NORTECH SYSTEMS INC Goodwill & Intangibles Disclosure
NOTE 3. OTHER INTANGIBLE ASSETS
Finite life intangible assets as of December 31, 2024 and 2023 are as follows:
| Customer Relationships | Patents | Total | ||||||||||
| Balance as of January 1, 2023 | $ | 216 | $ | 206 | $ | 422 | ||||||
| Amortization | 144 | 15 | 159 | |||||||||
| Balance as of December 31, 2023 | $ | 72 | $ | 191 | $ | 263 | ||||||
| Amortization | 72 | 17 | 89 | |||||||||
| Balance as of December 31, 2024 | $ | $ | 174 | $ | 174 | |||||||
Intangible assets are amortized on a straight-line basis over their estimated useful lives. The weighted average remaining amortization period of our intangible assets is 5.1 years. Of the patents value as of December 31, 2024, $89 are being amortized and $85 are in process as patents have not yet been issued.
Amortization expense of finite life intangible assets was $89 and $159 for the years ended December 31, 2024 and 2023, respectively.
Estimated future annual amortization expense (except projects in process) related to these assets is approximately as follows:
| Year | Amount | |||
| 2025 | $ | 18 | ||
| 2026 | 18 | |||
| 2027 | 18 | |||
| 2028 | 18 | |||
| 2029 | 12 | |||
| Thereafter | 5 | |||
| Total | $ | 89 | ||
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About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.