Note 9 - Fair Value Measurements

3 Months Ended

Apr. 30, 2014

Disclosure Text Block [Abstract]

Fair Value, Measurement Inputs, Disclosure [Text Block]

9.	Fair Value Measurements

We follow FASB ASC 820, "Fair Value Measurements and Disclosures" (“ASC 820”), in connection with assets and liabilities measured at fair value on a recurring basis subsequent to initial recognition. The guidance applies to our derivative liabilities. We had no assets or liabilities measured at fair value on a non-recurring basis for any period reported.

ASC 820 requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories. We measure the fair value of applicable financial and non-financial assets based on the following fair value hierarchy:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value.

The fair value of our recorded derivative liabilities is determined based on unobservable inputs that are not corroborated by market data, which is a Level 3 classification. We record derivative liabilities on our balance sheet at fair value with changes in fair value recorded in our consolidated statements of operations.

The hierarchy noted above requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. There were no transfers between Level 1, Level 2 and/or Level 3 during the first quarter of fiscal 2015. Our fair value measurements at the April 30, 2014 reporting date are classified based on the valuation technique level noted in the table below (in thousands):

Description

April 30,

2014

Quoted Prices

in Active

Markets for

(Level 1)

Significant Other

Observable

(Level 2)

Significant

Unobservable

(Level 3)

Derivative Liabilties

$

3,525

$

-

$

-

$

3,525

The following outlines the significant weighted average assumptions used to estimate the fair value information presented in connection with our outstanding and contingent warrants issued to Broadwood warrants as described in Note 8 utilizing the Monte Carlo simulation model:

		April 30, 2014
Risk free interest rate		2.04%
Average expected life (years)		6.24
Expected volatility		120.03%
Expected dividends		None

The following outlines the significant weighted average assumptions used to estimate the fair value information presented in connection with the derivative liabilities associated with our Elkhorn Loan as described in Note 8 utilizing the Monte Carlo simulation model:

		April 30, 2014
Risk free interest rate		0.06%
Average expected life (years)		0.59
Expected volatility		82.31%
Expected dividends		None

The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the three months ended April 30, 2014 (in thousands):

Description		February 1, 2014				Recorded new Derivative Liabilities				Change in estimated fair value recognized in results of operations				April 30, 2014

Broadwood warrants		$	2,426			$	-			$	799			$	3,225
Elkhorn conversion features			94				0				206				300
		$	2,520			$	-			$	1,005			$	3,525

The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the three months ended April 30, 2013 (in thousands):

February 1,
2013

Recorded New

Derivative
Liabilities

Change in estimated

fair value recognized

in results of

operations

April 30,
2013

Derivative liabilities

$

2,466

$

624

$

767

$

3,857