Financial Instruments

9 Months Ended

Sep. 30, 2012

Financial Instruments [Abstract]

Financial Instruments

2.  Financial Instruments

The Company’s financial instruments include cash equivalents, marketable securities, restricted securities, accounts receivable, notes receivable, and accounts payable.  The Company typically values financial assets and liabilities such as receivables, accounts payable, and debt obligations at their carrying values, which approximate fair value due to their generally short-term duration. 

The Company records certain financial instruments at fair value, including: cash equivalents, certain marketable securities, and certain restricted securities.  These financial instruments are discussed in further detail in the notes below.  The Company may make an irrevocable election to measure other financial instruments at fair value on an instrument-by-instrument basis, although as of September 30, 2012 the Company has not chosen to make any such elections.  Fair value financial instruments are recorded in accordance with the fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair values in their broad levels. 

The following is a summary of the Company’s financial instruments measured at fair value (in thousands):

September 30, 2012	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	--	$	781	$	--	$	781
Restricted securities:
Money market funds		--		324		--		324
Total assets		--		1,105		--		1,105
Long-term liabilities:
Contingent consideration		--		--		(1,902)		(1,902)
Total liabilities		--		--		(1,902)		(1,902)
Net assets (liabilities)	$	--	$	1,105	$	(1,902)	$	(797)

December 31, 2011	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	--	$	7,334	$	--	$	7,334
Restricted securities:
Money market funds		--		5,312		--		5,312
Total assets	$	--	$	12,646	$	--	$	12,646

TheCompany used prices quoted from its investment management companies to determine the Level 2 valuation of its investments in money market funds and securities. The Company recorded contingent consideration liability, classified as Level 3, as a result of its acquisition of Hemosphere, Inc. (“Hemosphere”) in May 2012.  Refer to Note 4 for further discussion of the Level 3 contingent consideration liability.  Changes in fair value of Level 3 liabilities are listed below (in thousands):

	Contingent Consideration
Balance as of December 31, 2011	$	--
Discounted value of contingent consideration at acquisition		1,840
Loss on remeasurement of contingent consideration		62
Balance as of September 30, 2012	$	1,902

The Company also measures certain non-financial assets at fair value on a non-recurring basis when applying accounting for business combinations or when asset impairments are recorded.  The Company uses the fair value hierarchy to value these assets and reports these fair values in the periods in which they are recorded or written down. During the nine months ended September 30, 2012 the Company initially recorded certain non-financial assets at fair value related to the acquisition of Hemosphere.  Refer to the discussion of the inputs and methods used in the non-recurring valuation of the Company’s assets acquired from Hemosphere in Note 4.  During the year ended December 31, 2011 the Company initially recorded certain non-financial assets at fair value related to the acquisition of CardiogenesisCorporation (“Cardiogenesis”).  Refer to the discussion of the inputs and methods used in the non-recurring valuation of the Company’s assets acquired from Cardiogenesis in Note 6.  As of September 30, 2012 the Company revalued its investment in ValveXchange, Inc. (“ValveXchange”) preferred stock on a non-recurring basis after initial recognition using a Level 3 valuation.  Refer to the discussion of the inputs and methods used in the non-recurring valuation of the Company’s investment in ValveXchange in Note 5.  No non-financial assets were measured at fair value on a non-recurring basis after initial recognition in the Company’s Summary Consolidated Balance Sheets as of December 31, 2011.