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4. GOODWILL

6 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 4 GOODWILL

The Company has recorded intangible assets, such as goodwill, trademark, and customer relationships on the IPS reporting unit’s books and accounts for these in accordance with ASC 350, “Intangibles-Goodwill and Other.” ASC 350 requires an annual test of goodwill and indefinite-lived assets for impairment, unless circumstances dictate more frequent assessments.

During the three months ended March 31, 2020, the Company experienced triggering events that resulted in the Company testing its goodwill for impairment. Those triggering events include the reduction in fair value of the deferred earn-out compensation discussed in Note 3 and revised revenue and operational projections for the remainder of the fiscal year and future periods. Based on these factors, Management concluded that it was more likely than not that the fair value has declined below the carrying amount for the IPS reporting unit. Management then engaged with a valuation firm to calculate the impairment charge by comparing the fair value of a reporting unit with its carrying amount. With the support of the external valuation firm, management determined the reporting unit’s fair value to be below the carrying value by $1,015,000 and an impairment charge was recognized for the amount for the period ended March 31, 2020. Fair value of the reporting unit was determined using Level 3 inputs, which is a combination of asset-based, income and market approaches. These estimates and assumptions include discount rate, terminal growth rate, selection of peer group companies and control premium applied as well as forecasts of revenue growth rates, gross margins, operating margins, and working capital requirements. Any changes in the judgments, estimates, or assumptions used could produce significantly different results.

Below is the rollforward of goodwill for IPS, the only reporting unit with goodwill.

	IPS			Consolidated

September 30, 2019:	$	2,182,427		$	2,182,427

Goodwill impairment		(1,015,000	)		(1,015,000	)

March 31, 2020:	$	1,167,427		$	1,167,427