INTANGIBLES AND OTHER ASSETS

Long-lived intangible assets and other assets consisted of the following:



	Dollars in Thousands
	September 30, 2011						December 31, 2010
	Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value
Intangibles—acquired technology	$	6,535	$	683	$	5,852	$	6,535	$	—	$	6,535
Intangibles—assay royalties	1,434		154		1,280		1,434		—		1,434
Intangibles—third party payor relationships	367		—		367		367		—		367
Intangibles—tradenames and trademarks	344		37		307		344		—		344
Patents	767		263		504		511		245		266
Intellectual property	20		5		15		290		274		16
	$	9,467	$	1,142	$	8,325	$	9,481	$	519	$	8,962




	Estimated Useful Life
Intellectual property	10 years
Patents	7 years
Intangibles—acquired technology	7 – 8 years
Intangibles—third party payor relationships	Indefinite
Intangibles—assay royalties	7 years
Intangibles—tradenames and trademarks	7 years

Other assets include U.S. security deposits and deferred tax assets, net of applicable valuation allowances.

The intangible assets were each valued separately using valuation approaches most appropriate for each specific asset.




Intangibles—acquired technology		Income Approach - Multi-period Excess Earnings Method
Intangibles—third party payor relationships		Cost Approach - Replacement Cost Method
Intangibles—assay royalties		Income Approach - Multi-period Excess Earnings Method
Intangibles—tradenames and trademarks		Income Approach - Relief from Royalty Method

Income Approach

The income approach is based upon the economic principle of anticipation. In this approach, the value of the subject intangible asset is the present value of the expected economic income to be earned from that intangible asset. This expectation is then converted into a present value through the selection of an investor's required rate of return given the risk and/or uncertainty associated with the subject intangible asset. In valuing an intangible asset using the income approach, the following elements should be considered: (i) remaining useful life, (ii) legal rights, (iii) position of the intangible asset in its respective life cycle, (iv) appropriate capital charges, (v) allocations of income, and (vi) whether any tax amortization benefit should be included in the analysis.

Cost Approach

The cost approach to intangible asset analysis is based upon the economic principles of substitution and price equilibrium. These basic economic principles assert that an investor pay no more for an investment than the cost to obtain an investment of equal utility. Within the cost approach there are several related analytical methods. Two of the most common and widely accepted include the reproduction cost and replacement cost methods. All cost based approaches typically involve a comprehensive analysis of the relevant cost components, which typically include: (i) materials, (ii) labor, (iii) overhead, (iv) intangible asset developer's profit, and (v) an adequate return on the asset developer's capital.

Reproduction cost contemplates the construction of an exact replica of the subject intangible asset. Before appropriate adjustments are made for the purposes of deriving an indication of value, reproduction cost does not consider either the market demand for or the market acceptance of the subject intangible. Therefore, before the requisite adjustments, the reproduction cost estimate does not answer the question of whether anyone would be interested in an exact replica of the subject interest.

Unlike the reproduction cost method, the replacement cost method does consider market demand and market acceptance for the subject intangible. In other words, if there are elements or components of the subject intangible that generate little or no demand, they are not included in the subject intangible.

Excess Earnings Method

The Excess Earnings Method, a form of the Income Approach, reflects the present value of the projected cash flows that are expected to be generated by the intangible asset, less charges representing the contribution of other assets to those cash flows. As part of our analysis, we determined individual rates of return applicable to each acquired asset and estimate the effective “capital charge” to be applied to the earnings of the identified intangibles.

Relief-from-Royalty Method

The Relief-from-Royalty method, a form of the Income Approach, estimates the cost of licensing the acquired intangible asset from an independent third party using a royalty rate. Since the company owns the intangible asset, it is relieved from making royalty payments. The resulting cash flow savings attributed to the owned intangible asset are estimated over the intangible asset's remaining useful life and discounted to present value.

Amortization expense for intangible assets was $0.3 million and less than $0.1 million during the three months ended September 30, 2011 and 2010, respectively. Amortization expense for intangible assets was $1.0 million and less than $0.1 million during the nine months ended September 30, 2011 and 2010, respectively. Amortization expense for intangible assets is expected to be $1.2 million in each of the years 2011 through 2017.