Fair Value Measurements

6 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Note 12 - Fair Value Measurements

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis aggregated by the level in the fair value hierarchy within which the measurements fall:

• Level 1 inputs: Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.

• Level 2 inputs: Level 2 inputs are from other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 inputs: Level 3 inputs are unobservable and should be used to measure fair value to the extent that observable inputs are not available.

The hierarchy noted above requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. There were no transfers between Level 1, Level 2 and/or Level 3 during the 26 weeks ended March 31, 2013. Financial liabilities carried at fair value as of March 31, 2013 on a recurring basis are classified below:

	Level 1		Level 2		Level 3		Total
Derivative liabilities	$	-	$	-	$	17,893,000	$	17,893,000

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial instruments for the 26 weeks ended March 31, 2013:

	September 30, 2012		Recorded New Derivative Liabilities		Change in estimated fair value recognized in results of operations		March 31, 2013
Derivative liabilities	$	19,925,000	$	1,646,000	$	(3,678,000)	$	17,893,000

The Senior Subordinated Secured Convertible 2012 Notes, senior secured revolving credit facility, Senior Subordinated Secured Promissory Notes, subordinated secured convertible promissory note, and the Senior Subordinated Secured Convertible 2012 Notes are presented at their carrying amounts; as there are a lack of comparable instruments available for observation by the Company, it is not practicable to estimate the fair value of these instruments.

approximate fair value based on the borrowing rates currently available to the Company.

The following is a description of the valuation methodologies used for instruments measure at fair value, including the general classification of such instruments pursuant to the valuation hierarchy:

Assets measure at Fair Value on a Non-Recurring Basis. The Company’s goodwill, intangibles, and other purchased intangible assets may be measured at fair value on a non-recurring basis.  These assets are measured at cost but are written down to fair value if they are impaired.  As of March 31, 2013, the Company’s goodwill, intangibles and other purchased intangibles were not impaired, and therefore were not measured at fair value.  

Fair Value of Financial Instruments. The Company estimate the fair value of financial instruments that are not required to be carried in the condensed consolidated balance sheet at fair value on either a recurring or non-recurring basis as follows:

	March 31, 2012				September 30, 2012
(in thousands)	Carrying amount		Fair value		Carrying amount		Fair value		Level in fair value hierarchy
Cash and cash equivalents	$	322,000	$	322,000	$	1,738,000	$	1,738,000	1
Accounts Receivable, net	127,000		127,000		-		-		2
Accounts Payable	852,000		852,000		604,000		604,000		2

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximated fair value due to their short-term nature.