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Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements - Warrant Derivative liability

v3.6.0.2
Fair Value Measurements - Warrant Derivative liability
 6 Months Ended
Oct. 31, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements - Warrant Derivative liability

Note 11. Fair Value Measurements – Warrant Derivative liability


 The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The accounting standard established a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 input are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.


Assets and liabilities measured at fair value on a recurring and non-recurring basis consisted of the following at October 31, 2016 which related to 750,000 warrants which contained price protection:


 

 

Carrying

 

 

 

 

 

 

 

 

 

 

 

 

Value at

 

 

 

 

 

 

 

 

 

 

 

 

October 31,

 

 

Fair value Measurements at October 31, 2016

 

 

 

2016

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant Derivative Liability

 

$

52,500

 

 

$

—

 

 

$

—

 

 

$

52,500

 


The following is a summary of activity of Level 3 liabilities for the six-month period ended October 31, 2016:


Balance April 30, 2016

 

$

—

 

Initial valuation of warrant derivative liability

 

 

52,500

 

Change in valuation of warrant derivative liability

 

 

—

 

Balance October 31, 2016

 

$

52,500

 


Changes in fair value of the warrant derivative liability are included in other income (expense) in the accompanying unaudited condensed consolidated statements of operations.


The Company intends to provide notice to the warrant holder that they would redeem any unexercised warrants within 30 days in accordance with the warrant terms as the Company’s common stock trading average was at least twenty-five cents over ten consecutive trading days. Accordingly, the fixed monetary redemption value of $0.07 indicates the fair value as of October 31, 2016.


There were no changes in the valuation techniques during the three and six month periods ended October 31, 2016.