Note 11 - Commitments and Contingencies
|6 Months Ended|
Jun. 30, 2018
|Notes to Financial Statements|
|Commitments and Contingencies Disclosure [Text Block]||
We are subject to legal proceedings and claims that arise in the ordinary course of business.
Sinotau Litigation –
August 31, 2015,Sinotau filed a suit for damages, specific performance, and injunctive relief against the Company in the U.S. District Court for the District of Massachusetts alleging breach of a letter of intent for licensing to Sinotau of the Company’s
NAV4694product candidate and technology. In
September 2016,the Court denied the Company’s motion to dismiss. The Company filed its answer to the complaint and the parties have filed multiple joint motions to stay the case pending settlement discussion, which to date have been granted.
October 2017,the Company executed a letter of intent with Sinotau and Cerveau outlining a plan to sublicense to Cerveau the worldwide rights to conduct research using
NAV4694,as well as grant to Cerveau an exclusive license for the development, marketing and commercialization of
NAV4694in Australia, Canada, China and Singapore. The letter of intent included a provision stating that Sinotau will release all claims in the Sinotau Litigation upon the parties’ execution of a definitive agreement; the commercial rights agreement contemplated by the letter of intent would also include a release of such claims and a covenant
notto sue on such claims.
April 2018,the Company executed an agreement to provide Meilleur worldwide rights to conduct research using
NAV4694,as well as an exclusive license for the development and commercialization of
NAV4694in Australia, Canada, China, and Singapore. Meilleur also has an option to commercialize worldwide. As a result of the agreement, Navidea expects that the litigation initiated by Sinotau will be dismissed.
As disclosed in the Company’s Annual Report on Form
10-K and other filings, 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, 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
$66.0million, limited to
$66.0million under the parties’ Global Settlement Agreement reached in
2017.The Texas Court acknowledged only the
$59.0million payment made in
March 2017,concluding that the Company owed CRG another
$7.0million, however the Texas Court did
notexpressly take the Company’s
June 2016payment of
$4.1million into account and awarded, as part of the
$66.0million, amounts that had already been paid as part of the
$4.1million. The Company believes that this
$4.1million should be credited against the
$7.0million; CRG disagrees.
January 16, 2018,the Company filed an emergency motion to set supersedeas bond and to modify judgment, describing the double recovery created by the
$66.0million award without taking into account the
$4.1million payment in
June 2016,requesting that the judgment be modified to set the supersedeas amount at
$2.9million so that the Company could stay enforcement of the judgment pending appeal. The Texas Court refused to rule on this motion, and the court of appeals entered an order compelling the Texas Court to set a supersedeas amount. On
March 26, 2018,the Texas Court ordered the Company to put up a supersedeas bond in the amount of
$7.7million. The Company filed for an emergency stay of the order in the appellate court in Harris County. On
April 2, 2018,the appellate court denied the Company’s emergency stay motion. The Company continues to believe that the
$4.1million paid to CRG in
June 2016should be credited as payment toward the
$66.0million total, and the Company intends to further contest the matter through the appellate court in Texas. Navidea’s brief on the merits in this appeal is due on
August 10, 2018,but this deadline is subject to potential extension. Navidea does
notexpect a ruling on this appeal until
2019at the earliest.
April 9, 2018,CRG drew approximately
$7.1million on the letter of credit. This was in addition to the
$4.1million and the
$59.0million that Navidea had previously paid to CRG.
April 12, 2018Navidea filed suit in the Ohio Court against the Lenders. The suit asserts that the Lenders fraudulently induced Navidea to enter into a settlement agreement and breached the terms of the same through certain actions taken by the Lenders in connection with the Global Settlement Agreement reached in
2017,pursuant to which Navidea agreed to pay up to
$66.0million to Lenders, as well as through actions and misrepresentations by CRG after the Global Settlement Agreement was executed. The suit also asserts claims for conversion and unjust enrichment against the Lenders for their collection of more than
$66.0million, the maximum permitted under the Global Settlement Agreement, and their double recovery of amounts paid as part of the
$4.1million paid in
June 2016and recovered again as part of the
$66.0million. CRG’s double recovery and recovery of more than
$66.0million are due to CRG drawing the entire
$7.1million on the Cardinal Health
414letter of credit. On
May 22, 2018Navidea filed an amended complaint asserting additional claims, including claims for breach of confidentiality by CRG, and on
June 26, 2018CRG filed a motion seeking to dismiss the amended complaint. CRG’s motion to dismiss has been fully briefed and a decision on the motion is expected from the Court in the near future.
In a related proceeding before the Ohio Court, initially filed in
2016,and under which the Global Settlement Agreement was reached in
2017,the Ohio Court has issued preliminary findings that the settlement gave rise to a
$66.0million cap on amounts owed to Lenders by Navidea and that Navidea might
nothave been properly credited for certain funds in excess of
$4.1million previously swept by Lenders from a bank account owned by Navidea. The Ohio Court also made a preliminary ruling that it possessed jurisdiction to interpret the settlement agreement at issue. The Company is pursuing recovery of the
$4.1million, and other damages, in the Ohio Court.
April 11, 2018,CRG filed a new suit against the Company in the Texas Court. This new suit seeks a declaratory judgment that CRG did
notbreach the Global Settlement Agreement by drawing approximately
$7.1million on the Cardinal Health
414letter of credit. On
April 16, 2018,CRG moved the Texas Court to issue an anti-suit injunction barring the Company from litigating in the Ohio Court. The Texas Court denied that motion on
April 27, 2018.The Company moved to dismiss these claims pursuant to the Texas Citizens Participation Act. This motion to dismiss will be heard by the Texas Court on
August 20, 2018.
July 11, 2018,CRG filed a
firstamended petition in the new suit. This amended petition includes the prior request for declaratory judgment that CRG did
notbreach the Global Settlement Agreement. In addition, the amended petition asserts a claim against Navidea for breach of contract. CRG alleges that Navidea breached the Global Settlement Agreement and its duty of good faith and fair dealing by seeking reconsideration in the original Texas suit, appealing the original Texas suit, and filing the Ohio suit. The Company is contesting this issue in the Ohio Court, the Texas Court, and on appeal in Texas. See Notes
Sinotau Litigation –
February 1, 2017,Navidea filed suit against Sinotau in the U.S. District Court for the Southern District of Ohio. The Company's complaint included claims seeking a declaration of the rights and obligations of the parties to an agreement regarding rights for the
Tc99mtilmanocept product in China and other claims. The complaint sought a temporary restraining order (“TRO”) and preliminary injunction to prevent Sinotau from interfering with the Company’s Asset Sale to Cardinal Health
February 3, 2017,the Court granted the TRO and extended it until
March 6, 2017.The Asset Sale closed on
March 3, 2017.On
March 6,the Court dissolved the TRO as moot. Sinotau also filed a suit against the Company and Cardinal Health
414in the U.S. District Court for the District of Delaware on
February 2, 2017.On
July 12, 2017,the District of Delaware case was transferred to the Southern District of Ohio. On
July 27, 2017the Ohio Court determined that both cases in the Southern District of Ohio are related and the case was stayed for
60days pending settlement discussions. On
February 8, 2018,Navidea and Sinotau executed an amendment to the agreement, modifying certain terms of the agreement and effectively resolving the legal dispute. On
February 17, 2018,Navidea and Sinotau executed a Settlement Agreement and Mutual Release, and on
February 20, 2018,Navidea and Sinotau voluntarily dismissed their legal cases.
Platinum-Montaur Life Sciences LLC
November 2, 2017,Platinum-Montaur commenced an action against the Company in the Supreme Court of the State of New York, County of New York, seeking damages of approximately
$1.9million purportedly due as of
March 3, 2017,plus interest accruing thereafter. The claims asserted are for breach of contract and unjust enrichment in connection with funds received by the Company under the Platinum Loan Agreement. Said action was removed to the United States District Court for the Southern District of New York on
December 6, 2017.An initial pretrial conference was held on
January 26, 2018and a follow up status conference was held on
March 9, 2018,during which the Court set a briefing schedule and determined that Navidea’s motion to dismiss was due on
April 6, 2018.The Company filed its motion to dismiss in advance of the filing deadline and the motion has been fully briefed with a decision expected from the Court in the near future.
In accordance with ASC Topic
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
notmaterially affect our financial position.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef