Interest Rate Swap

9 Months Ended

Jan. 31, 2019

Note 7.

Interest Rate Swap

We were required by the Credit Facility to have a secured interest rate swap for at least 50% of the Credit Facility commitment. On December 28, 2015, the Company entered into a swap transaction with Mutual of Omaha Bank (“MOOB”), which had a calculation period as of the tenth day of each month through the maturity date of the Credit Facility. Under the terms of the swap agreement, the Company paid a fixed rate of 1.77% and a received variable rate based on one-month LIBOR as of the first day of each floating-rate calculation period. The Company terminated its rate swap as part of the December 31, 2018 loan repayment.

The Company did not designate the interest rate swap as a cash flow hedge and the interest rate swap did not qualify for hedge accounting under ASC Topic 815. Changes in our interest rate swap fair value are recorded in our condensed consolidated statements of operations. Each quarter, the Company receives fair value statements from the counterparty, MOOB. The fair value of the interest rate swap is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including forward interest rate curves. To comply with the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As a result of our evaluation and cancellation of our interest rate swap, as of January 31, 2019, we recorded a $69,892 and $60,872 decrease in our interest rate swap fair value for the three and nine months ended January 31, 2019. As of January 31, 2018 and April 30, 2018, our interest rate swap fair value is a $0 and $134,672 asset, which is included in other assets as of January 31, 2019 and April 30, 2018 on the condensed consolidated balance sheets.