Note 3 – Acquisitions and Dispositions

Scott-Rice Acquisition

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

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

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

Total Consideration for Acquisition	$	42,180,283

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

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

Pro Forma Financial Information

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017

Revenue	$	18,411,062	$	15,779,409	$	49,203,865	$	46,676,925

Net Income	$	3,449,095	$	1,231,510	$	7,144,076	$	3,312,397

Basic and Diluted Net
Income Per Share	$	0.67	$	0.24	$	1.38	$	0.64