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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2021
OR
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 001-04321
Coinbase Global, Inc.
(Exact name of registrant as specified in its charter)
Delaware46-4707224
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
Not ApplicableNot Applicable
(Address of Principal Executive Offices)(Zip Code)
Not Applicable
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.00001 par value per shareCOINNasdaq Global Select Market
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, a 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. (Check one):
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 Act).     Yes        No   ☒

As of November 2, 2021, the number of shares of the registrant's Class A common stock outstanding was 155,243,470 and the number of shares of the registrant's Class B common stock outstanding was 59,961,149.



TABLE OF CONTENTS
Page



1


SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our future financial performance, including our expectations regarding our net revenue, operating expenses, and our ability to achieve and maintain future profitability;
our business plan and our ability to effectively manage our growth;
anticipated trends, growth rates, and challenges in our business, the cryptoeconomy, and in the markets in which we operate;
market acceptance of our products and services;
beliefs and objectives for future operations;
our ability to maintain, expand, and further penetrate our existing customer base;
our ability to develop new products and services and grow our business in response to changing technologies, customer demand, and competitive pressures;
our expectations concerning relationships with third parties;
our ability to maintain, protect, and enhance our intellectual property;
our ability to continue to expand internationally;
the effects of increased competition in our markets and our ability to compete effectively;
future acquisitions of or investments in complementary companies, products, services, or technologies and our ability to successfully integrate such companies or assets;
our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
economic and industry trends, projected growth, or trend analysis;
trends in revenue, cost of revenue, and gross margin;
trends in operating expenses, including technology and development expenses, sales and marketing expenses, and general and administrative expenses, and expectations regarding these expenses as a percentage of revenue;
our key business metrics used to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions;
increased expenses associated with being a public company; and
other statements regarding our future operations, financial condition, and prospects and business strategies.
2


