Note 5 - Fair Value

6 Months Ended

Sep. 27, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 5. FAIR VALUE

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, 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 for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our cash and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The fair value of contingent consideration arising from the acquisitions of Altior Inc. (“Altior”) and Cadeka Technologies (Cayman) Holding Ltd. (“Cadeka”) are classified within Level 3 of the fair value hierarchy since it is based on a probability-based approach that includes significant unobservable inputs. Due to a significant decrease in revenue projections during the quarter ended September 28, 2014, we reversed $3.9 million of contingent consideration as the payment of such consideration was no longer probable. The fair value of the contingent consideration from the acquisitions of Altior and Cadeka was fully released as of September 28, 2014.

In the first quarter of fiscal year 2015, we received approximately 93,000 common shares of CounterPath Corporation (“CounterPath”) through the dissolution of Skypoint Telecom Fund II (US), LP. (“Skypoint Fund”) in which we were a limited partner since 2001. CounterPath was one of the investee companies of Skypoint Fund. We estimated the fair value using the market value of common shares as determined by trading on the Nasdaq Capital Market. These securities have been classified to Level 2 as of September 28, 2014 and recorded in the other non-current assets line item on the condensed consolidated balance sheet. We believe the fair value inputs of CounterPath do not meet all of the criteria for Level 1 classification primarily due to the low trading volume of the stock. See Note 7–“Long-term Investments” for the discussion on Skypoint Fund.

There were no transfers between Level 1, Level 2, and Level 3 during the fiscal quarter ended September 27, 2015.

The following table summarizes our investment assets as of September 27, 2015 (in thousands):

	September 27, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	4	$	—	$	—	$	4
Common shares of CounterPath		—		43		—		43
Total investment assets	$	4	$	43	$	—	$	47

The following table summarizes our investment assets as March 29, 2015 (in thousands):

	March 29, 2015
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	6	$	—	$	—	$	6
Common shares of CounterPath		—		48		—		48
Total investment assets	$	6	$	48	$	—	$	54

Our cash and cash equivalents as of the dates indicated below were as follows (in thousands):

	September 27, 2015		March 29, 2015
Cash and cash equivalents
Cash at financial institutions	$	53,480	$	55,227
Money market funds		4		6
Total cash and cash equivalents	$	53,484	$	55,233

In the first quarter of fiscal year 2015, we sold all of our short term investments to fund the iML acquisition.

Realized gains (losses) on the sale of marketable securities are determined by the specific identification method and are reflected in the interest income and other net, line item on the condensed consolidated statements of operations.

Our net realized gains (losses) on marketable securities for the periods indicated below were as follows (in thousands):

	Three Months Ended				Six Months Ended
	September 27, 2015		September 28, 2014		September 27, 2015		September 28, 2014
Gross realized gains	$	—	$	—	$	—	$	264
Gross realized losses		—		—		—		(238	)
Net realized income (losses)	$	—	$	—	$	—	$	26

In fiscal year 2013 and 2014, we completed acquisitions of Altior Inc. (“Altior”) and Cadeka and recorded $10.1 million and $4.7 million purchase consideration earn-outs, respectively. The fair value of contingent consideration arising from the Altior and Cadeka acquisitions is classified within Level 3 of the fair value hierarchy since it is based on a probability-based approach that includes significant unobservable inputs. A significant increase (decrease) in the projected revenue, discount rate or probability of occurrence in isolation could result in a significantly higher (lower) fair value measurement. We calculate the fair value of the contingent consideration on a quarterly basis based on a collaborative effort of our operations and financial accounting groups based on additional information as it becomes available. Any change in the fair value adjustment is recorded in the earnings of that period. The fair value of the contingent consideration liabilities was reduced to zero during the second quarter of fiscal year 2015.