Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Fair Value Measurements

v3.5.0.2
Note 5 - Fair Value Measurements
6 Months Ended
Jun. 30, 2016
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
5.
FAIR VALUE MEASUREMENTS
 
The Company's financial assets and liabilities reflected at fair value in the consolidated financial statements include: cash and cash equivalents; short-term investments; accounts receivable; other current assets; accounts payable; and contingent consideration. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods, including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:
 
 
Level 1:
Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.
 
 
Level 2:
Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.
 
 
Level 3:
Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.
 
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation methodologies used for the Company's financial instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth in the tables below:
 
   
As of June 30, 2016
   
Fair Value Measurements
 
   
Carrying
   
Fair
   
As of June 30, 2016
 
   
Amount
   
Value
   
Level 1
   
Level 2
   
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents:
                                       
Cash
  $ 3,039     $ 3,039     $ 3,039     $ -     $ -  
Money market funds
    -       -       -       -       -  
    $ 3,039     $ 3,039     $ 3,039     $ -     $ -  
Marketable securities:
                                       
U.S. Treasury securities
  $ 676     $ 676     $ 676     $ -     $ -  
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration:
                                       
Asuragen
  $ 4,507     $ 4,507     $ -     $ -     $ 4,507  
RedPath
    14,409       14,409       -       -       14,409  
    $ 18,916     $ 18,916     $ -     $ -     $ 18,916  
 
   
As of December 31, 2015
   
Fair Value Measurements
 
   
Carrying
   
Fair
   
As of December 31, 2015
 
   
Amount
   
Value
   
Level 1
   
Level 2
   
Level 3
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents:
                                       
Cash
  $ 7,534     $ 7,534     $ 7,534     $     $  
Money market funds
    776       776       776              
    $ 8,310     $ 8,310     $ 8,310     $     $  
Marketable securities:
                                       
Money market funds
  $ 48     $ 48     $ 48     $     $  
Mutual funds
    58       58       58              
U.S. Treasury securities
    1,115       1,115       1,115              
Government agency securities
    131       131       131              
    $ 1,352     $ 1,352     $ 1,352     $     $  
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration:
                                       
Asuragen
  $ 4,628     $ 4,628     $     $     $ 4,628  
RedPath
    13,921       13,921                   13,921  
    $ 18,549     $ 18,549     $     $     $ 18,549  
 
The fair value of cash and cash equivalents and marketable securities is valued using market prices in active markets (level 1). As of June 30, 2016, the Company did not have any marketable securities in less active markets (level 2) or without observable market values that would require a high level of judgment to determine fair value (level 3).
 
In connection with the acquisition of assets from Asuragen and the acquisition of RedPath, the Company recorded $4.6 million and $13.9 million of contingent cash consideration related to contingent payments and other revenue based payments, respectively. The Company determined the fair value of the contingent consideration based on a probability-weighted income approach derived from revenue estimates. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement.  There was an increase in the fair value of the contingent consideration of approximately $0.4 million during the period ended June 30, 2016 as resulting from the accretion of interest over time and amounting to $0.7 million, partially offset by the Company making payments of $0.3 million in the second quarter of 2016.
 
The Company considers carrying amounts of accounts receivable, accounts payable and accrued expenses to approximate fair value due to the short-term nature of these financial instruments.  There is no fair value ascribed to the letters of credit as management does not expect any material losses to result from these instruments because performance is not expected to be required.
 
Certain of the Company's non-financial assets, such as other intangible assets and goodwill, are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.