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ACQUISITIONS | 9 Months Ended
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Sep. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS | ACQUISITIONS2023 acquisitions One River Digital Asset Management, LLC On March 3, 2023, the Company completed the acquisition of One River Digital Asset Management, LLC. (“ORDAM”) by acquiring all issued and outstanding membership units of ORDAM. ORDAM is an institutional digital asset manager which is registered as an investment adviser with the SEC. The Company believes the acquisition aligns with the Company’s long-term strategy to unlock further opportunities for institutions to participate in the cryptoeconomy. Prior to the acquisition, the Company held a minority ownership stake in ORDAM, which was accounted for as a cost method investment. In accordance with ASC 805, Business Combinations, the acquisition was accounted for as a business combination achieved in stages under the acquisition method. Accordingly, the cost method investment was remeasured to fair value as of the acquisition date. As the fair value of the cost method investment was equal to its carrying value, no gain or loss on remeasurement was recorded on the acquisition date. The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce, market presence, synergies, and time-to-market advantages. The final allocation of purchase consideration to assets and liabilities remains in process as the Company continues to evaluate certain balances, estimates, and assumptions during the measurement period (up to one year from the acquisition date). Any changes in the fair value of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. The total consideration transferred in the acquisition was $96.8 million, consisting of the following (in thousands):
Cash | $ | 30,830 |
Cash payable | 1,005 |
Previously-held interest on acquisition date | 20,000 |
Class A common stock of the Company | 44,995 |
Total purchase consideration | $ | 96,830 |
Included in the purchase consideration are $6.0 million in cash and 119,991 shares of the Company’s Class A common stock that are subject to an indemnity holdback. The cash and shares subject to the indemnity holdback will be released 18 months after the closing date of the transaction. The results of operations and the provisional fair values of the assets acquired and liabilities assumed have been included in the condensed consolidated financial statements as of the date of acquisition. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of acquisition (in thousands):
Cash and cash equivalents | $ | 100 |
Accounts and loans receivable, net of allowance | 425 |
Prepaid expenses and other current assets | 134 |
Goodwill | 65,764 |
Intangible assets, net | 21,100 |
Other non-current assets | 9,911 |
Total assets | 97,434 |
Accounts payable | 604 |
Total liabilities | 604 |
Net assets acquired | $ | 96,830 |
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands, except for years data):
| Fair Value |  | Useful Life at Acquisition (in years)
Licenses | $ | 1,100 |  |  | Indefinite
Customer relationships | 17,100 |  |  | 6
In-process research and development ("IPR&D") | 2,900 |  |  | N/A
Customer relationships will be amortized on a straight-line basis over their respective useful lives to general and administrative expense. The licenses have an indefinite useful life and will not be amortized. Management applied significant judgment in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to forecasted revenues and expenses, and costs to recreate the IPR&D and obtain the licenses. Total acquisition costs of $2.6 million were incurred related to the acquisition, which were recognized as an expense and included in general and administrative expenses in the condensed consolidated statements of operations. The impact of this acquisition was not considered material to the Company’s condensed consolidated financial statements for the periods presented and pro forma financial information has not been provided.2022 acquisitions Unbound Security, Inc. On January 4, 2022, the Company completed the acquisition of Unbound Security, Inc. (“Unbound”) by acquiring all issued and outstanding shares of capital stock and stock options of Unbound. Unbound is a pioneer in a number of cryptographic security technologies, which the Company believes will play a key role in the Company’s product and security roadmap. In accordance with ASC 805, Business Combinations, the acquisition was accounted for as a business combination under the acquisition method. The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill balance is primarily attributed to the assembled workforce, synergies, and the use of purchased technology to develop future products and technologies. During the year ended December 31, 2022, a measurement period adjustment associated with deferred tax assets was recorded, resulting in an increase in other non-current assets of $4.1 million and a corresponding reduction in goodwill. The total consideration transferred in the acquisition was $258.0 million, consisting of the following (in thousands):
Cash | $ | 151,424 |
Cash payable | 126 |
Class A common stock of the Company | 103,977 |
RSUs for shares of the Company’s Class A common stock | 2,457 |
Total purchase consideration | $ | 257,984 |
Included in the purchase consideration are $21.7 million in cash and 85,324 shares of the Company’s Class A common stock that are subject to an indemnity holdback. The cash and shares subject to the indemnity holdback were released within 18 months from the closing date of the transaction. The results of operations and the fair values of the assets acquired and liabilities assumed have been included in the condensed consolidated financial statements from the date of acquisition. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of acquisition (in thousands):
Cash and cash equivalents | $ | 10,560 |
Restricted cash | 573 |
Accounts and loans receivable, net of allowance | 4,981 |
Prepaid expenses and other current assets | 4,182 |
Lease right-of-use assets | 1,059 |
Property and equipment, net | 1,248 |
Goodwill | 222,732 |
Intangible assets, net | 28,500 |
Other non-current assets | 3,476 |
Total assets | 277,311 |
Accounts payable | 719 |
Accrued expenses and other current liabilities | 11,325 |
Lease liabilities | 1,059 |
Other non-current liabilities | 6,224 |
Total liabilities | 19,327 |
Net assets acquired | $ | 257,984 |
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands, except for years data):
| Fair Value |  | Useful Life at Acquisition (in Years)
Developed technology | $ | 15,700 |  |  | 1 - 5
IPR&D | 2,500 |  |  | N/A
Customer relationships | 10,300 |  |  | 2
The intangible assets will be amortized on a straight-line basis over their respective useful lives to technology and development expenses for developed technology and general and administrative expenses for customer relationships. Amortization of the IPR&D will be recognized in technology and development expenses once the research and development is placed into service as internally developed software. Management applied significant judgment in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to development costs and profit, costs to recreate customer relationships, market participation profit, and opportunity cost. Total acquisition costs of $3.0 million were incurred in relation to the acquisition, which were recognized as an expense and included in general and administrative expenses in the condensed consolidated statements of operations. The impact of this acquisition was not considered material to the Company’s condensed consolidated financial statements for the periods presented and pro forma financial information has not been provided. FairXchange, Inc. On February 1, 2022, the Company completed the acquisition of FairXchange, Inc. (“FairX”) by acquiring all issued and outstanding shares of capital stock, stock options and warrants of FairX. FairX is a derivatives exchange which is registered with the U.S. Commodity Futures Trading Commission as a designated contract market (“DCM”) and the Company believes it has been a key stepping stone on the Company’s path to offer crypto derivatives to consumers and institutional customers in the United States. In accordance with ASC 805, Business Combinations, the acquisition was accounted for as a business combination under the acquisition method. The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill balance is primarily attributed to the assembled workforce, market presence, synergies, and the use of purchased technology to develop future products and technologies. During the year ended December 31, 2022, a measurement period adjustment associated with deferred tax assets was recorded, resulting in an increase in other non-current assets of $0.3 million and a corresponding reduction in goodwill. The total consideration transferred in the acquisition was $275.1 million, consisting of the following (in thousands):
Cash | $ | 56,726 |
Cash payable | 10,442 |
Class A common stock of the Company - issued | 174,229 |
Class A common stock of the Company - to be issued | 33,693 |
Total purchase consideration | $ | 275,090 |
The aggregate purchase consideration includes 170,397 shares of the Company’s Class A common stock to be issued after the acquisition date. The fair value of these shares on the acquisition date is included in additional paid-in capital. Additionally, included in the purchase consideration are $4.7 million in cash and 83,035 shares of the Company’s Class A common stock that are subject to an indemnity holdback. The cash and shares remain subject to an indemnity holdback. The results of operations and the fair values of the assets acquired and liabilities assumed have been included in the condensed consolidated financial statements from the date of acquisition. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of acquisition (in thousands):
Cash and cash equivalents | $ | 10,867 |
Accounts and loans receivable, net of allowance | 411 |
Prepaid expenses and other current assets | 20 |
Intangible assets, net | 41,000 |
Goodwill | 231,685 |
Other non-current assets | 8,295 |
Total assets | 292,278 |
Accounts payable | 472 |
Accrued expenses and other current liabilities | 5,796 |
Other non-current liabilities | 10,920 |
Total liabilities | 17,188 |
Net assets acquired | $ | 275,090 |
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands, except for years data):
| Fair Value |  | Useful Life at Acquisition (in Years)
DCM License | $ | 26,900 |  |  | Indefinite
Developed technology | 10,700 |  |  | 5
Trading relationships | 3,400 |  |  | 3
The developed technology and trading relationships will be amortized on a straight-line basis over their respective useful lives to technology and development expenses for developed technology and general and administrative for trading relationships. The DCM license has an indefinite useful life and will not be amortized. Management applied significant judgment in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to forecasted revenues and expenses, development costs and profit, costs to recreate trading relationships, market participation profit, and opportunity cost. Total acquisition costs of $1.1 million were incurred related to the acquisition, which were recognized as an expense and included in general and administrative expenses in the condensed consolidated statements of operations. The impact of this acquisition was not considered material to the Company’s condensed consolidated financial statements for the periods presented and pro forma financial information has not been provided.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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