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Note 11 - Fair Value Measurements
 6 Months Ended
Jun. 30, 2016
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
11.          Fair Value Measurements
 
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) 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. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
 
 
●
Level 1—Quoted prices in active markets for identical assets or liabilities.
 
 
 
 
 
 
●
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
 
 
●
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
 
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
 
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis:
 
 
 
June 30, 2016
 
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
   $ 3,006,149     $ —     $ —  
                         
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration
   $ —     $ —     $ 10,000  
 
 
 
December 31, 2015
 
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
   $ 1,997,192     $ —     $ —  
                         
Contingent consideration
   $ —     $ —     $ —  
 
 
As of June 30, 2016 and December 31, 2015, the fair value of the convertible notes was $1,700,000 and $4,800,000, respectively. The fair value of the convertible notes falls within Level 3 of the fair value hierarchy at December 31, 2015 as it is significantly driven by the creditworthiness of the Company, which is an unobservable input, and Level 1 at June 30, 2016 as the Company’s debt is convertible into shares of the Company’s common stock, which has quoted prices in an active market.
 
Contingent Value Rights Distribution
 
In December 2015, the Company’s Board of Directors authorized, declared and effected a distribution of contingent value rights (CVRs) to shareholders of the
Company as of the close of business on January 7, 2016 (the “CVR Record Date”) at a rate of one CVR for each share of the Company’s common stock. The CVRs, which are not certificated and not attached to the shares of the Company’s common stock, were payable immediately prior to the effective time. Each CVR represents a non-transferable right (subject to certain limited exceptions) to potentially receive certain cash payments in the event the Company receives net cash payments during the five-year period after the Merger as a result of the sale, transfer, license or similar transaction relating to the Company’s product currently known as RES-440, which is a “soft” anti-androgen, upon the terms and subject to the conditions set forth in a contingent value rights agreement, dated January 8, 2016, between the Company and Computershare, Inc., as rights agent (the “CVR Agreement”). The aggregate cash payments to be distributed to the holders of the CVRs, if any, will be equal to the amount of net cash payments received by the Company as a result of the sale, transfer, license or similar transaction relating to RES-440, as determined pursuant to the CVR Agreement, but will not exceed $50,000,000 in the aggregate. Any option or warrant holder of the Company as of the record date for the CVRs would, at the time of exercise, be entitled to receive one CVR for each share of the Company’s common stock issued upon the future exercise of the option or warrant, which would entitle the holder to a pro rata portion of any CVR payments made after the date of exercise.
 
 
 
 
The reconciliation of the contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows:
 
   
Contingent
Consideration
  
Issued in connection with the merger transaction
   $ 10,000  
Change in fair value
     —  
Balance at June 30, 2016
   $ $10,000