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Item 9A. Controls and Procedures

2021-03-31 compared with 2020-03-16 · 1568 added, 3268 removed, 732 unchanged (87% of the section changed)

This section is long enough that the comparison stopped early. What follows is partial, and the remainder is not necessarily unchanged.

2 unchanged sentences

Controls and Procedures

Disclosure controls and procedures (as

defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) are designed only to provide reasonable assurance that they will

meet their objectives.

Under the supervision and with the participation of our management, including our principal executive officer

and principal financial officer, we conducted an evaluation of the effectiveness, as of December 31, 2019, of the design and

operation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e).

Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of such date,

our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange

Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and

forms, and that such information is accumulated and communicated to our management, including our principal executive officer and

principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) are designed only to provide reasonable assurance that they will meet their objectives.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness, as of December 31, 2020, of the design and operation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e).

Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

Management’s Report on Internal

Control over Financial Reporting

Our management is responsible for establishing

and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and

Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal

executive officer and principal financial officer, and effected by our Board of Directors, management and other personnel, to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external

purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

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(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on the financial statements.

Internal control over financial reporting

has inherent limitations.

Internal control over financial reporting is a process that involves human diligence and compliance and

is subject to lapses in judgment and breakdowns resulting from human failures.

Internal control over financial reporting also can

be circumvented by collusion or improper management override.

Because of such limitations, there is a risk that material misstatements

may not be prevented or detected on a timely basis by internal control over financial reporting.

However, these inherent limitations

are known features of the financial reporting process.

Therefore, it is possible to design into the process safeguards to reduce,

though not eliminate, this risk.

Our management assessed the effectiveness

of our internal control over financial reporting as of December 31, 2019.

In making the assessment, management used the criteria

set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework

Based on the results of this assessment,

management (including our Chief Executive Officer and our Chief Financial Officer) has concluded that, as of December 31,

2019, our internal control over financial reporting was effective.

Attestation Report of Registered

Public Accounting Firm

The effectiveness of our internal controls

over financial reporting as of December 31, 2019 has been audited by our independent registered accounting firm, BDO USA,

LLP, as stated in their attestation report, which is included on page F-3 herein.

Changes in Internal Controls over

Financial Reporting.

There were no changes in our internal control

over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

Internal control over financial reporting has inherent limitations.

Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.

Internal control over financial reporting also can be circumvented by collusion or improper management override.

Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.

However, these inherent limitations are known features of the financial reporting process.

Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020.

In making the assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013) .

Based on the results of this assessment, management (including our Chief Executive Officer and our Chief Financial Officer) has concluded that, as of December 31, 2020, our internal control over financial reporting was effective.

Changes in Internal Controls over Financial Reporting.

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

Directors, Executive Officers and Corporate Governance

The information required by this Item is

incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

Executive Compensation

The information required by this Item is

incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is

incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is

incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

Principal Accounting Fees and Services

The information required by this Item is

incorporated herein by reference from our Proxy Statement for our 2020 Annual Meeting of Stockholders.

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2021 Annual Meeting of Stockholders.

Exhibits, Financial Statement Schedules.

(a) Financial Statements.

The following financial statements are

filed as part of this report:

Reports of Independent Registered Public Accounting

The following financial statements are filed as part of this report:

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders’

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

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(b) Exhibits.

Incorporated by Reference

(Unless Otherwise Indicated)

Exhibit Title

Amended and Restated Certificate of Incorporation of the Registrant.

July 15, 2011

First Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant.

July 15, 2011

Second Amended and Restated Bylaws of the Registrant.

October 31, 2013

Second Certificate of Amendment of Amended and Restated Certificate of Incorporation, as amended.

March 14, 2014

Third Certificate of Amendment of Amended and Restated Certificate of Incorporation, as amended.

April 27, 2015

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Fortress Biotech, Inc.

Certificate of Amendment to the Certificate of Designations of Rights and Preferences of the Fortress Biotech, Inc.

9.375% Series A Cumulative Preferred Stock under the Amended and Restated Certificate of Incorporation of Fortress Biotech, Inc.

Form of Common Stock Certificate.

July 15, 2011

Certificate of Designation of Rights and Preferences 9.375% Series A Perpetual Preferred Stock.

November 7, 2017

Description of Securities of Fortress Biotech, Inc.

Form of Stock Option Award Agreement.

July 15, 2011

Amended and Restated Consulting Agreement, entered into as of January 1, 2019, by and between the Registrant and Eric Rowinsky.

March 18, 2019

Form of Indemnification Agreement by and between the Registrant and its officers and directors.

August 23, 2011

Coronado Biosciences, Inc.

Fortress Biotech, Inc.

2012 Employee Stock Purchase Plan.

July 13, 2012

Promissory Note issued by Registrant to Israel Discount Bank of New York, dated February 13, 2014.

February 18, 2014

Assignment and Pledge of Money Market Account date February 13, 2014 in favor of Israel Discount Bank of New York.

February 18, 2014

Restricted Stock Issuance Agreement, dated as of February 2, 2014, by and between the Registrant and Michael S.

February 26, 2014

Restricted Stock Issuance Agreement, dated as of December 19, 2013, by and between the Registrant and Michael S.

March 14, 2014

Restricted Stock Issuance Agreement, dated as of December 19, 2013, by and between the Registrant and Lindsay A.

Rosenwald, M.D.#

March 14, 2014

Form of Coronado Biosciences, Inc.

2013 Stock Incentive Plan Award Agreement (2013 Stock Incentive Plan).

March 14, 2014

Form of Subscription Agreement

November 10, 2014

Note Purchase Agreement, dated February 27, 2015, by and between the Registrant and NSC Biotech Venture Fund.

March 5, 2015

Form of Subco Securities Purchase Agreement.

March 5, 2015

Form of Subco Warrant.

March 5, 2015

Form of Subco Promissory Note.

March 5, 2015

Coronado Biosciences, Inc.

Deferred Compensation Plan for Directors, dated March 12, 2015.

March 18, 2015

Fortress Biotech, Inc.

2013 Stock Incentive Plan, as amended.

Fortress Biotech, Inc.

Long-Term Incentive Plan.

Exhibit Title

Restricted Stock Unit Award Agreement between Fortress Biotech, Inc.

and George Avgerinos effective July 15, 2015.#

July 17, 2015

Amended and Restated Promissory Note issued by the Registrant to NSC Biotech Venture Fund I LLC, dated July 29, 2015.

August 4, 2015

Form of Fortress Biotech, Inc.

Convertible Second Promissory Note.

November 9, 2016

Form of Common Stock Purchase Warrant.

November 9, 2016

Pledge and Security Agreement dated as of September 14, 2016 made by Fortress Biotech, Inc.

and FBIO Acquisition, Inc.

in favor of Opus Point Healthcare Innovations Fund, LP.

November 9, 2016

Placement Agency Agreement dated March 25, 2017, between Fortress Biotech, Inc., NAM Biotech Fund II, LLC- Series I and National Securities Corporation.

Placement Agency Agreement dated March 25, 2017, between Fortress Biotech, Inc., NAM Special Situations Fund I QP, LLC –

FBIO Series I and National Securities Corporation.

Form of Common Stock Purchase Warrant in favor of National Securities Corporation.

Form of Note Purchase Agreement between Fortress Biotech, Inc., NAM Biotech Fund II, LLC –

Series I and NAM Special Situations Fund I QP, LLC –

FBIO Series I.

Form of Promissory Note issued by Fortress Biotech, Inc.

to NAM Biotech Fund II, LLC –

Series I and NAM Special Situations Fund I QP, LLC –

FBIO Series I.

Fortress Biotech, Inc.

2012 Employee Stock Purchase Plan, as amended.

June 12, 2017

Fortress Biotech, Inc.

Amended and Restated Long-Term Incentive Plan.

June 12, 2017

Amended and Restated Credit Facility Agreement dated as of March 12, 2018, by and among Fortress Biotech, Inc.

and Opus Healthcare Innovations Fund, LP.*

March 16, 2018

Stock Purchase and Merger Agreement, dated as of November 12, 2018, by and between Avenue Therapeutics, Inc., InvaGen Pharmaceuticals Inc.

and Madison Pharmaceuticals Inc.

November 16, 2018

Stockholders Agreement, dated as of November 12, 2018, by and between Fortress Biotech, Inc., Avenue Therapeutics, Inc., Dr.

1 unchanged sentence

and InvaGen Pharmaceuticals Inc.

November 16, 2018

Credit Agreement, dated as of November 12, 2018, by and between Avenue Therapeutics, Inc.

and InvaGen Pharmaceuticals Inc.

November 16, 2018

Guaranty, dated as of November 12, 2018, by and between Fortress Biotech, Inc.

and InvaGen Pharmaceuticals Inc.

November 16, 2018

Voting and Support Agreement, dated as of November 12, 2018, by and between Fortress Biotech, Inc., Avenue Therapeutics, Inc., Dr.

1 unchanged sentence

and InvaGen Pharmaceuticals Inc.

November 16, 2018

Waiver Agreement, dated as of November 12, 2018, by and between Fortress Biotech, Inc., Avenue Therapeutics, Inc.

and InvaGen Pharmaceuticals Inc.

November 16, 2018

Restrictive Covenant Agreement, dated as of November 12, 2018, by and between Fortress Biotech, Inc.

and InvaGen Pharmaceuticals Inc.

November 16, 2018

Indemnification Agreement, dated as of November 12, 2018, by and between Fortress Biotech, Inc.

and InvaGen Pharmaceuticals Inc.

November 16, 2018

Stock Purchase Agreement by and among FBIO Acquisition, Inc., Fortress Biotech, Inc., and NHC Holdings, LLC, dated November 14, 2018.

November 20, 2018

Option and Stock Purchase Agreement by and among Caelum Biosciences, Inc., Alexion Pharmaceuticals, Inc., Fortress Biotech, Inc.,

and the several shareholders of Caelum Biosciences, Inc., dated January 30, 2019.*

January 31, 2019

At Market Issuance Sales Agreement by and among the Registrant, Cantor Fitzgerald & Co., Oppenheimer & Co.

Wainwright & Co., LLC, JonesTrading Institutional Services LLC and B.

Riley FBR, Inc., dated June 30, 2019.

June 28, 2019

Development, Option and Stock Purchase Agreement by and among Caelum Biosciences, Inc., Alexion Pharmaceuticals, Inc., Fortress Biotech, Inc., and the several shareholders of Caelum Biosciences, Inc., dated January 30, 2019.*

Amendment to the Fortress Biotech, Inc.

2013 Stock Incentive Plan.#

Credit Agreement entered into by and among Fortress Biotech, Inc.

the lenders form time to time party thereto, and Oaktree Fund administration, LLC on August 27, 2020.

Subsidiaries of the Registrant.

Filed herewith

Consent Independent Registered Public Accounting Firm.

Filed herewith

Power of Attorney (included on the signature page of this Form 10-K).

Filed herewith

Certification of Chairman, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

Exhibit Title

Certification of Chairman, President and Chief Executive Officer, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed herewith

Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Filed herewith

XBRL Instance Document.

Filed herewith

XBRL Taxonomy Extension Schema Document.

Filed herewith

XBRL Taxonomy Extension Calculation Linkbase Document.

Filed herewith

XBRL Taxonomy Extension Definition Linkbase Document.

Filed herewith

XBRL Taxonomy Extension Label Linkbase Document.

Filed herewith

XBRL Taxonomy Extension Presentation Linkbase Document.

Filed herewith

Inline XBRL Instance Document.*

Inline XBRL Taxonomy Extension Schema Document.*

Inline XBRL Taxonomy Extension Calculation Linkbase Document.*

Inline XBRL Taxonomy Extension Definition Linkbase Document.*

Inline XBRL Taxonomy Extension Label Linkbase Document.*

Inline XBRL Taxonomy Extension Presentation Linkbase Document.*

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).*

# Management contract or compensatory plan.

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Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders’

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public

Accounting Firm

Shareholders and Board of Directors

Fortress Biotech, Inc.

and subsidiaries

New York, New York

Opinion on the Consolidated Financial

We have audited the accompanying consolidated

balance sheets of Fortress Biotech, Inc.

and subsidiaries (the “Company”) as of December 31, 2019 and 2018,

the related consolidated statements of operations, stockholders’

equity, and cash flows for each of the two years in the

period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company

and subsidiaries at December 31, 2019 and 2018, and the results of their operations and their cash flows for each of the two

years in the period ended December 31, 2019 , in conformity with accounting principles generally accepted in the United

States of America.

We also have audited, in accordance with

the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal

control over financial reporting as of December 31, 2019, based on criteria established in Internal Control –

Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our

report dated March 16, 2020 expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 2 to the

consolidated financial statements, on January 1, 2019, the Company changed its method of accounting for leases due to

the adoption of ASU 2016-02, Leases (ASC 842).

Basis for Opinion

These consolidated financial statements

are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures

to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and

disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

that our audits provide a reasonable basis for our opinion.

We have served as the Company's auditor

/s/ BDO USA, LLP

Boston, Massachusetts

March 16, 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

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New York, New York

Opinion on Internal Control over Financial

We have audited Fortress Biotech, Inc.

and subsidiaries (the “Company’s”) internal control over financial reporting as of December 31, 2019, based

on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations

of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects,

effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.

We also have audited, in accordance with

the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance

sheets of the Company and subsidiaries as of December 31, 2019 and 2018, the related consolidated statements of operations,

stockholders’

equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related

notes and our report dated March 16, 2020 expressed an unqualified opinion thereon.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Fortress Biotech, Inc.

and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020 , in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company’s management is responsible

for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control

over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the

We conducted our audit of internal control

over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that

a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the

assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal

Control over Financial Reporting

A company’s internal control over

financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s

internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records

that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with

generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with

authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely

detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the

financial statements.

Because of its inherent limitations, internal

control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness

to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree

of compliance with the policies or procedures may deteriorate.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for Oaktree Note

As described in Note 2 and Note 10 to the consolidated financial statements, in August 2020, the Company entered into a $60.0 million senior secured credit agreement with Oaktree (“Note”).

In connection with the Oaktree Note, the Company issued warrants to Oaktree and certain of its affiliates to purchase up to 1,749,450 shares of common stock (see Note 14)

with a relative fair value of $4.4 million.

In accounting for the Oaktree Note, the Company analyzed the Note and warrants and their related features for the appropriate accounting of the arrangement, including assessment of potential embedded derivatives.

We identified the accounting for the Oaktree Note as a critical audit matter.

The principal considerations that led us to determine this matter was a critical audit matter included the inherent complexity in assessing the accounting for the Note and related embedded derivatives.

Auditing these elements required complex auditor judgment and an increased level of audit effort, including the need for specialized knowledge and skill in assessing these elements.

The procedures we performed to address this critical audit matter included:

● Evaluating management’s accounting policies and practices including the appropriateness of

management’s evaluation of various terms and conditions in the debt agreement, and assessment of embedded derivatives.

● Inspecting the underlying agreements and testing management’s evaluation and application of the relevant accounting guidance to the terms of the agreements.

● Utilizing personnel with specialized knowledge and skill with complex debt instruments to assist in assessing the analysis and accounting for the Note and its features including the warrants.

We have served as the Company’s auditor since 2016.

/s/ BDO USA, LLP

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Consolidated Balance Sheets

($ in thousands except for share and

per share amounts)

($ in thousands except for share and per share amounts)

Current assets

Cash and cash equivalents

Accounts receivable (net of allowance for doubtful accounts of $100 and $0 at December 31, 2019 and December 31, 2018, respectively)

Short-term investments (certificates of deposit)

Accounts receivable, net

Other receivables - related party

Prepaid expenses and other current assets

Current assets held for sale

Total current assets

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Accounts payable and accrued expenses

Accounts payable and accrued expenses - related party

Interest payable

Interest payable - related party

Notes payable, short-term (net of debt discount of $0 and $336 at December 31, 2019 and December 31, 2018, respectively)

Partner company convertible note, short-term, at fair value

Income taxes payable

Notes payable, short-term

Operating lease liabilities, short-term

Derivative warrant liability

Partner company note payable, short-term

Total current liabilities

1 unchanged sentence

Operating lease liabilities, long-term

Partner company note payable, long-term

Other long-term liabilities

2 unchanged sentences

Stockholders’ equity

Preferred stock, $.001 par value, 15,000,000 authorized, 5,000,000 designated Series A shares, 1,341,167 and 1,000,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively;

Cumulative redeemable perpetual preferred stock, $ .001 par value, 15,000,000 authorized, 5,000,000 designated Series A shares, 3,427,138 and 1,341,167 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively;

liquidation value of $ 25.00 per share

Common stock, $.001 par value, 100,000,000 shares authorized, 74,027,425 and 57,845,447 shares issued and outstanding as of December 31, 2019 and December 31, 2018, respectively

Common stock, $ .001 par value, 150,000,000 and 100,000,000 shares authorized, 94,877,492 and 74,027,425 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively

Common stock issuable, 0 and 251,337 shares as of December 31, 2020 and December 31, 2019, respectively

5 unchanged sentences

Total liabilities and stockholders' equity

The accompanying notes

are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

FORTRESS BIOTECH, INC.

1 unchanged sentence

Consolidated Statements of Operations

($ in thousands except for share and

per share amounts)

For the Years Ended

($ in thousands except for share and per share amounts)

Year Ended December 31,

Product revenue, net

Revenue - from a related party

Revenue - related party

Operating expenses

1 unchanged sentence

Research and development

Research and development –

licenses acquired

General and administrative

Research and development - licenses acquired

Selling, general and administrative

Total operating expenses

4 unchanged sentences

Change in fair value of derivative liability

Change in fair value of subsidiary convertible note

Change in fair value of investments

1 unchanged sentence

Total other income (expense)

Loss from continuing operations

Discontinued operations:

Gain from disposal of National

Loss from discontinued operations, net of tax

Total loss from discontinued operations

Loss before income tax expense

Income tax expense

net loss attributable to non-controlling interests

Net loss attributable to common stockholders

Loss from continuing operations per common share - basic and diluted

Loss from discontinued operations per common share - basic and diluted

Net loss per common share - basic and diluted

Net loss per common share attributable to non - controlling interests - basic and diluted

Net loss per common share attributable to common stockholders - basic and diluted

Weighted average common shares outstanding - basic and diluted

The accompanying notes are an integral part

of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Consolidated Statements of Changes in

Stockholders’

Consolidated Statements of Changes in Stockholders’ Equity

($ in thousands except for share amounts)

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Issuance of common stock under ESPP

Issuance of subsidiaries' common shares for license expenses

Partner company’s offering, net

Partner company’s at-the-market offering, net

Exercise of partner company’s warrants for cash

Issuance of common stock for at-the-market offering, net

Contribution of capital for 2017 bonuses

Common shares issuable for 2017 Subordinated Note Financing interest expense

Common shares issued for 2017 Subordinated Note Financing interest expense

Common shares issued for Opus interest expense

Preferred A dividends declared and paid

2017 Preferred A offering cost adjustment

Disposal of National

Non-controlling interest in subsidiaries

Net loss attributable to non-controlling interest

Net loss attributable to common stockholders

Balance at December 31, 2018

Stock-based compensation expense

Settlement of restricted stock units into common stock

Issuance of common stock under ESPP

Issuance of common stock for at-the-market offering, net

Issuance of Series A preferred stock for at-the-market offering, net

1 unchanged sentence

Preferred A dividends declared and paid

Partner company’s offering, net

Partner company’s at-the-market offering, net

Partner company’s offering, net

Partner company’s at-the-market offering, net

Issuance of partner company's common shares for license expenses

11 unchanged sentences

Balance at December 31, 2019

The accompanying notes are an integral part

of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

($ in thousands except for share amounts)

Series A Preferred Stock

Non-Controlling

Stockholders'

Balance at December 31, 2019

Stock-based compensation expense

Issuance of common stock related to equity plans

Issuance of common stock under ESPP

Issuance of common stock for at-the-market offering, net

Preferred A dividends declared and paid

Repurchase of Series A preferred stock, net

Retirement of Series A preferred stock

Issuance of Series A preferred stock for cash, net

Partner company’s offering, net

Partner companies' at-the-market offering, net

Partner company’s preferred stock offering, net

Issuance of common stock under partner company’s ESPP

Partner company’s dividends declared and paid

Partner company’s exercise of warrants for cash

Partner company’s exercise of options for cash

Reclass partner company's warrants from liability to equity

Issuance of partner company’s common shares for research and development expenses

Common shares issued for 2017 Subordinated Note Financing interest expense

Issuance of warrants in conjunction with Oaktree Note

Non-controlling interest in partner companies

Net loss attributable to non-controlling interest

Net loss attributable to common stockholders

Balance at December 31, 2020

The accompanying notes are an integral part of these consolidated financial statements.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

($ in thousands)

For the Years Ended

For the Year Ended

Cash Flows from Operating Activities:

Net loss on discontinued operations

Gain from disposal of National

Loss from continuing operations

Reconciliation of net loss to net cash used in operating activities:

2 unchanged sentences

Amortization of debt discount

Non-cash interest

Amortization of product revenue license fee

1 unchanged sentence

Stock-based compensation expense

Issuance of common stock for research and development-licenses acquired expense

Issuance of common stock for service

Issuance of partner company’s common shares for research and development expenses

1 unchanged sentence

Common shares issued for 2017 Subordinated Note Financing interest expense

Common shares issuable for Opus interest expense

Common shares issued for Opus interest expense

Change in fair value of investments

Common shares issuable for 2019 Notes interest expense

Common shares issued for 2019 Notes interest expense

Change in fair value of derivative liability

Change in fair value of partner company's convertible note

Change in fair value of investment

Gain on deconsolidation of Caelum

8 unchanged sentences

Interest payable - related party

Income taxes payable

Lease liabilities

Other long-term liabilities

Net cash used in continuing operating activities

Net cash used in discontinued operating activities

Net cash used in operating activities

2 unchanged sentences

Purchase of property and equipment

Acquisition of intangible assets - Journey

Purchase of intangible asset

Purchase of short-term investment (certificates of deposit)

Redemption of short-term investment (certificates of deposit)

Security deposits paid

Deconsolidation of Caelum

Net cash provided by continuing investing activities

Net cash provided by (used in) continuing investing activities

Net cash provided by discontinued investing activities

Net cash provided by investing activities

Net cash provided by (used in) investing activities

The accompanying notes are an integral part of these consolidated financial statements.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

($ in thousands)

For the Year Ended

Cash Flows from Financing Activities:

Payment of Preferred A dividends

Payment of Series A preferred stock dividends

Purchase of treasury stock

Payment of costs related to purchase of treasury stock

Proceeds from issuance of Series A preferred stock

Payment of cost related to issuance of Series A preferred stock

Proceeds from issuance of Series A preferred stock for at-the-market offering

Payment of cost related to issuance of Series A preferred stock for at-the-market offering

Payment of costs related to issuance of Series A preferred stock

Proceeds from issuance of common stock for at-the-market offering

Payment of cost related to issuance of common stock for at-the-market offering

Payment of costs related to issuance of common stock for at-the-market offering

Proceeds from issuance of Series A preferred stock for at-the-market offering

Payment of costs related to issuance of Series A preferred stock for at-the-market offering

Proceeds from issuance of common stock under ESPP

Proceeds from partner company's sale of stock

Payment of costs related to partner company's sale of stock

Proceeds from partner company's at-the-market offering

Payment of costs related to partner company's at-the-market offering

Proceeds from partner companies' ESPP

Partner company’s dividends declared and paid

Proceeds from partner companies' sale of stock

Payment of costs related to partner companies' sale of stock

Proceeds from partner companies' at-the-market offering

Payment of costs related to partner companies' at-the-market offering

Proceeds from partner company's preferred stock offering

Payment of costs related to partner company's preferred stock offering

Proceeds from exercise of partner company’s warrants

Proceeds from exercise of partner company’s options

Payment of debt issuance costs associated with 2017 Subordinated Note Financing

Proceeds from 2018 Venture Notes

Payment of debt issuance costs associated with 2018 Venture Notes

1 unchanged sentence

Payment of debt issuance costs associated with partner company's Horizon Notes

Payment of partner company's Convertible Notes

Net cash provided by continuing financing activities

Net cash provided by discontinued financing activities

Proceeds from Oaktree Note

Payment of debt issuance costs associated with Oaktree Note

Repayment of 2017 Subordinated Note Financing

Repayment of 2018 Venture Notes

Repayment of 2019 Notes

Repayment of partner company's Horizon Notes

Repayment of IDB Note

Installment payment related to intangible asset

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents and restricted cash

Net increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

For the Years Ended

Supplemental disclosure of cash flow information:

1 unchanged sentence

Cash paid for interest - related party

The accompanying notes are an integral part of these consolidated financial statements.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

($ in thousands)

Year Ended December 31,

Supplemental disclosure of non-cash financing and investing activities:

2 unchanged sentences

Issuance of partner company warrants in conjunction with Horizon Notes

Common shares issued for 2017 Subordinated Note Financing interest expense

Common shares issued for Opus debt

Receivables of contribution of capital for 2017 bonuses

Issuance of warrants in conjunction with Oaktree Note

Common shares issued from 2017 Subordinated Note Financing interest expense

Common shares issued for 2019 Notes

Unpaid fixed assets

Unpaid research and development licenses acquired

Partner company's unpaid intangible assets

Partner company's previous paid offering cost

Reclass partner company's warrants from liability to equity

Unpaid partner company’s offering cost

Unpaid partner company’s at-the-market offering cost

Unpaid partner company’s preferred stock offering cost

Unpaid debt offering cost

Unpaid at-the-market offering cost

Unpaid Preferred A offering cost

Unpaid partner company's offering cost

Partner company's previous paid offering cost

Partner company's unpaid intangible assets

The accompanying notes are an integral part

of these consolidated financial statements.

Unpaid Series A preferred stock offering cost

Unpaid research and development licenses acquired

Retirement of Series A preferred stock

The accompanying notes are an integral part of these consolidated financial statements.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

Notes to the Consolidated Financial Statements

Organization and Description of Business

Fortress Biotech, Inc.

(“Fortress”

or the “Company”) is a biopharmaceutical company dedicated to acquiring, developing and commercializing pharmaceutical

and biotechnology products and product candidates, which the Company does at the Fortress level, at its majority-owned and majority-controlled

subsidiaries and joint ventures, and at entities the Company founded and in which it maintains significant minority ownership positions.

Fortress has a talented and experienced business development team, comprising scientists, doctors and finance professionals, who

identify and evaluate promising products and product candidates for potential acquisition by new or existing partner companies.

Fortress through its partner companies has executed such arrangements in partnership with some of the world’s foremost universities,

research institutes and pharmaceutical companies, including City of Hope National Medical Center, Fred Hutchinson Cancer Research

Jude Children’s Research Hospital, Dana-Farber Cancer Institute, Nationwide Children’s Hospital, Cincinnati

Children’s Hospital Medical Center, Columbia University, the University of Pennsylvania, and AstraZeneca plc.

Following the exclusive license or other

acquisition of the intellectual property underpinning a product or product candidate, Fortress leverages its business, scientific,

regulatory, legal and finance expertise to help the partners achieve their goals.

Partner companies then assess a broad range of

strategic arrangements to accelerate and provide additional funding to support research and development, including joint ventures,

partnerships, out-licensings, and public and private financings;

to date, three partner companies are publicly-traded, and two

have consummated strategic partnerships with industry leaders Alexion Pharmaceuticals, Inc.

(“Fortress” or the “Company”) is a biopharmaceutical company dedicated to acquiring, developing and commercializing pharmaceutical and biotechnology products and product candidates, which the Company does at the Fortress level, at its majority-owned and majority-controlled subsidiaries and joint ventures, and at entities the Company founded and in which it maintains significant minority ownership positions.

Fortress has a talented and experienced business development team, comprising scientists, doctors and finance professionals, who identify and evaluate promising products and product candidates for potential acquisition by new or existing partner companies.

Fortress through its partner companies has executed such arrangements in partnership with some of the world’s foremost universities, research institutes and pharmaceutical companies, including City of Hope National Medical Center, Fred Hutchinson Cancer Research Center, St.

Jude Children’s Research Hospital, Dana-Farber Cancer Institute, Nationwide Children's Hospital, Cincinnati Children's Hospital Medical Center, Columbia University, the University of Pennsylvania, and AstraZeneca plc.

Following the exclusive license or other acquisition of the intellectual property underpinning a product or product candidate, Fortress leverages its business, scientific, regulatory, legal and finance expertise to help the partners achieve their goals.

Partner companies then assess a broad range of strategic arrangements to accelerate and provide additional funding to support research and development, including joint ventures, partnerships, out-licensings, and public and private financings;

to date, three partner companies are publicly-traded, and two have consummated strategic partnerships with industry leaders Alexion Pharmaceuticals, Inc.

and InvaGen Pharmaceuticals, Inc.

(a subsidiary of Cipla Limited).

Several of our partner companies possess

licenses to product candidate intellectual property, including Aevitas Therapeutics, Inc.

(“Aevitas”), Avenue

Therapeutics, Inc.

(“Avenue”), Baergic Bio, Inc.

(“Baergic”), Caelum Biosciences, Inc.

(“Caelum”),

Cellvation, Inc.

(“Cellvation”), Checkpoint Therapeutics, Inc.

(“Checkpoint”), Cyprium Therapeutics, Inc.

(“Cyprium”), Helocyte, Inc.

(“Helocyte”), Hepla Sciences, Inc.

(“Hepla”), Journey

Medical Corporation (“Journey”

or “JMC”), Mustang Bio, Inc.

(“Mustang”) and Oncogenuity, Inc.

(“Oncogenuity”).

Several of our partner companies possess licenses to product candidate intellectual property, including Aevitas Therapeutics, Inc.

(“Aevitas”), Avenue Therapeutics, Inc.

(“Avenue”), Baergic Bio, Inc.

(“Baergic”), Caelum Biosciences, Inc.

(“Caelum”), Cellvation, Inc.

(“Cellvation”), Checkpoint Therapeutics, Inc.

(“Checkpoint”), Cyprium Therapeutics, Inc.

(“Cyprium”), Helocyte, Inc.

(“Helocyte”), Journey Medical Corporation (“Journey” or “JMC”), Mustang Bio, Inc.

(“Mustang”) and Oncogenuity, Inc.

("Oncogenuity").

Liquidity and Capital Resources

Since inception, the Company’s operations

have been financed primarily through the sale of equity and debt securities, from the sale of partner companies, the proceeds from

the exercise of warrants and stock options.

The Company has incurred losses from operations and negative cash flows from operating

activities since inception and expects to continue to incur substantial losses for the next several years as it continues to fully

develop and prepare regulatory filings and obtain regulatory approvals for its existing and new product candidates.

The Company’s

current cash and cash equivalents are sufficient to fund operations for at least the next 12 months.

However, the Company will

need to raise additional funding through strategic relationships, public or private equity or debt financings, sale of a partner

company, grants or other arrangements to fully develop and prepare regulatory filings and obtain regulatory approvals for the existing

and new product candidates, fund operating losses, and, if deemed appropriate, establish or secure through third parties manufacturing

for the potential products, sales and marketing capabilities.

If such funding is not available or not available on terms

acceptable to the Company, the Company’s current development plan and plans for expansion of its general and administrative

infrastructure will be curtailed.

The Company also has the ability, subject to limitations imposed by Rule 144 of the Securities

Act of 1933 and other applicable laws and regulations, to raise money from the sale of common stock of the public companies in

which it has ownership positions.

National Holdings Corporation

During 2016, the Company purchased

56.6% of National Holdings Corporation, a diversified independent brokerage company (together with its subsidiaries, herein

referred to as “NHLD”

or “National”) through wholly owned subsidiary FBIO Acquisition, Inc.

(“FBIO Acquisition”).

The Company paid total consideration of $22.9 million or approximately 7.0 million shares

at $3.25 per share in connection with this transaction.

On November 14, 2018, the Company announced that it had reached

an agreement with NHC Holdings, LLC (“NHC”) to sell all of its shares of National, representing 56.1% of the

total outstanding shares of NHLD for $3.25 per share or total consideration of $22.9 million.

Pursuant to the terms of the

agreement with NHC the sale of the shares was subject to two closings.

The first closing occurred on November 14, 2018

in which the Company sold approximately 3.0 million of its shares in NHLD and received $9.8 million in proceeds.

closing occurred on February 11, 2019 upon the receipt of FINRA approval of the sale in which the Company received $13.1

million in proceeds for the sale of its remaining 4.0 million shares of NHLD to NHC and two other minority holders.

December 31, 2018, the Company’s holding in National approximated 32.1% and was recorded on the consolidated

balance sheets at fair value as a component of current assets held for sale.

At December 31, 2019, the Company had no

ownership interest in National.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

Since inception, the Company’s operations have been financed primarily through the sale of equity and debt securities, from the sale of partner companies, the proceeds from the exercise of warrants and stock options.

The Company has incurred losses from operations and negative cash flows from operating activities since inception and expects to continue to incur substantial losses for the next several years as it continues to fully develop and prepare regulatory filings and obtain regulatory approvals for its existing and new product candidates.

The Company’s current cash and cash equivalents are sufficient to fund operations for at least the next 12 months.

However, the Company will need to raise additional funding through strategic relationships, public or private equity or debt financings, sale of a partner company, grants or other arrangements to fully develop and prepare regulatory filings and obtain regulatory approvals for the existing and new product candidates, fund operating losses, and, if deemed appropriate, establish or secure through third parties manufacturing for the potential products, sales and marketing capabilities.

If such funding is not available or not available on terms acceptable to the Company, the Company’s current development plan and plans for expansion of its selling, general and administrative infrastructure will be curtailed.

The Company also has the ability, subject to limitations imposed by Rule 144 of the Securities Act of 1933 and other applicable laws and regulations, to raise money from the sale of common stock of the public companies in which it has ownership positions.

In addition to the foregoing, the Company does not expect any material impact on its development timelines, revenue levels and its liquidity due to the worldwide spread of COVID-19 (except as may be implicated by the Material Adverse Effect claimed by InvaGen in connection with their agreement with Avenue).

However, the Company is continuing to assess the impact the spread of COVID-19 may have on its operations.

Avenue will also continue to assess the alleged Material Adverse Effect claimed by InvaGen.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Company’s consolidated financial

statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The Company’s consolidated financial statements include the accounts of the Company and the accounts of the Company’s

subsidiaries, listed above.

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The Company’s consolidated financial statements include the accounts of the Company and the accounts of the Company’s subsidiaries, listed above.

All intercompany balances and transactions have been eliminated.

The accompanying consolidated financial

statements include the accounts of the Company’s subsidiaries.

For consolidated entities where the Company owns less than

100% of the subsidiary, the Company records net loss attributable to non-controlling interests in its consolidated statements of

operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling

The accompanying consolidated financial statements include the accounts of the Company’s subsidiaries.

For consolidated entities where the Company owns less than 100% of the subsidiary, the Company records net loss attributable to non-controlling interests in its consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties.

The Company also consolidates subsidiaries in which it owns less than 50% of the subsidiary but maintains voting control.

The Company continually assesses whether changes to existing relationships or future transactions may result in the consolidation

or deconsolidation of partner companies.

The Company continually assesses whether changes to existing relationships or future transactions may result in the consolidation or deconsolidation of partner companies.

Use of Estimates

The Company’s consolidated financial

statements include certain amounts that are based on management’s best estimates and judgments.

The Company’s significant

estimates include, but are not limited to, useful lives assigned to long-lived assets, fair value of stock options and warrants,

stock-based compensation, common stock issued to acquire licenses, investments, accrued expenses, provisions for income taxes and

contingencies.

The Company’s consolidated financial statements include certain amounts that are based on management’s best estimates and judgments.

The Company’s significant estimates include, but are not limited to, useful lives assigned to long-lived assets, fair value of stock options and warrants, stock-based compensation, common stock issued to acquire licenses, investments, accrued expenses, provisions for income taxes and contingencies.

Due to the uncertainty inherent in such estimates, actual results may differ from these estimates.

Revenue Recognition

Effective January 1, 2018, the Company began recognizing revenue

under ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle of this

revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in

an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The Company recognizes revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle of this revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

Identify the contract with the customer

Identify the performance obligations in the

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance

obligations in the contract

Recognize revenue when the company satisfies

a performance obligation

In order to identify the performance obligations in a contract

with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service

that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct”

good or service (or bundle

of goods or services) if both of the following criteria are met:

The customer can benefit from the good or service either on

its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being

The entity’s promise to transfer the good or service to

the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service

is distinct within the context of the contract).

If a good or service is not distinct, the good or service is

combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which

an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected

on behalf of third parties (for example, some sales taxes).

The consideration promised in a contract with a customer may include

fixed amounts, variable amounts, or both.

Variable consideration is included in the transaction price only to the extent that it

is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated

with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation

on a relative standalone selling price basis.

The transaction price allocated to each performance obligation is recognized when

that performance obligation is satisfied, at a point in time or over time as appropriate.

ASC 606 does not generally change the practice under which the

Company recognizes product revenue from sales of Targadox®, Exelderm®, Luxamend®

and Ceracade®.

The Company’s

performance obligation to deliver products is satisfied at the point in time that the goods are delivered to the customer, which

is when the customer obtains title to and has the risks and rewards of ownership of the products.

The Company has variable consideration in the form of rights

of return, coupons, and price protection to customers.

The Company uses an expected value method to estimate variable consideration

and whether the transaction price is constrained.

Payment is due within months of when the customer is invoiced, with discounts

for prompt payment.

Because the Company’s agreements for sales of product

to its distributors can be cancelled early, prior to the termination date, they are deemed to have an expected duration of one

year or less, and as such, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about

its remaining performance obligations.

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct).

The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

The Company recognizes product revenue from sales of Ximino®, Targadox®, Exelderm®, Luxamend® and Ceracade®.

The Company’s performance obligation to deliver products is satisfied at the point in time that the goods are delivered to the customer, which is when the customer obtains title to and has the risks and rewards of ownership of the products.

The Company has variable consideration in the form of rights of return, coupons, and price protection to customers.

The Company uses an expected value method to estimate variable consideration and whether the transaction price is constrained.

Payment is due within months of when the customer is invoiced, with discounts for prompt payment.

The Company recorded expense related to returns reserve of $ 1.3 million and $ 2.9 million for the years ended December 31, 2020 and December 31, 2019, respectively.

Because the Company’s agreements for sales of product to its distributors can be cancelled early, prior to the termination date, they are deemed to have an expected duration of one year or less, and as such, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations.

Discontinued Operations

At December 31, 2018, the Company

determined that its National segment met the discontinued operations criteria set forth in Accounting Standards Codification (ASC)

Subtopic 205-20-45, Presentation of Financial Statements , for the twelve months ended December 31, 2018.

the National segment results have been classified as discontinued operations in the accompanying Consolidated Balance

Sheets and Consolidated Statements of Operations.

See Note 3 for more information relating to the Company’s discontinued

Pursuant to the discontinued operations criteria set forth in ASC Subtopic 205-20-45, Presentation of Financial Statements , proceeds received from the Company’s sale of its holdings in National Holding Corporation were classified as cash provided by discontinued investing activities in the Company’s cash flow statement for the year ended December 31, 2019.

See Note 3 for more information relating to the Company’s discontinued operations.

Fair Value Measurement

The Company follows accounting guidance

on fair value measurements for financial assets and liabilities measured at fair value on a recurring basis.

Under the accounting

guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer

a liability in an orderly transaction between market participants at the measurement date.

As such, fair value is a market-based

measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance requires fair value

measurements be classified and disclosed in one of the following three categories:

Quoted prices in active markets for identical assets or

Observable inputs other than Level 1 prices for similar

assets or liabilities that are directly or indirectly observable in the marketplace.

Unobservable inputs which are supported by little or no

market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies,

or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

The fair value hierarchy also requires

an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant

to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement

in its entirety requires management to make judgments and consider factors specific to the asset or liability.

Certain of the Company’s financial

instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due

to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The Company follows accounting guidance on fair value measurements for financial assets and liabilities measured at fair value on a recurring basis.

Under the accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Quoted prices in active markets for identical assets or liabilities.

Observable inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.

Segment Reporting

The Company operates in two operating and

reportable segments, Dermatology Product Sales and Pharmaceutical and Biotechnology Product Development.

The Company evaluates

the performance of each segment based on operating profit or loss.

There is no inter-segment allocation of interest expense and

income taxes.

The Company operates in two operating and reportable segments, Dermatology Product Sales and Pharmaceutical and Biotechnology Product Development.

The Company evaluates the performance of each segment based on operating profit or loss.

There is no inter-segment allocation of interest expense and income taxes.

Cash and Cash Equivalents

The Company considers highly liquid investments

with a maturity of three months or less when purchased to be cash equivalents.

Cash and cash equivalents at December 31, 2019

and at December 31, 2018 consisted of cash and certificates of deposit in institutions in the United States.

Balances at certain

institutions have exceeded Federal Deposit Insurance Corporation insured limits and U.S.

The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Cash and cash equivalents at December 31, 2020 and at December 31, 2019 consisted of cash and certificates of deposit in institutions in the United States.

Balances at certain institutions have exceeded Federal Deposit Insurance Corporation insured limits and U.S.

government agency securities.

Short-term Investments

The Company classifies its certificates

of deposit as cash and cash equivalents or held to maturity in accordance with the Financial Accounting Standards Board ("FASB")

Accounting Standards Codification (“ASC”) 320, Investments - Debt and Equity Securities .

The Company considers

all short-term investments with an original maturity in excess of three months when purchased to be short-term investments.

investments consist of short-term FDIC insured certificates of deposit with a maturity of more than three months and less than

twelve months, carried at amortized cost using the effective interest method.

The cost of the Company’s certificates of deposit

approximated fair value.

The Company reassesses the appropriateness of the classification of its investments at the end of each

reporting period.

At December 31, 2019, the Company

had approximately $15.0 million in certificates of deposit, which the Company classified as cash and cash equivalents.

no short term investments classified as held-to-maturity as of December 31, 2019.

At December 31, 2018, the Company had

approximately $27.6 million in certificates of deposit.

The Company classified $10.0 million as cash and cash equivalents and classified

$17.6 million as short-term investments (certificates of deposits) held-to-maturity as of December 31, 2018.

This classification

was based upon management’s determination that it has the positive intent and ability to hold the securities until their

maturity dates, as its investments mature within one year and the underlying cash invested in these securities is not required

for current operations.

The Company classifies its certificates of deposit as cash and cash equivalents or held to maturity in accordance with ASC 320, Investments - Debt and Equity Securities .

The Company reassesses the appropriateness of the classification of its investments at the end of each reporting period.

At December 31, 2020, the Company had approximately $ 76.8 million and $ 15.0 million, respectively, in certificates of deposit, which the Company classified as cash and cash equivalents.

There were no short term investments classified as held-to-maturity as of December 31, 2020.

Property and Equipment

Computer equipment, furniture &

fixtures and machinery & equipment are recorded at cost and depreciated using the straight-line method over the estimated

useful life of each asset.

Leasehold improvements are amortized over the shorter of the estimated useful lives or the term of the

respective leases.

Impairment of Long-Lived Assets

The Company reviews long-lived assets,

including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying

amount of the assets may not be fully recoverable.

Factors that the Company considers in deciding when to perform an impairment

review include significant underperformance of the business in relation to expectations, significant negative industry or economic

trends, and significant changes or planned changes in the use of the assets.

If an impairment review is performed to evaluate a

long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use

and eventual disposition of the long-lived asset to its carrying value.

An impairment loss would be recognized when estimated undiscounted

future cash flows expected to result from the use of an asset are less than its carrying amount.

The impairment loss would be based

on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows.

Computer equipment, furniture & fixtures and machinery & equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of each asset.

Leasehold improvements are amortized over the shorter of the estimated useful lives or the term of the respective leases.

In connection with Mustang’s cell processing facility, Mustang incurred costs for the design and construction of the facility and the purchase of equipment;

$ 0.5 million and $ 1.2 million are recorded in fixed assets – construction in process on the balance sheet at December 31, 2020 and 2019, respectively.

Upon completion of the facility’s construction, all costs associated with the buildout will be recorded as leasehold improvements and amortized over the shorter of the estimated useful lives or the term of the respective leases, upon the improvement being placed in service.

Restricted Cash

The Company records cash held in trust

or pledged to secure certain debt obligations as restricted cash.

As of December 31, 2019, and 2018, the Company has $16.6

million and $16.1 million, respectively, of restricted cash collateralizing a note payable of $14.9 million in 2019 and 2018, and

certain pledges to secure letters of credit in connection with certain office leases of $1.7 million and $1.2 million in 2019 and

2018, respectively.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The following table provides a reconciliation

of cash, cash equivalents, and restricted cash from the consolidated balance sheets to the consolidated statements of cash flows

for the years ended December 31, 2019, and 2018 ($ in thousands).

The Company records cash held in trust or pledged to secure certain debt obligations as restricted cash.

