Note 6 - Accrued Expenses and Other Long-term Liabilities

12 Months Ended

Oct. 31, 2020

Notes to Financial Statements

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Noncurrent [Text Block]

Note

6

–

Accrued expenses and other long-term liabilities

Accrued expenses consist of the following (in thousands):

	2020		2019
Wages payable	$	1,506	$	1,591
Accrued receipts		518		1,683
Other current liabilities		549		379
Totals	$	2,573	$	3,653

Accrued receipts represent purchased inventory for which invoices have

not

been received.

The purchase agreement for the Schrofftech acquisition provides for earn-out payments of up to

$2,400,000,

which is earned through

October 31, 2021.

The initial earn-out liability was valued at its fair value using an option pricing based approach with a risk-neutral framework using Black Scholes due to the option-like nature of the earn-out payout structure. The earn-out was and will continue to be revalued quarterly using a present value approach and any resulting increase or decrease will be recorded into selling and general expenses. Any changes in the amount of the actual results and forecasted scenarios could impact the fair value. Significant judgment is employed in determining the appropriateness of the assumptions used in calculating the fair value of the earn-out as of the acquisition date and subsequent period ends. Accordingly, significant variances between actual and forecasted results or changes in the assumptions can materially impact the amount of contingent consideration expense we record in future periods.  In determining the fair value of the earn-out liability as of

October 31, 2020,

we used the most recent projections while giving consideration to actual results versus such projections subsequent to

October 31, 2020.

We estimate the fair value of the earn-out liability using an option pricing based approach with a risk-neutral framework using Black Scholes related to Schrofftech calculated at net present value (Level

3

of the fair value hierarchy).

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of

October 31, 2020 (

in thousands):

Description	Level 3
Earn-out liability	$	370

There were

no

financial assets or liabilities measured at fair value as of

October 31, 2019.

The following table summarizes the changes to the Level

3

liabilities measured at fair value for the

three

months ended

October 31, 2020,

July 31, 2020,

April 30, 2020,

and

January 31, 2020 (

in thousands):

	Level 3
	October 31, 2020			July 31, 2020			April 30, 2020			January 31, 2020			October 31, 2019
Beginning balance	$	558		$	869		$	1,215		$	1,249		$	-
Change in value		(188	)		(311	)		(346	)		(34	)		-
Ending balance	$	370		$	558		$	869		$	1,215		$	-

As of

October 31, 2020,

the full amount of the

$0.4

million earn-out was classified as other long-term liabilities.