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Note 5 - Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Text Block]

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Impairment testing

U.S. GAAP requires that both indefinite-lived intangible assets and Goodwill are tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not (i.e., a likelihood greater than 50%) that the intangible asset or the reporting unit is impaired. During interim periods, ASC 350 requires companies to focus on those events and circumstances that affect the significant inputs used to determine the fair value of the asset group or reporting unit to determine whether an interim quantitative impairment test is required.

The Company performed its annual impairment test for Goodwill and intangible assets as of the last day of the fourth quarter. The Company first assessed certain qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible assets is less than its carrying amount, and whether it is therefore necessary to perform the quantitative impairment test. In 2023, for all reporting units other than CAD Enterprises the qualitative analysis indicated that a quantitative analysis was not necessary. During 2022 a quantitative analysis was performed for Global-Tek as well as CAD. No impairment was identified in the periods presented.

The Goodwill values are presented below:

	December 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		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

Goodwill increased by $0.2 million from $16.2 million at December 31, 2022 to $16.5 million at December 31, 2023. The increase in Goodwill was driven by a purchase accounting adjustment to Goodwill, recorded in the second quarter of 2023, 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.

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 other intangible assets is calculated on a straight-line basis over periods ranging from one year to 15 years. Intangible assets consist of the following:

	*December 31, 2023*		*December 31, 2022*
Customer list intangibles	$	9,316,000	$	9,316,000
Non-compete agreements		200,000		200,000
Trademarks		4,466,899		4,445,649
Total intangible assets		13,982,899		13,961,649
Less: accumulated amortization		5,730,299		4,469,089
Intangible assets, net	$	8,252,600	$	9,492,560

Intangible amortization expense was as follows:

	*December 31, 2023*		*December 31, 2022*

Accumulated amortization at the beginning of the period	$	4,469,089	$	3,203,585
Amortization expense		1,261,210		1,265,504
Accumulated amortization at end of period	$	5,730,299	$	4,469,089

Intangible amortization for the next five years is as follows:

	*Amortization in future periods*
2024		1,261,210
2025		1,261,210
2026		933,345
2027		817,298
2028		759,117