14. Stockholders’ Equity

Common Stock

At the Company’s 2020 Annual Meeting of Stockholders held on June 17, 2020, its stockholders approved an amendment to its certificate of incorporation to increase the number of authorized shares of common stock available to issue by 50,000,000 to 150,000,000 with a par value of $0.001 per share. The amendment was filed with the Secretary of State of the State of Delaware on June 18, 2020.

Stock-based Compensation

The following table summarizes the stock-based compensation expense from stock option, employee stock purchase programs and restricted Common Stock awards and warrants for the three and nine months ended September 30, 2020 and 2019:

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For the three months ended September 30, 2020 and 2019, approximately $0.7 million and $1.2 million, respectively, of stock-based compensation expense was included in research and development expenses in connection with equity grants made to employees and consultants and approximately $2.5 million and $2.5 million, respectively, was included in general and administrative expenses in connection with grants made to employees, members of the board of directors and consultants.

For the nine months ended September 30, 2020 and 2019, approximately $2.5 million and $2.6 million, respectively, of stock-based compensation expense was included in research and development expenses in connection with equity grants made to employees and consultants and approximately $7.8 million and $7.8 million, respectively, was included in general and administrative expenses in connection with grants made to employees, members of the board of directors and consultants.

Equity Compensation Plans

At the Company’s 2020 Annual Meeting on June 30, 2020, the Company’s shareholders approved an amendment to the Company’s 2013 Stock Incentive Plan, as amended (“Stock Plan”) to increase common shares issuable under the Stock Plan by 3.0 million to 13.0 million.  For the nine months ended September 30, 2020, 4.2 million shares remain to be issued under the Stock Plan.

Stock Options

The following table summarizes Fortress stock option activities excluding activity related to Fortress partner companies:

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As of September 30, 2020, Fortress had no unrecognized stock-based compensation expense related to options.

Restricted Stock and Restricted Stock Units

The following table summarizes Fortress restricted stock awards and restricted stock units activities, excluding activities related to Fortress Companies:

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As of September 30, 2020 and 2019, the Company had unrecognized stock-based compensation expense related to restricted stock and restricted stock unit awards of approximately $17.5 million and $12.7 million, respectively, which is expected to be recognized over the remaining weighted-average vesting period of 3.9 years and 5.0 years, respectively.

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Warrants

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

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In connection with the Oaktree Note (see Note 10), the Company issued warrants to Oaktree and certain of its affiliates to purchase up to 1,749,450 shares of common stock at a purchase price of $3.20 per share (the “Oaktree Warrants”). Oaktree is entitled to additional warrants if at any time prior to the expiration of the Oaktree Warrants in event 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 Warrants expire on August 27, 2030 and may be net exercised at the holder’s election. The Company also agreed to file a registration statement on Form S-3 to register for resale the shares of common stock issuable upon exercise of the Warrants.

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The Company evaluated the accounting treatment of the Oaktree Warrants and determined that the Oaktree warrants met the scope exception of ASC 815-10-15-74(a) Derivatives and Hedging and therefore the warrants should be classified in stockholders’ equity.  As such the Company used a Black-Scholes model to value the Oaktree Warrants.  Utilizing the following inputs: term of 10 years, volatility of 86.8%, risk-free rate of return of 0.74% yielding a value of $4.8 million. ASC 470-20-25-2 Debt – Debt with Conversion and Other Options dictates that debt or stock issued with detachable warrants requires the proceeds to be allocated to the two instruments based on their relative fair values.  The relative fair value of the warrants was determined to be $4.4 million and was recorded as a component of Stockholders’ Equity in the Company’s condensed consolidated balance sheet at September 30, 2020.

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Employee Stock Purchase Plan

Eligible employees can purchase the Company’s Common Stock at the end of a predetermined offering period at 85% of the lower of the fair market value at the beginning or end of the offering period. The ESPP is compensatory and results in stock-based compensation expense.

As of September 30, 2020, 507,783 shares have been purchased and 492,217 shares are available for future sale under the Company’s ESPP. Share-based compensation expense recorded was approximately $38,000 and $18,000, respectively, for the three months ended September 30, 2020 and 2019, and approximately $0.1 million and $0.1 million, respectively, for the nine months ended September 30, 2020 and 2019.

Capital Raises

9.375% Series A Cumulative Redeemable Perpetual Preferred Stock Offering

On August 26, 2020, the Company closed on an underwritten public offering whereby it sold 666,666 shares of its 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock (Nasdaq: FBIOP) (the "Preferred Stock"), (plus a 45-day option to purchase up to an additional 66,666 shares, which was exercised in August 2020) at a price of $18.00 per share for gross proceeds of approximately $13.2 million, before deducting underwriting discounts and commissions and offering expenses of approximately $1.1 million.

On May 29, 2020, the Company closed on an underwritten public offering whereby it sold 555,556 shares of its 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock (Nasdaq: FBIOP) (the "Preferred Stock"), (plus a 45-day option to purchase up to an additional 83,333 shares, which was exercised in May 2020) at a price of $18.00 per share for gross proceeds of approximately $11.5 million, before deducting underwriting discounts and commissions and offering expenses of approximately $1.1 million.

On February 14, 2020, the Company announced the closing of an underwritten public offering, whereby it sold 625,000 shares of its Preferred Stock, (plus a 45-day option to purchase up to an additional 93,750 shares, which was exercised in February 2020) at a price of $20.00 per share for gross proceeds of approximately $14.4 million, before deducting underwriting discounts and commissions and offering expenses of approximately $1.3 million.

Cyprium 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock Offering

On August 28, 2020, Cyprium closed on an underwritten public offering whereby it sold 255,400 shares of its 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock (“Cyprium Perpetual Preferred Stock” or “Cyprium PPS”), plus an overallotment of an additional 64,600 shares, which was exercised on September 18, 2020, at a price of $25.00 per share for gross proceeds of $8.0 million, before deducting underwriting discounts and commissions and offering expenses of approximately $0.9 million (the “Cyprium Offering”).

Pursuant to the terms of the Cyprium PPS, shareholders on the record date are entitled to receive a monthly cash dividend of $0.19531 per share which yields an annual dividend of $2.34375 per share. The Cyprium PPS will automatically be redeemed upon the first (and only the first) bona fide, arm’s-length sale of a Priority Review Voucher (a “PRV”) issued by the FDA in connection with the approval of CUTX-101, Cyprium’s lead product candidate.  Upon the P   R V Sale, each share of Cyprium PPS will be automatically redeemed in exchange for a payment equal to twice (2x) the $25.00 liquidation preference, plus accumulated and unpaid dividends to, but excluding, the redemption date.

An optional exchange to Company Preferred Stock is available after 24 months from the issuance date so long as a sale of the PRV has not occurred.  Additionally, if a PRV Sale has not occurred by September 30, 2024 the Cyprium PPS is either automatically exchanged for Company Preferred Stock or cash at the discretion of Fortress.  The Cyprium PPS is fully and unconditionally guaranteed by Fortress.

Cyprium paid an initial dividend of $49,883 ($0.19531 per share) to shareholders of record on September 30, 2020.

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Checkpoint Underwritten Offering

In September 2020, Checkpoint completed an underwritten public offering in which it sold 7,321,429 shares of its common stock at a price of $2.80 per share for gross proceeds of approximately $20.5 million. Total net proceeds from the offering were approximately $18.9 million, net of underwriting discounts and offering expenses of approximately $1.6 million. The shares were sold under a shelf registration statement on Form S-3 that Checkpoint filed in November 2017 and was declared effective in December 2017 (“the Checkpoint S-3”).

Mustang Underwritten Offering

In June 2020, Mustang completed an underwritten public offering in which it sold 11,455,604 shares of its common stock at a price of $3.25 per share for gross proceeds of approximately $37.2 million. Total net proceeds from the offering were approximately $34.9 million, net of underwriting discounts and offering expenses of approximately $2.3 million. The shares were sold under Mustang’s S-3.

At-the-Market Offering

On June 28, 2019, the Company entered into an At Market Issuance Sales Agreement ("2019 Common ATM"), with Cantor Fitzgerald & Co., Oppenheimer & Co., Inc., H.C. Wainwright & Co. Inc., Jones Trading Institutional Services LLC and B. Riley, as selling agents, governing potential sales of the Company's common stock.

The shares of common stock were sold under the Company’s shelf registration statement on Form S-3 originally filed on July 6, 2018 and declared effective July 23, 2019 (the “2019 Shelf”) through May 27, 2020.

On May 18, 2020, the Company filed a new shelf registration statement on Form S-3, which was declared effective on May 26, 2020 (the "2020 Shelf"). In connection with the 2020 Shelf, the Company entered into an At Market Issuance Sales Agreement ("2020 Common ATM"), with Cantor Fitzgerald & Co., Oppenheimer & Co., Inc., H.C. Wainwright & Co. Inc., B. Riley and Dawson James Securities, Inc., as selling agents, governing potential sales of the Company's common stock. ATM sales commencing on June 1, 2020 were made under the 2020 Shelf.

