Fair Value Of Financial Instruments

3 Months Ended

Jul. 31, 2011

Fair Value Of Financial Instruments

Fair Value Of Financial Instruments

6. Fair Value of Financial Instruments

We adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements.

Under ASC Topic 820, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company bases its estimates of fair value for liabilities on the amount it would pay a third-party market participant to transfer the liability and incorporates inputs such as equity prices, historical and implied volatilities, dividend rates and prices of convertible securities issued by comparable companies maximizing the use of observable inputs when available. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

· Level 1 – Quoted prices in active markets for identical assets and liabilities.  Level 1 is generally considered the most reliable measurement of fair value under ASC 820.

· Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company values its warrants based on open form option pricing models which, based on the relevant inputs, render the fair value estimate Level 3.

Fair Value on a Recurring Basis

The table below categorizes assets and liabilities measured at fair value on a recurring basis as of July 31, 2011:

	Fair Value	Fair value measurement using
	July 31, 2011	Level 1	Level 2	Level 3
Liabilities:
Common stock warrant liability	$            1,178	$            -	$            -	$      1,178

The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the quarter ended July 31, 2011:

(in thousands)	Common Stock Warrants
Balance at April 30, 2011	$	1,623
Issuance of common stock warrants		-
Change in fair value of common stock warrant liability		(445)
Balance at July 31, 2011	$	1,178