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Notes Payable
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12 Months Ended |
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Dec. 31, 2014
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| Debt Disclosure [Abstract] | |
| Notes Payable |
Notes Payable
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 million (the Hercules Note), bearing interest at the greater of either (a) the U.S. Prime Rate as reported in The Wall Street Journal plus 6.75%, or (b) 10.0% 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). The Hercules Loan Agreement provided for an interest-only period beginning on December 29, 2011 and expiring on July 1, 2012. 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.
In accordance with current accounting standards, Hercules’ option to convert up to $1.5 million of the debt into stock was evaluated and determined to be a beneficial conversion feature. The beneficial conversion feature of $24,888 was recorded as a discount on the Hercules Note based on the market price of the Company’s stock on the date of the Loan Agreement. In addition, the Series GG warrants were accounted for as a liability at origination due to the existence of certain provisions in the instrument which remained in effect for the first 365 days the warrant was outstanding. As a result, we recorded a current derivative liability with an estimated fair value of $520,478 on the date of issuance of the Series GG warrants. The estimated fair value of the Series GG warrants was recorded as a discount on the Hercules Note. Navidea paid total debt issuance costs of $593,339 including origination, legal, and other costs related to the loan. The total aggregate discounts on the Hercules Note of $545,366 and the debt issuance costs of $593,339 were being amortized as non-cash interest expense using the effective interest method over the term of the Hercules Loan Agreement.
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 an 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, 2014, the Hercules Note was no longer outstanding.
Platinum-Montaur Life Sciences, LLC
In July 2012, we entered into an agreement with Platinum-Montaur Life Sciences, LLC (Platinum) to provide us with a credit facility of up to $50 million. Under the terms of the agreement, Platinum committed to extend up to $15 million in debt, which was available immediately, to the Company at an interest rate equal to the greater of (a) the U.S. Prime Rate as reported in the Wall Street Journal plus 6.75%; (b) 10.0%; or (c) the highest rate of interest then payable pursuant to the Hercules Loan Agreement plus 0.125%. In March 2013, the Company received FDA approval to market Lymphoseek. The approval of Lymphoseek resulted in an additional $20 million being made available to the Company under the Platinum credit facility. Another $15 million was potentially available on terms to be negotiated. Principal amounts were due the earlier of two years from the date of draw or June 30, 2016. No conversion features or warrants were initially associated with the facility. We drew a total of $4.0 million under the credit facility in each of the years ended December 31, 2013 and 2012. We did not make any draws under the credit facility during the year ended December 31, 2014.
In June 2013, concurrent with entering into the GECC/MidCap Loan Agreement (discussed below), the Company and Platinum entered into an Amendment to the July 2012 credit facility between the Company and Platinum (the Platinum Amendment). Navidea, Platinum, and GECC/MidCap also entered into a Subordination Agreement (the GECC/MidCap Subordination Agreement), providing for subordination of the Company’s indebtedness under the Platinum credit facility to the Company’s indebtedness under the GECC/MidCap Loan Agreement, among other customary terms and conditions.
In connection with the execution of the Platinum Amendment, the Company delivered an Amended and Restated Promissory Note (the Amended Platinum Note) to Platinum, which amended and restated the original promissory note, issued to Platinum, in the principal amount of up to $35.0 million. The 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 Platinum Amendment granted Platinum the right, at Platinum’s option, to convert all or any portion of the unpaid principal or unpaid interest accrued on any future draws (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 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. The conversion option applied to the Conversion Amount if the Company was prohibited from making such repayment under the terms of the GECC/MidCap Subordination Agreement.
In accordance with current accounting standards, the 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 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 for 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). These 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.
In March 2014, in connection with entering into the Oxford Loan Agreement (discussed below), we 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% (the effective interest rate at December 31, 2014 was 10.0%). Navidea, Platinum, and Oxford also entered into a Subordination Agreement, providing for subordination of the Company’s indebtedness under the Platinum Loan Agreement to the Company’s indebtedness under the Oxford Loan Agreement, among other customary terms and conditions. As such, no payments may be made under the Platinum loan until the Oxford Notes have been paid in full and therefore, the current balance outstanding under the Platinum loan has been classified as long-term notes payable to coincide with the maturity of the Oxford Notes. The fair value of the Second Amended Platinum Note includes the estimated fair value of an embedded conversion option.
The net increase in the estimated fair value of the Amended Platinum Notes was $1.3 million and $106,000, which was recorded as a non-cash change in fair value of financial instruments during the years ended December 31, 2014 and 2013, respectively. The estimated fair value of the Amended Platinum Notes was $5.6 million as of December 31, 2014. As of December 31, 2014, the remaining outstanding principal balance of the Amended Platinum Notes was approximately $3.2 million, with $31.8 million still available under the credit facility.
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, totaling $881,000, were recorded as other assets on the balance sheet on the closing date. 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, 2014, the GECC/MidCap Notes were no longer outstanding.
Oxford Finance, LLC
In March 2014, we executed a Loan and Security Agreement (the Oxford Loan Agreement) with Oxford Finance, LLC (Oxford), pursuant to which we issued Oxford: (1) Term Notes in the aggregate principal amount of $30,000,000, 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). We made monthly payments of interest only commencing on April 1, 2014, and continuing through April 1, 2015 (the Amortization Date). Commencing on the Amortization Date, the Company will make 48 consecutive equal monthly payments of principal and interest, in arrears, to the lenders then party to the Oxford Loan Agreement. All unpaid principal, and accrued and unpaid interest, with respect to the Oxford Notes is due and payable in full on March 1, 2019. We will also make a final payment to the lenders in an aggregate amount equal to the original principal amount of the loan multiplied by 7.95%. The Oxford Notes are collateralized by a security interest in substantially all of the Company’s assets except for intellectual property, as to which the security interest is in rights to income or proceeds from the sale or licensing thereof. The Oxford Loan Agreement requires that the Company adhere to certain affirmative and negative covenants, including, without limitation, 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 Oxford Loan Agreement. As of December 31, 2014, the outstanding principal balance of the Oxford Loan Agreement was $30 million, and we were in compliance with all covenants of the Oxford Loan Agreement.
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 a non-current asset on the consolidated balance sheet on the closing date. The debt discount and debt offering costs are 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. As of December 31, 2014, the balance of the debt discount was $2.4 million and the balance of the debt issuance costs was $90,000.
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. Also in connection with entering into the R-NAV joint enterprise, we executed an amendment to the Oxford Loan Agreement that amended certain covenants to permit our investment in R-NAV, and R-NAV entered into a Subordination Agreement with Oxford to subordinate our indebtedness to R-NAV to our obligations under the Oxford Loan Agreement. See Note 7.
During the years ended December 31, 2014, 2013 and 2012, we recorded interest expense of $3.7 million, $2.8 million and $1.2 million, respectively, related to our notes payable. Of those amounts, $844,000, $765,000 and $545,000, respectively, was non-cash in nature related to amortization of the debt discounts and deferred financing costs related to our notes payable.
Annual principal maturities of our notes payable are $5.2 million, $7.3 million, $7.6 million, $8.3 million and $5.4 million in 2015, 2016, 2017, 2018 and 2019, respectively.
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