UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended June 30March 31, 20182019

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from Not Applicable to Not Applicable

Commission file number: 0-147

HICKOK INCORPORATED 

(Exact name of registrant as specified in its charter)

Registrant's telephone number (216) 541-8060

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted  pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Securities registered pursuant to Section 12(b) of the Act: None.

As of July 31, 2018, 2,123,806April 30, 2019, 2,158,806 shares of Class A Common Stock and 596,848 shares of Class B Common Stock were outstanding.

1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The consolidated financial statements include the accounts of Hickok Incorporated and its wholly-owned subsidiaries (the “Company”). Significant intercompany transactions and balances have been eliminated in the financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2018March 31, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2018.2019. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s TransitionAnnual Report on Form 10-KT10-K for the year ended December 31, 2017.2018. 

During the six-monththree-month period ended June 30, 2018,March 31, 2019, there have been no changes to our significant accounting policies other than the revenue recognition from contracts with customer,adoption of the new standard for leases, as discussed in Note 2 below.

Reclassifications

Certain prior year amounts were reclassified to conform to the current year presentation, including transaction costs related to acquisitions that were reclassified from selling, general and administrative to other (income) expenses as these costs are not considered as operating costs. These reclassifications have no effect on the financial position or results of operations reported as of and for the periods presented.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s Summary of Significant Accounting Policies is provided with the consolidated financial statements and footnotes thereto included in the Company’s TransitionAnnual Report on Form 10-KT10-K for the three-month transition periodyear ended December 31, 2017.2018.

Recently Adopted Accounting Standards
The Company did not incur any material impact to its financial condition or results of operations due to the adoption of any new accounting standards during the periods reported. The adoption of the new standard for leases did have a material impact on consolidated balance sheets as disclosed below and in Note 9.

In May 2017,February 2016, the Financial Accounting Standards Board (FASB), issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting." ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. The Company adopted this guidance January 1, 2018.  The adoption of this guidance did not have a material effect on our consolidated financial statements.

In August 2016, FASB issued ASU 2016-15, "Statement2016-02 “Leases (Topic 842),” a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of Cash Flows (Topic 230), Classificationlease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of Certain Cash Receiptsassets and Cash Payments."liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The amendments in this update provide guidance on eight specific cash flow issues, thereby reducingnew standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the diversity in practice in how certain transaction are classifiedbeginning of the earliest comparative period presented in the consolidatedfinancial statements, but it does not require transition accounting for leases that expire prior to the date of cash flows. Thisinitial application. The new standard is effective for annual periodsfiscal years and interim periods forwithin those annual periodsyears, beginning on or after December 15, 2017.  Early2018, with early adoption is permitted. The Company adopted this guidance January 1, 2018. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU 2016-09) a new standard that changes the accounting for certain aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from the other income tax cash flows. The standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flow statements, and provides an accounting policy election to account for forfeitures as they occur. The Company adopted this standard effective October 1, 2017. The adoption of this new standard did not have a material impact on our consolidated financial statements.January 1, 2019 resulted in assets of $9.7 million recorded as Operating Right of Use Assets, net, and additional lease liabilities of $9.8 million.  The Company also recorded an adjustment to retained earnings resulting from the cumulative effect of the change in accounting of ($0.1) million.  See Note 9 for further information.

In May 2014, the FASB issued its final standard on the recognition of revenue from contracts with customers. The standard, issued as Accounting Standards Update (ASU) 2014-09, outlines a single comprehensive model for entities to use in the accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry specific guidance. The core principle of this model is that “an entity recognizes revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.” The Company adopted this new standard effective January 1, 2018.  The adoption of this standard did not have a material impact on our consolidated financial statements.   

