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Note 12 - Acquisition of Businesses | 9 Months Ended
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Sep. 30, 2022
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | NOTE 12 – Acquisition of Businesses: Gifts By Design, Inc. On January 29, 2021, the Company, through BAMKO, acquired substantially all of the assets of Gifts By Design, Inc. (“Gifts by Design”) of Seattle, Washington. Gifts by Design is a promotional products and branded merchandise agency that is well-established as a developer and supplier of corporate awards, incentives, and recognition programs for some of the world’s biggest brands. The purchase price for the acquisition consisted of $6.0 million in cash at closing. Assets Acquired and Liabilities Assumed The total purchase price was allocated to the tangible and intangible assets and liabilities of Gifts by Design based on their estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was allocated to goodwill. The following table presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of Gifts by Design based on their estimated fair values as of the effective date of the transaction (in thousands):
Accounts receivable |  | $ | 251 |
Prepaid expenses and other current assets |  |  | 196 |
Property, plant and equipment |  |  | 60 |
Intangible assets |  |  | 3,673 |
Goodwill |  |  | 2,417 |
Total assets |  | $ | 6,597 |
Accounts payable |  |  | 199 |
Other current liabilities |  |  | 372 |
Total liabilities |  | $ | 571 |
The Company recorded $3.7 million in identifiable intangibles at fair value, consisting of $2.5 million in acquired customer relationships and $1.2 million for the brand name. The intangible assets associated with the customer relationships are being amortized for seven years. The Gifts by Design trade name was fully impaired during the nine months ended September 30, 2022 as a result of the Company’s rebranding efforts during the second quarter of 2022. See Note 11 for further details. The difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities. The acquisition of Gifts by Design was treated as an asset purchase for income tax purpose, and therefore, the resulting goodwill from this acquisition is deductible for U.S. income tax purposes. The goodwill associated with the Gifts by Design acquisition was fully impaired during the three and nine months ended September 30, 2022 as a result of the Company’s goodwill impairment test performed during the third quarter of 2022, which was triggered by the depressed market price of the Company's common stock and corresponding significant decline in the Company’s market capitalization. See Note 11 for further details. Sutter’s Mill Specialties, Inc. On December 2, 2021, the Company, principally through BAMKO, acquired substantially all of the assets of Sutter’s Mill Specialties, Inc. (“Sutter’s Mill”) of Tempe, Arizona. Sutter’s Mill is a vertically integrated manufacturer of high quality, decorated promotional products. Sutter’s Mill has the capability to print on demand and create customized promotional programs and products for customers of any size. The purchase price of the acquisition consisted of the following: (a) approximately $10.5 million in cash, (b) the issuance of 45,620 restricted shares of Superior’s common stock that vest ratably over a three-year period, and (c) potential future payments of approximately $4.5 million in additional contingent consideration for calendar years 2022 through 2024 based on the results of the acquired business. Fair Value of Consideration Transferred A summary of the purchase price is as follows (in thousands):
Cash consideration |  | $ | 10,533 |
Restricted shares of Superior common stock issued |  |  | 869 |
Contingent consideration |  |  | 2,520 |
Total Consideration |  | $ | 13,922 |
Assets Acquired and Liabilities Assumed The table below presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of Sutter’s Mill based on their estimated fair values as of the effective date of the transaction. The assets and liabilities of Sutter’s Mill shown below are based on our preliminary estimates of their acquisition date fair values. Our final fair value determination may be different than those shown below. The following is our preliminary assignment of the aggregate consideration (in thousands):
Accounts receivable |  | $ | 4,701 |
Inventories |  |  | 9,149 |
Prepaid expenses and other current assets |  |  | 135 |
Property, plant and equipment |  |  | 1,043 |
Operating lease right-of-use assets |  |  | 648 |
Intangible assets |  |  | 2,031 |
Goodwill |  |  | 1,019 |
Other assets |  |  | 41 |
Total assets |  | $ | 18,767 |
Accounts payable |  |  | 3,209 |
Other current liabilities |  |  | 389 |
Long-term debt |  |  | 758 |
Long-term operating lease liabilities |  |  | 489 |
Total liabilities |  | $ | 4,845 |
