Note 7 - Investment in Macrophage Therapeutics, Inc.
|3 Months Ended|
Mar. 31, 2021
|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. 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, 2020the 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
noaction 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
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 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
third-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, 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
notbreaches 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
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 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: (
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.
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
notbeing granted advancement of fees and expenses incurred in connection with either the Delaware Action or the assertion of
third-party claims against MT, the District 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. Dr. Goldberg is also asking the Court to accelerate the timeline by which advancement will occur, and 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.
April 21, 2021,the Magistrate Judge issued her report and recommended that: (
1) Dr. Goldberg only be awarded
$14,955for indemnification for his attorneys' fees; (
2) Dr. Goldberg only be advanced
$1,237.50for his attorneys' fees subject to repayment; (
3) Navidea should
notbe required to indemnify or advance any of the costs sought by Dr. Goldberg; (
4) Dr. Goldberg is
notentitled to advancement for the prosecution of his counterclaims and
third-party claims; (
5) Dr .Goldberg's motion to hold Navidea in contempt be denied; and (
6) Navidea should
notbe required to advance any additional fees or costs unless Dr. Goldberg presents his time records and costs in compliance with the District Court's orders. On
May 5, 2021,Dr. Goldberg filed his objections to the Magistrate Judge's order and Navidea will respond on
May 19, 2021.The District Court will rule upon the objections.
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
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 was held on
December 3, 2020.The Delaware Court requested post-trial briefing and a post-trial hearing. In addition, Dr. Goldberg filed
twoadditional requests for relief –
oneseeking to hold MT's directors in contempt and
oneseeking to challenge the appointment of certain individuals to the MT Board. MT opposed Dr. Goldberg's filings. The Delaware Court conducted oral argument on all remaining issues on
March 16, 2021and 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
notyet re-filed his derivative complaint. 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