Fair Value Measurements
|12 Months Ended
Dec. 31, 2022
|Fair Value Measurements
|Fair Value Measurements
4. Fair Value Measurements
A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers all related factors of the asset by market participants in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Items Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis, including their levels in the fair value hierarchy are as follows:
The Akerna marketable security balance included in investments has Level 1 inputs. The HERBL balance included in investments is recorded at cost and excluded from the schedule above. The Big Toe balance included in investments was initially recorded at cost, but impairment was subsequently identified and the balance was adjusted to liquidation value as an approximation of fair value using Level 3 inputs at December 31, 2022 and 2021, resulting in losses of $196 and $804 during the years ended December 31, 2022 and 2021, respectively, included in unrealized loss on investment on the consolidated statements of operations and comprehensive loss.
During the years ended December 31, 2022 and 2021, the Company recorded gains of $2,394 and $6,001, respectively, on the change in fair value of its warrant liability. These gains are included in other income (expense) in the consolidated statements of operations and comprehensive loss. During the year ended December 31, 2022, all warrants valued at market had expired and there was no warrant liability as of December 31, 2022.
The carrying amount of the Company’s term loan approximates its fair value based upon market interest rates available to the Company for debt of similar risk and maturities, a Level 3 input. See Note 12 — Notes Payable for additional information. Additionally, the carrying amount of the Company’s loans receivable, net of related current expected credit losses, approximates their fair values. See Note 10 — Loans Receivable for additional information. The carrying amounts of all financial assets and liabilities, other than notes payable and loans receivables, approximate their fair values. There were no transfers between the levels of fair value hierarchy during the years ended December 31, 2022 and 2021.
Items Measured at Fair Value on a Non-Recurring Basis
As a result of missed forecasts for Jupiter, the Company conducted testing of its goodwill related to Jupiter as of June 30, 2022. After this review, the Company determined that the carrying amount of the Jupiter reporting unit exceeded its fair value and recorded a $6,668 goodwill impairment charge for the six months ended June 30, 2022.
During the six months ended December 31, 2022, the Company identified additional impairment triggers for three of its reporting units, which resulted in an additional impairment charge of $38,957 for Jupiter and impairment charges of $2,789 and $1,380 for Standard Farms, LLC (“Standard Farms PA”) and Standard Farms OH, respectively.
The following table summarizes the goodwill activity for the year ended December 31, 2022:
See Note 9 — Goodwill for additional information.