6. FAIR VALUE OF ASSETS AND LIABILITIES

3 Months Ended

Jan. 31, 2015

Fair Value Disclosures [Abstract]

6. Fair Value of Assets and Liabilities

Fair Value Hierarchy

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

	Level 1		Level 2		Level 3
Liabilities:
January 31, 2015
Unrealized loss on derivatives	$	-	$	23,692	$	-
October 31, 2014
Unrealized loss on derivatives	$	-	$	28,516	$	-

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.

There were no assets or liabilities measured at fair value on a nonrecurring basis.