Quarterly report pursuant to Section 13 or 15(d)

Note 2 - Liquidity

v3.20.2
Note 2 - Liquidity
9 Months Ended
Sep. 30, 2020
Notes to Financial Statements  
Substantial Doubt about Going Concern [Text Block]
2.
Liquidity
 
As disclosed in the Company's Annual Report on Form
10
-K and other filings, the Company has been engaged in litigation with Platinum-Montaur Life Sciences LLC (“Platinum-Montaur”), an affiliate of Platinum Management (NY) LLC, Platinum Partners Value Arbitrage Fund L.P., Platinum Partners Capital Opportunity Fund, Platinum Partners Liquid Opportunity Master Fund L.P., Platinum Liquid Opportunity Management (NY) LLC, and Montsant Partners LLC (collectively, “Platinum”), in which Platinum-Montaur was seeking damages of approximately
$1.9
million plus interest.  See Note
10.
 
In addition, the Company is engaged in ongoing litigation with our former President and Chief Executive Officer, Dr. Michael Goldberg. See Notes
6
and
10.
 
The Company has also been engaged in ongoing litigation with Capital Royalty Partners II L.P. (“CRG”) and pursuing recovery of approximately
$4.3
million and other damages. On
November 27, 2019,
the Court of Common Pleas of Franklin County, Ohio (the “Ohio Court”) entered a judgment in the amount of
$4.3
million to Navidea, plus statutory interest from
April 9, 2018 (
the “CRG Judgment”). See Note
10.
 
In
December 2019,
the Company executed a Stock Purchase Agreement with the investors named therein. Pursuant to the Stock Purchase Agreement, the investors agreed to purchase approximately
2.1
million shares of the Company's Common Stock in a private placement for aggregate gross proceeds to the Company of approximately
$1.9
million. Of this amount, approximately
$1.1
million was received during
2019.
The remaining
$812,000
of proceeds were received and the related Common Stock was issued in
January 2020.
See Note
11.
 
 
In 
February 2020,
the Company executed agreements with
two
existing investors to purchase approximately
4.0
million shares of the Company's Common Stock for aggregate gross proceeds to Navidea of approximately
$3.4
million. The entire
$3.4
million was received during the
first
three
quarters of
2020.
See Note
11.
 
On
May 6, 2020,
the Company entered into a Stock Purchase Agreement and Letter of Investment Intent with Keystone Capital Partners, LLC (“Keystone”) pursuant to which the Company agreed to issue to Keystone
420,000
shares of newly-designated Series C Redeemable Convertible Preferred Stock (the “Series C Preferred Stock”) for an aggregate purchase price of
$4.2
million.  The entire
$4.2
million was received and the related Series C Preferred Stock was issued during the
second
and
third
quarters of
2020.
The Series C Preferred Stock was guaranteed by a portion of the proceeds of the CRG Judgment. See Note
11.
 
 
On
August 9, 2020,
the Company entered into a binding memorandum of understanding (“MOU”) with Jubilant Draximage Inc., dba Jubilant Radiopharma, Radiopharmaceuticals Division (“Jubilant”). The MOU outlines the terms and framework for a potential Exclusive License and Distribution Agreement (“ELDA”) for Navidea's
Tc99m
-Tilmanocept Rheumatoid Arthritis diagnostic application (“TRA”) in the United States, Canada, Mexico, and Latin America. In connection with the MOU, the Company entered into a Stock Purchase Agreement with Jubilant (the “Jubilant Stock Purchase Agreement”), pursuant to which Jubilant purchased
$1.0
million in shares of the Company's common stock (the “Transaction Shares”) in exchange for exclusivity of negotiations while due diligence efforts are completed. The investment was priced “at market,” which was the closing price of Navidea's common stock on the NYSE American on the trading day immediately preceding the investment.
 
The MOU outlines certain terms that are expected to be included in the ELDA, including:
 
 
Jubilant to provide Navidea with an additional
$19.0
million in the form of stock purchases and license fees, subject to the achievement of certain milestones, to be used to fund Navidea's upcoming
NAV3
-
32
(Phase
2b
) and
NAV3
-
33
(Phase
3
) trials.
 
 
Jubilant will pay license fees and sales-based royalties to Navidea based on revenue generated from the sale of TRA in the licensed territory.
 
 
Jubilant will serve as the exclusive commercial and distribution partner for TRA in the United States, Canada, Mexico, and Latin America. Jubilant will be responsible for all commercialization efforts within the licensed territory.
 
 
The execution of the ELDA is subject to certain conditions, including negotiation of a definitive agreement in mutually acceptable form and Jubilant's completion of its due diligence. See Note
11.
 
On
August 30, 2020,
the Company entered into a Stock Purchase Agreement (the “Common Stock Purchase Agreement”) with each of the investors named therein (the “Investors”), pursuant to which the Investors agreed to purchase from the Company, up to
$25.0
million in shares of the Company's common stock, par value
$0.001
per share (“Common Stock”). See Note
11.
 
On
August 31, 2020,
the Company entered into a Stock Purchase Agreement and Letter of Investment Intent (the “Series D Preferred Stock Purchase Agreement” and, together with the Common Stock Purchase Agreement, the “Purchase Agreements”) with Keystone pursuant to which the Company agreed to issue to Keystone
150,000
shares of newly-designated Series D Redeemable Convertible Preferred Stock (the “Series D Preferred Stock”) for an aggregate purchase price of
$15.0
million. Pursuant to the Series D Preferred Stock Purchase Agreement, Keystone will purchase Series D Preferred Stock in amounts to be determined by Keystone in
one
or more closings (each, a “Series D Call Closing”). The Series D Preferred Stock will be convertible into a maximum of
5,147,000
shares of Common Stock. See Notes
11
and
16.
 
 
Navidea intends to use the net proceeds from these transactions to fund its research and development programs, including continued advancement of its
two
Phase
2b
and Phase
3
clinical trials of
Tc99m
tilmanocept in patients with rheumatoid arthritis, and for general working capital purposes and other operating expenses.
 
The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on
March 27, 2020.
Among the provisions contained in the CARES Act is the creation of the Payroll Protection Program (“PPP”) that provides for Small Business Administration (“SBA”) Section
7
(a) loans for qualified small businesses. PPP loan proceeds are available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt.  On
May 18, 2020,
Fifth Third Bank (the “Lender”) funded a loan to the Company in the amount of
$366,000
under the SBA's PPP (the “PPP Loan”). In accordance with the loan forgiveness requirements of the CARES Act, the Company used the proceeds from the PPP Loan primarily for payroll costs, rent and utilities, thus the Company anticipates that
100%
of the loan will be forgiven.
 
During the ongoing COVID-
19
global pandemic, the Company's primary focus is the safety of its employees, the employees of its clinical trial sites, and the patients enrolled in its clinical trials. The Company is working to mitigate any safety risk along with any long-term impact on its clinical development programs. To date, we do
not
believe there has been any appreciable impact to the Company's clinical development and regulatory timelines resulting from COVID-
19.
  The funding from the
February 2020
transactions described above was received on a delayed basis during the
second
and
third
quarters of
2020,
due in part to the COVID-
19
pandemic and its devastating impact on global financial markets.   
 
  The Company has experienced recurring net losses and has used significant cash to fund its operations. The Company has considerable discretion over the extent of development project expenditures and has the ability to curtail the related cash flows as needed. The
February 2020
transactions described above have provided approximately
$7.6
million of additional working capital. The
August 2020
transactions described above
may
potentially provide up to an additional
$60.0
million of working and growth capital,
$20.0
million of which is fully committed. The Company also has funds remaining under outstanding grant awards, and continues working to establish new sources of funding, including collaborations, potential equity investments, and additional grant funding that can augment the balance sheet. Based on our committed equity investments, current working capital, and our projected cash burn, management believes that the Company will be able to continue as a going concern for at least
twelve
months following the filing of this Quarterly Report on Form
10
-Q.