Note 6 - Investment in Macrophage Therapeutics, Inc.
|6 Months Ended|
Jun. 30, 2020
|Notes to Financial Statements|
|Investments in and Advances to Affiliates, Schedule of Investments [Text Block]||
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
oneor more additional definitive agreements, which set forth the terms of the separation from service. In
February 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
mayhave been appointed or in which he was serving.
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
third-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 the Company and MT and Dr. Goldberg that substantially limited the claims that Dr. Goldberg can pursue against the Company and MT. Specifically, the Court found that certain portions of Dr. Goldberg's counterclaims against the Company and
third-party claims against Macrophage failed to state a claim upon which relief can be granted. Specifically, the Court ruled that actions taken by the Company and MT, including reconstituting the MT Board, replacing Dr. Goldberg with Jed A. Latkin as Chief Executive Officer of MT, terminating the sublicense between the Company and MT, terminating certain research projects, and allowing MT intellectual property to revert back to the Company, were
notbreaches of an
August 2018Agreement between the Company, MT and Dr. Goldberg.
The Court also rejected Dr. Goldberg's claim for wrongful termination as Chief Executive Officer of MT. In addition, the 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 the Company to the Board of MT), or to reinstate the terminated sublicense between the Company and MT.
In addition, the District Court found the Company's breach of fiduciary duty claim against Dr. Goldberg for conduct occurring more than
threeyears 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 are in the process of submitting the issue to the District Court for resolution on how much in fees Dr. Goldberg is owed under the District Court's order.
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 has 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: (
1) 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; (
2) the District Court decline to award any fees to Dr. Goldberg for the breach of fiduciary duty without additional motion practice on the issue; (
3) 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 (
4) establish a protocol by which Dr. Goldberg could establish the amounts due for advancement. On
July 23, 2020both Navidea and Dr. Goldberg objected to portions of the Report and Recommendation and following additional briefing, the Report and Recommendation will be considered by the District Court.
January 31, 2020,Dr. 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. The discovery deadline in the New York Action was
July 31, 2020,but is anticipated to be extended in light of the COVID-
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
notauthorized in compliance with the Delaware General Corporation 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, 2019in 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 is presently scheduled for
Derivative Action Involving Dr. Goldberg
July 26, 2019,Dr. Goldberg served shareholder demands on the Boards 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 retains the ability to re-file the action in Delaware. See Notes
The entire disclosure for the information summarizing investments in and advances to majority-owned subsidiaries, other controlled companies, and other affiliates. It reflects specified information about ownership, financial results from, and financial position in such entities.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef