Bakkt Holdings, Inc. [BKKT] Filings

10-Q 1 bakkt-20230930.htm 10-Q bakkt-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-39544

BAKKT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware			98-1550750
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
10000 Avalon Boulevard, Suite 1000 Alpharetta, Georgia			30009
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (678) 534-5849

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

BKKT

The New York Stock Exchange

Warrants to purchase Class A Common Stock

BKKT WS

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

As of November 10, 2023, there were 91,429,477 shares of the registrant’s Class A common stock, 183,234,872 shares of Class V common stock, and 7,140,808 public warrants issued and outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Operations	6
	Consolidated Statements of Comprehensive Loss	7
	Consolidated Statements of Changes in Stockholders’ Equity	8
	Consolidated Statements of Cash Flows	10
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities , Use of Proceeds, and Issuer Purchases of Equity Securities	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70
	Signatures	71

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Unless the context otherwise requires, all references to “Bakkt,” “we,” “us,” “our,” or the “Company” in this Quarterly Report on Form 10-Q (this “Report”) refer to Bakkt Holdings, Inc. and its subsidiaries.

This Report contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. You can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would,” the negative of such terms, and other similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on management’s current expectations, assumptions, hopes, beliefs, intentions and strategies regarding future events and are based on currently available information as to the outcome and timing of future events. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to our business. Forward-looking statements in this Report may include, for example, statements about:

• our future financial performance;

• changes in the market for our products and services;

• the expected impacts from our acquisition of Apex Crypto LLC, which we have since renamed Bakkt Crypto Solutions, LLC ("Bakkt Crypto"); and

• expansion plans and opportunities. including our plans to expand to international markets.

These forward-looking statements are based on information available as of the date of this Report and management’s current expectations, forecasts and assumptions, and involve a number of judgments, known and/or unknown risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable law.

You should not place undue reliance on these forward-looking statements. Should one or more of a number of known and unknown risks and uncertainties materialize, or should any of our assumptions prove incorrect, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to:

•our ability to grow and manage growth profitably;

•changes in our business strategy;

•changes in the markets in which we compete, including with respect to our competitive landscape, technology evolution or changes in applicable laws or regulations;

•changes in the markets that we target;

•disruptions in the crypto market that subject us to additional risks, including the risk that banks may not provide banking services to us;

•the possibility that we may be adversely affected by other economic, business, and/or competitive factors;

•the inability to launch new services and products or to profitably expand into new markets and services, or the inability to continue offering existing services or products;

•the inability to execute our growth strategies, including identifying and executing acquisitions and our initiatives to add new clients;

•our ability to achieve the expected benefits from the acquisition of Bakkt Crypto;

Table of Contents

•our failure to comply with extensive government regulation, oversight, licensure and appraisals;

•the uncertain regulatory regime governing blockchain technologies and crypto;

•the inability to develop and maintain effective internal controls and procedures;

•the exposure to any liability, protracted and costly litigation or reputational damage relating to our data security;

•the impact of any goodwill or other intangible assets impairments on our operating results;

•the impact of any pandemics or other public health emergencies;

•our inability to maintain the listing of our securities on the NYSE; and

•other risks and uncertainties indicated in this Report, including those set forth under “Risk Factors.”

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Bakkt Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share data)


	As of September 30, 2023 (Unaudited)		As of December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	68,219	$	98,332
Restricted cash	28,262		16,500
Customer funds	28,223		591
Available-for-sale securities	22,678		141,062
Accounts receivable, net	21,699		25,306
Prepaid insurance	12,050		22,822
Safeguarding asset for crypto	505,697		15,792
Other current assets	7,329		6,060
Total current assets	694,157		326,465
Property, equipment and software, net	20,508		19,744
Goodwill	66,500		15,852
Intangible assets, net	41,738		55,833
Deposits with clearinghouse	159		15,150
Other assets	23,672		22,458
Total assets	$	846,734	$	455,502
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	49,192	$	66,787
Customer funds payable	28,223		591
Deferred revenue, current	4,370		3,972
Due to related party	1,770		1,168
Safeguarding obligation for crypto	505,697		15,792
Other current liabilities	4,303		3,819
Total current liabilities	593,555		92,129
Deferred revenue, noncurrent	2,850		3,112
Warrant liability	1,642		785
Other noncurrent liabilities	37,612		23,402
Total liabilities	635,659		119,428
Commitments and contingencies (Note 14)
Class A common stock ($0.0001 par value, 750,000,000 shares authorized, 91,414,923 shares issued and outstanding as of September 30, 2023 and 80,926,843 shares issued and outstanding as of December 31, 2022)	9		8
Class V common stock ($0.0001 par value, 250,000,000 shares authorized, 183,249,426 shares issued and outstanding as of September 30, 2023 and 183,482,777 shares issued and outstanding as of December 31, 2022)	19		19
Additional paid-in capital	794,199		772,973
Accumulated other comprehensive loss	(293)		(290)
Accumulated deficit	(724,602)		(676,447)
Total stockholders’ equity	69,332		96,263
Noncontrolling interest	141,743		239,811
Total equity	211,075		336,074
Total liabilities and stockholders’ equity	$	846,734	$	455,502

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Bakkt Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)


