Note 2 - Liquidity
|9 Months Ended|
Sep. 30, 2017
|Notes to Financial Statements|
|Substantial Doubt about Going Concern [Text Block]||
Prior to the Asset Sale to Cardinal Health
March 2017,all of our material assets were pledged as collateral for our borrowings under
our Term Loan Agreement with Capital Royalty Partners II L.P. and certain of its affiliates (collectively, “CRG”) (the “CRG Loan Agreement”). In addition to the security interest in our assets, the CRG Loan Agreement included covenants that imposed significant requirements on us. An event of default would have entitled CRG to accelerate the maturity of our indebtedness, increase the interest rate from
14%to the default rate of
18%per annum, and invoke other remedies available to CRG under the loan agreement and the related security agreement. During the course of
2016,CRG alleged multiple claims of default on the CRG Loan Agreement, and filed suit in the District Court of Harris County, Texas. On
June 22, 2016,CRG exercised control over
oneof the Company’s primary bank accounts and took possession of
$4.1million that was on deposit.
March 3, 2017,the Company entered into a Global Settlement Agreement with MT, CRG, and Cardinal Health
414to effectuate the terms of the settlement previously entered into by the parties on
February 22, 2017.In accordance with the Global Settlement Agreement, on
March 3, 2017,the Company repaid
$59million (the “Deposit Amount”) of its alleged indebtedness and other obligations outstanding under the CRG Term Loan. Concurrently with payment of the Deposit Amount, CRG released all liens and security interests granted under the CRG Loan Documents and the CRG Loan Documents were terminated and are of
nofurther force or effect; provided, however, that, notwithstanding the foregoing, the Company and CRG agreed to continue with their proceeding pending in The District Court of Harris County, Texas to fully and finally determine the actual amount owed by the Company to CRG under the CRG Loan Documents (the “Final Payoff Amount”). The Company and CRG further agreed that the Final Payoff Amount would be
$47million (the “Low Payoff Amount”) and
$66million (the “High Payoff Amount”). In addition, concurrently with the payment of the Deposit Amount and closing of the Asset Sale, (i) Cardinal Health
$7million letter of credit in favor of CRG (at the Company’s cost and expense to be deducted from the closing proceeds due to the Company, and subject to Cardinal Health
414’sindemnification rights under the Purchase Agreement) as security for the amount by which the High Payoff Amount exceeds the Deposit Amount in the event the Company is unable to pay all or a portion of such amount, and (ii) CRG posted a
$12million letter of credit in favor of the Company as security for the amount by which the Deposit Amount exceeds the Low Payoff Amount. If, on the
onehand, it is finally determined by the Texas Court that the amount the Company owes to CRG under the Loan Documents exceeds the Deposit Amount, the Company will pay such excess amount, plus the costs incurred by CRG in obtaining CRG’s letter of credit, to CRG and if, on the other hand, it is finally determined by the Texas Court that the amount the Company owes to CRG under the Loan Documents is less than the Deposit Amount, CRG will pay such difference to the Company and reimburse Cardinal Health
414for the costs incurred by Cardinal Health
414in obtaining its letter of credit. Any payments owing to CRG arising from a final determination that the Final Payoff Amount is in excess of
firstbe paid by the Company without resort to the letter of credit posted by Cardinal Health
414,and such letter of credit shall only be a secondary resource in the event of failure of the Company to make payment to CRG. The Company will indemnify Cardinal Health
414for any costs it incurs in payment to CRG under the settlement, and the Company and Cardinal Health
414further agree that Cardinal Health
414can pursue all possible remedies, including offset against earnout payments (guaranteed or otherwise) under the Purchase Agreement, warrant exercise, or any other payments owed by Cardinal Health
414,or any of its affiliates, to the Company, or any of its affiliates, if Cardinal Health
414incurs any cost associated with payment to CRG under the settlement. The
$2million being held in escrow pursuant to court order in the Ohio case and the
$3million being held in escrow pursuant to court order in the Texas case were released to the Company following the closing of the Asset Sale.
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., 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 Credit Opportunities Master Fund, LP (“PPCO”) an aggregate of approximately
$7.7million in partial satisfaction of the Company
’s liabilities, obligations and indebtedness under the Platinum Loan Agreement between the Company and Platinum-Montaur, which was purportedly transferred by Platinum-Montaur to PPCO. The Company was informed by Platinum Partners Value Arbitrage Fund LP (“PPVA”) that it was the owner of the balance of the Platinum Note. Such balance of approximately
$1.9million was due upon closing of the Asset Sale but withheld by the Company and
notpaid to anyone as it is subject to competing claims of ownership by both Dr. Michael Goldberg, the Company’s President and Chief Executive Officer, and PPVA.
March 2, 2017,PPCO provided a payoff letter (the “Payoff Letter”). In the Payoff Letter, PPCO defined “Indebtedness” to include all amounts due under the Platinum Note, indicated that upon payment of the Payoff Amount, all “Indebtedness owed to Lender” shall have been satisfied in full, and that the “Loan Documents,” which included the Platinum Loan Agreement and the Platinum Note, “shall terminate and have
nofurther force or effect.” The letter also confirmed that as of the date that payment was made by Navidea, the Receiver was providing a release and indemnification in favor of Navidea based on any claims made by any affiliate of PPCO. The Payoff Amount was paid pursuant to the Payoff Letter.
The remaining balance of the Platinum Note would have matured under its terms in
September 2017,however the Company has
notpaid the balance as it is still subject to ongoing competing claims of ownership. The Company intends to pay the balance of the debt if it is determined to be due and owing to PPVA or Dr. Goldberg.
Based on our
current working capital and our projected cash burn, including the potential for the Company to pay up to an additional
$7million to CRG depending upon the outcome of the Texas litigation, management believes that the Company will be able to continue as a going concern for at least
twelvemonths following the issuance of this Quarterly Report on Form
10-Q. Our projected cash burn also factors in certain cost cutting initiatives that have been implemented and approved by the board of directors, 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. We believe all of these factors are sufficient to alleviate substantial doubt about the Company’s ability to continue as a going concern.
The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
Reference 1: http://www.xbrl.org/2003/role/presentationRef