| Related Party Transactions |
16. Related Party Transactions
The Company’s Chairman, President and Chief Executive Officer, individually and through certain trusts over which he has voting and dispositive control, beneficially owned approximately 10.8% of the Company’s issued and outstanding Common Stock as of March 31, 2021. The Company’s Executive Vice Chairman, Strategic Development owns approximately 11.6% of the Company’s issued and outstanding Common Stock as of March 31, 2021.
Shared Services Agreement with TG Therapeutics, Inc (“TGTX”)
In July 2015, TGTX and the Company entered into an arrangement to share the cost of certain research and development employees. The Company’s Executive Vice Chairman, Strategic Development, is Executive Chairman and Interim Chief Executive Officer of TGTX. Under the terms of the Agreement, TGTX will reimburse the Company for the salary and benefit costs associated with these employees based upon actual hours worked on TGTX related projects. In connection with the shared services agreement, the Company invoiced TGTX $0.1 million and $0.1 million, and received payments of $0.1 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively.
Desk Space Agreements with TGTX and OPPM
In connection with the Company’s Desk Space Agreements for the New York, NY office space, for the three ended March 31, 2021 and 2020, the Company had paid $0.7 million and $0.7 million in rent, respectively, and invoiced TGTX and OPPM approximately $0.4 million and $0.4 million and nil and nil respectively, for their prorated share of the rent base. At March 31, 2021, there were no amounts due related to this arrangement from TGTX or 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. For the three months ended March 31, 2021 and 2020, the Company had paid approximately $0.1 million and $0.1 million in rent for the Waltham, MA office, and invoiced TGTX approximately $28,000 and $29,000, respectively.
Avenue Credit Facility Agreement
On June 12, 2020, Avenue, the Company and InvaGen entered into a Facility Agreement (“Avenue Facility Agreement”), under which, beginning on October 1, 2020, Avenue could have borrowed up to $2.0 million collectively from the Company and InvaGen, subject to certain conditions set forth therein. The Company’s commitment amount was $0.8 million, and InvaGen’s was $1.2 million, and a 7% per annum interest rate applied (payable on the last day of each fiscal quarter. The Avenue Facility Agreement expired on April 29, 2021 and went undrawn. As of March 31, 2021, there were no amounts drawn by Avenue on the Avenue Facility Agreement.
Founders Agreement
The Company has entered into Founders Agreements and, in some cases, Exchange Agreements with certain of its subsidiaries as described in the Company's Form 10-K for the year ended December 31, 2020, filed with the SEC on March 31, 2021. The following table summarizes, by partner company, 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:
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PIK Dividend as |
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a % of fully |
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diluted |
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outstanding |
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Class of Stock |
Fortress Partner Company |
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Effective Date 1 |
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capitalization |
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Issued |
Helocyte |
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March 20, 2015 |
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2.5 |
% |
Common Stock |
Avenue |
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February 17, 2015 |
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0.0 |
%2 |
Common Stock |
Mustang |
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March 13, 2015 |
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2.5 |
% |
Common Stock |
Checkpoint |
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March 17, 2015 |
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0.0 |
%3 |
Common Stock |
Cellvation |
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October 31, 2016 |
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2.5 |
% |
Common Stock |
Baergic |
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December 17, 2019 4 |
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2.5 |
% |
Common Stock |
Cyprium |
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March 13, 2017 |
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2.5 |
% |
Common Stock |
Aevitas |
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July 28, 2017 |
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2.5 |
% |
Common Stock |
Oncogenuity |
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April 22, 2020 4 |
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2.5 |
% |
Common Stock |
FBIO Acquisition Corp. VIII |
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November 7, 2017 4 |
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0.0 |
% |
Common Stock |
Note 1: |
Represents the effective date of each subsidiary’s Founders Agreement. Each PIK dividend and equity fee is payable on the annual anniversary of the effective date of the original Founders Agreement or has since been amended to January 1 of each calendar year. |
Note 2: |
Concurrently with the execution and delivery of the Stock Purchase and Merger Agreement (“Avenue SPMA”) entered into between, Avenue, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”) (together, the “ SPMA Parties”), the SPMA Parties entered into a waiver agreement (the “Waiver Agreement”), pursuant to which the Company irrevocably waived its right to receive the annual dividend of Avenue’s common shares under the terms of the Class A preferred stock and any fees, payments, reimbursements or other distributions under the management services agreement between the Company and Avenue and the Founders Agreement, for the period from the effective date of the Waiver Agreement until such time as InvaGen beneficially owns less than 75% of the shares of Avenue common stock it acquired under the first closing of the Avenue SPMA. Pursuant to the Waiver Agreement, immediately prior to the closing of the Merger Transaction contemplated under the Avenue SPMA, the Company will convert all of its preferred shares into common shares pursuant to the terms of the certificate of incorporation of Avenue, as amended from time to time. |
Note 3: |
Instead of a PIK dividend, Checkpoint pays the Company an annual equity fee in shares of Checkpoint’s common stock equal to 2.5% of Checkpoint’s fully diluted outstanding capitalization. |
Note 4: |
Represents the Trigger Date, the date that the Fortress partner company first acquires, whether by license or otherwise, ownership rights in a product. |
Management Services Agreements
The Company has entered in Management Services Agreements (the “MSAs”) with certain of its partner companies as described in the Company’s Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020. The following table summarizes the effective date of the MSA and the annual consulting fee payable by the partner company to the Company in quarterly installments:
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Annual MSA Fee |
Fortress partner company |
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Effective Date |
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(Income)/Expense |
Helocyte |
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March 20, 2015 |
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$ |
500 |
Avenue 1 |
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February 17, 2015 |
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— |
Mustang |
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March 13, 2015 |
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500 |
Checkpoint |
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March 17, 2015 |
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500 |
Cellvation |
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October 31, 2016 |
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500 |
Baergic |
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March 9, 2017 |
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500 |
Cyprium |
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March 13, 2017 |
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500 |
Aevitas |
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July 28, 2017 |
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500 |
Oncogenuity |
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February 10, 2017 |
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500 |
FBIO Acquisition Corp. VIII |
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November 7, 2017 |
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500 |
Fortress |
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(4,500) |
Consolidated (Income)/Expense |
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$ |
— |
Note 1: |
Concurrently with the execution and delivery of the Avenue SPMA entered into among, Avenue, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”) (together, the “SPMA Parties”), the SPMA Parties entered into a waiver agreement (the “Waiver Agreement”), pursuant to which the Company irrevocably waived its right to receive the annual dividend of Avenue’s common shares under the terms of the Class A preferred stock and any fees, payments, reimbursements or other distributions under the management services agreement between the Company and Avenue and the Founders Agreement, for the period from the effective date of the Waiver Agreement until such time as InvaGen beneficially owns less than 75% of the shares of Avenue common stock it acquired under the first closing of the Avenue SPMA. Pursuant to the Waiver Agreement, immediately prior to the closing of the Merger Transaction contemplated under the Avenue SPMA, the Company will convert all of its preferred shares into common shares pursuant to the terms of the certificate of incorporation of Avenue, as amended from time to time. (See Note 3). |
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