3. MARKETABLE SECURITIES AND INVESTMENT OTHER SECURITIES

6 Months Ended

Mar. 31, 2018

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, using 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, of an OTC-quoted company under the terms of its agreement for services to the OTC-quoted company, which was valued at $650,000 based on the trading price on the OTC Markets 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 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 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. 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 period ended March 31, 2018.

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 Company assessed the common stock and determined there was not an impairment for the period ended March 31, 2018.

In November 2017, the Company completed services in relation to an agreement with SG Blocks, Inc. (NASDAQ: SGBX) As payment for these services, SG Blocks issued 50,000 shares of its common stock to Level Brands. The customer is a publicly traded entity and the stock was valued based on the trading price at the day the services were determined delivered, which was $5.09 per share for an aggregate value of $254,500. 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. The common stock is held as available for sale, and at December 31, 2017 and March 31, 2018 respectively, the shares were $5.98 and $4.61 per share, and we have recorded $44,500 and $(68,500) as other comprehensive income (loss) on the Company consolidated financial statements for the three and six months ended March 31, 2018. The Company assessed the common stock and determined there was not an indication of an other-than-temporary impairment.

In December 2017, the Company completed services per an advisory services agreement with Kure Corp, a related party. As payment for these services, Kure Corp issued 400,000 shares of its stock to Level Brands. The customer is a private entity and the stock was valued at $200,000, which was based on financing activities by Kure Corp in September 2017 in which shares were valued at $0.50 per share. 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 information provided by the issuer regarding their recent results and future plans as well as their most recent financing transactions. As of March 31, 2018, the Company has determined there is no impairment on the value of the shares of stock.

On December 21, 2017, the Company purchased 300 shares of preferred stock in a private offering from a current customer for $300,000. The preferred shares are convertible into common stock at a 20% discount of a defined subsequent financing, or an IPO offering of a minimum $15 million, or at a company valuation of $45 million whichever is the least. The customer is a private entity. 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 value paid, which was the price offered to all third party investors. As of March 31, 2018, the Company has determined there is no impairment on the value of the shares of stock.

In December 2017, the Company engaged and completed advisory services in relation to an agreement with Kure Corp, a related party, for services related to their “vape-pod” strategy. As payment for these services, Kure Corp issued 400,000 shares of its stock to Level Brands which the Company received in January 2018. The customer is a private entity and the stock was valued at $200,000, which was based on financing activities by Kure Corp in September 2017 in which shares were valued at $0.50 per share. 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 information provided by the issuer regarding their recent results and future plans as well as their most recent financing transactions. As of March 31, 2018, the Company has determined there is no impairment on the value of the shares of stock.

On December 30, 2017 Level Brands entered into an Agreement with Isodiol International, Inc. (CSE: ISOL, OTCQB: ISOLF, FSE:LB6A.F), a Canadian company which is a developer of pharmaceutical grade phytochemical compounds and a manufacture and developer of phytoceutical consumer products. The agreement required the Company to create a global branding and marketing campaign, which includes a joint strategy to develop Isodiol’s brand and products, an influencer program, and a social and traditional media strategy. As payment for these services, Isodiol agreed to pay $2,000,000 and issued 1,679,321 shares of its common stock to Level Brands, based on the trading price on the day of the agreement, which was $1.1909 per share. These shares were issued on January 22, 2018. In addition, the Company will provide ongoing quarterly support of the campaign which includes two branded videos each quarter, Ms. Ireland’s direct involvement in meetings or conferences once each quarter, and ongoing social media support by Ms. Ireland and Level Brands, all the services valued at $750,000 per quarter. This amount will be paid through issuance of Isodiol stock and the number of shares issued will be determined based on the trading value of Isodiol stock on the last day of each quarter. The common stock is held as available for sale, and at March 31, 2018, the shares were $0.85 per share, and we recorded $(572,577) as other comprehensive income (loss) on the Company consolidated financial statements for the three months ended March 31, 2018. The Company assessed the common stock and determined there was not an indication of an other-than-temporary impairment.

The table below summarizes the assets valued at fair value as of March 31, 2018:

	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 March 31, 2018
Marketable securities	$	1,657,923		-	$	-	$	1,657,923
Investment other securities		-		-	$	1,559,112	$	1,559,112

	Level 1			Level 2		Level 3		Total
Balance at September 30, 2017	$	-		$	-	$	859,112	$	859,112
Receipt of equity investment upon completion of contract	$	254,500		$	-	$	-	$	254,500
Receipt of equity investment upon completion of contract	$	-		$	-	$	200,000	$	200,000
Purchase of preferred shares, convertible into common stock	$	-		$	-	$	300,000	$	300,000
Change in value of equity, other comprehensive income	$	44,500		$	-	$	-	$	44,500
Balance at December 31, 2017	$	299,000		$	-	$	1,359,112	$	1,658,112
Receipt of equity investment upon completion of services	$	-		$	-	$	200,000	$	200,000
Receipt of equity investment upon completion of services	$	2,000,000		$	-	$	-	$	2,000,000
Change in value of equity, other comprehensive income	$	(641,077	)	$	-	$	-	$	(641,077	)
Balance at March 31, 2018	$	1,657,923		$	-	$	1,559,112	$	3,217,035