Note 2 - Fair Value Measurement

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

2.

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 December 31, 201 6 u sing
(in thousands)	December 31, 201 6		Quoted p rices in a ctive m arkets for i dentical a ssets (Level 1)		Significant o ther observable i nputs (Level 2)		Significant u nobservable i nputs (Level 3)
Liabilities:
Contingent purchase price consideration	$	3,475	$	—	$	—	$	3,475
Total	$	3,475	$	—	$	—	$	3,475

			Fair v alue m easurements at December 31, 201 5 u sing
(in thousands)	December 31, 201 5		Quoted p rices in a ctive m arkets for i dentical a ssets (Level 1)		Significant o ther observable i nputs (Level 2)		Significant u nobservable i nputs (Level 3)
Liabilities:
Contingent purchase price consideration	$	1,293	$	—	$	—	$	1,293
Total	$	1,293	$	—	$	—	$	1,293

The following tables provide a summary of changes in the fair value of the Company's Level 

3

financial liabilities for the years ended

December

31:

(in thousands)	201 6
Balance – beginning	$	1,293
Immunetics acquisition (Note 17)		3,444
Change in fair value of contingent purchase price consideration		244
Write-off of Boulder contingent purchase price consideration		(1,452	)
Foreign currency adjustment		(54	)
Balance – ending	$	3,475

(in thousands)	2015
Balance – beginning	$	1,218
Change in fair value of c ontingent purchase price consideration		202
Foreign currency adjustment		(127	)
Balance – ending	$	1,293

During the

fourth

quarter of

2016,

the decision was made to halt research on the GoutiFind test, which was an assay intended to allow early diagnosis of gout and to better inform therapies by measuring the strength of the underlying uric acid induced inflammation. Based on this decision, the Company wrote off the related contingent purchase price consideration of

$901,000.

During the same quarter, the Company determined that the SpiroFind assay developed using IPR&D from Boulder would not qualify for future milestone payments. Due to this fact, the Company wrote off the related contingent purchase price consideration of

$551,000.

Both charges have been included in the line “Change in fair value of contingent purchase price consideration” in the consolidated statements of operations. Similar charges recorded in prior years have been reclassified out of research and development expense for comparative purposes.

On

October

12,

2016,

the Company acquired Immunetics, a Massachusetts based diagnostics company focused on developing specialized tests for infectious diseases, including tick-borne diseases, such as Lyme disease. The terms of the purchase agreement included contingent purchase price consideration consisting of up to an additional

$6.0

million in cash payable on the achievement of certain revenue thresholds and pipeline related milestones over the next

three

years

. The fair value of these milestone payments has been estimated to be

$3.4

million on the date of acquisition based on significant assumptions, including the probabilities of milestone occurrence, the expected timing of milestone payments, and a discount rate of

4.4%,

which are considered as Level

3

inputs.

The Company has a term loan outstanding under the MidCap agreement. The amount outstanding on its

2016

term loan is reported at its carrying value in the accompanying balance sheet. The estimated fair value of the term loan as of

December

31,

2016,

based upon current market rates for similar borrowings, as measured using Level

2

inputs, approximates the carrying amount as presented on the consolidated balance sheet.