XML 50 R14.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

12 Months Ended

Dec. 31, 2011

6. Fair Value Measurements

The Company follows ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”) for the Company’s financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and are re-measured and reported at fair value at least annually using a fair value hierarchy that is broken down into three levels. Level inputs are as defined as follows:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The Company categorized its cash equivalents as Level 1 hierarchy. The valuation for Level 1 was determined based on a “market approach” using quoted prices in active markets for identical assets. Valuations of these assets do not require a significant degree of judgment. The Company categorized its warrants potentially settleable in cash as a Level 2 hierarchy. The warrants are measured at market value on a recurring basis and are being marked to market each quarter-end until they are completely settled. The warrants are valued using the Black-Scholes method, using assumptions consistent with our application of ASC 718. The contingent purchase price consideration is categorized as a Level 3 hierarchy and is measured at its estimated fair value on a recurring basis and is adjusted at each quarter-end until it is completely settled. The contingent price consideration is valued based on the expected timing of milestones, the expected probability of success for each milestone and the updated discount rates based on a corporate debt interest rate index publicly issued.


Description	December 31, 2011		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	11,433	$	11,433	$	—	$	—

Total assets	$	11,433	$	11,433	$	—	$	—

Liabilities:
Warrants potentially settleable in cash	$	3,746	$	—	$	3,746	$	—
Contingent purchase price consideration		6,351		—		—		6,351

Total liabilities	$	10,097	$	—	$	3,746	$	6,351


Description	December 31, 2010		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	6,891	$	6,891	$	—	$	—

Total assets	$	6,891	$	6,891	$	—	$	—

Liabilities:
Warrants potentially settleable in cash		3,138	$	—	$	3,138	$	—

Total liabilities	$	3,138	$	—	$	3,138	$	—

The Company has classified its liabilities for contingent earn-out consideration relating to its acquisitions of Apthera within Level 3 of the fair value hierarchy because the fair values are determined using significant unobservable inputs, which included probability weighted cash flows.

The Company has not transferred any financial instruments into or out of Level 3 classification during 2010 or 2011. A reconciliation of the beginning and ending Level 3 liabilities for the year ended December 31, 2011 is as follows:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	(In Thousands)
Balance at January 1, 2011	$	—
Initial fair value of contingent earnout consideration related to Meridian Acquisition		6,460
Change in fair value of earnout consideration		(109	)

Balance at December 31, 2011	$	6,351