Note 5 - Fair Value Measurements

12 Months Ended

Dec. 31, 2021

Note 5 – Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

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Level 1 - Quoted prices in active markets for identical assets and liabilities.

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Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Fair Value on a Recurring Basis

The tables below categorize assets measured at fair value on a recurring basis as of December 31, 2021 and 2020:

	*Fair Value*		*Fair value measurement using*
	*December 31,*
(in thousands)	*2021*		*Level 1*		*Level 2*		*Level 3*

Cash equivalents:
Money market funds	$	21,104	$	21,104	$	-	$	-
Total Assets	$	21,104	$	21,104	$	-	$	-

	*Fair Value*		*Fair value measurement using*
	*December 31,*
(in thousands)	*2020*		*Level 1*		*Level 2*		*Level 3*

Cash equivalents:
U.S. Treasury notes	$	9,101	$	9,101	$	-	$	-
Money market funds		6,518		6,518		-		-
Total Assets	$	15,619	$	15,619	$	-	$	-

Fair Value on a Non-Recurring Basis

The table below categorizes assets measured at fair value on a non-recurring basis for the period presented:

	Fair Value		Fair value measurement using
	December 31,
(in thousands)	2021		Level 1		Level 2		Level 3

Intangible assets:
Rostafuroxin drug candidate	$	9,730	$	-	$	-	$	9,730

The only asset or liability measured at fair value on a non-recurring basis during the year ended December 31, 2021 and 2020 was the IPR&D intangible asset related to our rostafuroxin drug candidate, which was recorded at its estimated fair value as a result of the impairment tests performed during 2021 (see, Note 4 – Accounting Policies and Recent Accounting Pronouncements – Goodwill and Intangible Assets).

Significant factors considered in estimating the fair value of the IPR&D intangible asset include the risks inherent in the development process, including the likelihood of achieving commercial success and the cost and related time to complete the remaining development. Future cash flows for the IPR&D asset were estimated based on forecasted revenue and costs, taking into account the expected product life cycle, market penetration, and growth rates. Other significant estimates and assumptions inherent in this approach include (i) the amount and timing of the projected net cash flows associated with the IPR&D asset; (ii) the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and (iii) the tax rate, which considers geographic diversity of the projected cash flows. Quantitative information about the significant unobservable inputs used in the fair value measurement of the IPR&D asset included a discount rate of approximately 19.0% and a tax rate of 30.0%. While we use the best available information to prepare our cash flows and discount rate assumptions, actual future cash flows could differ significantly based on the commercial success of the related drug candidate and market conditions which could result in future impairment charges related to the indefinite-lived intangible asset balance.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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