The Company’s Chairman, President and Chief Executive Officer, individually and through certain trusts over which he has voting and dispositive control, beneficially owned approximately 13.1% and 13.0% of the Company’s issued and outstanding Common Stock as of December 31,

2018

 The Company’s Executive Vice Chairman, Strategic Development individually owns approximately

 15.2% and 15.2% of the Company’s issued and outstanding Common Stock at December 31, 2018

 

500,000

 

 

In July 2015, TGTX and the Company entered into an arrangement to share the cost of certain research and development employees. The Company’s Executive Vice Chairman, Strategic Development, is Executive Chairman and Interim Chief Executive Officer of TGTX. Under the terms of the Agreement, TGTX will reimburse the Company for the salary and benefit costs associated with these employees based upon actual hours worked on TGTX related projects. For the year ended December 31, 2018 

 the Company invoiced TGTX $1.3 million and $1.0 million respectively. The Company received payments of $1.3 million and $0.9, respectively, for the years ended December 31, 2018 and 2017.

 

 

In September 2014, the Company entered into Desk Share Agreements with OPPM and TGTX to occupy 20% and 40% of the New York, NY office space that requires TGTX and OPPM to pay their share of the average annual rent of $0.5 million and $1.1 million, respectively. These initial rent allocations will be adjusted periodically for each party based upon actual percentage of the office space occupied. Additionally, the Company has reserved the right to execute desk share agreements with other third parties and those arrangements will also affect the cost of the lease actually borne by the Company. The Desk Share Agreement was amended in May 2016, adjusting the initial rent allocations to 45% for TGTX and 10% for OPPM.

 

Each initial Desk Share Agreement has a term of five years. The Company took possession of the New York, NY office space in December 2015, commenced build out of the space shortly thereafter and took occupancy of the space in April 2016. As of December 31, 2017, the Company paid $2.4 million in rent under the Desk Space Agreements, and invoiced OPPM and TGTX approximately $135,000 and $1.0 million, respectively, for their prorated share of the rent base. In addition, as of December 31, 2017 the Company had incurred $163,000 in connection with the build out of the space and recorded a receivable of $24,000 due from TGTX and $6,600 due from OPPM.

 

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. As of December 31, 2018, the Company had paid approximately $223,000 in rent for the Waltham, MA office, and invoiced TGTX approximately $47,000.

 

As of December 31, 2018, the Company had paid $2.7 million in rent under the Desk Share Agreements for both the New York, NY office and the Waltham, MA office combined, and invoiced TGTX and OPPM approximately $1.0 million and $217,000, respectively, for their prorated shares of the rents. In addition, for the year ended December 31, 2018, the Company had incurred approximately $121,000 in connection with the build out of the space and received the $54,000 due from TGTX and recorded a receivable of $12,000 due from OPPM. At December 31, 2018, the amount due from TGTX approximated $105,000 and the amount due from OPPM approximated $229,000.

 

Checkpoint has entered into various agreements with TGTX to develop and commercialize certain assets in connection with its licenses, including a collaboration agreement for some of the Dana Farber licensed antibodies, an option agreement and sponsored research agreement for compounds licensed from NeuPharma, and a sublicense agreement for the Jubilant family of patents. Checkpoint believes that by partnering with TGTX to develop these compounds in therapeutic areas outside of its business focus, it may substantially offset its preclinical costs and milestone costs related to the development and marketing of these compounds in solid tumor indications.

 

 

On September 14, 2016, the Company and Opus Point Health Innovations Fund (“OPHIF”) entered into a Credit Facility Agreement (the “Opus Credit Facility”). Fortress’s Chairman, President and Chief Executive Officer (Lindsay A. Rosenwald) and Fortress’s Executive Vice President, Strategic Development (Michael Weiss), are Co-Portfolio Managers and Partners of OPPM, an affiliate of OPHIF. As such, all of the disinterested directors of Fortress’s board of directors approved the terms of the Opus Credit Facility and related agreements.

 

On March 12, 2018, the Company and OPHIF amended and restated the Opus Credit Facility (the “A&R Opus Credit Facility”). The A&R Opus Credit Facility extends the maturity date of the notes issued under the Opus Credit Facility from September 14, 2018 by one year to September 14, 2019. The A&R Opus Credit Facility also permits the Company to make portions of interest and principal repayments in the form of shares of the Company’s common stock and/or in common stock of the Company’s publicly-traded subsidiaries, subject to certain conditions. Fortress retains the ability to prepay the Notes at any time without penalty. The notes payable under the A&R Opus Credit Facility continue to bear interest at 12% per annum. For the years ended December 31, 2018 

$0.3 million and $1.1 million, respectively (see Note 9).

 

NSC, a subsidiary of National (of which the Company owns 32.1%

), served as

in

connection with Checkpoint’s 2018 equity offering, which closed on March 12, 2018. As the

, NSC received a fee of approximately $million, or 8% on the gross proceedsised of $23.0 million.

 

For the year ended December 31, 2018, the Company raised approximately $21.7 million in promissory notes. National Securities Corporation (“NSC”), a wholly-owned subsidiary of National, and a related party as a result of the Company’s ownership of National, acted as the sole placement agent for the 2018 Venture Notes. The Company paid NSC a fee of $1.7 million during the year ended December 31, 2018, in connection with the 2018 Venture Notes. At December 31, 2018, the fee, which was recorded as debt discount on the Company’s Consolidated Balance Sheet and will be amortized over the life of the 2018 Venture Notes. In November 2018, the Company announced that it had an agreement to sell its majority holding in National, the sale was completed in February of 2019, see Note 3.

 

On March 17, 2017, the Company and NSC, a subsidiary of National, (entered into placement agency agreements with NAM Biotech Fund and NAM Special Situation Fund in connection with the sale of subordinated promissory notes (see Note 9). Pursuant to the terms of the agreements, NSC received a placement agent fee in cash of 10% of the debt raised and warrants equal to 10% of the aggregate principal amount of debt raised divided by the closing share price of the Company’s common stock on the date of closing.

 

For the year ended December 31, 2017, NSC earned a placement agent fee of $2.8 million and a Placement Agent Warrant to purchase 716,180 shares of the Company’s common stock, all of which are outstanding, with exercise prices ranging from $3.61 to $4.75. In November 2018, the Company announced that it had an agreement to sell its majority holding in National, of which NSC is a wholly owned subsidiary, the sale was completed in February of 2019, see Note 3.

 

On July 31, 2017 Caelum through NSC, a subsidiary of National, offered up to $10 million, convertible promissory notes to accredited investors (as defined under the U.S. Federal securities laws). Caelum raised $9.9 million in the offering, in three separate closings and paid a placement fee equal to NSC of 10% of the proceeds of the sale or $1.0 million. Additionally NSC received warrants to purchase a number of shares the Caelum’s Common Stock equal to 10% of the aggregate amount of shares underlying the Notes with a per share exercise price equal to 110% of the per share conversion price of the Notes; provided, however, that if no Note converts, the exercise price will be $75 million dollars divided by the total number of fully-diluted shares of Common Stock outstanding immediately prior to exercise of the warrant, giving effect to the assumed conversion of all options, warrants, and convertible securities of the Company

For the year ended December 31, 2017, NSC earned fees of approximately $1.0 million. 

In November 2018, the Company announced that it had an agreement to sell its majority holding in National, of which NSC is a wholly owned subsidiary, the sale was completed in February of 2019, see Note 3.

 

On June 26, 2017, Avenue completed an IPO in which NSC acted as co-manager and earned fees and commissions of approximately $2.3 million that were deducted from the proceeds. In November 2018, the Company announced that it had an agreement to sell its majority holding in National, of which NSC is a wholly owned subsidiary, the sale was completed in February of 2019, see Note 3.

