Annual report pursuant to Section 13 and 15(d)

FAIR VALUE PRESENTATION

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FAIR VALUE PRESENTATION
12 Months Ended
Nov. 30, 2018
FAIR VALUE PRESENTATION [Text Block]

NOTE 17 - 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 November 30, 2017, the Company’s liabilities that are measured at fair value and classified as level 3 fair value are as follows (in thousands):

    November 30,  
    2017  
    Level 3  
Embedded derivatives convertible loans *   (37 )
CALL/PUT option derivative   (339 )

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

The fair value is determined by using a Black-Scholes Model.

The following table presents the assumptions that were used for the models as of November 30, 2017 :

        Embedded Put Option
        Derivative Derivative
Fair value of shares of common stock $4.38  
Expected volatility 77% 54%
Discount on lack of marketability - 12%
Risk free interest rate 1.21%- 1.39% 1.44%
Expected term (years) 0.17 - 0.42 0.5
Expected dividend yield 0%  

     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, 2018:

    Embedded     Put Option  
    Derivatives     Derivative  
             
Balance at beginning of the period $ 37   $ (339 )
Repayment   (14 )   -  
Changes in fair value during the period   (23 )   49  
Option disposal   -     290  
Balance at end of the period $   -   $   -  

(*) There were no transfers to Level 3 during the twelve months ended November 30, 2018.

     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, 2017:

    Embedded     Convertible     Put Option  
    Derivatives     Bonds     Derivative  
                   
Balance at beginning of the year $ 240   $ 1,818   $ 273  
Repayment   (876 )   (1,827 )   -  
Changes in fair value during the period   662     22     (612 )
Translation adjustments   11     (13 )   -  
Balance at end of the year $ 37   $   -   $ (339 )

(*) There were no transfers to Level 3 during the twelve months ended November 30, 2017.

     The Company has performed a sensitivity analysis of the results for the Put Option Derivative fair value as of November 30, 2017 with the following parameters:

    Base - 50%     Base     Base+ 50%  
    (in thousands)  
Sensitivity analysis due to changes in the assumptions expected volatility $ 335   $   339   $ 379  
Sensitivity analysis due to changes in Atvio's FV   252     339     440