Note 5 - Goodwill and Other Intangible Assets, Net

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill represents the excess of cost over the fair value of identifiable assets acquired. Goodwill is tested annually for impairment, or more frequently if indicators of impairment are identified.

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 fair value exceeded carrying value for all reporting units and no indefinite-lived intangible assets or goodwill was determined to be impaired. There have been no impairment indicators identified during the three or six-month periods ended June 30, 2023.

Goodwill increased by $0.2 million from $16.2 million at  December 31, 2022 to $16.4 million at  June 30, 2023. The increase in Goodwill was driven by a purchase accounting adjustment to Goodwill, recorded in the second quarter, for Knitting Machinery Company of America (KMC). 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 $2.0 million in the Industrial and Transportation Products segment related to the acquisitions of Reverso Pumps & Separ America and KMC and in the first and second quarters of 2022, respectively. These increases were partially offset by a decrease of $0.2 million related to a purchase accounting adjustment for Global-Tek, also in the Industrial and Transportation Products segment.

Goodwill by reportable segment is as follows:

	June 30,		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		221,111		(169,854	)
Ending Balance	$	15,974,793	$	15,753,682
Total Company:
Beginning Balance	$	16,231,938	$	14,404,618
Acquisitions		-		1,997,174
Adjustments		221,111		(169,854	)
Ending Balance	$	16,453,049	$	16,231,938

The Company's intangible assets have been generated via acquisitions. Intangibles are being amortized on a straight-line basis over periods ranging from one to 15 years.

Intangible assets are as follows:

	June 30,		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		5,099,694		4,469,089
Intangible assets, net	$	8,861,955	$	9,492,560

Amortization of intangibles assets was: $315,302 and $320,895 for the three months ended June 30, 2023 and 2022, respectively and $630,605 and $640,124 for the six months ended June 30, 2023 and 2022, respectively.