/stocks — the workspaceLOADING

FBIO · All filings · Read this filing

What changed 10-K

Item 9A. Controls and Procedures

2024-03-28 compared with 2023-03-31 · 659 added, 603 removed, 1132 unchanged (53% of the section changed)

22 unchanged sentences

Changes in Internal Controls over Financial Reporting

Except for the remediation efforts described above taken to address the material weakness, 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.

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

During the three months ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted, modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

1 unchanged sentence

Directors, Executive Officers and Corporate Governance

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2023 Annual Meeting of Stockholders.

Information required by this item is incorporated by reference from the information contained under the sections “Corporate Governance,” “Code of Business Conduct and Ethics,” and “Our Executive Officers” in our Proxy Statement for the 2024 Annual Meeting of Stockholders.

The information under the heading “Executive Officers of Fortress” in Part I of this Annual Report on Form 10-K is also incorporated herein by reference.

Executive Compensation

The information required by this Item is incorporated herein by reference from our Proxy Statement for our 2023 Annual Meeting of Stockholders.

Information required by this item is incorporated by reference from the information contained under the sections “Executive Compensation,” and “Director Compensation” in our Proxy Statement for the 2024 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 2023 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 2023 Annual Meeting of Stockholders.

Information required by this item is incorporated by reference from the information contained under the sections “Stock Ownership of Our Directors, Executive Officers, and 5% Beneficial Owners,” “Outstanding Equity Awards at Fiscal Year-End,” and “Equity Compensation Plan Information” in our Proxy Statement for the 2024 Annual Meeting of Stockholders.

Certain Relationship s and Related Transactions, and Director Independence

Information required by this item is incorporated by reference from the information contained under the sections “Related-Person Transactions,” and “Corporate Governance” in our Proxy Statement for the 2024 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 2023 Annual Meeting of Stockholders.

During the year ended December 31, 2023, KPMG LLP audited the consolidated financial statements of the Registrant and its subsidiaries.

Information required by this item is incorporated by reference from the information contained under the section “Independent Registered Public Accounting Firm Fees and Other Matters” in our Proxy Statement for the 2024 Annual Meeting of Stockholders.

Exhibits and Financial Statement Schedules.

12 unchanged sentences

000-54463) filed with the SEC on July 15, 2011).

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

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

dated May 20, 2011 (incorporated by reference to Exhibit 3.2 of the Registrant’s Form 10 (file No.

000-54463) filed with SEC on July 15, 2011) .

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

Second Certificate of Amendment to Amended and Restated Certificate of Incorporation, as amended, of Fortress Biotech, Inc.

dated October 1, 2013 (incorporated by reference to Exhibit 3.8 of the Registrant’s Annual Report on Form 10-K (file No.

001-35366) filed with the SEC on March 14, 2014) .

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

Third Certificate of Amendment to Amended and Restated Certificate of Incorporation, as amended, of Fortress Biotech, Inc.

dated April 22, 2015 (incorporated by reference to Exhibit 3.9 of the Registrant’s Current Report on Form 8-K (file No.

3 unchanged sentences

001-35366) filed with the SEC on June 19, 2020).

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

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

dated June 18, 2020 (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on June 19, 2020).

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

4 unchanged sentences

001-35366) filed with the SEC on July 11, 2022).

Second Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.7 of the Registrant’s Current Report on Form 8-K (file No.

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

dated October 9, 2023 (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on October 10, 2022).

Third Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on August 14, 2023.

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 10 (file No.

3 unchanged sentences

001-35366) filed with the SEC on November 7, 2017) .

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

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

dated June 18, 2020 (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on June 19, 2020).

Description of Securities of Fortress Biotech, Inc.*

Exhibit Title

Form of Amended and Restated Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on June 16, 2023).

Form of Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on November 14, 2023).

Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on January 3, 2024.

Form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.9 of the Registrant’s Form 10 (file No.

2 unchanged sentences

001-35366) filed with the SEC on March 18, 2019).

Exhibit Title

Form of Indemnification Agreement by and between the Registrant and its officers and directors (incorporated by reference to Exhibit 10.25 of the Registrant’s Form 10 (file No.

000-54463) filed with the SEC on August 24, 2011).#

Fortress Biotech, Inc.

2012 Employee Stock Purchase Plan (incorporated by reference to Annex A of the Registrant’s Schedule 14A (file No.

001-35366) filed with the SEC on July 13, 2012).

Restricted Stock Issuance Agreement, dated as of February 20, 2014, by and between the Registrant and Michael S.

7 unchanged sentences

001-35366) filed with the SEC on March 14, 2014).

Form of Coronado Biosciences, Inc.

2013 Stock Incentive Plan Award Agreement (2013 Stock Incentive Plan) (incorporated by reference to Exhibit 10.60 of the Registrant’s Form S-8 (file No.

333-194588) filed with the SEC on March 14, 2014).

Coronado Biosciences, Inc.

2 unchanged sentences

Fortress Biotech, Inc.

2013 Stock Incentive Plan, as amended (incorporated by reference to Appendix A of the Registrant’s Schedule 14-A (file No.

001-35366) filed with the SEC on June 4, 2015).

Form of Common Stock Purchase Warrant in favor of National Securities Corporation (incorporated by reference to Exhibit 10.35 of the Registrant’s Quarterly Report on Form 10-Q (file No.

001-35366) filed with the SEC on May 10, 2017) .

Fortress Biotech, Inc.

2012 Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10.38 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on June 12, 2017).#

Amendment to Fortress Biotech, Inc.

2012 Employee Stock Purchase Plan (incorporated by reference to Exhibit A of the Registrant’s Schedule 14A (file No.

001-35366) filed with the SEC on April 30, 2018).#

Amendment to the Fortress Biotech, Inc.

2012 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on June 23, 2023).#

Fortress Biotech, Inc.

1 unchanged sentence

001-35366) filed with the SEC on June 12, 2017).#

Exhibit Title

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 (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form 10-Q (file No.

001-35366) filed with the SEC on May 10, 2019).

Fortress Biotech, Inc.

2013 Stock Incentive Plan, as amended (incorporated by reference to Appendix A of the Registrant’s Schedule 14-A (file No.

001-35366) filed with the SEC on June 4, 2015).#

Form of Stock Incentive Plan Award Agreement (Fortress Biotech, Inc.

2013 Stock Incentive Plan) (incorporated by reference to Exhibit 10.60 of the Registrant’s Form S-8 (file No.

333-194588) filed with the SEC on March 14, 2014).#

Amendment to the Fortress Biotech, Inc.

1 unchanged sentence

001-35366) filed with the SEC on June 19, 2020).#

Exhibit Title

Amendment to the Fortress Biotech, Inc.

1 unchanged sentence

001-35366) filed with the SEC on June 27, 2022).#

Amendment to the Fortress Biotech, Inc.

2013 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on June 23, 2023).#

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

8 unchanged sentences

001-35366) filed with the Sec on December 19, 2022).#

Amendment to Fortress Biotech, Inc.

2012 Employee Stock Purchase Plan (incorporated by reference to Exhibit A of the Registrant’s Schedule 14A (file No.

001-35366) filed with the SEC on April 30, 2018).#

Letter from BDO USA, LLP to the Securities and Exchange Commission dated September 22, 2021 (incorporated by reference to Exhibit 16.1 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on September 24, 2021).

Form of Securities Purchase Agreement, dated November 10, 2023, by and among the Registrant and the purchasers party thereto (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on November 14, 2023).

Form of Securities Purchase Agreement, dated December 29, 2023, by and among the Registrant and the purchasers party thereto (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on January 3, 2024).

Form of Placement Agency Agreement, dated November 10, 2023, by and among the Registrant and Roth Capital Partners, LLC (Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on November 14, 2023).

Placement Agency Agreement, dated December 29, 2023, by and among the Registrant and Roth Capital Partners, LLC (Incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on January 3, 2024).

Exhibit Title

At Market Issuance Sales Agreement between the Company and Cantor Fitzgerald & Co., Oppenheimer & Co.

Wainwright & Co., LLC, B.

Riley FBR, Inc., and Dawson James Securities, Inc., dated May 29, 2020 (incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K (file No.

001-35366) filed with the SEC on May 29, 2020) .

Subsidiaries of the Registrant.

5 unchanged sentences

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.**

Clawback Policy of Fortress Biotech, Inc.*

Inline XBRL Instance Document.*

7 unchanged sentences

* Filed herewith.

**Furnished herewith.

Form 10-K Summary

32 unchanged sentences

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:

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our 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.

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 matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.

Evaluation of accrued coupon liability

As discussed in Note 10 of the consolidated financial statements, the Company accrues for coupons on products for certain qualified commercially-insured parties.

At December 31, 2022, the Company recorded $7,604 thousand in accrued coupon and rebates, which included the accrued coupon liability.

At December 31, 2023, the Company recorded $9,987 thousand in accrued coupon and rebates, which included the accrued coupon liabilities.

The Company estimates the amount of its expected coupon redemptions for product that is still in the distribution channel and records the estimate as a reduction of revenue in the period the related product revenue is recognized.

The Company’s accrued coupon liability is primarily based on historical company coupon redemption costs, cost per coupon claims, and estimates of product remaining in the distribution channel.

The Company’s accrued coupon liability is primary based on historical company coupon redemption costs, cost per coupon claim, and estimates of product remaining in the distribution channel.

We identified the evaluation of the accrued coupon liability as a critical audit matter.

5 unchanged sentences

We developed an expectation of the accrued coupon liability based on an independent estimate of the product in the distribution channel and we compared our expectation to the Company’s accrued coupon liability.

Accounting for and fair value of the warrant inducement transaction

As discussed in Notes 6 and 13 to the financial statements, in October 2023, Checkpoint Therapeutics, Inc.

(Checkpoint), a consolidated subsidiary of the Company, entered into an inducement offer letter agreement with a holder of certain existing warrants.

As part of the inducement, Checkpoint issued new unregistered Series A and Series B warrants.

The Series A and B warrants are exercisable immediately upon issuance with an exercise price of $1.51 per share.

The total gross proceeds from the inducement were approximately $11.1 million with net proceeds of approximately $10.0 million after deducting commissions and other transaction costs.

Prior to the inducement, some of the existing warrants were liability classified and accounted for at fair value.

At the date of the inducement, the Company revalued the existing liability classified warrants which resulted in a loss on common stock warrant liabilities.

The other existing warrants, which were equity classified, were revalued to calculate the difference in fair value as a result of the change in exercise price, which was recorded as a deemed dividend.

The Company also calculated the fair value of the Series A and Series B warrants and allocated that fair value to the existing warrants on a weighted basis.

The Company used the Black-Scholes model to determine the estimated fair value of the warrants.

We identified the evaluation of the Company’s accounting for the inducement transaction and the determination of the fair value of the warrants as a critical audit matter.

Specifically, challenging and complex auditor judgment and specialized skills and knowledge were required in evaluating 1) the application of the relevant accounting guidance for equity and liability classified warrants and 2) the estimated fair value of the warrants due to the degree of subjectivity associated with the volatility assumption.

The following are the primary procedures we performed to address this critical audit matter.

We inspected the Company’s accounting analysis for the transaction.

We involved professionals with specialized skills and knowledge, who assisted in inspecting the underlying agreements to understand the relevant terms and conditions of the transaction and evaluating whether the Company’s accounting for the transaction is in accordance with the relevant accounting guidance.

We also involved valuation professionals with specialized skills and knowledge who assisted in:

● developing an independent expectation of the volatility assumption based on consideration of implied share price volatility information

● developing an independent range of the fair value of the warrant liability for the December 2022 warrants, the fair value of the February 2023 equity classified warrants, and the fair value of both the Series A and Series B

warrants as of the inducement date using publicly available market data and the independently developed volatility assumption

● comparing the independently developed ranges of the fair value to the respective fair value of the warrant liability and the equity classified awards determined by the Company.

We have served as the Company’s auditor since 2021.

15 unchanged sentences

Intangible asset, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities

Accounts payable and accrued expenses

Deferred revenue

Income taxes payable

12 unchanged sentences

Commitments and contingencies (Note 14)

Stockholders’ equity

Stockholders’ equity (deficit)

Cumulative redeemable perpetual preferred stock, $ 0.001 par value, 15,000,000 authorized, 5,000,000 designated Series A shares, 3,427,138 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively, liquidation value of $ 25.00 per share

Common stock, $ 0.001 par value, 200,000,000 shares authorized, 110,494,245 shares issued and outstanding as of December 31, 2022;

170,000,000 shares authorized, 101,435,505 shares issued and outstanding as of December 31, 2021, respectively

Common stock, $ 0.001 par value, 200,000,000 shares authorized, 15,093,053 and 7,366,283 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Additional paid-in-capital

2 unchanged sentences

Non-controlling interests

Total stockholders' equity

Total liabilities and stockholders' equity

Total stockholders' equity (deficit)

Total liabilities and stockholders' equity (deficit)

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

13 unchanged sentences

Selling, general and administrative

Wire transfer fraud loss

Total operating expenses

3 unchanged sentences

Interest expense and financing fee

Foreign exchange loss

Change in fair value of investments

Change in fair value of warrant liabilities

Other income (expense)

Total other income (expense)

2 unchanged sentences

Net loss attributable to non-controlling interests

Net loss attributable to Fortress

Preferred A dividends declared and paid

Net loss attributable to common stockholders

5 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

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

For the Year Ended December 31, 2023

Series A Preferred Stock

5 unchanged sentences

Issuance of common stock related to equity plans

Issuance of stock for public offerings, net

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

Warrant charge in conjunction with Oaktree debt

Common shares issued for dividend on partner company's convertible preferred shares

Payment of Series A perpetual preferred stock dividends

Partner company’s offering, net

Exercise of warrants for cash

Partner companies’ proceeds from stock and warrants, net

Partner companies' at-the-market offering, net

Partner company’s exercise of options for cash

Issuance of common stock under partner company’s ESPP

Partner company’s dividends declared and paid

Partner company’s exercise of options for cash

Partner company’s redemption of preferred shares

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

Common shares issued for dividend on partner company's convertible preferred shares

Conversion of partner company convertible preferred shares

Conversion of partner company derivative warrant liabilities

Deconsolidation/dissolution of partner companies

Non-controlling interest in subsidiaries

2 unchanged sentences

Balance at December 31, 2023

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 and per share amounts)

For the Year Ended December 31, 2022

Series A Preferred Stock

Non-Controlling

Stockholders'

($ in thousands except for share amounts)

Balance at December 31, 2021

Stock-based compensation expense

4 unchanged sentences

Partner companies' at-the-market offering, net

Issuance of common stock under partner company’s ESPP

Partner company’s dividends declared and paid

Partner company’s exercise of options for cash

2 unchanged sentences

Partner company’s repurchase of stock

Issuance of common stock under partner company’s ESPP

Partner company’s dividends declared and paid

Partner company’s redemption of preferred shares

Partner company’s stock adjustment

Partner company’s net settlement of shares withheld for taxes

Partner company stock adjustment

Partner company’s warrants issued in conjunction with debt

Partner company’s retained earning adjustment

Partner company’s retained earnings adjustment

Partner company’s redemption of preferred shares

Non-controlling interest in subsidiaries

11 unchanged sentences

Depreciation expense

Loss on disposal of property and equipment

(Gain) loss on sale of property and equipment

Bad debt expense

2 unchanged sentences

Non-cash interest

Prepayment penalty of Oaktree Note

Amortization of product revenue license fee

Amortization of operating lease right-of-use assets

Loss on extinguishment of debt

Amortization of acquired intangible assets

Reduction in the carrying amount of operating lease right-of-use assets

Stock-based compensation expense

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

Common shares issued for dividend on partner company's convertible preferred shares

Change in fair value of investment in Caelum

Change in fair value of partner companies' warrant liabilities

Research and development - licenses acquired, expense

Loss from deconsolidation/dissolution of subsidiaries

Asset impairment loss

Increase (decrease) in cash and cash equivalents resulting from changes in operating assets and liabilities:

11 unchanged sentences

Purchase of property and equipment

Proceeds from the sale of partner company's fixed assets

Purchase of intangible asset

Proceeds from sale of property and equipment

Acquisition of VYNE products

Proceeds from sale of Caelum

Acquired intangible assets

Net cash used in investing activities

7 unchanged sentences

Payment of Series A perpetual preferred stock dividends

Proceeds from issuance of common stock for public offering, net

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

Proceeds from issuance of common stock under ESPP

Exercise of warrants for cash

Proceeds from partner companies' ESPP

Partner company’s dividends declared and paid

Partner company’s redemption of preferred shares

Proceeds from partner companies' sale of stock and warrants, net

Proceeds from partner companies' at-the-market offering, net

Proceeds from partner company convertible preferred shares, net

Proceeds from partner company's preferred stock offering, net

Proceeds from exercise of partner companies’ equity grants

Proceeds from exercise of partner companies’ options and warrants, net

Partner company’s net settlement of shares withheld for taxes

Partner company's cash payout for reverse stock split fractional shares

Payment of partner company’s redemption of preferred shares

Payment of partner company's repurchase of stock

Payment of partner company's deferred financing cost

Payment of debt issuance costs associated with Oaktree Note

Repayment of Oaktree Note

Repayment of partner company installment payments - licenses

1 unchanged sentence

Payment of debt issuance costs associated with partner company convertible preferred shares

Proceeds from partner company long-term debt, net

Proceeds from partner's company line of credit

Proceeds from partner companies' long-term debt, net

Repayment of partner companies' long-term debt

Proceeds from partner company's line of credit

Repayment of partner company's line of credit

Net cash provided by financing activities

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

Net cash (used in) provided by financing activities

Net decrease in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

2 unchanged sentences

Cash paid for interest

Cash paid for tax

Cash paid (refunded) for income taxes

Supplemental disclosure of non-cash financing and investing activities:

Settlement of restricted stock units into common stock

Unpaid fixed assets

Conversion of partner company convertible preferred shares

Conversion of partner company derivative warrant liabilities

Conversion of partner company annual maintenance fee to a promissory note

2 unchanged sentences

Unpaid partner company’s offering cost

Unpaid partner company’s repurchase of stock

Partner company’s retained earning adjustment

10 unchanged sentences

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 it does through Fortress itself and through partner companies and subsidiaries.

Fortress has a talented and experienced business development team, comprising scientists, doctors and finance professionals, who work in concert with its extensive network of key opinion leaders to identify and evaluate promising products and product candidates for potential acquisition.

The Company 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 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, Mayo Foundation for Medical Education and Research, AstraZeneca plc and Dr.

(“Fortress” or the “Company”) is a biopharmaceutical company focused on acquiring and advancing assets to enhance long-term value for shareholders through product revenue, equity holding and dividend and royalty revenue streams.

Fortress works in concert with its extensive network of key opinion leaders to identify and evaluate promising products and product candidates for potential acquisition.

The Company 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 (“COH” or “City of Hope”), Fred Hutchinson Cancer Center, St.

Jude Children’s Research Hospital (“St.

Jude”), Dana-Farber Cancer Institute, Nationwide Children’s Hospital, Cincinnati Children’s Hospital Medical Center, Columbia University, the University of Pennsylvania, Mayo Foundation for Medical Education and Research (“Mayo Clinic”), AstraZeneca plc and Dr.

Reddy’s Laboratories, Ltd.

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

and InvaGen Pharmaceuticals, Inc.

(a subsidiary of Cipla Limited) and Sentynl Therapeutics, Inc.

(“Sentynl”), respectively.

