SRx Health Solutions, Inc. Goodwill & Intangibles Disclosure
Note 6 – Goodwill and intangible assets
Intangible assets
The Company’s intangible assets (in thousands) and related useful lives (in years) relate to the discontinued operations and are as follows:
| September 30, 2024 | ||||||||||||||||||
Estimated Useful Life (in years) | Gross Carrying Amount | Accumulated Amortization | Impairment Loss | Net Carrying Amount | ||||||||||||||
| Computer software | 3 years | $ | 288 | $ | (238 | ) | $ | $ | 50 | |||||||||
| Domain/website | 3 years | 2 | (1 | ) | 1 | |||||||||||||
| Customer list | 5 years | 10,816 | (3,021 | ) | (1,585 | ) | 6,210 | |||||||||||
| Charter license | 10 years | 930 | (190 | ) | 740 | |||||||||||||
| Total intangible assets | $ | 12,036 | $ | (3,450 | ) | $ | (1,585 | ) | $ | 7,001 | ||||||||
The Company did not have any intangible assets as of September 30, 2025, nor did it record amortization expense for the year ended September 30, 2025.
The Company recognized an impairment loss of $1.6 million during the year ended September 30, 2024, related to customer list intangible assets acquired through prior business combinations. The customer lists were tested for impairment prior to goodwill testing using the income approach, specifically a discounted cash flow (DCF) method. The impairment was the result of a decline in the estimated fair value of the customer lists below their carrying amount, based on updated projections of future cash flows attributable to customer relationships and the application of a discount rate reflecting current market conditions and entity-specific risks. The impairment charge is included in the consolidated statement of operations and relates to the Pharmacy and Prescription Drug Sales reporting unit.
The change in the carrying amount of goodwill is summarized as follows:
| Year Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Beginning balance | $ | $ | 18,346 | |||||
| Disposals | (1,115 | ) | ||||||
| Acquisitions | 2,438 | |||||||
| Impairment expense | $ | (19,669 | ) | |||||
| Total | $ | $ | ||||||
The Company allocates goodwill to its Pharmacy and Prescription Drug Sales reporting unit, which includes multiple operating segments primarily consisting of retail and specialty pharmacies, wholesale distribution of pharmaceuticals, patient support programs, and a diagnostic laboratory.
The impairment was primarily driven by significant adverse changes in expected future cash flows resulting from the Company’s loss of a key contract during the fourth quarter of fiscal 2024, which materially reduced projected revenue for the Pharmacy and Prescription Drug Sales reporting unit. The contract, which accounted for a substantial portion of the reporting unit’s revenue base, was not renewed due to changes in customer procurement strategy. In addition, challenging industry dynamics, including increased pricing pressure from payors and reduced reimbursement rates, contributed to lower long-term growth expectations and operating margin forecasts. These factors, combined with a higher discount rate reflecting increased market volatility and risk specific to the Company’s sector, resulted in a decrease in the estimated fair value of the reporting unit below its carrying amount, triggering goodwill impairment.
As September 30, 2024, the Company performed a quantitative goodwill impairment test for this reporting unit in accordance with ASC 350, Intangibles—Goodwill and Other. The fair value of the reporting unit was estimated using a discounted cash flow (DCF) analysis under the income approach. Based on the results of this analysis, the carrying amount of the reporting unit exceeded its fair value, resulting in a goodwill impairment charge of $19.7 million for the year ended September 30, 2024, which was recognized in the consolidated statement of operations for the period then ended.
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.