XML 16 R10.htm IDEA: XBRL DOCUMENT
v3.24.0.1

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended
--- | ---
Dec. 31, 2023
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Report on Form 10-K for the year ended September 30, 2023, filed with the SEC on December 1, 2023 (the “Form 10-K”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented in this Quarterly Report on Form 10-Q have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted. The accompanying unaudited consolidated financial statements include the accounts of CleanSpark, Inc., and the Company’s wholly owned subsidiaries, ATL Data Centers LLC (“ATL”), CleanBlok, CleanSpark DW, LLC, CleanSpark GLP, LLC, CSRE Properties Norcross, LLC, CSRE Property Management Company, LLC, CSRE Properties, LLC, CSRE Properties Washington, LLC, CSRE Properties Sandersville, LLC, CSRE Properties Dalton, LLC, and CleanSpark HQ, LLC. All intercompany transactions have been eliminated upon consolidation of these entities. Recently issued accounting pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-08, Intangible - Goodwill and Other - Crypto Assets (Subtopic 350-60) (“ASC 350-60”). ASC 350-60 requires entities with certain crypto assets to subsequently measure such assets at fair value, with changes in fair value recorded in net income in each reporting period. Crypto assets that meet all the following criteria are within the scope of the ASC 350-60: (1) meet the definition of intangible assets as defined in the Codification (2) do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets (3) are created or reside on a distributed ledger based on blockchain or similar technology (4) are secured through cryptography (5) are fungible, and (6) are not created or issued by the reporting entity or its related parties. In addition, entities are required to provide additional disclosures about the holdings of certain crypto assets. Bitcoin, which is the sole crypto asset mined by the Company, meets each of these criteria. For all entities, the ASC 350-60 amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The Company has elected to early adopt the new guidance effective October 1, 2023 resulting in a $4,183 cumulative-effect change to adjust the Company's bitcoin held on October 1, 2023 with the corresponding entry to beginning accumulated deficit. In November 2023, the FASB issued ASU 2023-07, Improvements to Disclosures About Reportable Segments, which requires enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The new guidance is effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2020-01 on its consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. The Company adopted the provisions of the accounting pronouncement as of October 1, 2023 and t he new standard did not have an impact on the Company's consolidated financial statements in the first quarter ended December 31, 2023. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on October 1, 2020 (“ASU 2016-13”). ASU 2016-13 requires entities to use a new forward-looking “expected loss” model that reflects expected credit losses, including credit losses related to trade receivables, and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates, which generally will result in the earlier recognition of allowances for losses. The Company adopted the ASU effective October 1, 2023, and the adoption of the new standard did not have a material impact on the Company's results of operations or cash flows. Liquidity The Company has cash and cash equivalents of $48,458 and bitcoin (measured at fair value) of $126,951 as of December 31, 2023. As shown in the accompanying unaudited consolidated financial statements, the Company generated a net income from continuing operations of $25,909 during the three months ended December 31, 2023. The Company had cash outflows from operating activities from continuing operations, which were $39,626 during the three months ended December 31, 2023. The Company has cash outflows from investing activities from continuing operations due to its investments in capital expenditures in support of its bitcoin mining operations partially offset by proceeds of bitcoin sales. The Company has generated significant cash inflows from financing activities from continuing ope rations, primarily attributed to proceeds from equity offerings. The Company generates non-cash consideration in the form of bitcoin, that the Company will sell to generate cash to funds its operations. During the quarter ended December 31, 2023, the Company sold $43,035 of bitcoin at various times during the quarter and utilized the proceeds to pay expenditures. However, the Company utilized portions of its equity offerings to offset its cash used in operating and investing activities. The Company has sufficient cash and bitcoin, which should continue to support its ongoing operations for the next twelve months. The Company intends to continue generating cash from its access to equity financing through its At-the-Market offering facility (see Note 12). Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include valuation of derivative assets, available-for-sale investments, and the valuations of share-based awards. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions including, but not limited to, the ultimate impact that the ongoing global supply chain issues may have on the Company’s operations. Revenue from Contracts with Customers - Revenue from Bitcoin Mining The Company recognizes revenue in accordance with ASC Topic 606 – Revenue from Contracts with Customers (ASC 606). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle: 1. Identify the contract with the customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognize revenue when the Company satisfies a performance obligation Step 1: The Company enters into a contract with a bitcoin mining pool operator (i.e., the customer) to provide computing power to the mining pools. The contracts are terminable at any time by either party and there are no penalties for contract termination by either party. The Company earns revenue based on the Full-Pay-Per-Share (“FPPS”) payout method, set forth by our customer. The calculation has specific components which include network block subsidies, network difficulty, network transaction fees, and pool operating fees. The network block subsidy consists of newly generated coins and comprises the largest share of the block reward. Network difficulty is the difficulty required to mine a block on the Bitcoin network, which is a component in the calculation for payout. Network transaction fees consist of fees paid by the users of the network for the execution of transactions that are included in the block. Pool operating fees are fees charged by the mining pool operator in order to operate the pool. Network block subsidies are based on the total amount of block subsidies that are expected to be generated on the bitcoin network as a whole during the 24-hour period beginning at midnight Universal Time Coordinated (UTC) daily, regardless of whether the mining pool operator successfully records a block to the blockchain. Network difficulty is based on the actual difficulty to mine a block on the Bitcoin network. Network transaction fees are based on the total amount of transaction fees and block rewards that are actually generated on the blockchain network as a whole during the 24-hour period. Pool operating fees are determined by a fee rate set forth in the customer’s terms of service as a percentage of the actual daily FPPS payout. The mining pool that the Company contributes its hash computation computing power only provides services for bitcoin mining and the fees charged during the most recent quarter were 0.19% of the total daily bitcoin mined. Applying the criteria per ASC 606-10-25-1, the contract arises at the point that the Company provides computing power to the mining pool operator, which is beginning contract day at midnight UTC (contract inception), because customer consumption is in tandem with daily earnings of delivery of the computing power. Step 2: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: • The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and • t he entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). Based on these criteria, the Company has a single performance obligation in providing computing power services (i.e., hashrate) to the mining pool operator (i.e., customer). The performance obligation of computing power services is fulfilled daily over-time, as opposed to a point in time, because the Company provides the hashrate throughout the day and the customer simultaneously obtains control of it and uses the asset to produce bitcoin. The Company has full control of the mining equipment utilized in the mining pool and if the Company determines it will increase or decrease the processing power of its machines and/or fleet (i.e., for repairs or when power costs are excessive) the computing power provided to the customer will be reduced. Step 3: The transaction consideration the Company earns is non-cash digital consideration in the form of bitcoin, which the Company measures at fair value as the closing bitcoin price on the date earned as determined by our principal market and such price is not materially different from using the price at the inception of each daily contract. According to the customer contract, daily earnings are calculated from midnight-to-midnight UTC time, and the sub-account balance is credited one hour later at 1:00 AM UTC time. The Company utilizes Greenwich Mean Time (GMT), which is also the midnight of UTC time, since this is consistent with our customer contract in calculating our daily earnings from midnight-to-midnight UTC time. The transaction consideration the Company earns is all variable since it is dependent on the daily computing power provided by the Company. The Company’s bitcoins earned through the contractual payout formula is not known until the Company’s computational hashrate contributed over the daily measurement period is fulfilled over-time daily between midnight-to-midnight UTC time. The Company’s proportionate amount of the global network transaction fee rewards earned are calculated at the end of each transactional day (midnight to midnight). There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items. The Company fully constrains all variable consideration as a result of ASC 606-10-32-12a because the amount of consideration is highly susceptible to factors outside of our control as defined by the Company’s customer’s payout methodology. The variable consideration is constrained until the Company can reasonably estimate the amount of mining rewards by the end of a given transactional day based on the actual amount of computing power provided to the mining pool operators. By then, the Company considers it is highly probable that a significant reversal in the amount of revenues will not occur and includes such variable consideration in the transaction price. Step 4: The transaction price is allocated to the single performance obligation upon verification for the provision of