Intangible Assets and Goodwill

12 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets arose from the acquisition of SDI in the fiscal year ended September 30, 2019 and the acquisitions of S&N and EMCORE Chicago in the fiscal year ended September 30, 2022. Intangible assets are amortized on a straight-line basis over the estimated useful life of: (a) 7.0 years for patents (b) 8.0 years for customer relationships, and (c) 2.0-8.0 years for technology. IPR&D is indefinite-lived until completion of the related development project, at which point amortization of the carrying value of the technology will commence. If it is determined that the IPR&D will not come to completion, it is impaired at that time. A certain Company trademark is indefinite-lived.

The following table summarizes changes in intangible assets, net:


	September 30,
(in thousands)	2023		2022
Balance at beginning of period	$	14,790	$	167
Additions from acquisition	1,470		14,740
Write off due to impairment	(2,125)		—
Amortization	(1,890)		(117)
Balance at end of period	$	12,245	$	14,790

During the fiscal year ended September 31, 2023, in accordance with ASC 350, the Company performed a quantitative (Step 1) analysis to determine the fair value of a certain Company trademark. The Company utilized the relief from royalty method and concluded that the carrying value of such trademark of $2.2 million exceeded the fair value and impairment expense of $1.3 million was recorded. Key assumptions utilized in the determination of fair value include expected future revenues and estimated royalty rates. While we believe the expectations and assumptions about the future are reasonable, they are inherently uncertain.

With respect to EMCORE Chicago's acquired IPR&D, those projects were completed in the quarter ended December 31, 2022 and were classified as technology assets and assigned an eight-year useful life. With respect to a certain IPR&D project arising from the acquisition of S&N, it was determined during the quarter ended September 31, 2023, that the Company would abandon the project underlying the remaining IPR&D and the carrying value of $0.8 million was impaired.

The weighted average remaining useful lives by definite-lived intangible asset category are as follows:


(in thousands, except weighted average remaining life)	September 30, 2023
	Weighted Average Remaining Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Technology	13.0	$	16,901	$	(9,527)	$	7,374
Customer relationships	4.0	4,690		(674)		4,016
Definite-lived intangible assets total		$	21,591	$	(10,201)	$	11,390

As of September 30, 2023 trademarks were approximately $0.9 million.


(in thousands, except weighted average remaining life)	September 30, 2022
	Weighted Average Remaining Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Technology	5.4	$	10,991	$	(8,261)	$	2,730
Customer relationships	4.6	3,260		(50)		3,210
Definite-lived intangible assets total		$	14,251	$	(8,311)	$	5,940

As of September 30, 2022 IPR&D and trademarks was approximately $6.7 million and $2.2 million, respectively.

Estimated future amortization expense for intangible assets recorded by the Company at September 30, 2023 is as follows:


(in thousands)	Amount
2024	$	1,956
2025	1,930
2026	1,527
2027	1,504
2028	1,491
Thereafter	2,982
Total amortization expense	$	11,390

Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable intangible assets acquired. As of September 30, 2022, $17.8 million of the Company’s goodwill of $17.9 million related to the S&N and EMCORE Chicago acquisitions. For the fiscal year ended September 30, 2023, we recognized an additional $1.2 million due to a change in purchase price valuation. None of the Company’s goodwill is deductible for tax purposes.

The following table summarizes changes in goodwill:


	Year Ended September 30,
(in thousands)	2023		2022
Balance at beginning of period	$	17,894	$	69
Additions from acquisition	1,150		17,825
Write off from impairment	(19,044)		—
Balance at end of period	$	—	$	17,894

During the fiscal year ended September 30, 2023, in accordance with ASC 350, the Company performed a quantitative (Step 1) analysis of goodwill utilizing a weighted income and market approach and concluded that the carrying value of the reporting unit that carried the goodwill (adjusted for trademark impairment) was greater than the fair value of equity of the reporting unit, and impairment expense of $19.0 million was recorded. Key assumptions utilized in the determination of fair value include forecasted financial performance of the Company. While we believe the expectations and assumptions about the future are reasonable, they are inherently uncertain.