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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Contingent Consideration (Policies)
9 Months Ended
Sep. 30, 2025
Policies  
Contingent Consideration

Contingent Consideration

The Company records a contingent consideration liability relating to potential additional shares to be issued pursuant to its acquisition. The estimated fair value of the contingent consideration is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument.

 

The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates changes in the fair value of contingent consideration and recognizes any change in fair in the consolidated statement of operations. The estimate of the fair value of contingent consideration requires very subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and, therefore, materially affect the Company’s future financial results. The contingent consideration liability is to be settled with the issuance of shares of common stock once contingent provisions set forth in respective acquisition agreements have been achieved. Upon achievement of contingent provisions, respective liabilities are relieved and offset by increases to common stock and additional paid-in capital in the stockholders’ equity section of the Company’s consolidated balance sheets.

 

42 Telecom Earnout

The 42 Telecom agreement contains an earn out provision providing for the issuance of 1 million Escrow Shares if 42 Telecom has achieved consolidated net profit above US$1,000,000 for FY2025. An additional 1 million shares (up until the total 8 million Escrow Shares) shall be released for each US$1,000,000 in profit above the threshold, with pro rata releases for fractional increments (“Bonus Shares”).  

 

The Company determined the preliminary fair value of the contingent consideration was $2,300,000, which is a Level 3 financial instrument. There was no change to the fair value for the contingent consideration for the period ended September 30, 2025.

 

The fair value of the contingent consideration is preliminary and may be subject to change based on facts and circumstances that arise prior to final measurement at year-end. The Company intends to reassess and, if necessary, adjust the valuation of the contingent consideration as additional financial performance data for 42 Telecom becomes available.