Note 5 - Goodwill and Other Intangible Assets, Net

6 Months Ended

Jun. 30, 2024

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. 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. For the identified reporting unit, impairment testing was performed as of  December 31, 2023 using an income approach based on management’s determination of the prospective financial information, and no indefinite-lived intangible assets or goodwill was determined to be impaired.

There were no impairment indicators identified during the six-month periods ended June 30, 2024 or June 30, 2023.

Goodwill increased by $0.9 million from $16.5 million at  December 31, 2023 to $17.4 million at  June 30, 2024. The increase in Goodwill was driven by an addition of $0.9 million in the Industrial and Transportation Products segment related to the acquisition of Heany Industries, LLC. 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 by reportable segment is as follows:

	June 30,		December 31,
	2024		2023
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	$	15,974,793	$	15,753,682
Acquisitions		918,402		-
Adjustments		-		221,111
Ending Balance	$	16,893,195	$	15,974,793
Total Company:
Beginning Balance	$	16,453,049	$	16,231,938
Acquisitions		918,402		-
Adjustments		-		221,111
Ending Balance	$	17,371,451	$	16,453,049

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

Intangible assets consist of the following:

	June 30,		December 31,
	2024		2023
Customer list intangibles	$	11,367,000	$	9,316,000
Non-compete agreements		200,000		200,000
Trademarks		4,554,074		4,466,899
Total intangible assets		16,121,074		13,982,899
Less: accumulated amortization		6,430,971		5,730,299
Intangible assets, net	$	9,690,103	$	8,252,600

Amortization of intangible assets was $350,336 and $315,302 for the three months ended June 30, 2024 and 2023, respectively and $700,672 and $630,605 for the six months ended June 30, 2024 and 2023, respectively.

Intangible amortization for the remainder of 2024 and the next four years is expected to be as follows:

	Amortization in future periods
Remainder of 2024	$	700,672
2025		1,401,343
2026		1,073,479
2027		957,432
2028		899,250