Note 6 - Fair Value Measurements

3 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

6.

Fair Value Measurements

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 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 from Level

1,

Level

2

or Level

3

of the fair value measurement hierarchy during the

three

months ended

June 30, 2019

.

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 on a recurring basis, measured as of 

June 30, 2019

and 

March 31, 2019

(in thousands):

	Total Carrying Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2019:
Assets:
Cash equivalents	$	67,222	$	67,222	$	—	$	—
Derivative liabilities:
Warrants	$	1,702	$	—	$	—	$	1,702

	Total Carrying Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2019:
Assets:
Cash equivalents	$	41,839	$	41,839	$	—	$	—
Derivative liabilities:
Warrants	$	4,942	$	—	$	—	$	4,942

The table below reflects the activity for the Company’s major classes of liabilities measured at fair value on a recurring basis (in thousands):

	Warrants
April 1, 2019	$	4,942
Mark to market adjustment		(2,946	)
Warrant exercise		(294	)
Balance at June 30, 2019	$	1,702

	Warrants
April 1, 2018	$	1,217
Mark to market adjustment		464
Balance at June 30, 2018	$	1,681

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 certificates of deposits and money market accounts.

Warrants

Warrants were issued in conjunction with an equity offering to Hudson Bay Capital in

November 2014

and a Loan and Security Agreement with Hercules Technology Growth Capital, Inc. (“Hercules”). The warrants issued to Hercules were exercised on

April 8, 2019. 

Outstanding 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 derivatives and warrants 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 valued the warrants within Level

3

of the valuation hierarchy. See Note

13,

“Warrants and Derivative Liabilities,” for additional information including a discussion of the warrants and the valuation assumptions used.