Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements (Tables)

v3.19.1
Fair Value Measurements (Tables)
 12 Months Ended
Dec. 31, 2018
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
The following tables classify into the fair value hierarchy of Fortress’ financial instruments, measured at fair value on a recurring basis on the Consolidated Balance Sheets as of December 31, 2018 and 2017:
 
   
Fair Value Measurement as of December 31, 2018
  
($ in thousands)
  
Level 1
    
Level 2
    
Level 3
    
Total
  
Liabilities
                                
Warrant liabilities   $ –     $ –     $ 991     $ 991  
Helocyte Convertible Note, at fair value     –       –       –       –  
Caelum Convertible Note, at fair value     –       –       9,914       9,914  
Total   $ –     $ –     $ 10,905     $ 10,905  
 
   
Fair Value Measurement as of December 31, 2017
  
($ in thousands)
  
Level 1
    
Level 2
    
Level 3
    
Total
  
Assets
                                
Long-term investments, at fair value   $ –     $ –     $ 1,390     $ 1,390  
Total   $ –     $ –     $ 1,390     $ 1,390  
                                 
Liabilities
                                
Warrant liabilities   $ –     $ –     $ 309     $ 309  
Caelum Convertible Note, at fair value     –       –       10,059       10,059  
Helocyte Convertible Note, at fair value     –       –       4,700       4,700  
Total   $ –     $ –     $ 15,068     $ 15,068  
Schedule of changes in fair value of financial instruments
The table below provides a roll forward of the changes in fair value of Level 3 financial instruments for the years ended December 31, 2018 and 2017:
 
   
Investment
    
Convertible Notes at fair value
    
Warrants 
1
    
Warrant
        
($ in thousands)
  
in Origo
    
Helocyte
    
Caelum
    
National
    
liabilities
    
Total
  
Balance at December 31, 2017   $ 1,390     $ 4,700     $ 10,059     $ 5,597     $ 87     $ 21,833  
Payment of convertible note     –       (4,408 )     –       –       –       (4,408 )
Disposal of National     –       –       –       (5,597 )     222       (5,375 )
Change in fair value of investments     (1,390 )     –       –       –       –       (1,390 )
Change in fair value of convertible notes     –       (292 )     (145 )     –       –       (437 )
Change in fair value of derivative liabilities     –       –       –       –       682       682  
Balance at December 31, 2018   $ –     $ –     $ 9,914     $ –     $ 991     $ 10,905  
 
               
Convertible Notes, at fair value
                    
($ in thousands)
  
Investment in
Origo
    
Investment in
laser device
    
Helocyte
    
Avenue
    
Caelum
    
Warrants 
1
 National
    
Warrant
liabilities
    
Total
  
Balance at December 31, 2016
  
$
1,164
    
$
250
    
$
4,487
    
$
200
    
$
-
    
$
14,673
    
$
167
    
$
20,941
  
Additions during the period
    
–
      
–
      
–
      
–
      
9,914
      
–
      
–
      
9,914
  
Conversion into common shares
    
–
      
–
      
–
      
(299
)
    
–
      
(765
)
    
–
      
(1,064
)
Loss on write off investment
    
–
      
(250
)
    
–
      
–
      
–
      
–
      
–
      
(250
)
Change in fair value of investments
    
226
      
–
      
–
      
–
      
–
      
–
      
–
      
226
  
Change in fair value of convertible notes
    
–
      
–
      
213
      
99
      
145
      
–
      
–
      
457
  
Change in fair value of derivative liabilities
    
–
      
–
      
–
      
–
      
–
      
(8,311
)
    
(80
)
    
