Platinum Settlement

As discussed in Note 12, Platinum and the Company settled their dispute and Platinum’s lawsuit was dismissed in January 2022. As part of the settlement, Platinum returned their six shares of MT Preferred Stock, representing 60% of the noncontrolling interest in MT, to the Company. Prior to the settlement, the carrying amount of the noncontrolling interest in MT was $731,299. As a result of the settlement and the return of six shares of MT Preferred Stock, the Company recorded a reduction of the noncontrolling interest in MT and an increase in additional paid-in capital of $438,778.

Series D Preferred Stock

On August 31, 2020, the Company entered into a Stock Purchase Agreement and Letter of Investment Intent (the “Series D Preferred Stock Purchase Agreement”) with Keystone pursuant to which the Company agreed to issue to Keystone 150,000 shares of newly-designated Series D Redeemable Convertible Preferred Stock (the “Series D Preferred Stock”) for an aggregate purchase price of $15.0 million. Pursuant to the Series D Preferred Stock Purchase Agreement, Keystone agreed to purchase Series D Preferred Stock in amounts to be determined by Keystone in one or more closings before the end of the nine-month period following the date when the Company’s prospectus supplement to its existing registration statement on Form S-3 was filed with the SEC, provided that all of the Series D Preferred Stock must be purchased by such date. Holders of the Series D Preferred Stock had the option to convert some or all of the Series D Preferred Stock into shares of the Company’s Common Stock at a 10% discount to market (the “Series D Conversion Shares”), provided that the Company could not issue such Series D Conversion Shares in excess of 19.99% of the number of shares of Company common stock outstanding as of the date of the investment without shareholder approval, which the Company was not required to seek. The Series D Preferred Stock was convertible into a maximum of 5,147,000 shares of Common Stock.

Through July 7, 2021, Keystone purchased 72,500 shares of Series D Preferred Stock pursuant to the Series D Preferred Stock Purchase Agreement for an aggregate purchase price of $7.25 million, leaving a remaining balance of 77,500 shares of Series D Preferred Stock to be purchased by Keystone. The 72,500 shares of Series D Preferred Stock were subsequently converted into 3,778,789 shares of Common Stock. Of those amounts, 54,750 and 17,750 shares of Series D Preferred Stock were purchased and converted into 2,951,509 and 827,280 shares of Common Stock during 2021 and 2020, respectively. On July 8, 2021, the Company entered into an Amendment to Stock Purchase Agreement and Letter of Investment Intent (the “Series D Amendment”) with Keystone pursuant to which Keystone purchased 22,077 shares of Series D Preferred Stock for an aggregate purchase price of approximately $2.2 million. After purchasing the 22,077 shares, Keystone has no further right or obligation to purchase shares of Series D Preferred Stock. Including the purchases pursuant to the Series D Amendment, Keystone’s purchases of Series D Preferred Stock pursuant to the Series D Purchase Agreement during the year ended December 31, 2021 totaled 76,827 shares of Series D Preferred Stock for an aggregate purchase price of approximately $7.7 million. The Series D Amendment also contained a customary mutual release provision. All of the outstanding shares of Series D Preferred Stock were exchanged and cancelled pursuant to the Rights Offering completed in August 2022. There were 0 and 22,077 shares of Series D Preferred Stock outstanding as of December 31, 2022 and 2021, respectively.

Series E Preferred Stock

On March 2, 2021, the Company entered into a Series E Preferred Stock Purchase Agreement with an existing accredited investor, John K. Scott, Jr. pursuant to which the Company issued to Mr. Scott 50,000 shares of Series E Preferred Stock for an aggregate purchase price of $5.0 million.

Under the Series E Preferred Stock Purchase Agreement, Mr. Scott was granted a right of first offer with respect to future issuances of Company securities (the “Right of First Offer”); provided, however, that in no event shall Mr. Scott have such right if the acquisition of any of such securities would result in Mr. Scott beneficially holding more than 33.33% of the Company’s outstanding Common Stock on an as-converted basis, as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules thereunder (the “Share Cap”). In the event that Mr. Scott did not exercise the Right of First Offer, the Company would have then been entitled to offer and sell the new securities to any third party at a price not less than, and upon terms no more favorable to the offeree than, those offered to Mr. Scott (a “Third Party Offering”). Pursuant to the Series E Preferred Stock Purchase Agreement, Mr. Scott also had the option to purchase up to 33.33% of the new securities offered in a Third-Party Offering at the same price and upon the terms available to the other purchaser(s) (the “Preemptive Right”); provided, however, that in no event could Mr. Scott acquire new Company securities in a Third-Party Offering to the extent the acquisition thereof would violate the Share Cap. The Right of First Offer and the Preemptive Right expired on December 31, 2021.

In connection with the private placement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which, among other things, the Company prepared and filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-1 to register for resale the maximum number of Series E Conversion Shares (as defined below) issuable upon conversion of the Series E Preferred Stock. In the event that both (i) the number of shares of Common Stock beneficially held by Mr. Scott fell below 20% of the outstanding Common Stock on an as-converted basis, as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder, and (ii) Mr. Scott was an affiliate (as that term is defined under Rule 144) at the time of the Reload Request (as defined below), the Company, upon written request from Mr. Scott (the “Reload Request”), would have been required prepare and file with the SEC one, and only one, additional registration statement covering the resale of those shares of Common Stock owned by Mr. Scott as of the date of the Reload Request that, as of such time, were not registered for resale under the Securities Act of 1933, as amended (the “Securities Act”). The securities issued in the offering were not registered under the Securities Act, and could not have been offered or sold absent registration or availability of an applicable exemption from registration.

Except with respect to transactions which may adversely affect any right, preference, privilege or voting power of the Series E Preferred Stock, the Series E Preferred Stock had no voting rights. Whenever the Company’s Board of Directors declared a dividend on Common Stock, each record holder of a share of Series E Preferred Stock on the record date set by the Board of Directors would have been entitled to receive an amount equal to such dividend declared on one share of Common Stock multiplied by the number of shares of Common Stock (the “Series E Conversion Shares”) into which such share of Series E Preferred Stock could have been converted on the record date, without regard to any conversion limitations in the Series E Preferred Certificate of Designation of Preferences, Rights and Limitations (the “Series E Preferred Certificate”). Holders of the Series E Preferred Stock could have converted some or all of the Series E Preferred Stock into Series E Conversion Shares at a fixed price of $2.30 per Series E Conversion Share, provided that the aggregate number of Series E Conversion Shares issued pursuant to the Series E Preferred Certificate could not have exceeded the Share Cap without shareholder approval, which the Company was not required to seek. The Company had the right to redeem any outstanding shares of Series E Preferred Stock at a price of $110 per share at any time on or prior to the one-year anniversary of the issuance date, payable in cash.

On January 31, 2022, pursuant to the Series E Preferred Certificate dated March 2, 2021, Mr. Scott exercised his option to extend the Conversion Deadline (as defined therein) for an additional period of six months. All of the outstanding shares of Series E Preferred Stock were exchanged and cancelled pursuant to the Stock Exchange Agreement in April 2022. There were 0 and 50,000 shares of Series E Preferred Stock outstanding as of December 31, 2022 and 2021, respectively.

NOL Rights Agreement

On April 7, 2022, the Company’s Board of Directors adopted an NOL rights plan in the form of a Section 382 Rights Agreement (“NOL Rights Agreement”) to preserve and protect the Company’s net operating loss carryforwards (“NOLs”) and other tax assets. As of December 31, 2022, the Company had approximately $175 million of NOLs available to offset future federal taxable income.

Under the NOL Rights Agreement, the Board declared a non-taxable dividend of one preferred share purchase right for each outstanding share of common stock of the Company, each right initially representing the right to purchase one one-thousandth of a share of our Series H Junior Participating Preferred Stock. The rights will be exercisable only if a person or group acquires 4.99% or more of Navidea common stock. Existing shareholders that beneficially own in excess of 4.99% of Navidea common stock are “grandfathered in” at their current ownership level and the rights then become exercisable if any of those stockholders acquire an additional 0.5% or more of Navidea common stock. If the rights become exercisable, all holders of rights, other than the person or group triggering the rights, will be entitled to purchase Navidea common stock at a 50 percent discount or the Company may exchange each right held by such holders for five shares of common stock. Rights held by the person or group triggering the rights will become void and will not be exercisable. The Board has the discretion to exempt any person or group from the provisions of the NOL Rights Agreement.

