SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
Mar. 31, 2024
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned and controlled subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The Company has prepared the Condensed Consolidated Financial Statements in accordance with U.S. GAAP and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable to interim financial information, which permit the omission of certain disclosure to the extent they have not changed materially since the latest annual financial statements. These Condensed Consolidated Financial Statements reflect all adjustments consisting only of normal recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for any future fiscal periods in 2024 or for the full year ending December 31, 2024. These financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 28, 2024. Use of Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant accounting estimates inherent in the preparation of the Company’s financial statements include fair value of assets acquired and liabilities assumed in a business combination, estimates associated with the useful lives of property and equipment, realization of long-lived assets, valuation of derivative instruments, deferred income taxes, unrealized tax positions, and measurement of digital assets. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments and other short-term investments with a maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). During March 2023, the Company began to participate, to the extent practicable, in insured cash sweep programs which “sweep” its deposits across multiple FDIC insured accounts, each with deposits of no more than $250.0 thousand. As of March 31, 2024, substantially all of the Company’s cash and cash equivalents were FDIC insured. Digital Assets Digital assets are included in current assets in the Condensed Consolidated Balance Sheets due to the Company’s ability to sell bitcoin in a highly liquid marketplace and the sale of bitcoin to fund operating expenses to support operations. The proceeds from the sale of digital assets are included within investing activities in the accompanying Condensed Consolidated Statement of Cash Flows. Following the adoption of ASU 2023-08 effective January 1, 2023, the Company measures digital assets at fair value with changes recognized in operating expenses in the Condensed Consolidated Statements of Operations. The Company tracks its cost basis of digital assets by-wallet in accordance with the first-in-first-out (“FIFO”) method of accounting. Refer to Note 5 – Digital Assets, for further information. Accounts Receivable The Company acquired accounts receivable as a result of its acquisition of GC Data Center Equity Holdings, LLC on January 12, 2024, refer to Note 3 - Acquisitions, for further information, which consist of trade receivables. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts, based on historical and customer specific experience, current economic and market conditions. The allowance for doubtful accounts was $12.2 million as of March 31, 2024. Deposits The Company contracts with other service providers for hosting of its equipment and operational support in data centers where the Company’s equipment is deployed. These arrangements typically require advance payments to vendors pursuant to the contractual obligations associated with these services. The Company classifies these payments as “Deposits” or “Long-term deposits” in the Condensed Consolidated Balance Sheets. Derivatives The Company enters into derivative contracts to manage its exposure to fluctuations in the price of bitcoin and energy costs and not for any other purpose. In addition, the Company evaluates its financing and service arrangements to determine whether certain arrangements contain features that qualify as embedded derivatives requiring bifurcation in accordance with Accounting Standard Codification (“ASC”) 815 - Derivatives and Hedging. Embedded derivatives that are required to be bifurcated from the host instrument or arrangement are accounted for and valued as separate financial instruments. There were no embedded derivatives requiring separation from the host instrument as of March 31, 2024 and December 31, 2023. The Company does not elect to designate derivatives as hedges for accounting purposes and as such, records derivatives at fair value with subsequent changes in fair value and settlements recognized in earnings. The Company classifies derivative assets or liabilities in the Condensed Consolidated Balance Sheets as current or non-current based on whether settlement of the instrument could be required within 12 months of the balance sheet date of the Balance Sheets and for derivatives with multiple settlements, based on the term of the contract. Bitcoin Derivatives Beginning in the third quarter of 2023, the Company entered into a series of fixed strike option collar contracts to mitigate bitcoin market pricing volatility risk. During the three months ended March 31, 2024, the Company recorded a $2.3 million loss on derivatives as a non-operating charge in the Condensed Consolidated Statements of Operations, all settled through cash payments. There were no derivative instruments outstanding as of March 31, 2024 and December 31, 2023. Energy Derivatives The Company acquired a commodity swap contract as a result of its acquisition of GC Data Center Equity Holdings, LLC on January 12, 2024, refer to Note 3 - Acquisitions, for further information. The commodity swap contract hedges price variability in electricity purchases and expires December 31, 2027. The commodity swap contract meets the definition of a derivative due to terms that provide for net settlement. As of March 31, 2024, the estimated fair value of the Company’s derivative instrument was $4.3 million, estimated using observable market-based inputs classified under Level 2 of the fair value hierarchy. The significant assumptions used in the discounted cash flow model to estimate fair value include the discount rate and electricity forward curves. During the three months ended March 31, 2024, the Company recorded a $15.3 million loss to “Change in fair value of derivative” in the Condensed Consolidated Statements of Operations for the change in fair value of the commodity swap contract since January 12, 2024, the acquisition date of GC Data Center Equity Holdings, LLC. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and impairment, as applicable. Property and equipment acquired through business combinations are measured at fair value at the acquisition date. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company’s property and equipment is primarily composed of bitcoin mining rigs, which are largely homogeneous and have approximately the same useful lives. Accordingly, the Company utilizes the group method of depreciation for its bitcoin mining rigs. The Company will update the estimated useful lives of its bitcoin mining server group periodically if information on the operations of the mining equipment indicates changes are required. The Company will assess and adjust the estimated useful lives of its mining equipment when there are indicators that the productivity of the mining assets is longer or shorter than the assigned estimated useful lives. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is not subject to amortization, and instead, assessed for impairment annually at the end of each fiscal year, or more frequently when events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount in accordance with ASC 350 - Intangibles - Goodwill and Other. The Company has the option to first assess qualitative factors to determine whether events or circumstances indicate it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, in which case a quantitative impairment test is not required. As provided for by ASU 2017-04, Simplifying the Test for Goodwill Impairment, the quantitative goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not impaired. An impairment loss is recognized for any excess of the carrying amount of the reporting unit over its fair value up to the amount of goodwill allocated to the reporting unit. Income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit are considered when measuring the goodwill impairment loss, if applicable. Finite-Lived Intangible Assets Intangible assets are recorded at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets acquired through business combinations are measured at fair value at the acquisition date. Intangible assets with finite lives are comprised of customer relationships and intellectual property and are amortized over their estimated useful lives on an accelerated basis over the projected pattern of economic benefits. Finite-lived intangible assets are reviewed for impairment annually, or more frequently when events or changes in circumstances indicate that it is more likely than not that the fair value has been reduced to less than its carrying amount. Business Combinations The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805 - Business Combinations, by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, measured at the acquisition date fair value. The determination of fair value involves assumptions, estimates and judgments. The initial allocation of the purchase price is considered preliminary and therefore subject to change until the end of the measurement period (up to one year from the acquisition date). Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net assets acquired. Contingent consideration is included within the purchase price and is initially recognized at fair value as of the acquisition date. Contingent consideration classified as either an asset or liability, is remeasured to fair value each reporting period, until the contingency is resolved. Changes in contingent consideration period-over-period are recognized in earnings. Acquisition related expenses are recognized separately from the business combination and are expensed as incurred. Investments Investments, which may be made from time to time for strategic reasons, are included in non-current assets in the Condensed Consolidated Balance Sheets. Investments without a readily determinable fair value are recorded at cost minus impairment, plus or minus changes from observable price changes in orderly transactions for identical or similar investments of the same issuer, in accordance with the measurement alternative described in ASC 321 - Investments – Equity Securities. As part of the Company’s policy to maximize return on strategic investment opportunities, while preserving capital and limiting downside risk, the Company may at times enter into equity investments or Simple Agreements for Future Equity (“SAFE”). The nature and timing of the Company’s investments will depend on available capital at any particular time and the investment opportunities identified and available to the Company. However, we generally do not make investments for speculative purposes and do not intend to engage in the business of making investments. On January 10, 2024, the Company purchased additional shares of Auradine preferred stock with a purchase price of $8.0 million, bringing the total carrying amount of its investment in Auradine preferred stock to $48.7 million. The preferred stock purchased on January 10, 2024 was similar to the Company’s other investments in Auradine preferred stock and as a result, the Company recorded a $5.2 million “Gain on investments” in the Condensed Consolidated Statement of Operations to adjust the carrying amount of its investments to an observable price in accordance with the measurement alternative in ASC 321. Refer to Note 15 – Related Party Transactions, for further information. As of March 31, 2024 and December 31, 2023, the Company has one remaining SAFE investment with a carrying value of $1.0 million, with no noted impairments or other adjustments. During September 2023, the Company entered into an agreement with Auradine, Inc. (“Auradine”) to secure certain rights to future purchases by the Company from Auradine for which the Company paid $15.0 million and recorded to “Long-term prepaids” in the Condensed Consolidated Balance Sheets. The purchase rights that the Company secured do not expire, do not require minimum purchases and include most favored nation and right of first refusal provisions. On September 27, 2022, the Company purchased additional shares of Auradine preferred stock with a purchase price of $30.0 million, bringing the then total carrying amount of its investment in Auradine preferred stock to $35.5 million, with no noted impairments or other adjustments. Refer to Note 15 – Related Party Transactions, for further information. On May 3, 2022, the Company converted $2.0 million from its prior Auradine SAFE investment into preferred stock while purchasing additional Auradine preferred stock with a purchase price of $3.5 million. At the same time, the Company entered into a commitment to acquire additional shares of Auradine preferred stock with a purchase price of $30.0 million. This forward contract was accounted for under ASC 321 as an equity security. Equity Method Investments The Company accounts for investments in which it owns between 20% and 50% of the common stock or has the ability to exercise significant influence, but not control, over the investee using the equity method of accounting in accordance with ASC 323 - Equity Method Investments and Joint Ventures. Under the equity method, an investor initially records an investment in the stock of an investee at cost and adjusts the carrying amount of the investment to recognize the investor’s share of the earnings or losses of the investee after the date of acquisition. On January 27, 2023, the Company and Zero Two (formerly known as FS Innovation, LLC) entered into a Shareholders’ Agreement regarding the formation of an Abu Dhabi Global Markets company (the “ADGM Entity”) in which the Company has a 20% ownership interest and accounted for as an equity method investment. The ADGM Entity started mining operations during September 2023. During the three months ended March 31, 2024, the Company received a non-monetary dividend in the amount of $4.4 million associated with approximately 1,950 miners rigs distributed by Zero Two. The Company recorded the mining rigs to property and equipment at fair value and accordingly, recognized an impairment of $4.1 million that reduced our investment in the ADGM Entity. The Company’s share of net operating income was $5.4 million for the three months ended March 31, 2024. As of March 31, 2024, the Company’s investment in the ADGM Entity was $61.4 million and is reflected in “Investments” in the Condensed Consolidated Balance Sheets. Stock-based Compensation The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the grant date fair value of the awards. Refer to Note 11 – Stockholders' Equity, for further information. Impairment of Long-lived Assets Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Revenues The Company recognizes revenue under ASC 606 – Revenue from Contracts with Customers. The core principle of the revenue standard is that a reporting entity should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Refer to Note 4 – Revenues, for further information. Research and Development Research and development costs consist primarily of contractor costs, equipment, supplies, personnel, and related expenses for research and development activities. Research and development costs are expensed as incurred in accordance with ASC 730 - Research and Development, and are included in operating expenses in the Condensed Consolidated Statement of Operations. Research and development costs were $2.5 million and $0.2 million, for the three months ended March 31, 2024 and March 31, 2023, respectively. Income Taxes Effective Tax Rate The effective tax rate (“ETR”) from continuing operations was 10.14% for the three months ended March 31, 2024, and 0.06% for the three months ended March 31, 2023. The difference between the U.S. statutory tax rate of 21% was primarily due to a change in the valuation allowance as a result of current year activity. The following items caused the quarterly ETR to be significantly different compared to the Company’s historic annual ETR: During the period ended March 31, 2024, the Company concluded, based upon all available evidence, that it was more likely than not that it would have sufficient future taxable income to realize the Company’s federal and state deferred tax assets. As a result, the Company is releasing its valuation allowance associated with deferred tax assets, the tax benefit of which is being offset by the tax expense associated with the recording of a deferred tax liability for the increase in the fair value of bitcoin in the Condensed Consolidated Statement of Operations. The Company’s conclusion regarding the realizability of such deferred tax assets was based on the scheduled reversal of deferred tax liabilities. Income Tax in Interim Periods The Company records its tax expense or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. The income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised. Uncertainties The Company files federal and state income tax returns. The 2020-2023 tax years generally remain subject to examination by the IRS and various state taxing authorities, although the Company is not currently under examination in any jurisdiction. The Company does not currently expect any of its remaining unrecognized tax benefits to be recognized in the next twelve months. Recent Accounting Pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement may affect the Company’s financial reporting, the Company undertakes an analysis to determine any required changes to its Condensed Consolidated Financial Statements and assures that there are proper controls in place to ascertain that the Company’s Condensed Consolidated Financial Statements properly reflect the change. There have been no material changes to our recent accounting pronouncements that were disclosed in our Annual Report on Form 10-K, which was filed with the SEC on February 28, 2024.

