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Fair Value Measurements
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements

(8) Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company did not have any assets or liabilities measured at fair value on a recurring basis as of December 31, 2022. For the period-ended September 30, 2023, the fair value of the complex embedded derivative issued as a part of the PIPE Agreement was estimated using a Monte Carlo simulation to simulate potential changes in share price and the resulting impact on the amount of cash to be collected under the PIPE Agreement. The fair value of the embedded derivative was then determined by comparing (i) the best estimate of the cash to be collected at the valuation date using this simulation compared to (ii) the cash that would be collected under a hypothetical host contract that assumes the share price did not change since the date of initial recognition (both on a present value basis). The fair value is considered a level 2 fair value given the observability of the following inputs:

 

 

September 30, 2023

 

Bitcoin Depot Inc. stock price at September 30, 2023

 

 

2.63

 

Term to the end of the 6th reference period (in years)

 

 

0.41

 

Risk free rate

 

 

5.46

%

Equity volatility

 

 

50

%

Dividend yield

 

 

0

%

 

The fair value is determined to be a Level 2 fair value because there are no significant unobservable inputs. Level 2 fair values involve inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. In the case of the PIPE Financing embedded derivative fair value, the inputs are limited to share price, interest rates, and dividend yield, each of which are observable along with volatility, which is based on historical traded prices and implied volatility derived from the same historical data.

Contingent Consideration

The following table presents the changes in the estimated fair value of the contingent consideration liability measured using significant unobservable inputs (Level 3) (in thousands):

 

 

Nine Months Ended
September 30,
2023

 

 

Year ended
December 31,
2022

 

Balance, beginning of period

 

$

1,841

 

 

$

2,879

 

Change in fair value during the period

 

 

159

 

 

 

962

 

Payment made during the period

 

 

(2,000

)

 

 

(2,000

)

Balance, end of period

 

$

-

 

 

$

1,841

 

 

Contingent consideration related to the BitAccess acquisition in July 2021 was measured at the probability-weighted fair value at the date of acquisition, which was estimated by applying an income valuation approach based on Level 3 inputs consisting primarily of a discount rate and probability of achieving the performance metrics. During the year-ended December 31, 2022, the Company made the first year payment of $2.0 million to the former owners of BitAccess as the performance conditions were determined to have been met. In addition, the Company amended the contingent consideration arrangement to remove the performance conditions for the second year payment such that the full $2.0 million related to the second year payment would be paid out in accordance with the agreement on July 31, 2023. As such, there was no contingent consideration liability as of September 30, 2023. The change in fair value of the contingent consideration is recognized in interest expense in the consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the nine months ended September 30, 2023 and 2022. The difference between the recorded fair value of the payments and the ultimate payment amounts was not material to any period. In July 2023, in accordance with the BitAccess acquisition agreement, the Company paid $2.0 million to settle the remaining contingent consideration.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

The Company’s non-financial assets, such as goodwill, intangible assets, property and equipment, operating lease right-of-use assets and cryptocurrencies are adjusted down to fair value when an impairment charge is recognized. Certain fair value measurements are based predominantly on Level 3 inputs. No impairment charges related to goodwill, intangible assets, operating lease right-of-use assets and property and equipment have been recognized for the nine months ended September 30, 2023 and 2022. Fair value of cryptocurrencies are based on Level 1 inputs. The carrying value of the Company’s cryptocurrency reflects any impairment charges recorded since its purchase or receipt.

Assets and Liabilities Not Measured and Recorded at Fair Value

The Company considers the carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses (excluding contingent consideration) in the consolidated financial statements to approximate fair value due to their short maturities.

The Company estimates the fair value of its fixed-rated note payable based on quoted prices in markets that are not active, which is considered a Level 2 valuation input. As of September 30, 2023, the estimated fair value of the fixed-rated note was approximately $19.6 million and the carrying value was $18.7 million.