Fortress Biotech, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

Stockholders' Equity

12 Months Ended

Dec. 31, 2016

Stockholders' Equity Note [Abstract]

Stockholders’ Equity

15. Stockholders' Equity

Common Stock

The Company’s Certificate of Incorporation, as amended, authorizes the Company to issue 15,000,000 shares of $0.001 par value Preferred Stock (none of which is outstanding at December 31, 2016 and 2015) and 100,000,000 shares of $0.001 par value Common Stock.

The terms, rights, preference and privileges of the Common Stock are as follows:

Voting Rights

Each holder of Common Stock is entitled to one vote per share of Common Stock held on all matters submitted to a vote of the stockholders, including the election of directors. The Company’s certificate of incorporation and bylaws do not provide for cumulative voting rights.

Dividends

Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of the Company’s outstanding shares of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by the Company’s Board of Directors out of legally available funds.

Liquidation

In the event of the Company’s liquidation, dissolution or winding up, holders of Common Stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of the Company’s debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of Preferred Stock.

Rights and Preference

Holders of the Company’s Common Stock have no preemptive, conversion or subscription rights, and there is no redemption or sinking fund provisions applicable to our Common Stock. The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of the Company’s preferred stock that are or may be issued.

Fully Paid and Nonassessable

All of the Company’s outstanding shares of Common Stock are fully paid and nonassessable.

Stock-Based Compensation including National

As of December 31, 2016, the Company had four equity compensation plans: the Fortress Biotech, Inc. 2007 Stock Incentive Plan (the “2007 Plan”), the Fortress Biotech, Inc. 2013 Stock Incentive Plan, as amended (the “2013 Plan”), the Fortress Biotech, Inc. 2012 Employee Stock Purchase Plan (the “ESPP”) and the Fortress Biotech, Inc. Long Term Incentive Plan (“LTIP”). In 2007, the Company’s Board of Directors adopted and stockholders approved the 2007 Plan authorizing the Company to grant up to 6,000,000 shares of Common Stock to eligible employees, directors, and consultants in the form of restricted stock, stock options and other types of grants. In 2015, the Company’s Board of Directors and stockholders approved an increase of 7,700,000 shares for the 2013 Plan bringing the total number of shares approved under this plan to 10,000,000.

The purpose of the Company’s equity compensation plans is to provide for equity awards as part of an overall compensation package of performance-based rewards to attract and retain qualified personnel. Such awards include, without limitation, options, stock appreciation rights, sales or bonuses of restricted stock, restricted stock units or dividend equivalent rights, and an award may consist of one such security or benefit, or two or more of them in any combination or alternative. Vesting of awards may be based upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. An aggregate of 9,978,201 shares were granted under both the 2007 and 2013 plans, net of cancellations, and 6,021,799 shares were available for issuance as of December 31, 2016.

Incentive and nonstatutory stock options are granted pursuant to option agreements adopted by the plan administrator. Options generally have 10-year contractual terms and vest in three equal annual installments commencing on the grant date.

The Company estimates the fair value of stock option grants using a Black-Scholes option pricing model. In applying this model, the Company uses the following assumptions:

•

Risk-Free Interest Rate: The risk-free interest rate is based on the yields of United States Treasury securities with maturities similar to the expected term of the options for each option group.

•

Volatility: As the Company has a limited trading history for its Common Stock, the expected stock price volatility for its Common Stock was estimated by incorporating two years of the Company’s historical volatility and the average historical price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of several public companies in the biopharmaceutical industry similar in size, stage of life cycle and financial leverage. The Company’s historical volatility is weighted with that of the peer group and that combined historical volatility is weighted 80% with a 20% weighting of the Company’s implied volatility, which is obtained from traded options of the Company’s stock. The Company intends to continue to consistently apply this process using the same or similar public companies until it has sufficient historical information regarding the volatility of its Common Stock that is consistent with the expected life of the options. Should circumstances change such that the identified companies are no longer similar to the Company, more suitable companies whose share prices are publicly available would be utilized in the calculation.

•

Expected Term: Due to the limited exercise history of the Company’s stock options, the Company determined the expected term based on the Simplified Method under SAB 107 and the expected term for non-employees is the remaining contractual life for both options and warrants.

•

Expected Dividend Rate: The Company has not paid and does not anticipate paying any cash dividends in the near future.

The fair value of each option award was estimated on the grant date using the Black-Scholes option-pricing model and expensed under the straight line method. Journey issued stock options during the years ended December 31, 2016 and 2015.

The fair value for non-employee stock based awards are marked-to-market on each valuation date until vested using the Black-Scholes pricing model.

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 years ended December 31, 2016, 2015 and 2014:

	For the Years Ended December 31,
($ in thousands)	2016		2015		2014
Employee awards	$	7,386	$	8,130	$	5,492
Executive awards of Fortress Companies' stock		-		2,228		-
Non-employee awards		33		33		54
Fortress Companies (1), (2)		4,709		3,900		-
Total stock-based compensation expense	$	12,128	$	14,291	$	5,546

(1)

Consists of approximately $28,000 of Avenue's compensation expenses, approximately $3.9 million of Checkpoint's compensation expense, approximately $0.5 million of JMC's compensation expenses, approximately $0.3 million of Helocyte's compensation expenses, approximately $7,000 of Cellvation's compensation expenses and approximately $42,000 of National Holdings' compensation expenses on stock and option grants for the year ended December 31, 2016

(2)	Consists of approximately $50,400 of Avenue's compensation expenses, approximately $3.3 million of Checkpoint's compensation expense, and approximately $0.6 million of JMC's compensation expenses on stock grants for the year ended December 31, 2015.

In February 2016, the Company modified the vesting schedule on the 1.9 million share grant made to its Chief Executive Officer and Executive Chair, Strategic Development in December 2013, and the 3.9 million share inducement grant made to its Executive Chair, Strategic Development in February 2014. The modification extended the vesting on the first tranche of all the grants by twelve months. The impact of the modification was $0.4 million, which will be amortized over the remaining life of the award.

For the years ended December 31, 2016, 2015 and 2014, $4.7 million, $5.8 million and $1.1 million was included in research and development expenses, and $7.4 million, $8.5 million and $4.4 million was included in general and administrative expenses, respectively.

Options

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

					Total weighted		Weighted average
			Weighted average		average intrinsic		remaining contractual
	Number of shares		exercise price		value		life (years)
Options vested and expected to vest at December 31, 2015		1,779,365	$	4.37	$	666,396		6.32
Forfeited		(648,864)		0.51		-		-
Options vested and expected to vest at December 31, 2016		1,130,501	$	3.73	$	602,451		4.93
Exercisable as of December 31, 2016		1,105,501	$	3.71	$	602,451		4.91

During the years ended December 31, 2016 and 2015, exercises of stock options resulted in total proceeds of approximately nil and $0.2 million, respectively.

Restricted Stock

Stock-based compensation expense from restricted stock awards and restricted stock units for the years ended December 31, 2016, 2015, 2014 was $9.9 million, $6.9 million and $4.0 million, respectively.

During 2014, the Company granted 4,343,692 restricted shares of its Common Stock to executives, employees and directors of the Company. The fair value of the restricted stock awards issued during 2014 of $11.6 million was estimated on the grant date using the Company’s stock price on the date of grant. The 2014 restricted stock awards vest upon both the passage of time as well as meeting certain performance criteria. Restricted stock awards are expensed under the straight line method over the vesting period.

