6. Fair Value Measurements

Common Stock Warrant Liabilities

​

​

Checkpoint

​

On December 16, 2022, Checkpoint closed on an offering for the sale of shares of its common stock and pre-funded warrants as part of a registered direct offering (the “December 2022 Registered Direct Offering”). The common stock and the pre-funded warrants were sold together with December 2022 common warrants and placement agent warrants. Net proceeds from the December 2022 Registered Direct Offering were $6.7 million after deducting commissions and other transaction costs (See Note 14).

​

The Company deemed the December 2022 common warrants and placement agent warrants to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control. The common warrants and placement agent warrants were recorded at the time of closing at a fair value of $7.9 million, determined by using the Black-Scholes model. As the total fair value of the common stock warrant liability exceeded the total net proceeds of $6.7 million, the Company recorded a loss of $1.2 million to loss on common stock warrant liabilities in the Consolidated Statements of Operations. Accordingly, there were no proceeds allocated to the common stock and pre-funded warrants issued as part of this transaction.

​

The Company revalued the December 2022 common warrants and placement agent warrants at December 31, 2022 using the Black-Scholes model.  This resulted in an increase in common stock warrant liability of $3.3 million, with an offsetting loss recorded to loss on common stock warrant liabilities in the Statements of Operations.

​

​

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

​

​

​

​

​

​

​

​

Avenue

On October 11, 2022, Avenue announced the closing of an underwritten public offering of 3,636,365 common and pre-funded units.  Each common unit consists of one share of common stock and one warrant to purchase one share of common stock, and each pre-funded unit consists of one pre-funded warrant to purchase one share of common stock and one warrant to purchase one share of common stock. Each share of common stock (or pre-funded warrant) was sold together with one warrant at a combined purchase price of $3.30 per common unit (or $3.2999 per pre-funded unit after reducing $0.0001 attributable to the exercise price of the pre-funded warrants).  Avenue also simultaneously closed on the sale of an additional 545,454 warrants to purchase common stock, which were sold pursuant to a partial exercise of the underwriter’s over-allotment option. Avenue received net proceeds of approximately $10.3 million at closing after deducting underwriting discounts and commissions and other expenses of the offering.  

​

The Company deemed the warrants to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control. The warrants were recorded at the time of closing at a fair value of $8.3 million, determined by using the Monte Carlo simulation approach.

The Company revalued the warrants at December 31, 2022 using the Monte Carlo simulation approach. This resulted in a decrease in common stock warrant liability of $5.7 million, with an offsetting gain recorded in the Statements of Operations.

​

​

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

​

​

Urica

​

The fair value of Urica’s contingently issuable placement agent warrants in connection with Urica’s first close of their preferred offering in December 2022 (see Note 10), 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 Urica’s warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

​

​

At December 31, 2022 the value of the Urica’s contingent payment warrant is $0.1 million, and was recorded on the  consolidated balance sheet. No liability was recorded at December 31, 2021.

​

Caelum

Fair Value of Investment in Caelum

Upon AstraZeneca’s notification of their intent to acquire Caelum in September 2021, the Company increased the carrying value of its investment in Caelum to 42.4% of the distribution of proceeds from the option exercise price of $150 million, or $56.9 million.  Fortress received the funds at the acquisition close in October 2021.  Prior to AstraZeneca’s notification, the Company had valued its holdings in Caelum in accordance with ASC Topic 820, Fair Value Measurements and Disclosures.

​

Journey

​

Journey Placement Agent Warrant Liability

​

The fair value of Journey’s contingently issuable Placement Agent Warrants in connection with Journey’s preferred offering in March 2021 (see Note 10), 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 Journey’s warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

​

​

Upon the closing of the Journey Initial Public Offering (“Journey IPO”) (see note 14), Journey issued the Placement Agent Warrants to purchase 5% of the shares of Journey common stock into which the Journey Preferred Stock converted. The Placement Agent Warrants have a term of 5 years. At December 31, 2021, Journey issued 111,567 shares of Journey common stock related to the exercise of all of the Placement Agent Warrants.

​

​

Journey Contingent Payment Warrant

​

In connection with the Journey license, collaboration, and assignment agreement (the “DFD Agreement”) to obtain the global rights for the development and commercialization of  DFD-29 with Dr. Reddy’s Laboratories, Ltd (“DRL”) (see Note 7), Journey agreed to pay DRL additional consideration upon either an IPO of the Journey’s common stock or an acquisition of Journey, the agreement further specifies that only one payment can be made. The contingent payment associated with an IPO of Journey’s common stock is deemed to be achieved if upon the completion of an IPO Journey’s market capitalization on a fully diluted basis is $150 million or greater at the close of business on the date of such Journey IPO. The payment due for the achievement of the IPO criteria is a follows: (a) issue to DRL a number of shares of Journey’s common stock equal to $5.0 million as calculated using a fifteen (15) day volume weighted average price (“VWAP”) of Journey’s closing price, measured fifteen (15) days following the Journey IPO; or (b) make a cash payment to DRL equal to $5.0 million. Journey valued the contingent payment discussed above utilizing a Probability Weighted Expected Return Method (PWERM) model using a discount rate of 30% and expected term of 3 - 5 months.

As a result of Journey’s IPO on November 16, 2021, Journey issued 545,131 unregistered shares of Journey common stock to DRL, calculated using a 15-day VWAP of $9.1721 per share.