In October 2021, AstraZeneca plc (“AstraZeneca”) (acquiror of Alexion) purchased 100 % of the Company’s partner Caelum Biosciences, Inc.

(“Caelum”) for approximately $ 150 million upfront and up to $ 350 million in contingent regulatory and sales milestone payments.

Several of the Company’s partner companies possess licenses to product candidate intellectual property are Aevitas Therapeutics, Inc.

(“Aevitas”), Avenue Therapeutics, Inc.

Partner and subsidiary 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, sales transactions, and public and private financings.

To date, four partner companies are publicly-traded, and three have consummated strategic partnerships with industry leaders, including AstraZeneca plc as successor-in-interest to Alexion Pharmaceuticals, Inc.

(“AstraZeneca”) and Sentynl Therapeutics, Inc.

Our subsidiaries and partner companies that are pursuing development and/or commercialization of biopharmaceutical products and product candidates are:

Avenue Therapeutics, Inc.

ATXI, “Avenue”), Baergic Bio, Inc.

6 unchanged sentences

MBIO, “Mustang”), Oncogenuity, Inc.

("Oncogenuity"), and Urica Therapeutics, Inc.

(“Urica”, formerly UR-1 Therapeutics, Inc).

(“Oncogenuity”) and Urica Therapeutics, Inc.

Aevitas Therapeutics, Inc.

(“Aevitas”) was a consolidated subsidiary company until the sale of its primary asset to 4D Molecular Therapeutics in April 2023.

As used throughout this filing, the words “we”, “us” and “our” may refer to Fortress individually, to one or more of its subsidiaries and/or partner companies, or to all such entities as a group, as dictated by context.

Generally, “subsidiary” refers to a private Fortress subsidiary, “partner company” refers to a public Fortress subsidiary, and “partner” refers to an entity with whom one of the foregoing parties has a significant business relationship, such as an exclusive license or an ongoing product-related payment obligation.

The context in which any such term is used throughout this document, however, may dictate a different construal from the foregoing.

Reverse Stock Split

On October 9, 2023, Fortress filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation, as amended, to effect the 1 -for-15 Reverse Stock Split of the Company’s shares of Common Stock (the “Reverse Stock Split”).

The Reverse Stock Split was approved on August 10, 2023, by the Company’s Board of Directors and by the Company’s stockholders at a special meeting held on October 9, 2023.

As a result of the Reverse Stock Split, every 15 shares of the Company’s pre-reverse split Common Stock was combined and reclassified as one share of Common Stock.

The proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Split, other than as the result of payment for fractional shares.

No fractional shares were issued in connection with the Reverse Stock Split.

Stockholders who would otherwise have held a fractional share of Common Stock received a cash payment in lieu thereof.

In addition, there was no change to the authorized capital of the Company as a result of the reverse Stock Split and the number of authorized shares of common stock remained 200,000,000 .

All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented.

Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted stock and warrants outstanding at October 10, 2023, which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock and warrants, and, in the case of stock options and warrants, a proportional increase in the exercise price of all such stock options and warrants.

Liquidity and Capital Resources

1 unchanged sentence

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.

The parent Company’s current cash and cash equivalents of $ 40.6 million are sufficient to fund the parent entity and private subsidiary 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 companies, grants or other arrangements to 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.

1 unchanged sentence

Fortress 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.

On October 31, 2022, we received a letter from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the bid price of the Company’s common stock, par value $ 0.001 per share (the “Common Stock”), had closed below $ 1.00 per share for 30 consecutive business days and, as a result, the Company is not in compliance with Nasdaq Listing Rule 5550(a)(2), which sets forth the minimum bid price requirement for continued listing on The Nasdaq Capital Market.

Our Common Stock may be subject to delisting from The Nasdaq Capital Market if we are unable to regain compliance which may decrease the market liquidity and market price of our Common Stock.

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.

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 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’s consolidated financial statements have been prepared in conformity with GAAP.

The Company’s consolidated financial statements include the results of the Company’s subsidiaries for which it has voting control but does not own 100 % of the outstanding equity of the subsidiaries.

For consolidated entities where the Company owns less than 100 % of the subsidiary, but retains voting control, the Company records net loss attributable to non-controlling interests in its consolidated statements of operations and presents non-controlling interests as a component of stockholders’ equity on its consolidated balance sheets.

All intercompany income and/or expense items are eliminated entirely in consolidation prior to the allocation of net gain/loss attributable to non-controlling interest, which is based on ownership interests as calculated quarterly for each subsidiary.

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, provisions for product returns, coupons, rebates, chargebacks, discounts, allowances and distribution fees paid by Journey to certain wholesalers, inventory realization, useful lives assigned to long-lived assets and amortizable intangible 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 preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period.

The Company’s significant estimates include, but are not limited to, provisions for product returns, coupons, rebates, chargebacks, discounts, allowances and distribution fees paid by Journey to certain wholesalers, inventory realization, valuation of intangible assets, useful lives assigned to long-lived assets and amortizable intangible assets, fair value of stock options and warrants, stock-based compensation, common stock issued to acquire licenses, accrued expenses and contingencies.

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

Revenue Recognition

The Company records and recognizes revenues in a manner that depicts 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 records and recognizes revenue in a manner that depicts 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’s revenues primarily result from contracts with customers, which are generally short-term and have a single performance obligation – the delivery of product.

10 unchanged sentences

Coupons are processed and redeemed at the time of prescription fulfilment by the pharmacy.

The majority of coupon reserve accrual at the end of the period reflects coupons that have been redeemed for which the Company has been billed in addition to an accrual for expected redemptions for product in the distribution channel.

The expected accrual reserve requires us to estimate the distribution channel inventory at period end, the expected redemption rates, and the cost per coupon claim that the Company expects to receive.

The estimate of product remaining in the distribution channel is comprised of estimated inventory at the wholesaler as well as an estimate of inventory on the shelves at the specialty pharmacies, which the Company estimates based upon historical ordering patterns.

The estimate of product remaining in the distribution channel is comprised of estimated inventory at the wholesaler as well as an estimate of inventory at the specialty pharmacies, which the Company estimates based upon historical ordering patterns.

The estimated redemption rate is based on historical redemptions as a percentage of units sold.

The cost per coupon is based on the coupon rate.

Chargebacks and Government Chargebacks — The Company sells a portion of its products indirectly through wholesaler distributors to contracted indirect customers, qualified government healthcare providers, qualified U.S.

Department of Veterans Affairs hospitals, and 340B entities.

Chargebacks and Government Chargebacks — The Company sells a portion of its products indirectly through wholesaler distributors to contracted indirect customers and qualified government healthcare providers.

The Company enters into specific agreements with or provides discounts to these indirect customers and entities to establish pricing for the Company’s products, and in-turn, the indirect customers and entities independently purchase these products.

Because the price paid by the indirect customers and/or entities is lower than the price paid by the wholesaler, the Company provides a credit, called a chargeback, to the wholesaler for the difference between the contractual price with the indirect customers and their purchase price.

The Company’s provision for chargebacks is based on expected sell-through levels by the Company’s wholesale customers to the indirect customers and estimated wholesaler inventory levels as well as historical chargeback rates.

5 unchanged sentences

The Company regularly reviews the information related to these estimates and adjusts the provision accordingly.

Prompt-Pay Discounts – The Company provides for prompt pay discounts if payment is received within contractual payment term days, which generally ranges from 30 to 90 days .

These discounts are recorded at the time of sale based on the customer’s contracted rate and recorded as a reduction of revenue and a reduction to accounts receivables.

Specialty Pharmacy Discounts — The Company has in place contractual arrangements with specialty pharmacies and provides for contractually agreed upon discounts.

9 unchanged sentences

The Company estimates products returns as a percentage of sales to its customers.

The rate is estimated by using historical and its own sales information, including its visibility and estimates into the inventory remaining in the distribution channel.

The rate is estimated by using historical sales information, including its visibility and estimates into the inventory remaining in the distribution channel.

Collaboration Revenue

The Company’s collaboration revenue includes service revenue, license fees and future contingent milestone-based payments.

Collaboration revenue is recognized for contracted R&D services performed for it’s customers over time.

The Company measures it’s progress using an input method based on the effort expended or costs incurrd toward the satisfaction of the Company’s performance obligation.

Collaboration revenue is recognized for contracted R&D services performed for its customers over time.

The Company measures its progress using an input method based on the effort expended or costs incurred toward the satisfaction of the Company’s performance obligation.

The Company estimates the amount of effort to be expended, including the time it will take to complete the activities, or the costs that may be incurred in a given period, relative to the estimated total effort or costs to satisfy the performance obligation.

This results in a percentage that is multiplied by the transaction price to determine the amount of revenue the Comapny recognizes each period.

This approach requires the use of estimates and judgemenst.

This results in a percentage that is multiplied by the transaction price to determine the amount of revenue the Company recognizes each period.

This approach requires the use of estimates and judgement.

If the Company’s estimates or judgements change over the course of the collaboration, they may affect the timing and amount of revenue that is recognized in the current and future periods.

24 unchanged sentences

Treasury obligations and government agency securities.

Credit risk in these securities is reduced as a result of the Company’s investment policy to limit the amount invested in any single issuer and to only invest in securities of a high credit quality.

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.

2 unchanged sentences

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;

$ 1.0 million and $ 2.0 million are recorded in fixed assets – construction in process on the balance sheet at December 31, 2022 and 2021, 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.

Intangible Assets

The Company’s finite-lived intangible assets consist of intangible assets acquired by Journey.

Intangible assets are reported at cost, less accumulated amortization.

1 unchanged sentence

Amortization is calculated primarily using the straight-line method.

During the ordinary course of business, the Company has entered into certain licenses and asset purchase agreements.

Potential milestone payments for achieving sales targets or regulatory development milestones are recorded when it is probable of achievement.

Upon a milestone payment being achieved, the milestone payment will be capitalized and amortized over the remaining useful life for approved products and expensed for milestones prior to FDA approval.

Royalty payments are recorded as cost of goods sold as sales are recognized.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including intangible assets with finite useful lives, for impairment at least annually or whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable (a “triggering event”).

3 unchanged sentences

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.

The Company has not recorded any impairment losses on long-lived assets for the years ended December 31, 2022 and 2021.

During the ordinary course of business, the Company has entered into certain licenses and asset purchase agreements.

Potential milestone payments for achieving sales targets or regulatory development milestones are recorded when it is probable of achievement.

Upon a milestone payment being achieved, the milestone payment will be capitalized and amortized over the remaining useful life for approved products and expensed for milestones prior to FDA approval.

Royalty payments are recorded as cost of goods sold as sales are recognized.

During the year ended December 31, 2023, Journey recorded an intangible asset impairment charge of $ 3.1 million during the year ended December 31, 2023.

This non-cash charge was recorded to selling, general and administrative expenses on the consolidated statements of operations.

The Company did not record any impairment loss on long-lived assets for the year ended December 31, 2022.

Restricted Cash

2 unchanged sentences

As of December 31, 2022, the Company had $ 2.7 million of restricted cash representing 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 2022 and 2021:

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 as of the dates presented:

Cash and cash equivalents

1 unchanged sentence

Total cash and cash equivalents and restricted cash

The Company’s inventory consists of raw materials, work-in-process and finished goods supporting Journey’s sales of dermatology products.

Inventories are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

1 unchanged sentence

If non-saleable items are observed and there are no alternate uses for the inventory, the Company records a write-down to net realizable value in the period that the decline in value is first recognized.

The Company’s inventory reserves were $ 0.4 million and zero at December 31, 2022 and 2021, respectively.

The Company’s inventory reserves were $ 0.3 million and $ 0.4 million at December 31, 2023 and 2022, respectively.

Accounts Receivable, Net

The Company’s accounts receivable consists of amounts due from customers related to product sales and have standard payment terms.

For certain customers, the accounts receivable for the customer is net of prompt payment or specialty pharmacy discounts.

The Company’s accounts receivable consists of amounts due from customers to Journey related to dermatological product sales and have standard payment terms.

For certain customers, the accounts receivable for the customer are net of prompt payment or specialty pharmacy discounts.

The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in their credit profile.

2 unchanged sentences

The allowance for doubtful accounts was $ 0.5 million and $ 0.4 million at December 31, 2023 and 2022, respectively.

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 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.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including intangible assets with finite useful lives, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable (a “triggering event”).

Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the long-lived asset 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.

The Company has not recorded any impairment losses on long-lived assets for the years ended December 31, 2022 and 2021.

Research and Development

27 unchanged sentences

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.

Based on the Company’s evaluation, as of December 31, 2023 and December 31, 2022, the Company has recorded a liability related to an uncertain tax position of $ 0.8 million and $ 0.7 million, respectively.

The 2019 through 2021 tax years are the only periods subject to examination upon filing of appropriate tax returns.

1 unchanged sentence

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, 2022 and 2021.

As of December 31, 2023 and December 31, 2022, the Company accrued interest related to uncertain tax positions of $ 0.1 million and approximately $ 32,000 , respectively.

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

Net Loss Per Common Share

Basic net loss per share of common stock is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the reporting period.

Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the reporting period after giving effect to dilutive potential common shares for stock options and restricted stock units, determined using the treasury stock method.

Basic and diluted net loss per share attributed to common stockholders is calculated by dividing the net loss attributed to Fortress (less the Series A Preferred Dividend) by the weighted-average number of shares of Common Stock outstanding during the period, not including unvested restricted stock, and without consideration for Common Stock equivalents.

Diluted net loss per share is the same as the basic loss per share due to net losses incurred in all periods.

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 interests.

The Company records net loss attributable to non-controlling interests in its consolidated statements of operations and presents non-controlling interests as a component of stockholders’ equity on its consolidated balance sheets.

All intercompany income and/or expense items are eliminated entirely in consolidation prior to the allocation of net gain/loss attributable to non-controlling interest, which is based on a quarterly calculation of ownership interests for each relevant subsidiary.

Subsidiary preferred shares and Class A common shares, if issued, are included in the ownership calculation on a 1 :1 basis consistent with how the relevant contractual agreements provide for the allocation and distribution of earnings.

These shares, if any, are convertible at Fortress’ election on a 1 :1 basis into common stock (with adjustments for stock splits, if any) and upon conversion would have the same voting rights as the common stock.

Only preferred stock and Class A common stock held by Fortress have majority voting rights, which rights would terminate upon conversion into common stock.

The Company allocates the subsidiaries’ net loss/income to the non-controlling interest on a quarterly basis, and the

calculation of non-controlling interest ownership percentage is determined as the average of the prior quarter and the current quarter’s non-controlling ownership interest.

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

Comprehensive Loss

1 unchanged sentence

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas.

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023 for smaller reporting companies.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280) :

Improvements to Reportable Segment Disclosures The amendments in ASU 2023-07 improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses.

The amendments introduce a new requirement to disclose significant segment expenses regularly provided to the chief operating decision maker (“CODM”), extend certain annual disclosures to interim periods, clarify that single reportable segment entities must apply ASC 280 in its entirety, permit more than one measure of segment profit or loss to be reported under certain conditions, and require disclosure of the title and position of the CODM.

This guidance is effective for fiscal years, beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption will be permitted.

The Company is currently evaluating the impact of this standard on its consolidated financial statements.

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

The ASU sets forth a current expected credit loss 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.

Collaboration and Stock Purchase Agreements

Agreement with AstraZeneca’s Alexion

In January 2019, Caelum, a subsidiary of the Company at that time, entered into a Development, Option and Stock Purchase Agreement (as amended, the "DOSPA") and related documents by and among Caelum, AstraZeneca as successor-in-interest to Alexion Therapeutics, Inc., the Company and Caelum’s other equity holders as parties thereto (such equity holders, including Fortress, the "Sellers").

Under the terms of the DOSPA, AstraZeneca obtained a minority interest in Caelum and a contingent exclusive option to acquire the remaining equity in Caelum.

On September 28, 2021 AstraZeneca notified Caelum of its intention to exercise its purchase option, and on October 5, 2021 AstraZeneca acquired 100 % of the capital stock of Caelum.

Fortress received 42.4 % of the distribution of proceeds from the option exercise price of $ 150 million, approximately $ 56.9 million, which is net of the 10 % , 24-month escrow holdback and other miscellaneous transaction expenses.

The Sellers currently remain eligible to receive up to an additional $ 350 million in contingent regulatory and commercial milestone payments, of which Fortress is eligible to receive 42.4 % or approximately $ 148.6 million.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S.

and foreign jurisdictions.

The update will be effective for annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact of the new standard on its consolidated financial statements.

Asset Purchase Agreements

Agreement with 4DMT

On April 21, 2023, Aevitas entered into an Asset Purchase Agreement (the “4DMT APA”) with 4DMT under which 4DMT acquired Aevitas’ proprietary rights to its short-form human complement factor H (“sCFH”) asset for the treatment of complement-mediated diseases.

Under the terms of the 4DMT APA, 4DMT will make cash payments totaling up to $ 140 million if certain late-stage development, regulatory and sales milestones are met with respect to sCFH.

A range of single-digit royalties on net sales are also payable.

The aforementioned payments are payable solely to Aevitas, and 4DMT will be responsible for license payment obligations to the licensor of sCFH, University of Pennsylvania.

4DMT is not a related party to the Company and has assumed all ongoing and future development costs.

The fair value of the interest in Aevitas retained by the Company of $ 2.6 million was based on the risk-adjusted present value of the aforementioned potential cash payments (see Note 6).

In connection with the 4DMT APA, the preferred shares of Aevitas held by the Company converted to Aevitas common shares, at which point the Company no longer maintained voting control of Aevitas.

As a result, the Company deconsolidated its holdings in Aevitas.

In connection with this transaction, the Company recorded a loss on deconsolidation of Aevitas of $ 3.4 million during the year ended December 31, 2023 in other expense in the Consolidated Statement of Operations.

Agreements with uBriGene (Boston) Biosciences, Inc.

On May 18, 2023, Mustang entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with uBriGene, as amended by a first amendment thereto, dated June 29, 2023, and further amended by a second amendment thereto, dated as of July 28, 2023 (collectively the “Amended Asset Purchase Agreement”), pursuant to which Mustang agreed, subject to the terms and conditions therein, to sell its leasehold interest in its cell processing facility located in Worcester, MA (the “Facility”) and associated assets relating to the manufacturing and production of cell and gene therapies at the Facility to uBriGene.

On July 28, 2023, the closing date, pursuant to the terms and conditions of the Amended Asset Purchase Agreement, Mustang completed the sale of Mustang’s assets primarily relating to the manufacturing and production of cell and gene therapies to uBriGene for base consideration of $ 6.0 million.

Mustang recorded a gain of $ 1.5 million in connection with the sale of the assets and recorded approximately $ 0.3 million of the base consideration as deferred income, to be recognized upon the transfer of the lease.

Certain assets, including Mustang’s lease of the Facility and related contracts did not transfer to uBriGene on the Closing date.

uBriGene will be obligated to pay to Mustang a contingent amount of $ 5.0 million less certain severance obligations and payments payable in connection with the transfer of certain contracts related to the transferred assets, if Mustang, within two years of the closing date:

(i) completes one or more issuances of equity securities in an aggregate gross amount equal to or greater than $ 10.0 million after the closing and (ii) obtains consent of the landlord to the proposed lease transfer within two years after the closing date.

The Asset Purchase Agreement contemplates that Mustang will seek to procure the consent and approval of the landlord of the Facility, WCS-377 Plantation Street, Inc.

(the “Landlord”), and the Landlord informed Mustang that it will not consider the lease transfer request until receipt of the final determination letter from with the U.S.

Committee on Foreign Investment in the United States (“CFIUS”), although there can be no guarantee that, even if CFIUS does approve the below-described Facility Transaction, the Landlord will approve the lease transfer.

In connection with the sale of its leasehold interest in the Facility and associated assets relating to the manufacturing and production of cell and gene therapies at the Facility (the “Facility Transaction”) to uBriGene and an indirect, wholly owned subsidiary of uBriGene (Jiangsu) Biosciences Co., Ltd., a Chinese contract development and manufacturing organization, Mustang and uBriGene previously submitted a voluntary notice with CFIUS.

The current 45-day review period will conclude no later than March 28, 2024.

If CFIUS does not conclude its review by March 28, 2024, the proceeding will transition to a subsequent 45-day phase as CFIUS further investigates the Transaction.

Unless and until the lease is transferred to uBriGene, Mustang will retain its facility lease and facility personnel, and will continue to occupy the leasehold premises and manufacture there its lead product candidates, including MB-106.

As contemplated by the Amended Asset Purchase Agreement, on the Closing Date, Mustang and uBriGene entered into a Manufacturing Services Agreement (the “Manufacturing Services Agreement”).

Under the Manufacturing Services Agreement, Mustang contracted uBriGene to manufacture Mustang’s lead product candidates, including MB-106, and Mustang committed to spend at least $ 8 million over a period of two years after the closing of the transaction to purchase manufacturing and related services (the “Manufacturing Services”) from uBriGene (the “Minimum Commitment”).

Mustang paid uBriGene 25 % of the Minimum Commitment at the time of signing of the Manufacturing Services Agreement and will pay the remainder of the Minimum Commitment over the following two years .

Subject to Mustang’s payment of its Minimum Commitment, uBriGene will provide to Mustang a manufacturing rebate, payable in cash at the end of the second year of the Manufacturing Services Agreement term, for any amounts paid for Manufacturing Services in excess of the Minimum Commitment (but in no event will such rebate exceed $ 3 million).

In connection with the Manufacturing Services Agreement, Mustang will provide uBriGene with the customary licenses to use intellectual property rights specific to Mustang’s cell and gene therapies to the extent reasonably necessary for uBriGene’s performance under the Manufacturing Services Agreement.

Mustang intends to expense manufacturing costs under the Manufacturing Services Agreement and the sub-contracting Manufacturing Services Agreement, pursuant to which uBriGene contracted with Mustang to perform the Manufacturing Services to be performed by uBriGene under the Manufacturing Services Agreement and account for reimbursed costs associated with the agreements as an offset to such expense.

For the year ended December 31, 2023, Mustang has expensed $ 4.1 million of manufacturing costs under the Manufacturing Services Agreement.

In addition, as contemplated by the Asset Purchase Agreement, on the closing date, Mustang and uBriGene entered into a sub-contracting Manufacturing Services Agreement (the “Sub-Contracting CDMO Agreement”).

Under the terms of the Sub-Contracting CDMO Agreement, Mustang will manufacture its lead product candidates, including MB-106, and may from time to time manufacture other products as requested by uBriGene.

In addition, under the Sub-Contracting CDMO Agreement, Mustang and uBriGene agreed to establish a joint steering committee comprising two representatives from each of Mustang and uBriGene to review, discuss and decide on operational matters relating to the services to be performed by Mustang under such agreement, including matters relating to expenses.

For the year ended December 31, 2023, Mustang received $ 2.4 million in reimbursed costs and has a receivable of $ 3.2 million associated with the Sub-Contracting CDMO Agreement.

Because the Facility was not assigned to uBriGene within 120 days following July 28, 2023, so long as the lease has not been so assigned, uBriGene may deliver a notice to Mustang indicating its intention to enter into good faith negotiations (the “Repurchase Notice”) to provide for Mustang to repurchase the associated assets relating to the manufacturing and production of cell and gene therapies at the Facility, re-assume the transferred liabilities and resume all transferred operations.

Upon receipt of such Repurchase Notice, Mustang and uBriGene have agreed to use our best commercial efforts to negotiate in good faith the terms of any such Repurchase Transaction.

Agreement with Sentynl

On February 24, 2021, Cyprium entered into a development and contingent asset purchase agreement with Sentynl.

Pursuant to the terms of the agreement, Sentynl paid Cyprium an upfront fee of $ 8.0 million to complete the CUTX-101 development program for the treatment of Menkes disease, through the filing of Cyprium’s New Drug Application (“NDA”) with the U.S.

Food and Drug Administration (“FDA”).

Cyprium also remains eligible to receive up to an additional $ 12.0 million in development milestones, payable as follows:

(i) $ 3.0 million upon acceptance by the FDA of the NDA for review;

and (ii) $ 9.0 million upon FDA approval of the NDA and transfer of CUTX-101 to Sentynl.

Cyprium would also be eligible to receive up to $255.0 million in additional sales milestone payments (payable pursuant to five separate milestones), as well as royaltieson CUTX-101 net sales ranging from mid-single digits up to the mid-twenties.

All of the foregoing milestone and royalty payments are subject to 50% diminution in the event Sentynl decides, at its option, to assume development control of CUTX-101 during the 45-day period beginning on September 30, 2023.

The Company will recognize revenue associated with these future milestones based upon achievement.

At December 31, 2022, none of these future milestones was deemed probable.

Cyprium would retain 100 % ownership over any FDA Priority Review Voucher that may be issued at NDA approval for CUTX-101.

The Company determined that this agreement falls within the scope of ASC 606-10-15-3 and ASC 808-10-15-5A Revenue from Collaborative Arrangements (“ASC 808”) and as such the Company will recognize revenue in connection with achievement of two future development milestone payments.

In connection with the $ 8.0 million upfront payment to Sentynl, the Company is recognizing revenue using an input method based upon the costs incurred to date in relation to the total estimated costs to complete the development activities.

Accordingly, revenue is being recognized over the period in which the development activities are expected to occur.

For the years ended December 31, 2022 and 2021, the Company recognized revenue of $ 1.9 million and $ 5.4 million, respectively.

On February 24, 2021, Cyprium entered into a development and asset purchase agreement (the “Sentynl APA”) with Sentynl, a U.S.-based specialty pharmaceutical company owned by the Zydus Group.

Under the Sentynl APA, Sentynl provided $ 8.0 million of upfront development funding for Cyprium’s CUTX-101 program, with Cyprium remaining in control of development of such program;

upon approval of the NDA for CUTX-101 by the FDA, Cyprium would be obligated to assign the NDA and certain other assets pertaining to the CUTX-101 program to Sentynl, after which point Sentynl would commercialize the drug and owe Cyprium royalties and regulatory and sales milestones.

The Sentynl APA contained an alternative “Approval Deadline Transfer” mechanism pursuant to which, in the event that CUTX-101 NDA approval had not been obtained by September 30, 2023, then Sentynl could elect, during the subsequent 45 -day period, to assume control over development of CUTX-101 by effecting a Closing under the Sentynl APA.

Cyprium received notice of Sentynl’s election to effect the Approval Deadline Transfer during such 45-day period, and the Closing of such transfer occurred in December 2023.

The Approval Deadline Transfer obligated Sentynl to pay Cyprium $ 4.5 million in connection with the Closing, which was received by Cyprium in December 2023 and recorded as collaboration revenue by Fortress in its consolidated statements of operations for the year ended December 31, 2023.

There are no further obligations required by Cyprium in regards to the $ 4.5 million.

Following such Closing, Sentynl is obligated to use commercially reasonable efforts to develop and commercialize CUTX-101, including the funding of the same.

Additionally, Cyprium remains eligible to receive up to $ 129 million in aggregate development and sales milestones under the Agreement, and royalties on net sales of CUTX-101 as follows:

(i) 3 % of annual net sales up to $ 75 million;

(ii) 8.75 % of annual net sales between $ 75 million and $ 100 million;

and (iii) 12.5 % of annual net sales in excess of $ 100 million.

Cyprium will retain 100% ownership over any FDA priority review voucher that may be issued at NDA approval for CUTX-101.

With respect to the $ 8.0 million upfront payment from Sentynl received in 2021, the Company recognized revenue over the period in which the development activities occurred using an input method based upon the costs incurred to date in relation to the total estimated costs to complete the development activities.

As of the date of the Approval Deadline Transfer, the revenue related to the upfront payment has been fully recognized.

For the years ended December 31, 2023 and 2022, the Company recognized revenue from this arrangement of $ 0.7 million and $ 1.9 million, respectively.

Agreements with InvaGen

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”), which contemplated:

(i) the purchase by InvaGen of a 33.3 % stake in Avenue and;

(ii) the contingent sale of Avenue to InvaGen.

The first stage stock purchase 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.

Under a contingent second stage closing, InvaGen may have acquired the remaining shares of Avenue’s capital stock (in some cases compulsorily and in some cases at InvaGen’s option), pursuant to a reverse triangular merger with Avenue remaining as the surviving entity.

On November 1, 2021, Avenue delivered InvaGen notice of termination of the Avenue SPMA, meaning that the second stage acquisition of Avenue by InvaGen pursuant to the Avenue SPMA is no longer possible.

In July 2022 Avenue entered into a Share Repurchase Agreement with InvaGen (described below).

In connection with the closing by Avenue of an underwritten public offering (see Note 14) on October 11, 2022, Avenue consummated the transactions contemplated by the Share Repurchase Agreement with InvaGen, pursuant to which Avenue repurchased 100 % of the shares in Avenue held by InvaGen (the “InvaGen Shares”) for a purchase price of $ 3 million.

In addition, under the Share Repurchase Agreement Avenue agreed to pay InvaGen an additional amount as a contingent fee, payable in the form of seven and a half percent ( 7.5 %) of the proceeds of future financings, up to $ 4 million.

In connection with the closing of the Share Repurchase Agreement, which occurred on October 31, 2022, all of the rights retained by InvaGen pursuant to the Stockholders Agreement entered into by and among Avenue, InvaGen and Fortress on November 12, 2018, were terminated.

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

In November 2021, Avenue delivered InvaGen notice of termination of the Avenue SPMA and in July 2022, Avenue entered into a Share Repurchase Agreement (the “Avenue SRA”) with InvaGen which closed in October 2022.

In connection with the closing of the Avenue SRA, Avenue repurchased all the common shares of Avenue held by InvaGen, and all of the rights retained by InvaGen pursuant to the Stockholders Agreement entered into by and among Avenue, InvaGen and Fortress on November 12, 2018, were terminated.

Under the Avenue SRA, Avenue agreed to pay InvaGen seven and a half percent ( 7.5 %) of the proceeds from future financings, up to $ 4 million.

In connection with the closing of financings that occurred in 2023 and 2022, Avenue made payments totaling $ 0.5 million to InvaGen.

Inventory consisted of the following:

16 unchanged sentences

Property, plant and equipment, net

Relates to the Mustang cell processing facility.

Depreciation expenses of Fortress’ property and equipment for the years ended December 31, 2022 and 2021 was $ 3.1 million and $ 2.6 million, respectively, and was recorded in research and development, and selling, general and administrative expense in the Consolidated Statements of Operations.

Fortress’ depreciation expense for the years ended December 31, 2023 and 2022 was $ 2.2 million and $ 3.1 million, respectively, and was recorded in research and development, and selling, general and administrative expense in the Consolidated Statements of Operations.

Fair Value Measurements

Fair Value of Aevitas

The Company valued its retained investment in Aevitas, as part of the deconsolidation of its holdings (see Note 3) in accordance with ASC Topic 820, Fair Value Measurements and Disclosures , and estimated the fair value to be $ 2.6 million based on a per share value of $ 0.328 .

The following inputs were utilized to derive the value:

risk free rate of return of 3.7 %, volatility of 80 % and a discount for lack of marketability of 39.7 %.

Common Stock Warrant Liabilities

1 unchanged sentence

Balance at December 31, 2021

Journey contingent payment liability

Journey placement agent warrant

Change in fair value of contingent payment liability

Satisfaction of partner company contingent payment

Balance at December 31, 2021

Checkpoint Series A & B common stock warrants

5 unchanged sentences

Balance at December 31, 2022

Avenue common stock warrants

Urica placement agent warrants

Change in fair value of common stock warrants - Avenue

Change in fair value of common stock warrants - Checkpoint

Change in fair value of placement agent warrants - Urica

Exercise of common stock warrants - Checkpoint

Balance at December 31, 2023

On December 16, 2022, Checkpoint closed on an offering for the sale of shares of its common stock and pre-funded warrants as part of a registered direct offering (the “December 2022 Registered Direct Offering”).

The common stock and the pre-funded warrants were sold together with December 2022 common warrants and placement agent warrants.

Net proceeds from the December 2022 Registered Direct Offering were $ 6.7 million after deducting commissions and other transaction costs (See Note 14).

The Company deemed the December 2022 common warrants and placement agent warrants to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control.

The common warrants and placement agent warrants were recorded at the time of closing at a fair value of $ 7.9 million, determined by using the Black-Scholes model.

As the total fair value of the common stock warrant liability exceeded the total net proceeds of $ 6.7 million, the Company recorded a loss of $ 1.2 million to loss on common stock warrant liabilities in the Consolidated Statements of Operations.

Accordingly, there were no proceeds allocated to the common stock and pre-funded warrants issued as part of this transaction.

The Company revalued the December 2022 common warrants and placement agent warrants at December 31, 2022 using the Black-Scholes model.

This resulted in an increase in common stock warrant liability of $ 3.3 million, with an offsetting loss recorded to loss on common stock warrant liabilities in the Statements of Operations.

The common stock and the pre-funded warrants were sold together with December 2022 Common Stock Warrants and placement agent warrants.

Net proceeds to Checkpoint from the December 2022 Registered Direct Offering were $ 6.7 million after deducting commissions and other transaction costs (see Note 13).

Checkpoint deemed the December 2022 common warrants and placement agent warrants to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control.

The common warrants and placement agent warrants were recorded at the time of closing at a fair value, determined by using the Black-Scholes model.

As the total fair value of the common stock warrant liability exceeded the total net proceeds, no proceeds were allocated to the common stock and pre-funded warrants issued as part of this transaction.

Checkpoint revalued the December 2022 common warrants and placement agent warrants at December 31, 2022 resulting in a fair value of $ 11.2 million.

Checkpoint also revalued the December 2022 Common Stock Warrants and December 2022 Placement Agent Warrants at each reporting period in 2023, resulting in gains throughout the year.

In February 2023, Checkpoint closed on an offering for the sale of shares of its common stock and pre-funded warrants as part of a registered direct offering (the “February 2023 Registered Direct Offering”).

The common stock and pre-funded warrants were sold together with February 2023 Common Stock Warrants and placement agent warrants (collectively, the “February 2023 Common Stock Warrants”).

The total gross proceeds from the February 2023 Registered Direct Offering were approximately $ 7.5 million with net proceeds of approximately $ 6.7 million after deducting approximately $ 0.8 million in commissions and other transaction costs.

The February 2023 Common Stock Warrants and placement agent warrants met the criteria for equity classification.

In October 2023, Checkpoint entered into an inducement offer letter agreement (the “October 2023 Inducement”) with a holder of certain of its existing warrants to exercise for cash an aggregate of 6,325,354 shares of the Checkpoint’s common stock at a reduced exercise price of $ 1.76 per share.

The exercised warrants included the December 2022 Common Stock Warrants with an original exercise price of $ 4.075 per share and the February Common Stock Warrants with an original exercise price of $ 5.00 per share.

These warrants were issued as part of the December 2022 Registered Direct Offering and February 2023 Registered Direct Offering.

As part of the October 2023 Inducement, Checkpoint agreed to issue new unregistered Series A Warrants to purchase up to 6,325,354 shares of Common Stock and new unregistered Series B Warrants to purchase up to 6,325,354 shares of Common Stock (the October 2023 Common Stock Warrants”).

Checkpoint also issued the placement agent warrants to purchase up to 379,521 shares of common stock with an exercise price of $ 2.20 per share.

The total gross proceeds from the October 2023 Inducement were approximately $ 11.1 million with net proceeds of approximately $ 10.0 million after deducting approximately $ 1.1 million in commissions and other transaction costs.

The October 2023 Common Stock Warrants and placement agent warrants met the criteria for equity classification.

The December 2022 Common Stock Warrants, which were liability classified, were revalued on October 4, 2023 using Black-Scholes Model to calculate the difference in fair value as a result of the change in exercise price.

The difference in fair value of $ 1.2 million was recorded as a loss on common stock warrant liabilities in the Consolidated Statements of Operations.

The issuance of the October 2023 Common Stock Warrants was also considered as part of the cost of the inducement and were valued using Black-Scholes Model and allocated between the December 2022 Common Stock Warrants and The February 2023 Common Stock Warrants on a weighted basis.

The approximately $ 7.7 million allocated to the December 2022 Common Stock Warrants was recorded as loss on common stock warrant liabilities in the Consolidated Statements of Operations with a corresponding offset to additional paid-in-capital.

The February 2023 Common Stock Warrants, which were equity classified and treated under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity , were revalued using Black-Scholes Model to calculate the difference in fair value as a result of the change in exercise price.

The difference in fair value of $ 1.1 million was deemed to be a dividend and recorded to additional paid-in-capital by Checkpoint because Checkpoint had an accumulated deficit on the exercise date.

The approximately $ 6.3 million allocated to the February 2023 Common Stock Warrants from the issuance of the October 2023 Common Stock Warrants was also deemed to be a dividend and recorded to additional paid-in-capital by Checkpoint because Checkpoint had an accumulated deficit on the exercise date.

($ in thousands)

4 unchanged sentences

Common Stock Warrant liabilities at December 31, 2022

Change in fair value of common stock warrant liabilities

Exercise of common stock warrants

Common Stock Warrant liabilities at December 31, 2023

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

Checkpoint Series A Warrants

Exercise price

Expected life

Risk-free rate

Dividend yield

Checkpoint Series B Warrants

Exercise price

Expected life

Risk-free rate

Dividend yield

Checkpoint Placement Agent Warrants

Checkpoint Warrants

Exercise price

1 unchanged sentence

Risk-free rate

Dividend yield

On October 11, 2022, Avenue announced the closing of an underwritten public offering of 3,636,365 common and pre-funded units.

Each common unit consists of one share of common stock and one warrant to purchase one share of common stock, and each pre-funded unit consists of one pre-funded warrant to purchase one share of common stock and one warrant to purchase one share of common stock.

Each share of common stock (or pre-funded warrant) was sold together with one warrant at a combined purchase price of $ 3.30 per common unit (or $ 3.2999 per pre-funded unit after reducing $ 0.0001 attributable to the exercise price of the pre-funded warrants).

Avenue also simultaneously closed on the sale of an additional 545,454 warrants to purchase common stock, which were sold pursuant to a partial exercise of the underwriter’s over-allotment option.

Avenue received net proceeds of approximately $ 10.3 million at closing after deducting underwriting discounts and commissions and other expenses of the offering.

The Company deemed the warrants to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control.

The warrants were recorded at the time of closing at a fair value of $ 8.3 million, determined by using the Monte Carlo simulation approach.

The Company revalued the warrants at December 31, 2022 using the Monte Carlo simulation approach.

This resulted in a decrease in common stock warrant liability of $ 5.7 million, with an offsetting gain recorded in the Statements of Operations.

Avenue issued freestanding warrants to purchase shares of its common stock in connection with financing activities in October 2022 (the “October 2022 Warrants”) and January 2023 (the “January 2023 Warrants”, collectively the “Avenue Warrants”) (see Note 13).

