6. FAIR VALUE OF ASSETS AND LIABILITIES

6 Months Ended

Apr. 30, 2013

Fair Value Disclosures [Abstract]

6. Fair Value of Assets and Liabilities

Fair Value Hierarchy

The Company had no assets measured at fair value on a recurring basis as of April 30, 2013 or October 31, 2012.  The Company’s liabilities measured at fair value on a recurring basis are as follows:

	Level 1		Level 2		Level 3
Liabilities:
April 30, 2013
Unrealized loss on derivatives	$	-	$	67,561	$	-
October 31, 2012
Unrealized loss on derivatives	$	-	$	127,180	$	-

In determining the fair value, the Company uses a model that calculates a present value of the payments as they amortize through the life of the loan (float) based on the variable rate and compares them to the calculated value of the payment based on the fixed rate (fixed) defined in the swap.  In calculating the present value, in addition to the term, the model relies on other data – the “rate” and the “discount factor.”

§   In the “float” model, the rate reflects where the market expects LIBOR to be in for the respective period and is based on the Eurodollar futures market.

§   The discount factor is a function of the volatility of LIBOR.

Payments are calculated by applying the rate to the notional amount and adjusting for the term. Then the present value is calculated by using the discount factor.

The Company’s assets and liabilities measured at fair value on a nonrecurring basis are as follows:

	Level 1		Level 2		Level 3
Assets:
October 31, 2012
Goodwill (a)	$	-	$	-	$	12,156,790

(a)   In accordance with FASB Accounting Standards Codification Subtopic 350-20, goodwill with a carrying amount of $32,123,294 was written down to its implied fair value of $12,156,790, resulting in an impairment charge of $19,966,504, which was included in earnings for the year ended October 31, 2012.

There were no assets or liabilities measured at fair value on a nonrecurring basis at April 30, 2013.

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments.  The carrying amounts reported in the consolidated balance sheet for cash equivalents, trade receivables, and accounts payable approximate fair value based on the short-term maturity of these instruments.  The carrying value of senior debt approximates its fair value since it provides for variable market interest rates. Subordinated debt is carried at its approximate market value based on periodic comparisons to similar instruments in the market place.