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FAIR VALUE MEASUREMENT
 6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENT

NOTE 8 – FAIR VALUE MEASUREMENT

 

The Company measures certain financial and non-financial assets and liabilities at fair value on a recurring or non-recurring basis. The Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy are:

 

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities
   
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
   
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions

 

 

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, restricted cash, other receivable, deposits, prepaid expenses and other current assets, property and equipment, advances to vendors, accounts payable, accrued expenses, and legal reserve payable, approximate their estimated fair market value based on the short-term maturity of these instruments.

 

Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to their fair value measurement. The Company measures the fair value of its marketable securities and investments by taking into consideration valuations obtained from third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs included reported trades and broker-dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs.

 

Recurring measurement of fair value

 

As of June 30, 2023, the Company’s cash and cash equivalents was $113,675, none of which represented money market accounts. The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of December 31, 2022, respectively:

 

    Recurring fair value measured at December 31, 2022 
    Total carrying value at December 31, 2022  

Quoted prices in active markets

(Level 1)

  

Significant other observable inputs

(Level 2)

  

Significant unobservable inputs

(Level 3)

 
Assets:                 
Cash and cash equivalents (1)   $92,044   $92,044   $—   $— 

 

(1)Represents money market accounts. Excludes $11,661 of cash and cash equivalents as of December 31, 2022.

 

There were no transfers among Levels 1, 2 or 3 during the six months ended June 30, 2023.

 

 

Non-recurring measurement of fair value

 

The following tables present information about the Company’s assets and liabilities measured at fair value on a non-recurring basis and therefore, not included in the tables above. These assets include (a) digital assets and digital assets, restricted that are initially recorded at cost and subsequently impaired as the fair value falls below its carrying value; (b) mining rigs and advances to vendors that are written down to fair value due to the decrease in the cost of bitcoin mining rigs that was driven by the drop in bitcoin prices during the fourth quarter ended December 31, 2022. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., impairment). The Company’s estimated level within the fair value hierarchy of those assets and liabilities as of June 30, 2023 and December 31, 2022, respectively:

 

   Non-recurring fair value measured at June 30, 2023 
   Total carrying value at June 30, 2023  

Quoted prices in active markets

(Level 1)

  

Significant other observable inputs

(Level 2)

  

Significant unobservable inputs

(Level 3)

 
Assets:                
Digital assets  $234,412   $381,992   $—   $— 
Liabilities:                    
Notes payable  $734,231   $405,594    -    - 

 

    Non-recurring fair value measured at December 31, 2022 
    Total carrying value at December 31, 2022  

Quoted prices in active markets

(Level 1)

  

Significant other observable inputs

(Level 2)

  

Significant unobservable inputs

(Level 3)

 
Assets:                 
Digital assets    121,842    —    129,335    — 
Property and equipment, net (1 )    271,280    —    271,280    — 
Advances to vendors    488,299    —    488,299    — 
Digital assets, restricted    68,875    —    73,074    — 
Liabilities:                     
Notes payable    732,289    166,842    -    - 

 

(1)Represents mining rigs. Excludes $1,746 of Property and equipment relating to containers, website and leasehold improvements.

 

During the three months ended March 31, 2023, the fair value of digital assets were transferred from Level 2 to Level 1, as a result of using the quoted price in the active market in accordance with ASC 820. There were no other transfers among Levels 1, 2 or 3 during the six months ended June 30, 2023. As of June 30, 2023 and December 31, 2022, there were no other assets and liabilities measured at fair value on a non-recurring basis.