Fair Value

6 Months Ended

Apr. 30, 2012

Fair Value [Abstract]

FAIR VALUE

3. FAIR VALUE

The table below segregates all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

	April 30, 2012			Quoted prices in active markets for identical assets (level 1)			Significant other observable inputs (level 2)			Significant unobservable inputs (level 3)
Assets:
Money market funds		$	30,547		$	30,547		$	—		$	—
Bank deposits		$	1,187		$	1,187		$	—		$	—
Total financial assets		$	31,734		$	31,734		$	—		$	—
Liabilities:
Warrant liability		$	957		$	—		$	—		$	957
Total financial liabilities		$	957		$	—		$	—		$	957

The Company has outstanding warrants that may require settlement by transferring assets under certain change of control circumstances. These warrants are classified as liabilities in the accompanying consolidated balance sheets. The warrants have an exercise price of $2.04 per share and expire in March 2013. The Company measures the fair value of the warrants at each balance sheet date, using the Black-Scholes method, and a gain or loss is recorded in earnings each period as change in fair value of warrants.

Assumptions used to determine the fair value of the warrants were:

	Three Months ended April 30,				Six Months ended April 30,
	2012		2011		2012		2011
Estimated fair value of stock		$2.45-$2.53		$1.21-$3.75		$2.45-$3.37		$0.62-$3.75
Expected warrant term		0.9-1.1 years		1.9-2.1 years		0.9-1.4 years		1.9-2.4 years
Risk-free rate		0.1-0.2%		0.6-0.8%		0.1-0.2%		0.4-0.8%
Expected volatility		79.0-80.1%		75.5-77.9%		79.0-80.1%		73.5-77.9%
Dividend yield		0%		0%		0%		0%

A summary of the changes to the Company’s warrant liability, as measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended April 30, 2012 and 2011 is presented below:

	Three Months ended April 30,				Six Months ended April 30,
	2012		2011		2012		2011
Beginning balance		$1,122		$560		$1,949		$144
Warrants exercised		-		(937)		-		(937)
Total (gain) loss included in net income		(165)		2,928		(992)		3,344
Ending balance		$957		$2,551		$957		$2,551

The carrying value of accounts receivable, accounts payable and accrued expenses, due from factor, and advances from customers are reasonable estimates of their fair values because of their short-term maturity.