The Avenue Warrants are classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside of its control.

The October 2022 Warrants were valued using the Monte Carlo simulation approach.

In connection with the Avenue January 2023 Registered Direct Offering (see Note 13) in January 2023, the down-round price protection feature was triggered and the exercise price for the October 2022 Warrants was permanently adjusted to $ 1.55 , which was the offering price for the Avenue Registered Offering in January 2023.

The Black-Scholes model was used to value the October 2022 Warrants and January 2023 Warrants as of December 31, 2023.

For the year ended December 31, 2023, the decrease in the fair value of the Avenue Warrants resulted in a decrease in common stock warrant liabilities of $ 4.3 million, with an offsetting gain recorded in the Statements of Operations.

($ in thousands)

3 unchanged sentences

Common Stock Warrant liabilities at December 31, 2022

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

Issuance of Avenue common warrants

Change in fair value of common stock warrant liabilities

Common Stock Warrant liabilities at December 31, 2023

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Avenue warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

Risk-free interest rate

4.02 % - 4.14

Expected dividend yield

1 unchanged sentence

Expected volatility

92.8 % - 90.3

The fair value of Urica’s contingently issuable placement agent warrants in connection with Urica’s first close of their preferred offering in December 2022 (see Note 10), was measured using a Monte Carlo simulation valuation methodology.

Urica’s contingently issuable placement agent warrants were issued in connection with Urica’s first close of their preferred offering in December 2022 (see Note 9).

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Urica’s warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

3 unchanged sentences

Expected volatility

At December 31, 2022 the value of the Urica’s contingent payment warrant is $ 0.1 million, and was recorded on the consolidated balance sheet.

No liability was recorded at December 31, 2021.

Fair Value of Investment in Caelum

Upon AstraZeneca’s notification of their intent to acquire Caelum in September 2021, the Company increased the carrying value of its investment in Caelum to 42.4 % of the distribution of proceeds from the option exercise price of $ 150 million, or $ 56.9 million.

Fortress received the funds at the acquisition close in October 2021.

Prior to AstraZeneca’s notification, the Company had valued its holdings in Caelum in accordance with ASC Topic 820, Fair Value Measurements and Disclosures.

Journey Placement Agent Warrant Liability

The fair value of Journey’s contingently issuable Placement Agent Warrants in connection with Journey’s preferred offering in March 2021 (see Note 10), 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 Journey’s warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

Risk-free interest rate

Expected dividend yield

Expected term in years

Expected volatility

Upon the closing of the Journey Initial Public Offering (“Journey IPO”) (see note 14), Journey issued the Placement Agent Warrants to purchase 5 % of the shares of Journey common stock into which the Journey Preferred Stock converted.

The Placement Agent Warrants have a term of 5 years .

At December 31, 2021, Journey issued 111,567 shares of Journey common stock related to the exercise of all of the Placement Agent Warrants.

Journey Contingent Payment Warrant

In connection with the Journey license, collaboration, and assignment agreement (the “DFD Agreement”) to obtain the global rights for the development and commercialization of DFD-29 with Dr.

Reddy’s Laboratories, Ltd (“DRL”) (see Note 7), Journey agreed to pay DRL additional consideration upon either an IPO of the Journey’s common stock or an acquisition of Journey, the agreement further specifies that only one payment can be made.

The contingent payment associated with an IPO of Journey’s common stock is deemed to be achieved if upon the completion of an IPO Journey’s market capitalization on a fully diluted basis is $ 150 million or greater at the close of business on the date of such Journey IPO.

The payment due for the achievement of the IPO criteria is a follows:

(a) issue to DRL a number of shares of Journey’s common stock equal to $ 5.0 million as calculated using a fifteen (15) day volume weighted average price (“VWAP”) of Journey’s closing price, measured fifteen (15) days following the Journey IPO;

or (b) make a cash payment to DRL equal to $ 5.0 million.

Journey valued the contingent payment discussed above utilizing a Probability Weighted Expected Return Method (PWERM) model using a discount rate of 30 % and expected term of 3 - 5 months.

As a result of Journey’s IPO on November 16, 2021, Journey issued 545,131 unregistered shares of Journey common stock to DRL, calculated using a 15-day VWAP of $ 9.1721 per share.

Licenses Acquired

At December 31, 2023 and 2022, the value of Urica’s contingent payment warrant was $ 0.2 million and $ 0.1 million, respectively, and was recorded on the consolidated balance sheet.

License Agreements

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, 2022 and 2021, the total purchase price of licenses acquired, totaling approximately $ 0.7 million and $ 15.6 million, respectively, was classified as research and development-licenses acquired in the Consolidated Statements of Operations.

For the years ended December 31, 2022 and 2021, the Company’s research and development-licenses acquired are comprised of the following:

Year Ended December 31,

($ in thousands)

Partner companies:

On June 29, 2021, Journey entered into a license, collaboration, and assignment agreement (the “DFD-29 Agreement”) to obtain the global rights, except for DRL retained rights in the BRIC and CIS countries, for the development and commercialization of a late-stage development modified early release oral minocycline for the treatment of rosacea (“DFD-29”) with Dr.

Expense recognized was $ 4.3 million (primarily Avenue) and $ 0.7 million, for the years ended December 31, 2023 and 2022, respectively.

The purchase prices of the licenses acquired were classified as research and development-licenses acquired in the consolidated statements of operations.

On February 28, 2023, Avenue entered into a license agreement with AnnJi Pharmaceutical Co.

("AnnJi"), whereby Avenue obtained an exclusive license (the "AnnJi License Agreement") from AnnJi to the intellectual property rights pertaining to the molecule known as JM17, which activates Nrf1 and Nrf2, enhances androgen receptor degradation and underlies AJ201, a clinical product candidate currently in a Phase 1b/2a clinical trial in the U.S.

for the treatment of SBMA, also known as Kennedy's Disease.

Under the AnnJi License Agreement, in exchange for exclusive rights to the intellectual property underlying the AJ201 product candidates, Avenue agreed to pay $ 3.0 million, of which $ 2.0 million was paid on April 27, 2023 and $ 1 million was paid on September 8, 2023.

The license provided under the AnnJi License Agreement is exclusive as to all oral forms of AJ201 for use in all indications (other than androgenetic alopecia and Alzheimer’s disease) in the United States, Canada, the European Union, the United Kingdom and Israel.

The AnnJi License Agreement also contains customary representations and warranties and provisions related to confidentiality, diligence, indemnification and intellectual property protection.

Avenue will initially be obligated to obtain both clinical and commercial supply of AJ201 exclusively through AnnJi.

AnnJi retains the manufacturing rights for AJ201 and Avenue has the option to acquire those rights from AnnJi as described in the AnnJi License Agreement.

Pursuant to the terms of the AnnJi License Agreement, Avenue was also obligated to issue two tranches of shares of its common stock and make additional payments including:

reimbursement of payments up to $ 10.8 million in connection with the product’s Phase 1b/2a clinical trial (which AnnJi is currently administering with Joint Steering Committee Oversight before assigning the IND to Avenue upon such trial’s conclusion, and which is reflective of market pricing for the services to be received), up to $ 14.5 million in connection with certain development milestones pertaining to the first indication in the U.S., up to $ 27.5 million in connection with certain drug development milestones pertaining to additional indications and development outside the U.S., up to $ 165 million upon the achievement of certain net sales milestones ranging from $ 75 million to $ 750 million in annual net sales, and royalty payments based on a percentage of net sales ranging from mid-single digits to the low-double digits, which are subject to potential diminution in certain circumstances.

In connection with the signing of the AnnJi License Agreement, Avenue issued 831,618 shares of its common stock to AnnJi (“First Tranche Shares”) and recognized expense of $ 0.9 million;

and issued 276,652 shares of common stock (“Second Tranche Shares”), recorded at a fair value of $ 0.3 million, on September 26, 2023 upon enrollment of the eighth patient in the ongoing Phase 1b/2a SBMA clinical trial.

Avenue and AnnJi entered into a Subscription Agreement, dated as of February 28, 2023, that provided for the issuance of First Tranche Shares which were issued March 30, 2023.

In the event that the common stock of Avenue ceases to be traded on a national securities exchange, AnnJi has the right to sell the common stock of Avenue back to Avenue at a price of $ 2.10 per share, subject to the terms of the AnnJi License Agreement.

On August 31, 2023, Journey entered into a license agreement (the “New License Agreement”) with Maruho, whereby Journey agreed to grant an exclusive license to Maruho to develop and commercialize Qbrexza® for the treatment of primary axillary hyperhidrosis, in South Korea, Taiwan, Hong Kong, Macau, Thailand, Indonesia, Malaysia, Philippines, Singapore, Vietnam, Brunei, Cambodia, Myanmar and Laos (the “Territory”).

Under the terms of the New License Agreement, in exchange for the exclusive rights to Qbrexza in the Territory and the amendment to the royalty payments associated with the Japanese license, Maruho paid $ 19.0 million to Journey as a non-refundable upfront payment.

Prior to the date of the New License Agreement, Journey and Maruho were party to an existing exclusive amended and restated license agreement (the “First A&R License Agreement”), under which Maruho acquired exclusive license rights to Qbrexza® in Japan.

In connection with Journey’s entry into the New License Agreement, Journey and Maruho also entered into the Second Amended and Restated Exclusive License Agreement (the “Second A&R License Agreement”), which supersedes the First A&R License Agreement.

The Second A&R License Agreement contains modifications that remove Maruho’s obligation to pay Journey royalties on its net sales of Rapifort® (the Japanese equivalent of Qbrexza®) in Japan for sales occurring after October 1, 2023 and removes Maruho’s obligation to pay $ 10 million to Journey in the event that Maruho achieves net sales of at least ¥ 4 billion (yen) of Rapifort® during a single fiscal year.

All other remaining potential milestone payment obligations, which aggregate to $ 45 million, remain in full force and effect.

Journey recognized $ 19.0 million as other revenue in the consolidated statements of operations during the year ended December 31, 2023.

In June 2021, Journey entered a license, collaboration, and assignment agreement (the “DFD-29 Agreement”) to obtain global rights for the development and commercialization of a late-stage development modified release oral minocycline for the treatment of rosacea (“DFD-29”) with Dr.

Reddy’s Laboratories, Ltd (“DRL”);

provided, that DRL retained certain rights to the program in select markets including Brazil, Russia, India and China.

Pursuant to the terms and conditions of the DFD-29 Agreement, Journey paid $ 10.0 million.

Additional contingent regulatory and commercial milestone payments totaling up to $ 158.0 million may also be payable.

Royalties ranging from approximately 10 % to approximately 15 % are payable on net sales of the DFD-29 product.

The product candidates acquired by the Company require substantial completion of research and development, and regulatory and marketing approval efforts in order to reach technological feasibility.

As such, the $ 10.0 million for the year ended December 31, 2021 for the purchase price of licenses acquired were classified as research and development-licenses acquired in the consolidated statement of operations.

The DFD-29 Agreement contained contingent consideration payable by Journey upon either an IPO of Journey’s common stock or an acquisition of Journey.

Journey recognized $ 3.8 million of expense classified as research and development-licenses acquired upon execution of the DFD-29 Agreement associated with the contingent consideration.

In connection with the closing of Journey’s IPO on November 16, 2021, Journey issued 545,131 shares of its common stock to DRL in a transaction exempt from registration under the Securities Act calculated using a 15 -day volume weighted average price (“VWAP”) of $ 9.1721 per share in full settlement of the contingent payment to DRL.

The restrictions on the unregistered shares of common stock are governed by the terms set forth in the DFD-29 Agreement and applicable securities laws.

See “Journey Contingent Payment Derivative” in Note 6 for further details.

Additionally, the Company is required to fund and oversee the Phase 3 clinical trials.

Either party may terminate the agreement prior to NDA approval in the event of bankruptcy or a material breach that remains uncured beyond the applicable cure period.

Additionally, DRL may terminate the agreement if the Company:

i.) ceases development of the product for 6 consecutive months (except if such cessation is caused by DRL, applicable laws, or action/inaction of any third party beyond Company’s control);

ii.) files a patent challenge on any claim for a product patent or DRL background patent;

or iii.) fails to initiate development of the product in the European Union (“EU”) (such termination solely relates to the rights granted in EU) within 24 months after product regulatory approval or cause first commercial sale in at least one country in the EU within 72 months after product regulatory approval.

From inception to date the Company has incurred approximately $ 13.0 million associated with the development of DFD-29.

In May 2021, Urica entered into an exclusive license agreement with Fuji Yakuhin Co.

(“Fuji”) to develop Dotinurad in North America, Europe, and the UK.

Dontinurad is approved for the treatment of gout and hyperuricemia in Japan.

Based on the development and commercialization of DFD-29, additional contingent regulatory and commercial milestone payments totaling up to $ 158.0 million may also become payable by Journey.

Journey is required to pay royalties ranging from approximately ten percent to fifteen percent on net sales of the DFD-29 product, subject to certain reductions.

Additionally, Journey was required to fund and oversee the Phase 3 clinical trials beginning upon the license of DFD-29 in 2021.

The Phase 3 clinical trials substantially concluded in July 2023 upon Journey’s receipt of positive topline results from the trials.

From inception to date Journey has incurred approximately $ 23.8 million in costs associated with the development of DFD-29.

On March 31, 2021, Journey acquired global rights to Qbrexza®, a prescription cloth towelette to treat primary axillary hyperhidrosis in patients nine years of age or older.

Journey is obligated to pay Dermira up to $ 144 million in the aggregate upon the achievement of certain sales milestones.

The royalty structure for the agreement is tiered with royalties for the first two years ranging from approximately 40 % to 30 %.

Thereafter for a period of eight years royalties are approximately 12.0 % to 19.0 %.

Royalty amounts are subject to 50 % diminution in the event of loss of exclusivity due to generic competition.

In May 2021, Urica entered into an exclusive license agreement with Fuji to develop dotinurad in North America, Europe, and the UK.

Dotinurad is approved for the treatment of gout and hyperuricemia in Japan.

The license agreement includes contingent regulatory and commercial milestone payments totaling up to $ 88 million with subsequent sales royalties ranging from approximately 7 % to approximately 10 % payable on net sales of dotinurad.

1 unchanged sentence

In December 2022 Urica Therapeutics expanded its exclusive license agreement with Fuji for the development of dotinurad to include the Middle East and North Africa (“MENA”) and Turkey territories.

The amendment to the exclusive license agreement included a one-time amendment payment of $ 0.3 million, which was paid in December 2022.

Partner Companies

The Company’s partner companies and subsidiaries have entered into various license agreements with other medical centers.

These license agreements include upfront payments which are expensed and various d evelopmental milestone payments due upon achievement of various milestones which in the aggregate are approximately $ 521.2 million, of which $ 348.2 million relates to Mustang agreements.

The amendment to the exclusive license agreement included a one-time license amendment payment of $ 0.3 million.

Partner Companies and Subsidiaries

The Company’s partner companies and subsidiaries have also entered into other various license agreements with research institutions and medical centers.

These license agreements include upfront payments which were expensed and various d evelopment milestone payments due upon achievement of various milestones which in the aggregate are approximately $ 439.5 million, of which $ 285.2 million relates to Mustang agreements.

The license agreements also have sales-based milestone payments that total approximately $ 337.9 million.

The agreements also include royalty payments on any future sales .

Sponsored Research and Clinical Trial Agreements

For the years ended December 31, 2022 and 2021, the Company recorded $ 7.0 million and $ 7.8 million, respectively, in research and development expenses in the Company’s Consolidated Statement of Operations pursuant to the terms of various sponsored research and clinical trial agreements.

The breakout of this expense by partner company is as follows:

For the Year Ended December 31,

($ in thousands)

Intangible Assets

The Company’s finite-lived intangible assets consist of intangible assets acquired by Journey.

During the year ended December 31, 2023, Journey experienced lower net product revenues and gross profit levels for its Ximino products.

Based on these results, Journey revised the financial outlook and plans for its Ximino products.

Journey assessed the revised forecast for Ximino and determined that this constituted a triggering event and the results of the analysis indicated the carrying amount was not expected to be recovered.

Journey recorded an intangible asset impairment charge of $ 3.1 million during the year ended December 31, 2023.

This non-cash charge was recorded to selling, general and administrative expenses on the consolidated statements of operations.

The Company did not record any impairment loss on long-lived assets for the year ended December 31, 2022.

Agreement with VYNE Therapeutics Inc.

On January 12, 2022, Journey entered into an agreement with Vyne Therapeutics Inc.

(“Vyne”) to acquire two FDA-approved topical minocycline products, Amzeeq ® (minocycline) topical foam, 4%, and Zilxi ® (minocycline) topical foam, 1.5%, and a Molecule Stabilizing Technology™ proprietary platform from Vyne for an upfront payment of $ 20.0 million and an additional $ 5.0 million payment on the one year anniversary of the closing (the “Vyne APA”), which was paid in January 2023.

This expanded Journey’s commercial portfolio to eight marketed branded dermatology products.

Journey also acquired the associated inventory related to the products.

The Vyne APA also provides for contingent net sales milestone payments, on a product-by-product basis.

In the first calendar year in which annual net sales reach each of $100 million, $200 million, $300 million, $400 million and $500 million, Journey is required to make a one-time payment of $ 10 million, $ 20 million, $ 30 million, $ 40 million and $ 50 million, respectively, in that year only, per product, totaling up to $ 450 million.

In addition, Journey will pay Vyne 10 % of any upfront payment received by Journey from a licensee or sublicensee of the products in any territory outside of the United States, subject to exceptions for certain jurisdictions as detailed in the Vyne APA.

The following table summarizes the aggregate consideration transferred for the assets acquired by Journey in connection with the Vyne APA:

In January 2022, Journey entered into an agreement with VYNE Therapeutics, Inc.

(“VYNE”) to acquire two FDA-Approved Topical Minocycline Products, Amzeeq (minocycline) topical foam, 4%, and Zilxi (minocycline) topical foam, 1.5%, and a Molecule Stabilizing Technology TM proprietary platform from VYNE for an upfront payment of $ 20.0 million and an additional $ 5.0 million payment on the one-year anniversary of the closing (the “VYNE Product Acquisition Agreement”).

This expanded Journey’s product portfolio to eight marketed branded dermatology products.

Journey also acquired certain associated inventory.

The VYNE Product Acquisition Agreement also provides for contingent net sales milestone payments.

In the first calendar year in which annual sales reach each of $ 100 million, $ 200 million, $ 300 million, $ 400 million and $ 500 million, a one-time payment of $ 10 million, $ 20 million, $ 30 million, $ 40 million and $ 50 million, respectively, will be paid in that year only, per product, totaling up to $ 450 million.

In addition, Journey will pay VYNE 10 % of any upfront payment received by Journey from a licensee or sublicensee of the products in any territory outside of the United States, subject to exceptions for certain jurisdictions as detailed in the VYNE Product Acquisition Agreement.

The following table summarizes the aggregate consideration transferred for the assets acquired by Journey in connection with the VYNE Product Acquisition Agreement:

($ in thousands)

4 unchanged sentences

Total consideration transferred at closing

The fair value of the deferred cash payment is being accreted to the $ 5.0 million January 2023 cash payment over a one-year period through interest expense.

The deferred cash payment had a carrying value of $ 5.0 million in the Company’s consolidated balance sheets at December 31, 2022, and was paid to Vyne on January 12, 2023.

The fair value of the deferred cash payment was accreted to the $ 5.0 million January 2023 cash payment over a one-year period through interest expense.

Journey made the $ 5.0 million deferred cash payment in January 2023.

The following table summarizes the assets acquired in the VYNE Product Acquisition Agreement:

4 unchanged sentences

The intangible assets were valued using an income approach, while the inventory was valued using a final sales value less cost to dispose approach.

On March 31, 2021, Journey executed an Asset Purchase Agreement (the “Qbrexza APA”) with Dermira, Inc.

a subsidiary of Eli Lilly and Company (“Dermira”).

Pursuant to the terms of the agreement, Journey acquired global rights to Qbrexza® (glycoprronium), a prescription cloth towelette to treat primary axillary hyperhidrosis in patients nine years of age or older.

Journey paid an upfront fee of $ 12.5 million to Dermira.

In addition, Journey is obligated to pay Dermira up to $ 144 million in the aggregate upon the achievement of certain sales milestones.

The royalty structure for the agreement is tiered with royalties for the first two years ranging from approximately 40 % to 30 %.

Thereafter for a period of eight years royalties are approximately 12.0 % to 19.0 %.

Royalty amounts are subject to 50 % diminution in the event of loss of exclusivity due to generic competition.

Upon closing of the Qbrexza® purchase on May 13, 2021, Journey was substituted for Dermira as the plaintiff in U.S.

patent litigation commenced by Dermira on October 21, 2020 in the U.S.

District Court of Delaware (the “Patent Litigation”) against Perrigo Pharma International DAC (“Perrigo”) alleging infringement of certain patents covering Qbrexza® (the “Qbrexza® Patents”), which are included among the proprietary rights to Qbrexza®.

The Patent Litigation was initiated following the submission by Perrigo, in accordance with the procedures set out in the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”), of an Abbreviated New Drug Application (“ANDA”).

The ANDA sought approval to market a generic version of Qbrexza® prior to the expiration of the Qbrexza® Patents and alleged that the Qbrexza® Patents were invalid.

Perrigo was subject to a 30-month stay preventing it from selling a generic version, but that stay was set to expire on March 9, 2023.

As of December 31, 2022, the Patent Litigation was settled by and between the parties and the case subsequently has been dismissed.

Pursuant to the terms of the settlement agreement, Padagis is prohibited from launching its generic to Qbrexza, under its ANDA or otherwise, until August 15, 2030.

The purchase price of $ 12.5 million included the asset Qbrexza as well as finished goods and raw material inventory.

Journey also has the obligation to accept any product returns related to sales made by Dermira.

Journey allocated the upfront payment to inventory since the fair value of the inventory and Qbrexza rights exceeded the purchase price.

The future contingent milestone payments, if achieved, will be recorded to intangible asset and amortized over the seven-year life of the asset commencing on the closing date.

In July 2020, Journey entered into an exclusive license and supply agreement for Accutane (the “Accutane Agreement”) with DRL.

Pursuant to the Accutane Agreement, Journey agreed to pay $ 5.0 million, comprised of an upfront payment of $ 1.0 million paid upon execution, with additional milestone payments totaling $ 4.0 million.

To date, Journey has paid all milestone payments.

Three additional milestone payments totaling $ 17.0 million are contingent upon the achievement of certain net sales milestones.

Journey is required to pay royalties in an amount equal to a low-double-digit percentage of net sales.

The term of the Accutane Agreement is ten years and renewable upon mutual agreement.

Each party may terminate the Accutane Agreement for an uncured material breach by the other party or for certain bankruptcy or insolvency related events.

Journey may also terminate the Accutane Agreement without cause upon 180 days written notice to DRL.

The table below provides a summary of intangible assets as of December 31, 2023 and 2022, respectively:

Estimated Useful

Year Ended December 31,

($ in thousands)

Lives (Years)

December 31, 2022

December 31, 2021

Intangible assets – product licenses

Accumulated amortization

Impairment loss

Net intangible assets

Intangible asset activity for the years ended December 31, 2022 and 2021:

($ in thousands)

Ending balance at December 31, 2020

Exelderm milestone

Amortization expense

Bbalance at December 31, 2021

VYNE Product Acquisition:

Amortization expense (recorded in cost of goods sold)

Ending balance at December 31, 2022

The future amortization of these intangible assets is as follows:

10 unchanged sentences

August - 2025

SWK Term Loan

December - 2027

EWB Term Loan

1 unchanged sentence

Discount on notes payable

Repayment of Oaktree Note

Total notes payable

On August 27, 2020 (the “Closing Date”), Fortress, as borrower, entered into the $ 60.0 million senior secured credit agreement with Oaktree (the “Oaktree Agreement” and the debt thereunder, the “Oaktree Note”) with Oaktree Fund Administration, LLC and the lenders from time-to-time party thereto (collectively, “Oaktree”) .

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”).

On August 27, 2020 (the “Oaktree Closing Date”), Fortress, as borrower, entered into the $ 60.0 million senior secured credit agreement with Oaktree (the “Oaktree Agreement” and the debt thereunder, the “Oaktree Note”) with Oaktree Fund Administration, LLC and the lenders from time-to-time party thereto (collectively, “Oaktree”) .

The Oaktree Note bears interest at a fixed annual rate of 11.0 %, payable quarterly and maturing on the fifth anniversary of the Oaktree 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.

1 unchanged sentence

The Company is also required to make mandatory prepayments of the Oaktree Note under various circumstances.

No mandatory prepayments were required in the years ended December 31, 2023 or 2022.

No amounts paid or prepaid may be reborrowed without Oaktree consent.

AstraZeneca’s notification of its intent to acquire Caelum, received on September 28, 2021, is defined in the Oaktree Agreement as a monetization event and as such, triggered a $ 10 million prepayment and an applicable prepayment fee of $ 0.5 million.

The prepayment fee of $ 0.5 million is included in interest expense for the year ended December 31, 2021.

The Company paid the $ 10.5 million on October 12, 2021.

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.

12 unchanged sentences

None of Fortress’ subsidiaries or partner companies is a party to the Oaktree Agreement, and the collateral package does not include the assets 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, and 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.

Pursuant to the terms of the Oaktree Agreement, on the Oaktree 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 Oaktree Closing Date and will be due annually, together with fees of $ 2.5 million directly to third parties involved in the transaction, and issued warrants to Oaktree and certain of its affiliates to purchase up to 116,624 shares of common stock of the Company (see Note 13) with a relative fair value of $ 4.4 million.

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, to be amortized over the term of the Oaktree Note.

For the years ended December 31, 2023 and 2022, the Company amortized $ 2.1 million and $ 1.5 million, respectively, of debt discount associated with the Oaktree Note.

SWK Term Loan

On December 27, 2023 (the “SWK Closing Date”), Journey entered into a Credit Agreement with SWK Funding LLC (“SWK”).

The Credit Agreement provides for a term loan facility (the “Credit Facility”) in the original principal amount of up to $ 20.0 million.

On the SWK Closing Date, Journey drew $ 15 million.

The remaining $ 5.0 million may be drawn upon request by Journey within 12 months after the SWK Closing Date.

Loans under the Credit Facility (the “Term Loans”) mature on December 27, 2027 unless the Credit Facility is otherwise terminated pursuant to the terms of the Credit Agreement.

The Term Loans accrue interest which is payable quarterly in arrears.

The Term Loans bear interest at a rate per annum equal to the three-month term SOFR (subject to a SOFR floor of 5 %) plus 7.75 %.

The interest rate resets quarterly.

Beginning in February 2026, Journey is required to repay a portion of the outstanding principal of the Term Loans quarterly in an amount equal to 7.5 % of the principal amount of funded Term Loans.

If the total revenue of Journey, measured on a trailing twelve-month basis, is greater than $ 70.0 million as of December 31, 2025, principal repayment is not required until February 2027, at which point Journey is required to repay a portion of the outstanding principal of the Term Loans quarterly in an amount equal to 15 % of the principal amount of funded Term Loans.

Journey may at any time prepay the outstanding principal balance of the Term Loans in whole or in part.

Prepayment of the Term Loans is subject to payment of a prepayment premium equal to (i) 2 % of the Term Loans prepaid plus the amount of interest that would have been due through the first anniversary of the SWK Closing Date if the Term Loans are prepaid prior to the first anniversary of the SWK Closing Date, (ii) 1 % of the Term Loans prepaid if the Term Loans are prepaid on or after the first anniversary of the SWK Closing Date but prior to the second anniversary of the SWK Closing Date, or (iii) 0 % if prepaid thereafter.

Upon repayment in full of the Term Loans, Journey will pay an exit fee equal to 5 % of the original principal amount of the Term Loans.

Additionally, Journey paid an origination fee of $ 0.2 million on the SWK Closing Date and incurred issuance costs of $ 0.2 million, both of which have been recorded as a debt discount.

Journey is accreting the carrying value of the SWK Term Loan to the original principal balance plus the exit fee over the term of the loan using the effective interest method.

The amortization of the discount is accounted for as interest expense in the Consolidated Statement of Operations.

The effective interest rate on the SWK Term Loan for the fiscal year ended December 31, 2023 was 15.1 %.

The SWK Credit Facility also includes both revenue and liquidity covenants, restrictions as to payment of dividends, and is secured by substantially all assets of Journey.

As of December 31, 2023, Journey was in compliance with the financial covenants under the SWK Credit Facility.

East West Bank Line of Credit and Long-Term Debt (“EWB Term Loan”)

On January 12, 2022, Journey entered into a third amendment of the loan and security agreement with East West Bank (“EWB”) (the “Amendment”), which increased the borrowing capacity of Journey’s revolving line of credit to $ 10.0 million, $ 2.9 million of which was outstanding at December 31, 2022, and added a term loan not to exceed $ 20.0 million.

Both the revolving line of credit and the term loan mature on January 12, 2026.

Journey was previously party to a Loan and Security Agreement, dated March 31, 2021 (as amended, the “EWB Facility”), with East West Bank (“EWB”), under which EWB made a $ 20.0 million term loan and a $ 10 million revolving line of credit available to Journey.

In January 2022 and August 2022, Journey borrowed $ 15 million and $ 5 million, respectively, against the term loan.

The term loan bears interest at a floating rate equal to 1.73 % above the prime rate and are payable monthly.

The term loan effective interest rate at December 31, 2022 is 9.64 %.

The term loan contains an interest-only payment period through January 12, 2024, with an extension through July 12, 2024, if certain covenants are met, after which the outstanding balance of each term loan is payable in equal monthly installments of principal, plus all accrued interest, through the term loan maturity date.

Journey may prepay all or any part of the term loan without penalty or premium, but may not re-borrow any amount, once repaid.

Any outstanding borrowing against the revolving line of credit bears interest at a floating rate equal to 0.70 % above the prime rate.

The Amendment includes customary financial covenants such as collateral ratios and minimum liquidity provisions.

Journey was in compliance with all applicable financial covenants under the Amendment as of December 31, 2022.

The remaining $ 7.1 million revolving line of credit is fully available to Journey without any restrictions, other than certain customary and ordinary closing conditions.

Journey accounted for the Amendment as a debt modification.

The remaining unamortized debt issuance costs related to the original revolving facility together with any lender fees and direct third-party costs incurred in connection with the entry into the Amendment are considered associated with the new arrangement.

The fees allocated to the revolving line are amortized over the new four-year term of the amended revolving facility.

The fees allocated to the term loan are recorded as a debt discount and amortized to interest expense over the four-year term of the term loan under the effective interest method.

During 2023, Journey voluntarily repaid the entire $ 20 million outstanding term loan principal balance under the EWB Facility.

The repayment satisfied all of Journey’s outstanding debt obligations under the EWB Facility.

Journey has no further obligations to EWB.

Mustang Runway Growth Finance Corp.

Debt Facility (“Runway Note”)

On March 4, 2022 (the “Closing Date”), Mustang entered into a $ 75.0 million long-term debt facility with Runway Growth Finance Corp.

(the “Runway Note”).

Under the Runway Note, $ 30.0 million of the $ 75.0 million loan was funded on the Closing Date, with the remaining $ 45.0 million fundable when Mustang achieves certain predetermined milestones.

The Runway Note matures on April 15, 2027 (the “Maturity Date”).

Starting March 15, 2022, Mustang makes monthly payments of interest only until April 1, 2024 (the “Amortization Date”).

The Amortization Date may be extended to April 1, 2025, if Mustang achieves certain predetermined milestones based on equity raises and the initiation of certain clinical trials.

After that, Mustang will make monthly payments of interest and principal.

If the Amortization Date is extended to April 1, 2025, the monthly payments will be recalculated in equal amounts according to the remaining number of payment dates through the Maturity Date.

All unpaid outstanding principal and accrued and unpaid interest will be due and payable in full on the Maturity Date.

The Runway Note accrues interest at a variable annual rate equal to 8.75 % plus the greater of (i) 0.50 % and (ii) the three month LIBOR Rate for U.S.

dollar deposits or a rate equivalent to the three month LIBOR (the “Applicable Rate”);

provided that the Applicable Rate will not be less than 9.25 %.

On December 7, 2022, Mustang entered into the Runway First Amendment (the “Runway First Amendment”) to the Runway Note by and between Mustang and Runway.

The Runway First Amendment amended certain definitions and other provisions of the Runway Note to replace LIBOR-based benchmark rates applicable to loans outstanding under the Runway Note with SOFR-based rates, subject to adjustments as specified in the Runway First Amendment.

At December 31, 2022 the floating interest rate was 13.40 %.

Mustang has the option to prepay all of the outstanding Runway Note but not less.

Prepayment would include outstanding principal, accrued interest, prepayment fee and final payment which is equal to the original principal amount of the Runway Note times 3.5 % or $ 1.1 million and is accreted over the life of the Runway Note.

In addition, Mustang’s Runway Note is secured by a lien on substantially all of Mustang’s assets other than certain intellectual property assets and certain other excluded collateral, and it contains a minimum liquidity covenant and other covenants that include among other items:

(i) limits on indebtedness, repurchase of stock from employees, officers and directors.

Mustang was in compliance with all applicable covenants as of December 31, 2022.

The Runway Note contains customary events of default, in certain circumstances subject to customary cure periods.

Following an event of default and any cure period, if applicable, Runway will have the right upon notice to accelerate all amounts outstanding under the Runway Note, in addition to other remedies available to the lenders as secured creditors of the Mustang.

Pursuant to the terms of the Runway Note, upon closing Mustang paid Runway an upfront commitment fee equal to 1 % of the $ 30 million, or $ 0.3 million.

In addition, Mustang paid a $ 75,000 deposit fee to Runway, together with other cash fees of $ 2.7 million directly to third parties involved in the transaction.

Mustang also issued to Runway a warrant to purchase up to 748,036 of Mustang common shares with an exercise price of $ 0.8021 per share, pursuant to the terms of the Runway Note.

In addition, the provisions of the warrant provide for additional warrants to be issued upon funding of the loan tranches.

The fair value of the warrant was determined utilizing a Black Scholes Model with the following assumptions:

risk free rate of return 1.74 % , volatility of 57.3 % , 10 -year life yielding a value of approximately $ 0.4 million at March 4, 2022.

The fair value of the warrant was recorded in debt discount and will be amortized over the life of the note.

For the year ended December 31, 2022, Mustang amortized approximately $ 0.5 million of debt discount associated with the Runway Note, which was included in interest expense in the consolidated statement of operations.

On April 11, 2023, the long-term debt facility with Runway Growth Finance Corp.

(the “Mustang Term Loan” or the “Runway Note”), was terminated upon receipt by Runway of a payoff amount of $ 30.4 million from Mustang comprising of principal, interest and the applicable final payment amount.

A loss on extinguishment of $ 2.8 million was recorded to interest expense in the consolidated statement of operations for the year ended December 31, 2023.

IDB Letters of Credit

The Company has letters of credit (“LOC”) with IDB of approximately $ 2.7 million and $ 2.2 million as of December 31, 2022 and December 31, 2021, respectively, securing rent deposits for lease facilities and an undertaking posted by Cyprium to secure potential damages in an injunctive proceeding.

The Company has letters of credit (“LOC”) with one of its commercial banks, IDB Bank (“IDB”), of approximately $ 2.4 million and $ 2.7 million as of December 31, 2023 and December 31, 2022, respectively, securing rent deposits for lease facilities and an undertaking posted by Cyprium to secure potential damages in an injunctive proceeding.

The Company’s LOC’s are secured by cash, which is included in restricted cash on the Company’s Consolidated Balance Sheet .

1 unchanged sentence

Urica 8 % Cumulative Convertible Class B Preferred Offering

On December 27, 2022, Urica consummated the first closing in a private offering of its 8 % Cumulative Convertible Class B Preferred Stock (the “Urica Preferred Stock”), at a price of $ 25.00 per share (“Subscription Price”) pursuant to which it sold 101,334 shares of Preferred Stock for gross proceeds of $ 2.5 million, before deducting underwriting discounts and commissions and offering expenses of approximately $ 0.3 million (the “Urica Offering”).

In December 2022 and February 2023, Urica closed private offerings of its 8 % Cumulative Convertible Class B Preferred Stock (the “Urica Preferred Stock”), at a price of $ 25.00 per share (“Subscription Price”) pursuant to which it sold a total of 135,494 shares of Preferred Stock for gross proceeds of $ 3.4 million, before deducting underwriting discounts and commissions and offering expenses of approximately $ 0.5 million (the “Urica Offering”).

A non-cash contingent warrant value of $ 0.1 million was also recorded in debt discount (see Note 6).

Dividends on the Preferred Stock are payable quarterly in shares of Fortress common stock based upon a 7.5 % discount to the average trading price over the 10-day period preceding the dividend payment date.

Dividends will be recorded as interest expense and were immaterial in 2022.

Dividends on the Urica Preferred Stock are payable monthly by Fortress in shares of Fortress Common Stock based upon a 7.5 % discount to the average trading price over the 10-day period preceding the dividend payment date.

Dividends are recorded as interest expense.

For the year ended December 31, 2023, the Company recorded expense of $ 0.3 million associated with the Urica dividends owed on the outstanding Urica Preferred Stock.

The shares mandatorily convert into Urica common stock upon either:

9 unchanged sentences

Accordingly, the Company determined liability classification is appropriate and as such, this instrument was accounted for as a liability.

Harley Capital LLC (“Harley”) was the primary placement agent for the Urica Offering and received a 10 % fee on gross proceeds raised, plus either warrants to purchase 10 % of the Urica common stock into which the Urica Preferred Stock converts (in the event of a sale of Urica or a qualified financing) or 10 % of the Company common stock for which the Urica Preferred Stock is exchanged (in the event neither a sale of Urica nor a qualified financing occurs), in addition to reimbursement of legal and other expenses.

In February 2023, Urica completed two additional closings, raising a combined additional $ 0.9 million and paid placement agent fees of $ 0.1 million for net proceeds of $ 0.8 million.

Journey 8 % Cumulative Convertible Class A Preferred Offering

In March 2021, Journey commenced an offering of 8 % Cumulative Convertible Class A Preferred Stock (“Journey Preferred Offering”) in an aggregate minimum amount of $ 12.5 million and an aggregate maximum amount of $ 30.0 million.

The Journey Preferred Offering terminated on July 18, 2021.

Journey issued an aggregate of 758,680 Class A Preferred shares at a price of $ 25.00 per share, for gross proceeds of $ 19.0 million.

Following the payment of placement agent fees of $ 1.9 million, and other expenses of $ 0.1 million, Journey received $ 17.0 million of net proceeds.

