Fortress Biotech, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

Stockholders' Equity

6 Months Ended

Jun. 30, 2015

Stockholders' Equity Note [Abstract]

Shareholders' Equity and Share-based Payments

12. Stockholders’ Equity

Stock-based Compensation

As of June 30, 2015, the Company had three equity compensation plans: the Fortress Biotech, Inc. 2007 Stock Incentive Plan, the Fortress Biotech, Inc. 2013 Stock Incentive Plan, and the Fortress Biotech, Inc. 2012 Employee Stock Purchase Plan.

The following table summarizes the stock-based compensation expense from stock option awards, restricted common stock awards, employee stock purchase programs and warrants granted by Fortress for the three and six months ended June 30, 2015 and 2014:

	For the three months ended June 30,				For the six months ended June 30,
($ in thousands)	2015		2014		2015		2014
Employee awards	$	1,525	$	1,452	$	2,988	$	2,574
Non-employee awards		7		11		14		24
Fortress Companies (1)		35		-		393		-
Total stock-based compensation expense	$	1,574	$	1,463	$	3,395	$	2,598

(1)

Includes for Avenue $22,900 for compensation expense on stock grants, Coronado SO $178,500 for stock a grant in connection with a license acquired, Checkpoint $32,500 for a stock grant in connection with a license acquired and $12,242 for compensation expense and Mustang $147,000 for a stock grant in connection with the license acquired.

For the three months ended June 30, 2015 and 2014, $0.3 million of stock-based compensation expenses was included in research and development expenses and $1.3 million was included in general and administrative expenses, and $0.3 million was included in research and development expenses and $1.2 million was included in general and administrative expenses, respectively in the unaudited condensed consolidated statements of operations.

For the six months ended June 30, 2015 and 2014, $0.5 million of stock-based compensation expenses was included in research and development expenses and $2.5 million was included in general and administrative expenses, and $0.6 million was included in research and development expenses and $2.0 million was included in general and administrative expenses, respectively in the unaudited condensed consolidated statements of operations.

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

						Weighted average
				Total weighted		remaining
		Weighted average		average intrinsic		contractual life
($ in thousands)	Number of shares	exercise price		value		(years)
Options vested and expected to vest at December 31, 2014	2,164,365	$	4.69	$	-	7.38
Options granted	-		-		-
Options exercised	(100,000)		2.15		1.21
Options cancelled	-		-		-
Options vested and expected to vest at June 30, 2015	2,064,365	$	4.82	$	-	7.20
Options vested and exercisable	1,747,698	$	4.75	$	-	6.79

The following table summarizes Fortress’ restricted stock award and restricted stock unit activity, excluding activity related to Fortress Companies:

		Weighted average
		grant date fair
	Number of shares	value
Unvested balance at December 31, 2014	8,287,384	$	2.33
Restricted stock granted	200,000		3.04
Restricted stock vested	(783,115)		2.43
Restricted stock units granted	61,000		2.34
Restricted stock units vested	(25,000)		2.19
Unvested balance at June 30, 2015	7,740,269	$	2.34

As of June 30, 2015, the Company had unrecognized stock-based compensation expense related to unvested stock options and restricted stock awards and restricted stock units of $0.7 million and $14.3 million, respectively, which is expected to be recognized over the remaining weighted-average vesting period of 0.4 years and 2.5 years, respectively.

Warrants

As of June 30, 2015 and December 31, 2014 the Company had vested warrants to purchase 685,061 shares of common stock with a weighted average exercise price of $6.65.

Deferred Compensation Plan

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 six months ended June 30, 2015, certain non-employee directors elected to defer 250,000 restricted stock awards under this plan.

Employee Stock Purchase Plan

As of June 30, 2015, 77,875 shares have been purchased and 122,125 shares are available for future sale under the Employee Stock Purchase Plan (“ESPP”). The Company recognized share-based compensation expense related to this plan of $8,465 and $7,128 for the three months ended June 30, 2015 and 2014, and $14,848 and $15,746 for the six months ended June 30, 2015 and 2014, respectively.

Fortress Companies

Checkpoint

In March 2015, Checkpoint issued a restricted stock grant to Dr. Wayne Marasco for services in connection with their scientific advisory board. Dr. Marasco was issued a grant for 1.5 million shares, which vest 25% on the first anniversary of the grant date and monthly thereafter for 48 months. An independent consultant valued the restricted stock Checkpoint granted to Dr. Marasco utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 44.8% and a weighted average cost of capital of 30%, net of debt utilized resulting in a value of $0.065 per share. For the three months and six months ended June 30, 2015, Checkpoint recorded expense of $9,000 and $12,000, respectively.

Avenue

During the three months ended June 30, 2015, Avenue granted 150,000 shares to two consultants in exchange for services provided and 1.0 million shares to its acting Chief Executive Officer, Lucy Lu, who is also Chief Financial Officer of Fortress, for services provided. The stock price was determined utilizing a discounted cash flow model to determine the weighted market value of invested capital, discounted by a lack of marketability of 44.8%, weighted average cost of capital of 30%, and net of debt utilized, resulting in a $0.146 value per share. Grants issued to the consultants were immediately vested. The grant issued to Dr. Lucy Lu vests 50% in four annual equal tranches of 12.5%, with the remaining 50% vesting upon the achievement of certain performance goals. In connection with these grants for the three and six months ended June 30, 2015, approximately $23,000 was recorded in expense on the Unaudited Condensed Consolidated Statements of Operations.