FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Dec. 31, 2019

NOTE J — FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments are measured at fair value on a recurring basis. Related unrealized gains or losses are recognized in unrealized gain on change in fair value of secured convertible notes payable in the consolidated statements of operations. For additional disclosures regarding methods and assumptions used in estimating fair values of these financial instruments, see Note A.

The Existing Notes (as defined in Note E) were repaid in full during December 31, 2019. The fair value of the Existing Notes was calculated immediately prior to repayment. The fair value was calculated using the Monte Carlo simulation model and the significant unobservable output utilized in the calculation was annualized volatility at a rate of 170.3%. The Company did not have any assets or liabilities categorized as Level 1 or 2 as of December 31, 2019.

The following table presents a summary of changes in fair value of the Existing Notes (Level 3 financial liabilities) which are marked to market on a periodic basis:


	December 31,
	2019
Beginning balance, October 1, 2019	$	102,777
Change in fair value included in earnings		10,926
Change in fair value for repayment of notes payable		(113,703)
Ending balance, December 31, 2019	$	—

- 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.

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