Summary of Significant Accounting Policies |
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Sep. 30, 2011 | |||||||||||||||||||||
| Summary of Significant Accounting Policies |
Our
consolidated financial statements include the accounts of Neoprobe,
our wholly-owned subsidiary, Cardiosonix Ltd. (Cardiosonix), and
our 90%-owned subsidiary, Cira Biosciences, Inc. (Cira
Bio). All significant inter-company accounts were
eliminated in consolidation.
In
May 2011, the Company’s Board of Directors approved the sale
(the Asset Sale) of our gamma detection device line of business
(the GDS Business) to Devicor Medical Products, Inc. (Devicor) and
the Company executed an Asset Purchase Agreement (APA) with Devicor
dated May 24, 2011. Our stockholders approved the Asset
Sale at our Annual Meeting of Stockholders on August 15, 2011, and
the Asset Sale closed on August 17, 2011 consistent with the terms
of the APA. Under the terms of the APA, we sold the
assets and assigned certain liabilities that were primarily related
to the GDS Business. In exchange for the assets of the
GDS Business, Devicor made a cash payment to us of $30,000,000 and
agreed to pay an additional amount for a net working capital
adjustment, currently estimated at $254,000, assumed certain
liabilities of the Company associated with the GDS Business as
specified in the APA, and agreed to make royalty payments to us of
up to an aggregate maximum amount of $20,000,000 based on the net
revenue attributable to the GDS Business over the course of the
next six fiscal years. Our consolidated balance sheets
and statements of operations have been reclassified, as required,
for all periods presented to reflect the GDS Business as a
discontinued operation. Cash flows associated with the
operation of the GDS Business have been combined within operating,
investing and financing cash flows, as appropriate, in our
consolidated statements of cash flows. See Note
2.
In
August 2009, the Company’s Board of Directors decided to
discontinue the operations of Cardiosonix and to attempt to divest
our Cardiosonix subsidiary. This decision was based on
the determination that the blood flow measurement device segment
was no longer considered a strategic initiative of the Company, due
in part to positive events in our other development
initiatives. Our consolidated balance sheets and
statements of operations have been reclassified, as required, for
all periods presented to reflect Cardiosonix as a discontinued
operation. Cash flows associated with the operation of
Cardiosonix have been combined within operating, investing and
financing cash flows, as appropriate, in our consolidated
statements of cash flows. See Note 2.
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
or financial instruments for which all significant inputs are
observable, either directly or indirectly; and
Level 3 – Prices or valuations that require inputs
that are both significant to the fair value measurement and
unobservable.
A
financial instrument’s level within the fair value hierarchy
is based on the lowest level of any input that is significant to
the fair value measurement. In determining the
appropriate levels, we perform a detailed analysis of the assets
and liabilities whose fair value is measured on a recurring
basis. At each reporting period, all assets and
liabilities for which the fair value measurement is based on
significant unobservable inputs or instruments which trade
infrequently and therefore have little or no price transparency are
classified as Level 3. In estimating the fair value of
our derivative liabilities, we used the Black-Scholes option
pricing model and, where necessary, other macroeconomic, industry
and Company-specific conditions. In addition, we
considered non-performance risk and determined that such risk is
minimal. See Note 3.
The
following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
In
June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic
220): Presentation of Comprehensive Income (ASU
2011-05). ASU 2011-05 will require companies to present
the components of net income and other comprehensive income either
as one continuous statement or as two consecutive statements,
eliminating the option to present components of other comprehensive
income as part of the statement of changes in stockholders'
equity. ASU 2011-05 does not change the items which must
be reported in other comprehensive income, how such items are
measured or when they must be reclassified to net
income. ASU 2011-05 is effective for interim and annual
reporting periods beginning after December 15, 2011. Because ASU
2011-05 impacts presentation only, it will have no effect on our
consolidated financial statements.
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