UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from ____ to _____.
Commission File No.
(Exact Name of Registrant as Specified in its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
| (I.R.S. Employer Identification No.) |
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| 10014 | |
(Address of Principal Executive Offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter: $
Class of Stock |
| Outstanding Shares as of March 18, 2021 |
Common Stock, $0.001 par value |
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9.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value |
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2020 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
EXPLANATORY NOTE
Fortress Biotech, Inc., a Delaware corporation (the “Company”), is filing this Amendment No. 1 on Form 10-K/A (the “10-K/A”) to amend the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “10-K”), originally filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021, solely to correct the date of the independent auditor opinion. No other amendments have been made to the 10-K or to the audited financial statements for the fiscal year ending December 31, 2020.
This 10-K/A does not reflect events that may have occurred subsequent to the initial filing of the 10-K and does not modify or update the disclosure contained therein in any way, other than as required to reflect the amendments discussed above.
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Item 8. Financial Statements and Supplementary Data.
The information required by this Item is set forth in the consolidated financial statements and notes thereto beginning at page F-1 of this Annual Report on Form 10-K/A.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following financial statements are filed as part of this report:
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F-4 | |
F-5 | |
F-6 | |
F-8 | |
F-11 – F-77 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Fortress Biotech, Inc. and subsidiaries
New York, New York
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Fortress Biotech, Inc. and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for Oaktree Note
As described in Note 2 and Note 10 to the consolidated financial statements, in August 2020, the Company entered into a $60.0 million senior secured credit agreement with Oaktree (“Note”). In connection with the Oaktree Note, the Company issued warrants to Oaktree and certain of its affiliates to purchase up to 1,749,450 shares of common stock (see Note 14)
F-2
with a relative fair value of $4.4 million. In accounting for the Oaktree Note, the Company analyzed the Note and warrants and their related features for the appropriate accounting of the arrangement, including assessment of potential embedded derivatives.
We identified the accounting for the Oaktree Note as a critical audit matter. The principal considerations that led us to determine this matter was a critical audit matter included the inherent complexity in assessing the accounting for the Note and related embedded derivatives. Auditing these elements required complex auditor judgment and an increased level of audit effort, including the need for specialized knowledge and skill in assessing these elements.
The procedures we performed to address this critical audit matter included:
management’s evaluation of various terms and conditions in the debt agreement, and assessment of embedded derivatives.
● | Inspecting the underlying agreements and testing management’s evaluation and application of the relevant accounting guidance to the terms of the agreements. |
● | Utilizing personnel with specialized knowledge and skill with complex debt instruments to assist in assessing the analysis and accounting for the Note and its features including the warrants. |
We have served as the Company’s auditor since 2016.
/s/ BDO USA, LLP
Boston, Massachusetts
March 31, 2021
F-3
FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands except for share and per share amounts)
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Current assets |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net |
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Inventory |
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Other receivables - related party |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset, net |
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Restricted cash |
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Long-term investment, at fair value |
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Intangible asset, net |
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Other assets |
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Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable and accrued expenses | $ | | $ | | ||
Interest payable |
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Interest payable - related party |
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Income taxes payable | | | ||||
Notes payable, short-term |
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Operating lease liabilities, short-term |
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Derivative warrant liability |
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Partner company note payable, short-term | | | ||||
Total current liabilities |
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Notes payable, long-term (net of debt discount of $ |
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Operating lease liabilities, long-term |
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Partner company note payable, long-term |
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Other long-term liabilities |
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Total liabilities | | | ||||
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Commitments and contingencies |
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Stockholders’ equity |
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Cumulative redeemable perpetual preferred stock, $ |
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Common stock, $ |
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Common stock issuable, |
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Additional paid-in-capital |
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Accumulated deficit |
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Total stockholders' equity attributed to the Company |
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Non-controlling interests |
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Total stockholders' equity |
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Total liabilities and stockholders' equity | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
($ in thousands except for share and per share amounts)
Year Ended December 31, | ||||||
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Research and development |
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Research and development - licenses acquired |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
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Other income (expense) |
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Interest income |
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Interest expense and financing fee |
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Change in fair value of derivative liability |
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Change in fair value of investments |
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Gain on deconsolidation of Caelum |
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Total other income (expense) |
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Loss before income tax expense | ( | ( | ||||
Income tax expense | | | ||||
Net loss |
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Less: net loss attributable to non-controlling interests |
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Net loss attributable to common stockholders | $ | ( | $ | ( | ||
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Net loss per common share - basic and diluted | $ | ( | $ | ( | ||
Net loss per common share attributable to non - controlling interests - basic and diluted | $ | ( | $ | ( | ||
Net loss per common share attributable to common stockholders - basic and diluted | $ | ( | $ | ( | ||
Weighted average common shares outstanding - basic and diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
F-5
FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
($ in thousands except for share amounts)
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Series A Preferred Stock | Common Stock | Shares | Treasury | Paid-In | Accumulated | Non-Controlling | Stockholders' | |||||||||||||||||||||
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Balance at December 31, 2018 |
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Stock-based compensation expense |
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Settlement of restricted stock units into common stock |
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Issuance of common stock under ESPP |
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Issuance of common stock for at-the-market offering, net |
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Issuance of Series A preferred stock for at-the-market offering, net |
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Issuance of Series A preferred stock for cash, net |
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Preferred A dividends declared and paid |
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Partner company’s offering, net |
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