	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Revenues:
Crypto services	$	191,750	$	471	$	527,526	$	1,464
Loyalty services, net	13,024		12,742		38,096		38,852
Total revenues	204,774		13,213		565,622		40,316
Operating expenses:
Crypto costs	189,428		353		521,601		1,352
Execution, clearing and brokerage fees	697		—		2,902		—
Compensation and benefits	24,608		37,800		85,818		107,135
Professional services	1,962		2,707		7,204		9,291
Technology and communication	5,536		4,137		15,647		12,659
Selling, general and administrative	7,447		7,792		21,722		26,995
Acquisition-related expenses	(739)		454		17,053		1,148
Depreciation and amortization	3,959		6,391		10,843		18,340
Related party expenses	1,033		267		3,145		901
Goodwill and intangible assets impairments	23,325		1,547,711		23,325		1,547,711
Impairment of long-lived assets	56		15		56		15
Restructuring expenses	—		—		4,471		—
Other operating expenses	322		487		1,231		1,706
Total operating expenses	257,634		1,608,114		715,018		1,727,253
Operating loss	(52,860)		(1,594,901)		(149,396)		(1,686,937)
Interest income, net	1,177		623		3,502		838
(Loss) gain from change in fair value of warrant liability	(214)		428		(857)		13,139
Other income, net	379		696		33		607
Loss before income taxes	(51,518)		(1,593,154)		(146,718)		(1,672,353)
Income tax (expense) benefit	(231)		606		(401)		8,844
Net loss	(51,749)		(1,592,548)		(147,119)		(1,663,509)
Less: Net loss attributable to noncontrolling interest	(34,418)		(1,124,416)		(98,964)		(1,184,352)
Net loss attributable to Bakkt Holdings, Inc.	$	(17,331)	$	(468,132)	$	(48,155)	$	(479,157)

Net loss per share attributable to Class A common stockholders:
Basic	$	(0.19)	$	(6.11)	$	(0.55)	$	(7.00)
Diluted	$	(0.19)	$	(6.11)	$	(0.55)	$	(7.00)

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Bakkt Holdings, Inc.

Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)


	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Net loss	$	(51,749)	$	(1,592,548)	$	(147,119)	$	(1,663,509)
Currency translation adjustment, net of tax	(397)		(777)		(36)		(971)
Unrealized gains (losses) on available-for-sale securities, net of tax	16		(165)		20		(178)
Comprehensive loss	$	(52,130)	$	(1,593,490)	$	(147,135)	$	(1,664,658)
Comprehensive loss attributable to noncontrolling interest	(34,669)		(1,125,081)		(98,977)		(1,185,157)
Comprehensive loss attributable to Bakkt Holdings, Inc.	$	(17,461)	$	(468,409)	$	(48,158)	$	(479,501)

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Bakkt Holdings, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share data)

(Unaudited)


	Class A Common Stock			Class V Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
	Shares	$		Shares	$
Balance as of December 31, 2022	80,926,843	$	8	183,482,777	$	19	$	772,973	$	(676,447)	$	(290)	$	96,263	$	239,811	$	336,074
Share-based compensation	—	—		—	—		6,713		—		—		6,713		—		6,713
Unit-based compensation	—	—		—	—		—		—		—		—		542		542
Shares issued upon vesting of share-based awards, net of tax withholding	1,495,040	—		—	—		—		—		—		—		—		—
Exchange of Class V shares for Class A shares	202,890	—		(202,890)	—		345		—		—		345		(345)		—
Currency translation adjustment, net of tax	—	—		—	—		—		—		7		7		15		22
Unrealized losses on available-for-sale securities, net of tax	—	—		—	—		—		—		(72)		(72)		(157)		(229)
Net loss	—	—		—	—		—		(13,976)		—		(13,976)		(30,883)		(44,859)
Balance as of March 31, 2023	82,624,773	$	8	183,279,887	$	19	$	780,031	$	(690,423)	$	(355)	$	89,280	$	208,983	$	298,263
Share-based compensation	—	—		—	—		4,614		—		—		4,614		—		4,614
Unit-based compensation	—	—		—	—		—		—		—		—		377		377
Shares issued upon vesting of share-based awards, net of tax withholding	2,520,711	—		—	—		(2,502)		—		—		(2,502)		—		(2,502)
Shares issued in connection with Apex acquisition	6,140,611	1		—	—		9,062		—		—		9,063		—		9,063
Exchange of Class V shares for Class A shares	—	—		—	—		—		—		—		—		—		—
Currency translation adjustment, net of tax	—	—		—	—		—		—		112		112		227		339
Unrealized losses on available-for-sale securities, net of tax	—	—		—	—		—		—		77		77		156		233
Net loss	—	—		—	—		—		(16,848)		—		(16,848)		(33,663)		(50,511)
Balance as of June 30, 2023	91,286,095	$	9	183,279,887	$	19	$	791,205	$	(707,271)	$	(166)	$	83,796	$	176,080	$	259,876
Share-based compensation	—	—		—	—		2,957		—		—		2,957		—		2,957
Unit-based compensation	—	—		—	—		—		—		—		—		385		385
Forfeiture and cancellation of common units	—	—		(4,845)	—		—		—		—		—		(13)		(13)
Shares issued upon vesting of share-based awards, net of tax withholding	103,212	—		—	—		—		—		—		—		—		—
Exchange of Class V shares for Class A shares	25,616	—		(25,616)	—		37		—		—		37		(37)		—
Currency translation adjustment, net of tax	—	—		—	—		—		—		(133)		(133)		(264)		(397)
Unrealized losses on available-for-sale securities, net of tax	—	—		—	—		—		—		6		6		10		16
Net loss	—	—		—	—		—		(17,331)		—		(17,331)		(34,418)		(51,749)
Balance as of September 30, 2023	91,414,923	$	9	183,249,426	$	19	$	794,199	$	(724,602)	$	(293)	$	69,332	$	141,743	$	211,075

