Significant Accounting Policies (Policies)

9 Months Ended

Jun. 30, 2020

(a) Revenue Recognition –

Revenue Disaggregation

The following tables present our revenues disaggregated by major geographic region, major product platform and disease state (Diagnostics only), noting that “Non-molecular assays” is comprised of traditional immunoassays, blood chemistry assays and urea breath tests:

Revenue by Reportable Segment & Geographic Region


	Three Months Ended June 30,							Nine Months Ended June 30,
	2020		2019		Inc (Dec)			2020		2019		Inc (Dec)
Diagnostics-
Americas	$	17,575	$	27,356		(36	)%	$	72,980	$	84,042		(13	)%
EMEA		3,576		5,076		(30	)%		16,853		17,427		(3	)%
ROW		447		686		(35	)%		1,498		1,814		(17	)%

Total Diagnostics		21,598		33,118		(35	)%		91,331		103,283		(12	)%


Life Science-
Americas		22,015		4,369		404	%		30,642		14,347		114	%
EMEA		26,070		6,389		308	%		40,977		21,608		90	%
ROW		15,114		4,564		231	%		26,564		10,930		143	%

Total Life Science		63,199		15,322		312	%		98,183		46,885		109	%

Consolidated	$	84,797	$	48,440		75	%	$	189,514	$	150,168		26	%

Revenue by Product Platform/Type


	Three Months Ended June 30,							Nine Months Ended June 30,
	2020		2019		Inc (Dec)			2020		2019		Inc (Dec)
Diagnostics-
Molecular assays	$	3,182	$	5,894		(46	)%	$	17,259	$	20,208		(15	)%
Non -m olecular assays		18,416		27,224		(32	)%		74,072		83,075		(11	) %

Total Diagnostics	$	21,598	$	33,118		(35	)%	$	91,331	$	103,283		(12	)%

Life Science-
Molecular reagents	$	38,784	$	5,495		606	%	$	55,691	$	17,495		218	%
Immunological reagents		24,415		9,827		148	%		42,492		29,390		45	%

Total Life Science	$	63,199	$	15,322		312	%	$	98,183	$	46,885		109	%

Revenue by Disease State (Diagnostics only)


	Three Months Ended June 30,							Nine Months Ended June 30,
	2020		2019		Inc (Dec)			2020		2019		Inc (Dec)
Diagnostics-
Gastrointestinal assays	$	9,584	$	17,232		(44	)%	$	39,644	$	52,024		(24	)%
Respiratory illness assays		5,052		5,708		(11	)%		23,664		21,242		11	%
Blood chemistry assays		3,364		4,666		(28	) %		12,508		13,364		(6	)%
Other		3,598		5,512		(35	)%		15,515		16,653		(7	)%

Total Diagnostics	$	21,598	$	33,118		(35	)%	$	91,331	$	103,283		(12	)%

Revenue Policies

Product Sales

Revenue from contracts with customers is recognized in an amount that reflects the consideration we expect to receive in exchange for products when obligations under such contracts are satisfied. Revenue is generally recognized at a

point-in-time

when products are shipped and control has passed to the customer. Such contracts can include various combinations of products that are generally accounted for as distinct performance obligations.

Revenue is reduced in the period of sale for fees paid to distributors, which are inseparable from the distributor’s purchase of our product and for which we receive no goods or services in return. Revenue for the Diagnostics segment is reduced at the date of sale for product price adjustments payable to certain distributors under local contracts. Management estimates accruals for distributor price adjustments based on local contract terms, sales data provided by distributors, historical statistics, current trends, and other factors. Changes to the accruals are recorded in the period that they become known. Such accruals are netted against accounts receivable.

Shipping and handling costs incurred after control of the product is transferred to our customers are treated as fulfillment costs and not a separate performance obligation.

Our payment terms differ by jurisdiction and customer but payment is generally required in a term ranging from

30 to 90 days from the date of shipment or satisfaction of the performance obligation

. Trade accounts receivable are recorded in the accompanying Condensed Consolidated Balance Sheets at invoiced amounts less provisions for distributor price adjustments under local contracts and doubtful accounts. The allowance for doubtful accounts represents our estimate of probable credit losses and is based on historical

write-off

experience and known conditions that would likely lead to

non-payment.

Customer invoices are charged off against the allowance when we believe it is probable that the invoices will not be paid.

Practical Expedients and Exemptions

Revenue is recognized net of any taxes collected from customers (sales tax, value added tax, etc.), which are subsequently remitted to government authorities.

Our diagnostic assay products are generally not subject to a customer right of return except for product recall events under the rules and regulations of the Food and Drug Administration or equivalent agencies outside the United States. In this circumstance, the costs to replace affected products would be accrued at the time a loss was probable and estimable.

We expense as incurred the costs to obtain contracts, as the amortization period would be one year or less. These costs, recorded within selling and marketing expense, include our internal sales force compensation programs and certain partner sales incentive programs, as we have determined that annual compensation is commensurate with annual selling activities.

Reagent Rental Arrangements

Certain of our Diagnostics segment’s product platforms require the use of instruments for the tests to be processed. In many cases, a customer is given use of the instrument provided they continue purchasing the associated tests, also referred to as “consumables” or “reagents”. If a customer stops purchasing the consumables, the instrument must be returned to us. Such arrangements are common practice in the diagnostics industry and are referred to as “Reagent Rentals”. Reagent Rentals may also include instrument related services such as a limited replacement warranty, training and installation. We concluded that the use of the instrument and related services (collectively known as “lease elements”) are not within the scope of Accounting Standards Codification (“ASC”) 606,

Revenue from Contracts with Customers

but rather ASC 842,

Leases

. Accordingly, we first allocate the transaction price between the lease elements and the

non-lease

elements based on estimates of relative standalone selling prices. Lease revenue is derived solely from the sale of consumables and is therefore recognized monthly as earned, which coincides with the transfer of control of the

non-lease

elements.

For the portion of the transaction price allocated to the

non-lease

elements, which are principally the test kits, the related revenue is recognized at a

point-in-time

when control transfers.

Fair Value Measurements

(b)	Fair Value Measurements –

Certain assets and liabilities are recorded at fair value in accordance with ASC

820-10,

Fair Value Measurements and Disclosures

. ASC

820-10

defines fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC

820-10

establishes a three-level hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy level assigned to each asset and liability is based on the assessment of the transparency and reliability of the inputs used in the valuation of such items at the measurement date based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories based on inputs:

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

Level 2

Quoted prices in markets that are not active and financial instruments for which all significant inputs are observable, either directly or indirectly

Level 3

Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable

As described in Note 3, we acquired

Exalenz

and

the business of GenePOC in

April 2020 and June

2019

, respectively

. The fair value of the acquired accounts receivable and other current assets and the fair value of the assumed accounts payable and accrued expenses approximated their carrying value at the acquisition date. Inventories, property, plant and equipment, intangible assets and contingent consideration were valued using Level 3 inputs.

In connection with the acquisition of Exalenz and as disclosed in Note 3, the Company assumed a number of Israeli government grant obligations, which have been recognized in the preliminary purchase accounting opening balance at their face value totaling $11,108. The fair value of the obligations is expected to be finalized prior to December 31, 2020 and at such time, any required adjustment to the then-current carrying value will be recorded as an adjustment to the goodwill recognized on the transaction. The liabilities are considered to be Level 2 financial liabilities that will be

re-measured

each reporting period The face value of the obligations as of June 30, 2020 totals $11,173, which is reflected on the Condensed Consolidated Balance Sheet within current liabilities ($577) and

non-current

liabilities ($10,596).

