Fair Value Measurements (Tables)
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6 Months Ended |
Jun. 30, 2018 |
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| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis |
The following tables classify the fair value hierarchy of Fortress's financial instruments, exclusive of National's financial instruments, measured at fair value as of June 30, 2018 and December 31, 2017:
| | | Fair Value Measurement as of June 30, 2018 | | | ($ in thousands) | | Level 1 | | Level 2 | | Level 3 | | Total | | | Assets | | | | | | | | | | | | | | | Long-term investments, at fair value | | $ | - | | $ | - | | $ | 565 | | $ | 565 | | | Total | | $ | - | | $ | - | | $ | 565 | | $ | 565 | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | Warrant liabilities | | $ | - | | $ | - | | $ | - | | $ | - | | | Helocyte Convertible Note, at fair value | | | - | | | - | | | 333 | | | 333 | | | Caelum Convertible Note, at fair value | | | - | | | - | | | 10,240 | | | 10,240 | | | Total | | $ | - | | $ | - | | $ | 10,573 | | $ | 10,573 | | | | | 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 | | $ | | | $ | | | $ | 87 | | $ | 87 | | | Caelum Convertible Note, at fair value | | | | | | | | | 10,059 | | | 10,059 | | | Helocyte Convertible Note, at fair value | | | | | | | | | 4,700 | | | 4,700 | | | Total | | $ | | | $ | | | $ | 14,846 | | $ | 14,846 | |
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| 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 six months ended June 30, 2018: | ($ in thousands) | | Investment in
Origo | | Helocyte
Convertible
Note, at fair
value | | Caelum
Convertible
Note, at fair
value | | Warrants
issued and
issuable | | Warrant
liabilities | | Total | | | Balance at December 31, 2017 | | $ | 1,390 | | $ | 4,700 | | $ | 10,059 | | $ | 5,597 | | $ | 87 | | $ | 21,833 | | | Payment of convertible note | | | - | | | (4,076) | | | - | | | - | | | - | | | (4,076) | | | Reclassification of warrant liability from debt to equity | | | - | | | - | | | - | | | (13,615) | | | - | | | (13,615) | | | | | | | | | | | | | | | | | | | | | | | | Change in fair value of investments | | | (825) | | | - | | | - | | | - | | | - | | | (825) | | | Change in fair value of convertible notes | | | - | | | (291) | | | 181 | | | - | | | - | | | (110) | | | Change in fair value of derivative liabilities | | | - | | | - | | | - | | | 8,018 | | | (87) | | | 7,931 | | | Balance at June 30, 2018 | | $ | 565 | | $ | 333 | | $ | 10,240 | | $ | 0 | | $ | 0 | | $ | 11,138 | |
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| Warrants Issuable [Member] |
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| Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques |
Accordingly, at March 15, 2018, the date of the amendment, the fair value of the warrants issued by National (represents 44% of the warrants issued to non-Fortress shareholders) was $ 13.6 million. Such valuation (using level 3 inputs) was determined by use of the Black-Scholes option pricing model using the following assumptions: | | | March 15, 2018 | | | Dividend yield | | | | % | | Expected volatility | | | 59.23 | % | | Risk-free interest rate | | | 2.42 | % | | Life (in years) | | | 3.49 | % | |
| Fair Value for Derivative Contingently Issuable Warrant Liabilities |
The following table shows the fair value of the warrant liability on the Condensed Consolidated Balance Sheets as of March 31, 2018 and September 30, 2017: | ($ in thousands) | | National’s
Warrants | | | Beginning balance at September 30, 2017 | | $ | 5,597 | | | Change in fair value of derivative liability | | | 8,018 | | | Ending balance at March 15, 2018 | | | 13,615 | | | Reclassification of warrant to equity | | | (13,615) | | | Ending balance at March 31, 2018 | | $ | | |
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| Helocyte [Member] |
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| Fair Value for Derivative Contingently Issuable Warrant Liabilities |
The fair value of Helocyte’s warrant liability, which was issued in connection with Helocyte’s convertible note (see Note 11), as of June 30, 2018 approximated $ 0, as the probability of the conversion of the underlying notes approximated $ 0. The table below provides a summary: | ($ in thousands) | | Fair Value of
Derivative
Warrant
Liability | | | Beginning balance at January 1, 2018 | | $ | 87 | | | Change in fair value of derivative liabilities | | | (87) | | | Ending balance at June 30, 2018 | | $ | | | |
| Helocyte [Member] | Convertible Debt [Member] |
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| Fair Value for Derivative Contingently Issuable Warrant Liabilities |
A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Helocyte’s convertible debt that is categorized within Level 3 of the fair value hierarchy as of June 30, 2018, the fair value approximated cost, as the convertible note approaches maturity, is as follows: | ($ in thousands) | | Helocyte
Convertible
Note, at Fair
value | | | Beginning balance at January 1, 2018 | | $ | 4,700 | | | Payment of convertible notes | | | (4,076) | | | Change in fair value of convertible notes | | | (291) | | | Ending balance at June 30, 2018 | | $ | 333 | | |
| National Warrant Liabilities [Member] |
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| Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques |
A summary of the weighted averages (in aggregate) of significant unobservable inputs (Level 3 inputs) used in measuring National’s warrants that are categorized within Level 3 of the fair value hierarchy as of March 31, 2018 is as follows: | | | March 31, 2018 | | | Risk-free interest rate | | 1.63% 2.56% | | | Expected dividend yield | | % | | | Expected term in years | | 0.18 4.11 | | | Remaining volatility | | 56.4% 386.1% | | | Strike price | | $0.01 $10.00 | | |
| Fair Value for Derivative Contingently Issuable Warrant Liabilities |
| ($ in thousands) | | Fair Value of
Derivative
Warrants | | | Beginning balance at September 30, 2017 | | $ | 202 | | | Trading revenue gain | | | 1,349 | | | Ending balance at March 31, 2018 | | $ | 1,551 | |
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| Caelum [Member] | Convertible Debt [Member] |
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| Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques |
Caelum’s convertible debt, which is guaranteed by the Company, 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 of the fair value hierarchy as of June 30, 2018 is as follows: | | | June 30, 2018 | | | Risk-free interest rate | | | 1.89%- 2.37 | % | | Expected dividend yield | | | - | % | | Expected term in years | | | 0.21 1.21 | | | Expected volatility | | | 53.0 | % | |
| Fair Value for Derivative Contingently Issuable Warrant Liabilities |
| ($ in thousands) | | Caelum
Convertible
Note, at fair
value | | | Beginning balance at January 1, 2018 | | $ | 10,059 | | | Change in fair value of convertible notes | | | 181 | | | Ending balance at June 30, 2018 | | $ | 10,240 | |
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| National Holdings Corporation [Member] |
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| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis |
The following table shows the fair values hierarchy of National's financial instruments measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets as of March 31, 2018 and September 30, 2017: | | | Fair Value Measurement as of March 31, 2018 | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | | Assets | | | | | | | | | | | | | | | National | | | | | | | | | | | | | | | Securities owned, at fair value | | | | | | | | | | | | | | | Corporate stocks | | $ | 32 | | $ | | | $ | | | $ | 32 | | | Municipal bonds | | | | | | 1,183 | | | | | | 1,183 | | | Restricted stock | | | | | | 1,046 | | | | | | 1,046 | | | Warrants | | | | | | - | | | 1,551 | | | 1,551 | | | Total | | $ | 32 | | $ | 2,229 | | $ | 1,551 | | $ | 3,812 | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | National | | | | | | | | | | | | | | | Securities sold, but not yet purchased at fair value: | | | | | | | | | | | | | | | Corporate stocks | | | 2 | | | | | | | | | 2 | | | Corporate debt | | | | | | 6 | | | | | | 6 | | | Contingent consideration | | | | | | | | | 889 | | | 889 | | | Total | | $ | 2 | | $ | 6 | | $ | 889 | | $ | 897 | |
| | | Fair Value Measurement as of September 30, 2017 | | | | | Level 1 | | Level 2 | | Level 3 | | Total | | | Assets | | | | | | | | | | | | | | | National | | | | | | | | | | | | | | | Securities owned, at fair value | | | | | | | | | | | | | | | Corporate stocks | | $ | 116 | | $ | | | $ | | | $ | 116 | | | Municipal bonds | | | | | | 1,239 | | | | | | 1,239 | | | Restricted stock | | | | | | 82 | | | | | | 82 | | | Warrants | | | | | | | | | 548 | | | 548 | | | Total | | $ | 116 | | $ | 1,321 | | $ | 548 | | $ | 1,985 | | | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | National | | | | | | | | | | | | | | | Securities sold, but not yet purchased at fair value | | | | | | | | | | | | | | | Municipal bonds | | | | | | 151 | | | | | | 151 | | | Contingent consideration | | | | | | | | | 311 | | | 311 | | | Warrants issued - National | | | | | | | | | 5,597 | | | 5,597 | | | Total | | $ | | | $ | 151 | | $ | 5,908 | | $ | 6,059 | |
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