XML 20 R10.htm IDEA: XBRL DOCUMENT
v3.21.1

Note 4 - Fair Value Measurements | 3 Months Ended
--- | ---
Mar. 31, 2021
Notes to Financial Statements |
Fair Value Disclosures [Text Block] |
4. | Fair Value Measurements
The Company held U.S. treasury bills of $2.5 million at December 31, 2020. Unrealized losses and the associated tax impact on the Company’s available-for-sale securities were insignificant as December 31, 2020. There were no available-for-sale securities as of March 31, 2021. The Company’s investments are all classified within Level 1 of the fair value hierarchy and are valued based quoted prices in active markets. For cash, current receivables, accounts payable, and interest accrual, the carrying amounts approximate fair value, because of the short maturity of these instruments, and therefore fair value information is not included in the table below. Contingent consideration related to the previously described business combinations are classified within Level 3 of the fair value hierarchy as the determination of fair value uses considerable judgement and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. The classification of the Company’s cash equivalents and investments within the fair value hierarchy is as follows:
|  |  |  |  |  | Active Markets |  |  | Significant Other |  |  | Significant |  |  |  |  |
|  |  |  |  |  | for Identical Assets |  |  | Observable Inputs |  |  | Unobservable Inputs |  |  |  |  |
|  | March 31, 2021 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Amortized Cost |
Cash equivalents: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money Market Funds |  | $ | 77,030 |  |  | $ | 77,030 |  |  | $ | - |  |  | $ | - |  |  | $ | 77,030 |
Other current and long-term liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent Consideration - Short Term |  | $ | 24,830 |  |  | $ | - |  |  | $ | - |  |  | $ | 24,830 |  |  | $ | - |
Contingent Consideration - Long Term |  |  | 5,760 |  |  |  | - |  |  |  | - |  |  |  | 5,760 |  |  |  | - |
Total other current and long-term liabilities |  | $ | 30,590 |  |  | $ | - |  |  | $ | - |  |  | $ | 30,590 |  |  | $ | - |
|  |  |  |  |  | Active Markets |  |  | Significant Other |  |  | Significant |  |  |  |  |
|  |  |  |  |  | for Identical Assets |  |  | Observable Inputs |  |  | Unobservable Inputs |  |  |  |  |
|  | December 31, 2020 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Amortized Cost |
Cash equivalents: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money Market Funds |  | $ | 74,522 |  |  | $ | 74,522 |  |  | $ | - |  |  | $ | - |  |  | $ | 74,522 |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury Bills |  | $ | 2,501 |  |  | $ | 2,501 |  |  | $ | - |  |  | $ | - |  |  | $ | 2,524 |
Other current and long-term liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent Consideration - Short Term |  | $ | 13,090 |  |  | $ | - |  |  | $ | - |  |  | $ | 13,090 |  |  | $ | - |
Contingent Consideration - Long Term |  |  | 22,320 |  |  |  | - |  |  |  | - |  |  |  | 22,320 |  |  |  | - |
Total other current and long-term liabilities |  | $ | 35,410 |  |  | $ | - |  |  | $ | - |  |  | $ | 35,410 |  |  | $ | - |
There were no transfers between fair value levels during the three-month period ended March 31, 2021 or in 2020. Contingent Consideration The following table provides a rollforward of the contingent consideration related to business acquisitions discussed in Note 3, Business Combinations.
|  | Three Months Ended March 31, 2021 |
Balance, beginning |  | $ | 35,410 |
Additions |  |  | - |
Payments |  |  | - |
Change in fair value |  |  | (4,820 | )
Balance, ending |  | $ | 30,590 |
Under the Parcus Medical Merger Agreement and Arthrosurface Merger Agreement, there are earn-out milestones totaling $100 million payable from 2020 to 2022. Parcus Medical has net sales earn-out milestones annually from 2020 to 2022, while Arthrosurface has both regulatory and net sales earn-out milestones in 2020 and 2021. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model or a Monte Carlo simulation approach. The unobservable inputs used in the fair value measurement of the Company’s contingent consideration are the probabilities of successful achievement, the net sales estimates, the weighted average cost of capital used for the Monte Carlo simulation, discount rate and the periods in which the milestones are expected to be achieved. The discount rates used for the net sales milestones ranged from 2.6% - 2.8%, and for the regulatory earn-out milestones the discount rate was 3.6%. As of March 31, 2021, the probability of successful achievement of the Arthrosurface regulatory earn-out milestones range from 0%-70%, as compared to a range of 60%-75% at the acquisition date. The weighted average cost of capital for Arthrosurface increased from 11.5% on the acquisition date to 12.1% as of March 31, 2021, and for Parcus Medical decreased from 14.5% at the acquisition date to 12.1% as of March 31, 2021. Increases or decreases in any of the probabilities of success in which milestones are expected to be achieved would result in a higher or lower fair value measurement, respectively. Increases or decreases in the discount rate would result in a lower or higher fair value measurement, respectively. In October 2020, the Company made a regulatory-based milestone payment of $5 million pursuant to the terms of the Arthrosurface Merger Agreement as a result of regulatory clearance for the WristMotion Total Arthroplasty System. The fair value of remaining contingent consideration is assessed on a quarterly basis. The fair value of the contingent consideration decreased by $4.8 million during the three-month period ended March 31, 2021 due primarily to the decrease in the likelihood that certain contingent milestones would be achieved and result in payment.

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration