Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

v3.5.0.2
FAIR VALUE MEASUREMENTS
9 Months Ended
Jul. 31, 2016
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]

3. FAIR VALUE MEASUREMENTS


US GAAP defines fair value and establishes a framework for measuring fair value.  We have categorized our financial assets, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below.  If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.


Financial assets and liabilities recorded in the accompanying condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:


Level 1 - Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market which we have the ability to access at the measurement date.


Level 2 - Financial assets and liabilities whose values are based on quoted market prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.   


Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset and liabilities.


The following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of July 31, 2016:


  

Level 1

 

Level 2

 

Level 3

 

Total

  

 

 

 

 

       

 

 

       

 

 

 

Money market funds –   Cash equivalents

$

1,413,112

 

$

-

 

$

-

 

$

1,413,112

Certificates of deposit - Short-term investments

 

-

 

 

1,900,000

 

 

-

 

 

1,900,000

Total financial assets

$

1,413,112

 

$

1,900,000

 

$

-

 

$

3,313,122


The following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of October 31, 2015:


  

Level 1

 

Level 2

 

Level 3

 

Total

  

 

 

 

 

       

 

 

       

 

 

 

Money market funds –  Cash equivalents

$

467,967

 

$

-

 

$

-

 

$

467,967

Certificates of deposit - Short-term investments

 

           -

 

 

2,400,000

 

 

-

 

 

2,400,000

Total financial assets

$

467,967

 

$

2,400,000

 

$

-

 

$

2,867,967


The following table presents the hierarchy for our financial liabilities measured at fair value on the transaction date and then adjusted for the subsequent accretion of interest as of July 31, 2016:


  

Level 1

 

Level 2

 

Level 3

 

Total

  

 

 

 

 

       

 

 

       

 

 

 

Patent acquisition obligation

$

-

 

$

-

 

$

4,071,425

 

$

4,071,425


The following table presents the hierarchy for our financial liabilities measured at fair value on the transaction date and then adjusted for the subsequent accretion of interest as of October 31, 2015:


  

Level 1

 

Level 2

 

Level 3

 

Total

  

 

 

 

 

       

 

 

       

 

 

 

Patent acquisition obligation

$

-

 

$

-

 

$

3,688,187 

 

$

3,688,187 


The following table sets forth the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a non-recurring basis:


 

 

 

Patent acquisition obligation

 

 

Balance October 31, 2015

$

3,688,187

Accreted interest on patent obligation

 

383,238

Balance July 31, 2016

$

4,071,425


Our non-financial assets that are measured on a non-recurring basis include our patents and property and equipment which are measured using fair value techniques whenever events or changes in circumstances indicate a condition of impairment exists.  The estimated fair value of prepaid expenses, accounts payable and accrued expenses approximates their individual carrying amounts due to the short term nature of these measurements.  Cash and cash equivalents are stated at carrying value which approximates fair value.