We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled Risk Factors and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on any forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in such forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, restructurings, joint ventures, partnerships, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Coinbase Global, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value data)
(unaudited)
September 30,December 31,
20212020
Assets
Current assets:
Cash and cash equivalents$6,352,775 $1,061,850 
Restricted cash30,884 30,787 
Customer custodial funds8,956,966 3,763,392 
USDC92,107 48,938 
Accounts and loans receivable, net of allowance237,131 189,471 
Income tax receivable94,689  
Prepaid expenses and other current assets105,165 39,510 
Total current assets15,869,717 5,133,948 
Crypto assets held833,763 316,094 
Lease right-of-use assets105,583 100,845 
Property and equipment, net55,632 49,250 
Goodwill567,420 77,212 
Intangible assets, net142,183 60,825 
Other non-current assets879,973 117,240 
Total assets$18,454,271 $5,855,414 
Liabilities, Convertible Preferred Stock, and Stockholders’ Equity
Current liabilities:
Custodial funds due to customers$8,807,978 $3,849,468 
Accounts payable and accrued expenses290,471 85,111 
Crypto asset borrowings445,172 271,303 
Lease liabilities, current31,854 25,270 
Other current liabilities39,684 15,703 
Total current liabilities9,615,159 4,246,855 
Lease liabilities, non-current81,602 82,508 
Long-term debt3,382,185  
Other non-current liabilities14,828  
Total liabilities13,093,774 4,329,363 
Commitments and contingencies (Note 17)
Convertible preferred stock, $0.00001 par value; 500,000 and 126,605 shares authorized at September 30, 2021 and December 31, 2020, respectively; zero and 112,878 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $578,750 at September 30, 2021 and December 31, 2020, respectively
 562,467 
Stockholders’ equity:
Class A common stock, $0.00001 par value; 10,000,000 and 267,640 shares authorized at September 30, 2021 and December 31, 2020, respectively; 153,701 and 12,204 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
1  
Class B common stock, $0.00001 par value; 500,000 and 208,414 shares authorized at September 30, 2021 and December 31, 2020; 59,961 and 60,904 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
1  
Additional paid-in capital1,850,711 231,024 
Accumulated other comprehensive (loss) income(432)6,256 
Retained earnings3,510,216 726,304 
Total stockholders’ equity5,360,497 963,584 
Total liabilities, convertible preferred stock, and stockholders’ equity$18,454,271 $5,855,414 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Coinbase Global, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Revenue:
Net revenue$1,234,736 $286,663 $4,864,727 $644,076 
Other revenue77,172 28,694 476,254 48,293 
Total revenue1,311,908 315,357 5,340,981 692,369 
Operating expenses:
Transaction expense197,251 36,766 766,743 85,568 
Technology and development356,264 73,319 831,950 181,234 
Sales and marketing105,395 11,977 419,117 33,281 
General and administrative242,642 71,433 612,068 182,379 
Other operating expense, net118,548 20,357 556,857 27,541 
Total operating expenses1,020,100 213,852 3,186,735 510,003 
Operating income291,808 101,505 2,154,246 182,366 
Other expense (income), net20,948 (1,211)17,839 5,935 
Income before provision for income taxes270,860 102,716 2,136,407 176,431 
(Benefit from) provision for income taxes (135,240)21,417 (647,505)30,899 
Net income$406,100 $81,299 $2,783,912 $145,532 
Net income attributable to common stockholders:
Basic$402,343 $17,437 $2,241,790 $41,012 
Diluted$405,340 $20,505 $2,338,407 $48,046 
Net income per share attributable to common stockholders:
Basic$1.92 $0.25 $13.58 $0.61 
Diluted$1.62 $0.23 $11.19 $0.55 
Weighted-average shares of common stock used to compute net income per share attributable to common stockholders:
Basic209,604 68,981 165,045 67,653 
Diluted250,536 90,708 209,052 88,140 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Coinbase Global, Inc.
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Net income$406,100 $81,299 $2,783,912 $145,532 
Other comprehensive (loss) income:
Translation adjustment, net of tax(3,206)2,844 (6,688)3,320 
Comprehensive income$402,894 $84,143 $2,777,224 $148,852 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Coinbase Global, Inc.
Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity
(In thousands)
(unaudited)
Three Months Ended September 30, 2021
Convertible Preferred StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained Earnings
Common Stock
SharesAmountSharesAmountTotal
Balance at July 1, 2021 $ 209,876 $2 $1,516,533 $2,774 $3,104,116 $4,623,425 
Issuance of common stock upon exercise of stock options, net of repurchases— — 2,964 — 43,221 — — 43,221 
Stock-based compensation expense— — — — 264,941 — — 264,941 
Issuance of equity instruments as consideration for business combinations— — 211 — 77,482 — — 77,482 
Issuance of common stock upon settlement of RSUs and restricted common stock, net of shares withheld— — 611 — (51,466)— — (51,466)
Comprehensive loss— — — — — (3,206)— (3,206)
Net income— — — — — — 406,100 406,100 
Balance at September 30, 2021 $ 213,662 $2 $1,850,711 $(432)$3,510,216 $5,360,497 

Three Months Ended September 30, 2020
Convertible Preferred StockAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeRetained Earnings
Common Stock
SharesAmountSharesAmountTotal
Balance at July 1, 2020114,959 $564,697 67,102 $ $115,141 $(245)$468,220 $583,116 
Issuance of common stock upon exercise of stock options, net of repurchases— — 345 — 2,388 — — 2,388 
Stock-based compensation expense— — — — 16,180 — — 16,180 
Conversion of preferred stock(2,081)(2,230)2,081 — 2,230 — — 2,230 
Issuance of equity instruments as consideration in business combination— — 1,304 — 31,349 — — 31,349 
Issuance of common stock to settle contingent consideration— — 691 — 16,205 — — 16,205 
Comprehensive income— — — — — 2,844 — 2,844 
Net income— — — — — — 81,299 81,299 
Balance at September 30, 2020112,878 $562,467 71,523 $ $183,493 $2,599 $549,519 $735,611 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Coinbase Global, Inc.
Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity
(In thousands)
(unaudited)
Nine Months Ended September 30, 2021
Convertible Preferred StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained Earnings
Common Stock
SharesAmountSharesAmountTotal
Balance at January 1, 2021112,878 $562,467 73,108 $ $231,024 $6,256 $726,304 $963,584 
Issuance of common stock upon exercise of stock options, net of repurchases— — 22,257 — 181,025 — — 181,025 
Stock-based compensation expense— — — — 559,652 — — 559,652 
Issuance of equity instruments as consideration for business combinations— — 3,891 — 509,379 — — 509,379 
Conversion of preferred stock(112,878)(562,467)112,878 2 562,465 — — 562,467 
Issuance of shares from exercise of warrants— — 412 — 433 — — 433 
Issuance of common stock upon settlement of RSUs and restricted common stock, net of shares withheld— — 1,116 — (103,136)— — (103,136)
Purchase of capped calls— — — — (90,131)— — (90,131)
Comprehensive loss— — — — — (6,688)— (6,688)
Net income— — — — — — 2,783,912 2,783,912 
Balance at September 30, 2021 $ 213,662 $2 $1,850,711 $(432)$3,510,216 $5,360,497 

