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3. ACQUISITIONS | 3 Months Ended
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Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS | 3. ACQUISITIONS Acquisitions Relating to Continuing Operations Mawson Infrastructure Group - Sandersville, GA On October 8, 2022, the Company completed the acquisition of a lease for approximately 16.35 acres of real property located in Sandersville, Washington County, Georgia (the “Property”), all personal property located on the Property and 6,349 application-specific integrated circuit miners (the “ASICs”) from subsidiaries of Mawson Infrastructure Group, Inc. a Delaware corporation (“Mawson”), all pursuant to a Purchase and Sale Agreement dated September 8, 2022 (the “Purchase Agreement”) and an Equipment Purchase and Sale Agreement dated September 8, 2022 (the "Mawson Transaction"). The Company paid the following consideration to Mawson for the Property: (i) $13,500 in cash; (ii) 1,590,175 shares (the “Closing Shares”) of our common stock, par value $0.001 per share (which had a value of approximately $4,800 based upon the closing price of the common stock on October 7, 2022), and (iii) $6,500 in seller financing in the form of a promissory note. The Company also agreed to pay up to $9,018 in cash within 15 days of the closing for the ASICs. The following additional consideration may be payable to Mawson following the closing: • up to 1,100,890 shares of our common stock (the “Earn-out Shares” and, together with the Closing Shares, the “Company Shares”) (which have a value of approximately $3,325 based upon the closing price of the Company's common stock on October 7, 2022), based upon the number of modular data centers on the Property occupied by Mawson being emptied and made available for our use; and • up to an additional $2,000 in a seller-financed earn-out payable at least 60 days post-closing if the Company is able to utilize at least an additional 150 megawatts ("MW") of power on the Property by the six month anniversary of the closing. The Company accounted for this transaction as an acquisition of a business. The fair value of the consideration given to the Sellers in connection with the transaction and the allocation of the purchase price in accordance with ASC 820 were as follows:
($ in thousands) |  | Fair Value |
Cash |  | $ | 22,518 |
Financing provided by seller |  |  | 6,500 |
1,590,175 shares of CLSK common stock |  |  | 4,803 |
Total purchase price |  | $ | 33,821 |
Contingent Consideration |  |  |
Earn-out Shares of CLSK common stock |  |  | 3,325 |
Megawatt earnout (up to $2,000 max) |  |  | 2,000 |
Total contingent consideration |  | $ | 5,325 |
Total purchase sale agreement consideration-Combined |  | $ | 39,146 |
($ in thousands) |  | Preliminary Allocation at Acquisition Date |
Right of use lease asset |  | $ | 5,010 |
Lease liability assumed |  |  | (5,100 | )
Building |  |  | 13,654 |
Infrastructure asset |  |  | 4,465 |
Miners |  |  | 12,914 |
Machinery and equipment |  |  | 160 |
Goodwill |  |  | 8,043 |
Total |  | $ | 39,146 |
The contingent purchase price pertaining to the 1,100,890 earn-out shares has been classified as a liability in the Consolidated Balance Sheets in accordance with ASC 480, and accordingly is reported at fair value at the end of each reporting period. As of December 31, 2022, the fair value of this contingent liability was reduced to $2,840 from $3,325 resulting in a change in fair value of contingent consideration of $485 in other income expense in the consolidated statements of operations and comprehensive loss. SPRE Commercial Group Inc. and WAHA Technologies Inc. - Washington, GA On August 17, 2022, the Company, through its wholly owned subsidiary, CSRE Properties Washington, LLC, (“CSRE”), completed the purchase of real property, together with all improvements situated thereon and all rights, easements and appurtenances belonging thereto (collectively, the “Property”), from SPRE Commercial Group, Inc. f/k/a WAHA, Inc. (“SPRE”), (the “Seller”), pursuant to a Land Purchase and Sale Agreement dated as of August 5, 2022 and amended on August 17, 2022. Additionally, on August 17, 2022, in connection with the Land Purchase and Sale Agreement, the Company completed the purchase of a mix of S19 and S19 J Pro bitcoin miners with a total processing power equal to approximately 341,985 terahashes, pursuant to an equipment purchase and sale agreement (together with the Land Purchase and Sale Agreement, the “Acquisition”), from Waha Technologies, Inc., a Georgia corporation (“WAHA”, collectively with the Seller "WAHA & SPRE" or the "Sellers"), an affiliate of the Seller. Pursuant to the Land Purchase and Sale Agreement and the Equipment Purchase and Sale Agreement the Company acquired substantially all of WAHA & SPRE's assets. The transaction was accounted for as an acquisition of a business. Total consideration for the Property and miners consisted of (i) $1,962 in financing provided by the Seller to the Company at an interest rate of 12% per annum, to be repaid in 12 monthly installments of $174, (ii) the Company’s assumption of a mortgage with a maximum principal amount of $2,158 and an interest rate of 13% and (iii) $19,772 of cash consideration paid by the Company to the Seller. Acquisition related costs of $118, consisting primarily of legal and recording fees, were expensed as incurred in accordance with ASC 805 and are reflected in professional fees on the Consolidated Statements of Operations and Comprehensive Loss. The Company determined the fair value of the consideration given to the Sellers in connection with the transaction and the allocation of the purchase price in accordance with ASC 820 were as follows:
Consideration: ($ in thousands) |  | Fair Value |
Cash |  | $ | 19,772 |
Financing provided by Seller |  |  | 1,962 |
Mortgage assumed |  |  | 2,158 |
Total Consideration |  | $ | 23,892 |
Purchase Price Allocation ($ in thousands) |  | Preliminary Allocation at Acquisition Date |
Land |  | $ | 100 |
Building/Improvements |  |  | 14,700 |
Miners |  |  | 9,092 |
Total |  | $ | 23,892 |
The total purchase price was allocated to identifiable assets deemed acquired based on their estimated fair values. The fair values of the assets have been recorded and are reflected in property and equipment, net on the Company's Consolidated Balance Sheets. The useful life for the building and improvements is estimated to be 30 years consistent with the Company's policy. The useful life for miners was estimated to be 3 years consistent with the Company's policy for depreciating used miners. Land is not depreciated. Financing provided by the Seller and the mortgage assumed have been recorded as loans payable and are reflected in the Company's Consolidated Balance Sheets. Pro forma of Consolidated Financial Statements (Unaudited) The following is the unaudited pro forma information assuming the acquisition of Mawson and WAHA occurred on October 1, 2021:
|  | For the Three Months Ended |
($ in thousands, except share and per share) |  | December 31, 2021 |
Net sales from continuing operations |  | $ | 46,137 |
Income from continuing operations |  | $ | 16,662 |
Income from continuing operations per common share - basic |  | $ | 0.41 |
Weighted average common shares outstanding – basic |  |  | 40,279,938 |
Income from continuing operations per common share - diluted |  | $ | 0.41 |
Weighted average common shares outstanding – diluted |  |  | 40,485,761 |
Pro forma results of operations for the three months ended December 31, 2022, were not presented since the Mawson acquisition occurred on October 8, 2022 and the results for the 8-day period would be immaterial. The WAHA transaction was included during the entire three month period ended December 31, 2022. The unaudited pro forma consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that would have actually resulted had the acquisition occurred on the first day of the earliest period presented, or of future results of the consolidated entities. The unaudited pro forma consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition. All transactions that would be considered inter-company transactions for pro forma purposes have been eliminated.

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- Definition Tabular disclosure of transactions that are recognized separately from the acquisition of assets and assumptions of liabilities in the business combination. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (e) -URI https://asc.fasb.org/extlink&oid=79982066&loc=d3e1392-128463 + Details
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