Quarterly report pursuant to Section 13 or 15(d)

Significant Accounting Policies (Policies)

v3.20.2
Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]
a.
Basis of Presentation:
The information presented as of
June 30, 2020
and for the
three
-month and
six
-month periods ended
June 30, 2020
and
2019
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. In addition, 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. The balances as of
June 30, 2020
and the results for the interim periods are
not
necessarily indicative of results to be expected for the year. The consolidated financial statements should be read in conjunction with Navidea's audited consolidated financial statements for the year ended
December 
31,
2019,
which were included as part of our Annual Report on Form
10
-K.
 
Our consolidated financial statements include the accounts of Navidea and our wholly owned subsidiary, Navidea Biopharmaceuticals Limited, as well as those of our majority-owned subsidiary, Macrophage Therapeutics, Inc. (“MT”). All significant inter-company accounts were eliminated in consolidation.
 
In
March 2020,
the World Health Organization categorized the current COVID-
19
outbreak as a pandemic, and the President of the United States declared the COVID-
19
outbreak a national emergency. COVID-
19
continues to spread globally, including throughout the United States, which has impacted the global economy and
may
impact our operations, including the potential interruption of our clinical trial activities and our supply chain.  To date, we do
not
believe there has been any appreciable impact to the Company's clinical development and regulatory timelines resulting from COVID-
19.
However, the COVID-
19
pandemic has adversely affected economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations, including our ability to obtain additional funding, if needed.  Much of the funding from the
February 2020
transactions described in Note
2
below was delayed, due in part to the COVID-
19
pandemic and its devastating impact on global financial markets. However, funding for all of these transactions has been received as of the date of filing of this Quarterly Report on Form
10
-Q. The extent to which COVID-
19
impacts our operations and financial results will depend on numerous evolving factors that we are
not
able to accurately predict, including: the duration and scope of the pandemic, government actions taken in response to the pandemic, and the impact on our ability to continue to conduct our clinical trials.
Fair Value of Financial Instruments, Policy [Policy Text Block]
b.
Financial Instruments and Fair Value:
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
 
 
(
1
)
Cash
and cash equivalents
, stock subscriptions and other receivables, and accounts payable:
The carrying amounts approximate fair value because of the short maturity of these instruments.
 
 
(
2
)
Notes payable:
The carrying value of our debt as of
June 30, 2020
and
December 
31,
2019
primarily consisted of the face amount of the notes plus accrued interest. As of
June 30, 2020
and
December 31, 2019,
the fair value of our notes payable was approximately
$410,000
and
$306,000,
both amounts equal to the carrying value of the notes payable. See Note
8.
Revenue [Policy Text Block]
c.
Revenue Recognition:
We currently generate revenue primarily from grants to support various product development initiatives. We generally recognize grant revenue when expenses reimbursable under the grants have been paid and payments under the grants become contractually due.
 
We also 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 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.
Lessee, Leases [Policy Text Block]
d.
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 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 as identified for purposes of compensation analysis. Short-term operating leases which have an initial term of
12
months or less are
not
recorded on the 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 consolidated statements of operations. See Note
9.
Stockholders' Equity Note, Redeemable Preferred Stock, Issue, Policy [Policy Text Block]
e.
Series C Convertible Preferred Stock:
The Company evaluated the provisions of the Series C Preferred Stock under Accounting Standards Codification ("ASC")
480,
Distinguishing Liabilities from Equity,
ASC
815,
Derivatives and Hedging,
ASC
470,
Debt
, and Accounting Series Release ("ASR")
268,
Presentation in Financial Statements of "Redeemable Preferred Stocks."
  Based on this evaluation, the Company determined that the Series C Preferred Stock is
not
a mandatorily redeemable financial instrument and any obligation to issue a variable number of shares of Common Stock is
not
unconditional.  Accordingly, the Series C Preferred Stock should be classified as equity.  Neither the embedded conversion option nor the embedded call option meet the criteria to be separated from the Series C Preferred stock and thus these features should
not
be bifurcated and accounted for as derivatives.  Additionally, the Series C Preferred Stock contains a beneficial conversion feature ("BCF") that results in an increase to additional paid-in capital and a discount on the Series C Preferred Stock.  The discount on the Series C Preferred Stock is considered to be fully amortized at the date of issuance because the Series C Preferred Stock is immediately convertible.  This results in a deemed dividend at the date of issuance for the amount of the BCF.  Finally, the Company determined that the conversion features of the Series C Preferred Stock could result in the Company being required to redeem a portion of the shares converted, thus the Series C Preferred Stock should be classified in mezzanine equity.  See Note
11.
New Accounting Pronouncements, Policy [Policy Text Block]
f.
Recent
ly
Adopted
Accounting
Standards
:
In
August 2018,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No.
2018
-
13,
Fair Value Measurement (Topic
820
):
Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement
. ASU
2018
-
13
is intended to improve the effectiveness of disclosure requirements on fair value measurements in Topic
820.
ASU
2018
-
13
modifies certain disclosure requirements and is effective for annual and interim reporting periods beginning after
December 15, 2019.
The adoption of ASU
2018
-
13
did
not
have any impact on our consolidated financial statements or our fair value disclosures.
 
 
g.
Recently Issued Accounting Standards:
In
December 2019,
the FASB issued ASU
No.
2019
-
12,
Income Taxes (Topic
740
)
:
Simplifying the Accounting for Income Taxes
. ASU
2019
-
12
is intended to improve consistent application and simplify the accounting for income taxes. ASU
2019
-
12
removes certain exceptions to the general principles in Topic
740
and clarifies and amends existing guidance. ASU
2019
-
12
is effective for annual and interim reporting periods beginning after
December 15, 2020,
with early adoption permitted. We do
not
expect the adoption of ASU
2019
-
12
to have a material impact on our consolidated financial statements.