Annual report pursuant to Section 13 and 15(d)

Note 11 - Investment in R-NAV, LLC

Note 11 - Investment in R-NAV, LLC

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Equity Method Investments and Joint Ventures Disclosure [Text Block]

Investment in R-NAV, LLC

July 2014,

Navidea formed a joint enterprise with Essex Woodlands-backed Rheumco, LLC

(“Rheumco”), to develop and commercialize radiolabeled diagnostic and therapeutic products for rheumatologic and arthritic diseases. The joint enterprise, called R-NAV, LLC, combined Navidea’s proprietary Manocept

CD206

macrophage targeting platform and Rheumco’s proprietary Tin-

117m

radioisotope technology to focus on leveraging the platforms across several indications with high unmet medical need, including the detection and treatment of RA and veterinary osteoarthritis.

Both Rheumco and Navidea contributed licenses for intellectual property and technology to R-NAV in exchange for common units in R-NAV. The contributions of these licenses were recorded using the carryover basis. R-NAV was initially capitalized through a

$4.0

million investment from

third

-party private investors, and the technology contributions from Rheumco and Navidea. Navidea committed an additional

$1.0

million investment to be paid over

three

years, with

$333,334

in cash contributed at inception and a promissory note in the principal amount of

$666,666,

payable in

two

equal installments on the

first

and

second

anniversaries of the transaction.

A principal payment of

$333,333

was made on the note payable to R-NAV in

July 2015.

See Note

13.

In exchange for its capital and in-kind investment, the Company received

3,500,000

Common Units and

1,000,000

Series A preferred units of R-NAV (“Series A Units”). The Company was to receive an additional

500,000

Series A Units for management and technical services associated with the programs described above performed by the Company for R-NAV pursuant to a services agreement.

Navidea initially owned approximately

33.7%

of the combined entity. At

December 31, 2015,

Navidea own

ed approximately

27.3%

of R-NAV. Joint oversight over certain aspects of R-NAV was shared between Navidea and the other investors; Navidea did

not

control the operations of R-NAV. Navidea had

three

-year call options to acquire, at its sole discretion, all of the equity of R-NAV’s TcRA Imaging, Inc. subsidiary (“TcRA”) for

$10.5

million prior to the launch of a Phase

clinical trial for its development program, and all of the equity of R-NAV’s SnRA Theragnostics, Inc. subsidiary at fair value upon completion of radiochemistry and biodistribution studies for its development program.

Effective

May 31, 2016,

Navidea terminated its joint venture with R-NAV. Under the terms of the agreement, Navidea (

) transferred all of its shares of R-NAV, consisting of

1,500,000

Series A Preferred Units and

3,500,000

Common Units, to R-NAV; and (

) paid

$110,000

in cash to R-NAV. In exchange, R-NAV (

) transferred all of its shares of TcRA to Navidea, thereby returning the technology licensed to TcRA to Navidea; and (

) forgave the

$333,333

remaining on the promissory note.

See Note

13.

Neither Navidea nor R-NAV has any further obligations of any kind to either party. As a result of this transaction, the Company recognized a loss on disposal of the investment in R-NAV of

$39,732

during

2016.

Navidea

’s investment in R-NAV was accounted for using the equity method of accounting. In accordance with current accounting guidance, the Company's initial contributions of cash and note payable totaling

$1.0

million were allocated between the investment in R-NAV and the call option on TcRA based on the relative fair values of the assets. As a result, we recorded an initial equity investment in R-NAV of

$727,000

and a call option asset of

$273,000

as non-current assets at the time of the initial investment. Navidea's equity in the loss of R-NAV was

$15,159

and

$305,253

for the years ended

December 31, 2016

and

2015,

respectively. Navidea’s equity in the loss of R-NAV exceeded our initial investment in R-NAV. As such, the carrying value of the Company’s investment in R-NAV was

as of

May 31, 2016

, immediately prior to termination of the joint venture.

The Company

’s obligation to provide

$500,000

of in-kind services to R-NAV was being recognized as those services were provided. The Company provided

$15,000

and

$64,000

of in-kind services during the years ended

December 31, 2016

and

2015,

respectively. As of

May 31, 2016,

the Company had

$383,000

of in-kind services remaining to provide under this obligation. This obligation ceased on

May 31, 2016

under the terms of the agreement.

Navidea provided additional services to R-NAV in support of its development activities. Such services were immaterial to Navidea

’s overall operations.