CERTAIN FINANCIAL STATEMENT INFORMATION

Accounts receivable, net:



	June 30, 2015			March 31, 2015
	(In thousands)
Accounts receivable	$	11,803		$	12,709
Less: allowance for bad debts	(277		)	(302		)
	$	11,526		$	12,407

Inventories:



	June 30, 2015		March 31, 2015
	(In thousands)
Finished goods	$	10,305	$	15,310
Work in process	5,250		5,377
Raw materials	4,248		2,827
	$	19,803	$	23,514

Other current assets:



	June 30, 2015		March 31, 2015
	(In thousands)
Prepaid expenses	$	13,790	$	14,847
Executive deferred compensation assets	1,003		1,004
Other	872		989
	$	15,665	$	16,840

Property and equipment:



	Useful Life	June 30, 2015			March 31, 2015
	(In years)	(In thousands)
Machinery and equipment	3-5	$	38,895		$	37,286
Leasehold improvements	1-5	7,526			9,909
Computers, office furniture and equipment	3-5	32,996			32,902
		79,417			80,097
Less: accumulated depreciation and amortization		(64,190		)	(63,348		)
		$	15,227		$	16,749

Goodwill:



	June 30, 2015		March 31, 2015
	(In thousands)
Goodwill	$	11,425	$	11,425

Other assets:



	June 30, 2015		March 31, 2015
	(In thousands)
Non-current portion of prepaid expenses	$	578	$	1,974
Other	595		596
	$	1,173	$	2,570

Other accrued liabilities:



	June 30, 2015		March 31, 2015
	(In thousands)
Employee related liabilities	$	1,383	$	1,454
Executive deferred compensation	1,028		1,025
Income taxes	852		1,311
Professional fees	761		515
Other	4,179		3,339
	$	8,203	$	7,644

Short-term investments:

The following is a summary of cash, cash equivalents and available-for-sale investments by type of instrument (in thousands):



	June 30, 2015									March 31, 2015
	Amortized Cost		Gross Unrealized					Estimated Fair Value		Amortized Cost		Gross Unrealized					Estimated Fair Value
	Amortized Cost		Gains		Losses			Estimated Fair Value		Amortized Cost		Gains		Losses			Estimated Fair Value
Cash	$	35,209	$	—	$	—		$	35,209	$	33,936	$	—	$	—		$	33,936
Cash equivalents	9,081		—		—			9,081		2,559		—		—			2,559
U.S. Treasury securities and agency bonds	985		—		—			985		1,230		—		—			1,230
Corporate bonds	10,918		17		(13		)	10,922		10,772		28		(6		)	10,794
Mortgage-backed securities	—		6		—			6		—		15		—			15
Municipal bonds	267		—		—			267		—		—		—			—
Mutual funds	19,849		391		(110		)	20,130		24,895		1,955		(59		)	26,791
Preferred stock	5		11		—			16		11		22		—			33
	$	76,314	$	425	$	(123	)	$	76,616	$	73,403	$	2,020	$	(65	)	$	75,358
Reported as:
Cash and cash equivalents								$	44,290								$	36,495
Short-term investments available-for-sale								32,326									38,863
								$	76,616								$	75,358

The established guidelines for measuring fair value and expanded disclosures regarding fair value measurements are defined as a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 — Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Valuation of instruments includes unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities.

The following is a summary of cash, cash equivalents and available-for-sale investments by type of instrument measured at fair value on a recurring basis (in thousands):



	June 30, 2015								March 31, 2015
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash	$	35,209	$	—	$	—	$	35,209	$	33,936	$	—	$	—	$	33,936
Cash equivalents	9,081		—		—		9,081		2,559		—		—		2,559
U.S. Treasury securities and agency bonds	985		—		—		985		1,230		—		—		1,230
Corporate bonds	—		10,922		—		10,922		—		10,794		—		10,794
Mortgage-backed securities	—		6		—		6		—		15		—		15
Municipal bonds	267		—		—		267		—		—		—		—
Mutual funds	20,130		—		—		20,130		26,791		—		—		26,791
Preferred stock	—		16		—		16		—		33		—		33
	$	65,672	$	10,944	$	—	$	76,616	$	64,516	$	10,842	$	—	$	75,358

There were no significant transfers in and out of Level 1 and Level 2 fair value measurement categories during the three months ended June 30, 2015 and 2014.

The following is a summary of the cost and estimated fair values of available-for-sale securities with stated maturities, which include U.S. Treasury securities and agency bonds, corporate bonds and mortgage-backed securities, by contractual maturity (in thousands):



	June 30, 2015
	Cost		Estimated Fair Value
Less than 1 year	$	3,546	$	3,552
Mature in 1 – 2 years	7,518		7,519
Mature in 3 – 5 years	839		836
Mature after 5 years	—		6
	$	11,903	$	11,913

The following is a summary of gross unrealized losses (in thousands):



As of June 30, 2015	Less Than 12 Months of Unrealized Losses					12 Months or More of Unrealized Losses					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
Corporate bonds	$	3,502	$	(13	)	$	—	$	—		$	3,502	$	(13	)
Mutual funds	2,186		(58		)	421		(52		)	2,607		(110		)
	$	5,688	$	(71	)	$	421	$	(52	)	$	6,109	$	(123	)



As of March 31, 2015	Less Than 12 Months of Unrealized Losses					12 Months or More of Unrealized Losses					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
Corporate bonds	$	878	$	(6	)	$	—	$	—		$	878	$	(6	)
Mutual funds	14,592		(17		)	475		(42		)	15,067		(59		)
	$	15,470	$	(23	)	$	475	$	(42	)	$	15,945	$	(65	)

Other-Than-Temporary Impairment

Based on an evaluation of securities that have been in a continuous loss position, the Company did not recognize any other-than-temporary impairment charges for the three months ended June 30, 2015 and 2014. The Company considered various factors which included a credit and liquidity assessment of the underlying securities and the Company’s intent and ability to hold the underlying securities until the estimated date of recovery of its amortized cost.

Warranty reserves:

The Company's products typically carry a one-year warranty. The Company establishes reserves for estimated product warranty costs at the time revenue is recognized. Although the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates, use of materials, and service delivery costs incurred in correcting any product failure. Should actual product failure rates, use of materials or service delivery costs differ from the Company’s estimates, additional warranty reserves could be required, which could reduce its gross margin.

The following table summarizes warranty reserve activity (in thousands):



	Three months ended June 30,
	2015			2014
Beginning balance	$	194		$	199
Additions during the period	57			—
Settlements and expirations	(28		)	(15		)
Change in estimates	(1		)	(7		)
Ending balance	$	222		$	177

Net realized gain (loss) on short-term investments and interest income, net (in thousands):



	Three months ended June 30,
	2015		2014
Net realized gain (loss) on short-term investments	$	1,430	$	(5	)
Interest income, net	189		341
	$	1,619	$	336

Net loss per share:

Shares used in basic net loss per share are computed using the weighted average number of common shares outstanding during each period. Shares used in diluted net loss per share include the dilutive effect of common shares potentially issuable upon the exercise of stock options and vesting of restricted stock units ("RSUs"). The reconciliation of shares used to calculate basic and diluted net loss per share consists of the following (in thousands, except per share data):



	Three months ended June 30,
	2015			2014
Net loss	$	(7,404	)	$	(13,065	)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic	81,179			77,916
Net effect of dilutive common share equivalents	—			—
Weighted average common shares outstanding, diluted	81,179			77,916
Basic and diluted net loss per share	$	(0.09	)	$	(0.17	)

The effect of dilutive securities (comprised of options and RSUs) totaling 0.7 million and 1.2 million shares for the three months ended June 30, 2015 and 2014, respectively, has been excluded from the diluted net loss per share computation since the Company incurred net losses in the periods presented and their effect would be antidilutive.