Current report filing

Note 1 - Organization and Summary of Significant Accounting Policies

Note 1 - Organization and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Significant Accounting Policies [Text Block]

1.	Organization and Summary of Significant Accounting Policies

Organization and Nature of Operations:

Navidea Biopharmaceuticals, Inc. (“Navidea,” the “Company,” or “we”), a Delaware Corporation (NYSE MKT: 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 help identify the sites and pathways of undetected disease and enable better diagnostic accuracy, clinical decision-making, targeted treatment and, ultimately, patient care.

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 Lymphoseek

(technetium

Tc99m

tilmanocept) injection, the

first

product developed and commercialized by Navidea based on the platform. Building on the success of

Tc99m

tilmanocept, the flexible and versatile Manocept platform acts as an engine for the design of purpose-built molecules offering the potential to be utilized across a range of diagnostic modalities, including single photon emission computed tomography (“SPECT”), positron emission tomography (“PET”), intra-operative and/or optical-fluorescence detection in a variety of disease states.

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 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 rights, 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

November 15, 2007 (

as amended, the “Supply and Distribution Agreement”), between Cardinal Health

414

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).

The Asset Sale to Cardinal Health

414

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.

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.

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.

January 2015,

Macrophage Therapeutics, Inc. (“MT”), a majority-owned subsidiary, was formed specifically to explore immuno-therapeutic applications for the Manocept platform.

From our inception through

August 2011,

we also manufactured a line of gamma detection systems called the neoprobe® GDS system (the

“GDS Business”). We sold the GDS Business to Devicor Medical Products, Inc. (“Devicor”) in

August 2011.

In exchange for the assets of the GDS Business, Devicor made net cash payments to us totaling

$30.3

million, assumed certain liabilities of the Company associated with the GDS Business, and agreed to make royalty payments to us of up to an aggregate maximum amount of

$20

million based on the net revenue attributable to the GDS Business through

2017.

We recorded income of

$759,000,

net of taxes, in

2015

related to royalty amounts earned based on

2015

GDS Business revenue. The royalty amount of

$1.2

million was offset by

$436,000

in estimated taxes which were allocated to discontinued operations, but were fully offset by the tax benefit from our net operating loss for

2015.

We did

not

earn or receive any such royalty payments prior to

2015

or in

2016.

December 2001,

we acquired Cardiosonix Ltd. (“Cardiosonix”), an Israeli company with a blood flow measurement device product line in the early stages of commercialization. In

August 2009,

the Company

’s Board of Directors decided to discontinue the operations and attempt to sell Cardiosonix. However, we were obligated to continue to service and support the Cardiosonix devices through

2013.

The Company has

not

received significant expressions of interest in the Cardiosonix business and as such, we continue to wind down our activities in this area until a final shutdown of operations is completed.

July 2011,

we established a European business unit, Navidea Biopharmaceuticals Limited, to address international development and commercialization needs for our technologies, including

Tc99m

tilmanocept. Navidea owns

100%

of the outstanding shares of Navidea Biopharmaceuticals Limited.

Principles of Consolidation:

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”) in

May 2016,

Navidea's investment in R-NAV was being accounted for using the equity method of accounting and was therefore

not

consolidated. See Note

11.

Use of Estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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

measurements) and the lowest priority to unobservable inputs (Level

measurements). The

three

levels of the fair value hierarchy are described below:

Level

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

Level

– Quoted prices in markets that are

not

active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level

– 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:

(

)

Cash, restricted cash, accounts and other receivables, accounts payable, and accrued liabilities: The carrying amounts approximate fair value because of the short maturity of these instruments. At

December 31, 2016,

restricted cash represents the balance in an account that is under the control of Capital Royalty Partners II L.P. (“CRG”). See Note

13.

December 31, 2016,

approximately

$894,000

of accounts payable was being disputed by the Company related to unauthorized expenditures by a former executive during the year ended

December 31, 2016.

(

)

Notes payable: The carrying value of our debt at

December 31,

201

and

2015

primarily consists of the face amount of the notes plus the fair value of the conversion option less unamortized discounts. At

December 31, 2016

and

2015,

the conversion option of certain notes payable was required to be recorded at fair value. The estimated fair value of the conversion option was calculated using a Monte Carlo simulation. This valuation method includes Level

inputs such as the estimated current market interest rate for similar instruments with similar creditworthiness. Unrealized gains and losses on the fair value of the conversion option are classified in other expenses as a change in the fair value of financial instruments in the consolidated statements of operations. At

December 31, 2016

and

2015,

the fair value of the conversion option was approximately

$153,000

and

$3.0

million, respectively. See Notes

and

13.

(

)

Derivative liabilities: Derivative liabilities are related to certain outstanding warrants which are recorded at fair value.

Derivative liabilities totaling

$63,000

as of

December 31, 2016

and

2015

were included in other liabilities on the consolidated balance sheets. The assumptions used to calculate fair value as of

December 31, 2016

and

2015

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

Stock-Based Compensation:

December 31, 2016,

we have instruments outstanding under

two

stock-based compensation plans; the Fourth Amended and Restated

2002

Stock Incentive Plan (the

“2002

Plan”) and the

2014

Stock Incentive Plan (the

“2014

Plan”). Currently, under the

2014

Plan, we

may

grant incentive stock options, nonqualified stock options, and restricted stock awards to full-time employees and directors, and nonqualified stock options and restricted stock awards

may

be granted to our consultants and agents. Total shares authorized under each plan are

million shares and

million shares, respectively. Although instruments are still outstanding under the

2002

Plan, the plan has expired and

new grants

may

be made from it. Under both plans, the exercise price of each option is greater than or equal to the closing market price of our common stock on the date of the grant.

Stock options granted under the

2002

Plan and the

2014

Plan generally vest on an annual basis over

one

four

years. Outstanding stock options under the plans, if

not

exercised, generally expire

ten

years from their date of grant or up to

days following the date of an optionee

’s separation from employment with the Company. We issue new shares of our common stock upon exercise of stock options.

September 2016,

the Board of Directors approved the

2016

Stock Incentive Plan (the

“2016

Plan”), authorizing a total of

million shares. The

2016

Plan has

not

yet been approved by Navidea

’s stockholders. In connection with Dr. Goldberg’s appointment as Chief Executive Officer of the Company in

September 2016,

the Board of Directors awarded options to purchase

5,000,000

shares of our common stock to Dr. Goldberg, subject to stockholder approval of the

2016

Plan. If approved, these stock options will vest

100%

when the average closing price of the Company’s common stock over a period of

five

consecutive trading days equals or exceeds

$2.50

per share, and expire on the

tenth

anniversary of the date of grant.

Stock-based payments to employees and directors, including grants of stock options, are recognized in the consolidated statement of operations based on their estimated fair values. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Expected volatilities are based on the Company

’s historical volatility, which management believes represents the most accurate basis for estimating expected future volatility under the current circumstances. Navidea uses historical data to estimate forfeiture rates. The expected term of stock options granted is based on the vesting period and the contractual life of the options. The risk-free rate is based on the U.S. Treasury yield in effect at the time of the grant. The assumptions used to calculate the fair value of stock option awards granted during the years ended

December 31, 2016,

2015

and

2014

are noted in the following table:

	2016			2015			2014
Expected volatility	59%	-	75%	61%	-	64%	61%	-	67%
Weighted-average volatility		60%			62%			65%
Expected dividends		—			—			—
Expected term (in years)	5.0	-	6.0	5.1	-	6.3	5.3	-	7.4
Risk-free rate	1.2%	-	1.8%	1.5%	-	1.9%	1.6%	-	2.0%

The portion of the fair value of stock-based awards that is ultimately expected to vest is recognized as compensation expense over either (

) the requisite service period or (

) the estimated performance period. 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. Restricted stock

may

vest based on the passage of time, or upon occurrence of a specific event or achievement of goals as defined in the grant agreements. In such cases, we record compensation expense related to grants of restricted stock based on management

’s estimates of the probable dates of the vesting events. Stock-based awards that do

not

vest because the requisite service period is

not

met prior to termination result in reversal of previously recognized compensation cost. See Note

Cash and Cash Equivalents:

Cash equivalents are highly liquid instruments such as U.S. Treasury bills, bank certificates of deposit, corporate commercial paper and money market funds which have maturities of less than

months from the date of purchase.

Accounts

and Other

Receivable

Accounts and other receivables are recorded net of an allowance for doubtful accounts. We estimate an allowance for doubtful accounts based on a review and assessment of specific accounts and other receivables and write off accounts when deemed uncollectible. See Note

Inventory:

All components of inventory are valued at the lower of cost (

first

-in,

first

-out) or market. We adjust inventory to market value when the net realizable value is lower than the carrying cost of the inventory. Market value is determined based on estimated sales activity and margins. We estimate a reserve for obsolete inventory based on management’s judgment of probable future commercial use, which is based on an analysis of current inventory levels, estimated future sales and production rates, and estimated shelf lives. See Note

Property and Equipment:

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is generally computed using the straight-line method over the estimated useful lives of the depreciable assets. Depreciation and amortization related to equipment under capital leases and leasehold improvements is recognized over the shorter of the estimated useful life of the leased asset or the term of the lease. Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized. See Note

Intangible Assets:

Intangible assets consist primarily of patents and trademarks. Intangible assets are stated at cost, less accumulated amortization. Patent costs are amortized using the straight-line method over the estimated useful lives of the patents of approximately

years. Patent application costs are deferred pending the outcome of patent applications. Costs associated with unsuccessful patent applications and abandoned intellectual property are expensed when determined to have

recoverable value. We evaluate the potential alternative uses of all intangible assets, as well as the recoverability of the carrying values of intangible assets, on a recurring basis.

Impairment or Disposal of Long-Lived Assets:

Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

impairment was recognized during the years ended

December 31, 2016,

2015

2014.

Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Leases:

Leases are categorized as either operating or capital leases at inception. Operating lease costs are recognized on a straight-line basis over the term of the lease. An asset and a corresponding liability for the capital lease obligation are established for the cost of capital leases. The capital lease obligation is amortized over the life of the lease. For build-to-suit leases, the Company establishes an asset and liability for the estimated construction costs incurred to the extent that it is involved in the construction of structural improvements or takes construction risk prior to the commencement of the lease. Upon occupancy of facilities under build-to-suit leases, the Company assesses whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If a lease does

not

meet the criteria to qualify for a sale-leaseback transaction, the established asset and liability remain on the Company's balance sheet. See Note

21.

Derivative Instruments:

Derivative instruments embedded in contracts, to the extent

not

already a free-standing contract, are bifurcated from the debt instrument 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. Derivative liabilities with expiration dates within

one

year are classified as current, while those with expiration dates in more than

one

year are classified as long term. We do

not

use derivative instruments for hedging of market risks or for trading or speculative purposes.

	n .	Revenue Recognition: Prior to the Asset Sale to Cardinal Health 414 in March 2017, we generated revenue primarily from sales of Lymphoseek. Our standard shipping terms are free on board (FOB) shipping point, and title and risk of loss passes to the customer upon delivery to a carrier for shipment. We generally recognize sales revenue related to sales of our products when the products are shipped. Our customers have no right to return products purchased in the ordinary course of business, however, we may allow returns in certain circumstances based on specific agreements.

		We earned additional revenues based on a percentage of the actual net re venues achieved by Cardinal Health 414 on sales to end customers made during each fiscal year. The amount we charged Cardinal Health 414 related to end customer sales of Lymphoseek was subject to a retroactive annual adjustment. To the extent that we could reasonably estimate the end-customer prices received by Cardinal Health 414, we recorded sales based upon these estimates at the time of sale. If we were unable to reasonably estimate end customer sales prices related to products sold, we recorded revenue related to these product sales at the minimum (i.e., floor) price provided for under our distribution agreement with Cardinal Health 414. During the years ended December 31, 2016 and 2015, approximately 99% of Lymphoseek sales were made to Cardinal Health 414. Revenues from Cardinal Health 414 in the years ended December 31, 2016, 2015 and 2014 have been reclassified to discontinued operations. See Note 3.

		We also earn revenues related to our licensing and distribution agreements. The terms of these agreements may 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 not 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 $2.0 million from SpePharm AG upon execution of the SpePharm License Agreement in March 2015. We have determined that the license and other non-contingent deliverables do not have stand-alone value because the license could not be deemed to be fully delivered for its intended purpose unless we perform our other obligations, including specified development work. Accordingly, they do not 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 two years. However, the remaining deferred revenue of $417,000 was recognized upon obtaining European approval of a reduced-mass vial in September 2016, several months earlier than originally anticipated.

		We generate additional revenue from grants to support various product dev elopment initiatives. We generally recognize grant revenue when expenses reimbursable under the grants have been paid and payments under the grants become contractually due. Lastly, we recognized revenues from the provision of services to R-NAV and its subsidiaries through the termination of the R-NAV joint venture on May 31, 2016. See Note 11.

Research and Development Costs:

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, 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.

Income Taxes:

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities 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. Deferred tax assets and liabilities 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 deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Due to the uncertainty surrounding the realization of the deferred tax assets in future tax returns, all of the deferred tax assets have been fully offset by a valuation allowance at

December 31, 2016

and

2015.

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,

liability for uncertain tax positions was recorded as of

December 31,

201

2015

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

December 31, 2016,

tax years

2013

2016

remained subject to examination by federal and state tax authorities. See Note

18.

Change in Accounting Principle:

April 2015,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

No.

2015

03,

Simplifying the Presentation of Debt Issuance Costs

. ASU

2015

requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability rather than as an asset. The recognition and measurement guidance for debt issuance costs are

not

affected by ASU

2015

03.

ASU

2015

was effective for fiscal years beginning after

December 15, 2015,

and interim periods within those fiscal years. Early adoption was permitted. Entities must apply the amendments in ASU

2015

on a retrospective basis. In

2015,

the Company adopted ASU

2015

03.

We have reflected all remaining unamortized costs as a reduction of the debt on the balance sheets as of

December 31, 2016

and

2015,

and will continue to do so in future periods. The adoption of ASU

2015

had

impact on the consolidated statements of operations, stockholders' deficit or cash flows.

November 2015,

the FASB issued ASU

No.

2015

17,

Balance Sheet Classification of Deferred Taxes

. ASU

2015

eliminates the requirement to bifurcate deferred taxes between current and noncurrent on the balance sheet and requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet. ASU

2015

may

be applied retrospectively or prospectively and early adoption is permitted. We early-adopted ASU

2015

as of

December 31, 2015

and the statement of financial position as of this date reflects the revised classification of current deferred tax assets and liabilities as noncurrent. Adoption of ASU

2015

resulted in a retrospective reclassification between current deferred tax assets and noncurrent deferred tax assets.

As a result of the Asset Sale, our

consolidated balance sheets and statements of operations have been reclassified, for all periods presented to reflect the Business as a discontinued operation, including interest expense related to the CRG and Platinum notes, as required by Accounting Standards Codification

205

Recent Accounting Standards:

August 2014,

the FASB issued ASU

No.

2014

15,

Presentation of Financial Statements-Going Concern

. ASU

2014

defines when and how companies are required to disclose going concern uncertainties, which must be evaluated each interim and annual period. ASU

2014

requires management to determine whether substantial doubt exists regarding the entity's going concern presumption. Substantial doubt about an entity's ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within

one

year after the date that the financial statements are issued (or available to be issued). If substantial doubt exists, certain disclosures are required; the extent of those disclosures depends on an evaluation of management's plans (if any) to mitigate the going concern uncertainty. ASU

2014

is effective prospectively for annual periods ending after

December 15, 2016,

and to annual and interim periods thereafter. Early adoption was permitted. The adoption of ASU

2014

did

not

have any effect on our consolidated financial statements, however it does affect disclosures.

February 2016,

the FASB issued ASU

No.

2016

02,

Leases (Topic

842

)

. ASU

2016

requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous 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

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 expect the adoption of ASU

2016

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. Management is currently evaluating the impact that the adoption of ASU

2016

will have on our consolidated financial statements.

March 2016,

the FASB iss

ued ASU

No.

2016

08,

Revenue from Contracts with Customers – Principal versus Agent Considerations (Reporting Revenue Gross versus Net)

. ASU

2016

does

not

change the core principle of the guidance, rather it clarifies the implementation guidance on principal versus agent considerations. ASU

2016

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

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 will evaluate the potential impact that the adoption of ASU

2014

may

have on our consolidated financial statements following the closing of the Asset Sale to Cardinal Health

414

March 2017.

March 2016,

the FASB issued ASU

No.

2016

09,

Compensation – Stock Compensation

. ASU

2016

simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the simplified areas apply only to nonpublic entities. ASU

2016

is effective for public business entities for annual periods beginning after

December 15, 2016,

and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts ASU

2016

in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Methods of adoption vary according to each of the amendment provisions. Management is currently evaluating the impact that the adoption of ASU

2016

will have on our consolidated financial statements.

April 2016,

the FASB issued ASU

No.

2016

10,

Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing

. ASU

2016

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

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

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 will evaluate the potential impact that the adoption of ASU

2016

120

may

have on our consolidated financial statements following the closing of the Asset Sale to Cardinal Health

414

March 2017.

May 2016,

the FASB issued ASU

No.

2016

12,

Revenue from Contracts with Customers – Narrow-Scope Improvements and Practical Expedients

. ASU

2016

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

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

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 will evaluate the potential impact that the adoption of ASU

2016

may

have on our consolidated financial statements following the closing of the Asset Sale to Cardinal Health

414

March 2017.

August 2016,

the FASB issued ASU

No.

2016

15,

Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments

. ASU

2016

addresses certain specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement cash flows. ASU

2016

is effective for public business entities for fiscal years beginning after

December 15, 2017,

and interim periods within those fiscal years. Early adoption is permitted in any interim or annual period. If an entity early adopts ASU

2016

in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. ASU

2016

should be applied using a retrospective transition method to each period presented, with certain exceptions. We adopted ASU

2016

upon issuance, which resulted in debt prepayment costs being classified as financing costs rather than operating costs on the statement of cash flows for the year ended

December 31, 2016.

November 2016,

the FASB issued ASU

No.

2016

18,

Statement of Cash Flows – Restricted Cash

. ASU

2016

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

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

in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes the interim period. Following the payoff of our CRG debt and release of our restricted cash in

March 2017,

we do

not

expect the adoption of ASU

2016

to have a material effect on our consolidated financial statements.

December 2016,

the FASB issued ASU

No.

2016

20,

Technical Corrections and Improvements to Topic

606,

Revenue from Contracts with Customers

. ASU

2016

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

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

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 will evaluate the potential impact that the adoption of ASU

2016

may

have on our consolidated financial statements following the closing of the Asset Sale to Cardinal Health

414

March 2017.

January 2017,

the FASB issued ASU

No.

2017

01,

Business Combinations (Topic

805

), Clarifying the Definition of a Business

. ASU

2017

provides a screen to determine when a set of assets and activities (collectively, a “set”) is

not

a business. The screen requires that when substantially all of the fair market value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is

not

a business. If the screen is

not

met, ASU

2017

(

) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output, and (

) removes the evaluation of whether a market participant could replace missing elements. ASU

2017

is effective for public business entities for annual periods beginning after

December 15, 2017,

including interim periods within those periods. ASU

2017

should be applied prospectively on or after the effective date.

disclosures are required at transition. Early adoption is permitted for certain transactions as described in ASU

2017

01.

Management is currently evaluating the impact that the adoption of ASU

2017

will have on our consolidated financial statements.