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FAIR VALUE MEASUREMENTS | 12 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | NOTE 6 FAIR VALUE MEASUREMENTS The earnout consideration of $70,000 and $90,000 at September 30, 2021 and 2020, respectively, represents the fair value of the contingent earnout consideration related to the acquisition of Kablooe. The current and non-current portions of this liability are shown in the corresponding categories on the consolidated balance sheets at September 30, 2021 and 2020. During Fiscal 2021, the Company reduced this liability from $90,000 to $70,000 based on changes in the expected likelihood of Kablooe reaching the specified earnings targets. The IPS earnout consideration was adjusted down to $0 in Fiscal 2020 due to the low likelihood of IPS reaching the underlying earnings targets. The following table presents the placement in the fair value hierarchy and summarizes the change in fair value of the earn-out consideration for Fiscal 2021 and Fiscal 2020:
Schedule of fair value liability measured on recurring basis |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Fair value measurement at reporting date using |
|  |  |  |  | Quoted prices in active markets for identical assets |  |  | Significant other observable inputs |  |  | Significant unobservable inputs |
|  | Balance |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Balance at September 30, 2019 |  | $ | 834,000 |  |  | $ | – |  |  | $ | – |  |  | $ | 834,000 |
Increase in fair value of IPS deferred cash consideration |  |  | 16,000 |  |  |  | – |  |  |  | – |  |  |  | 16,000 |
Decrease in the fair value of IPS earnout consideration |  |  | (350,000 | ) |  |  | – |  |  |  | – |  |  |  | (350,000 | )
Payout of IPS deferred cash consideration |  |  | (500,000 | ) |  |  | – |  |  |  | – |  |  |  | (500,000 | )
Fair value of Kablooe earnout consideration |  |  | 90,000 |  |  |  | – |  |  |  | – |  |  |  | 90,000 |
Balance at September 30, 2020 |  |  | 90,000 |  |  |  | – |  |  |  | – |  |  |  | 90,000 |
Decrease in fair value of Kablooe earnout consideration |  |  | (20,000 | ) |  |  | – |  |  |  | – |  |  |  | (20,000 | )
Balance at September 30, 2021 |  | $ | 70,000 |  |  | $ | – |  |  | $ | – |  |  | $ | 70,000 |
The fair value of the Kablooe contingent earn-out consideration is measured on a recurring basis at each reporting date. The following inputs and assumptions were used in the Black-Scholes valuation model to estimate the fair value of the Kablooe earn-out consideration at September 30, 2021 and 2020:
Fair value assumptions |  |  |  |
|  | September 30,
|  | 2021 |  | 2020
Volatility |  | 40% |  | 40%
Risk-free interest rate |  | 0.3% |  | 1%
Expected term in years |  | 0.5-3.4 |  | 0.5-4.5
Dividend yield |  | – |  | –
During Fiscal 2019, the Company received common stock from a customer as compensation for services provided, which was recorded as a cost-method investment with an estimated fair value of $327,000. This initial fair value was based on a private placement round of common stock issued to third party private investors of the customer at a time close to the valuation date. Management determined that the inputs used to value the investment were observable, either directly or indirectly, and therefore classified as a level 2 valuation measurement. In Fiscal 2019, the Company recorded bad debt expense of $1,626,000 to fully reserve accounts receivable deemed uncollectible from the same customer in which it is invested. In Fiscal 2020, the Company converted the amount outstanding from this customer into a non-negotiable secured promissory note with interest that accrues at a rate of 8% per annum and reclassified the related allowance for doubtful accounts to an allowance on the note receivable. The Company received $101,000 and $134,000 from this customer in Fiscal 2021 and Fiscal 2020, respectively, of which $89,000 and $61,000, respectively, was applied to past due interest and penalties and recorded as interest income, and $12,000 and $73,000, respectively, was applied to principal and recorded as a recovery of bad debt expense as a reduction of general and administrative expense. During Fiscal 2020, as a result of the customer’s default on the promissory note, the impact of COVID-19, and performance of the business in which the Company is invested, including its inability to generate revenue, management concluded the investment was also impaired and it recorded an impairment charge of $327,000 to fully reserve the investment on the Company’s consolidated balance sheet at September 30, 2020. The impairment charge is included in general and administrative expenses on the consolidated statement of operations for Fiscal 2020. The following table presents the placement in the fair value hierarchy and summarizes the change in fair value of the cost method investment during Fiscal 2020:
Schedule of changes in fair value of the cost method investment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | Fair value measurement at reporting date using |
|  |  |  |  | Quoted prices in active markets for identical assets |  |  | Significant other observable inputs |  |  | Significant unobservable inputs |
|  | Balance |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
September 30, 2019 |  | $ | 327,000 |  |  | $ | – |  |  | $ | 327,000 |  |  | $ | – |
Impairment of cost method investment |  |  | (327,000 | ) |  |  | – |  |  |  | (327,000 | ) |  |  | – |
September 30, 2020 |  | $ | – |  |  | $ | – |  |  | $ | – |  |  | $ | – |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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