Senior Vice President (“SVP”) Grant

On July 15, 2015, the Company’s SVP, Biologics Operations, was granted 1.0 million restricted stock units which vest 10% immediately and an additional 10% per year over four years commencing the later of trading availability, under the Company’s Insider Trading Policy, or July 15, 2015. The remaining 50% vests in accordance with the achievement of certain performance goals. As a condition of this grant, the SVP surrendered his option grant dated June 2013 for 200,000 shares. On the date of modification, the incremental value of the new award of $3.3 million plus the unamortized expense of the old award of $0.4 million yielded a value of $3.7 million to be amortized over the life of the restricted stock units. For the year ended December 31, 2016 and 2015, 150,000 and 300,000, respectively restricted stock units vested resulting in a charge of $1.9 million on the Consolidated Statements of Operations.

Acceleration of Grants to Former Director

On July 15, 2015, the Board of Directors accelerated the vesting of 133,000 restricted shares of Fortress common stock granted to a former member of the Board of Directors for his service on the Board through July 15, 2015. In connection with this acceleration, Fortress recorded a charge of approximately $0.4 million during 2015 on the Consolidated Statements of Operations.

Restricted Stock Unit Grant to a Current Director

During 2016, the Company granted 1,240,868 restricted shares of its Common Stock to executives and directors of the Company and 641,000 restricted stock units to employees and non-employees of the Company. The fair value of the restricted stock awards issued during 2016 of $3.4 million and the fair value of the restricted stock unit awards issued during 2016 of $1.8 million were estimated on the grant date using the Company’s stock price as of the grant date. The 2016 restricted stock awards and restricted stock unit awards vest upon both the passage of time as well as meeting certain performance criteria. Restricted stock awards and restricted stock unit awards are expensed under the straight line method over the vesting period.

On July 15, 2015, a Director joined the Board of Directors. In connection therewith, Fortress granted the Director 50,000 restricted stock units, which vest 25% per year over the next four years. At the grant date, the Director elected to defer 40,000 restricted stock units. The deferral of restricted stock units does not have any impact on the consolidated financial statements.

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

			Weighted
			average
	Number of shares		grant price
Unvested balance at December 31, 2015		8,757,935	$	2.47
Restricted stock granted		1,240,868		2.77
Restricted stock cancelled		(33,333)		2.69
Restricted stock vested		(173,333)		2.73
Restricted stock units granted		641,000		2.93
Restricted stock units cancelled		(111,750)		3.58
Restricted stock units vested		(227,292)		3.56
Unvested balance at December 31, 2016		10,094,095	$	2.49

As of December 31, 2016, the Company had unrecognized stock-based compensation expense related to all unvested restricted stock and restricted stock unit awards of $4.1 million and $0.9 million, respectively, which is expected to be recognized over the remaining weighted-average vesting period of 2.2 years and 2.0 years, respectively.

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 year ended December 31, 2016, certain non-employee directors elected to defer an aggregate of 230,000 restricted stock awards under this plan.

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.

On June 2, 2014, the Company issued 7,139 shares of Common Stock under the ESPP. The shares were issued at $1.45 per share, which represents 85% of the closing price of $1.71 of the Common Stock on June 2, 2014. On December 1, 2014, the Company issued 6,841 shares of Common Stock under the ESPP. The shares were issued at $1.80 per share, which represents 85% of the closing price of $2.12 of the Common Stock on December 1, 2014.

On June 1, 2015, the Company issued 14,681 shares of Common Stock under the ESPP. The shares were issued at $1.80 per share, which represents 85% of the closing price of $2.12 of the Common Stock on December 1, 2014. On December 1, 2015, the Company issued 13,317 shares of Common Stock under the ESPP. The shares were issued at $2.41 per share, which represents 85% of the closing price of $2.84 of the Common Stock on June 1, 2015.

On June 1, 2016, the Company issued 33,958 shares of Common Stock under the ESPP. The shares were issued at $2.40 per share, which represents 85% of the closing price of $2.82 of the Common Stock on May 31, 2016. On December 1, 2016, the Company issued 52,769 shares of Common Stock under the ESPP. The shares were issued at $2.03 per share, which represents 85% of the closing price of $2.39 of the Common Stock on November 30, 2016.

As of December 31, 2016, 177,919 shares have been purchased and 22,081 shares are available for future sale under the Company’s ESPP. The Company recognized share-based compensation expense of $0.1 million, $45,000 and $25,000 for the years ended December 31, 2016, 2015 and 2014, respectively.

Warrants

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

					Total weighted		Weighted average
			Weighted average		average intrinsic		remaining contractual
	Number of shares		exercise price		value		life (years)
Outstanding as of December 31, 2015		569,835	$	6.31	$	120,700		1.84
Granted		1,880,000		3.00		-		5.65
Expired		(161,382)		6.30		-		-
Exercised (*)		(25,000)		1.37		33,250		-
Outstanding as of December 31, 2016		2,263,453	$	3.62	$	79,800		4.74
Exercisable as of December 31, 2016		483,453	$	5.88	$	79,800		2.13

(*) - cashless

All stock-based expense in connection with these warrants has been recognized prior to January 1, 2016.

Long-Term Incentive Program (“LTIP”)

On July 15, 2015, the stockholders approved the LTIP for the Company’s Chairman, President and Chief Executive Officer, Dr. Rosenwald, and Executive Vice Chairman, Strategic Development, Mr. Weiss. The LTIP consists of a program to grant equity interests in the Company and in the Company’s subsidiaries, and a performance-based bonus program that is designed to result in performance-based compensation that is deductible without limit under Section 162(m) of the Internal Revenue Code of 1986, as amended.

On July 15, 2015 and on October 31, 2016, the following grants of 500,000 warrants each were made to Dr. Rosenwald and Mr. Weiss for their services to the Company:

											Exercise
2015	Warrant Shares		Risk Free Rate			Volatilty			Life		price		Fair Value
Mustang		1,000,000		2.36	%		106.11	%		10	$	0.147	$	135
Checkpoint		1,000,000		2.36	%		106.11	%		10	$	0.129	$	118
Avenue		1,000,000		2.36	%		106.11	%		10	$	0.146	$	134
CNDO SO		1,000,000		2.36	%		106.11	%		10	$	1.190	$	1,091
Helocyte		1,000,000		2.36	%		106.11	%		10	$	0.097	$	89
JMC		1,000,000		2.36	%		106.11	%		10	$	0.650	$	596
Escala		1,000,000		2.36	%		106.11	%		10	$	0.071	$	65
2016
Cellvation		1,000,000		2.86	%		70	%		9	$	0.024	$	18,075

The exercise price, which approximates the fair value, was determined by the Company 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.

On January 1, 2016, the Compensation Committee granted 510,434 shares each to Dr. Rosenwald and Mr. Weiss. These equity grants, made in accordance with the LTIP, represent one percent (1%) of total outstanding shares of the Company and were granted in recognition of their performance in 2015. The shares are subject to repurchase by the Company until both of the following conditions are met: (i) the Company’s market capitalization increases by a minimum of $100.0 million, and (ii) the employee is either in the service of the Company as an employee or as a Board member (or both) on the tenth anniversary of the LTIP, or the eligible employee has had an involuntary separation from service (as defined in the LTIP). The Company’s repurchase option on such shares will also lapse upon the occurrence of a corporate transaction (as defined in the LTIP) if the eligible employee is in service on the date of the corporate transaction. Since these awards contain a market condition as defined in ASC 718, Compensation - Stock Compensation, the Company valued the award using the Monte Carlo simulation model. The model generated the fair value of the award at the grant date of $2.8 million for both grants, which is amortized over the vesting period, ten years from the date of the LTIP, subject to the above performance condition being probable of being met. For the year ended December 31, 2016, the Company recorded expense of approximately $0.3 million. No expense was recorded in 2015.

Fortress Companies

Checkpoint Therapeutics, Inc.

Checkpoint has a long term incentive plan. In March 2015, Checkpoint issued a restricted stock grant to Dr. Marasco for services in connection with its Scientific Advisory Board. Dr. Marasco was issued a grant for 1.5 million shares of Checkpoint common stock, which vest 25% on the first anniversary of the grant date and monthly thereafter for 48 months. The Company valued the restricted stock 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%, resulting in a value of $0.065 per share on grant date. At December 31, 2015, the Company re-measured this non-employee restricted stock utilizing a market approach, based upon a third party financing. Such valuation resulted in a value of $4.39 per share utilizing a volatility of 83%, a risk free rate of return of 1.5% and a term of five years. At December 31, 2016, the Company re-measured this non-employee restricted stock utilizing a market approach, based upon a third party financing. Such valuation resulted in a value of $5.43 per share utilizing a volatility of 80%, a risk free rate of return of 2.10% and a term of five years. For the years ended December 31, 2016 and 2015, in connection with this grant, Checkpoint re-measured this non-employee grant and recorded expense of approximately $2.5 million and $3.0 million, respectively, in research and development expenses on the Consolidated Statements of Operations.

Certain Checkpoint employees and directors have been awarded restricted stock under Checkpoint’s 2015 Incentive Plan. Checkpoint recorded stock-based compensation expense of $1.4 million and $0.3 million, respectively, for the years ended December 31, 2016 and 2015.

During 2016, 60,000 stock options were granted to a consultant under Checkpoint’s 2015 Incentive Plan with a $5.43 exercise price and a ten-year life. The stock options were valued using a Black-Scholes model with the following assumptions; volatility of 100.65%, risk free rate of 2.6% and effective life of 10 years. Checkpoint recorded stock-based compensation expense of approximately $5,500 for the year ended December 31, 2016.

Avenue Therapeutics, Inc.

Avenue has a long term incentive program. During 2015, Avenue granted 150,000 shares of its common stock to two consultants in exchange for services provided and 1.0 million shares to its acting Chief Executive Officer, Dr. Lu, who is also Chief Financial Officer of Fortress, for services to be provided. In October 2016, Avenue repurchased 100,000 shares from one of the consultants for $0.176 per share or $17,600 and subsequently retired those shares. 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 value of $0.146 per share. Grants issued to the consultants were fully vested. The grant issued to Dr. 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 year ended December 31, 2016 and 2015, the Company recorded approximately $14,000 and $29,000, respectively, as general and administrative expenses and approximately $14,000 and $21,000, respectively, as research and development expenses on the Consolidated Statements of Operations.

Journey Medical Corporation

During the year ended December 31, 2016, JMC granted 440,000 of options to its employees. The fair value of stock options granted was determined on the grant date using assumptions for risk free interest rate, the expected term, expected volatility, and expected dividend yield. 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 44.2%, weighted average cost of capital of 25.1%, and net of debt utilized, resulting in a value of $0.53 per share at December 31, 2015. 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 42.7%, weighted average cost of capital of 21.1%, and net of debt utilized, resulting in a value of $0.68 per share at December 31, 2016. JMC does not expect to pay dividends in the foreseeable future. As a result, the expected dividend yield is 0%. The expected term for stock options granted with service conditions represents the average period the stock options are expected to remain outstanding and is based on the expected term calculated using the approach prescribed by the Securities and Exchange Commission's Staff Accounting Bulletin No. 110 for “plain vanilla” options. JMC obtained the risk-free interest rate from publicly available data published by the Federal Reserve. The volatility rate was computed based on a comparison of average volatility rates of similar companies. The fair value of options granted in 2016 was estimated using the following assumptions:

	For the year ended
	December 31, 2016
Risk-free interest rate		1.14% - 2.25	%
Expected dividend yield		-
Expected term in years		5.05 - 6.95
Expected volatility		96.89% - 105.48	%

On July 28, 2015, JMC granted 1,950,000 restricted stock units to its key employees. 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 44.5%, weighted average cost of capital of 30%, and net of debt utilized, resulting in a value of $0.65 per share.

On October 19, 2015, JMC repurchased 1,250,000 shares of one employee’s unvested restricted awards and replaced the shares with an option grant. On the date of modification, the fair value of the new awards was less than the old awards. Accordingly, the Company will continue to amortize the unamortized expense of the old award of $0.8 million in 2015.

											Fair Value
	RSU Grant		Vesting Term		Vested		Forfeited		Unvested		per Share
President		1,500,000		4		250,000		(1,250,000)		-	$	0.650
Sales Operations Staff		450,000		4		116,666		-		333,334	$	0.650
		1,950,000				366,666		(1,250,000)		333,334

During the year ended December 31, 2016, stock-based compensation associated with the amortization of stock option expense was approximately $0.4 million. JMC also recorded approximately $85,000 related to the restricted stock during the year ended December 31, 2016. Expense for the year ended December 31, 2015 of approximately $0.6 million was recorded in general and administrative expense on the Consolidated Statements of Operations.

Helocyte, Inc.

On March 30, 2016, Helocyte granted 150,000 shares of restricted stock to a consultant. The shares will vest in four equal annual installments beginning on March 30, 2017. On May 6, 2016, Helocyte granted 508,333 shares of restricted stock to a different consultant. The shares will vest in twelve equal quarterly installments of which 127,084 shares were immediately vested in May 2016. The stock price was determined utilizing a market approach, based upon a third party financing, which resulted in a value of $0.46 per share as of May 31, 2016, utilizing a volatility of 68% and a risk free rate of return of 1.3%. Helocyte remeasured stock price at December 31, 2016, utilizing a volatility of 70% and a risk free rate of return of 1.47%, which resulted in a value of $0.59 per share. For the year ended December 31, 2016, Helocyte re-measured the non-employee grants and recorded expense of approximately $0.2 million, in research and development expenses on the Consolidated Statements of Operations.

On March 30, 2016, Helocyte granted 1.0 million shares to its Chief Executive Officer for services to be provided. The shares vest in twelve equal quarterly installments beginning on June 30, 2016. The fair market value of the stock is $0.097 per share based upon management’s estimate of fair value. In connection with this grant, for the year ended December 31, 2016, the Company recorded approximately $55,000, as general and administrative expenses on the Consolidated Statements of Operations.

There were no stock-based compensation expenses recorded in 2015.

Cellvation, Inc.

On October 31, 2016, Cellvation granted 700,000 shares of restricted stock to three consultants. The stock price was determined utilizing a market approach, based upon a third-party 409A valuation, which resulted in a value of $0.024 per share as of September 30, 2016, utilizing a volatility of 70% and a risk free rate of return of 1.1%. For the year ended December 31, 2016, Cellvation the recorded expense of non-employee grants of approximately $2,500, in research and development expenses on the Consolidated Statements of Operations.

On October 31, 2016, Cellvation granted 1,000,000 shares of restricted stock to its interim President and Chief Executive Officer. In connection with this grant, for the year ended December 31, 2016, the Company recorded approximately $4,000, as general and administrative expenses on the Consolidated Statements of Operations.

There were no stock-based compensation expenses recorded in 2015.

Capital Raise

Checkpoint Therapeutics, Inc.

On September 18, 2015, Checkpoint entered into a placement agency agreement with National Securities Corporation (the “Placement Agent”) relating to Checkpoint’s offering, issuance and sale (the “Offering”) to select institutional investors (the “Investors”) of units consisting of 10,000 shares of Checkpoint’s common stock, $0.0001 par value per share (the “Common Stock”), and warrants (the “Warrants”) exercisable for 2,500 shares of common stock at an exercise price of $7.00 per share, for a purchase price of $50,000 per unit. Pursuant to the agreement, Checkpoint agreed to pay the Placement Agent a cash fee of 10.0% of the gross proceeds from the Offering and granted a warrant exercisable for shares of Checkpoint’s common stock equal to 10% of the aggregate number of shares of Checkpoint’s common stock sold in the Offering (the “Placement Agent Warrants”). In addition, Checkpoint and the Investors entered into a unit purchase agreement (the “Unit Purchase Agreement”) relating to the sale of the Checkpoint’s common stock and the warrants in five separate closings during the third and fourth quarter of 2015. In the aggregate, in 2015, Checkpoint closed on gross proceeds of $57.8 million, before commissions and expenses. Net proceeds from this offering were approximately $51.5 million. The financing involved the sale of Units, each consisting of 10,000 shares of common stock and a warrant exercisable for 2,500 shares of common stock at an exercise price of $7.00 per share, for a purchase price of $50,000 per Unit. The warrants have a five-year term and are only exercisable for cash. Checkpoint expects to use the net proceeds primarily for general corporate purposes, which may include financing Checkpoint’s growth, developing new or existing product candidates, and funding capital expenditures, acquisitions and investments.

Following this capital raise, the Company’s ownership in Checkpoint decreased to 37.7%. Since the Company’s ownership of Checkpoint is through Class A Common Shares, which have super-majority voting rights, the Company maintains voting control, thereby consolidating Checkpoint.

On February 23, 2016, Checkpoint closed on gross proceeds of $0.6 million, in a private placement of shares and warrants to Opus Point Healthcare Fund GP, LLC, a fund managed by OPPM, a related party. The financing involved the sale of units, each consisting of 10,000 shares of common stock and a warrant exercisable for 3,500 shares of common stock at an exercise price of $7.00 per share, for a total price of $45,000 per unit. The warrants have a five-year term and are only exercisable for cash. Checkpoint issued 126,640 unregistered shares of common stock and 44,324 warrants in connection with this transaction. Due to the absence of a placement agent in this transaction, the net proceeds to, and warrants issued by, Checkpoint were consistent with terms of the December 2015 third-party financing, which included the payment of fees and issuance of warrants to a placement agent.

As of December 31, 2016, the Company determined that the warrants still did not meet the definition of a derivative and continued to qualify for equity recognition.

Mustang Bio, Inc.

In third and fourth quarter of 2016, Mustang closed on gross proceeds of $39.1 million, before expenses, in a private placement of shares and warrants for which OPN Capital Markets was the placement agent and received a fee of $3.9 million (recorded as contra-equity) or 10% of the gross proceeds. The financing involved the sale of units, each consisting of 10,000 shares of common stock and a warrant exercisable for 2,500 shares of common stock at an exercise price of $8.50 per share, for a total price of $65,000 per unit. The warrants have a five-year term and are only exercisable for cash. Mustang issued 6.0 million unregistered shares of common stock, excluding founder shares, and 1.5 million warrants in connection with this transaction. In addition, the placement agent received 601,486 warrants or 10% of the shares issued.

As of December 31, 2016, the Company determined that the warrants still did not meet the definition of a derivative and continued to qualify for equity recognition.

At Market Offerings

In May 2016, the Company issued 150,556 shares at an average price of $2.89 per share for gross proceeds of $0.4 million under its then existing at the market facility. Fees totaled $79,000.

On August 17, 2016, the Company entered into an Amended and Restated At Market Issuance Sales Agreement, or Sales Agreement, with MLV & Co. LLC, or MLV, and FBR Capital Markets & Co., or FBR. On August 18, 2016, the Company filed a Registration Statement on Form S-3, which became effective on December 1, 2016 and permits the Company to issue and sell shares of its common stock having an aggregate offering price of up to $53.0 million from time to time through MLV and FBR, as sales agents under the Sales Agreement. The Sales Agreement terminates on August 17, 2019.