Note 12 - Acquisitions

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

12. ACQUISITIONS

Effective January 15, 2021, the Company completed the acquisition of all of the issued and outstanding membership interests of KT Acquisition LLC (dba Komtek Forge, “Komtek”), a Massachusetts limited liability company and supplier of highly engineered forgings for the aerospace, industrial gas turbine, medical prosthetics. alternative energy, petrochemical, and defense industries, pursuant to a Membership Interest Purchase Agreement entered into as of January 15, 2021. The Company acquired Komtek in consideration of the payment by the Company of an aggregate purchase price of $3.7 million, subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Membership Interest Purchase Agreement, which was comprised of cash, the issuance of 60,000 Class A common shares of the Company and the assumption of certain specified liabilities of the seller.

Cash Consideration Transferred	$	840,551
Assumed Debt		1,753,757
Fair Value of Stock Consideration		1,059,000
Total Consideration	$	3,653,308
Cash	$	75,701
Accounts Receivable		1,502,713
Inventory		1,595,859
Fixed Assets		434,197
Prepaid and Other Assets		280,258
Goodwill		832,306
Total Assets Acquired	$	4,721,034
Accounts Payable	$	843,817
Accrued Expense		223,909
Total Liabilities Assumed	$	1,067,726
Total Fair Value	$	3,653,308
Acquisition transaction costs incurred were:	$	147,400

Goodwill

Goodwill has an assigned value of $0.8 million and represents the expected synergies generated by combining the operations of Komtek and the Company. The Company purchases forgings to manufacture products for customers in the Industrial and Transportation Products segment and the Komtek acquisition strengthens the Company’s supply chain.

Effective March 1, 2021, MTA Acquisition Company, LLC, a Delaware limited liability company and indirect wholly-owned subsidiary of Crawford United Corporation, completed the acquisition of all of the membership interests of Global-Tek-Manufacturing LLC, a Puerto Rico limited liability company (“Global-Tek Manufacturing”) and specialist in machining parts from wrought, rounds, castings or extrusions and providing in house anodizing and other finishing and assembly operations and substantially all of the assets of Machining Technology L.L.C., a Colorado limited liability company (“Global-Tek Colorado”) with CNC machining capability, pursuant to a Membership Interest and Asset Purchase Agreement entered into March 2, 2021 and effective as of March 1, 2021. The stock and assets were transferred and assigned to MTA in exchange for approximately $4.9 million in cash and the repayment of remaining outstanding indebtedness and transaction costs totaling $1.4 million, subject to customary post-closing adjustments. The Purchase Agreement also includes a post-closing “earnout” that provides for up to an aggregate of $1.5 million in additional consideration to the certain sellers (up to $750,000 per year) if specified performance targets are met in the two years following closing. If earned, the additional consideration is payable in cash or, at the election of each such seller, in Company common shares up to a maximum aggregate amount of 61,475 shares.

Cash Consideration Transferred	$	4,926,035
Seller Transaction Costs and Repayment of Indebtedness		1,398,394
Total Consideration	$	6,324,429
Accounts Receivable	$	1,058,460
Inventory		173,202
Fixed Assets		3,233,073
Prepaid and Other Assets		189,214
Intangibles Asset: Trademark		1,162,000
Intangible Asset: Customer List		1,041,000
Goodwill		1,896,607
Total Assets Acquired	$	8,753,556
Accounts Payable	$	473,119
Accrued Payroll and Other Expense		456,008
Contingent Liability		1,500,000
Total Liabilities Assumed	$	2,429,127
Total Fair Value	$	6,324,429
Acquisition transaction costs incurred were:	$	190,007

Goodwill and Intangible Assets

Goodwill has an assigned value of $1.9 million and represents the expected synergies generated by combining the operations of Global-Tek Colorado, Global-Tek-Manufacturing and the Company. The Company utilizes machined parts for customers in the Industrial and Transportation Products segment and the acquisition of Global-Tek Colorado and Global-Tek-Manufacturing allows the Company to strengthen its supply chain. Intangible asset, trademark has an assigned value of $1.2 million which represents the expected value of the Global-Tek trade name in the market. Intangible asset, customer list has an assigned value of $1.0 million which represents the expected value of the list of the customers of Global-Tek to the Company.

