3. MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES

12 Months Ended

Sep. 30, 2017

Marketable Securities And Investment Other Securities

MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES

The Company may, from time to time, enter into contracts where a portion of the consideration provided by the customer in exchange for the Company's services is common stock, options or warrants (an equity position).  In these situations, upon invoicing the customer for the stock or other instruments, the Company will record the receivable as accounts receivable other, and use the value of the stock or other instrument upon invoicing to determine the value. If there is insufficient data to support the valuation of the security directly, the company will value it, and the underlying revenue, on the estimated fair value of the services provided. Where an accounts receivable is settled with the receipt of the common stock or other instrument, the common stock or other instrument will be classified as an asset on the balance sheet as either an investment marketable security (when the customer is a public entity) or as an investment other security (when the customer is a private entity). 

As of April 2017, the Company received 2,500,000 shares of common stock as terms of its agreement for services, which was valued at $650,000 based on the trading price on the OTC Markets, Inc. the day of issuance, which was $0.26 per share. The shares were restricted as indicated under Securities Act of 1933 and may not be resold without registration under the Securities Act of 1933 or an exemption therefrom. The Company determined that this common stock was classified as Level 1 for fair value measurement purposes as the stock was actively traded on an exchange.

As of June 30, 2017 the trading price on the OTC Markets, Inc. was $0.03 and the Company had exchanged the 2,500,000 shares of common stock with the issuer for 65 shares of preferred stock. The 65 shares of preferred stock issued were each convertible using the lesser of either $0.26 per share or the 30 day trading average, that would provide a number of shares equal to the value of $10,000 per share. The Company classified the preferred stock as Level 3 for fair value measurement purposes as there were no observable inputs. The preferred shares also contained a put option for the holder for the stated value per share. The Company determined that the value of the preferred shares was $475,000, which was an approximation of fair market value. On July 31, 2017 the Company sold the preferred shares to a related party for $475,000; $200,000 in cash and a short term note receivable for $275,000. As a result, the Company recorded an other-than-temporary impairment on securities for the year ended September 30, 2017 of $175,000 in the consolidated statement of operations.

On June 23, 2017, I’M1 and EE1 in aggregate exercised a warrant for 1,600,000 shares of common stock for services delivered to a customer and accounted for this in Investment Other Securities. The common stock was issued to the Company’s subsidiaries I’M1 and EE1. The customer is a private entity and the stock was valued at $912,000, which was based on its recent financing in June 2017 at $0.57 per share, the shares are not restricted. The Company has classified this common stock as Level 3 for fair value measurement purposes as there are no observable inputs. In valuing the stock the Company used the fair value of the services provided, utilizing an analysis of vendor specific objective evidence of its selling price. In August 2017, each of I’M1 and EE1 distributed the shares to its majority owner, Level Brands, and also distributed shares valued at $223,440 to its non-controlling interests (“NCI”). In August 2017, the Company also provided referral services for kathy ireland WorldWide and this customer. As compensation the Company received an additional 200,000 shares of common stock valued at $114,000 using the pricing described above. The Company assessed the common stock and determined there was not an impairment for the year ended September 30, 2017.

On September 19, 2017, I’M1 and EE1 in aggregate exercised a warrant for 56,552 shares of common stock for services delivered to a customer and accounted for this in Investment Other Securities. The common stock was issued to the Company’s subsidiaries I’M1 and EE1. The customer is a private entity and the stock was valued at $56,552, which was based on all 2017 financing transactions of the customer set at $1.00 per share, with the most recent third party transaction in August 2017. The Company has classified this common stock as Level 3 for fair value measurement purposes as there are no observable inputs. In valuing the stock the Company used factors including financial projections provided by the issuer and conversations with the issuer management regarding the Company’s recent results and future plans and the Company’s financing transactions over the past twelve months.

The table below summarizes the assets valued at fair value as of September 30, 2017:

	In Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value at September 30, 2017
Marketable securities		—		—	$	—	$	—
Investment other securities		—		—	$	859,112	$	859,112

	Level 1			Level 2		Level 3			Total
Balance at September 30, 2016	$-			$-		$-			$-
Receipt of equity investment upon completion of contracts	$	650,000		$	—	$	912,000		$	1,562,000
Exchange of common stock for preferred stock	$	(650,000	)	$	—	$	650,000		$	—
Other-than-temporary impairment on marketable securities	$	—		$	—	$	(175,000	)	$	(175,000	)
Exchange of marketable security for cash and note receivable	$	—		$	—	$	(475,000	)	$	(475,000	)
Receipt of equity investment upon completion of contract	$	—		$	—	$	114,000		$	114,000
Distribute equity from subsidiaries to Level and NCI	$	—		$	—	$	(223,440	)	$	(223,440	)
Receipt of equity investment upon completion of contract	$	—		$	—	$	56,552		$	56,552
Balance at September 30, 2017	$	—		$	—	$	859,112		$	859,112