The Journey Preferred Stock automatically converts into Journey’s Common Stock upon a sale of Journey or a financing in an amount of at least $ 25.0 million within a year of the closing date of the Journey Preferred Offering (extendable by another six months at Journey’s option) at a discount of 15 % to the per share qualified stock price.

On November 12, 2021 the Journey IPO was completed, resulting in the conversion of all of the Journey Preferred Stock into 2,231,346 shares of Journey common stock (see Note 14).

The Company evaluated the terms of the Journey Preferred Offering under ASC 480, Distinguishing Liabilities from Equity , and determined the instrument met the criteria to be recorded as a liability.

The value at conversion does not vary with the value of Journey’s common shares, therefore the settlement provision would not be considered a conversion feature.

Accordingly, the Company determined liability classification is appropriate and as such, this instrument was accounted for as a liability, until it converted into Journey common stock upon completion of the Journey IPO.

Dividends on the Journey Preferred Stock were paid quarterly in shares of Fortress common stock based upon a 7.5 % discount to the average trading price over the 10-day period preceding the dividend payment date.

Dividends paid on the Journey Preferred Stock was recorded as interest expense on the consolidated statements of operations.

For the year ended December 31, 2021, Journey issued 253,815 shares of common stock representing dividends paid of $ 0.8 million from issuance through conversion.

As consideration for the foregoing, Journey issued to Fortress 81,985 shares of its common stock at the Journey IPO price of $ 10.00 .

In connection with the Journey Preferred Offering, Journey issued upon the closing of the Journey IPO to the placement agent (“the Placement Agent Warrants”) to purchase 5 % of the shares of Journey common stock into which the Journey Preferred Stock converted.

The Placement Agent Warrants have a term of 5 years .

At December 31, 2021 Journey issued 111,567 shares of Journey common stock related to the conversion of all of the placement agent warrants.

Harley Capital LLC (“Harley”) was the primary placement agent for the Urica Offering and received a 10 % fee on gross proceeds raised, plus either warrants to purchase 10 % of the Urica common stock into which the Urica Preferred Stock converts (in the event of a sale of Urica or a qualified financing) or 10 % of the Company common stock for which the Urica Preferred Stock is exchanged (in the event neither a sale of Urica nor a qualified financing occurs), in addition to reimbursement of legal and other expenses (see Note 6).

Interest Expense

3 unchanged sentences

($ in thousands)

Oaktree Note 1

Partner company convertible preferred shares

Partner company dividend payable

Partner company installment payments - licenses

1 unchanged sentence

Total Interest Expense and Financing Fee

Includes $ 0.5 million prepayment fee for the Oaktree Note included in interest expense in 2021.

Imputed interest expense related to Ximino, Accutane, Anti-itch product license and VYNE product licenses (see Note 8);

includes loss on extinguishment of $ 2.8 million recorded by Mustang related to payoff of the Runway Note on April 11, 2023 .

Accounts Payable and Accrued Expenses

14 unchanged sentences

Non-Controlling Interests

Non-controlling interests in consolidated entities are as follows:

For the Year Ended

As of December 31, 2022

December 31, 2022

As of December 31, 2022

Non-controlling interests

Net loss attributable to

Non-controlling interests

Non-controlling

($ in thousands)

non-controlling interests

in consolidated entities

For the Year Ended

As of December 31, 2021

December 31, 2021

As of December 31, 2021

Non-controlling interests

Net loss attributable to

Non-controlling interests

Non-controlling

($ in thousands)

non-controlling interests

in consolidated entities

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 Class A Preferred Shares which provide super-majority voting rights.

On April 21, 2023, Aevitas ceased to be a controlled Fortress entity and as such is no longer consolidated (see Note 3).

Fortress’ ownership in Baergic was transferred to Avenue as of November 7, 2022 (see Note 14).

Tamid was dissolved in the year ended December 31, 2023 due to inactivity.

The Company’s ownership interest in its consolidated subsidiaries in 2023 was similar to 2022, except for Checkpoint which decreased from 18 % to 9 % and Journey, which decreased from 56 % to 50 %.

Net Loss per Common Share

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.

Basic and diluted net loss per share attributed to common stockholders is calculated by dividing the net loss attributed to Fortress (less the Series A Preferred dividends) by the weighted-average number of shares of Common Stock outstanding during the period, not including unvested restricted stock, and without consideration for Common Stock equivalents.

Diluted net loss per share is the same as the basic loss per share due to net losses in all periods.

The Company updated its presentation of net loss attributable to common stockholders and its net loss per share as an immaterial correction to reflect the preferred stock dividend of $ 2.0 million per quarter.

The statement of changes in stockholders’ equity (deficit) and statement of cash flows reflected the dividend and as such are not impacted by this change in presentation.

For the year ended December 31, 2022, in addition to being retroactively adjusted to give effect to the Reverse Stock Split (see Note 1), the net loss attributable to Fortress increased from ($ 86.6 ) million to ($ 94.6 ) million and the net loss per share increased from ($ 14.61 ) to ($ 15.97 ) per share to reflect the preferred stock dividend.

The following shares of potentially dilutive securities, weighted during the years ended December 31, 2023 and 2022 have been excluded from the computations of diluted weighted average shares outstanding as the effect of including such securities would be anti-dilutive:

5 unchanged sentences

Stockholders’ Equity

Fortress’ Certificate of Incorporation, as amended, authorizes the Company to issue 200,000,000 shares of $ 0.001 par value Common Stock of which 110,494,245 shares of Common Stock are outstanding as of December 31, 2022.

As of December 31, 2021, 170,000,000 shares were authorized and 101,435,505 shares of Common Stock were outstanding.

Reverse Stock Split

On October 9, 2023, Fortress filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation, as amended, to effect the 1 -for-15 Reverse Stock Split of the Company’s shares of Common Stock.

The Reverse Stock Split was approved on August 10, 2023, by the Company’s Board of Directors and by the Company’s stockholders at a special meeting held on October 9, 2023.

As a result of the Reverse Stock Split, every 15 shares of the Company’s pre-reverse split Common Stock was combined and reclassified as one share of Common Stock.

The proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Split, other than as the result of payment for fractional shares.

No fractional shares were issued in connection with the Reverse Stock Split.

Stockholders who would otherwise have held a fractional share of Common Stock received a cash payment in lieu thereof.

All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.

Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted stock and warrants outstanding at October 10, 2023, which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such stock options, restricted stock and warrants, and, in the case of stock options and warrants, a proportional increase in the exercise price of all such stock options and warrants.

Fortress’ Certificate of Incorporation, as amended, authorizes the Company to issue 200,000,000 shares of $ 0.001 par value Common Stock of which 15,093,053 and 7,366,283 shares of Common Stock were outstanding as of December 31, 2023 and 2022, respectively.

The terms, rights, preference and privileges of the Common Stock are as follows:

7 unchanged sentences

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.

Series A Cumulative Redeemable Perpetual Preferred Stock

40 unchanged sentences

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.

2007 Stock Incentive Plan, the Fortress Biotech, Inc.

2013 Stock Incentive Plan, as amended (collectively, the “Plans”), 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 and 2022, the Company’s Board of Directors and stockholders approved an increase of 3,000,000 shares each year, bringing the total number of shares approved under this plan to 16,000,000 , with the aggregate total of authorized shares available for grants under the 2007 Plan and the 2013 Plan of up to 22,000,000 shares.

An aggregate 21,110,948 shares have been granted under both the Company’s 2007 and 2013 plans, net of cancellations, and 889,052 shares were available for issuance as of December 31, 2022.

Long Term Incentive Plan (the “LTIP”).

In the years ended December 31, 2023 and 2022, the Company’s Board of Directors and stockholders approved increases of 0.5 million and 0.2 million shares, respectively, to the Plans, bringing the aggregate total of authorized shares available under the Plans to 1.9 million shares.

A total of 1,858,879 shares have been granted under the Plans, net of cancellations, and 74,454 shares remained available for issuance as of December 31, 2023.

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.

2 unchanged sentences

December 31, 2023

Aevitas Therapeutics, Inc.

2018 Long Term Incentive Plan

Avenue Therapeutics, Inc.

2015 Stock Plan

FBIO Acquisition Corp.

III 2017 Incentive Plan

Cellvation Inc.

47 unchanged sentences

Options vested and expected to vest at December 31, 2023

Options vested and expected to vest at December 31, 2022

Options vested and exercisable at December 31, 2023

2 unchanged sentences

The table below summarizes the assumptions used:

Year Ended December 31,

December 31, 2022

Risk-free interest rate

2 unchanged sentences

Expected volatility

100.65 - 102.71

As of December 31, 2022, the Company had $ 0.1 million of unrecognized stock-based compensation expense related to options.

As of December 31, 2023, the Company had no unrecognized stock-based compensation expense related to options.

Restricted Stock

18 unchanged sentences

Unvested balance at December 31, 2023

Restricted stock granted

Restricted stock vested

( 1,755,637 )

Restricted stock units granted

Restricted stock units forfeited

Restricted stock units vested

Unvested balance at December 31, 2022

The total fair value of restricted stock units and awards that vested during the years ended December 31, 2023 and 2022 was $ 9.6 million and $ 7.3 million, respectively.

As of December 31, 2023, the Company had unrecognized stock-based compensation expense related to all unvested restricted stock and restricted stock unit awards of $ 10.6 million and $ 1.4 million, respectively, which is expected to be recognized over the remaining weighted-average vesting period of 1.6 years and 1.7 years, respectively.

This amount does not include 0.1 million restricted stock units as of December 31, 2022 which are performance-based and vest upon achievement of certain corporate milestones.

This amount does not include restricted stock units 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.

1 unchanged sentence

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, 2022 and 2021, certain non-employee directors elected to defer an aggregate of 330,000 and 230,000 restricted stock awards, respectively, under this plan.

During the year ended December 31, 2023 and 2022, certain non-employee directors elected to defer an aggregate of approximately 27,000 and 22,000 restricted stock awards, respectively, under this plan.

Employee Stock Purchase Plan

1 unchanged sentence

The ESPP is compensatory and results in stock-based compensation expense.

As of December 31, 2022, 961,898 shares have been purchased and 38,102 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, 2022 and 2021, respectively.

As of December 31, 2023, 0.1 million shares have been purchased and 0.1 million shares are available for future sale under the Company’s ESPP.

The Company recognized share-based compensation expense of approximately $ 11,000 and $ 0.1 million for the years ended December 31, 2023 and 2022, respectively.

The following table summarizes Fortress warrant activities, excluding activities related to partner companies:

6 unchanged sentences

Outstanding as of December 31, 2022

( 2,596,171 )

Outstanding as of December 31, 2023

Exercisable as of December 31, 2023

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 is being amortized over the term of the Oaktree Note (see Note 10).

As of December 31, 2022, the Company had no unrecognized stock-based compensation expense related to warrants.

In connection with the Oaktree Note (see Note 9), the Company had issued warrants to Oaktree and certain of its affiliates to purchase up to approximately 0.1 million shares of Common Stock at a purchase price of $ 48.00 per share (the “Oaktree Warrants”).

Oaktree is entitled to additional warrants if at any time prior to the expiration of the Oaktree Warrants the Company issues equity, warrants or convertible notes (collectively known as “Security Instruments”) at a price that is less than 95 % of the market price of the Company’s Common Stock on the trading day prior to the issuance of the Security Instruments.

The Oaktree Warrants expire on August 27, 2030 and may be net exercised at the holder’s election.

The Company filed registration statement No.

333-249983 on Form S-3 to register the resale of the shares of Common Stock issuable upon exercise of the Oaktree Warrants that was declared effective by the SEC on November 20, 2020.

On June 13, 2023, the Company entered into a Letter Agreement (the “Letter Agreement”) by and among the Company, Oaktree and certain of its affiliates, pursuant to which the Company agreed to lower the exercise price of the existing warrants to $ 8.136 per share (adjusted for the Reverse Stock Split) and issue amended and restated warrants reflecting the new exercise price (the “Amended and Restated Warrants”), as consideration for the warrant holders’ agreement to permit the Company and/or certain of its subsidiaries to take certain actions.

The Amended and Restated Warrants are exercisable on or after June 13, 2023 and expire August 27, 2030.

The Oaktree Warrants were reported as a component of additional paid in capital within Stockholders’ equity, and the value ascribed to the warrants was recorded as debt discount of the Oaktree Note and is amortized utilizing the effective interest method over the term of the Oaktree Note.

The modification of the warrants resulted in a change in value of $ 0.3 million which was recorded as interest expense in the condensed consolidated statement of operations for the year ended December 31, 2023.

Long-Term Incentive Program (“LTIP”)

5 unchanged sentences

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 2021 and 2020.

The shares will vest in full once both of the following conditions are met:

(i) the Company’s market capitalization has increased 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 $ 2.8 million for the January 1, 2022 grant and $ 3.3 million for the January 1, 2021 grant.

For the year ended December 31, 2022 and 2021, the Company recorded stock compensation expense of approximately $ 5.3 million and $ 3.8 million, respectively related to the LTIP 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.

The shares will vest in full if the employee is either in the service of the Company as an employee, Board member or consultant (or any combination of the foregoing) on the tenth anniversary of the LTIP, or the eligible employee has had an involuntary Separation from Service (as defined in the LTIP).

The only other vesting condition – one based on achievement of an increase in the Company’s market capitalization – has already been achieved, with respect to each annual award under the LTIP.

The shares awarded under the LTIP will also vest in full (and the Company’s repurchase option on each tranche of shares granted thereunder will accordingly lapse) upon the occurrence of a Corporate Transaction (as defined in the LTIP) if the eligible employee is in service to the Company on the date of such Corporate Transaction.

The fair value of each grant on the grant date was approximately $ 0.8 million for the 2023 grant and $ 2.8 million for the 2022 grant.

For the year ended December 31, 2023 and 2022, the Company recorded stock compensation expense related to LTIP grants of approximately $ 5.8 million and $ 5.3 million, respectively, on the consolidated statement of operations.

Capital Raises

On July 23, 2021, the Company filed a shelf registration statement 333-255185 on Form S-3, which was declared effective on July 30, 2021 (the "2021 Shelf").

No securities have been drawn down under the 2021 Shelf.

Common Stock At the Market Offering and 2020 Shelf

On July 23, 2021, the Company filed shelf registration statement 333-258145 on Form S-3, which was declared effective on July 30, 2021 (the “2021 Shelf”).

No securities have been drawn down under the 2021 Shelf.

On May 18, 2020, the Company filed a shelf registration statement on Form S-3 (File No.

333-238327), 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"), governing potential sales of the Company's common stock.

ATM activity since June 1, 2020 were made under the 2020 Shelf.

On July 23, 2021, the Company filed a shelf registration statement (File No.

333-255185 ) on Form S-3, which was declared effective on July 30, 2021 (the "2021 Shelf").

Approximately $ 100.1 million of securities remain available for sale under the 2021 Shelf as of December 31, 2023.

The Company’s shelf registration statement (File No.

333-238327) on Form S-3 filed in 2020 expired on May 26, 2023.

Common Stock At the Market Offering

For the year ended December 31, 2023, the Company issued approximately 0.2 million shares of common stock at an average price of $ 9.61 per share for gross proceeds of $ 2.2 million.

In connection with these sales, the Company paid aggregate fees of $ 0.1 million.

Approximately $ 11.1 million of securities remain available for sale under the 2020 Shelf at December 31, 2022.

For the year ended December 31, 2022, the Company issued approximately 0.3 million shares of common stock at an average price of $ 22.58 per share for gross proceeds of $ 6.2 million.

In connection with these sales, the Company paid aggregate fees of $ 0.2 million.

February 2023 Registered Direct Offering and Concurrent Private Placement

On February 10, 2023, the Company completed a registered direct offering of Common Stock pursuant to which it issued and sold approximately 1.1 million shares of its common stock at a purchase price of $ 12.53 (as adjusted for the Reverse Stock Split) per share and secured approximately $ 13.2 million in net proceeds after deducting offering expenses.

The Company also simultaneously closed on a concurrent private placement with investors in the registered direct offering, for the pro rata rights to acquire, in the aggregate, securities exercisable into approximately 3.5 % of the outstanding shares of common stock in each of the Company’s next 20 new operating subsidiaries (the “Contingent Subsidiary Securities”).

The Contingent Subsidiary Securities will only be issued to the extent such a new operating subsidiary first consummates a specified corporate development transaction within the next five years , and will be exercisable immediately upon issuance, with an exercise period of 10 years , at an exercise price equal to the fair market value of one share of common stock of the subsidiary on the date of the corporate development transaction.

The Company’s stockholders approved the issuance of the rights and Contingent Subsidiary Securities at a special meeting of stockholders on April 10, 2023, as required by Nasdaq Listing Rule 5635.

November 2023 Public Offering

In November 2023, Fortress closed on a public offering of the issuance and sale of an aggregate of 5,885,000 units at a purchase price of $ 1.70 per unit.

Each unit consists of (i) one share of common stock, and (ii) one warrant to purchase one share of common stock, exercisable immediately upon issuance at a price of $ 1.70 per share and expiring five years following the issuance date.

The total gross proceeds from the offering were approximately $ 10.0 million with net proceeds of approximately $ 8.9 million after deducting placement agent fees and other transaction costs.

Certain directors and officers of the Company participated in the offering and purchased an aggregate amount of approximately $ 2.9 million of units at the same purchase price.

Journey 2022 Shelf Registration Statement and At the Market Offering (the “Journey ATM”)

On December 30, 2022, Journey filed a shelf registration statement on Form S-3 (File No.

333-269079 ), which was declared effective by the Securities and Exchange Commission (“SEC”) on January 26, 2023.

This shelf registration statement covers the offering, issuance and sale by Journey of up to an aggregate of $ 150.0 million of Journey’s common stock, preferred stock, debt securities, warrants, and units (the “Journey 2022 Shelf”).

At December 31, 2022, $ 150.0 million remains available under the Journey 2022 Shelf.

In connection with the Journey 2022 shelf, Journey has entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with B.

Riley Securities, Inc.

333-269079 ), which was declared effective by the SEC on January 26, 2023.

This shelf registration statement covers the offering, issuance and sale by Journey of up to an aggregate of $ 150.0 million of Journey’s common stock, preferred stock, debt securities, warrants, and units.

In connection with the Journey 2022 S-3, Journey has entered into the Sales Agreement with B.

Riley, relating to shares of the Journey’s common stock.

1 unchanged sentence

Riley acting as Journey’s agent or principal.

Journey’s common stock began trading on the Nasdaq Capital Market on November 12, 2021 under the ticker symbol “DERM.” On November 16, 2021, Journey completed an initial public offering (the “Journey IPO”) whereby it sold 3,520,000 shares of its common stock at a price of $ 10.00 per share for net proceeds of $ 30.6 million, after deducting underwriting discounts and other offering costs of $ 4.6 million.

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.

For the year ended December 31, 2023, Journey issued approximately 0.7 million shares of common stock at an average price of $ 6.189 per share for gross proceeds of $ 4.6 million under the Journey ATM.

In connection with these sales, Journey paid aggregate fees of $ 0.1 million.

At December 31, 2023, 4,151,297 shares remain available for issuance under the Journey 2022 S-3.

Checkpoint 2020 and 2023 Shelf Registration Statements and At the Market Offering

In March 2023, the Checkpoint 2023 S-3 (File No.

333-270843), which was declared effective May 5, 2023.

Under the Checkpoint 2023 S-3, Checkpoint may sell up to a total of $ 150 million of its securities.

