5.         INVESTMENTS 

Short-term Investments

At July 31, 2012 we had marketable securities consisting of certificates of deposit of approximately $950,000. At October 31, 2011 marketable securities totaled approximately $2,249,000, consisting of Treasury Bills of approximately $1,049,000 and certificates of deposit of approximately $1,200,000, which were classified as "available-for-sale securities" and reported at fair value, which approximates cost.  Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis. 

Investment in Videocon

Our investment in Videocon is classified as an "available-for-sale security" and reported at fair value, with unrealized gains and losses excluded from operations and reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity.  The original cost basis of $16,200,000 was determined using the specific identification method.  The fair value of the Videocon GDRs is based on the price on the Luxembourg Stock Exchange, which price is based on the underlying price of Videocon’s equity shares which are traded on stock exchanges in India with prices quoted in rupees.  

ASC 320 “Investments-Debt and Equity Securities” (“ASC 320”) and SEC guidance on other than temporary impairments of certain investments in equity securities requires an evaluation to determine if the decline in fair value of an investment is either temporary or other than temporary.  Unless evidence exists to support a realizable value equal to or greater than the carrying cost of the investment, an other than temporary impairment should be recorded.  At each reporting period we assess our investment in Videocon to determine if a decline that is other than temporary has occurred.  In evaluating our investment in Videocon at October 31, 2011, we determined that based on both the duration and the continuing magnitude of the market price decline compared to the carrying cost basis of approximately $7,105,000, and the uncertainty of its recovery, a write-down of the investment of approximately $1,723,000 should be recorded as of October 31, 2011, and a new cost basis of approximately $5,382,000 should be established.  In evaluating our investment in Videocon at July 31, 2012, we determined that, based on both the duration and the magnitude of the market price decline compared to the revised cost basis, a write down of the investment as of July 31, 2011 is not required.

The fair value of investment in Videocon as of July 31, 2012 and October 31, 2011, and the unrealized loss for the nine-month period ended July 31, 2012, are as follows:

Investment in and Related Party Transactions with Volga-Svet, Ltd

In September 2009, we entered into the Volga License Agreement (as defined below) to produce and market our thin, flat, low voltage phosphor displays in Russia.  We have been working with Volga for the past fourteen years to assist us with our low voltage phosphor displays.  As part of the Volga License Agreement, Volga is required to purchase from us the matrix substrate, carbon nanotubes, and associated display electronics, however, no purchases have been made to date.  In addition, in September 2009, we acquired a 19.9% ownership interest in Volga in exchange for 150,000 unregistered shares of our common stock.  As we do not believe that we can exercise significant influence over Volga, our investment in Volga is recorded at cost of $127,500 based on the closing price of our common stock at the time of the acquisition.  As of July 31, 2012, we have not identified any events or changes in circumstances that may have a significant adverse effect on the fair value of the investment.  During the third quarter of fiscal 2012 we reduced our level of development activity with Volga.  Management is presently reassessing many of our development efforts, which may result in a continued reduction of our development work with Volga.  Research and development expenses in the accompanying consolidated statements of operations include payments to Volga for the nine-month periods ended July 31, 2012 and 2011 of approximately $326,000 and $383,000, respectively, and for the three-month periods ended July 31, 2012 and 2011 of approximately $20,000 and $128,000, respectively.

Investment in ZQX Advisors, LLC

In August 2009, we entered into an Engagement Agreement with ZQX Advisors, LLC (“ZQX”) to assist us in seeking business opportunities and licenses for our electrophoretic display technology.  Management is currently evaluating our relationship with ZQX.  Concurrently with entering into the Engagement Agreement, we acquired a 19.5% ownership interest in ZQX and they agreed to attempt to locate business opportunities and licenses for our technology.  In exchange for the 19.5% ownership interest and related services, we issued 800,000 unregistered shares of common stock as well as warrants to purchase an additional 500,000 unregistered shares of common stock, half of which are exercisable at $0.37 per share and the other half at $0.555 per share to ZQX.  The warrants are exercisable at any time after August 19, 2010 and expire on August 19, 2019.  The total fair value of the common stock and warrants was approximately $468,000.  We recognized approximately $377,000 of this amount as consulting expense in fiscal year 2009 since the two other owners of ZQX did not contribute any assets to ZQX but instead have agreed to seek business opportunities and licenses for our electrophoretic display technology.  In addition, we have classified our remaining ownership interest of $91,000 in ZQX as a reduction of additional paid-in capital within shareholders’ equity since this investment in ZQX consists entirely of our equity securities.