Copytele Inc (COPY) SEC Quarterly Report (10-Q) for Q2 2016

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2016

Commission file number 0-11254

ITUS Corporation

(Exact name of registrant as specified in its charter)

Delaware				11-2622630
(State or other jurisdiction of				(I.R.S. Employer
incorporation or organization)				Identification No.)

12100 Wilshire Boulevard, Suite 1275
Los Angeles, CA				90025
(Address of principal executive offices)				(Zip Code)

(310) 484-5200

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes X No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]		Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)		Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ____ No X

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

On May 16, 2016, the registrant had outstanding 8,739,659 shares of Common Stock, par value $.01 per share, which is the registrant ' s only class of common stock.

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PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements.

	Condensed Consolidated Balance Sheets as of April 30, 2016 (Unaudited) and October 31, 2015	3

	Condensed Consolidated Statements of Operations (Unaudited) for the six months ended April 30, 2016 and 2015	4

	Condensed Consolidated Statements of Operations (Unaudited) for the three months ended April 30, 2016 and 2015	5

	Condensed Consolidated Statement of Shareholders' Equity (Unaudited) for the six months ended April 30 2016	6

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended April 30, 2016 and 2015	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8 – 18

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	19 - 25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	26

Item 4.	Controls and Procedures.	26

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings.	26

Item 1A.	Risk Factors.	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	26

Item 3.	Defaults Upon Senior Securities.	26

Item 4.	Mine Safety Disclosures.	26

Item 5.	Other Information.	27

Item 6.	Exhibits.	27

	SIGNATURES	28

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ITUS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	April 30, 2016		October 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	2,612,321	$	4,369,219
Short-term investments in certificates of deposit		2,150,000		2,400,000
Prepaid expenses and other current assets		39,032		126,528
Total current assets		4,801,353		6,895,747

Patents, net of accumulated amortization of $802,393 and $639,744, respectively		2,233,719		2,396,367
Property and equipment, net of accumulated depreciation of $27,473 and $13,617 respectively		170,685		43,456
Total assets	$	7,205,757	$	9,335,570

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	512,796	$	380,765
Royalties and contingent legal fees payable		194,134		213,017
Total current liabilities		706,930		593,782

Patent acquisition obligation		3,939,068		3,688,187
Total liabilities		4,645,998		4,281,969

Commitments and contingencies (Note 9)

Shareholders' equity:
Preferred stock, par value $100 per share; 19,860 shares authorized; no shares issued or outstanding		-		-
Series A convertible preferred stock, par value $100 per share; 140 shares issued and outstanding, respectively		14,000		14,000
Common stock, par value $.01 per share; 24,000,000 shares authorized; 8,739,659 and 8,724,878
shares issued and outstanding, respectively		87,397		87,249
Additional paid-in capital		151,472,110		151,101,117
Accumulated deficit		(149,013,748)		(146,148,765)
Total shareholders' equity		2,559,759		5,053,601
Total liabilities and shareholders' equity	$	7,205,757	$	9,335,570

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ITUS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the Six Months Ended April 30,

	2016		2015
Revenue:
Revenue from patent licensing activities	$	-	$	160,000
Settlement with AU Optronics Corporation		-		9,000,000
Total revenue		-		9,160,000

Operating costs and expenses:
Inventor royalties and contingent legal fees		-		103,944
Litigation and licensing expenses		75,162		3,440,272
Amortization of patents		162,648		162,648
Marketing, general and administrative expenses (including non-cash stock option
compensation expenses of $329,749 and $1,557,708, respectively)		2,383,016		3,729,645
Total operating costs and expenses		2,620,826		7,436,509

(Loss) income from operations		(2,620,826)		1,723,491

Interest expense		(250,881)		(217,798)

Interest income		6,724		9,856
(Loss) income before income taxes		(2,864,983)		1,515,549

Provision for income taxes		-		-
Net (loss ) income	$	(2,864,983)	$	1,515,549

Net (loss) income per common share:
Basic	$	(0.33)	$	0.17
Diluted	$	(0.33)	$	0.16

Weighted average common shares outstanding:
Basic		8,731,489		8,778,737
Diluted		8,731,489		9,657,835

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ITUS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the Three Months Ended April 30,

	2016		2015
Revenue:
Revenue from patent licensing activities	$	-	$	25,000
Total revenue		-		25,000

Operating costs and expenses:
Inventor royalties and contingent legal fees		-		15,067
Litigation and licensing expenses		15,521		105,570
Amortization of patents		81,324		81,324
Marketing, general and administrative expenses (including non-cash stock option
compensation expenses of $217,254 and $1,065,929 respectively)		1,051,542		1,956,277
Total operating costs and expenses		1,148,387		2,158,238

Loss from operations		(1,148,387)		(2,133,238)

Interest expense		(126,980)		(108,612)

Interest income		3,473		5,179
Loss before income taxes		(1,271,894)		(2,236,671)

Provision for income taxes		-		-
Net loss	$	(1,271,894)	$	(2,236,671)

Net loss per common share:
Basic and diluted	$	(0.15)	$	(0.26)

Weighted average common shares outstanding:
Basic and diluted		8,736,024		8,768,775

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ITUS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED April 30, 2016 (UNAUDITED)

							Additional Paid-in Capital				Total Shareholders' Equity
	Preferred Stock			Common Stock				Accumulated Deficit
	Shares	Par Value		Shares	Par Value

Balance, October 31, 2015	140	$	14,000	8,724,878	$	87,249	$	151,101,117	$	(146,148,765)	$	5,053,601
Stock option compensation to employees and directors	-		-	-		-		329,749		-		329,749
Common stock issued upon exercise of stock options	-		-	7,080		71		18,160		-		18,231
Common stock issued to consultants	-		-	3,701		37		11,324		-		11,361
Common stock issued to acquire patents	-		-	4,000		40		11,760		-		11,800
Net income	-		-	-		-		-		(2,864,983)		(2,864,983)
Balance, April 30, 2016	140	$	14,000	8,739,659	$	87,397	$	151,472,110	$	(149,013,748)	$	2,559,759

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ITUS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the six months ended April 30,

	2016		2015
Reconciliation of net (loss) income to net cash (used in) provided by operating activities:
Net (loss) income	$	(2,864,983)	$	1,515,549
Stock option compensation to employees, directors and consultants		329,749		1,557,708
Common stock issued to consultants		11,361		6,100
Amortization of patents		162,648		162,648
Accretion of interest on patent acquisition obligations to interest expense		250,881		217,798
Common stock issued to acquire patent license		11,800
Loss on acquisition of 800,000 shares of common stock and cancellation of warrants to
purchase 400,000 shares of common stock		-		101,280
Other		13,881		15,532
Change in operating assets and liabilities:
Accounts receivable		-		400,000
Prepaid expenses and other current assets		87,496		18,051
Accounts payable and accrued expenses		132,031		(803,989)
Royalties and contingent legal fees payable		(18,883)		(316,837)
Net cash (used in) provided by operating activities		(1,884,019)		2,873,840

Cash flows from investing activities:
Disbursements to acquire short-term investments in certificates of deposit		(1,550,000)		(2,400,000)
Proceeds from sales of short-term investments in certificates of deposit		1,800,000		2,500,000
Purchases of property and equipment		(141,110)		(54,776)
Net cash provided by investing activities		108,890		45,224

Cash flows from financing activities:
Proceeds from exercise of employee stock options		18,231		-
Payments to acquire 800,000 share common stock and cancellation of
warrants to purchase 400,000 shares common stock		-		(200,000)
Net cash provided by (used in) financing activities		18,231		(200,000)

Net (decrease) increase in cash and cash equivalents		(1,756,898)		2,719,064
Cash and cash equivalents at beginning of period		4,369,219		3,361,246
Cash and cash equivalents at end of period	$	2,612,321	$	6,080,310

The accompanying notes are an integral part of these statements.

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ITUS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

BUSINESS AND FUNDING

Description of Business

As used herein, " we, " " us, " " our, " the " Company " or " ITUS " means ITUS Corporation and its wholly-owned subsidiaries. From inception through October 2012, our primary operations involved the development of patented technologies in the areas of thin-film displays and encryption. In October of 2012, under the leadership of a new management team, the Company undertook a transformation process to recapitalize the Company, unencumber the Company ' s assets, seek reparations from a previous joint development partner, change the Company ' s name and ticker symbol, relocate the Company ' s headquarters and modernize its systems, and monetize patented technologies developed by the Company, or acquired from third parties. In July of 2015, the Company ' s stock was accepted for listing and began trading on the NASDAQ Capital Market.

