The information presented as of and for the -month and -month periods ended and is unaudited, but includes all adjustments (which consist only of normal recurring adjustments) that the management of Navidea Biopharmaceuticals, Inc. (“Navidea”, the “Company,” or “we”) believes to be necessary for the fair presentation of results for the periods presented. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. The balances as of and the results for the interim periods are necessarily indicative of results to be expected for the year. The consolidated financial statements should be read in conjunction with Navidea's audited consolidated financial statements for the year ended which were included as part of our Annual Report on Form -K.

 

Our consolidated financial statements include the accounts of Navidea and our wholly owned subsidiary, Navidea Biopharmaceuticals Limited, as well as those of our majority-owned subsidiary, Macrophage Therapeutics, Inc. (“MT”). All significant inter-company accounts were eliminated in consolidation.

 

In the World Health Organization categorized the current COVID- outbreak as a pandemic, and the President of the United States declared the COVID- outbreak a national emergency.  COVID- continues to spread globally, including throughout the United States, which has impacted the global economy and impact our operations, including the potential interruption of our clinical trial activities and our supply chain. To date, we do believe there has been any appreciable impact to the Company's clinical development and regulatory timelines resulting from COVID-  However, the COVID- pandemic has adversely affected economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations, including our ability to obtain additional funding, if needed.  The funding from the transactions described in Note below was received on a delayed basis during the and quarters of due in part to the COVID- pandemic and its devastating impact on global financial markets. The extent to which COVID- impacts our operations and financial results will depend on numerous evolving factors that we are able to accurately predict, including: the duration and scope of the pandemic, government actions taken in response to the pandemic, and the impact on our ability to continue to conduct our clinical trials

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

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The carrying amounts approximate fair value because of the short maturity of these instruments.

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The carrying value of our debt as of and primarily consisted of the face amount of the notes plus accrued interest. As of and the fair value of our notes payable was approximately and both amounts equal to the carrying value of the notes payable. See Note

We currently generate revenue primarily from grants to support various product development initiatives. We generally recognize grant revenue when expenses reimbursable under the grants have been paid and payments under the grants become contractually due.

 

We also earn revenues related to our licensing and distribution agreements. The consideration we are eligible to receive under our licensing and distribution agreements typically includes upfront payments, reimbursement for research and development costs, milestone payments, and royalties. Each licensing and distribution agreement is unique and requires separate assessment in accordance with current accounting standards. See Note

All of our leases are operating leases and are included in right-of-use lease assets, current lease liabilities and noncurrent lease liabilities on our consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company's incremental borrowing rates or implicit rates, when readily determinable. The discount rates used for each lease were based principally on the Platinum debt, which was secured and outstanding for most of We used a “build-up” method where the approach was to estimate the risk/credit spread priced into the debt rate and then adjust that for the remaining term of each lease. Additionally, some market research was completed on the Company's peer group as identified for purposes of compensation analysis. Short-term operating leases which have an initial term of months or less are recorded on the consolidated balance sheets. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense is included in selling, general and administrative expenses on our consolidated statements of operations. See Note

  The Company evaluated the provisions of the Series C and Series D Preferred Stock under Accounting Standards Codification (“ASC”) , ASC , ASC , and Accounting Series Release (“ASR”) .”  Based on this evaluation, the Company determined that neither the Series C nor Series D Preferred Stock is a mandatorily redeemable financial instrument and any obligation to issue a variable number of shares of Common Stock is unconditional.  Accordingly, the Series C and Series D Preferred Stock should be classified as equity.  Neither the embedded conversion option nor the embedded call option meet the criteria to be separated from the Series C or Series D Preferred stock and thus these features should be bifurcated and accounted for as derivatives.  Additionally, both the Series C and Series D Preferred Stock contain a beneficial conversion feature (“BCF”) that results in an increase to additional paid-in capital and a discount on the Series C and Series D Preferred Stock.  The discount on the Series C and Series D Preferred Stock is considered to be fully amortized at the date of issuance because the Series C and Series D Preferred Stock are immediately convertible.  This results in a deemed dividend at the date of issuance for the amount of the BCF.  Finally, the Company determined that the conversion features of the Series D Preferred Stock cannot result in the Company being required to redeem a portion of the shares converted, thus the Series D Preferred Stock should be classified in mezzanine equity.  See Note

In the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) - . ASU - is intended to improve the effectiveness of disclosure requirements on fair value measurements in Topic ASU - modifies certain disclosure requirements and is effective for annual and interim reporting periods beginning after The adoption of ASU - did have any impact on our consolidated financial statements or our fair value disclosures.

In the FASB issued ASU - . ASU - is intended to improve consistent application and simplify the accounting for income taxes. ASU - removes certain exceptions to the general principles in Topic and clarifies and amends existing guidance. ASU - is effective for annual and interim reporting periods beginning after with early adoption permitted. We do expect the adoption of ASU - to have a material impact on our consolidated financial statements.

 

In the FASB issued ASU - . ASU - was issued to reduce the complexity associated with accounting for certain financial instruments with characteristics of liabilities and equity. ASU - reduces the number of accounting models for convertible debt instruments and convertible preferred stock and improves the disclosures for convertible instruments and related earnings-per-share (“EPS”) guidance. ASU - also amends the guidance for the derivatives scope exception for contracts in an entity's own equity and improves and amends the related EPS guidance. ASU - is effective for public business entities except smaller reporting companies for annual and interim reporting periods beginning after and for annual and interim reporting periods beginning after for all other entities. Early adoption is permitted, but the guidance must be adopted as of the beginning of a fiscal year. We are currently evaluating the impact of the adoption on ASU - on our consolidated financial statements.