In connection with the Checkpoint 2020 S-3, Checkpoint entered into an At-the-Market Issuance Sales Agreement (the “Checkpoint 2020 ATM”) with certain agents relating to the sale of shares of Checkpoint’s common stock.

Under the Checkpoint 2020 ATM, Checkpoint will pay the sales agents a commission rate of up to 3.0 % of the gross proceeds from the sale of any shares of Checkpoint’s common stock.

During the year ended December 31, 2022, Checkpoint sold a total of 532,816 shares of common stock under the Checkpoint 2020 ATM for aggregate total gross proceeds of approximately $ 10.1 million at an average selling price of $ 18.99 per share, resulting in net proceeds of approximately $ 9.9 million after deducting commissions and other transaction costs.

As of December 31, 2023, approximately $ 91.7 million of the securities remains available for sale through the Checkpoint 2023 S-3.

There were no sales under the Checkpoint 2020 ATM in the year ended December 31, 2023.

During the year ended December 31, 2022, Checkpoint sold a total of 532,816 shares of common stock under the Checkpoint 2020 ATM for aggregate total gross proceeds of approximately $ 10.1 million at an average selling price of $ 18.99 per share, resulting in net proceeds of approximately $ 9.9 million after deducting commissions and other transaction costs.

In December 2022, Checkpoint closed on the December 2022 Registered Direct Offering with a single institutional investor for the issuance and sale of 950,000 shares of its common stock and 784,105 pre-funded warrants.

Each pre-funded warrant was exercisable for one share of Checkpoint’s common stock.

The common stock and the pre-funded warrants were sold together with Series A warrants to purchase up to 1,734,105 shares of common stock and Series B warrants to purchase up to 1,734,105 shares of common stock, at a purchase price of $ 4.325 per share of common stock and associated common stock warrants, and $ 4.33249 per pre-funded warrant and associated common stock warrants.

The pre-funded warrants were funded in full at closing except for a nominal exercise price of $ 0.0001 and are exercisable commencing on the closing date and will terminate when such pre-funded warrants are exercised in full.

The Series A warrants are exercisable immediately upon issuance and will expire five years following the issuance date and have an exercise price of $ 4.075 per share and the Series B warrants are exercisable immediately upon issuance and will expire eighteen months following the issuance date and have an exercise price of $ 4.075 per share.

Net proceeds from the registered direct offering were $ 6.7 million after deducting commissions and other transaction costs.

As the total fair value of the resulting warrant liability exceeded the total net proceeds of $ 6.7 million, Checkpoint recorded a loss of $ 1.2 million to loss on common stock warrant liabilities in the Consolidated Statements of Operations.

Accordingly, there were no proceeds allocated to the common stock and pre-funded warrants issued as part of this transaction (See Note 6).

As of December 31, 2022, approximately $ 22.3 million of the shelf remains available for sale under the Checkpoint 2020 S-3.

Checkpoint Registered Direct Offerings

In 2023, Checkpoint made registered direct offerings in February, April, May and July and sold a total of 6,957,186 shares of common stock and 2,663,903 pre-funded warrants at prices ranging from $ 3.07 to $ 5.25 .

All pre-funded warrants were exercised in 2023.

Each of these offerings included Series A warrants with a five -year term and Series B warrants with an 18 -month term.

Total Series A warrants were 9,621,089 and total Series B warrants were 9,621,089 with exercise prices ranging from $ 2.82 to $ 5.00 .

Total gross proceeds were $ 33.6 million, with net proceeds of $ 30.4 million.

In October 2023, Checkpoint entered into an inducement offer letter agreement with a holder of certain of its existing warrants to exercise for cash an aggregate of 6,325,354 warrants for shares of Checkpoint’s common stock at a reduced exercise price of $ 1.76 per share.

The warrants were issued to the holder on December 16, 2022 with an exercise price of $ 4.075 per share and on February 22, 2023 with an exercise price of $ 5.00 per share as part of registered direct offerings.

The shares of Checkpoint common stock issuable upon exercise of the warrants were registered pursuant to effective registration statements on Form S-3 (File No.

333-251005) and Form S-3 (File No.

333-270474), respectively.

As part of the inducement, Checkpoint agreed to issue new unregistered Series A Warrants to purchase up to 6,325,354 shares and new unregistered Series B Warrants to purchase up to 6,325,354 shares of Checkpoint Common Stock.

The Series A and B warrants are exercisable immediately upon issuance with an exercise price of $ 1.51 per share.

The Series A warrants will expire in five years and the Series B warrants will expire twenty-four months .

The total gross proceeds from the offering were approximately $ 11.1 million with net proceeds of approximately $ 10.0 million after deducting approximately $ 1.1 million in commissions and other transaction costs.

In December 2022, Checkpoint closed on the December 2022 Registered Direct Offering with a single institutional investor for the issuance and sale of 950,000 shares of its common stock and 784,105 pre-funded warrants for one share of Checkpoint’s common stock.

The common stock and the pre-funded warrants were sold together with Series A warrants to purchase up to 1,734,105 shares of common stock and Series B warrants to purchase up to 1,734,105 shares of common stock, at a purchase price of $ 4.325 per share of common stock.

The Series A warrants will expire in five years and the Series B warrants will expire in eighteen months, and both have an exercise price of $ 4.075 per share.

Net proceeds from the registered direct offering were $ 6.7 million and allocated to the common stock warrant liabilities (see Note 6).

Pursuant to the Founders Agreement, Checkpoint issued to Fortress 2.5 % of the aggregate number of shares of Checkpoint common stock issued in the offerings noted above.

Accordingly, Checkpoint issued 398,660 shares and 56,671 shares to Fortress for the year ended December 31, 2023 and 2022, respectively.

On April 23, 2021, Mustang filed a shelf registration statement No.

Mustang 2020 and 2021 Shelf Registration Statements and At-the-Market Offering

On April 23, 2021, Mustang filed a shelf registration statement (File No.

333-255476) on Form S-3 (the “Mustang 2021 S-3”), which was declared effective on May 24, 2021.

Under the Mustang 2021 S-3, Mustang may sell up to a total of $ 200 million of its securities.

As of December 31, 2022, $ 200 million of the Mustang 2021 S-3 remained available for sales of securities.

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 in December 2020.

Under the 2020 Mustang S-3, Mustang may sell up to a total of $ 100.0 million of its securities.

As of December 31, 2022, approximately $ 8.0 million of the 2020 S-3 remains available for sales of securities.

Through the Mustang 2021 S-3, Mustang may sell up to a total of $ 200 million of its securities.

As of December 31, 2023, approximately $ 195.6 million of the Mustang 2021 S-3 remained available for sales of securities.

On July 2018, Mustang entered into an At-the-Market Issuance Sales Agreement (the “Mustang ATM”) relating to the sale of shares of common stock pursuant to the Mustang 2021 S-3.

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.

On April 14, 2023, the Mustang ATM was amended to add the limitations imposed by General Instruction I.B.6 to Form S-3.

During the year ended December 31, 2023, Mustang issued approximately 0.1 million shares of common stock at an average price of $ 3.15 per share for gross proceeds of $ 0.2 million under the ATM Agreement.

In connection with these sales, Mustang paid aggregate fees of approximately $ 3,000 for net proceeds of approximately $ 0.2 million.

During the year ended December 31, 2022, Mustang issued approximately 0.5 million shares of common stock at an average price of $ 12.61 per share for gross proceeds of $ 6.6 million under the Mustang ATM.

In connection with these sales, Mustang paid aggregate fees of approximately $ 0.1 million for net proceeds of approximately $ 6.5 million.

During the year ended December 31, 2021, Mustang issued approximately 19.4 million shares of common stock at an average price of $ 3.70 per share for gross proceeds of $ 71.9 million under the ATM Agreement.

In connection with these sales, the Company paid aggregate fees of approximately $ 1.3 million for net proceeds of approximately $ 70.6 million.

Pursuant to the terms of the Second Amended and Restated Founders Agreement, Mustang issued to Fortress 2.5 % of the aggregate number of shares of Mustang common stock issued in the offerings noted above.

Accordingly, Mustang issued 196,952 shares of common stock to Fortress for the year ended December 31, 2022 and issued 576,157 common shares to Fortress for the year ended December 31, 2021.

Mustang Registered Direct Offering

In October 2023, Mustang closed on the October 2023 Registered Direct Offering with a single institutional accredited investor for the issuance and sale of an aggregate of (i) 920,000 shares of its common stock and (ii) pre-funded warrants to purchase up to 1,688,236 shares of its common stock at a purchase price of $ 1.70 per share and $ 1.699 per pre-funded warrant in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market LLC.

In a concurrent private placement, Mustang issued and sold 2,588,236 unregistered warrants to purchase shares of common stock.

The unregistered warrants have an exercise price of $ 1.58 , were exercisable immediately upon issuance and will

expire five and one-half years following the issuance date.

The total gross proceeds from the offerings were approximately $ 4.4 million before deducting approximately $ 0.5 million in placement agency fees and offering expenses.

Pursuant to the terms of the Second Amended and Restated Founders Agreement, Mustang owes to Fortress 2.5 % of the aggregate number of shares of Mustang common stock issued in the offerings noted above.

Accordingly, Mustang recorded the value of 1,297 as shares issuable at December 31, 2023 and issued 13,131 common shares to Fortress for the year ended December 31 2022.

Avenue Registered Direct, Private Placement and PIPE

In November 2023, Avenue closed on a public offering of the issuance and sale of an aggregate of 16,633,400 units at a purchase price of $ 0.3006 per unit (the “November 2023 Offering”).

Each unit consists of (i) one share of common stock (or pre-funded warrant in lieu of), and (ii) one Series A warrant to purchase one share of common stock, exercisable immediately upon issuance at a price of $ 0.3006 per share and expiring five years following the issuance date, and (iii) one Series B warrant to purchase one share of common stock, exercisable immediately upon issuance at a price of $ 0.3006 per share and expiring eighteen months following the issuance date (in aggregate the “November 2023 Warrants”).

The total gross proceeds from the offering were approximately $ 5.0 million with net proceeds of approximately $ 3.8 million after deducting commissions and other transaction costs.

In January 2024, Avenue entered into an inducement offer letter agreement with certain investors in the November 2023 Offering who agreed to exercise certain outstanding November 2023 Warrants to purchase up to an aggregate of 14,600,000 shares of Avenue common stock at their exercise price of $ 0.3006 per share (see Note 20).

In connection with the Avenue September 2023 Private Placement (see Note 16), Avenue entered into a registration rights letter agreement (the “Avenue Registration Rights Letter Agreement”) with Fortress and the Company’s Chairman, President and Chief Executive Officer, a director on the board of directors of Avenue (the “Avenue Private Placement Investors”).

Avenue will file, on or prior to September 8, 2024, a resale registration statement to register the resale of the Avenue September 2023 Private Placement Shares.

In January 2023, Avenue agreed to issue and sell (i) 448,000 shares of Avenue’s common stock at a price per share of $ 1.55 , and (ii) pre-funded warrants to purchase 1,492,299 shares of common stock, at a price equal to the price per share, less $ 0.001 (the “Avenue January 2023 Registered Direct Offering”).

The Avenue Pre-Funded Warrants had an exercise price of $ 0.001 per share.

Also in January 2023, Avenue entered into a private placement offering (“Avenue January 2023 Private Placement”) of January 2023 Warrants to purchase 1,940,299 shares of Avenue common stock, each with an exercise price of $ 1.55 per share.

Avenue agreed to issue and sell the January 2023 Warrants at an offering price of $ 0.125 per January 2023 Warrant to purchase one share of Avenue common stock.

The gross proceeds across the Avenue January 2023 Registered Direct Offering and the Avenue January 2023 Private Placement were $ 3.2 million and net proceeds were $ 2.8 million.

On October 11, 2022, Avenue announced the closing of an underwritten public offering of 3,636,365 common and pre-funded units.

Each common unit consists of one share of common stock and one warrant to purchase one share of common stock, and each pre-funded unit consists of one pre-funded warrant to purchase one share of common stock and one warrant to purchase one share of common stock.

Each share of common stock (or pre-funded warrant) was sold together with one warrant at a combined purchase price of $ 3.30 per common unit (or $ 3.2999 per pre-funded unit after reducing $ 0.0001 attributable to the exercise price of the pre-funded warrants).

Each unit consists of one share of common stock or one pre-funded warrant and one warrant to purchase one share of common stock.

Each unit was sold for a purchase price of $ 3.30 per common unit (or $ 3.2999 per pre-funded unit after reducing $ 0.0001 attributable to the exercise price of the pre-funded warrants).

Avenue also simultaneously closed on the sale of an additional 545,454 warrants to purchase common stock, which were sold pursuant to a partial exercise of the underwriter’s over-allotment option.

Avenue received net proceeds of approximately $ 10.3 million at closing after deducting underwriting discounts and commissions and other expenses of the offering.

This transaction, along with Avenue’s repurchase of 100 % of the Avenue shares held by InvaGen for a purchase price of $ 3.0 million, and the closing of the Share Repurchase Agreement between Avenue and InvaGen in October 2022 (see Note 3), resulted in the November 2022 consummation of the Contribution Agreement between Fortress and Avenue (see Note 17).

In November 2021, Avenue, pursuant to an underwritten public offering, sold 2,238,805 shares of its common stock at a price of $ 1.34 per share for gross proceeds of approximately $ 3.0 million.

After deducting underwriting discounts and commissions and other expenses, net proceeds to Avenue from this underwritten public offering were $ 2.6 million.

In December 2021, Avenue, pursuant to an underwritten public offering, sold 1,910,100 shares of its common stock at a price of $ 1.07 per share for gross proceeds of approximately $ 2.0 million.

After deducting underwriting discounts and commissions and other expenses, net proceeds to Avenue from this underwritten public offering were $ 1.8 million.

In December 2022, Urica commenced an offering of 8 % Cumulative Convertible Class B Preferred Stock.

Urica issued an aggregate of 101,334 Class B Preferred shares at a price of $ 25.00 per share, for gross proceeds of $ 2.5 million.

Following the payment of placement agent fees and other expenses of $ 0.3 million, Urica received $ 2.2 million in net proceeds (see Note 21).

The Company determined liability classification is appropriate and as such, this instrument was accounted for as a liability (see Note 10) at December 31, 2022.

Avenue received net proceeds of approximately $ 10.3 million at closing, before giving effect to any warrant exercises.

This transaction, along with Avenue’s repurchase of 100 % of the Avenue shares held by InvaGen for a purchase price of $ 3.0 million in October 2022 (see Note 3), resulted in the November 2022 consummation of the Contribution Agreement between Fortress and Avenue (see Note 16).

Pursuant to the Founders Agreement, Avenue issued to Fortress 2.5 % of the aggregate number of shares of Avenue common stock issued in the offerings noted above.

Accordingly, Avenue issued 52,419 shares and recorded 415,718 shares issuable for the year ended December 31, 2023, and recorded 90,909 shares issuable to Fortress for the year ended December 31, 2022.

Commitments and Contingencies

27 unchanged sentences

Year Ended December 31, 2027

Year Ended December 31, 2027

Total operating lease liabilities

2 unchanged sentences

License Agreements

The Company has undertaken to make contingent milestone payments to the licensors of its portfolio of drug products and candidates.

The Company has undertaken to make contingent development and commercial milestone payments to the licensors of its portfolio of drug products and candidates.

In addition, the Company shall pay royalties to such licensors based on a percentage of net sales of each drug candidate following regulatory marketing approval.

7 unchanged sentences

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.

University of Tennessee Research Foundation v.

Caelum Biosciences, Inc.

Caelum Biosciences, Inc.

(“Caelum”), a former subsidiary of Fortress that was sold to AstraZeneca’s Alexion (“Alexion”) in October 2021, is the defendant in a lawsuit brought by The University of Tennessee Research Foundation (“UTRF”) captioned as University of Tennessee Research Foundation v.

Caelum Biosciences, Inc.

19-cv-00508, which is pending in the United States District Court for the Eastern District of Tennessee (the “UTRF Litigation”).

UTRF brought claims against Caelum, for, inter alia , tortious interference and trade secret misappropriation.

UTRF primarily alleges that Caelum unauthorizedly used non-patent trade secrets owned by UTRF in the development of Caelum’s 11-1F4 monoclonal antibody, known as CAEL-101.

Under the agreement pursuant to which Alexion acquired Caelum (as amended, the “DOSPA”), Fortress has indemnification obligations of Caelum under certain circumstances, including for certain of Caelum’s legal expenses and potential damages arising out of the UTRF Litigation (with such indemnification capped in the aggregate as to Fortress at the amount of Caelum acquisition proceeds received by Fortress and which, at Caelum’s election, may be satisfiable in the form of offsets against future amounts that Caelum may owe Fortress under the DOSPA).

Caelum is defending the UTRF Litigation, with Fortress participating in such defense and maintaining a consent right over any potential settlements.

Caelum’s legal fees and costs in defending the UTRF Litigation are being reimbursed by Fortress by distribution from a $15 million escrow account established concurrently with the acquisition of Caelum;

Fortress considers the amount remaining in escrow to be in excess of the amount of its anticipated out-of-pocket indemnifiable costs and damages in the UTRF Litigation and therefore has not accrued any liability pertaining to this indemnity.

Caelum and Fortress both believe the UTRF Litigation is without merit and intend to continue defending it vigorously (including exhausting all appeals if applicable).

Caelum’s motion for summary judgment on all claims is currently pending, and a trial is scheduled for September 2024 with respect to any of UTRF’s claims that may survive summary judgment.

Employee Benefit Plan

4 unchanged sentences

The Company’s Executive Vice Chairman, Strategic Development individually owns approximately 7.5 % and 11.2 % of the Company’s issued and outstanding Common Stock at December 31, 2023 and 2022, respectively.

Avenue September 2023 Private Placement

In September 2023, Avenue entered into an unwritten agreement with the Avenue Private Placement Investors, pursuant to which Avenue agreed to issue and sell 767,085 shares (the “Avenue September 2023 Private Placement Shares”) of Avenue common stock for an aggregate purchase price of approximately $ 550,000 in a private placement transaction (the “Avenue September 2023 Private Placement).

The Avenue common shares were purchased by the Avenue Private Placement Investors at a price per Avenue September 2023 Private Placement Share of $ 0.717 , which was the “consolidated closing bid price” of the Avenue common stock on Nasdaq as of September 7, 2023, in compliance with Nasdaq Listing Rule 5365(c).

The net proceeds to Avenue from the Avenue September 2023 Private Placement were approximately $ 550,000 .

Avenue did not incur any underwriting or placement agent fees associated with the Avenue September 2023 Private Placement.

Avenue intends to use the net proceeds from the Avenue September 2023 Private Placement for working capital and other general corporate purposes.

Shared Services Agreement with TGTX

3 unchanged sentences

In connection with the shared services agreement, the Company invoiced TGTX $ 0.4 million and $ 0.4 million, and received payments of $ 0.4 million and $ 0.4 million for the years ended December 31, 2023 and 2022, respectively.

Shared Services Agreement with Journey

On November 12, 2021, Journey and the Company entered into an arrangement to share the cost of certain legal, finance, regulatory, and research and development employees.

The Company’s Executive Chairman and Chief Executive Officer is the Executive Chairman of Journey.

Under the terms of the Agreement, Journey will reimburse the Company for the salary and benefit costs associated with these employees based upon actual hours worked on Journey related projects following the completion of their initial public offering.

For the year ended December 31, 2021, the Company’s employees have provided services to Journey totaling approximately $ 0.6 million.

Upon completion of Journey’s initial public offering in November 2021 (see Note 14) $ 0.5 million was converted into 52,438 shares of Journey common stock at the initial public offering price of $ 10.00 per share.

Desk Share Agreement with TGTX

4 unchanged sentences

At December 31, 2023, there were no amounts due from TGTX related to this arrangement.

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, 2022 and 2021, the Company had paid approximately $ 0.2 million and $ 0.2 million in rent for the Waltham, MA office, and invoiced TGTX approximately $ 0.1 million and $ 0.1 million, respectively.

From 2018 until 2022, TGTX employees occupied desks in the Waltham, MA office under the Desk Share Agreement.

TGTX paid their share of the rent based on actual percentage of the office space occupied on a month by month basis.

For the year ended December 31, 2022, the Company had paid approximately $ 0.2 million in rent for the Waltham, MA office, and invoiced TGTX approximately $ 0.1 million.

The Desk Share Agreement with TGTX terminated on December 31, 2022.

Checkpoint Collaborative Agreements with TGTX

1 unchanged sentence

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.

Journey Promissory Note

On September 30, 2021, the Company increased the Journey promissory note by $ 9.5 million in response to a cyber incident that occurred at Journey and resulted in $ 9.5 million of fraudulent payments.

The $ 9.5 million contribution was approved by the boards of directors of both the Company and Journey, and ensured that Journey’s accounts payable function continued to operate smoothly.

This contribution, along with the $ 5.2 million already outstanding under the Journey Promissory Note, converted into 1,476,044 shares of Journey common stock upon completion of Journey’s initial public offering in November 2021 (see Note 14) at the initial public offering price of $ 10.00 per share.

The amounts associated with the Journey Promissory Note are eliminated in the consolidated balance sheets.

Avenue Share Contribution Agreement

In November 2022, Fortress completed a Share Contribution Agreement with Avenue to contribute its’ shares in Baergic, which is developing BAER-101, a novel α2/3–subtype-selective GABA A positive allosteric modulator (“PAM”), to Avenue.

Effective September 30, 2023, Checkpoint and TGTX agreed to mutually terminate both the collaboration agreement and the sublicense agreement.

Shared Services Agreement with Journey

In November 2021, Journey and the Company entered into an arrangement to share the cost of certain legal, finance, regulatory, and research and development employees.

The Company’s Executive Chairman and Chief Executive Officer is the Executive Chairman of Journey.

Under the terms of the arrangement, Journey began reimbursing the Company for the salary and benefit costs associated with these employees based upon actual hours worked on Journey related projects following the completion of their initial public offering in November 2021.

In addition, Journey reimburses the Company

for various payroll-related costs and selling, general and administrative costs incurred by Fortress for the benefit of Journey.

For the year ended December 31, 2023 and 2022, the Company’s employees have provided services to Journey totaling approximately $ 0.1 million and $ 0.1 million, respectively.

At December 31, 2023, approximately $ 0.2 million is due from Journey related to this arrangement.

Contribution Agreement with Avenue

On May 11, 2022, the Company entered into a stock contribution agreement (the “Contribution Agreement”) with Avenue, pursuant to which the Company agreed to transfer ownership of 100 % of its shares (common and preferred) in Baergic to Avenue.

Under the Contribution Agreement, the Company also agreed to assign to Avenue certain intercompany agreements existing between Fortress and Baergic, including a Founders Agreement, by and between Fortress and Baergic, dated as of March 9, 2017, and Management Services Agreement, by and between Fortress and Baergic, dated as of March 9, 2017.

Consummation of the transactions contemplated by the Contribution Agreement was subject to the satisfaction of certain conditions precedent, including, inter alia:

(i) the closing of an equity financing by Avenue resulting in gross proceeds of at least $ 7.5 million, (ii) the agreement by minority Avenue shareholder InvaGen to (A) have 100 % of its shares in Avenue repurchased by Avenue and (B) terminate certain of the agreements to which it was party with Avenue and/or the Company in connection with InvaGen’s 2019 equity investment in Avenue, which eliminated certain negative consent rights of InvaGen over Avenue and restore certain rights and privileges of Fortress in Avenue;

and (iii) the sustained listing of Avenue’s common stock on the Nasdaq Capital Market.

On October 11, 2022, Avenue announced the closing of an underwritten public offering in which it received net proceeds of approximately $ 10.4 million (see Note 13).

The offering, together with the October 2022 repurchase of Avenue common shares held by InvaGen, resulted in the consummation of the Contribution Agreement in November 2022 (see Note 3).

As a result, Baergic became a majority-controlled and owned subsidiary company of Avenue.

Under the Contribution Agreement, Fortress also agreed to assign to Avenue certain intercompany agreements existing between Fortress and Baergic, including a Founders Agreement and Management Services Agreement.

Cyprium 9.375 % Series A Cumulative Redeemable Perpetual Preferred Stock Dividend Obligation

Pursuant to a private placement in August 2020, Cyprium sold shares of its 9.375 % Series A Cumulative Redeemable Perpetual Preferred Stock (“Cyprium PPS”);

as of December 31, 2023, there are 300,600 shares of Cyprium PPS outstanding.

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 Sale”) issued by the FDA in connection with the approval of CUTX-101, a product candidate previously developed by Cyprium.

Upon the PRV Sale, each share of Cyprium PPS will be automatically redeemed in exchange for a payment equal to twice the $ 25.00 liquidation preference, plus accumulated and unpaid dividends to, but excluding, the redemption date.

An optional exchange for Fortress Series A 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 Fortress Series A Preferred Stock or cash at the discretion of Fortress.

The Cyprium PPS is fully and unconditionally guaranteed by Fortress.

Founders Agreement and Management Services Agreement

21 unchanged sentences

capitalization

July 28, 2017

February 17, 2015

16 unchanged sentences

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’/subsidiaries’ certificates of incorporation for the years ended December 31, 2023 and 2022 ($ in thousands):

Year Ended December 31,

Partner company

December 31, 2022

December 31, 2021

Pursuant to the Share Contribution Agreement between Fortress and Avenue, under which Baergic became a majority-controlled and owned subsidiary of Avenue, Fortress also assigned to Avenue the Founders Agreement previously between Fortress and Baergic, such that Baergic’s annual PIK dividend is now payable to Avenue.

21 unchanged sentences

Consolidated (Income)/Expense

Fees under the MSA were not due or accrued during the pendency of agreements formerly in place between Avenue and InvaGen (now terminated).

Pursuant to the Share Contribution Agreement between Fortress and Avenue, under which Baergic became a majority-controlled and owned subsidiary of Avenue, Fortress also assigned to Avenue the MSA previously between Fortress and Baergic, such that Baergic’s annual MSA fee is now payable to Avenue.

Aevitas was deconsolidated in April 2023 as a result of the Asset Purchase Agreement with 4DMT (see Note 3).

Pursuant to the Share Contribution Agreement between Fortress and Avenue, under which Baergic became a majority-controlled and owned subsidiary of Avenue, Fortress also assigned to Avenue the Founders Agreement previously between Fortress and Baergic, such that Baergic’s annual MSA is now payable to Avenue.

Fees and Stock Grants Received by Fortress

3 unchanged sentences

The components of the income tax provision are as follows:

For the years ended December 31,

Year Ended December 31,

($ in thousands)

For the years ended December 31, 2023 and 2022, income tax expense was $0.5 million and $ 0.4 million, respectively, resulting in an effective income tax rate of - 0.3 % and - 0.2 %.

The income tax expense in 2022 is primarily due to the recording of uncertain tax positions and state income taxes.

The income tax expense in 2023 is primarily due to uncovered deferred tax liabilities with respect to investments in subsidiaries, state income taxes and interest accrued related to a prior years' uncertain tax position.

The Company has incurred net operating losses since inception.

24 unchanged sentences

Basis in subsidiary

Total deferred tax assets, net

Total deferred tax liabilities, net

A reconciliation of the statutory tax rates and the effective tax rates is as follows:

7 unchanged sentences

Change in state rate

Intercompany elimination adjustments

Change in valuation allowance

Change in subsidiary basis

Deconsolidation/dissolution of subsidiaries

Adjustment for warrants

Section 162(m) compensation disallowance

Effective income tax rate

14 unchanged sentences

In accordance with the provisions related to accounting for uncertainty in income taxes, the Company recognizes the benefit of tax position if the position is “more likely than not” to prevail upon examination by the relevant tax authority.

The table below sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits:

For the year ended December 31, 2022, the company added $ 3.2 million of unrecognized tax benefits.

3 unchanged sentences

The Company classifies interest and penalties related to uncertain tax positions as income tax expense.

The Company had an immaterial amount of accrued interest and penalties at December 31, 2022 and 2021.

The NOLs from tax years 2006 through 2021 remain open to examination (and adjustment) by the Internal Revenue Service and state tax authorities.

The Company has accrued for $ 0.1 million and approximately $ 32,000 of such interest as of December 31, 2023 and 2022, respectively.

No penalties have been accrued for.

The NOLs from tax years 2010 through 2023 remain open to examination (and adjustment) by the Internal Revenue Service and state taxing authorities.

In addition, federal tax years ending December 31, 2020, 2021 and 2022 are open for assessment of federal taxes.

10 unchanged sentences

Selling, general and administrative

Other expense

Income tax expense

5 unchanged sentences

Selling, general and administrative

Wire transfer fraud loss

Other expense

Income tax expense

Segment income (loss)

Income tax (expense) benefit

The following tables summarize, for the periods indicated, total assets by reportable segment:

20 unchanged sentences

Year Ended December 31,

Other branded revenue

Collaboration revenue

1 unchanged sentence

Other revenue

Other revenue for the year ended December 31, 2022 included a net $ 2.5 million milestone payment from Maruho Co., Ltd, upon receipt of marketing and manufacturing approval for Rapifort® Wipes 2.5% (Qbrexza®), as well as $ 0.2 million in royalties from Maruho on sales of Rapifort® Wipes 2.5% in Japan.

Total net revenue

Other revenue for the year ended December 31, 2023, includes royalties on sales of Rapifort® Wipes 2.5% (“Rapifort”) in Japan, from Maruho, Journey’s exclusive out-licensing partner in Japan, and also reflects a net $ 19.0 million payment from Maruho under the New License Agreement.

Other revenue for the year ended December 31, 2022, included a net $ 2.5 million milestone payment from Maruho Co., Ltd, upon receipt of marketing and manufacturing approval for Rapifort, as well as $ 0.2 million in royalties from Maruho on sales of Rapifort in Japan.

Significant Customers

For the years ended December 31, 2022, none of Journey’s Dermatology Products customers accounted for more than 10.0% of its total gross product revenue.

At December 31, 2022, two of Journey’s customers accounted for more than 10% of its total accounts receivable balance at 16.3 % and 12.9 %.

As of December 31, 2021, one of the Company’s Dermatology Products customers accounted for 12 % of its total accounts receivable balance.

For the years ended December 31, 2023 and 2022, none of Journey’s Dermatology Products customers accounted for more than 10.0% of its total gross product revenue.

For the year ended December 31, 2023, one of Journey’s customers accounted for more than 10% of its total accounts receivable balance at 13 %.

For the year ended December 31, 2022, two of Journey’s Dermatology Products customers accounted for more than 10% of its total accounts receivable balance at 16.7 % and 10.4 %.

Subsequent Events

Avenue Therapeutics Private Offering

On January 27, 2023, Avenue entered into an agreement with a single institutional investor for the sale of 1,940,299 shares of common stock and pre-funded warrants.

In a concurrent private placement, Avenue also agreed to issue to the same investor a total of 1,940,299 warrants to purchase up to one share of common stock each at an exercise price of $ 1.55 per share and a purchase price of $ 0.125 .

The purchase price of each share is $ 1.55 .

The purchase price of each pre-funded warrant is $ 1.5499 with an exercise price of $ 0.0001 .

Avenue received $ 2.8 million in net proceeds.

Avenue License Agreement

In March 2023, Avenue announced that it had entered into an exclusive license agreement with AnnJi Pharmaceutical Co., a Taiwanese clinical-stage drug company, for AJ201, a first-in-class clinical asset currently in a Phase 1b/2a study in the U.S.

for the treatment of spinal and bulbar muscular atrophy, also known as Kennedy's Disease.

Under the license agreement, in exchange for exclusive rights to the intellectual property underlying the AJ201 product candidate, Avenue will pay an initial cash license fee of $ 3.0 million, of which $ 2.0 million is payable within 60 days and $ 1.0 million payable within 180 days after the effective date of the License Agreement.

Checkpoint Therapeutics Registered Direct Offering

In February 2023, Checkpoint closed on a registered direct offering (“February 2023 Direct Offering”) with a single institutional investor for the issuance and sale of 1,180,000 shares of its common stock and 248,572 pre-funded warrants.

Each pre-funded warrant is exercisable for one share of common stock.

The common stock and the pre-funded warrants were sold together with Series A warrants to purchase up to 1,428,572 shares of common stock and Series B warrants to purchase up to 1,428,572 shares of common stock, at a purchase price of $ 5.25 per share of common stock and associated common stock warrants, and $ 4.2499 per pre-funded warrant and associated common stock warrants.

Net proceeds from the February 2023 Direct Offering were $ 6.7 million after deducting commissions and other transaction costs.

Checkpoint BLA Submission and Acceptance

Checkpoint submitted a BLA to FDA in January 2023, for Cosibelimab as a Treatment for Patients with Metastatic or Locally Advanced Cutaneous Squamous Cell Carcinoma.

In March 2023 the FDA accepted this submission and set a Prescription Drug User Fee Act (“PDUFA”) goal date of January 3, 2024.

Fortress Registered Direct Offering and Concurrent Private Placement

On February 10, 2023, the Company completed a registered direct offering of common stock pursuant to which it issued and sold 16,642,894 shares of its common stock at a purchase price of $ 0.835 per share and secured approximately $ 13.3 million in net proceeds after deducting estimated offering expenses.

The Company also simultaneously closed on a concurrent private placement with investors in the registered direct offering, for the pro rata rights to acquire, in the aggregate, securities exercisable into approximately 3.5 % of the outstanding shares of common stock in each of the Company’s next 20 new operating subsidiaries (the “Contingent Subsidiary Securities”).

The Contingent Subsidiary Securities will only be issued to the extent such a new operating subsidiary first consummates a specified corporate development transaction within the next five years , and will be exercisable immediately upon issuance, with an exercise period of 10 years , at an exercise price equal to the fair market value of one share of common stock of the subsidiary on the date of the corporate development transaction.

The issuance of the rights and Contingent Subsidiary Securities are conditioned on the approval of the Company’s stockholders required by Nasdaq Listing Rule 5635.

Urica Preferred Offering

In February 2023, Urica completed two additional closings of the Urica Preferred Offering, whereby it sold 34,160 Class B Preferred shares at a price of $ 25.00 per share, for net proceeds of $ 0.8 million, after deducting placement agent fees of $ 0.1 million.

January 2024 Private Placement - Avenue

On January 5, 2024, Avenue entered into (i) an inducement offer letter agreement (the “January 2023 Investor Inducement Letter”) with a certain investor (the “January 2023 Investor”) in connection with certain outstanding warrants to purchase up to an aggregate of 1,940,299 shares of Common Stock, originally issued to the January 2023 Investor on January 31, 2023 (the “January 2023 Warrants”) and (ii) an inducement offer letter agreement (the “November 2023 Investor Inducement Letter Agreement” and, together with the January 2023 Investor Inducement Letter, the “Inducement Letters”) with certain investors (the “November 2023 Investors” and, together with the January 2023 Investor, the “Holders”) in connection with certain outstanding warrants to purchase up to an aggregate of 14,600,000 shares of Common Stock, originally issued to the November 2023 Investors on November 2, 2023 (the “November 2023 Warrants” and, together with the January 2023 Warrants, the “Existing Warrants”).

The January 2023 Warrants had an exercise price of $ 1.55 per share, and the November 2023 Warrants had an exercise price of $ 0.3006 per share.

Pursuant to the Inducement Letters, (i) the January 2023 Investor agreed to exercise its January 2023 Warrants for cash at a reduced exercise price of $ 0.3006 per share and (ii) the November 2023 Investors agreed to exercise their November 2023 Warrants for cash at the existing exercise price of $ 0.3006 , in each case in consideration for Avenue’s agreement to issue in a private placement (x) Series A Warrants to purchase up to 16,540,299 shares of Avenue Common Stock and (y) Series B Warrants to purchase up to 16,540,299 shares of Avenue Common Stock.

The gross proceeds to Avenue from the exercise of the warrants is approximately $ 5.0 million, before deducting placement agent fees and estimated offering costs.

Registered Direct Offering – Checkpoint

In January 2024, Checkpoint closed on a registered direct offering (the “January 2024 Registered Direct Offering”) with a single institutional investor for the issuance and sale of 1,275,000 shares of its common stock and 6,481,233 Pre-Funded Warrants.

Each Pre-Funded Warrant was exercisable for one share of Checkpoint common stock.

The Checkpoint common stock and the Pre-Funded Warrants were sold together with common stock warrants (the “January 2024 Common Warrants”) to purchase up to 7,756,233 shares of Checkpoint common stock, at a purchase price of $ 1.805 per share of common stock and $ 1.8049 per Pre-Funded Warrant.

The Pre-Funded Warrants are funded in full at closing except for a nominal exercise price of $ 0.0001 and are exercisable commencing on the closing date and will terminate when such Pre-Funded Warrants are exercised in full.

The January 2024 Common Warrants are exercisable immediately upon issuance and will expire five years following the issuance date and have an exercise price of $ 1.68 per share.

Checkpoint also issued the placement agent warrants to purchase up to 465,374 shares of common stock with an exercise price of $ 2.2563 per share.

Net proceeds to Checkpoint from the January 2024 Registered Direct Offering were $ 12.8 million after deducting commissions and other transaction costs.

As of March 19, 2024, 2,661,233 Pre-Funded warrants from the January 2024 Registered Direct Offering were fully exercised.

Nasdaq Hearing Panel Meeting - Avenue

On February 15, 2024, Avenue met with the Nasdaq Hearings Panel regarding the outstanding Nasdaq deficiencies and on March 11, 2024, the Nasdaq Hearings Panel informed Avenue that it granted Avenue's request for an extension until May 20, 2024 to demonstrate compliance with the Stockholders' Equity Requirement and Minimum-Bid Price Requirement.

Avenue is considering all options available to it to regain compliance with these rules;

however, there can be no assurance that Avenue will be able to evidence compliance with the Stockholders' Equity Requirement and the Minimum-Bid Price Requirement within the extension period granted by the Panel.

Registered Direct Offering – Fortress

In January 2024, Fortress closed on a registered direct offering for the issuance and sale of an aggregate of 3,303,305 shares of its common stock and warrants to purchase up to 3,303,305 shares of its common stock at a combined purchase price of $ 3.33 per share of common stock and accompanying warrant priced at-the-market under Nasdaq rules.

The warrants have an exercise price of $ 3.21 per share, are immediately exercisable, and will expire five years following the date of issue.

Net proceeds to Fortress, after deducting the placement agent’s fees and other offering expenses, were approximately $ 10.2 million.

As a result of the foregoing transactions and as of the date of this filing, the Company believes it has stockholders’ equity of at least $2.5 million and therefore satisfies the minimum Nasdaq listing requirement set forth in Nasdaq Listing Rule 5550(b)(1).

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.

38 unchanged sentences

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.