As of December 31, 2020, the Company had $ 1.6 million of restricted cash representing pledges to secure letters of credit in connection with certain office leases.

As of December 31, 2019, the Company had $ 16.6 million of restricted cash collateralizing a note payable of $ 15.0 million and $ 1.6 million in certain pledges to secure letters of credit in connection with certain office leases.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash from the consolidated balance sheets to the consolidated statements of cash flows for the years ended 2020, and 2019:

($ in thousands)

Cash and cash equivalents

1 unchanged sentence

Total cash and cash equivalents and restricted cash

Inventories comprise finished goods, which

are valued at the lower of cost or market, on a first-in, first-out basis.

The Company evaluates the carrying value of inventories

on a regular basis, taking into account anticipated future sales compared with quantities on hand, and the remaining shelf life

of goods on hand.

Accounts Receivable

Accounts receivable consists of amounts

due to the Company for product sales of JMC.

The Company’s accounts receivable reflects discounts for estimated early payment

and for product estimated returns.

Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful

Accounts that are outstanding longer than the contractual payment terms are considered past due.

The Company determines

its allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable

are past due and the customer’s current ability to pay its obligation to the Company.

The Company writes off accounts

receivable when they become uncollectible.

The allowance for product estimated returns were $5.4 million and $3.1 million at December 31,

2019 and 2018, respectively.

The Company recorded expense related to returns reserve of $2.9 million and $2.4 million for the years

ended December 31, 2019 and 2018, respectively.

Inventories comprise finished goods, which are valued at the lower of cost and net realizable value, on a first-in, first-out basis.

The Company evaluates the carrying value of inventories on a regular basis, taking into account anticipated future sales compared with quantities on hand, and the remaining shelf life of goods on hand.

Accounts Receivable, net

Accounts receivable consists of amounts due to the Company for product sales of JMC.

The Company’s accounts receivable reflects discounts for estimated early payment and for product estimated returns.

Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts that are outstanding longer than the contractual payment terms are considered past due.

The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due and the customer’s current ability to pay its obligation to the Company.

The Company writes off accounts receivable when they become uncollectible.

For the years ended December 31, 2020 and 2019 the allowance for doubtful accounts was approximately $ 0.1 million and $ 0.1 million, respectively.

The allowance for product estimated returns were $ 4.6 million and $ 5.4 million at December 31, 2020 and 2019, respectively, representing constrained revenue.

Investments at Fair Value

The Company elects the fair value option

for its long-term investments at fair value (see Note 6).

The decision to elect the fair value option, which is irrevocable once

elected, is determined on an instrument by instrument basis and applied to an entire instrument.

The net gains or losses, if any,

on an investment for which the fair value option has been elected are recognized as a change in fair value of investments on the

Consolidated Statements of Operations.

The Company elected the fair value option,

instead of the equity method, for its investment in National as of December 31, 2018 (see Note 3).

The Company has various processes and controls

in place to ensure that fair value is reasonably estimated.

While the Company believes its valuation methods are appropriate and

consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain

financial instruments could result in a different estimate of fair value at the reporting date.

Fair Value Option

As permitted under the FASB, ASC 825, Financial

Instruments, (“ASC 825”), the Company has elected the fair value option to account for the Helocyte and Caelum

convertible notes.

In accordance with ASC 825, the Company records these convertible notes at fair value with changes in fair value

recorded in the Consolidated Statement of Operations.

As a result of applying the fair value option, direct costs and fees related

to the Helocyte and Caelum convertible notes were recognized in earnings as incurred and were not deferred.

During 2018, the Helocyte

convertible notes matured and the Company repaid the principal amount due of approximately $4.4 million.

During 2019, Caelum’s

convertible notes were converted into Common shares of Caelum (see Note 10).

The Company elects the fair value option for its long-term investments at fair value (see Note 6).

The decision to elect the fair value option, which is irrevocable once elected, is determined on an instrument by instrument basis and applied to an entire instrument.

The net gains or losses, if any, on an investment for which the fair value option has been elected are recognized as a change in fair value of investments on the Consolidated Statements of Operations.

The Company has various processes and controls in place to ensure that fair value is reasonably estimated.

While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Accounting for Warrants at Fair Value

The Company classifies as liabilities any

contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs

and if that event is outside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or

settlement in shares (physical settlement or net-share settlement).

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The fair value of warrants that include

price protection reset provision features are deemed to be “down-round protection”

and, therefore, do not meet the

scope exception for treatment as a derivative under ASC 815, Derivatives and Hedging , since “down-round protection”

is not an input into the calculation of the fair value of warrants and cannot be considered “indexed to the Company’s

own stock”

which is a requirement for the scope exception as outlined under ASC 815.

The accounting treatment of derivative

financial instruments requires that the Company record the warrants at their fair values as of the inception date of the agreement

and at fair value as of each subsequent balance sheet date.

Any change in fair value is recorded as non-operating, non-cash income

or expense for each reporting period at each balance sheet date.

The Company reassesses the classification of its derivative instruments

at each balance sheet date.

If the classification changes as a result of events during the period, the contract is reclassified

as of the date of the event that caused the reclassification.

The Company assessed the classification

of warrants issuable in connection with 2018 Venture Notes and determined that the Cyprium Contingently Issuable Warrants met the

criteria for liability classification.

Accordingly, the Company classified the Cyprium Contingently Issuable Warrants as a liability

at their fair value and shall adjust the instruments to fair value at each balance sheet date until the warrants are issued.

change in the fair value of the Cyprium Contingently Issuable Warrants shall be recognized as “change in the fair value of

derivative liabilities”

in the Consolidated Statements of Operations.

The Company classifies as liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

The accounting treatment of derivative financial instruments requires that the Company record the warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date.

Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date.

The Company reassesses the classification of its derivative instruments at each balance sheet date.

If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

The Company assessed the classification of warrants issuable in connection with 2018 Venture Notes and determined that the Cyprium Contingently Issuable Warrants met the criteria for liability classification.

Accordingly, the Company classified the Cyprium Contingently Issuable Warrants as a liability at their fair value and adjusted the instruments to fair value at each balance sheet date until the warrants were issued.

Any change in the fair value of the Cyprium Contingently Issuable Warrants is recognized as “change in the fair value of derivative liabilities” in the Consolidated Statements of Operations.

During the year ended December 31, 2020, Cyprium raised approximately $ 8.0 million in Cumulative Redeemable Perpetual Preferred Shares (“Cyprium Offering,” see Note 14).

The Cyprium Offering coupled with the repayment of the 2018 Venture Debt (see Note 10), triggered the issuance of the Cyprium Warrant, in that a price per share could be established.

As such these events resulted in Cyprium recording the Cyprium Warrant as issued rather than contingently issuable.

Opus Credit Facility, with Detachable Warrants

The Company accounts for the Opus Credit

Facility with detachable warrants in accordance with ASC 470, Debt .

The Company assessed the classification of its common

stock purchase warrants as of the date of the transaction and determined that such instruments meet the criteria for equity classification.

The warrants are reported on the Consolidated Balance Sheets as a component of additional paid in capital within stockholders’

The Company recorded the related issue

costs and value ascribed to the warrants as a debt discount of the Opus Credit Facility.

The discount is amortized utilizing the

effective interest method over the term of the Opus Credit Facility.

The unamortized discount, if any, upon repayment of the Opus

Credit Facility will be expensed to interest expense.

In accordance with ASC Subtopic 470-20, the Company determined the weighted

average effective interest rate of the debt was approximately 16% at December 31, 2019.

The Company has also evaluated the

Opus Credit Facility and warrants in accordance with the provisions of ASC 815, Derivatives and Hedging , including consideration

of embedded derivatives requiring bifurcation.

As of December 31, 2019, Opus dissolved

and is in the process of distributing its assets among its Limited Partners.

While this dissolution will not impact any of the

terms under the Opus Credit Facility the Company is working with Opus to amend and restate the relevant documentation, in order

to memorialize the distribution of assets.

The Company accounted for the Opus Credit Facility (see Note 10) with detachable warrants in accordance with ASC 470, Debt .

The Company assessed the classification of its common stock purchase warrants as of the date of the transaction and determined that such instruments met the criteria for equity classification.

The warrants were reported on the Consolidated Balance Sheets as a component of additional paid in capital within stockholders’ equity.

The Company recorded the related issue costs and value ascribed to the warrants as a debt discount of the Opus Credit Facility.

The discount was amortized utilizing the effective interest method over the term of the Opus Credit Facility.

The unamortized discount, if any, upon repayment of the Opus Credit Facility would be expensed to interest expense.

In accordance with ASC Subtopic 470-20, the Company determined the weighted average effective interest rate of the debt was approximately 16 % at December 31, 2019.

The Company also evaluated the Opus Credit Facility and warrants in accordance with the provisions of ASC 815, Derivatives and Hedging , including consideration of embedded derivatives requiring bifurcation.

As of December 31, 2019, Opus dissolved and distributed its assets among its Limited Partners.

The dissolution did not impact any of the terms under the Opus Credit Facility.

During the year ended December 31, 2020, the Company used certain proceeds from the Oaktree Note to pay off the $ 9.0 million balance previously outstanding under the Opus Credit Facility/2019 Notes (see Note 10).

Issuance of Debt and Equity

The Company issues complex financial instruments

which include both equity and debt features.

The Company analyzes each instrument under ASC 480, Distinguishing Liabilities

from Equity, ASC 815, Derivatives and Hedging and, ASC 470, Debt , in order to establish whether such instruments

include any embedded derivatives.

The Company issues complex financial instruments which include both equity and debt features.

The Company analyzes each instrument under ASC 480, Distinguishing Liabilities from Equity, ASC 815, Derivatives and Hedging and, ASC 470, Debt , in order to establish whether such instruments include any embedded derivatives.

The Company accounted for the Oaktree Note with detachable warrants in accordance with ASC 470, Debt .

The Company assessed the classification of its common stock purchase warrants as of the date of the transaction and determined that such instruments met the criteria for equity classification.

The note proceeds were allocated between the Oaktree Note and the warrants on a relative fair value basis.

The warrants were reported on the Consolidated Balance Sheets as a component of additional paid in capital within stockholders’ equity.

The Company recorded the related issue costs and value ascribed to the warrants as a debt discount of the Oaktree Note.

The discount was amortized utilizing the effective interest method over the term of the Oaktree Note.

The unamortized discount, if any, upon repayment of the Oaktree Note would be expensed to interest expense.

In accordance with ASC Subtopic 470-20, the Company determined the weighted average effective interest rate of the debt was approximately 15.13 % at December 31, 2020.

The Company also evaluated the Oaktree Note and warrants in accordance with the provisions of ASC 815, Derivatives and Hedging , including consideration of embedded derivatives requiring bifurcation.

Long-Lived Assets

Long-lived assets, primarily fixed assets,

are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not

be recoverable.

Long-lived assets, primarily fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable.

The Company will perform a periodic assessment of assets for impairment in the absence of such information or indicators.

Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset,

a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that

the carrying amount of an asset or group of assets is not recoverable.

For long-lived assets to be held and used, the Company would

recognize an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the

impairment loss based on the difference between the carrying amount and estimated fair value.

As of December 31, 2019 and

2018 there were no indicators of impairment.

Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable.

For long-lived assets to be held and used, the Company would recognize an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and estimated fair value.

As of December 31, 2020 and 2019 there were no indicators of impairment.

Research and Development

Research and development costs are expensed

Advance payments for goods and services that will be used in future research and development activities are expensed

when the activity has been performed or when the goods have been received rather than when the payment is made.

Upfront and milestone

payments due to third parties that perform research and development services on the Company’s behalf will be expensed as

services are rendered or when the milestone is achieved.

Research and development costs primarily

consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation,

payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to

third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants,

the cost of acquiring and manufacturing clinical trial materials, and costs associated with regulatory filings, laboratory costs

and other supplies.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

In accordance with ASC 730-10-25-1, Research

and Development , costs incurred in obtaining technology licenses are charged to research and development expense if the technology

licensed has not reached commercial feasibility and has no alternative future use.

Such licenses purchased by the Company require

substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility

and has no alternative future use.

Accordingly, the total purchase price for the licenses acquired during the period was reflected

as research and development - licenses acquired on the Consolidated Statements of Operations for the years ended December 31,

2019 and 2018.

Research and development costs are expensed as incurred.

Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Upfront and milestone payments due to third parties that perform research and development services on the Company’s behalf will be expensed as services are rendered or when the milestone is achieved.

Research and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, and costs associated with regulatory filings, laboratory costs and other supplies.

In accordance with ASC 730-10-25-1, Research and Development , costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached commercial feasibility and has no alternative future use.

Such licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternative future use.

Accordingly, the total purchase price for the licenses acquired during the period was reflected as research and development - licenses acquired on the Consolidated Statements of Operations for the years ended December 31, 2020 and 2019.

Contingencies

The Company records accruals for contingencies

and legal proceedings expected to be incurred in connection with a loss contingency when it is probable that a liability has been

incurred and the amount can be reasonably estimated.

If a loss contingency is not probable but

is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate

of the range of possible loss if determinable and material, would be disclosed.

Effective January 1, 2019, the Company

accounts for its leases under ASC 842, Leases .

Under this guidance, arrangements meeting the definition of a lease

are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right-of-use asset

and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the

Company’s incremental borrowing rate.

Lease liabilities are increased by interest and reduced by payments each period, and

the right-of-use asset is amortized over the lease term.

For operating leases, interest on the lease liability and the amortization

of the right-of-use asset result in straight-line rent expense over the lease term.

For finance leases, interest on the lease liability

and the amortization of the right-of-use asset results in front-loaded expense over the lease term.

Variable lease expenses are

recorded when incurred.

In calculating the right-of-use asset and

lease liability, the Company elects to combine lease and non-lease components.

The Company continues to account for leases in the

prior period financial statements under ASC Topic 840.

The Company records accruals for contingencies and legal proceedings expected to be incurred in connection with a loss contingency when it is probable that a liability has been incurred and the amount can be reasonably estimated.

If a loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases .

Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company's incremental borrowing rate.

Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term.

For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term.

For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term.

Variable lease expenses are recorded when incurred.

In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components.

The Company continues to account for leases in the prior period consolidated financial statements under ASC Topic 840, Leases .

Stock-Based Compensation

The Company expenses stock-based compensation

to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards and

forfeiture rates.

For stock-based compensation awards to

non-employees, prior to the adoption of ASU 2018-07 on January 1, 2019, the Company remeasured the fair value of the non-employee

awards at each reporting period prior to vesting and finally at the vesting date of the award.

Changes in the estimated fair value

of these non-employee awards were recognized as compensation expense in the period of change.

Subsequent to the adoption of ASU

2018-07, the Company recognizes non-employees compensation costs over the requisite service period based on a measurement of fair

value for each stock award at the time the award is granted.

The Company estimates the fair value of

stock option grants using the Black-Scholes option pricing model or 409A valuations, as applicable.

The assumptions used in calculating

the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application

of management’s judgment.

The Company records income taxes using

the asset and liability method.

Deferred income tax assets and liabilities are recognized for the future tax effects attributable

to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective

income tax bases, and operating loss and tax credit carryforwards.

The Company establishes a valuation allowance if management

believes it is more likely than not that the deferred tax assets will not be recovered based on an evaluation of objective verifiable

For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount

of the benefit that is greater than 50% likely of being realized.

For tax positions that are not more likely than not of being

sustained upon audit, the Company does not recognize any portion of the benefit.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeitures, which are recorded upon occurence.

For stock-based compensation awards to non-employees, prior to the adoption of ASU 2018-07 on January 1, 2019, the Company remeasured the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award.

Changes in the estimated fair value of these non-employee awards were recognized as compensation expense in the period of change.

Subsequent to the adoption of ASU 2018-07, the Company recognizes non-employees compensation costs over the requisite service period based on a measurement of fair value for each stock award at the time the award is granted.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

The Company accounts for income taxes under ASC 740, Income Taxes (“ASC 740”).

ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards.

ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition.

Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements.

The 2017 through 2019 tax years are the only periods subject to examination upon filing of appropriate tax returns.

The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position.

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense.

There were no amounts accrued for penalties or interest as of or during the years ended December 31, 2020 and 2019.

Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

Non-Controlling Interests

Non-controlling interests in consolidated

entities represent the component of equity in consolidated entities held by third parties.

Any change in ownership of a subsidiary

while the controlling financial interest is retained is accounted for as an equity transaction between the controlling and non-controlling

Non-controlling interests in consolidated entities represent the component of equity in consolidated entities held by third parties.

Any change in ownership of a subsidiary while the controlling financial interest is retained is accounted for as an equity transaction between the controlling and non-controlling interests.

Comprehensive Loss

The Company’s comprehensive loss

is equal to its net loss for all periods presented.

Reclassifications

Certain prior period amounts may have been

reclassified to conform to the current year presentation.

The Company’s comprehensive loss is equal to its net loss for all periods presented.

Recently Adopted Accounting Pronouncements

In June 2018, the FASB issued ASU

2018-07, “Improvements to Nonemployee Share-Based Payment Accounting”

, which simplifies the accounting for share-based

payments granted to nonemployees for goods and services.

Under the ASU, most of the guidance on such payments to nonemployees would

be aligned with the requirements for share-based payments granted to employees.

The changes take effect for public companies for

fiscal years starting after December 15, 2018, including interim periods within that fiscal year.

For all other entities,

the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning

after December 15, 2020.

Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606.

Company adopted ASU No.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Early adoption is permitted upon issuance of the update.

The Company adopted ASU No.

2018-13 as of January 1, 2020.

The adoption of this update did not have a material impact on

the Company’s financial statements.

In July 2017, the FASB issued ASU

2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic

Accounting for Certain Financial Instruments with Down Round Features;

Replacement of the Indefinite Deferral for

Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests

with a Scope Exception .

Part I of this update addresses the complexity of accounting for certain financial instruments

with down round features.

Down round features are features of certain equity-linked instruments (or embedded features) that result

in the strike price being reduced on the basis of the pricing of future equity offerings.

Current accounting guidance creates cost

and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features

that require fair value measurement of the entire instrument or conversion option.

Part II of this update addresses the difficulty

of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB

Accounting Standards Codification.

This pending content is the result of the indefinite deferral of accounting requirements about

mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests.

The amendments in Part II of this update do not have an accounting effect.

This ASU is effective for fiscal years, and interim

periods within those years, beginning after December 15, 2018.

The adoption of this ASU on January 1, 2019, did not have

a material impact on the Company’s financial statements.

In February 2016, the FASB issued

ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among

other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating

leases under previous GAAP.

For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018

(including interim periods within those periods) using a modified retrospective approach and early adoption is permitted.

In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing

before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease,

(b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows

entities to carryforward accounting conclusions under previous U.S.

In July 2018, the FASB issued ASU 2018-11,

Leases (Topic 842):

Targeted Improvements , which provides entities an optional transition method to apply the guidance under

Topic 842 as of the adoption date, rather than as of the earliest period presented.

The Company adopted Topic 842 on January 1,

2019, using the optional transition method by recording a right of use asset of $23.0 million, a lease liability of $26.8 million

and eliminated deferred rent of approximately $3.8 million;

there was no effect on opening retained earnings, and the Company continues

to account for leases in the prior period financial statements under ASC Topic 840.

In adopting the new standard, the Company elected

to apply the practical expedients regarding the identification of leases, lease classification, indirect costs, and the combination

of lease and non-lease components.

the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards

Update (“ASU”) 2017-09, Compensation-Stock Compensation (Topic 718):

Scope of Modification

Accounting , which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification.

Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification

of the award (as equity or liability) changes as a result of the change in terms or conditions.

The new standard was effective

on January 1, 2018;

however, early adoption is permitted.

The adoption of this update did not have a material impact on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting” , which simplifies the accounting for share-based payments granted to nonemployees for goods and services.

Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees.

The changes take effect for public companies for fiscal years starting after December 15, 2018, including interim periods within that fiscal year.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606.

The Company adopted ASU No.

2018-07 as of January 1, 2019.

The adoption of this update did not impact the Company’s financial statements.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

In January 2017,

the FASB issued an ASU 2017-01, “

Business Combinations

(Topic 805) Clarifying the Definition of a Business ”.

The amendments in this ASU clarify the definition

of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted

for as acquisitions (or disposals) of assets or businesses.

The definition of a business affects many areas of accounting

including acquisitions, disposals, goodwill, and consolidation.

The guidance is effective for annual periods beginning after December 15,

2017, including interim periods within those periods.

The Company adopted ASU 2017-01 on January 1, 2018.

of this update did not impact the Company’s financial statements.

The adoption of this update did not have a material impact on the Company’s consolidated financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815):

Accounting for Certain Financial Instruments with Down Round Features;

Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception .

Part I of this update addresses the complexity of accounting for certain financial instruments with down round features.

Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings.

Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option.

Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification.

This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests.

The amendments in Part II of this update do not have an accounting effect.

This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.

The adoption of this ASU on January 1, 2019, did not have a material impact on the Company's consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP.

For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted.

In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous U.S.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements , which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented.

The Company adopted Topic 842 on January 1, 2019, using the optional transition method by recording a right of use asset of $ 23.0 million, a lease liability of $ 26.8 million and eliminated deferred rent of approximately $ 3.8 million;

there was no effect on opening retained earnings, and the Company continues to account for leases in the prior period financial statements under ASC Topic 840.

In adopting the new standard, the Company elected to apply the practical expedients regarding the identification of leases, lease classification, indirect costs, and the combination of lease and non-lease components.

Recent Accounting Pronouncements

June 2016, the FASB issued ASU 2016-13, “Financial Instruments –

Credit Losses”

The ASU sets forth

a “current expected credit loss”

(CECL) model which requires the Company to measure all expected credit losses for

financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets

measured at amortized cost and applies to some off-balance sheet credit exposures.

This ASU is effective for fiscal years beginning

after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.

the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023.

Company is currently assessing the impact of the adoption of this ASU on its financial statements .

In August 2018, the FASB issued ASU

2018-13, Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value

Measurement , which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with

the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements.

This guidance is effective

for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Early adoption is permitted

upon issuance of the update.

The Company does not expect the adoption of this guidance to have a material impact on its financial

December 2019, the FASB issued ASU No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income

Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes.

2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance

to improve consistent application.

This guidance is effective for fiscal years, and interim periods within those fiscal years,

beginning after December 15, 2020, with early adoption permitted.

The Company is currently evaluating the impact of this standard

on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” .

The ASU sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures.

This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.

Recently, the FASB issued the final ASU to delay adoption for smaller reporting companies to calendar year 2023.

The Company is currently assessing the impact of the adoption of this ASU on its consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

The Company adopted the new guidance in the first quarter of 2021 and the adoption of this guidance did not to have a material impact on the financial statements.

Discontinued Operations

As of December 31, 2018, the Company

recorded its investment in National at fair value of $13.1 million or $3.25 per share.

This holding is reported on the Company’s

Consolidated Balance Sheets as current assets held for sale on December 31, 2018.

Pursuant to the terms of the NHC agreement

the Company also recorded a net gain of $2.3 million related to the transactions which is included in discontinued operations in

the consolidated statement of operations for the twelve months ended December 31, 2018.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The following is a summary of revenue and

expenses of National for the year ended December 31, 2018:

($ in thousands)

Operating expenses

Commissions, compensation and fees

Clearing fees

Communications

Licenses and registration

Professional fees

Depreciation and amortization

Other administrative expenses

Total operating expenses

Gain from operations

Other income (expense)

Change in fair value of warrants

Total other (expense) income

Loss from discontinued operations before income taxes

Income tax expense

Loss from discontinued operations

Gain from disposal of National

Total loss from discontinued operations, net of tax

In connection with this sale, the Company

classified the assets and liabilities related to NHLD, included on its consolidated balance sheet as of December 31, 2018,

as held for sale as presented in the table below:

($ in thousands)

Current assets

Current assets held for sale

Total current assets held for sale

Total assets held for sale

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The table below depicts the cash flows

from the transaction for the year ended December 31, 2018:

On November 14, 2018, the Company announced that it had reached an agreement with NHC Holdings, LLC (“NHC”) to sell all of its shares of National Holdings Corporation, a diversified independent brokerage company (together with its subsidiaries, herein referred to as “NHLD” or “National”) for total consideration of $ 22.9 million.

Pursuant to the terms of the agreement with NHC the sale of the shares was subject to two closings.

The first closing occurred on November 14, 2018 in which the Company sold approximately 3.0 million of its shares in NHLD and received $ 9.8 million in proceeds.

The second closing occurred on February 11, 2019 upon the receipt of FINRA approval of the sale in which the Company received $ 13.1 million in proceeds for the sale of its remaining 4.0 million shares of NHLD to NHC and two other minority holders.

At December 31, 2019, the Company had no ownership interest in National.

The table below depicts the cash flows from the transaction for the year ended December 31, 2019:

For the Year Ended

($ in thousands)

Operating activities

Effect of elimination entry with discontinued operations presentation

Total cash used in discontinued operating activities

Investing activities

3 unchanged sentences

Agreement with Alexion

In January 2019, Caelum, a subsidiary

of the Company, entered into a Development, Option and Stock Purchase Agreement (the “

DOSPA ”)

and related documents by and among Caelum, Alexion Therapeutics, Inc.

Alexion ”),

the Company and Caelum security holders parties thereto (including Fortress, the “

Sellers ”).

In January 2019, Caelum, a subsidiary of the Company at that time, entered into a Development, Option and Stock Purchase Agreement (the "DOSPA") and related documents by and among Caelum, Alexion Therapeutics, Inc.

("Alexion"), the Company and Caelum security holders parties thereto (including Fortress, the "Sellers").

Under the terms of the agreement, Alexion purchased a 19.9 % minority equity interest in Caelum for $ 30 million.

Additionally, Alexion

has agreed to make potential payments to Caelum upon the achievement of certain developmental milestones, in exchange for which

Alexion obtained a contingent exclusive option to acquire the remaining equity in Caelum.

The agreement also provides

for potential additional payments, in the event Alexion exercises the purchase option, for up to $500 million, which

includes an upfront option exercise payment and potential regulatory and commercial milestone payments.

The Company deconsolidated its holdings

in Caelum immediately prior to the execution of the DOSPA.

Following the DOSPA execution,

the Company owns approximately 40% of the issued and outstanding capital stock of Caelum.

The following table provides a

summary of the assets and liabilities of Caelum impacted by the deconsolidation:

Additionally, Alexion has agreed to make potential payments to Caelum upon the achievement of certain developmental milestones, in exchange for which Alexion obtained a contingent exclusive option to acquire the remaining equity in Caelum.

The agreement also provides for potential additional payments, in the event Alexion exercises the purchase option, for up to $ 500 million, which includes an upfront option exercise payment and potential regulatory and commercial milestone payments.

Alexion’s 19.9 % ownership does not participate in the potential additional payments.

The Company deconsolidated its holdings in Caelum immediately prior to the execution of the DOSPA.

Following the DOSPA execution, the Company owns approximately 40 % of the issued and outstanding capital stock of Caelum.

The following table provides a summary of the assets and liabilities of Caelum impacted by the deconsolidation:

($ in thousands)

11 unchanged sentences

Net liability impacted by deconsolidation

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

In connection with this transaction the

Company recorded a gain resulting from the deconsolidation of Caelum on its consolidated financial statements for the year ended

December 31, 2019:

In connection with this transaction the Company recorded a gain resulting from the deconsolidation of Caelum on its consolidated financial statements for the year ended December 31, 2019:

deconsolidation of

($ in thousands)

deconsolidation

Fair value of Caelum

3 unchanged sentences

Gain on deconsolidation of Caelum

In December 2019, following FDA feedback which resulted in the redesign and expansion of Caelum’s planned clinical development program for CAEL-101, Caelum entered into an Amended and Restated DOSPA (“A&R DOSPA”), which amended the terms of the existing agreement with Alexion.

The amendment modified the terms of Alexion’s option to acquire the remaining equity in Caelum based on data from the expanded Phase II/III trials.

The amendment also modified the development-related milestone events associated with the initial $ 30.0 million in contingent payments, provided for an additional $ 20.0 million in upfront funding, as well as funding of $ 60.0 million in exchange for an additional equity interest in Caelum at fair value upon achievement of a specific development-related milestone event.

On December 12, 2020, AstraZeneca (“AZ”) announced its intention to acquire Alexion, with the acquisition expected to close by the third quarter of 2021, as the acquisition is subject to approval by both AZ and Alexion shareholders, as well as certain regulatory approvals, share listing approvals, and other customary closing conditions.

The acquisition of Alexion by AZ triggers the Change of Control clause in the A&R DOSPA, such that Alexion’s purchase option expires on the date that is six months after the closing of any Change of Control.

Agreement with InvaGen

On November 12, 2018, the Company’s

partner company Avenue entered into a Stock Purchase and Merger Agreement (“SPMA”) with InvaGen Pharmaceuticals Inc.

(“InvaGen”) and Madison Pharmaceuticals Inc., a newly formed, wholly-owned subsidiary of InvaGen.

Pursuant to the SPMA,

and following approval by Avenue’s stockholders on February 8, 2019, InvaGen purchased a number of shares of Avenue

common stock representing 33.3% of Avenue’s fully diluted capital stock for net proceeds to Avenue of $31.5 million (after

deducting fees and other offering-related costs).

Upon the achievement of certain closing

conditions (including most notably U.S.

Food and Drug Administration approval for IV Tramadol, Avenue’s product candidate), InvaGen

will be obligated to acquire Avenue via reverse subsidiary merger (the “Merger Transaction”).

Under the Merger Transaction, InvaGen

will pay $180 million (subject to certain potential reductions) to the holders of Avenue’s capital stock (other than InvaGen

Subject to the terms and conditions described

in the SPMA, InvaGen may also provide interim financing to Avenue in an amount of up to $7.0 million during the time period

between February 8, 2019 and the Merger Transaction.

Any amounts drawn on the interim financing will be deducted from the

aggregate consideration payable to Company stockholders by virtue of the Merger Transaction.

Prior to the closing of the Merger Transaction,

Avenue will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with a trust company as rights agent,

pursuant to which holders of common shares of Avenue, other than InvaGen (each, a “Holder”), will be entitled to receive

on Contingent Value Right (“CVR”) for each share held immediately prior to the Merger Transaction.

Each CVR represents the right of its holder

to receive a contingent cash payment pursuant to the CVR Agreement upon the achievement of certain milestones.

If, during the period

commencing on the day following the closing of the Merger Transaction until December 31, 2028, IV Tramadol generates

at least $325 million or more in Net Sales (as defined in the CVR Agreement) in a calendar year, each Holder shall be entitled

to receive their pro rata share of (i) if the product generated less than $400 million in Net Sales during such calendar year,

10% of Gross Profit (as defined in the CVR Agreement), (ii) if the product generated between $400 million and $500 million

in Net Sales during such calendar year, 12.5% of Gross Profit, or (iii) if the product generated more than $500 million in

Net Sales during such calendar year, 15% of Gross Profit.

Additionally, at any time beginning on January 1, 2029 that IV Tramadol

has generated at least $1.5 billion in aggregate Net Sales, then with respect to each calendar year in which IV Tramadol generates

$100 million or more in Net Sales, each Holder shall be entitled to receive their pro rata share of an amount equal to 20% of the

Gross Profit generated by IV Tramadol.

These additional payments will terminate on the earlier of December 31, 2036 and the

date (which may be extended by up to 6 months) that any person has received approval from the FDA for an Abbreviated New Drug Application

or an FDA AP-rated 505(b)(2) NDA using IV Tramadol.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

Property and Equipment

Fortress’

On November 12, 2018, Avenue entered into a Stock Purchase and Merger Agreement (the “Avenue SPMA”) with InvaGen Pharmaceuticals Inc.

(“InvaGen”), and Madison Pharmaceuticals Inc.

(the “Merger Sub”), under which Avenue would be sold to InvaGen in a two-stage transaction.

The first stage of the strategic transaction between InvaGen and Avenue closed in February 2019.

InvaGen acquired approximately 5.8 million shares of Avenue’s common stock at $ 6.00 per share for total gross consideration of $ 35.0 million, representing a 33.3 % stake in Avenue’s capital stock on a fully diluted basis.

At the second stage closing, InvaGen would acquire the remaining shares of Avenue’s common stock, pursuant to a reverse triangular merger with Avenue remaining as the surviving entity.

The second stage closing is subject to the satisfaction of certain closing conditions, including conditions pertaining to the FDA approval, labeling, scheduling and the absence of any Risk Evaluation and Mitigation Strategy or similar restrictions in effect with respect to IV Tramadol, as well as the expiration of any waiting period applicable to the acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”).

In October 2020, InvaGen communicated to Avenue that it believes a Material Adverse Effect (as defined in the Avenue SPMA) has occurred due to the impact of the COVID-19 pandemic on potential commercialization and projected sales of IV Tramadol, which means it is possible InvaGen could attempt to avoid its obligation to consummate the second stage closing under the Avenue SPMA, terminate the Avenue SPMA, and/or pursue monetary claims against Avenue and/or Fortress.

Avenue disagrees with InvaGen’s assertion that a Material Adverse Effect has occurred and has advised InvaGen of this position.

In February 2020, the U.S.

Food and Drug Administration (“FDA”) accepted the submission of Avenue’s’ New Drug Application (“NDA”) for IV Tramadol for review and assigned a Prescription Drug User Fee Act (“PDUFA”) date of October 10, 2020.

In October 2020, Avenue announced that it had received a Complete Response Letter (“CRL”) from the FDA regarding Avenue’s NDA for IV Tramadol.

The FDA held a Type A meeting with Avenue in November 2020 to discuss the issues outlined in the CRL.

On February 12, 2021 Avenue resubmitted its NDA to the FDA for IV Tramadol.

The NDA resubmission followed the receipt of the official minutes from Avenue’s Type A meeting with the FDA.

The NDA resubmission included revised language relating to the proposed product label and a report relating to terminal sterilization validation.

On February 26, 2021, Avenue received an acknowledgement letter from the FDA that Avenue’s resubmission of its NDA is a complete, class 1 response to the CRL, and a PDUFA goal date was set for April 12, 2021.

In connection with the resubmission of Avenue’s NDA, InvaGen communicated to Avenue that it believes the proposed label for IV Tramadol under certain circumstances would constitute a Material Adverse Effect on the purported basis that the proposed label for IV Tramadol would make the product commercially unviable, and in addition that the indiciation that the FDA approves may fail to satisfy a condition precedent to InvaGen’s obligation to consummate the second stage closing of the Avenue SPMA.

Avenue has notified InvaGen that it disagrees with InvaGen’s assertions.

Nevertheless, InvaGen may seek to avoid its obligation to consummate the second stage closing under the Avenue SPMA, terminate the Avenue SPMA, and/or pursue monetary claims against Avenue and/or Fortress.

Over the past several months, Avenue has communicated with InvaGen relating to InvaGen’s assertions.

Nevertheless, InvaGen has communicated to Avenue its desire to consider all options on the proposed merger, including the option to not consummate the merger.

This indicates that InvaGen may attempt to avoid its obligations under the Avenue SPMA to consummate the merger, terminate the Avenue SPMA, and/or pursue monetary claims against Avenue and/or Fortress.

As a result, the possible timing and likelihood of the completion of the merger are uncertain, and, accordingly, there can be no assurance that such transaction will be completed on the expected terms, anticipated schedule, or at all.

During the pendency of any dispute regarding these matters, Avenue may be, and so long as the Avenue SPMA remains in place Avenue will be, prohibited from engaging in a change-of-control transaction, selling its rights to IV Tramadol or effecting an equity or debt financing, in each case without the prior written consent of InvaGen.

Subject to the terms and conditions described in the Avenue SPMA, InvaGen may also provide interim financing to Avenue in an amount of up to $ 7.0 million during the time period between February 8, 2019 and the Merger Transaction.

Any amounts drawn on the interim financing will be deducted from the aggregate consideration payable to Company stockholders by virtue of the Merger Transaction.

There have been no amounts drawn upon this interim financing as of December 31, 2020.

Prior to the closing of the Merger Transaction, Avenue will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with a trust company as rights agent, pursuant to which holders of common shares of Avenue, other than InvaGen (each, a “Holder”), will be entitled to receive on Contingent Value Right (“CVR”) for each share held immediately prior to the Merger Transaction.

Each CVR represents the right of its holder to receive a contingent cash payment pursuant to the CVR Agreement upon the achievement of certain milestones.

If, during the period commencing on the day following the closing of the Merger Transaction until December 31, 2028, IV Tramadol generates at least $ 325 million or more in Net Sales (as defined in the CVR Agreement) in a calendar year, each Holder shall be entitled to receive their pro rata share of (i) if the product generated less than $ 400 million in Net Sales during such calendar year, 10 % of Gross Profit (as defined in the CVR Agreement), (ii) if the product generated between $ 400 million and $ 500 million in Net Sales during such calendar year, 12.5 % of Gross Profit, or (iii) if the product generated more than $ 500 million in Net Sales during such calendar year, 15 % of Gross Profit.

Additionally, at any time beginning on January 1, 2029 that IV Tramadol has generated at least $ 1.5 billion in aggregate Net Sales, then with respect to each calendar year in which IV Tramadol generates $ 100 million or more in Net Sales, each Holder shall be entitled to receive their pro rata share of an amount equal to 20 % of the Gross Profit generated by IV Tramadol.

These additional payments will terminate on the earlier of December 31, 2036 and the date (which may be extended by up to 6 months) that any person has received approval from the FDA for an Abbreviated New Drug Application or an FDA AP-rated 505(b)(2) NDA using IV Tramadol.

Property and Equipment

consisted of the following:

Fortress’ property and equipment consisted of the following:

($ in thousands)

Useful Life (Years)

Computer equipment

6 unchanged sentences

Property and equipment, net

Relates to the Mustang cell processing

Depreciation expenses of Fortress’

property and equipment for the years ended December 31, 2019 and 2018 was $1.9 million and $1.4 million, respectively, and

was recorded in research and development, manufacturing and general and administrative expense in the Consolidated Statements of

Relates to the Mustang cell processing facility.

Depreciation expenses of Fortress’ property and equipment for the years ended December 31, 2020 and 2019 was $ 2.3 million and $ 1.9 million, respectively, and was recorded in research and development, and selling, general and administrative expense in the Consolidated Statements of Operations.

Fair Value Measurements

Certain of the Company’s financial

instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due

to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.

Fair Value of Caelum

The Company valued its investment in Caelum

in accordance with ASC Topic 820, Fair Value Measurements and Disclosures , and estimated the fair value to be $11.1 million

based on a per share value of $1.543.

The following inputs were utilized to derive the value:

risk free rate of return of 1.6%,

volatility of 70% and a discount for lack of marketability of 28.7%.

In connection with the DOSPA Caelum’s

convertible notes automatically converted into common shares of Caelum and the warrant liability payable to the placement agent

in connection with the placement of the convertible notes was also issued (see Note 10).

The Company values its investment in Caelum in accordance with ASC Topic 820, Fair Value Measurements and Disclosures , and as of December 31, 2020, estimated the fair value to be $ 17.6 million based on a per share value of $ 2.43 .

As of December 31, 2020, the following inputs were utilized to derive the value:

risk free rate of return of 0.36 %, volatility of 70 % and a discount for lack of marketability of 21.0 % to 31.0 % based on maturity dates of various scenerios.

Further, the Company considered the impact of the acquisition of Alexion by AZ, which if consummated, will shorten the timeframe in which the option will be exercised in accordance with the A&R DOSPA.

As of December 31, 2019, the estimated fair value of the Company’s investment in Caelum was $ 11.1 million based on a per share value of $ 1.54 .

As of December 31, 2019, the following inputs were utilized to derive the value:

risk free rate of return of 1.6 %, volatility of 70 % and a discount for lack of marketability of 28.7 %.

Caelum Warrant Liability

The fair value of Caelum's warrant liability,

which was issued in connection with Caelum’s convertible note, was written up to the full value of the liability at December 31,

2018 due to the conversion of the notes in January 2019 (see Note 4).

The fair value at December 31, 2018 was measured

using a Monte Carlo simulation valuation methodology.

A summary of the weighted average (in aggregate) significant unobservable

inputs (Level 3 inputs) used in measuring Caelum’s warrant liabilities that are categorized within Level 3 of the fair value

hierarchy as of December 31, 2018 are as follows:

December 31, 2018

The fair value of Caelum's warrant liability, which was issued in connection with Caelum’s convertible note, was written up to the full value of the liability prior to the conversion of the notes in January 2019 (see Note 10).

The fair value was measured using a Monte Carlo simulation valuation methodology.

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of January 2019 was as follows:

Risk-free interest rate

2.905% –

2.905 % - 2.909

Expected dividend yield

1 unchanged sentence

Expected volatility

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

($ in thousands)

In connection with the DOSPA Caelum's convertible notes automatically converted into common shares of Caelum and the warrant liability payable to the placement agent in connection with the placement of the convertible notes was also issued (see Note 10).

Fair Value of

Warrant Liability

Ending balance at January 1, 2018

Change in fair value of derivative liability

Ending balance at December 31, 2018

($ in thousands)

Beginning balance at January 1, 2019

Issuance of warrant due to conversion of note

1 unchanged sentence

Caelum Convertible Notes

Caelum’s convertible debt was measured

at fair value using the Monte Carlo simulation valuation methodology.

A summary of the weighted average (in aggregate) significant

unobservable inputs (Level 3 inputs) used in measuring Caelum’s convertible debt that is categorized within Level 3.

December 31, 2018, conversion of the Caelum Convertible Notes was probable and as such the fair value approximated cost.

Caelum Convertible Notes were converted during 2019.

For the year ended December 31, 2018 the following inputs were utilized

to derive the notes’

December 31, 2018

Caelum’s convertible debt was measured at fair value using the Monte Carlo simulation valuation methodology.

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s convertible debt that is categorized within Level 3.

As of December 31, 2018, conversion of the Caelum Convertible Notes was probable and as such the fair value approximated cost.

The Caelum Convertible Notes were converted during 2019.

As of January 2019 the following inputs were utilized to derive the notes’ fair value:

Risk-free interest rate

2 unchanged sentences

Expected volatility

($ in thousands)

Notes, at fair

Ending balance at December 31, 2017

($ in thousands)

Beginning balance at January 1, 2019

Change in fair value of convertible notes

Ending balance at December 31, 2019

Conversion of the convertible notes

Ending balance at December 31, 2019

Cyprium Warrant Liability

The fair value of the Cyprium Contingently

Issuable Warrants in connection with the 2018 Venture Debt was determined by applying management’s estimate of the probability

of issuance of the Contingently Issuable Warrants together with an option-pricing model, with the following key assumptions:

The fair value of the Cyprium Contingently Issuable Warrants in connection with the 2018 Venture Debt was determined by applying management’s estimate of the probability of issuance of the Contingently Issuable Warrants together with an option-pricing model, with the following key assumptions:

Risk-free interest rate

3 unchanged sentences

Probability of issuance of the warrant

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

Issuable Warrant

($ in thousands)

Cyprium Contingently

Issuable Warrant Liability

Ending balance at January 1, 2019

Issuance of warrant due to probability of financing

Beginning balance at January 1, 2019

Change in fair value

Ending balance at December 31, 2019

The following tables classify into the

fair value hierarchy of Fortress’

financial instruments, measured at fair value on a recurring basis on the Consolidated

Balance Sheets as of December 31, 2019 and 2018:

Change in fair value

Reclass partner company's warrants from liability to equity

Ending balance at December 31, 2020

The following tables classify into the fair value hierarchy of Fortress’ financial instruments, measured at fair value on a recurring basis on the Consolidated Balance Sheets as of December 31, 2020 and 2019:

Fair Value Measurement as of December 31, 2020

3 unchanged sentences

($ in thousands)

Warrant liabilities

Fair value of investment in Caelum

Fair Value Measurement as of December 31, 2019

1 unchanged sentence

Warrant liabilities

Caelum Convertible Note, at fair value

The table below provides a roll forward

of the changes in fair value of Level 3 financial instruments for the years ended December 31, 2019 and 2018:

The table below provides a roll forward of the changes in fair value of Level 3 financial instruments for the years ended December 31, 2020 and 2019:

Investment in

($ in thousands)

Balance at December 31, 2019

Conversion of convertible notes

Issuance of warrant

Contingent warrant liability

Fair value of investment

Change in fair value

Reclass partner company's warrants from liability to equity

Change in fair value of investments

Balance at December 31, 2020

Convertible Notes at fair value

Caelum Convertible

($ in thousands)

Balance at December 31, 2018

Payment of convertible note

Disposal of National

Change in fair value of investments

Change in fair value of convertible notes

Change in fair value of derivative liabilities

Conversion of convertible notes

Issuance of warrant

Fair value of investment

Change in fair value of derivative liability

Balance at December 31, 2019

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

Licenses Acquired

In accordance with ASC 730-10-25-1, Research

and Development , costs incurred in obtaining technology licenses are charged to research and development expense if the technology

licensed has not reached commercial feasibility and has no alternative future use.