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned and controlled subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The Company has prepared the Condensed Consolidated Financial Statements in accordance with U.S. GAAP and regulations of the U.S. Securities and Exchange Commission (the “SEC”) applicable to interim financial information, which permit the omission of certain disclosure to the extent they have not changed materially since the latest annual financial statements. These Condensed Consolidated Financial Statements reflect all adjustments consisting only of normal recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for any future fiscal periods in 2024 or for the full year ending December 31, 2024.

These financial statements should be read in conjunction with the financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 28, 2024.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant accounting estimates inherent in the preparation of the Company’s financial statements include fair value of assets acquired and liabilities assumed in a business combination, estimates associated with the useful lives of property and equipment, realization of long-lived assets, valuation of derivative instruments, deferred income taxes, unrealized tax positions, and measurement of digital assets. Actual results could differ from those estimates.

The Company considers all highly liquid investments and other short-term investments with a maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). During March 2023, the Company began to participate, to the extent practicable, in insured cash sweep programs which “sweep” its deposits across multiple FDIC insured accounts, each with deposits of no more than $250.0 thousand. As of March 31, 2024, substantially all of the Company’s cash and cash equivalents were FDIC insured.

Digital assets are included in current assets in the Condensed Consolidated Balance Sheets due to the Company’s ability to sell bitcoin in a highly liquid marketplace and the sale of bitcoin to fund operating expenses to support operations. The proceeds from the sale of digital assets are included within investing activities in the accompanying Condensed Consolidated Statement of Cash Flows. Following the adoption of ASU 2023-08 effective January 1, 2023, the Company measures digital assets at fair value with changes recognized in operating expenses in the Condensed Consolidated Statements of Operations. The Company tracks its cost basis of digital assets by-wallet in accordance with the first-in-first-out (“FIFO”) method of accounting. Refer to Note 5 – Digital Assets, for further information.

The Company acquired accounts receivable as a result of its acquisition of GC Data Center Equity Holdings, LLC on January 12, 2024, refer to Note 3 - Acquisitions, for further information, which consist of trade receivables. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts, based on historical and customer specific experience, current economic and market conditions. The allowance for doubtful accounts was $12.2 million as of March 31, 2024.

The Company contracts with other service providers for hosting of its equipment and operational support in data centers where the Company’s equipment is deployed. These arrangements typically require advance payments to vendors pursuant to the contractual obligations associated with these services. The Company classifies these payments as “Deposits” or “Long-term deposits” in the Condensed Consolidated Balance Sheets.

The Company enters into derivative contracts to manage its exposure to fluctuations in the price of bitcoin and energy costs and not for any other purpose. In addition, the Company evaluates its financing and service arrangements to determine whether certain arrangements contain features that qualify as embedded derivatives requiring bifurcation in accordance with Accounting Standard Codification (“ASC”) 815 - Derivatives and Hedging. Embedded derivatives that are required to be bifurcated from the host instrument or arrangement are accounted for and valued as separate financial instruments. There were no embedded derivatives requiring separation from the host instrument as of March 31, 2024 and December 31, 2023.

The Company does not elect to designate derivatives as hedges for accounting purposes and as such, records derivatives at fair value with subsequent changes in fair value and settlements recognized in earnings. The Company classifies derivative assets or liabilities in the Condensed Consolidated Balance Sheets as current or non-current based on whether settlement of the instrument could be required within 12 months of the balance sheet date of the Balance Sheets and for derivatives with multiple settlements, based on the term of the contract.

Beginning in the third quarter of 2023, the Company entered into a series of fixed strike option collar contracts to mitigate bitcoin market pricing volatility risk. During the three months ended March 31, 2024, the Company recorded a $2.3 million loss on derivatives as a non-operating charge in the Condensed Consolidated Statements of Operations, all settled through cash payments. There were no derivative instruments outstanding as of March 31, 2024 and December 31, 2023.

