INTANGIBLE ASSETS AND GOODWILL

12 Months Ended

Sep. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS AND GOODWILL

NOTE 4         INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The Company’s intangible assets consist of the following:  

	September 30, 2021									September 30, 2020
	Trademark			Customer Relationships			Total Intangible Assets			Trademark			Customer Relationships			Total Intangible Assets
Gross carrying amount	$	585,000		$	1,390,000		$	1,975,000		$	585,000		$	1,390,000		$	1,975,000
Less accumulated amortization		(125,000	)		(531,000	)		(656,000	)		(86,000	)		(358,000	)		(444,000	)
Net carrying amount	$	460,000		$	859,000		$	1,319,000		$	499,000		$	1,032,000		$	1,531,000

The Company’s intangible assets were acquired as a result of the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively, and relate to the design segment of our business. Intangible assets are amortized over their expected useful lives of 15 years for the trademarks and 8 years for the customer relationships. During Fiscal 2021 and Fiscal 2020, the Company recorded amortization expense related to intangible assets of $212,000 and $167,000, respectively, which is included in general and administrative expenses in the Company’s consolidated statements of operations.

At September 30, 2021, estimated amortization expense for the Company’s intangible assets for each of the next five years and thereafter is as follows: 

Fiscal 2022	$	213,000
Fiscal 2023		213,000
Fiscal 2024		213,000
Fiscal 2025		213,000
Fiscal 2026		121,000
Thereafter		346,000
Total	$	1,319,000

Goodwill

Goodwill represents the future economic benefits of assets acquired in a business combination that are not individually identified or separately recognized. The Company’s goodwill resulted from the acquisitions of Kablooe and IPS in Fiscal 2020 and Fiscal 2018, respectively. The goodwill associated with the IPS acquisition is not deductible for tax purposes, but the goodwill associated with the Kablooe acquisition is deductible for tax purposes. All of the Company’s goodwill is held under the design segment of our business.

During Fiscal 2020, the Company experienced triggering events that prompted the testing of its goodwill for impairment. Those triggering events included the reduction in fair value of the IPS contingent earn-out consideration discussed in Note 6 and revised revenue and operational projections for IPS for the later part of Fiscal 2020 and future periods. Based on these factors, the Company concluded that it was more likely than not that the fair value of the IPS reporting unit had declined below its carrying amount. The Company then calculated the fair value of this reporting unit using Level 3 inputs, which is a combination of asset-based, income and market approaches. The estimates and assumptions utilized in the estimated fair value calculation included 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. The Company concluded the IPS reporting unit’s fair value was below its carrying amount by $1,015,000 and an impairment charge was recognized for this amount in Fiscal 2020. The Company performed the annual goodwill impairment test for Fiscal 2021 and determined there was no impairment.