v3.26.1
Note 11 - Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

11. Fair Value Measurements

 

The fair values of cash and cash equivalents, prepaid and other current assets, accounts payable, accrued expenses, and other current liabilities approximate their carrying values because of the short-term nature of these instruments.

 

Our convertible notes are recorded at face value in the unaudited condensed consolidated balance sheets as of  June 30, 2026 and December 31, 2025.  As of  June 30, 2026 and December 31, 2025, the estimated fair value of our convertible notes was approximately $2.0 million and $2.8 million, respectively, and would be categorized within Level 2 of the fair value hierarchy. 

 

The following tables summarize the fair value of our contingent payment obligations measured at fair value on a recurring basis as of  June 30, 2026 and  December 31, 2025 (in thousands):

 

      

Fair Value Measurements

 
  

Total Fair Value

  

Quoted Prices in Active Markets (Level 1)

  

Significant Other Observable Inputs (Level 2)

  

Significant Unobservable Inputs (Level 3)

 

June 30, 2026:

                

Liabilities:

                

Secured contingent payment obligation

 $39,010  $-  $-  $39,010 

Unsecured contingent payment obligations

  5,753   -   -   5,753 

 

 

      

Fair Value Measurements

 
  

Total Fair Value

  

Quoted Prices in Active Markets (Level 1)

  

Significant Other Observable Inputs (Level 2)

  

Significant Unobservable Inputs (Level 3)

 

December 31, 2025:

                

Liabilities:

                

Secured contingent payment obligation

 $39,650  $-  $-  $39,650 

Unsecured contingent payment obligations

  6,439   -   -   6,439 

 

 

 

The fair values of our secured and unsecured contingent payment obligations were estimated using a probability-weighted income approach based on various cash flow scenarios as to the outcome of patent-related actions both in terms of timing and amount, discounted to present value using a risk-adjusted rate.  We used risk-adjusted discount rates for the secured and unsecured contingent payment obligations of 18.15% and 18.14%, respectively, at June 30, 2026, based on risk-free rates of 4.15% and 4.14%, respectively, as adjusted by 8% for credit risk and 6% for litigation inherent risk.  We used risk-adjusted discount rates for the secured and unsecured contingent payment obligations of 17.55% and 17.47%, respectively, at December 31, 2025, based on risk-free rates of 3.55% and 3.47%, respectively, as adjusted by 8% for credit risk and 6% for litigation inherent risk.

 

The following table provides quantitative information about the significant unobservable inputs used in the measurement of fair value for both the secured and unsecured contingent payment obligations at  June 30, 2026 and December 31, 2025, including the lowest and highest undiscounted payout scenarios as well as a weighted average payout scenario based on relative undiscounted fair value of each cash flow scenario.

 

June 30, 2026

 
  

Secured Contingent Payment Obligation

  

Unsecured Contingent Payment Obligations

 

Unobservable Inputs

 

Low

  

Weighted Average

  

High

  

Low

  

Weighted Average

  

High

 
                         

Estimated undiscounted cash outflows (in millions)

 $-  $69.1  $146.6  $-  $7.8  $10.8 

Duration (in years)

  1.0   3.5   4.0   1.0   1.9   3.5 

Estimated probabilities

  15%  21%  30%  15%  21%  30%

 

December 31, 2025

 
  

Secured Contingent Payment Obligation

  

Unsecured Contingent Payment Obligations

 

Unobservable Inputs

 

Low

  

Weighted Average

  

High

  

Low

  

Weighted Average

  

High

 
                         

Estimated undiscounted cash outflows (in millions)

 $-  $70.8  $150.3  $-  $8.1  $10.8 

Duration (in years)

  0.5   3.7   4.5   0.5   1.5   3.0 

Estimated probabilities

  15%  21%  30%  15%  21%  30%

 

We evaluate the estimates and assumptions used in determining the fair value of our contingent payment obligations each reporting period and make any adjustments prospectively based on those evaluations.  Changes in any of these Level 3 inputs could result in a significantly higher or lower fair value measurement.