Annual report pursuant to Section 13 and 15(d)

Note 9 - Investment in Macrophage Therapeutics, Inc.

Note 9 - Investment in Macrophage Therapeutics, Inc.
12 Months Ended
Dec. 31, 2020
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
common shares of MT (“MT Common Stock”) to Platinum and Dr. Michael Goldberg (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 were 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 had certain characteristics including a net settlement provision that required 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. At
December 31, 2019,
the fair value of the warrants was determined to be
due to their
March 2020
expiration date and MT's insolvency. In addition, 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 sublicense 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. The Company initially recorded the entire
as a current liability pending determination of the form of compensation.
July 2016,
MT'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 stock 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. As of the date of filing of this Annual Report on Form 
-K, final documents related to the above transactions authorized by the MT Board have
been completed.
Goldberg Litigation
August 2018,
Dr. Michael 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”), with the intent of entering into
or more additional Definitive Agreements, which set forth the terms of the separation from service. Among other things, the Goldberg Agreement provided that Dr. Goldberg would be entitled to
shares of our Common Stock, representing in part payment of accrued bonuses and payment of the balance of the Platinum debt. A portion of the
shares to be issued to Dr. Goldberg would be held in escrow for up to
months in order to reimburse Navidea in the event that Navidea is obligated to pay any portion of the Platinum debt to a party other than Dr. Goldberg. Further, the Goldberg Agreement provided that the Company's subsidiary, MT, would redeem all of Dr. Goldberg's preferred stock and issue to Dr. Goldberg super voting common stock equal to
of the outstanding shares of MT. In
November 2018,
the Company issued
shares of our Common Stock to Dr. Goldberg,
of which were placed in escrow in accordance with the Goldberg Agreement.
February 11, 2019,
Dr. Goldberg represented to 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
have been appointed or in which he was serving. Dr. Goldberg remains a member of the MT Board, together with Michael Rice and Dr. Claudine Bruck. Mr. Rice and Dr. Bruck remain members of the board of directors of Navidea. The MT Board then appointed Jed A. Latkin to serve as President and Chief Executive Officer of MT. On or about
December 18, 2020
the Joint Official Liquidators and Foreign Representatives of Platinum Partners Value Arbitrage Fund L.P. sent a letter to MT directing that Dr. Goldberg be removed from the MT Board.  The MT Board has taken
action in response.
New York Litigation Involving Dr. Goldberg
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
-party claims against MT for breach of the Goldberg Agreement, wrongful termination, injunctive relief, and quantum meruit.
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
-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 of directors, 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
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 MT's Board of Directors, 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 Board of MT), 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
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. The parties have briefed the issue to the District Court for resolution on how much in fees Dr. Goldberg is owed under the District Court's order.
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.
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: (
) 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; (
) the District Court decline to award any fees to Dr. Goldberg for the breach of fiduciary duty without additional motion practice on the issue; (
) 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 (
) establish a protocol by which Dr. Goldberg could establish the amounts due for advancement.
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
being granted advancement of fees and expenses incurred in connection with either the Delaware Action or the assertion of
-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
entitled to indemnification.  Dr. Goldberg is also asking the Court to accelerate the timeline by which advancement will occur, is asking the Court to expand the scope of issues to which Dr. Goldberg would be entitled to advancement, and is seeking to hold Navidea in contempt for failing to advance fees to date. The Company has opposed Dr. Goldberg's requests.
Fact discovery in the New York Action has been completed and the parties and the Court anticipate meeting in the future to address remaining case deadlines.
Delaware Litigation Involving Dr. Goldberg
February 20, 2019,
MT initiated a suit against Dr. Goldberg in the Court of Chancery of the State of Delaware (the “Delaware Court”), alleging, among other things, breach of fiduciary duty as a director and officer of MT and conversion, and to obtain a declaratory judgment that the transactions Dr. Goldberg caused MT to effect are void. On
June 12, 2019,
the Delaware Court found that Dr. Goldberg's actions were
authorized in compliance with the Delaware General Corporate Law. Specifically, the Delaware Court found that Dr. Goldberg's creation of a new subsidiary of MT and the purported assignment by Dr. Goldberg of MT's intellectual property to that subsidiary were void. The Delaware Court's ruling follows the order on
May 23, 2019
in the case, in which it found Dr. Goldberg in contempt of its prior order holding Dr. Goldberg responsible for the payment of MT's fees and costs to cure the damages caused by Dr. Goldberg's contempt. MT's claims for breach of fiduciary duty and conversion against Dr. Goldberg remain pending. As a result of the Delaware Court's ruling and Navidea's prior termination of the sublicense between itself and MT, all of the intellectual property related to the Manocept platform is now directly controlled by Navidea. A trial on MT's claims against Goldberg for breach of fiduciary duty and conversion was held on
December 1
December 3, 2020.
The Delaware Court requested post-trial briefing and a post-trial hearing. In addition, Dr. Goldberg filed
additional requests for relief –
seeking to hold MT's directors in contempt and
seeking to challenge the appointment of certain individuals to the MT board of directors. MT opposed Dr. Goldberg's filings. The Delaware Court conducted oral argument on all remaining issues on
March 16, 2021
and indicated that a written opinion will be forthcoming.
Derivative Action Involving Dr. Goldberg
July 26, 2019,
Dr. Goldberg served shareholder demands on the Boards of Directors of Navidea and MT repeating many of the claims made in the lawsuits described above. On or about
November 20, 2019,
Dr. Goldberg commenced a derivative action purportedly on behalf of MT in the District Court against Dr. Claudine Bruck, Y. Michael Rice, and Jed Latkin alleging a claim for breach of fiduciary duty based on the actions alleged in the demands. On
April 3, 2020,
Dr. Goldberg dismissed the derivative action in New York without prejudice, and the Court approved the dismissal. Dr. Goldberg retains the ability to re-file the action in Delaware. Dr. Goldberg has
yet re-filed his derivative complaint. See Notes