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Note 5 - Goodwill and Other Intangible Assets, Net

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Text Block]

5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

For the identified reporting units, impairment testing was performed as of December 31, 2021 using an income approach based on management’s determination of the prospective financial information, with consideration given to the existing uncertainty in the global economy and aerospace and defense industry, particularly the commercial sector. The results of this test indicated the fair value exceeded carrying value for all reporting units tested. As a result of the impairment testing performed as of December 31, 2021, no indefinite-lived intangible assets or goodwill was determined to be impaired. Management updated their assessment during the first quarter of fiscal 2022 and validated the assumptions used in the analyses performed as of December 31, 2021 and determined that the resulting conclusions remained appropriate as of June 30, 2022.

Goodwill increased by $1.8 million from $14.4 million at December 31, 2021 to $16.2 million at June 30, 2022. The increase in Goodwill was driven by the addition of $1.9 million of Goodwill related to the acquisitions of Knitting Machinery Company of America, Reverso Pumps and Separ America in the Industrial and Transportation Products segment in the quarter, partially offset by a decrease of $0.2 million related to a purchase accounting adjustment to Goodwill for Global-Tek and Global-Tek Colorado, also in the Industrial and Transportation Products segment. Goodwill by reportable segment is as follows:

	June 30, 2022			December 31, 2021
Commercial Air Handling Equipment Segment:
Beginning Balance	$	478,256		$	478,256
Acquisitions		-			-
Adjustments		-			-
Ending Balance	$	478,256		$	478,256

Industrial and Transportation Products Segment:
Beginning Balance	$	13,926,362		$	11,027,596
Acquisitions		1,922,513			2,898,766
Adjustments		(169,854	)		-
Ending Balance	$	15,679,021		$	13,926,362

Total Company:
Beginning Balance	$	14,404,618		$	11,505,852
Acquisitions		1,922,513			2,898,766
Adjustments		(169,854	)		-
Ending Balance	$	16,157,277		$	14,404,618

Intangible assets relate to the purchase of businesses. Goodwill represents the excess of cost over the fair value of identifiable assets acquired. Goodwill is not amortized but is reviewed on an annual basis for impairment. Amortization of intangibles is being amortized on a straight-line basis over period ranging from one year to 15 years. Intangible assets are as follows:

	June 30, 2022		December 31, 2021
Customer list intangibles	$	9,316,000	$	8,741,000
Non-compete agreements		200,000		200,000
Trademarks		4,474,149		3,599,149
Total intangible assets		13,990,149		12,540,149
Less: accumulated amortization		3,843,709		3,203,585
Intangible assets, net	$	10,146,440	$	9,336,564

Amortization of intangibles assets was: $320,895 and $261,025 for the three months ended June 30, 2022 and 2021, respectively and $640,124 and $466,949 for the six months ended June 30, 2022 and 2021, respectively.