(8,391
)
Balance at December 30, 2017
  
$
1,390
    
$
-
    
$
4,700
    
$
–
    
$
10,059
    
$
5,597
    
$
87
    
$
21,833
  
 
Note 1: Warrants issued and issuable related to National
Caelum [Member] | Convertible Debt [Member]  
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques
Caelum’s convertible debt is measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s convertible debt that is categorized within Level 3. As of December 31, 2018, conversion of the Caelum Convertible Note was probable and as such the fair value approximated cost. For the years ended December 31, 2018 and 2017 the following input were utilized to derive the note’s fair value:
 
   
December 31
  
   
2018
    
2017
  
Risk-free interest rate     2.302 %     1.506%- 1.851 %
Expected dividend yield     – %     - %
Expected term in years     0.32       0.46 – 1.70  
Expected volatility     67 %     70.0 %
Fair Value for Derivative Contingently Issuable Warrant Liabilities
($ in thousands)
  
Caelum
Convertible
Note, at fair
value
  
Beginning balance at January 1, 2017   $ –  
Additions   $ 9,914  
Change in fair value of convertible notes     145  
Ending balance at December 31, 2017   $ 10,059  
Change in fair value of convertible notes     (145 )
Ending balance at December 31, 2018   $ 9,914  
Helocyte [Member] | Convertible Debt [Member]  
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques
For the year ended December 31, 2017, Helocyte’s convertible debt was measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the convertible debt that is categorized within Level 3 of the fair value hierarchy is presented in the following table. For the year ended December 31, 2018 the note was not valued as it matured and was paid off. For the year ended December 31, 2017 the following input were utilized to derive the note’s fair value:
 
   
December 31
  
   
2018
    
2017
  
Risk-free interest rate     NA       1.53% - 1.72 %
Expected dividend yield     NA       -  
Expected term in years     NA       0.50 - 0.911  
Expected volatility     NA       52.4 %
Fair Value for Derivative Contingently Issuable Warrant Liabilities
($ in thousands)
  
Helocyte
Convertible
Note, at fair
value
  
Beginning balance at January 1, 2017   $ 4,487  
Change in fair value of convertible notes     213  
Ending balance at December 31, 2017   $ 4,700  
Payment of convertible note     (4,408 )
Change in fair value of convertible notes     (292 )
Ending balance at December 31, 2018   $ –  
Warrant [Member] | Caelum [Member]  
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques
The fair value of Caelum's warrant liability, which was issued in connection with Caelum’s convertible note, was written up to the full value of the liability at December 31, 2018 due to the conversion of the notes in January 2019 (see Note 21). The fair value at December 31, 2018 and 2017 was measured using a Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of December 31, 2018 and 2017 are as follows:
 
   
December 31
  
   
2018
    
2017
  
Risk-free interest rate     2.905% -2.909 %     2.154% - 2.168 %
Expected dividend yield     – %     – %
Expected term in years     3.84 – 3.96       4.58 - 4.71  
Expected volatility     70 %     70 %
Fair Value for Derivative Contingently Issuable Warrant Liabilities
($ in thousands)
  
Fair Value of
Derivative
Warrant
Liability
  
Beginning balance at January 1, 2017   $ -  
Additions     225  
Change in fair value of derivative liabilities     (3 )
Ending balance at December 31, 2017   $ 222  
Change in fair value of derivative liabilities     769  
Ending balance at December 31, 2018   $ 991  
Warrant [Member] | Helocyte [Member]  
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques
A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Helocyte’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of December 31, 2017 are as follows:
 
   
December 31
  
   
2018
    
2017
  
Risk-free interest rate     NA       2.04% - 2.08 %
Expected dividend yield     NA       - %
Expected term in years     NA       3.50 – 3.92  
Expected volatility     NA       70 %
Fair Value for Derivative Contingently Issuable Warrant Liabilities
($ in thousands)
  
Fair Value of
Derivative
Warrant
Liability
  
Beginning balance at January 1, 2017   $ 167  
Change in fair value of derivative liabilities     (80 )
Ending balance at December 31, 2017   $ 87  
Change in fair value of derivative liabilities     (87 )
Ending balance at December 31, 2018   $ –