Recently Issued Accounting Standards

In January 2017, FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 eliminates the second step in the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The standard, which should be applied prospectively, is effective for fiscal years and interim periods within those years beginning on or after December 15, 2019. Early adoption is permitted. We are evaluating the impact the adoption of this standard could have on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. The standard requires a financial asset (including trade receivables) measured at amortized cost basis to be presented at the net amount expected to be collected. Thus, the income statement will reflect the measurement of credit losses for newly-recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. This standard is effective for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2019 with early adoption permitted. We are evaluating the impact the adoption of this standard could have on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842),” a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial application. The new standard is effective for fiscal years and interim periods within those years, beginning on or after January 1, 2019, with early adoption permitted. We are evaluating the impact the adoption of this standard will have to our consolidated financial statements.

3.  ACCOUNTS RECEIVABLE 

The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. The reserve for doubtful accounts was $6,418$35,750 and $10,175$35,000 at June 30, 2018March 31, 2019 and December 31, 2017,2018, respectively.

4.  INVENTORY

Inventory is valued at the lower of cost (first-in, first-out) or marketnet realizable value and consistconsists of:

5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Intangible assets relate to the purchase of businesses on June 1, 2017 and July 1, 2016.businesses. Goodwill represents the excess of cost over the fair value of identifiable assets acquired. Goodwill is not amortized but will beis reviewed on an annual basis for impairment. Amortization of other intangibles is being amortized on a straight-line basis over period ranging from one year to 15 years. Intangible assets are as follows:

Amortization of other intangibles assets was: $377,015$93,591 and $120,904$217,257 for the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, respectively.

6.  PROPERTY, PLANT AND EQUPMENT,EQUIPMENT, NET

Property, plant and equipment are recorded at cost and depreciated over their useful lives. Maintenance and repair costs are expenses as incurred. Property, plant and equipment are as follows:

Depreciation expense was $271,960$400,601 and $161,752$139,746 for the sixthree months ended June 30,March 31, 2019 and 2018, and 2017, respectively.

7.  BANK DEBT 

The Company entered into a Credit Agreement on June 1, 2017 with JPMorgan Chase Bank, N.A. as lender, (thewhich was subsequently amended in connection with funding the acquisition of CAD Enterprises, Inc. (“CAD”) on July 5, 2018 (as amended, the “Credit Agreement”). TheAs amended, the Credit Agreement is comprised of a revolving facility in the amount of $8,000,000,$12,000,000, subject to a borrowing base (determined based on 80% of Eligible Accounts, plus 50% of Eligible Progress Billing Accounts, plus 50% of Eligible Inventory, minus Reserves, each as defined in the Credit Agreement) and a term A loan in the amount of $2,000,000,$6,000,000. Outstanding borrowings on the term A loan are payable in consecutive monthly installments, of $41,667 commencing on July 1, 2017.which currently amount to $111,111 per month.  

The revolving facility under the Credit Agreement includes a $3 million sublimit for the issuance of letters of credit thereunder.  The Credit Agreement also provides for a separate credit line for borrowings of up to an aggregate of $1,000,000 for capital expenditures until July 5, 2019, at which time any outstanding capital expenditure borrowings will be converted into a term loan maturing at the earlier of five years after such conversion or the termination of the revolving credit facility.  Interest for borrowings under the revolving facility accrues at a per annum rate equal to Prime Rate or LIBOR plus applicable margins of (i) 0.00% for Prime Rate loans and (ii) 2.00% for LIBOR loans. The maturity date of the revolving facility is June 1, 2020. Interest for borrowings under the term A loan accrues at a per annum rate equal to Prime Rate or LIBOR plus applicable margins of (i) 0.25% for Prime Rate loans and (ii) 2.25% for LIBOR loans. The maturity date of the term A loan is JuneDecember 1, 2021.2022. The Credit Agreement includes a commitment fee on the unused portion of the revolving facility of 0.25% per annum payable quarterly. The obligations of the Company and other borrowers under the Credit Agreement are secured by a blanket lien on all the assets of the Company and its subsidiaries. The Credit Agreement also includes customary representations and warranties and applicable reporting requirements and covenants. The financial covenants includingunder the Credit Agreement include a minimum fixed charge coverage ratio, anda maximum senior funded indebtednessdebt to EBITDA ratio financial covenants.and a maximum total funded debt to EBITDA ratio.