The Company acquired a commodity swap contract as a result of its acquisition of GC Data Center Equity Holdings, LLC on January 12, 2024, refer to Note 3 - Acquisitions, for further information. The commodity swap contract hedges price variability in electricity purchases and expires December 31, 2027. The commodity swap contract meets the definition of a derivative due to terms that provide for net settlement. As of March 31, 2024, the estimated fair value of the Company’s derivative instrument was $4.3 million, estimated using observable market-based inputs classified under Level 2 of the fair value hierarchy. The significant assumptions used in the discounted cash flow model to estimate fair value include the discount rate and electricity forward curves.

During the three months ended March 31, 2024, the Company recorded a $15.3 million loss to “Change in fair value of derivative” in the Condensed Consolidated Statements of Operations for the change in fair value of the commodity swap contract since January 12, 2024, the acquisition date of GC Data Center Equity Holdings, LLC.

Property and equipment are stated at cost, net of accumulated depreciation and impairment, as applicable. Property and equipment acquired through business combinations are measured at fair value at the acquisition date. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company’s property and equipment is primarily composed of bitcoin mining rigs, which are largely homogeneous and have approximately the same useful lives. Accordingly, the Company utilizes the group method of depreciation for its bitcoin mining rigs. The Company will update the estimated useful lives of its bitcoin mining server group periodically if information on the operations of the mining equipment indicates changes are required. The Company will assess and adjust the estimated useful lives of its mining equipment when there are indicators that the productivity of the mining assets is longer or shorter than the assigned estimated useful lives.

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is not subject to amortization, and instead, assessed for impairment annually at the end of each fiscal year, or more frequently when events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount in accordance with ASC 350 - Intangibles - Goodwill and Other.

The Company has the option to first assess qualitative factors to determine whether events or circumstances indicate it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, in which case a quantitative impairment test is not required.

As provided for by ASU 2017-04, Simplifying the Test for Goodwill Impairment, the quantitative goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not impaired. An impairment loss is recognized for any excess of the carrying amount of the reporting unit over its fair value up to the amount of goodwill allocated to the reporting unit. Income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit are considered when measuring the goodwill impairment loss, if applicable.

Intangible assets are recorded at cost less any accumulated amortization and any accumulated impairment losses. Intangible assets acquired through business combinations are measured at fair value at the acquisition date.

Intangible assets with finite lives are comprised of customer relationships and intellectual property and are amortized over their estimated useful lives on an accelerated basis over the projected pattern of economic benefits. Finite-lived intangible assets are reviewed for impairment annually, or more frequently when events or changes in circumstances indicate that it is more likely than not that the fair value has been reduced to less than its carrying amount.

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805 - Business Combinations, by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, measured at the acquisition date fair value. The determination of fair value involves assumptions, estimates and judgments. The initial allocation of the purchase price is considered preliminary and therefore subject to change until the end of the measurement period (up to one year from the acquisition date). Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net assets acquired. Contingent consideration is included within the purchase price and is initially recognized at fair value as of the acquisition date. Contingent consideration classified as either an asset or liability, is remeasured to fair value each reporting period, until the contingency is resolved. Changes in contingent consideration period-over-period are recognized in earnings.

Investments, which may be made from time to time for strategic reasons, are included in non-current assets in the Condensed Consolidated Balance Sheets. Investments without a readily determinable fair value are recorded at cost minus impairment, plus or minus changes from observable price changes in orderly transactions for identical or similar investments of the same issuer, in accordance with the measurement alternative described in ASC 321 - Investments – Equity Securities.

As part of the Company’s policy to maximize return on strategic investment opportunities, while preserving capital and limiting downside risk, the Company may at times enter into equity investments or Simple Agreements for Future Equity (“SAFE”). The nature and timing of the Company’s investments will depend on available capital at any particular time and the investment opportunities identified and available to the Company. However, we generally do not make investments for speculative purposes and do not intend to engage in the business of making investments.

On January 10, 2024, the Company purchased additional shares of Auradine preferred stock with a purchase price of $8.0 million, bringing the total carrying amount of its investment in Auradine preferred stock to $48.7 million. The preferred stock purchased on January 10, 2024 was similar to the Company’s other investments in Auradine preferred stock and as a result, the Company recorded a $5.2 million “Gain on investments” in the Condensed Consolidated Statement of Operations to adjust the carrying amount of its investments to an observable price in accordance with the measurement alternative in ASC 321. Refer to Note 15 – Related Party Transactions, for further information.

During September 2023, the Company entered into an agreement with Auradine, Inc. (“Auradine”) to secure certain rights to future purchases by the Company from Auradine for which the Company paid $15.0 million and recorded to “Long-term prepaids” in the Condensed Consolidated Balance Sheets. The purchase rights that the Company secured do not expire, do not require minimum purchases and include most favored nation and right of first refusal provisions.

On September 27, 2022, the Company purchased additional shares of Auradine preferred stock with a purchase price of $30.0 million, bringing the then total carrying amount of its investment in Auradine preferred stock to $35.5 million, with no noted impairments or other adjustments. Refer to Note 15 – Related Party Transactions, for further information.

On May 3, 2022, the Company converted $2.0 million from its prior Auradine SAFE investment into preferred stock while purchasing additional Auradine preferred stock with a purchase price of $3.5 million. At the same time, the Company entered into a commitment to acquire additional shares of Auradine preferred stock with a purchase price of $30.0 million. This forward contract was accounted for under ASC 321 as an equity security.

The Company accounts for investments in which it owns between 20% and 50% of the common stock or has the ability to exercise significant influence, but not control, over the investee using the equity method of accounting in accordance with ASC 323 - Equity Method Investments and Joint Ventures. Under the equity method, an investor initially records an investment in the stock of an investee at cost and adjusts the carrying amount of the investment to recognize the investor’s share of the earnings or losses of the investee after the date of acquisition.

On January 27, 2023, the Company and Zero Two (formerly known as FS Innovation, LLC) entered into a Shareholders’ Agreement regarding the formation of an Abu Dhabi Global Markets company (the “ADGM Entity”) in which the Company has a 20% ownership interest and accounted for as an equity method investment. The ADGM Entity started mining operations during September 2023. During the three months ended March 31, 2024, the Company received a non-monetary dividend in the amount of $4.4 million associated with approximately 1,950 miners rigs distributed by Zero Two. The Company recorded the mining rigs to property and equipment at fair value and accordingly, recognized an impairment of $4.1 million that reduced our investment in the ADGM Entity. The Company’s share of net operating income was $5.4 million for the three months ended March 31, 2024. As of March 31, 2024, the Company’s investment in the ADGM Entity was $61.4 million and is reflected in “Investments” in the Condensed Consolidated Balance Sheets.

The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the grant date fair value of the awards. Refer to Note 11 – Stockholders' Equity, for further information.

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

The Company recognizes revenue under ASC 606 – Revenue from Contracts with Customers. The core principle of the revenue standard is that a reporting entity should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Refer to Note 4 – Revenues, for further information.

Research and development costs consist primarily of contractor costs, equipment, supplies, personnel, and related expenses for research and development activities. Research and development costs are expensed as incurred in accordance with ASC 730 - Research and Development, and are included in operating expenses in the Condensed Consolidated Statement of Operations. Research and development costs were $2.5 million and $0.2 million, for the three months ended March 31, 2024 and March 31, 2023, respectively.

The effective tax rate (“ETR”) from continuing operations was 10.14% for the three months ended March 31, 2024, and 0.06% for the three months ended March 31, 2023. The difference between the U.S. statutory tax rate of 21% was primarily due to a change in the valuation allowance as a result of current year activity. The following items caused the quarterly ETR to be significantly different compared to the Company’s historic annual ETR:

During the period ended March 31, 2024, the Company concluded, based upon all available evidence, that it was more likely than not that it would have sufficient future taxable income to realize the Company’s federal and state deferred tax assets. As a result, the Company is releasing its valuation allowance associated with deferred tax assets, the tax benefit of which is being offset by the tax expense associated with the recording of a deferred tax liability for the increase in the fair value of bitcoin in the Condensed Consolidated Statement of Operations. The Company’s conclusion regarding the realizability of such deferred tax assets was based on the scheduled reversal of deferred tax liabilities.

The Company records its tax expense or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. The income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period.

The Company files federal and state income tax returns. The 2020-2023 tax years generally remain subject to examination by the IRS and various state taxing authorities, although the Company is not currently under examination in any jurisdiction.

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement may affect the Company’s financial reporting, the Company undertakes an analysis to determine any required changes to its Condensed Consolidated Financial Statements and assures that there are proper controls in place to ascertain that the Company’s Condensed Consolidated Financial Statements properly reflect the change.