Fair Value Disclosures

12 Months Ended

Mar. 31, 2014

Fair Value Disclosures

3. Fair Value Disclosures

Fair Value Hierarchy

A valuation hierarchy for disclosure of the inputs to valuation used to measure fair value has been established. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1 -	Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 -	Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 -	Unobservable inputs that reflect the Company’s assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available, including its own data.

The Company provides a gross presentation of activity within the Level 3 measurement roll-forward and details of transfers in and out of Level 1 and 2 measurements. A change in the hierarchy of an investment from its current level is reflected in the period during which the pricing methodology of such investment changes. Disclosure of the transfer of securities from Level 1 to Level 2 or Level 3 is made in the event that the related security is significant to total cash and investments. The Company did not have any transfers of assets and liabilities between Level 1 and Level 3 of the fair value measurement hierarchy during the years ended March 31, 2014 and 2013.

A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the assets and liabilities carried at fair value, measured as of March 31, 2014 and 2013 (in thousands):

	Total		Quoted Prices in		Significant Other		Significant
	Carrying		Active Markets		Observable Inputs		Unobservable Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2014:
Assets:
Cash equivalents	$	17,675	$	17,675	$	-	$	-
Derivative liabilities:
Warrants	$	2,601	$	-	$	-	$	2,601
	Total		Quoted Prices in		Significant Other		Significant
	Carrying		Active Markets		Observable Inputs		Unobservable Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
March 31, 2013:
Assets:
Cash equivalents	$	18,649	$	18,649	$	-	$	-
Derivative liabilities:
Derivative liability	$	529	$	-	$	-	$	529
Warrants	$	3,633	$	-	$	-	$	3,633

The table below reflects the activity for the Company’s major classes of liabilities measured at fair value for the years ended March 31, 2014 and 2013 (in thousands):

	Derivative
	Liability			Warrants
April  1, 2013	$	529		$	3,633
Warrant issuance with Senior Secured Term Loan		-			315
Mark to market adjustment		(525	)		(1,347	)
Extinguishment of derivative liability		(4	)		-
Balance at March 31, 2014	$	-		$	2,601
	Derivative
	Liability			Warrants
April  1, 2012	$	-		$	-
Valuation of original derivative liability		3,779			-
Warrant issuance with Senior Convertible Note		-			7,018
Warrant issuance with Senior Secured Term Loan		-			380
Valuation of derivative liability attributable to modification		542			-
Mark to market adjustment		(3,792	)		(3,765	)
Balance at March 31, 2013	$	529		$	3,633

The following table provides the assets and liabilities measured at fair value on a non-recurring basis, as of March 31, 2014 (in thousands):

	Total		Quoted Prices in	Significant Other	Significant
	Carrying		Active Markets	Observable Inputs	Unobservable Inputs
	Value		(Level 1)	(Level 2)	(Level 3)
March 31, 2014:
Assets:
Investment in unconsolidated entity – Blade Dynamics	$	3,690	$	$	$	3,690

Valuation Techniques

Cash Equivalents

Cash equivalents consist of highly liquid instruments with maturities of three months or less that are regarded as high quality, low risk investments and are measured using such inputs as quoted prices, and are classified within Level 1 of the valuation hierarchy. Cash equivalents consist principally of money market accounts.

Derivative Liability

The Company had identified all of the derivatives (“Derivative Liability”) associated with the extinguished Exchanged Note which include holder change of control redemption rights, issuer optional redemption rights, sale redemption rights and a feature to convert the Exchanged Note into equity at the holder’s option. The Derivative Liability was subject to revaluation at each balance sheet date, and any change in fair value was recorded as a change in fair value in other income (expense) until its expiration. The Company relied on assumptions in a lattice model to determine the fair value of Derivative Liability. The Company had appropriately valued the Derivative Liability within Level 3 of the valuation hierarchy. (See Note 9, “Debt,” for discussion on the Exchanged Note, Derivative Liability and valuation assumptions used.)

Warrants

Warrants were issued in conjunction with the Initial Note and the Term Loan. (See Note 9, “Debt,” for additional information on warrants.) These warrants are subject to revaluation at each balance sheet date, and any change in fair value will be recorded as a change in fair value in other income (expense) until the earlier of their exercise or expiration.

The Company relies on various assumptions in a lattice model to determine the fair value of warrants. The Company has appropriately valued the warrants within Level 3 of the valuation hierarchy. (See Note 10, “Warrants and Derivative Liabilities,” for a discussion of the warrants and the valuation assumptions used.)

Minority Investment

The Company accounts for the minority investment in Blade Dynamics on a cost basis (See Note 15, “Minority Investments”).During the year ended March 31, 2014, the Company determined that as a result of its efforts to sell its investment in Blade Dynamics, certain indicators of impairment existed which required the Company to perform further analysis. Based on analysis which included potential sale scenarios of the investment, the Company recorded an impairment charge of approximately $1.3 million and reported the investment at its estimated fair value in the fourth quarter ended March 31, 2014.