Annual report pursuant to Section 13 and 15(d)

Fair Value of Financial Instruments

Fair Value of Financial Instruments
12 Months Ended
Oct. 31, 2010
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments



FASB ASC Topic 820 - Fair Value Measurements and Disclosures (“ASC 820”) defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value:


Level 1 - Quoted prices in active markets for identical assets or liabilities.


Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.


Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.


To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.


Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of October 31, 2010:


          Quoted Prices
in Active
Markets for
    Total     Level 1     Level 2     Level 3  
Restricted cash   $ 827,266     $ 827,266     $ -     $ -  
Short term investment   $ 14,875     $ 14,875     $ -     $ -  
Total   $ 842,141     $ 842,141     $ -     $ -  
Warrant liability   $ 473,384     $ -     $ -     $ 473,384  
Loans and notes payable   $ 14,583,866     $ -     $ 14,583,866     $ -  
Totals   $ 15,057,250     $ -     $ 14,583,866     $ 473,384  


With the exception of assets and liabilities included within the scope of ASC 820-10-15, the Company adopted the provisions of ASC 820 prospectively effective as of the beginning of the year ended October 31, 2008. For financial assets and liabilities included within the scope of ASC 820-10-15, the Company will be required to adopt the provisions of ASC 820 prospectively as of the year beginning October 31, 2009. The adoption of ASC 820 did not have a material impact on our financial position or results of operations, and the Company do not believe that the adoption of ASC 820-10-15 will have a material impact on our financial position or results of operations.


The fair value of the assets, short term investments, at October 31, 2010 was grouped as Level 1 valuation as the market price was readily available.


As of October 31, 2009, this investment had a value of $51,000, with a realized loss of $782,000, and an unrealized loss of $17,000 included in the determination of comprehensive loss.


Loans and notes payable is recorded at face amount, which approximates fair value.


See Note 16 of the Consolidated Financial Statement on current information on the matters set out in this Note 4.