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FAIR VALUE MEASUREMENTS
 9 Months Ended
Jun. 30, 2021
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 4                  FAIR VALUE MEASUREMENTS

 

The earnout consideration of $70,000 and $90,000 at June 30, 2021 and September 30, 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 condensed consolidated balance sheets in each period presented. In December 2020, the Company reduced this liability from $90,000 to $60,000 based on the low likelihood of Kablooe reaching the first year’s earnings target and in June 2021, it increased this liability from $60,000 to $70,000 based on the estimated increase in fair value of earnout payments in future periods.

 

In connection with the acquisition of IPS in January 2018, the Company agreed to pay deferred cash consideration and contingent earnout consideration to the selling shareholders of IPS and these liabilities were measured at fair value each reporting period. In March 2020, the fair value of the earnout consideration was reduced from $350,000 to $0 due to the low likelihood of IPS reaching the underlying earnings target. At September 30, 2020, the Company had no remaining obligation for consideration payments related to the acquisition of IPS.

 

The following table presents the placement in the fair value hierarchy and summarizes the changes in fair value of the earnout liability for the three and nine months ended June 30, 2021: 

                    
   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) 
Earnout consideration at September 30, 2020  $90,000   $–   $–   $90,000 
Decrease in fair value of Kablooe earnout consideration   (30,000)   –    –    (30,000)
Earnout consideration at December 31, 2020   60,000    –    –    60,000 
Change in fair value of Kablooe earnout consideration   –    –    –    – 
Earnout consideration at March 31, 2021   60,000    –    –    60,000 
Increase in fair value of Kablooe earnout consideration   10,000    –    –    10,000 
Earnout consideration at June 30, 2021  $70,000   $–   $–   $70,000 

 

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 March 2020, due to the performance of the business in which the Company was invested, it concluded the investment was impaired and recorded an impairment charge of $327,000, which was recorded as a component of general and administrative expenses on the condensed consolidated statement of operations.