Platinum

In July 2012, we entered into an agreement with Platinum to provide us with a credit facility of up to $50 million.  Following the approval of Lymphoseek, Platinum was committed under the terms of the agreement to extend up to $35 million in debt financing to the Company.  The agreement also provided for Platinum to extend an additional $15 million on terms to be negotiated.  Through June 25, 2013, we drew a total of $8.0 million under the original facility.

In June 2013, in connection with entering into the GECC/MidCap Loan Agreement (discussed below), the Company and Platinum entered into an Amendment to the Platinum Loan Agreement (the First Platinum Amendment).  Concurrent with the execution of the First Platinum Amendment, the Company delivered an Amended and Restated Promissory Note (the First Amended Platinum Note) to Platinum, which amended and restated the original promissory note issued to Platinum, in the principal amount of up to $35 million.  The First Amended Platinum Note also adjusted the interest rate to the greater of (a) the U.S. Prime Rate as reported in the Wall Street Journal plus 6.75%; (b) 10%; or (c) the highest rate of interest then payable pursuant to the GECC/MidCap Loan Agreement plus 0.125%.  In addition, the First Platinum Amendment granted Platinum the right, at Platinum’s option subject to certain conditions, to convert all or any portion of the unpaid principal or unpaid interest accrued on any future draw (the Conversion Amount), beginning on a date two years from the date the draw is advanced, into the number of shares of Navidea’s common stock computed by dividing the Conversion Amount by a conversion price equal to the lesser of (i) 90% of the lowest VWAP for the 10 trading days preceding the date of such conversion request, or (ii) the average VWAP for the 10 trading days preceding the date of such conversion request.  The First Platinum Amendment also provided a conversion right on the same terms with respect to the amount of any mandatory repayment due following the Company achieving $2.0 million in cumulative revenues from sales or licensing of Lymphoseek.

In accordance with current accounting standards, the First Platinum Amendment was treated as an extinguishment of debt.  The difference between the fair value of the new debt and the carrying value of the original Platinum loan balance was recorded as loss on extinguishment of $943,000.  Platinum’s option to convert future draws into common stock was determined to meet the definition of a liability.  The fair value of the new debt included the estimated fair value of the embedded conversion option.

Also in connection with the First Platinum Amendment, the Company and Platinum entered into a Warrant Exercise Agreement (Exercise Agreement), pursuant to which Platinum exercised its Series X Warrant and Series AA Warrant.    The warrants were exercised on a cashless basis by canceling a portion of the indebtedness outstanding under the Platinum Loan Agreement equal to $4.8 million, the aggregate exercise price of the warrants.  Pursuant to the Exercise Agreement, in lieu of common stock, Platinum received on exercise of the warrants 2,364.9 shares of the Company’s Series B Convertible Preferred Stock (the Series B Preferred Stock), convertible into 7,733,223 shares of our common stock in the aggregate (3,270 shares of common stock per preferred share).

In March 2014, in connection with entering into the Oxford Loan Agreement (discussed below), we repaid all amounts outstanding under the GECC/MidCap Loan agreement and entered into a second amendment to the Platinum Loan Agreement (the Second Platinum Amendment).  Concurrent with the execution of the Second Platinum Amendment, the Company delivered an Amended and Restated Promissory Note (the Second Amended Platinum Note) to Platinum, which amended and restated the First Amended Platinum Note.  The Second Amended Platinum Note adjusted the interest rate to the greater of (i) the United States prime rate as reported in The Wall Street Journal plus 6.75%, (ii) 10.0%, and (iii) the highest rate of interest then payable by the Company pursuant to the Oxford Loan Agreement plus 0.125%.

In May 2015, in connection with the execution of the CRG Loan Agreement (discussed below), the Company amended the existing Platinum credit facility to allow this facility to remain in place in a subordinated role to the CRG Loan (the Third Platinum Amendment).  Among other things, the Third Platinum Amendment (i) extends the term of the Platinum Loan Agreement until a date six months following the maturity date or earlier repayment of the CRG Term Loan; (ii) changes the interest rate to the greater of (a) the United States prime rate as reported in The Wall Street Journal plus 6.75%, (b) 10.0% and (c) the highest rate of interest then payable pursuant to the CRG Term Loan plus 0.125% (the effective interest rate at December 31, 2015 was 14.125%); (iii) requires such interest to compound monthly; and (iv) changes the provisions of the Platinum Loan Agreement governing Platinum’s right to convert advances into common stock of the Company.  The Third Platinum Amendment provides for the conversion of all principal and interest outstanding under the Platinum Loan Agreement, but not until such time as the average daily volume weighted average price of the Company’s common stock for the ten preceding trading days exceeds $2.53 per share.  The amendment became effective upon initial funding of the CRG Loan Agreement.

