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7. FINANCIAL INSTRUMENTS

12 Months Ended

Mar. 31, 2025

FINANCIAL INSTRUMENTS

NOTE 7 - FINANCIAL INSTRUMENTS

NOTE 7—FINANCIAL INSTRUMENTS

Fair value measurements

Authoritative accounting guidance for fair value measurements provides a framework for measuring fair value and related disclosures. The guidance applies to all financial assets and financial liabilities that are measured

on a recurring basis. The guidance requires fair value measurement to be classified and disclosed in one of the following three categories:

Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities. The fair value of available-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market. As of March 31, 2025, the Level 1 category included money market funds of $4.8 million, which were included in cash and cash equivalents on the Consolidated Balance Sheets.

Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. The fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers. There were no short-term or long-term investments as of March 31, 2025.

Level 3: Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing. As of March 31, 2024, the Company’s Level 3 financial instruments measured at fair value on the Consolidated Balance Sheets consisted of the contingent consideration liability related to the MikaMonu acquisition. The fair value of the contingent consideration liability was initially determined as of the acquisition date using unobservable inputs. These inputs include the estimated amount and timing of future revenues, the probability of achievement of the revenue forecast, revenue volatility and a risk-adjusted discount rate of approximately 14.8% used to adjust the probability-weighted cash flow payments to their present value. Significant increases (decreases) to the estimated amount and timing of future revenues or the probability of achievement of the revenue forecast would result in a significantly higher (lower) fair value measurement. Conversely, a significant increase (decrease) in the risk-adjusted discount rate would result in a significantly (lower) higher fair value measurement. Generally, changes used in the assumptions for future revenues and probability of achievement of the revenue forecast would be accompanied by a directionally similar change in the fair value measurement and expense. Conversely, changes in the risk-adjusted discount rate would be accompanied by a directionally opposite change in the related fair value measurement and expense. The continued appropriateness of the Monte Carlo valuation model selected or any decision to change the valuation model may also lead to changes in fair value measurement. Subsequent to the acquisition date, at each reporting period, the contingent consideration liability is re-measured to fair value with changes recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. During the most recent re-measurement of the contingent consideration liability as of March 31, 2025, the Company’s forecasted future revenues prior to the measurement date of December 31, 2025 were not expected to exceed certain revenue targets, thus no valuation inputs were utilized. As of March 31, 2024, the Company used a risk-adjusted discount rate of approximately 16.1% to adjust the probability-weighted cash flows to their present value using probabilities ranging from 25% to 75% for the remaining contingent events. The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheets at March 31, 2025 and 2024 in the amount of $0 and $160,000, respectively.

Refer to Note 14, “Acquisition” for more information.

The fair value of financial assets and liabilities measured on a recurring basis is as follows (in thousands):


					Fair Value Measurements at Reporting Date Using
					Quoted Prices
					in Active			Significant
					Markets for			Other			Significant
					Identical Assets			Observable			Unobservable
					and Liabilities			Inputs			Inputs
		March 31, 2025			(Level 1)			(Level 2)			(Level 3)
Assets:
Money market funds		$	4,836		$	4,836		$	—		$	—
Total		$	4,836		$	4,836		$	—		$	—


					Fair Value Measurements at Reporting Date Using
					Quoted Prices
					in Active			Significant
					Markets for			Other			Significant
					Identical Assets			Observable			Unobservable
					and Liabilities			Inputs			Inputs
		March 31, 2024			(Level 1)			(Level 2)			(Level 3)
Assets:
Money market funds		$	5,676		$	5,676		$	—		$	—
Total		$	5,676		$	5,676		$	—		$	—

Liabilities:
Contingent consideration		$	160		$	—		$	—		$	160

The following table sets forth the changes in fair value of contingent consideration for the fiscal years ended March 31, 2025, 2024 and 2023, respectively:


		Year Ended March 31,
		2025			2024			2023

		(In thousands)
Contingent consideration, beginning of period		$	160		$	1,052		$	2,738
Change due to accretion			8			108			222
Re-measurement of contingent consideration			(168)			(1,000)			(1,908)
Contingent consideration, end of period		$	—		$	160		$	1,052

Short-term and long-term investments

The Company had money market funds of $4.8 million and $5.7 million at March 31, 2025 and March 31, 2024, respectively, included in cash and cash equivalents on the Consolidated Balance Sheets. The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when declines are determined to be other-than-temporary.

There were no available-for-sale investments at March 31, 2025 and 2024, respectively.

At March 31, 2024, the deferred tax asset related to unrecognized gains and losses on short-term and long-term investments was $10,000.