Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.7.0.1
Fair Value Measurements
6 Months Ended
Apr. 30, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements

7. FAIR VALUE MEASUREMENTS

 

In accordance with ASC 820, Fair Value Measurements, financial instruments were measured at fair value using a three-level hierarchy which maximizes use of observable inputs and minimizes use of unobservable inputs:

 

  Level 1: Observable inputs such as quoted prices in active markets for identical instruments
  Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the market
  Level 3: Significant unobservable inputs supported by little or no market activity. Financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, for which determination of fair value requires significant judgment or estimation.

 

In connection with the April 19, 2016 common stock offering, the Company issued warrants to purchase an aggregate of 187,500 shares of common stock. These warrants were exercisable at $6.90 per share and expire on April 19, 2018. These warrants were analyzed and it was determined that they require liability treatment. Under ASC 815, registered common stock warrants that require the issuance of registered shares upon exercise and do not expressly preclude an implied right to cash settlement are accounted for as derivative liabilities. The Company classifies these derivative warrant liabilities on the condensed consolidated balance sheet as a current liability.

 

The fair value of these warrants at January 18, 2017 and October 31, 2016 was determined to be approximately $78,000 and $70,000, respectively, as calculated using Black-Scholes with the following assumptions: (1) stock price of $3.62 and $3.58, respectively; (2) a risk-free rate of 0.97% and 0.75%, respectively; and (3) an expected volatility of 68% and 61%, respectively.

 

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. At April 30, 2017, there was no warrant liability balance.

 

The following table sets forth the changes in the estimated fair value for our Level 3 classified derivative warrant liability (in thousands):

 

    Warrant Liability  
Fair value - October 31, 2016   $ 70  
Exchanged - January 18, 2017 (see Note 6)     (78 )
Change in fair value     8  
Fair value - April 30, 2017   $ -