Table of Contents


	Class A Common Stock			Class V Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
	Shares	$		Shares	$
Balance as of December 31, 2021	57,164,388	$	6	206,271,792	$	21	$	566,766	$	(98,342)	$	(55)	$	468,396	$	1,825,775	$	2,294,171
Share-based compensation	—	—		—	—		13,190		—		—		13,190		—		13,190
Unit-based compensation	—	—		—	—		—		—		—		—		1,118		1,118
Forfeiture and cancellation of common units	—	—		(268,522)	—		—		—		—		—		(60)		(60)
Exercise of warrants	100	—		—	—		1		—		—		1		—		1
Currency translation adjustment, net of tax	—	—		—	—		—		—		41		41		147		188
Net loss	—	—		—	—		—		(7,128)		—		(7,128)		(36,193)		(43,321)
Balance as of March 31, 2022	57,164,488	$	6	206,003,270	$	21	$	579,957	$	(105,470)	$	(14)	$	474,500	$	1,790,787	$	2,265,287
Share-based compensation	—	—		—	—		8,016		—		—		8,016		—		8,016
Unit-based compensation	—	—		—	—		—		—		—		—		1,063		1,063
Forfeiture and cancellation of common units	—	—		(9,693)	—		—		—		—		—		(15)		(15)
Exercise of warrants	100	—		—	—		1		—		—		1		—		1
Shares issued upon vesting of share-based awards, net of tax withholding	624,497	—		—	—		(2,586)		—		—		(2,586)		—		(2,586)
Exchange of Class V shares for Class A shares	17,554,639	2		(17,554,639)	(2)		152,235		—		—		152,235		(152,235)		—
Increase in deferred tax liability from step-up tax basis related to exchanges of Opco Common Units	—	—		—	—		(19,063)		—		—		(19,063)		—		(19,063)
Currency translation adjustment, net of tax	—	—		—	—		—		—		(105)		(105)		(277)		(382)
Unrealized losses on available-for-sale securities	—	—		—	—		—		—		(4)		(4)		(9)		(13)
Net loss	—	—		—	—		—		(3,897)		—		(3,897)		(23,744)		(27,641)
Balance as of June 30, 2022	75,343,724	$	8	188,438,938	$	19	$	718,560	$	(109,367)	$	(123)	$	609,097	$	1,615,570	$	2,224,667
Share-based compensation	—	—		—	—		7,657		—		—		7,657		—		7,657
Unit-based compensation	—	—		—	—		—		—		—		—		1,045		1,045
Forfeiture and cancellation of common units	—	—		(34,929)	—		—		—		—		—		(110)		(110)
Exercise of warrants	21	—		—	—		—		—		—		—		—		—
Shares issued upon vesting of share-based awards, net of tax withholding	287,491	—		—	—		—		—		—		—		—		—
Exchange of Class V shares for Class A shares	2,051,166	—		(2,051,166)	—		17,914		—		—		17,914		(17,914)		—
Decrease in deferred tax liability due to tax impact of goodwill and intangible assets impairments	—	—		—	—		19,056		—		—		19,056		—		19,056
Currency translation adjustment, net of tax	—	—		—	—		—		—		(228)		(228)		(549)		(777)
Unrealized losses on available-for-sale securities	—	—		—	—		—		—		(49)		(49)		(116)		(165)
Net loss	—	—		—	—		—		(468,132)		—		(468,132)		(1,124,416)		(1,592,548)
Balance as of September 30, 2022	77,682,402	$	8	186,352,843	$	19	$	763,187	$	(577,499)	$	(400)	$	185,315	$	473,510	$	658,825

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Bakkt Holdings, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Cash flows from operating activities:
Net loss	$	(147,119)	$	(1,663,509)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	10,843		18,340
Non-cash lease expense	2,298		1,893
Share-based compensation expense	14,284		28,863
Unit-based compensation expense	1,300		322
Forfeiture and cancellation of common units	(13)		(185)
Deferred income taxes	—		(8,858)
Impairment of long-lived assets	56		15
Goodwill and intangible assets impairments	23,325		1,547,711
Loss on disposal of assets	70		—
Loss (gain) from change in fair value of warrant liability	857		(13,139)
Other	19		213
Changes in operating assets and liabilities:
Accounts receivable	3,607		(3,964)
Prepaid insurance	10,772		11,629
Deposits with clearinghouse	14,991		1
Accounts payable and accrued liabilities	(14,243)		(10,668)
Due to related party	602		284
Deferred revenue	136		(2,033)
Operating lease liabilities	(2,088)		4,261
Customer funds payable	27,632		41
Other assets and liabilities	(1,220)		(5,122)
Net cash used in operating activities	(53,891)		(93,905)
Cash flows from investing activities:
Capitalized internal-use software development costs and other capital expenditures	(7,905)		(22,533)
Purchase of available-for-sale securities	(44,599)		(188,759)
Proceeds from the maturity of available-for-sale securities	163,165		74,714
Acquisition of Bumped Financial, LLC	(631)		—
Acquisition of Apex Crypto LLC, net of cash acquired	(44,320)		—
Net cash provided by (used in) investing activities	65,710		(136,578)
Cash flows from financing activities:
Proceeds from the exercise of warrants	—		3
Repurchase and retirement of Class A common stock	(2,502)		—
Net cash (used in) provided by financing activities	(2,502)		3
Effect of exchange rate changes	(36)		(968)
Net increase (decrease) in cash, cash equivalents, restricted cash and customer funds	9,281		(231,448)
Cash, cash equivalents, restricted cash and customer funds at the beginning of the period	115,423		408,415
Cash, cash equivalents, restricted cash and customer funds at the end of the period	$	124,704	$	176,967
Supplemental disclosure of cash flow information:
Non-cash operating lease right-of-use asset acquired	$	3,783	$	11,021
Supplemental disclosure of non-cash investing and financing activity:
Capitalized internal-use software development costs and other capital expenditures included in accounts payable and accrued liabilities.	548		2,756
Reconciliation of cash, cash equivalents, restricted cash and customer funds to consolidated balance sheets:
Cash and cash equivalents	$	68,219	$	159,850
Restricted cash	28,262		16,525
Customer funds	28,223		592
Total cash, cash equivalents, restricted cash and customer funds	$	124,704	$	176,967

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Bakkt Holdings, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1.Organization and Description of Business

Organization

VPC Impact Acquisition Holdings (“VIH”) was a blank check company incorporated as a Cayman Islands exempted company on July 31, 2020. VIH was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.

