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Note 5 - Accrued Expenses

6 Months Ended

Apr. 30, 2022

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, 2022		October 31, 2021

Wages payable	$	2,323	$	2,607
Accrued receipts		2,752		1,711
Other accrued expenses		3,022		716

Totals	$	8,097	$	5,034

Accrued receipts represent purchased inventory for which invoices have not been received.

The purchase agreement for the Schrofftech acquisition provided for earn-out payments of up to $2,400,000, which were to be 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 revalued quarterly using a present value approach and any resulting increase or decrease was recorded into selling and general expenses. Significant variances between actual and forecasted results or changes in the assumptions affected the amount of contingent consideration expense that we recorded from time to time. In determining the fair value of the earn-out liability as of October 31, 2021, we used results through October 31, 2021.

We estimated 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). At October 31, 2021, the fair value of the Schrofftech earn-out liability was zero, and since the earn-out obligation expired on October 31, 2021, no earn-out liability was recorded for the period ended April 30, 2022.

The following table summarizes the changes to the Level 3 liabilities measured at fair value for the six months ended April 30, 2022 and 2021 (in thousands):

	April 30, 2022		April 30, 2021
Beginning balance	$	-	$	296
Change in value		-		(296	)
Ending balance	$	-	$	-

The earn-out was revalued quarterly using a present value approach and the resulting decrease was recorded into selling and general expenses.