Founders Agreement and Management Services Agreement

The Company has entered into Founders Agreements with each of the Fortress

listed in the table below. Pursuant to each Founders Agreement, in exchange for the time and capital expended in the formation of each

and the identification of specific assets the acquisition of which result in the formation of a viable emerging growth life science company, the Company will loan each such

an amount representing the up-front fee required to acquire assets. Each Founders Agreement has a term of 15 years, which upon expiration automatically renews for successive one-year periods unless terminated by the Company or a Change in Control (as defined in the Founders Agreement) occurs. In connection with each Founders Agreement the Company receives 250,000 Class A Preferred shares (except for that with Checkpoint, in which the Company holds Class A Common Stock). The Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) is identical to common stock other than as to voting rights, conversion rights and the PIK Dividend right (as described below). Each share of Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) is entitled to vote the number of votes that is equal to one and one-tenth (1.1) times a fraction, the numerator of which is the sum of (A) the shares of outstanding common stock and (B) the whole shares of common stock into which the shares of outstanding Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) are convertible and the denominator of which is the number of shares of outstanding Class A Preferred Stock (Class A Common Stock with respect to Checkpoint). Thus, the Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) will at all times constitute a voting majority. Each share of Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) is convertible, at the holder’s option, into one fully paid and nonassessable share of common stock of such

, subject to certain adjustments. The holders of Class A Preferred Stock (and the Class A Common Stock with respect to Checkpoint), as a class, are entitled receive on each effective date or “Trigger Date” (defined as the date that the Company first acquired, whether by license or otherwise, ownership rights to a product) of each agreement (each a “PIK Dividend Payment Date”) until the date all outstanding Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) is converted into common stock or redeemed (and the purchase price is paid in full), pro rata per share dividends paid in additional fully paid and nonassessable shares of common stock (“PIK Dividends”) such that the aggregate number of shares of common stock issued pursuant to such PIK Dividend is equal to two and one-half percent (2.5%) of such

 company’s fully-diluted outstanding capitalization on the date that is one (1) business day prior to any PIK Dividend Payment Date. The Company has reached agreements with several of the

to change the PIK Dividend Interest Payment Date to January 1 of each year - a change that has not and will not result in the issuance of any additional

common stock beyond that amount to which the Company would otherwise be entitled absent such change(s). The Company owns 100% of the Class A Preferred Stock (Class A Common Stock with respect to Checkpoint) of each

that has a Founders Agreement with the Company.

 

  

The following table summarizes, by subsidiary, the effective date of the Founders Agreements and PIK dividend or equity fee payable to the Company in accordance with the terms of the Founders Agreements, Exchange Agreements and the subsidiaries’ certificates of incorporation. 

 

 

Pursuant to the Founders’ Agreement, Caelum, in connection with each Convertible Note Closing during the three months ended September 30, 2017, issued to Fortress approximately 218,000 shares of its common stock representing the 2.5% fee or approximately $0.2 million.

 

On June 26, 2017, pursuant to the Founders’ Agreement, Avenue, in connection with its IPO, issued to Fortress approximately 158,000 shares or approximately $0.9 million of its common stock representing the 2.5% financing fee.

 

 

The following table summarizes, by subsidiary, the PIK dividend or equity fee recorded by the Company in accordance with the terms of the Founders Agreements, Exchange Agreements and the subsidiaries’ certificates of incorporation for the years ended December 31

2017 ($ in thousands):

 

 

Note 1: Includes 2019 PIK dividend accrued for the year ended December 31, 2018, as Type 1 subsequent event

Note 2: Includes 2018 PIK dividend accrued for the year ended December 31, 2017, as Type 1 subsequent event

Note 3: Pursuant to the terms of the agreement between Avenue and InvaGen Pharmaceuticals, Inc. during the option period PIK dividends will not be paid nor accrued.

 

 

 

Fees recorded in connection with the Company’s agreements with its subsidiaries are eliminated in consolidation. These include management services fees, issuance of common shares of partner

companies 

in

connection with third party raises and annual stock dividend or issuances on the anniversary date of respective Founders Agreements.

 

 

In May 2015, the Company entered into a full-service consulting agreement with Chord Advisors, LLC (“Chord”) to provide advisory accounting services. Under the terms of the agreement, the Company pays Chord $10,000 per month to provide technical accounting and financial reporting support. Either party upon 30-days written notice can terminate the agreement. Mustang, Checkpoint and Avenue are billed at a blended hourly rate, for services incurred. For the years ended December 31, 2018, and 2017, Mustang incurred approximately $82,000 and $90,000, respectively, Checkpoint incurred approximately $50,000 and $65,000, respectively, and Avenue incurred approximately $9,000 and $64,700, respectively, in hourly fees.