CONTINGENT CONSIDERATION – PRECISION ACOUSTICS LIMITED (“PAL”) |
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Jul. 31, 2026 | |||||||||||||||||||||||||||||||||||||
| Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||
| CONTINGENT CONSIDERATION – PRECISION ACOUSTICS LIMITED (“PAL”) |
Note 9 – CONTINGENT CONSIDERATION – PRECISION ACOUSTICS LIMITED (“PAL”)
In connection with the acquisition of Precision Acoustics Limited (“PAL”), the Company may be required to make contingent consideration payments based on PAL achieving specified revenue and pre-tax profit targets during a three-year earn-out period. The earn-out period consists of three annual measurement periods referred to as Year 1, Year 2 and Year 3. The Year 1 earn-out period ended in October 2025.
PAL achieved the Year 1 earn-out targets. As a result, the Company recognized contingent consideration expense of $213,343 in its consolidated financial statements for the year ended October 31, 2025. In accordance with the terms of the acquisition agreement, this amount was paid to the sellers following the filing of the Company’s Annual Report on Form 10-K on January 29, 2026 as amended on Form 10-K/A.
During the quarter ended July 31, 2026, management completed its assessment of PAL’s operating performance and forecasted results for the Year 2 earn-out period. Based on PAL’s year-to-date operating performance and forecast for the remainder of the measurement period, management concluded that achievement of the applicable revenue and pre-tax profit targets for the Year 2 earn-out period is probable and that the related contingent consideration obligation is reasonably estimable.
Accordingly, the Company recognized a contingent consideration expense and corresponding contingent consideration liability of $438,588 during the quarter ended July 31, 2026, representing management’s current estimate of the Year 2 earn-out obligation.
The potential contingent consideration payable for the remaining earn-out periods as of July 31, 2026 is presented below using an exchange rate of $1.341249 per British Pound Sterling:
Schedule of potential earn-out amounts:
The earn-out obligations are denominated in British Pounds Sterling. Accordingly, the ultimate amount payable, if earned, may differ from the amounts presented above due to fluctuations in foreign currency exchange rates.
As of July 31, 2026, the Company has recognized a contingent consideration liability of $438,588 relating to the Year 2 earn-out period. No liability has been recorded with respect to the Year 3 earn-out period, as management has not concluded that achievement of the related performance conditions is probable. The Company will continue to evaluate the likelihood of achieving the Year 3 performance targets and will recognize any related contingent consideration liability when it becomes probable that the applicable performance conditions will be achieved and the amount can be reasonably estimated.
No contingent consideration liability relating to the Year 2 earn-out period had been recognized as of April 30, 2026. Accordingly, the full Year 2 contingent consideration expense was recognized during the quarter ended July 31, 2026.
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