Fair Value Measurements

12 Months Ended

Apr. 30, 2020

Fair Value Measurements

Fair Value Measurements

4.           Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels as follows:

● Level 1—Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

● Level 2—Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.

● Level 3—Inputs to the valuation that are unobservable inputs for the asset or liability.

The Company’s financial assets measured at fair value on a recurring basis at April 30, 2020, were as follows (in thousands):

	Fair Value Measurement Using
			Significant
	Quoted prices in		other		Significant
	active markets for		observable		unobservable
	identical assets		inputs		inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Available-for-sale securities	$	—	$	58,095	$	—	$	58,095
Total	$	—	$	58,095	$	—	$	58,095

The following table provides a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):

	Fair Value
	Measurements Using
	Significant
	Unobservable Inputs
Description	(Level 3)
Balance at May 1, 2019	$	—
Business acquisition		1,703
Transfers to Level 3		—
Total (gains) losses (realized or unrealized)
Included in product cost of sales		1,147
Included in selling, general and administrative		(703)
Included in research and development		353
Included in other comprehensive income		—
Settlements		(2,500)
Balance at April 30, 2020	$	—
The amount of total (gains) or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at April 30, 2020	$	—

Pursuant to the Pulse Purchase Agreement, the sellers may have received up to a maximum of $5,000,000 in additional cash consideration (“contingent consideration”), if specific research and development milestones were achieved by December 10, 2021 and the continued employment of specific key employees. The contingent consideration was valued using a probability weighted discounted cash flow model. The analysis considered, among other items, contractual terms of the Pulse Purchase Agreement, the Company’s discount rate, the timing of expected future cash flows and the probability that the milestones required for payment of the contingent consideration will be achieved. See Note 19—Business Acquisitions. During the fiscal year ended April 30, 2020, one of the research and development milestones was achieved, and the requirements for the payout of remaining contingent consideration were concluded to not have been met. As a result, the Company recorded a gain of $832,000, which was recorded in selling, general, and administrative expense in the consolidated statements of income. On February 26, 2020, $2,500,000 of contingent consideration was paid to the sellers for the achieved milestone, and the remaining $2,500,000 will not be paid.