FORTRESS BIOTECH, INC. TRANSITION REPORT UNDER …

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

OR

? TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

From the transition period from __________ to__________.

Commission File Number 001-35366

FORTRESS BIOTECH, INC. (Exact name of small business issuer as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)

20-5157386 (IRS Employer Identification No.)

2 Gansevoort Street, 9th Floor New York, New York 10014 (Address of principal executive offices)

(781) 652-4500 (Issuer's telephone number)

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. Yes x No ?

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ?

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer ?

Accelerated filer

x

Non-accelerated filer

? (Do not check if a smaller reporting company)

Smaller reporting company

?

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ? No x

As of November 9, 2016, there were 48,875,087 shares of Common Stock of the issuer outstanding.

FORTRESS BIOTECH, INC. AND SUBSIDIARIES Quarterly Report on Form 10-Q TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1.

Unaudited Condensed Consolidated Financial Statements

3

Condensed Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015

3

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2016

and 2015 (unaudited)

4

Condensed Consolidated Statement of Changes in Stockholders' Equity for the Nine Months Ended September

30, 2016 (unaudited)

5

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015

(unaudited)

6

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

48

Item 3.

Quantitative and Qualitative Disclosures About Market Risks

54

Item 4.

Controls and Procedures

55

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

55

Item 1A. Risk Factors

55

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

Item 3.

Defaults Upon Senior Securities

69

Item 4.

Mine Safety Disclosures

69

Item 5.

Other Information

69

Item 6.

Exhibits

70

Signature

71

2

PART I. FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements

FORTRESS BIOTECH, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets

($ in thousands except for share and per share amounts)

ASSETS Current assets

Cash and cash equivalents Accounts receivable Cash deposits with clearing organizations Receivables from broker-dealers and clearing organizations Securities owned, at fair value Inventory Other receivables - related party Prepaid expenses and other current assets

Total current assets

Property and equipment, net Restricted cash Long-term investments, at fair value Intangible assets, net Goodwill Other assets Total assets

September 30, 2016

(Unaudited)

December 31, 2015

$

82,537 $

98,182

5,007

-

1,030

-

1,607

-

2,178

-

123

-

1,545

156

4,556

1,599

98,583

99,937

6,957

309

15,859

14,586

685

2,485

1,550

1,250

21,739

-

48

43

$

145,421 $

118,610

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable and accrued expenses

$

Accrued commissions and payroll payable

Deferred clearing and marketing credits

Interest payable

Derivative warrant liability

Other current liabilities

Total current liabilities

Notes payable, long-term (net of debt discount of $2,764 and $835 at September 30, 2016 and December 31, 2015, respectively) Subsidiary convertible note, at fair value Other long-term liabilities

Total liabilities

21,831 $ 14,029

1,007 68

951 707 38,593

24,373 3,031 4,583

70,580

10,438 -

27 114

10,579

23,174 -

584 34,337

Commitments and contingencies

Stockholders' equity Convertible Preferred stock, $.001 par value, 129,767 Series C shares authorized, 0 shares issued and

outstanding as of September 30, 2016 and December 31, 2015, respectively Common Stock, $.001 par value, 100,000,000 shares authorized, 48,875,087 and 47,147,032 shares

issued and outstanding as of September 30, 2016 and December 31, 2015, respectively Additional paid-in-capital Accumulated deficit

Total stockholders' equity attributed to the Company

Non-controlling interests

Total stockholders' equity

Total liabilities and stockholders' equity

$

-

49 264,397 (227,820) 36,626

38,215 74,841 145,421 $

-

47 246,955 (190,156)

56,846

27,427 84,273 118,610

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

Revenue Product revenue, net Revenue - from a related party

Total revenue

Cost of goods sold - product revenue Gross margin

FORTRESS BIOTECH, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations ($ in thousands except for share and per share amounts)

(Unaudited)

For the Three Months Ended

September 30,

2016

2015

For the Nine Months Ended

September 30,

2016

2015

$

429 $

546

975

- $

1,793 $

-

25

2,072

525

25

3,865

525

41

-

365

-

934

25

3,500

525

Operating expenses Research and development Research and development - licenses acquired General and administrative

Total operating expenses Loss from operations

Other income (expenses) Interest income Interest expense and financing fees Change in fair value of derivative liabilities Change in fair value of subsidiary convertible note Change in fair value of investments

Total other expenses Net loss

Less: net loss attributable to non-controlling interests Net loss attributable to common stockholders

7,316 1,000 8,864 17,180 (16,246)

9,073 1,895 7,129 18,097 (18,072)

21,416 3,143

25,414 49,973 (46,473)

13,172 10,882 14,376 38,430 (37,905)

89 (689)

(16) (13) (81) (710)

(16,956)

39 (350)

(1,472) (1,783)

(19,855)

241 (1,838)

(105) (13)

(1,800) (3,515)

(49,988)

195 (1,033)

(65) (903)

(38,808)

3,975

1,694

12,324

2,416

$

(12,981) $

(18,161) $

(37,664) $

(36,392)

Basic and diluted net loss per common share

$

(0.32) $

(0.46) $

(0.94) $

(0.93)

Weighted average common shares outstanding-basic and diluted

40,128,475

39,412,056

39,885,685

39,038,522

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

FORTRESS BIOTECH, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Changes in Stockholders' Equity

($ in thousands) (Unaudited)

Balance at December 31, 2015 Stock-based compensation expense Issuance of restricted stock Cashless exercise of warrants Subsidiary's offering, net Issuance of subsidiaries' common shares for license expenses Issuance of common stock for At-the-Market offering At-the-market offering cost Issuance of common stock under ESPP Cancellation of restricted stock Beneficial conversion feature related to Opus Credit Facility Non-controlling interest in subsidiaries Non-controlling interest related to National Net loss attributable to non-controlling interests Net loss attributable to common stockholders

Balance at September 30, 2016

Common Stock

Shares

Amount

47,147,032 $

47

-

-

1,564,241

2

12,633

-

-

-

Additional Paid-In

Capital

$ 246,955 8,792 (2) 11,652

Accumulated

Deficit $ (190,156)

-

Non-Controlling

Interests

$

27,427

-

-

-

-

Total Stockholders'

Equity

$

84,273

8,792

-

-

11,652

150,556

33,958 (33,333)

-

48

-

-

434

-

-

(49)

-

-

81

-

-

-

-

-

48

-

434

-

(49)

-

81

-

-

-

-

48,875,087 $

-

-

49 $

1,881 (5,395)

-

-

264,397 $

(37,664) (227,820) $

5,395 17,717 (12,324)

-

38,215 $

1,881 -

17,717 (12,324) (37,664)

74,841

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download