Fair Value Measurements
|9 Months Ended
Sep. 30, 2023
|Fair Value Measurements
|Fair Value Measurements
3. 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 paying 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:
Assets and liabilities measured at fair value on a recurring basis, including their levels in the fair value hierarchy were as follows:
The Akerna Corp. (“Akerna”) marketable security balance included in investments has Level 1 inputs. During the three months ended September 30, 2023, the Company recorded a loss of $1 related to its investment in Akerna. During the three and nine months ended September 30, 2022, the Company recorded losses of $2 and $96, respectively, related to its investment in Akerna. These losses are included in unrealized loss on investment on the condensed consolidated statements of operations and comprehensive loss.
The HERBL Inc. (“HERBL”) investment is recorded at cost and excluded from the schedule above. During the three months ended June 30, 2023, the Company noted declining conditions in its investment in HERBL and performed impairment testing. The Company concluded that the balance of its investment was not recoverable due to HERBL entering into receivership in June 2023 and recorded an impairment of $6,400 on its investment in HERBL, bringing the balance of its investment to zero. These losses are included in unrealized loss on investment on the condensed consolidated statements of operations and comprehensive loss. The balance was $0 and $6,400 as of September 30, 2023 and December 31, 2022, respectively.
See Note 6 — Investments for additional information about the Akerna and HERBL investments.
The Big Toe Ventures LLC balance included in investments was initially recorded at cost, but impairment was subsequently identified and the balance was adjusted to zero as an approximation of fair value using Level 3 inputs during the year ended December 31, 2022. The balance was zero as of both September 30, 2023 and December 31, 2022.
There was no warrant liability as of both September 30, 2023 and December 31, 2022. During the three and nine months ended September 30, 2022, the Company recorded losses of $610 and $2,360, respectively, on the change in fair value of its warrant liability. These losses are included in other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
The carrying amount of the Company’s notes payable, which are recorded at amortized cost, approximates their fair value based upon market interest rates available to the Company for debt of similar risk and maturities, a Level 3 input. See Note 11 — 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 9 — Loans Receivable for additional information. The carrying amounts of all other financial assets and liabilities approximate their fair values. There were no transfers between the levels of fair value hierarchy during each of the nine months ended September 30, 2023 and 2022.
Items Measured at Fair Value on a Non-Recurring Basis
No impairment triggers to goodwill were identified during the nine months ended September 30, 2023. In 2022, as a result of missed forecasts for Jupiter, the Company conducted additional 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 estimated recoverable amount and recorded a $6,668 goodwill impairment charge for the nine months ended September 30, 2022. The following table summarizes the goodwill activity for the nine months ended September 30, 2022:
See Note 8 — Goodwill for additional information.