computing power to the mining pool operator. There is a single performance obligation (i.e., computing power or hashrate) for the contract; therefore, all consideration from the mining pool operator is allocated to this single performance obligation. Step 5: The Company’s performance is complete in transferring the hashrate service over-time (midnight to midnight) to the customer and the customer obtains control of that asset. In exchange for providing computing power, the Company is entitled to a pro-rata share of the fixed bitcoin awards earned over the measurement period, plus a pro-rata fractional share of the global transaction fee rewards for the respective measurement period, less net digital asset fees due to the mining pool operator over the measurement period, as applicable. The transaction consideration the Company receives is non-cash consideration, in the form of bitcoin. The Company measures the bitcoin at fair value on the date earned using the closing price of bitcoin on the date earned (midnight UTC). There are no deferred revenues or other liability obligations recorded by the Company since there are no payments in advance of the performance. At the end of the 24 hour “midnight-to-midnight" period, there are no remaining performance obligations. Revenues from data center services As of September 30, 2023, data center services are no longer provided to external customers. The Company formerly provided data services, such as providing its customers with rack space, power and equipment, and cloud services, such as virtual services, virtual storage, and data backup services, generally based on monthly services provided at a defined price included in the contracts. The performance obligations were the services provided to a customer for the month based on the contract. The transaction price was the price agreed with the customer for the monthly services provided and the revenues are recognized monthly based on the services rendered for the month. Cost of Revenues Bitcoin mining segment (sole reportable segment) The Company includes energy costs and external co-location mining hosting fees in cost of revenues. Cash and cash equivalents, including restricted cash Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less. Temporary cash investments are made with high credit quality financial institutions. At times, such investments in U.S. accounts may be in excess of Federal Deposit Insurance Corporation insurance limit. The Company does have restricted cash of $1,716 as of December 31, 2023 held in a separate bank account in a certificate of deposit as collateral for utility bonds. The utility bonds are reported in prepaid expense and other current assets on the consolidated balance sheet. Accounts Receivable, net Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms. They are initially recorded at the invoiced amount upon the sale of goods or services to customers and do not bear interest. The Company performs ongoing credit evaluation of its customers and management closely monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded. Accounts receivable, net consists of the following:
($ in thousands) |  | December 31, 2023 |  |  | September 30, 2023 |
Accounts Receivable, gross |  | $ | 348 |  |  | $ | 353 |
Provision for doubtful allowances |  |  | (348 | ) |  |  | (348 | )
Total Accounts Receivable, net |  | $ | — |  |  | $ | 5 |
Inventory Inventory balances mainly include supplies inventory used to maintain bitcoin mining facilities and are presented at net realizable value with cost being measured on an average cost method. The Company periodically reviews inventories for unusable and obsolete items. Based on this evaluation, provisions are made to write inventories down to their net realizable value. Inventory was $732 and $809 as of December 31, 2023 and September 30, 2023, respectively. Prepaid expense and other current assets The Company records a prepaid expense for costs paid but not yet incurred. Those expected to be incurred within one year are recognized and shown as a short-term pre-paid expense. Any costs expected to be incurred outside of one year would be considered other long-term assets. Other current assets are assets that consist of supplies, deposits and interest receivable. Deposits and interest we expect to receive within one year are shown as short-term. Those we expect to receive outside of one year are shown as other long-term assets. Concentration Risk At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of Federal Deposit Insurance Corporation (“FDIC”) limits. The cash balance in excess of the FDIC limits was $36,484 and $28,965 as of December 31, 2023 and September 30, 2023, respectively. The accounts offered by the custodian of the Company’s bitcoin, which accounts totaled $126,951 and $56,241 as of December 31, 2023 and September 30, 2023, respectively, are not insured by the FDIC. The Company has not experienced any losses in such accounts. The Company has certain customers and vendors who individually represented 10% or more of the Company’s revenue or capital expenditures. Please refer to Note 16 - Major Customers and Vendors. Stock-based compensation The Company follows the guidelines in FASB Codification Topic ASC 718-10 Compensation-Stock Compensation, which requires companies to measure the cost of employee and non-employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Stock-based compensation expense for stock options is recognized on a straight-line basis over the requisite service period. The Company may issue compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services. The Company determines the grant date fair value of the options using the Black-Scholes option-pricing model. For equity awards granted by the Company that are contingent upon market-based conditions, the Company fair values these awards using the Monte Carlo simulation model. For discussion of accounting for restricted stock units (“RSUs”), please refer Note 14 – Stock-Based Compensation. Earnings (loss) per share The Company reports earnings (loss) per share in accordance with FASB ASC 260-10 “Earnings Per Share,” which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive. All common stock equivalents that consist of options, warrants and restricted stock units were excluded from the calculation of the diluted loss per share calculation for the three months ended December 31, 2022 as their effect is anti-dilutive. Provided below is the income (loss) per share calculation for the three months ended December 31, 2023 and 2022:
|  | For the Three Months Ended December 31, |
($ in thousands, except share and per share) |  | 2023 |  |  | 2022 |
Continuing Operations |  |  |  |  |  |
Numerator |  |  |  |  |  |
Income (loss) from continuing operations |  | $ | 25,909 |  |  | $ | (30,488 | )
Preferred stock dividends |  |  | 579 |  |  |  | — |
Income (loss) from continuing operations attributable to common shareholders |  | $ | 25,330 |  |  | $ | (30,488 | )
Denominator |  |  |  |  |  |
Weighted- average common shares outstanding, basic |  |  | 178,809,264 |  |  |  | 66,395,174 |
Dilutive impact of stock options and other share-based awards |  |  | 1,974,271 |  |  |  | — |
Dilutive impact of contingent shares issued for business acquisition |  |  | — |  |  |  | — |
Weighted- average common shares outstanding, diluted |  |  | 180,783,535 |  |  |  | 66,395,174 |
Income (loss) from continuing operations per common share attributable to common shareholders |  |  |  |  |  |
Basic |  | $ | 0.14 |  |  | $ | (0.46 | )
Diluted |  | $ | 0.14 |  |  | $ | (0.46 | )
Discontinued Operations |  |  |  |  |  |
Numerator |  |  |  |  |  |
Income from discontinued operations |  | $ | — |  |  | $ | 1,457 |
Denominator |  |  |  |  |  |
Weighted- average common shares outstanding, basic |  |  | 178,809,264 |  |  |  | 66,395,174 |
Dilutive impact of stock options and other share-based awards |  |  | 1,974,271 |  |  |  | 1,005,160 |
Dilutive impact of contingent shares issued for business acquisition |  |  | — |  |  |  | — |
Weighted- average common shares outstanding, diluted |  |  | 180,783,535 |  |  |  | 67,400,334 |
Income on discontinued operations per common share attributable to common shareholders |  |  |  |  |  |
Basic |  | $ | - |  |  | $ | 0.02 |
Diluted |  | $ | - |  |  | $ | 0.02 |
Property and equipment Property and equipment are stated at cost less accumulated depreciation. Construction-in-progress is the construction or development of assets that have not yet been placed in service for their intended use. Depreciation for machinery and equipment, mining equipment, buildings, furniture and fixtures and leasehold improvements commences once they are ready for their intended use. Leasehold improvements are depreciated on a straight-line basis over the shorter of their estimated useful lives or the terms of the related leases. Land is not depreciated. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
|  | Useful life (years)
Land improvements |  | 5 - 15
Building and building improvements |  | Shorter of lease term or 30 years
Leasehold improvements | ﻿ | Shorter of lease term or 15 years
Miners |  | 3 - 5
Mining equipment |  | 3 - 15
Infrastructure asset |  | Shorter of lease term or 15 years
Machinery and equipment |  | 3 - 10
Furniture and fixtures |  | 1 - 5
In accordance with the FASB ASC 360-10, Property, Plant and Equipment, the carrying value of property and equipment and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value. During the three months ended December 31, 2023 and 2022, the Company did no t record an impairment expense on property and equipment. Bitcoin Bitcoin are included in current assets in the consolidated balance sheets due to the Company’s ability to sell bitcoin in a highly liquid marketplace and such bitcoin holdings are expected to be realized in cash or sold or consumed during the normal operating cycle of the Company. As a result of adopting ASC 350-60 on October 1, 2023, bitcoin is measured at fair value as of each reporting period (see Recently Issued Accounting Pronouncements). The fair value of bitcoin is measured using the period-end closing bitcoin price from its principal market, Coinbase, in accordance with ASC 820, Fair Value Measurement. Since bitcoin is traded on a 24-hour period, the Company utilizes the price as of midnight UTC time, which aligns with the Company's revenue recognition cut-off. The increase and decrease in fair value from each reporting period is reflected on the consolidated statements of operation as "Gain on fair value of bitcoin, net". The Company sells bitcoin and such gains and losses from such transactions are measured as the difference between the cash proceeds and the carrying basis of bitcoin as determined on a First In-First Out ("FIFO") basis and are also recorded within the same line item "Gain on fair value of bitcoin, net". Prior to issuance of the ASU 2023-08 and adoption of ASC 350-60, bitcoin were recorded at cost less impairment and were classified as indefinite-lived intangible assets in accordance with ASC 350, Intangibles — Goodwill and Other. Bitcoin