Annual report pursuant to Section 13 and 15(d)

FAIR VALUE OF FINANCIAL INSTRUMENTS

v3.19.2
FAIR VALUE OF FINANCIAL INSTRUMENTS
 12 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS
NOTE 9:
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company uses exit prices, that is the price to sell an asset or transfer a liability, to measure assets and liabilities that are within the scope of the fair value measurements guidance. The Company classifies these assets and liabilities based on the following fair value hierarchy:
 
Level 1:
  
Quoted (observable) market prices in active markets for identical assets or liabilities.
   
Level 2:
  
Observable inputs other than Level 1, 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 asset or liability.
   
Level 3:
  
Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The Company did not have any transfers between Level 1 and Level 2 fair value measurements during the fiscal years ended March 31, 2019 and 2018.
The Company has certain non-financial assets that are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when an impairment is recognized. These assets include property and equipment and amortizable intangible assets. The Company did not record impairments to any non-financial assets in the fiscal years ended March 31, 2019 or fiscal 2018. The Company does not have any non-financial liabilities measured and recorded at fair value on a non-recurring basis. The carrying amounts reported in the accompanying consolidated financial statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses and other current liabilities approximate their respective fair values because of the short-term nature of these accounts.
Warrant Liability
As further discussed in Note 5,
Long-Term Debt
, during fiscal year ended March 31, 2018, the Company began issuing warrants to purchase the Company’s common stock in connection with the TCW Term Loan agreement and issued warrants in connection with the Senior Secured Term Loan issuance. The warrants were initially accounted for as a liability and recorded at estimated fair value on a recurring basis due to exercise price reset provisions contained with the warrant agreements. As such, the Company estimated the fair value of the warrants at the end of each reporting period using a Black-Scholes option valuation model. At the end of each reporting period, the Company recorded the changes in the estimated fair value during the period in other income (expense) in the consolidated statements of operations. As of March 31, 2018, there were 75,000 outstanding February 2018 Amendment Warrants that were classified as a liability with an estimated fair value of $0.3 million. As of March 31, 2019, there were no liability classified warrants outstanding. During the fourth quarter of the fiscal year ended March 31, 2019, the exercise price for the February 2018 Amendment Warrants reset and became fixed, at which time they were considered to be indexed to the Company’s own stock and met the scope requirements for equity classification. The fair value of the warrants upon the exercise price reset was reclassified to stockholders’ deficit. The Company classified the warrants liability subject to recurring fair value measurement as Level 3 prior to the reclassification to stockholders’ deficit. The fair value of these warrants were based on significant inputs that were not observable in the market.
The following table summarizes the ending balances of warrant liabilities measured and recorded at fair value on a recurring basis (in thousands):
 
   
As of March 31,
  
   
2019
    
2018
  
Warrant liability
   $ —       $ 272  
The Company uses the Black-Scholes option valuation model for estimating fair value of common stock warrants. The expected life of warrants granted represent the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, exercise patterns, and post-vesting forfeitures. The Company estimates volatility based on the historical volatility of the common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black-Scholes stock option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent term equal to the expected life of the award. The Company has not paid any cash dividends on the common stock and does not anticipate paying any cash dividends in the foreseeable future. The warrant liabilities are valued at issuance and each subsequent measurement date using the Black-Scholes option valuation model.
The following table the ranges of assumptions and estimates utilized within the Black-Scholes option valuation models for each annual period (see Note 7:
Stock Incentive Plans and Stock-based Compensation
for specific details related to each issuance):
 
   
Years ended March 31,
  
   
2019
    
2018
  
Inputs
                
Company’s stock price
     $1.62 - $2.40       $3.64 - $5.63  
Exercise prices
     $0.01 - $2.40         $0.01  
Expected term (years)
     4.5 to 5.0       4.8 to 5.0  
Volatility
     64.1% - 71.8%       59.8% - 69.1%  
Risk free rate
     2.5% - 3.0%       2.1% - 2.7%  
Dividend rate
     0.0%       0.0%  
The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuations for the warrant liability for the years ended March 31, 2019 and 2018 (in thousands):
 
   
Warrant liabilities
  
Balance, March 31, 2017 as restated
   $ —    
Issuances
     2,370  
Settlements
     (1,888 ) 
Changes in fair value
     (210 ) 
   
 
 
  
Balance, March 31, 2018
     272  
Issuances
     5,683  
Settlements
     (615 ) 
Changes in fair value
     297  
Reclassifications to stockholders’ deficit
     (5,637 ) 
   
 
 
  
Balance March 31, 2019
   $ —    
   
 
 
  
Long-Term Debt
The Company’s financial liabilities were comprised primarily of long-term debt at March 31, 2019 and 2018. The Company uses significant other observable market data or assumptions (Level 2 inputs as defined in the accounting guidance) that it believes market participants would use in pricing debt.
The carrying value and fair value of the Company’s financial liabilities were primarily comprised of the following as of March 31, 2019 and 2018 (in thousands):
 
   
As of March 31,
  
   
2019
    
2018
  
   
Carrying
Value
    
Fair Value
    
Carrying
Value
    
Fair Value
  
Long-term debt:
(1)
                                
TCW Term Loan
                   $ 90,424     $ 90,424  
Senior Secured Term Loan
   $  164,588     $ 143,398                  
PNC Revolving Credit Agreements
     —                 33,107     $ 27,323  
   
 
 
    
 
 
    
 
 
    
 
 
  
Total long-term debt
   $ 164,588     $ 143,398     $ 123,531     $ 117,747  
   
 
 
    
 
 
    
 
 
    
 
 
  
 
(1)
 
Fair value based on outstanding borrowings and market interest rates (level 2)