The net change in the estimated fair value of the Amended Platinum Notes was $(615,000), $(1.3) million and $(106,000), which was recorded as non-cash change in fair value of financial instruments during the years ended December 31, 2015, 2014 and 2013, respectively.  The estimated fair value of the Amended Platinum Notes was $11.5 million as of December 31, 2015.

The Platinum Loan Agreement carries standard non-financial covenants typical for commercial loan agreements, many of which are similar to those contained in the CRG Loan Agreement, that impose significant requirements on us.  Our ability to comply with these provisions may be affected by changes in our business condition or results of our operations, or other events beyond our control.  The breach of any of these covenants would result in a default under the Platinum Loan Agreement, permitting Platinum to terminate our ability to obtain additional draws under the Platinum Loan Agreement and accelerate the maturity of the debt, subject to the limitations of the Subordination Agreement with CRG.  Such actions by Platinum could materially adversely affect our operations, results of operations and financial condition, including causing us to substantially curtail our product development activities.  As of December 31, 2015, we were in compliance with all covenants under the Platinum Loan Agreement.

The Platinum Loan Agreement, as amended, provides us with a credit facility of up to $50 million. We drew a total of $4.5 million and $4.0 million under the credit facility in each of the years ended December 31, 2015 and 2013.  We did not make any draws under the credit facility during the year ended December 31, 2014.  In addition, $761,000 of interest was compounded and added to the balance of the Third Amended Platinum Note during the year ended December 31, 2015.  As of December 31, 2015, the remaining outstanding principal balance of the Amended Platinum Notes was approximately $8.5 million, consisting of $7.7 million of draws and $761,000 of compounded interest, with $27.3 million still available under the credit facility.  In March 2016, Platinum reaffirmed its obligations to make loans to the Company under the Platinum Loan Agreement.

Capital Royalty Partners II, L.P.

In May 2015, Navidea and MT, as guarantor, executed a Term Loan Agreement (the CRG Loan Agreement) with Capital Royalty Partners II L.P. (CRG) in its capacity as a lender and as control agent for other affiliated lenders party to the CRG Loan Agreement (collectively, the Lenders)  in which the Lenders agreed to make a term loan to the Company in the aggregate principal amount of $50 million (the CRG Term Loan), with an additional $10 million in loans to be made available upon the satisfaction of certain conditions stated in the CRG Loan Agreement.  Closing and funding of the CRG Term Loan occurred on May 15, 2015 (the Effective Date).  The principal balance of the CRG Term Loan will bear interest from the Effective Date at a per annum rate of interest equal to 14.0%.  Through March 31, 2019, the Company has the option of paying (i) 10.00% of the per annum interest in cash and (ii) 4.00% of the per annum interest as compounded interest which is added to the aggregate principal amount of the CRG Term Loan.  During 2015, $1.3 million of interest was compounded and added to the balance of the CRG Term Loan.  In addition, the Company began paying the cash portion of the interest in arrears on June 30, 2015.  Principal is due in eight equal quarterly installments during the final two years of the term.  All unpaid principal, and accrued and unpaid interest, is due and payable in full on March 31, 2021.  As of December 31, 2015, the outstanding principal balance of the CRG Term Loan was $51.3 million.

The Company may voluntarily prepay the CRG Term Loan in full, upon fifteen business days’ prior written notice to the Lenders, with a prepayment premium beginning at 5% and declining by 1% annually thereafter, with no premium being payable if prepayment occurs after the fifth year of the term.  The CRG Term Loan required the payment on the borrowing date of a financing fee of $625,000 which was recorded as a discount to the debt.  In addition, a facility fee of $1.0 million is payable at the end of the term or when the loan is repaid in full.  A long-term liability has been recorded for the $1.0 million facility fee with a corresponding discount to the debt.  The CRG Term Loan is collateralized by a security interest in substantially all of the Company's assets.

The CRG Loan Agreement requires that the Company adhere to certain affirmative and negative covenants, including financial reporting requirements and a prohibition against the incurrence of indebtedness, or creation of additional liens, other than as specifically permitted by the terms of the CRG Loan Agreement.  The Lenders may accelerate the payment terms of the CRG Loan Agreement upon the occurrence of certain events of default set forth therein, which include the failure of the Company to make timely payments of amounts due under the CRG Loan Agreement, the failure of the Company to adhere to the covenants set forth in the CRG Loan Agreement, and the insolvency of the Company.  The covenants of the CRG Loan Agreement include a covenant that the Company shall have EBITDA of no less than $5 million in each calendar year during the term or revenues from sales of Lymphoseek in each calendar year during the term of at least $11 million in 2015 and $22.5 million in 2016, with the target minimum revenue increasing in each year thereafter until reaching $45 million in 2020.  However, if the Company were to fail to meet the applicable minimum EBITDA or revenue target in any calendar year, the CRG Loan Agreement provides the Company a cure right if it raises 2.5 times the EBITDA or revenue shortfall in equity or subordinated debt and deposits such funds in a separate blocked account.  Effective December 23, 2015, the CRG Loan Agreement was amended to reduce the required minimum net revenue of the Company during 2015 to $10 million.  Additionally, the Company must maintain liquidity, defined as the balance of unencumbered cash and permitted cash equivalent investments, of at least $5 million during the term of the CRG Term Loan.  The events of default under the CRG Loan Agreement also include a failure of Platinum to perform its funding obligations under the Platinum Loan Agreement at any time as to which the Company had negative EBITDA for the most recent fiscal quarter, as a result either of Platinum’s repudiation of its obligations under the Platinum Loan Agreement, or the occurrence of an insolvency event with respect to Platinum.  As of December 31, 2015, we were in compliance with all applicable covenants of the CRG Loan Agreement.

In connection with the CRG Loan Agreement, the Company recorded a debt discount related to lender fees and other costs directly attributable to the CRG Loan Agreement totaling $2.2 million.  The debt discount is being amortized as non-cash interest expense using the effective interest method over the term of the CRG Loan Agreement.  As of December 31, 2015, the balance of the debt discount was $2.0 million.

Oxford Finance, LLC

In March 2014, we executed a Loan and Security Agreement (the Oxford Loan Agreement) with Oxford Finance, LLC (Oxford), providing for a loan to the Company of $30 million.  Pursuant to the Oxford Loan Agreement, we issued Oxford: (1) Term Notes in the aggregate principal amount of $30 million, bearing interest at 8.5% (the Oxford Notes), and (2) Series KK warrants to purchase an aggregate of 391,032 shares of our common stock at an exercise price of $1.918 per share, expiring in March 2021 (the Series KK warrants).  The Company recorded a debt discount related to the issuance of the Series KK Warrants and other fees to the lenders totaling $3.0 million.  Debt issuance costs directly attributable to the Oxford Loan Agreement, totaling $120,000, were recorded as an additional debt discount on the consolidated balance sheet on the closing date.  The debt discounts were being amortized as non-cash interest expense using the effective interest method over the term of the Oxford Loan Agreement.  The final payment fee of $2.4 million was recorded in other non-current liabilities on the consolidated balance sheet on the closing date.

We began making monthly payments of interest only on April 1, 2014, and monthly payments of principal and interest beginning April 1, 2015.  In May 2015, in connection with the consummation of the CRG Loan Agreement, the Company repaid all amounts outstanding under the Oxford Loan Agreement.  The payoff amount of $31.7 million included payments of $289,000 as a pre-payment fee and $2.4 million as an end-of-term final payment fee.  As of December 31, 2015, the Oxford Notes were no longer outstanding.  The Series KK warrants remained outstanding as of December 31, 2015.

General Electric Capital Corporation/MidCap Financial SBIC, LP

In June 2013, we executed a Loan and Security Agreement (the GECC/MidCap Loan Agreement) with General Electric Capital Corporation (GECC) and MidCap Financial SBIC, LP (MidCap), pursuant to which we issued GECC and MidCap: (1) Term Notes in the aggregate principal amount of $25 million, bearing interest at 9.83%, (the GECC/MidCap Notes), and (2) Series HH warrants to purchase an aggregate of 301,205 shares of our common stock at an exercise price of $2.49 per share, expiring in June 2023 (the Series HH warrants).  The GECC/MidCap Loan Agreement provided for an interest-only period beginning on June 25, 2013 and expiring on June 30, 2014.  The principal and interest was to be repaid in 30 equal monthly installments, payable on the first of each month following the expiration of the interest-only period, and one final payment in an amount equal to the entire remaining principal balance of the GECC/MidCap Notes on the maturity date.  The outstanding balance of the debt was due December 23, 2016.  On the date upon which the outstanding principal amount of the loan was paid in full, the Company was required to pay a non-refundable end-of-term fee equal to 4.0% of the original principal amount of the loan.

The Company recorded a debt discount related to the issuance of the Series HH warrants and other fees to the lenders totaling $1.9 million.  Debt issuance costs directly attributable to the GECC/MidCap Loan Agreement totaled $881,000.  The debt discount and debt issuance costs were being amortized as non-cash interest expense using the effective interest method over the term of the GECC/MidCap Loan Agreement.  The final payment fee of $1.0 million was recorded in other non-current liabilities on the consolidated balance sheet on the closing date.

In March 2014, in connection with the consummation of the Oxford Loan Agreement (discussed below), we repaid all amounts outstanding under the GECC/MidCap Notes for a payoff amount of $26.7 million, which included payments of $500,000 as a pre-payment fee and $1.0 million as an end-of-term final payment fee, resulting in a loss on extinguishment of $2.6 million.  As of December 31, 2015, the GECC/MidCap Notes were no longer outstanding.  The Series HH warrants remained outstanding as of December 31, 2015.

Hercules Technology II, L.P.

In December 2011, we executed a Loan and Security Agreement (the Hercules Loan Agreement) with Hercules Technology II, L.P. (Hercules), pursuant to which we issued Hercules: (1) a Secured Term Promissory Note in the principal amount of $7,000,000 (the Hercules Note), and (2) Series GG warrants to purchase 333,333 shares of our common stock at an exercise price of $2.10 per share, expiring in December 2016 (the Series GG warrants).

During 2012, we paid $1.3 million of principal payments on the Hercules Note.  During the period from January 1, 2013 through June 24, 2013, we paid and additional $1.3 million of principal payments on the Hercules Note.  On June 25, 2013, the Company used a portion of the proceeds from the GECC/MidCap Notes (discussed below) to pay the remaining $4.4 million of principal outstanding on the Hercules Note, as well as a $250,000 end-of-term fee and a $66,000 early payment penalty in accordance with the terms of the Hercules Loan Agreement.  We recorded a loss on extinguishment of the Hercules Note of $429,000, consisting of the write-off of the remaining unamortized discount of $187,000 and unamortized debt issuance costs of $176,000, as well as the early payment penalty of $66,000.  As of December 31, 2015, the Hercules Note was no longer outstanding.  The Series GG warrants remained outstanding as of December 31, 2015.

R-NAV, LLC

In July 2014, in connection with entering into the R-NAV joint enterprise, Navidea executed a promissory note in the principal amount of $666,666, payable in two equal installments on July 15, 2015 and July 15, 2016, the first and second anniversaries of the R-NAV transaction.  The note bears interest at the applicable federal rate, currently 0.31% per annum, compounded annually.  A principal payment of $333,333 was made on the note payable to R-NAV in July 2015.  As of December 31, 2015, the outstanding principal balance of the note payable to R-NAV was $333,333.  The final payment of $333,333 is due in July 2016.  See Note 10.

Summary

During the years ended December 31, 2015, 2014 and 2013, we recorded interest expense of $6.9 million, $3.7 million and $2.8 million, respectively, related to our notes payable.  Of those amounts, $493,000, $844,000 and $765,000, respectively, was non-cash in nature related to amortization of the debt discounts and deferred financing costs related to our notes payable.  An additional $2.0 million of this interest expense was compounded and added to the balance of our notes payable during 2015.

Annual principal maturities of our notes payable are $333,000, $0, $0, $21.9 million, $29.2 million, and $26.5 million in 2016, 2017, 2018, 2019, 2020 and 2021, respectively.