Note 5 - Accrued Expenses

6 Months Ended

Apr. 30, 2021

Notes to Financial Statements

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

Note 5 – Accrued expenses

Accrued expenses consist of the following (in thousands):

	April 30, 2021		October 31, 2020
Wages payable	$	1,432	$	1,506
Accrued receipts		1,368		518
Other accrued expenses		440		549
Totals	$	3,240	$	2,573

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 $2.4 million, which are 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. 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 April 30, 2021, we used the most recent projections while giving consideration to actual results versus such projections subsequent to April 30, 2021.

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 April 30, 2021 (in thousands):

Description	Level 3
Earn-out liability	$	-

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

The following table summarizes the changes to the Level 3 liabilities measured at fair value for the three months ended April 30, 2021, January 31, 2021 and for the year ended October 31, 2020 (in thousands):

	Level 3
	April 30, 2021			January 31, 2021			October 31, 2020
Beginning balance	$	296		$	370		$	1,249
Change in value		(296	)		(74	)		(879	)
Ending balance	$	-		$	296		$	370