FAIR VALUE MEASUREMENT

6 Months Ended

Jul. 31, 2013

Fair Value Measurement [Abstract]

Fair Value Measurement

11. Fair Value Measurement

The FASB's authoritative guidance establishes a framework for measuring fair value and requires disclosures about fair value measurements by establishing a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 Unobservable inputs reflecting the Company's own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

Basis of Fair Value Measurement at Reporting Date Using

The following table summarizes the input levels that were used to determine the fair value of the Company's investment securities and contingent consideration obligations at July 31, 2013:

	Total			(Level 1)		(Level 2)		(Level 3)
SERP investment in mutual funds	$	3,441,000		$	3,441,000	$	-	$	-
Liability on earn-out for LTI acquisition		(705,000	)		-		-		(705,000	)
Liability on earn-out for Garwood acquisition		(200,000	)		-		-		(200,000	)

The following inputs were used to determine the fair value of the Company's investment securities, contingent consideration obligation and embedded derivative at January 31, 2013:

	Total			(Level 1)		(Level 2)		(Level 3)
SERP investment in mutual funds	$	3,410,000		$	3,410,000	$	-	$	-
Liability on earn-out for LTI acquisition		(650,000	)		-		-		(650,000	)
Liability on earn-out for Garwood acquisition		(200,000	)		-		-		(200,000	)
Embedded derivative in debt put option		(61,000	)		-		-		(61,000	)

The fair value of the contingent earn-out considerations related to the LTI and Garwood acquisitions were estimated by applying the income approach. That measure is based on significant inputs not observable in the market, which are considered to be Level 3 inputs. Key assumptions in establishing the fair value of these liabilities include the discount rate and probability adjusted future revenues. After review of performance as of July 31, 2013, the earn-out related to LTI was increased by $55,000 from January 31, 2013. The embedded derivative in debt put option decreased from $61,000 to zero as of July 31, 2013, upon repayment of the Mill Road debt.