Note 5 - Goodwill and Other Intangible Assets, Net

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

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, 2022 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, 2022, no indefinite-lived intangible assets or goodwill was determined to be impaired. Management updated their assessment during the first three months of 2023 and validated the assumptions used in the analyses performed as of December 31, 2022 and determined that the resulting conclusions remained appropriate as of March 31, 2023.

There was no change to the balance of Goodwill from December 31, 2022 to March 31, 2023. Goodwill increased by $1.8 million from $14.4 million at December 31, 2021 to $16.2 million at December 31, 2022. The increase in Goodwill was driven by the addition of $1.9 million of Goodwill related to the acquisitions in the Industrial and Transportation Products segment of Knitting Machinery Company of America in the second quarter of 2022 and of Reverso Pumps and Separ America in the first quarter of 2022, partially offset by a decrease of $0.2 million related to a purchase accounting adjustment to Goodwill for Global-Tek Manufacturing and Global-Tek Colorado, also in the Industrial and Transportation Products segment. Goodwill by reportable segment is as follows:

	March 31,		December 31,
	2023		2022
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	$	15,753,682	$	13,926,362
Acquisitions		-		1,997,174
Adjustments		-		(169,854	)
Ending Balance	$	15,753,682	$	15,753,682
Total Company:
Beginning Balance	$	16,231,938	$	14,404,618
Acquisitions		-		1,997,174
Adjustments		-		(169,854	)
Ending Balance	$	16,231,938	$	16,231,938

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:

	March 31,		December 31,
	2023		2022
Customer list intangibles	$	9,316,000	$	9,316,000
Non-compete agreements		200,000		200,000
Trademarks		4,445,649		4,445,649
Total intangible assets		13,961,649		13,961,649
Less: accumulated amortization		4,784,392		4,469,089
Intangible assets, net	$	9,177,257	$	9,492,560

Amortization of intangibles assets was: $315,303 and $319,230 for the three months ended March 31, 2023 and 2022, respectively.