Annual report pursuant to Section 13 and 15(d)

Note 10 - Investment in Macrophage Therapeutics, Inc.

Note 10 - Investment in Macrophage Therapeutics, Inc.
12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
Investments in and Advances to Affiliates, Schedule of Investments [Text Block]
Investment in Macrophage Therapeutics, Inc.
March 2015,
MT, our previously wholly-owned subsidiary, entered into a Securities Purchase Agreement to sell up to
shares of its Series A Convertible Preferred Stock (
“MT Preferred Stock”) and warrants to purchase up to
shares of MT Common Stock to the MT Investors for a purchase price of
per unit. A unit consists of
share of MT Preferred Stock and
warrants to purchase MT Common Stock. Under the agreement,
of the MT Preferred Stock and warrants are committed to be purchased by Dr. Goldberg, and the balance by Platinum. The full
shares of MT Preferred Stock and warrants that
be sold under the agreement are convertible into, and exercisable for, MT Common Stock representing an aggregate
interest on a fully converted and exercised basis. Navidea owns the remainder of the MT Common Stock. On
March 11, 2015,
definitive agreements with the MT Investors were signed for the sale of the
tranche of shares of MT Preferred Stock and warrants to purchase
shares of MT Common Stock to the MT Investors, with gross proceeds to MT of
The MT Common Stock held by parties other than Navidea is reflected on the consolidated balance sheets as a noncontrolling interest.
The warrants have certain characteristics including a net settlement provision that require the warrants to be accounted for as a derivative liability at fair value, with subsequent changes in fair value included in earnings. The fair value of the warrants was estimated to be
at issuance and at
December 31,
See Notes
(m) and
In addition, the MT Preferred Stock was immediately available for conversion upon issuance and includes a beneficial conversion feature, resulting in a deemed dividend of
related to the beneficial conversion feature. Finally, certain provisions of the Securities Purchase Agreement obligate the MT Investors to acquire the remaining MT Preferred Stock and related warrants for
million at the option of MT. The estimated relative fair value of this put option was
at issuance based on the Black-Scholes option pricing model and is classified within stockholders' equity.
In addition, we entered into a Securities Exchange Agreement with the
MT Investors providing them an option to exchange their MT Preferred Stock for our common stock in the event that MT has
completed a public offering with gross proceeds to MT of at least
million by the
anniversary of the closing of the initial sale of MT Preferred Stock, at an exchange rate per share obtained by dividing
by the greater of (i)
of the
-day volume weighted average price per share of our common stock on the
anniversary of the initial closing or (ii)
To the extent that the MT Investors do
timely exercise their exchange right, MT has the right to redeem their MT Preferred Stock for a price equal to
per share. We also granted MT an exclusive license for certain therapeutic applications of the Manocept technology.
December 2015
May 2016,
Platinum contributed a total of
to MT. MT was
obligated to provide anything in return, although it was considered likely that the MT Board would ultimately authorize some form of compensation to Platinum.
During the year ended
December 31, 2016,
the Company recorded the entire
as a current liability pending determination of the form of compensation.
July 2016,
’s Board of Directors authorized modification of the original investments of
by Platinum and
by Dr. Goldberg to a convertible preferred stock with a
PIK coupon retroactive to the time the initial investments were made. The conversion price of the preferred will remain at the
million initial market cap but a full ratchet was added to enable the adjustment of conversion price, warrant number and exercise price based on the valuation of the
institutional investment round. In addition, the MT Board authorized issuance of additional convertible preferred stock with the same terms to Platinum as compensation for the additional
of investments made in
December 2015
May 2016.
Based on the MT Board’s authorization of additional equity, the Company reclassified the additional
from a current liability to equity during the year ended
December 31, 2017.
As of the date of filing of this Form 
-K, final documents related to the above transactions authorized by the MT Board have
been completed.