In June of 2015, the Company announced its intention to develop non-invasive blood tests for the early detection of solid tumor based cancers. In July of 2015, the Company entered into a collaborative research agreement with The Wistar Institute, the nation ' s first independent biomedical research institute and a leading National Cancer Institute designated cancer research center, for the purpose of validating the Company ' s cancer detection methodologies and establishing protocols for identifying certain biomarkers in the blood stream identified by the Company and associated with solid tumors. In October of 2015, the Company and Wistar announced very favorable results from initial testing of a small group of breast cancer patients and healthy controls. One hundred percent (100%) of the blood samples tested from breast cancer patients showed the presence of the biomarkers identified by the Company, and none of the healthy patient blood samples contained the biomarkers. A more extensive clinical study is currently being conducted.

Over the next several quarters, we expect the blood test for early cancer detection to be the primary focus of the Company. As part of our legacy operations, the Company had outsourced a small development project in connection with one of the Company ' s thin-film display technologies which was discontinued in February 2016, and through certain of its subsidiary companies, the Company remains engaged in limited patent licensing activities. We do not expect these activities to be a significant part of the Company ' s ongoing operations.

Over the past several quarters, our revenue has been derived from technology licensing and the sale of patented technologies, including in connection with the settlement of litigation. The Company expects to make investments in and form new companies to develop additional emerging technologies.

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AUO Lawsuit and Settlement

On December 29, 2014, the Company settled a lawsuit filed by the Company against AU Optronics Corporation ( " AUO " ) in connection with the joint development and commercialization of certain of the Company ' s patented technologies and received an aggregate of $9,000,000 from AUO. For more information regarding the settlement with AUO, please refer to our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the " SEC " ) December 23, 2015.

Funding and Management ' s Plans

During the six months ended April 30, 2016, cash used in operating activities was approximately $1,884,000. Net cash provided by investing activities was approximately $109,000, which reflected proceeds from the sale or maturity of certificates of deposit totaling $1,800,000, which was offset by the purchase of certificates of deposit totaling $1,550,000 and the purchase of property and equipment of approximately $141,000. Cash provided by financing activities was approximately $18,000, representing proceeds from the exercise of stock options. As a result, our cash, cash equivalents and short-term investments at April 30, 2016 decreased by approximately $2,007,000 to approximately $4,762,000 from approximately $6,769,000 at the end of fiscal year 2015.

Based on currently available information as of May 20, 2016, we believe that our existing cash, cash equivalents, short-term investments and expected cash flows will be sufficient to enable us to continue our business activities for at least 12 months. However, our projections of future cash needs and cash flows may differ from actual results. If current cash on hand, cash equivalents, short-term investments and cash that may be generated from our business operations are insufficient to satisfy our liquidity requirements, we may seek to sell equity securities or obtain loans from various financial institutions where possible. The sale of additional equity securities or convertible debt could result in dilution to our stockholders. Additionally, the sale of equity securities or issuance of debt securities may be subject to certain security holder approvals or may result in downward adjustment of the exercise or conversion price of our outstanding securities. We can give no assurance that we will generate sufficient cash flows in the future to satisfy our liquidity requirements or sustain future operations, or that other sources of funding, such as sales of equity or debt, would be available or would be approved by our security holders, if needed, on favorable terms or at all. If we cannot obtain such funding if needed or if we cannot sufficiently reduce operating expenses, we would need to curtail or cease some or all of our operations.

Reverse Stock Split

On June 26, 2015, we effected a 1-for-25 reverse stock split (the " Stock Split " ) of our issued common stock and preferred stock. Each shareholders ' percentage ownership and proportional voting power remained unchanged as a result of the Stock Split. All applicable share data, per share amounts and related information in the condensed consolidated financial statements and notes thereto have been adjusted retroactively to give effect to the Stock Split. As a result of the Stock Split, the number of shares of our common stock and preferred stock authorized was also decreased by the same proportion as the outstanding shares.

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Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnotes required by generally accepted accounting principles in annual financial statements have been omitted or condensed. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended October 31, 2015, as reported by us in our Annual Report on Form 10-K filed with the SEC on December 23, 2015. The October 31, 2015 consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America ( " US GAAP " ). The condensed consolidated financial statements include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of our financial position as of April 30, 2016, and results of operations and cash flows for the interim periods represented. The results of operations for the six and three months ended April 30, 2016 are not necessarily indicative of the results to be expected for the entire year.

Revenue Recognition

Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability of amounts is reasonably assured.

Patent Licensing

In certain instances, our past revenue arrangements have provided for the payment of contractually determined fees in settlement of litigation and in consideration for the grant of certain intellectual property rights for patented technologies owned or controlled by the Company. These arrangements typically include some combination of the following: (i) the grant of a non-exclusive, retroactive and future license to manufacture and/or sell products covered by patented technologies owned or controlled by the Company, (ii) a covenant-not-to-sue, (iii) the release of the licensee from certain claims, and (iv) the dismissal of any pending litigation. In such instances, the intellectual property rights granted have been perpetual in nature, extending until the expiration of the related patents. Pursuant to the terms of these agreements, we had no further obligations. As such, the earnings process was complete and revenue has been recognized upon the execution of the agreement, when collectability was reasonably assured, and when all other revenue recognition criteria were met.

Intangible Assets

Our only identifiable intangible assets are patents and patent rights. We capitalize patent and patent rights acquisition costs and amortize the cost over the estimated economic useful life. We did not capitalize any patent acquisition costs during the six months ended April 30, 2016 and 2015. We recorded patent amortization expense of approximately $163,000 and $163,000 during the six months ended April 30, 2016 and 2015, respectively, and approximately $81,000 and $81,000 during the three months ended April 30, 2016 and 2015, respectively.

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STOCK-BASED COMPENSATION

The Company maintains stock equity incentive plans under which the Company grants non-qualified stock options, stock appreciation rights, stock awards, performance awards, or stock units to employees, directors and consultants.

Stock Option Compensation Expense

The compensation cost for stock options granted to employees and directors is measured at the grant date, based on the fair value of the award using the Black-Scholes pricing model, and is recognized as an expense, on a straight-line basis, over the requisite service period (the vesting period of the stock option) which is one to ten years. We recorded stock-based compensation expense, related to stock options granted to employees and directors, of approximately $330,000 and $1,225,000 during the six months ended April 30, 2016 and 2015, respectively, and approximately $217,000 and $683,000 during the three months ended April 30, 2016 and 2015, respectively.

The compensation cost for stock options granted to consultants is measured based on fair value at each reporting period, using the Black-Scholes pricing model, and is recognized as an expense over the requisite service period of the grant. We recorded stock-based compensation expense, related to stock options granted to consultants, of approximately $-0- and $332,000 during the six months ended April 30, 2016 and 2015, respectively, and approximately $-0- and $383,000 during the three months ended April 30, 2016 and 2015, respectively.

Stock Option Activity

During the six months ended April 30, 2016 and 2015, we granted options to purchase 545,000 shares and 52,000 shares of common stock, respectively, to employees and directors at exercise prices of $2.92 and $2.80 per share, respectively, pursuant to the ITUS Corporation 2010 Share Incentive Plan (the "2010 Share Plan"). During the six months ended April 30, 2016, stock options to purchase 7,080 shares of common stock were exercised with aggregate proceeds of approximately $18,000. During the six months ended April 30, 2015, no stock options to purchase shares of common stock were exercised.

Stock Option Plans

As of April 30, 2016, we have two stock option plans: the ITUS Corporation 2003 Share Incentive Plan (the "2003 Share Plan") and the 2010 Share Plan, which were adopted by our Board of Directors on April 21, 2003 and July 14, 2010, respectively.

