Quarterly report pursuant to Section 13 or 15(d)

Derivative Instruments

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Derivative Instruments
9 Months Ended
Jul. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments

7. DERIVATIVE INSTRUMENTS

 

Warrants

 

A summary of changes in warrants for the nine months ended July 31, 2017 is as follows:

 

    Number of     Weighted-Average  
    Warrants     Exercise Price  
Outstanding Warrants at October 31, 2016:     3,110,575     $ 5.04  
Issued     -     $ -  
Exercised     (225 )   $ 5.00  
Expired     (16,177 )   $ 10.63  
Outstanding Warrants at July 31, 2017     3,094,173     $ 5.01  

 

At July 31, 2017 and October 31, 2016, the Company had 3,092,395 and 3,092,619 outstanding warrants classified as equity (equity warrants) out of it total 3,094,173 and 3,110,575 warrants, respectively. At issuance, equity warrants are recorded at their relative fair values, using the Relative Fair Value Method, in the shareholders’ equity section of the balance sheet. The equity warrants can only be settled through the issuance of shares and are not subject to anti-dilution provisions.

 

Warrant Liability

 

At July 31, 2017, the Company had approximately 2,000 of its total approximately 3.09 million outstanding warrants classified as liabilities (liability warrants). At October 31, 2016, the Company had approximately 18,000 of its total approximately 3.11 million outstanding warrants classified as liabilities (liability warrants). The Company utilizes the BSM to calculate the fair value of these warrants at issuance and at each subsequent reporting date. The liability warrants contain a cash settlement provision in the event of a fundamental transaction (as defined in the Common Stock purchase warrant). Any changes in the fair value of the warrant liability (i.e. - the total fair value of all outstanding liability warrants at the balance sheet date) between reporting periods will be reported on the statement of operations.

 

At July 31, 2017 and October 31, 2016, the fair value of the warrant liability was $0 and $20,156, respectively. For the three months ended July 31, 2017 and 2016, the Company reported a gain of $0 and $6,340, respectively, due to changes in the fair value of the warrant liability. For the nine months ended July 31, 2017 and 2016, the Company reported a gain of $20,156 and $56,214, respectively, due to changes in the fair value of the warrant liability. In determining the fair value of the warrant liability at July 31, 2017 and October 31, 2016, the Company used the following inputs in its BSM:

 

    July 31, 2017     October 31, 2016  
Exercise Price   $ 18.75     $ 10.63-18.75  
Stock Price   $ 6.47     $ 8.09  
Expected term     0.01 years       0.55-0.75 years  
Expected Volatility     67.34 %     81.84%-87.09 %
Risk Free Interest Rate     1.00 %     0.51%-0.66 %