Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE PRESENTATION

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FAIR VALUE PRESENTATION
6 Months Ended
May 31, 2017
FAIR VALUE PRESENTATION [Text Block]

NOTE 9 - FAIR VALUE PRESENTATION

            The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable inputs that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

            In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs, to the extent possible, and considers credit risk in its assessment of fair value.

            As of May 31, 2017, and November 30, 2016, the Company’s liabilities that are measured at fair value and classified as level 3 fair value are as follows (in thousands):

    May 31,     November 30,  
    2017     201 6  
    Level 3     Level 3  
Warrants (1) $ 2,861   $ 1,843  
Price protection derivative (1)   -     76  
Embedded derivatives convertible loans*(1)   383     240  
Put option derivatives   273     273  
Convertible bonds (2) $   -   $ 1,818  

*

The embedded derivative is presented in the Company's balance sheets on a combined basis with the related host contract (the convertible loans).

(1) The fair value of the warrants, price protection derivative and embedded derivatives is determined by using a Monte Carlo Simulation Model. This model, in contrast to a closed form model, such as the Black-Scholes Model, enables the Company to take into consideration the conversion price changes over the conversion period of the loan, and therefore is more appropriate in this case.

(2) The fair value of the convertible bonds described in Note 7 of the Annual Report is determined by using a binomial model for the valuation of the embedded derivative and the fair value of the bond was calculated based on the effective rate on the valuation date ( 6%). The binomial model used the forecast of the Company share price during the convertible bond's contractual term. Since the convertible bond is in Euro and the model is in USD, the Company has used the Euro/USD forward rates for each period. In order to solve for the embedded derivative fair value, the calculation was performed as follows:

•        Stage A - The model calculates several potential future share prices of the Company based on the volatility and risk-free interest rate assumptions.

•        Stage B - the embedded derivative value is calculated "backwards" in a way that considers the maximum value between holding the bonds until maturity or converting the bonds.

            As of May 31, 2017, the convertible bonds have been repaid or converted see Note 4(e).

            The following table presents the assumptions that were used for the models as of May 31, 2017:

    Price Protection        
    Derivative and     Embedded  
    Warrants     Derivative  
Fair value of shares of Common Stock $ 0.59   $ 0.59  
Expected volatility   95%     100%  
Discount on lack of marketability   16%     -  
Risk free interest rate   0.47%     0.86%  
Expected term (years)   1.4 - 2.1     0.08 - 0.42  
Expected dividend yield   0%     0%  
             
Expected capital raise dates   July 31, 2017     -  

The fair value of the convertible bonds is equal to their principal amount and the aggregate accrued interest.

            The table below sets forth a summary of the changes in the fair value of the Company’s financial liabilities classified as Level 3 for the six months ended May 31, 2017:

                Convertible     Price     Put Option  
          Embedded     Bonds     Protection     Derivative  
    Warrants     Derivatives           Derivative        
          (in thousands)                    
Balance at beginning of the year $ 1,843   $ 240   $ 1,818   $ 76   $ 273  
Changes in fair value during the period   1,018     143     22     (76 )      
Repayment and conversion of                              
convertible bonds               (1,827 )            
Translation adjustments               (13 )            
Balance at end of the period $ 2,861   $ 383   $   -   $   -   $ 273  

            The table below sets forth a summary of the changes in the fair value of the Company’s financial liabilities classified as Level 3 for the year ended November 30, 2016:

                Convertible     Price     Put Option  
          Embedded     Bonds     Protection     Derivative  
    Warrants     Derivatives           Derivative        
          (in thousands)                    
Balance at beginning of the year $ 1,382   $ 289   $ 1,888   $ 1,533   $    
Additions   802     40           120     273  
Conversion         (10 )                  
Changes in fair value related to Price                              
Protection Derivative expired*                     (108 )      
Changes in fair value during the period   (341 )   (87 )   (84 )   (1,469 )      
Changes in fair value due to                              
extinguishment of convertible loan         8                    
Translation adjustments               14              
Balance at end of the year $ 1,843   $ 240   $ 1,818   $ 76   $ 273  

(*) During the twelve months ended November 30, 2016, 11,732,916 Price Protection Derivative have expired. There were no transfers to Level 3 during the twelve months ended November 30, 2016.