On October 15, 2021 (the “Closing Date”), VIH and Bakkt Opco Holdings, LLC (then known as Bakkt Holdings, LLC, “Opco”) and its operating subsidiaries consummated a business combination (the “VIH Business Combination”) contemplated by the definitive Agreement and Plan of Merger entered into on January 11, 2021 (as amended, the “Merger Agreement”). In connection with the VIH Business Combination, VIH changed its name to “Bakkt Holdings, Inc.” and changed its jurisdiction of incorporation from the Cayman Islands to the State of Delaware (the “Domestication”).

Unless the context otherwise provides, “we,” “us,” “our,” “Bakkt”, the “Company” and like terms refer to Bakkt Holdings, Inc. and its subsidiaries, including Opco.

Immediately following the Domestication, we became organized in an umbrella partnership corporation, or “up-C,” structure in which substantially all of our assets and business are held by Opco, and our only direct assets consist of common units in Opco (“Opco Common Units”), which are non-voting interests in Opco, and the managing member interest in Opco.

In connection with the VIH Business Combination, a portion of VIH shares were exchanged for cash for shareholders who elected to execute their redemption right. The remaining VIH shares were exchanged for newly issued shares of our Class A common stock. Additionally, all outstanding membership interests and rights to acquire membership interests in Opco were exchanged for Opco Common Units and an equal number of newly issued shares of our Class V common stock. The existing owners of Opco other than Bakkt are considered noncontrolling interests in the accompanying consolidated financial statements.

On April 1, 2023 we completed the acquisition of 100% of the ownership interests of Apex Crypto LLC ("Apex Crypto") and subsequently changed the name of the legal entity to Bakkt Crypto Solutions, LLC ("Bakkt Crypto").

Description of Business

We provide, or are working to provide, simplified solutions focused in the following areas:

Crypto

•Custody: Our institutional-grade qualified custody solution caters to more experienced market participants and also supports a portion of our consumer-facing crypto business. This solution is primarily provided by our subsidiary, Bakkt Trust Company LLC (“Bakkt Trust”), a limited purpose trust company that is supervised by the New York State Department of Financial Services (“NYDFS”) and governed by an independent Board of Managers. In connection to the acquisition of Apex Crypto, we acquired third-party custodial relationships with BitGo and Coinbase Custody, which are currently used by Bakkt Crypto for custody and coin transfers, where applicable. In addition, Bakkt Crypto also self-custodies select coins to facilitate consumer withdrawals. Our intention is to consolidate our self-custodial services while still offering diversification across custodians for clients that request it.

Table of Contents

•Trading: Bakkt Marketplace, LLC (“Bakkt Marketplace”), together with its wholly owned subsidiary Bakkt Crypto, operates platforms that provide consumers with the ability to buy, sell and store crypto in a simple, intuitive digital experience accessed via application programming interfaces or embedded web experience. We aim to enable businesses in various industries - such as fintechs, financial institutions and wallet providers - to provide their customers with the ability to transact in crypto directly in their trusted environments. We currently facilitate transactions in the crypto assets listed in the table below.


Crypto Asset			Symbol
Bitcoin			BTC
Bitcoin Cash			BCH
Dogecoin			DOGE
Ether			ETH
Ether Classic			ETC
Litecoin			LTC
Shiba Inu			SHIB
USD Coin			USDC

We also intend to expand our services to include crypto rewards, as described in more detail below. As part of our ongoing review of potential services we have de-prioritized investment in Bakkt Payouts as a service offering as we work with our clients to understand the desired feature set and their timelines to implementation. Any new services will be subject to governance and regulatory approvals.

◦Bakkt Rewards: Subject to regulatory approval, we are in the process of enabling clients of all sizes to offer their customers the ability to convert loyalty points earned through participation in the client's loyalty program into bitcoin (and, in the future, into other crypto assets depending on demand). We initially expect to offer this service in the first quarter of 2024.

Bakkt Trust’s custody solution provides support to Bakkt Marketplace with respect to bitcoin and ether functionality. The list of crypto assets for which Bakkt Trust provides custody services will expand by the end of this year to include more of the crypto assets which we support for trading. In addition, Bakkt Crypto provides custodial services that support certain crypto tokens offered on the consumer platform. Additionally, until October 2, 2023, Bakkt Trust operated, in conjunction with Intercontinental Exchange, Inc. ("ICE"), regulated infrastructure for trading, clearing, and custody services for physically-delivered bitcoin futures (See Note 8 "Related Parties" below for a description of a recent delisting of some Bakkt Bitcoin futures and option contracts by ICE Futures U.S., Inc. ("IFUS")). Bakkt Marketplace and Bakkt Crypto each hold a New York State virtual currency license (commonly referred to as a "BitLicense"), and money transmitter licenses from all states throughout the U.S. where such licenses are required for the operation of their business, and both are registered as a money services business with the Financial Crimes Enforcement Network of the United States Department of the Treasury.

We are also expanding into new international markets. We are currently offering crypto services in Latin America, and expect crypto services to launch in the United Kingdom, Hong Kong, Dubai, Australia and Spain by the end of this year. We expect to continue to pursue new international markets in the future by working with our existing client base as well as targeting new clients.

Loyalty

•We offer a full spectrum of content that our clients can make available to their customers when redeeming loyalty currencies. Our redemption solutions span a variety of rewards categories including merchandise (such as Apple products and services), gift cards and digital experiences. Our travel solution offers a retail e-commerce booking platform, as well as live-agent booking and servicing. Our platform provides a unified shopping experience that is

Table of Contents

configurable for our clients and their loyalty programs. Capabilities include a mobile-first user experience, a multi-tier construct to accommodate loyalty tiers, comprehensive fraud protection capabilities and a split-tender payments platform to accept both points and credit cards as a form of payment.

2.Summary of Significant Accounting Policies

Our accounting policies are as set forth in the notes to our Annual Report on Form 10-K for the year ended December 31, 2022 (our "Form 10-K").

Basis of Presentation

The accompanying unaudited interim consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited interim consolidated financial statements include the accounts of the Company and our subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. In addition, certain reclassifications of amounts previously reported have been made to the accompanying consolidated financial statements in order to conform to current presentation.

In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation have been included. The interim results for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or for any other future annual or interim period. These consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes thereto included in our Form 10-K.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our audited consolidated financial statements and accompanying notes. We base our estimates and assumptions on various judgments that we believe to be reasonable under the circumstances. The significant estimates and assumptions that affect the financial statements may include, but are not limited to, those that are related to going concern, income tax valuation allowances, useful lives of intangible assets and property, equipment and software, fair value of financial assets and liabilities, determining provision for doubtful accounts, valuation of acquired tangible and intangible assets, the impairment of intangible assets and goodwill, and fair market value of Bakkt common units, incentive units and participation units. Actual results and outcomes may differ from management’s estimates and assumptions and such differences may be material to our audited consolidated financial statements.

Liquidity and Going Concern

The accompanying unaudited Consolidated Financial Statements are prepared in accordance with U.S. GAAP applicable to a going concern. This presentation contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and does not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described below.

At each reporting period, in accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, we evaluate whether there are conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. In accordance with ASC 250-40, our initial evaluation can only include management’s plans that have been fully implemented as of the issuance date. Operating forecasts for new products/markets cannot be considered in the initial evaluation as those product/market launches have not been fully implemented.

Table of Contents

Accordingly, our evaluation entails analyzing prospective fully implemented operating budgets and forecasts for expectations of our cash needs and comparing those needs to the current cash and cash equivalent balances. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, we evaluate whether the mitigating effect of its plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued.

Evaluation in conjunction with the issuance of the September 30, 2023 unaudited Consolidated Financial Statements

We have incurred net losses and consumed cashflow from operations since our inception. For the nine months ended September 30, 2023 we incurred a net loss of $147.1 million and consumed $53.9 million of cash in operations. The Company has historically relied on its existing cash and available-for-sale securities portfolio to fund operations. As of September 30, 2023 the Company had $68.2 million of available cash and cash equivalents that was not restricted or required to be held for regulatory capital (see Note 13) and $22.7 million in available-for-sale securities. The Company does not have any debt to service but has commitments under long-term cloud computing, lease and marketing contracts as described in Notes 14 and 17. We expect to continue to incur losses and consume cash for the foreseeable future and will require additional capital to continue to fund operations or will need to take other measures to reduce our cash burn. Due to the challenging nature of our business and regulatory environment, we have limited prospects to secure additional debt or equity financing. In forecasting our expectation of cash needs for the initial ASC 205-40 evaluation, the crypto revenue growth projections exclude expansion to international retail crypto markets where such arrangements are not signed, as well as activation of new partners currently not live on our platform as of the date of release of these Consolidated Financial Statements.

Our losses and projected cash needs, combined with our current liquidity level, initially raised substantial doubt about our ability to continue as a going concern. Management’s plan to improve our liquidity and mitigate the substantial doubt includes integrating our regulated entities to reduce regulatory capital and insurance requirements. We expect these actions will increase available cash by approximately $11.5 million. Additionally, we have been executing a strategic plan to optimize our capital allocation and expense base since the fourth quarter of 2022. Management's plans over the next twelve months include the further reduction of cash expenses through continued alignment of headcount and vendor spend, and further reductions in our non-essential operating footprint.

Management believes the expected impact on our liquidity and cash flows resulting from the entity integration and the operational initiatives outlined above are probable of occurring, sufficient to enable us to meet our obligations for at least twelve months from the date the financial statements are issued and alleviate the conditions that initially raised substantial doubt about our ability to continue as a going concern.

Bakkt Crypto Revenue Recognition

Bakkt Crypto offers customers the ability to purchase or sell certain crypto on its platform. Bakkt Crypto partners with a number of liquidity providers to provide customers with immediate liquidity and access to crypto. Bakkt Crypto settles with the liquidity partners on a daily basis. The contract with a customer is created when a customer agrees to execute a trade on our platform. Each customer purchase transaction includes multiple performance obligations including execution, custody of the customer's purchased crypto, and material rights for ongoing custody beyond the original contractual period. Customer sales only carry a single performance obligation which is execution of the trade. We consider the sale of customer crypto associated with delisted crypto to be revenue in the context of our contracts with customers. We own the crypto as it crosses our platform and accordingly act as a principal in the arrangement. We report the gross proceeds of a sale to a customer or liquidity provider, including a spread on the market price of the crypto as revenue. Substantially all of the consideration is allocated to the execution performance obligation, which is satisfied when we

Table of Contents

record the transaction to the customer's account. Custody services are rendered over the initial contract term which we have concluded is one day. Customers have a material right to obtain additional custody services at no cost by not selling the purchased crypto, which is recognized over the period that the assets are held on our platform. The consideration allocated to the custody and material right performance obligations is estimated on the basis of a cost plus a margin approach and was not material to the three or nine months ended September 30, 2023.

Judgment is required in determining whether the Company is the principal or the agent in our contracts with customers. We have determined that we are the principal in transactions with customers as we control the crypto prior to its delivery to the customer and we are primarily responsible for the delivery of the crypto to the customer. Accordingly, revenue and costs associated with Bakkt Crypto's services are presented gross in our consolidated statement of operations.

Where applicable, we make payments to introducing brokers based on the transaction volume from resulting customer volume. These payments are expensed in the period they are incurred and are included in "Clearing, Execution and Brokerage Fees" on the consolidated statement of operations.

Recently Adopted Accounting Pronouncements

For the nine months ended September 30, 2023, there were no significant changes to the recently adopted accounting pronouncements applicable to us from those disclosed in Note 2 to the consolidated financial statements included in our Form 10-K.

3.Revenue from Contracts with Customers

Disaggregation of Revenue

We disaggregate revenue by service type and by platform, respectively, as follows (in thousands):


Service Type	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Transaction revenue(a)	$	198,526	$	6,927	$	548,774	$	21,477
Subscription and service revenue	6,248		6,286		16,848		18,839
Total revenue	$	204,774	$	13,213	$	565,622	$	40,316

(a)Amounts are net of rebates and incentive payments of less than $0.1 million for both the three and nine months ended September 30, 2023, respectively, and less than $0.1 million and $0.4 million for the three and nine months ended September 30, 2022, respectively. Included in these amounts are amounts earned from related parties of less than $0.1 million for both the three and nine months ended September 30, 2023 and September 30, 2022, respectively.