The licenses purchased by the Company require

substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility

and has no alternate use.

As such, for the years ended December 31, 2019 and 2018, the total purchase price of licenses acquired,

totaling approximately $6.1 million and $4.1 million, respectively, was classified as research and development-licenses acquired

in the Consolidated Statements of Operations.

For the years ended December 31, 2019 and 2018, the Company’s

research and development-licenses acquired are comprised of the following:

For the Years Ended

The licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternate use.

As such, for the years ended December 31, 2020 and 2019, the total purchase price of licenses acquired, totaling approximately $ 2.8 million and $ 6.1 million, respectively, was classified as research and development-licenses acquired in the Consolidated Statements of Operations.

For the years ended December 31, 2020 and 2019, the Company’s research and development-licenses acquired are comprised of the following:

For the Year Ended

($ in thousands)

Partner companies:

License Agreement with Revogenex Ireland

In 2015, the Company purchased an exclusive

license to IV Tramadol for the U.S.

market from Revogenex, a privately held company in Dublin, Ireland, for an upfront fee

of $3.0 million.

License Agreement with University of Massachusetts

On December 17, 2020, Aevitas entered into an exclusive license agreement (the “UMass license”) with the University of Massachusetts to obtain an exclusive license to the University’s intellectual property rights which relate to gene therapy for Factor H deficiency.

For the year ended December 31, 2020, Aevitas recorded $ 0.1 million in connection with the execution of the UMass License.

Development milestone payments totaling approximately $ 1.0 million in the aggregate are due upon achievement of each milestone.

Four net sales milestones totaling $ 4.0 million are due on licensed products as are high single digit royalties due on aggregate, annual, worldwide net sales of licensed products.

License Agreement with Revogenex Ireland Ltd

In 2015, the Company purchased an exclusive license to IV Tramadol for the U.S.

market from Revogenex, a privately held company in Dublin, Ireland, for an upfront fee of $ 3.0 million.

The Company then assigned all of its right, title and interest to the exclusive license to Avenue.

a centrally acting synthetic opioid analgesic for moderate to moderately severe pain and is available as immediate release or extended-release

tablets in the United States.

Under the terms of the license agreement assumed by Avenue, Revogenex is eligible to receive additional

milestone payments upon the achievement of certain development milestones.

As of December 31, 2019, one remaining development

milestone of $3.0 million for approval of IV Tramadol by the FDA has not been achieved.

In addition, royalty payments ranging from

high single digit to low double digits royalty payments are due on net sales of the approved product.

For the year ended December 31, 2019

Avenue recorded $1.0 million in connection with the filing of its NDA for IV Tramadol to treat moderate to moderately severe postoperative

Under the terms of the license agreement assumed by Avenue, Revogenex is eligible to receive additional milestone payments upon the achievement of certain development milestones.

As of December 31, 2020, one remaining development milestone of $ 3.0 million for approval of IV Tramadol by the FDA has not been achieved.

In addition, royalty payments ranging from high single digit to low double digits are due on net sales of the approved product.

No expense was recorded in connection with this agreement in 2020.

For the year ended December 31, 2019, Avenue recorded $ 1.0 million in connection with the filing of its NDA for IV Tramadol.

AstraZeneca AB License Agreement

On December 17, 2019, Baergic entered

into two license agreements:

(i) a License Agreement (the “AZ License”) with AstraZeneca AB (“AZ”)

to acquire an exclusive license to patent and related intellectual property rights pertaining to their proprietary compound Gamma-aminobutyric

acid receptor A alpha 2 & 3 (GABAA α2,3) positive allosteric modulators (collectively, the “AZ IP”);

and (ii) an Exclusive License Agreement (the “Cincinnati License”) with Cincinnati Children’s Hospital Medical

Center (“Cincinnati”) to acquire patent and related intellectual property rights pertaining to a GABA inhibitor program

for neurological disorders (the “Cincinnati IP”).

Pursuant to the terms of the AZ License,

Baergic paid an upfront fee of $3.0 million, and issued 2,492,192 common shares equal to 19.95% of Baergic to AZ as consideration

for AZ License.

In connection with the issuance of the shares, Baergic also provided AZ with anti-dilution protection up to $75

Baergic valued the stock grant to AZ utilizing a discounted cash flow model to determine the weighted market value of

invested capital, discounted by a lack of marketability of 44.6%, weighted average cost of capital of 20.5%, and net of debt utilized,

resulting in a value of $0.029 per share or $0.1 million on December 31, 2019.

Development milestone payments totaling

approximately $75 million in the aggregate are due upon achievement of each milestone.

Three net sales milestones totaling $130

million are due on licensed products as are high single digit royalties due on aggregate, annual, worldwide net sales of licensed

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

Cincinnati Children’s License

Pursuant to the terms of the Cincinnati

License, Baergic agreed to pay an upfront fee of $0.2 million as well as $30,000 for reimbursement of past patent expenses and

issued 624,922 common shares equal to 5% of Baergic, to Cincinnati as consideration for the License.

In connection with the issuance

of the shares, Baergic also provided Cincinnati with anti-dilution protection up to $15M.

Baergic valued the stock grant to Cincinnati

utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability

of 44.6%, weighted average cost of capital of 20.5%, and net of debt utilized, resulting in a value of $0.029 per share or $0.1

million on December 31, 2019.

Two development milestone payments of approximately

$6.5 million are payable upon milestone achievements.

Four net sales milestones totaling $21 million are due on licensed products

as are low single digit royalties due on aggregate, annual, worldwide net sales of licensed products.

License Agreement with Columbia University

In January 2017, Caelum entered into

an exclusive license agreement with Columbia University (“Columbia”) to secure worldwide license rights to CAEL-101,

a chimeric fibril-reactive monoclonal antibody (mAb) being evaluated in a Phase 1a/1b study for the treatment of amyloid light

chain (“AL”) amyloidosis.

Under the terms of the agreement, Columbia is eligible to receive additional milestone payments

of up to $5.5 million upon the achievement of certain development milestones, in addition to royalty payments for sales of the

CAEL-101 is a novel antibody being developed for patients with AL Amyloidosis, a rare systemic disorder caused by an abnormality

of plasma cells in the bone marrow.

For the year ended December 31, 2018,

Caelum recorded expense of $0.3 million in connection with its license for CAEL-101 from Columbia University.

In January 2019,

in connection with the Alexion DOSPA the Company ceased to consolidate Caelum (see Note 4).

University of Texas Health Science Center

at Houston License Agreement

In October 2016, Cellvation entered

into a license agreement with the University of Texas Health Science Center at Houston (“University of Texas”) for

the treatment of traumatic brain injury using Autologous Bone Marrow Mononuclear Cells (the “Initial TBI License”)

for an upfront cash fee of approximately $0.3 million and the issuance of 500,000 common shares representing 5% of the outstanding

shares of Cellvation.

An additional 9 development milestones approximating $6.2 million are due in connection with the development

of adult indications, and an additional 8 development milestones approximating $6.0 million are due in connection with the development

of pediatric indications, as well as single digit royalty net sales and royalty milestones are due for the term of the contract.

On December 17, 2019, Baergic entered into two license agreements:

(i) a License Agreement (the “AZ License”) with AstraZeneca AB (“AZ”) to acquire an exclusive license to patent and related intellectual property rights pertaining to their proprietary compound Gamma-aminobutyric acid receptor A alpha 2 & 3 (GABAA α2,3) positive allosteric modulators (collectively, the “AZ IP”);

and (ii) an Exclusive License Agreement (the “Cincinnati License”) with Cincinnati Children’s Hospital Medical Center (“Cincinnati”) to acquire patent and related intellectual property rights pertaining to a GABA inhibitor program for neurological disorders (the “Cincinnati IP”).

Pursuant to the terms of the AZ License, Baergic paid an upfront fee of $ 3.0 million and issued 2,492,192 common shares equal to 19.95 % of Baergic to AZ as consideration for AZ License.

In connection with the issuance of the shares, Baergic also provided AZ with anti-dilution protection up to $ 75 million.

Baergic valued the stock grant to AZ utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 44.6 %, weighted average cost of capital of 20.5 %, and net of debt utilized, resulting in a value of $ 0.029 per share or $ 0.1 million on December 31, 2019.

Development milestone payments totaling approximately $ 75 million in the aggregate are due upon achievement of each milestone.

Three net sales milestones totaling $ 130 million are due on licensed products as are high single digit royalties due on aggregate, annual, worldwide net sales of licensed products.

For the years ended December 31, 2020 and 2019, Baergic recorded expense of approximately $ 9,000 and nil , respectively, in connection with its licenses with AZ.

Cincinnati Children’s License Agreement

Pursuant to the terms of the Cincinnati License, Baergic paid an upfront fee of $ 0.2 million as well as $ 30,000 for reimbursement of past patent expenses and issued 624,922 common shares equal to 5 % of Baergic to Cincinnati as consideration for the license.

In connection with the issuance of the shares, Baergic also provided Cincinnati with anti-dilution protection up to $ 15.0 million.

Baergic valued the stock grant to Cincinnati utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 44.6 %, weighted average cost of capital of 20.5 %, and net of debt utilized, resulting in a value of $ 0.029 per share or $ 0.1 million on December 31, 2019.

Two development milestone payments of approximately $ 6.5 million are payable upon milestone achievements.

Four net sales milestones totaling $ 21.0 million are due on licensed products as are low single digit royalties due on aggregate, annual, worldwide net sales of licensed products.

For the years ended December 31, 2020 and 2019, Baergic recorded expense of approximately $ 2,000 and nil , respectively, in connection with its Cincinnati License.

University of Texas Health Science Center at Houston License Agreement

In October 2016, Cellvation entered into a license agreement with the University of Texas Health Science Center at Houston (“University of Texas”) for the treatment of traumatic brain injury using Autologous Bone Marrow Mononuclear Cells (the “Initial TBI License”) for an upfront cash fee of approximately $ 0.3 million and the issuance of 500,000 common shares representing 5 % of the outstanding shares of Cellvation.

An additional 9 development milestones approximating $ 6.2 million are due in connection with the development of adult indications, and an additional 8 development milestones approximating $ 6.0 million are due in connection with the development of pediatric indications, as well as single digit royalty net sales and royalty milestones are due for the term of the contract.

An additional minimum annual royalty ranging from $ 50,000 to $ 0.2 million is due, depending on the age of the license.

In addition, Cellvation entered into a

secondary license with the University of Texas for a method and apparatus for conditioning cell populations for cell therapies

(the “Second TBI License”).

Cellvation paid an upfront fee of $50,000 in connection with the Second TBI License, and

a minimum annual royalty of $0.1 million is payable beginning in the year after first commercial sale occurs (which minimum annual

royalty is creditable against actual royalties paid under the Second TBI License.

Additional payments of $0.3 million

are due for the completion of certain development milestones and single digit royalties upon the achievement of net sales.

In connection

with the two University of Texas licenses, Cellvation granted each of two University of Texas researchers acting as consultants

to Cellvation 500,000 shares of Cellvation common stock.

For the years ended December 31, 2019

and 2018, Cellvation recorded expense of approximately nil and $1,000, respectively, in connection with its licenses with the University

Dana-Farber Cancer Institute License

In March 2015, Checkpoint entered

into an exclusive license agreement with Dana-Farber Cancer Institute (“Dana-Farber”) to develop a portfolio of fully

human immuno-oncology targeted antibodies.

The portfolio of antibodies licensed from Dana-Farber include antibodies targeting PD-L1,

GITR and CAIX.

Under the terms of the agreement, Checkpoint paid Dana-Farber an up-front licensing fee of $1.0 million in 2015

and, on May 11, 2015, granted Dana-Farber 500,000 shares of Checkpoint common stock, valued at $32,500 or $0.065 per share.

The agreement included an anti-dilution clause that maintained Dana-Farber’s ownership at 5% until such time that Checkpoint

raised $10.0 million in cash in exchange for common shares.

Pursuant to this provision, on September 30, 2015, Checkpoint

granted to Dana-Farber an additional 136,830 shares of common stock valued at approximately $0.6 million and the anti-dilution

clause thereafter expired.

Dana-Farber is eligible to receive payments of up to an aggregate of approximately $21.5 million for

each licensed product upon Checkpoint’s successful achievement of certain clinical development, regulatory and first commercial

sale milestones.

In addition, Dana-Farber is eligible to receive up to an aggregate of $60.0 million upon Checkpoint’s successful

achievement of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered low to

mid-single digit percentage of net sales.

Dana-Farber receives an annual license maintenance fee of $50,000, which is creditable

against milestone payments or royalties due to Dana-Farber.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

For the year ended December 31, 2018,

Checkpoint expensed a non-refundable milestone payment of $1.0 million upon the twelfth patient dosed in a Phase 1 clinical study

of its anti-PD-LI antibody, cosibelimab (formerly referred to as CK-301), which is included in the Statements of Operations for

the year ended December 31, 2018.

In connection with the license agreement

with Dana-Farber, Checkpoint entered into a collaboration agreement with TGTX, which was amended and restated in June 2019,

to develop and commercialize the anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies,

while Checkpoint retains the right to develop and commercialize these antibodies in the field of solid tumors.

Michael Weiss, Chairman

of the Board of Directors of Checkpoint is also the Executive Chairman, President and Chief Executive Officer and a stockholder

In addition, Cellvation entered into a secondary license with the University of Texas for a method and apparatus for conditioning cell populations for cell therapies (the “Second TBI License”).

Cellvation paid an upfront fee of $ 50,000 in connection with the Second TBI License, and a minimum annual royalty of $ 0.1 million is payable beginning in the year after first commercial sale occurs (which minimum annual royalty is creditable against actual royalties paid under the Second TBI License).

Additional payments of $ 0.3 million are due for the completion of certain development milestones and single digit royalties upon the achievement of net sales.

In connection with the two University of Texas licenses, Cellvation granted each of two University of Texas researchers acting as consultants to Cellvation 500,000 shares of Cellvation common stock.

For the years ended December 31, 2020 and 2019, Cellvation recorded expense of approximately $ 1,000 and nil , respectively, in connection with its licenses with the University of Texas.

Dana-Farber Cancer Institute License Agreement

In March 2015, Checkpoint entered into an exclusive license agreement with Dana-Farber Cancer Institute (“Dana-Farber”) to develop a portfolio of fully human immuno-oncology targeted antibodies.

The portfolio of antibodies licensed from Dana-Farber include antibodies targeting PD-L1, GITR and CAIX.

Under the terms of the agreement, Checkpoint paid Dana-Farber an up-front licensing fee of $ 1.0 million in 2015 and, on May 11, 2015, granted Dana-Farber 500,000 shares of Checkpoint common stock, valued at $ 32,500 or $ 0.065 per share.

The agreement included an anti-dilution clause that maintained Dana-Farber’s ownership at 5 % until such time that Checkpoint raised $ 10.0 million in cash in exchange for common shares.

Pursuant to this provision, on September 30, 2015, Checkpoint granted to Dana-Farber an additional 136,830 shares of common stock valued at approximately $ 0.6 million and the anti-dilution clause thereafter expired.

Dana-Farber is eligible to receive payments of up to an aggregate of approximately $ 21.5 million for each licensed product upon Checkpoint’s successful achievement of certain clinical development, regulatory and first commercial sale milestones.

In addition, Dana-Farber is eligible to receive up to an aggregate of $ 60.0 million upon Checkpoint’s successful achievement of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered low to mid-single digit percentage of net sales.

Dana-Farber receives an annual license maintenance fee of $ 50,000 , which is creditable against future milestone payments or royalties.

The portfolio of antibodies licensed from Dana-Farber include antibodies targeting PD-L1, GITR and CAIX.

In connection with the license agreement with Dana-Farber, Checkpoint entered into a collaboration agreement with TGTX, which was amended and restated in June 2019, to develop and commercialize the anti-PD-L1 and anti-GITR antibody research programs in the field of hematological malignancies, while Checkpoint retains the right to develop and commercialize these antibodies in the field of solid tumors.

Michael Weiss, Chairman of the Board of Directors of Checkpoint is also the Executive Chairman, President and Chief Executive Officer and a stockholder of TGTX.

Under the terms of the original agreement, TGTX paid Checkpoint $ 0.5 million, representing an upfront licensing fee.

the signing of the amended and restated collaboration agreement in June 2019, TGTX paid Checkpoint an additional $1.0 million

upfront licensing fee.

Checkpoint is eligible to receive substantive potential milestone payments for the anti-PD-L1 program of

up to an aggregate of approximately $28.6 million upon TGTX’s successful achievement of certain clinical development, regulatory

and first commercial sale milestones.

This is comprised of up to approximately $9.4 million upon TGTX’s successful completion

of clinical development milestones, and up to approximately $19.2 million upon regulatory filings and first commercial sales in

specified territories.

Checkpoint is also eligible to receive substantive potential milestone payments for the anti-GITR antibody

program of up to an aggregate of approximately $21.5 million upon TGTX’s successful achievement of certain clinical development,

regulatory and first commercial sale milestones.

This is comprised of up to approximately $7.0 million upon TGTX’s successful

completion of clinical development milestones, and up to approximately $14.5 million upon first commercial sales in specified territories.

In addition, Checkpoint is eligible to receive up to an aggregate of $60.0 million upon TGTX’s successful achievement of

certain sales milestones based on aggregate net sales for both programs, in addition to royalty payments based on a tiered low

double-digit percentage of net sales.

Checkpoint also receives an annual license maintenance fee, which is creditable against milestone

payments or royalties due to Checkpoint.

TGTX also pays Checkpoint for its out-of-pocket costs of material used by TGTX for their

development activities.

During the year ended December 31, 2019 and 2018, the Company recognized approximately $1.6 million

and $3.0 million, respectively in revenue from its collaboration agreement with TGTX on the Consolidated Statements of Operations.

Upon the signing of the amended and restated collaboration agreement in June 2019, TGTX paid Checkpoint an additional $ 1.0 million upfront licensing fee.

Checkpoint is eligible to receive substantive potential milestone payments for the anti-PD-L1 program of up to an aggregate of approximately $ 27.6 million upon TGTX’s successful achievement of certain clinical development, regulatory and first commercial sale milestones.

This is comprised of up to approximately $ 8.4 million upon TGTX's successful completion of clinical development milestones, and up to approximately $ 19.2 million upon regulatory filings and first commercial sales in specified territories.

Checkpoint is also eligible to receive substantive potential milestone payments for the anti-GITR antibody program of up to an aggregate of approximately $ 21.5 million upon TGTX's successful achievement of certain clinical development, regulatory and first commercial sale milestones.

This is comprised of up to approximately $ 7.0 million upon TGTX’s successful completion of clinical development milestones, and up to approximately $ 14.5 million upon first commercial sales in specified territories.

In addition, Checkpoint is eligible to receive up to an aggregate of $ 60.0 million upon TGTX’s successful achievement of certain sales milestones based on aggregate net sales for both programs, in addition to royalty payments based on a tiered low double-digit percentage of net sales.

Checkpoint also receives an annual license maintenance fee, which is creditable against future milestone payments or royalties.

TGTX also pays Checkpoint for its out-of-pocket costs of material used by TGTX for their development activities.

For the years ended December 31, 2020 and 2019, Checkpoint recognized approximately $ 1.0 million and $ 1.6 million, respectively, in revenue related to the collaboration agreement in the Consolidated Statements of Operations.

The revenue for the year ended December 31, 2020 included a milestone of $ 925,000 upon the 12 th patient dosed in a phase 1 clinical trial for the anti-PD-L1 antibody cosibelimab during March 2020.

Adimab, LLC Collaboration Agreement

In October 2015, Fortress entered

into a collaboration agreement with Adimab to discover and optimize antibodies using their proprietary core technology platform.

Under this agreement, Adimab optimized cosibelimab, Checkpoint’s anti-PD-L1 antibody which it originally licensed from Dana-Farber.

In January 2019, Fortress transferred the rights to the optimized antibody to Checkpoint, and Checkpoint entered into a collaboration

agreement directly with Adimab on the same day.

Under the terms of the agreement, Adimab is eligible to receive payments up to

an aggregate of approximately $7.1 million upon the Checkpoint’s successful achievement of certain clinical development and

regulatory milestones, of which $4.8 million are due upon various filings for regulatory approvals to commercialize the product.

In October 2015, Fortress entered into a collaboration agreement with Adimab to discover and optimize antibodies using their proprietary core technology platform.

Under this agreement, Adimab optimized cosibelimab, Checkpoint's anti-PD-L1 antibody which it originally licensed from Dana-Farber.

In January 2019, Fortress transferred the rights to the optimized antibody to Checkpoint, and Checkpoint entered into a collaboration agreement directly with Adimab on the same day.

Under the terms of the agreement, Adimab is eligible to receive payments up to an aggregate of approximately $ 7.1 million upon the Checkpoint's successful achievement of certain clinical development and regulatory milestones, of which $ 4.8 million are due upon various filings for regulatory approvals to commercialize the product.

In addition, Adimab is eligible to receive royalty payments based on a tiered low single digit percentage of net sales.

1 unchanged sentence

License Agreement

In March 2015, the Company entered

into an exclusive license agreement with NeuPharma, Inc.

(“NeuPharma”) to develop and commercialize novel irreversible,

3rd generation epidermal growth factor receptor (“EGFR”) inhibitors including CK-101, on a worldwide basis (other than

certain Asian countries).

In March 2015, the Company entered into an exclusive license agreement with NeuPharma, Inc.

(“NeuPharma”) to develop and commercialize novel irreversible, 3rd generation epidermal growth factor receptor (“EGFR”) inhibitors including CK-101, on a worldwide basis (other than certain Asian countries).

On the same date, the Company assigned all of its right and interest in the EGFR inhibitors to Checkpoint.

Under the terms of the agreement, Checkpoint paid NeuPharma an up-front licensing fee of $1.0 million in 2015, and NeuPharma is

eligible to receive payments of up to an aggregate of approximately $40.0 million upon Checkpoint’s successful achievement

of certain clinical development and regulatory milestones in up to three indications, of which $22.5 million are due upon various

regulatory approvals to commercialize the products.

In addition, NeuPharma is eligible to receive payments of up to an aggregate

of $40 million upon Checkpoint’s successful achievement of certain sales milestones based on aggregate net sales, in addition

to royalty payments based on a tiered mid to high-single digit percentage of net sales.

In September 2016, Checkpoint dosed

the first patient in a Phase 1/2 clinical study of CK-101, which is currently ongoing as of December 31, 2019.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Teva Pharmaceutical Industries Ltd.

License Agreement (through its subsidiary, Cephalon, Inc.)

In December 2015, Fortress entered into a license agreement

with Teva Pharmaceutical Industries Ltd.

through its subsidiary, Cephalon, Inc.

(“Cephalon”).

This agreement

was assigned to Checkpoint by the Company on the same date.

Under the terms of the license agreement, Checkpoint obtained an exclusive,

worldwide license to Cephalon’s patents relating to CEP-8983 and its small molecule prodrug, CEP-9722, a PARP inhibitor,

which Checkpoint referred to as CK-102.

Checkpoint paid Cephalon an up-front licensing fee of $0.5 million.

In August 2018,

Checkpoint gave notice to Cephalon of its intention to terminate the license agreement, which became effective in February 2019.

Under the terms of the agreement, Checkpoint paid NeuPharma an up-front licensing fee of $ 1.0 million in 2015, and NeuPharma is eligible to receive payments of up to an aggregate of approximately $ 40.0 million upon Checkpoint’s successful achievement of certain clinical development and regulatory milestones in up to three indications, of which $ 22.5 million are due upon various regulatory approvals to commercialize the products.

In addition, NeuPharma is eligible to receive payments of up to an aggregate of $ 40 million upon Checkpoint’s successful achievement of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered mid to high-single digit percentage of net sales.

Jubilant Biosys Limited License Agreement

In May 2016, Checkpoint entered into

a license agreement with Jubilant Biosys Limited (“Jubilant”), whereby Checkpoint obtained an exclusive, worldwide

license (the “Jubilant License”) to Jubilant’s family of patents covering compounds that inhibit BRD4, a member

of the BET domain for cancer treatment, including CK-103.

Under the terms of the Jubilant License, Checkpoint paid Jubilant an

up-front licensing fee of $2.0 million, and Jubilant is eligible to receive payments up to an aggregate of approximately $89.0

million upon Checkpoint’s successful achievement of certain preclinical, clinical development, and regulatory milestones,

of which $59.5 million are due upon various regulatory approvals to commercialize the products.

In addition, Jubilant is eligible

to receive payments up to an aggregate of $89.0 million upon Checkpoint’s successful achievement of certain sales milestones

based on aggregate net sales, in addition to royalty payments based on a tiered low to mid-single digit percentage of net sales.

In connection with the Jubilant License,

Checkpoint entered into a sublicense agreement with TGTX (the “Sublicense Agreement”), a related party, to develop

and commercialize the compounds licensed in the field of hematological malignancies, with Checkpoint retaining the right to develop

and commercialize these compounds in the field of solid tumors.

Michael Weiss, Chairman of the Board of Directors of Checkpoint

and the Company’s Executive Vice Chairman, Strategic Development, is also the Executive Chairman, President and Chief Executive

Officer and a stockholder of TGTX.

Under the terms of the Sublicense Agreement, TGTX paid Checkpoint $1.0 million, representing

an upfront licensing fee, recorded as collaboration revenue –

related party and Checkpoint is eligible to receive substantive

potential milestone payments up to an aggregate of approximately $87.2 million upon TGTX’s successful achievement of clinical

development and regulatory milestones.

Such potential milestone payments may approximate $25.5 million upon TGTX’s successful

completion of three clinical development milestones for two licensed products, and up to approximately $61.7 million upon the achievement

of five regulatory approvals and first commercial sales in specified territories for two licensed products.

In addition, Checkpoint

is eligible to receive potential milestone payments up to an aggregate of $89.0 million upon TGTX’s successful achievement

of three sales milestones based on aggregate net sales by TGTX, for two licensed products, in addition to royalty payments based

on a mid-single digit percentage of net sales by TGTX.

TGTX also pays Checkpoint for 50% of IND enabling costs and patent

The Company recognized $0.1 million and $0.4 million in revenue related to this arrangement during the year ended December 31,

2019 and 2018, respectively.

The collaborations with TGTX each contain

single material performance obligations under Topic 606, which is the granting of a license that is functional intellectual property.

Checkpoint’s performance obligation was satisfied at the point in time when TGTX had the ability to use and benefit from

the right to use the intellectual property.

The performance obligations of the original agreements were satisfied prior to the

adoption of Topic 606.

In May 2016, Checkpoint entered into a license agreement with Jubilant Biosys Limited (“Jubilant”), whereby Checkpoint obtained an exclusive, worldwide license (the “Jubilant License”) to Jubilant’s family of patents covering compounds that inhibit BRD4, a member of the BET domain for cancer treatment, including CK-103.

Under the terms of the Jubilant License, Checkpoint paid Jubilant an up-front licensing fee of $ 2.0 million, and Jubilant is eligible to receive payments up to an aggregate of approximately $ 89.0 million upon Checkpoint’s successful achievement of certain preclinical, clinical development, and regulatory milestones, of which $ 59.5 million are due upon various regulatory approvals to commercialize the products.

In addition, Jubilant is eligible to receive payments up to an aggregate of $ 89.0 million upon Checkpoint’s successful achievement of certain sales milestones based on aggregate net sales, in addition to royalty payments based on a tiered low to mid-single digit percentage of net sales.

In connection with the Jubilant License, Checkpoint entered into a sublicense agreement with TGTX (the “Sublicense Agreement”), a related party, to develop and commercialize the compounds licensed in the field of hematological malignancies, with Checkpoint retaining the right to develop and commercialize these compounds in the field of solid tumors.

Under the terms of the Sublicense Agreement, TGTX paid Checkpoint $ 1.0 million, representing an upfront licensing fee, recorded as collaboration revenue – related party and Checkpoint is eligible to receive substantive potential milestone payments up to an aggregate of approximately $ 87.2 million upon TGTX’s successful achievement of clinical development and regulatory milestones.

Such potential milestone payments may approximate $ 25.5 million upon TGTX’s successful completion of three clinical development milestones for two licensed products, and up to approximately $ 61.7 million upon the achievement of five regulatory approvals and first commercial sales in specified territories for two licensed products.

In addition, Checkpoint is eligible to receive potential milestone payments up to an aggregate of $ 89.0 million upon TGTX’s successful achievement of three sales milestones based on aggregate net sales by TGTX, for two licensed products, in addition to royalty payments based on a mid-single digit percentage of net sales by TGTX.

TGTX also pays Checkpoint for 50 % of IND enabling costs and patent expenses.

Checkpoint recognized $ 0.1 million and $ 0.1 million in revenue related to this arrangement during the year ended December 31, 2020 and 2019, respectively.

The collaborations with TGTX each contain single material performance obligations under Topic 606, which is the granting of a license that is functional intellectual property.

Checkpoint's performance obligation was satisfied at the point in time when TGTX had the ability to use and benefit from the right to use the intellectual property.

The performance obligations of the original agreements were satisfied prior to the adoption of Topic 606.

The performance obligation of the amendment to the collaboration agreement was satisfied in June 2019.

The milestone payments are based on successful

achievement of clinical development, regulatory, and sales milestones.

Because these payments are contingent on the occurrence

of a future event, they represent variable consideration and are constrained and included in the transaction price only when it

is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

The sales-based royalty

payments are recognized as revenue when the subsequent sales occur.

Checkpoint also receives variable consideration for certain

research and development, out-of-pocket material costs and patent maintenance related activities that are dependent upon the Company’s

actual expenditures under the collaborations and are constrained and included in the transaction price only when it is probable

that a significant reversal in the amount of cumulative revenue recognized will not occur.

Revenue is recognized approximately

when the amounts become due because it relates to an already satisfied performance obligation.

For the year ended December 31,

2019, Checkpoint did not receive any milestone or royalty payments.

License Agreement with the Eunice

Kennedy Shriver National Institute of Child Health and Human Development

In March 2017, Cyprium and the Eunice

Kennedy Shriver National Institute of Child Health and Human Development (“NICHD”), part of the National Institutes

of Health (“NIH”), entered into a Cooperative Research and Development Agreement to advance the clinical development

of Phase 3 candidate CUTX-101 (copper histidinate injection) for the treatment of Menkes disease.

Cyprium and NICHD also entered

into a worldwide, exclusive license agreement to develop and commercialize AAV-based ATP7A gene therapy for use in combination

with CUTX-101 for the treatment of Menkes disease and related copper transport disorders .

Cyprium made an upfront payment

of $0.1 million to NICHD upon execution of the exclusive license.

NICHD is eligible to receive payments of up to an aggregate of

approximately $1.7 million upon Cyprium’s successful achievement of certain clinical development and regulatory milestones

for each licensed product, in addition to $1 million upon first commercial sale of a product candidate.

In addition, in the event

Cyprium sells a Priority Review Voucher that it receives from the FDA in connection with the approval of one of its product candidates

(a “PRV”) to a third party, it is obligated to pay to NIH 20% of the proceeds that it receives from such third party

with respect to the first PRV sold, and 15% of the proceeds with respect to the second PRV sold.

In the alternative, in the event

Cyprium redeems a PRV in connection with seeking priority review for one of its product candidates, Cyprium will be obligated to

pay NIH $15 million.

The milestone payments are based on successful achievement of clinical development, regulatory, and sales milestones.

Because these payments are contingent on the occurrence of a future event, they represent variable consideration and are constrained and included in the transaction price only when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

The sales-based royalty payments are recognized as revenue when the subsequent sales occur.

Checkpoint also receives variable consideration for certain research and development, out-of-pocket material costs and patent maintenance related activities that are dependent upon the Company's actual expenditures under the collaborations and are constrained and included in the transaction price only when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

Revenue is recognized approximately when the amounts become due because it relates to an already satisfied performance obligation.

For the year ended December 31, 2020, Checkpoint recognized the achievement of a clinical development milestone under its collaboration agreement with TGTX based upon their dosing of a 12th patient in a phase 1 clinical trial of cosibelimab.

For the year ended December 31, 2019, Checkpoint did no t receive any milestone or royalty payments.

License Agreement with the Eunice Kennedy Shriver National Institute of Child Health and Human Development

In March 2017, Cyprium and the Eunice Kennedy Shriver National Institute of Child Health and Human Development (“NICHD”), part of the National Institutes of Health (“NIH”), entered into a Cooperative Research and Development Agreement to advance the clinical development of Phase 3 candidate CUTX-101 (copper histidinate injection) for the treatment of Menkes disease.

Cyprium and NICHD also entered into a worldwide, exclusive license agreement to develop and commercialize AAV-based ATP7A gene therapy for use in combination with CUTX-101 for the treatment of Menkes disease and related copper transport disorders .

Cyprium made an upfront payment of $ 0.1 million to NICHD upon execution of the exclusive license.

NICHD is eligible to receive payments of up to an aggregate of approximately $ 1.7 million upon Cyprium’s successful achievement of certain clinical development and regulatory milestones for each licensed product, in addition to $ 1 million upon first commercial sale of a product candidate.

In addition, in the event Cyprium sells a Priority Review Voucher that it receives from the FDA in connection with the approval of one of its product candidates (a "PRV") to a third party, it is obligated to pay to NIH 20 % of the proceeds that it receives from such third party with respect to the first PRV sold, and 15 % of the proceeds with respect to the second PRV sold.

In the alternative, in the event Cyprium redeems a PRV in connection with seeking priority review for one of its product candidates, Cyprium will be obligated to pay NIH $ 15 million.

For the years ended December 31, 2020 and 2019, no expense was recorded in connection with this license.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

License Agreement with the City of Hope

Helocyte entered into the original license

agreement with City of Hope National Medical Center (“COH”) on March 31, 2015, to secure:

(i) an exclusive

worldwide license for two immunotherapies for Cytomegalovirus (“CMV”) control in the post-transplant setting (known

as Triplex and PepVax).

Helocyte entered into the original license agreement with City of Hope National Medical Center (“COH”) on March 31, 2015, to secure:

(i) an exclusive worldwide license for two immunotherapies for Cytomegalovirus (“CMV”) control in the post-transplant setting (known as Triplex and PepVax).

In consideration for the license and option, Helocyte made an upfront payment of $ 0.2 million.

In March 2016,

Helocyte entered into amended and restated license agreements for each of its PepVax and Triplex immunotherapies programs with

its licensor COH.

The amended and restated licenses expand the intellectual property and other rights granted to Helocyte by COH

in the original license agreement without modifying the financial terms.

In 2018, Helocyte discontinued the development of PepVax

and terminated the related license and clinical trial agreements with COH.

If Helocyte successfully develops and commercializes

Triplex, COH is eligible to receive up to $3.7 million related to three financial milestones, $7.5 million in development milestones

for the remaining two development milestones and up to $26.0 million in three milestones related to net sales for each licensed

In March 2016, Helocyte entered into amended and restated license agreements for each of its PepVax and Triplex immunotherapies programs with its licensor COH.

The amended and restated licenses expand the intellectual property and other rights granted to Helocyte by COH in the original license agreement without modifying the financial terms.

In 2018, Helocyte discontinued the development of PepVax and terminated the related license and clinical trial agreements with COH.

If Helocyte successfully develops and commercializes Triplex, COH is eligible to receive up to $ 3.7 million related to three financial milestones, $ 7.5 million in development milestones for the remaining two development milestones and up to $ 26.0 million in three milestones related to net sales for each licensed product.

To date Helocyte has completed a Phase 2 clinical trial program for Triplex.

In April 2015, Helocyte secured the

exclusive worldwide rights to an immunotherapy for the prevention of congenital CMV:

ConVax (formerly Pentamer) from COH for an

upfront payment of $45,000.

If Helocyte successfully develops and commercializes Pentamer, COH could receive up to $5.5 million

for the achievement of four development milestones, $26.0 million for three sales milestones, single digit royalties based on net

sales reduced by certain factors and a minimum annual royalty of $0.75 million per year following a first marketing approval.

For the twelve months ended December 31,

2019 and 2018, Helocyte recorded nil and $1.5 million respectively in research and development - licenses acquired on the Consolidated

Statement of Operations in connection with this license.

The expense recorded in 2018 was in connection to the achievement of the

development milestone related to the completion of the Phase 2 clinical study for Triplex.

License with the National Institute

of Allergy and Infectious Disease (NIAD)

In December 2019, Helocyte entered

into a non-exclusive license agreement with the National Institute of Allergy and Infectious Disease (a division of the National

Institutes of Health (“NIAID”)) for the use of certain material pertaining to one of its product candidates.

agreed to pay an upfront fee of $0.5 million, which is payable in three separate installments, as well as a minimum annual royalty

Additional payments of up to $1,050,000 in the aggregate are due upon the achievement of four developmental milestones,

and royalties in the low single digits are due on net sales of licensed products.

For the twelve

months ended December 31, 2019 and 2018, Helocyte recorded $0.5 million and nil, respectively, in research and

development - licenses acquired on the Consolidated Statement of Operations in connection with this license.

For the years ended December 31, 2019

and 2018 Mustang recorded the following expense in research and development –

licenses acquired:

In April 2015, Helocyte secured the exclusive worldwide rights to an immunotherapy for the prevention of congenital CMV:

ConVax (formerly Pentamer) from COH for an upfront payment of $ 45,000 .

If Helocyte successfully develops and commercializes Pentamer, COH could receive up to $ 5.5 million for the achievement of four development milestones, $ 26.0 million for three sales milestones, single digit royalties based on net sales reduced by certain factors and a minimum annual royalty of $ 0.75 million per year following a first marketing approval.

For the year ended December 31, 2020 and 2019, Helocyte recorded nil and nil respectively in research and development - licenses acquired on the Consolidated Statement of Operations in connection with this license.

License with the National Institute of Allergy and Infectious Disease (NIAD)

In December 2019, Helocyte entered into a non-exclusive license agreement with the National Institute of Allergy and Infectious Disease (a division of the National Institutes of Health (“NIAID”)) for the use of certain material pertaining to one of its product candidates.

Helocyte agreed to pay an upfront fee of $ 0.5 million, which is payable in three separate installments, as well as a minimum annual royalty of $ 55,000 .

Additional payments of up to $ 1,050,000 in the aggregate are due upon the achievement of four developmental milestones, and royalties in the low single digits are due on net sales of licensed products.

For the year ended December 31, 2020 and 2019, Helocyte recorded nil and $ 0.5 million, respectively, in research and development - licenses acquired on the Consolidated Statement of Operations in connection with this license.

For the years ended December 31, 2020 and 2019 Mustang recorded the following expense in research and development – licenses acquired:

For the Year Ended December 31,

($ in thousands)

For the Years Ended

MB-102 (CD 123 CAR T for AML)

Nationwide Children's Hospital

MB-108 (C134 Oncolytic Virus for GBM)

MB-104 (CS1 CAR T for Multiple Myeloma and Light Chain Amyloidosis)

MB-105 (PSCA CAR T for Prostate & Pancreatic Cancers)

MB-107 (XSCID)

MB-105 (PSCA CAR T for Prostate & Pancreatic Cancers)

MB-103 (HER2 CAR T for GBM & Metastatic Breast Cancer to Brain)

MB-107 (XSCID)

Manufacturing License

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

City of Hope National Medical Center

CD123 (MB-102) 3

IL13Rα2 (MB-101) 3

HER2 (MB-103) 1

PSCA (MB-105) 3

Fred Hutch - CD20 (MB-106) 2

Nationwide Children’s Hospital - C134 (MB-108)

CSL Behring (Calimmune)

SIRION LentiBOOST TM

License Agreement with City of Hope

In March 2015, Mustang entered into

an exclusive license agreement with COH to acquire intellectual property rights pertaining to CAR T (the “COH License”).

Pursuant to the COH License, Mustang paid COH an upfront fee of $2.0 million in April 2015 (included in research and development-licenses

acquired expenses on the Consolidated Statement of Operations) and granted COH 1.0 million shares of Mustang’s Class A

Common Stock, representing 10% ownership of Mustang.

Additional payments totaling $2.0 million are due upon the completion of two

financial milestones, and payments totaling $14.5 million are due upon the completion of six development goals.

Future mid-single

digit royalty payments are due on net sales of licensed products, with a minimum annual royalty of $1.0 million.

In February 2017, the Company and

COH amended and restated the Original Agreement by entering into three separate amended and restated exclusive license agreements,

one relating to CD123 (MB-102), one relating to IL13Rα2 (MB-101) and one relating to the Spacer technology, that amended

the Original Agreement in certain other respects, and collectively replace the Original Agreement in its entirety.

The total potential

consideration payable to COH by the Company, in equity or cash, did not, in the aggregate, change materially from the Original

In March 2015, Mustang entered into an exclusive license agreement with COH to acquire intellectual property rights pertaining to chimeric antigen receptor (“CAR”) engineered T cell (“CAR T”) technologies (the “COH License”).

Pursuant to the COH License, Mustang paid COH an upfront fee of $ 2.0 million in April 2015 (included in research and development-licenses acquired expenses on the Consolidated Statement of Operations) and granted COH 1.0 million shares of Mustang’s Class A Common Stock, representing 10 % ownership of Mustang.

Additional payments totaling $ 2.0 million are due upon the completion of two financial milestones, and payments totaling $ 14.5 million are due upon the completion of six development goals.

Future mid-single digit royalty payments are due on net sales of licensed products, with a minimum annual royalty of $ 1.0 million.

In February 2017, the Company and COH amended and restated the COH License by entering into three separate amended and restated exclusive license agreements, one relating to CD123 (MB-102), one relating to IL13Rα2 (MB-101) and one relating to the Spacer technology, that amended the COH License in certain other respects, and collectively replace the COH License in its entirety.

The total potential consideration payable to COH by the Company, in equity or cash, did not, in the aggregate, change materially from the COH License.

CD123 License with City of Hope (MB-102)

Pursuant to the CD123 License, Mustang

and COH acknowledge that an upfront fee was paid under the Original License.

In addition, an annual maintenance fee will continue

COH is eligible to receive up to approximately $14.5 million in milestone payments upon and subject to the achievement

of certain milestones.

Pursuant to the CD123 License, Mustang and COH acknowledge that an upfront fee was paid under the COH License.

In addition, an annual maintenance fee will continue to apply.

COH is eligible to receive up to approximately $ 14.5 million in milestone payments upon and subject to the achievement of certain milestones.

Royalty payments in the mid-single digits are due on net sales of licensed products.

Mustang is obligated

to pay COH a percentage of certain revenues received in connection with a sublicense in the mid-teens to mid-thirties, depending

on the timing of the sublicense in the development of any product.

In addition, equity grants made under the Original License were

acknowledged, and the anti-dilution provisions of the Original License were carried forward.

For the year ended December 31,

2019, Mustang expensed a non-refundable milestone payment of $0.3 million upon the twelfth patient dosed in a Phase 1 clinical

study of CD123.

Mustang is obligated to pay COH a percentage of certain revenues received in connection with a sublicense in the mid-teens to mid-thirties, depending on the timing of the sublicense in the development of any product.

In addition, equity grants made under the COH License were acknowledged, and the anti-dilution provisions of the COH License were carried forward.

For the year ended December 31, 2020, Mustang expensed a non-refundable milestone payment of $ 0.3 million in connection with their public underwritten offerings.

For the year ended December 31, 2019, Mustang expensed a non-refundable milestone payment of $ 0.3 million upon the twelfth patient dosed in a Phase 1 clinical study of CD123.

Nationwide Children’s Hospital License Agreement (MB-108)

In February 2019, Mustang announced that it partnered and entered into an exclusive worldwide license agreement with Nationwide Children’s Hospital (“Nationwide”) to develop their C134 oncolytic virus (MB-108) for the treatment of glioblastoma multiforme (“GBM”).

Mustang intends to combine MB-108 with MB-101 (IL13Rα2-specific CAR T) to potentially enhance efficacy in treating GBM.

There were no expenses recorded in 2020 in connection with this license.

Nationwide Children’s Hospital

License Agreement (MB-108)

In February 2019, Mustang announced

that it partnered and entered into an exclusive worldwide license agreement with Nationwide Children’s Hospital (“Nationwide”)

to develop their C134 oncolytic virus (MB-108) for the treatment of glioblastoma multiforme (“GBM”).

Mustang intends

to combine MB-108 with MB-101 (IL13Rα2-specific CAR T) to potentially enhance efficacy in treating GBM.

For the year ended

December 31, 2019, Mustang paid $0.2 million in consideration for the license to exclusive, worldwide rights to develop and

commercialize products that incorporate data, know-how and/or MB-108 that were developed at Nationwide.

Additional payments are

due to Nationwide upon achievement of development and commercialization milestones totaling $152.8 million.

Royalty payments in

the low-single digits are due on net sales of licensed products.

CS1 Technology License with City of

Hope (MB-104)

2017, Mustang entered into an exclusive license agreement with the COH for the use of CS1 specific CAR T technology (CS1

Technology) to be directed against multiple myeloma.

