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. Prior to termination of Navidea’s joint venture with R-NAV, LLC (“R-NAV”), Navidea's investment in R-NAV was being accounted for using the equity method of accounting and was therefore consolidated.

 

On pursuant to an Asset Purchase Agreement dated the “Purchase Agreement”), the Company completed its previously announced sale to Cardinal Health LLC (“Cardinal Health ) 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 the License-Back described below 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 right, title and interest in and to the Product, as specified in the Purchase Agreement (the “Acquired Assets”).

 

Upon closing of the Asset Sale, the Supply and Distribution Agreement, dated as amended, the “Supply and Distribution Agreement”), between Cardinal Health and the Company was terminated and, as a result, the provisions thereof are of further force or effect (other than any indemnification, payment, notification or data sharing obligations which survive the termination).

 

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

 

 

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

 

– Quoted prices in markets that are active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

 

– 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 price transparency are classified as Level See Note

 

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

 

 

 

 

 

We also earn revenues related to our licensing and distribution agreements. The terms of these agreements include payment to us of non-refundable upfront license fees, funding or reimbursement of research and development efforts, milestone payments if specified objectives are achieved, and/or royalties on product sales. We evaluate all deliverables within an arrangement to determine whether or they provide value on a stand-alone basis. We recognize a contingent milestone payment as revenue in its entirety upon our achievement of a substantive milestone if the consideration earned from the achievement of the milestone (i) is consistent with performance required to achieve the milestone or the increase in value to the delivered item, (ii) relates solely to past performance and (iii) is reasonable relative to all of the other deliverables and payments within the arrangement. We received a non-refundable upfront cash payment of million from SpePharm AG upon execution of the SpePharm License Agreement in We determined that the license and other non-contingent deliverables did have stand-alone value because the license could be deemed to be fully delivered for its intended purpose unless we performed our other obligations, including specified development work. Accordingly, they did meet the separation criteria, resulting in these deliverables being considered a single unit of account. As a result, revenue relating to the upfront cash payment was deferred and was being recognized on a straight-line basis over the estimated obligation period of years. However, the remaining deferred revenue of was recognized upon obtaining European approval of a reduced-mass vial in several months earlier than originally anticipated.

 

 

 

 

 

 

 

In the FASB issued ASU - . ASU - provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity should account for the effects of a modification unless all of the following criteria are met: () The fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is required to estimate the value immediately before and after the modification. () The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified. () The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. Disclosure requirements remain unchanged. ASU - is effective for all entities for annual periods, and interim periods within those annual periods, beginning after Early adoption is permitted as described in ASU - Management is currently evaluating the impact that the adoption of ASU - will have on our consolidated financial statements.