FAIR VALUE DISCLOSURES

9 Months Ended

Jun. 30, 2025

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES

9. FAIR VALUE DISCLOSURES

Mandatorily Redeemable Non-Controlling Interest

Mandatorily redeemable non-controlling interest (“MRNCI”) recorded on the Company’s condensed consolidated balance sheets represents the fair value of the non-controlling interest in the Company’s strategic investment in Team Sledd. During April 2025, Team Sledd redeemed certain membership interests from its non-controlling interest, which increased the Company’s ownership interest to approximately 92% at June 2025. The Company owned approximately 76% of Team Sledd at September 2024. The Company has elected to present the MRNCI liability at fair value under FASB Accounting Standards Codification 825 – Financial Instruments as it believes this best represents the potential future liability and cash flows. As such, the MRNCI balance at June 2025 represents the fair value of the remaining future membership interest redemptions and other amounts due to noncontrolling interest holders through April 2026. The Company calculates the estimated fair value of the MRNCI based on a discounted cash flow valuation technique using the best information available at the reporting date, and records changes in the fair value of the MRNCI as a component of other expense (income) in the condensed consolidated statements of operations. The MRNCI is classified as Level 3 because of the Company’s reliance on unobservable assumptions. The Company estimates the probability and timing of future redemptions and earnings of Team Sledd based on management’s knowledge and assumptions of certain events as of each reporting date, including the timing of any future redemptions and an appropriate discount rate, which was 13.2% at June 2025. At June 2025 and September 2024, the difference between the contractual amount due under the MRNCI and the fair value was approximately $0.4 million and $0.7 million, respectively.

A summary of the MRNCI activity is as follows:

	For the Three Months Ended June 30,
	2025		2024
Fair value, beginning of period	$	8,679,168	$	9,824,964
Redemption of non-controlling interests		(1,812,558)		(1,812,558)
Distributions to non-controlling interest		(148,852)		(256,599)
Change in fair value		195,750		393,324
Fair value, end of period	$	6,913,508	$	8,149,131

	For the Nine Months Ended June 30,
	2025		2024
Fair value, beginning of period	$	8,211,500	$	9,490,831
Redemption of non-controlling interests		(1,812,558)		(1,812,558)
Distributions to non-controlling interest		(148,852)		(256,599)
Change in fair value		663,418		727,457
Fair value, end of period	$	6,913,508	$	8,149,131

Contingent Consideration

On April 5, 2024, the Company acquired substantially all of the net operating assets of Burklund Distributors, Inc. (“Burklund”). A portion of the consideration exchanged in the acquisition of Burklund was in the form of contingent consideration of up to $3.0 million in cash payable in two installments on the one-year and two-year anniversaries of the acquisition date based on the achievement of certain sales thresholds. In accordance with ASC 805, the Company recorded this contingent consideration at fair value as of the acquisition date and re-measures the liability at each reporting period. The Company calculates the estimated fair value of the contingent consideration based on a discounted cash flow valuation technique using the best information available at the reporting date, and records changes in the fair value of the contingent consideration in selling, general and administrative expenses in the condensed consolidated statements of operations. The short-term and long-term portions of any contingent consideration payable are recorded in accrued expenses and other long-term liabilities, respectively, in the Company’s condensed consolidated balance sheets. The contingent consideration liability is classified as Level 3 because of the Company’s reliance on unobservable assumptions.

At each reporting date, the Company reviews certain inputs, including sales thresholds and an appropriate discount rate, based on management’s knowledge and assumptions of certain events. In Q1 2025, the Company determined that due to current sales trends including customer turnover, the achievement of the sales thresholds required to meet the minimum payout of any contingent consideration was not probable. As such, the Company adjusted the fair value of its contingent consideration liability and recognized operating income of approximately $1.5 million in Q1 2025, which was recorded as a reduction of selling, general and administrative expenses in the condensed consolidated statements of operations. At June 2025, the Company reaffirmed that the achievement of the sales thresholds required to meet the minimum payout of any contingent consideration was not probable.

At September 2024, the difference between the estimated amount due under the contingent consideration arrangement and the fair value was approximately $0.2 million.

The following table presents changes in the fair value of the contingent consideration since September 2024:

Current portion of contingent consideration at fair value as of September 2024	$	710,270
Long-term portion of contingent consideration at fair value as of September 2024		743,182
Fair value of contingent consideration as of September 2024	$	1,453,452
Change in fair value		(1,453,452)
Fair value of contingent consideration as of June 2025	$	—