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11. LOANS
 12 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
LOANS

12. LOANS

As of September 30, 2024, the Company had a gross balance of loans payable outstanding of $66,120, netted against discount on the loans payable of $163. Total principal payments on loans during the years ended September 30, 2024 and 2023 was $7,283 and $14,466, respectively. The following table reflects our outstanding loans as of September 30, 2024 and September 30, 2023:

 

 

 

 

 

 

 

Loans Payable Balance, Net
as of September 30,

 

($ in thousands)

 

Maturity Date

 

Rate

 

2024

 

 

2023

 

Coinbase Line of Credit

 

Not specified

 

8.50%

 

$

50,000

 

 

$

—

 

Western Alliance Bank Credit Agreement

 

Aug-29

 

6.75%

 

 

6,839

 

 

 

—

 

Trinity Master Equipment Financing Arrangement

 

Apr-25

 

13.80%

 

 

5,171

 

 

 

11,603

 

Mortgage - Corporate Facility

 

Apr-25

 

10.00%

 

 

1,981

 

 

 

1,950

 

Marquee Funding Partners

 

Aug-26 to Mar-27

 

13.00%

 

 

1,267

 

 

 

1,725

 

Auto & Equipment Loans

 

Jun-26 to Dec-29

 

0.0-11.3%

 

 

699

 

 

 

625

 

Total Loans Payable

 

 

 

 

 

$

65,957

 

 

$

15,903

 

Less: current portion of loans payable

 

 

 

 

 

 

(58,781

)

 

 

(6,992

)

Loans payable, net of current portion

 

 

 

 

 

$

7,176

 

 

$

8,911

 

The following table reflects the principal amount of loan maturities due over the next five years and beyond as of September 30, 2024:

 

($ in thousands)

 

5-Year Loan Maturities

 

Outstanding Loan

 

FY 2025

 

 

FY 2026

 

 

FY 2027

 

 

FY 2028

 

 

FY 2029

 

 

Thereafter

 

 

Total

 

Coinbase Line of Credit

 

$

50,000

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

50,000

 

Western Alliance Bank Credit Agreement

 

 

811

 

 

 

869

 

 

 

930

 

 

 

996

 

 

 

3,327

 

 

 

—

 

 

 

6,933

 

Trinity Master Equipment Financing Arrangement

 

 

5,221

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,221

 

Mortgage - Corporate Facility

 

 

2,000

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,000

 

Marquee Funding Partners

 

 

521

 

 

 

592

 

 

 

154

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,267

 

Auto & Equipment Loans

 

 

226

 

 

 

218

 

 

 

128

 

 

 

94

 

 

 

29

 

 

 

4

 

 

 

699

 

Total principal amount of loan payments by fiscal year

 

$

58,779

 

 

$

1,679

 

 

$

1,212

 

 

$

1,090

 

 

$

3,356

 

 

$

4

 

 

$

66,120

 

Unamortized deferred financing costs and discounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(163

)

Total loan book value as of September 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

65,957

 

Description of Outstanding Loans

Coinbase Line of Credit and Receivable For Bitcoin Collateral

On August 7, 2024, the Company signed a Master Loan Agreement (the “Master Loan”) with Coinbase Credit, Inc. (the “Lender”) for a line of credit in which the Lender will lend the Company certain digital assets or cash. The Master Loan provided has a credit limit of $50,000. On or prior to a drawdown, the Company is required to pledge collateral, and the Company has opted to pledge bitcoin to be held in a segregated custody account, such that the loan-to-value ratio of principal outstanding of the loan and the fair value of collateral is equal to or less than 64%. If the value of the collateral under the credit facility decreases past a specified margin, the Company may be required to post additional bitcoin as collateral.

The Master Loan includes embedded redemption features, which allows the lender to redeem the security before its maturity date (“redemption feature”). The Master Loan also includes a contingent interest feature that requires additional interest to be paid only if certain conditions are met. One such redemption feature and contingent interest feature is in the event of default, including failure to maintain sufficient collateral, the Lender may liquidate the collateral to satisfy the outstanding loan balance or charge incremental interest at the federal funds rate upon the under-collateralized portion of the loan. The Company assessed the embedded redemption features and the contingent interest feature and determined the features are clearly and closely related to the line of credit and do not require bifurcation. Upon transfer of the bitcoin, the Lender has the exclusive right to sell, pledge and rehypothecate the bitcoin without notice to the Company. Either party can terminate a loan with two days’ notice to the other party. As of the date of this report, no such termination has occurred.

The Company drew $50,000 from the line of credit in August 2024, and concurrently transferred bitcoin to the Lender as collateral at fair value of $78,130. Pursuant to the terms, the line of credit initially bore interest of 9% per annum and has no defined maturity date but is terminable by either the Lender or the Company with notice. During September 2024, the interest rate on the line of credit was adjusted to 8.5% per annum. As of September 30, 2024, the outstanding balance on the Coinbase line of credit was $50,000 at a rate of 8.5% per annum.

Since the Lender has the rights to sell, pledge and rehypothecate the bitcoin during the term of the Master Loan, the Company derecognized the bitcoin transferred as collateral. As the Company has the right to receive the bitcoin back from the Lender upon the repayment of the line of credit, the Company recorded a corresponding Receivable for bitcoin collateral. The Receivable for bitcoin collateral is measured at fair value and changes in fair value are recorded as Change in fair value of bitcoin collateral under the Other Income category. As of September 30, 2024, 1,229 bitcoin was posted as collateral for the line of credit at a total cost basis of $76,444 and a fair value of $77,827.

Western Alliance Bank Credit Agreement

On August 14, 2024, the Company entered into a credit agreement that provides for borrowings under a promissory note with Western Alliance Bank. Pursuant to this agreement, the Company executed a promissory note in the amount of $7,000 in order to finance the purchase of an aircraft for operational use. The aircraft is pledged as collateral for the note. The notes bears a variable interest rate equal to the 30 day Secured Overnight Financing Rate (“SOFR”) plus 3% per annum, payable monthly, and matures on August 14, 2029.

The credit agreement contains financial covenants, including a minimum loan-to-value ratio, a minimum debt service coverage ratio, and a minimum average deposit balance. As of September 30, 2024, the Company was in compliance with all covenants, and no events of default had occurred under the credit agreement.

Concurrently with the credit agreement, on August 14, 2024, the Company entered into a plain vanilla interest rate swap agreement with a counterparty in which the company will pay a fixed rate of 6.75% and receive a variable rate equal to 30 day SOFR plus 3% per annum on the initial notional value of $7,000. This interest rate swap has a maturity date of August 14, 2029. This interest rate swap was not designated as a hedge and is presented within Note 8 - Investments and Derivatives.

Trinity Master Equipment Financing Agreement

On April 22, 2022, the Company entered into a Master Equipment Financing Agreement with Trinity Capital Inc. (the "Trinity"). The Master Equipment Financing Agreement provided for up to $35,000 of borrowings to finance the Company’s acquisition of blockchain computing equipment. The Company received a loan of $20,000 at closing, with the remaining $15,000 fundable upon the Company's request, if requested no later than December 31, 2022, subject to certain customary conditions. The Company did not request the funding and agreed with the Trinity that the related 1% loan commitment fee for the unused portion would be refunded to the Company, which was received in December 2022. The borrowings under the Master Equipment Financing Agreement are collateralized by 3,336 S19j Pro miners, which are located at the Company's College Park, GA and Norcross, GA sites.

The Company recorded an original loan discount of approximately $379, of which $150 was refunded and $76 and $56 was amortized and recorded to interest expense during the years ended September 30, 2024 and 2023, respectively.

Mortgage - Corporate Office

On May 10, 2023, HQLLC completed a refinancing transaction whereby it borrowed a net $1,937 against the equity of the real property purchased in April 2023 that now serves as the Company’s Corporate Office (see Note 9 - Property and Equipment). The loan agreement has a two-year term, 10% interest rate and monthly interest only payments until maturity.

Marquee Funding Partners

In connection with the acquisition of WAHA in August 2022, certain assets were encumbered with mortgages which the Company assumed. The mortgages assumed have a current unpaid principal balance of $1,267, remaining payment terms ranging from 23-29 months and an annual interest rate of 13%. The last mortgage matures on March 1, 2027.

Auto Loans

The Company has entered into various financing arrangements to purchase vehicles and non-miner equipment with combined principal amount of $699 as of September 30, 2024. The loans vary in terms from 12-72 months with annual interest rates ranging from 0.0% - 11.3%. The loans are secured by the purchased vehicles and equipment. During the year ended September 30, 2024, the Company entered into seven separate agreements for the purchase of machinery and equipment and mining equipment with a combined principal of $287, with terms ranging from 12-72 months and interest rates ranging from 0.0%-11.3%. The last auto loan will mature on December 18, 2029.

Western Alliance Equipment Financing Agreement

On August 28, 2024, the Company entered into an equipment financing agreement with Western Alliance Bank for borrowings of up to $1,000 to finance new equipment for operational purposes. The Company can continue to secure equipment with this equipment financing agreement until February 28, 2025. This instrument bears interest at the Floating Wall Street Journal Prime Rate plus 1.00% per annum, calculated on the basis of a 360-day year consisting of twelve (12) consecutive thirty (30)-day months, and will be charged for each day there is an outstanding balance. As of September 30, 2024, the financing agreement had no outstanding balance. The Floating Wall Street Journal Prime Rate was 8.00% at the end of the period, resulting in an interest rate of 9.00% per annum as of September 30, 2024. The financing agreement contains financial covenants, including a minimum loan-to-value ratio, a minimum debt service coverage ratio, and a minimum average deposit balance. As of September 30, 2024, the Company was in compliance with all covenants, and no events of default had occurred under the financing agreement.

SPRE Commercial Group, Inc.

In connection with the acquisition of WAHA, the Company entered into a financing arrangement with the seller. The loan had a term of 12 months with monthly payments of $174 and a stated interest rate of 12%. The loan matured in fiscal year 2023, and no amount is outstanding as of September 30, 2023.

As of September 30, 2024, the weighted average interest rate on all short-term obligations outstanding was approximately 9.0%, and the carrying values of all loans approximate fair values based on the borrowing rates currently available for loans with similar terms and average maturities.