The 2003 Share Plan provided for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to key employees, directors and consultants. In accordance with the provisions of the 2003 Share Plan, the plan terminated with respect to the ability to grant future options on April 21, 2013. Information regarding the 2003 Share Plan for the six months ended April 30, 2016 is as follows:

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		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value

	Shares
Options Outstanding at October 31, 2015	366,200	$	17.86
Exercised	(7,080)	$	2.58
Forfeited	(71,920)	$	17.16
Options Outstanding and exercisable at April 30, 2016	287,200	$	18.41	$	9,730

The following table summarizes information about stock options outstanding and exercisable under the 2003 Share Plan as of April 30, 2016:

	Number Outstanding and Exercisable	Weighted Average Remaining Contractual Life (in years)
		Weighted Average Exercise Price
Range of Exercise Prices

$ 1.79 - $ 7.75	50,000	1.91	$	2.95
$13.50 - $17.50	59,600	.83	$	16.75
$18.75 - $23.00	137,600	.94	$	21.60
$29.25	40,000	1.31	$	29.25

The 2010 Share Plan provides for the grant of nonqualified stock options, stock appreciation rights, stock awards, performance awards and stock units to key employees, directors and consultants. As of April 30, 2016, the 2010 Share Plan had 443,955 shares available for future grants. Information regarding the 2010 Share Plan for the six months ended April 30, 2016 is as follows:

		Weighted Average Exercise Price Per Share	Aggregate Intrinsic Value

	Shares
Options Outstanding at October 31, 2015	526,272	$3.33
Granted	545,000	$2.92
Options Outstanding at April 30, 2016	1,071,272	$3.12	$ 100,673
Options Exercisable at April 30, 2016	506,539	$3.26	$ 88,573

The following table summarizes information about stock options outstanding and exercisable under the 2010 Share Plan as of April 30, 2016:

	Options Outstanding				Options Exercisable
		Weighted Average Remaining Contractual Life (in years)				Weighted Average Remaining Contractual Life (in years)

		Weighted Average Exercise Price			Weighted Average Exercise Price
Range of Exercise Prices	Number Outstanding			Number Exercisable


$2.58 - $9.25	1,071,272	7.09	$3.12		506,539	6.45	$3.26

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In addition to options granted under the 2003 Share Plan and the 2010 Share Plan, the Board of Directors approved the grant of stock options to purchase 1,780,000 shares. Information regarding stock options outstanding that were not granted under the 2003 Plan or the 2010 Plan for the six months ended April 30, 2016 is as follows:

		Weighted Average Exercise Price Per Share	Aggregate Intrinsic Value

	Shares
Options Outstanding at October 31, 2015	1,780,000	$2.70
Options Outstanding and exercisable at April 30, 2015	1,780,000	$2.70	$	416,010

The following table summarizes information about stock options outstanding and exercisable that were not granted under the 2003 Share Plan or the 2010 Share Plan as of April 30, 2016:

	Number Outstanding and Exercisable	Weighted Average Remaining Contractual Life (in years)
	Weighted Average Exercise Price
Range of Exercise Prices
$2.58-$5.56	1,780,000	6.26	$2.70

Stock Awards

We account for stock awards granted to employees and consultants based on the grant date market price of the underlying common stock. During the six months ended April 30, 2016 and 2015, we issued 3,701 shares and 1,600 shares, respectively, of common stock to consultants for services rendered. We recorded consulting expense for the six months ended April 30, 2016 and 2015 of approximately $11,000 and $6,000, respectively, for the shares of common stock issued to consultants.

FAIR VALUE MEASUREMENTS

US GAAP defines fair value and establishes a framework for measuring fair value. We have categorized our financial assets, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded in the accompanying condensed consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

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Level 1 - Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market which we have the ability to access at the measurement date.

Level 2 - Financial assets and liabilities whose values are based on quoted market prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets.

Level 3 – Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management ' s own assumptions about the assumptions a market participant would use in pricing the asset and liabilities.

The following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of April 30, 2016:

	Level 1		Level 2		Level 3		Total

Money market funds – Cash equivalents	$	2,047,039	$	-	$	-	$	2,047,039
Certificates of deposit - Short-term investments		-		2,150,000		-		2,150,000
Total financial assets	$	2,047,039	$	2,150,000	$	-	$	4,197,039

The following table presents the hierarchy for our financial assets measured at fair value on a recurring basis as of October 31, 2015:

	Level 1		Level 2		Level 3		Total

Money market funds – Cash equivalents	$	467,967	$	-	$	-	$	467,967
Certificates of deposit - Short-term investments		-		2,400,000