UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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State or Other Jurisdiction of Incorporation or Organization |
IRS Employer Identification No. |
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Address of Principal Executive Offices |
Zip Code |
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Registrant’s Telephone Number, Including Area Code
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of exchange on which registered |
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N/A |
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Preferred Stock Purchase Rights |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Act.) Yes
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of the latest practicable date:
NAVIDEA BIOPHARMACEUTICALS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PART I – Financial Information |
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Item 1. |
Condensed Consolidated Financial Statements |
3 |
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Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 |
3 |
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Condensed Consolidated Statements of Operations for the Three-Month and Nine-Month Periods Ended September 30, 2023 and 2022 (unaudited) |
5 |
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Condensed Consolidated Statements of Stockholders’ Deficit for the Three-Month and Nine-Month Periods Ended September 30, 2023 and 2022 (unaudited) |
6 |
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Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2023 and 2022 (unaudited) |
8 |
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Notes to the Condensed Consolidated Financial Statements (unaudited) |
9 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
27 |
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Forward-Looking Statements |
27 |
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The Company |
27 |
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Technology and Product Candidates |
28 |
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Outlook |
32 |
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Discontinued Operations |
32 |
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Results of Operations |
33 |
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Liquidity and Capital Resources |
34 |
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Off-Balance Sheet Arrangements |
37 |
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Recent Accounting Standards |
37 |
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Critical Accounting Policies |
37 |
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Critical Accounting Estimates |
38 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
38 |
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Item 4. |
Controls and Procedures |
39 |
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Disclosure Controls and Procedures |
39 |
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Changes in Control Over Financial Reporting |
39 |
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PART II – Other Information |
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Item 1. |
Legal Proceedings |
40 |
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Item 1A. |
Risk Factors |
40 |
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Item 2 |
Unregistered Sales of Equity Securities and Use of Proceeds |
41 |
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Item 6. |
Exhibits |
41 |
PART I – FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Navidea Biopharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
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September 30, 2023 |
December 31, 2022 |
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(unaudited) |
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| ASSETS | ||||||||
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
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Receivables |
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Inventory, net |
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Prepaid expenses and other |
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Total current assets |
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Property and equipment |
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Less accumulated depreciation and amortization |
( |
) |
( |
) |
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Property and equipment, net |
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Right-of-use lease assets |
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Less accumulated amortization |
( |
) |
( |
) |
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Right-of-use lease assets, net |
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License agreements, patents and trademarks |
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Less accumulated amortization |
( |
) |
( |
) | ||||
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License agreements, patents and trademarks, net |
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Other assets |
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Total assets |
$ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
Navidea Biopharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
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September 30, 2023 |
December 31, 2022 |
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(unaudited) |
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| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
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Current liabilities: |
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Accounts payable |
$ | 2,070,633 | $ | 2,122,538 | ||||
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Accrued liabilities and other |
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Notes payable, current |
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Notes payable related party, current, net of discount |
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Lease liabilities, current |
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Deferred revenue, current |
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Total current liabilities |
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Lease liabilities, net of current portion |
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Notes payable to related party, net of discount |
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Deferred revenue |
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Total liabilities |
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Commitments and contingencies (See Note 10) |
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Stockholders’ deficit: |
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Preferred stock; $ par value; |
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Series G preferred stock; $ par value, |
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Series H preferred stock; $ par value, |
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Series I preferred stock; $ par value, |
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Series J preferred stock; $ par value, |
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Common Stock; $ par value, |
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Additional paid-in capital |
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Accumulated deficit |
( |
) |
( |
) |
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Total stockholders' deficit |
( |
) |
( |
) |
||||
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Noncontrolling interest |
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Total Navidea stockholders’ deficit |
( |
) |
( |
) |
||||
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Total liabilities and stockholders’ deficit |
$ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
Navidea Biopharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2023 |
2022 |
2023 |
2022 |
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Revenue: |
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Sales revenue |
$ | $ | $ | $ | ||||||||||||
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Grant and other revenue |
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Total revenue |
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Cost of revenue |
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Reserve for expiring inventory |
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Gross profit |
( |
) | ( |
) | ||||||||||||
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Operating expenses: |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
( |
) |
( |
) |
( |
) |
( |
) |
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Other (expense) income: |
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Interest (expense) income, net |
( |
) | ( |
) |
( |
) |
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Gain on amendment of contracts |
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Gain on sale of non-financial asset – NAV4694 |
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Loss on extinguishment of debt |
( |
) |
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Other, net |
( |
) |
( |
) |
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Total other (expense) income, net |
( |
) |
( |
) |
( |
) |
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Loss from continuing operations |
( |
) |
( |
) |
( |
) |
( |
) |
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Discontinued operations, net of tax effect: |
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Gain on discontinued operations – Lymphoseek® |
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Net (loss) income |
( |
) | ( |
) |
( |
) |
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Net loss attributable to noncontrolling interest |
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Preferred stock dividends |
( |
) |
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Deemed dividend on preferred stock exchanged |
( |
) | ( |
) |
( |
) | ||||||||||
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Net (loss) income attributable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) |
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| (Loss) income per common share (basic and diluted) | ||||||||||||||||
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Continuing operations |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
$ | ( |
) |
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Discontinued operations |
$ | $ | $ | $ | ||||||||||||
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Attributable to common stockholders |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) |
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Weighted average shares outstanding |
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See accompanying notes to condensed consolidated financial statements.
Navidea Biopharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Deficit
(unaudited)
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For the Nine Months Ended September 30, 2023 |
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Preferred Stock |
Common Stock Issued |
Additional Paid-In |
Accumulated |
Non-Controlling |
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Shares |
Amount |
Shares |
Amount |
Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
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Balance, January 1, 2023 |
$ | $ | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||||||||
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Issued stock to 401(k) plan |
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Stock compensation expense |
- | - | ||||||||||||||||||||||||||||||
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Net loss |
- | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
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Balance, March 31, 2023 |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Issued stock under Equity Line of Credit, net of costs |
- | - | - | - | ||||||||||||||||||||||||||||
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Issued Series J Preferred Stock, net of costs |
- | - | ||||||||||||||||||||||||||||||
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Accrued Dividends payable on Series G Preferred Stock |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
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990 Series G Preferred Stock and Accrued Dividends exchanged for 11,969 Series J Preferred Stock |
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Deemed dividend on Series G Preferred Stock and Accrued Dividends exchanged for Series J Preferred Stock |
- | - | - | - | ( |
) | ||||||||||||||||||||||||||
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Series I Preferred Stock converted into Common Stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
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Series J Preferred Stock converted into Common Stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
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Issued Series K Preferred Stock dividend |
(84 | ) | ||||||||||||||||||||||||||||||
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Issued stock as partial repayment of debt |
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Issued stock for payment of director fees |
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Stock compensation expense |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
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Net income |
- | - | ||||||||||||||||||||||||||||||
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Balance, June 30, 2023 |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Series K Preferred Stock dividend redemption |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Series I Preferred Stock converted into Common Stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
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Issued stock in payment of director fees |
||||||||||||||||||||||||||||||||
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Stock compensation expense |
- | - | ||||||||||||||||||||||||||||||
|
Net loss |
- | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
|
Balance, September 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
Navidea Biopharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Deficit (continued)(unaudited)
|
For the Nine Months Ended September 30, 2022 |
||||||||||||||||||||||||||||||||
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Preferred Stock |
Common Stock Issued |
Additional Paid-In | Accumulated | Non-Controlling | ||||||||||||||||||||||||||||
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Shares |
Amount |
Shares |
Amount |
Capital | Deficit | Interest | Total | |||||||||||||||||||||||||
|
Balance, January 1, 2022 |
$ | $ | $ | $ | ( |
) | $ | $ | ||||||||||||||||||||||||
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Issued stock in lieu of cash bonuses |
||||||||||||||||||||||||||||||||
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Issued stock to 401(k) plan |
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Issued stock for payment of director fees |
||||||||||||||||||||||||||||||||
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MT Preferred Stock reacquired due to Platinum settlement |
- | - | ( |
) | ||||||||||||||||||||||||||||
|
Stock compensation expense |
- | - | ||||||||||||||||||||||||||||||
|
Net loss |
- | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
|
Balance, March 31, 2022 |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Series E Preferred Stock exchanged for Series F and Series G Preferred Stock |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Issued stock for payment of director fees |
||||||||||||||||||||||||||||||||
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Stock compensation expense |
- | - | ||||||||||||||||||||||||||||||
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Net loss |
- | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
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Balance, June 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||||||||
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Issued Series I Preferred Stock, net of cots |
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Series D and Series F Preferred Stock exchanged for Units in Rights Offering |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
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Deemed dividend on Series D and Series F Preferred Stock exchanged for Units in Rights Offering |
- | - | ( |
) | ||||||||||||||||||||||||||||
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Series I Preferred Stock converted into common stock |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
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Issued stock for payment of director fees |
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Issued stock in lieu of cash bonus |
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Issued stock under long term incentive plan |
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Stock compensation expense |
- | - | ||||||||||||||||||||||||||||||
|
Net loss |
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||
|
Balance, September 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
Navidea Biopharmaceuticals, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
Nine Months Ended September 30, |
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2023 |
2022 |
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Cash flows from operating activities: |
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Net income (loss) |
$ |
$ |
( |
) |
||||
| Less: gain from discontinued operations | ( |
) | ||||||
| Net loss from continuing operations | ( |
) | ( |
) | ||||
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Non-cash lease expense |
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Loss on abandonment of patent and trademark applications |
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Reserve for expiring inventory |
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Stock compensation expense, net |
( |
) |
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Value of stock issued to 401(k) plan for employer matching contributions |
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Value of stock issued in payment of employee bonuses |
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Value of stock issued under long term incentive plan |
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Value of stock issued in payment of director fees |
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| Value of stock issued in payment of upfront commitment fee | ||||||||
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Gain on amendment of contracts |
( |
) |
||||||
| Gain on sale of non-financial asset – NAV4694 | ( |
) | ||||||
|
Loss on extinguishment of debt |
||||||||
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Amortization of debt discount and issuance costs |
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Changes in operating assets and liabilities: |
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Receivables |
( |
) |
( |
) |
||||
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Inventory |
( |
) |
( |
) |
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Prepaid expenses and other assets |
||||||||
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Accounts payable |
( |
) |
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Accrued and other liabilities |
( |
) |
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Lease liabilities |
( |
) |
( |
) |
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Deferred revenue |
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Net cash provided by (used in) operating activities from continuing operations |
( |
) | ( |
) |
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Cash flows from investing activities: |
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| Proceeds from sale of non-financial asset – NAV4694 | ||||||||
|
Payments for purchases of equipment |
( |
) |
( |
) |
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Proceeds from sales of equipment |
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Patent and trademark costs |
( |
) |
( |
) |
||||
| Net cash used in investing activities from continuing operations | ( |
) |
( |
) |
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Cash flows from financing activities: |
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Proceeds from issuance of Preferred Stock |
||||||||
|
Payment of preferred stock issuance costs |
( |
) |
( |
) |
||||
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Proceeds from issuance of Common Stock |
||||||||
|
Payment of Common Stock issuance costs |
( |
) |
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Proceeds from note payable |
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|
Payment of debt issuance costs |
( |
) |
||||||
|
Principal payments on notes payable |
( |
) |
( |
) |
||||
|
Net cash provided by financing activities from continuing operations |
||||||||
| Net (decrease) increase in cash and cash equivalents – continuing operations | ( |
) | ||||||
| Cash provided by investing activities from discontinued operations | ||||||||
| Net increase in cash and cash equivalents | ||||||||
|
Cash and cash equivalents, beginning of period |
||||||||
|
Cash and cash equivalents, end of period |
$ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements (unaudited)
|
1. |
Summary of Significant Accounting Policies |
|
a. |
Basis of Presentation: The information presented as of September 30, 2023 and for the three-month and nine-month periods ended September 30, 2023 and 2022 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. 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 (“SEC”). The balances as of September 30, 2023 and the results for the interim periods are not necessarily indicative of results to be expected for the year. The condensed consolidated financial statements should be read in conjunction with Navidea’s audited consolidated financial statements for the year ended December 31, 2022, which were included as part of our Annual Report on Form 10-K filed with the SEC on March 27, 2023 (“2022 Form 10-K”). |
Our condensed consolidated financial statements include the accounts of Navidea and our wholly owned subsidiaries, Navidea Biopharmaceuticals Europe Limited (“Navidea Europe”) and Navidea Biopharmaceuticals Limited (“Navidea UK”), as well as those of our majority-owned subsidiary, Macrophage Therapeutics, Inc. (“MT”). All significant inter-company accounts were eliminated in consolidation.
|
b. |
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
|
c. |
Revenue Recognition: We occasionally generate revenue from grants to support our product development initiatives. We generally recognize grant revenue when expenses reimbursable under the grant have been paid and payments under the grant become contractually due. |
We also earn revenue from product sales to end customers, primarily in Europe. Revenue from product sales is generally recognized at the point where the customer obtains control of the goods and we satisfy our performance obligation, which occurs upon either shipment of the product or arrival at its destination, depending upon the shipping terms of the transaction. Our customers have no right to return products purchased in the ordinary course of business, however, we may allow returns in certain circumstances based on specific agreements.
In addition, we 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 (“R&D”) costs, milestone payments, and royalties. Each licensing and distribution agreement is unique and requires separate assessment in accordance with current accounting standards. See Note 3.
|
d. |
Net Earnings (Loss) Per Share: Net earnings (loss) per share is calculated in accordance with the two-class method. Under the two-class method, net earnings (loss) is allocated between Common Stock and other participating securities based on their participation rights. We have determined that the outstanding nonvested restricted stock represents participating securities. Net earnings (losses) are not allocated to the nonvested restricted stockholders for calculating net earnings (loss) per share under the two-class method because nonvested restricted stockholders do not have contractual obligations to share in the earnings (losses) of the Company. Basic net earnings (loss) per share is calculated by dividing net earnings (loss) attributable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the period, excluding the effects of any potentially dilutive instruments. Diluted net earnings (loss) per share is calculated using the more dilutive of (a) the two-class method, or (b) treasury stock method, as applicable, to the potentially dilutive instruments. The weighted average number of shares of Common Stock outstanding during the period reflects additional common shares that would have been outstanding if dilutive potential shares of Common Stock had been issued. Potential shares of Common Stock that may be issued by the Company include convertible preferred stock, options and warrants. See Note 5. |
|
e. |
Research and Development Costs: R&D expenses include both internal R&D activities and external contracted services. Internal R&D activity expenses include salaries, benefits, and stock-based compensation, as well as travel, supplies, and other costs to support our R&D staff. External contracted services include clinical trial activities, manufacturing and control-related activities, and regulatory costs. R&D expenses are charged to operations as incurred. We review and accrue R&D expenses based on services performed and rely upon estimates of those costs applicable to the stage of completion of each project. |
|
f. |
Inventory: All components of inventory are valued at the lower of cost (first-in, first-out) or net realizable value. We adjust inventory to net realizable value when the net realizable value is lower than the carrying cost of the inventory. Net realizable value is determined based on estimated sales activity and margins. We estimate a reserve for obsolete inventory based on management’s judgment of probable future commercial use, which is based on an analysis of current inventory levels, estimated future sales and production rates, and estimated shelf lives. See Note 6. |
|
g. |
Intangible Assets: Intangible assets consist primarily of license agreements, and patent and trademark costs. Intangible assets are stated at cost, less accumulated amortization. License agreements and patent costs are amortized using the straight-line method over the estimated useful lives of the license agreements and patents of approximately |
|
h. |
Leases: 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 condensed 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 2018. 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. Short-term operating leases which have an initial term of 12 months or less are not recorded on the condensed 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 condensed consolidated statements of operations. See Note 9. |
|
i. |
Contingent Liabilities: We are subject to legal proceedings and claims that arise in the normal course of business. In accordance with ASC Topic 450, Contingencies, we accrue for contingent liabilities when management determines it is probable that a liability has been incurred and the amount can be reasonably estimated. This determination requires significant judgment by management. As of the date of the filing of this Quarterly Report on Form 10-Q, we are engaged in separate matters of ongoing litigation with Capital Royalty Partners II, L.P. (“CRG”) and our former President and Chief Executive Officer, Dr. Michael Goldberg. See Note 10. |
|
j. |
Recently Adopted Accounting Standards: In June 2016, the Financial Accounting Standards Board (“FASB”) Issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was issued to provide financial statement users with more useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost to be presented at the net amount expected to be collected. In addition, credit losses related to available-for-sale debt securities should be recorded through an allowance for credit losses. The amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application of the amendments is permitted. An entity should apply the amendments in ASU 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (a modified-retrospective approach). The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements. |
|
2. |
Liquidity |
The Company is engaged in ongoing litigation with CRG. On August 30, 2022, the District Court of Harris County, Texas (the “Texas Court”) awarded CRG approximately $
In addition, the Company is engaged in ongoing litigation with our former President and Chief Executive Officer, Dr. Michael Goldberg. See Note 10.
The Company has previously entered into an API Development Funding and Access Agreement (“API Development Agreement”) with a strategic partner for assistance with the development and supply of the active pharmaceutical ingredient (“API”) used to manufacture Lymphoseek (technetium Tc 99m tilmanocept) that is sold by the Company in countries other than the United States, Canada and Mexico. Under the API Development Agreement, among other things, the strategic partner agreed to reimburse the Company for up to a total of $
On April 10, 2023, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Meilleur Technologies, Inc. (“Meilleur”), pursuant to which Meilleur agreed to acquire certain assets and assume certain liabilities of the Company relating to its business of developing and commercializing PET biomarkers for Alzheimer’s Disease (the “Business”). As part of the purchase price, Meilleur paid a cash payment of $
On June 14, 2023, the Company entered into a Second Amendment to Asset Purchase Agreement (the “Second Amendment”) with Cardinal Health 414, LLC, a Delaware limited liability company (the “Buyer”), in respect of that certain Asset Purchase Agreement, dated November 23, 2016, by and between the Buyer and the Company. Under the Second Amendment, the Buyer paid to the Company a lump sum payment of $
The current conflict between Ukraine and Russia, and recent Middle East conflict have created volatility in the global capital markets and is continuing to have further global economic consequences, including disruptions of the global supply chain and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties who operate in Europe on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any debt or equity financing more difficult to obtain, more costly or more dilutive.
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 Company also continues working to establish new sources of funding, including potential equity and/or debt financings, collaborations and additional grant funding that can augment the balance sheet. However, based on our current working capital and our projected cash burn, management believes that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the filing of this Quarterly Report on Form 10-Q. The Company’s condensed consolidated financial statements do not include any adjustments to the assets carrying amount, to the expenses presented and to the reclassification of the condensed balance sheets items that could be necessary should the Company be unable to continue its operations.
|
3. |
Revenue from Contracts with Customers and Other Revenue |
Navidea is focused on the development and commercialization of precision immunodiagnostic agents and immunotherapeutics. We manage our business based on two primary types of drug products: (i) diagnostic substances, including Tc99m tilmanocept and other diagnostic applications of our Manocept platform, and (ii) therapeutic development programs, including all therapeutic applications of our Manocept platform. Tc99m tilmanocept, which the Company has a license to distribute outside of Canada, Mexico and the United States, is the only one of the Company’s drug product candidates that has been approved for sale in any market. Tc99 tilmanocept has only been approved for sale in the European Union (“EU”), the UK, India and Australia.
We earn revenue from product sales to end customers, primarily in Europe. Revenue from product sales is generally recognized at the point where the customer obtains control of the goods and we satisfy our performance obligation, which occurs upon either shipment of the product or arrival at its destination, depending upon the shipping terms of the transaction. Our customers have no right to return products purchased in the ordinary course of business, however, we may allow returns in certain circumstances based on specific agreements. Normal payment terms generally range from 30 to 90 days from invoice date, in accordance with each contract or purchase order.
