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Note 6 - Goodwill

12 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Goodwill Disclosure [Text Block]

6. Goodwill

The carrying value of goodwill is not amortized, but is tested for impairment annually as of September 30th, as well as whenever events or changes in circumstances indicate that the carrying amount of a reporting unit may not be recoverable. The purpose of an impairment test is to identify any potential impairment by comparing the carrying value of a reporting unit including goodwill to its fair value. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Impairment charges are reflected as a reduction in goodwill in the Company’s consolidated balance sheets and an expense in the Company’s consolidated statements of operations.

Annual tests were performed at September 30, 2024 and 2023. Due to the current inflationary macro-economic conditions and a sustained decline in the Company’s market capitalization, for the 2023 test, the Company elected to forgo the qualitative test and performed a quantitative goodwill impairment test by comparing the fair value of its reporting unit to its respective carrying value. The Company estimated the fair value of the reporting unit using a 75% and 25% weighting to the market approach and income approach, respectively, and a discount rate of 22.9%. The Company used industry accepted valuation models. Under the income approach (level 3 inputs), the Company used a discounted cash flow methodology which required management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, the Company used the guideline public company method. Under this method, the Company utilized information from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit, to create valuation multiples that were applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values. The Company also reconciled the aggregate fair value of its reporting unit to its current market capitalization, allowing for a reasonable control premium.

For fiscal 2024, management performed a qualitative assessment that did not result in any impairment indicators at September 30, 2024.

Based on the impairment assessment performed, the Company recognized a goodwill impairment charge of $7.5 million, all of which was attributable to goodwill, during fiscal 2023. The Company concluded that the definite-lived and other long-lived assets were not impaired.

Changes in the carrying value of goodwill are as follows:

		*As of September 30,*
		*2024*				*2023*
Balance at beginning of period		$	8,468			$	15,985
Impairments			-				(7,517	)
Balance at end of period		$	8,468			$	8,468