Pursuant to the Agreement, Mustang paid an upfront fee of $0.6 million

on July 3, 2017, and owes an annual maintenance fee of $50,000, which began in 2019.

Additional payments of up to $14.9

million are due upon and subject to the achievement of ten development milestones, and royalty payments in the mid-single

digits are due on net sales of licensed products.

During the year ended December 31, 2019, Mustang expensed a

non-refundable milestone payment of $0.2 million upon the first patient dosed in a Phase 1 clinical study of CS1.

no expenses recorded in 2018 in connection with this license.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

PSCA Technology License with City of

Hope (MB-105)

2017, Mustang entered into an exclusive license agreement with the COH for the use of prostate stem cell antigen

(“PSCA”) CAR T technology (“PSCA Technology”) to be used in the treatment of prostate cancer.

Pursuant to the Agreement, Mustang paid an upfront fee of $0.3 million on July 3, 2017, and owes an annual maintenance

fee of $50,000, which began in 2019.

Additional payments of up to $14.9 million are due upon and subject to the

achievement of ten development milestones, and royalty payments in the mid-single digits are due on net sales of licensed

During the years ended December 31, 2019 and 2018, Mustang recorded an expense of $0.2 million and nil,

respectively, in connection with the acquisition of this license.

CSL Behring License (MB-107)

On August 23,

2019, Mustang entered into a license agreement with CSL Behring (“CSL Behring License”) for the

Cytegrity TM stable producer cell line for the production of MB-107 lentiviral gene therapy.

Cytegrity™

stable producer cell line will be used to produce the viral vector for Mustang Bio’s MB-107 lentiviral gene therapy

program for the treatment of XSCID.

Mustang licensed MB-107 from St.

For the year ended December 31, 2019, Mustang paid $ 0.2 million in consideration for the license to exclusive, worldwide rights to develop and commercialize products that incorporate data, know-how and/or patents related to MB-108 that were developed at Nationwide.

Additional payments are due to Nationwide upon achievement of development and commercialization milestones totaling $ 152.8 million.

Royalty payments in the low-single digits are due on net sales of licensed products.

CS1 License with City of Hope (MB-104)

On May 31, 2017, Mustang entered into an exclusive license agreement with the COH for the use of CS1-specific CAR T technology to be directed against multiple myeloma.

Pursuant to the agreement, Mustang paid an upfront fee of $ 0.6 million on July 3, 2017, and owes an annual maintenance fee of $ 50,000 , which began in 2019.

Additional payments of up to $ 14.9 million are due upon and subject to the achievement of ten development milestones, and royalty payments in the mid-single digits are due on net sales of licensed products.

During the year ended December 31, 2020, Mustang expensed a non-refundable milestone payment of $ 0.2 million in connection with this license for the issuance of the first patent related to the CS1 technology.

During the year ended December 31, 2019, Mustang expensed a non-refundable milestone payment of $ 0.2 million upon the first patient dosed in a Phase 1 clinical study of the CS1 CAR T.

PSCA License with City of Hope (MB-105)

On May 31, 2017, Mustang entered into an exclusive license agreement with the COH for the use of prostate stem cell antigen (“PSCA”) CAR T technology to be used in the treatment of prostate cancer.

Pursuant to the agreement, Mustang paid an upfront fee of $ 0.3 million on July 3, 2017, and owes an annual maintenance fee of $ 50,000 , which began in 2019.

During the years ended December 31, 2020 and 2019, Mustang recorded an expense of $ 0.2 million and nil , respectively, in connection with the acquisition of this license.

CSL Behring (Calimmune) License (MB-107)

On August 23, 2019, Mustang entered into a non-exclusive license agreement with CSL Behring (Calimmune, Inc.) (“Calimmune License”) for the Cytegrity TM stable producer cell line for the production of viral vector for Mustang’s lentiviral gene therapy program for the treatment of XSCID.

Mustang had previously licensed the XSCID gene therapy program from St.

Jude in August 2018.

Mustang paid $0.2 million in

consideration for the license.

CSL Behring is eligible to receive additional payments totaling $1.2 million upon the

achievement of three development and commercialization milestones.

Royalty payments in the low-single digits are due on net

sales of licensed products.

Upon the execution of the CSL Behring License, Mustang recorded research and development expense

of $0.2 million in the statement of operations for the year ended December 31, 2019.

License with University of California

On March 17, 2017, Mustang entered

into an exclusive license agreement with the Regents of the University of California (“UCLA License”) to acquire intellectual

property rights in patent applications related to the engineered anti-prostate stem cell antigen antibodies for cancer targeting

and detection.

Pursuant to the UCLA Agreement, Mustang paid UCLA an upfront fee of $0.2 million on April 25, 2017.

maintenance fees also apply;

additional payments are due upon achievement of certain development milestones totaling $14.3 million,

and royalty payments in the mid-single digits are due on net sales of licensed products.

In September 2019, COH commenced

its Phase 1 clinical trial resulting in the achievement of a development milestone and as a result Mustang recorded an expense

of $0.3 million.

Mustang paid $ 0.2 million in consideration for the Calimmune license.

CSL Behring is eligible to receive additional payments totaling $ 1.2 million upon the achievement of three development and commercialization milestones.

Royalty payments in the low-single digits are due on net sales of licensed products.

Upon the execution of the Calimmune License, Mustang expensed a non-refundable milestone payment of $ 0.2 million and $ 0.2 million in the Consolidated Statement of Operations for the years ended December 31, 2020 and 2019, respectively.

University of California License

On March 17, 2017, Mustang entered into an exclusive license agreement with the Regents of the University of California (“UCLA License”) to acquire intellectual property rights in patent applications related to the engineered anti-prostate stem cell antigen antibodies for cancer targeting and detection.

Pursuant to the UCLA License, Mustang paid UCLA an upfront fee of $ 0.2 million on April 25, 2017.

Annual maintenance fees also apply;

additional payments are due upon achievement of certain development milestones totaling $ 14.3 million, and royalty payments in the mid-single digits are due on net sales of licensed products.

In September 2019, COH commenced its Phase 1 clinical trial resulting in the achievement of a development milestone, and as a result Mustang recorded an expense of $ 0.3 million.

There were no expenses recorded in 2020 in connection with this license.

HER2 Technology License with City of

Hope (MB-103)

2017, Mustang entered into an exclusive license agreement with the COH for the use of human epidermal growth factor receptor

2 (“HER2”) CAR T technology (“HER2 Technology”), which will be applied in the treatment of

glioblastoma multiforme.

Pursuant to the Agreement, Mustang paid an upfront fee of $0.6 million and owes an annual

maintenance fee of $50,000, which began in 2019.

Additional payments of up to $14.9 million are due upon and subject to the

achievement of ten development milestones, and royalty payments in the mid-single digits are due on net sales of licensed

During the years ended December 31, 2019 and 2018, Mustang recorded an expense of nil and $0.2 million,

respectively, in connection with the acquisition of this license as well as the achievement of a milestone during 2018.

Jude Children’s Research Hospital

License Agreement (MB-107)

On August 2, 2018, Mustang entered

into an exclusive worldwide license agreement with St.

Jude for the development of a first-in-class ex vivo lentiviral gene

therapy for the treatment of X-linked severe combined immunodeficiency (“XSCID”).

Mustang paid $1.0 million in consideration

for the exclusive license in addition to an annual maintenance fee of $0.1 million (which began in 2019).

Jude is eligible

to receive payments totaling $13.5 million upon the achievement of five development and commercialization milestones.

Royalty payments

in the mid-single digits are due on net sales of licensed products.

During the years ended December 31, 2019 and 2018 Mustang

recorded an expense of nil and $1.0 million, respectively, in connection with the acquisition of this license.

HER2 License with City of Hope (MB-103)

On May 31, 2017, Mustang entered into an exclusive license agreement with the COH for the use of human epidermal growth factor receptor 2 (“HER2”) CAR T technology (“HER2 Technology”), which will be applied in the treatment of glioblastoma multiforme.

Pursuant to the agreement, Mustang paid an upfront fee of $ 0.6 million and owes an annual maintenance fee of $ 50,000 , which began in 2019.

During the year ended December 31, 2020, Mustang recorded a non-refundable milestone payment of $ 0.5 million in connection with the twelfth patient treated in the Phase 1 clinical study of HER2 CAR T technology at COH.

For the year ended December 31, 2019, Mustang expensed a non-refundable milestone payment of $ 0.2 million upon the first patient dosed in the Phase 1 clinical study of HER2.

Jude Children’s Research Hospital License (MB-107 and MB-207)

On August 2, 2018, Mustang entered into an exclusive worldwide license agreement with St.

Jude for the development of a first-in-class ex vivo lentiviral gene therapy for the treatment of X-linked severe combined immunodeficiency (“XSCID”).

Mustang paid $ 1.0 million in consideration for the exclusive license in addition to an annual maintenance fee of $ 0.1 million (which began in 2019).

Jude is eligible to receive payments totaling $ 13.5 million upon the achievement of five development and commercialization milestones.

Royalty payments in the mid-single digits are due on net sales of licensed products.

During the years ended December 31, 2020 and 2019 Mustang did no t record any expenses in connection with this license.

Manufacturing License with City of Hope

On January 3, 2018, Mustang entered

into a non-exclusive license agreement with COH to acquire patent and licensed know-how rights related to developing, manufacturing,

and commercializing licensed products.

The Company paid $75,000 in consideration for the licenses to the patent rights and the

licensed know-how in addition to an annual maintenance fee.

Royalty payments in the low-single digits are due on net sales of licensed

During the years ended December 31, 2019 and 2018, respectively, Mustang recorded an expense of nil and $0.1 million,

respectively, in connection with the acquisition of this license.

IL13Rα2 License with City of Hope

Pursuant to the IL13Rα2 License,

Mustang and COH acknowledge that an upfront fee was paid under the Original License.

In addition, an annual maintenance fee will

continue to apply.

COH is eligible to receive up to approximately $14.5 million in milestone payments upon and subject to the achievement

of certain milestones.

On January 3, 2018, Mustang entered into a non-exclusive license agreement with COH to acquire patent and licensed know-how rights related to developing, manufacturing, and commercializing licensed products.

The Company paid $ 0.1 million in consideration for the licenses to the patent rights and the licensed know-how in addition to an annual maintenance fee.

Royalty payments in the low-single digits are due on net sales of licensed products.

During the years ended December 31, 2020 and 2019, respectively, Mustang recorded no expense in connection with the COH license.

IL13Rα2 License with City of Hope (MB-101)

Pursuant to the IL13Rα2 License, Mustang and COH acknowledge that an upfront fee was paid under the Original License.

In addition, an annual maintenance fee will continue to apply.

COH is eligible to receive up to approximately $ 14.5 million in milestone payments upon and subject to the achievement of certain milestones.

Royalty payments in the mid-single digits are due on net sales of licensed products.

Mustang is obligated

to pay COH a percentage of certain revenues received in connection with a sublicense in the mid-teens to mid-thirties, depending

on the timing of the sublicense in the development of any product.

In addition, equity grants made under the Original License were

acknowledged, and the anti-dilution provisions of the Original License were carried forward.

During the years ended December 31,

2019 and 2018, Mustang recorded no expense in connection with the IL13Rα2 License.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

In addition, equity grants made under the Original License were acknowledged, and the anti-dilution provisions of the Original License were carried forward.

For the year ended, December 31, 2020, Mustang expensed a non-refundable milestone payment of $ 0.3 million in connection with their public underwritten offerings.

There was no expense recorded for the year ended December 31, 2019.

Spacer License with City of Hope

Pursuant to the Spacer License, Mustang

and COH acknowledge that an upfront fee was paid under the Original License.

In addition, an annual maintenance fee will continue

No royalties are due if the Spacer technology is used in conjunction with a CD123 CAR or an IL13Rα2 CAR, and royalty

payments in the low single digits are due on net sales of licensed products if the Spacer technology is used in conjunction with

other intellectual property.

Mustang is obligated to pay COH a percentage (in the mid-thirties) of certain revenues received in

connection with a sublicense.

In addition, equity grants made under the Original License were acknowledged, and the anti-dilution

provisions of the Original License were carried forward.

During the years ended December 31, 2019 and 2018, Mustang recorded

no expense in connection with the Spacer License.

Pursuant to the Spacer License, Mustang and COH acknowledge that an upfront fee was paid under the Original License.

In addition, an annual maintenance fee will continue to apply.

No royalties are due if the Spacer technology is used in conjunction with a CD123 CAR or an IL13Rα2 CAR, and royalty payments in the low single digits are due on net sales of licensed products if the Spacer technology is used in conjunction with other intellectual property.

Mustang is obligated to pay COH a percentage (in the mid-thirties) of certain revenues received in connection with a sublicense.

In addition, equity grants made under the Original License were acknowledged, and the anti-dilution provisions of the Original License were carried forward.

For the year ended December 31, 2020, Mustang expensed a non-refundable milestone payment of $ 0.3 million in connection with their public underwritten offerings.

There was no expense recorded for the year ended December 31, 2019.

IV/ICV Agreement with City of Hope

On February 17, 2017, Mustang entered

into an exclusive license agreement (the “IV/ICV Agreement”) with COH to acquire intellectual property rights in patent

applications related to the intraventricular and intracerebroventricular methods of delivering T cells that express CARs.

to the IV/ICV Agreement, Mustang paid COH an upfront fee of $0.1 million in March 2017.

COH is eligible to receive up to approximately

$0.1 million in milestone payments upon the achievement of a certain milestone as well as an annual maintenance fee.

Royalty payments

in the low-single digits are due on net sales of licensed products and services.

During the years ended December 31, 2019

and 2018 Mustang recorded no expense in connection with the IV/ICV Agreement.

Fred Hutchinson Cancer Research Center

License (MB-106)

On July 3, 2017, Mustang entered into

an exclusive, worldwide licensing agreement with Fred Hutchinson Cancer Research Center (“Fred Hutch”) for the use

of a CAR T therapy related to autologous T cells engineered to express a CD20-specific chimeric antigen receptor (“CD20 Technology

License”).

Pursuant to the CD20 Technology License, Mustang paid Fred Hutch an upfront fee of $0.3 million and will owe an

annual maintenance fee of $50,000 on each anniversary of the license until the achievement by Mustang of regulatory approval of

a licensed product using CD20 Technology.

Additional payments are due for the achievement of certain development milestones totaling

$39.1 million and royalty payments in the mid-single digits are due on net sales of licensed products.

During the years ended December 31,

2019 and 2018 Mustang recorded no expense in connection with the CD20 Technology License.

On February 17, 2017, Mustang entered into an exclusive license agreement (the “IV/ICV Agreement”) with COH to acquire intellectual property rights in patent applications related to the intraventricular and intracerebroventricular methods of delivering T cells that express CARs.

Pursuant to the IV/ICV Agreement, Mustang paid COH an upfront fee of $ 0.1 million in March 2017.

COH is eligible to receive up to approximately $ 0.1 million in milestone payments upon the achievement of a certain milestone as well as an annual maintenance fee.

Royalty payments in the low-single digits are due on net sales of licensed products and services.

During the years ended December 31, 2020 and 2019, Mustang recorded no expense in connection with the IV/ICV Agreement.

Fred Hutchinson Cancer Research Center License (MB-106)

On July 3, 2017, Mustang entered into an exclusive, worldwide licensing agreement with Fred Hutchinson Cancer Research Center (“Fred Hutch”) for the use of a CAR T therapy related to autologous T cells engineered to express a CD20-specific chimeric antigen receptor (“CD20 Technology License”).

Pursuant to the CD20 Technology License, Mustang paid Fred Hutch an upfront fee of $ 0.3 million and will owe an annual maintenance fee of $ 50,000 on each anniversary of the license until the achievement by Mustang of regulatory approval of a licensed product using CD20 Technology.

Additional payments are due for the achievement of certain development milestones totaling $ 39.1 million and royalty payments in the mid-single digits are due on net sales of licensed products.

During the years ended December 31, 2020 and 2019 Mustang recorded expenses totaling $ 0.3 million and nil , respectively, in connection with the CD20 Technology License.

Harvard College License

On November 20, 2017, Mustang entered

into an exclusive, worldwide license agreement with President and Fellows of Harvard College (the “Harvard Agreement”)

for the use of gene editing, via the use of CRISPR/Cas9, to be used in enhancing the efficacy of chimeric antigen receptor T (CAR

T) cell therapies for solid tumor indications and to generate universal off the shelf CAR T cell therapies for both liquid and

solid tumor indications.

Pursuant to the Harvard Agreement, Mustang paid Harvard College an upfront fee of $0.3 million and will

owe an annual maintenance fee of $25,000 and $50,000 for calendar years 2018 and 2019, respectively, and $100,000 for each subsequent

calendar year during the term of the agreement.

Additional payments are due for the achievement of seven development milestones

totaling $16.7 million and royalty payments in the low-single digits are due on the net sales of licensed products.

years ended December 31, 2019 and 2018 Mustang recorded no expense in connection with the Harvard College License.

In November 2019, Mustang terminated

the Harvard Agreement.

Licenses with the University of North

On November 30, 2017, Tamid entered

into three exclusive AAV gene therapies licensing arrangements with the University of North Carolina at Chapel Hill (“UNC”).

The preclinical product candidates acquired through these licenses target ocular manifestations of Mucopolysaccharidosis type

1 (MPS1), dysferlinopathies and corneal transplant rejections.

The three therapies were developed in the lab of Matthew Hirsch,

Ph.D., Assistant Professor, Ophthalmology at the UNC Gene Therapy center.

In December 2019, Tamid discontinued

the development the development of all three candidates and terminated the related licenses and clinical trial agreements with

On November 20, 2017, Mustang entered into an exclusive, worldwide license agreement with President and Fellows of Harvard College (the “Harvard Agreement”) for the use of gene editing, via the use of CRISPR/Cas9, to be used in enhancing the efficacy of chimeric antigen receptor T (CAR T) cell therapies for solid tumor indications and to generate universal off the shelf CAR T cell therapies for both liquid and solid tumor indications.

Pursuant to the Harvard Agreement, Mustang paid Harvard College an upfront fee of $ 0.3 million and will owe an annual maintenance fee of $ 25,000 and $ 50,000 for calendar years 2018 and 2019, respectively, and $ 100,000 for each subsequent calendar year during the term of the agreement.

Additional payments are due for the achievement of seven development milestones totaling $ 16.7 million and royalty payments in the low-single digits are due on the net sales of licensed products.

During the years ended December 31, 2020 and 2019, Mustang recorded no expense in connection with the Harvard Agreement.

Mustang terminated the Harvard Agreement in January 2020.

SIRION Biotech GmbH - LentiBOOST TM (MB-207)

In October, 2020, Mustang announced a worldwide licensing agreement with SIRION Biotech (“SIRION”) for the rights to SIRION’s LentiBOOST TM technology for the development of MB-207, Mustang’s lentiviral gene therapy for the treatment of previously transplanted patients with X-linked severe combined immunodeficiency (the “SIRION Technology License”).

Pursuant to the SIRION Technology License, which requires payment in Euro, the Company paid SIRION a one-time upfront fee of $ 0.1 million (€ 0.1 million) during 2020.

In addition, five future development milestone payments totaling up to approximately $ 5.6 million (€ 4.7 million) in the aggregate are due upon achievement of certain milestones.

Additional milestone payments totaling up to $ 4.1 million (€ 3.5 million) in the aggregate are due in connection with the achievement of three commercial milestones and low- to mid-single digit royalties are due on aggregate cumulative worldwide net sales of licensed products.

For the year ended December 31, 2020, Mustang expensed an up-front payment of $ 0.1 million.

There was no expense recorded for the year ended December 31, 2019.

Effective May 6, 2020, Oncogenuity entered into a license agreement with the Trustees of Columbia University in the City of New York (“Columbia”) to develop novel oligonucleotides for the treatment of genetically driven cancers (the “Columbia License”).

The proprietary platform produces oligomers, known as “ONCOlogues.”

As consideration for the Columbia License, Oncogenuity paid an upfront fee of $ 0.3 million, and Fortress transferred to Columbia 1,000,000 shares of Oncogenuity common stock, representing 10.00 % ownership of Oncogenuity.

In connection with the share transfer, Oncogenuity also provided Columbia with limited anti-dilution protection.

Oncogenuity valued the stock grant to Columbia utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 41.7 %, weighted average cost of capital of 20.5 %, and net of debt utilized, resulting in a value of $ 0.021 per share or $ 21,000 for the year ended December 31, 2020.

Since a portion of the acquisition of the license was settled through the transfer of shares of Oncogenuity's common stock, this transaction fell within the scope of ASC Topic 718 , Compensation-Stock Compensation , since equity was transferred in exchange for goods (the license).

Specifically, Oncogenuity recorded the cost of the license as a non-employee share based payment, measured at the grant date fair value of the common stock.

The common shares were equity-classified.

The anti-dilution provision was concluded to represent a performance condition tied to a future liquidity event, which was not considered as probable to occur at December 31, 2020, because it was deemed outside of Oncogenuity’s control.

Development milestone payments totaling up to approximately $ 18.0 million in the aggregate are due upon achievement of certain milestones in connection with the initial indication.

Additional milestone payments totaling up to $ 15.3 million in the aggregate are due in connection with product development milestones for subsequent indications.

A $ 15.0 million sales milestone is due upon the achievement of a licensed product sales threshold, and low- to mid-single digit royalties are due on aggregate cumulative worldwide net sales of licensed products.

For the year ended December 31, 2020, Oncogenuity recorded expense of $ 0.3 million in research and development - licenses acquired in the Company’s Consolidated Statement of Operations.

Licenses with the University of North Carolina

On November 30, 2017, Tamid entered into three exclusive AAV gene therapies licensing arrangements with the University of North Carolina at Chapel Hill (“UNC”).

The preclinical product candidates acquired through these licenses target ocular manifestations of Mucopolysaccharidosis type 1 (MPS1), dysferlinopathies and corneal transplant rejections.

The three therapies were developed in the lab of Matthew Hirsch, Ph.D., Assistant Professor, Ophthalmology at the UNC Gene Therapy center.

In December 2019, Tamid discontinued the development of all three candidates and terminated the related licenses and clinical trial agreements with UNC.

For the years ended December 31, 2020 and 2019, Tamid recorded no expense in connection with these licenses.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

Sponsored Research and Clinical Trial Agreements

On January 25, 2018, Aevitas entered

into a Sponsored Research Agreement with the University of Massachusetts (“UMass SRA”) for certain continued research

and development activities related to the development of adeno-associated virus (“AAV”) gene therapies in complement-mediated

For the Year Ended December 31,

($ in thousands)

UMass - adeno-associated virus ("AAV")

On January 25, 2018, Aevitas entered into a Sponsored Research Agreement with the University of Massachusetts (“UMass SRA”) for certain continued research and development activities related to the development of adeno-associated virus (“AAV”) gene therapies in complement-mediated diseases.

The total amount to be funded by Aevitas under the UMass SRA is $ 0.8 million.

Pursuant to the terms of the UMass SRA,

Aevitas paid $0.8 million which was due upon execution.

For the years ended December 31, 2019 and 2018, Aevitas recorded expense

of approximately nil and $0.8 million, respectively, in connection with the UMass SRA.

The expense was recorded in research and

development expenses in the Company’s Consolidated Statements of Operations.

On July 24, 2018, Aevitas entered

into a Sponsored Research Agreement with the Trustees of the University of Pennsylvania (“UPenn SRA”) for certain continued

research and development activities related to the development of AAV gene therapies in complement-mediated diseases.

amount to be funded by Aevitas under the UPenn SRA is $2.0 million.

Pursuant to the terms of the UPenn SRA, Aevitas paid $0.3 million

which was due upon execution.

For the years ended December 31, 2019 and 2018, Aevitas recorded expense of approximately $1.1

million and $0.5 million, respectively, in connection with the UPenn SRA.

The expense was recorded in research and development

expenses in the Company’s Consolidated Statements of Operations.

On September 1, 2019, Aevitas entered

into a Sponsored Research Arrangement (“SRA”) with Duke University School of Medicine (“Duke”).

the year ended December 31, 2019, Aevitas recorded approximately $0.1 million for the purpose of conducting a study to identify

a dose range for AAV8 vectors in Dry Age-related Macular Degeneration (“Dry AMD”) in research and development expense

on the consolidated statement of operations.

No expense related to this SRA was recorded in 2018.

On March 12, 2018, Caelum entered

into a Sponsored Research Agreement with Columbia University to conduct preclinical research in connection with CAEL-101.

cost of the study approximates $0.1 million.

For the year ended December 31, 2018, Caelum recorded expense of approximately

$0.1 million in connection with the agreement in research and development expense in the Company’s Consolidated Statements

of Operations.

In January 2019, in connection with the Alexion DOSPA the Company ceased to consolidate Caelum (see Note 4).

In October 2016, Cellvation entered

research funding agreement with the University of Texas in connection with the license for a method and apparatus for conditioning

cell populations for cell therapies.

In connection with this agreement Cellvation agreed to fund $0.8 million of research quarterly

through March 31, 2018.

Pursuant to the terms of the UMass SRA, Aevitas paid $ 0.8 million which was due upon execution.

On May 31, 2020, a First Amendment to the UMass SRA was signed and the total amount to be funded was $ 0.7 million, including $ 0.4 million due within 30 days of execution.

For the years ended December 31, 2020 and 2019, Aevitas recorded expense of approximately $ 0.4 million and nil , respectively, in connection with the UMass SRA.

The expense was recorded in research and development expenses in the Company’s Consolidated Statement of Operations.

On July 24, 2018, Aevitas entered into a Sponsored Research Agreement with the Trustees of the University of Pennsylvania (“UPenn SRA”) for certain continued research and development activities related to the development of AAV gene therapies in complement-mediated diseases.

The total amount to be funded by Aevitas under the UPenn SRA is $ 2.0 million.

Pursuant to the terms of the UPenn SRA, Aevitas paid $ 0.3 million which was due upon execution.

For the years ended December 31, 2020 and 2019, Aevitas recorded expense of approximately $ 0.6 million and $ 1.1 million, respectively, in connection with the UPenn SRA.

The expense was recorded in research and development expenses in the Company’s Consolidated Statement of Operations.

On September 1, 2019, Aevitas entered into a Sponsored Research Arrangement (“SRA”) with Duke University School of Medicine (“Duke”).

For the years ended December 31, 2020 and 2019, Aevitas recorded approximately nil and $ 0.1 million, respectively, for the purpose of conducting a study to identify a dose range for AAV8 vectors in Dry Age-related Macular Degeneration (“Dry AMD”) in research and development expense on the Consolidated Statement of Operations.

In October 2016, Cellvation entered research funding agreement with the University of Texas in connection with the license for a method and apparatus for conditioning cell populations for cell therapies.

In connection with this agreement Cellvation agreed to fund $ 0.8 million of research quarterly through March 31, 2018.

The agreement was revised effective May 1, 2017, with quarterly payments extended through December 31, 2018.

For the years ended December 31, 2019 and 2018, Cellvation recorded an expense of $0.1 million and $0.3 million, respectively,

representing amounts due under this arrangement.

In connection with its license agreement

with NeuPharma, Checkpoint entered into a Sponsored Research Agreement with NeuPharma for certain research and development activities.

Effective January 11, 2016, TGTX, a related party, agreed to assume all costs associated with this Sponsored Research Agreement

and paid Checkpoint for all amounts previously paid by the Company.

For the year ended December 31, 2019 and 2018, approximately

nil and $35,000, respectively, was recognized in revenue from a related party in connection with the Sponsored Research Agreement

in the Consolidated Statements of Operations.

PepVax Clinical Research and Support Agreements

March 2016, Helocyte entered into an Investigator-Initiated Clinical Research Support Agreement, as amended, with the

COH, to support a Phase 2 clinical study of its PepVax immunotherapy for CMV control in allogeneic stem cell transplant

recipients (“PepVax Research Agreement”).

The Phase 2 study is additionally supported by grants from the National

Institutes of Health/National Cancer Institute (“NCI”).

During 2018, Helocyte elected to discontinue the further

development of its HLA-restricted, single-antigen PepVax program and as such ceased to incur costs associated with this

For the years ended December 31, 2019 and 2018, Helocyte recorded nil and $0.1 million, respectively, in

connection with the PepVax Research Agreement, recorded in research and development expenses in the Company’s

Consolidated Statements of Operations.

In 2018 Helocyte discontinued the development of PepVax and terminated this

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

ConVax (Pentamer) Sponsored Research

On May 1, 2017,

Helocyte and COH entered in a Sponsored Research Agreement for preclinical studies in connection with the development of ConVax.

In June 2017, Helocyte made an upfront payment of $1.5 million to fund the development plan, the payment was recorded as

a prepayment on the Consolidated Balance Sheets.

For the years ended December 31, 2019 and 2018, Helocyte recorded approximately

nil and $1.3 million, respectively, in research and development expenses in the Company’s Consolidated Statements of Operations.

This agreement expired during 2018.

For the years ended December 31, 2019

and 2018 Mustang recorded the following expense in research and development for sponsored research and clinical trial agreements:

For the years ended December 31, 2020 and 2019, Cellvation recorded an expense of nil and $ 0.1 million, respectively, representing amounts due under this arrangement.

For the years ended December 31, 2020 and 2019 Mustang recorded the following expense in research and development for sponsored research and clinical trial agreements:

For the Year Ended December 31,

($ in thousands)

For the Years Ended

CAR T development (multiple programs)

MB-102 (CD123 CAR T for AML)

MB-101 (IL13Rα2 CAR T for Glioblastoma)

Manufacturing License

MB-107 (XSCID)

MB-106 (CD20 CAR T for GBM & Metastatic Breast Cancer to Brain)

Beth Israel Deaconess Medical Center

CRISPR (multiple programs)

City of Hope National Medical Center

CD123 (MB-102)

IL13Rα2 (MB-101)

Manufacturing

HER2 (MB-103)

PSCA (MB-105)

Beth Israel Deaconess Medical Center - CRISPR

Jude Children's Research Hospital - XSCID (MB-107)

Fred Hutchinson Cancer Research Center - CD20 (MB-106)

City of Hope Sponsored Research Agreement

In March 2015, in connection with

Mustang’s license with COH for the development of CAR T, Mustang entered into a Sponsored Research Agreement in which Mustang

will fund continued research in the amount of $2.0 million per year, payable in four equal annual installments, until 2020.

research covered under this arrangement is for IL13Rα2 (MB-101), CD123 (MB-102) and the Spacer technology.

For the years

ended December 31, 2019 and 2018, Mustang incurred expense of $2.0 million and $2.0 million, respectively and recorded as

research and development expense in the Company’s Consolidated Statement of Operations.

CD123 (MB-102) Clinical Research Support

On February 17, 2017, Mustang entered

into a Clinical Research Support Agreement for CD123.

Pursuant to the terms of this agreement, Mustang made an upfront payment

of approximately $20,000 and will contribute an additional $0.1 million per patient in connection with the on-going investigator-initiated

In March 2015, in connection with Mustang’s license with COH for the development of CAR T, Mustang entered into a Sponsored Research Agreement in which Mustang will fund continued research in the amount of $ 2.0 million per year, payable in four equal annual installments, until 2020.

The research covered under this arrangement is for IL13Rα2 (MB-101), CD123 (MB-102) and the Spacer technology.

For the years ended December 31, 2020 and 2019, Mustang incurred expense of $ 0.5 million and $ 2.0 million, respectively and recorded as research and development expense in the Company’s Consolidated Statement of Operations.

CD123 (MB-102) Clinical Research Support Agreement

On February 17, 2017, Mustang entered into a Clinical Research Support Agreement for CD123.

Pursuant to the terms of this agreement, Mustang made an upfront payment of approximately $ 20,000 and will contribute an additional $ 0.1 million per patient in connection with the on-going investigator-initiated study.

Further, Mustang agreed to fund approximately $ 0.2 million over three years pertaining to the clinical development of CD123.

For the years ended December 31, 2019 and 2018 Mustang recorded approximately $1.2 million and $0.8 million, respectively,

in research and development expenses in the Company’s Consolidated Statements of Operations.

IL13Rα2 (MB-101) Clinical Research

Support Agreement

Also, on February 17, 2017, Mustang

entered into a Clinical Research Support Agreement for IL13Rα2 (“IL13Rα2 CRA”).

Pursuant to the terms of

this agreement Mustang made an upfront payment of approximately $9,300 and will contribute an additional $0.1 million per patient

in connection with the on-going investigator-initiated study.

Further, Mustang agreed to fund approximately $0.2 million over three

years pertaining to the clinical development of IL13Rα2.

For the years ended December 31, 2019 and 2018, Mustang recorded

approximately $0.9 million and $1.1 million, respectively, in research and development expenses under the IL13Rα2 CRA in

the Company’s Consolidated Statements of Operations.

For the years ended December 31, 2020 and 2019, Mustang recorded approximately $ 0.4 million and $ 1.2 million, respectively, in research and development expenses in the Company’s Consolidated Statements of Operations.

CS1(MB-104) Clinical Research Support Agreement

In June 2020, Mustang entered into a clinical research and support agreement with COH in connection with an Investigator-sponsored study conducted under an Institutional Review Board-approved, investigator-initiated protocol entitled:

"Phase I Study to Evaluate Cellular Immunotherapy Using Memory-Enriched T Cells Lentivirally Transduced to Express a CS1-Targeting, Hinge-Optimized, 41BB-Costimulatory Chimeric Antigen Receptor and a Truncated EGFR Following Lymphodepleting Chemotherapy in Adult Patients with CS1+ Multiple Myeloma."

The CAR T being studied under this protocol has been designated by Mustang as MB-104.

Under the terms of the agreement Mustang will reimburse COH for costs associated with this trial not to exceed $ 2.4 million.

The agreement will expire upon the delivery of the final study report or earlier.

During the year ended December 31, 2020, Mustang recorded approximately $ 0.9 million in research and development expenses in the Company’s Consolidated Statement of Operations pursuant to this agreement.

IL13Rα2 (MB-101) Clinical Research Support Agreements

On February 17, 2017, Mustang entered into a Clinical Research Support Agreement for IL13Rα2 (the “IL13Rα2 GBM CRA”).

Pursuant to the terms of this agreement Mustang made an upfront payment of approximately $ 9,300 and will contribute an additional $ 0.1 million per patient in connection with the on-going investigator-initiated study.

Further, Mustang agreed to fund approximately $ 0.2 million over three years pertaining to the clinical development of IL13Rα2.

In October 2020, Mustang entered into a Clinical Research Support Agreement for the IL13Rα2 directed CAR T program for adult patients with Leptomeningeal Glioblastoma, Ependymoma or Medulloblastoma (the “IL13Rα2 Leptomeningeal CRA”).

Pursuant to the terms of the IL13Rα2 Leptomeningeal CRA, Mustang made an upfront payment of $ 29,375 and will contribute an additional $ 0.1 million per patient in connection with the on-going investigator-initiated study.

Further, the Company agreed to fund approximately $ 0.2 million annually pertaining to the clinical development of IL13Rα2.

For the years ended December 31, 2020 and 2019, Mustang recorded approximately $ 0.5 million and $ 0.9 million, respectively, in research and development expenses under the IL13Rα2 CRAs in the Company’s Consolidated Statement of Operations.

HER2 (MB-103) Clinical Research Support Agreement

In September 2020, Mustang entered into a clinical research support agreement with COH in connection with an Investigator-sponsored study conducted under an Institutional Review Board-approved, investigator-initiated protocol entitled:

“Phase I Study of Cellular Immunotherapy using Memory-Enriched T Cells Lentivirally Transduced to Express a HER2-Specific, Hinge-Optimized, 41BB-Costimulatory Chimeric Receptor and a Truncated CD19 for Patients with Recurrent/Refractory Malignant Glioma.” The CAR T being studied under this protocol has been designated as MB-103.

Under the terms of the agreement Mustang will pay COH $ 29,375 upon execution and will reimburse COH for costs associated with this trial not to exceed $ 3.0 million.

The agreement will expire upon the delivery of a final study report or earlier.

For the year ended December 31, 2020, Mustang recorded $ 1.5 million in research and development expenses in the Company’s Consolidated Statement of Operations pursuant to this agreement.

PSCA (MB-105) Clinical Research Support Agreement

In October 2020, Mustang entered into a clinical research support agreement with COH in connection with an Investigator-sponsored study conducted under an Institutional Review Board-approved, investigator-initiated protocol entitled:

“A Phase 1b study to evaluate PSCA-specific chimeric antigen receptor (CAR)-T cells for patients with metastatic castration resistant prostate cancer.” The CAR T being studied under this protocol has been designated as MB-105.

Under the terms of the agreement Mustang will pay COH $ 33,000 upon execution and will reimburse COH for costs associated with this trial not to exceed $ 2.3 million.

The agreement will expire upon the delivery of a final study report or earlier.

For the year ended December 31, 2020, Mustang recorded $ 0.2 million in research and development expenses in the Company’s Consolidated Statement of Operations pursuant to this agreement.

City of Hope Sponsored Research Agreement - Manufacturing

On January 3, 2018, Mustang entered

into a Sponsored Research Agreement with COH to optimize and develop CAR T cell processing procedures.

Pursuant to the SRA, the

Company will fund continued research in the amount of $0.9 million for the program, which has an initial term of two (2) years.

For the years ended December 31, 2019 and 2018 Mustang recorded approximately $0.5 million and $0.5 million, respectively,

in research and development expenses in the Company’s Consolidated Statements of Operations.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

CRISPR Sponsored Research Agreement

with Beth Israel Deaconess Medical Center, Inc.

On November 28, 2017, Mustang entered

into a Sponsored Research Agreement with Beth Israel Deaconess Medical Center Inc.

(“BIDMC”) to perform research relating

to gene editing, via the use of CRISPR/Cas9, to be used in enhancing the efficacy of chimeric antigen receptor T (CAR T) cell therapies

for solid tumor indications and to generate universal off the shelf CAR T cell therapies for both liquid and solid tumor indications.

On January 3, 2018, Mustang entered into a Sponsored Research Agreement (“SRA”) with COH to optimize and develop CAR T cell processing procedures.

Pursuant to the SRA, Mustang funded continued research in the amount of $ 0.9 million for the program, with an initial term of two (2) years.

The SRA expired in January 2020.

For the years ended December 31, 2020 and 2019, Mustang recorded approximately nil and $ 0.5 million, respectively, in research and development expenses in the Company’s Consolidated Statements of Operations.

CRISPR Sponsored Research Agreement with Beth Israel Deaconess Medical Center, Inc.

On November 28, 2017, Mustang entered into a Sponsored Research Agreement with Beth Israel Deaconess Medical Center Inc.

(“BIDMC”) to perform research relating to gene editing, via the use of CRISPR/Cas9, to be used in enhancing the efficacy of CAR T cell therapies for solid tumor indications and to generate universal off the shelf CAR T cell therapies for both liquid and solid tumor indications.

Mustang agreed to fund approximately $ 0.8 million over a three-year period.

Mustang recorded $0.1 million and $0.1 million in 2019

and 2018, respectively, related to this agreement in research and development expenses in the Company’s Consolidated Statements

of Operations.

The CRISPR license was terminated in 2019, see Note 7.

CD20 (MB-106) Clinical Trial Agreement

with Fred Hutch

Also, on July 3, 2017, in conjunction

with the CD20 Technology License from Fred Hutch, Mustang entered into an investigator-initiated clinical trial agreement (“CD20

CTA”) to provide partial funding for a Phase 1/2 clinical trial at Fred Hutch evaluating the safety and efficacy of the CD20

Technology in patients with relapsed or refractory B-cell non-Hodgkin lymphomas.

In connection with the CD20 CTA, Mustang agreed

to fund up to $5.3 million of costs associated with the clinical trial, which commenced during the fourth quarter of 2017.

the years ended December 31, 2019 and 2018 Mustang recorded $0.8 million and $1.3 million of expense, respectively, related

to this agreement in research and development expenses in the Company’s Consolidated Statements of Operations.

MB-107 (XSCID)

Non-Interventional Services Agreement with St.

In December 2019, Mustang entered

into a Non-Interventional Services Agreement with Children’s CGMP, LLC (“CGMP”), an affiliate of St.

Jude Children’s

Research Hospital, pursuant to which CGMP provides lentiviral vector for non-clinical XSCID research purposes, as well as related

advisory services.

Mustang agreed to fund approximately $0.8 million upon execution of the agreement, which was recorded in research

and development expenses for the year ended December 31, 2019 in the Company’s Consolidated Statements of Operations.

On November 30, 2017, in connection

with its three separate license agreements with UNC, Tamid entered into a Sponsored Research Agreement with UNC (“UNC SRA”)

for certain continued research and development activities related to Nanodysferlin for treatment of Dysferlinopathy, and AAV-HLA-G

for corneal transplant rejection.

Mustang recorded nil and $ 0.1 million in 2020 and 2019, respectively, related to this agreement in research and development expenses in the Company’s Consolidated Statements of Operations.

In January 2019, Mustang terminated the SRA with BIDMC due to the departure of key personnel from BIDMC.

CD20 (MB-106) Clinical Trial Agreement with Fred Hutch

On July 3, 2017, in conjunction with the CD20 Technology License from Fred Hutch, Mustang entered into an investigator-initiated clinical trial agreement (“CD20 CTA”) to provide partial funding for a Phase 1/2 clinical trial at Fred Hutch evaluating the safety and efficacy of the CD20 Technology in patients with relapsed or refractory B-cell non-Hodgkin lymphomas.

In connection with the CD20 CTA, Mustang agreed to fund up to $ 5.3 million of costs associated with the clinical trial, which commenced during the fourth quarter of 2017.

In November 2020, the CD20 CTA was amended to include additional funding of approximately $ 0.8 million for the treatment of five patients with chronic lymphocytic leukemia.

For the years ended December 31, 2020 and 2019 Mustang recorded $ 1.8 million and $ 0.6 million of expense, respectively, related to this agreement in research and development expenses in the Company’s Consolidated Statements of Operations.

CD20 (MB-106) Sponsored Research Agreement – Manufacturing with Fred Hutch

On March 17, 2018, Mustang entered into a Sponsored Research Agreement (“SRA”) with Fred Hutch related to developing and optimizing processes and systems associated with CD20 cell processing.

Pursuant to the SRA, Mustang funded research in the amount of $ 0.6 million during the term of the SRA, which expired in March 2019.

For the years ended December 31, 2020 and 2019, Mustang recorded expense of nil and $ 0.2 million, respectively, in research and development expenses in the Statements of Operations pursuant to the terms of this agreement.

XSCID (MB-107) Data Transfer Agreement with St.

In June 2020, Mustang entered into a Data Transfer Agreement with St.

Jude under which Mustang will reimburse St.

Jude for costs associated with St.

Jude’s clinical trial for the treatment of infants with XSCID.

Pursuant to the terms of this agreement and for the year ended December 31, 2020, Mustang paid an upfront fee of $ 1.1 million, which was recorded in research and development expenses in the Company’s Consolidated Statement of Operations.

Mustang will continue to reimburse St.

Jude for costs incurred in connection with this trial.

MB-107 (XSCID) Non-Interventional Services Agreement with Children’s CGMP

In December 2019, Mustang entered into a Non-Interventional Services Agreement with Children's CGMP, LLC ("Children’s"), an affiliate of St.

Jude Children's Research Hospital, pursuant to which Children’s provides lentiviral vector for non-clinical XSCID research purposes, as well as related advisory services.

Mustang agreed to fund approximately $ 0.8 million upon execution of the agreement, which was recorded in research and development expenses for the year ended December 31, 2019 in the Company's Consolidated Statement of Operations.

Columbia Sponsored Research Agreement

Pursuant to the terms of the Columbia License, Oncogenuity will make semi-annual research payments to Columbia over a five year period ending in November 2024;

such payments not to exceed $ 4.8 million.

For the year ended December 31, 2020, Oncogenuity recorded expense of $ 0.5 million in research and development in the Company’s Consolidated Statements of Operations.

No expense was recorded in 2019.

University of Oxford Sponsorship Agreement

On December 16, 2020 Oncogenuity entered into an agreement with The Chancellor Masters and Scholars of the University of Oxford (“Oxford”).

Under the terms of the agreement Oxford will engage in preclinical development of antisense oligonulcleotides as a therapy in certain indications.

In connection with the agreement Oncogenuity agreed to fund research for approximately 18 months for up to of $ 0.6 million ( £ 0.4 million).

Oncogenuity made an up-front payment of $ 0.1 million ( £ 0.1 million) in January 2021.

On November 30, 2017, in connection with its three separate license agreements with UNC, Tamid entered into a Sponsored Research Agreement with UNC (“UNC SRA”) for certain continued research and development activities related to Nanodysferlin for treatment of Dysferlinopathy, and AAV-HLA-G for corneal transplant rejection.

Total amount to be funded by Tamid under the UNC SRA is $ 2.3 million over a term of three years .

Pursuant to the terms of the UNC SRA, Tamid paid $ 0.8 million which was due upon execution.

