agreement in April of 2024 and the Amplex Acquisition in June of 2024, the Company's plant specific and nonspecific operations expenses are not comparable on a year-over-year basis.
General and Administrative Expenses of Continuing Operations
General and administrative expenses totaled $10.8 million for the fiscal year ended March 31, 2025, compared to $6.2 million fiscal year ended March 31, 2024. The increase in general and administrative expenses for the fiscal year ended March 31, 2025 is primarily due to additional professional fees and restructuring expenses incurred in relation to the Amplex Acquisition, which was closed by the Company during the period. As a result of the Westlake Purchase Agreement in April of 2024 and the Amplex Acquisition in June of 2024, the Company's general and administrative expenses are not comparable on a year-over-year basis.
Depreciation and Amortization Expenses of Continuing Operations
Depreciation and amortization expense totaled $2.0 million for the fiscal year ended March 31, 2025, compared to $0.1 million for the fiscal year ended March 31, 2024. The increase in depreciation and amortization expense for the fiscal year ended March 31, 2025 is primarily due to an increase in property, plant, and equipment and intangible assets resulting from Amplex Acquistion. With the Westlake Purchase Agreement in April of 2024 and the Amplex Acquisition in June of 2024, the Company's depreciation and amortization expense is not comparable on a year-over-year basis.
Emigration Tax Expense of Continuing Operations
Emigration tax expense was $1.7 million for the fiscal year ended March 31, 2025 compared to $0 for the fiscal year ended March 31, 2024. The increase in emigration tax expense in the current period is due to the Company completing its continuation and domestication from a company incorporated under the laws of British Columbia to a corporation incorporated under the laws of the State of Delaware as of April 18, 2024.
Loss on Dissenting Shareholders' Liability of Continuing Operations
Loss on dissenting shareholders' liability was $1.1 million for the fiscal year ended March 31, 2025 compared to $0 for the fiscal year ended March 31, 2024. The increase in loss on dissenting shareholders' liability is a result of the change in fair value of the liability during the period that represents the amount owed to dissenting shareholders from the sale of assets to Westlake Financial. As of March 31, 2025, the Company settled the total amount owed to the dissenting shareholders.
Discontinued Operations
Income from discontinued operations was $0.5 million for the fiscal year ended March 31, 2025 compared to the loss of $14.7 million for the fiscal year ended March 31, 2024. The increase in income for the fiscal year ended March 31, 2025 is primarily attributable to a decrease in general and administrative expenses and a decrease in credit losses due to the sale of the finance receivables and repossessed assets to Westlake Financial when compared to the fiscal year ended March 31, 2024.
Liquidity and Capital Resources
During the fiscal year ended March 31, 2025, the Company closed on the Share Purchase Agreement with Amplex, in which the Company purchased 51% of the issued and outstanding common shares, no par value per share, of Amplex and to make payment to holders of options for Amplex’s common shares in consideration of cancellation of such options for total purchase consideration of $18.4 million. In conjunction with the closing of the Share Purchase Agreement, the Company converted the outstanding principal and accrued interest of approximately $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the Share Purchase Price of $1,792.55 and purchased an additional 1,674 shares of Amplex common stock at the share purchase price of $1,792.55 per share for a purchase price of $3.0 million. During the quarter ended December 31, 2024, the Company entered into a Subscription Agreement whereby the Company invested an additional $4.5 million into Amplex, increasing the Company's ownership percentage to 61%. For further details of the Amplex Acquisition, refer to Note 3, "Business Combinations" of the Notes to Consolidated Financial Statement
The Company's cash flows are summarized as follows:
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Fiscal Year Ended March 31,
Net cash (used in) provided by operating activities $ (1,900 ) $ 1,827
Net cash provided by investing activities 12,548 45,801
Net cash used in financing activities (4,801 ) (29,100 )
Our major source of liquidity and capital is cash generated from our ongoing operations and our borrowing capacity under the RUS Loan.
Assuming business operations continue as currently structured, we believe our cash balance, expected operating cash flows, and available borrowing capacity under the RUS Loan will be sufficient to meet our cash needs and planned expenditures over the next 12 months. Our access to, and the availability of, financing on acceptable terms in the future will be affected by many factors including overall liquidity in the capital or credit markets, the state of the economy and our credit strength as viewed by potential lenders. We cannot provide assurances that we will have future access to the capital or credit markets on acceptable terms.
Net cash (used in) provided by operating activities decreased for the fiscal year ended March 31, 2025 when compared to the fiscal year ended March 31, 2024. The decrease in cash (used in) provided by operating activities was primarily due to a decrease in net loss of $15 million, noncash charge of $1.1 million for the loss on dissenting shareholders' liability, and net change in operating assets and liabilities of $0.5 million, partially offset by a decrease in cash provided by operating activities from discontinued operations of $22.6 million. Further, as a result of the Westlake Purchase Agreement in April of 2024 and the Amplex Acquisition in June of 2024, the Company's change in cash provided by operating activities is not comparable on a year-over-year basis.
Net cash provided by investing activities decreased for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. The decrease in net cash provided by investing activities is primarily due to $18.1 million of cash paid for the Amplex Acquisition in June 2024, partially offset by an increase in net cash provided by investing activities from discontinued operations of $85.1 million for the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. As a result of the Westlake Purchase Agreement in April of 2024 and the Amplex Acquisition in June of 2024, the Company's change in cash provided by investing activities is not comparable on a year-over-year basis.
Net cash used in financing activities decreased during the fiscal year ended March 31, 2025 compared to the fiscal year ended March 31, 2024. The decrease was primarily due to the repurchase of $5.6 million worth of shares of common stock held by dissenting shareholders, offset by the proceeds of long-term debt of $0.6 million during the fiscal year ended March 31, 2025.
We have no material commitments for capital expenditures as of March 31, 2025. Part of our growth strategy, however, is to acquire businesses. We would anticipate funding such activity through cash on hand, the issuance of debt, Common Stock, restricted stock units, and warrants for our Common Stock or a combination thereof.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.
Significant Developments
None.
Critical Accounting Policies and Estimates
Note 2, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Our acquisition of a controlling interest in Amplex closed June 15, 2024. Our critical accounting policies relate to business combinations.
We account for our business combinations using the acquisition accounting method, which requires us to determine the fair value of identifiable assets acquired and liabilities assumed, including any contingent consideration, to properly allocate the purchase price to the individual assets acquired and liabilities assumed and record any residual purchase price as goodwill. We identify and attribute fair values and estimated lives to the intangible assets acquired and allocate the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. If the initial accounting for the business combination has not been completed by the end of the reporting period in which the business combination occurs, provisional amounts are reported to present information about facts and circumstances that existed as of the acquisition date. Once the measurement period ends, which in no case extends beyond one year from the acquisition date, revisions to the accounting for the business combination are recorded in earnings. All acquisition-related costs, other than the costs to issue debt or equity securities, are accounted for as expenses in the period in which they are incurred.
The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require
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the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. A critical accounting estimate is an estimate that: (i) is made in accordance with GAAP, (ii) involved a significant level of estimation uncertainty and (iii) has had or is reasonably likely to have a material impact on the Company's financial condition or results of operations. The Company’s critical accounting estimates and assumptions affecting the financial statements relate to the fair value of assets acquired and liabilities assumed. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates and asset lives. We base our fair value estimates on assumptions we believe are reasonable but recognize that the assumptions are inherently uncertain.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Not applicable.
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Item 8. Financial Statements and Supplementary Data
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Report of Independent Registered Public Accounting Firm0F
To the Shareholders, Board of Directors, and Audit Committee
Old Market Capital Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Old Market Capital Corporation and subsidiaries (the “Company”) as of March 31, 2025 and 2024, the related consolidated statements of operations, redeemable non-controlling interest and shareholders' equity, and cash flows for each of the years in the two-year period ended March 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Acquired Property, Plant and Equipment, Trade Name and Customer Relationships
As described in Note 3 to the financial statements, on June 15, 2024, the Company acquired a majority of the issued and outstanding common shares Amplex Electric, Inc. The acquisition was accounted for using the acquisition method of accounting, which requires, among other things, that identifiable assets acquired be recognized at their fair values as of the acquisition date. Such acquired assets included property, plant and equipment, a trade name and customer relationships, which were valued using valuation models and methods. We identified the Company’s fair value estimates of the acquired property, plant and equipment, a trade name and customer relationships as a critical audit matter. The principal considerations for that determination included the level of subjectivity, judgment, and audit effort involved in evaluating management’s fair value estimates, particularly assumptions related to the forecasted revenues and cash flows, attrition rate, discount rate, and market-based royalty rate, as well as the involvement of an auditor’s specialist.
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The primary procedures we performed to address this critical audit matter included the following:
•
We obtained an understanding of management’s process for determining the fair value measurements of the acquired property, plant and equipment, trade name and customer relationships.
•
We evaluated forward-looking assumptions, such as the forecasted revenues and cash flows, attrition rate, discount rate, and market-based royalty rate used by management, by performing procedures that included, but were not limited to, comparisons to industry and historical performance data, and sensitivity analysis to assess their reasonableness.
•
Utilizing internal valuation specialists, we evaluated the significant assumptions and methods used in developing the fair value estimates of the property, plant and equipment, trade name and customer relationships, including:
o
We evaluated the appropriateness of the valuation models and methodologies used by management in making the estimate.
o
We evaluated the reasonableness of the key assumptions used by management related to the revenue and cash flow projections and attrition.
o
We developed an independent calculation of the discount rate for comparison with the rate used by management.
o
We reperformed the calculation of the fair value of the property, plant and equipment.
/s/ Forvis Mazars, LLP
We have served as the Company’s auditor since 2022.