was accounted for in connection with the Company’s revenue recognition policy detailed above. An intangible asset with an indefinite useful life was not amortized but was assessed for impairment annually, or more frequently, when events or changes in circumstances occurred indicating that it was more likely than not that the indefinite-lived asset was impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment for periods under prior accounting guidance, the Company had the option to first perform a qualitative assessment to determine whether it was more likely than not that an impairment exists. If it was determined that it was not more likely than not that an impairment exists, a quantitative impairment test was not necessary. If the Company concluded otherwise, it was required to perform a quantitative impairment test. The Company elected to perform the quantitative impairment test each period rather than first performing the qualitative assessment. Quantitative impairment was measured using the intraday low bitcoin price from Coinbase in accordance with ASC 820, Fair Value Measurement. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses was not permitted as per ASC 350, Intangibles – Goodwill and Other. Bitcoin, which is non-cash consideration earned by the Company through its mining activities, are included as a reconciling item as a cash outflow within operating activities on the accompanying consolidated statements of cash flows. The cash proceeds from the sales of bitcoin are classified based on the holding period in which the bitcoin are held. ASC 350-60 provides guidance on classifying proceeds from bitcoin and concludes that bitcoin converted nearly immediately into cash would qualify as cash flows from operating activities. All other sales would qualify as investing activities. In prior fiscal periods, the Company did not hold its bitcoin for extended periods of time and such sales proceeds prior to the adoption of ASC 350-60, were reported as cash flows from operating activities. Upon adoption, the Company evaluates its sales of bitcoin and will record bitcoin sold nearly immediately as operating cash flows and the remainder will be recorded as investing activities. During the quarter ended December 31, 2023, all proceeds from bitcoin sales were classified as investing activities. Fair Value Measurement of financial instruments, derivative asset and contingent consideration Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable. Level 1 Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily available pricing sources for comparable instruments. Level 3 Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available under the circumstances. The carrying value of cash, accounts payable, accrued expenses and short-term portion of loan payable approximate their fair values because of the short-term nature of the instruments. The carrying amount of the Company's long-term portion of loan payable is also stated at fair value since the stated rate of interest approximates market rates. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments. The following table presents the Company’s financial instruments that are measured and recorded at fair value on the Company’s balance sheets on a recurring basis, and their level within the fair value hierarchy as of December 31, 2023 and September 30, 2023:
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Amount |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Bitcoin |  | $ | 126,951 |  |  | $ | 126,951 |  |  | $ | — |  |  | $ | — |
Derivative investment asset |  |  | 1,454 |  |  |  | — |  |  |  | — |  |  |  | 1,454 |
Investment in debt security |  |  | 755 |  |  |  | — |  |  |  | — |  |  |  | 755 |
Total |  | $ | 129,160 |  |  | $ | 126,951 |  |  | $ | — |  |  | $ | 2,209 |
September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Amount |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Derivative investment asset |  | $ | 2,697 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,697 |
Investment in debt security |  |  | 726 |  |  |  | — |  |  |  | — |  |  |  | 726 |
Total |  | $ | 3,423 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,423 |
There were no transfers between Level 1, 2 or 3 during the three months ended December 31, 2023. The activities of the financial instruments that are measured and recorded at fair value on the Company's balance sheets on a recurring basis during the three months ended December 31, 2023 are described in Note 6 - Investments. Discontinued Operations The Company deemed its energy operations to be discontinued operations due to its strategic decision to strictly focus on its bitcoin mining operations and divest of the majority of its energy assets. Through its discontinued operations segment, the Company previously provided energy solutions through its wholly-owned subsidiaries CleanSpark, LLC, CleanSpark Critical Power Systems, Inc., GridFabric, LLC, and Solar Watt Solutions, Inc. These solutions consisted of engineering, design and software solutions, custom hardware solutions, Open Automated Demand response, solar, energy storage for microgrid and distributed energy systems. The Company has sold the majority of its assets related to the Energy Segment, which included software and intellectual property, and inventory. See Note 4 – Discontinued Operations.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147483426/235-10-50-1 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//235/tableOfContent + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration