3. FAIR VALUE

The table below segregates all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

	July 31, 2015		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Assets:
Money market funds	$	6,505	$	6,505	$	—	$	—
Bank deposits		2,079		2,079		—		—
Total financial assets	$	8,584	$	8,584	$	—	$	—

	October 31, 2014		Quoted prices in active markets for identical assets (level 1)		Significant other observable inputs (level 2)		Significant unobservable inputs (level 3)
Assets:
Money market funds	$	6,099	$	6,099	$	—	$	—
Bank deposits		1,097		1,097		—		—
Total financial assets	$	7,196	$	7,196	$	—	$	—

Prior to the April 2015 exchange transaction described in Note 11, the Company had outstanding warrants that contained re-pricing provisions for “down-round” issuances and other events not indexed to the Company’s own stock and were classified as liabilities in the Company’s consolidated balance sheets. The Company recognized these warrants as liabilities at their fair value and re-measured them through the date of their exchange in April 2105. ASC 820 Fair Value Measurement provides requirements for disclosure of liabilities that are measured at fair value on a recurring basis in periods subsequent to the initial recognition.

The Company uses Level 3 inputs for its valuation methodology for the warrant liabilities. The estimated fair values were determined using a binomial option pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect estimated fair value at each period end, with any decrease or increase in the estimated fair value being recorded in other income or expense accordingly, as adjustments to the fair value of derivative liabilities. Various factors are considered in the pricing models the Company uses to value the warrants, including the Company’s current common stock price, the remaining life of the warrants, the volatility of the Company’s common stock price, and the risk-free interest rate. In addition, as of the valuation dates, management assessed the probabilities of future financing and other re-pricing events in the binominal valuation models.

A summary of the changes to the Company’s warrant liability, as measured at fair value on a recurring basis using significant unobservable inputs (Level 3), for the nine months ended July 31, 2015 is presented below:

	Nine months ended July 31, 2015
Beginning balance	$	-
Issuance of warrants		3,765
Change in fair value of warrant liability		1,547
Settlement of warrants		(5,312)
Ending balance	$	-

Assumptions used to determine the fair value of the warrants in the nine months ended July 31, 2015 were:

Market price of common stock	$	0.59-$1.26
Expected warrant term		4.5-5.0 years
Risk-free rate		1.0% -1.7	%
Expected volatility		80	%
Dividend yield		0	%
Probability of certain litigation costs at each of three pricing thresholds		0-33	%
Probability of future down-round financing		0-50	%
Stock price discount		0-41	%

The carrying value of accounts receivable, accounts payable and accrued expenses, customer credits, due to distribution partners and advances from customers are reasonable estimates of their fair values because of their short-term maturity.