Atlanta, Georgia
June 27, 2024
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Old Market Capital Corporation
Consolidated Balance Sheets
(In thousands)
Assets
Current assets:
Materials and supplies 968 -
Income taxes receivable 902 902
Prepaid expenses and other assets 941 373
Assets of discontinued operations - 39,441
Operating lease right-of-use assets 2,963 65
Property, plant, and equipment, net 30,945 75
Intangible assets, net 3,673 -
Other assets 375 -
Liabilities, redeemable non-controlling interest and shareholders' equity
Current liabilities:
Accrued expenses and other current liabilities 588 335
Current portion of operating lease liabilities 286 -
Contract liability 569 -
Current portion long-term debt 69 -
Liabilities of discontinued operations 90 497
Deferred income taxes 4,306 -
Long-term debt 759 -
Operating lease liabilities 2,685 65
Commitments and contingencies (Note 10)
Redeemable non-controlling interest 13,880 -
Shareholders’ equity:
Preferred stock, no par: 5,000 shares authorized; none issued - -
Additional paid-in capital 41,645 -
See accompanying Notes to the Consolidated Financial Statements.
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Old Market Capital Corporation
Consolidated Statements of Operations
(Inthousands, except per share amounts)
Year ended March 31,
Revenue
Wireless internet services $ 5,432 $ -
Fiber internet services 2,600 -
Other revenue 1,334 -
Total revenue: 9,366 -
Operating expenses
Depreciation and amortization 2,007 84
Plant specific operations 1,240 -
Plant nonspecific operations 771 -
Cost of other revenue (exclusive of depreciation shown separately) 638 -
Other income (expense)
Emigration tax (expense) (1,711 ) -
(Loss) on dissenting shareholders' liability (1,103 ) -
Gain on sale of assets 29 -
Gain on lease settlement 14 -
Other income (expense) 66 -
Total other income (expense), net (1,329 ) 145
(Loss) before income taxes (8,288 ) (6,098 )
Income tax (expense) benefit (63 ) -
(Loss) from continuing operations, net of tax (8,351 ) (6,098 )
Income (loss) from discontinued operations, net of tax 3,038 (14,703 )
Less: Net (loss) attributable to redeemable noncontrolling interest (164 ) -
Net (loss) attributable to common shareholders $ (5,149 ) $ (20,801 )
Net (loss) per share attributable to common shareholders:
See accompanying Notes to Consolidated Financial Statements.
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Old Market Capital Corporation
Consolidated Statements of Redeemable Non-Controlling Interest and Shareholders' Equity
(In Thousands)
Shares Amount
Issuance of restricted stock awards - 17 - - - - -
Repurchase of common stock from dissenting shareholders - - - (5,629 ) 5,629 - -
Share-based compensation - 42 - - 373 - 373
Acquisition of Amplex 17,644 - - - - - -
Purchase of additional shares of Amplex (3,600 ) - - - 3,600 - 3,600
Common Stock Treasury Stock Retained Earnings Total OMCC Shareholders' Equity
Shares Amount
Cumulative effect of adoption of ASU 2016-13, net of tax - - - (210 ) (210 )
Share-based compensation - 44 - - 44
See accompanying Notes to Consolidated Financial Statements.
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Old Market Capital Corporation
Consolidated Statements of Cash Flows
(In Thousands)
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For the Year Ended March 31,
Cash flows from operating activities:
Depreciation and amortization expense 2,007 84
Amortization of debt issuance costs - 164
Loss on dissenting shareholders' liability 1,103 -
Gain on sale of assets (29 ) 89
Share-based compensation 473 44
Impairment of operating lease right-of-use assets 56 -
Deferred income taxes 63 -
Provision for credit losses 2 -
Amortization of operating lease right-of-use assets 109 59
Gain on lease settlement (14 ) -
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable 5 -
Materials and supplies (431 ) -
Prepaid expenses and other assets 124 54
Accounts payable, accrued expenses, and other liabilities 441 (509 )
Operating lease liabilities (143 ) (46 )
Income taxes receivable - 44
Other assets (375 ) -
Net cash (used in) provided by operating activities (1,900 ) 1,827
Cash flows from investing activities:
Cash paid for acquisition of Amplex, net of cash acquired (18,143 ) (300 )
Payments for property, plant, and equipment (8,416 ) -
Proceeds from the disposal of property, plant, and equipment 95 (13 )
Net cash provided by investing activities 12,548 45,801
Cash flows from financing activities:
Proceeds from RUS Loan 615 -
Proceeds from Bank Equipment Financing Loans 248 -
Payment on Bank Loans (35 ) -
Repurchase of dissenting shares (5,629 ) -
Cash used in financing activities from discontinued operations - (29,100 )
Net cash used in financing activities (4,801 ) (29,100 )
Net increase in cash and cash equivalents 5,847 18,528
Cash, cash equivalents and restricted cash at beginning of period 18,982 454
Cash, cash equivalents and restricted cash at end of period $ 24,829 $ 18,982
Cash and cash equivalents at beginning of period $ 18,982 $ 454
Cash and cash equivalents at end of period $ 24,516 $ 18,982
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Supplemental disclosure of cash flow information:
Supplemental schedule of noncash investing and financing activities:
Purchase of property, plant, and equipment included in accounts payable $ 403 -
Additional investments in controlled entity (Amplex) $ 7,500 -
See accompanying Notes to Consolidated Financial Statements.
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Notes to the Consolidated Financial Statements
Note 1. Organization
Effective as of September 27, 2024, the Company amended its Certificate of Incorporation to change its name from Nicholas Financial, Inc. to Old Market Capital Corporation by filing a Certificate of Amendment to Certificate of Incorporation with the Delaware Secretary of State. Old Market Capital Corporation (f/k/a Nicholas Financial, Inc. (“NFI”) and now "OMCC" and together, with its wholly-owned and majority-owned subsidiary, the ("Company") is a holding company incorporated under the laws of the State of Delaware with one wholly-owned United States subsidiary, Nicholas Data Services, Inc. ("NDS") and its controlling interest in Amplex Holdings, Inc. ("Amplex"). On April 18, 2024, OMCC completed its continuation and domestication from British Columbia to the State of Delaware by filing its Certificate of Corporate Domestication and Certification of Incorporation in the State of Delaware. As a result of the domestication, the Company's common stock par value increased from $0.00 to $0.01 on a one-for-one basis.
NDS historically was engaged in supporting and updating industry specific computer application software for small businesses located primarily in the Southeastern United States. NDS has ceased its operations; however, it continues as the interim holding company for OMCC. NFI was a specialized consumer finance company engaged primarily in acquiring and servicing automobile finance installment contracts for purchases of used and new automobiles and light trucks. NFI had also offered direct consumer loans and sold consumer finance related products. OMCC is based in Nebraska, U.S.A.
On November 13, 2023, the Company entered into a Master Asset Purchase Agreement (the "Purchase Agreement") with Westlake Services, LLC dba Westlake Financial, a California limited liability company ("Westlake Financial"), pursuant to which the Company agreed to sell substantially all of the finance receivables and all of the repossessed assets of Nicholas Financial Parent and NFI. In connection with entering into the Purchase Agreement, the Company ceased new loan originations of contracts and direct loans. On April 26, 2024, the transactions contemplated by the Purchase Agreement closed. See Note 13 for additional information.
On June 15, 2024, OMCC closed upon the acquisition of 51% of the issued and outstanding common shares of Amplex Electric, Inc, which was placed into a newly formed entity Amplex Holdings, Inc. ("Amplex"). Amplex is a provider of broadband internet, voice over internet protocol (VOIP), and video services within service areas located primarily in Northwest and North Central Ohio. As of March 31, 2025, Amplex had approximately 13,000 broadband customers (4,400 fiber subscribers) and over 12,000 fiber passings completed. Amplex's customer base includes residential and commercial customers. Amplex leases certain property (including an office building).
In conjunction with the closing of the Amplex Acquisition, the Company converted the outstanding principal and accrued interest of approximately $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the share purchase price of $1,792.55. Subsequent to the acquisition the Company contributed $3.0 million for 1,674 shares of Amplex common stock, bringing Nicholas Financial Parent's total ownership to 56.5%. The Company also investedan additional $4.5 million into Amplex for 2,583 shares, increasing the Company's ownership percentage to 61%.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of Old Market Capital Corporation and its wholly-owned and majority-owned subsidiaries, primarily consisting of the operations of Amplex. For consolidated entities that are less than wholly-owned, the third party's holding of the equity interest is presented as noncontrolling interests in the consolidated statements of redeemable noncontrolling interest and shareholders' equity. The portion of net income (loss) attributable to the noncontrolling interests is presented as net loss attributable to noncontrolling interests in the Company's consolidated statements of operations. All intercompany accounts and transactions have been eliminated in consolidation.
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The accompanying consolidated financial statements are stated in U.S. dollars and are presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
Use of Estimates
The preparation of the Company’s consolidated financial statements, in accordance with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Management evaluates its estimates, assumptions, and judgments on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company's significant estimates and assumptions include the fair value of assets acquired and liabilities assumed in business combinations, the recognition of deferred taxes, assessing the useful life and recoverability of long-lived assets including property, plant and equipment, goodwill, and intangible assets, and assessing the likelihood of adverse outcomes from pending litigation and regulatory matters. Actual results could differ from those estimates.
Cash, Cash Equivalents, and Restricted Cash
Short-term highly liquid investments with a maturity date that was 3 months or less at the time of purchase are treated as cash equivalents. Amounts earned from cash equivalents are presented separately in the consolidated statements of operations.
Restricted cash consists of cash held in a pledged deposit account received in connection with the RUS Loan (see Note 6) that is required to be held by Amplex and is able to be used by the Company solely for the purposes for which the funds were awarded to complete a project, or for such other purposes as may be approved in writing. Restricted cash is included in Prepaid expenses and other assets in the Consolidated Balance Sheets.
