FAIR VALUE MEASUREMENTS

12 Months Ended

Jun. 30, 2017

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

9. FAIR VALUE MEASUREMENTS

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

When determining the fair value measurements for assets or liabilities required or permitted to be recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.

The following summarizes the basis used to measure certain financial assets and liabilities at fair value as of June 30, 2017:

	2017 Fair Value Measurements Using
	Level 1		Level 2		Level 3
Asset — interest rate cap	$	—	$	90	$	—

There were no financial assets or liabilities subject to fair value measurements at June 30, 2016. The interest rate cap is valued utilizing pricing models taking into account inputs such as interest rates and notional amounts. Fair value measurements for the Company’s interest rate cap are classified under Level 2 because such measurements are based on significant other observable inputs. There were no transfers of assets or liabilities between Level 1 and Level 2 during the fiscal year ended June 30, 2017.

The Company had issued a common stock warrant for the purchase of 1,113,900 shares of common stock which was classified within Level 3 because it was valued using valuation techniques using certain inputs that are unobservable in the market. The strike price was $4.27 per share and is subject to adjustment based on stock splits, stock dividends and certain other events or transactions. The Company used an option pricing model to estimate the fair value of the warrant as of June 30, 2015. Key inputs used in valuing the Company’s warrant include the Company’s common stock price (estimated using a combination of the income and market approach), the Company’s common stock price volatility, risk-free interest rate, and exercise price of the warrant. The estimated expected volatility was based on the volatility of common stock of a group of comparable, publicly traded companies. As of June 3, 2016 all holders of the common stock warrants had exchanged or exercised their warrants for common stock.

The following table shows the reconciliation from the beginning to the ending balance for the Company’s common stock warrant liability measured at fair value on a recurring basis using significant unobservable inputs (i.e., Level 3) at June 30, 2016:

	2016
Beginning balance	9,147
Issuance of shares for common stock warrant	(12,572)
Change in common stock warrant fair value	3,425
Ending balance	—