For the years ended December 31,

2019 and 2018, Tamid recorded expense of nil and $0.7 million respectively in connection with the UNC SRA.

The expense was recorded

in research and development expenses in the Company’s Consolidated Statements of Operations.

Effective December 2019,

Tamid returned the license to UNC and ceased to incur costs associated with the development of products under this license.

On July 22, 2019 Journey purchased

Ximino®, a minocycline hydrochloride used to treat acne from a third party.

Pursuant to the terms and conditions of the Asset

Purchase Agreement (“APA”), total consideration for the APA is $9.4 million, comprised of an upfront payment of $2.4

million payable within 60 days after execution on September 22, 2019.

The remaining four payments totaling $7.0 million are

due in consecutive years commencing on the second anniversary of execution of the APA.

In addition, Journey is obligated to pay

royalties in the mid-single digits based on net sales of Ximino, subject to specified reductions.

The Company, in accordance with ASU 2017-01,

Business Combinations (Topic 805):

Clarifying the Definition of a Business , determined the purchase of Ximino did not constitute

the purchase of a business, and therefore recorded the purchase price of Ximino as an asset, to be amortized over the life of the

product, which is deemed to be seven years.

In addition, the Company determined pursuant to ASC 450, Contingencies, that

royalty payments in connection with the APA will be recorded when they become payable with a corresponding charge to cost of goods

In accordance with the terms of the APA

Journey will incur interest expense in the event of payment default.

As such per ASC 835-30 Interest-Imputed Interest, Journey

recorded an initial discount for imputed interest of $2.3 million.

As of December 31, 2019, Journey recorded an intangible

asset related to this transaction of $7.1 million which was recorded on the consolidated balance sheet of Fortress.

On August 31, 2018, JMC entered into

an agreement with a third party to acquire the exclusive rights to Exelderm®, a topical antifungal available in a cream and

This acquisition was recorded as an intangible asset and expense will be recognized over the expected life of Exelderm®

JMC commenced the sale of Exelderm®

in September 2018 and accordingly commenced the amortization of this cost.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

In January 2016, JMC entered into

a licensing agreement with a third party to distribute its prescription wound cream Luxamend ®

and paid an upfront fee of $50,000.

Additionally, in January 2016, JMC entered into a licensing agreement with a third party to distribute its prescription emollient

Ceracade ®

for the treatment of various types of dermatitis and paid an upfront fee of $0.3 million.

JMC commenced the sale

of both of these products during the year ended December 31, 2016 and accordingly commenced the amortization of these costs

over their respective three year estimated useful life.

In March 2015, JMC entered into a

license and supply agreement to acquire the rights to distribute Targadox®

a dermatological product for the treatment of acne.

For the years ended December 31, 2020 and 2019, Tamid recorded expense of nil and nil respectively in connection with the UNC SRA.

The expense was recorded in research and development expenses in the Company’s Consolidated Statements of Operations.

Effective December 2019, Tamid returned the license to UNC and ceased to incur costs associated with the development of products under this license.

On December 18, 2020, Journey entered an Asset Purchase Agreement with a third party (the “Anti-itch Product Agreement”) for a topical product that is indicated to treat scabies and skin itch conditions (“Anti-itch Product”).

Pursuant to the terms and conditions of the Anti-itch Product Agreement, Journey agreed to pay $ 4.0 million, comprised of a non-refundable deposit of $ 0.2 million upon the execution of the term sheet, a cash upfront payment of $ 1.8 million on January 1, 2021 and additional future payments of $ 0.5 million on April 1, 2021, $ 0.5 million on July 1, 2021, and $ 1.0 million on January 1, 2022.

There are no subsequent milestone payments or royalties beyond the aforementioned payments.

Commercial launch of this product is expected in the third quarter of 2021.

The Company, in accordance with ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business , determined the purchase of the Anti-itch Product did not constitute the purchase of a business, and therefore recorded the purchase price of the Anti-itch Product as an asset, to be amortized over the life of the product, which is deemed to be three years .

On July 29, 2020, Journey entered into a License and Supply Agreement with a third party to acquire intellectual property rights to an oral acne product that is indicated for the treatment of severe acne (the “Isotretinoin Agreement”).

Pursuant to the terms and conditions of the Isotretinoin Agreement, Journey agreed to pay $ 5.0 million, comprised of an upfront payment of $ 1.0 million paid upon execution with remaining payments due as follows:

$ 0.5 million upon achievement of a regulatory approval milestone and $ 0.5 million upon the delivery of the first order and $ 3.0 million due in $ 1.0 million installments, on the 18-month anniversary, the 24-month anniversary and the 36-month anniversary of execution of the Isotretinoin Agreement.

Three additional milestone payments totaling $ 17.0 million are contingent upon the achievement of certain net sales milestones.

Royalties in the low-double digits based on net sales, subject to specified reductions are also due.

Commercial launch of this product is expected in the second quarter of 2021.

The Company, in accordance with ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business , determined the purchase of the Isotretinoin Agreement did not constitute the purchase of a business, and therefore recorded the purchase price of the Isotretinoin Agreement as an asset, to be amortized over the life of the product, which is deemed to be five years .

On July 22, 2019 Journey purchased Ximino®, a minocycline hydrochloride used to treat acne from a third party.

Pursuant to the terms and conditions of the Asset Purchase Agreement (“APA”), total consideration for the APA is $ 9.4 million, comprised of an upfront payment of $ 2.4 million payable within 60 days after execution on September 22, 2019.

The remaining four payments totaling $ 7.0 million are due in consecutive years commencing on the second anniversary of execution of the APA.

In addition, Journey is obligated to pay royalties in the mid-single digits based on net sales of Ximino, subject to specified reductions.

The Company, in accordance with ASU 2017-01, Business Combinations (Topic 805):

Clarifying the Definition of a Business , determined the purchase of Ximino did not constitute the purchase of a business, and therefore recorded the purchase price of Ximino as an asset, to be amortized over the life of the product, which is deemed to be seven years .

In addition, the Company determined pursuant to ASC 450, Contingencies, that royalty payments in connection with the APA will be recorded when they become payable with a corresponding charge to cost of goods sold.

In accordance with the terms of the APA Journey will incur interest expense in the event of payment default.

As such per ASC 835-30 Interest-Imputed Interest, Journey recorded an initial discount for imputed interest of $ 2.3 million.

As of December 31, 2019, Journey recorded an intangible asset related to this transaction of $ 7.1 million which was recorded on the Consolidated Balance Sheet of Fortress.

On August 31, 2018, JMC entered into an agreement with a third party to acquire the exclusive rights to Exelderm®, a topical antifungal available in a cream and solution.

This acquisition was recorded as an intangible asset and expense will be recognized over the expected life of Exelderm® of 3 years .

JMC commenced the sale of Exelderm® in September 2018 and accordingly commenced the amortization of this cost.

In January 2016, JMC entered into a licensing agreement with a third party to distribute its prescription wound cream Luxamend ® and paid an upfront fee of $ 50,000 .

Additionally, in January 2016, JMC entered into a licensing agreement with a third party to distribute its prescription emollient Ceracade ® for the treatment of various types of dermatitis and paid an upfront fee of $ 0.3 million.

JMC commenced the sale of both of these products during the year ended December 31, 2016 and accordingly commenced the amortization of these costs over their respective three year estimated useful life.

In March 2015, JMC entered into a license and supply agreement to acquire the rights to distribute Targadox® a dermatological product for the treatment of acne.

JMC made an upfront payment of $ 1.3 million.

Further payments will be made based on a revenue sharing arrangement.

FDA approval for the manufacturing of this product in July 2016 and commenced sales of this product in October 2016.

The table below provides a summary of intangible

assets as of December 31, 2019 and 2018, respectively:

JMC received FDA approval for the manufacturing of this product in July 2016 and commenced sales of this product in October 2016.

The table below provides a summary of intangible assets as of December 31, 2020 and 2019, respectively:

Estimated Useful

($ in thousands)

Lives (Years)

December 31, 2020

December 31, 2019

Intangible assets –

asset purchases

Total Intangible assets – asset purchases

Accumulated amortization

Net intangible assets

The table below provides a summary for

the years ended December 31, 2019 and 2018, of recognized expense related to product licenses, which was recorded in costs

of goods sold on the Consolidated Statement of Operations (see Note 19):

The table below provides a summary for the years ended December 31, 2020 and 2019, of recognized expense related to product licenses, which was recorded in costs of goods sold on the Consolidated Statement of Operations (see Note 19):

($ in thousands)

Beginning balance at January 1, 2018

Amortization expense

Ending balance at December 31, 2018

Beginning balance at December 31, 2018

Purchase of Ximino 1

Amortization expense

Beginning balance at December 31, 2019

Isotretinoin Agreement 2

Anti-itch product license acquisition 3

Amortization expense

Ending balance at December 31, 2020

Includes an upfront payment of $2.4 million and four

payments totaling $7.0 million due in consecutive years commencing on the second anniversary of the execution of the APA.

payments were discounted by $2.3 million as a result of the long-term nature of such payments.

The future amortization of these intangible

assets is as follows ($ in thousands):

Exelderm®

Includes an upfront payment of $ 2.4 million and four payments totaling $ 7.0 million due in consecutive years commencing on the second anniversary of the execution of the APA.

Such payments were discounted by $ 2.3 million as a result of the long-term nature of such payments.

Includes an upfront payment of $ 1.0 million and a milestone payment of $ 0.5 million in 2020 and three payments totaling $ 3.5 million due at various points between 2021 through 2023.

Such payments were discounted by $ 0.3 million as a result of the long-term nature of such payments.

As of December 31, 2020, this asset has not yet been placed in service, therefore no amortization expense was recognized on this asset for the year ended December 31, 2020.

Journey expects the asset to be placed in service in the first half of 2021.

Once the asset is placed in service Journey will amortize the asset over five years , which represents its expected useful life.

Includes an upfront payment of $ 0.2 million and three payments totaling $ 2.8 million in 2021 and $ 1.0 million in 2022.

Such payments were discounted by $ 0.1 million as a result of the long-term nature of such payments.

As of December 31, 2020, this asset has not yet been placed in service, therefore no amortization expense was recognized on this asset for the year ended December 31, 2020.

The Company expects to launch this asset in Q3 2021.

Once the asset is placed in service Journey will amortize the asset over three years , which represents its expected useful life.

The future amortization of these intangible assets is as follows:

($ in thousands)

Year Ended December 31, 2021

3 unchanged sentences

Year Ended December 31, 2025

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

Intangible assets not yet placed in service

Debt and Interest

Total debt consists of the following as

of December 31, 2019 and December 31, 2018:

Total debt consists of the following:

($ in thousands)

11 unchanged sentences

September - 2021

O pus Credit Facility 1

September - 2021

M ustang Horizon Notes 2

Mustang Horizon Notes 2

October - 2022

C aelum Convertible Note, at fair value 4

January - 2019

C aelum Convertible Note, at fair value 4

August - 2025

Total notes payable

1 unchanged sentence

Total notes payable

Classified as short-term on the Company's Consolidated Balance Sheet as of December 31, 2018.

Classified as long-term on the Company's Consolidated Balance Sheet as of December 31, 2019.

Formerly the Opus Credit Facility (see Note 17).

Interest rate is 9.0 % plus one-month LIBOR Rate in excess of 2.5 %;

at December 31, 2019, $ 1.2 million is included in Notes payable, short-term on the Consolidated Balance Sheet.

As a result of a one year maturity date extension, the interest rate of 9.0 % takes effect in year 4 of the note.

These notes converted in January 2019 with Caelum's execution of the DOSPA with Alexion (see Note 4).

Maturity was extended into 2021 in January 2020.

On February 13, 2014, the Company

executed a promissory note in favor of IDB in the amount of $15.0 million (the “IDB Note”).

The Company borrowed $14.0

million against this note and used it to repay its prior loan from Hercules Technology Growth Capital, Inc.

The Company may

request revolving advances under the IDB Note in a minimum amount of $0.1 million (or the remaining amount of the undrawn balance

under the IDB Note if such amount is less than $0.1 million).

All amounts advanced under the IDB Note are due in full at the earlier

(i) August 1, 2020, as extended or (ii) on the IDB’s election following the occurrence and continuation

of an event of default.

The unpaid principal amount of each advance shall bear interest at a rate per annum equal to the rate payable

on the Company’s money market account plus a margin of 150 basis points.

At December 31, 2019, $ 6.0 million is included in Notes payable, short-term on the Consolidated Balance Sheet.

On August 27, 2020 (the “Closing Date”), Fortress, as borrower, entered into a $ 60.0 million senior secured credit agreement (the “Oaktree Agreement”) with Oaktree.

The Company borrowed the full $ 60.0 million in connection with the terms of the Oaktree Note on the Closing Date and used the bulk of the proceeds to repay its outstanding debt to other lenders (2017 Subordinated Notes, 2018 Venture Notes and 2019 Notes (previously the “Opus Credit Facility”)).

The Oaktree Note bears interest at a fixed annual rate of 11.0 %, payable quarterly and maturing on the fifth anniversary of the Closing Date, August 27, 2025 , the (“Maturity Date”).

The Company is required to make quarterly interest-only payments until the Maturity Date, at which point the outstanding principal amount is due.

The Company may voluntarily prepay the Oaktree Note at any time subject to a Prepayment Fee.

The Company is also required to make mandatory prepayments of the Oaktree Note under various circumstances.

No amounts paid or prepaid may be reborrowed without Oaktree consent.

The Oaktree Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, affiliate transactions, investments, acquisitions, mergers, dispositions, prepayment of permitted indebtedness, and dividends and other distributions, subject to certain exceptions.

These affirmative and negative covenants apply in different instances to Fortress itself, its private subsidiaries, its public subsidiaries, or certain combinations of the foregoing.

The limitations on dividends and other distributions have the practical effect of preventing any further issuances by the Company or its private subsidiaries of equity securities with cash dividends or redemption features.

In addition, the Oaktree Agreement contains certain financial covenants, including, among other things, (i) maintenance of minimum liquidity and (ii) a minimum revenue test that requires Journey’s annual revenue to be equal to or to exceed annual revenue projections set forth in the agreement.

Failure by the Company or Journey, as applicable, to comply with the financial covenants will result in an event of default, subject to certain cure rights of the Company.

The Company was in compliance with all applicable covenants under the Oaktree Note as of December 31, 2020.

The Oaktree Agreement contains customary events of default, in certain circumstances subject to customary cure periods.

These events of default apply in different instances to Fortress itself, its private subsidiaries, its public subsidiaries, or a certain combination of the foregoing.

Following an event of default and any cure period, if applicable, the Agent will have the right upon notice to accelerate all amounts outstanding under the Oaktree Agreement, in addition to other remedies available to the lenders as secured creditors of the Company.

The Oaktree Agreement grants a security interest in favor of the Agent, for the benefit of the lenders, in substantially all of the Company’s assets (consisting principally of the Company’s shareholdings in, and in some cases debt owing from, its partner companies) as collateral securing the Company’s obligations under the Oaktree Agreement, except for:

(i) certain interests in controlled foreign corporation subsidiaries of the Company;

(ii) the Company’s holdings in Avenue;

and (iii) those portions of the Company’s holdings in certain subsidiaries (plus Caelum) that are encumbered by pre-existing equity pledges to certain of the Company’s officers.

None of Fortress’ subsidiaries or partner companies is a party to the Oaktree Agreement, and the collateral package does not include the asets of any such subsidiaries or partner companies.

Pursuant to the terms of the Oaktree Agreement, on the Closing Date the Company paid Oaktree an upfront commitment fee equal to 3 % of the $ 60.0 million, or $ 1.8 million.

In addition, the Company paid a $ 35,000 Agency fee to the Agent, which was due on the Closing Date and will be due annually, together with fees of $ 2.5 million directly to third parties involved in the transaction.

In connection with the Oaktree Note, the Company issued warrants to Oaktree and certain of its affiliates to purchase up to 1,749,450 shares of common stock of the Company (see Note 14) with a relative fair value of $ 4.4 million.

As of December 31, 2020, the Company recorded the fees totaling $ 8.7 million ($ 1.8 million to Oaktree, $ 2.5 million of expenses paid to third-parties and $ 4.4 million representing the relative fair value of the Oaktree Warrants) to debt discount.

These costs will be amortized over the term of the Oaktree Note.

On February 13, 2014, the Company executed a promissory note in favor of IDB in the amount of $ 15.0 million (the “IDB Note”).

The Company borrowed $ 14.0 million against this note and used it to repay its prior loan from Hercules Technology Growth Capital, Inc.

The Company could request revolving advances under the IDB Note in a minimum amount of $ 0.1 million (or the remaining amount of the undrawn balance under the IDB Note if such amount were less than $ 0.1 million).

All amounts advanced under the IDB Note were due in full at the earlier of:

(i) August 1, 2020, as extended or (ii) on the IDB’s election following the occurrence and continuation of an event of default.

The unpaid principal amount of each advance shall bear interest at a rate per annum equal to the rate payable on the Company’s money market account plus a margin of 150 basis points.

The interest rate at December 31, 2019 was 2.25 %.

The IDB Note contains various representations and warranties customary for financings of this type.

The obligations of the Company under the

IDB Note are collateralized by a security interest in, a general lien upon, and a right of set-off against the Company’s

money market account of $15.0 million, which is recorded as restricted cash in the Company’s consolidated balance sheets,

pursuant to the Assignment and Pledge of Money Market Account, dated as of February 13, 2014 (the “Pledge Agreement”).

Pursuant to the Pledge Agreement, the Bank may, after the occurrence and continuation of an event of default under the IDB Note,

recover from the money market account all amounts outstanding under the IDB Note.

The Pledge Agreement contains various representations,

warranties, and covenants customary for pledge agreements of this type.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

The Company will default on the IDB Note

if, among other things, it fails to pay outstanding principal or interest when due.

Following the occurrence of an event of default

under the IDB Note, the Bank may:

(i) declare the entire outstanding principal balance of the IDB Note, together with all

accrued interest and other sums due under the IDB Note, to be immediately due and payable;

(ii) exercise its right of setoff

against any money, funds, credits or other property of any nature in possession of, under control or custody of, or on deposit

The obligations of the Company under the IDB Note were collateralized by a security interest in, a general lien upon, and a right of set-off against the Company’s money market account of $ 15.0 million, which was recorded as restricted cash in the Company's Consolidated Balance Sheets, pursuant to the Assignment and Pledge of Money Market Account, dated as of February 13, 2014 (the “Pledge Agreement”).

Pursuant to the Pledge Agreement, the Bank may, after the occurrence and continuation of an event of default under the IDB Note, recover from the money market account all amounts outstanding under the IDB Note.

The Pledge Agreement contained various representations, warranties, and covenants customary for pledge agreements of this type.

The Company could default on the IDB Note if, among other things, it failed to pay outstanding principal or interest when due.

Following the occurrence of an event of default under the IDB Note, the Bank may:

(i) declare the entire outstanding principal balance of the IDB Note, together with all accrued interest and other sums due under the IDB Note, to be immediately due and payable;

(ii) exercise its right of setoff against any money, funds, credits or other property of any nature in possession of, under control or custody of, or on deposit with IDB;

(iii) terminate the commitments of IDB;

and (iv) liquidate the money market account to reduce the Company’s

obligations to IDB.

On September 18, 2017, the maturity

on the IDB Note was extended to August 1, 2020.

and (iv) liquidate the money market account to reduce the Company’s obligations to IDB.

On September 18, 2017, the maturity on the IDB Note was extended to August 1, 2020 .

In January 2020, the maturity on the IDB Note was extended to August 1, 2021 .

The Company applied the 10% cash flow test pursuant to ASC 470 to calculate the difference between the present value of the

amended IDB Note’s cash flows and the present value of the original remaining cash flow and concluded that the results didn't

exceed the 10% factor, the debt modification is not considered substantially different and did not apply extinguishment accounting,

rather accounting for the modification on a prospective basis pursuant to ASC 470.

The Company only pays interest on the IDB Note

through maturity.

At December 31, 2019 and 2018, the

Company had approximately $14.9 million outstanding under its promissory note with IDB.

Helocyte Convertible Notes

During 2016 Helocyte entered into an agreement

with Aegis Capital Corp.

(“Aegis”) to raise up to $5.0 million in convertible notes.

The notes had an initial term

of 18 months, which could be extended at the option of the holder, on one or more occasions, for up to 180 days and accrue simple

interest at the rate of 5% per annum for the first 12 months and 8% per annum simple interest thereafter.

The notes are guaranteed

The outstanding principal and interest of the notes automatically converts into the type of equity securities sold

by Helocyte in the next sale of equity securities in which Helocyte realizes aggregate gross cash proceeds of at least $10.0 million

(before commissions or other expenses and excluding conversion of the notes) at a conversion price equal to the lesser of (a) the

lowest price per share at which equity securities of Helocyte are sold in such sale less a 33% discount and (b) a per share

price based on a pre-offering valuation of $50.0 million divided by the number of common shares outstanding on a fully-diluted

The outstanding principal and interest of the notes may be converted at the option of the holder in any sale of equity securities

that does not meet the $10.0 million threshold for automatic conversion using the same methodology.

The notes also automatically

convert upon a “Sale”

of Helocyte, defined as (a) a transaction or series of related transactions where one or

more non-affiliates acquires (i) capital stock of Helocyte or any surviving successor entity possessing the voting power to

elect a majority of the board of directors or (ii) a majority of the outstanding capital stock of Helocyte or the surviving

successor entity (b) the sale, lease or other disposition of all or substantially all of Helocyte’s assets or any other

transaction resulting in substantially all of Helocyte’s assets being converted into securities of another entity or cash.

Upon a Sale of Helocyte, the outstanding principal and interest of the notes automatically converts into common shares at a price

equal to the lesser of (a) a discount to the price per share being paid in the Sale of Helocyte equal to 33% or (b) a

conversion price per share based on a pre-sale valuation of $50.0 million divided by the fully-diluted common stock of Helocyte

immediately prior to the Sale of Helocyte (excluding the notes).

As of December 31, 2016, Helocyte

realized net proceeds in its four separate closings of $3.9 million after paying Aegis, its placement fee of $0.4 million, or approximately

10% of the net proceeds, and legal fees of approximately $0.1 million.

Additionally, Aegis received warrants (“Helocyte Warrants”)

to purchase the number of shares of Helocyte’s common stock equal to $0.4 million, divided by the price per share at which

any note sold to investors first converts into Helocyte’s common stock.

The warrants are issued at each closing.

Warrants, which were recorded as a liability in accordance with ASC 815, have a five-year term and have a per share exercise price

equal to 110% of the price per share at which any note sold to investors first converts into Helocyte’s common stock.

Offering expired on December 31, 2016.

Due to the complexity and number of embedded

features within each convertible note, and as permitted under accounting guidance, the Company elected to account for the convertible

notes and all the embedded features under the fair value option.

During the twelve months ended December 31,

2018, the Helocyte Convertible Notes matured, and were all repaid in full.

Opus Credit Facility Agreement

On September 14, 2016, Fortress entered

into a Credit Facility Agreement (the “Opus Credit Facility”) with Opus Point Healthcare Innovations Fund, LP (“OPHIF”).

Since Fortress’s Chairman, President and Chief Executive Officer (Lindsay A.

Rosenwald) and Fortress’s Executive Vice

President, Strategic Development (Michael S.

Weiss), are Co-Portfolio Managers and Partners of Opus Point Partners Management,

LLC (“Opus”), an affiliate of OPHIF, all of the disinterested directors of Fortress’s board of directors approved

the terms of the Credit Facility Agreement and accompanying Pledge and Security Agreement and forms of Note and Warrant (collectively,

the “Financing Documents”).

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

Pursuant to the Opus Credit Facility, Fortress was eligible

to borrow up to a maximum aggregate amount of $25.0 million from OPHIF and any other lender that joins the Credit Facility Agreement

from time to time (OPHIF and each subsequent lender, a “Lender”) under one or more convertible secured promissory

notes (each a “Note”) from September 14, 2016 until September 1, 2017 (the “Commitment Period”).

All amounts borrowed under the Credit Facility Agreement were required to be paid in full by September 14, 2018 (the “Maturity

Date”), however Fortress had the right to prepay the Notes at any time without penalty.

Pursuant to the Opus Credit Facility and

form of Note, each Note will bear interest at 12% per annum and interest will be paid quarterly in arrears commencing on December 1,

2016 and on the first business day of each September, December, March and June thereafter until the Maturity Date.

the occurrence and continuance of an event of default (as specified in Credit Facility Agreement and form of Note), each Note will

bear interest at 14% and be payable on demand.

The Lenders may elect to convert the principal and interest of the Notes at any

time into shares of Fortress’s common stock (“Common Stock”) at a conversion price of $10.00 per share.

are secured by shares of capital stock currently held by Fortress in certain Fortress Companies as set forth in the Pledge and

Security Agreement entered into between Fortress, its wholly owned subsidiary, FBIO Acquisition, Inc., and OPHIF (as collateral

agent on behalf of all the Lenders) on September 14, 2016 (the “Pledge and Security Agreement”).

Fortress may terminate the Opus Credit

Facility upon notice to the Lenders and payment of all outstanding obligations under the Credit Facility Agreement.

Notwithstanding

any early termination of the Credit Facility Agreement, within 15 days after termination of the Commitment Period, Fortress will

issue each Lender warrants (each a “Warrant”) pursuant to the terms of the Credit Facility Agreement and form of Warrant

to purchase their pro rata share of (a) 1,500,000 shares of Common Stock;

and (b) that number of shares of Common Stock

equal to the product of (i) 1,000,000, times (ii) the principal amount of all Notes divided by 25,000,000.

will have a five-year term and will be exercisable at a price of $3.00 per share.

On March 12, 2018, the Company and

OPHIF amended and restated the Opus Credit Facility (the “A&R Opus Credit Facility”).

The A&R Opus Credit Facility

extended the maturity date of the notes issued under the Opus Credit Facility from September 14, 2018 by one year to September 14,

In September 2019 the A&R Opus Credit Facility was amended to extend the maturity of the notes under the Opus Credit

Facility from September 14, 2019 to September 14, 2021.

The A&R Opus Credit Facility also permits the Company to

make portions of interest and principal repayments in the form of shares of the Company’s common stock and/or in common stock

of the Company’s publicly traded subsidiaries, subject to certain conditions.

Fortress retains the ability to prepay the

Notes at any time without penalty.

The notes payable under the A&R Opus Credit Facility continue to bear interest at 12% per

The Company applied the 10% cash flow test pursuant to ASC 470 to calculate the difference between the present value of the amended IDB Note’s cash flows and the present value of the original remaining cash flow and concluded that the results didn't exceed the 10% factor, the debt modification is not considered substantially different and therefore did not apply extinguishment accounting, rather it accounted for the modification on a prospective basis pursuant to ASC 470.

The Company only paid interest on the IDB Note through maturity.

During August 2020, the Company repaid the IDB Note utilizing the cash collateral securing the IDB Note, which was classified as restricted cash on the Company’s Consolidated Balance Sheet.

At December 31, 2020 and 2019, the Company had approximately nil and $ 14.9 million, respectively, outstanding under its promissory note with IDB.

2019 Notes (formerly the Opus Credit Facility)

On September 14, 2016, Fortress entered into a Credit Facility Agreement (the “Opus Credit Facility”) with Opus Point Healthcare Innovations Fund, LP (“OPHIF”).

Since Fortress’s Chairman, President and Chief Executive Officer (Lindsay A.

Rosenwald) and Fortress’s Executive Vice President, Strategic Development (Michael S.

Weiss), are Co-Portfolio Managers and Partners of Opus Point Partners Management, LLC (“Opus”), an affiliate of OPHIF, all of the disinterested directors of Fortress’s board of directors approved the terms of the Credit Facility Agreement and accompanying Pledge and Security Agreement and forms of Note and Warrant (collectively, the “Financing Documents”).

Pursuant to the Opus Credit Facility, Fortress was eligible to borrow up to a maximum aggregate amount of $ 25.0 million from OPHIF and any other lender that joins the Credit Facility Agreement from time to time (OPHIF and each subsequent lender, a “Lender”) under one or more convertible secured promissory notes (each a “Note”) from September 14, 2016 until September 1, 2017 (the “Commitment Period”).

All amounts borrowed under the Credit Facility Agreement were required to be paid in full by September 14, 2018 (the “Maturity Date”), however Fortress had the right to prepay the Notes at any time without penalty.

Pursuant to the Opus Credit Facility and form of Note, each Note will bear interest at 12 % per annum and interest will be paid quarterly in arrears commencing on December 1, 2016 and on the first business day of each September, December, March and June thereafter until the Maturity Date.

Upon the occurrence and continuance of an event of default (as specified in Credit Facility Agreement and form of Note), each Note will bear interest at 14 % and be payable on demand.

The Lenders may elect to convert the principal and interest of the Notes at any time into shares of Fortress’s common stock (“Common Stock”) at a conversion price of $ 10.00 per share.

All Notes are secured by shares of capital stock currently held by Fortress in certain Fortress Companies as set forth in the Pledge and Security Agreement entered into between Fortress, its wholly owned subsidiary, FBIO Acquisition, Inc., and OPHIF (as collateral agent on behalf of all the Lenders) on September 14, 2016 (the “Pledge and Security Agreement”).

Fortress may terminate the Opus Credit Facility upon notice to the Lenders and payment of all outstanding obligations under the Credit Facility Agreement.

Notwithstanding any early termination of the Credit Facility Agreement, within 15 days after termination of the Commitment Period, Fortress will issue each Lender warrants (each a “Warrant”) pursuant to the terms of the Credit Facility Agreement and form of Warrant to purchase their pro rata share of (a) 1,500,000 shares of Common Stock;

and (b) that number of shares of Common Stock equal to the product of (i) 1,000,000 , times (ii) the principal amount of all Notes divided by 25,000,000 .

The Warrants will have a five-year term and will be exercisable at a price of $ 3.00 per share.

On March 12, 2018, the Company and OPHIF amended and restated the Opus Credit Facility (the “A&R Opus Credit Facility”).

The A&R Opus Credit Facility extended the maturity date of the notes issued under the Opus Credit Facility from September 14, 2018 by one year to September 14, 2019.

In September 2019 the A&R Opus Credit Facility was amended to extend the maturity of the notes under the Opus Credit Facility from September 14, 2019 to September 14, 2021.

The A&R Opus Credit Facility also permits the Company to make portions of interest and principal repayments in the form of shares of the Company’s common stock and/or in common stock of the Company’s publicly traded subsidiaries, subject to certain conditions.

Fortress retains the ability to prepay the Notes at any time without penalty.

The notes payable under the A&R Opus Credit Facility continue to bear interest at 12 % per annum.

The A&R Opus Credit Facility was accounted for as a debt modification for the year ended December 31, 2018.

July 18, 2019, Fortress issued 396,825 common shares of Fortress at $1.26 per share to Dr.

The shares were

issued as a prepayment by Fortress of $500,000 of debt owed to Dr.

On July 18, 2019, Fortress issued 396,825 common shares of Fortress at $ 1.26 per share to Dr.

The shares were issued as a prepayment by Fortress of $ 500,000 of debt owed to Dr.

Rosenwald that was held in the name of OPHIF.

The prepayment

was made in the form of Fortress common stock, measured at the closing price on July 18, 2019, under that certain A&R

Opus Credit Facility.

As of December 31, 2019 and 2018,

$9.0 million and $9.5 million, respectively, was outstanding under the Opus Credit Facility.

Also, as of December 31, 2019

Opus dissolved and is in the process of distributing its assets among its Limited Partners.

While this dissolution will not impact

any of the terms under the Opus Credit Facility the Company is working with Opus to amend and restate the relevant documentation,

in order memorialize the distribution of assets.

The prepayment was made in the form of Fortress common stock, measured at the closing price on July 18, 2019, under that certain A&R Opus Credit Facility.

Effective December 31, 2019, OPHIF dissolved and distributed it assets among its limited partners.

Following the distribution, the $ 9.0 million facility comprised of separate notes (collectively, the “2019 Notes”) held by DAK Capital Inc.

($ 3.8 million);

Fortress’ Chairman, President and Chief Executive Officer Lindsay A.

Rosenwald, M.D.

($ 0.3 million);

Fortress's Executive Vice President, Strategic Development Michael S.

Weiss ($ 2.0 million);

and various entities and individuals affiliated with Dr.

Rosenwald and Mr.

Weiss ($ 2.9 million).

The terms of the 2019 Notes did not change in connection with such reallocations.

In August, 2020, the Company used certain proceeds from the Oaktree Note to pay off the $ 9.0 million balance previously outstanding under the 2019 Notes.

As of December 31, 2020 and 2019, nil and $ 9.0 million, respectively, was outstanding under the 2019 Notes.

IDB Letters of Credit

The Company has several letters of credit

(“LOC”) with IDB securing rent deposits for lease facilities totaling approximately $1.1 million.

The LOC’s are

secured by cash, which is included in restricted cash.

The Company has several letters of credit (“LOC”) with IDB securing rent deposits for lease facilities totaling approximately $ 1.6 million.

The LOC’s are secured by cash, which is included in restricted cash on the Company’s Consolidated Balance Sheet .

Interest paid on the letters of credit is 2 % per annum.

2017 Subordinated Note Financing

On March 31, 2017, the Company entered

into Note Purchase Agreements (the “Purchase Agreements”) with NAM Biotech Fund II, LLC I (“NAM Biotech Fund”)

and NAM Special Situations Fund I QP, LLC (“NAM Special Situations Fund”), both of which are accredited investors,

and sold subordinated promissory notes (the “Notes”) of the Company (the “2017 Subordinated Note Financing”)

in the aggregate principal amount of $3.25 million.

On March 31, 2017, the Company entered into Note Purchase Agreements (the “Purchase Agreements”) with NAM Biotech Fund II, LLC I (“NAM Biotech Fund”) and NAM Special Situations Fund I QP, LLC (“NAM Special Situations Fund”), both of which are accredited investors, and sold subordinated promissory notes (the “Notes”) of the Company (the “2017 Subordinated Note Financing”) in the aggregate principal amount of $ 3.25 million.

The Notes bear interest at the rate of 8 % per annum;

additionally, the Notes

accrue paid-in-kind interest at the rate of 7% per annum, which will be paid quarterly in shares of the Company’s common

stock and/or shares of common stock of one of the Company’s subsidiaries that are publicly traded, in accordance with the

terms of the Notes.

Each Note is due on the third anniversary of its issuance, provided that the Company may extend the maturity

date for two one-year periods in its sole discretion.

The 2017 Subordinated Note Financing is for a maximum of $40.0 million (which

the Company may, in its sole discretion, increase to $50.0 million).

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

National Securities Corporation (“NSC”),

a subsidiary of National and a related party, (see Note 17), pursuant to a Placement Agency Agreement entered into between the

Company, NAM Biotech Fund and NSC (the “NAM Placement Agency Agreement”) and a Placement Agency Agreement entered into

between the Company, NAM Special Situations Fund and NSC (together with the NAM Placement Agency Agreement, the “Placement

Agency Agreements”) acts as placement agent in the 2017 Subordinated Note Financing.

Pursuant to the terms of the Placement

Agency Agreements, NSC receives (in addition to reimbursement of certain expenses) an aggregate cash fee equal to 10% of the aggregate

sales price of the Notes sold in the 2017 Subordinated Note Financing to NAM Biotech Fund and NAM Special Situations Fund.

Placement Agent also receives warrants equal to 10% of the aggregate principal amount of the Notes sold in the 2017 Subordinated

Note Financing divided by the closing share price of the Company’s common stock on the date of closing (the “Placement

Agent Warrants”).

The Placement Agent Warrants are exercisable immediately at such closing share price for a period of five

The Placement Agent will have a right of first offer for a period of 12 months for any proposed issuance of the Company’s

capital stock in a private financing, subject to certain exceptions, and will also have the right to participate as an investor

in subsequent financings.

On March 31, 2017, the Company held

its first closing of the 2017 Subordinated Note Financing and received gross proceeds of $3.2 million.

NSC received a cash fee

of approximately $0.3 million and warrant to purchase 87,946 shares of the Company’s common stock at an exercise price of

per share $3.70.

On May 1, 2017, the Company held a

second closing of the 2017 Subordinated Note Financing and received gross proceeds of $8.6 million, before expenses.

a placement agent fee of approximately $0.9 million in the second closing and warrants to purchase 234,438 shares of the Company’s

common stock at an exercise price of $3.65 per share.

On May 31, 2017, the Company held

a third closing of the 2017 Subordinated Note Financing and received gross proceeds of $5.3 million, before expenses.

a placement agent fee of approximately $0.5 million in the third closing and warrants to purchase 147,806 shares of the Company’s

common stock at an exercise price of $3.61 per share.

On June 30, 2017, the Company held

a fourth closing of the 2017 Subordinated Note Financing and received gross proceeds of $1.8 million, before expenses.

a placement agent fee of approximately $0.2 million in the fourth closing and warrants to purchase 38,315 shares of the Company’s

common stock at an exercise price of $4.75 per share.

On August 31, 2017, the Company held

a fifth closing of the 2017 Subordinated Note Financing and received gross proceeds of $3.0 million, before expenses.

a placement agent fee of approximately $0.3 million in the fifth closing and warrants to purchase 63,526 shares of the Company’s

common stock at an exercise price of $4.75 per share.

On September 30, 2017, the Company

held a sixth closing of the 2017 Subordinated Note Financing and received gross proceeds of $6.4 million, before expenses.

received a placement agent fee of approximately $0.6 million in the sixth closing and warrants to purchase 144,149 shares of the

Company’s common stock at an exercise price of $4.42 per share.

Caelum Convertible Notes

On July 31, 2017 Caelum through National

Securities Corporation (“NSC”

or “Placement Agent”), a subsidiary of National offered up to $10 million,

convertible promissory notes (the “Caelum Convertible Notes”) to accredited investors (as defined under the U.S.

securities laws).

Under the terms of the offering the Placement Agent received a 10% selling commission, payable by Caelum and

deducted from the gross proceeds (see Note 17).

During the year ended December 31,

2017, Caelum raised $9.9 million in the offering, in three separate closings and paid a placement fee equal to 10% of the proceeds

of the sale or $0.9 million.

Additionally NSC received warrants to purchase a number of shares the Caelum’s Common Stock

equal to 10% of the aggregate amount of shares underlying the Notes with a per share exercise price equal to 110% of the per share

conversion price of the Notes;

provided, however, that if no Note converts, the exercise price will be $75 million dollars divided

by the total number of fully-diluted shares of Common Stock outstanding immediately prior to exercise of the warrant, giving effect

to the assumed conversion of all options, warrants, and convertible securities of the Company.

The notes convert upon a qualified financing

in which Caelum raises gross proceeds of at least $10 million as follows:

the lesser of (a) a discount to the price per common

share being paid in the Sale of the Company equal to 20% or (b) a conversion price per share based on a pre-sale valuation

of $75,000,000 divided by the number of common shares outstanding at that time assuming the hypothetical conversion or exercise

of any convertible securities, options, warrants and other rights to acquire common shares of the Company.

The Company elected

the fair value option to account for this note.

On January 30, 2019 Caelum entered

into a DOSPA and related documents by and among Caelum, Alexion, Fortress and the Caelum security holders’

parties thereto

(including Fortress, the “Sellers”) (see Note 4).

The first of four transactional components of the DOSPA is the purchase

by Alexion of a number of shares of Caelum preferred stock equal to 19.9% of Caelum’s total capitalization for consideration

of $30 million.

This transaction caused the Caelum convertible notes to convert into 1,870,412,shares of Caelum preferred Class B

Based on this transaction, the notes were written down to par value of $9.9 million and the related warrant liability was

written up to the full value of $1.0 million at December 31, 2018 (see Note 6).

Further, the Alexion transaction resulted

in the automatic conversion of the notes, as such on January 30, 2019 the notes were converted into equity.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

additionally, the Notes accrue paid-in-kind interest at the rate of 7 % per annum, which will be paid quarterly in shares of the Company’s common stock and/or shares of common stock of one of the Company’s subsidiaries that are publicly traded, in accordance with the terms of the Notes.

Each Note is due on the third anniversary of its issuance, provided that the Company may extend the maturity date for two one-year periods in its sole discretion.

The 2017 Subordinated Note Financing is for a maximum of $ 40.0 million (which the Company may, in its sole discretion, increase to $ 50.0 million).

National Securities Corporation (“NSC”), a subsidiary of National and a related party, (see Note 17), pursuant to a Placement Agency Agreement entered into between the Company, NAM Biotech Fund and NSC (the “NAM Placement Agency Agreement”) and a Placement Agency Agreement entered into between the Company, NAM Special Situations Fund and NSC (together with the NAM Placement Agency Agreement, the “Placement Agency Agreements”) acts as placement agent in the 2017 Subordinated Note Financing.

Pursuant to the terms of the Placement Agency Agreements, NSC receives (in addition to reimbursement of certain expenses) an aggregate cash fee equal to 10 % of the aggregate sales price of the Notes sold in the 2017 Subordinated Note Financing to NAM Biotech Fund and NAM Special Situations Fund.

The Placement Agent also receives warrants equal to 10 % of the aggregate principal amount of the Notes sold in the 2017 Subordinated Note Financing divided by the closing share price of the Company’s common stock on the date of closing (the “Placement Agent Warrants”).

The Placement Agent Warrants are exercisable immediately at such closing share price for a period of five years .

The Placement Agent will have a right of first offer for a period of 12 months for any proposed issuance of the Company’s capital stock in a private financing, subject to certain exceptions, and will also have the right to participate as an investor in subsequent financings.

On March 31, 2017, the Company held its first closing of the 2017 Subordinated Note Financing and received gross proceeds of $ 3.2 million.

NSC received a cash fee of approximately $ 0.3 million and warrant to purchase 87,946 shares of the Company’s common stock at an exercise price of per share $ 3.70 .

On May 1, 2017, the Company held a second closing of the 2017 Subordinated Note Financing and received gross proceeds of $ 8.6 million, before expenses.

NSC received a placement agent fee of approximately $ 0.9 million in the second closing and warrants to purchase 234,438 shares of the Company’s common stock at an exercise price of $ 3.65 per share.

On May 31, 2017, the Company held a third closing of the 2017 Subordinated Note Financing and received gross proceeds of $ 5.3 million, before expenses.

NSC received a placement agent fee of approximately $ 0.5 million in the third closing and warrants to purchase 147,806 shares of the Company’s common stock at an exercise price of $ 3.61 per share.

On June 30, 2017, the Company held a fourth closing of the 2017 Subordinated Note Financing and received gross proceeds of $ 1.8 million, before expenses.

NSC received a placement agent fee of approximately $ 0.2 million in the fourth closing and warrants to purchase 38,315 shares of the Company’s common stock at an exercise price of $ 4.75 per share.

On August 31, 2017, the Company held a fifth closing of the 2017 Subordinated Note Financing and received gross proceeds of $ 3.0 million, before expenses.

NSC received a placement agent fee of approximately $ 0.3 million in the fifth closing and warrants to purchase 63,526 shares of the Company’s common stock at an exercise price of $ 4.75 per share.

On September 30, 2017, the Company held a sixth closing of the 2017 Subordinated Note Financing and received gross proceeds of $ 6.4 million, before expenses.

NSC received a placement agent fee of approximately $ 0.6 million in the sixth closing and warrants to purchase 144,149 shares of the Company’s common stock at an exercise price of $ 4.42 per share.

In August, 2020, the Company used certain proceeds from the Oaktree Note to pay off the $ 28.4 million balance previously outstanding under the 2017 Subordinated Note Financing.

As of December 31, 2020 and 2019, nil and $ 28.4 million, respectively, was outstanding under the 2017 Subordinated Note Financing.

2018 Venture Notes

During the year ended December 31,

2018, the Company closed a private placement of promissory notes for an aggregate of $21.7 million (the “2018 Venture Notes”)

The Company intends to use the proceeds from the 2018 Venture Notes to acquire and license medical technologies and

products through existing or recently formed Company subsidiaries.

During the year ended December 31, 2018, the Company closed a private placement of promissory notes for an aggregate of $ 21.7 million (the “2018 Venture Notes”) through NSC.

The Company intends to use the proceeds from the 2018 Venture Notes to acquire and license medical technologies and products through existing or recently formed Company subsidiaries.

The Company may also use the proceeds to finance its subsidiaries.

The notes mature 36 months from issuance, provided that during the first 24 months the Company may extend the maturity date by

The notes mature 36 months from issuance, provided that during the first 24 months the Company may extend the maturity date by six months.

No principal amount will be due for the first 24 months (or the first 30 months if the maturity date is extended).

Thereafter, the note will be repaid at the rate of 1/12 of the principal amount per month for a period of 12 months.

the note is 8% payable quarterly during the first 24 months (or the first 30 months if the note is extended) and monthly during

the last 12 months.

NSC acted as the sole placement agent for

the 2018 Venture Notes.

The Company paid NSC a fee of $1.7 million during the three months ended March 31, 2018 in connection

with its placement of the 2018 Venture Notes.

