Note 2 - Summary of Significant Accounting Policies | 9 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Significant Accounting Policies [Text Block] | ' |
2. Summary of Significant Accounting Policies |
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Other than the significant policies added below, there have been no material changes to any of the Company’s significant accounting policies and estimates as disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2013. |
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Private Placement Funding with Redeemable Convertible Preferred Stock and Warrants |
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On May 31, 2013, in connection with the first closing of a private placement equity financing (the “Financing”), the Company sold and issued 577,105 shares of our common stock (the “Common Shares”), and 231,518 shares of our newly created redeemable Series C Convertible Preferred Stock (the “Series C Stock”), to certain institutional funds and other accredited investors (“Outside Investors”) at a purchase price of $7.00 per share. The Series C Stock automatically converted into 231,518 shares of common stock upon stockholder approval at the annual meeting on September 10, 2013. Had the Series C Stock not converted into common stock, the Series C Stock would have been redeemable at the option of the holder and was therefore recorded in temporary equity until September 10, 2013. In addition, the Company issued to the Outside Investors Series A Warrants to purchase common stock as amended on September 4, 2013 (the “Series A Warrants”), initially exercisable for 404,309 shares of common stock. The exercise price of the Series A Warrants is $7.75 per share. The Series A Warrants have a five-year term and first became exercisable on November 30, 2013, six months following the date of issuance. Prior to amendment on September 4, 2013, the Series A Warrants had an exercise price of $8.75 per share and had a potential adjustment to the warrant exercise price that could result in the event we issued securities at a price below the then current exercise price. In addition, the amendment removed a cash settlement provision in the case of a Fundamental Transaction, as defined in the Warrant agreement. |
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On September 12, 2013, in connection with the second closing (the “Second Closing”) of a private placement equity financing, the Company sold and issued 91,144 shares of its common stock at a purchase price per share of $7.00 to certain members of management and the Board of Directors of the Company (the “Second Closing Investors”). The $0.6 million aggregate gross purchase price was received in cash and recorded in stockholders’ equity. |
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In addition, at the Second Closing the Company issued to each Second Closing Investor a Series B warrant to purchase common stock (the “Series B Warrants”), initially exercisable for 45,571 shares of common stock. The exercise price of the Series B Warrants is $7.75 per share. The warrants have a five-year term, and are not exercisable for the first six months following the date of issuance. The Company has evaluated the Series B Warrants issued in the Financing and has concluded that equity classification is appropriate as all such warrants are considered to be indexed to the Company’s equity and there are no settlement provisions that would result in classification as a debt instrument. |
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In connection with the Financing, the Company issued to Lake Street Capital Markets, LLC, who served as the placement agent in the Financing, warrants to purchase an aggregate of 26,993 shares of common stock, which represents 3% of the total number of Common Shares and shares of Series C Stock sold in the Financing. |
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| (a) | Presentation of Series A Warrants | | |
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Prior to amendment on September 4, 2013, the potential adjustment to the Series A Warrant exercise price precluded the warrants from meeting the criteria set forth in ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s own Stock” to be considered indexed to the Company’s own stock. Accordingly, the fair value of the Series A Warrants was initially recorded as a liability. We estimated the fair value of these warrants at the May 31, 2013 issuance date using the Black-Scholes model and revalued the Series A Warrants as of June 30, 2013 and upon amendment on September 4, 2013 when the Series A Warrants were no longer required to be reported as a liability and were reclassified to equity using the September 4, 2013 Black-Sholes value of $1.3 million. The Black-Scholes model requires the input of highly subjective assumptions, including the warrant’s risk free rate and stock price volatility. The change in the fair value of the Series A Warrants was recognized in the statements of operations within non-operating income (expense). |
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| (b) | Presentation of Redeemable Convertible Preferred Stock | | |
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Because the Series C Stock was redeemable at the option of the holder (had the stockholders not approved conversion on September 10, 2013 as discussed above), the Company recorded the Series C Stock in temporary equity until conversion on September 10, 2013 when the redemption value of $1.6 million was reclassified to stockholders’ equity. |
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| (c) | Beneficial Conversion Feature (“BCF”) | | |
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The Series C Stock was assessed under ASC 470, “Debt,” and the Company determined that the conversion to common stock qualifies as a BCF since it had a nondetachable conversion feature that was in the money at the commitment date. The BCF computation compares the carrying value of the preferred stock after the value of any derivatives has been allocated from the proceeds (in this case, the warrant liability) to the transaction date value of the number of shares that the holder can convert into. The calculation resulted in a BCF of $0.8 million. The BCF was recorded in additional paid-in capital. |
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| (d) | Carrying Values | | |
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The proceeds of the Financing were allocated first to the fair value of the warrants and then to the common stock and Series C Stock sold on a pro rata basis. The Company accreted the Series C Stock to its redemption value, which was $1.6 million based upon the 231,518 shares sold multiplied by the $7.00 per share redemption price. Accretion was calculated through September 10, 2013 the earliest possible redemption date. |
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The following table shows the allocation of proceeds from the Outside Investors and carrying value of the Series C Stock which was reclassified to stockholders’ equity upon conversion to common stock on September 10, 2013 (in thousands, except per share amounts): |
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Gross proceeds on May 31, 2013 | | $ | 5,660 | |
Fair value of warrants on May 31, 2013 | | | (2,268 | ) |
Gross proceeds to allocate to common stock and Series C Stock | | $ | 3,392 | |
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Gross proceeds allocated to common shares sold | | $ | 2,421 | |
Related transaction costs allocated | | | (313 | ) |
Net value allocated to common shares sold | | $ | 2,108 | |
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Gross proceeds allocated to Series C Stock sold on May 31, 2013 | | $ | 971 | |
Related transaction costs allocated | | | (125 | ) |
Net value allocated to Series C Stock sold prior to BCF | | | 846 | |
Calculated BCF value | | | (846 | ) |
Accretion of Series C Stock through September 10, 2013 | | | 1,620 | |
Carrying value of Series C Stock recalssified upon conversion to common stock | | $ | 1,620 | |
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Capitalized Software |
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The Company capitalizes software development costs related to software developed for external use in accordance with ASC 985-20, Costs of Software to Be Sold, Leased, or Marketed ("ASC 985-20") upon achieving technological feasibility of the related products. See Note 4 below for more discussion. |