Certain assets and liabilities are recorded at fair value in accordance with Accounting Standards Codification (“ASC”) 820,

Fair Value Measurements and Disclosures

(“ASC 820”). ASC 820 defines fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy level assigned to each asset and liability is based on the assessment of the transparency and reliability of the inputs used in the valuation of such items at the measurement date based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories based on inputs:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

Level 2

Quoted prices in markets that are not active and financial instruments for which all significant inputs are observable, either directly or indirectly

Level 3

Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable

To limit exposure to volatility in the LIBOR interest rate, the Company has entered into interest rate swap agreements, which effectively convert the variable interest rate on $50,000 of the outstanding revolving credit facility discussed in Note 11 to a fixed rate. The fair values of the interest rate swap agreements were determined by reference to a third-party valuation and is considered a Level 2 input within the fair value hierarchy of valuation techniques.

As described in Note 6, we acquired Exalenz Bioscience Ltd. (“Exalenz”) in fiscal 2020. The fair values of the acquired accounts receivable, inventories, property, plant and equipment, and other current assets and the fair values of the assumed accounts payable and accrued expenses were valued using Level 2 inputs, which included data points that were observable, such as appraisals or established values of comparable assets (market approach). Intangible assets were valued using Level 3 inputs, which are unobservable by nature, and included internal estimates of future cash flows (income approach). Significant increases (decreases) in any of those unobservable inputs, as of the date of the acquisition, in isolation would result in a significantly lower (higher) fair value measurement. Management engaged a third-party valuation firm to assist in the determination of the purchase accounting fair values, and specifically those considered Level 3 measurements. Management ultimately oversees the third-party valuation firm to ensure that the transaction-specific assumptions are appropriate for the Company.

In connection with the acquisition of the business of GenePOC, Inc. (“GenePOC”) in fiscal 2019 and subsequent amendments to modify certain terms of the agreement related to contingent consideration achievement levels and milestone dates, the Company is required to make contingent consideration payments of up to $64,000 (originally $70,000 at the acquisition date), comprised of up to $14,000 for achievement of product development milestones (originally $20,000 at the acquisition date) and up to $50,000 for achievement of certain financial targets. The fair value for the contingent consideration recognized upon the acquisition as part of the purchase price allocation was $27,202. The fair value of the product development milestone payments is estimated by discounting the probability-weighted contingent payments to present value and is presented on the Condensed Consolidated Balance Sheets based on the Company’s anticipated date of payment at each reporting period. Assumptions used in the calculations include probability of success, duration of the

earn-out

and discount rate, and such calculations were updated for the effect of the previously noted amendments to the contingent consideration achievement levels and milestone dates. The fair value of the financial performance target payments was determined using a Monte Carlo simulation-based model. Assumptions used in these calculations include expected revenues, probability of certain developments, expected expenses and discount rate. The ultimate settlement of contingent consideration could deviate significantly from the current Level 3 measurement estimates, based on the actual results of these financial measures.

The following table provides information by level for financial assets and liabilities that are measured at fair value on a recurring basis:


				Fair Value Measurements Using Inputs Considered as
	Carrying Value			Level 1		Level 2			Level 3
Interest rate swaps -
As of June 30, 2021	$	(245	)	$	—	$	(245	)	$	—
As of September 30, 2020	$	(713	)	$	—	$	(713	)	$	—
Contingent consideration -
As of June 30, 2021	$	(15,404	)	$	—	$	—		$	(15,404	)
As of September 30, 2020	$	(20,909	)	$	—	$	—		$	(20,909	)