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SIGNIFICANT ACCOUNTING POLICIES
 6 Months Ended
Mar. 31, 2013
Accounting Policies [Abstract]  
Significant Accounting Policies [Text Block]

3. SIGNIFICANT ACCOUNTING POLICIES

 

Following are certain remarkable accounting principles and disclosures.

 

Marketable Securities

 

Marketable securities at March 31, 2013 consist of bond funds. ASC 320, Investments in Debt and Equity Securities, requires certain investments be recorded at fair value or amortized cost. The appropriate classification of the investments in marketable equity is determined at the time of purchase and re-evaluated at each balance sheet date. As of March 31, 2013, the Company’s marketable securities were classified as available-for-sale, which are carried at fair value, with unrealized gains and losses reported as other comprehensive income within the stockholders’ equity section of the accompanying consolidated balance sheets. The cost of marketable securities sold is determined on a specific identification basis. The fair value of marketable securities is based on quoted market prices based on Level 1 inputs — quoted prices (unadjusted) for identical assets or liabilities in active markets. There have been no realized gains or losses related to marketable securities for the six month periods ended March 31, 2013 or 2012.  Marketable securities held at March 31, 2013 have a cost basis of approximately $500,000.

 

Fair Value Accounting

 

In December 2006, the FASB issued SFAS No. 157 (ASC 820), Fair Value Measurements . SFAS No. 157 clarifies the definition of fair value, describes methods used to appropriately measure fair value, and expands fair value disclosure requirements, but does not change existing guidance as to whether or not an instrument is carried at fair value. For financial assets and liabilities, ASC 820 is effective for fiscal years beginning after November 15, 2007, which required the Company to adopt these provisions in fiscal 2009. For nonfinancial assets and liabilities, SFAS No. 157 is effective for fiscal years beginning after November 15, 2008, which required the Company to adopt these provisions in fiscal 2010.

 

US GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

  · Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
  · Level 2 – Include other inputs that are directly or indirectly observable in the marketplace.
  · Level 3 – Unobservable inputs which are supported by little or no market activity.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

The Company’s derivative liabilities have been measured principally utilizing Level 2 inputs.

 

The Company classifies its marketable securities as available-for-sale, which are reported at fair value. Unrealized holding gains and losses, net of the related income tax effect, if any, on available-for-sale securities are excluded from income and are reported as accumulated other comprehensive income in stockholders’ equity. Realized gains and losses from securities classified as available for-sale are included in income. The Company measures the fair value of its marketable securities based on quoted prices for identical securities in active markets, or Level 1 inputs. As of March 31, 2013, available-for-sale securities consisted of the following:

 

          Gross        
(in thousands)   Cost     Unrealized     Fair  
Available for Sale   Basis     Gains     Value  
Tax-Advantaged Bond Fund   $ 500     $ 72     $ 572  

 

In accordance with ASC Topic 320, Investments — Debt and Equity Securities , the Company reviews its marketable securities to determine whether a decline in fair value of a security below the cost basis is other than temporary. Should the decline be considered other than temporary, the Company writes down the cost basis of the security and include the loss in current earnings as opposed to an unrealized holding loss. No losses for other than temporary impairments in the Company’s marketable securities portfolio were recognized during the quarter ended March 31, 2013.

 

 Financial assets and liabilities measured at fair value on a recurring basis are summarized below:

 

(in thousands)   Carrying                    
March  31, 2013   Amount     Level 1     Level 2     Level 3  
Marketable securities   $ 572     $ 572     $ -     $ -  

 

(in thousands)   Carrying                    
September 30, 2012   Amount     Level 1     Level 2     Level 3  
Marketable securities   $ 1,059     $ 1,059     $ -     $ -  
Derivative liability   $ 75     $ -     $ 75     $ -  

 

Discontinued Operations

 

In March 2011, the Company made the decision to sell its Las Vegas location and, in April 2011, sharply reduced its operations in order to eliminate losses as it sought a buyer for the club. The Company believes that it has done everything possible to make this location viable since its acquisition in 2008 and now believes it is in its shareholders’ best interests not to continue these efforts. The club was shuttered and the landlord took over the property in June 2011. Therefore, this club is recognized as a discontinued operation in the accompanying consolidated financial statements.

 

The Company has sold a controlling portion of the membership interest in the entity that previously operated its Rick’s Cabaret in Austin, Texas. Accordingly, the Company has deconsolidated the subsidiary and carries it as an equity-method investment. The Company has not received any cash flows from the entity since the sale and doesn’t anticipate any in the near future. The remaining unimpaired investment amounted to approximately $96,000 as of March 31, 2013. The Company believes the investment is recoverable in the future due to the Sexually Oriented Business license which is held in the entity and the location. A new nightclub has not been opened in the space since the Company sold its controlling interest. Accordingly, the club is recognized as a discontinued operation in the accompanying consolidated financial statements.

 

Discontinued Operations - continued

  

We closed our Divas Latinas club in Houston during September 2010. This club is recognized in discontinued operations.