Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.20.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2020
Fair Value Measurements  
Fair Value Measurements

6. Fair Value Measurements

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.

Fair Value of Caelum

The Company valued its investment in Caelum in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, and estimated the fair value to be $11.1 million based on a per share value of $1.543. The following inputs were utilized to derive the value: risk free rate of return of 1.6%, volatility of 70% and a discount for lack of marketability of 28.7%.

In connection with the DOSPA Caelum’s convertible notes automatically converted into common shares of Caelum and the warrant liability payable to the placement agent in connection with the placement of the convertible notes was also issued (see Note 10).

Cyprium Warrant Liability

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:

 

 

 

 

 

 

 

 

    

March 31, 2020

 

December 31, 2019

 

Risk-free interest rate

 

0.70

%

1.92

%

Expected dividend yield

 

 —

 

 —

 

Expected term in years

 

10.0

 

10.0

 

Expected volatility

 

93

%

93

%

Probability of issuance of the warrant

 

10

%

 5

%

 

 

 

 

 

 

 

Cyprium

 

 

Contingently

 

 

Issuable Warrant

($ in thousands)

    

Liability

Ending balance at January 1, 2020

 

$

27

Change in fair value

 

 

42

Ending balance at March 31, 2020

 

$

69

 

The following tables classify into the fair value hierarchy of Fortress’ financial instruments, measured at fair value as of March 31, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement as of  March 31, 2020

($ in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

 

 

  

 

 

  

 

 

  

 

 

  

Fair value of investment in Caelum

 

$

 —

 

$

 —

 

$

11,148

 

$

11,148

Total

 

$

 —

 

$

 —

 

$

11,148

 

$

11,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement as of  March 31, 2020

($ in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

Liabilities

 

 

  

 

 

  

 

 

  

 

 

  

Warrant liabilities

 

$

 —

 

$

 —

 

$

69

 

$

69

Total

 

$

 —

 

$

 —

 

$

69

 

$

69

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement as of  December 31, 2019

($ in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

 

 

  

 

 

  

 

 

  

 

 

  

Fair value of investment in Caelum

 

$

              —

 

$

              —

 

$

11,148

 

$

11,148

Total

 

$

              —

 

$

              —

 

$

11,148

 

$

11,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement as of  December 31, 2019

($ in thousands)

    

Level 1

    

Level 2

    

Level 3

    

Total

Liabilities

 

 

  

 

 

  

 

 

  

 

 

  

Warrant liabilities

 

$

              —

 

$

              —

 

$

27

 

$

27

Total

 

$

              —

 

$

              —

 

$

27

 

$

27

 

The table below provides a roll-forward of the changes in fair value of Level 3 financial instruments as of March 31, 2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in

 

 

Warrant

 

 

 

($ in thousands)

    

Caelum

    

 Liabilities

    

Total

Balance at December 31, 2019

 

$

11,148

 

$

27

 

$

11,175

Fair value of investment

 

 

 —

 

 

42

 

 

42

Balance at March 31, 2020

 

$

11,148

 

$

69

 

$

11,217

 

As of March 31, 2020, no transfers occurred between Level 1, Level 2 and Level 3 instruments.