The 2018 Venture Notes allows the Company

to transfer a portion of the proceeds from the 2018 Venture Notes to a Fortress subsidiary upon the completion by such subsidiary

of an initial public offering in which it raises sufficient equity capital so that it has cash equal to five times the amount of

the portion of the proceeds of the 2018 Venture Notes so transferred (the “SubCo Funding Threshold”).

Through December 31, 2019, the Company

has transferred $3.8 million to Aevitas, $1.6 million to Tamid, $2.2 Million to Cyprium and $2.0 million to Cellvation.

Notwithstanding

such transfers, the Company continues to hold such debt balances as liabilities on its own balance sheet on a consolidated basis,

until such time as the SubCo Funding Threshold is met with respect to a particular subsidiary.

In connection with this transfer NSC received

warrants to purchase each such subsidiary’s stock equal to 25% of that subsidiary’s proceeds of the 2018 Venture Notes

divided by the lowest price at which the subsidiary sells its equity in its first third party equity financing.

The warrants issued

have a term of 10 years and an exercise price equal to the par value of the Fortress subsidiary’s common stock.

As of December 31,

2019, the warrants were contingently issuable as neither an initial public offering nor a third-party financing had occurred at

any such subsidiary.

Interest on the note is 8 % payable quarterly during the first 24 months (or the first 30 months if the note is extended) and monthly during the last 12 months .

NSC acted as the sole placement agent for the 2018 Venture Notes.

The Company paid NSC a fee of $ 1.7 million during the three months ended March 31, 2018 in connection with its placement of the 2018 Venture Notes.

The 2018 Venture Notes allows the Company to transfer a portion of the proceeds from the 2018 Venture Notes to a Fortress subsidiary upon the completion by such subsidiary of an initial public offering in which it raises sufficient equity capital so that it has cash equal to five times the amount of the portion of the proceeds of the 2018 Venture Notes so transferred (the “SubCo Funding Threshold”).

Through December 31, 2019, the Company had transferred $ 3.8 million to Aevitas, $ 1.6 million to Tamid, $ 2.2 Million to Cyprium and $ 2.0 million to Cellvation.

Notwithstanding such transfers, the Company continued to hold such debt balances as liabilities on its own balance sheet on a consolidated basis, until such time as the SubCo Funding Threshold is met with respect to a particular subsidiary.

In connection with this transfer NSC received warrants to purchase each such subsidiary’s stock equal to 25 % of that subsidiary’s proceeds of the 2018 Venture Notes divided by the lowest price at which the subsidiary sells its equity in its first third party equity financing.

The warrants issued have a term of 10 years and an exercise price equal to the par value of the Fortress subsidiary’s common stock.

As of December 31, 2019, the warrants were contingently issuable as neither an initial public offering nor a third-party financing had occurred at any such subsidiary.

In August, 2020, the Company used certain proceeds from the Oaktree Note to pay off the $ 21.7 million balance previously outstanding under the 2018 Venture Notes.

As of December 31, 2020 and 2019, nil and $ 21.7 million, respectively, was outstanding under the 2018 Venture Notes.

Mustang Horizon Notes

On March 29, 2019 (the “Closing

Date”), Mustang entered into a $20.0 million Loan Agreement with Horizon Technology Finance Corporation (“Horizon”),

herein referred to as the “Mustang Horizon Notes”.

In accordance with the Loan Agreement, $15.0 million of the $20.0

million loan was funded on the Closing Date, with the remaining $5.0 million fundable upon Mustang achieving certain predetermined

Each advance under the Mustang Horizon

Notes will mature 42 months from the first day of the month following the funding of the advance.

The first three advances will

mature on October 1, 2022 (the “Loan Maturity Date”).

Each advance accrues interest at a per annum rate of interest

equal to 9.00% plus the amount by which the one-month LIBOR Rate, as reported in the Wall Street Journal, exceeds 2.50%.

Agreement provides for interest-only payments commencing May 1, 2019, through and including October 1, 2020.

The interest-only

period may be extended to April 1, 2021, if the Company satisfies the Interest Only Extension Milestone (as defined in the

Loan Agreement).

Thereafter, commencing May 1, 2021, amortization payments will be payable monthly in eighteen installments

of principal and interest.

At its option, upon ten business days’

prior written notice to Horizon, the Company may prepay

all or any portion greater than or equal to $500,000 of each of the outstanding advances by paying the entire principal balance

(or portion thereof) and all accrued and unpaid interest, subject to a prepayment charge of 4.0% of the then outstanding principal

balance of each advance if such advance is prepaid on or before the Loan Amortization Date (as defined in the Loan Agreement),

3% if such advance is prepaid after the Loan Amortization Date applicable to such Loan, but on or prior to twelve months following

the Loan Amortization Date, and 2% thereafter.

In addition, a final payment equal to $250,000 for each advance (i.e., $750,000

in aggregate with respect to the initial $15.0 million) is due on the maturity date or other date of payment in full.

Amounts outstanding

during an event of default shall be payable on demand and shall accrue interest at an additional rate of 5.0% per annum of the

past due amount outstanding.

Each advance of the loan is secured by

a lien on substantially all of the assets of Mustang, other than Intellectual Property and Excluded Collateral (in each case as

defined in the Loan Agreement), and contains customary covenants and representations, including a liquidity covenant, financial

reporting covenant and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions,

taxes, corporate changes, deposit accounts, and subsidiaries.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

The events of default under the Loan Agreement

include, among other things, without limitation, and subject to customary grace periods, (1) Mustang’s failure to make

any payments of principal or interest under the Loan Agreement, promissory notes or other loan documents, (2) the Mustang’s

breach or default in the performance of any covenant under the Loan Agreement, (3) the occurrence of a material adverse change,

(4) Mustang making a false or misleading representation or warranty in any material respect, (5) the Mustang’s

insolvency or bankruptcy, (6) certain attachments or judgments on the Mustang’s assets, (7) the occurrence of any

material default under certain agreements or obligations of Mustang involving indebtedness in excess of $250,000, or (8) failing

to maintain certain minimum monthly cash balances which range from approximately $8 to $13 million over the term of the loan ($13.0

million as of December 31, 2019).

If an event of default occurs, Horizon is entitled to take enforcement action, including

acceleration of amounts due under the Loan Agreement.

The Loan Agreement also contains warrant

coverage of 5% of the total amount funded.

Four warrants (the “Warrants”) were issued by Mustang to Horizon to purchase

a combined 288,184 shares of Mustang’s common stock with an exercise price of $3.47 and a fair value of $0.9 million.

Warrant is exercisable for ten years from the date of issuance.

Horizon may exercise the Warrant either by (a) cash or check

or (b) through a net issuance conversion.

The shares of the Company’s common stock will, upon request by Horizon, be

registered and freely tradable following a period of six months after issuance.

Mustang paid Horizon an initial commitment

fee of $0.2 million and reimbursed Horizon for $30,000 of legal fees in connection with the Loan Agreement.

Mustang incurred approximately

$1.2 million of legal and other direct costs in connection with the Loan Agreement.

All fees, warrants and costs paid to Horizon

and all direct costs incurred by Mustang are recognized as a debt discount to the funded loans and are amortized to interest expense

using the effective interest method over the term of the Loan Agreement.

On March 29, 2019 (the "Closing Date"), Mustang entered into a $ 20.0 million Loan Agreement with Horizon Technology Finance Corporation ("Horizon"), herein referred to as the "Mustang Horizon Notes".

In accordance with the Loan Agreement, $ 15.0 million of the $ 20.0 million loan was funded on the Closing Date, with the remaining $ 5.0 million fundable upon Mustang achieving certain predetermined milestones.

Each advance under the Mustang Horizon Notes will mature 42 months from the first day of the month following the funding of the advance.

The first three advances will mature on October 1, 2022 (the "Loan Maturity Date").

Each advance accrues interest at a per annum rate of interest equal to 9.00 % plus the amount by which the one-month LIBOR Rate, as reported in the Wall Street Journal, exceeds 2.50 %.

The Loan Agreement provides for interest-only payments commencing May 1, 2019, through and including October 1, 2020.

The interest-only period may be extended to April 1, 2021, if the Company satisfies the Interest Only Extension Milestone (as defined in the Loan Agreement).

Thereafter, commencing May 1, 2021, amortization payments will be payable monthly in eighteen installments of principal and interest.

At its option, upon ten business days' prior written notice to Horizon, the Company may prepay all or any portion greater than or equal to $ 500,000 of each of the outstanding advances by paying the entire principal balance (or portion thereof) and all accrued and unpaid interest, subject to a prepayment charge of 4.0 % of the then outstanding principal balance of each advance if such advance is prepaid on or before the Loan Amortization Date (as defined in the Loan Agreement), 3 % if such advance is prepaid after the Loan Amortization Date applicable to such Loan, but on or prior to twelve months following the Loan Amortization Date, and 2 % thereafter.

In addition, a final payment equal to $ 250,000 for each advance (i.e., $ 750,000 in aggregate with respect to the initial $ 15.0 million) is due on the maturity date or other date of payment in full.

Amounts outstanding during an event of default shall be payable on demand and shall accrue interest at an additional rate of 5.0 % per annum of the past due amount outstanding.

Each advance of the loan is secured by a lien on substantially all of the assets of Mustang, other than Intellectual Property and Excluded Collateral (in each case as defined in the Loan Agreement), and contains customary covenants and representations, including a liquidity covenant, financial reporting covenant and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries.

The events of default under the Loan Agreement include, among other things, without limitation, and subject to customary grace periods, (1) Mustang's failure to make any payments of principal or interest under the Loan Agreement, promissory notes or other loan documents, (2) the Mustang's breach or default in the performance of any covenant under the Loan Agreement, (3) the occurrence of a material adverse change, (4) Mustang making a false or misleading representation or warranty in any material respect, (5) the Mustang's insolvency or bankruptcy, (6) certain attachments or judgments on the Mustang's assets, (7) the occurrence of any material default under certain agreements or obligations of Mustang involving indebtedness in excess of $ 250,000 , or (8) failing to maintain certain minimum monthly cash balances which range from approximately $ 8 to $ 13 million over the term of the loan ($ 13.0 million as of December 31, 2019).

If an event of default occurs, Horizon is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.

The Loan Agreement also contains warrant coverage of 5 % of the total amount funded.

Four warrants (the "Warrants") were issued by Mustang to Horizon to purchase a combined 288,184 shares of Mustang's common stock with an exercise price of $ 3.47 and a fair value of $ 0.9 million.

The Warrants are exercisable for ten years from the date of issuance.

Horizon may exercise the Warrant either by (a) cash or check or (b) through a net issuance conversion.

The shares of the Company's common stock will, upon request by Horizon, be registered and freely tradable following a period of six months after issuance.

Mustang paid Horizon an initial commitment fee of $ 0.2 million and reimbursed Horizon for $ 30,000 of legal fees in connection with the Loan Agreement.

Mustang incurred approximately $ 1.2 million of legal and other direct costs in connection with the Loan Agreement.

All fees, warrants and costs paid to Horizon and all direct costs incurred by Mustang are recognized as a debt discount to the funded loans and are amortized to interest expense using the effective interest method over the term of the Loan Agreement.

On September 30, 2020, Mustang repaid the amount outstanding under the Horizon Notes in full, which was comprised of $ 15.0 million face value of the outstanding notes, $ 0.1 million in accrued and unpaid interest, a $ 0.8 million final payment fee and prepayment penalties of $ 0.6 million.

Interest Expense

The following table shows the details of

interest expense for all debt arrangements during the periods presented.

Interest expense includes contractual interest and amortization

of the debt discount and amortization of fees represents fees associated with loan transaction costs, amortized over the life of

For the Years Ended December 31,

The following table shows the details of interest expense for all debt arrangements during the periods presented.

Interest expense includes contractual interest and amortization of the debt discount and amortization of fees represents fees associated with loan transaction costs, amortized over the life of the loan:

Year Ended December 31,

($ in thousands)

2017 Subordinated Note Financing 1

Opus Credit Facility

2018 Venture Notes 1

Helocyte Convertible Note

Caelum Convertible Note

Mustang Horizon Notes 1,3

Oaktree Note 1

Note Payable 2

Total Interest Expense and Financing Fee

Amortization of fees.

Note 1:For the year ended December 31, 2020, includes $ 1.2 million expense of unamortized debt discount fees for the 2017 Subordinated Note Financing, $ 0.3 million for the 2018 Venture Notes and $ 1.8 million for the Mustang Horizon Notes.

Imputed interest expense related to Ximino purchase (see Note 9).

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

Includes $ 0.6 million of prepayment penalties included in interest expense for the Mustang Horizon Notes.

Accrued Liabilities and other Long-Term Liabilities

Accrued expenses and other long-term liabilities

consisted of the following:

Accrued expenses and other long-term liabilities consisted of the following:

($ in thousands)

1 unchanged sentence

Professional fees

Salaries, bonuses and related benefits

Salaries, bonus and related benefits

Research and development

Research and development - manufacturing

Research and development - clinical supplies

Research and development - license maintenance fees

Research and development - milestones

Falk Pharma milestone

Accrued royalties payable

Accrued coupon expense

Accrued coupon funding expense

Total accrued expenses

1 unchanged sentence

Deferred rent and long-term lease abandonment charge 1

Long-term note payable 2

Total other long-term liabilities

As of December 31, 2019, balance consists of deferred

charges related to build-out of the New York facility, and as of December 31, 2018, balance consists of deferred rent and

deferred build out charges.

As of December 31, 2019, Journey recorded a note

payable, net of an imputed interest discount of $2.3 million, of $4.7 million in connection with its acquisition of Ximino, see

The imputed interest discount was calculating utilizing an 11.96% effective interest rate based upon a non-investment

grade “CCC”

rate over a five-year period.

Amortization of interest discount was $0.3 million for the year

ended December 31, 2019.

Partner company note payable, long-term

Ximino agreement 2

Isotretinoin agreement 3

Anti-itch product agreement 4

Total other long-term liabilities and partner company note payable, long-term

Balance consists of deferred charges related to build-out of the New York facility

As of December 31, 2019, Journey recorded a note payable, net of an imputed interest discount of $ 2.3 million, of $ 4.7 million in connection with its acquisition of Ximino, see Note 9.

The imputed interest discount was calculating utilizing an 11.96 % effective interest rate based upon a non-investment grade “CCC” rate over a five-year period.

Amortization of interest discount was $ 0.6 million and $ 0.3 million for the years ended December 31, 2020 and 2019, respectively.

At December 31, 2020, $ 2.0 million was classified as Partner company note payable, short-term on the Company’s Consolidated Balance Sheet.

As of December 31, 2020, Journey recorded a note payable, net of an imputed interest discount of $ 0.3 million, of $ 3.7 million in connection with its acquisition of the Isotretinoin agreement, see Note 9.

The imputed interest discount was calculated utilizing a 4.00 % effective rate, which represents the market rate for an asset-backed three year loan, secured by receivables.

Amortization of interest discount was $ 0.1 million for the year ended December 31, 2020.

At December 31, 2020, $ 0.5 million of note payable was classified as Partner company note payable, short-term on the Company’s Consolidated Balance Sheet.

As of December 31, 2020, Journey recorded a note payable, net of an imputed interest discount of $ 0.1 million, of $ 3.7 million in connection with its acquisition of an anti-itch product, see Note 9.

The imputed interest discount was calculated utilizing a 4.25 % effective rate, which represents the market rate for an asset-backed three year loan, secured by receivables.

Amortization of interest discount was negligible for the year ended December 31, 2020.

As of December 31, 2020, $ 2.8 million of note payable was classified as Partner company note payable, short-term on the Company’s Consolidated Balance Sheet.

Non-Controlling Interests

Non-controlling interests in consolidated

entities are as follows:

For the twelve months ended

Non-controlling interests in consolidated entities are as follows:

For the year ended

As of December 31, 2020

1 unchanged sentence

As of December 31, 2020

Net loss attributable to

Non-controlling interests

Non-controlling

($ in thousands)

NCI equity share

Net loss attributable to non-

controlling interests

non-controlling interests

in consolidated entities

Non-controlling

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

For the twelve months ended

Acquisition Corp VIII

For the year ended

As of December 31, 2019

1 unchanged sentence

As of December 31, 2019

Net loss attributable to

Non-controlling interests

Non-controlling

($ in thousands)

NCI equity share

Net loss attributable to non-

controlling interests

non-controlling interests

in consolidated entities

Non-controlling

Checkpoint is consolidated with Fortress’

operations because Fortress maintains voting control through its ownership of Checkpoint’s Class A Common Shares which provide super-majority voting rights.

Avenue and Mustang are consolidated with Fortress’

operations because Fortress maintains voting control through its ownership of Preferred Class A Shares which provide super-majority voting rights.

Effective January 30, 2019, Caelum ceased to be a controlled Fortress entity and as such is no longer consolidated.

Checkpoint is consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Checkpoint’s Class A Common Shares which provide super-majority voting rights.

Avenue and Mustang are consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Preferred Class A Shares which provide super-majority voting rights.

Net Loss per Common Share

The Company calculates loss per share using

the two-class method, which is an earnings allocation formula that determines earnings per share for Common Stock and participating

securities, if any, according to dividends declared and non-forfeitable participation rights in undistributed earnings.

method, all earnings (distributed and undistributed) are allocated to Common Stock and participating securities, if any, based

on their respective rights to receive dividends.

Holders of restricted Common Stock were entitled to all cash dividends, when and

if declared, and such dividends are non-forfeitable.

The participating securities do not have a contractual obligation to share

in any losses of the Company.

As a result, net losses are not allocated to the participating securities for any periods presented.

Basic net loss per share is calculated

by dividing the net loss by the weighted-average number of shares of Common Stock outstanding during the period, without consideration

for Common Stock equivalents.

Diluted net loss per share is computed by dividing the net loss by the weighted-average number of

Common Stock and Common Stock equivalents outstanding for the period.

Included in Common Stock issued and outstanding

as of December 31, 2019 and 2018 were 12,625,144 and 11,174,113 shares of unvested restricted stock, which is excluded from

the weighted average Common Stock outstanding since its effect would be dilutive.

The Company’s potential dilutive

securities which consist of unvested restricted stock, unvested restricted stock units, options, and warrants have been excluded

from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average

Common Stock outstanding used to calculate both basic and diluted net loss per share is the same.

The following shares of potentially dilutive

securities, weighted during the years ended December 31, 2019 and 2018 have been excluded from the computations of diluted

weighted average shares outstanding as the effect of including such securities would be antidilutive:

For the Years Ended

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of Common Stock outstanding during the period, without consideration for Common Stock equivalents.

Diluted net loss per share is computed by dividing the net loss by the weighted-average number of Common Stock and Common Stock equivalents outstanding for the period.

The following shares of potentially dilutive securities, weighted during the years ended December 31, 2020 and 2019 have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be antidilutive:

Year Ended December 31,

Warrants to purchase Common Stock

Opus warrants to purchase Common Stock

Options to purchase Common Stock

2 unchanged sentences

Unvested Restricted Stock Units

Stockholders’

The Company’s Certificate of Incorporation,

as amended, authorizes the Company to issue 100,000,000 shares of $0.001 par value Common Stock of which 74,027,425 and 57,845,447

shares are outstanding at December 31, 2019 and 2018, respectively.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

The terms, rights, preference and privileges

of the Common Stock are as follows:

Stockholders’ Equity

At the Company’s 2020 Annual Meeting of Stockholders held on June 17, 2020, its stockholders approved an amendment to its certificate of incorporation to increase the number of authorized shares of common stock available to issue by 50,000,000 to 150,000,000 with a par value of $ 0.001 per share.

The amendment was filed with the Secretary of State of the State of Delaware on June 18, 2020.

94,877,492 and 74,027,425 shares of common stock are outstanding at December 31, 2020 and 2019, respectively.

The terms, rights, preference and privileges of the Common Stock are as follows:

Voting Rights

Each holder of Common Stock is entitled

to one vote per share of Common Stock held on all matters submitted to a vote of the stockholders, including the election of directors.

The Company’s certificate of incorporation and bylaws do not provide for cumulative voting rights.

Subject to preferences that may be applicable

to any then outstanding preferred stock, the holders of the Company’s outstanding shares of Common Stock are entitled to

receive dividends, if any, as may be declared from time to time by the Company’s Board of Directors out of legally available

In the event of the Company’s liquidation,

dissolution or winding up, holders of Common Stock will be entitled to share ratably in the net assets legally available for distribution

to stockholders after the payment of all of the Company’s debts and other liabilities, subject to the satisfaction of any

liquidation preference granted to the holders of any outstanding shares of Preferred Stock.

Each holder of Common Stock is entitled to one vote per share of Common Stock held on all matters submitted to a vote of the stockholders,f including the election of directors.

The Company’s certificate of incorporation and bylaws do not provide for cumulative voting rights.

Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of the Company’s outstanding shares of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by the Company’s Board of Directors out of legally available funds.

In the event of the Company’s liquidation, dissolution or winding up, holders of Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of the Company’s debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of Preferred Stock.

Rights and Preference

Holders of the Company’s Common Stock

have no preemptive, conversion or subscription rights, and there is no redemption or sinking fund provisions applicable to the

Common Stock.

The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected

by, the rights of the holders of shares of any series of the Company’s preferred stock that are or may be issued.

Holders of the Company’s Common Stock have no preemptive, conversion or subscription rights, and there is no redemption or sinking fund provisions applicable to the Common Stock.

The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company’s preferred stock that are or may be issued.

Fully Paid and Nonassessable

All of the Company’s outstanding

shares of Common Stock are fully paid and nonassessable.

All of the Company’s outstanding shares of Common Stock are fully paid and nonassessable.

Series A Preferred Stock

On October 26, 2017, the Company designated

5,000,000 shares of $0.001 par value preferred stock as Series A Preferred Stock.

As of December 31, 2019, and

2018, 1,341,167 and 1,000,000 shares, respectively, of Series A Preferred Stock were issued and outstanding.

The terms, rights, preference and privileges

of the Series A Preferred Stock are as follows:

On October 26, 2017, the Company designated 5,000,000 shares of $ 0.001 par value preferred stock as Series A Preferred Stock.

As of December 31, 2020, and 2019, 3,427,138 and 1,341,167 shares, respectively, of Series A Preferred Stock were issued and outstanding.

The terms, rights, preference and privileges of the Series A Preferred Stock are as follows:

Voting Rights

Except as may be otherwise required by

law, the voting rights of the holders of the Series A Preferred Stock are limited to the affirmative vote or consent of the

holders of at least two-thirds of the votes entitled to be cast by the holders of the Series A Preferred Stock outstanding

at the time in connection with the:

(1) authorization or creation, or increase in the authorized or issued amount of, any

class or series of capital stock ranking senior to the Series A Preferred Stock with respect to payment of dividends or the

distribution of assets upon liquidation, dissolution or winding up or reclassification of any of the Company’s authorized

capital stock into such shares, or creation, authorization or issuance of any obligation or security convertible into or evidencing

the right to purchase any such shares;

or (2) amendment, alteration, repeal or replacement of the Company’s certificate

of incorporation, including by way of a merger, consolidation or otherwise in which the Company may or may not be the surviving

entity, so as to materially and adversely affect and deprive holders of Series A Preferred Stock of any right, preference,

privilege or voting power of the Series A Preferred Stock.

Dividends on Series A Preferred Stock

accrue daily and will be cumulative from, and including, the date of original issue and shall be payable quarterly every March 31,

June 30, September 30, and December 31, at the rate of 9.375% per annum of its liquidation preference, which is

equivalent to $2.34375 per annum per share.

The first dividend on Series A Preferred Stock sold in the offering was payable

on December 31, 2017 (in the amount of $0.299479 per share) to the holders of record of the Series A Preferred Stock

at the close of business on December 15, 2017 and thereafter for each subsequent quarter in the amount of $0.5839375 per share.

The Company recorded approximately $2.6 million and $2.3 million of dividends in Additional Paid in Capital on the Consolidated

Balance Sheets as of December 31, 2019 and 2018, respectively.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

Except as may be otherwise required by law, the voting rights of the holders of the Series A Preferred Stock are limited to the affirmative vote or consent of the holders of at least two-thirds of the votes entitled to be cast by the holders of the Series A Preferred Stock outstanding at the time in connection with the:

(1) authorization or creation, or increase in the authorized or issued amount of, any class or series of capital stock ranking senior to the Series A Preferred Stock with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up or reclassification of any of the Company’s authorized capital stock into such shares, or creation, authorization or issuance of any obligation or security convertible into or evidencing the right to purchase any such shares;

or (2) amendment, alteration, repeal or replacement of the Company’s certificate of incorporation, including by way of a merger, consolidation or otherwise in which the Company may or may not be the surviving entity, so as to materially and adversely affect and deprive holders of Series A Preferred Stock of any right, preference, privilege or voting power of the Series A Preferred Stock.

Dividends on Series A Preferred Stock accrue daily and will be cumulative from, and including, the date of original issue and shall be payable monthly at the rate of 9.375 % per annum of its liquidation preference, which is equivalent to $ 2.34375 per annum per share.

The first dividend on Series A Preferred Stock sold in the offering was payable on December 31, 2017 (in the amount of $ 0.299479 per share) to the holders of record of the Series A Preferred Stock at the close of business on December 15, 2017 and thereafter for each subsequent quarter in the amount of $ 0.5839375 per share.

The Company recorded approximately $ 6.5 million and $ 2.6 million of dividends in Additional Paid in Capital on the Consolidated Balance Sheets as of December 31, 2020 and 2019, respectively.

No Maturity Date or Mandatory Redemption

The Series A Preferred Stock has no

maturity date, and the Company is not required to redeem the Series A Preferred Stock.

Accordingly, the Series A Preferred

Stock will remain outstanding indefinitely unless the Company decides to redeem it pursuant to its optional redemption right or

its special optional redemption right in connection with a Change of Control (as defined below), or under the circumstances set

forth below under “Limited Conversion Rights Upon a Change of Control”

and elect to convert such Series A Preferred

The Series A Preferred Stock has no maturity date, and the Company is not required to redeem the Series A Preferred Stock.

Accordingly, the Series A Preferred Stock will remain outstanding indefinitely unless the Company decides to redeem it pursuant to its optional redemption right or its special optional redemption right in connection with a Change of Control (as defined below), or under the circumstances set forth below under “Limited Conversion Rights Upon a Change of Control” and elect to convert such Series A Preferred Stock.

The Company is not required to set aside funds to redeem the Series A Preferred Stock.

Optional Redemption

The Series A Preferred Stock may be

redeemed in whole or in part (at the Company’s option) any time on or after December 15, 2022, upon not less than 30

days nor more than 60 days’

written notice by mail prior to the date fixed for redemption thereof, for cash at a redemption

price equal to $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the redemption date.

The Series A Preferred Stock may be redeemed in whole or in part (at the Company’s option) any time on or after December 15, 2022, upon not less than 30 days nor more than 60 days ’ written notice by mail prior to the date fixed for redemption thereof, for cash at a redemption price equal to $ 25.00 per share, plus any accumulated and unpaid dividends to, but not including, the redemption date.

Special Optional Redemption

Upon the occurrence a Change of Control

(as defined below), the Company may redeem the shares of Series A Preferred Stock, at its option, in whole or in part, within

one hundred twenty (120) days of any such Change of Control, for cash at $25.00 per share, plus accumulated and unpaid dividends

(whether or not declared) to, but excluding, the redemption date.

If, prior to the Change of Control conversion date, the Company

has provided notice of its election to redeem some or all of the shares of Series A Preferred Stock (whether pursuant to the

Company’s optional redemption right described above under “Optional Redemption”

or this special optional redemption

right), the holders of shares of Series A Preferred Stock will not have the Change of Control conversion right with respect

to the shares of Series A Preferred Stock called for redemption.

If the Company elects to redeem any shares of the Series A

Preferred Stock as described in this paragraph, the Company may use any available cash to pay the redemption price.

A “Change of Control”

to occur when, after the original issuance of the Series A Preferred Stock, the following have occurred and are continuing:

the acquisition by any person, including any syndicate or group deemed to be a “person”

under Section 13(d)(3) of the Exchange Act of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of the Company’s stock entitling that person to exercise more than 50% of the total voting power of all the Company’s stock entitled to vote generally in the election of the Company’s directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition);

Upon the occurrence a Change of Control (as defined below), the Company may redeem the shares of Series A Preferred Stock, at its option, in whole or in part, within one hundred twenty (120) days of any such Change of Control, for cash at $ 25.00 per share, plus accumulated and unpaid dividends (whether or not declared) to, but excluding, the redemption date.

If, prior to the Change of Control conversion date, the Company has provided notice of its election to redeem some or all of the shares of Series A Preferred Stock (whether pursuant to the Company’s optional redemption right described above under “Optional Redemption” or this special optional redemption right), the holders of shares of Series A Preferred Stock will not have the Change of Control conversion right with respect to the shares of Series A Preferred Stock called for redemption.

If the Company elects to redeem any shares of the Series A Preferred Stock as described in this paragraph, the Company may use any available cash to pay the redemption price.

A “Change of Control” is deemed to occur when, after the original issuance of the Series A Preferred Stock, the following have occurred and are continuing:

● the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of the Company’s stock entitling that person to exercise more than 50% of the total voting power of all the Company’s stock entitled to vote generally in the election of the Company’s directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition);

● following the closing of any transaction referred to in the bullet point above, neither the Company nor the acquiring or surviving entity has a class of common equity securities (or American Depositary Receipts representing such securities) listed on the NYSE, the NYSE American LLC or the Nasdaq Stock Market, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American LLC or the Nasdaq Stock Market.

Conversion, Exchange and Preemptive Rights

Except as described below under “Limited

Conversion Rights upon a Change of Control,”

the Series A Preferred Stock is not subject to preemptive rights or convertible

into or exchangeable for any other securities or property at the option of the holder.

Limited Conversion Rights upon a Change

Upon the occurrence of a Change of Control,

each holder of shares of Series A Preferred Stock will have the right (unless, prior to the Change of Control Conversion Date,

the Company has provided or provides irrevocable notice of its election to redeem the Series A Preferred Stock as described

above under “Optional Redemption,”

or “Special Optional Redemption”) to convert some or all of the shares

of Series A Preferred Stock held by such holder on the Change of Control Conversion Date, into the Common Stock Conversion

Consideration, which is equal to the lesser of:

the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference per share of Series A Preferred Stock plus the amount of any accumulated and unpaid dividends (whether or not declared) to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a record date for a Series A Preferred Stock dividend payment and prior to the corresponding Dividend Payment Date, in which case no additional amount for such accumulated and unpaid dividend will be included in this sum) by (ii) the Common Stock Price (such quotient, the “Conversion Rate”);

Except as described below under “Limited Conversion Rights upon a Change of Control,” the Series A Preferred Stock is not subject to preemptive rights or convertible into or exchangeable for any other securities or property at the option of the holder.

Limited Conversion Rights upon a Change of Control

Upon the occurrence of a Change of Control, each holder of shares of Series A Preferred Stock will have the right (unless, prior to the Change of Control Conversion Date, the Company has provided or provides irrevocable notice of its election to redeem the Series A Preferred Stock as described above under “Optional Redemption,” or “Special Optional Redemption”) to convert some or all of the shares of Series A Preferred Stock held by such holder on the Change of Control Conversion Date, into the Common Stock Conversion Consideration, which is equal to the lesser of:

● the quotient obtained by dividing (i) the sum of the $ 25.00 liquidation preference per share of Series A Preferred Stock plus the amount of any accumulated and unpaid dividends (whether or not declared) to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a record date for a Series A Preferred Stock dividend payment and prior to the corresponding Dividend Payment Date, in which case no additional amount for such accumulated and unpaid dividend will be included in this sum) by (ii) the Common Stock Price (such quotient, the “Conversion Rate”);

● 13.05483 shares of common stock, subject to certain adjustments.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

In the case of a Change of Control pursuant

to which the Company’s common stock will be converted into cash, securities or other property or assets, a holder of Series A

Preferred Stock will receive upon conversion of such Series A Preferred Stock the kind and amount of Alternative Form Consideration

which such holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of shares

of the Company’s common stock equal to the Common Stock Conversion Consideration immediately prior to the effective time

of the Change of Control.

Notwithstanding the foregoing, the holders

of shares of Series A Preferred Stock will not have the Change of Control Conversion Right if the acquiror has shares listed

or quoted on the NYSE, the NYSE American LLC or Nasdaq Stock Market or listed or quoted on an exchange or quotation system that

is a successor to the NYSE, the NYSE American LLC or Nasdaq Stock Market, and the Series A Preferred Stock becomes convertible

into or exchangeable for such acquiror’s listed shares upon a subsequent Change of Control of the acquiror.

In the case of a Change of Control pursuant to which the Company’s common stock will be converted into cash, securities or other property or assets, a holder of Series A Preferred Stock will receive upon conversion of such Series A Preferred Stock the kind and amount of Alternative Form Consideration which such holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of shares of the Company’s common stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control.

Notwithstanding the foregoing, the holders of shares of Series A Preferred Stock will not have the Change of Control Conversion Right if the acquiror has shares listed or quoted on the NYSE, the NYSE American LLC or Nasdaq Stock Market or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American LLC or Nasdaq Stock Market, and the Series A Preferred Stock becomes convertible into or exchangeable for such acquiror’s listed shares upon a subsequent Change of Control of the acquiror.

Liquidation Preference

In the event the Company liquidates, dissolves

or is wound up, holders of the Series A Preferred Stock will have the right to receive $25.00 per share, plus any accumulated

and unpaid dividends to, but not including, the date of payment, before any payment is made to the holders of the Company’s

common stock.

The Series A Preferred Stock will

rank, with respect to rights to the payment of dividends and the distribution of assets upon the Company’s liquidation, dissolution

or winding up, (1) senior to all classes or series of the Company’s common stock and to all other equity securities

issued by the Company other than equity securities referred to in clauses (2) and (3);

(2) on a par with all equity securities

issued by the Company with terms specifically providing that those equity securities rank on a par with the Series A Preferred

Stock with respect to rights to the payment of dividends and the distribution of assets upon the Company’s liquidation, dissolution

or winding up;

(3) junior to all equity securities issued by the Company with terms specifically providing that those equity

securities rank senior to the Series A Preferred Stock with respect to rights to the payment of dividends and the distribution

of assets upon the Company liquidation, dissolution or winding up;

and (4) junior to all of the Company’s existing and

future indebtedness.

In the event the Company liquidates, dissolves or is wound up, holders of the Series A Preferred Stock will have the right to receive $ 25.00 per share, plus any accumulated and unpaid dividends to, but not including, the date of payment, before any payment is made to the holders of the Company’s common stock.

The Series A Preferred Stock will rank, with respect to rights to the payment of dividends and the distribution of assets upon the Company’s liquidation, dissolution or winding up, (1) senior to all classes or series of the Company’s common stock and to all other equity securities issued by the Company other than equity securities referred to in clauses (2) and (3);

(2) on a par with all equity securities issued by the Company with terms specifically providing that those equity securities rank on a par with the Series A Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon the Company’s liquidation, dissolution or winding up;

(3) junior to all equity securities issued by the Company with terms specifically providing that those equity securities rank senior to the Series A Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon the Company liquidation, dissolution or winding up;

and (4) junior to all of the Company’s existing and future indebtedness.

Stock-Based Compensation

As of December 31, 2019, the Company

had four equity compensation plans:

As of December 31, 2020, the Company had four equity compensation plans:

the Fortress Biotech, Inc.

2007 Stock Incentive Plan (the “2007 Plan”), the

Fortress Biotech, Inc.

2013 Stock Incentive Plan, as amended (the “2013 Plan”), the Fortress Biotech, Inc.

2012 Employee Stock Purchase Plan (the “ESPP”) and the Fortress Biotech, Inc.

Long Term Incentive Plan (“LTIP”).

In 2007, the Company’s Board of Directors adopted and stockholders approved the 2007 Plan authorizing the Company to grant

up to 6,000,000 shares of Common Stock to eligible employees, directors, and consultants in the form of restricted stock, stock

options and other types of grants.

In 2013, the Company’s Board of Directors adopted and stockholders approved the 2013 Plan

authorizing the Company to grant up to 2,300,000 shares of Common Stock to eligible employees, directors, and consultants in the

form of restricted stock, stock options and other types of grants.

In 2015, the Company’s Board of Directors and stockholders

approved an increase of 7,700,000 shares for the 2013 Plan bringing the total number of shares approved under this plan to 10,000,000,

with the aggregate total of authorized shares available for grants under the 2007 Plan and the 2013 Plan of up to 16,000,000 shares.

An aggregate 13,750,535 shares were granted under both the Company’s 2007 and 2013 plans, net of cancellations, and 2,249,465

shares were available for issuance as of December 31, 2019.

Certain partner companies have their own

equity compensation plan under which shares are granted to eligible employees, directors and consultants in the form of restricted

stock, stock options, and other types of grants of stock of the respective partner company’s common stock.

The table below

provides a summary of those plans as of December 31, 2019:

2007 Stock Incentive Plan (the “2007 Plan”), the Fortress Biotech, Inc.

2013 Stock Incentive Plan, as amended (the “2013 Plan”), the Fortress Biotech, Inc.

2012 Employee Stock Purchase Plan (the “ESPP”) and the Fortress Biotech, Inc.

Long Term Incentive Plan (“LTIP”).

In 2007, the Company’s Board of Directors adopted and stockholders approved the 2007 Plan authorizing the Company to grant up to 6,000,000 shares of Common Stock to eligible employees, directors, and consultants in the form of restricted stock, stock options and other types of grants.

In 2013, the Company’s Board of Directors adopted and stockholders approved the 2013 Plan authorizing the Company to grant up to 2,300,000 shares of Common Stock to eligible employees, directors, and consultants in the form of restricted stock, stock options and other types of grants.

In 2015, the Company’s Board of Directors and stockholders approved an increase of 7,700,000 shares for the 2013 Plan and in 2020, the Company’s Board of Directors and stockholders approved an increase of 3,000,000 shares bringing the total number of shares approved under this plan to 13,000,000 , with the aggregate total of authorized shares available for grants under the 2007 Plan and the 2013 Plan of up to 19,000,000 shares.

An aggregate 14,721,911 shares were granted under both the Company’s 2007 and 2013 plans, net of cancellations, and 4,278,089 shares were available for issuance as of December 31, 2020.

Certain partner companies have their own equity compensation plan under which shares are granted to eligible employees, directors and consultants in the form of restricted stock, stock options, and other types of grants of stock of the respective partner company’s common stock.

The table below provides a summary of those plans as of December 31, 2020:

Shares available at

17 unchanged sentences

2016 Incentive Plan

Oncogenuity, Inc.

FBIO Acquisition Corp.

VII 2017 Incentive Plan

FBIO Acquisition Corp.

V 2017 Incentive Plan

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated

Financial Statements

The purpose of the Company’s and partner company’s

equity compensation plans is to provide for equity awards as part of an overall compensation package of performance-based rewards

to attract and retain qualified personnel.

Such awards include, without limitation, options, stock appreciation rights, sales

or bonuses of restricted stock, restricted stock units or dividend equivalent rights, and an award may consist of one such security

or benefit, or two or more of them in any combination or alternative.

Vesting of awards may be based upon the passage of time,

the occurrence of one or more events, or the satisfaction of performance criteria or other conditions.

Incentive and non-statutory stock options

are granted pursuant to option agreements adopted by the plan administrator.

Options generally have 10-year contractual terms and

vest in three equal annual installments commencing on the grant date.

The Company estimates the fair value of

stock option grants using a Black-Scholes option pricing model.

The purpose of the Company’s and partner company’s equity compensation plans is to provide for equity awards as part of an overall compensation package of performance-based rewards to attract and retain qualified personnel.

Such awards include, without limitation, options, stock appreciation rights, sales or bonuses of restricted stock, restricted stock units or dividend equivalent rights, and an award may consist of one such security or benefit, or two or more of them in any combination or alternative.

Vesting of awards may be based upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions.

Incentive and non-statutory stock options are granted pursuant to option agreements adopted by the plan administrator.

Options generally have 10-year contractual terms and vest in three equal annual installments commencing on the grant date.

The Company estimates the fair value of stock option grants using a Black-Scholes option pricing model.

In applying this model, the Company uses the following assumptions:

1 unchanged sentence

The risk-free interest rate is based on the yields of United States Treasury securities with maturities similar to the expected term of the options for each option group.

As the Company has a limited trading history for its Common Stock, the expected stock price volatility for its Common Stock was estimated by incorporating two years of the Company’s historical volatility and the average historical price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants.

Industry peers consist of several public companies in the biopharmaceutical industry similar in size, stage of life cycle and financial leverage.

The Company’s historical volatility is weighted with that of the peer group and that combined historical volatility is weighted 80% with a 20% weighting of the Company’s implied volatility, which is obtained from traded options of the Company’s stock.

The Company intends to continue to consistently apply this process using the same or similar public companies until it has sufficient historical information regarding the volatility of its Common Stock that is consistent with the expected life of the options.

Should circumstances change such that the identified companies are no longer similar to the Company, more suitable companies whose share prices are publicly available would be utilized in the calculation.

● Volatility :

The Company utilizes the trading history of its Common Stock to determine the expected stock price volatility for its Common Stock.

● Expected Term :

Due to the limited exercise history of the Company’s stock options, the Company determined the expected term based on the Simplified Method under SAB 107 and the expected term for non-employees is the remaining contractual life for both options and warrants.

● Expected Dividend Rate :

The Company has not paid and does not anticipate paying any cash dividends in the near future on its common stock.

The fair value of each option award was

estimated on the grant date using the Black-Scholes option-pricing model and expensed under the straight-line method.

The following table summarizes the stock-based

compensation expense from stock option, employee stock purchase programs and restricted Common Stock awards and warrants for the

years ended December 31, 2019 and 2018:

For the Years Ended

The fair value of each option award was estimated on the grant date using the Black-Scholes option-pricing model and expensed under the straight-line method.

The following table summarizes the stock-based compensation expense from stock option, employee stock purchase programs and restricted Common Stock awards and warrants for the years ended December 31, 2020 and 2019

Year Ended December 31,

($ in thousands)

Employee awards

Executive awards of Fortress Companies' stock

Non-employee awards

1 unchanged sentence

Total stock-based compensation expense

For the years ended December 31, 2019

and 2018, $2.8 million and $5.3 million was included in research and development expenses, and $10.4 million and $9.7 million was

included in general and administrative expenses, respectively.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The following table summarizes Fortress

stock option activities excluding activities related to partner companies:

exercise price

Total weighted

intrinsic value

For the years ended 2020 and 2019, $ 3.2 million and $ 2.8 million was included in research and development expenses, and $ 10.3 million and $ 10.4 million was included in selling, general and administrative expenses, respectively.

The following table summarizes Fortress stock option activities excluding activities related to partner companies:

Weighted average

weighted average

contractual life

exercise price

intrinsic value

Options vested and expected to vest at December 31, 2018

1 unchanged sentence

Options vested and expected to vest at December 31, 2020

Options vested and exercisable

During the years ended December 31,

2019 and 2018, there were no exercises of stock options.

As of December 31, 2019, the Company

had no unrecognized stock-based compensation expense related to options.

During the years ended December 31, 2020 and 2019, there were no exercises of stock options.

As of December 31, 2020, the Company had no unrecognized stock-based compensation expense related to options.

Restricted Stock

Stock-based compensation expense from restricted

stock awards and restricted stock units for the years ended December 31, 2019 and 2018 was $11.5 million and $13.9 million,

respectively.

During 2019, the Company granted 1,546,408

restricted shares of its Common Stock to executives and directors of the Company and 290,000 restricted stock units to employees

and non-employees of the Company.

The fair value of the restricted stock awards issued during 2019 of $1.4 million and the fair

value of the restricted stock unit awards issued during 2019 of $0.4 million were estimated on the grant date using the Company’s

stock price as of the grant date.

The 2019 restricted stock awards and restricted stock unit awards vest upon both the passage

of time as well as meeting certain performance criteria.

Restricted stock awards and restricted stock unit awards are expensed

under the straight-line method over the vesting period.

During 2018, the Company granted 1,721,802

restricted shares of its Common Stock to executives and directors of the Company and 490,000 restricted stock units to employees

and non-employees of the Company.

The fair value of the restricted stock awards issued during 2018 of $6.6 million and the fair

value of the restricted stock unit awards issued during 2018 of $1.8 million were estimated on the grant date using the Company’s

stock price as of the grant date.

The 2018 restricted stock awards and restricted stock unit awards vest upon both the passage

of time as well as meeting certain performance criteria.

Restricted stock awards and restricted stock unit awards are expensed

under the straight-line method over the vesting period.

The following table summarizes Fortress

restricted stock awards and restricted stock units activities, excluding activities related to Fortress subsidiaries:

Stock-based compensation expense from restricted stock awards and restricted stock units for the years ended December 31, 2020 and 2019 was $ 12.5 million and $ 11.5 million, respectively.

During 2020, the Company granted 1.9 million restricted shares of its Common Stock to executives and directors of the Company and 0.6 million restricted stock units to employees and non-employees of the Company.

The fair value of the restricted stock awards issued during 2020 of $ 4.8 million and the fair value of the restricted stock unit awards issued during 2020 of $ 2.4 million were estimated on the grant date using the Company’s stock price as of the grant date.

The 2020 restricted stock awards and restricted stock unit awards vest upon both the passage of time as well as meeting certain performance criteria.

Restricted stock awards and restricted stock unit awards are expensed under the straight-line method over the vesting period.

Expense for awards with performance-based vesting criteria will be measured and recorded if and when it becomes probable that the milstone will be achieved.

During 2019, the Company granted 1.5 million restricted shares of its Common Stock to executives and directors of the Company and 0.3 million restricted stock units to employees and non-employees of the Company.

The fair value of the restricted stock awards issued during 2019 of $ 1.4 million and the fair value of the restricted stock unit awards issued during 2019 of $ 0.4 million were estimated on the grant date using the Company’s stock price as of the grant date.

The 2019 restricted stock awards and restricted stock unit awards vest upon both the passage of time as well as meeting certain performance criteria.

Restricted stock awards and restricted stock unit awards are expensed under the straight-line method over the vesting period.

Expense for awards with performance-based vesting criteria will be measured and recorded if and when it becomes probable that the milstone will be achieved.

The following table summarizes Fortress restricted stock awards and restricted stock units activities, excluding activities related to Fortress subsidiaries:

average grant

Number of shares

Unvested balance at December 31, 2018

6 unchanged sentences

Restricted stock granted

Restricted stock forfeited

Restricted stock vested

3 unchanged sentences

Unvested balance at December 31, 2020

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The total fair value of restricted

stock units and awards that vested during the years ended December 31, 2019 and 2018 was $2.0 million and $3.3 million,

respectively.

As of December 31, 2019, the Company had unrecognized stock-based compensation expense related to all

unvested restricted stock and restricted stock unit awards of $11.9 million and $1.8 million, respectively, which is expected

to be recognized over the remaining weighted-average vesting period of 4.8 years and 2.1 years, respectively.

does not include 227,083 restricted stock units and 395,869 restricted stock awards as of December 31, 2019 which are

performance-based and vest upon achievement of certain corporate milestones.

Stock-based compensation for these awards will

be measured and recorded if and when it is probable that the milestone will be achieved.

The total fair value of restricted stock units and awards that vested during the years ended December 31, 2020 and 2019 was $ 2.0 million and $ 2.0 million, respectively.

As of December 31, 2020, the Company had unrecognized stock-based compensation expense related to all unvested restricted stock and restricted stock unit awards of $ 12.6 million and $ 3.1 million, respectively, which is expected to be recognized over the remaining weighted-average vesting period of 4.1 years and 2.8 years, respectively.

This amount does not include 0.1 million restricted stock units as of December 31, 2020 which are performance-based and vest upon achievement of certain corporate milestones.

Stock-based compensation for these awards will be measured and recorded if and when it is probable that the milestone will be achieved.

Deferred Compensation Plan

On March 12, 2015, the Company’s

Compensation Committee approved the Deferred Compensation Plan allowing all non-employee directors the opportunity to defer all

or a portion of their fees or compensation, including restricted stock and restricted stock units.

During the year ended December 31,

2019 and 2018, certain non-employee directors elected to defer an aggregate of 230,000 and 230,000 restricted stock awards, respectively,

under this plan.

On March 12, 2015, the Company’s Compensation Committee approved the Deferred Compensation Plan allowing all non-employee directors the opportunity to defer all or a portion of their fees or compensation, including restricted stock and restricted stock units.

During the year ended December 31, 2020 and 2019, certain non-employee directors elected to defer an aggregate of 230,000 and 230,000 restricted stock awards, respectively, under this plan.

Employee Stock Purchase Plan

Eligible employees can purchase the Company’s

Common Stock at the end of a predetermined offering period at 85% of the lower of the fair market value at the beginning or end

of the offering period.

Eligible employees can purchase the Company’s Common Stock at the end of a predetermined offering period at 85 % of the lower of the fair market value at the beginning or end of the offering period.

The ESPP is compensatory and results in stock-based compensation expense.

As of December 31, 2019, 454,515 shares

have been purchased and 545,485 shares are available for future sale under the Company’s ESPP.

The Company recognized share-based

compensation expense of $0.1 million and $0.2 million for the years ended December 31, 2019 and 2018, respectively.

The following table summarizes Fortress

warrant activities, excluding activities related to partner companies:

Number of shares

Weighted average

exercise price

As of December 31, 2020, 577,301 shares have been purchased and 422,699 shares are available for future sale under the Company’s ESPP.

The Company recognized share-based compensation expense of $ 0.1 million and $ 0.1 million for the years ended December 31, 2020 and 2019, respectively.

The following table summarizes Fortress warrant activities, excluding activities related to partner companies:

Total weighted

average intrinsic

Weighted average

contractual life

exercise price

Outstanding as of December 31, 2018

2 unchanged sentences

Exercisable as of December 31, 2020

All stock-based expense in connection with

these warrants has been recognized prior to January 1, 2017.

Long-Term Incentive Program (“LTIP”)

On July 15, 2015, the stockholders

approved the LTIP for the Company’s Chairman, President and Chief Executive Officer, Dr.

Rosenwald, and Executive Vice

Chairman, Strategic Development, Mr.

The LTIP consists of a program to grant equity interests in the Company and in

the Company’s subsidiaries, and a performance-based bonus program that is designed to result in performance-based compensation

that is deductible without limit under Section 162(m) of the Internal Revenue Code of 1986, as amended.

On January 1, 2019 and 2018, the Compensation

Committee granted 648,204 and 586,429 shares each to Dr.

During 2020, in connection with the issuance of the Oaktree Note, the Company issued warrants to purchase 1,749,450 shares of common stock;

in connection with a consulting agreement the Company issued warrants to purchase 100,000 shares of common stock.

The relative fair value of the Oaktree warrants was recorded to debt discount and will be amortized over the term of the Oaktree Note (see Note 10).

As of December 31, 2020, the Company had no unrecognized stock-based compensation expense related to warrants.

Long-Term Incentive Program (“LTIP”)

On July 15, 2015, the stockholders approved the LTIP for the Company’s Chairman, President and Chief Executive Officer, Dr.

Rosenwald, and Executive Vice Chairman, Strategic Development, Mr.

The LTIP consists of a program to grant equity interests in the Company and in the Company’s subsidiaries, and a performance-based bonus program that is designed to result in performance-based compensation that is deductible without limit under Section 162(m) of the Internal Revenue Code of 1986, as amended.

On January 1, 2020 and 2019, the Compensation Committee granted 801,536 and 648,204 shares each to Dr.

Rosenwald and Mr.

Weiss, respectively.

These equity grants,

made in accordance with the LTIP, represent 1% of total outstanding shares of the Company as of the dates of such grants and were

granted in recognition of their performance in 2018 and 2017.

The shares are subject to repurchase by the Company until both of

the following conditions are met:

(i) the Company’s market capitalization increases by a minimum of $100.0 million,

and (ii) the employee is either in the service of the Company as an employee or as a Board member (or both) on the tenth anniversary

of the LTIP, or the eligible employee has had an involuntary separation from service (as defined in the LTIP).

The Company’s

repurchase option on such shares will also lapse upon the occurrence of a corporate transaction (as defined in the LTIP) if the

eligible employee is in service on the date of the corporate transaction.

The fair value of each grant on the grant date was approximately

$0.6 million for the 2019 grant and $2.3 million for the 2018 grant.

For the year ended December 31, 2019 and 2018, the Company

recorded expense of approximately $1.4 million and $1.3 million, respectively related to the LTIP grants on the Consolidated Statements

of Operations.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

For their service in 2017, Dr.

Weiss received bonuses of $500,000 each, paid in cash during the quarter ended June 30, 2018 (the “LTIP

Annual Cash Bonus”).

Rosenwald and Mr.

Weiss waived their right to the LTIP Annual Cash Bonus.

treated this transaction as a capital contribution, which is reflected on the Consolidated Statement of Changes in Stockholders’

Equity for the year ended December 31, 2018.

In lieu of the LTIP Annual Cash Bonus, on July 3, 2018 the Company’s

Board granted Dr.

Rosenwald and Mr.

Weiss each a restricted stock award for the number of shares of the Company’s

common stock with a fair market value equal to the LTIP Annual Cash Bonus, measured at the date of such consent;

such number of

shares as calculated at the $3.04 closing trading price of the Company’s common stock, equal to 164,473 shares each.

fair value of each grant on the grant date was approximately $0.5 million.

For the years ended December 31, 2019 and 2018,

the Company recorded expense of approximately $0.3 million and $0.1 million, respectively, related to these grants on the Consolidated

Statements of Operations.

These equity grants, made in accordance with the LTIP, represent 1 % of total outstanding shares of the Company as of the dates of such grants and were granted in recognition of their performance in 2019 and 2018.

The shares are subject to repurchase by the Company until both of the following conditions are met:

(i) the Company’s market capitalization increases by a minimum of $ 100.0 million, and (ii) the employee is either in the service of the Company as an employee or as a Board member (or both) on the tenth anniversary of the LTIP, or the eligible employee has had an involuntary separation from service (as defined in the LTIP).

The Company’s repurchase option on such shares will also lapse upon the occurrence of a corporate transaction (as defined in the LTIP) if the eligible employee is in service on the date of the corporate transaction.

The fair value of each grant on the grant date was approximately $ 2.1 million for the 2020 grant and $ 0.6 million for the 2019 grant.

For the year ended December 31, 2020 and 2019, the Company recorded stock compensation expense of approximately $ 2.5 million and $ 1.4 million, respectively related to the LTIP grants on the Consolidated Statements of Operations.

Capital Raise

At the Market Offering

On August 17, 2016, the Company entered

into an Amended and Restated At Market Issuance Sales Agreement, or Sales Agreement, with MLV & Co.

LLC, or MLV, and FBR

Capital Markets & Co., or FBR (“ATM”).

On August 18, 2016, the Company filed a Registration Statement

on Form S-3, which became effective on December 1, 2016 and permits the Company to issue and sell shares of its common

stock having an aggregate offering price of up to $53.0 million from time to time through MLV and FBR, as sales agents under the

Sales Agreement.

2019 Common Stock At the Market Offering

On June 28, 2019, the Company entered into an At Market Issuance Sales Agreement (“2019 Common ATM”), with Cantor Fitzgerald & Co., Oppenheimer & Co., Inc., H.C.

Wainwright & Co.

Inc., Jones Trading Institutional Services LLC and B.

Riley, as selling agents, governing potential sales of the Company’s common stock.

For the years ended December 31, 2020 and 2019, the Company issued approximately 17.4 million and 3.8 million shares of common stock, respectively, for gross proceeds of $ 47.5 million and $ 5.6 million, respectively, at an average selling price of $ 2.73 and $ 1.49 , respectively.

Under the 2019 Common ATM, the Company pays the agents a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of common stock, and in connection with these sales, with respect to the years ended December 31, 2020 and 2019, the Company paid aggregate fees of approximately $ 1.4 million and $ 0.2 million, respectively.

Common Stock At the Market Offering

On August 17, 2016, the Company entered into an Amended and Restated At Market Issuance Sales Agreement, or Sales Agreement, with MLV & Co.

LLC, or MLV, and FBR Capital Markets & Co., or FBR (“ATM”).

On August 18, 2016, the Company filed a Registration Statement on Form S-3, which became effective on December 1, 2016 and permits the Company to issue and sell shares of its common stock having an aggregate offering price of up to $ 53.0 million from time to time through MLV and FBR, as sales agents under the Sales Agreement.

The Sales Agreement terminated on August 17, 2019 .

Pursuant to the terms of the ATM, for the

year ended December 31, 2019 and 2018, the Company issued approximately 8.0 million and 2.9 million shares of common stock,

respectively, at an average price of $1.88 and $2.50 per share, respectively, for gross proceeds of $15.1 million and $7.3 million,

respectively.

In connection with these sales, the Company paid aggregate fees of approximately $0.3 million and $0.3 million, respectively.

2018 9.375% Series A Cumulative

Redeemable Perpetual Preferred Stock At the Market Offering

On April 5, 2018, the Company entered

into an At Market Sales Agreement (the “2018 Preferred ATM”), with B.

Riley, National Securities Corporation, LifeSci

Capital LLC, Maxim Group LLC and Noble Capital Markets, Inc.

as selling agents, governing the issuance of the Company’s

9.375% Series A Cumulative Redeemable Perpetual Preferred Stock (“Perpetual Preferred Stock”).

For the year ended

December 31, 2019, the Company issued 39,292 shares of Perpetual Preferred Stock for gross proceeds $0.8 million at an average

selling price of $20.67.

Pursuant to the terms of the ATM, for the year ended December 31, 2019, the Company issued approximately 8.0 million shares of common stock, respectively, at an average price of $ 1.88 per share for gross proceeds of $ 15.1 million.

In connection with these sales, the Company paid aggregate fees of approximately $ 0.3 million, respectively.

2019 9.375 % Series A Cumulative Redeemable Perpetual Preferred Stock Offering

In November 2019, the Company completed an underwritten public offering of 262,500 shares of its 9.375 % Series A Cumulative Redeemable Perpetual Preferred Stock, (Nasdaq:

FBIOP) (the "Preferred Stock"), (plus a 45-day option to purchase up to an additional 39,375 shares, which was exercised in November, 2019) at a price of $ 20 per share for gross proceeds of approximately $ 6.0 million, before deducting underwriting discounts and commissions and offering expenses.

On February 14, 2020, the Company announced the closing of an underwritten public offering, whereby it sold 625,000 shares of its Preferred Stock, (plus a 45-day option to purchase up to an additional 93,750 shares, which was exercised in February 2020) at a price of $ 20.00 per share for gross proceeds of approximately $ 14.4 million, before deducting underwriting discounts and commissions and offering expenses of approximately $ 1.3 million.

On May 29, 2020, the Company closed on an underwritten public offering whereby it sold 555,556 shares of its Preferred Stock, (plus a 45-day option to purchase up to an additional 83,333 shares, which was exercised in May 2020) at a price of $ 18.00 per share for gross proceeds of approximately $ 11.5 million, before deducting underwriting discounts and commissions and offering expenses of approximately $ 1.1 million.

On August 26, 2020, the Company closed on an underwritten public offering whereby it sold 666,666 shares of its Preferred Stock, (plus a 45-day option to purchase up to an additional 66,666 shares, which was exercised in August 2020) at a price of $ 18.00 per share for gross proceeds of approximately $ 13.2 million, before deducting underwriting discounts and commissions and offering expenses of approximately $ 1.1 million.

2018 9.375 % Series A Cumulative Redeemable Perpetual Preferred Stock At the Market Offering

On April 5, 2018, the Company entered into an At Market Sales Agreement (the “2018 Preferred ATM”), with B.

Riley, National Securities Corporation, LifeSci Capital LLC, Maxim Group LLC and Noble Capital Markets, Inc.

as selling agents, governing the issuance of the Company’s 9.375 % Series A Cumulative Redeemable Perpetual Preferred Stock (“Perpetual Preferred Stock”).

For the year ended December 31, 2019, the Company issued 39,292 shares of Perpetual Preferred Stock for gross proceeds $ 0.8 million at an average selling price of $ 20.67 .

No shares of Perpetual Preferred Stock were issued in 2018.

Under the 2018 Preferred ATM, the Company

pays the agents a commission rate of up to 7.0% of the gross proceeds from the sale of any shares of Perpetual Preferred Stock,

and in connection with these sales, with respect to the year ended December 31, 2019, the Company paid aggregate fees of approximately

The above-mentioned shares of Perpetual

Preferred Stock were sold under the 2016 Shelf.

Under the 2018 Preferred ATM, the Company pays the agents a commission rate of up to 7.0 % of the gross proceeds from the sale of any shares of Perpetual Preferred Stock, and in connection with these sales, with respect to the year ended December 31, 2019, the Company paid aggregate fees of approximately $ 24,000 .

The above-mentioned shares of Perpetual Preferred Stock were sold under the 2016 Shelf.

The 2016 Shelf expired on December 1, 2019 .

2019 Common Stock At the Market Offering

On June 28, 2019, the Company entered

into an At Market Issuance Sales Agreement (“2019 Common ATM”), with Cantor Fitzgerald & Co., Oppenheimer &

Co., Inc., H.C.

The 2019 offerings of both common stock and preferred stock were sold under the Company’s shelf registration statement on Form S-3 originally filed on July 6, 2018 and declared effective July 23, 2019 (the “2019 Shelf”).

The shares of common stock were sold under the Company’s shelf registration statement on Form S-3 originally filed on July 6, 2018 and declared effective July 23, 2019 (the “2019 Shelf”) through May 27, 2020.

On May 18, 2020, the Company filed a new shelf registration statement on Form S-3, which was declared effective on May 26, 2020 (the "2020 Shelf").

In connection with the 2020 Shelf, the Company entered into an At Market Issuance Sales Agreement ("2020 Common ATM"), with Cantor Fitzgerald & Co., Oppenheimer & Co., Inc., H.C.

Wainwright & Co.

Inc., Jones Trading Institutional Services LLC and B.

Riley, as selling agents,

governing potential sales of the Company’s common stock.

For the year ended December 31, 2019, the Company issued approximately

3.8 million shares of common stock for gross proceeds of $5.6 million at an average selling price of $1.49.

Under the 2019 Common

ATM, the Company pays the agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock,

and in connection with these sales, with respect to the year ended December 31, 2019, the Company paid aggregate fees of approximately

$0.2 million.

2019 9.375% Series A Cumulative

Redeemable Perpetual Preferred Stock Offering

In November 2019, the Company completed

an underwritten public offering of 262,500 shares of its 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock,

(plus a 45-day option to purchase up to an additional 39,375 shares, which was exercised in November, 2019) at a price of $20 per

share for gross proceeds of approximately $6.0 million, before deducting underwriting discounts and commissions and offering expenses.

(See Note 21.)

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The 2019 offerings of both common stock

and preferred stock were sold under the Company’s shelf registration statement on Form S-3 originally filed on July 6,

2018 and declared effective July 23, 2019 (the “2019 Shelf”).

Approximately $38.3 million of securities remain

available for sale under the 2019 Shelf at December 31, 2019.

Riley and Dawson James Securities, Inc., as selling agents, governing potential sales of the Company's common stock.

ATM sales commencing on June 1, 2020 were made under the 2020 Shelf as were Perpetual Preferred Offerings.

Approximately $ 26.7 million of securities remain available for sale under the 2020 Shelf at December 31, 2020.

Cyprium 9.375 % Series A Cumulative Redeemable Perpetual Preferred Stock Offering

On August 28, 2020, Cyprium closed on an underwritten public offering whereby it sold 255,400 shares of its 9.375 % Series A Cumulative Redeemable Perpetual Preferred Stock (“Cyprium Perpetual Preferred Stock” or “Cyprium PPS”), plus an overallotment of an additional 64,600 shares, which was exercised on September 18, 2020, at a price of $ 25.00 per share for gross proceeds of $ 8.0 million, before deducting underwriting discounts and commissions and offering expenses of approximately $ 0.9 million (the “Cyprium Offering”).

Pursuant to the terms of the Cyprium PPS, shareholders on the record date are entitled to receive a monthly cash dividend of $ 0.19531 per share which yields an annual dividend of $ 2.34375 per share.

The Cyprium PPS will automatically be redeemed upon the first (and only the first) bona fide, arm’s-length sale of a Priority Review Voucher (a “PRV”) issued by the FDA in connection with the approval of CUTX-101, Cyprium’s lead product candidate.

Upon the PRV sale, each share of Cyprium PPS will be automatically redeemed in exchange for a payment equal to twice (2x) the $ 25.00 liquidation preference, plus accumulated and unpaid dividends to, but excluding, the redemption date.

An optional exchange to Company Preferred Stock is available after 24 months from the issuance date so long as a sale of the PRV has not occurred.

Additionally, if a PRV Sale has not occurred by September 30, 2024 the Cyprium PPS is either automatically exchanged for Company Preferred Stock or cash at the discretion of Fortress.

The Cyprium PPS is fully and unconditionally guaranteed by Fortress.

Cyprium paid an initial dividend of $ 49,883 ($ 0.19531 per share) to shareholders of record on September 30, 2020.

Cyprium paid $ 0.2 million in dividends for the year ended December 31, 2020.

Checkpoint Therapeutics, Inc.

In November 2017, the Checkpoint filed

a shelf registration statement on Form S-3 (No.

333-221493) (the "Checkpoint S-3"), which was declared effective

in December 2017.

In November 2017, the Checkpoint filed a shelf registration statement on Form S-3 (No.

333-221493) (the "Checkpoint 2017 S-3"), which was declared effective in December 2017.

Under the Checkpoint S-3, Checkpoint may sell up to a total of $ 100 million of its securities.

In connection

with the Checkpoint S-3, Checkpoint entered into an At-the-Market Issuance Sales Agreement (the "Checkpoint ATM") with

Cantor Fitzgerald & Co., Ladenburg Thalmann & Co.

In connection with the Checkpoint S-3, Checkpoint entered into an At-the-Market Issuance Sales Agreement (the "Checkpoint 2017 ATM") with Cantor Fitzgerald & Co., Ladenburg Thalmann & Co.

Wainwright & Co., LLC (each an "Agent"

and collectively, the "Agents"), relating to the sale of shares of common stock.

Under the Checkpoint ATM, Checkpoint

pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

During the year ended December 31,

2019, Checkpoint sold a total of 2,273,189 shares of common stock under the ATM for aggregate total gross proceeds of approximately

$8.0 million at an average selling price of $3.52 per share, resulting in net proceeds of approximately $7.8 million after deducting

commissions and other transaction costs.

During the year ended December 31,

2018, Checkpoint sold a total of 1,841,774 shares of common stock under the Checkpoint ATM for aggregate total gross proceeds of

approximately $8.0 million at an average selling price of $4.33 per share, resulting in net proceeds of approximately $7.7 million

after deducting commissions and other transactions costs.

In November 2019, Checkpoint completed

an underwritten public offering of 15,400,000 shares of its common stock at a price of $1.27 per share for gross proceeds of approximately

$19.6 million.

Total net proceeds from the offering were approximately $17.6 million, net of underwriting discounts and offering

expenses of approximately $2.0 million.

In March 2018, Checkpoint completed

an underwritten public offering of 5,290,000 shares of its common stock at a price of $4.35 per share for gross proceeds of approximately

$23.0 million.

Total net proceeds from the offering were approximately $20.8 million, net of underwriting discounts and offering

expenses of approximately $2.2 million.

Approximately $41.4 million of the shelf

remains available for sale under the Checkpoint S-3, following the offerings noted above.

Under the Checkpoint 2017 ATM, Checkpoint pays the Agents a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of common stock.

The Checkpoint 2017 S-3 expired in December 2020.

During the year ended December 31, 2020, Checkpoint sold a total of 5,104,234 shares of common stock under the Checkpoint ATM for aggregate total gross proceeds of approximately $ 12.8 million at an average selling price of $ 2.50 per share, resulting in net proceeds of approximately $ 12.4 million after deducting commissions and other transaction costs.

During the year ended December 31, 2019, Checkpoint sold a total of 2,273,189 shares of common stock under the Checkpoint ATM for aggregate total gross proceeds of approximately $ 8.0 million at an average selling price of $ 3.52 per share, resulting in net proceeds of approximately $ 7.8 million after deducting commissions and other transaction costs.

In September 2020, Checkpoint completed an underwritten public offering in which it sold 7,321,429 shares of its common stock at a price of $ 2.80 per share for gross proceeds of approximately $ 20.5 million.

Total net proceeds from the offering were approximately $ 18.9 million, net of underwriting discounts and offering expenses of approximately $ 1.6 million.

The shares were sold under the Checkpoint 2017 S-3.

In November 2019, Checkpoint completed an underwritten public offering of 15,400,000 shares of its common stock at a price of $ 1.27 per share for gross proceeds of approximately $ 19.6 million.

Total net proceeds from the offering were approximately $ 17.6 million, net of underwriting discounts and offering expenses of approximately $ 2.0 million.

The shares were sold under the Checkpoint 2017 S-3.

In November 2020, Checkpoint filed a shelf registration statement on Form S-3 (the “Checkpoint 2020 S-3”), which was declared effective in December 2020.

Under the Checkpoint 2020 S-3, Checkpoint may sell up to a total of $ 100 million of its securities.

In connection with the Checkpoint S-3, Checkpoint entered into an ATM (the "Checkpoint 2020 ATM") with Cantor Fitzgerald & Co., Ladenburg Thalmann & Co.

Wainwright & Co., LLC (each an “Agent” and collectively, the “Agents”), relating to the sale of shares of common stock.

Under the ATM, Checkpoint pays the Agents a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of common stock.

As of December 31, 2020, approximately $ 83.6 million of the shelf remains available for sale under the Checkpoint 2020 S-3.

Mustang Bio, Inc.

July 13, 2018, Mustang filed a shelf registration statement No.

333-226175 on Form S-3, as amended on July 20,

2018 (the "2018 Mustang S-3"), which was declared effective in August 2018.

Under the 2018 Mustang S-3, Mustang

may sell up to a total of $75.0 million of its securities.

In connection with the 2018 Mustang S-3, Mustang entered into an At-the-Market

Issuance Sales Agreement (the "Mustang ATM") with B.

Riley FBR, Inc., Cantor Fitzgerald & Co., National

Securities Corporation, and Oppenheimer & Co.

On July 13, 2018, Mustang filed a shelf registration statement No.

333-226175 on Form S-3 , as amended on July 20, 2018 (the "2018 Mustang S-3"), which was declared effective in August 2018.

Under the 2018 Mustang S-3, Mustang may sell up to a total of $ 75.0 million of its securities.

In connection with the 2018 Mustang S-3, Mustang entered into an At-the-Market Issuance Sales Agreement (the "Mustang ATM") with B.

Riley Securities, Inc.

Riley FBR, Inc.), Cantor Fitzgerald & Co., National Securities Corporation, and Oppenheimer & Co.

(each an "Agent"

and collectively, the "Agents"),

relating to the sale of shares of common stock.

Under the Mustang ATM, Mustang pays the Agents a commission rate of up to 3.0%

of the gross proceeds from the sale of any shares of common stock.

During the year ended December 31, 2019, Mustang

issued approximately 3.5 million shares of common stock under the Mustang ATM at an average price of $6.42 per share for gross

proceeds of $22.5 million.

In connection with these sales, Mustang paid aggregate fees of approximately $0.5 million, for net proceeds

of approximately $22.0 million.

No sales were made under the Mustang ATM in 2018.

In April 2019, Mustang completed an

underwritten public offering of 6,875,000 shares of its common stock, (plus a 30-day option to purchase up to an additional 1,031,250

shares of common stock, which was exercised in May 2019) at a price of $4.00 per share for gross proceeds of approximately

$31.6 million, before deducting underwriting discounts and commissions and offering expenses.

The shares were sold under the 2018

and collectively, the "Agents"), relating to the sale of shares of common stock.

Under the Mustang ATM, Mustang pays the Agents a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of common stock.

During the year ended December 31, 2020, Mustang issued approximately 17.6 million shares of common stock at an average price of $ 3.40 per share for gross proceeds of $ 59.8 million under the Mustang ATM.

In connection with these sales, Mustang paid aggregate fees of approximately $ 1.1 million for net proceeds of approximately $ 58.7 million.

During the year ended December 31, 2019, Mustang issued approximately 3.5 million shares of common stock at an average price of $ 6.42 per share for gross proceeds of $ 22.5 million under the Mustang ATM.

In connection with these sales, Mustang paid aggregate fees of approximately $ 0.5 million for net proceeds of approximately $ 22.0 million.

On June 11, 2020, Mustang entered into an underwriting agreement (the “Mustang Underwriting Agreement”) with Cantor Fitzgerald & Co., as representative of the underwriters named therein (each, an “Underwriter” and collectively with Cantor Fitzgerald & Co., the “Underwriters”).

In connection with the Mustang Underwriting Agreement, Mustang issued 10,769,231 shares of common stock (plus a 30-day option to purchase up to an additional 1,615,384 shares of common stock, of which 686,373 were exercised) at a price of $ 3.25 per share for gross proceeds of approximately $ 37.2 million, before deducting underwriting discounts and commissions and offering expenses.

In connection with the public offering, Mustang paid aggregate fees of approximately $ 2.4 million for net proceeds of approximately $ 34.8 million.

The shares were sold under the Mustang S-3 registrations filed with the Securities and Exchange Commission.

The offering closed on June 15, 2020, and the over-allotment closed on June 25, 2020.

In April 2019, Mustang completed an underwritten public offering of 6,875,000 shares of its common stock, (plus a 30-day option to purchase up to an additional 1,031,250 shares of common stock, which was exercised in May 2019) at a price of $ 4.00 per share for gross proceeds of approximately $ 31.6 million, before deducting underwriting discounts and commissions and offering expenses.

The shares were sold under the 2018 Mustang S-3.

Mustang paid aggregate fees of approximately $ 2.1 million and received approximately $ 29.5 million of net proceeds.

On August 16, 2019, Mustang filed

a shelf registration statement No.

333-233350 on Form S-3 (the “2019 Mustang S-3”), which was declared effective

on September 30, 2019.

On October 23, 2020, Mustang filed a shelf registration statement No.

333-249657 on Form S-3 (the "2020 Mustang S-3"), which was declared effective on December 4, 2020.

Under the 2020 Mustang S-3, Mustang may sell up to a total of $ 100.0 million of its securities.

December 31, 2019, no sales were made under Mustang’s 2019 S-3 and approximately $20.9 million of the 2018 Mustang S-3

remains available for sale.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

As of December 31, 2020, approximately $ 85.7 million of the 2020 Mustang S-3 remains available for sales of securities.

On August 16, 2019, Mustang filed a shelf registration statement No.

333-233350 on Form S-3 (the "2019 Mustang S-3"), which was declared effective on September 30, 2019.

Under the 2019 Mustang S-3, Mustang may sell up to a total of $ 75.0 million of its securities.

As of December 31, 2020, the 2019 S-3 is no longer available for sales of securities.

Commitments and Contingencies

On October 3, 2014, the Company entered

into a 15-year lease for office space at 2 Gansevoort Street, New York, NY 10014, at an average annual rent of $2.5 million.

Company took possession of this space, which serves as its principal executive offices, in December 2015, and took occupancy

in April 2016.

On October 3, 2014, the Company entered into a 15 -year lease for office space at 2 Gansevoort Street, New York, NY 10014, at an average annual rent of $ 2.5 million.

The Company took possession of this space, which serves as its principal executive offices, in December 2015, and took occupancy in April 2016.

Total rent expense, over the full term of the lease for this space will approximate $ 40.7 million.

In conjunction

with the lease, the Company entered into Desk Space Agreements with two related parties:

OPPM and TGTX, to occupy 10% and 45%,

respectively, of the office space that requires them to pay their share of the average annual rent of $0.3 million and $1.1 million,

respectively.

In conjunction with the lease, the Company entered into Desk Space Agreements with two related parties:

OPPM and TGTX, to occupy 10 % and 45 %, respectively, of the office space that requires them to pay their share of the average annual rent of $ 0.3 million and $ 1.1 million, respectively.

The total net rent expense will approximate $ 16.0 million over the lease term.

These initial rent allocations will

be adjusted periodically for each party based upon actual percentage of the office space occupied.

Additionally, the Company has

reserved the right to execute desk space agreements with other third parties and those arrangements will also affect the cost of

the lease actually borne by us.

In October 2015, the Company entered

into a 5-year lease for approximately 6,100 square feet of office space in Waltham, MA at an average annual rent of approximately

$0.2 million.

These initial rent allocations will be adjusted periodically for each party based upon actual percentage of the office space occupied.

Additionally, the Company has reserved the right to execute desk space agreements with other third parties and those arrangements will also affect the cost of the lease actually borne by us.

In October 2015, the Company entered into a 5-year lease for approximately 6,100 square feet of office space in Waltham, MA at an average annual rent of approximately $ 0.2 million.

The Company took occupancy of this space in January 2016.

In June 2017, Journey extended its

lease for 2,295 square feet of office space in Scottsdale, AZ by one year, at an average annual rent of approximately $55,000.

In December 2020, we amended our lease and entered into a new two-year extension of the same office space in Waltham, MA at an average annual rent of $ 0.2 million.

The term of this amended lease commences on April 1, 2021 and will expire on March 31, 2023 .

In June 2017, Journey extended its lease for 2,295 square feet of office space in Scottsdale, AZ by one year , at an average annual rent of approximately $ 55,000 .

Journey originally took occupancy of this space in November 2014.

In August 2018, Journey amended their lease and entered

into a new two-year extension for 3,681 square feet of office space in the same location in Scottsdale, AZ at an annual rate of

approximately $94,000.

In August 2018, Journey amended their lease and entered into a new two-year extension for 3,681 square feet of office space in the same location in Scottsdale, AZ at an annual rate of approximately $ 94,000 .

The term of this amended lease commenced on December 1, 2018 and will expire on November 30, 2020 .

On October 27, 2017, Mustang entered

into a lease agreement with WCS - 377 Plantation Street, Inc., a Massachusetts nonprofit corporation (“Landlord”).

Pursuant to the terms of the lease agreement, Mustang agreed to lease 27,043 square feet from the Landlord, located at 377 Plantation

Street in Worcester, MA (the “Facility”), through November 2026, subject to additional extensions at Mustang’s

In August 2020, Journey amended their lease and entered into a new 25-month extension of the same office space in Scottsdale, AZ at an average annual rent of $ 0.1 million.

The term of this amended lease commenced on December 1, 2020 and will expire on December 31, 2022 .

On October 27, 2017, Mustang entered into a lease agreement with WCS - 377 Plantation Street, Inc., a Massachusetts nonprofit corporation (“Landlord”).

Pursuant to the terms of the lease agreement, Mustang agreed to lease 27,043 square feet from the Landlord, located at 377 Plantation Street in Worcester, MA (the “Facility”), through November 2026, subject to additional extensions at Mustang’s option.

Base rent, net of abatements of $ 0.6 million over the lease term, totals approximately $ 3.6 million, on a triple-net basis.

The terms of the lease also require that

Mustang post an initial security deposit of $0.8 million, in the form of $0.5 million letter of credit and $0.3 million in cash,

which increased to $1.3 million ($1.0 million letter of credit, $0.3 million in cash) on November 1, 2019.

After the fifth

lease year, the letter of credit obligation is subject to reduction.

The Facility began operations for the production

of personalized CAR T and gene therapies in 2018.

The Company leases copiers under agreements

classified as operating leases that expire on various dates through 2021.

Most of the Company’s lease liabilities

result from the lease of its New York City, NY office, which expires in 2031 and Mustang’s Worcester, MA cell processing

facility lease, which expires in 2026.

Such leases do not require any contingent rental payments, impose any financial restrictions,

or contain any residual value guarantees.

Certain of the Company’s leases include renewal options and escalation clauses;

renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not

reasonably certain to exercise the options.

The Company does not act as a lessor or have any leases classified as financing

At December 31, 2019, the Company had operating lease liabilities of $25.5 million and right of use assets of $21.5

million, which were included in the consolidated balance sheet.

During the year ended December 31,

2019, the Company recorded $3.2 million as lease expense to current period operations.

The terms of the lease also require that Mustang post an initial security deposit of $ 0.8 million, in the form of $ 0.5 million letter of credit and $ 0.3 million in cash, which increased to $ 1.3 million ($ 1.0 million letter of credit, $ 0.3 million in cash) on November 1, 2019.

After the fifth lease year, the letter of credit obligation is subject to reduction.

The Facility began operations for the production of personalized CAR T and gene therapies in 2018.

The Company leases copiers under agreements classified as operating leases that expire on various dates through 2024.

Most of the Company’s lease liabilities result from the lease of its New York City, NY office, which expires in 2031 and Mustang’s Worcester, MA cell processing facility lease, which expires in 2026 .

Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees.

Certain of the Company’s leases include renewal options and escalation clauses;

renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not reasonably certain to exercise the options.

The Company does not act as a lessor or have any leases classified as financing leases.

At December 31, 2020, the Company had operating lease liabilities of $ 24.7 million and right of use assets of $ 20.5 million, which were included in the Consolidated Balance Sheet.

During the years ended December 31, 2020 and 2019, the Company recorded $ 3.2 million and $ 3.2 million, respectively, as lease expense to current period operations.

Year Ended December 31,

($ in thousands)

2 unchanged sentences

Variable lease cost

Total lease cost

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The following tables summarize quantitative

information about the Company’s operating leases, under the adoption of Topic 842 :

Total lease expense

The following tables summarize quantitative information about the Company’s operating leases, under the adoption of ASC Topic 842 , Leases :

Year Ended December 31,

($ in thousands)

Operating cash flows from operating leases

Weighted-average remaining lease term –

operating leases

Weighted-average discount rate –

operating leases

Right-of-use assets exchanged for new operating lease liabilities

Weighted-average remaining lease term – operating leases (years)

Weighted-average discount rate – operating leases

($ in thousands)

4 unchanged sentences

Year Ended December 31, 2025

Total operating lease liabilities

present value discount

Operating lease liabilities

The Company recognizes rent expense on

a straight-line basis over the non-cancellable lease term.

Rent expense for the years ended December 31, 2019 and 2018 was

$2.1 million and $1.7 million, respectively.

Net operating lease liabilities, short-term and long-term

The Company recognizes rent expense on a straight-line basis over the non-cancellable lease term.

Rent expense for the years ended December 31, 2020 and 2019 was $ 2.0 million and $ 2.1 million, respectively.

Indemnification

In accordance with its certificate of incorporation,

bylaws and indemnification agreements, the Company has indemnification obligations to its officers and directors for certain events

or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity.

There have been

no claims to date, and the Company has director and officer insurance to address such claims.

Pursuant to agreements with clinical

trial sites, the Company provides indemnification to such sites in certain conditions.

In accordance with its certificate of incorporation, bylaws and indemnification agreements, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity.

There have been no claims to date, and the Company has director and officer insurance to address such claims.

Pursuant to agreements with clinical trial sites, the Company provides indemnification to such sites in certain conditions.

Legal Proceedings

Fortress Biotech, Inc.

In the ordinary course of business, the

Company and its subsidiaries may be subject to both insured and uninsured litigation.

Suits and claims may be brought against the

Company by customers, suppliers, partners and/or third parties (including tort claims for personal injury arising from clinical

trials of the Company’s product candidates and property damage) alleging deficiencies in performance, breach of contract, etc.,

and seeking resulting alleged damages.

Falk Pharma, GmbH v.

Biotech, Inc.

(Frankfurt am Main Regional Court, Ref.

3-06 0 28/16).

Falk Pharma, GmbH (“Dr.

Pharma”) and Fortress were among the parties to that certain Collaboration Agreement dated March 20, 2012, whereby they

agreed to collaborate to develop a product for treatment of Crohn’s disease.

A dispute arose between Dr.

and Fortress with respect to their relative rights and obligations under the Collaboration Agreement;

specifically, Dr.

Pharma contended that it had fulfilled its contractual obligations to Fortress and is entitled to the final milestone payment due

under the Collaboration Agreement - EUR 2.5 million.

Fortress contended that no such payment is due because a condition of the

EUR 2.5 million payment was the delivery of a Clinical Study Report that addressed the primary and secondary objectives of a Phase

II trial, and Fortress contended that Dr.

Falk Pharma failed to deliver such a Clinical Study Report.

filed a lawsuit against Fortress in the above-referenced Court in Frankfurt, Germany to recover the EUR 2.5 million plus interest

and attorneys’

fees, and Fortress filed an answer to the complaint, denying that it had any liability to Dr.

On July 27, 2017, Fortress received a judgment from the court in Frankfurt awarding the full amount (EUR 2.5 million) plus

interest to Dr.

Fortress appealed the decision to the Higher Regional Court of Frankfurt on August 28, 2017,

and the initial response of Dr.

Falk Pharma to the appeal was filed on February 16, 2018.

At an appellate hearing in

the Higher Regional Court on June 12, 2018, the court issued an oral ruling upholding the lower court’s judgment and

indicating that an impending written, enforceable judgment would do the same.

On July 12, 2018, the Higher Regional Court

approved and recorded terms of settlement between Fortress and Dr.

Falk Pharma pursuant to which Fortress paid $3.3 million

Falk Pharma during the calendar year of 2018, and approximately $39,500 to the court in mandated administrative fees.

The final $300,000 was paid during calendar year 2019.

No remaining liability exists at December 31, 2019.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

In the ordinary course of business, the Company and its subsidiaries may be subject to both insured and uninsured litigation.

Suits and claims may be brought against the Company by customers, suppliers, partners and/or third parties (including tort claims for personal injury arising from clinical trials of the Company’s product candidates and property damage) alleging deficiencies in performance, breach of contract, etc., and seeking resulting alleged damages.

In November 2020, a purported securities class action complaint was filed in the U.S.

District Court for the Eastern District of New York, putatively on behalf of all shareholders who purchased or otherwise acquired Fortress securities between December 11, 2019 and October 9, 2020 (the “Class Period”), and who were allegedly damaged in connection therewith.

The case is captioned Cushman v.

Fortress Biotech, Inc., et al.

1:20-cv-05767, and names as defendants the Company and two of our officers.

The complaint alleges that, throughout the Class Period, the Company made false and/or misleading statements and/or failed to disclose various facts and circumstances with respect to a New Drug Application filed by Avenue Therapeutics, Inc., our partner company, regarding IV Tramadol, Avenue’s lead product candidate.

The complaint alleges violations of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and seeks damages as well as attorneys’ fees, expert fees and other costs.

The action is in the early stages of litigation, and the Company intends to vigorously contest the claims.

Employee Benefit Plan

On January 1, 2008, the Company adopted

a defined contribution 401(k) plan which allows employees to contribute up to a percentage of their compensation, subject

to IRS limitations and provides for a discretionary Company match up to a maximum of 4% of employee compensation.

For the years

ended December 31, 2019 and 2018, the Company paid a matching contribution of $0.4 million and $0.2 million, respectively.

On January 1, 2008, the Company adopted a defined contribution 401(k) plan which allows employees to contribute up to a percentage of their compensation, subject to IRS limitations and provides for a discretionary Company match up to a maximum of 4 % of employee compensation.

For the years ended December 31, 2020 and 2019, the Company paid a matching contribution of $ 0.5 million and $ 0.4 million, respectively.

Related Party Transactions

The Company’s Chairman, President

and Chief Executive Officer, individually and through certain trusts over which he has voting and dispositive control, beneficially

owned approximately 11.6% and 13.1% of the Company’s issued and outstanding Common Stock as of December 31, 2019 and

2018, respectively.

The Company’s Executive Vice Chairman, Strategic Development individually owns approximately 12.7% and

15.2% of the Company’s issued and outstanding Common Stock at December 31, 2019 and 2018, respectively.

For the years ended December 31, 2019

and 2018, the Company’s CEO and Executive Vice Chairman received nil and $500,000 each, respectively.

For their service in

2017, the Company’s CEO and Executive Vice Chairman received bonuses of $500,000 each, paid in cash during the quarter ended

June 30, 2018.

The bonus recipients waived their right to a cash bonus from the Company.

The Company treated this transaction

as a capital contribution, which is reflected on the Consolidated Statement of Changes in Stockholders’

Equity for the year

ended December 31, 2018.

The Company’s Chairman, President and Chief Executive Officer, individually and through certain trusts over which he has voting and dispositive control, beneficially owned approximately 9.9 % and 11.6 % of the Company’s issued and outstanding Common Stock as of December 31, 2020 and 2019, respectively.

The Company’s Executive Vice Chairman, Strategic Development individually owns approximately 10.8 % and 12.7 % of the Company’s issued and outstanding Common Stock at December 31, 2020 and 2019, respectively.

Shared Services Agreement with TGTX

In July 2015, TGTX and the Company

entered into an arrangement to share the cost of certain research and development employees.

The Company’s Executive Vice

Chairman, Strategic Development, is Executive Chairman and Interim Chief Executive Officer of TGTX.

Under the terms of the Agreement,

TGTX will reimburse the Company for the salary and benefit costs associated with these employees based upon actual hours worked

on TGTX related projects.

In connection with the shared services agreement, the Company invoiced TGTX $0.5 million and $1.3 million,

and received payments of $0.5 million and $1.3 million for the years ended December 31, 2019 and 2018, respectively.

Desk Share Agreements with TGTX and

In September 2014, the Company entered

into Desk Share Agreements with TGTX and Opus Point Partners Management, LLC (“OPPM”) to occupy 40% and 20% of the

New York, NY office space that requires TGTX and OPPM to pay their share of the average annual rent.

These initial rent allocations

will be adjusted periodically for each party based upon actual percentage of the office space occupied.

Additionally, the Company

has reserved the right to execute desk share agreements with other third parties and those arrangements will also affect the cost

of the lease actually borne by the Company.

In July 2015, TGTX and the Company entered into an arrangement to share the cost of certain research and development employees.

The Company’s Executive Vice Chairman, Strategic Development, is Executive Chairman and Interim Chief Executive Officer of TGTX.

Under the terms of the Agreement, TGTX will reimburse the Company for the salary and benefit costs associated with these employees based upon actual hours worked on TGTX related projects.

In connection with the shared services agreement, the Company invoiced TGTX $ 0.6 million and $ 0.5 million, and received payments of $ 0.5 million and $ 0.5 million for the years ended December 31, 2020 and 2019, respectively.

Desk Share Agreements with TGTX and OPPM

In September 2014, the Company entered into Desk Share Agreements with TGTX and Opus Point Partners Management, LLC (“OPPM”) to occupy 40 % and 20 % of the New York, NY office space that requires TGTX and OPPM to pay their share of the average annual rent.

These initial rent allocations will be adjusted periodically for each party based upon actual percentage of the office space occupied.

Additionally, the Company has reserved the right to execute desk share agreements with other third parties and those arrangements will also affect the cost of the lease actually borne by the Company.

Each initial Desk Share Agreement has a term of five years .

The Company took possession

of the New York, NY office space in December 2015, commenced build out of the space shortly thereafter and took occupancy

of the space in April 2016.

The Desk Share Agreement was amended in May 2016, adjusting the initial rent allocations

to 45% for TGTX and 10% for OPPM.

In connection with the Company’s

Desk Space Agreements for the New York, NY office space, for the year ended December 31, 2019 and 2018, the Company had paid

$2.6 million and $2.7 million in rent, respectively, and invoiced TGTX and OPPM approximately $1.3 million and $1.0 million and

$180,000 and $217,000, respectively, for their prorated share of the rent base.

At December 31, 2019, the amount due related

to this arrangement from TGTX and OPPM approximated $114,000 and $400,000, respectively.

As of July 1, 2018, TGTX employees

began to occupy desks in the Waltham, MA office under the Desk Share Agreement.

TGTX began to pay their share of the rent based

on actual percentage of the office space occupied on a month by month basis.

For the years ended December 31, 2019 and 2018,

the Company had paid approximately $240,000 and $223,000 in rent for the Waltham, MA office, and invoiced TGTX approximately $109,000

and $47,000, respectively.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

As of December 31, 2019, the Company

had paid a total of $2.8 million in rent under the Desk Share Agreements for both the New York, NY office and the Waltham, MA office

combined, and invoiced TGTX and OPPM approximately $1.4 million and $180,000, respectively, for their prorated shares of the rents.

Checkpoint Collaborative Agreements

Checkpoint has entered into various agreements

with TGTX to develop and commercialize certain assets in connection with its licenses, including a collaboration agreement for

some of the Dana Farber licensed antibodies, a sponsored research agreement for compounds licensed from NeuPharma, and a sublicense

agreement for the Jubilant family of patents.

Checkpoint believes that by partnering with TGTX to develop these compounds in therapeutic

areas outside of its business focus, it may substantially offset its preclinical costs and milestone costs related to the development

and marketing of these compounds in solid tumor indications.

Opus Credit Facility

On September 14, 2016, the Company

and Opus Point Health Innovations Fund (“OPHIF”) entered into a Credit Facility Agreement (the “Opus Credit Facility”).

Fortress’s Chairman, President and Chief Executive Officer (Lindsay A.

Rosenwald) and Fortress’s Executive Vice President,

Strategic Development (Michael Weiss), are Co-Portfolio Managers and Partners of OPPM, an affiliate of OPHIF.

As such, all of the

disinterested directors of Fortress’s board of directors approved the terms of the Opus Credit Facility and related agreements.

On March 12, 2018, the Company and

OPHIF amended and restated the Opus Credit Facility (the “A&R Opus Credit Facility”).

The A&R Opus Credit Facility

extends the maturity date of the notes issued under the Opus Credit Facility from September 14, 2018 by one year to September 14,

The A&R Opus Credit Facility also permits the Company to make portions of interest and principal repayments in the form

of shares of the Company’s common stock and/or in common stock of the Company’s publicly traded subsidiaries, subject

to certain conditions.

On September 13, 2019, the Company and OPHIF extended the maturity dates of the notes from September 14,

2019 by two years to September 14, 2021.

Fortress retains the ability to prepay the Notes at any time without penalty.

notes payable under the A&R Opus Credit Facility continue to bear interest at 12% per annum.

July 18, 2019, the Company prepaid $500,000 of debt owed under the A&R Opus Credit Facility by issuing 396,825 shares

of Fortress common stock at $1.26 per share (the closing price on July 18, 2019) to Dr.

The notes payable under the A&R Opus

Credit Facility continue to bear interest at 12% per annum.

For the years ended December 31, 2019 and 2018, the Company paid

cash for interest expense of $0.5 million and $0.3 million, respectively (see Note 10).

Checkpoint Public Offering of Common

NSC, a subsidiary of National (of which

the Company owned 32.1% as of December 31, 2018), served as an underwriter in connection with Checkpoint’s 2018 equity

offering, which closed on March 12, 2018.

As the underwriter, NSC received a fee of approximately $1.8 million, or 8% on the

gross proceeds raised of $23.0 million.

The Company took possession of the New York, NY office space in December 2015, commenced build out of the space shortly thereafter and took occupancy of the space in April 2016.

The Desk Share Agreement was amended in May 2016, adjusting the initial allocations to 45 % for TGTX and 10 % for OPPM.

The Desk Share Agreement was amended again in 2020, adjusting the rent allocations to 65 % for TGTX and 0 % for OPPM.

In connection with the Company’s Desk Space Agreements for the New York, NY office space, for the years ended December 31, 2020 and 2019, the Company had paid $ 2.6 million and $ 2.6 million in rent, respectively, and invoiced TGTX and OPPM approximately $ 1.6 million and $ 1.3 million and nil and $ 0.2 million respectively, for their prorated share of the rent base.

At December 31, 2020, the amount due related to this arrangement from TGTX and OPPM approximated nil and $ 0.4 million, respectively.

As of July 1, 2018, TGTX employees began to occupy desks in the Waltham, MA office under the Desk Share Agreement.

TGTX began to pay their share of the rent based on actual percentage of the office space occupied on a month by month basis.

For the years ended December 31, 2020 and 2019, the Company had paid approximately $ 0.3 million and $ 0.2 million in rent for the Waltham, MA office, and invoiced TGTX approximately $ 0.1 million and $ 0.1 million, respectively.

As of December 31, 2020 and 2019, the Company had paid a total of $ 2.9 million and $ 2.8 million, respectively, in rent under the Desk Share Agreements for both the New York, NY office and the Waltham, MA office combined, and invoiced TGTX approximately $ 1.7 million and $ 1.4 million, respectively, for their prorated share of the rents.

Checkpoint Collaborative Agreements with TGTX

Checkpoint has entered into various agreements with TGTX to develop and commercialize certain assets in connection with its licenses, including a collaboration agreement for some of the Dana Farber licensed antibodies, and a sublicense agreement for the Jubilant family of patents.

Checkpoint believes that by partnering with TGTX to develop these compounds in therapeutic areas outside of its business focus, it may substantially offset its preclinical costs and milestone costs related to the development and marketing of these compounds in solid tumor indications.

2019 Notes (formerly the Opus Credit Facility)

On September 14, 2016, the Company and Opus Point Health Innovations Fund (“OPHIF”) entered into a Credit Facility Agreement (the “Opus Credit Facility”).

Fortress’s Chairman, President and Chief Executive Officer (Lindsay A.

Rosenwald) and Fortress’s Executive Vice President, Strategic Development (Michael Weiss), are Co-Portfolio Managers and Partners of OPPM, an affiliate of OPHIF.

As such, all of the disinterested directors of Fortress’s board of directors approved the terms of the Opus Credit Facility and related agreements.

On March 12, 2018, the Company and OPHIF amended and restated the Opus Credit Facility (the “A&R Opus Credit Facility”).

The A&R Opus Credit Facility extended the maturity date of the notes issued under the Opus Credit Facility from September 14, 2018 by one year to September 14, 2019 .

On September 13, 2019, the Company and OPHIF extended the maturity dates of the notes from September 14, 2019 by two years to September 14, 2021 .

Fortress retained the ability to prepay the Notes at any time without penalty.

The notes payable under the A&R Opus Credit Facility bear interest at 12 % per annum.

Effective December 31, 2019, OPHIF dissolved and distributed it assets among its limited partners.

Following the distribution, the $ 9.0 million facility comprised of separate notes (collectively, the “2019 Notes”) held by DAK Capital Inc.

($ 3.8 million);

Fortress’ Chairman, President and Chief Executive Officer Lindsay A.

Rosenwald, M.D.

($ 0.3 million);

Fortress's Executive Vice President, Strategic Development Michael S.

Weiss ($ 2.0 million);

and various entities and individuals affiliated with Dr.

Rosenwald and Mr.

Weiss ($ 2.9 million).

The terms of the 2019 Notes did not change in connection with such reallocations.

During the year ended December 31, 2020, the Company used certain proceeds from the Oaktree Note to pay off the $ 9.0 million balance previously outstanding under the 2019 Notes.

For the year ended December 31, 2020, in connection with the 2019 Notes pay off, the Company paid $ 0.5 million in interest on the portion of the 2019 Notes held by the Company's Chairman, President and Chief Executive Officer and the Company's Executive Vice President, Strategic Development.

2018 Venture Notes

For the year ended December 31, 2018,

the Company raised approximately $21.7 million in promissory notes.

National Securities Corporation (“NSC”), a wholly

owned subsidiary of National, and a related party as a result of the Company’s ownership of National, acted as the sole placement

agent for the 2018 Venture Notes.

The Company paid NSC a fee of $1.7 million during the year ended December 31, 2018, in connection

with the 2018 Venture Notes.

At December 31, 2018, the fee, which was recorded as debt discount on the Company’s Consolidated

Balance Sheet and will be amortized over the life of the 2018 Venture Notes.

In November 2018, the Company announced that

it had an agreement to sell its majority holding in National, the sale was completed in February of 2019, see Note 3.

For the year ended December 31, 2018, the Company raised approximately $ 21.7 million in promissory notes.

National Securities Corporation (“NSC”), a wholly owned subsidiary of National, and a related party as a result of the Company’s ownership of National, acted as the sole placement agent for the 2018 Venture Notes.

In November 2018, the Company announced that it had an agreement to sell its majority holding in National, the sale was completed in February of 2019, see Note 3.

During the year ended December 31, 2020, the Company used certain proceeds from the Oaktree Note to pay off the $ 21.7 million balance previously outstanding under the 2018 Venture Notes.

2017 Subordinated Note Financing

On March 17, 2017, the Company and

NSC, a subsidiary of National, (entered into placement agency agreements with NAM Biotech Fund and NAM Special Situation Fund in

connection with the sale of subordinated promissory notes (see Note 10).

Pursuant to the terms of the agreements, NSC received

a placement agent fee in cash of 10% of the debt raised and warrants equal to 10% of the aggregate principal amount of debt raised

divided by the closing share price of the Company’s common stock on the date of closing.

For the year ended December 31, 2017,

NSC earned a placement agent fee of $2.8 million and a Placement Agent Warrant to purchase 716,180 shares of the Company’s

common stock, all of which are outstanding, with exercise prices ranging from $3.61 to $4.75.

In November 2018, the Company

announced that it had an agreement to sell its majority holding in National, of which NSC is a wholly owned subsidiary, the sale

was completed in February of 2019, see Note 3.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

Caelum Convertible Notes

On July 31, 2017 Caelum, through NSC,

a subsidiary of National, offered up to $10 million, convertible promissory notes to accredited investors (as defined under the

Federal securities laws).

Caelum raised $9.9 million in the offering, in three separate closings and paid a placement fee

equal to NSC of 10% of the proceeds of the sale or $1.0 million.

Additionally NSC received warrants to purchase a number of shares

the Caelum’s Common Stock equal to 10% of the aggregate amount of shares underlying the Notes with a per share exercise price

equal to 110% of the per share conversion price of the Notes;

provided, however, that if no Note converts, the exercise price will

be $75 million dollars divided by the total number of fully-diluted shares of Common Stock outstanding immediately prior to exercise

of the warrant, giving effect to the assumed conversion of all options, warrants, and convertible securities of the Company (see

In January 2019, as a result of the Caelum strategic financing these notes were converted pursuant to the terms

of the note agreement.

In November 2018, the Company announced

that it had an agreement to sell its majority holding in National, of which NSC is a wholly owned subsidiary, the sale was completed

in February of 2019, see Note 3.

On June 26, 2017, Avenue completed

an IPO in which NSC acted as co-manager and earned fees and commissions of approximately $2.3 million that were deducted from the

In November 2018, the Company announced that it had an agreement to sell its majority holding in National, of which

NSC is a wholly owned subsidiary, the sale was completed in February of 2019, see Note 3.

Founders Agreement and Management Services

The Company has entered into Founders Agreements

with each of the Fortress subsidiaries listed in the table below.

Pursuant to each Founders Agreement, in exchange for the time

and capital expended in the formation of each partner company and the identification of specific assets the acquisition of which

result in the formation of a viable emerging growth life science company, the Company will loan each such partner company an amount

representing the up-front fee required to acquire assets.

Each Founders Agreement has a term of 15 years, which upon expiration

automatically renews for successive one-year periods unless terminated by the Company or a Change in Control (as defined in the

Founders Agreement) occurs.

In connection with each Founders Agreement the Company receives 250,000 Class A Preferred shares

(except for that with Checkpoint, in which the Company holds Class A Common Stock).

The Class A Preferred Stock (Class A

Common Stock with respect to Checkpoint) is identical to common stock other than as to voting rights, conversion rights and the

PIK Dividend right (as described below).

Each share of Class A Preferred Stock (Class A Common Stock with respect to

Checkpoint) is entitled to vote the number of votes that is equal to one and one-tenth (1.1) times a fraction, the numerator of

which is the sum of (A) the shares of outstanding common stock and (B) the whole shares of common stock into which the

shares of outstanding Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) are convertible and the

denominator of which is the number of shares of outstanding Class A Preferred Stock (Class A Common Stock with respect

to Checkpoint).

Thus, the Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) will at all times

constitute a voting majority.

Each share of Class A Preferred Stock (Class A Common Stock with respect to Checkpoint)

is convertible, at the holder’s option, into one fully paid and nonassessable share of common stock of such partner company,

subject to certain adjustments.

The holders of Class A Preferred Stock (and the Class A Common Stock with respect to

Checkpoint), as a class, are entitled receive on each effective date or “Trigger Date”

(defined as the date that the

Company first acquired, whether by license or otherwise, ownership rights to a product) of each agreement (each a “PIK Dividend

Payment Date”) until the date all outstanding Class A Preferred Stock (Class A Common Stock with respect to Checkpoint)

is converted into common stock or redeemed (and the purchase price is paid in full), pro rata per share dividends paid in additional

fully paid and nonassessable shares of common stock (“PIK Dividends”) such that the aggregate number of shares of common

stock issued pursuant to such PIK Dividend is equal to two and one-half percent (2.5%) of such partner company’s fully-diluted

outstanding capitalization on the date that is one (1) business day prior to any PIK Dividend Payment Date.

The Company has

reached agreements with several of the partner companies to change the PIK Dividend Interest Payment Date to January 1 of

each year - a change that has not and will not result in the issuance of any additional partner company common stock beyond that

amount to which the Company would otherwise be entitled absent such change(s).

The Company owns 100% of the Class A Preferred

Stock (Class A Common Stock with respect to Checkpoint) of each partner company that has a Founders Agreement with the Company.

As additional consideration under the Founders

Agreement, each partner company with which the Company has entered into a Founders Agreement will also:

(i) pay an equity

fee in shares of the common stock of such partner company, payable within five (5) business days of the closing of any equity

or debt financing for each partner company or any of its respective subsidiaries that occurs after the effective date of the Founders

Agreement and ending on the date when the Company no longer has majority voting control in such partner company’s voting

equity, equal to two and one-half (2.5%) of the gross amount of any such equity or debt financing;

and (ii) pay a cash fee

equal to four and one-half percent (4.5%) of such partner company’s annual net sales, payable on an annual basis, within

ninety (90) days of the end of each calendar year.

In the event of a Change in Control, each such partner company will pay a one-time

change in control fee equal to five (5x) times the product of (A) net sales for the twelve (12) months immediately preceding

the change in control and (B) four and one-half percent (4.5%).

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The following table summarizes, by subsidiary,

the effective date of the Founders Agreements and PIK dividend or equity fee payable to the Company in accordance with the terms

of the Founders Agreements, Exchange Agreements and the subsidiaries’

certificates of incorporation.

Partner company

Effective Date 1

On March 17, 2017, the Company and NSC entered into placement agency agreements with NAM Biotech Fund and NAM Special Situation Fund in connection with the sale of subordinated promissory notes (see Note 10).

Pursuant to the terms of the agreements, NSC received a placement agent fee in cash of 10 % of the debt raised and warrants equal to 10 % of the aggregate principal amount of debt raised divided by the closing share price of the Company’s common stock on the date of closing.

For the year ended December 31, 2017, NSC earned a placement agent fee of $ 2.8 million and a Placement Agent Warrant to purchase 716,180 shares of the Company’s common stock, all of which are outstanding, with exercise prices ranging from $ 3.61 to $ 4.75 .

During the year ended December 31, 2020, the Company used certain proceeds from the Oaktree Note to pay off the $ 28.4 million balance previously outstanding under the 2017 Subordinated Note Financing.

Avenue Credit Facility Agreement

On June 12, 2020, Avenue, the Company and InvaGen entered into a Facility Agreement (“Avenue Facility Agreement”), under which, beginning on October 1, 2020, Avenue may borrow up to $ 2.0 million collectively from the Company and InvaGen, subject to certain conditions set forth therein.

The Company’s commitment amount is $ 0.8 million, and InvaGen’s is $ 1.2 million, and a 7 % per annum interest rate applies (payable on the last day of each fiscal quarter).

Repayment of the loan is due upon the earliest to occur of:

(i) the Second Stage Closing Date, as defined in the Avenue SPMA;

(ii) April 29, 2021;

and (iii) the date that is 30 days following the termination of the Avenue SPMA.

As of December 31, 2020, there have been no amounts drawn by Avenue on the Avenue Facility Agreement.

Founders Agreement and Management Services Agreement

The Company has entered into Founders Agreements with each of the Fortress partner companies listed in the table below.

Pursuant to each Founders Agreement, in exchange for the time and capital expended in the formation of each partner company and the identification of specific assets the acquisition of which result in the formation of a viable emerging growth life science company, the Company will loan each such partner company an amount representing the up-front fee required to acquire assets.

Each Founders Agreement has a term of 15 years , which upon expiration automatically renews for successive one-year periods unless terminated by the Company or a Change in Control (as defined in the Founders Agreement) occurs.

In connection with each Founders Agreement the Company receives 250,000 Class A Preferred shares (except for that with Checkpoint, in which the Company holds Class A Common Stock).

The Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) is identical to common stock other than as to voting rights, conversion rights and the PIK Dividend right (as described below).

Each share of Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) is entitled to vote the number of votes that is equal to one and one-tenth (1.1) times a fraction, the numerator of which is the sum of (A) the shares of outstanding common stock and (B) the whole shares of common stock into which the shares of outstanding Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) are convertible and the denominator of which is the number of shares of outstanding Class A Preferred Stock (Class A Common Stock with respect to Checkpoint).

Thus, the Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) will at all times constitute a voting majority.

Each share of Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) is convertible, at the holder’s option, into one fully paid and nonassessable share of common stock of such partner company, subject to certain adjustments.

The holders of Class A Preferred Stock (and the Class A Common Stock with respect to Checkpoint), as a class, are entitled receive on each effective date or “Trigger Date” (defined as the date that the Company first acquired, whether by license or otherwise, ownership rights to a product) of each agreement (each a “PIK Dividend Payment Date”) until the date all outstanding Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) is converted into common stock or redeemed (and the purchase price is paid in full), pro rata per share dividends paid in additional fully paid and nonassessable shares of common stock (“PIK Dividends”) such that the aggregate number of shares of common stock issued pursuant to such PIK Dividend is equal to two and one-half percent ( 2.5 %) of such partner company’s fully-diluted outstanding capitalization on the date that is one (1) business day prior to any PIK Dividend Payment Date.

The Company has reached agreements with several of the partner companies to change the PIK Dividend Interest Payment Date to January 1 of each year - a change that has not and will not result in the issuance of any additional partner company common stock beyond that amount to which the Company would otherwise be entitled absent such change(s).

The Company owns 100 % of the Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) of each partner company that has a Founders Agreement with the Company.

As additional consideration under the Founders Agreement, each partner company with which the Company has entered into a Founders Agreement will also:

(i) pay an equity fee in shares of the common stock of such partner company, payable within five (5) business days of the closing of any equity or debt financing for each partner company or any of its respective subsidiaries that occurs after the effective date of the Founders Agreement and ending on the date when the Company no longer has majority voting control in such partner company’s voting equity, equal to two and one-half ( 2.5 %) of the gross amount of any such equity or debt financing;

and (ii) pay a cash fee equal to four and one-half percent ( 4.5 %) of such partner company’s annual net sales, payable on an annual basis, within ninety (90) days of the end of each calendar year.

In the event of a Change in Control, each such partner company will pay a one-time change in control fee equal to five (5x) times the product of (A) net sales for the twelve (12) months immediately preceding the change in control and (B) four and one-half percent ( 4.5 %).

The following table summarizes, by subsidiary, the effective date of the Founders Agreements and PIK dividend or equity fee payable to the Company in accordance with the terms of the Founders Agreements, Exchange Agreements and the partner companies’ certificates of incorporation.

PIK Dividend as

capitalization

Class of Stock

Fortress Partner Company

Effective Date 1

capitalization

March 20, 2015

3 unchanged sentences

October 31, 2016

January 1, 2017

December 17, 2019 5

1 unchanged sentence

July 28, 2017

November 30, 2017 3

Represents the effective date of each subsidiary’s Founders Agreement.

Instead of a PIK dividend, Checkpoint pays the Company an annual equity fee in shares of Checkpoint’s common stock equal to 2.5% of Checkpoint’s fully diluted outstanding capitalization, pursuant to its Founders Agreement.

Represents the Trigger Date.

April 22, 2020 5

Represents the effective date of each subsidiary’s Founders Agreement.

Each PIK dividend and equity fee is payable on the annual anniversary of the effective date of the original Founders Agreement or has since been amended to January 1 of each calendar year.

Pursuant to the terms of the agreement between Avenue and InvaGen Pharmaceuticals, Inc.

during the term of the SPMA PIK dividends will not be paid or accrued.

The following table summarizes, by subsidiary,

the PIK dividend or equity fee recorded by the Company in accordance with the terms of the Founders Agreements, Exchange Agreements

and the subsidiaries’

certificates of incorporation for the years ended December 31, 2019 and 2018 ($ in thousands):

during the term of the Avenue SPMA PIK dividends will not be paid or accrued.

Instead of a PIK dividend, Checkpoint pays the Company an annual equity fee in shares of Checkpoint’s common stock equal to 2.5 % of Checkpoint’s fully diluted outstanding capitalization.

Effective January 31, 2019 the Caelum Founders Agreement and MSA with Fortress were terminated in conjunction with the execution of the DOSPA between Caelum and Alexion (See Note 4).

Represents the Trigger Date, the date that the Fortress partner company first acquires, whether by license or otherwise, ownership rights in a product.

The following table summarizes, by subsidiary, the PIK dividend or equity fee recorded by the Company in accordance with the terms of the Founders Agreements, Exchange Agreements and the partner companies’ certificates of incorporation for the years ended December 31, 2020 and 2019 ($ in thousands):

Partner company

3 unchanged sentences

Pursuant to the terms of the Amended and Restated Mutual Conditional Termination Agreement between Fortress and Caelum, the Founders Agreement dated January 1, 2017 was terminated upon signing of the DOSPA with Alexion on January 30, 2019.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

Management Services Agreements

The Company has entered into Management

Services Agreements (the “MSAs”) with certain of its partner companies.

Pursuant to each MSA, the Company’s management

and personnel provide advisory, consulting and strategic services to each partner company that has entered into an MSA with Fortress

for a period of five (5) years.

Such services may include, without limitation, (i) advice and assistance concerning any

and all aspects of each such partner company’s operations, clinical trials, financial planning and strategic transactions

and financings and (ii) conducting relations on behalf of each such partner company with accountants, attorneys, financial

advisors and other professionals (collectively, the “Services”).

Each such partner company is obligated to utilize

clinical research services, medical education, communication and marketing services and investor relations/public relation services

of companies or individuals designated by Fortress, provided those services are offered at market prices.

However, such partner

companies are not obligated to take or act upon any advice rendered from Fortress, and the Company shall not be liable to any such

partner company for its actions or inactions based upon the Company’s advice.

The Company and its affiliates, including all

members of Fortress’

Board of Directors, have been contractually exempted from fiduciary duties to each such partner company

relating to corporate opportunities.

The following table summarizes, by partner

company, the effective date of the MSA and the annual consulting fee payable by the subsidiary to the Company in quarterly installments

($ in thousands):

Fortress partner

The Company has entered into Management Services Agreements (the “MSAs”) with certain of its partner companies.

Pursuant to each MSA, the Company’s management and personnel provide advisory, consulting and strategic services to each partner company that has entered into an MSA with Fortress for a period of five (5) years.

Such services may include, without limitation, (i) advice and assistance concerning any and all aspects of each such partner company’s operations, clinical trials, financial planning and strategic transactions and financings and (ii) conducting relations on behalf of each such partner company with accountants, attorneys, financial advisors and other professionals (collectively, the “Services”).

Each such partner company is obligated to utilize clinical research services, medical education, communication and marketing services and investor relations/public relation services of companies or individuals designated by Fortress, provided those services are offered at market prices.

However, such partner companies are not obligated to take or act upon any advice rendered from Fortress, and the Company shall not be liable to any such partner company for its actions or inactions based upon the Company’s advice.

The Company and its affiliates, including all members of Fortress’ Board of Directors, have been contractually exempted from fiduciary duties to each such partner company relating to corporate opportunities.

The following table summarizes, by partner company, the effective date of the MSA and the annual consulting fee payable by the subsidiary to the Company in quarterly installments ($ in thousands):

Year Ended December 31,

Fortress partner company

Effective Date

(Income)/Expense

March 20, 2015

7 unchanged sentences

November 30, 2017

Oncogenuity 3

February 10, 2017

Fortress - MSA Income

Consolidated (Income)/Expense

Pursuant to the terms of the agreement between Avenue and InvaGen Pharmaceuticals, Inc.

during the term of the SPMA fees under the MSA will not be due or accrued.

during the term of the Avenue SPMA fees under the MSA will not be due or accrued.

In December 2019, Tamid discontinued development and terminated its’ licenses and clinical trial agreements with UNC.

Oncogenuity license was purchased in the year ended December 31, 2020.

Fees and Stock Grants Received by Fortress

Fees recorded in connection with the Company’s

agreements with its subsidiaries are eliminated in consolidation.

These include management services fees, issuance of common shares

of partner companies in connection with third party raises and annual stock dividend or issuances on the anniversary date of respective

Founders Agreements.

Deferred income taxes reflect the net tax

effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes

and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

The components of the income tax provision

(benefit) are as follows:

For the years ended December 31,

Fees recorded in connection with the Company’s agreements with its subsidiaries are eliminated in consolidation.

These include management services fees, issuance of common shares of partner companies in connection with third party raises and annual stock dividend or issuances on the anniversary date of respective Founders Agreements.

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

The components of the income tax provision (benefit) are as follows:

For the Year Ended December 31,

($ in thousands)

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The Company has incurred net operating

losses since inception.

The Company has not reflected any benefit of such net operating loss carryforwards (“NOL”)

in the accompanying consolidated financial statements and has established a valuation allowance of $168.2 million against its net

deferred tax assets.

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts

of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating

losses and tax credit carryforwards.

The significant components of the Company’s

deferred taxes consist of the following:

For the years ended December 31, 2020 and 2019, income tax expense was $ 0.1 million and nil , respectively, resulting in an effective income tax rate of 0.13 % and 0 %.

The increase in income tax expense in 2020 is due to additional state tax return filings.

The Company has incurred net operating losses since inception.

The Company has not reflected any benefit of such net operating loss carryforwards (“NOL”) in the accompanying consolidated financial statements and has established a valuation allowance of $ 203.9 million against its net deferred tax assets.

The significant components of the Company’s deferred taxes consist of the following:

As of December 31,

9 unchanged sentences

Unrealized gain/loss on investments

Business interest expense deduction limit

Reserve on Sales Return, Discount and Bad Debt

Total deferred tax assets

2 unchanged sentences

Deferred tax liabilities:

Unrealized gain/loss on investment

Right of use asset

Gain / loss on Deconsolidation of Caelum

Fair Value adjustment on investment in Caelum

Basis in subsidiary

Total deferred tax assets, net

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

A reconciliation of the statutory tax rates

and the effective tax rates is as follows:

A reconciliation of the statutory tax rates and the effective tax rates is as follows:

For the Year Ended December 31,

5 unchanged sentences

Stock based compensation shortfall

Change in federal rate

Change in state rate

Intercompany elimination adjustments

Deconsolidation of Caelum

Change in fair value of warrants

Change in valuation allowance

1 unchanged sentence

Effective income tax rate

The Company files a consolidated income

tax return with subsidiaries for which the Company has an 80% or greater ownership interest.

subsidiaries for which the Company

does not have an 80% or more ownership are not included in the Company’s consolidated income tax group and file their own

separate income tax return.

As a result, certain corporate entities included in these financial statements are not able to combine

or offset their taxable income or losses with other entities' tax attributes.

ASC 740 requires a valuation allowance

to reduce the deferred tax assets reported if, based on the weight of all positive and negative evidence, it is more likely than

not that some portion, or all, of the deferred tax assets will not be realized.

Realization of the deferred tax assets is substantially

dependent on the Company’s ability to generate sufficient taxable income within certain future periods.

Management has considered

the Company’s history of cumulative tax and book losses incurred since inception, and the other positive and negative evidence,

and has concluded that it is more likely than not that the Company will not realize the benefits of the net deferred tax assets

as of December 31, 2019 and 2018.

Accordingly, a full valuation allowance has been established against the net deferred tax

assets as of December 31, 2019 and 2018.

The Company files a consolidated income tax return with subsidiaries for which the Company has an 80 % or greater ownership interest.

subsidiaries for which the Company does not have an 80 % or more ownership are not included in the Company’s consolidated income tax group and file their own separate income tax return.

As a result, certain corporate entities included in these financial statements are not able to combine or offset their taxable income or losses with other entities’ tax attributes.

ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of all positive and negative evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.

Realization of the deferred tax assets is substantially dependent on the Company’s ability to generate sufficient taxable income within certain future periods.

Management has considered the Company’s history of cumulative tax and book losses incurred since inception, and the other positive and negative evidence, and has concluded that it is more likely than not that the Company will not realize the benefits of the net deferred tax assets as of December 31, 2020 and 2019.

Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2020 and 2019.

The valuation allowance increased by a net $ 35.7 million during the current year.

The Company has incurred net

operating losses (“NOLs”) since inception.

At December 31, 2019, the Company had federal NOLs of $445.9

million, which will begin to expire in the year 2026, state NOLs of $487.0 million, which will begin to expire in 2022,

federal income tax credits of $12.4 million, which will begin to expire in 2028, and state R&D tax credits of $0.4

million, which will begin to expire in 2033.

The utilization of the Company’s NOLs and tax credit carryovers are

subject to annual Internal Revenue Code Section 382 limitations (“382 Limitations”).

Based on the analysis

of the NOLs and tax credit carryovers subject to the 382 Limitations, the Company has concluded that the 382 Limitations

would not prevent the Company from utilizing all of its NOLs and tax credit carryovers before expiration.

On November 14, 2018, the Company

entered into a stock purchase agreement with B.

Riley Financial, Inc.

Riley”) to sell approximately 7.0 million

shares of the common stock of National, representing approximately 56.1% of National’s outstanding common stock and the Company’s

entire economic interest in National.

The first closing occurred on November 14, 2018 in which the Company sold approximately

3.0 million of its shares in NHLD and received $9.8 million in proceeds.

The second closing occurred on February 11, 2019

upon the receipt of FINRA approval of the sale in which the Company received $13.1 million in proceeds for the sale of its remaining

4.0 million shares of NHLD to NHC and two other minority holders and received.

The Company has written off National’s deferred

tax assets and the corresponding allowance as of December 31, 2018.

In January 2019, in connection with the

Alexion DOSPA, the Company ceased to consolidate Caelum (see Note 4).

As a result of the deconsolidation of Caelum, the Company

has eliminated Caelum’s deferred tax assets and the valuation allowance for a net tax expense charge or benefit of zero for

the year ended December 31, 2019.

As of December 31, 2019, the Company

had no unrecognized tax benefits and does not anticipate any significant change to the unrecognized tax benefit balance.

would classify interest and penalties related to uncertain tax positions as income tax expense, if applicable.

There was no interest

expense or penalties related to unrecognized tax benefits recorded through December 31, 2019.

The NOLs from tax years 2006

through 2018 remain open to examination (and adjustment) by the Internal Revenue Service and state taxing authorities.

federal tax years ending December 31, 2016, 2017 and 2018 are open for assessment of federal taxes.

The expiration of the

statute of limitations related to the various state income and franchise tax returns varies by state.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

The Company has incurred net operating losses (“NOLs”) since inception.

At December 31, 2020, the Company had federal NOLs of $ 525.7 million, which will begin to expire in the year 2026 , state NOLs of $ 648.2 million, which will begin to expire in 2022 , and federal income tax credits of $ 15.4 million and state income tax credits of $ 1.2 million, which will begin to expire in 2028 .

Approximately $ 284.8 million of the federal NOLs and $ 4.5 million of the state NOLs can be carried forward indefinitely.

Under the provisions of Section 382 of the Internal Revenue Code, a corporation that undergoes an “ownership change”, as defined therein, is subject to limiatations on its use of pre-change NOLs and income tax credits carryforwards to offset future tax liabilities.

The Company is currently evaluating the impact of Section 382 on its tax attributes.

The Company has recorded a full valuation allowance on all of its deferred tax assets as it believes that it is more likely than not that the deferred tax assets will not be realized regardless of whether an “ownership change” has occurred.

As of December 31, 2020, th Company had no unrecognized tax benefits and does not anticipate any significant change to the unrecognized tax benefit balance.

The Company would classify interest and penalties related to uncertain tax positions as income tax expense, if applicable.

There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2020.

The NOLs from tax years 2008 through 2019 remain open to examination (and adjustment) by the Internal Revenue Service and state taxing authorities.

In addition, federal tax years ending December 31, 2017, 2018 and 2019 are open for assessment of federal taxes.

The expiration of the statute of limitations related to the various state income and franchise tax returns varies by state.

In January 2019, in connection with the Alexion DOSPA, the Company ceased to consolidate Caelum (see Note 4).

As a result of the deconsolidation of Caelum, the Company has eliminated Caelum’s deferred tax assets and the valuation allowance for a net tax expense charge or benefit of zero for the year ended December 31, 2019.

Coronavirus Aid, Relief and Economic Security Act ("CARES Act")

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on March 27, 2020.

The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer's social security payments, net operating loss utilization and carryback periods and modifications to the net interest deduction limitations.

The CARES Act did not have a material impact on the Company’s income tax provision for 2020.

The Company will continue to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

On December 27, 2020, the President of the United States signed the Consolidated Appropriations Act, 2021 (“Consolidated Appropriations Act”) into law.

The Consolidated Appropriations Act is intended to enhance and expand certain provisions of the CARES Act, allows for the deductions of expenses related to the Paycheck Protection Program funds received by companies, and provides an update to meals and entertainment expensing for 2021.

The Consolidated Appropriations Act did not have a material impact to the Company’s income tax provision for 2020.

Segment Information

The Company operates in two reportable

segments, Dermatology Product Sales and Pharmaceutical and Biotechnology Product Development.

The accounting policies of the Company’s

segments are the same as those described in Note 2.

Prior to the sale of National the Company operated in three segments, one which

included National, see Note 3.

The following tables summarize, for the periods indicated, operating results, from continued operations

by reportable segment ($ in thousands):

Pharmaceutical and

The Company operates in two reportable segments, Dermatology Product Sales and Pharmaceutical and Biotechnology Product Development.

The accounting policies of the Company’s segments are the same as those described in Note 2.

The following tables summarize, for the periods indicated, operating results from continued operations by reportable segment:

Pharmaceutical

Biotechnology

($ in thousands)

Year Ended December 31, 2020

Product Development

Direct cost of goods

2 unchanged sentences

General and administrative

Segment gain (loss) from operations

Other expense

Income tax expense

Segment income (loss)

Segment assets

2 unchanged sentences

Total segment assets

Pharmaceutical and

Pharmaceutical

Biotechnology

($ in thousands)

Year Ended December 31, 2019

Product Development

Direct cost of goods

2 unchanged sentences

General and administrative

Other expense

Segment gain (loss) from operations

Segment income (loss)

Segment assets

4 unchanged sentences

Disaggregation of Total Revenues

The Company has five marketed products,

Targadox®, Ximino®, Exelderm®, Luxamend®

and Ceracade®.

Substantially all of the Company’s product revenues

are recorded in the U.S.

Substantially all of the Company’s collaboration revenues are from its collaboration with TGTX.

Revenues by product and collaborator are summarized as follows ($ in thousands):

The Company has five marketed products, Targadox®, Ximino®, Exelderm®, Luxamend® and Ceracade®.

Substantially all of the Company’s product revenues are recorded in the U.S.

Substantially all of the Company’s collaboration revenues are from its collaboration with TGTX.

The table below summarizes the Company’s revenue for the years ended December 31, 2020 and 2019:

Year Ended December 31,

Targadox®

Other Branded Revenue 1

Total product revenues

Total Revenue

$6.9M in other branded revenue in 2019 includes $3.6M in Ximino Sales.

Ximino was sold for five months starting in August 2019.

FORTRESS BIOTECH, INC.

AND SUBSIDIARIES

Notes to the Consolidated Financial

Collaboration Revenue

The Company recognized collaboration and

license agreement revenues of $1.7 million and $3.5 million during the year ended December 31, 2019 and 2018, respectively.

($ in thousands)

Product revenue, net

Revenue – related party

Significant Customers

For the year ended December 31, 2019,

two of the Company’s Dermatology Products customers each accounted for more than 10.0% of its total gross product revenue,

accounting for approximately 50% and 10%, respectively.

The revenue from these customers is captured in the product revenue, net

line item within the Consolidated Statements of Operations.

For the year ended December 31, 2018,

two of the Company’s Dermatology Products customers each accounted for more than 10.0% of its total gross product revenue,

accounting for approximately 48.5% and 10.6%, respectively.

The revenue from these customers is captured in the product revenue,

net line item within the Consolidated Statements of Operations.

At December 31, 2019, two of the Company’s Dermatology

Products customers accounted for more than 10% of its total accounts receivable balance at 21% and 18% respectively.

At December 31, 2018, one of the Company’s Dermatology

Products customers accounted for 79.1% of its total accounts receivable balance.

Net Revenue from Pharmaceutical and Biotechnology

Product Development represents collaboration revenue from TGTX in connection with Checkpoint, which is classified as related party

For the year ended December 31, 2020, none of the Company’s Dermatology Products customers accounted for more than 10.0% of its total gross product revenue.

For the year ended December 31, 2019, two of the Company’s Dermatology Products customers each accounted for more than 10.0% of its total gross product revenue, accounting for approximately 50 % and 10 %, respectively.

The revenue from these customers is captured in the product revenue, net line item within the Consolidated Statements of Operations.

At December 31, 2020, one of the Company’s Dermatology Products customers accounted for 12 % of its total accounts receivable balance.

At December 31, 2019, two of the Company’s Dermatology Products customers accounted for more than 10% of its total accounts receivable balance at 21 % and 18 %, respectively.

Included in Product revenue, net, for the years ended December 31, 2020 and 2019 was $ 1.4 million and nil , respectively, of revenue that was constrained in a prior period.

Revenue – related party represents collaboration revenue from TGTX in connection with Checkpoint.

Subsequent Events

February 11, 2020, the Company announced the pricing of an underwritten public offering, whereby it sold 625,000 shares

of its 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock, (plus a 45-day option to purchase up to an

additional 93,750 shares, which was exercised in February 2020) at a price of $20.00 per share for gross proceeds of

approximately $14.4 million, before deducting underwriting discounts and commissions and offering expenses.

The above-mentioned shares of Perpetual Preferred Stock were

sold under the 2019 Fortress Shelf.

Pursuant to the requirements of Section 13

or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by

the undersigned, thereunto duly authorized.

On February 24, 2021, Cyprium announced the execution of an asset purchase agreement with Sentynl Therapeutics, Inc.

(“Sentynl”), a U.S.-based specialty pharmaceutical company owned by the Zydus Group.

The asset purchase agreement commits Sentynl to an upfront cash payment to Cyprium of $ 8.0 million for development, a $ 3.0 million cash milestone payment at NDA acceptance, the purchase price of $ 9.0 million, as well as potential sales milestones totaling $ 255.0 million.

Royalties on CUTX-101 net sales range from the mid-single digits up to the mid-twenties are also payable.

Cyprium will retain development responsibility of CUTX-101 through approval of the NDA by the FDA, and Sentynl will be responsible for commercialization of CUTX-101 as well as progressing newborn screening activities.

Continued development of CUTX-101 will be overseen by a Joint Steering Committee consisting of representatives from Cyprium and Sentynl.

Cyprium will retain 100 % ownership over any FDA priority review voucher that may be issued at NDA approval for CUTX-101.

On February 12, 2021, Avenue resubmitted its NDA to the FDA for IV Tramadol.

The NDA for IV Tramadol was resubmitted following the receipt of official minutes from a Type A meeting with the FDA, which was conducted following a CRL issued by the FDA in October 2020.

The resubmission included revised language relating to the proposed product label and a report relating to terminal sterilization validation.

On February 26, 2021, Avenue received an acknowledgement letter from the FDA that Avenue’s resubmission of its NDA is a complete, class 1 response to the CRL, and a Prescription Drug User Fee Act goal date has been set for April 12, 2021.

8 % Cumulative Convertible Class A Preferred Offering

In March 2021, our partner company Journey is conducting an offering to accredited investors of 8 % Cumulative Convertible Class A Preferred Stock in an aggregate minimum amount of $ 12.5 million and an aggregate maximum amount of $ 30.0 million, which may be increased if Journey and the placement agent agree to do so.

Dividends on the Journey preferred stock will be paid quarterly in shares of the Company’s common based upon a 7.5 % discount to the average trading price over the 10-day period preceding the dividend payment date.

The approximate number of shares issuable as a dividend per quarter, based upon the Company’s common stock price as of March 26, 2021, would be 72,849 shares if the minimum amount is raised and 174,838 if the maximum amount is raised.

In addition, if the Journey preferred stock has not been converted into Journey common stock upon a sale of Journey or a financing of Journey in an amount of at least $ 25.0 million within a year of the closing (extendable by another six months at Journey’s option), the Journey preferred stock will be exchanged for shares of the Company’s common stock, also based upon a 7.5 % discount to the average Company common stock trading price over the 10-day period preceding such exchange.

The approximate number of the Company’s common shares issuable upon such exchange would be approximately 3.4 million shares if the minimum amount is sold and 8.1 million if the maximum amount is sold, in each case based upon the Company’s common stock price as of March 26, 2021.

The Company will be obligated to file one or more registration statements covering the issuance of shares that result from such dividends/exchange.

As consideration for the foregoing Journey will issue to the Company additional shares of Journey common stock, debt securities, or a combination of the foregoing.

From the initial closing on March 31, 2021, the Company raised gross proceeds of $ 12.5 million.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Fortress Biotech, Inc.

3 unchanged sentences

Rosenwald, M.D.

Chairman, President and Chief Executive Officer (Principal Executive Officer)

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

POWER OF ATTORNEY

We, the undersigned directors and/or executive

officers of Fortress Biotech, Inc., hereby severally constitute and appoint Lindsay A.

Rosenwald, M.D., acting singly, his

or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her in any and

all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits

thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact

and agent full power and authority to do and perform each and every act and thing necessary or appropriate to be done in connection

therewith, as fully for all intents and purposes as he or she might or could do in person, hereby approving, ratifying and confirming

all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities

Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities

and on the dates indicated.

We, the undersigned directors and/or executive officers of Fortress Biotech, Inc., hereby severally constitute and appoint Lindsay A.

Rosenwald, M.D., acting singly, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing necessary or appropriate to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby approving, ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Lindsay A.

22 unchanged sentences

March 31, 2021

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures