Note 4 – Impairment of Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable net assets acquired in business combinations. Goodwill is not amortized but is tested for impairment at least annually as of December 31st, or more frequently if events or changes in circumstances indicate that the carrying amount of a reporting unit may exceed its fair value.

During the three months ended June 30, 2026, the Company identified triggering events related to its Z-Tech reporting unit, including a decline in revenues from the prior year and underperformance compared with revenue forecast. As a result, the Company performed a quantitative goodwill impairment test in accordance with ASC 350, Intangibles – Goodwill and Other.

The Company estimated the fair value of the reporting unit using the income approach, utilizing the discounted cash flow model. Significant assumptions used in the valuation included projected revenues, gross profit and EBITDA margins, discount rates and terminal growth rates, which were based on historical performance, industry trends and market conditions. These assumptions require significant management judgment and are based on management’s best estimates and assumptions regarding future operating performance and market conditions.

Based on the results of the quantitative impairment test, the carrying amount of the reporting unit exceeded its estimated fair value. Accordingly, the Company recognized a non-cash goodwill impairment charge of $0.9 million during the three months ended June 30, 2026, which was recorded within Impairment of Goodwill in the accompanying condensed consolidated statements of operations.

The impairment charge reduced the carrying amount of goodwill attributable to the Z-Tech reporting unit from $2.3 million to $1.3 million as of June 30, 2026. The goodwill impairment did not impact the Company’s cash flows, liquidity, or operations.

The Company will continue to monitor the operating performance of its reporting units and market conditions and will perform additional interim impairment assessments if events or changes in circumstances indicate that the carrying amounts of any reporting units may not be recoverable.