The rights issued under the NOL Rights Agreement will expire on the earliest of (i) April 6, 2025; (ii) the effective date of the repeal of Section 382 or any successor statute if the Board determines in its sole discretion that the NOL Rights Agreement is no longer necessary or desirable for the preservation of NOLs or other tax benefits; (iii) the first day of a taxable year of the Company to which the Board determines in its sole discretion that no NOLs or other Tax Benefits may be carried forward; or (iv) the day following the certification of the voting results of the Company’s 2022 annual meeting of stockholders if at or before such annual meeting a proposal to approve the NOL Rights Agreement has not been approved by stockholders, unless the Rights are earlier redeemed or exchanged by the Company, or upon the occurrence of certain transactions. See Note 19(a).

Stock Exchange and Loan Agreement

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 $2.5 million, of which $1.5 million was funded on the closing date. Mr. Scott funded an additional $1.0 million on July 1, 2022. The outstanding balance of the loan, which is evidenced by a Bridge Note, bears interest at a rate of 8% per annum, with payments of interest only to be made monthly over a period of two years. All outstanding principal and accrued and unpaid interest under the Bridge Note is due and payable on the second anniversary of the Stock Exchange Agreement. The Company’s obligations under the Bridge Note are secured by a first priority security interest in all of the Company’s assets and personal property pursuant to a Security Agreement.

As consideration and a partial inducement for Mr. Scott to make the loan, at the closing, Mr. Scott delivered 50,000 shares of Series E Preferred Stock, representing 100% of the outstanding Series E Preferred Stock, to the Company in exchange for the Company’s issuance of 1,740 shares of Series F Convertible Preferred Stock and 3,260 shares of Series G Preferred Stock. The number of shares of Common Stock that the Company may issue to Mr. Scott upon conversion of the Series F Preferred stock may not exceed that number of shares that would result in Mr. Scott owning more than 33.33% of the Company’s then outstanding shares of Common Stock unless the Company obtains stockholder approval to issue more than the 33.33% cap. The closing of the loan and stock exchange took place on April 12, 2022.

In connection with the Stock Exchange Agreement, the Company entered into a Registration Rights Agreement with Mr. Scott, pursuant to which the Company agreed to file a registration statement with the SEC to register the resale of the shares issuable to Mr. Scott upon conversion of the Series F Preferred Stock.

Rights Offering

On August 30, 2022, the Company closed on the Rights Offering to its stockholders and certain warrant holders as of August 3, 2022 of the right to purchase up to 35,000 Units at a subscription price of $1,000 per Unit. The Rights Offering resulted in the sale of 10,423 Units for aggregate gross proceeds of $6,173,000 to the Company. Each Unit consisted of one share of Series I Preferred Stock which is convertible into 2,222 shares of Common Stock and one Warrant to purchase an additional 2,222 shares of Common Stock at $0.45 per share. If exercised, additional gross proceeds of up to $11.6 million may be received through the exercise of Warrants issued in the Rights Offering.

Both the Series I Preferred Stock and the Warrants are standalone instruments and each is classified as stockholders’ equity. We measured the fair value of the Series I Preferred Stock based on the market price of the underlying Common Stock on the closing date of the Rights Offering. We measured the fair value of the Warrants using the Black-Scholes option pricing model as of the closing date of the Rights Offering. The assumptions used to calculate fair value of the Warrants included volatility of 89.25%, a risk-free rate of 3.27% and expected dividends of $0. We then allocated the total value of the Units sold in the Rights Offering based on the relative fair value of the Series I Preferred Stock and the Warrants. Of the $10,423,000 total value of Units sold in the Rights Offering, we allocated $6,278,815 to the Series I Preferred Stock and $4,144,185 to the Warrants.

Certain participants in the Rights Offering had the ability to pay the subscription price for their Units by cancelling or exchanging their shares of Series D Preferred Stock, Series F Preferred Stock and/or Series G Preferred Stock and the Company’s indebtedness evidenced by the Bridge Note, instead of paying by check or wire transfer of funds. The fair market value of the shares of each series of preferred stock and the Bridge Note to be cancelled or exchanged in the Rights Offering was determined by the Company’s Board of Directors with the assistance of an independent appraisal obtained by the Company. In order to help maximize Navidea’s ability to use its NOLs and other tax benefits in future years, Navidea’s Board of Directors exercised its discretion to limit the number of Units that John K. Scott, Jr. could purchase to 2,400 Units, which Mr. Scott elected to pay for by exchanging and surrendering all of his shares of Series F Preferred Stock. Of the total 10,423 Units sold in the Rights Offering, 4,250 Units were sold pursuant to the exchange and surrender of all outstanding shares of Navidea’s Series D Preferred Stock and Series F Preferred Stock. Neither the Series G Preferred Stock nor the Bridge Note was exchanged or cancelled pursuant to the Rights Offering.

In accordance with U.S. GAAP, we determined that the fair value of the Series D Preferred Stock and Series F Preferred Stock that was surrendered pursuant to the Rights Offering was approximately $2,212,114. The total fair value of the Units that were issued in exchange for the Series D Preferred Stock and Series F Preferred Stock was $4,250,000. Therefore, the incremental fair value received by the holders of the Series D Preferred Stock and Series F Preferred Stock was approximately $2,037,886. The incremental amount was recognized as a deemed dividend in the Company’s consolidated statement of operations for the year ended December 31, 2022.

Net proceeds after deducting fees and expenses of $998,401 related to the Rights Offering will be used to fund our pivotal Phase 3 clinical trial for RA, obtaining regulatory approvals, working capital, and for general corporate purposes.

401(k) Employer Match

During the years ended December 31, 2022 and 2021, we issued 53,238 and 30,018 shares of our Common Stock as matching contributions to our 401(k) Plan which were valued at $44,720 and $76,846, respectively.

Bonuses Paid in Stock

During the year ended December 31, 2022, we issued 44,782 shares of our Common Stock to certain of our employees as partial payment in lieu of cash for their 2021 bonuses, which were valued at $24,847.

Long Term Incentive Plan

On September 9, 2022, the Company’s Board of Directors approved and adopted the terms and conditions of a long-term incentive plan (“LTIP”) that seeks to motivate and reward employees. The LTIP provides for the issuance of share-based awards to employees of the Company pursuant to the 2014 Plan. The target amount of the stock award under the LTIP for each employee was determined based on a variety of factors. Payout of the stock awards is based on the achievement of pre-established performance objectives and goals related to financing and U.S. Food and Drug Administration (“FDA”) and European Medicines Agency (“EMA”) regulatory milestones for the Company’s Phase 3 clinical trial for rheumatoid arthritis (NAV3-33). The financing and EMA regulatory milestones will each comprise 5% of the total stock award payout for participants; the FDA regulatory milestones will comprise the remaining 90%. The payout amount is subject to downward adjustment based on the timing of the achievement of the particular milestone. In order to receive the payout, the participant generally will be required to continue to be employed through the date of the payout. Upon issuance of the stock award, the participant will be 100% vested in the stock award.

Although the Company did not fully satisfy the financing milestone, based on completion of the Rights Offering, the Board of Directors decided to pay out 5% of the target stock award to all participants under the LTIP. During the year ended December 31, 2022, we issued 70,500 shares of Common Stock to all participants under the LTIP, which were valued at $19,740.

Stock Warrants

On October 25, 2022, the Holders of Series LL warrants to purchase 218,264 shares of Common Stock at $0.20 per share exercised those warrants on a cashless basis, resulting in the issuance of 62,361 shares of Common Stock.

As of December 31, 2022, there are warrants outstanding to purchase 23,363,966 shares of Common Stock. The warrants are exercisable at prices ranging from $0.50 to $49.80 per share with a weighted average exercise price per share of $0.54. The warrants have remaining outstanding terms ranging from 0.5 to 4.7 years.

The following table summarizes information about our outstanding warrants as of December 31, 2022:

Common Stock Reserved

As of December 31, 2022, we have reserved 24,066,771 shares of authorized Common Stock for the exercise of all outstanding stock options and warrants, 21,064,560 shares for the issuance of Common Stock upon conversion of Series I Preferred Stock and 102,869 shares to be issued to certain directors who elected to defer receipt of stock for director fees until the Company raises sufficient additional capital.

An additional 250,000 shares of Common Stock have been reserved for issuance to Dr. Goldberg related to the Goldberg Agreement. See Note 12.