Platform	Three Months Ended September 30, 2023		Three Months Ended September 30, 2022		Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Loyalty redemption platform	$	13,024	$	12,742	$	38,096	$	38,852
Crypto services(b)	191,750		471		527,526		1,464
Total revenue	$	204,774	$	13,213	$	565,622	$	40,316

(b)Amounts are net of rebates and incentive payments of less than $0.1 million for both the three and nine months ended September 30, 2023, respectively, and less than $0.1 million and $0.4 million for the three and nine months ended September 30, 2022, respectively. Included in these amounts are amounts earned from related parties of less than $0.1 million for both the three and nine months ended September 30, 2023 and September 30, 2022, respectively.

Table of Contents

We recognized revenue from foreign jurisdictions of $1.1 million and $2.8 million for the three and nine months ended September 30, 2023, respectively, and $0.8 million and $2.8 million for the three and nine months ended September 30, 2022, respectively.

We have one reportable segment to which our revenues relate.

Deferred Revenue

Contract liabilities consist of deferred revenue for amounts invoiced prior to us meeting the criteria for revenue recognition. We invoice customers for service fees at the time the service is performed, and such fees are recognized as revenue over time as we satisfy its performance obligation. Contract liabilities are classified as “Deferred revenue, current” and “Deferred revenue, noncurrent” in our consolidated balance sheets. The activity in deferred revenue for the nine months ended September 30, 2023 and September 30, 2022, respectively, was as follows (in thousands):


	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
Beginning of the period contract liability	$	7,084	$	9,448
Revenue recognized from contract liabilities included in the beginning balance	(3,055)		(3,629)
Increases due to cash received, net of amounts recognized in revenue during the period	3,191		1,596
End of the period contract liability	$	7,220	$	7,415

Remaining Performance Obligations

As of September 30, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations related to partially completed contracts is $20.5 million, comprised of $13.3 million of subscription fees and $7.2 million of service fees that are deferred. We recognize our subscription fees as revenue over a weighted-average period of 29 months (ranges from 1 month – 36 months) and our service fees as revenue over approximately 14 months.

As of September 30, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations related to partially completed contracts is $21.9 million, comprised of $14.5 million of subscription fees and $7.4 million of service fees that are deferred. We recognize our subscription fees as revenue over a weighted-average period of 41 months (ranges from 3 months – 48 months) and our service fees as revenue over approximately 24 months.

Contract Costs

For the three and nine months ended September 30, 2023 and September 30, 2022, we incurred no incremental costs to obtain and/or fulfill contracts with customers.

4.Business Combination and Asset Acquisition

Apex Crypto

On April 1, 2023 we completed the acquisition of 100% of the ownership interests of Apex Crypto. We recognized goodwill from the acquisition due to the assembled, experienced workforce and anticipated growth we expect to achieve from Apex Crypto’s sales pipeline and product capabilities. The total consideration as measured at April 1, 2023 included $55.0 million in cash, approximately $9.1 million in Class A common stock payable based on Apex Crypto’s performance in the fourth quarter of 2022, and $12.2 million of cash paid for net working capital, which was predominantly cash held in banks. In addition, we may pay up to $100.0 million of our Class A common stock as additional consideration depending on Apex Crypto’s achievement of certain financial targets through 2025 (the "contingent consideration"). As part of the purchase price allocation the value of the contingent consideration was estimated to be $2.9 million. The Company has since recognized expense of $(0.3) million and $10.1 million during the

Table of Contents

three and nine months ended September 30, 2023, respectively, to adjust the value of the contingent consideration. The Company’s evaluation of the fair value of the contingent consideration and of the assets acquired and the liabilities assumed is preliminary. Accordingly, the adjustments to record the assets acquired and the liabilities assumed at fair value reflect the best estimates of the Company based on the information currently available and are subject to change once additional analyses are completed.

The following is a preliminary reconciliation of the fair value of consideration transferred in the acquisition to the fair value of the assets acquired and liabilities assumed.


($ in millions)
Cash consideration paid	55.0
Cash paid for working capital and cash	12.2
Class A common stock at transaction close	9.1
Estimated fair value of Class A common stock contingent consideration	2.9
Total consideration	$	79.2
Current assets	32.0
Safeguarding asset for crypto	682.2
Property, equipment and software, net	0.1
Non-current assets	0.3
Intangible assets - developed technology	5.6
Intangible assets - customer relationships	10.2
Goodwill	51.0
Current liabilities	(20.0)
Safeguarding obligation for crypto	(682.2)
Net assets acquired	$	79.2

The above fair values are as of the acquisition date. The acquired intangible assets and goodwill required the use of significant unobservable inputs including partner activation forecasts, expectations about customer trading volume and frequency, customer attrition rates, and estimated useful lives of acquired technology and discount rates. The acquired customer relationships were valued using a multi-period excess earnings model. The acquired developed technology was valued using a relief from royalty method. Acquired crypto safeguarding asset and obligation were valued based on the midpoint of a bid-ask spread as of the acquisition date. Other assets and liabilities were carried over at their acquired costs which was not materially different than their fair values.

The contingent consideration payable in Class A common stock to Apex Crypto's former owners based on the performance of the business in the 2023-2025 annual periods was estimated using a Monte Carlo model given the range of possible outcomes.

Revenue generated by Apex Crypto for the three and nine months ended September 30, 2023 was $191.4 million and $526.7 million, respectively, and is included in the Company's statements of operations. Net loss generated by Apex Crypto for the three and nine months ended September 30, 2023 was $8.4 million and $17.0 million, respectively, and is included in the Company's statements of operations.

The following unaudited pro forma financial information presents the Company's results of operations as if the acquisition of Apex Crypto had occurred on January 1, 2022. The unaudited pro forma financial information as presented below is for illustrative purposes and does not purport to represent what the results of operations would actually have been if the acquisition of Apex Crypto occurred as of the date indicated or what the results would be for any future periods. The unaudited pro forma results reflect the step-up amortization adjustments for the fair value of intangible assets acquired, acquisition-related expenses, and share-based compensation expense for newly issued restricted stock units. Proforma revenue for the nine months ended September 30, 2023 would be $1,011.0 million. Proforma revenue for the three and nine

Table of Contents

months ended September 30, 2022 would be $496.2 million and $2,695.6 million, respectively. Proforma net loss for the nine months ended September 30, 2023 would be $148.3 million. Proforma net loss for the three and nine months ended September 30, 2022 would be $1,601.9 million and $1,675.4 million, respectively.

Subsequent to the acquisition, we changed the name of Apex Crypto to Bakkt Crypto Solutions, LLC ("Bakkt Crypto").

Bumped Financial, LLC

On February 8, 2023, we acquired 100% of the units of Bumped Financial, LLC, which we subsequently renamed Bakkt Brokerage, LLC ("Bakkt Brokerage"), a broker-dealer registered with the SEC and the Financial Industry Regulatory Authority, Inc., for cash consideration of $631,000. Because of the limited scope of its historical operations, we determined that substantially all of the purchase consideration in the transaction would be allocated to the in-place licenses Bakkt Brokerage held and as such, have accounted for this as an asset acquisition.

5.Goodwill and Intangible Assets, Net

Changes in goodwill consisted of the following (in thousands):


Balance as of December 31, 2022	$	15,852
Apex acquisition	50,648
Balance as of September 30, 2023	$	66,500

During the period ended September 30, 2023, we concluded it was more likely than not the fair value of our equity was lower than book basis as of September 30, 2023, and our indefinite-lived intangible assets, long-lived assets and goodwill should be evaluated for impairment as of September 30, 2023. Our conclusion was based on several determinative factors, including the sustained decline in our market capitalization as of September 30, 2023 and failure to achieve our projected growth. We conducted a quantitative test for our various long-lived asset groups, indefinite lived intangible assets and single reporting unit's goodwill. We concluded in the quantitative assessment that the fair value of our loyalty-related customer relationships and developed technology and our trademark/trade name indefinite-lived intangible asset fell below their carrying values as of September 30, 2023 and recorded impairments of $16.6 million, $3.1 million and $3.7 million, respectively. No impairment of the recently acquired Apex Crypto customer-relationships or developed technology was indicated. No goodwill impairment was indicated by the quantitative assessment and no goodwill impairment charges have been recognized in the nine months ended September 30, 2023.

Our goodwill impairment analyses involved the use of a market approach and an income approach, with equal weighting given to both approaches. The market approach valuation was derived from metrics of publicly traded companies, which are Level 2 inputs. A significant judgment in using the market approach included the selection of comparable businesses with consideration of risk profiles, size, geography, and business operations. Significant assumptions used in the income approach included growth (revenue, earnings before interest, taxes, depreciation, and amortization ("EBITDA") and earnings before interest and taxes ("EBIT") margin, and terminal value) and discount rates. We used historical performance and management estimates of future performance to estimate margins and revenue growth rates. Our growth rates and margins are impacted significantly by our ability to grow crypto trading volumes and our ability to expand to international markets. The income approach utilized our projected cash flow estimates to determine fair value, which were unobservable, Level 3 inputs. Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available. We developed our estimates using the best information available as of September 30, 2023 and in consultation with third party valuation specialists. We used discount rates that were intended to be commensurate with the risks and uncertainty inherent in our business. Assumptions used, such as forecasted growth rates, capital expenditures, and our cost of capital, were consistent with our internal projections and operating plans as of September 30, 2023.

Table of Contents

Our quantitative impairment analysis for the loyalty-related customer relationships and developed technology intangible asset involved the use of a market approach which estimated the sale value of the asset group associated with the loyalty business. Significant judgments included the scope of the asset group and the hypothetical proceeds associated with the transaction, which are level 3 inputs.

Our impairment analysis for the trademark/trade name involved the use of a relief from royalty approach, which estimated the value of the stream of payments a market participant would pay to make use of the in-place trade name. Significant judgments in this analysis included forecasted revenue growth rates, the royalty rate and the discount rate.

The discount rate used in the valuations described above ranged from 13.5% (used in the loyalty asset group valuations) to 35% (used in the crypto services asset group valuations) The crypto services discount rate increased by approximately 400 basis points from the rate used in the Apex Crypto acquisition described in Note 4 due to the additional uncertainty around our international expansion. The discount rate used in the income approach in the goodwill quantitative test and the valuation of the trademark/tradename indefinite-lived intangible asset was a weighted average 25%.

During the period ended September 30, 2022, we concluded it was more likely than not the fair value of our equity was lower than book basis as of September 30, 2022, and our indefinite-lived intangible assets, long-lived assets and goodwill should be evaluated for impairment as of September 30, 2022. Our conclusion was based on several determinative factors, including the elongated timing for expected crypto product activations and the sustained decline in our market capitalization as of September 30, 2022.

After assessing the totality of circumstances and giving effect to the indefinite-lived intangible asset impairment described below, as of September 30, 2022 we concluded that the carrying value of our reporting unit exceeded its fair value and recorded a goodwill impairment of $1,389.9 million.