Nine Months Ended September 30, 2020
Convertible Preferred StockAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeRetained Earnings
Common Stock
SharesAmountSharesAmountTotal
Balance at January 1, 2020114,959 $564,697 66,994 $ $93,820 $(721)$403,987 $497,086 
Issuance of common stock upon exercise of stock options, net of repurchases— — 453 — 1,323 — — 1,323 
Stock-based compensation expense— — — — 38,566 — — 38,566 
Conversion of preferred stock(2,081)(2,230)2,081  2,230 — — 2,230 
Issuance of equity instruments as consideration in business combination— — 1,304 — 31,349 — — 31,349 
Issuance of common stock to settle contingent consideration— — 691 — 16,205 — — 16,205 
Comprehensive income— — — — — 3,320 — 3,320 
Net income— — — — — — 145,532 145,532 
Balance at September 30, 2020112,878 $562,467 71,523 $ $183,493 $2,599 $549,519 $735,611 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Coinbase Global, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Nine Months Ended
September 30,
20212020
Cash flows from operating activities
Net income$2,783,912 $145,532 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization40,633 22,385 
Impairment expense234,023 8,352 
Stock-based compensation expense558,157 37,800 
Provision for transaction losses and doubtful accounts14,816 (2,388)
Loss on disposal of property and equipment361  
Deferred income taxes(572,044)7,637 
Unrealized loss on foreign exchange16,084 6,207 
Non-cash lease expense27,151 18,366 
(Gain) loss on investments(14,209)397 
Change in fair value of contingent consideration(924)3,281 
Realized gain on crypto assets(125,822)(15,609)
Crypto assets received as revenue(661,254)(46,892)
Crypto asset payments for expenses465,157 20,421 
Fair value gain on derivatives(23,823)(10,995)
Amortization of debt discount and issuance costs2,420  
Changes in operating assets and liabilities:
USDC(56,710)36,696 
Accounts and loans receivable37,244 (8,859)
Income taxes, net(95,756)43,805 
Other assets(26,331)(28,190)
Custodial funds due to customers4,938,326 616,517 
Accounts payable and accrued expenses194,290 12,192 
Lease liabilities(18,899)(18,286)
Other liabilities19,909 (2,542)
Net cash provided by operating activities7,736,711 845,827 
Cash flows from investing activities
Purchase of property and equipment(1,628)(7,500)
Proceeds from sale of property and equipment31  
Capitalized internal-use software development costs(15,507)(6,265)
Business combination, net of cash acquired(39,405)33,615 
Purchase of investments(251,118)(4,950)
Purchase of assembled workforce(24,000) 
Proceeds from settlement of investments 303 
Purchase of crypto assets held(1,479,091)(274,385)
Disposal of crypto assets held1,268,801 289,045 
Loans originated(169,325) 
Proceeds from repayment of loans66,827  
Net cash (used in) provided by investing activities(644,415)29,863 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Coinbase Global, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Nine Months Ended
September 30,
20212020
Cash flows from financing activities
Issuance of common stock upon exercise of stock options, net of repurchases174,949 1,971 
Taxes paid related to net share settlement of equity awards(103,136) 
Proceeds received under the employee stock purchase plan11,532  
Issuance of shares from exercise of warrants433  
Issuance of convertible senior notes, net1,403,753  
Issuance of senior notes, net1,976,011  
Purchase of capped calls(90,131) 
Proceeds from short-term borrowing20,000  
Net cash provided by financing activities3,393,411 1,971 
Net increase in cash, cash equivalents, and restricted cash10,485,707 877,661 
Effect of exchange rates on cash(1,111)(18,118)
Cash, cash equivalents, and restricted cash, beginning of period4,856,029 1,784,417 
Cash, cash equivalents, and restricted cash, end of period$15,340,625 $2,643,960 
Cash, cash equivalents, and restricted cash consisted of the following:
Cash and cash equivalents$6,352,775 $766,262 
Restricted cash30,884 36,317 
Customer custodial funds8,956,966 1,841,381 
Total cash, cash equivalents, and restricted cash$15,340,625 $2,643,960 
Supplemental disclosure of cash flow information
Cash paid during the period for income taxes$53,426 $21,623 
Operating cash outflows for amounts included in the measurement of operating lease liabilities$16,781 $22,483 
Supplemental schedule of non-cash investing and financing activities
Unsettled purchases of property and equipment$974 $2,501 
Right-of-use assets obtained in exchange for operating lease obligations$26,672 $2,146 
Non-cash consideration paid for business combinations$535,989 $39,887 
Purchase of crypto assets and investments with non-cash consideration$4,940 $112 
Crypto assets borrowed$292,635 $62,914 
Crypto assets borrowed repaid with crypto assets$59,348 $ 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1.    NATURE OF OPERATIONS
Coinbase, Inc. was founded in 2012. In April 2014, in connection with a corporate reorganization, Coinbase, Inc. became a wholly-owned subsidiary of Coinbase Global, Inc. (together with its consolidated subsidiaries, the “Company”).
The Company operates globally and is a leading provider of end-to-end financial infrastructure and technology for the cryptoeconomy. The Company offers retail users the primary financial account for the cryptoeconomy, institutions a state of the art marketplace with a deep pool of liquidity for transacting in crypto assets, and ecosystem partners technology and services that enable them to build crypto-based applications and securely accept crypto assets as payment.
In May 2020, the Company became a remote-first company. Accordingly, the Company does not maintain a headquarters.
2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying interim condensed consolidated financial statements of the Company are unaudited. These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), on the same basis as the audited consolidated financial statements, and in management’s opinion, reflect all adjustments, consisting only of normal, recurring adjustments, that are necessary for the fair statement of the Company’s condensed consolidated balance sheet as of September 30, 2021, condensed consolidated results of operations for the three and nine months ended September 30, 2021 and September 30, 2020, and condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and September 30, 2020. The unaudited condensed consolidated results of operations for the three and nine months ended September 30, 2021 and September 30, 2020 are not necessarily indicative of the results to be expected for the full year or any other period.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s final prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on April 14, 2021 (the “Prospectus”).
These accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. The Company’s subsidiaries are entities in which the Company holds, directly or indirectly, more than 50% of the voting rights or where it exercises control. Certain subsidiaries of the Company have a basis of presentation different from GAAP. For the purposes of these unaudited condensed consolidated financial statements, the basis of presentation of such subsidiaries is converted to GAAP. All intercompany accounts and transactions have been eliminated in consolidation.
There were no changes to the significant accounting policies or recent accounting pronouncements that were disclosed in Note 2. Summary of Significant Accounting Policies to the audited consolidated financial statements included in the Prospectus, other than as discussed below.
Reclassifications
Certain prior period amounts have been reclassified in order to conform with the current period presentation. These reclassifications have no impact on the Company’s previously reported consolidated net income.
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Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Use of estimates
The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions in the Company’s condensed consolidated financial statements and notes thereto.
Significant estimates and assumptions include the determination of the recognition, measurement, and valuation of current and deferred income taxes; the fair value of stock-based awards issued; the useful lives of intangible assets; the useful lives of property and equipment; the impairment of long-lived assets; the Company’s incremental borrowing rate; the fair value of assets acquired and liabilities assumed in business combinations, including contingent consideration arrangements; the fair value of derivatives and related hedges; the fair value of long-term debt; and loss provisions.
Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties. To the extent that there are material differences between these estimates and actual results, the Company’s condensed consolidated financial statements will be affected. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the result of which forms the basis for making judgments about the carrying values of assets and liabilities.
Business combinations
The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Acquisition-related costs incurred by the Company are recognized as an expense in General and administrative expenses within the condensed consolidated statements of operations.
The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement.
During the measurement period, which may be up to one year from the acquisition date, and to the extent that the value was not previously finalized, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information about facts and circumstance that existed at the date of acquisition and reevaluates these estimates and assumptions quarterly and records any adjustments to the Company’s preliminary estimates to goodwill, provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s condensed consolidated statements of operations.

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Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Accounts and loans receivable and allowance for doubtful accounts
Accounts and loans receivables are contractual rights to receive cash either on demand or on fixed or determinable dates, and are recognized as an asset on the Company’s balance sheet. Accounts and loans receivable consists of in-transit customer receivables, post-trade credit receivables, custodial fee revenue receivable, loans receivable, interest receivable, and other receivables.
In-transit customer receivables represent settlements from third-party payment processors and banks for customer transactions. In-transit receivables are typically received within one or two business days of the transaction date. The Company establishes withdrawal-based limits in order to mitigate potential losses by preventing customers from withdrawing the crypto asset to an external blockchain address until the payment settles. In certain jurisdictions, in-transit customer receivables qualify as eligible liquid assets to meet regulatory requirements to fulfill the Company’s direct obligations under custodial funds due to customers.
Post-trade credit receivables represent funds due for crypto assets delivered to credit eligible customers and are typically received within three business days from the transaction date. Post-trade credit receivables enable customers to instantly invest in crypto assets without pre-funding their trade.
Custodial fee revenue receivable represents the fee earned and receivable by the Company for providing a dedicated secure cold storage solution to customers. The fee is based on a contractual percentage of the daily value of assets under custody and is collected on a monthly basis. Such custodial fee revenue income is included in the net revenue in the condensed consolidated statements of operations.
Loans receivable represent loans made to retail users and institutions. These loans are collateralized with crypto assets held by those users in their crypto asset wallet on the Company’s platform. Loans receivable are subsequently measured at amortized cost.
The Company recognizes an allowance for doubtful accounts for receivables based on expected credit losses. In determining expected credit losses, the Company considers historical loss experience, the aging of its receivable balance, and the fair value of any collateral held. For loans receivable, the Company applies the collateral maintenance provision practical expedient. The Company would recognize credit losses on these loans if there is a collateral shortfall and it is not reasonably expected that the borrower will replenish such a shortfall.
Concentration of credit risk
The Company’s cash, cash equivalents, restricted cash, customer custodial funds, and accounts and loans receivable are potentially subject to concentration of credit risk. Cash, cash equivalents, restricted cash, and customer custodial funds are placed with financial institutions which are of high credit quality. The Company invests cash, cash equivalents, and customer accounts primarily in highly liquid, highly rated instruments which are uninsured. The Company may also have deposit balances with financial institutions which exceed the Federal Deposit Insurance Corporation insurance limit of $250,000. The Company also holds cash at crypto trading venues and performs a regular assessment of these crypto trading venues as part of its risk management process.
The Company held $92.1 million and $48.9 million of USD Coin (“USDC”) as of September 30, 2021 and December 31, 2020, respectively. The underlying U.S. dollar denominated assets are recognized by the issuer in U.S. regulated financial institutions on behalf of USDC holders.
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Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of September 30, 2021, the Company had no customers who accounted for more than 10% of the Company’s accounts and loans receivable. As of December 31, 2020, two customers accounted for more than 10% of the Company’s accounts and loans receivable. One customer had fiat of $45.0 million transferred to their platform account prior to December 31, 2020, but the Company had not yet settled the transaction by collecting payment. The Company had extended $20.5 million of post trade credit to the second customer as of December 31, 2020. As these customers had transferred or were in the process of transferring funds to their portfolio equal to or in excess of the crypto assets purchased, the Company did not record an allowance for doubtful accounts.
As of September 30, 2021 and December 31, 2020, the Company had no payment processors or bank partners representing more than 10% of accounts and loans receivable. During the three and nine months ended September 30, 2021 and September 30, 2020, no customer accounted for more than 10% of total revenue.
Recent accounting pronouncements
Recently adopted accounting pronouncements
On August 5, 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 simplifies accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity, by removing certain separation models that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. ASU 2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. After adoption of ASU 2020-06 entities will not separately present in equity an embedded conversion feature in such debt. Instead entities will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (2) a convertible instrument was issued at a substantial premium. ASU 2020-06 also expands disclosure requirements for convertible instruments and simplifies areas of the guidance for diluted earnings-per-share calculations that are impacted by the amendments. Under ASU 2020-06, entities must apply the more dilutive of the if-converted method and the two-class method to all convertible instruments; the treasury stock method is no longer available. ASU 2020-06 eliminates an entity’s ability to overcome the presumption of share settlement, and as a result, the issuers of convertible debt that may be settled in any combination of cash or stock at the issuer’s option, must use the more dilutive among the if-converted method and the two-class method in computing diluted net income per share, which is typically more dilutive than the net share settlement under the treasury stock method. ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted. The Company early adopted ASU 2020-06 on January 1, 2021. The adoption of this new guidance did not have an impact on the Company’s consolidated financial statements since the Company had no existing convertible notes prior to issuance of the 2026 Convertible Notes, described below, in the second quarter of 2021. Further, the Company’s outstanding convertible preferred stock, which were converted into common stock in conjunction with the Company’s direct listing of its Class A common stock on the Nasdaq Global Select Market (the “Direct Listing”), did not contain any beneficial conversion feature. The Company’s 2026 Convertible Notes are accounted for in accordance with this new guidance. See Note 9. Indebtedness for additional information.
14

Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
On December 18, 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes, as part of its overall simplification initiative to reduce the costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other things, the new guidance simplifies intraperiod tax allocation and reduces the complexity in accounting for income taxes with year-to-date losses in interim periods. The Company adopted the standard on January 1, 2021. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.
On August 29, 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)—Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under Accounting Standards Codification (“ASC”) 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense. The Company adopted the standard on January 1, 2021 using the prospective transition approach. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.
On June 16, 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. The Company adopted the standard on January 1, 2021 using the modified retrospective approach. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements, as the Company’s receivables are either fully collateralized or are short term in nature and therefore less susceptible to risks and uncertainty of credit losses over extended periods of time.
3.    ACQUISITIONS
2021 Acquisitions
Bison Trails
On February 8, 2021, the Company completed the acquisition of Bison Trails Co. (“Bison Trails”) by acquiring all issued and outstanding common stock and stock options of Bison Trails. Bison Trails is a platform-as-a-service company that provides a suite of easy-to-use blockchain infrastructure products and services on multiple networks to custodians, exchanges and funds.
Prior to the acquisition, the Company held a minority ownership stake in Bison Trails, which was accounted for as a cost method investment. In accordance with ASC 805, Business Combinations, the acquisition was accounted for as a business combination achieved in stages under the acquisition method. Accordingly, the cost method investment was remeasured to fair value as of the acquisition date. The Company considered multiple factors in determining the fair value of the previously held cost method investment, including the price negotiated with the selling shareholders and current trading multiples for comparable companies. Based on this analysis, the Company recognized an $8.8 million gain on remeasurement, which was recorded in other expense (income), net in the condensed consolidated statement of operations on the acquisition date.
15

Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The final allocation of purchase consideration to assets and liabilities remains in process as the Company continues to evaluate certain balances, estimates, and assumptions during the measurement period (up to one year from the acquisition date). Any changes in the fair value of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.
The total preliminary consideration transferred in the acquisition was $457.3 million, consisting of the following (in thousands):
Common stock of the Company$389,314 
Previously held interest on acquisition date10,863 
Cash28,726 
Replacement of Bison Trails options28,365 
Total purchase consideration$457,268 
Included in the purchase consideration are 496,434 shares of the Company’s Class A common stock that are subject to an indemnity holdback. These shares will be released 18 months after the closing date of the transaction.
The results of operations and the provisional fair values of the assets acquired and liabilities assumed have been included in the condensed consolidated financial statements as of the date of acquisition. The following table summarizes the estimated fair values of assets acquired and liabilities assumed using a cost based approach (in thousands):
Cash and cash equivalents$12,201 
Crypto assets held5,177 
Accounts and loans receivable, net of allowance2,323 
Prepaid expenses and other current assets122 
Intangible assets39,100 
Goodwill404,167 
Other non-current assets1,221 
Lease right-of-use assets808 
Total assets465,119 
Accounts payable and accrued expenses2,446 
Lease liabilities808 
Other liabilities4,597 
Total liabilities7,851 
Net assets acquired$457,268 

16

Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands, except for years data):
Fair ValueUseful Life at Acquisition (in years)
Developed technology$36,000 3
In-process research and development ("IPR&D")1,200 N/A
User base1,900 3
The intangible assets will be amortized on a straight-line basis over their respective useful lives to Technology and development expenses for developed technology and General and administrative expenses for user base. Amortization of the IPR&D will be recognized in Technology and development expenses once the research and development is placed into service as internally developed software. Management applied significant judgement in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to development costs and profit, costs to recreate customer relationships, market participation profit, and opportunity cost.
Total acquisition costs of $3.7 million were incurred related to the acquisition, which were recognized as an expense and included in General and administrative expenses in the condensed consolidated statements of operations.
Other Acquisitions
During the nine months ended September 30, 2021, the Company also completed three other acquisitions that were not material individually, but were material when aggregated. In each of these acquisitions the Company acquired all issued and outstanding common stock and stock options of the acquiree.
The total purchase consideration in each acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition dates, with the excess recorded as goodwill. For each acquisition, the final allocation of purchase consideration to assets and liabilities remains in process as the Company continues to evaluate certain balances, estimates, and assumptions during the measurement period (up to one year from each acquisition’s respective acquisition date). Any changes in the fair value of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.
The aggregate total preliminary consideration transferred in these acquisitions was $135.7 million, consisting of the following (in thousands):
Common stock of the Company - issued$51,760 
Common stock of the Company - to be issued39,940 
Cash27,795 
Cash payable412 
Contingent consideration arrangement15,752 
Aggregate total purchase consideration$135,659 
17

Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The aggregate purchase consideration includes 160,840 shares of the Company’s Class A common stock to be issued six months after the respective acquisition date. The fair value of these shares on the acquisition date is included in Additional paid-in capital. Additionally, 39,663 shares of the Company’s Class A common stock included in the aggregate purchase consideration that were issued, or to be issued, are subject to an indemnity holdback. These shares will be released between 15 and 18 months after the closing date of each transaction.
Also included in the aggregate purchase consideration is the original estimated fair value of the contingent consideration arrangement agreed to in one of the acquisitions. The contingent consideration consists of two separate tranches. The first tranche is settled one year after the closing date and may result in delivery of up to 75,534 shares of the Company’s Class A common stock if specified revenue targets are met during the first year after the closing date. The second tranche is settled two years after the closing date and may result in delivery of up to another 75,534 shares of the Company’s Class A common stock if specified revenue targets are met during only the second year after the closing date. For each tranche, the revenue targets are adjusted for changes in the combined Bitcoin (“BTC”) and Ethereum (“ETH”) market capitalization since the closing date. The total number of the Company’s Class A common stock issued to settle the contingent consideration arrangement would be adjusted downward in proportion to recognized revenues that do not meet the specified revenue targets.
The contingent consideration arrangement is included in Other non-current liabilities and subject to subsequent measurement at fair value with changes in fair value recognized through Other expense (income), net.
The results of operations and the provisional fair values of the assets acquired and liabilities assumed have been included in the condensed consolidated financial statements as of the dates of acquisition. The following table summarizes the aggregate estimated fair values of assets acquired and liabilities assumed using a cost based approach (in thousands):
Cash and cash equivalents$4,915 
Accounts receivable, net of allowance57 
Prepaid expenses and other current assets209 
Intangible assets46,100 
Goodwill86,041 
Total assets137,322 
Accounts payable and accrued expenses281