7. Licenses Acquired

In accordance with ASC 730-10-25-1, Research and Development, costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future use. The licenses purchased by Fortress and its partner companies require substantial completion of research and development, and regulatory and marketing approval efforts in order to reach technological feasibility. As such, for the June 30, 2021 and 2020, the purchase price of licenses acquired were classified as research and development-licenses acquired in the condensed consolidated statement of operations as reflected in the following table:

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Journey

On June 29, 2021 (the “Effective Date”), Journey entered a license, collaboration, and assignment agreement (the “DFD Agreement”) to obtain the global rights for the development and commercialization of a late-stage development modified release oral minocycline for the treatment of rosacea (“DFD-29”) with DRL. Pursuant to the terms and conditions of the DFD-29 Agreement, Journey agreed to pay an upfront payment of $10.0 million, of which $2.0 million (the “First Installment”) was paid upon execution and $8.0 million (the “Second Installment”) is payable 90 days following the Effective Date.  Additional contingent regulatory and commercial milestone payments totaling up to $163.0 million are also payable. Royalties ranging from the lower double digits to the lower teen digits are payable on net sales of the DFD-29 product.

Additionally, Journey is required to fund and oversee the Phase III clinical trials approximating $24.0 million, based upon the current development plan and budget.  DRL may terminate the DFD Agreement in the event that Journey fails to make the Second Installment payment, in which case (subject to certain narrow exceptions) DRL’s sole remedy under the DFD Agreement would be to keep the First Installment.

The DFD Agreement also includes contingent payments to be made to DRL in the event of a Journey IPO or the sale of Journey, See Note 6.

Mustang

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On April 1, 2021, Mustang entered into an exclusive license agreement with Mayo Foundation for Medical Education and Research (“Mayo Clinic”) for the use of an in-situ CAR-T technology, with the potential to be developed as an off-the-shelf technology. Pursuant to this agreement, Mustang paid an upfront fee of $0.8 million and will pay an annual maintenance fee of $25,000. Additional payments are due for each of two licensed products for the achievement of eleven development and commercial milestones totaling up to $92.6 million per product, and royalty payments in the mid-single digits are due on net sales of licensed product.

For the three and six months ended June 30, 2021, the Company recorded $0.8 million in research and development expenses in the condensed consolidated statements of operations pursuant to the terms of this agreement. For the three and six months ended June 30, 2020, the Company recorded no research and development expenses in the condensed consolidated statements of operations pursuant to the terms of this agreement.