Quarterly report pursuant to Section 13 or 15(d)

Note 9 - Notes Payable

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Note 9 - Notes Payable
3 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Debt Disclosure [Text Block]
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.
 
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 of New York on
December 6, 2017.
An initial pretrial conference was held on
January 26, 2018.
At the conference the Court stayed the deadline for the Company to answer or otherwise respond to the complaint. The Court also directed the parties to engage in informal jurisdictional discovery 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. A settlement conference was held on
April 30, 2018
and attended by a representative of Navidea and counsel, Dr. Goldberg and counsel, and counsel for PPVA and PPCO.  PPCO requested participation in the conference due to certain recent issues that have arisen concerning potential liability of PPCO to Navidea under the release and indemnification provisions of the payoff letter issued by PPCO in connection with the payment PPCO has received under the Platinum Loan Agreement.  The settlement conference resulted in
no
agreement. Because the funds sought by Platinum-Montaur are subject to claims of competing ownership, the Company intends to continue to defend itself in the action.
 
During the
three
-month periods ended
March 
31,
2018
and
2017,
$42,000
and
$143,000
of interest was compounded and added to the balance of the Platinum Note, respectively. As of
March 31, 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
March 31, 2018
and
December 31, 2017.
Changes in the estimated fair value of the Platinum Note were decreases of
$0
and
$140,000,
respectively, and were recorded as non-cash changes in fair value of the conversion option during the
three
-month periods ended
March 
31,
2018
and
2017.
The estimated fair value of the Platinum Note was
$2.1
million and
$2.0
million as of
March 
31,
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 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
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.
 
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. To date,
no
answer or other response or motion has been filed by the Lenders to Navidea’s complaint.
 
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 intends to pursue 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.
CRG served the Company with the new Texas suit on
May 2, 2018,
and the Company’s answer is due on
May 21, 2018.
The Company intends to contest this issue in the Ohio Court, the Texas Court, and on appeal in Texas. See Notes
2,
11
and
17
(b).
 
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 due 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 is approximately
$200,000
and
$318,000
as of
March 31, 2018
and
December 31, 2017,
respectively, and is included in notes payable, current in the consolidated balance sheets.
 
Summary
 
During the
three
-month periods ended
March 
31,
2018
and
2017,
we recorded interest expense of
$44,000
and
$1.7
million, respectively, related to our notes payable. Of these amounts,
$42,000
and
$143,000
was compounded and added to the balance of our notes payable during the
three
-month periods ended
March 
31,
2018
and
2017,
respectively.