navb20180630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-35076

NAVIDEA BIOPHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware

31-1080091

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

4995 Bradenton Avenue, Suite 240, Dublin, Ohio		43017-3552
(Address of principal executive offices)		(Zip Code)

(614) 793-7500

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Act.) Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 163,620,090 shares of common stock, par value $.001 per share (as of the close of business on August 1, 2018).

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenue:
Tc99m tilmanocept royalty revenue	$	6,665		$	—		$	7,460		$	—
License revenue		257,709			100,000			257,709			100,000
Grant and other revenue		277,753			511,599			553,403			1,091,629
Total revenue		542,127			611,599			818,572			1,191,629
Cost of revenue		35,392			—			35,710			—
Gross profit		506,735			611,599			782,862			1,191,629
Operating expenses:
Research and development		1,142,718			1,185,874			2,141,674			1,891,148
Selling, general and administrative		1,789,399			4,249,584			3,565,771			7,272,018
Total operating expenses		2,932,117			5,435,458			5,707,445			9,163,166
Loss from operations		(2,425,382	)		(4,823,859	)		(4,924,583	)		(7,971,537	)
Other (expense) income:
Interest (expense) income, net		(23,547	)		44,649			7,840			68,761
Change in fair value of financial instruments		—			12,872			—			153,357
Loss on extinguishment of debt		—			—			(4,265,434	)		(1,314,102	)
Other, net		2,828			(16,673	)		(1,886	)		(38,277	)
Total other (expense) income, net		(20,719	)		40,848			(4,259,480	)		(1,130,261	)
Loss before income taxes		(2,446,101	)		(4,783,011	)		(9,184,063	)		(9,101,798	)
Benefit from income taxes		10,929			1,631,234			10,929			3,085,406
Loss from continuing operations		(2,435,172	)		(3,151,777	)		(9,173,134	)		(6,016,392	)
Discontinued operations, net of tax effect:
Loss from discontinued operations		(1,938	)		(82,376	)		(1,938	)		(338,237	)
Gain (loss) on sale		43,053			(1,953,378	)		43,053			86,748,123
Net (loss) income		(2,394,057	)		(5,187,531	)		(9,132,019	)		80,393,494
Less (loss) income attributable to noncontrolling interest		(16	)		33			(25	)		(169	)
Net (loss) income attributable to common stockholders	$	(2,394,041	)	$	(5,187,564	)	$	(9,131,994	)	$	80,393,663
(Loss) income per common share (basic):
Continuing operations	$	(0.02	)	$	(0.02	)	$	(0.06	)	$	(0.04	)
Discontinued operations	$	—		$	(0.01	)	$	—		$	0.54
Attributable to common stockholders	$	(0.02	)	$	(0.03	)	$	(0.06	)	$	0.50
Weighted average shares outstanding (basic)		162,716,988			161,910,792			162,494,238			161,147,873
(Loss) income per common share (diluted):
Continuing operations	$	(0.02	)	$	(0.02	)	$	(0.06	)	$	(0.04	)
Discontinued operations	$	—		$	(0.01	)	$	—		$	0.52
Attributable to common stockholders	$	(0.02	)	$	(0.03	)	$	(0.06	)	$	0.49
Weighted average shares outstanding (diluted)		162,716,988			161,910,792			162,494,238			165,631,000

	Six Months Ended June 30,
	2018			2017
Cash flows from operating activities:
Net (loss) income	$	(9,132,019	)	$	80,393,494
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		75,498			161,751
Loss on disposal and abandonment of assets		—			806,710
Compounded interest on long term debt		84,576			182,680
Stock compensation expense		217,147			256,384
Change in fair value of financial instruments		—			(153,357	)
Loss on extinguishment of debt		4,265,434			1,314,102
Issued warrants in connection with Asset Sale		—			3,337,187
Value of stock issued to directors		—			10,500
Value of stock issued to employees		316,902			369,342
Value of stock issued to 401(k) plan for employer matching contributions		35,980			53,707
Changes in operating assets and liabilities:
Accounts and other receivables		12,573,372			(14,642,466	)
Inventory		—			1,470,826
Prepaid expenses and other assets		371,538			197,025
Accounts payable		(401,323	)		(5,502,541	)
Accrued and other liabilities		(112,274	)		(3,948,055	)
Deferred revenue		(5,037	)		(2,315,037	)
Net cash provided by operating activities		8,289,794			61,992,252
Cash flows from investing activities:
Purchases of available-for-sale securities		—			(2,000,000	)
Proceeds from sales of available-for-sale securities		200,000			—
Maturities of available-for-sale securities		800,000			—
Purchases of equipment		(3,165	)		(8,170	)
Net cash provided by (used in) investing activities		996,835			(2,008,170	)
Cash flows from financing activities:
Proceeds from issuance of common stock		200			54,319
Payment of debt-related costs		(7,153,000	)		(1,314,102	)
Principal payments on notes payable		(237,862	)		(59,630,775	)
Net cash used in financing activities		(7,390,662	)		(60,890,558	)
Net increase (decrease) in cash, cash equivalents and restricted cash		1,895,967			(906,476	)
Cash, cash equivalents and restricted cash, beginning of period		2,795,006			6,540,578
Cash, cash equivalents and restricted cash, end of period	$	4,690,973		$	5,634,102

1.	Summary of Significant Accounting Policies

Basis of Presentation: The information presented as of June 30, 2018 and for the three-month and six-month periods ended June 30, 2018 and 2017 is unaudited, but includes all adjustments (which consist only of normal recurring adjustments) that the management of Navidea Biopharmaceuticals, Inc. (“Navidea”, the “Company,” or “we”) believes to be necessary for the fair presentation of results for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. The balances as of June 30, 2018 and the results for the interim periods are not necessarily indicative of results to be expected for the year. The consolidated financial statements should be read in conjunction with Navidea’s audited consolidated financial statements for the year ended December 31, 2017, which were included as part of our Annual Report on Form 10-K.

Our consolidated financial statements include the accounts of Navidea and our wholly-owned subsidiaries, Navidea Biopharmaceuticals Limited and Cardiosonix Ltd, as well as those of our majority-owned subsidiary, Macrophage Therapeutics, Inc. (“MT”). All significant inter-company accounts were eliminated in consolidation. Cardiosonix was legally dissolved in September 2017.

On March 3, 2017, pursuant to an Asset Purchase Agreement dated November 23, 2016 (the “Purchase Agreement”), the Company completed its previously announced sale to Cardinal Health 414, LLC (“Cardinal Health 414”) of its assets used, held for use, or intended to be used in operating its business of developing, manufacturing and commercializing a product used for lymphatic mapping, lymph node biopsy, and the diagnosis of metastatic spread to lymph nodes for staging of cancer (the “Business”), including the Company’s radioactive diagnostic agent marketed under the Lymphoseek^® trademark for current approved indications by the U.S. Food and Drug Administration (“FDA”) and similar indications approved by the FDA in the future (the “Product”), in Canada, Mexico and the United States (the “Territory”) (giving effect to a License-Back Agreement and excluding certain assets specifically retained by the Company) (the “Asset Sale”). Such assets sold in the Asset Sale consist primarily of, without limitation, (i) intellectual property used in or reasonably necessary for the conduct of the Business, (ii) inventory of, and customer, distribution, and product manufacturing agreements related to, the Business, (iii) all product registrations related to the Product, including the new drug application approved by the FDA for the Product and all regulatory submissions in the United States that have been made with respect to the Product and all Health Canada regulatory submissions and, in each case, all files and records related thereto, (iv) all related clinical trials and clinical trial authorizations and all files and records related thereto, and (v) all rights, title and interest in and to the Product, as specified in the Purchase Agreement (the “Acquired Assets”).

Our consolidated balance sheets and statements of operations have been reclassified, as required, for all periods presented to reflect the Business as a discontinued operation. Cash flows associated with the operation of the Business have been combined with operating, investing and financing cash flows, as appropriate, in our consolidated statements of cash flows. See Note 3.

Certain prior period amounts also have been reclassified to conform with the current year’s presentation, including the adoption of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, and cash flows related to loss on extinguishment of debt.

Financial Instruments and Fair Value: In accordance with current accounting standards, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, we perform a detailed analysis of the assets and liabilities whose fair value is measured on a recurring basis. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3. See Note 5.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

(1)

Cash, available-for-sale securities, accounts and other receivables, and accounts payable: The carrying amounts approximate fair value because of the short maturity of these instruments. At June 30, 2018 and December 31, 2017, approximately $96,000 of accounts payable was being disputed by the Company related to unauthorized expenditures by a former executive during 2016.

(2)

Notes payable: The carrying value of our debt at June 30, 2018 and December 31, 2017 primarily consisted of the face amount of the notes less unamortized discounts. At June 30, 2018, the fair value of our notes payable was approximately $2.2 million, equal to the carrying value of $2.2 million. At December 31, 2017, the fair value of our notes payable was approximately $2.4 million, equal to the carrying value of $2.4 million. See Note 9.

(3)

Derivative liabilities: Derivative liabilities are related to certain outstanding warrants which are recorded at fair value. Derivative liabilities totaling $63,000 as of June 30, 2018 and December 31, 2017 are included in other liabilities on the consolidated balance sheets. The assumptions used to calculate fair value as of June 30, 2018 and December 31, 2017 included volatility, a risk-free rate and expected dividends. In addition, we considered non-performance risk and determined that such risk is minimal. Unrealized gains and losses on the derivatives are classified in other expenses as a change in the fair value of financial instruments in the statements of operations. See Note 5.

(4)

Warrants: In March 2017, in connection with the Asset Sale, the Company granted to each of Cardinal Health 414 and the University of California, San Diego, (“UCSD”), a five-year warrant to purchase up to 10 million shares and 1 million shares, respectively, of the Company’s common stock at an exercise price of $1.50 per share, each of which warrant is subject to anti-dilution and other customary terms and conditions (the “Series NN warrants”). The assumptions used to calculate fair value at the date of issuance included volatility, a risk-free rate and expected dividends. The Series NN warrants granted to Cardinal Health 414 had an estimated fair value of $3.3 million, which was recorded as a reduction of the gain on sale in the consolidated statement of operations for the six-month period ended June 30, 2017. The Series NN warrants granted to UCSD had an estimated fair value of $334,000, which was recorded as an intangible asset related to the UCSD license in the consolidated balance sheet at the time of issuance. See Note 13.

Revenue Recognition: We currently generate revenue primarily from grants to support various product development initiatives. We generally recognize grant revenue when expenses reimbursable under the grants have been paid and payments under the grants become contractually due.

We also earn revenues related to our licensing and distribution agreements. The consideration we are eligible to receive under our licensing and distribution agreements typically includes upfront payments, reimbursement for research and development costs, milestone payments, and royalties. Each licensing and distribution agreement is unique and requires separate assessment in accordance with current accounting standards. See Note 4.

Recently Adopted Accounting Standards: In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five-step process that requires companies to exercise more judgment and make more estimates than under the current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. Since the issuance of ASU 2014-09, several additional ASUs have been issued and incorporated within Topic 606 to clarify various elements of the guidance. ASU 2014-09 allows a choice of transition methods: (a) a full retrospective adoption in which the standard is applied to all of the periods presented, or (b) a modified retrospective adoption in which the standard is applied only to the most current period presented in the financial statements with a cumulative-effect adjustment reflected in retained earnings. ASU 2014-09 also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those periods.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers – Principal versus Agent Considerations (Reporting Revenue Gross versus Net). ASU 2016-08 does not change the core principle of the guidance, rather it clarifies the implementation guidance on principal versus agent considerations. ASU 2016-08 clarifies the guidance in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for ASU 2016-08 are the same as for ASU 2014-09, which was deferred by one year by ASU No. 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date. Public business entities should adopt the new revenue recognition standard for annual reporting periods beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year.

In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing. ASU 2016-10 does not change the core principle of the guidance, rather it clarifies the identification of performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. ASU 2016-10 clarifies the guidance in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for ASU 2016-10 are the same as for ASU 2014-09, which was deferred by one year by ASU No. 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date. Public business entities should adopt the new revenue recognition standard for annual reporting periods beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year.

In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers – Narrow-Scope Improvements and Practical Expedients. ASU 2016-12 does not change the core principle of the guidance, rather it affects only certain narrow aspects of Topic 606, including assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. ASU 2016-12 affects the guidance in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for ASU 2016-12 are the same as for ASU 2014-09, which was deferred by one year by ASU No. 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date. Public business entities should adopt the new revenue recognition standard for annual reporting periods beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year.

In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. ASU 2016-20 does not change the core principle of the guidance, rather it affects only certain narrow aspects of Topic 606, including loan guarantee fees, contract cost impairment testing, provisions for losses on construction- and production-type contracts, clarification of the scope of Topic 606, disclosure of remaining and prior-period performance obligations, contract modification, contract asset presentation, refund liability, advertising costs, fixed-odds wagering contracts in the casino industry, and cost capitalization for advisors to private and public funds. ASU 2016-20 affects the guidance in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for ASU 2016-12 are the same as for ASU 2014-09, which was deferred by one year by ASU No. 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date. Public business entities should adopt the new revenue recognition standard for annual reporting periods beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that year.

We adopted ASU 2014-09, along with additional related ASUs 2016-08, 2016-10, 2016-12 and 2016-20, effective January 1, 2018 using the modified retrospective method of adoption. The adoption of ASU 2014-09 and related ASUs resulted in increases in deferred revenue and accumulated deficit of $700,000. See Note 4.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows – Restricted Cash. ASU 2016-18 requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash or equivalents. Therefore, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption in permitted, including adoption in an interim period. If an entity early adopts ASU 2016-18 in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. We adopted ASU 2016-18 effective January 1, 2018. The adoption of ASU 2016-18 resulted in reclassification of $5.0 million of restricted cash in the consolidated statement of cash flows for the three-month period ended March 31, 2017.

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 amends Accounting Standards Codification (“ASC”) Topic 740 to provide guidance on accounting for the tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) pursuant to Staff Accounting Bulletin No. 118. ASU 2018-05 addresses situations where the accounting under ASC Topic 740 is incomplete for certain income tax effects of the Tax Act upon issuance of the entity’s financial statements for the reporting period in which the Tax Act was enacted. The adoption of ASU 2018-05 in March 2018 did not have a material effect on our consolidated financial statements.

Recently Issued Accounting Standards: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. ASU 2016-02 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We have begun our assessment of the impact of adopting ASU 2016-02, and expect to complete that process during the third quarter of 2018. We expect the adoption of ASU 2016-02 to result in an increase in right-of-use assets and lease liabilities on our consolidated statement of financial position related to our leases that are currently classified as operating leases, primarily for office space.

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards, and that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The adoption of ASU 2018-07 is not expected to have a significant impact on our consolidated financial statements.

In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. ASU 2018-09 updates a variety of topics in order to clarify, correct errors, or make minor improvements to the Codification, making it easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. Certain amendments in ASU 2015-09 are effective upon issuance, others are effective for annual periods beginning after December 15, 2018 for public business entities, and some have been made to recently issued guidance and will be subject to the effective dates within the relevant guidance. The adoption of ASU 2018-09 is not expected to have a significant impact on our consolidated financial statements.

2.	Liquidity

As disclosed in the Company’s Annual Report on Form 10-K and other filings, the Company has been engaged in ongoing litigation with Capital Royalty Partners II L.P. (“CRG”) in its capacity as a lender and as control agent for other affiliated lenders party to the CRG Loan Agreement, in the District Court of Harris County, Texas (the “Texas Court”) relating to CRG’s claims of default under the terms the CRG Loan Agreement. Following a trial in December 2017, the Texas Court ruled that the Company’s total obligation to CRG was in excess of $66.0 million, limited to $66.0 million under the parties’ Global Settlement Agreement reached in 2017. The Texas Court acknowledged only the $59.0 million payment made in March 2017, concluding that the Company owed CRG another $7.0 million, however the Texas Court did not expressly take the Company’s June 2016 payment of $4.1 million into account and awarded, as part of the $66.0 million, amounts that had already been paid as part of the $4.1 million. The Company believes that this $4.1 million should be credited against the $7.0 million; CRG disagrees.

On January 16, 2018, the Company filed an emergency motion to set supersedeas bond and to modify judgment, describing the double recovery created by the $66.0 million award without taking into account the $4.1 million payment in June 2016, requesting that the judgment be modified to set the supersedeas amount at $2.9 million so that the Company could stay enforcement of the judgment pending appeal. The Texas Court refused to rule on this motion, and the court of appeals entered an order compelling the Texas Court to set a supersedeas amount. On March 26, 2018, the Texas Court ordered the Company to put up a supersedeas bond in the amount of $7.7 million. The Company filed for an emergency stay of the order in the appellate court in Harris County. On April 2, 2018, the appellate court denied the Company’s emergency stay motion. The Company continues to believe that the $4.1 million paid to CRG in June 2016 should be credited as payment toward the $66.0 million total, and the Company intends to further contest the matter through the appellate court in Texas. Navidea’s brief on the merits in this appeal is due on August 10, 2018, but this deadline is subject to potential extension. Navidea does not expect a ruling on this appeal until 2019 at the earliest.

On April 2, 2018, the Company entered into an Amendment to the Asset Purchase Agreement (the “Amendment”). Pursuant to the Amendment, Cardinal Health 414 paid the Company approximately $6.0 million and agreed to pay the Company an amount equal to the unused portion of the letter of credit (not to exceed approximately $7.1 million) promptly after the earlier of (i) the expiration of the letter of credit and (ii) the receipt by Cardinal Health 414 of evidence of the return and cancellation of the letter of credit. In exchange, the obligation of Cardinal Health 414 to make any further contingent payments has been eliminated. Cardinal Health 414 is still obligated to make the milestone payments in accordance with the terms of the earnout provisions of the Purchase Agreement. On April 9, 2018, CRG drew approximately $7.1 million on the letter of credit. This was in addition to the $4.1 million and the $59.0 million that Navidea had previously paid to CRG.

On April 12, 2018 Navidea filed suit in the Court of Common Pleas for Franklin County, Ohio (the “Ohio Court”) against CRG and certain of its affiliates (collectively, the “Lenders”). The suit asserts that the Lenders fraudulently induced Navidea to enter into a settlement agreement and breached the terms of the same through certain actions taken by the Lenders in connection with the Global Settlement Agreement reached in 2017, pursuant to which Navidea agreed to pay up to $66.0 million to Lenders, as well as through actions and misrepresentations by CRG after the Global Settlement Agreement was executed. The suit also asserts claims for conversion and unjust enrichment against the Lenders for their collection of more than $66.0 million, the maximum permitted under the Global Settlement Agreement, and their double recovery of amounts paid as part of the $4.1 million paid in June 2016 and recovered again as part of the $66.0 million. CRG’s double recovery and recovery of more than $66.0 million are due to CRG drawing the entire $7.1 million on the Cardinal Health 414 letter of credit. On May 22, 2018 Navidea filed an amended complaint asserting additional claims, including claims for breach of confidentiality by CRG, and on June 26, 2018 CRG filed a motion seeking to dismiss the amended complaint. CRG’s motion to dismiss has been fully briefed and a decision on the motion is expected from the Court in the near future.

In a related proceeding before the Ohio Court, initially filed in 2016, and under which the Global Settlement Agreement was reached in 2017, the Ohio Court has issued preliminary findings that the settlement gave rise to a $66.0 million cap on amounts owed to Lenders by Navidea and that Navidea might not have been properly credited for certain funds in excess of $4.1 million previously swept by Lenders from a bank account owned by Navidea. The Ohio Court also made a preliminary ruling that it possessed jurisdiction to interpret the settlement agreement at issue. The Company is pursuing recovery of the $4.1 million, and other damages, in the Ohio Court.

On April 11, 2018, CRG filed a new suit against the Company in the Texas Court. This new suit seeks a declaratory judgment that CRG did not breach the Global Settlement Agreement by drawing approximately $7.1 million on the Cardinal Health 414 letter of credit. On April 16, 2018, CRG moved the Texas Court to issue an anti-suit injunction barring the Company from litigating in the Ohio Court. The Texas Court denied that motion on April 27, 2018. The Company moved to dismiss these claims pursuant to the Texas Citizens Participation Act. This motion to dismiss will be heard by the Texas Court on August 20, 2018.

On July 11, 2018, CRG filed a first amended petition in the new suit. This amended petition includes the prior request for declaratory judgment that CRG did not breach the Global Settlement Agreement. In addition, the amended petition asserts a claim against Navidea for breach of contract. CRG alleges that Navidea breached the Global Settlement Agreement and its duty of good faith and fair dealing by seeking reconsideration in the original Texas suit, appealing the original Texas suit, and filing the Ohio suit. The Company is contesting this issue in the Ohio Court, the Texas Court, and on appeal in Texas.

In addition, the Company previously was a party to a Loan Agreement with Platinum-Montaur Life Sciences LLC (“Platinum-Montaur”), an affiliate of Platinum Management (NY) LLC, Platinum Partners Value Arbitrage Fund L.P. (“PPVA”), Platinum Partners Liquid Opportunity Master Fund L.P., Platinum Liquid Opportunity Management (NY) LLC, and Montsant Partners LLC (collectively, “Platinum”) (the “Platinum Loan Agreement”) and a Third Amended and Restated Promissory Note (“Platinum Note”) given by Navidea in favor of Platinum-Montaur.

In connection with the closing of the Asset Sale to Cardinal Health 414, the Company repaid to Platinum Partners Capital Opportunity Fund L.P. (“PPCO”) an aggregate of approximately $7.7 million in partial satisfaction of the Company’s liabilities, obligations and indebtedness under the Platinum Loan Agreement between the Company and Platinum-Montaur, which were transferred by Platinum-Montaur to PPCO. The Company was informed by PPVA that it was the owner of additional amounts owed on the Platinum-Montaur loan. PPVA claims a balance of approximately $1.9 million was due upon closing of the Asset Sale. That amount is also subject to competing claims of ownership by Dr. Michael Goldberg, the Company’s President and Chief Executive Officer. The Company has not yet paid any amounts to PPVA or Dr. Goldberg given the pending dispute.

On November 2, 2017, Platinum-Montaur commenced an action against the Company in the Supreme Court of the State of New York, County of New York, seeking damages of approximately $1.9 million purportedly due as of March 3, 2017, plus interest accruing thereafter. The claims asserted are for breach of contract and unjust enrichment in connection with funds received by the Company under the Platinum Loan Agreement. Said action was removed to the United States District Court for the Southern District of New York on December 6, 2017. An initial pretrial conference was held on January 26, 2018 and a follow up status conference was held on March 9, 2018, during which the Court set a briefing schedule and determined that Navidea’s motion to dismiss was due on April 6, 2018. The Company filed its motion to dismiss in advance of the filing deadline and the motion has been fully briefed with a decision expected from the Court in the near future.

The Company has experienced recurring net losses and recent unfavorable court rulings, and has used significant cash to fund its operations, all of which are factors that raise substantial doubt about our ability to continue as a going concern. Our projected cash burn factors in certain cost cutting initiatives that have been approved by the board of directors and implemented, including reductions in the workforce and a reduction in facilities expenses. Additionally, we have considerable discretion over the extent of development project expenditures and have the ability to curtail the related cash flows as needed. The Company also has funds remaining under outstanding grant awards, and continues working to establish new sources of funding, including collaborations, potential equity investments, and additional grant funding that can augment the balance sheet as the Company works to reduce spending. However, based on our current working capital and our projected cash burn, and without definitive agreements in place for additional funding, management believes that there is substantial doubt about the Company’s ability to continue as a going concern for at least twelve months following the issuance of this Quarterly Report on Form 10-Q.

3.	Discontinued Operations

On March 3, 2017, the Company completed the sale to Cardinal Health 414 of its assets used, held for use, or intended to be used in operating its business of developing, manufacturing and commercializing a product used for lymphatic mapping, lymph node biopsy, and the diagnosis of metastatic spread to lymph nodes for staging of cancer, including the Company’s radioactive diagnostic agent marketed under the Lymphoseek^® trademark for current approved indications by the FDA and similar indications approved by the FDA in the future, in Canada, Mexico and the United States. In exchange for the Acquired Assets, Cardinal Health 414 (i) made a cash payment to the Company at closing of approximately $80.6 million after adjustments based on inventory being transferred and an advance of $3.0 million of guaranteed earnout payments as part of the CRG settlement, (ii) assumed certain liabilities of the Company associated with the Product as specified in the Purchase Agreement, and (iii) agreed to make periodic earnout payments (to consist of contingent payments and milestone payments which, if paid, will be treated as additional purchase price) to the Company based on net sales derived from the purchased Product.

On April 2, 2018, the Company entered into an Amendment to the Asset Purchase Agreement. Pursuant to the Amendment, Cardinal Health 414 paid the Company approximately $6.0 million and agreed to pay the Company an amount equal to the unused portion of the letter of credit (not to exceed approximately $7.1 million) promptly after the earlier of (i) the expiration of the letter of credit and (ii) the receipt by Cardinal Health 414 of evidence of the return and cancellation of the letter of credit. In exchange, the obligation of Cardinal Health 414 to make any further contingent payments has been eliminated. Cardinal Health 414 is still obligated to make the milestone payments in accordance with the terms of the earnout provisions of the Purchase Agreement. On April 9, 2018, CRG drew approximately $7.1 million on the letter of credit. This was in addition to the $4.1 million and the $59.0 million that Navidea had previously paid to CRG.

We recorded a net gain on the sale of the Business of $86.7 million for the six months ended June 30, 2017, including $16.5 million in guaranteed consideration, which was discounted to the present value of future cash flows. The proceeds were offset by $3.3 million in estimated fair value of warrants issued to Cardinal Health 414, $2.0 million in legal and other fees related to the sale, $800,000 in net balance sheet dispositions and write-offs, and $6.5 million in estimated taxes.

As a result of the Asset Sale, we reclassified certain assets and liabilities as assets and liabilities associated with discontinued operations. The following liabilities have been segregated and included in liabilities associated with discontinued operations, as appropriate, in the consolidated balance sheets:

June 30,

2018

December 31,

2017

Accrued liabilities

—

7,092

Liabilities associated with discontinued operations, current

—

7,092

In addition, we reclassified certain revenues and expenses related to the Business to discontinued operations for all periods presented, including interest expense related to the CRG and Platinum debt obligations as required by current accounting guidance. The following amounts have been segregated from continuing operations and included in discontinued operations in the consolidated statements of operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Lymphoseek sales revenue	$	—		$	9,663		$	—		$	2,926,876
Cost of goods sold		—			24,216			—			388,408
Gross profit		—			(14,553	)		—			2,538,468
Operating expenses:
Research and development		2,453			75,196			2,453			358,729
Selling, general and administrative		—			—			—			820,203
Total operating expenses		2,453			75,196			2,453			1,178,932
(Loss) income from discontinued operations		(2,453	)		(89,749	)		(2,453	)		1,359,536
Interest expense		—			—			—			(1,718,506	)
Loss before income taxes		(2,453	)		(89,749	)		(2,453	)		(358,970	)
Benefit from income taxes		515			7,373			515			20,733
Loss from discontinued operations	$	(1,938	)	$	(82,376	)	$	(1,938	)	$	(338,237	)

4.	Revenue from Contracts with Customers

The Company adopted ASU 2014-09, along with all subsequent related ASUs impacting revenue from contracts with customers (collectively, “the new revenue recognition standard”), effective January 1, 2018, using the modified retrospective method of adoption. The Company has applied the new revenue recognition standard for the three-month and six-month periods ended June 30, 2018 with the cumulative effect of initially applying the new accounting recognized on January 1, 2018 as an adjustment to opening accumulated deficit. This adjustment reflects only contracts that were not completed as of January 1, 2018.

We earn revenues related to our licensing and distribution agreements. The terms of these agreements may include payment to us of non-refundable up-front license fees, funding or reimbursement of research and development efforts, milestone payments if specified objectives are achieved, and/or royalties on product sales. The new revenue recognition standard generally results in the delay of revenue recognition for the Company, as compared to the previous guidance. Previously, the Company recognized revenue related to non-refundable up-front license fees either immediately upon contract execution, or over the estimated period required to fulfill the related obligations. Under the new revenue recognition standard, the Company will generally be required to defer any up-front license fees and pre-market milestones, and recognize the revenue over the period beginning with initial product sale through the end of the initial term of the agreement.

The cumulative effect of the change on accumulated deficit as of January 1, 2018 is an increase of $700,000, consisting of $100,000 related to an up-front payment received upon execution of an exclusive license and distribution agreement with Sayre Pharmaceuticals (“Sayre”) for the development and commercialization of Tc99m tilmanocept in India in June 2017, and $600,000 related to up-front and milestone payments received pursuant to an exclusive licensing and distribution agreement with Beijing Sinotau Medical Research Co., Ltd. (“Sinotau”) for the marketing and distribution of Tc99m tilmanocept in China executed in August 2014. The following table compares deferred revenue as if the new revenue recognition standard had not been adopted to the amounts in the consolidated financial statements reflecting the adoption. Deferred revenue, the current portion of which is included in accrued liabilities and other in the consolidated balance sheets, and accumulated deficit are the only financial statement line items that were affected by the adoption of the new revenue recognition standard.

Pre-

Adoption

Post-

Adoption

Change

Deferred revenue

26,061

726,061

700,000

Accumulated deficit

(319,908,968

)

(320,608,968

)

(700,000

)

During the three-month and six-month periods ended June 30, 2018, the Company recognized revenue from contracts with customers of approximately $264,000 and 265,000, respectively. The Company did not recognize any related impairment losses during those periods.

Navidea is focused on the development and commercialization of precision immunodiagnostic agents and immunotherapeutics. We manage our business based on two primary types of drug products: (i) diagnostic substances, including Tc99m tilmanocept and other diagnostic applications of our Manocept platform, and (ii) therapeutic development programs, including therapeutic applications of our Manocept platform and all development programs undertaken by MT. Tc99m tilmanocept, which the Company has a license to distribute outside of Canada, Mexico and the United States, is the only one of the Company’s drug product candidates that has been approved for sale in any market. The Company has license and distribution agreements in place in Europe, India and China, however Tc99 tilmanocept has only been approved for sale in Europe.

In April 2018, the Company executed an agreement to provide Meilleur Technologies, Inc., (“Meilleur”), a wholly-owned subsidiary of Cerveau Technologies, Inc. (“Cerveau”), worldwide rights to conduct research using NAV4694, as well as an exclusive license for the development and commercialization of NAV4694 in Australia, Canada, China, and Singapore. Meilleur also has an option to commercialize worldwide.

The following tables disaggregate the Company’s revenue from contracts with customers for the three-month and six-month periods ended June 30, 2018.

Three Months Ended June 30, 2018	Diagnostics		Therapeutics		Total
Tc99m tilmanocept royalty revenue:
Europe	$	6,665	$	—	$	6,665
India		—		—		—
China		—		—		—
Total	$	6,665	$	—	$	6,665

License revenue:
NAV4694 sublicense	$	257,709	$	—	$	257,709

Other revenue:
Additional stability studies	$	—	$	—	$	—

Six Months Ended June 30, 2018	Diagnostics		Therapeutics		Total
Tc99m tilmanocept royalty revenue:
Europe	$	7,460	$	—	$	7,460
India		—		—		—
China		—		—		—
Total	$	7,460	$	—	$	7,460

License revenue:
NAV4694 sublicense	$	257,709	$	—	$	257,709

Other revenue:
Additional stability studies	$	15,037	$	—	$	15,037

The following economic factors affect the nature, amount, timing and uncertainty of the Company’s revenue and cash flows as indicated:

Geographical Location of Customers: Drug pricing models vary among different markets, which in turn may affect the royalty rates and milestones we are able to negotiate with our distributors in those markets. Royalty rates and milestone payments vary by contract but may be based in part on the potential market size in each territory. Royalty rates for Europe are lower than rates in India but higher than in China.

Status of Regulatory Approval: The majority of revenue from contracts with customers will generally be recognized after the product is approved for sale in each market. Each customer operates in its own distinct regulatory environment, and the laws and pathways to drug product approval vary by market. Tc99m tilmanocept has been approved for sale in Europe, thus the Company has begun to recognize royalties from sales in Europe. Tc99m tilmanocept has not yet been approved for sale in India or China, and may never achieve approval in those markets. The regulatory pathways and timelines in those markets will impact whether and when the Company recognizes the related royalties and milestones.

The following table summarizes the changes in contract liabilities, the current portion of which is included in accrued liabilities and other in the consolidated balance sheets, during the three-month and six-month periods ended June 30, 2018 and 2017:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018			2017
Total deferred revenue, beginning of period	$	711,024	$	26,061	$	26,061		$	41,098
Impact of adoption of ASU 2014-09 and related standards		—		—		700,000			—
Revenue receivable		10,000		—		10,000			—
Revenue recognized from satisfaction of performance obligations		—		—		(15,037	)		(15,037	)
Total deferred revenue, end of period	$	721,024	$	26,061	$	721,024		$	26,061

Currently, the Company recognizes revenue from up-front license fees and pre-market milestones after the cash has been received from its customers and the performance obligations have been met. Payments for sales-based royalties and milestones are generally received after the related revenue has been recognized and invoiced. Normal payment terms generally range from 15 to 90 days following milestone achievement or royalty invoice, in accordance with each contract. The Company had trade receivables of $10,000 outstanding as of and during the three-month and six-month periods ended June 30, 2018.

During the three-month and six-month periods ended June 30, 2018, the Company did not recognize any revenue from performance obligations associated with long-term contracts that were satisfied (or partially satisfied) in previous periods.

Up-front and milestone payments received related to our license and distribution agreements in India and China are deferred until Tc99m tilmanocept has been approved by the regulatory authorities in each of those countries. It is not possible to determine with any degree of certainty whether or when regulatory approval for this product will be achieved in India or China, if at all. In addition, since sales of Tc99m tilmanocept have not yet begun in India or China, there is no basis for estimating whether, to what degree, or the rate at which the product will be accepted and utilized in these markets. Therefore, it is not possible to determine with any degree of certainty the expected sales in future periods in those countries. As such, the Company intends to recognize revenue from up-front and milestone payments on a straight-line basis beginning at the time of regulatory approval in each country through the end of the initial term of each agreement. The initial term of each agreement is eight years in India and 10 years in China.

The transaction price of a contract is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. Transaction prices do not include amounts collected on behalf of third parties (e.g., sales taxes). To determine the transaction price of a contract, the Company considers the terms of the contract. For the purpose of determining transaction prices, the Company assumes that the goods or services will be transferred to the customer as promised in accordance with existing contracts and that the contracts will not be cancelled, renewed, or modified.

When estimating a contract’s transaction price, the Company considers all the information (historical, current, and forecasted) that is reasonably available to it and identifies possible consideration amounts. Most of the Company’s contracts with customers include both fixed and variable components of the transaction price. Under those contracts, some or all of the consideration for satisfied performance obligations is contingent on events over which the Company has no direct influence. For example, regulatory approval or product sales volume milestones are contingent upon the achievement of those milestones by the distributor. Additionally, the prices charged to end users of Tc99m tilmanocept, upon which royalty payments are based in Europe, India and China, are set by the distributor in each of those countries.

The milestone payments have a binary outcome (that is, the Company will either receive all or none of each milestone payment) and can be estimated using the most-likely-amount method. Taking into account the constraint on variable consideration, the Company has assessed the likelihood of achieving the non-sales-based milestone payments in our contracts and has determined that it is probable the milestones will be achieved and the Company will receive the consideration. Accordingly, it is probable that including those payments in the transaction price will not result in a significant revenue reversal when the contingency is resolved. Therefore, the amount of the non-sales-based milestone payments is included in the transaction price.

Royalties are estimated based on the expected value method because they are based on a variable amount of sales representing a range of possible outcomes. However, when taking into account the constraint on variable consideration, the estimate of future royalties included in the transaction price is generally $0. This conclusion is based on the fact that Tc99m tilmanocept is early in the commercial launch process in Europe and sales have not yet begun in India or China, therefore there is currently no basis for estimating whether, to what degree, or the rate at which the product will be accepted and utilized in these markets. Similarly, we currently have no basis for estimating whether sales-based milestones will ever be achieved. Accordingly, the Company recognizes revenue from royalties when the related sales occur and from sales-based milestones when they are achieved.

The sublicense of NAV4694 to Meilleur provides for payments to Navidea including up-front payments, milestones, an option for worldwide commercial rights, royalties on net sales, and reimbursement for product development assistance during the initial transition period. In accordance with the new revenue recognition standard, the upfront payments were recognized upon contract inception, and reimbursement for product development assistance will be recognized on a monthly basis. Should some or all of the variable consideration from milestones, the option and royalties meet the requirements of the new revenue recognition standard to be included in the transaction price, those amounts will be recognized as revenue in future periods.

Up-front fees, milestones and royalties are generally non-refundable. Therefore, the Company does not estimate expected refunds nor do we adjust revenue downward. The Company will evaluate and update the estimated transaction prices of its contracts with customers at the end of each reporting period.

Through June 30, 2018, the Company has not capitalized any contract-related costs as contract assets.

9.	Notes Payable

Platinum

In July 2012, we entered into an agreement with Platinum-Montaur to provide us with a credit facility of up to $50 million. In connection with the closing of the Asset Sale to Cardinal Health 414, the Company repaid to PPCO an aggregate of approximately $7.7 million in partial satisfaction of the Company’s liabilities, obligations and indebtedness under the Platinum Loan Agreement between the Company and Platinum-Montaur, which were transferred by Platinum-Montaur to PPCO. The Company was informed by PPVA that it was the owner of additional amounts owed on the Platinum-Montaur loan. PPVA claims a balance of approximately $1.9 million was due upon closing of the Asset Sale. That amount is also subject to competing claims of ownership by Dr. Michael Goldberg, the Company’s President and Chief Executive Officer. The Company has not yet paid any amounts to PPVA or Dr. Goldberg given the pending dispute.

During the six-month periods ended June 30, 2018 and 2017, $85,000 and $183,000 of interest was compounded and added to the balance of the Platinum Note, respectively. As of June 30, 2018, the remaining outstanding principal balance of the Platinum Note was approximately $2.1 million.

The Platinum Note is reflected on the consolidated balance sheets at its estimated fair value, which includes the estimated fair value of the embedded conversion option of $0 at June 30, 2018 and December 31, 2017. Changes in the estimated fair value of the Platinum Note were $0 and a decrease of $13,000, respectively, and were recorded as non-cash changes in fair value of the conversion option during the three-month periods ended June 30, 2018 and 2017. Changes in the estimated fair value of the Platinum Note were $0 and a decrease of $153,000, respectively, and were recorded as non-cash changes in fair value of the conversion option during the six-month periods ended June 30, 2018 and 2017. The estimated fair value of the Platinum Note was $2.1 million and $2.0 million as of June 30, 2018 and December 31, 2017, respectively.

Capital Royalty Partners II, L.P.

As disclosed in the Company’s Annual Report on Form 10-K and other filings, the Company has been engaged in ongoing litigation with CRG, in its capacity as a lender and as control agent for other affiliated lenders party to the CRG Loan Agreement, in the Texas Court relating to CRG’s claims of default under the terms the CRG Loan Agreement. Following a trial in December 2017, the Texas Court ruled that the Company’s total obligation to CRG was in excess of $66.0 million, limited to $66.0 million under the parties’ Global Settlement Agreement reached in 2017. The Texas Court acknowledged only the $59.0 million payment made in March 2017, concluding that the Company owed CRG another $7.0 million, however the Texas Court did not expressly take the Company’s June 2016 payment of $4.1 million into account and awarded, as part of the $66.0 million, amounts that had already been paid as part of the $4.1 million. The Company believes that this $4.1 million should be credited against the $7.0 million; CRG disagrees.

On April 9, 2018, CRG drew approximately $7.1 million on the letter of credit. This was in addition to the $4.1 million and the $59.0 million that Navidea had previously paid to CRG.

On April 12, 2018 Navidea filed suit in the Ohio Court against the Lenders. The suit asserts that the Lenders fraudulently induced Navidea to enter into a settlement agreement and breached the terms of the same through certain actions taken by the Lenders in connection with the Global Settlement Agreement reached in 2017, pursuant to which Navidea agreed to pay up to $66.0 million to Lenders, as well as through actions and misrepresentations by CRG after the Global Settlement Agreement was executed. The suit also asserts claims for conversion and unjust enrichment against the Lenders for their collection of more than $66.0 million, the maximum permitted under the Global Settlement Agreement, and their double recovery of amounts paid as part of the $4.1 million paid in June 2016 and recovered again as part of the $66.0 million. CRG’s double recovery and recovery of more than $66.0 million are due to CRG drawing the entire $7.1 million on the Cardinal Health 414 letter of credit. On May 22, 2018 Navidea filed an amended complaint asserting additional claims, including claims for breach of confidentiality by CRG, and on June 26, 2018 CRG filed a motion seeking to dismiss the amended complaint. CRG’s motion to dismiss has been fully briefed and a decision on the motion is expected from the Court in the near future.

IPFS Corporation

In December 2016, we prepaid $348,000 of insurance premiums through the issuance of a note payable to IPFS Corporation (“IPFS”) with an interest rate of 8.99%. The note was payable in eight monthly installments of $45,000, with the final payment made in July 2017.

In November 2017, we prepaid $396,000 of insurance premiums through the issuance of a note payable to IPFS with an interest rate of 4.0%. The note is payable in ten monthly installments of $40,000, with the final payment due in August 2018. The balance of the note was approximately $80,000 and $318,000 as of June 30, 2018 and December 31, 2017, respectively, and was included in notes payable, current in the consolidated balance sheets.

Summary

During the three-month periods ended June 30, 2018 and 2017, we recorded interest expense of $45,000 and $43,000, respectively, related to our notes payable. Of these amounts, $43,000 and $40,000 was compounded and added to the balance of our notes payable during the three-month periods ended June 30, 2018 and 2017, respectively. During the six-month periods ended June 30, 2018 and 2017, we recorded interest expense of $89,000 and $1.8 million, respectively, related to our notes payable. Of these amounts, $85,000 and $183,000 was compounded and added to the balance of our notes payable during the six-month periods ended June 30, 2018 and 2017, respectively.

11.	Commitments and Contingencies

We are subject to legal proceedings and claims that arise in the ordinary course of business.

Sinotau Litigation – NAV4694

On August 31, 2015, Sinotau filed a suit for damages, specific performance, and injunctive relief against the Company in the U.S. District Court for the District of Massachusetts alleging breach of a letter of intent for licensing to Sinotau of the Company’s NAV4694 product candidate and technology. In September 2016, the Court denied the Company’s motion to dismiss. The Company filed its answer to the complaint and the parties have filed multiple joint motions to stay the case pending settlement discussion, which to date have been granted.

In October 2017, the Company executed a letter of intent with Sinotau and Cerveau outlining a plan to sublicense to Cerveau the worldwide rights to conduct research using NAV4694, as well as grant to Cerveau an exclusive license for the development, marketing and commercialization of NAV4694 in Australia, Canada, China and Singapore. The letter of intent included a provision stating that Sinotau will release all claims in the Sinotau Litigation upon the parties’ execution of a definitive agreement; the commercial rights agreement contemplated by the letter of intent would also include a release of such claims and a covenant not to sue on such claims.

In April 2018, the Company executed an agreement to provide Meilleur worldwide rights to conduct research using NAV4694, as well as an exclusive license for the development and commercialization of NAV4694 in Australia, Canada, China, and Singapore. Meilleur also has an option to commercialize worldwide. As a result of the agreement, Navidea expects that the litigation initiated by Sinotau will be dismissed.

CRG Litigation

On April 9, 2018, CRG drew approximately $7.1 million on the letter of credit. This was in addition to the $4.1 million and the $59.0 million that Navidea had previously paid to CRG.

Sinotau Litigation – Tc99m Tilmanocept

On February 1, 2017, Navidea filed suit against Sinotau in the U.S. District Court for the Southern District of Ohio. The Company's complaint included claims seeking a declaration of the rights and obligations of the parties to an agreement regarding rights for the Tc99m tilmanocept product in China and other claims. The complaint sought a temporary restraining order (“TRO”) and preliminary injunction to prevent Sinotau from interfering with the Company’s Asset Sale to Cardinal Health 414. On February 3, 2017, the Court granted the TRO and extended it until March 6, 2017. The Asset Sale closed on March 3, 2017. On March 6, the Court dissolved the TRO as moot. Sinotau also filed a suit against the Company and Cardinal Health 414 in the U.S. District Court for the District of Delaware on February 2, 2017. On July 12, 2017, the District of Delaware case was transferred to the Southern District of Ohio. On July 27, 2017 the Ohio Court determined that both cases in the Southern District of Ohio are related and the case was stayed for 60 days pending settlement discussions. On February 8, 2018, Navidea and Sinotau executed an amendment to the agreement, modifying certain terms of the agreement and effectively resolving the legal dispute. On February 17, 2018, Navidea and Sinotau executed a Settlement Agreement and Mutual Release, and on February 20, 2018, Navidea and Sinotau voluntarily dismissed their legal cases.

Platinum-Montaur Life Sciences LLC

In accordance with ASC Topic 450, Contingencies, we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Although the outcome of any litigation is uncertain, in our opinion, the amount of ultimate liability, if any, with respect to these actions, will not materially affect our financial position.

14.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. DTAs and DTLs are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on DTAs and DTLs of a change in tax rates is recognized in income in the period that includes the enactment date.

Current accounting standards require a valuation allowance against DTAs if, based on the weight of available evidence, it is more likely than not that some or all of the DTAs may not be realized. Due to the uncertainty surrounding the realization of these DTAs in future tax returns, all of the DTAs have been fully offset by a valuation allowance at June 30, 2018 and December 31, 2017, except the alternative minimum tax (“AMT”) credit carryforward amount described below.

In assessing the realizability of DTAs, management considers whether it is more likely than not that some portion or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the DTAs are deductible, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences or tax carryforwards as of June 30, 2018 except for the AMT credit carryforward.

The Tax Cuts and Jobs Act was signed into law on December 22, 2017. The Tax Act reduced the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018. The Tax Act repeals the AMT for corporations, and permits any existing AMT credit carryforwards to be used to reduce the regular tax obligation in 2018, 2019 and 2020. Companies may continue using AMT credits to offset any regular income tax liability in years 2018 through 2020, with 50 percent of remaining AMT credits refunded in each of the 2018, 2019 and 2020 tax years, and all remaining credits refunded in tax year 2021. This results in full realization of an existing AMT credit carryforward irrespective of future taxable income. Accordingly, the Company recorded AMT credit carryforwards of $1.2 million in other noncurrent assets in the consolidated balance sheets as of June 30, 2018 and December 31, 2017. The impact of many provisions of the Tax Act lack clarity and is subject to interpretation until additional IRS guidance is issued. The ultimate impact of the Tax Act may differ from the Company’s estimates due to changes in the interpretations and assumptions made as well as any forthcoming regulatory guidance.

Current accounting standards include guidance on the accounting for uncertainty in income taxes recognized in the financial statements. Such standards also prescribe a recognition threshold and measurement model for the financial statement recognition of a tax position taken, or expected to be taken, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company believes that the ultimate deductibility of all tax positions is highly certain, although there is uncertainty about the timing of such deductibility. As a result, no liability for uncertain tax positions was recorded as of June 30, 2018 or December 31, 2017 and we do not expect any significant changes in the next twelve months. Should we need to accrue interest or penalties on uncertain tax positions, we would recognize the interest as interest expense and the penalties as a selling, general and administrative expense. As of June 30, 2018, tax years 2014-2017 remained subject to examination by federal and state tax authorities.

Benefit from income taxes was $11,000 for the three-month period ended June 30, 2018, representing an effective tax rate of 21.0%, as compared to a benefit from income taxes of $1.6 million for the three-month period ended June 30, 2017, representing an effective tax rate of 34.0%. The decrease in the effective rate for the three-month period ended June 30, 2018 compared with the same period in 2017 is primarily due to the corporate rate reduction of the Tax Act.

As of June 30, 2018, we had approximately $131.8 million of federal and $20.4 million of state net operating loss carryforwards, as well as approximately $9.7 million of federal R&D credit carryforwards.

15.	Segments

We report information about our operating segments using the “management approach” in accordance with current accounting standards. This information is based on the way management organizes and reports the segments within the enterprise for making operating decisions and assessing performance. Our reportable segments are identified based on differences in products, services and markets served. There were no inter-segment sales. We manage our business based on two primary types of drug products: (i) diagnostic substances, including Tc99m tilmanocept and other diagnostic applications of our Manocept platform, and NAV4694 (sublicensed in April 2018), and (ii) therapeutic development programs, including therapeutic applications of our Manocept platform and all development programs undertaken by MT.

The information in the following tables is derived directly from each reportable segment’s financial reporting.

Three Months Ended June 30, 2018	Diagnostics			Therapeutics			Corporate			Total
Royalty revenue	$	6,665		$	—		$	—		$	6,665
License revenue		257,709			—			—			257,709
Grant and other revenue		156,889			120,864			—			277,753
Total revenue		421,263			120,864			—			542,127
Cost of revenue		35,392			—			—			35,392
Research and development expenses		913,158			229,560			—			1,142,718
Selling, general and administrative expenses, excluding depreciation and amortization ⁽¹⁾		—			16,630			1,735,258			1,751,888
Depreciation and amortization ⁽²⁾		—			—			37,511			37,511
Loss from operations ⁽³⁾		(527,287	)		(125,326	)		(1,772,769	)		(2,425,382	)
Other expense ⁽⁴⁾		—			—			(20,719	)		(20,719	)
Income tax benefit		2,356			560			8,013			10,929
Net loss from continuing operations		(524,931	)		(124,766	)		(1,785,475	)		(2,435,172	)
Loss from discontinued operations, net of tax		(1,938	)		—			—			(1,938	)
Gain on sale of discontinued operations, net of tax		43,053			—			—			43,053
Net loss		(483,816	)		(124,766	)		(1,785,475	)		(2,394,057	)
Total assets, net of depreciation and amortization:
United States	$	409,769		$	87,751		$	8,139,434		$	8,636,954
International		22,147			—			1,391			23,538
Capital expenditures		—			—			3,165			3,165

Three Months Ended June 30, 2017	Diagnostics			Therapeutics			Corporate			Total
Royalty revenue	$	—		$	—		$	—		$	—
License revenue		100,000			—			—			100,000
Grant and other revenue		418,375			93,224			—			511,599
Total revenue		518,375			93,224			—			611,599
Research and development expenses		1,108,101			77,773			—			1,185,874
Selling, general and administrative expenses, excluding depreciation and amortization ⁽¹⁾		—			3,462			4,175,583			4,179,045
Depreciation and amortization ⁽²⁾		—			—			70,539			70,539
(Loss) income from operations ⁽³⁾		(589,726	)		11,989			(4,246,122	)		(4,823,859	)
Other income		—			—			40,848			40,848
Income tax benefit (expense)		201,125			(4,089	)		1,434,198			1,631,234
Net (loss) income from continuing operations		(388,601	)		7,900			(2,771,076	)		(3,151,777	)
Loss from discontinued operations, net of tax		(82,376	)		—			—			(82,376	)
Loss on sale of discontinued operations, net of tax		(1,953,378	)		—			—			(1,953,378	)
Net (loss) income		(2,424,355	)		7,900			(2,771,076	)		(5,187,531	)
Total assets, net of depreciation and amortization:
United States	$	16,373,919		$	16,002		$	9,411,189		$	25,801,110
International		98,806			—			2,299			101,105
Capital expenditures		—			—			8,170			8,170

Six Months Ended June 30, 2018	Diagnostics			Therapeutics			Corporate			Total
Royalty revenue	$	7,460		$	—		$	—		$	7,460
License revenue		257,709			—			—			257,709
Grant and other revenue		389,325			164,078			—			553,403
Total revenue		654,494			164,078			—			818,572
Cost of revenue		35,710			—			—			35,710
Research and development expenses		1,698,169			443,505			—			2,141,674
Selling, general and administrative expenses, excluding depreciation and amortization ⁽¹⁾		—			25,237			3,465,036			3,490,273
Depreciation and amortization ⁽²⁾		—			—			75,498			75,498
Loss from operations ⁽³⁾		(1,079,385	)		(304,664	)		(3,540,534	)		(4,924,583	)
Other expense ⁽⁴⁾		—			—			(4,259,480	)		(4,259,480	)
Income tax benefit		1,284			363			9,282			10,929
Net loss from continuing operations		(1,078,101	)		(304,301	)		(7,790,732	)		(9,173,134	)
Loss from discontinued operations, net of tax		(1,938	)		—			—			(1,938	)
Gain on sale of discontinued operations, net of tax		43,053			—			—			43,053
Net loss		(1,036,986	)		(304,301	)		(7,790,732	)		(9,132,019	)
Total assets, net of depreciation and amortization:
United States	$	409,769		$	87,751		$	8,139,434		$	8,636,954
International		22,147			—			1,391			23,538
Capital expenditures		—			—			3,165			3,165

Six Months Ended June 30, 2017	Diagnostics			Therapeutics			Corporate			Total
Royalty revenue	$	—		$	—		$	—		$	—
License revenue		100,000			—			—			100,000
Grant and other revenue		989,737			101,892			—			1,091,629
Total revenue		1,089,737			101,892			—			1,191,629
Cost of revenue		—			—			—			—
Research and development expenses		1,521,303			369,845			—			1,891,148
Selling, general and administrative expenses, excluding depreciation and amortization ⁽¹⁾		—			5,983			7,118,706			7,124,689
Depreciation and amortization ⁽²⁾		—			—			147,329			147,329
Loss from operations ⁽³⁾		(431,566	)		(273,936	)		(7,266,035	)		(7,971,537	)
Other expense ⁽⁴⁾		—			—			(1,130,261	)		(1,130,261	)
Income tax benefit		146,296			92,861			2,846,249			3,085,406
Net loss from continuing operations		(285,270	)		(181,075	)		(5,550,047	)		(6,016,392	)
Loss from discontinued operations, net of tax		(338,237	)		—			—			(338,237	)
Gain on sale of discontinued operations, net of tax		86,748,123			—			—			86,748,123
Net income (loss)		86,124,616			(181,075	)		(5,550,047	)		80,393,494
Total assets, net of depreciation and amortization:
United States	$	16,373,919		$	16,002		$	9,411,189		$	25,801,110
International		98,806			—			2,299			101,105
Capital expenditures		—			—			8,170			8,170

⁽¹⁾

General and administrative expenses, excluding depreciation and amortization, represent costs that relate to the general administration of the Company and as such are not currently allocated to our individual reportable segments.

⁽²⁾

Depreciation and amortization is reflected in selling, general and administrative expenses ($37,511 and $70,539 for the three-month periods ended June 30, 2018 and 2017, and $75,498 and $147,329 for the six-month periods ended June 30, 2018 and 2017, respectively).

⁽³⁾

Income (loss) from operations does not reflect the allocation of certain selling, general and administrative expenses, excluding depreciation and amortization, to our individual reportable segments, other than those expenses directly incurred by MT.

⁽⁴⁾

Amounts consist primarily of losses on debt extinguishment and changes in fair value of financial instruments, which are not currently allocated to our individual reportable segments.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including, among other things:

In addition, in this report, we use words such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “estimate,” “project,” and similar expressions to identify forward-looking statements.

We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Navidea Biopharmaceuticals, Inc., a Delaware corporation (NYSE American: NAVB), is a biopharmaceutical company focused on the development and commercialization of precision immunodiagnostic agents and immunotherapeutics. Navidea is developing multiple precision-targeted products based on our Manocept™ platform to enhance patient care by identifying the sites and pathways of undetected disease and enable better diagnostic accuracy, clinical decision-making and targeted treatment.

Navidea’s Manocept platform is predicated on the ability to specifically target the CD206 mannose receptor expressed on activated macrophages. The Manocept platform serves as the molecular backbone of Tc99m tilmanocept, the first product developed and commercialized by Navidea based on the platform.

On March 3, 2017, pursuant to an Asset Purchase Agreement dated November 23, 2016, the Company completed its previously announced sale to Cardinal Health 414 of its assets used, held for use, or intended to be used in operating its business of developing, manufacturing and commercializing a product used for lymphatic mapping, lymph node biopsy, and the diagnosis of metastatic spread to lymph nodes for staging of cancer, including the Company’s radioactive diagnostic agent marketed under the Lymphoseek^® trademark for current approved indications by the FDA and similar indications approved by the FDA in the future, in Canada, Mexico and the United States (giving effect to the License-Back described below and excluding certain assets specifically retained by the Company). Such assets sold in the Asset Sale consist primarily of, without limitation, (i) intellectual property used in or reasonably necessary for the conduct of the Business, (ii) inventory of, and customer, distribution, and product manufacturing agreements related to, the Business, (iii) all product registrations related to the Product, including the new drug application approved by the FDA for the Product and all regulatory submissions in the United States that have been made with respect to the Product and all Health Canada regulatory submissions and, in each case, all files and records related thereto, (iv) all related clinical trials and clinical trial authorizations and all files and records related thereto, and (v) all rights, title and interest in and to the Product, as specified in the Purchase Agreement.

In connection with the closing of the Asset Sale, the Company entered into a License-Back Agreement (the “License-Back”) with Cardinal Health 414. Pursuant to the License-Back, Cardinal Health 414 granted to the Company a sublicensable (subject to conditions) and royalty-free license to use certain intellectual property rights included in the Acquired Assets and owned by Cardinal Health 414 as of the closing of the Asset Sale to the extent necessary for the Company to (i) on an exclusive basis, subject to certain conditions, develop, manufacture, market, sell and distribute new pharmaceutical and other products that are not Competing Products (as defined in the License-Back), and (ii) on a non-exclusive basis, develop, manufacture, market, sell and distribute the Product throughout the world other than in the Territory. Subject to the Company’s compliance with certain restrictions in the License-Back, the License-Back also restricts Cardinal Health 414 from using the intellectual property rights included in the Acquired Assets to develop, manufacture, market, sell, or distribute any product other than the Product or other product that (a) accumulates in lymphatic tissue or tumor-draining lymph nodes for the purpose of (1) lymphatic mapping or (2) identifying the existence, location or staging of cancer in a body, or (b) provides for or facilitates any test or procedure that is reasonably substitutable for any test or procedure provided for or facilitated by the Product. Pursuant to the License-Back and subject to rights under existing agreements, Cardinal Health 414 was given a right of first offer to market, sell and/or market any new products developed from the intellectual property rights licensed by Cardinal Health 414 to the Company by the License-Back.

As part of the Asset Sale, the Company and Cardinal Health 414 also entered into ancillary agreements providing for transitional services and other arrangements. The Company amended and restated its license agreement with UCSD pursuant to which UCSD granted a license to the Company to exploit certain intellectual property rights owned by UCSD and, separately, Cardinal Health 414 entered into a license agreement with UCSD pursuant to which UCSD granted a license to Cardinal Health 414 to exploit certain intellectual property rights owned by UCSD for Cardinal Health 414 to sell the Product in the Territory.

In exchange for the Acquired Assets, Cardinal Health 414 (i) made a cash payment to the Company at closing of approximately $80.6 million after adjustments based on inventory being transferred and an advance of $3.0 million of guaranteed earnout payments as part of the settlement with CRG (described below in Part II, Item 1 – Legal Proceedings), (ii) assumed certain liabilities of the Company associated with the Product as specified in the Purchase Agreement, and (iii) agreed to make periodic earnout payments (to consist of contingent payments and milestone payments which, if paid, will be treated as additional purchase price) to the Company based on net sales derived from the purchased Product subject, in each case, to Cardinal Health 414’s right to off-set. In no event will the sum of all earnout payments, as further described in the Purchase Agreement, exceed $230 million over a period of ten years, of which $20.1 million are guaranteed payments for the three years immediately after closing of the Asset Sale. At the closing of the Asset Sale, $3 million of such earnout payments were advanced by Cardinal Health 414 to the Company, and paid to CRG as part of the Deposit Amount paid to CRG.

Upon closing of the Asset Sale, the Supply and Distribution Agreement dated November 15, 2007, as amended, between Cardinal Health 414 and the Company was terminated and, as a result, the provisions thereof are of no further force or effect (other than any indemnification, payment, notification or data sharing obligations which survive the termination). At the closing of the Asset Sale, Cardinal Health 414 paid to the Company $1.2 million, as an estimate of the accrued revenue sharing payments owed to the Company as of the closing date, net of prior payments.

The Asset Sale to Cardinal Health 414 in March 2017 significantly improved our financial condition and our ability to continue as a going concern. The Company also continues working to establish new sources of non-dilutive funding, including collaborations and grant funding that can augment the balance sheet as the Company works to reduce spending to levels that can be supported by our revenues.

Other than Tc99m tilmanocept, which the Company has a license to distribute outside of Canada, Mexico and the United States, none of the Company’s drug product candidates have been approved for sale in any market.

We manage our business based on two primary types of drug products: (i) diagnostic substances, including Tc99m tilmanocept and other diagnostic applications of our Manocept platform and NAV4694, and (ii) therapeutic development programs, including therapeutic applications of our Manocept platform and all development programs undertaken by Macrophage Therapeutics, Inc. (“MT”). See Note 15 to the consolidated financial statements for more information about our business segments.

Our primary development efforts over the last several years were focused on diagnostic products, including Lymphoseek which was sold to Cardinal Health 414 in March 2017. Our more recent initiatives have been focused exclusively on diagnostic and therapeutic line extensions based on our Manocept platform.

Navidea’s Manocept platform is predicated on the ability to specifically target the CD206 mannose receptor expressed primarily on activated macrophages. This flexible and versatile platform serves as a molecular engine for purpose-built targeted imaging molecules that may significantly impact patient care by providing enhanced diagnostic accuracy, clinical decision-making, and target-specific treatment. This CD206-targeted drug platform is applicable to a range of diagnostic modalities, including single photon emission computed tomography (“SPECT”), positron emission tomography (“PET”), gamma-scanning (both imaging and topical) and intra-operative and/or optical-fluorescence detection, as well as delivery of therapeutic compounds that target macrophages, and their role in a variety of immune- and inflammation-involved diseases. The FDA-approved sentinel node/lymphatic mapping agent, Tc99m tilmanocept, is representative of the ability to successfully exploit this mechanism to develop powerful new products and to expand this technology into additional diagnostic and therapeutic applications.

Activated macrophages play important roles in many disease states and are an emerging target in many diseases where diagnostic uncertainty exists. Impairment of the macrophage-driven disease mechanisms is an area of increasing and proven focus in medicine. The number of people affected by all the inflammatory diseases combined is estimated at more than 40 million in the United States and perhaps 700 million worldwide, making macrophage-mediated diseases an area of remarkable clinical importance. There are many recognized disorders having macrophage involvement, including rheumatoid arthritis (“RA”), atherosclerosis/vulnerable plaque, nonalcoholic steatohepatitis (“NASH”), inflammatory bowel disease, systemic lupus erythematosus, Kaposi’s sarcoma (“KS”), leishmaniosis, and others that span general clinical areas in oncology, autoimmunity, infectious diseases, cardiology, CNS diseases, and inflammation. For the near term, we have selected target diseases that would benefit from this remarkable technology, most deriving improved clinical diagnosis and therapy.

Two Tc99m tilmanocept dose escalation studies in RA have been completed. The first study was completed and included 18 subjects (nine with active disease and nine healthy subjects) dosed subcutaneously with 50 and 200 µg/2mCi Tc99m tilmanocept (ClinicalTrials.gov NCT02683421). The results of this study were presented at five international meetings, including Biotechnology Innovation Organization (“BIO”), Society of Nuclear Medicine and Molecular Imaging (“SNMMI”), and The American College of Rheumatology (“ACR”). In addition, based on completion of extensive preclinical dosing studies pursuant to our dialog with the FDA, we have completed a study involving intravenous (“IV”) dosing of 39 subjects with IV-administered Tc99m tilmanocept (ClinicalTrials.gov NCT02865434). In conjunction with this study, we have completed pharmacokinetic, pharmacodynamics and radiation dosimetry phases in human subjects as well. The majority of the costs of these studies have been supported through a Small Business Innovation Research (“SBIR”) grant (NIH/NIAMSD Grant 1 R44 AR067583-01A1). Results were presented at the June 2018 SNMMI meeting. These studies have been combined and submitted for peer review publication and full published results will follow.

Results of our studies to date provide strong evidence of the potential of Tc99m tilmanocept to accumulate in high-risk morphology plaques, the ability to make preliminary comparisons of aortic Tc99m tilmanocept uptake by SPECT/CT in clinically symptomatic patients vs. healthy age-matched subjects, and to evaluate the ability of Tc99m tilmanocept to identify the same aortic atherosclerotic plaques that are identified by contrast enhanced coronary computed tomography angiography and/or PET/CT. A nine-subject study to evaluate diagnostic imaging of emerging atherosclerosis plaque with the Tc99m tilmanocept product dosed subcutaneously is complete (ClinicalTrials.gov NCT02542371). The results of this study were presented at two major international meetings (Conference on Retroviruses and Opportunistic Infections (“CROI”) and SNMMI, 2017) and published in early release in the Journal of Infectious Diseases in January 2017 (published in the circulated version, Journal of Infectious Diseases (2017) 215 (8): 1264-1269), confirming that the Tc99m tilmanocept product can both quantitatively and qualitatively target non-calcified plaque in the aortic arch of Acquired Immunodeficiency Syndrome (“AIDS”) patients (supported by NIH/NHLBI Grant 1 R43 HL127846-01).

We have also begun a second Phase1/2 study in cooperation with Massachusetts General Hospital in subjects with Human Immunodeficiency Virus (“HIV”) that expands the original study in both the scope of the drug administration as well as the diagnostic assessment of the subjects. This study will enroll up to 24 AIDS subjects and healthy controls in imaging soft plaque using IV-administered Tc99m tilmanocept, and expand the initial investigation to the assessment of aortic plaque as well as carotid and coronary arteries. We anticipate preliminary results by the end of the third quarter of 2018. In addition, we have applied for follow-on NIH/NHLBI support to fund additional clinical studies that are currently under development and design for Phase 2 trials.

KS is a serious and potentially life threatening illness in persons infected with HIV and the third leading cause of death in this population worldwide. The prognosis for patients with KS is poor with high probabilities for mortality and greatly diminished quality of life. We initiated and completed a study of KS in 2015 (ClinicalTrials.gov NCT022201420), and received additional funding from the National Institutes of Health (“NIH”) in 2016 to continue diagnostic studies in this disease. The new support not only continues the imaging of the cutaneous form of this disease but expands this to imaging of visceral disease via IV administration of Tc99m tilmanocept (NIH/NCI 1 R44 CA192859-01A1; ClinicalTrials.gov NCT03157167). This now-escalated study includes a pathology/biopsy component as well as an imaging component to determine pathology concordance with image assessment. A manuscript with initial results has been submitted for peer review and publication, including both imaging and biological evaluation of KS correlates. We received Institutional Review Board approval of the clinical protocol, and we initiated a Phase 1/2 clinical study in KS in 2017.

During the first quarter of 2017, we initiated an imaging study in subjects with CRC and liver metastases via IV administration of Tc99m tilmanocept. This study is supported through a SBIR grant (NIH/NCI 1 R44 CA1962783-01A1; ClinicalTrials.gov NCT03029988) and continues to enroll subjects (up to 12 subjects with dose modification; this study may also be expanded depending on NIH/NCI funding). An initial presentation took place at SNMMI in June of 2018 and early results have been submitted for peer review publication. An additional report has been submitted to the National Cancer Institute (“NCI”) on the early results of this study.

We have initiated a clinical study (ClinicalTrials.gov NCT03332940) that is designed to enroll 12 subjects with IV administration of Tc99m tilmanocept and an imaging comparator to identify and quantify the extent of NASH lesions in human patients. This study is ongoing and includes dose escalation modification for Tc99m tilmanocept. Initial results were presented at the NASH Summit in Boston in April 2018, and the results are available on Navidea’s website. This study continues to enroll patients.

Based on performance in these very large market opportunities, the Company anticipates continued investment in these programs, including initiating studies designed to obtain new approvals for the Tc99m tilmanocept product.

In November 2017, the Company commenced the qualification of the biomarker CD206 with the FDA Biomarker Section of The Center for Drug Evaluation and Research (“CDER”). As per FDA protocol, Navidea submitted a draft letter of intent (“LOI”) to CDER prior to the November meeting. According to the CDER directive, “the Biomarker Qualification Program was established to support the CDER’s work with external stakeholders to develop biomarkers that aid in the drug development process. Through the FDA’s Biomarker Qualification Program, an entity may request regulatory qualification of a biomarker for a particular context of use (“COU”) in drug development.” Post-meeting with the FDA and because of Navidea’s data sets and the general external publication database, Navidea, in conjunction with FDA, is now reviewing the LOI with the FDA’s recommended consultants. Navidea has revised the LOI draft strategy in order to expedite the application process. In March 2018, Navidea had a follow-up meeting with the FDA’s assigned strategist and further narrowing of the LOI elements were reviewed. Navidea is continuing the process of finalizing the COU LOI and providing the background data sets for qualification review with the FDA/CDER. Additional meetings have taken place and the pursuit of this qualification is progressing well.

In December 2014, the Company formed a new business unit to further explore therapeutic applications for the Manocept platform. In January 2015, Navidea incorporated the business unit as MT, a majority-owned subsidiary of Navidea. Navidea also granted MT an exclusive license for certain therapeutic applications of the Manocept technology.

MT has developed processes for producing the first two therapeutic Manocept immuno-constructs, MT-1002, designed to specifically target and kill activated CD206+ macrophages by delivering doxorubicin, and MT-2002, designed to inhibit the inflammatory activity of activated CD206+ macrophages by delivering a potent anti-inflammatory agent. MT has contracted with independent facilities to produce sufficient quantities of the MT-1002 and MT-2002 agents along with the concomitant analytical standards, to provide material for planned preclinical animal studies and future clinical trials.

MT has been set up to pursue the therapeutic drug delivery model. This model enables the Company to leverage its technology over many potential disease applications and with multiple partners simultaneously without significant capital outlays. To date, the Company has developed two lead families of therapeutic products. The MT-1000 class is designed to deplete activated macrophages via apoptosis. The MT-2000 class is designed to modulate activated macrophages from a classically activated phenotype to the alternatively activated phenotype. Both families have been tested in a number of disease models in rodents.

We have already reported on the peripheral infectious disease aspects of KS, including HIV and HHV8 (CROI, Boston 2016, and KS HHV8 Summit Miami 2015). As noted, we continue this work funded by the NIH/NIAID and NCI. The Company has completed preclinical studies employing both MT 1000-class and 2000-class therapeutic conjugates of Manocept. The positive results from these studies are indicative of Manocept’s specific targeting supported by its strong binding affinity to CD206 receptors. This high degree of specificity is a foundation of the potential for this technology to be useful in treating diseases linked to the over-activation of macrophages. This includes various cancers as well as autoimmune, infectious, CV, and central nervous system (“CNS”) diseases. We expect to publish results of these preclinical efforts later this year.

The novel MT-1002 construct is designed to specifically deliver doxorubicin, a chemotoxin, which can kill KS tumor cells and their tumor-associated macrophages potentially altering the course of cancer. We have received additional funding to continue therapeutic studies in this disease with the goal of completing an IND submission for a Manocept construct (MT-1000 class of compounds) consisting of tilmanocept linked to doxorubicin for the treatment of KS. The first part of the grant, now complete, supported analyses including in vitro and cell culture studies, to be followed by Parts 2 and 3 FDA-required preclinical animal testing studies. The information from these studies will be combined with other information in an IND application that will be submitted to the FDA requesting permission to begin testing the compound in selected KS subjects (supported by NIH/NCI 1 R44 CA206788-01).

NAFLD is a spectrum of liver disorders and is defined by the presence of steatosis in more than 5% of hepatocytes with little or no alcohol consumption. NASH is the most extreme form of NAFLD. A major characteristic of NASH involves cells undergoing lipotoxicity, releasing endogenous signals prompting the accumulation of various macrophages to assess the damage. Studies have shown that levels of endogenous molecular inflammatory signals positively correlate with inflammation, hepatocyte ballooning, and other NAFLD symptoms. We have developed a molecular delivery technology capable of targeting only the disease-causing macrophages by selectively binding to the CD206 receptor. Selective binding and efficient delivery of this agent mitigates the potential of affecting the neighboring cells or interfering more broadly with the normal function of the immune system.

We have completed five in vivo studies employing our MT-1002 and MT-2002 Manocept conjugates in a well-established mouse model of NAFLD/NASH and liver fibrosis. The NALFD scores, which correlate to the agents’ effectiveness, were significantly reduced, with all the activity related to inflammation and “ballooning” scores. Fibrosis decreased significantly when compared to the control in the later dosing arm of the study. Liver weights did not differ during any phase of the study between control and agent-treated groups, nor was there any evidence of damage to the roughly 30% of the liver made up of un-activated macrophages called Kupffer cells. MT-1002 and MT-2002 both significantly reduced key disease assessment parameters in the in vivo STAM^TM NASH model. We believe these agents present themselves as potential clinically effective candidates for further evaluation. We continue to use this model to further assess the activity of our agents.

We have completed an expanded series of predictive in vitro screening tests of the MT-1002 and MT-2002 therapeutic conjugates against the Zika and Dengue viruses, which included infectivity and viral replication inhibition effectiveness as well as dose finding studies and mechanisms of action, the latter based on conjugate structures. We have also completed a series of predictive in vivo screening tests of the MT-1002 and MT-2002 therapeutic conjugates against Leishmaniosis, which included host cell targeting and killing effectiveness as well as dose finding studies and mechanisms of action. A portion of the results from the in vivo Leishmaniosis study, completed in conjunction with the National Institute of Allergy and Infectious Diseases/NIH, was recently published in the Journal of Experimental Medicine (published in the circulated version Journal of Experimental Medicine 2018 Jan 2;215(1):357-375). The results from all evaluations were positive and have provided a basis for moving forward with additional in vivo testing of the selected conjugates. We have selected collaborators for these in vivo studies, which we expect will take place over the next four to six months. We will provide updates as information becomes available on future testing.

Navidea and MT continue to evaluate emerging data in other disease states to define areas of focus, development pathways and partnering options to capitalize on the Manocept platform, including ongoing studies in KS, RA and infectious diseases. The immuno-inflammatory process is remarkably complex and tightly regulated with indicators that initiate, maintain and shut down the process. Macrophages are immune cells that play a critical role in the initiation, maintenance, and resolution of inflammation. They are activated and deactivated in the inflammatory process. Because macrophages may promote dysregulation that accelerates or enhances disease progression, diagnostic and therapeutic interventions that target macrophages may open new avenues for controlling inflammatory diseases. There can be no assurance that further evaluation or development will be successful, that any Manocept platform product candidate will ultimately achieve regulatory approval, or if approved, the extent to which it will achieve market acceptance.

NAV4694 is a fluorine-18 (“F-18”) labeled PET imaging agent being developed as an aid in the imaging and evaluation of patients with signs or symptoms of Alzheimer’s disease (“AD”) and mild cognitive impairment (“MCI”). NAV4694 binds to beta-amyloid deposits in the brain that can then be imaged in PET scans. Amyloid plaque pathology is a required feature of AD and the presence of amyloid pathology is a supportive feature for diagnosis of probable AD. Patients who are negative for amyloid pathology do not have AD. NAV4694 has been studied in rigorous pre-clinical studies and clinical trials in humans. Clinical studies through Phase 3 have included subjects with MCI, suspected AD patients, and healthy volunteers. Results suggest that NAV4694 has the potential ability to image patients quickly and safely with high sensitivity and specificity.

In May 2014, the Board of Directors made the decision to refocus the Company's resources to better align the funding of our pipeline programs with the expected growth in Tc99m tilmanocept revenue. This realignment primarily involved reducing our near-term support for our neurological product candidates, including NAV4694, as we sought a development partner or partners for these programs. Discussions related to the potential partnering or divestiture of NAV4694 were delayed due in large part to litigation brought by Sinotau, one of the potential partners. In August 2015, Sinotau filed a suit for damages, specific performance, and injunctive relief against the Company in the U.S. District Court for the District of Massachusetts alleging breach of a letter of intent for licensing to Sinotau of the Company’s NAV4694 product candidate and technology. In September 2016, the Court denied the Company’s motion to dismiss. The Company filed its answer to the complaint and the parties have filed multiple joint motions to stay the case pending settlement discussion, which to date have been granted.

In October 2017, the Company executed a letter of intent with Sinotau and Cerveau, outlining a plan to sublicense to Cerveau the worldwide rights to conduct research using NAV4694, as well as grant to Cerveau an exclusive license for the development, marketing and commercialization of NAV4694 in Australia, Canada, China and Singapore. The letter of intent included a provision stating that Sinotau will release all claims in the Sinotau Litigation upon the parties’ execution of a definitive agreement; the commercial rights agreement contemplated by the letter of intent would also include a release of such claims and a covenant not to sue on such claims. In April 2018, the Company executed an agreement to provide Meilleur, a wholly-owned subsidiary of Cerveau, worldwide rights to conduct research using NAV4694, as well as an exclusive license for the development and commercialization of NAV4694 in Australia, Canada, China, and Singapore. Meilleur also has an option to commercialize worldwide. As a result of the agreement, Navidea expects that the litigation initiated by Sinotau will be dismissed. See Part II, Item 1 – Legal Proceedings.

Our operating expenses in recent years have been focused primarily on support of our Manocept platform, Tc99m tilmanocept, and NAV4694 product development. We incurred approximately $2.1 million and $1.9 million in total on research and development activities during the six-month periods ended June 30, 2018 and 2017, respectively. Of the total amounts we spent on research and development during those periods, excluding costs related to our internal research and development headcount and our general and administrative staff which we do not currently allocate among the various development programs that we have underway, we incurred out-of-pocket charges by program as follows:

We expect to continue the advancement of our efforts with our Manocept platform during 2018. We expect our total research and development expenses, including both out-of-pocket charges as well as internal headcount and support costs, to be higher in 2018 than in 2017. The suspension of active patient accrual in our NAV4694 trials have decreased our development costs related to that program over the past year, however, we may continue to incur minimal costs while we complete our divestiture activities with Meilleur.

Tc99m tilmanocept is approved by the European Medicines Agency for use in imaging and intraoperative detection of sentinel lymph nodes draining a primary tumor in adult patients with breast cancer, melanoma, or localized squamous cell carcinoma of the oral cavity in the EU. Following the January 2017 transfer of the Tc99m tilmanocept Marketing Authorization to SpePharm, we transferred responsibility for manufacturing the reduced-mass vial for the EU market to SpePharm. During the second quarter of 2017, SpePharm launched Tc99m tilmanocept in select EU markets, providing a number of early adopters with sample doses to provide exposure to the product. EU sales commenced during the third quarter of 2017. We anticipate that we will incur costs related to supporting our product, regulatory, manufacturing and commercial activities related to the potential marketing registration and sale of Tc99m tilmanocept in markets other than the EU. There can be no assurance that Tc99m tilmanocept will achieve regulatory approval in any market other than the EU, or if approved in those markets, that it will achieve market acceptance in the EU or any other market.

We continue to evaluate existing and emerging data on the potential use of Manocept-related agents in the diagnosis, disease-staging and treatment of disorders in which macrophages are involved, such as KS, RA, NASH and other disease states, to define areas of focus, development pathways and partnering options to capitalize on the Manocept platform. We will also be evaluating potential funding and other resources required for continued development, regulatory approval and commercialization of any Manocept platform product candidates that we identify for further development, and potential options for advancing development. There can be no assurance of obtaining funding or other resources on terms acceptable to us, if at all, that further evaluation or development will be successful, that any Manocept platform product candidate will ultimately achieve regulatory approval, or if approved, the extent to which it will achieve market acceptance.

In March 2017, Navidea completed the Asset Sale to Cardinal Health 414, as discussed previously under “The Company.” In exchange for the Acquired Assets, Cardinal Health 414 (i) made a cash payment to the Company at closing of approximately $80.6 million after adjustments based on inventory being transferred and an advance of $3 million of guaranteed earnout payments as part of the CRG settlement, (ii) assumed certain liabilities of the Company associated with the Product as specified in the Purchase Agreement, and (iii) agreed to make periodic earnout payments (to consist of contingent payments and milestone payments which, if paid, will be treated as additional purchase price) to the Company based on net sales derived from the purchased Product subject, in each case, to Cardinal Health 414’s right to off-set. In no event will the sum of all earnout payments, as further described in the Purchase Agreement, exceed $230 million over a period of ten years, of which $20.1 million are guaranteed payments for the three years immediately after closing of the Asset Sale. At the closing of the Asset Sale, $3 million of such earnout payments were advanced by Cardinal Health 414 to the Company, and paid to CRG as part of the Deposit Amount paid to CRG.

In April 2018, the Company entered into an Amendment to the Asset Purchase Agreement. Pursuant to the Amendment, Cardinal Health 414 paid the Company approximately $6.0 million and agreed to pay the Company an amount equal to the unused portion of the letter of credit (not to exceed approximately $7.1 million) promptly after the earlier of (i) the expiration of the letter of credit and (ii) the receipt by Cardinal Health 414 of evidence of the return and cancellation of the letter of credit. In exchange, the obligation of Cardinal Health 414 to make any further contingent payments has been eliminated. Cardinal Health 414 is still obligated to make the milestone payments in accordance with the terms of the earnout provisions of the Purchase Agreement. CRG has drawn the entire $7.1 million available under the letter of credit.

We recorded a net gain on the sale of the Business of $86.7 million for the six months ended June 30, 2017, including $16.5 in guaranteed consideration, which was discounted to the present value of future cash flows. The proceeds were offset by $3.3 million in estimated fair value of warrants issued to Cardinal Health 414, $2.0 million in legal and other fees related to the sale, $800,000 in net balance sheet dispositions and write-offs, and $6.5 million in estimated taxes. We recorded an additional gain on the sale of the Business of $43,000 for the six month ended June 30, 2018, including $54,000 of payments by Cardinal Health 414 to Navidea in excess of receivables recognized related the Amendment, offset by $11,000 in estimated taxes. Our consolidated balance sheets and statements of operations have been reclassified, as required, for all periods presented to reflect the Business as a discontinued operation. Cash flows associated with the operation of the Business have been combined with operating, investing and financing cash flows, as appropriate, in our consolidated statements of cash flows.

This discussion of our Results of Operations focuses on describing results of our operations as if we had not operated the discontinued operations discussed above during the periods being disclosed. In addition, since our remaining pharmaceutical product candidates are not yet generating commercial revenue, the discussion of our revenue focuses on the grant and other revenue and our operating variances focus on our remaining product development programs and the supporting general and administrative expenses.

License Revenue. During the second quarter of 2018, we recognized license revenue of $258,000, primarily for a non-refundable upfront payment related to the sublicense of NAV4694 to Meilleur. During the second quarter of 2017, we recognized license revenue of $100,000 for a non-refundable upfront payment related to the Tc99m tilmanocept license and distribution agreement with Sayre Therapeutics in India.

Grant and Other Revenue. During the second quarter of 2018, we recognized $278,000 of grant and other revenue as compared to $512,000 in the second quarter of 2017. Grant revenue during the second quarter of 2018 was primarily related to SBIR grants from the NIH supporting Manocept development. Grant revenue during the second quarter of 2017 was primarily related to SBIR grants from the NIH supporting Manocept and Tc99m tilmanocept development.

Research and Development Expenses. Research and development expenses decreased $43,000, or 4%, to $1.1 million during the second quarter of 2018 from $1.2 million during the same period in 2017. The decrease was primarily due to net decreases in drug project expenses related to (i) decreased NAV4694 development costs of $75,000, primarily clinical trial costs; and (ii) decreased Manocept development costs of $5,000 including decreased clinical trial costs; offset by (iii) increased therapeutics development costs of $172,000 including increased manufacturing-related activities and research consulting costs; and (iv) increased Tc99m tilmanocept development costs of $75,000 including increased regulatory costs related to Europe, offset by decreased clinical testing and license fees. The net decrease in research and development expenses also included decreased compensation including incentive-based awards of $187,000 related to net decreased headcount.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $2.4 million, or 58%, to $1.8 million during the second quarter of 2018 from $4.2 million during the same period in 2017. The net decrease was primarily due to a loss on disposal of assets related to our previous office space of $706,000, decreased legal and professional services of $650,000, termination costs related to the arbitration award to Mr. Gonzalez of $478,000 and loss on termination of our previous office lease of $394,000, both during the second quarter of 2017, and decreased general office, depreciation, and rent expenses totaling $149,000.

Other Income (Expense). Other expense, net, was $21,000 during the second quarter of 2018 as compared to other income, net of $41,000 during the same period in 2017. During the second quarters of 2018 and 2017, $43,000 and $40,000, respectively, of interest expense was compounded and added to the balance of our note payable to Platinum. During the second quarters of 2018 and 2017, we recorded interest income of $21,000 and $103,000, respectively. Of the interest income recorded during the second quarter of 2017, $96,000 was related to the guaranteed consideration due from Cardinal Health 414, which was discounted to present value at the closing date of the Asset Sale. For the second quarter of 2017, we recorded non-cash income of $13,000 related to changes in the estimated fair value of financial instruments.

Gain (Loss) on Discontinued Operations. We recorded a net gain related to the Amendment to the sale of the Business to Cardinal Health 414 of $43,000 for the quarter ended June 30, 2018, including $54,000 of payments by Cardinal Health 414 to Navidea in excess of receivables recognized, offset by $11,000 in estimated taxes. We recorded a net loss on the sale of the Business to Cardinal Health 414 of $2.0 million for the quarter ended June 30, 2017, primarily related to adjustments in estimated taxes on the sale of the Business. Operating losses from discontinued operations related to the sale of the Business to Cardinal Health 414 were $2,000 and $82,000 for the first quarters of 2018 and 2017, respectively.

License Revenue. During the first six months of 2018, we recognized license revenue of $258,000, primarily for a non-refundable upfront payment related to the sublicense of NAV4694 to Meilleur. During the first six months of 2017, we recognized license revenue of $100,000 for a non-refundable upfront payment related to the Tc99m tilmanocept license and distribution agreement with Sayre Therapeutics in India.

Grant and Other Revenue. During the first six months of 2018, we recognized $553,000 of grant and other revenue as compared to $1.1 million in the same period in 2017. Grant revenue during the first six months of 2018 was primarily related to SBIR grants from the NIH supporting Manocept development. Grant revenue during the first six months of 2017 was primarily related to SBIR grants from the NIH supporting Manocept and Tc99m tilmanocept development. Other revenue for the first six months of 2018 and 2017 included $43,000 and $34,000, respectively, of revenue from our marketing partners in Europe related to development work performed at their request.

Research and Development Expenses. Research and development expenses increased $251,000, or 13%, to $2.1 million during the first six months of 2018 from $1.9 million during the same period in 2017. The increase was primarily due to net increases in drug project expenses related to (i) increased NAV4694 development costs of $488,000 due to reversal of certain previously accrued expenses during the first six months of 2017, offset by increased clinical testing; and (ii) increased therapeutics development costs of $128,000 including increased clinical testing, regulatory consulting, and research consulting costs, offset by decreased manufactuirng-related activities; offset by (iii) decreased Manocept development costs of $114,000 including decreased clinical trial costs; and (iv) decreased Tc99m tilmanocept development costs of $26,000 including decreased license fees, clinical testing, and manufacturing-related activities, offset by increased regulatory costs. The net increase in research and development expenses also included decreased compensation including incentive-based awards of $260,000 related to net decreased headcount.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $3.7 million, or 51%, to $3.6 million during the first six months of 2018 from $7.3 million during the same period in 2017. The net decrease was primarily due to decreased legal and professional services of $1.8 million, a loss on disposal of assets related to our previous office space of $717,000, termination costs related to the arbitration award to Mr. Gonzalez of $478,000 and loss on termination of our previous office lease of $438,000, both during the first six months of 2017, and decreased general office, depreciation, insurance and rent expenses totaling $304,000.

Other Income (Expense). Other expense, net, was $4.3 million during the first six months of 2018 as compared to other expense, net of $1.1 million during the same period in 2017. We recorded losses on extinguishment of the CRG debt of $4.3 million and $1.3 million during the first six months of 2018 and 2017, respectively. Also during the first six months of 2018 and 2017, we recognized interest income of $97,000 and $134,000, respectively, primarily related to the guaranteed consideration due from Cardinal Health 414, which was discounted to present value at the closing date of the Asset Sale. During the first six months of 2018 and 2017, $85,000 and $40,000, respectively, of interest expense was compounded and added to the balance of our note payable to Platinum. For the first six months of 2017, we recorded non-cash income of $153,000 related to changes in the estimated fair value of financial instruments.

Gain on Discontinued Operations. We recorded a net gain related to the Amendment to the sale of the Business to Cardinal Health 414 of $43,000 for the six months ended June 30, 2018, including $54,000 of payments by Cardinal Health 414 to Navidea in excess of receivables recognized, offset by $11,000 in estimated taxes. We recorded a net gain on the sale of the Business to Cardinal Health 414 of $86.7 million for the six months ended June 30, 2017, including $16.5 million in guaranteed consideration, which was discounted to the present value of future cash flows. The proceeds were offset by $3.3 million in estimated fair value of warrants issued to Cardinal Health 414, $2.0 million in legal and other fees related to the sale, $800,000 in net balance sheet dispositions and write-offs, and $6.5 million in estimated taxes. Operating losses from discontinued operations related to the sale of the Business to Cardinal Health 414 were $2,000 and $338,000 for the first six months of 2018 and 2017, respectively.

Cash balances increased to $4.7 million at June 30, 2018 from $2.8 million at December 31, 2017. The net increase was primarily due to accelerated receipt of the guaranteed earnout receivable from Cardinal Health 414 of $5.7 million, net of CRG’s draw on the letter of credit, and maturities and sales of available-for-sale securities of $1.0 million, offset by cash used to fund our operations of $4.6 million.

In connection with the closing of the Asset Sale to Cardinal Health 414, the Company repaid to PPCO an aggregate of approximately $7.7 million in partial satisfaction of the Company’s liabilities, obligations and indebtedness under the Platinum Loan Agreement between the Company and Platinum-Montaur, which were transferred by Platinum-Montaur to PPCO. The Company was informed by PPVA that it was the owner of additional amounts owed on the Platinum-Montaur loan. PPVA claims a balance of approximately $1.9 million was due upon closing of the Asset Sale. That amount is also subject to competing claims of ownership by Dr. Michael Goldberg, the Company’s President and Chief Executive Officer. The Company has not yet paid any amounts to PPVA or Dr. Goldberg given the pending dispute.

The Company has continued to accrue interest on the Platinum debt pending the outcome of the litigation, and the balance of the debt was approximately $2.1 million as of June 30, 2018.

Operating Activities. Cash provided by operations was $8.3 million during the first six months of 2018 compared to $62.0 million during the same period in 2017.

Accounts and other receivables decreased to $374,000 at June 30, 2018 from $8.1 million at December 31, 2017, primarily related to Cardinal Health 414’s payment of the entire balance of the guaranteed earnout pursuant to the Amendment executed on April 2, 2018.

Prepaid expenses and other current assets decreased to $737,000 at June 30, 2018 from $1.1 million at December 31, 2017. The decrease was primarily due to normal amortization of prepaid insurance and decreased interest receivable related to the guaranteed earnout due from Cardinal Health 414.

Accounts payable decreased to $454,000 at June 30, 2018 from $855,000 at December 31, 2017, primarily driven by net decreased payables due to therapeutics, NAV4694, process and product development, and operations vendors, offset by increased payables due to Manocept development vendors. Accrued liabilities and other current liabilities remained steady at approximately $1.8 million at June 30, 2018 and December 31, 2017. Decreased accruals for legal and professional services were offset by increased accruals for compensation and Manocept development costs. Our payable and accrual balances will continue to fluctuate but will likely decrease overall as we work to resolve our legal disputes, offset by planned increases in development activity related to the Manocept platform.

Investing Activities. Investing activities provided $997,000 during the first six months of 2018 compared to $2.0 million used during the same period in 2017. Investing activities during the first six months of 2018 included maturities and sales of available-for-sale securities of $1.0 million and capital expenditures of $3,000, primarily for computer equipment. Investing activities during the first six months of 2017 included purchases of available-for-sale securities of $2.0 million and capital expenditures of $8,000, primarily for computer equipment and leasehold improvements.

Financing Activities. Financing activities used $7.4 million during the first six months of 2018 compared to $60.9 million during the same period in 2017. The $7.4 million used by financing activities in the first six months of 2018 consisted primarily of CRG’s draw on the letter of credit of $7.1 million and principal payments on financed insurance premiums of $238,000. The $60.9 million used by financing activities in the first six months of 2017 consisted primarily of principal payments on the CRG, Platinum and IPFS notes payable of $59.6 million and payment of CRG debt-related costs to CRG of $1.3 million, offset by proceeds from issuance of common stock of $54,000.

On April 9, 2018, CRG drew approximately $7.1 million on the letter of credit. This was in addition to the $4.1 million and the $59.0 million that Navidea had previously paid to CRG.

The Company has continued to accrue interest on the Platinum debt pending the outcome of the litigation, and the balance of the debt was approximately $2.1 million as of June 30, 2018.

Our future liquidity and capital requirements will depend on a number of factors, including the ability of our distribution partners to achieve market acceptance of our products, our ability to complete the development and commercialization of new products, our ability to monetize our investment in non-core technologies, our ability to obtain milestone or development funds from potential development and distribution partners, regulatory actions by the FDA and international regulatory bodies, the ability to procure required financial resources, and intellectual property protection.

We plan to focus our resources for the remainder of 2018 primarily on development of products based on the Manocept platform. Although management believes that it will be able to achieve these objectives, they are subject to a number of variables beyond our control, including the nature and timing of any partnering opportunities, the ability to modify contractual commitments made in connection with these programs, and the timing and expense associated with suspension or alteration of clinical trials, and consequently there can be no assurance that we will be able to achieve our objective of bringing our expenses in line with our revenues, and we may need to seek additional financing if we cannot achieve that objective in a timely manner.

We will continue to evaluate our time lines, strategic needs, and balance sheet requirements. If we attempt to raise additional capital through debt, royalty, equity or otherwise, we may not be successful in doing so on terms acceptable to the Company, if at all. Further, we may not be able to gain access and/or be able to execute on securing new sources of funding, new development opportunities, successfully obtain regulatory approval for and commercialize new products, achieve significant product revenues from our products, or achieve or sustain profitability in the future.

See Notes 1(d) and 1(e) to the accompanying consolidated financial statements for a summary of all recent accounting standards.

We base our management’s discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this Quarterly Report on Form 10-Q, upon our consolidated financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. We describe our significant accounting policies in the notes to the audited consolidated financial statements contained in our Annual Report on Form 10-K. We include within these policies our “critical accounting policies.” Critical accounting policies are those policies that are most important to the preparation of our consolidated financial statements and require management’s most subjective and complex judgment due to the need to make estimates about matters that are inherently uncertain. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operations and/or financial condition.

Revenue Recognition. We currently generate revenue primarily from grants to support various product development initiatives. We generally recognize grant revenue when expenses reimbursable under the grants have been paid and payments under the grants become contractually due.

Research and Development. R&D expenses include both internal R&D activities and external contracted services. Internal R&D activity expenses include salaries, benefits, and stock-based compensation, as well as travel, supplies, and other costs to support our R&D staff. External contracted services include clinical trial activities, chemistry, manufacturing and control-related activities, and regulatory costs. R&D expenses are charged to operations as incurred. We review and accrue R&D expenses based on services performed and rely upon estimates of those costs applicable to the stage of completion of each project.

Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base these estimates and assumptions upon historical experience and existing, known circumstances. Actual results could differ from those estimates. Specifically, management may make significant estimates in the following areas:

We estimate the expected term based on the contractual term of the awards and employees' exercise and expected post-vesting termination behavior. Restricted stock awards are valued based on the closing stock price on the date of grant and amortized ratably over the estimated life of the award.

Since stock-based compensation is recognized only for those awards that are ultimately expected to vest, we have applied an estimated forfeiture rate to unvested awards for the purpose of calculating compensation cost. These estimates will be revised, if necessary, in future periods if actual forfeitures differ from estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs.

Interest Rate Risk. As of June 30, 2018, our $4.7 million in cash was primarily invested in interest-bearing money market accounts. Due to the low interest rates being realized on these accounts, we believe that a hypothetical 10% increase or decrease in market interest rates would not have a material impact on our consolidated financial position, results of operations or cash flows.

We also have exposure to changes in interest rates on our variable-rate debt obligations. As of June 30, 2018, the interest rate on certain of our debt obligations was the greater of: (a) the U.S. prime rate as reported in The Wall Street Journal plus 6.75%, and (b) 10.0%; both of the above rates reduced by 600 basis points (effective interest rate as of June 30, 2018 was 8.125%). Based on the amount of our variable-rate borrowings at June 30, 2018, which totaled approximately $2.1 million, an immediate one percentage point increase (decrease) in the U.S. prime rate would increase (decrease) our annual interest expense by approximately $21,000. This estimate assumes that the amount of variable rate borrowings remains constant for an annual period and that the interest rate change occurs at the beginning of the period.

Foreign Currency Exchange Rate Risk. We do not currently have material foreign currency exposure related to our assets as the majority are denominated in U.S. currency and our foreign-currency based transaction exchange risk is not material. For the six-month periods ended June 30, 2018 and 2017, we recorded foreign currency transaction losses of approximately $2,000 and $33,000, respectively.

Equity Price Risk. We do not use derivative instruments for hedging of market risks or for trading or speculative purposes. Derivative instruments embedded in contracts, to the extent not already a free-standing contract, are bifurcated and accounted for separately. All derivatives are recorded on the consolidated balance sheet at fair value in accordance with current accounting guidelines for such complex financial instruments. The fair value of our warrant liabilities is determined using various inputs and assumptions, several of which are based on a survey of peer group companies since the warrants are exercisable for common stock of a non-public subsidiary company. As of June 30, 2018, we had approximately $63,000 of derivative liabilities recorded on our balance sheet related to outstanding MT warrants. Due to the relatively low valuation of the MT warrants, a hypothetical 50% change in our stock price would not have a material effect on the consolidated financial statements.

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized, and reported within the specified time periods. As a part of these controls, our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Operating Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2018, and concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Chief Operating Officer and Chief Financial Officer, understands that our disclosure controls and procedures do not guarantee that all errors and all improper conduct will be prevented. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, a design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of improper conduct, if any, have been detected. These inherent limitations include the realities that judgments and decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more persons, or by management override of the control. Further, the design of any system of controls is also based in part upon assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations of a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

During the quarter ended June 30, 2018, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In April 2018, the Company executed an agreement to provide Meilleur, a wholly-owned subsidiary of Cerveau, worldwide rights to conduct research using NAV4694, as well as an exclusive license for the development and commercialization of NAV4694 in Australia, Canada, China, and Singapore. Meilleur also has an option to commercialize worldwide. As a result of the agreement, Navidea expects that the litigation initiated by Sinotau will be dismissed.

As disclosed in the Company’s Annual Report on Form 10-K and other filings, the Company has been engaged in ongoing litigation with CRG, in its capacity as a lender and as control agent for other affiliated lenders party to the CRG Loan Agreement, in the Texas Court relating to CRG’s claims of default under the terms the CRG Loan Agreement. Following a trial in December 2017, the Texas Court ruled that the Company’s total obligation to CRG is in excess of $66.0 million, limited to $66.0 million under the parties’ Global Settlement Agreement reached in 2017. The Texas Court acknowledged only the $59.0 million payment made in March 2017, concluding that the Company owed CRG another $7.0 million, however the Texas Court did not expressly take the Company’s June 2016 payment of $4.1 million into account and awarded, as part of the $66.0 million, amounts that had already been paid as part of the $4.1 million. The Company believes that this $4.1 million should be credited against the $7.0 million; CRG disagrees.

On April 9, 2018, CRG drew approximately $7.1 million on the letter of credit. This was in addition to the $4.1 million and the $59.0 million that Navidea had previously paid to CRG.

Except as set forth below, there have been no material changes to the Company's risk factors as previously reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 (the “Form 10-K”), filed with the SEC on March 15, 2018.

Our failure to maintain continued compliance with the listing requirements of the NYSE American exchange could result in the delisting of our common stock.

Our common stock has been listed on the NYSE American since February 2011. The rules of NYSE American provide that shares be delisted from trading in the event the financial condition and/or operating results of the Company appear to be unsatisfactory, the extent of public distribution or the aggregate market value of the common stock has become so reduced as to make further dealings on the NYSE American inadvisable, the Company has sold or otherwise disposed of its principal operating assets, or has ceased to be an operating company, or the Company has failed to comply with its listing agreements with the Exchange. For example, the NYSE American may consider suspending trading in, or removing the listing of, securities of an issuer that has stockholders’ equity of less than (i) $6.0 million if such issuer has sustained losses from continuing operations and/or net losses in its five most recent fiscal years, (ii) $4.0 million if such issuer has sustained losses from continuing operations and/or net losses in three of its four most recent fiscal years, and (iii) $2.0 million if such issuer has sustained losses from continuing operations and/or net losses in two of its three most recent fiscal years. As of June 30, 2018, the Company had stockholders’ equity of approximately $2.8 million. In addition, the Company had stockholders’ deficits for several years prior to December 31, 2017, and we may not be able to maintain stockholders’ equity in the future. Even if an issuer has a stockholders’ deficit, the NYSE American will not normally consider removing from the list securities of an issuer that fails to meet these requirements if the issuer has (1) total value of market capitalization of at least $50,000,000; or total assets and revenue of $50,000,000 each in its last fiscal year, or in two of its last three fiscal years; and (2) the issuer has at least 1,100,000 shares publicly held, a market value of publicly held shares of at least $15,000,000 and 400 round lot shareholders. As of June 30, 2018, the Company’s total value of market capitalization was approximately $35,000,000. As such, we do not currently meet these exception criteria and there is a risk that our common stock may be delisted as a result of our failure to meet the minimum stockholders' equity requirement for continued listing. The NYSE American provides for an 18-month “cure period” for the Company to regain the minimum stockholders’ equity requirement, however if the Company is unable to do so, the NYSE American may delist the Company’s common stock.

The NYSE American Company Guide also provides that the Exchange may suspend or remove from listing any common stock selling for a substantial period of time at a low price per share, if the issuer shall fail to effect a reverse split of such shares within a reasonable time after being notified that the Exchange deems such action to be appropriate under all the circumstances. The Company’s common stock has recently traded for a price as low as $0.15 per share, and if the low trading price persists, there is a risk that the Exchange may require the Company to effect a reverse split of its common stock in order to maintain its NYSE American listing. Accordingly, on July 9, 2018, the Company filed a definitive proxy statement in connection with its 2018 Annual Meeting of Stockholders (the “Annual Meeting”), to be held on August 16, 2018. At the Annual Meeting, we are asking for stockholders to approve, among other things, a reverse stock split of the Company’s common stock, as determined by the Board of Directors at its discretion, of a ratio of not less than one-for-five and not more than one-for-twenty. The shareholders’ meeting notice is more fully described in the Company’s Definitive Proxy Statement filed with the SEC on Schedule 14A on July 9, 2018.

There can be no assurance that stockholders will approve the proposal to effect a reverse split or that if such proposal is approved and implemented by the Board of Directors that such a reverse stock split will be sufficient to enable the Company to maintain its listing on the NYSE American. Therefore, there is a continued risk that the shares will be delisted if action is not taken to the satisfaction of the NYSE American.

The delisting of our common stock from the NYSE American likely would reduce the trading volume and liquidity in our common stock and may lead to decreases in the trading price of our common stock. The delisting of our common stock may also materially impair our stockholders’ ability to buy and sell shares of our common stock. In addition, the delisting of our common stock could significantly impair our ability to raise capital.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PART I – Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017	3

	Consolidated Statements of Operations for the Three-Month and Six-Month Periods Ended June 30, 2018 and 2017 (unaudited)	4

	Consolidated Statements of Comprehensive (Loss) Income for the Three-Month and Six-Month Periods Ended June 30, 2018 and 2017 (unaudited)	5

	Consolidated Statement of Stockholders’ Equity for the Six-Month Period Ended June 30, 2018 (unaudited)	6

	Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2018 and 2017 (unaudited)	7

	Notes to the Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

	Forward-Looking Statements	28

	The Company	28

	Product Line Overview	29

	Outlook	33

	Discontinued Operations	34

	Results of Operations	34

	Liquidity and Capital Resources	36

	Off-Balance Sheet Arrangements	39

	Recent Accounting Standards	39

	Critical Accounting Policies	39

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures	40

PART II – Other Information

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	43

Item 6.	Exhibits	45

	June 30, 2018			December 31, 2017
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,690,973		$	2,795,006
Available-for-sale securities		797,936			1,797,604
Accounts and other receivables		373,876			8,137,872
Prepaid expenses and other		737,336			1,101,923
Total current assets		6,600,121			13,832,405
Property and equipment		1,208,158			1,206,058
Less accumulated depreciation and amortization		1,028,958			969,357
Property and equipment, net		179,200			236,701
Patents, trademarks and license agreements		480,404			480,404
Less accumulated amortization		37,080			22,248
Patents, trademarks and license agreements, net		443,324			458,156
Guaranteed earnout receivable		—			4,809,376
Other assets		1,437,847			1,444,798
Total assets	$	8,660,492		$	20,781,436
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	453,720		$	855,043
Accrued liabilities and other		1,835,037			1,857,848
Notes payable		2,200,353			2,353,639
Terminated lease liability, current		139,833			107,215
Accrued loss for CRG litigation		—			2,887,566
Liabilities associated with discontinued operations, current		—			7,092
Total current liabilities		4,628,943			8,068,403
Terminated lease liability		479,566			588,092
Deferred revenue		700,000			11,024
Other liabilities		65,111			65,587
Total liabilities		5,873,620			8,733,106
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock; $.001 par value; 5,000,000 shares authorized; no shares issued or outstanding at June 30, 2018 and December 31, 2017		—			—
Common stock; $.001 par value; 300,000,000 shares authorized; 163,620,090 and 162,206,646 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively		163,620			162,207
Additional paid-in capital		331,697,603			331,128,787
Accumulated deficit		(329,740,962	)		(319,908,968	)
Accumulated other comprehensive loss		(2,064	)		(2,396	)
Total Navidea stockholders' equity		2,118,197			11,379,630
Noncontrolling interest		668,675			668,700
Total stockholders’ equity		2,786,872			12,048,330
Total liabilities and stockholders’ equity	$	8,660,492		$	20,781,436

	Six Months Ended June 30, 2018
	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at beginning of period		3,687,679		$	1.50
Granted		470,000			0.53
Exercised		—			—
Canceled and Forfeited		(5,000	)		0.51
Expired		(7,000	)		0.66
Outstanding at end of period		4,145,679		$	1.39		6.6	$	—
Exercisable at end of period		2,321,683		$	1.97		4.6	$	—

	Six Months Ended June 30, 2018
	Number of Shares			Weighted Average Grant-Date Fair Value
Unvested at beginning of period		150,000		$	0.51
Granted		200,000			0.37
Vested		(200,000	)		0.47
Forfeited		—			—
Unvested at end of period		150,000		$	0.37

	Terminated Lease Liability
Total liability, January 1, 2018	$	695,307
Changes in estimated future payments		(43,394	)
Payments under Blazer lease		(207,550	)
Receipts from subtenant		156,497
Accretion of liability		18,539
Total liability, June 30, 2018	$	619,399

	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Compre- hensive			Non- controlling			Total Stockholders’
	Shares		Amount		Capital		Deficit			Loss			Interest			Equity
Balance, January 1, 2018		162,206,646	$	162,207	$	331,128,787	$	(319,908,968	)	$	(2,396	)	$	668,700		$	12,048,330
Impact of adoption of ASC Topic 606		—		—		—		(700,000	)		—			—			(700,000	)
Issued stock in payment of employee bonuses		1,118,760		1,118		315,784		—			—			—			316,902
Issued restricted stock		200,000		200		—		—			—			—			200
Issued stock to 401(k) plan		94,684		95		35,885		—			—			—			35,980
Stock compensation expense		—		—		217,147		—			—			—			217,147
Comprehensive loss:
Net loss		—		—		—		(9,131,994	)		—			(25	)		(9,132,019	)
Unrealized gain on available-for-sale securities		—		—		—		—			332			—			332
Total comprehensive loss		—		—		—		—			—			—			(9,131,687	)
Balance, June 30, 2018		163,620,090	$	163,620	$	331,697,603	$	(329,740,962	)	$	(2,064	)	$	668,675		$	2,786,872

	Six Months Ended June 30,
Development Program ^(a)	2018		2017
Manocept Platform	$	737,286	$	851,589
Macrophage Therapeutics		432,910		304,603
Tc99m Tilmanocept ^(b)		143,928		285,745
NAV4694 ^(c⁾		19,105		(469,111	)

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2		Certification of Chief Operating Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1		Certification of Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.**

32.2		Certification of Chief Operating Officer and Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.**

101.INS		XBRL Instance Document*

101.SCH		XBRL Taxonomy Extension Schema Document*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

	NAVIDEA BIOPHARMACEUTICALS, INC.
	(the Company)
	August 8, 2018

	By:	/s/ Jed A. Latkin

	Jed A. Latkin
	Chief Operating Officer and Chief Financial Officer
	(Authorized Officer; Principal Financial and Accounting Officer)