In the first quarter of 2022, an adjustment to increase goodwill by $0.1 million was made to the initial amounts recorded, which relates to additional consideration paid by the Company to the seller. The Company recorded $2.0 million in identifiable intangibles at fair value, consisting of $1.2 million in acquired customer relationships, $0.1 million for a non-compete agreement and $0.7 million for the Sutter’s Mill Specialties trade name. The intangible assets associated with the customer relationships are being amortized for seven years and the non-compete agreement is being amortized for five years. The Sutter’s Mill Specialties trade name was fully impaired during the nine months ended September 30, 2022 as a result of the Company’s rebranding efforts during the second quarter of 2022. See Note 11 for further details. The difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities. The acquisition of Sutter’s Mill was treated as an asset purchase for income tax purpose, and therefore, the resulting goodwill from this acquisition is deductible for U.S. income tax purposes. The goodwill associated with the Sutter’s Mill acquisition was fully impaired during the three and nine months ended September 30, 2022 as a result of the Company’s goodwill impairment test performed during the third quarter of 2022, which was triggered by the depressed market price of the Company's common stock and corresponding significant decline in the Company’s market capitalization. See Note 11 for further details. Guardian Products, Inc. On May 1, 2022, the Company, through BAMKO, acquired substantially all of the assets of Guardian Products, Inc. (“Guardian”) of Norcross, Georgia. Guardian is a branded merchandise company that is one of the leading providers of promotional products to automotive dealers nationwide. The purchase price for the acquisition consisted of the following: (a) $11.1 million in cash at closing, subject to a working capital adjustment, (b) the issuance of 116,550 restricted shares of Superior’s common stock (the “Guardian Stock”) that vest ratably over a three-year period, and (c) estimated potential future payments of approximately $2.3 million in additional contingent consideration based on the results of the acquired business through April 2025. The Guardian Stock is subject to transfer restrictions over the three-year period following the closing of the acquisition. Fair Value of Consideration Transferred A summary of the purchase price is as follows (in thousands):
Cash consideration |  | $ | 11,077 |
Restricted shares of Superior common stock issued |  |  | 2,000 |
Contingent consideration |  |  | 1,119 |
Total Consideration |  | $ | 14,196 |
Assets Acquired and Liabilities Assumed The table below presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of Guardian based on their estimated fair values as of the effective date of the transaction. The assets and liabilities of Guardian shown below are based on our preliminary estimates of their acquisition date fair values. Our final fair value determination may be different than those shown below. The following is our preliminary assignment of the aggregate consideration (in thousands):
Accounts receivable |  | $ | 1,656 |
Inventories |  |  | 621 |
Prepaid expenses and other current assets |  |  | 272 |
Property, plant and equipment |  |  | 15 |
Intangible assets |  |  | 5,886 |
Goodwill |  |  | 6,463 |
Total assets |  | $ | 14,913 |
Accounts payable |  |  | 533 |
Other current liabilities |  |  | 184 |
Total liabilities |  | $ | 717 |
The Company recorded $5.9 million in identifiable intangibles at fair value, consisting of $5.0 million in acquired customer relationships, $0.2 million for a non-compete agreement and $0.7 million for the Guardian Products trade name. The intangible assets associated with the customer relationships are being amortized for seven years, the non-compete agreement is being amortized for five years and the trade name is being amortized for two years. The difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed was recorded as goodwill, which is primarily attributed to the assembled workforce and expanded market opportunities. The acquisition of Guardian was treated as an asset purchase for income tax purpose, and therefore, the resulting goodwill from this acquisition is deductible for U.S. income tax purposes. The goodwill associated with the Guardian acquisition was fully impaired during the three and nine months ended September 30, 2022 as a result of the Company’s goodwill impairment test performed during the third quarter of 2022, which was triggered by the depressed market price of the Company's common stock and corresponding significant decline in the Company’s market capitalization. See Note 11 for further details.

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