Our goodwill impairment analysis involved the use of a market approach and an income approach, with equal weighting given to both approaches. The market approach valuation was derived from metrics of publicly traded companies, which are Level 2 inputs. A significant judgment in using the market approach included the selection of comparable businesses with consideration of risk profiles, size, geography, and business operations. Significant assumptions used in the income approach included growth (revenue, earnings before interest, taxes, depreciation, and amortization (EBITDA) and earnings before interest and taxes (EBIT) margin, and terminal value) and discount rates. We used historical performance and management estimates of future performance to estimate margins and revenue growth rates. Our growth rates and margins are impacted significantly by our ability to grow loyalty redemption transactions, crypto trading volumes and subscription services. The income approach utilized our projected cash flow estimates to determine fair value, which were unobservable, Level 3 inputs. Unobservable inputs are used to measure fair value to the extent that relevant observable inputs are not available. We developed our estimates using the best information available as of September 30, 2022 and in consultation with third party valuation specialists. We used discount rates that were commensurate with the risks and uncertainty inherent in our business. Assumptions used, such as forecasted growth rates, capital expenditures, and our cost of capital, were consistent with our internal projections and operating plans as of September 30, 2022.

During the period ended September 30, 2022, we also concluded that the fair value of our licenses and trademark/trade name indefinite-lived intangible assets fell below their carrying values as of September 30, 2022 and recorded impairments of $131.3 million and $26.5 million, respectively.

Our impairment analysis for the licenses intangible asset involved the use of an income approach which estimated the value of the in-place licenses as compared to cash flows if the licenses had to be obtained at a delay. Significant judgments used in this analysis were consistent with the inputs used in the income approach for the goodwill impairment analysis and the assumed time to obtain the licenses.

Table of Contents

The discount rate used in the valuations described above was 15.5%, which was 400 basis points higher than the discount rate assumed in the valuation of these intangibles for the VIH Business Combination. The higher discount rate reflected the higher risk-free rate and beta observed as of September 30, 2022 as compared to the October 15, 2021 VIH Business Combination valuation date.

Our quantitative analysis of long-lived assets involved a comparison of undiscounted cash flows against the carrying value of the related assets which included finite-lived intangible assets and property, plant, and equipment. We concluded no impairment existed for the long-lived assets as of September 30, 2022. Significant judgments in this analysis were consistent with the inputs used in the income approach for the goodwill impairment analysis.

Intangible assets consisted of the following (in thousands):


	September 30, 2023
	Weighted Average Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Impairment		Net Carrying Amount
Licenses	Indefinite	$	611	$	—	$	—	$	611
Trademarks / trade names	Indefinite	8,000		—		(3,700)		4,300
Technology	5	18,360		(5,558)		(3,069)		9,733
Customer relationships	8.4	55,170		(11,520)		(16,556)		27,094
Total		$	82,141	$	(17,078)	$	(23,325)	$	41,738


	December 31, 2022
	Weighted Average Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Impairment		Net Carrying Amount
Licenses	Indefinite	$	241,320	$	—	$	(241,320)	$	—
Trademarks / trade names	Indefinite	39,470		—		(31,470)		8,000
Technology	4.2	67,310		(19,605)		(38,035)		9,670
Customer relationships	8	44,970		(6,807)		—		38,163
Total		$	393,070	$	(26,412)	$	(310,825)	$	55,833

Amortization of intangible assets for the three and nine months ended September 30, 2023 was $2.6 million and $7.2 million, respectively, and is included in “Depreciation and amortization” in the statements of operations. Amortization of intangible assets for the three and nine months ended September 30, 2022 was $5.5 million and $16.3 million, respectively, and is included in “Depreciation and amortization” in the statements of operations.

Table of Contents

Estimated future amortization for definite-lived intangible assets as of September 30, 2023 was as follows (in thousands):


	September 30, 2023
Remainder of 2023	$	1,654
2024	6,581
2025	6,564
2026	6,234
2027	5,021
Thereafter	10,773
Total	$	36,827

Intangible assets include crypto we own, which are accounted for as indefinite-lived intangible assets and are initially measured at cost (under a first-in, first-out basis) under the guidance in ASC 350 Intangibles - Goodwill and Other. These assets are not amortized, but assessed for impairment continually given the volatility of markets for these assets. Impairment exists when the carrying amount exceeds its fair value. The fair value of crypto is determined as the lowest price of executed transactions during the measurement or holding period using the quoted price of the crypto in our principal market. The carrying amount of a crypto asset after its impairment becomes its new cost basis. Impairment losses are not reversible or recoverable and are included in Crypto Costs in the consolidated statement of operations. Impairment losses were not material to the three or nine months ended September 30, 2023. Our owned crypto are typically liquidated on a daily basis during the fulfillment of customer orders and settlement with our liquidity providers. We classify cash flows from crypto within cash flows from operating activities.

6.Consolidated Balance Sheet Components

Accounts Receivable, Net

Accounts receivable, net consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Trade accounts receivable	$	12,596	$	16,284
Deposits at brokers or dealers	1,590		—
Crypto receivable from liquidity providers	186		—
Unbilled receivables	6,003		6,445
Other receivables	1,864		2,787
Total accounts receivable	22,239		25,516
Less: allowance for doubtful accounts	(540)		(210)
Total	$	21,699	$	25,306

Amounts payable and receivable to our liquidity providers are reported net by counterparty when the right of offset exists.

Other Current Assets

Other current assets consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Prepaid expenses	$	7,297	$	6,060
Other	32		—
Total	$	7,329	$	6,060

Table of Contents

Property, Equipment and Software, Net

Property, equipment and software, net consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Internal-use software	$	8,218	$	4,383
Purchased software

Bakkt Holdings, Inc. [BKKT] Filings
Bakkt Holdings, Inc. [BKKT-WT] Filings
10-Q	[2023-11-14]
10-Q	[2023-08-10]
10-Q	[2023-05-11]
10-K	[2023-03-24]
10-Q	[2022-11-10]
10-Q	[2022-08-11]
10-Q	[2022-05-12]
10-K	[2022-03-31]
S-1	[2021-11-12]
10-Q	[2021-10-13]
10-Q	[2021-08-13]
10-Q	[2021-05-24]
10-K	[2021-03-31]
10-Q	[2020-11-16]
S-1	[2020-09-04]

Bakkt Holdings, Inc. [BKKT] Filings

Bakkt Holdings, Inc. [BKKT-WT] Filings