Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.0.8
Fair Value Measurements
 3 Months Ended
Jun. 30, 2013
Fair Value Measurements  
Fair Value Measurements

10. Fair Value Measurements

 

The FASB has established a framework for measuring fair value using generally accepted accounting principles. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows:

 

Level 1.  Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

 

Level 2.  Inputs to the valuation methodology include:

 

·                  Quoted prices for similar assets or liabilities in active markets

 

·                  Quoted prices for identical or similar assets or liabilities in inactive markets

 

·                  Inputs other than quoted prices that are observable for the asset or liability

 

·                  Inputs that are derived principally from or corroborated by observable market data by correlation or other means

 

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

 

Level 3.  Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used must maximize the use of observable inputs and minimize the use of unobservable inputs.

 

The table below presents our assets and liabilities that are measured at fair value on a recurring basis during the first quarter of Fiscal 2014 and are categorized using the fair value hierarchy (in thousands):

 

 

Fair Value Measurements at June 30, 2013

 

 

 

Total

 

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

 

Significant Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Cash Equivalents

 

$

8,742

 

$

8,742

 

$

—

 

$

—

 

Warrant Liability

 

$

(10

)

$

—

 

$

—

 

$

(10

)

 

Cash equivalents include cash held in money market and U.S. treasury funds at June 30, 2013.

 

The table below presents our assets and liabilities that are measured at fair value on a recurring basis during the fiscal year ended March 31, 2013 and are categorized using the fair value hierarchy (in thousands):

 

 

 

Fair Value Measurements at March 31, 2013

 

 

 

Total

 

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

 

Quoted Prices in
Active Markets for
Identical Assets
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Cash Equivalents

 

$

27,742

 

$

27,742

 

$

—

 

$

—

 

Warrant Liability

 

$

(10

)

$

—

 

$

—

 

$

(10

)

 

Basis for Valuation

 

The carrying values reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair values because of the immediate or short-term maturities of these financial instruments. As the Company’s obligations under the Credit Facility (as defined below) are based on adjustable market interest rates, the Company has determined that the carrying value approximates the fair value. The carrying values and estimated fair values of these obligations are as follows (in thousands):

 

 

 

As of
June 30, 2013

 

As of
March 31, 2013

 

 

 

Carrying
Value

 

Estimated
Fair Value

 

Carrying
Value

 

Estimated
Fair Value

 

Obligations under credit facility

 

$

12,755

 

$

12,755

 

$

13,476

 

$

13,476

 

 

The fair value of the Company’s warrant liability recorded in the Company’s financial statements is determined using the Monte—Carlo simulation valuation method and the quoted price of the Company’s common stock in an active market, a Level 3 measurement. Volatility is based on the actual market activity of the Company’s stock. The expected life is based on the remaining contractual term of the warrants and the risk free interest rate is based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the warrants’ expected life. The Company’s use of different estimates and assumptions could produce different financial results.

 

From time to time, the Company has sold common stock warrants that are derivative instruments. The Company does not enter into speculative derivative agreements and does not enter into derivative agreements for the purpose of hedging risks.

 

As discussed above, the Company adopted authoritative guidance issued by the FASB on contracts in an entity’s own equity that requires the common stock warrants to be classified as liabilities at their estimated fair value with changes in fair value at each reporting date recognized in the statement of operations.