In connection with the acquisition of the business of GenePOC and

an agreement in principle, pending finalization, to amend certain terms of the agreement related to contingent consideration achievement levels and milestone dates,

as described in Note 3, the Company is required to make contingent consideration payments of up to

64,000 (originally

$70,000

at the acquisition date)

comprised of up to $14,000 for achievement of product development milestones

(originally $20,000 at the acquisition date)

and up to $50,000 for achievement of certain financial targets. The fair value for the contingent payments recognized upon the acquisition as part of the purchase accounting opening balance sheet totaled $27,202. The fair value of the product development milestone payments was estimated by discounting the probability-weighted contingent payments to present value. Assumptions used in the calculations

include probability of success, duration of the

earn-out

and discount rate. The fair value of the financial performance target payments was determined using a Monte Carlo simulation-based model. Assumptions used in these calculations

include expected revenue, probability of certain product development programs, expected expenses and discount rate. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. The liability is considered to be a Level 3 financial liability that is

re-measured

each reporting period. Giving effect to the previously noted expected amendment to the contingent consideration achievement levels and milestone dates, such

re-measurement

resulted in a value of $19,774 as of June 30, 2020.

The following table provides information by level for financial assets and liabilities that are measured at fair value on a recurring basis:


				Fair Value Measurements Using Inputs Considered as
	Carrying Value			Level 1		Level 2			Level 3
Interest rate swaps (see Note 9) -
As of June 30, 2020	$	(703	)	$	—	$	(703	)	$	—
As of September 30, 2019	$	—		$	—	$	—		$	—
Contingent consideration -
As of June 30, 2020	$	(19,774	)	$	—	$	—		$	(19,774	)
As of September 30, 2019	$	(27,202	)	$	—	$	—		$	(27,202	)
Government grant obligations -
As of June 30, 2020	$	(11,173	)	$	—	$	(11,173	)	$	—
As of September 30, 2019	$	—		$	—	$	—		$	—

Recent Accounting Pronouncements

(c)	Recent Accounting Pronouncements –

Pronouncements Adopted

On October 1, 2019, the Company adopted ASC 842,

Leases

. ASC 842 was issued to increase transparency and comparability among entities by recognizing

right-of-use

assets (“ROU assets”) and lease liabilities on the balance sheet and disclosing key information about lease arrangements. The Company elected to adopt ASC 842 effective October 1, 2019 using the modified retrospective transition method, which was applied to leases that existed or will be entered into on or after such date, with no adjustment made to prior comparative periods. The comparative periods presented herein reflect the former lease accounting guidance and the required comparative disclosures are included in Note 7,

“Leasing Arrangements”

. There was no cumulative-effect adjustment to beginning retained earnings as a result of adopting ASC 842, and additional operating lease ROU assets and obligations of approximately $5,880 were recognized as of October 1, 2019. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. The Company elected the package of practical expedients permitted under the new guidance to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to October 1, 2019. Additionally, the elections were made to not use hindsight to determine lease terms and to not separate

non-lease

components within the lease portfolio. See Note 7 for further information.

Pronouncements Issued but Not Yet Adopted as of June 30, 2020

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2020-04,

Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

, to provide temporary optional guidance relating to reference rate reform, particularly as it relates to easing the potential burden resulting from the expected discontinuation of the LIBOR rate. The guidance provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met, which may be applied through December 31, 2022. The Company plans to apply this guidance to such transactions and modifications of arrangements but does not expect application to have a material impact on financial condition, results of operations or cash flows.

In June 2016, the FASB issued ASU

2016-13,

Measurement of Credit Losses

on Financial Instruments

, which changes the impairment model used to measure credit losses for most financial assets. We will be required to use a new forward-looking expected credit loss model that will replace the existing incurred credit loss model for our accounts receivable. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years (fiscal 2021 for the Company), with early adoption permitted. The Company does not anticipate that the adoption of this guidance will have a material impact on its consolidated financial statements.

Reclassifications

(d)	Reclassifications –

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. Such reclassifications had no impact on net earnings or shareholders’ equity.