We are implementing a common Enterprise Resource Planning (ERP) system across all divisions. The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions and for consolidated reporting in early September 2023. Due to our cost reduction initiatives, we have temporarily paused the ERP project in the Home Meridian segment beginning in the third quarter of fiscal 2025. Based on the provisions of ASU 2018-15, Intangibles — Goodwill and Other — Internal-Use Software, we capitalize implementation costs associated with hosting arrangements that are service contracts. These costs are recorded in “other noncurrent assets” of our consolidated balance sheets. We amortize on a straight-line basis over 10-years term. The amortization expenses are recorded as a component of selling and administrative expenses in our consolidated statements of operations.

Implementation costs of $203,000 and interest expense of $62,000 were capitalized in fiscal 2026 first quarter. Implementation costs of $1.3 million and interest expense of $55,000 were capitalized in fiscal 2025 first quarter. Amortization expenses of $368,000 and $291,000 were recorded in first quarters of fiscal 2026 and 2025, respectively. The capitalized implementation costs at May 4, 2025 and February 2, 2025 were as follows: