Investments

12 Months Ended

Dec. 31, 2020

9.	INVESTMENTS

As of December 31, 2020 and 2019, the Company held various equity interests in privately held cannabis companies, which had a fair value of $40,794,806 and $14,068,821 as of each period end, respectively. The Company measures its equity interests that do not have readily determinable fair value, at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company performs an assessment on a quarterly basis to determine whether triggering events for impairment exist and to identify any observable price changes.

The following table summarizes the change in the Company’s investments as of December 31, 2020:


	Convertible Notes Receivable			Equity			Total
Balance at January 1, 2020	$	7,533,000		$	6,535,821		$	14,068,821
Additions		—			525,000			525,000
Disposals		—			(169,818	)		(169,818	)
Conversion of notes receivable		(7,533,000	)		7,533,000			—
Fair value adjustments		—			26,370,803			26,370,803

Balance at December 31, 2020	$	—		$	40,794,806		$	40,794,806

The following table summarizes the change in the Company’s investments as of December 31, 2019:


	Convertible Notes Receivable			Equity			Total
Balance at January 1, 2019	$	30,336,000		$	10,597,283		$	40,933,283
Fair value adjustment		(1,398,000	)		(4,061,462	)		(5,459,462	)
Applied to consideration in business combination		(21,405,000	)		—			(21,405,000	)

Balance at December 31, 2019	$	7,533,000		$	6,535,821		$	14,068,821

During the year ended December 31, 2020, the Company recorded fair value adjustments on a privately held equity interests which resulted in the Company recording a gain of $32,349,189 in other income (expense) during the period then ended. In January 2021, the Company sold approximately half of its equity interest in a privately held entity for $18,112,500 in cash. As of December 31, 2020 and 2019, the fair value of the equity interest was $37,249,189 and $4,900,000, respectively.

As of December 31, 2019, the Company held an investment in a convertible note which carried simple interest of 6.00% per annum. The fair value of this investment (which was considered a Level 3 investment) was $7,533,000, and was valued using the Binomial Lattice Model, which was based on a generalized binomial option pricing formula, using the following assumptions:


		December 31, 2019
Risk free rate		1.58% – 2.46%
Equity Volatility *		58% – 106%
Market Yield		15% – 18%
Probability of Qualified Financing		0%
Probability of Sale		30%
Probability of No Event		70%

*	Management estimated that market interest rates on similar borrowings without the conversion feature to be approximately 18% and used an implied volatility of 58% in measuring the fair value of the convertible note.

On August 1, 2020, the note matured and was converted into 613,875 preferred units of the privately held Company. During the year ended December 31, 2020, and as a result of the conversion, the Company, with the assistance of an independent valuation firm, measured the fair value of the preferred shares which resulted in the Company recording a loss of ($6,503,711) in other income (expense). As of December 31, 2020, the fair value of the preferred shares (which are considered a Level 3 investment) was $1,029,289.

For the years ended December 31, 2020, 2019 and 2018, the Company recorded fair value adjustments, net of $26,370,803, ($4,061,462) and $4,797,283, respectively, within other income (expense) on the consolidated statements of operations.