Acquisition (Tables)

12 Months Ended

Sep. 30, 2023

Acquisition

Schedule of preliminary allocation of the purchase consideration

	Amounts Recognized as of
	Acquisition Date		Measurement			Purchase Price
	(as previously reported)		Period Adjustments			Allocation
Cash consideration	$	35,860,000	$	—		$	35,860,000
Total consideration	$	35,860,000	$	—		$	35,860,000
							—
Prepaid inventory (a)	$	10,036,160	$	2,032,954	(1)	$	12,069,114
Equipment		2,609,000		(54,000)	(1)		2,555,000
Construction in progress		1,238,000		—			1,238,000
Intangible assets (b)		20,900,000		(4,460,000)	(1)		16,440,000
Goodwill (c)		4,608,041		(1,050,155)	(1)(2)		3,557,886
Assets acquired		39,391,201		(3,531,201)			35,860,000
Accrued expenses		(3,531,201)		3,531,201	(2)		—
Liabilities assumed		(3,531,201)		3,531,201			—
Net assets acquired	$	35,860,000	$	—		$	35,860,000

(a) Prepaid inventory consists of raw materials and finished goods acquired by the Company but not in the Company’s physical possession as of the Acquisition Date. The fair value of raw materials was estimated to equal the replacement cost. The fair value of finished goods was determined based on the estimated selling price, net of selling costs and a margin on the selling activities, which resulted in a step-up in the value of the finished goods.

(b) Intangible assets consist of license agreements related to the license rights to use certain Honeywell intellectual property and customer relationships and are recorded at estimated fair values. The estimated fair value of the license agreement is based on a variation of the income valuation approach and is determined using the relief from royalty method. The estimated fair value of the customer relationships is based on a variation of the income valuation approach known as the multi-period excess earnings method. Refer to Note 5, “Intangible assets” for further details.

(c) Goodwill represents the excess of the purchase consideration over the preliminary fair value of the net assets acquired. The goodwill recognized is primarily attributable to the expected synergies from the Transaction. Goodwill resulting from the Transaction has been assigned to the Company’s one reporting unit. The goodwill is not expected to be deductible for income tax purposes. Further, the Company determined that the goodwill was not impaired as of September 30, 2023 and as such, no impairment charges have been recorded for the year ended September 30, 2023.

(1) During the fiscal fourth quarter of 2023, the Company identified measurement period adjustments related to fair value estimates. The measurement period adjustments resulted from the refinement of inputs used to calculate the fair value of the prepaid inventory, equipment, license agreement, and customer relationships based on facts and circumstances that existed as of the Acquisition Date. The adjustments resulted in an overall increase to goodwill of $2.5 million. Additionally, the change to the fair value estimates did not have a material impact to the consolidated statements of operations for the year ended September 30, 2023.

(2) During the fourth quarter of fiscal year 2023, the Company identified measurement period adjustments related to the preliminary fair value estimates for accrued expenses. While the Honeywell Agreement indicated an amount of liabilities related to open supplier purchase orders to be assumed by the Company as of the Acquisition Date, it was determined that there were no actual liabilities outstanding as relates to these open supplier purchase orders as of the Acquisition Date; therefore, the $3.5 million assumed liabilities preliminarily recorded were reversed. The adjustments resulted in an overall decrease to goodwill of $3.5 million; the adjustments have no impact to the consolidated statements of operations for the year ended September 30, 2023.

Summary of unaudited pro forma consolidated information

	Year Ended September 30,
	2023		2022
Net sales	$	43,757,196	$	49,218,764
Net income	$	8,542,330	$	9,716,082