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FAIR VALUE MEASUREMENT

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT

NOTE 7 – 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

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 September 30, 2023

(in thousands)

Total carrying value at September 30, 2023

Quoted prices in active markets

(Level 1)

Significant other observable inputs

(Level 2)

Significant unobservable inputs

(Level 3)

Assets:

Cash and cash equivalents ⁽¹⁾

45,988

45,988

—

—

		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 $55,222 and $11,661 of cash and cash equivalents as of September 30, 2023 and December 31, 2022, respectively.

There were no transfers among Levels 1, 2 or 3 during the nine months ended September 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 and (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 these assets and liabilities as of September 30, 2023 and December 31, 2022, respectively, are:

		Non-recurring fair value measured at September 30, 2023
		Total carrying value at September 30, 2023				Quoted prices in active markets (Level 1)				Significant other observable inputs (Level 2)				Significant unobservable inputs (Level 3)
Assets:
Digital assets		$	286,801			$	369,797			$	—			$	—

		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				—				129,201				—
Property and equipment, net ⁽¹⁾			271,280				—				271,280				—
Advances to vendors			488,299				—				488,299				—
Digital assets, restricted			68,875				—				72,998				—

⁽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 nine months ended September 30, 2023. In addition, as of September 30, 2023 and December 31, 2022, the Company had convertible notes outstanding with carrying values of $325,266 and $732,289 and fair values of $237,980 and $166,842, respectively, based on Level 1 quoted prices in active markets. As of September 30, 2023 and December 31, 2022, there were no other assets and liabilities measured at fair value on a non-recurring basis.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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