Note 5 - Fair Value Measurements

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 5 – FAIR VALUE MEASUREMENTS

We measure certain financial assets and liabilities at fair value on a recurring basis in the financial statements. The fair value hierarchy ranks the quality and reliability of inputs, or assumptions, used in the determination of fair value and requires financial assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories:

● Level 1 – quoted prices in active markets for identical assets and liabilities;

● Level 2 – inputs other than Level 1 quoted prices that are directly or indirectly observable; and

● Level 3 – unobservable inputs that are not corroborated by market data.

At the time of our merger (we were then known as Manhattan Pharmaceuticals, Inc. (Manhattan)) with Ariston Pharmaceuticals, Inc. (Ariston) in March 2010, Ariston issued $15.5 million of five-year 5% notes payable (the 5% Notes) in satisfaction of several note payable issuances. The 5% Notes and accrued and unpaid interest thereon are convertible at the option of the holder into common stock at the conversion price of $1,125 per share. We have no obligations under the 5% Notes aside from the conversion feature.

The following tables provide the fair value measurements of applicable financial liabilities as of December 31, 2023 and 2022:

	Financial liabilities at fair value as of December 31, 2023
(in thousands)	Level 1		Level 2		Level 3		Total
5% Notes	$	—	$	—	$	357	$	357
Total	$	—	$	—	$	357	$	357

	Financial liabilities at fair value as of December 31, 2022
	Level 1		Level 2		Level 3		Total
5% Notes	$	—	$	—	$	243	$	243
Total	$	—	$	—	$	243	$	243

The Level 3 amounts above represent the fair value of the 5% Notes and related accrued interest.

The Company’s financial instruments include cash, cash equivalents consisting of money market funds, accounts receivable, accounts payable and loan payable. As of December 31, 2023 and 2022, the fair values of cash and cash equivalents, restricted cash, accounts receivable, and loan and interest payable approximate their carrying value. The carrying value of loan payable on the Company’s balance sheet is estimated to approximate its fair value as the interest rate approximates the market rate for loans with similar terms and risk characteristics.

We have no Level 1 or Level 2 instruments. Our Level 3 instrument amounts represent the fair value of the 5% Notes and related accrued interest. The following table summarizes the changes in Level 3 instruments for the years ended December 31, 2023 and 2022:

(in thousands)
Balance at January 1, 2022		360
Interest accrued on face value of 5% Notes		1,073
Change in fair value of Level 3 liabilities		(1,190	)
Balance at December 31, 2022	$	243
Interest accrued on face value of 5% Notes		1,133
Change in fair value of Level 3 liabilities		(1,019	)
Balance at December 31, 2023	$	357

The change in the fair value of the Level 3 liabilities is reported in other (income) expense in the accompanying consolidated statements of operations.