Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
 3 Months Ended
Jul. 31, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 12 – FAIR VALUE MEASUREMENTS

 

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the three months ended July 31, 2024. The carrying amounts of cash equivalents, other current assets, accounts payable and accrued expenses approximate their face values at July 31, 2024 due to their short-term nature. The fair value of the bifurcated embedded derivative related to the convertible preferred stock was estimated using a Monte Carlo simulation model, which uses as inputs the fair value of the Company’s common stock and estimates for the equity volatility and traded volume volatility of the Company’s common stock, the time maturity of the convertible preferred stock, the risk-free interest rate for a period of time that approximates the time to maturity, dividend rate, a penalty dividend rate and the probability of default. The fair value of the warrant liability was estimated using the Black Scholes Merton Model which uses as inputs the following weighted average assumptions, as noted above: dividend yield, expected terms in years, equity volatility and risk-free rate.

 

Fair Value on a Recurring Basis

 

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported and reported at fair at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The estimated fair value of the warrant liability and bifurcated embedded derivative represent Level 3 measurements. The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at July 31, 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

                       
Description   Level     July 31, 2024     April 30, 2024  
Liabilities:                        
Warrant liability     3     $ 8,700,000     $ 10,784,000  
Bifurcated embedded derivative     3     $ 980,000     $ 2,184,000  

  

The following table sets forth a summary of the change in the fair value of the warrant liability that is measured at fair value on a recurring basis.

       
    July 31, 2024  
Balance on April 30, 2024   $ 10,784,000  
Issuance of warrants     –  
Change in fair value of warrant liability     (2,084,000 )
Balance on July 31, 2024   $ 8,700,000  

 

The following table sets forth a summary of the change in the fair value of the bifurcated embedded derivative liability that is measured on a recurring basis: 

       
    July 31, 2024  
Balance on April 30, 2024   $ 2,184,000  
Issuance of convertible preferred stock with bifurcated embedded derivative liability     –  
Change in fair value of bifurcated embedded derivative     (1,204,000 )
Balance on July 31, 2024   $ 980,000  

 

 

The fair value of the convertible note receivable using the income approach, which uses as inputs the fair value of debtor’s common stock and estimates for the equity volatility and volume volatility of debtor’s common stock, the time to expiration of the convertible note, the discount rate, the stated interest rate compared to the current market rate, the risk-free interest rate for a period that approximates the time to expiration, and probability of default. Therefore, the estimate of expected future volatility is based on the actual volatility of debtor’s common stock and historical volatility of debtor’s common stock utilizing a lookback period consistent with the time to expiration. The time to expiration is based on the contractual maturity date. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration. Probability of default is estimated using the S&P Global default rate for companies with a similar credit rating to debtor’s.

 

The fair values of financial instruments by class as of July 31, 2024 are as follows: 

                       
    Level     July 31, 2024     April 30, 2024  
Financial Assets                        
Convertible note receivable – investment in debt security     3     $ 3,000,000     $ 2,755,000  
Warrant asset – Femasys     3     $ 3,642,000     $ 5,152,000  
Investment - TNF     3     $ 18,377,000     $ –  
Warrant asset – TNF     3     $ 10,743,000     $ –  

 

Assumptions used in the valuation of the Level 3 assets include time to expiration, discount rate, risk-free rate, volatility and probability of default.