The Company also recognizes revenue from up-front license fees and pre-market milestones after the cash has been received from its customers and the performance obligations have been met. Payments for sales-based royalties and milestones are generally received after the related revenue has been recognized and invoiced. Normal payment terms generally range from
Up-front and milestone payments received related to our license and distribution agreements in India and China are deferred until Tc99m tilmanocept has been approved by the regulatory authorities and product sales are authorized to commence in each of those countries. The Company received regulatory approval for Tc99m tilmanocept in India in late March 2022, however certain additional approvals, such as an import license and authorization to use an alternative manufacturer, must be obtained prior to commercial sales launch in India. It is not possible to determine with any degree of certainty whether or when regulatory approval for this product will be achieved in China, if at all. In addition, since sales of Tc99m tilmanocept have not yet begun in India or China, there is no basis for estimating whether, to what degree, or the rate at which the product will be accepted and utilized in these markets. Therefore, it is not possible to determine with any degree of certainty the expected sales in future periods in those countries. As such, the Company intends to recognize revenue from up-front and milestone payments on a straight-line basis beginning at the time of commercial sales launch in each country through the end of the initial term of each agreement. The initial term of each agreement is years in India and years in China.
The transaction price of a contract is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. Transaction prices do not include amounts collected on behalf of third parties (e.g., sales taxes). To determine the transaction price of a contract, the Company considers the terms of the contract. For the purpose of determining transaction prices, the Company assumes that the goods or services will be transferred to the customer as promised in accordance with existing contracts and that the contracts will not be cancelled, renewed, or modified.
When estimating a contract’s transaction price, the Company considers all the information (historical, current, and forecasted) that is reasonably available to it and identifies possible consideration amounts. Most of the Company’s contracts with customers include both fixed and variable components of the transaction price. Under those contracts, some or all of the consideration for satisfied performance obligations is contingent on events over which the Company has no direct influence. For example, regulatory approval or product sales volume milestones are contingent upon the achievement of those milestones by the distributor. Additionally, the prices charged to end users of Tc99m tilmanocept, upon which royalty payments are based in India and China, are set by the distributor in each of those countries.
The milestone payments have a binary outcome (that is, the Company will either receive all or none of each milestone payment) and can be estimated using the most-likely-amount method. Taking into account the constraint on variable consideration, the Company has assessed the likelihood of achieving the non-sales-based milestone payments in our current contracts and has determined that it is probable the milestones will be achieved and the Company will receive the consideration. Accordingly, it is probable that including those payments in the transaction price will not result in a significant revenue reversal when the contingency is resolved. Therefore, the amount of the non-sales-based milestone payments is included in the transaction price.
Royalties are estimated based on the expected value method because they are based on a variable amount of sales representing a range of possible outcomes. However, when taking into account the constraint on variable consideration, the estimate of future royalties included in the transaction price is generally $
Up-front fees, milestones and royalties are generally non-refundable. Therefore, the Company does not estimate expected refunds nor do we adjust revenue downward. The Company will evaluate and update the estimated transaction prices of its contracts with customers at the end of each reporting period.
During the three-month and nine-month periods ended September 30, 2023 and 2022, the Company recognized revenue from contracts with customers of $
The following table disaggregates the Company’s revenue from contracts with customers for the three-month and nine-month periods ended September 30, 2023 and 2022.
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Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
Sales revenue: |
||||||||||||||||
|
Tc99m tilmanocept - Europe |
$ | $ | $ | $ | ||||||||||||
The following economic factors affect the nature, amount, timing and uncertainty of the Company’s revenue and cash flows as indicated:
Geographical Location of Customers: Drug pricing models vary among different markets, which in turn may affect the royalty rates and milestones we are able to negotiate with our distributors in those markets. Royalty rates and milestone payments vary by contract but may be based in part on the potential market size in each territory. In the case of Tc99m tilmanocept, royalty rates for Europe were lower than rates in India but higher than in China.
Status of Regulatory Approval. The majority of revenue from contracts with customers will generally be recognized after the product is approved for sale in each market. Each Tc99m tilmanocept customer operates in its own distinct regulatory environment, and the laws and pathways to drug product approval vary by market. Tc99m tilmanocept has been approved for sale in the EU and the UK, thus the Company recognized revenue from sales in Europe. Tc99m tilmanocept was approved for sale in India in March 2022, however product sales have not yet commenced. Tc99m tilmanocept has not yet been approved for sale in China and may never achieve approval in that market. The regulatory pathways and timelines in China will impact whether and when the Company recognizes the related royalties and milestones.
Through September 30, 2023, the Company has capitalized any contract-related costs as contract assets.
The following table shows the opening and closing balances of contract liabilities from contracts with customers for the nine-month period ended September 30, 2023.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
|
Total deferred revenue related to contracts with customers, beginning of period |
$ | $ | $ | $ | ||||||||||||
|
Deferred revenue related to milestones achieved |
||||||||||||||||
|
Deferred revenue related to milestones achieved, written off due to contract renegotiations |
( |
) |
||||||||||||||
|
Total deferred revenue related to contracts with customers, end of period |
$ | $ | $ | $ | ||||||||||||
The Company had sales revenue receivable of $
In addition to revenue from contracts with customers, we also generate revenue from National Institutes of Health (“NIH”) grants to support various product development initiatives. The revenue recognition standard applies to revenue from contracts with customers. A customer is defined as a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ongoing major or central operations in exchange for consideration. The Company’s ongoing major or central operations consist of the development and commercialization of precision immunodiagnostic agents and immunotherapeutics. The NIH and its various institutes are responsible for biomedical and public health research and provide major biomedical research funding to non-NIH research facilities and entities such as Navidea. While the Company will directly benefit from any knowledge gained from the project, there is also a public health benefit provided, which justifies the use of public funds in the form of the grants. Based on the nature of the Company’s operations and the terms of the grant awards, Navidea does not have a vendor-customer relationship with the NIH and the grant awards are outside the scope of the revenue recognition standard. Accordingly, the revenue recognition standard need not be applied to the NIH grants. During the three-month and nine-month periods ended September 30, 2022, the Company recognized grant revenue of $
Finally, we expect to recognize revenue from a strategic development partner up to a total of $
|
4. |
Stock-Based Compensation |
For the three-month periods ended September 30, 2023 and 2022, our total stock-based compensation expense, which includes reversals of expense for certain forfeited or cancelled awards, was $
A summary of the status of our stock options as of September 30, 2023, and changes during the nine-month period then ended, is presented below.
|
Nine Months Ended September 30, 2023 |
||||||||||||||||
|
Number of Options |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (in years) |
Aggregate Intrinsic Value |
|||||||||||||
|
Outstanding, January 1, 2023 |
$ | $ | ||||||||||||||
|
Granted |
||||||||||||||||
|
Cancelled/Forfeited |
( |
) |
||||||||||||||
|
Expired |
( |
) |
||||||||||||||
|
Outstanding, September 30, 2023 |
$ | $ | ||||||||||||||
|
Exercisable, September 30, 2023 |
$ | $ | ||||||||||||||
The weighted average grant date fair value per stock option granted during the nine-month period ended September 30, 2023 was $
A summary of the status of our unvested restricted stock as of September 30, 2023, and changes during the nine-month period then ended, is presented below.
|
Nine Months Ended September 30, 2023 |
||||||||
|
Number of Shares |
Weighted Average Grant-Date Fair Value |
|||||||
|
Unvested, January 1, 2023 |
$ | |||||||
|
Granted |
||||||||
|
Vested |
||||||||
|
Unvested, September 30, 2023 |
$ | |||||||
As of September 30, 2023, there was $
|
5. |
Earnings (Loss) Per Share |
For the three and nine months ended September 30, 2023 and 2022, basic and diluted loss per share are the same for each respective period due to the Company’s net loss position. For the nine-month periods ended September 30, 2023 and 2022 there were common share equivalents of
The Company’s unvested restricted stock awards contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid (referred to as “participating securities”). Therefore, the unvested restricted stock awards are required to be included in the number of shares outstanding for both basic and diluted earnings (loss) per share calculations. However, due to our loss from continuing operations,
|
6. |
Inventory, Net |
The components of inventory, net as of September 30, 2023 and December 31, 2022 are as follows:
|
September 30, 2023 |
December 31, 2022 |
|||||||
|
Materials |
$ | $ | ||||||
|
Work in process |
||||||||
|
Finished goods |
||||||||
|
Reserve for expiring finished goods |
( |
) |
( |
) |
||||
|
Total inventory, net |
$ | $ | ||||||
finished goods inventory was allocated for use in clinical trials during the three-month or nine-month periods ended September 30, 2023. During the three-month and nine-month periods ended September 30, 2022, we allocated $
During the nine-month period ended September 30, 2022, we reserved $
|
7. |
Accounts Payable, Accrued Liabilities and Other |
Accounts payable as of September 30, 2023 and December 31, 2022 includes an aggregate of $
Prior to June 1, 2023 -the Company paid fees in both cash and stock to non-employee directors. The cash portion of director fees due is included in accounts payable and the stock portion is included in accrued liabilities and other in the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022. Certain directors elected to defer receipt of cash and stock for director fees until the Company raises sufficient additional capital. Effective June 1, 2023, non-employee directors do not receive any cash compensation for their services on the Company’s Board.
Under our license agreements with the University of California, San Diego (“UCSD”), we have exclusive world-wide rights to all diagnostic and therapeutic uses of tilmanocept, other than Tc99m tilmanocept used in lymphatic mapping in the United States, Canada and Mexico which rights are licensed to Cardinal Health 414, LLC (“Cardinal Health”). The UCSD license agreements include obligations for payments related to license fees, milestones, and royalties. As of September 30, 2023, the Company has accrued approximately $
On March 30, 2023 (the “Effective Date”), Dr. Michael Rosol signed a Separation & Release Agreement (the “Separation Agreement”) in connection with his resignation from his position as Chief Medical Officer on April 10, 2023 (the “Separation Date”). Pursuant to the Separation Agreement, among other things, the Company agreed to pay Dr. Rosol a lump sum payment, less all relevant taxes and other withholdings, of $
On March 30, 2023, in conjunction with Dr. Rosol’s separation, the Company entered into a Consulting Services Agreement (“Consulting Agreement”) with G2G Ventures (“G2G”), the executive director of which is Joshua Wilson, a director of the Company. Under the Consulting Agreement, G2G provides executive-level support services to the Company as mutually agreed in one or more statements of work. The Company pays G2G a monthly retainer of $
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8. |
Notes Payable |
Bridge Notes from John K. Scott, Jr.
On April 10, 2022, the Company entered into a Stock Exchange Agreement with John K. Scott, Jr., pursuant to which Mr. Scott agreed to make a loan to the Company in the principal amount of up to $
As consideration and partial inducement for Mr. Scott to enter into the 2022 Bridge Note, the Company exchanged all
On April 25, 2023, Mr. Scott agreed to make a second loan to the Company in the principal amount of up to $
On June 29, 2023, the Company entered into a letter agreement with Mr. Scott to exchange $
Interest expense related to the 2022 Bridge Note totaled $
IPFS Corporation
In November 2021, the Company prepaid $
Interest expense related to the IPFS note payable totaled $
AFCO Premium Credit LLC
In November 2022, the Company prepaid $
Interest expense related to the AFCO note payable totaled $
Summary
During the three-month periods ended September 30, 2023 and 2022, we recorded interest expense of $
|
9. |
Leases |
We currently lease approximately
In addition, we leased approximately
We currently lease office equipment at a monthly payment of $
Total operating lease expense was $
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of September 30, 2023.
|
Maturity of Lease Liabilities |
Operating Lease Payments |
|||
|
2023 (remaining) |
$ | |||
|
2024 |
||||
|
Total undiscounted operating lease payments |
||||
|
Less imputed interest |
( |
) |
||
|
Present value of operating lease liabilities |
$ | |||
|
Balance Sheet Classification |
||||
|
Current lease liabilities |
$ | |||
|
Noncurrent lease liabilities |
||||
|
Total operating lease liabilities |
$ |
|
Other Information |
||||
|
Weighted-average remaining lease term for operating leases (in years) |
||||
|
Weighted-average discount rate for operating leases |
% |
Cash paid for amounts included in the present value of operating lease liabilities was $
|
10. |
Commitments and Contingencies |
We are subject to legal proceedings and claims that arise in the ordinary course of business. In accordance with ASC Topic 450, Contingencies, we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Although the outcome of any litigation is uncertain, in our opinion, the amount of ultimate liability, if any, with respect to these actions, will not materially affect our financial position.
CRG Litigation
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 (collectively, the “CRG Lenders”), 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 was in excess of $
In April 2018, CRG asserted claims against Navidea and MT for alleged breaches of the GSA and Loan Agreement entered into by Navidea arising from Navidea’s challenge to CRG’s drawing down on letters of credit in the full amount of $
On November 21, 2021, the Texas Court entered an interlocutory judgment declaring that CRG did not breach the GSA, but that Navidea did breach the GSA and the indemnification provision of the CRG Loan Agreement. In the interlocutory order, the Texas Court sua sponte awarded as damages reasonable attorneys' fees in an amount, if any, to be determined at trial. CRG made a claim of approximately $
Despite its objections and pending appeal, and based in part on the ambiguity of language in the Final Judgement and the Findings and Conclusions, as well as the potential for any appeals or re-filing of motions by CRG, the Company recorded accrued interest on the judgement at a rate of
During the second quarter of 2023, the Company received additional clarification and confirmation from its outside counsel that the Texas Court’s judgment remains unchanged, and the stated post-judgment interest rate is
Goldberg Agreement and Litigation
In August 2018, Dr. Goldberg resigned from his positions as an executive officer and a director of Navidea. In connection with Dr. Goldberg’s resignation, Navidea and Dr. Goldberg entered into an Agreement (the “Goldberg Agreement”) which set forth the terms of the separation from service. Among other things, the Goldberg Agreement provided that Dr. Goldberg would be entitled to
On February 11, 2019, Dr. Goldberg represented to the MT Board of Directors (the “MT Board”) that he had, without MT Board or shareholder approval, created a subsidiary of MT, transferred all of the assets of MT into the subsidiary, and then issued himself stock in the subsidiary. On February 19, 2019, Navidea notified MT that it was terminating the sublicense in accordance with its terms, effective March 1, 2019, due to MT’s insolvency. On February 20, 2019, the MT Board removed Dr. Goldberg as President and Chief Executive Officer of MT and from any other office of MT to which he may have been appointed or in which he was serving. Dr. Goldberg remains a member of the MT Board, together with John K. Scott, Jr., who is also the Vice Chair of the Board of Directors of Navidea. On or about February 17, 2022, the Joint Official Liquidators and Foreign Representatives of PPVA executed the necessary paperwork to transfer its preferred stock in MT to Navidea.
New York Litigation Involving Dr. Goldberg
On February 20, 2019, Navidea filed a complaint against Dr. Goldberg in the United States District Court, Southern District of New York (the “District Court”), alleging breach of the Goldberg Agreement, as well as a breach of the covenant of good faith and fair dealing and to obtain a declaratory judgment that Navidea’s performance under the Goldberg Agreement is excused and that Navidea is entitled to terminate the Goldberg Agreement as a result of Dr. Goldberg’s actions. On April 26, 2019, Navidea filed an amended complaint against Dr. Goldberg which added a claim for breach of fiduciary duty seeking damages related to certain actions Dr. Goldberg took while CEO of Navidea. On June 13, 2019, Dr. Goldberg answered the amended complaint and asserted counterclaims against Navidea and third-party claims against MT for breach of the Goldberg Agreement, wrongful termination, injunctive relief, and quantum meruit.
On December 26, 2019, the District Court ruled on several motions related to Navidea and MT and Dr. Goldberg that substantially limited the claims that Dr. Goldberg can pursue against Navidea and MT. Specifically, the District Court found that certain portions of Dr. Goldberg’s counterclaims against Navidea and third-party claims against MT failed to state a claim upon which relief can be granted. Additionally, the District Court ruled that actions taken by Navidea and MT, including reconstituting the MT Board, replacing Dr. Goldberg with Mr. Latkin as Chief Executive Officer of MT, terminating the sublicense between Navidea and MT, terminating certain research projects, and allowing MT intellectual property to revert back to Navidea, were not breaches of the Goldberg Agreement.
The District Court also rejected Dr. Goldberg’s claim for wrongful termination as Chief Executive Officer of MT. In addition, the District Court found that Dr. Goldberg lacked standing to seek injunctive relief to force the removal of Dr. Claudine Bruck and Michael Rice from the MT Board, to invalidate all actions taken by the MT Board on or after November 29, 2018 (the date upon which Dr. Bruck and Mr. Rice were appointed by Navidea to the MT Board), or to reinstate the terminated sublicense between Navidea and MT.
In addition, the District Court found Navidea’s breach of fiduciary duty claim against Dr. Goldberg for conduct occurring more than three years prior to the filing of the complaint to be time-barred and that Dr. Goldberg is entitled to an advancement of attorneys’ fees solely with respect to that claim. To avoid further litigation expenses, the Company agreed to indemnify Dr. Goldberg solely with respect to the breach of fiduciary duty claim.
On January 31, 2020, Goldberg filed a motion for leave to amend his complaint to add back in claims for breach of contract, breach of the implied covenant of good faith and fair dealing, quantum meruit and injunctive relief. On April 1, 2020, the District Court denied Dr. Goldberg’s motion for leave to amend in its entirety.
On January 27, 2020, Dr. Goldberg filed a motion seeking additional advancement from Navidea for fees in connection with the New York Action and the Delaware Action. Navidea opposed the motion and the District Court referred the matters to a Magistrate Judge. On July 9, 2020, the Magistrate Judge issued her Report and Recommendation which recommended that: (1) the District Court decline to exercise jurisdiction over Dr. Goldberg’s motion as it pertained to expenses and fees incurred in defense of the Delaware Action; (2) the District Court decline to award any fees to Dr. Goldberg for the breach of fiduciary duty without additional motion practice on the issue; (3) the District Court find that Dr. Goldberg is entitled to advancement of his expenses and fees reasonably incurred in the defense of the remainder of the New York action subject to Dr. Goldberg’s posting of an undertaking; and (4) establish a protocol by which Dr. Goldberg could establish the amounts due for advancement.
On August 24, 2020, in connection with Dr. Goldberg’s motion for advancement, the District Court adopted the Magistrate Judge’s report and recommendation and found that while Dr. Goldberg was not being granted advancement of fees and expenses incurred in connection with either the Delaware Action or the assertion of third-party claims against MT, the Court ruled that Dr. Goldberg was entitled to advancement for the defense of the remaining claims asserted against him by Navidea in the New York action. The Court adopted a protocol by which additional motion practice will occur to determine the appropriate amount of fees to be advanced. Once that decision is made by the Magistrate Judge, subject to review by the District Court, Navidea will need to advance those fees to Dr. Goldberg conditioned upon Dr. Goldberg agreeing to pay those fees back to Navidea if it is determined that he is not entitled to indemnification.
On May 27, 2021, the District Court ordered that: (1) Dr. Goldberg be awarded $
On August 6, 2021, the Company moved for reconsideration of its obligations to advance fees. On October 14, 2021, the Magistrate Judge recommended that Navidea’s motion for reconsideration be denied. On March 7, 2022, the District Court adopted the Report and Recommendation in part and permitted Dr. Goldberg to seek advancement for his fees incurred in defense of his claims since September 1, 2020. On April 8, 2022, Dr. Goldberg submitted a fee application seeking advancement of $ for attorneys’ fees and disbursements for the time period September 1, 2020 through March 31, 2022. On March 15, 2023, the District Court adopted the Magistrate Judge’s report and recommendation that Dr. Goldberg’s application for fees allegedly incurred in connection with his defense of Navidea’s claims be denied as a sanction for failure to comply with prior court orders and that his application for fees incurred in connection with the successful prosecution of his prior fee applications be approved in the amount of $
Fact discovery and expert discovery in the New York Action have been completed. The Company moved to disqualify Dr. Goldberg’s damages expert. On November 9, 2022, the District Court issued an opinion granting the Company’s motion in part and precluding Dr. Goldberg’s damages expert from testifying on all but two issues. On July 20, 2023, the parties submitted motions for summary judgment each requesting that summary judgment be granted in their favor and dismissing the other parties’ affirmative claims. No trial date has been set.