Note 9 - Fair Value Measurements

6 Months Ended

Jul. 31, 2014

Table Text Block Supplement [Abstract]

Fair Value, Liabilities Measured on Recurring and Nonrecurring Basis [Table 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 second quarter of fiscal 2015. Our fair value measurements at the July 31, 2014 reporting date are classified based on the valuation technique level noted in the table below (in thousands):

						Quoted Prices
						in Active				Significant Other				Significant
		July 31,				Markets for				Observable				Unobservable
Description		2014				(Level 1)				(Level 2)				(Level 3)
Derivative Liabilties		$	2,294			$	-			$	-			$	2,294

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:

		July 31, 2014
Risk free interest rate			2.0	%
Average expected life (in years)		5.99
Expected volatility			124.3	%
Expected dividends		None

The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the six months ended July 31, 2014 (in thousands):

										Change in estimated
						Change in				fair value recognized
		February 1,				Derivative				in results of				July 31,
Description		2014				Liabilities				operations				2014

Broadwood warrants		$	2,426			$	-			$	(132	)		$	2,294
Elkhorn conversion features			94				(94	)			-				-
		$	2,520			$	(94	)		$	(132	)		$	2,294

The table below sets forth a summary of changes in the fair value of our Level 3 financial instruments for the six months ended July 31, 2013 (in thousands):

		February 1, 2013				Recorded New Derivative Liabilities				Change in estimated fair value recognized in results of operations				July 31, 2013

Derivative liabilities		$	2,466			$	624			$	717			$	3,807

Tabular disclosure of liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring and/or nonrecurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset.

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