In connection with entering into the Credit Agreement in 2017, the Company made a one-time prepayment of a portion of the outstanding principal under promissory notes held by First Francis Company Inc. (“First Francis”), in the amount of $500,000.  First Francis is owned by Edward Crawford and Matthew Crawford, who serve on the Board of Directors of the Company. 

Bank debt balances consist of the following: 

8. NOTES PAYABLE

Convertible Notes Payable - Related Party

On December 30, 2011, management entered intoThe Company is party to a Convertible Loan Agreement (“Convertible(as amended, “Convertible Loan”) with Roundball, LLC (“Roundball”). The Convertible Loan provides approximately $467,000 of liquidity to meet on- going  working capital requirements of the Company and allows $250,000 of borrowing on the agreement at the Company's discretion at an interest rate of 0.25%0.34%.  Borrowings under the Convertible Loan mature December 30, 2019.  Roundball, a major shareholder of the Company, is an affiliate of Steven Rosen and Matthew Crawford, who serve on the Board of Directors of the Company.

There have been several amendmentsThe Convertible Loan provides Roundball with the option to the original agreement over the years for the purpose of extending the existing terms of the Convertible Loan. On December 29, 2017, management entered into Amendment No. 6 ofelect to convert amounts outstanding under the Convertible Loan Agreementinto Class A Common Shares at a conversion price of $1.43 per Class A Common Share. In December 2018, the Convertible Loan was amended to provide Roundball with Roundball. The amended Convertible Loan:the option to elect to convert, subject to shareholder approval which was obtained on May 10, 2019, a portion of the indebtedness into Class B Common Shares at a conversion price of $1.43 per Class B Common Share, up to a maximum amount of 75,000 Class B Common Shares.

The outstanding balance on the Convertible Loan as of June 30, 2018,March 31, 2019 and December 31, 20172018, respectively was $200,000.

As part ofIn connection with the Convertible Loan, the parties entered into a Warrant Agreement, dated December 30, 2012 (as amended to date, the “Warrant Agreement”), whereby the Company issued a warrant to Roundball to purchase, at its option, up to 100,000 shares of Class A Common Stock of the Company at an exercise price of $2.50 per share, subject to certain anti-dilution and other adjustments. The Warrant Agreement, as amended,warrant expires on December 30, 2018.2019.

Short-Term FinancingNotes Payable – Related Party
On June 3, 2016, management entered into a revolving credit agreement

The Company has two separate outstanding promissory notes with First Francis. Francis Company Inc. (“First Francis became a major shareholder of the Company onFrancis”), which were originally issued in July 1, 2016 when the Company completedin connection with the acquisition of Federal Hose Manufacturing LLC.(“Federal Hose”) and which were amended in July 2018 in connection with acquisition of CAD. The agreement provides for a revolving credit facilityfirst promissory note was issued with original principal in the amount of $250,000$2,000,000, and the second was issued with original principal in the amount of $2,768,662. The promissory notes each have an interest atrate of 6.25% per annum, which was increased from 4.0% per annum. Each loan made under the credit arrangement will be due and payable in full on the expiration dateannum as part of the revolver note.July 2018 amendments. In addition, the agreement generallypromissory note with original principal amount of $2,768,662 was amended in July 2018 to provide for a conversion option commencing July 5, 2019 which allows for borrowing based on anFirst Francis to convert the promissory note, in whole in part with respect to a maximum amount equalof $648,000, into shares of the Company’s Class B common stock at the price of $6.48 per share (subject to eighty percent of eligible accounts receivables or $250,000. The revolving line of credit expiredadjustment), subject to shareholder approval which was obtained on May 31, 2017.10, 2019. First Francis is owned by Edward Crawford and Matthew Crawford, who serve on the Board of Directors of the Company. 

Notes Payable – Related PartySeller Note

Notes payable - related parties is a result of the acquisition of a business on July 1, 2016 and consists of the following:

9. EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per share.

10. ACQUISITIONS

The Company purchased certain assets and assumed certain liabilities of Air Enterprises Acquisition, LLC on June 1, 2017 for $10,250,000. The acquired business will continue to operate under the name Air Enterprises (“AE”). AE manufactures custom commercial air handling units under fixed price contracts. Its customers are typically in the health care, university, research, pharmaceutical and industrial manufacturing market segments, and span all across the United States and worldwide. AE has one operating location in Northeastern Ohio. The purchase price was assigned to the book value of the net assets acquired with the excess over the book value assigned to intangible assets and goodwill and has been allocated to the following accounts:

11. DISPOSITIONS

Effective June 1, 2018, Hickok Incorporated completed the sale (the “Transaction”) of certain assets comprising its Test and Measurement business segment (the “Test and Measurement Segment”) to Hickok Waekon, LLC, an Ohio limited liability company (“Buyer”), pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) by and among Buyer, the Company, Supreme Electronics Corp., a Mississippi corporation and wholly-owned subsidiary of the Company (“Supreme”), Waekon Corporation, an Ohio corporation and wholly-owned subsidiary of the Company (“Waekon Corporation”), and Robert L. Bauman, a director of the Company. Prior to the effectiveness of the Transaction, Supreme and Waekon Corporation owned certain of the assets used in the operation of the Test and Measurement Segment and were primarily responsible for the operation thereof.

Upon the closing of the Transaction, all of the issued and outstanding shares of capital stock of the Company then-owned, directly or indirectly, by Mr. Bauman or his affiliate, equaling approximately 21,413 shares of Class A Common Stock of the Company and 176,768 shares of Class B Common Stock of the Company, were transferred and assigned to the Company. The shares constitute the consideration received by the Company in the Transaction.  Based upon the share price at closing, the value of the proceeds received was approximately $1.6 million.  The net assets sold were approximately $2.7 million.  The Company recorded a loss on sale of approximately $1.2 million.

The Purchase Agreement contains customary indemnification obligations of each party with respect to breaches of their respective representations, warranties and covenants, and certain other specified matters, which are subject to certain exceptions, terms and limitations described further in the Purchase Agreement.

The Purchase Agreement contains customary post-closing covenants pertaining to the transition of the Test and Measurement Segment from the Company to Buyer and establishes certain rights and obligations of the parties relating to intellectual property rights in certain technology developed by the Company, Supreme and Waekon Corporation. Specifically, Buyer has an option under the Purchase Agreement to further develop such technology, which option is exercisable in accordance with the terms and conditions set forth therein.

Pursuant to the terms of the Purchase Agreement, the Company agreed to take commercially reasonable efforts to change its name to one or more names that do not include “Hickok” or “Waekon” or any derivation thereof.  Buyer granted the Company a non-exclusive, irrevocable, non-assignable, worldwide, royalty-free license to utilize the “Hickok” trademark and trade name in its business for a period of 180 days following the closing of the Transaction.  Buyer granted the Company a similar license to use the “Hickok-Inc.com” domain name during such 180 days post-closing period.  The Company is currently evaluating potential new names in anticipation of facilitating a name change upon the expiration of the 180 day post-closing period described above. 

12. SEGMENT AND RELATED INFORMATION

The Company operates three reportable segments: 1) commercial air handling, 2) test and measurement and 3) industrial hose. The Company's management evaluates segment performance based primarily on operating earnings before taxes. Non-operating items such as marketing and general administrative expenses, interest income, and interest expense are included in administrative and other expenses. Depreciation expense on assets used in manufacturing are considered part of each segment's operating performance. Depreciation expense on non-manufacturing assets is included in selling, general and administrative expenses.

Commercial Air Handling:
This segment manufactures custom air handling units under fixed price contract to customers in the health care, university, research, pharmaceutical and industrial manufacturing market segments, and across the United States and worldwide.

Test and Measurement:
This segment consists of diagnostic tools and equipment sold to the automotive industry and indicators and gauges sold primarily to companies in the aircraft and locomotive industries. These products are sold to original equipment manufacturers and to the aftermarket using a variety of distribution methods. (1)

Industrial Hose:
This segment consists primarily of flexible metal and silicone hose products designed and manufactured or distributed primarily to the trucking industry and other industrial end-users. These products are sold to original equipment manufacturers and to the aftermarket using a variety of distribution methods.

Information by industry segment is set forth below:

13. SUBSEQUENT EVENTS

Effective July 1, 2018, the Company completed the acquisition of all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc., (“CAD”), pursuant to a Share Purchase Agreement (the “Share Purchase Agreement”) entered into as of July 5, 2018 by and among the Company, the sellers named therein and the Sellers’ representative named therein.  Upon the closing of the transaction, the Shares were transferred and assigned to the Company in consideration of the payment by the Company offor an aggregate purchase price of $21 million, $12 million of which was payable in cash at closing, with the remainder paid in the form of a subordinated promissory note issued by the Company in favor of a Sellerseller (the “Seller Note), which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Share Purchase Agreement.Agreement entered into in connection with the acquisition (the “Share Purchase Agreement”).   The Seller Note bears interest at a rate of four percent (4%) per annum and is payable in full no later than June 30, 2023 (the “Maturity Date”).  The Maturity Date, with respect to any then-outstanding portion of the original principal amount which is subject to an indemnification claim by the Company (asserted in accordance with the terms of the Share Purchase Agreement) pending as of the date thereof, will be automatically extended until such time as any claim relating to such disputed amount is no longer pending, pursuant to the terms of the Seller Note and subject to additional conditions set forth therein and in the Share Purchase Agreement. The Company is not permitted to prepay any amounts due and owing under the Seller Note.  Payment of the Seller Note is secured by a second-priority security interest in the assets of the Company.   Interest accrued on the original principal amount becomesbecame due and payable in arrears beginning September 30, 2018, and subsequent interest is due on the first day of each calendar quarter thereafter up to and including the quarter ending June 30, 2019.  The Company is required to make quarterly principal payments, the amount of which will be calculated based on a four (4) year amortization schedule, beginning on September 30, 2019 and continuing on the last day of each calendar quarter thereafter up to and including the Maturity Date.

In connection with Transaction,

Notes payable consists of the following:

9. LEASES

On January 1, 2019, the Company adopted ASU 2016-02 “Leases (Topic 842),” a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP.

The Company has operating and finance leases for facilities, vehicles and equipment. These leases have remaining terms of 2 years to 15 years, some of which include options to extended the leases for up to 10 years.

Supplemental balance sheet information related to leases:

10. EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per share.

11. ACQUISITIONS

Effective July 5,1, 2018, the Company entered intocompleted the acquisition of all of the issued and outstanding shares of capital stock of CAD, pursuant to the Share Purchase Agreement.  Upon the closing of the transaction, the CAD shares were transferred and assigned to the Company in consideration of the payment by the Company of an amendment to its Credit Agreement with JPMorgan Chase Bank, N.A. dated June 1, 2017 (as amended, the “Credit Agreement”) and funded a portion of theaggregate purchase price of $21 million, $12 million of which was payable in cash at closing, with the Transaction with borrowings underremainder paid in the Credit Agreement. The amendment revised the Credit Agreement to, among other things: (i) increase the maximum aggregate borrowing amount available under the revolving credit facility from $8,000,000 to $12,000,000; (ii) increase the maximum aggregate borrowing amount, and the aggregate amount borrowed, under the term A loan to $6,000,000; (iii) extend the maturityform of the term A loan fromSeller Note, which is subject to certain post-closing adjustments based on working capital, indebtedness and selling expenses, as specified in the Share Purchase Agreement. 

CAD manufactures high end components for the aerospace industry and has one operating location in Phoenix, Arizona. The purchase price was assigned to the book value of the net assets acquired with the excess over the book value assigned to intangible assets and goodwill and has been allocated to the following accounts:

12. DISPOSITIONS

Effective June 20211, 2018, the Company completed the sale (the “Sale”) of certain assets comprising its Test and Measurement business segment (the “Test and Measurement Segment”) to December 2022; (iv) provide a separate credit line for borrowings of upHickok Waekon, LLC, an Ohio limited liability company (“Buyer”), pursuant to an aggregate of $1,000,000 for capital expenditures until July 5, 2019, at which time any outstanding capital expenditure borrowings will be converted intoAsset Purchase Agreement (the “Purchase Agreement”) by and among Buyer, the Company, Supreme Electronics Corp., a term loan maturing at the earlier of five years after such conversion or the terminationMississippi corporation and wholly-owned subsidiary of the revolving credit facility;Company (“Supreme”), Waekon Corporation, an Ohio corporation and (v) add CAD aswholly-owned subsidiary of the Company (“Waekon Corporation”), and Robert L. Bauman, who was a borrower underdirector of the Credit Agreement. The obligationsCompany. Prior to the effectiveness of the Sale, Supreme and Waekon Corporation owned certain of the assets used in the operation of the Test and Measurement Segment and were primarily responsible for the operation thereof.

Upon the closing of the Sale, all of the issued and outstanding shares of capital stock of the Company then-owned, directly or indirectly, by Mr. Bauman or his affiliate, equaling approximately 21,413 shares of Class A Common Stock of the Company and other borrowers176,768 shares of Class B Common Stock of the Company, were transferred and assigned to the Company. The shares constituted the consideration received by the Company in the Sale.  Based upon the share price at closing, the value of the proceeds received was approximately $1.6 million.  The net assets sold were approximately $2.7 million.  The Company recorded a loss on sale of approximately $1.2 million in the second quarter of 2018.

13. SEGMENT AND RELATED INFORMATION

The Company operates three reportable business segments: (1) Aerospace Components, (2) Commercial Air Handling, (3) and Industrial Hose.  The Company operated the Test and Measurement business segment through June 1, 2018, at which time it was sold to Hickok Waekon, LLC. The Company's management evaluates segment performance based primarily on operating income. Certain corporate costs are allocated to the segments and interest expense directly related to financing the acquisition of a business is allocated to that segment, respectively.  Intangible assets are allocated to each segment and the related amortization of these assets are recorded in selling, general and administrative expenses.

Aerospace Components:
The Aerospace Components segment was added July 1, 2018, when the Company purchased all of the issued and outstanding shares of capital stock of CAD Enterprises, Inc. (“CAD”) in Phoenix, Arizona. This segment manufactures precision components primarily for customers in the aerospace industry.  This segment provides complete end-to-end engineering, machining, grinding, welding, brazing, heat treat and assembly solutions.  Utilizing state-of-the-art machining and welding technologies, this segment is an industry leader in providing complex components produced from nickel-based superalloys and stainless steels.  Our quality certifications include ISO 9001:2015/AS9100D, as well as Nadcap accreditation for Fluorescent Penetrant Inspection (FPI), Heat Treating/Braze, Non-Conventional Machining EDM, TIG/E-Beam welding.

Commercial Air Handling:
The Commercial Air Handling segment was added June 1, 2017, when the Company purchased certain assets and assumed certain liabilities of Air Enterprises Acquisition LLC in Akron, Ohio. The acquired business, which operates under the Credit Agreementname Air Enterprises, is an industry leader in designing, manufacturing and installing large-scale commercial, institutional, and industrial custom air handling solutions. Its customers are securedtypically in the health care, education, pharmaceutical and industrial manufacturing markets in the United States. This segment also sells to select international markets. The custom air handling units are constructed of non-corrosive aluminum, resulting in sustainable, long-lasting, and energy efficient solutions with life expectancies of 50 years or more. These products are distributed through a network of sales representatives, based on relationships with health care networks, building contractors and engineering firms. The custom air handling equipment is designed, manufactured and installed under the brand names FactoryBilt® and SiteBilt®. FactoryBilt® air handling solutions are designed, fabricated and assembled in a vertically integrated process entirely within the Akron, Ohio facility. SiteBilt® air handling solutions are designed and fabricated in Akron, but are then crated and shipped to the field and assembled on-site.

Industrial Hose:

The Industrial Hose segment was added July 1, 2016, when the Company purchased the assets of the Federal Hose Manufacturing, LLC in Painesville, Ohio. This business segment includes the manufacture of flexible interlocking metal hoses and the distribution of silicone and hydraulic hoses. Metal hoses are sold primarily to major heavy-duty truck manufacturers and major aftermarket suppliers in North America. Metal hoses are also sold into the agricultural, industrial and petrochemical markets. Silicone hoses are distributed to a number of industries in North America, including agriculture and general industrial markets.

Test and Measurement:

The Test and Measurement segment is the legacy business that was started in 1910 when the Company was founded, and was sold June 1, 2018. This business segment included electronic testing products designed and manufactured for the automotive and trucking industries and includes indicators and gauges for the locomotive and aircraft industries. The automotive diagnostic products are sold to original equipment manufacturers and to the aftermarket under several brand names and through a variety of distribution methods. In the aircraft industry, primary customers are manufacturers of commercial, military and personal airplanes. In the locomotive industry, indicators and gauges are sold to manufacturers and servicers of railroad equipment and locomotives.

Information by a blanket lien onindustry segment is set forth below:

14. SUBSEQUENT EVENTS

On April 19, 2019, the Company, completed the acquisition of substantially all of the assets of Data Genomix, Inc., an Ohio corporation (“DG”), pursuant to the terms of an Asset Purchase Agreement (the “Asset Purchase Agreement”) entered into by and between Hickok Operating LLC, an Ohio limited liability company and wholly-owned subsidiary of the Company (“Hickok Operating”), and its subsidiaries. The Credit Agreement, as amended, also includes customary representationsDG on the date thereof. DG is in the business of developing and warranties, reporting requirementscommercializing marketing and covenants. The financial covenants under the amended Credit Agreementdata analytic technology applications, which applications include, a minimum fixed charge coverage ratio, a revised maximum senior funded debtbut are not limited to, EBITDA ratioanglrjobs, topplr, anglrlegal and a new maximum total funded debt to EBITDA ratio.anglrads.

InOn May 10, 2019, the shareholders approved the issuance of shares of Class B Common Stock of the Company in connection with the Transaction and the amendment to the Credit Agreement on July 5, 2018, the Company andconversion of indebtedness outstanding under loan agreements with First Francis Company Inc. (“First Francis”) entered into an amendment to the Promissoryand Roundball LLC.  See Note dated July 1, 2016 with original principal in the amount of $2,000,000, and an amendment to the Promissory Note dated July 1, 2016 with original principal in the amount of $2,768,662 (as amended, the “Promissory Notes”), each issued by the Company to First Francis. The Promissory8, Notes each were amended to increase the interest rate from 4.0% per annum to 6.25% per annum. In addition, the Promissory Note with original principal amount of $2,768,662 was amended to provide a conversion option commencing July 5, 2019 which allows First Francis to convert the Promissory Note, in whole in part with respect to a maximum amount of $648,000, into shares of the Company’s Class B common stock at the price of $6.48 per share (subject to adjustment), subject to shareholder approval. First Francis is owned by Edward Crawford and Matthew Crawford, who serve on the Board of Directors of the Company. Payable.