Note 2 - Fair Value Measurement

6 Months Ended

Jun. 30, 2015

. Fair value measurement

As a basis for determining the fair value of certain of the Company’s financial instruments, the Company utilizes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level I—Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level II—Observable inputs, other than Level I prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level III—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The carrying amount of certain of the Company’s financial instruments, including cash, accounts receivable, prepaid expenses and other assets, accounts payable, and accrued liabilities approximate fair value due to their short maturities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the entire fair value measurement requires management to make judgments and consider factors specific to the asset or liability.

The following tables present information about the balances of liabilities measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques it utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates, and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The Company did not have any financial assets measured at fair value on a recurring basis.

			Fair v alue m easurements at June 30, 2015 us ing
(in thousands)	June 30, 2015		Quoted p rices in a ctive m arkets f or i dentical a ssets (Level 1)		Significant o ther o bservable i nputs (Level 2)		Significant u nobservable i nputs (Level 3)
Liabilities:
Contingent purchase price consideration	$	1,219	$	—	$	—	$	1,219
Total	$	1,219	$	—	$	—	$	1,219

			Fair v alue m easurements at December 31, 2014 us ing
(in thousands)	December 31, 2 014		Quoted p rices in a ctive m arkets f or i dentical a ssets (Level 1)		Significant o ther o bservable i nputs (Level 2)		Significant u nobservable i nputs (Level 3)
Liabilities:
Contingent purchase price consideration	$	1,218	$	—	$	—	$	1,218
Total	$	1,218	$	—	$	—	$	1,218

Table Of Contents

On July 31, 2014, the Company acquired substantially all of the assets of Boulder Diagnostics, Inc., or Boulder, a privately owned company developing immunology-based assays for autoimmune and inflammatory conditions/diseases. The terms of the purchase agreement included contingent purchase price consideration consisting of future potential milestone payments totaling up to $6.1 million at any time on or prior to July 31, 2024. The milestone payments consist of completion of studies related to acquired technologies, development of diagnostic test kits, patient enrollment in an Institutional Review Board approved study, issuance of patents, and approvals or clearances by the U.S. Food and Drug Administration, or FDA. The fair value of future potential milestone payments was determined based upon a probability weighted analysis of expected future milestone payments to be made to the seller, which are considered as Level 3 inputs.

The following table provides a summary of changes in the fair value of the Company's Level 3 financial liabilities for the three and six-month periods ended June 30, 2015:

(in thousands)	Three months ended June 30, 2015		Six months ended June 30, 2015
Balance – beginning	$	1,126	$	1,218
Change in fair value of contingent purchase price consideration		49		96
Foreign currency adjustment		44		(95	)
Balance – ending	$	1,219	$	1,219

The change in the fair value of the contingent purchase price consideration was due to the effect of the passage of time on the fair value measurement of future potential milestone payments

related to the Boulder acquisition that is included in other income in the Company’s condensed consolidated statements of operations for the three and six month-periods ended June 30, 2015. Foreign currency adjustments are included in

accumulated other comprehensive loss

for the three and six-month periods ended June 30, 2015.

- 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.

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