Note 7 - Restructured Debt Liability

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Long-term Debt [Text Block]

Note

7

- Restructured Debt Liability

On

October 27, 2017,

we and Deerfield entered into the Exchange and Termination Agreement pursuant to which (i) promissory notes evidencing a loan with affiliates of Deerfield Management Company L.P., or the Deerfield Loan, in the aggregate principal amount of

$25.0

million and (ii) warrants to purchase up to

8,333

shares of our common stock at an exercise price of

$2,360.40

per share held by Deerfield were cancelled in consideration for (i) a cash payment in the aggregate amount of

$2.5

million, (ii)

23,703

shares of common stock, representing

2%

of fully-diluted shares outstanding (as defined in the Exchange and Termination Agreement) on the closing date, and (iii) the right to receive certain milestone payments based on achievement of specified AEROSURF development and commercial milestones, which, if achieved, could potentially total up to

$15.0

million. In addition, a related security agreement, pursuant to which Deerfield held a security interest in substantially all of our assets, was terminated. We established a

$15.0

million long-term liability for the contingent milestone payments potentially due to Deerfield under the Exchange and Termination Agreement (

see

, 

Note

4

- Summary of Significant Accounting Policies

). The liability has been recorded at full value of the contingent milestones and will continue to be carried at full value until the milestones are achieved and paid or milestones are

not

achieved and the liability is written off as a gain on debt restructuring.

As of

March 31, 2021

and

December 31, 2020

, the restructured debt liability balance was 

$15.0

million.