Fair Value Measurements (Tables)
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12 Months Ended |
Dec. 31, 2020 |
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| Schedule of Financial Instruments, Measured at Fair Value on a 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, 2020 and 2019:
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Fair Value Measurement as of December 31, 2020 |
($ in thousands) |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
Assets |
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Fair value of investment in Caelum |
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$ |
— |
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$ |
— |
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$ |
17,566 |
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$ |
17,566 |
Total |
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$ |
— |
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$ |
— |
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$ |
17,566 |
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$ |
17,566 |
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Fair Value Measurement as of December 31, 2019 |
($ in thousands) |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
Assets |
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Fair value of investment in Caelum |
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$ |
— |
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$ |
— |
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$ |
11,148 |
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$ |
11,148 |
Total |
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$ |
— |
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$ |
— |
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$ |
11,148 |
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$ |
11,148 |
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Fair Value Measurement as of December 31, 2019 |
($ in thousands) |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
Liabilities |
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Warrant liabilities |
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$ |
— |
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$ |
— |
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$ |
27 |
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$ |
27 |
Total |
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$ |
— |
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$ |
— |
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$ |
27 |
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$ |
27 |
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| Roll Forward of the Changes in Fair Value of Level 3 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, 2020 and 2019:
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Investment in |
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Warrant |
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($ in thousands) |
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Caelum |
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Liabilities |
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Total |
Balance at December 31, 2019 |
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$ |
11,148 |
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$ |
27 |
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$ |
11,175 |
Change in fair value |
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— |
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1,189 |
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1,189 |
Reclass partner company's warrants from liability to equity |
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— |
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(1,216) |
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(1,216) |
Change in fair value of investments |
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6,418 |
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— |
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6,418 |
Balance at December 31, 2020 |
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$ |
17,566 |
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$ |
— |
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$ |
17,566 |
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Investment |
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Caelum Convertible |
Warrants |
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($ in thousands) |
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in Caelum |
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Notes |
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liabilities |
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Total |
Balance at December 31, 2018 |
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$ |
— |
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$ |
9,914 |
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$ |
991 |
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$ |
10,905 |
Conversion of convertible notes |
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— |
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(9,914) |
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— |
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(9,914) |
Issuance of warrant |
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— |
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— |
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(991) |
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(991) |
Fair value of investment |
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11,148 |
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— |
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— |
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11,148 |
Change in fair value of derivative liability |
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— |
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— |
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27 |
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27 |
Balance at December 31, 2019 |
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$ |
11,148 |
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$ |
— |
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$ |
27 |
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$ |
11,175 |
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| Cyprium [Member] |
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| Roll Forward of the Changes in Fair Value of Level 3 Financial Instruments |
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Cyprium |
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Contingently |
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Issuable Warrant |
($ in thousands) |
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Liability |
Beginning balance at January 1, 2019 |
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$ |
— |
Change in fair value |
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27 |
Ending balance at December 31, 2019 |
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$ |
27 |
Change in fair value |
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1,189 |
Reclass partner company's warrants from liability to equity |
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(1,216) |
Ending balance at December 31, 2020 |
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$ |
— |
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| Warrants [Member] | Caelum [Member] |
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| Summary of the Weighted average Significant Unobservable Inputs |
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 prior to the conversion of the notes in January 2019 (see Note 10). The fair value 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 January 2019 was as follows:
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January |
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2019 |
Risk-free interest rate |
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2.905% - 2.909 |
% |
Expected dividend yield |
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— |
% |
Expected term in years |
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3.84 - 3.96 |
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Expected volatility |
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70 |
% |
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| Fair Value of Liabilities Measured on Recurring Basis |
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Fair Value of |
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Derivative |
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Warrant |
($ in thousands) |
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Liability |
Beginning balance at January 1, 2019 |
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$ |
991 |
Issuance of warrant due to conversion of note |
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(991) |
Ending balance at December 31, 2019 |
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$ |
— |
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| Warrants [Member] | Cyprium [Member] |
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| Summary of the Weighted average Significant Unobservable Inputs |
The fair value of the Cyprium Contingently Issuable Warrants in connection with the 2018 Venture Debt was determined by applying management’s estimate of the probability of issuance of the Contingently Issuable Warrants together with an option-pricing model, with the following key assumptions:
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December 31, |
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2020 |
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2019 |
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Risk-free interest rate |
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0.69 |
% |
1.92 |
% |
Expected dividend yield |
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— |
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— |
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Expected term in years |
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10.0 |
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10 |
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Expected volatility |
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85 |
% |
93 |
% |
Probability of issuance of the warrant |
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100 |
% |
5 |
% |
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| Convertible Notes [Member] | Caelum [Member] |
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| Summary of the Weighted average Significant Unobservable Inputs |
Caelum’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 Caelum’s convertible debt that is categorized within Level 3. As of December 31, 2018, conversion of the Caelum Convertible Notes was probable and as such the fair value approximated cost. The Caelum Convertible Notes were converted during 2019. As of January 2019 the following inputs were utilized to derive the notes’ fair value:
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January |
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2019 |
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Risk-free interest rate |
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2.302 |
% |
Expected dividend yield |
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— |
% |
Expected term in years |
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0.32 |
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Expected volatility |
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67 |
% |
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| Fair Value of Liabilities Measured on Recurring Basis |
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Caelum |
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Convertible |
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Notes, at fair |
($ in thousands) |
|
value |
Beginning balance at January 1, 2019 |
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$ |
9,914 |
Change in fair value of convertible notes |
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(9,914) |
Ending balance at December 31, 2019 |
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$ |
— |
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