For the nine-month period ended September 30, 2020, the Company issued approximately 16.4 million shares of common stock at an average price of $2.74 per share for gross proceeds of $44.8 million.  In connection with these sales, the Company paid aggregate fees of approximately $1.6 million.  Approximately $29.5 million of securities remain available for sale under the 2020 Shelf at September 30, 2020.

Mustang At-the-Market Offering

On July 13, 2018, Mustang filed a shelf registration statement No. 333-226175 on Form S-3, as amended on July 20, 2018 (the "2018 Mustang S-3"), which was declared effective in August 2018. Under the 2018 Mustang S-3, Mustang may sell up to a total of $75.0 million of its securities. In connection with the 2018 Mustang S-3, Mustang entered into an At-the-Market Issuance Sales Agreement (the "Mustang ATM") with B. Riley FBR, Inc., Cantor Fitzgerald & Co., National Securities Corporation, and Oppenheimer & Co. Inc. (each an "Agent" and collectively, the "Agents"), relating to the sale of shares of common stock. Under the Mustang ATM, Mustang pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of Mustang common stock.

On August 16, 2019, Mustang filed a shelf registration statement No. 333-233350 on Form S-3, (the "2019 Mustang S-3"), which was declared effective on September 30, 2019. Under the 2019 Mustang S-3, Mustang may sell up to a total of $75.0 million of its securities. On July 20, 2020, Mustang entered into Amendment No. 1 to the Mustang ATM with the Agents to reflect the new registration statement.

During the nine months ended September 30, 2020, Mustang issued approximately 7.2 million shares of common stock at an average price of $3.56 per share for gross proceeds of $25.6 million under the Mustang ATM. In connection with these sales, Mustang paid aggregate fees of approximately $0.5 million for net proceeds of approximately $25.1 million. During the nine months ended September 30, 2019, Mustang issued approximately 3.5 million shares of common stock at an average price of $6.42 per share for gross proceeds of $22.5 million under the Mustang ATM. In connection with these sales, Mustang paid aggregate fees of approximately $0.5 million for net proceeds of approximately $22.0 million. Pursuant to the Founders Agreement, Mustang issued 117,405 shares of common stock to Fortress at a weighted average price of $3.56 per share for the nine months ended September 30, 2020 for the Mustang ATM offering noted above. During the nine months ended September 30, 2019, Mustang issued 87,656 shares of common stock to Fortress at a weighted average price of $6.42 per share in connection with the Mustang ATM.

Approximately $32.6 million of the Mustang shelf remains available for sale under the 2019 Mustang S-3, following the offerings noted above. As of September 30, 2020, the 2018 Mustang S-3 is no longer available for sales of securities.

Checkpoint At-the-Market Offering

Under the Checkpoint S-3, Checkpoint may sell up to a total of $100 million of its securities. In connection with the Checkpoint S-3, Checkpoint entered into an At-the-Market Issuance Sales Agreement (the "Checkpoint ATM") with Cantor Fitzgerald & Co., Ladenburg Thalmann & Co. Inc. and H.C. Wainwright & Co., LLC (each a "Checkpoint Agent" and collectively, the "Checkpoint Agents"), relating to the sale of shares of common stock. Under the Checkpoint ATM, Checkpoint pays the Checkpoint Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of Checkpoint common stock.

During the nine months ended September 30, 2020, Checkpoint sold a total of 3,614,344 shares of common stock under the Checkpoint ATM for aggregate total gross proceeds of approximately $8.7 million at an average selling price of $2.40 per share, resulting in net proceeds of approximately $8.4 million after deducting commissions and other transaction costs.

Pursuant to the Founders Agreement, Checkpoint issued 273,379 shares of common stock to Fortress at a weighted average price of $2.92 per share for the Checkpoint ATM offerings and the Checkpoint Underwritten Offering, both noted above.

Approximately $12.3 million of the Checkpoint shelf remains available for sale under the Checkpoint S-3, following the offerings noted above.

Share Repurchase Program

On March 23, 2020, the Company announced that its Board of Directors had approved a share repurchase program of the Company's outstanding Preferred Stock in an aggregate amount of up to $5.0 million. Repurchases under the program were made in the open market or through privately-negotiated transactions until the earlier to occur of the repurchase of $5.0 million of the Company's Preferred Stock or the close of trading on May 31, 2020, subject to applicable laws and regulations. The program did not commit the Company to repurchase any shares of Preferred Stock. As of September 30, 2020, 5,000 Preferred Stock shares were repurchased and retired under this program for total consideration of $0.1 million, net of fees of approximately $2,000.