Accounts Receivable and Allowances for Credit Losses
Trade accounts receivable are recorded at invoiced amounts, net of allowance for credit losses, if applicable, and are unsecured and do not bear interest.
The allowance for credit losses is based on the probability of future collection under the current expect credited loss impairment model under ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Assets. The Company determines its allowance by applying a loss-rate method based on an aging schedule using the Company’s historical loss rate. The Company also considers reasonable and supportable current information in determining its estimated loss rates, such as macroeconomic trends or other factors including customers’ credit risk and historical loss experience. The adequacy of the allowance is evaluated on a regular basis. Account balances are written off after all means of collection are exhausted and the balance is deemed uncollectible. Subsequent recoveries are credited to the allowance. Changes in the allowance are recorded as adjustments to bad debt expense in the period incurred.
The allowance for credit losses for reported periods are as follows:
Year ended March 31,
Balance, beginning of period $ - $ -
Provision for credit losses 2 -
Uncollected balances written off, net of recoveries - -
Balance, end of period $ 2 $ -
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Property, Plant, and Equipment, net
Property, plant, and equipment is recorded at cost, net of accumulated depreciation. Expenditures for repairs and maintenance are charged to expense as incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. Upon disposal of assets, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized currently in the consolidated statements of operations. Depreciation of property, plant, and equipment is computed using the straight-line method over the estimated useful lives of the assets as follows:
Asset Estimated Useful Life
Equipment 5 - 7 years
Furniture and fixtures 5 - 7 years
Construction equipment 5 - 10 years
Fiber plant 15 - 30 years
Customer premise equipment 4 - 5 years
Towers 5 - 10 years
Plant in service 15 - 49 years
Acquisitions, Goodwill and Intangible Assets
Upon acquisition of a company, the Company determines if the transaction is a business combination, which is accounted for using the acquisition method of accounting. Under the acquisition method, once control is obtained from a business, the assets acquired, and liabilities assumed, including amounts attributed to noncontrolling interests, are recorded at their estimated fair values. We identify and attribute fair values and estimated lives to the intangible assets acquired and allocate the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.
Certain assumptions, estimates, and judgments are used in determining the fair value of net assets acquired, including goodwill and intangible assets, as well as determining the allocation of goodwill to the reporting units. Accordingly, the Company may obtain the assistance of third-party valuation specialists for the valuation of significant tangible and intangible assets. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management but that are inherently uncertain. Measurement period adjustments are reflected at the time identified, up through the conclusion of the measurement period, which is the time at which all information for determination of the values of assets acquired and liabilities assumed is received and is not to exceed one year from the acquisition date. The Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. Contract assets and liabilities are measured and recognized in accordance with ASC 606, Revenue from Contracts with Customers. Additionally, uncertain tax positions and tax-related valuation allowances, if any, are initially recorded in connection with a business combination as of the acquisition date. If the initial accounting for the business combination has not been completed by the end of the reporting period in which the business combination occurs, provisional amounts are reported to present information about facts and circumstances that existed as of the acquisition date. Once the measurement period ends, which in no case extends beyond one year from the acquisition date, revisions to the accounting for the business combination are recorded in earnings
With respect to the acquisition of Amplex (see Note 3), the allocation of the purchase price to the fair value of net assets acquired and liabilities assumed was finalized as of March 31, 2025 using the purchase method of accounting in accordance with ASC 805. Accordingly, there are no further adjustments to the fair values of the tangible and intangible assets acquired and liabilities assumed from the amounts disclosed in these financial statements expected as the measurement period is determined to have concluded as of March 31, 2025.
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Intangibles with definite lives are amortized on a straight-line basis over their useful lives, which generally range from 10 to 15 years. Annually, or when certain triggering events occur, the Company assesses the useful lives of its intangible assets.
Cable franchise rights represent the value attributed to our non-exclusive right to provide video services in a specified area. Spectrum licenses issued by the Federal Communications Commission (“FCC”) provide us with either an exclusive or priority access right to utilize designated radio frequency spectrum within specific geographic service areas to provide wireless communication services. While some cable franchises and spectrum licenses are issued for a fixed time period (generally ten years and up to fifteen years, respectively), renewals have been granted routinely and at a nominal cost. The Company believes it will be able to meet all requirements necessary to secure renewal of its cable franchise rights and spectrum licenses. Moreover, the Company has determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our cable franchises or spectrum licenses and, as a result, we account for cable franchise rights and spectrum licenses as indefinite-lived intangible assets.
Goodwill and indefinite-lived intangible assets are not amortized but rather, are subject to impairment testing annually, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Goodwill is evaluated for impairment based on the identification of reporting units. Our reporting unit aligns with our one reportable segment. Indicators that could trigger an interim impairment test include, but are not limited to, underperformance relative to projected future operating results, significant negative industry or economic trends, an adverse change in regulatory environment, or pending adverse litigation.
In evaluating goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of the Company's goodwill is less than its carrying value as of the assessment date. If no events, facts, or circumstances are identified during the qualitative assessment, the Company does not need to perform a quantitative impairment assessment. If the Company concludes that it is more likely than not that the fair value of the goodwill is less than its carrying value, then the Company will perform a quantitative impairment test by comparing the fair value of the goodwill with its carrying amount. If the carrying amount of goodwill exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill.
We evaluated goodwill for impairment as of January 1, 2025 using a qualitative assessment. The Company performs a qualitative assessment to determine whether there are events or circumstances which would lead to a conclusion that it is more likely than not that the carrying amount of the reporting unit exceeds its fair value, indicating that the goodwill could be impaired and a quantitative test would be necessary pursuant to the above. If, after this qualitative assessment, the Company determines that it is not more likely than not that the carrying amount of the reporting unit exceeds its fair value, then no further quantitative impairment testing is necessary. In performing the qualitative test, we assessed the potential impact of these key factors: macroeconomic conditions, market and industry conditions, our operating and competitive environment, regulatory and political developments, the overall financial performance of our reporting unit including cost factors and budgeted-to-actual revenue results. We also considered market capitalization and stock price performance, cash inflows, obligations and access to capital of our reporting unit. As a result of this qualitative impairment analysis performed over the goodwill acquired during the year, the Company concluded it was not more likely than not that the carrying amount of the reporting unit exceeded its fair value as of January 1, 2025, and also concluded there were no triggering events identified during the intervening period through March 31, 2025.
We evaluated our indefinite-lived intangible assets as of January 1, 2025 primarily on the basis of qualitative factors to determine whether the existence of events or circumstances lead us to conclude that it is more likely than not that our indefinite-lived intangibles have been impaired. Our consideration of qualitative factors included but was not limited to macroeconomic conditions, industry and market conditions, company specific events, changes in circumstances, after tax cash flows, and market capitalization trends. We concluded that there were no events or circumstances which indicated that it is more likely than not that our indefinite-lived intangible assets were impaired. As a result of the Company's qualitative analysis, no impairments of indefinite-lived intangible assets were recorded during the year ended March 31. 2025.
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Assets Held-for-Sale and Discontinued Operations
The Company classifies assets as held-for-sale if all held-for-sale criteria are met pursuant to Accounting Standards Codification ("ASC") 360-10, Property, Plant and Equipment. Criteria include, but are not limited to, management's commitment to sell the disposal group in its present condition and the sale being deemed probable of being completed within one year. Assets classified as held-for-sale are not depreciated and are measured at the lower of their carrying amount or fair value less cost to sell. The Company assesses the fair value of a disposal group, less any costs to sell, each reporting period it remains classified as held-for-sale and reports any subsequent changes as an adjustment to the carrying value of the disposal group, as long as the new carrying value does not exceed the initial carrying value of the disposal group.
Pursuant to ASC 310-10, Receivables, loans classified as held for investment were reclassified to held for sale as of the date that is concurrent with the Company's decision to sell the respective loans. On the date loans were transferred into the held-for-sale category, any previously recorded allowance for credit losses is reversed in earnings and the loans were recorded at its amortized cost basis. Prior to the transfer, the Company applied its write off policy to the amortized cost basis. The amortized cost at the date of transfer was reduced by any write offs recognized just prior to the transfer. Where the amortized cost basis exceeded the fair value at the date of transfer, the Company established a valuation allowance equal to the difference between amortized cost basis and fair value.
When the Company has sold, or classified as held for sale, a business component that represents a strategic shift with a major effect on the Company's operations and financial results, it classifies that business component as discontinued operations and retrospectively presents discontinued operations for the comparable periods. The post-tax income, or loss, of discontinued operations are shown as a single line on the face of the statement of operations. The disposal of the discontinued operation would also result in a gain or loss upon final disposal.
As a result of the sale of finance receivables and repossessed assets to Westlake Financial, the accompanying consolidated financial statements reflect the activity related to the sale of the assets of the consumer finance segment as discontinued operations. The Company determined that the finance receivables met the held-for-sale criteria as of November 1, 2023 and the consumer finance segment met the discontinued operations criteria during the fiscal year ended March 31, 2025. Additionally, concurrent with the decision to sell the finance receivables in November 2023, the Company reclassified its finance receivables to held for sale, which are carried at the lower of amortized cost or fair value. The Company compared the fair value and amortized cost of finance receivables held for sale and recorded a held for sale valuation allowance through earnings to reduce the amortized cost basis to fair value. The sale of the finance receivables and repossessed assets of the consumer finance segment was completed on April 26, 2024. See Note 13 for additional information regarding the activities of discontinued operations.
Leases
The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are presented as right-of-use ("ROU") assets, and the corresponding lease liabilities are included in the current portion of operating lease liabilities and operating lease liabilities in the Company's balance sheets. ROU assets represent the Company's right to use an underlying asset, and lease liabilities represent the Company's obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.
ROU assets and lease liabilities are recognized at commencement date or acquisition date and determined using the present value of the future minimum lease payments over the lease term. The Company uses a discount rate based on a benchmark approach to derive an appropriate incremental borrowing rate to discount remaining lease payments. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed rates for lease term lengths ranging 3 to 8 years. The lease term may include options to extend when it is reasonably certain that the Company will exercise that option. In addition, the Company does not recognize short term leases that have a term of twelve months or less as ROU assets or lease liabilities for all asset classes. The Company recognizes operating lease expense on a straight-line basis over the lease term.
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The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset classes when the payments are fixed. As such, variable lease payments, including those not dependent on an index or rate, such as real estate taxes, common area maintenance, and other costs that are subject to fluctuation from period to period are not included in lease measurement.
Upon the acquisition of Amplex on June 15, 2024, the Company recorded lease liabilities and corresponding right of use assets of approximately $3.0 million, based on the present value of the remaining minimum rental payments for leases existing upon adoption of the new lease standard and other adjustments to the opening balance of right of use assets. The Company estimates its incremental borrowing rate based on information available at the commencement date in determining the present value of payments. See Note 9 for additional detail on the Company's leasing arrangements.
Investments in Debt Securities
OMCC and Amplex entered into a Term Loan Agreement (the "Term Loan Agreement") entered into on February 15, 2024, as amended by the First Amendment dated April 26, 2024 and later amended by the Second Amendment dated June 15, 2024, pursuant to which OMCC agreed to make one or more term loan advances ("Term Loan Advances" or "Term Loans") to Amplex in an aggregate principal amount not to exceed $900 thousand. Amplex agreed to make monthly payments of interest on each Term Loan Advance, commencing on March 1, 2024, and on the first day of each month thereafter. No payments of principal were due until the earlier of a) closing of a share purchase agreement (the "Transaction Closing Date") or b) in the event of terminating the negotiation of a share purchase agreement ("Triggering Event"), the first anniversary of the date of initial Term Loan Advance (the "Term Loan Maturity Date"). All unpaid principal and accrued and unpaid interest on the Term Loan Advance was due and payable in cash on the Term Loan Maturity Date. Amounts could be prepaid without penalty by giving five days written notice to the Lender. Interest is accrued on Term Loan Advances at an interest rate of 12.5% per annum.
Per the amended terms of the Term Loan Agreement, at the Transaction Closing Date, the outstanding debt from the Term Loan Advances shall automatically be converted into the number of common shares of Amplex determined by dividing the outstanding debt from the Term Loan Advances by the share purchase price (the "Converted Shares"). The Term Loans were converted upon the Transaction Closing Date as of June 15, 2024 (a total of approximately $754 thousand, comprised of $750 thousand of principal and $4 thousand of accrued interest) at the share purchase price of $1,792.55 per share into 421 shares of Amplex common stock.
As of March 31, 2024, the Term Loan Advance receivable was accounted for as an available-for-sale debt security and fair valued using "Level 3" inputs, which consist of unobservable inputs and reflect management's estimates of assumptions that market participants would use in pricing the asset. The Company's Term Loan Advances were determined to be available-for-sale debt securities under ASC 320, Investments - Debt Securities. The Company estimated the fair value of the Term Loan Advances as of March 31, 2024 using a probability-weighted scenario-based model, which uses as inputs the estimated fair value of the Borrower's common stock, the estimated volatility of the Borrower's common stock, the time to expiration of the Term Loan Advances, the discount rate, the stated interest rate compared to the current market rate, and the risk-free interest rate for a period that approximates the time to expiration. The estimated fair value of the Borrower's common stock was based on the estimated closing price of the Amplex shares to the Company at the time of issuance. The estimated volatility of the Borrower's common stock was based on the observed volatility range of comparable publicly traded companies. The time to expiration was based on the probability of conversion prior to the contractual maturity date. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration.
Between April 1, 2024 and June 1, 2024 the Company made Term Loan Advances to Amplex in the aggregate amount of $450 thousand. The Term Loan Advances were to be settled at the closing of the share purchase agreement. As mentioned above, the Term Loan Advances with a total outstanding principal and accrued interest of $754 thousand was converted into 421 shares of Amplex common stock from a selling shareholder at the share purchase price of $1,792.55 per share in conjunction with the closing of the share purchase agreement.
Dissenting Shares & Domestication
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On November 22, 2023, OMCC, formerly known as Nicholas Financial, Inc., filed the initial Form S-4 related to the re-domestication (continuation) and Loan Portfolio Sale. Shareholders had the right to dissent to the continuation and the Loan Portfolio Sale under Section 309 of the British Columbia Business Corporations Act (“BCBCA”) (“Dissent Right”). Dissenting shareholders had the right to be paid the fair value of their shares (“Dissenting Shares”) under Section 245 of the BCBCA. Fair value was determined as of the close of business on the day before the Loan Portfolio Sale was approved by shareholders.
On April 15, 2024 (“Approval Date”), the stockholders of OMCC approved the re-domestication of the Company from Canada to Delaware and the Loan Portfolio Sale. There were 652,249 Dissenting Shares exercised in accordance with the Dissent Right. The Company determined the Dissenting Shares are within the scope of ASC 480-10 as they are considered mandatorily redeemable as of the Approval Date and as such were classified as liabilities. Liability-classified instruments are initially measured at fair value (or allocated value). Subsequent changes in fair value are recognized through earnings for as long as the instruments continue to be classified as a liability. As of April 15, 2024, the Company determined the fair value of the Dissenting Shares was $4.5 million based on the Company’s stock price of $6.94.
On September 5, 2024, the Company settled in cash with the dissenting shareholders to repurchase 652,249 Dissenting Shares at a price per share of $8.63, or $5.6 million. The Dissenting Shares were retained by the Company to be included within treasury stock. In conjunction with the cash settlement, the Company recognized a loss on dissenting shareholders’ liability of $1.1 million for the fiscal year ended March 31, 2025, and derecognized the dissenting shareholders' liability. In addition, the repurchase of the Dissenting Shares (which were retained by the Company) were included within treasury stock as of the date of repurchase.
The following table summarizes the change in the Dissenting Shares liability measured at fair value, on a recurring basis, for which Level 3 inputs have been used to determine fair value:
Balance of Dissenting Shareholders' Liability as of April 1, 2024 $ -
Initial value upon re-domestication 4,526
Change in fair value 1,103
Cash settlement of dissenting shareholders' liability (5,629 )
Balance of Dissenting Shareholders' Liability as of March 31, 2025 $ -
Fair Value Measurements
The Company applies ASC 820, Fair Value Measurement ("ASC 820"), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.
Certain assets and liabilities of the Company are required to be recorded at fair value either on a recurring or nonrecurring basis and are presented with Level 3 of the fair value hierarchy, such as Term Loan Advances, dissenting shareholders’ liability and contingent liability. The Company's non-financial assets such as property, plant, and equipment are recorded at cost. Fair value adjustments are made to these non-financial assets, on a nonrecurring basis, during the period an impairment charge is recognized, as applicable.
Certain of the Company's financial instruments are carried at fair value and are presented within Level 1 of the fair value hierarchy, such as treasury bills included within cash and cash equivalents on the consolidated balance sheet. In addition,
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the carrying amounts reflected in the consolidated balance sheet for cash and cash equivalents, accounts receivable, materials and supplies, prepaid expenses and other assets, accounts payable, and accrued expenses and other liabilities approximate fair value due to their short-term nature.
The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:
Level 1 - Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 - Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.
The following tables present information about the Company’s financial instruments measured at fair value, on a recurring basis, consistent with the fair value hierarchy provisions:
Fair Value Measurement Using(In thousands)
Description Level 1 Level 2 Level 3 Fair Value Carrying Value
Cash and Restricted Cash:
Cash equivalents:
Term loan advance to Amplex:
March 31, 2025 $ - $ - $ - $ - $ -
The following table summarizes the changes in financial assets measured at fair value, on a recurring basis, for which Level 3 inputs have been used to determine fair value:
Balance of Term Loan Advances as of April 1, 2024 $ 300
Change in fair value -
Interest accrued 4
Conversion (754 )
Balance of Term Loan Advances as of March 31, 2025 $ -
Balance of Dissenting Shareholders' Liability as of April 1, 2024 $ -
Initial value upon re-domestication 4,526
Change in fair value 1,103
Cash settlement of dissenting shareholders' liability (5,629 )
Balance of Dissenting Shareholders' Liability as of March 31, 2025 $ -
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Discontinued operations assets measured on a non-recurring basis using Level 3 inputs were $0 and $39.4 million as of March 31, 2025 and March 31, 2024, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense was $0.4 million and $0.1 million for the years ended March 31, 2025 and 2024 respectively. All advertising expenses recorded during the year ended March 31, 2024 pertained to discontinued operations.
Materials and supplies
Materials and supplies primarily consists of internet optical network terminals as well as telecommunications and customer installation equipment. All materials and supplies inventory is stated at the lower of cost or net realizable value, using the first-in, first-out ("FIFO") cost method. The total valuation of materials and supplies is determined based on the FIFO adjusted cost of the telecommunications or internet device, accessory shipped or optical network terminals.
The net realizable value of materials and supplies inventory is analyzed for signs of obsolescence or damage on a regular basis. If assessments regarding the above factors adversely change, we may be required to write down the value of materials and supplies inventory. Due to the longer shelf lives and quick turnover for use in the Company's operations of the materials and supplies purchased, there have been no inventory write-downs or allowances recorded to-date.
Long-lived assets
Finite-lived intangible assets, property, plant, and equipment, and other long-lived assets held for use are amortized or depreciated over their estimated useful lives, as summarized in the respective notes below. These assets are evaluated for impairment based on the identification of asset groups. Our asset groups align with our reportable segments. We evaluated our asset groups for impairment during the fourth quarter of 2024 and concluded that there were no indicators that an asset group impairment was more likely than not.
Loss Contingencies
Certain conditions may exist as of the date the consolidated financial statements are issued that may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies, the Company’s legal counsel evaluates the perceived merits of any legal proceedings, disputes, or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases along with operating loss and tax credit carryforwards, if any. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company evaluates the realizability of deferred tax assets
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by considering factors such as historical earnings, projected future taxable income, the reversal of existing taxable temporary differences, and tax planning strategies. The assessment of the need for a valuation allowance is performed at each reporting period. Changes in valuation allowances are recorded in the period in which the determination is made. If, based on new information, the Company determines that it is more likely than not that deferred tax assets will be realized, the valuation allowance is reduced accordingly.
The goodwill recognized under US GAAP as a result of the acquisition of Amplex through a stock purchase does not have favorable tax treatment. It will not be amortized or deducted for tax purposes, and the tax basis of the acquired assets remains unchanged. This results in a permanent book-tax difference when the goodwill is recognized for financial reporting purposes but not for tax purposes.
The Company recognizes tax benefits from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from any such position would be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. It is the Company’s policy to recognize interest and penalties accrued on any uncertain tax benefits as a component of income tax expense. There were no uncertain tax positions as of March 31, 2025 or 2024.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and Canada. The effect on deferred taxes of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
Revenue Recognition
The Company generates revenue primarily from the following sources:
1.
Wireless internet services – The Company offers these services to residential and commercial customers under standard monthly plans for 12-month periods. Contracts standard terms and conditions state a penalty for early termination; however, the Company normally waives this penalty. Standard monthly plans vary in price according to the amount of bandwidth provided and include installation and equipment. For the fiscal year ended March 31, 2025, revenues from these services totaled approximately $5.4 million.
2.
Fiber internet services – The Company offers these services to residential and commercial customers under standard monthly plans for 12-month periods. Fiber optic internet services provide higher speeds than wireless internet. Contracts are typically cancellable without penalty. Standard monthly plans vary in price according to the amount of bandwidth provided and include installation and equipment. For the fiscal year ended March 31, 2025, revenues from these services totaled approximately $2.6 million.
3.
Other – These services include primarily voice over IP (“VOIP”) telephone services to residential and commercial customers under 12-month periods. Contracts are typically cancellable without penalty. Standard monthly plans vary based on the features offered. Customers may purchase the equipment from the Company or a third-party vendor. In addition, the Company offers video streaming services through third-party providers. For the fiscal year ended March 31, 2025, revenues from these services totaled approximately $1.3 million.
In accordance with ASC 606 “Revenue Recognition”, the Company recognizes revenue from contracts with customers using a five-step model, which is described below:
1.
identify the customer contract;
2.
identify performance obligations that are distinct;
3.
determine the transaction price;
4.
allocate the transaction price to the distinct performance obligations; and
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5.
recognize revenue as the performance obligations are satisfied.
Identify the customer contract
A customer contract is generally identified when there is approval and commitment from both the Company and its customer, the rights have been identified, payment terms are identified, the contract has commercial substance and collectability is probable. Specifically, the Company obtains written/electronic signatures on contracts and purchase orders, if said purchase orders are issued in the normal course of business by the customer.
Identify performance obligations that are distinct
A performance obligation is a promise by the Company to provide a distinct good or service or a series of distinct goods or services. A good or service that is promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and a company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.
Determine the transaction price
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer, excluding sales taxes that are collected on behalf of government agencies.
Allocate the transaction price to distinct performance obligations
The transaction price is allocated to each performance obligation based on the relative standalone selling prices (“SSP”) of the goods or services being provided to the customer. The Company’s contracts may contain multiple performance obligations, for which the Company accounts for individual performance obligations separately, if they are distinct. The standalone selling price reflects the price the Company would charge for a specific piece of equipment or service if it was sold separately in similar circumstances and to similar customers.
Recognize revenue as the performance obligations are satisfied
Revenues from wireless and fiber internet, VOIP services, and video streaming services are recognized ratably as performance obligations are satisfied by transferring control of a promised product or service to a customer. Revenues from equipment sales are recognized when control transfers to the customer, which occurs upon delivery.
Customers are billed in advance for services to be provided in the upcoming month. Once billed, payment from customers is due 30 days from the invoice date. The Company’s agreements with its customers do not provide for any refunds for services or products and therefore no specific reserve for such is maintained.
Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.
The Company fulfills obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. There are no contract assets related to performance under the contract. The Company is contractually entitled to invoice in advance for services to be provided in the future. Accordingly, accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. The Company recognizes deferred revenue when consideration has been billed or received in advance of the Company’s satisfaction of its performance obligation(s).
In accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. Due to the nature of the Company’s contracts, these reporting requirements are not applicable. The majority of the Company’s remaining contracts meet one of the exemptions defined in ASC 606-10-50-14 through 606-10-50-14A, i.e., performance obligation is part of a contract that has an original expected duration of one year or less.
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Segment Reporting
The Company reports operating segments in accordance with ASC 280, Segment Reporting (“ASC 280”), including the impact of adopting ASU 2023-07, as further described below. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by their chief operating decision maker in deciding how to allocate resources and assesses performance. ASC 280 requires that a public enterprise report a measure of segment profit or loss, certain specific revenue and expense items, segment assets, information about the way operating segments were determined and other items.
The Company’s Chief Executive Officer represents the Company’s chief operating decision maker (“CODM”). The CODM regularly reviews the Company’s results to assess performance and allocates resources at the Telecommunications operating segment, excluding Corporate and discontinued operations of the Company. All of the Company’s ongoing services provided to customers are delivered through an integrated network and have similar types or classes of customers. As such, management has identified one operating segment, telecommunications, which is the Company’s reportable segment under this organizational and reporting structure.
Redeemable Noncontrolling Interest
The Company classifies noncontrolling interests with redemption features that are not solely within the control of the Company within temporary equity on the Company’s consolidated balance sheets in accordance with ASC 480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities (“ASC 480-10-S99-3A”). The noncontrolling interest was recorded outside of shareholders’ equity because the noncontrolling interest provided the holder with put rights which allows the holder to compel the Company to purchase Amplex common stock at a variable amount per share at any time following the fifth anniversary of the closing date of the Amplex acquisition but prior to the fifteenth anniversary of the closing date of the Amplex acquisition. During this time period, the put option may be exercised by the holder at any time after 90 days prior written notice, which is considered not solely within the Company’s control. The Company determined the put option is not within the scope of ASC 480-10 to be recorded as a liability at fair value and will not subsequently adjust for changes in fair value. The Company adjusts redeemable noncontrolling interests for the portion of net loss attributable to the redeemable noncontrolling interests and for the change in the carrying amount of redeemable noncontrolling interest for the incremental value the NCI holder may ultimately be entitled to. When the redemption amount of redeemable noncontrolling interest exceeds the fair value, the Company has made an accounting policy election to reflect as a deemed dividend the entire change in the redemption amount (see Note 5).
During the third quarter ended December 31, 2024, the Company recognized a deemed dividend of $154 thousand for its redeemable noncontrolling interest to adjust the carrying amount of the redeemable noncontrolling interest to its redemption value, after giving effect to the change in its carrying amount from the net income (loss) attributable to the redeemable noncontrolling interest. As of March 31, 2025, the calculation of the formula-based redemption amount resulted in a new redemption value that was less than the carrying amount of the redeemable noncontrolling interest after the attribution of the net loss incurred by the subsidiary during the quarter ending March 31, 2025. Accordingly, the Company reversed the entire amount of the previously recorded deemed dividend during the fourth quarter to reflect the decline in redemption value of the temporary equity, which is also limited to the extent of prior deemed dividend adjustments such that the carrying amount of the redeemable NCI is not lower than the amount that would have been reported pursuant to ASC 810 "Consolidation" (as detailed in ASC 480-10-S99-3A). As of March 31, 2025, the book value of this interest was approximately $13.9 million and was recorded as a redeemable noncontrolling interest in our consolidated balance sheets.
Reclassifications
During the fiscal year ended March 31, 2025, the Company determined that the consumer finance company segment met the criteria for discontinued operations classification. As a result, the Company made reclassifications to include certain prior year amounts within discontinued operations and assets held for sale in the Company's consolidated balance sheets, statements of operations, and statements of cash flows. See Note 13 Discontinued Operations for further details.
Recently Issued Accounting Pronouncements
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In November 2023, the FASB issued ASU No. 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" (“ASU 2023-07”). This ASU requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker (“CODM”) and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and contains other disclosure requirements. This authoritative guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted this ASU in the current fiscal year and has included the required disclosures within these financial statements. See Note 14, Segment Information for additional information.
In December 2023, the FASB issued ASU No. 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). This ASU requires that reporting entities disclose specific categories in the effective tax rate reconciliation as well as information about income taxes paid. The authoritative guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of this new guidance and does not expect this standard to have a material impact on the Company’s consolidated financial statements.
In March 2024, the FASB issued ASU 2024-02, Codification Improvements-Amendments to Remove References to the Concepts Statements (“ASU 2024-02”). ASU 2024-02 contains amendments to the Codification that remove references to various FASB Concepts Statements. The requirements of this ASU 2024-02 are effective for the Company for fiscal years beginning after December 15, 2024 and can be applied on a prospective or retrospective basis. This standard is not expected to have a significant impact on our consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). Additionally, in January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. ASU 2024-03 requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. The requirements of ASU 2024-03 are effective for the Company for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted and should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all period periods presented in the financial statements. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.
Note 3. Business Combination
On June 15, 2024 (the "Closing Date"), the Company closed a share purchase agreement to acquire Amplex from the sellers (the “Sellers”), pursuant to which the Sellers agreed to sell, and the Company agreed to purchase 51% of the issued and outstanding common shares, no par value per share, of Amplex and the Company agreed to make payment to holders of options for Amplex’s common shares in consideration of cancellation of such options for total purchase consideration of $18.4 million, which was paid in cash on the date of closing (the "Amplex Acquisition"). Amplex is an Ohio-based provider of rural broadband services to business and residential customers. The Company acquired Amplex in order to provide better shareholder value over time. The financial results of Amplex have been included within the consolidated financial statements since the Closing Date.
In conjunction with the closing of the Amplex Acquisition, the Company converted the outstanding principal and accrued interest of approximately $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the share purchase price of $1,792.55 and purchased an additional 1,674 shares of Amplex common stock at a price of $1,792.55 per share for a total of $3.0 million. These transactions, concurrently executed at the Transaction Closing Date, increased the Company's ownership in Amplex to 56.5%. In December 2024, the Company entered into a Subscription Agreement whereby the Company invested an additional $4.5 million into Amplex, increasing the Company's ownership percentage to 61%.
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In accordance with ASC 805, Business Combinations, the Amplex Acquisition was accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. Goodwill is calculated as the excess of the purchase price for the acquired business over the fair value of net assets acquired, including the liabilities assumed, from the Amplex Acquisition. Goodwill represents the value the Company expects to achieve through the implementation of operational synergies, the expansion of the business into new or growing segments of the industry, and other intangible assets acquired that do not qualify for separate recognition, including an assembled workforce. None of the goodwill recognized is expected to be deductible for income tax purposes.
The allocation of the purchase price to the assets acquired and liabilities assumed was finalized as of March 31, 2025 using the purchase method of accounting in accordance with ASC 805.
The fair value of the subscriber relationships were determined using the multi-period excess earnings method (“MPEEM”) under the income approach. This method reflects the present value of the operating cash flows generated by this asset after taking into account the cost to realize the revenue, and an appropriate discount rate to reflect the time value and risk associated with the invested capital. The Company utilized the relief-from-royalty method, a form of both the market and income approach, to determine the fair value of the trade names. Under this method, it is assumed that if the Company did not own the intangible asset, it would be willing to pay a royalty for its use. Internally developed software was valued using a cost approach, specifically the cost to re-create method. The cost to re-create method considers the cost required to recreate an identical asset considering current prices of direct and indirect costs. These costs are then adjusted for the developers’ profit, which reflects the expected return on the direct and indirect costs, and opportunity cost, which represents the forgone returns during the period when the asset is being developed. The Citizens Broadband Radio Service FCC license ("CBRS FCC license") was valued using a cost approach, specifically, the cost incurred by the business in acquiring the CBRS FCC license. In determining the fair value of the property, plant, and equipment, the Company used a combination of various valuation techniques including the income approach, the cost approach, and the market approach.
The Company's final allocation of the purchase price to the assets acquired, liabilities assumed, and noncontrolling interest recognized and redeemable as of the Closing Date were as follows:
(In thousands)
Cash and cash equivalents $ 221
Accounts receivable 116
Materials and supplies 537
Operating lease right-of-use 3,063
Prepaid expenses and other assets 265
Property, plant, and equipment 24,584
Intangible assets 4,133
Total assets acquired 45,199
Accounts payable 1,252
Accrued expenses and other liabilities 112
Lease liabilities 3,063
Deferred income taxes 4,208
Deferred revenue 556
Total liabilities assumed 9,191
Total fair value of net assets acquired 36,008
Less: redeemable noncontrolling interest (17,644 )
Total Adjusted Base Purchase Price $ 18,364
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The Company incurred $1.1 million of transaction costs related to the acquisition of Amplex during the fiscal year ended March 31, 2025. These costs are classified as general and administrative expenses in the Company's consolidated statements of operations. The Company recorded a measurement period adjustment during the fourth quarter of 2025 that decreased the value of finite lived intangible assets acquired in the transaction by $7.0 million, increased the value of property, plant, and equipment by $4.5 million, increased cash acquired by $0.2 million, and decreased total liabilities by $0.5 million (which is almost entirely attributable to a decrease in deferred income taxes). This had the net effect of increasing goodwill by $1.8 million.
The measurement period adjustments for the fair value of the assets acquired and liabilities assumed, as described above, were recognized in the current reporting period of which the final purchase price allocation adjustments were determined and calculated as if the accounting had been completed at the acquisition date. As a result of the final revised estimates in the fair values determined for the finite lived intangible assets, property, plant, and equipment, and their related estimated useful lives, there also was a corresponding adjustment to the income effects that would have been recognized for depreciation expense and amortization expense.
Of the $0.5 million of amortization expense recorded during the year ended March 31, 2025 for the finite lived intangible assets acquired, approximately $0.3 million would have been recognized through the third quarter ending December 31, 2024, which represents a $0.1 million decrease in amortization expense from the $0.4 million that was previously estimated using the provisional amounts of finite lived intangible assets as presented in previous filings.
Of the $1.5 million of depreciation expense recorded during the year ended March 31, 2025 for the property, plant, and equipment acquired, approximately $1.0 million would have been recognized through the third quarter ending December 31, 2024, which represents a $0.3 million increase in depreciation expense from the $0.7 million that was previously estimated using the provisional amounts of property, plant, and equipment as presented in previous filings.
The following is the net impact of the Amplex Acquisition on the Company's consolidated statements of operations since the Closing Date:
For the Fiscal Year Ended March 31, 2025
(In thousands)
Total revenue $ 9,366
Net loss from continuing operations $ (453 )
The following table represents the supplemental consolidated financial results of the Company on an unaudited pro forma basis, as if the acquisition had been consummated on April 1, 2023.
(In thousands)
For the Fiscal Year Ended March 31,
Net loss attributable to common shareholders $ (6,211 ) $ (19,680 )
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The following table represents the supplemental schedule of noncash investing and financing activities:
(In thousands)
For the Fiscal Year Ended March 31,
Supplemental schedule of noncash investing and financing activities
Fair value of Amplex assets acquired $ 45,199 $ -
Less: redeemable noncontrolling interest (17,644 ) -
Less: cash paid for Amplex common stock (18,364 ) -
Amplex liabilities assumed $ 9,191 $ -
Note 4. Revenue and Deferred Revenue
Revenue
The Company sells its goods and services to customers primarily under contracts with stated terms of 12 months. The Company’s standard terms and conditions state a penalty for early termination of wireless internet service contracts; however, the Company normally waives this penalty. Disaggregated revenues are presented in the accompanying statements of operations.
Contract Liability
The Company recorded a current contract liability balance of $0.6 million as of March 31, 2025, which represents amounts billed or collected in advance of the Company’s satisfaction of its performance obligations for the upcoming month.
Note 5. Earnings Per Share
The Company has granted stock compensation awards with nonforfeitable dividend rights which are considered participating securities. Earnings per share is calculated using the two-class method, as such awards are more dilutive under this method than the treasury stock method. Ordinarily, basic earnings per share is calculated by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period, which excludes the participating securities. The Company's participating securities are non-vested restricted shares which are not required to share losses, and accordingly, are not allocated losses in periods of net loss. Dilutive earnings per share are calculated by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding during the period which includes the dilutive effect of additional potential common shares from stock compensation awards. In a period of loss, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. Therefore, in periods when a loss is reported, basic and dilutive loss per share are the same.
In accordance with ASC 480-10-S99-3A, as the Company's redeemable noncontrolling interest is redeemable at an amount other than fair value, the Company has made an accounting policy election to reflect the entire adjustment to the carrying value, when the formula-based calculation of redemption value exceeds its stated carrying amount, as a deemed dividend. After accounting for the adjustments to the carrying value to reflect the changes in the calculated redemption amount during the year ended March 31, 2025 as described in the Summary of Significant Accounting Policies (see Note 2) there
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were no resulting deemed dividends to be recognized and accordingly no adjustment was made to the numerator for calculating earnings per share.
For the fiscal year ended March 31, 2025, there were no potentially dilutive securities excluded from the diluted net loss per share calculations due to there being none outstanding and also because they would be anti-dilutive if there were such dilutive shares outstanding during the year. For the fiscal year ended March 31 2024, potentially dilutive securities that were not included in the diluted net loss per share calculations because they would be anti-dilutive were comprised of 10 thousand shares from options to purchase common shares.
Loss and income per share has been computed based on the following weighted average number of common shares outstanding:
Fiscal Year Ended March 31,
(In thousands, except per share amounts)
Numerator
Net loss attributable to common shareholders $ (5,149 ) $ (20,801 )
Denominator
Per share loss from continuing operations attributable to common shareholders
Per share loss available to common stockholders
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Note 6. Long-Term Debt
(In thousands)
RUS Loan $ 615 -
Bank Equipment Loans 213 -
Total Outstanding Debt 828 -
Less Current Portion 69 -
Total Long-Term Debt $ 759 $ -
The scheduled maturities of outstanding debt, excluding the effect of any future drawdowns or interest expense, at March 31, 2025 are as follows (in thousands):
(In thousands)
Total Outstanding Debt $ 828
The Company’s weighted-average interest rate for the outstanding debt agreements for the fiscal years 2025 and 2024 was 4.73% and 0.00%, respectively. The Company's weighted-average interest rate on only its short-term borrowings outstanding as of March 31, 2025 and March 31, 2024 (which is solely inclusive of the bank equipment loans), was 15.50% and 0.00%, respectively.
RUS Loan - On September 23, 2024, Amplex entered into a Reconnect Program Loan and Security Agreement (the “RUS Loan”) with the United States of America acting through the Administrator of the Rural Electric Services (“RUS”), pursuant to which RUS has extended Amplex a secured loan in the principal amount of up to $21,341,792 (the “Loan”). The cash received from the RUS loan is restricted and held in a pledged deposit account. The purpose of the Loan is to finance the construction of a broadband infrastructure project to serve rural areas where at least 50% of the households are without sufficient access to broadband.
Amplex has five years to draw funds under the Loan Agreement, which expires on October 31, 2029. The Loan is secured by all of Amplex’s assets. The Loan bears interest at a rate of 2% per annum, calculated by daily accrual. All monthly payments for accrued interest and principal on advances are able to be deferred for a three year period ending on October 31, 2027, unless earlier payments are elected to be made by the Company. At the end of the three-year deferral period, all unpaid accrued interest will be capitalized and added to the outstanding principal, and monthly payments will be established in an amount that amortizes the outstanding balance in equal payments over the remaining term of the Loan. The principal advanced pursuant to this Agreement and remaining unpaid, if any, and interest thereon, shall be due and payable on October 31, 2046. All, or a portion of the outstanding balance, of any advance made under the Loan Agreement may be prepaid on any payment date without penalty.
The obligation of RUS to advance funds to Amplex under the Loan Agreement is subject to conditions that are customary for loans made by RUS, including the accuracy of Amplex’s representations and warranties, no material adverse effect with respect to Amplex, no event of default, receipt of a financial requirement statement from Amplex, current financial statements, compliance with buildout timelines, material compliance with the Loan Agreement, obtaining specified
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permits, licenses and franchises and maintenance of on deposit in a pledged deposit account of required matching funds for completion of projects. Other conditions include Amplex having positive cash flow from operations at the end of the fifth year of an award under the Loan Agreement and providing the specified level of broadband service for the period specified in the Loan Agreement. The Loan Agreement contains negative covenants of Amplex that are customary for loans made by RUS, including Amplex not merging, consolidating, reorganizing or selling, leasing or transferring a substantial part of its property without RUS’ prior written consent, not incurring additional debt with specified exceptions, Amplex not changing its principal place or place of business without RUS’ consent and not issuing preferred stock without RUS’ consent. RUS may suspend advances if Amplex suffers a material adverse effect or an event of default occurs.
The Loan Agreement contains customary events of default, including materially incorrect representations and warranties, nonpayment of the Loan, improper expenditures, failure to keep adequate records, failure to build in accordance with timelines, bankruptcy, dissolution or liquidation and impairment of business. If an event of default occurs, RUS could restrict Amplex’s ability to obtain additional advances under the Loan Agreement, accelerate all amounts outstanding under the Loan Agreement, enforce their interest against collateral pledged under the Loan Agreement or enforce such other rights and remedies as they have under the loan documents or applicable law as secured lenders.
Bank Equipment Loans - In November 2024, the Company entered into two equipment finance agreements with a lender to provide financing for the Company to enable the purchase of certain pieces of equipment fixed assets. The loans are secured by the pieces of equipment for which the financing agreements were entered into for purchase. The Bank Equipment Loans contain customary covenants and events of default, including materially incorrect representations and warranties, nonpayment of the loans, and failure to maintain proper registrations, titles, permits, licenses, and insurance policies covering the equipment. The interest accrues at a rate indexed to the "ICE Swap Rate - USD rates SOFR 1100" as published by Intercontinental Exchange, Inc., up to a maximum of 18% per annum. Payments on the loans are due monthly, and the loans mature in November 2026.
Note 7. Property, Plant, and Equipment, net
Property, plant, and equipment consist of the following:
(In thousands)
Leasehold improvements 580 2
Furniture and fixtures 249 6
Towers 36 -
Total, property, plant, and equipment in service 32,034 313
Property, plant, and equipment under construction 346 -
Total property, plant, and equipment 32,380 313
Less: accumulated depreciation (1,435 ) (238 )
Total property, plant, and equipment, net $ 30,945 $ 75
Depreciation expense was $1.5 million and $0.1 million for the fiscal year ended March 31, 2025 and 2024, respectively. Depreciation expense is included in depreciation and amortization in the consolidated statements of operations.
Note 8. Goodwill and Intangible Assets
The acquired goodwill represents the value of combining operations of Amplex and the Company. See the Business Combination (Note 3) for more information on the acquisition of Amplex and the calculation of goodwill.
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The change in the carrying amount of goodwill for the fiscal year ended March 31, 2025 was as follows:
(In thousands) March 31, 2024 Additions Impairment March 31, 2025
The Company performed a qualitative impairment analysis as described in the Summary of Significant Accounting Policies (see Note 2) and determined it was not more likely than not that the carrying value of its reporting unit exceeded its fair value.
For more information surrounding the intangible assets presented below, reference the Business Combination footnote (note 3). The changes in intangible assets for the fiscal year ended March 31, 2025 consists of the following:
Definite lived intangible assets:
Indefinite lived intangible assets:
CBRS FCC license N/A - 580 - - 580
The Company performed a qualitative impairment analysis as outlined in “Note 2 – Significant Accounting Policies” and determined it was not more likely than not that any intangible assets were impaired for the year ended March 31, 2025. No intangible assets were reported as of March 31, 2024.
Amortization expense totaled $0.5 million and $0.1 million for the fiscal year ended March 31, 2025 and 2024, respectively. Amortization expense is included in depreciation and amortization in the consolidated statements of operations.
As of March 31, 2025, the future expected amortization expense for the definite lived intangible assets is as follows:
(In thousands)
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Note 9. Leases, and Related Party Transactions
The Company's operating leases for its equipment and specialized spaces for company equipment have terms expiring at various dates through June 2033. Certain lease arrangements include renewal options and escalation clauses.
Operating lease assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at the commencement date. As most of the Company's leases do not provide an implicit rate, the Company estimates its incremental borrowing rate based on information available at the commencement date in determining the present value of future payments. Lease expense related to the net present value of payments is recognized on a straight-line basis over the lease term.
The key components of the Company's operating leases expenses were as follows:
Year Ended March 31,
Operating lease expense 361 57
Short-term lease expense 3 2
Total lease cost $ 364 $ 59
Right-of-use assets and lease liabilities for operating leases were recorded in the consolidated balance sheets as follows:
(In thousands)
Operating leases:
Operating lease right-of-use assets $ 2,963 $ 65
Current portion of operating lease liabilities 286 -
Operating lease liabilities, net of current portion 2,685 65
The weighted-average remaining lease term for operating leases was 10.0 years and 2.0 years for the fiscal year ended March 31, 2025 and 2024, respectively. The weighted-average discount rate was 6.3% and 6.5% for the fiscal year ended March 31, 2025 and 2024, respectively.
Future minimum lease payments under non-cancelable operating leases as of March 31, 2025, are as follows:
(In thousands)
Total minimum lease payments 4,047
Less: effects of discounting (1,076 )
Present value of future minimum lease payments $ 2,971
The amounts recorded for operating lease expenses include short-term leases, which are immaterial. During the second quarter of fiscal year 2025, the Company recorded $56 thousand in impairment charges related to operating lease right-of-use assets which is included within general and administrative expenses during the fiscal year ended March 31, 2025 as the Company had planned to close its Clearwater office location in December 2024. On December 13, 2024, the Company entered into a termination of lease agreement in connection with the Clearwater office location with an effective termination date of January 31, 2025. After executing the termination of lease agreement, the Company recorded a Gain
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on Lease Settlement of $14 thousand, reflecting the difference between the lease liability for the Clearwater office location as of the date of the termination of lease agreement and the total amount due to the Lessor as a result of the termination.
As previously stated, Amplex leases certain property (including an office building) and warehouse building from the Red Bug Entities (See Notes 1 and 2). The Red Bug Entities are considered related parties under ASC 850, Related Parties. The Red Bug Entities were created by, and are majority-owned by Amplex's Chief Executive Officer. The office building lease calls for monthly payments of approximately $13thousand for the duration of the fifteen-year lease term that runs through December 14, 2031. The warehouse building lease calls for monthly payments of approximately $15 thousand, with annual price increases being indexed to the Consumer Price Index, for the duration of the fifteen year lease term that runs through July 31, 2038. As of March 31, 2025 the related ROU assets and liabilities recorded on our consolidated balance sheets equaled approximately $3.0 million. Corresponding operating lease expenses of $0.3 million have been recorded within general and administrative expenses on the consolidated statements of operations for the fiscal year ended March 31, 2025. No balances or activity related to these leases are reflected in the March 31, 2024 consolidated balance sheet or the consolidated statements of operations for the fiscal year ended March 31, 2024 given Amplex was not consolidated within the Company financial statements during fiscal year ended March 31, 2024.
On December 2, 2024 the Company entered into a lease agreement for a new office space in Omaha, Nebraska. The lease term commenced on March 1, 2025 and the total future minimum lease payments under the agreement, after the effect of discounting, are $100 thousand. The sublandlord who entered into the sublease agreement with the Company, Boston Omaha Corporation, is also a related party to the Company under ASC 850. The CEO of the Company, and two other members of OMCC's Board of Directors also all serve on the Board of Directors of Boston Omaha Corporation. Further, the largest shareholder and CEO/Chairman of Boston Omaha Corporation is the largest shareholder of the outstanding common stock of OMCC through the shares beneficially owned. Management notes that all related party transactions and relationships, including this sublease agreement and resulting transactions, are subject to the Company's Related Party Transaction Policy and management believes that the transactions contemplated by this sublease were made at terms which approximate market, that are fair and reasonable to the Company and substantially the same as would apply if the other party was not a related party.
The Company has no other material related party transactions requiring disclosure in these consolidated financial statements.
Note 10. Commitments and Contingencies
The Company is involved in certain claims and legal proceedings in the normal course of business. If one of these claims were to be decided against the Company, they could have a material adverse effect on the Company’s financial condition or results of operations.
Claims and legal proceedings relating to discontinued operations
The Company has been sued together with several other defendants, in a lawsuit styled: Nicholas Financial, Inc. v. Jeremiah Gross, No. 21CY-CV02148-01, 7th Judicial Circuit, Clay County, Missouri. On March 9, 2021 the Company filed suit against Jeremiah Gross for a deficiency balance owed the Company following the 2018 surrender and sale of his motor vehicle which secured a loan from the Company. On April 22, 2021 a default judgment for $7,984 was entered against Gross. On December 22, 2021 Gross filed a motion to set aside the default judgment. The Court granted his motion on March 23, 2022. In his answer he asserted a class-action counterclaim against the Company seeking to represent a Nationwide class of the Company’s customers who received allegedly deficient notices regarding the sale of their vehicles and whose vehicles were recovered and sold by the Company, and on behalf of Missouri customers who received allegedly deficient notices from the Company regarding the sale of their recovered vehicles and the calculation of the deficiency owed the Company. The Company filed its answer to the counterclaim on May 13, 2022. On September 9, 2022 the Company filed a motion for summary judgment as to all counts of the counterclaim and Nicholas Financial, Inc.’s claim
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against Gross. The motion was argued on February 16, 2023. On March 27, 2023 the Court entered an order granting the motion in part and denying the motion in part. The Court found in favor of Nicholas Financial, Inc. as to the counterclaim regarding presale notices and prejudgment interest and in Gross’s favor for the counterclaim as to post-sale notices. The Court also denied Nicholas Financial, Inc.’s motion for summary judgment as to its claim for a deficiency against Gross. The remaining claim related to post sale notices sent to Missouri customers. The parties, including the Company’s insurer Gemini, settled the case and the Court entered a Final Approval Order on May 15, 2024 which found the Agreement to have been entered into in good faith and approving the Company’s assignment to the Class of the Company’s claims against certain insurers, brokers, and agents. Further, the Court approved the settlement as fair, reasonable, and adequate as to, and in the best interests of, each of the Parties and the Settlement Class members and in full compliance with all requirements of the laws of Missouri, the United States Constitution (including the Due Process Clause), and any other applicable law. The Court directed the parties to the Lawsuit to implement and consummate the Agreement pursuant to its terms and provisions. Pursuant to the terms of the Agreement, the Court entered a Final Judgment against the Company in favor of the Class. In the Final Judgment, the Court held that other than the funds to be paid by Gemini Insurance Company on behalf of the Company, the Company had no obligation to satisfy the judgment, and that any remaining amount may only be satisfied from the Company’s Insurers and Insurance Agents other than Gemini Insurance Company.
On May 15, 2024, Gross filed on behalf of the Class, as assignee of the Company, a Cross-Claim in the underlying lawsuit against American Zurich Insurance Company (“AZIC”), American Guarantee and Liability Insurance Company (“AGLIC”), and Zurich American Insurance Company (“ZAIC” and collectively with AZIC and AGLIC, “Zurich”), for breach of contract, breach of the duty to defend, and bad faith failure to defend or settle (“Cross-Claim”). On June 14, 2024, Zurich filed a Motion to Amend the Final Judgment and a Notice of Removal of the Cross-Claim, seeking to remove the Cross-Claim to federal court in the Western District of Missouri. In its Notice of Removal, Zurich acknowledged that the Company is no longer a proper party to the Lawsuit “because all the claims against it are resolved by the Final Judgment.” On June 24, 2024, Zurich filed a Notice of Appeal of the Final Judgment.
Claims and legal proceedings relating to continuing operations
On August 14, 2024, the federal court in the Western District of Missouri granted Gross’s (Class Representative’s) motion to remand the Cross-Claim against Zurich, which means the action was reinstated that day in the state Circuit Court. Shortly after the remand, on September 5, 2024, the state court granted a joint motion by Gross and Zurich to stay the state court action pending the state Appeals Court’s disposition of Zurich’s appeal. On April 25, 2025, Missouri Court of Appeals dismissed Zurich’s appeal for failure to prosecute
On October 16, 2024, Gross and the class reached an agreement with the Company and Zurich to resolve the dispute regarding the Company’s insurance coverage under the Zurich policies (the “Zurich settlement”). On May 22, 2025 the Circuit Court for Clay County, Missouri approved the Zurich settlement. The effective date under the Class Action settlement has been triggered, and Gemini made the Class Action Settlement payment on behalf of the Company which the Settlement Administrator confirmed cleared on June 3, 2025.
Note 11. Stock Plans
In May 2019, the Company’s Board of Directors (“Board”) authorized a stock repurchase program allowing for the repurchase of up to $8 million of the Company’s outstanding shares of common stock in open market purchases, privately negotiated transactions, or through other structures in accordance with applicable federal securities laws. The authorization was effective immediately.
The timing and actual number of shares will depend on a variety of factors, including stock price, corporate and regulatory requirements and other market and economic conditions. The Company’s stock repurchase program may be suspended or discontinued at any time.
In August 2019, the Company’s Board authorized an additional repurchase of up to $1 million of the Company’s outstanding shares.
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On September 5, 2024, the Company settled in cash with dissenting shareholders to repurchase the 652,249 Dissenting Shares at a price per share of $8.63, or $5.6 million (as discussed in Note 2). The Dissenting Shares were retained by the Company to be included within treasury stock.
The table below summarizes treasury share transactions for the Company (in thousands):
For the Year Ended March 31,
Number of Shares Amount Number of Shares Amount
Treasury shares purchased 652 (5,629 ) - -
The Company has share awards outstanding under two share-based compensation plans (the “Equity Plans”). The Company believes that such awards generally align the interests of its employees with those of its shareholders. Under the shareholder-approved 2006 Equity Incentive Plan (the “2006 Plan”) the Board of Directors was authorized to grant option awards for up to approximately 1.1 million common shares. On August 13, 2015, the Company’s shareholders approved the Nicholas Financial, Inc. Omnibus Incentive Plan (the “2015 Plan”) foremployees and non-employee Directors. Under the 2015 Plan, the Board of Directors is authorized to grant total share awards for up to 750,000 common shares. Awards under the 2006 Plan will continue to be governed by the terms of that plan. The 2015 Plan replaced the 2006 Plan; accordingly, no additional option awards may be granted under the 2006 Plan. In addition to option awards, the 2015 Plan provides for restricted stock, restricted stock units, performance shares, performance units, and other equity-based compensation.
Option awards previously granted to employees and directors under the 2006 Plan generally vested ratably based on service over a five- and three-year period, respectively, and generally have a contractual term of ten years. Vesting and contractual terms for option awards under the 2015 Plan are essentially the same as those of the 2006 Plan. Restricted stock awards generally cliff vest over a three-year period based on service conditions. Vesting of performance units generally does not commence until the attainment of Company-wide performance goals including annual revenue growth and operating income targets. There are no post-vesting restrictions for share awards.
The Company funds share awards from authorized but unissued shares and does not purchase shares to fulfill its obligations under the Equity Plans. Cash dividends, if any, are not paid on unvested performance units or unexercised options but are paid on unvested restricted stock awards.
As of March 31, 2025, the Company had no unrecognized compensation related to options grants. For the fiscal years ended March 31, 2025 and 2024, there was no compensation cost expense related to stock options.
During the year ended March 31, 2025, the Company issued 15,385, of common shares to board members at share price of $6.50 resulting in total compensation recognized of approximately $0.1 million.
During the year ended March 31, 2025, in accordance with compensation arrangement with the chief executive officer, the Company issued 30,000 shares in a one-time stock match option. Additionally, the chief executive officer’s compensation is paid in common shares in quarterly installments based on the average share price during the quarter, resulting in 12,468 common shares issued. Total stock compensation expense related to this compensation arrangement was approximately $0.3 million for the year ended March 31, 2025..
Note 12. Income Taxes
Income tax expense (benefit) consists of the following for the years ended March 31, 2025 and 2024:
49
(In thousands)
Fiscal Year Ended March 31,
Current:
U.S. federal $ - $ -
State & local - -
Foreign - -
Total current $ - $ -
Deferred:
U.S. federal $ 63 $ -
State & local - -
Foreign - -
Total deferred $ 63 $ -
Total tax provision (benefit) $ 63 $ -
On April 26, 2024, the Company sold substantially all of the finance receivables and all of the repossessed assets to Westlake Services, LLC. As the sale required the reporting of this business line as discontinued operations, which are reported net of tax, the tax provision related discontinued operations is removed from the total provision reported in the income statement for US GAAP purposes. The discontinued operations tax provision for the year ended March 31, 2025 was $0 on approximately $3.0 million of pre-tax income.
For the years ended March 31, 2025 and 2024, the loss from continuing operations before income taxes was $8.3 million and $6.1 million, respectively. The Company had an effective tax rate of (0.76%) and 0.00% for the years ended March 31, 2025 and 2024, respectively.
The reconciliation of the U.S. statutory federal income tax rate to the Company’s effective tax rate for the years ended March 31, 2025 and 2024 were as follows:
(In thousands)
Fiscal Year Ended March 31,
Increase (decrease) in income taxes resulting from:
State tax, net of federal benefit (241 ) 2.91 % (226 ) 3.71 %
Loss on dissenting shares 265 -3.20 % - 0.00 %
Impact of other permanent differences 409 -4.93 % 535 -8.77 %
The net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used of income tax purposes are reflected in deferred income taxes. Significant components of the Company's deferred tax assets as of March 31, 2025 and 2024 consist of the following:
50
(In thousands)