Contingent Consideration

Global-Tek had a contingent consideration of $1.5 million as of the acquisition date which represented $750 thousand of additional consideration per year for a period of two years following the acquisition date if specified performance targets were met. The additional consideration will be earned if Global-Tek achieves specified profitability targets and is payable either in cash or in common shares of the Company up to an aggregate maximum amount of 61,475 shares. The first year performance target has been achieved by Global-Tek and was paid out in the second quarter of 2022 in the cash amount of $750 thousand. The remaining maximum amount of the payment is the greater of the value of 30,736 comon shares of the Company and $750 thousand. The range of estimates for the outcome of the remaining contingent consideration is between $0 and approximately $750 thousand.

Effective July 1, 2021, Crawford EH Acquisition Company, LLC, a Delaware limited liability company and indirect wholly-owned subsidiary of Crawford United Corporation, completed the acquisition of all of the operating assets of Emergency Hydraulics LLC, (“Emergency Hydraulics”) a Florida limited liability company and provider of hydraulic hoses, air tank assemblies and related products to manufacturers of firefighting trucks and other emergency vehicles, pursuant to an Asset Purchase Agreement entered into July 1, 2021. The acquired business is strategically important to the Company’s growing industrial hose platform and will expand its offerings and diversify its customer base in this important market segment. The assets were transferred and assigned to Emergency Hydraulics in exchange for approximately $0.3 million of repayment of remaining outstanding indebtedness and transaction costs.

Assumption of Indebtedness	$	287,359
Accounts Receivable		79,843
Inventory		67,254
Intangible Assets: Customer List		478,649
Total Assets Acquired	$	625,746
Accounts Payable	$	338,387
Total Liabilities Assumed	$	338,387
Total Fair Value	$	287,359
Acquisition transaction costs incurred were:	$	36,204

Intangible Assets

Intangible assets, customer list has an assigned value of $0.5 million which represents the expected value of the list of the customers of Emergency Hydraulics to the Company.

Effective January 10, 2022, Crawford REV Acquisition Company LLC (name later changed to Reverso Pumps LLC or “Reverso Pumps”), a Delaware limited liability company and indirect wholly-owned subsidiary of Crawford United Corporation (the “Company”), completed the acquisition (the “Reverso Transaction”) of substantially all the assets of Reverso Pumps, Inc., a Florida corporation and developer, designer, manufacturer, seller and distributor of oil change systems, fuel and oil transfer pumps, fuel primers, fuel polishing systems and engine flushing systems (“Reverso”), pursuant to an Asset Purchase Agreement (the “Reverso Asset Purchase Agreement”) entered into and effective January 10, 2022 by and among Reverso Pumps, the Seller, the seller parties named therein and the Seller Parties’ representatives named therein. Upon the closing of the Transaction, the assets were transferred and assigned to Reverso Pumps in exchange for approximately $2.6 million in cash, subject to customary post-closing adjustments.

Additionally, effective on January 10, 2022, Crawford SEP Acquisition Company LLC (name later changed to Separ America LLC or “Separ America”), a Delaware limited liability company and indirect wholly-owned subsidiary of the Company, completed the acquisition (the “Separ Transaction,” and with the Reverso Transaction, the “Transactions”) of substantially all the assets of Separ of the Americas, LLC, a Florida limited liability company and developer, designer, manufacturer, seller and distributor of oil change systems, fuel and oil transfer pumps, fuel primers, fuel polishing systems and engine flushing systems (“Separ”) pursuant to an Asset Purchase Agreement (the “Separ Asset Purchase Agreement,” and together with the Reverso Asset Purchase Agreement, the “Purchase Agreements”) by and among Separ America, the Seller, the seller parties named therein and the Seller Parties’ representative named therein. Upon the closing of the Transaction, the assets were transferred and assigned to Separ America in exchange for approximately $1.6 million in cash, subject to customary post-closing adjustments.

Cash Consideration Transferred	$	3,973,375
Seller Transaction Costs		230,359
Total Consideration	$	4,203,734
Accounts Receivable		471,879
Inventory		1,349,115
Fixed Assets		255,000
Prepaid and Other Assets		47,632
Intangible Asset: Customer List & Trademark		1,300,000
Goodwill		1,378,191
Total Assets Acquired	$	4,801,817
Accounts Payable	$	542,359
Accrued Expense		55,724
Total Liabilities Assumed	$	598,083
Total Fair Value	$	4,203,734
Acquisition transaction costs incurred were:	$	124,825

Goodwill

Goodwill has an assigned value of $1.4 million and represents the expected synergies generated by combining the operations of Reverso, Separ, and the Company. The Company sells marine hoses and related products and the acquisition of Reverso Pumps and Separ America will allow the Company to expand its offerings to customers in the strategically important marine and defense markets. Intangible assets, customer list and trademarks has an assigned value of $1.3 million which represents the expected value of the list of the customers and trademarks of Reverso Pumps and Separ America.

Effective May 1, 2022, Knitting Machinery Company of America, LLC, a Delaware limited liability company (“Knitting Machinery”) and indirect wholly-owned subsidiary of Crawford United Corporation, completed the acquisition of all of the operating assets of KMC Corp. dba Knitting Machinery Corp., a Delaware corporation and specialist in the manufacture of hose reinforcement machinery for the plastic, rubber and silicone industries pursuant to an Asset Purchase Agreement entered into as of May 1, 2022. The acquired business is strategically important to the Company’s growing industrial hose platform and will expand its offerings and diversify its customer base in this important market segment. The assets were transferred and assigned to Knitting Machinery in exchange for approximately $250,000 in cash and 38,462 Class A Common Shares valued at $1.0 million.

Cash Consideration Transferred	$	250,000
Fair Value of Stock Consideration		1,000,012
Total Consideration	$	1,250,012
Cash	$	100,000
Accounts Receivable		155,932
Inventory		664,861
Fixed Assets		164,123
Intangible Assets		150,000
Goodwill		424,261
Total Assets Acquired	$	1,659,177
Accounts Payable	$	33,694
Deferred Revenue		375,471
Total Liabilities Assumed	$	409,165
Total Fair Value	$	1,250,012
Acquisition transaction costs incurred were:	$	30,479

Goodwill and Intangible Assets

Goodwill has an assigned value of $0.4 million and represents the expected synergies generated by combining the operations of KMC and the Company. The Company utilizes industrial hoses for customers in the Industrial and Transportation Products segment and the acquisition of KMC allows the Company to strengthen its supply chain. Intangible asset, trademark has an assigned value of $0.075 million which represents the expected value of the KMC trade name in the market. Intangible asset, customer list has an assigned value of $0.075 million which represents the expected value of the list of the customers of KMC to the Company.

Sales and Net Income for the Acquired Companies

Sales and net income information for the acquired companies, including Komtek Forge LLC (“Komtek”), Global-Tek Manufacturing LLC and Global-Tek Colorado LLC (“Global-Tek”), Emergency Hydraulics LLC (“EH”), Reverso Pumps LLC (“Reverso Pumps”), Separ America LLC (“Separ America”) and Knitting Machinery Company of America LLC (“Knitting Machinery”) since the respective acquisition dates for the nine months ended September 30, 2022 and 2021 are provided below.

	Nine Months ended					Nine Months ended
	September 30, 2022					September 30, 2021
	Sales		Net Income			Sales		Net Income
Acquired Companies:
Komtek (acquired January 15, 2021)	$	6,592,926		351,173		$	5,052,649	$	202,903
Global-Tek (acquired March 1, 2021)		4,883,279		(540,931	)		7,209,950		1,388,401
EH (acquired July 1, 2021)		1,088,372		97,375			268,102		19,549
Reverso Pumps (acquired January 10, 2022)		3,930,057		663,070			-		-
Separ America (acquired January 10, 2022)		1,440,788		247,346			-		-
Knitting Machinery (acquired May 1, 2022)		818,108		73,195			-		-
Subtotal Acquired Companies	$	18,753,530		891,228			12,530,701		1,610,853
All Other Companies		76,340,866		2,600,456			64,311,044		3,977,746
Total	$	95,094,396	$	3,491,684		$	76,841,745	$	5,588,599