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6. INVESTMENTS AND DERIVATIVES | 9 Months Ended
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Jun. 30, 2025
Schedule of Investments [Abstract] |
INVESTMENTS AND DERIVATIVES | 6. INVESTMENTS AND DERIVATIVES As of June 30, 2025 and September 30, 2024, the Company had total investment assets of $12,248 and $2,750, respectively. The following tables set forth the carrying value of all investments and derivative instruments as of June 30, 2025:
| Asset Derivatives as of June 30, 2025 |  |  | Liability Derivatives as of June 30, 2025 |
| Balance Sheet Location |  | Fair Value |  |  | Balance Sheet Location |  | Fair Value |
Derivative instruments not designated as hedging instruments: |  |  |  |  |  |  |  |  |
Bitcoin derivative - Bitmain contracts | Derivative instruments |  | $ | 7,717 |  |  | Other current liabilities |  | $ | — |
Warrant liabilities | ———— |  |  | — |  |  | Other current liabilities |  |  | 150 |
Interest rate swap contracts | Derivative instruments |  |  | — |  |  | Other current liabilities |  |  | 86 |
ILAL derivative asset | Derivative instruments |  |  | 126 |  |  | ———— |  |  | — |
ILAL debt securities | Accumulated other comprehensive income |  |  | 4,405 |  |  | ———— |  |  | — |
Total derivative instruments |  |  | $ | 12,248 |  |  |  |  | $ | 236 |
The following tables set forth the carrying value of all investments and derivative instruments as of September 30, 2024:
| Asset Derivatives as of September 30, 2024 |  |  | Liability Derivatives as of September 30, 2024 |
| Balance Sheet Location |  | Fair Value |  |  | Balance Sheet Location |  | Fair Value |
Derivative instruments not designated as hedging instruments: |  |  |  |  |  |  |  |  |
Interest rate swap contracts | Derivative instruments |  | $ | — |  |  | Other current liabilities |  | $ | 100 |
ILAL derivative asset | Derivative instruments |  |  | 1,832 |  |  | ———— |  |  | — |
ILAL debt securities | Accumulated other comprehensive income |  |  | 918 |  |  | ———— |  |  | — |
Total derivative instruments |  |  | $ | 2,750 |  |  |  |  | $ | 100 |
Bitcoin Treasury Derivatives During April 2025, as part of a broader bitcoin treasury management strategy, the Company began entering into bitcoin-linked derivative contracts to economically hedge the volatility of bitcoin prices and to generate liquidity in support of core operating activities. These contracts serve as a strategic alternative to selling bitcoin directly and are intended to monetize the Company’s bitcoin holdings while managing exposure to adverse price movements. The types of derivatives utilized for this purpose may include bitcoin futures, options, and other structured instruments. These contracts are typically short-term in nature and may be cash-settled or settled in-kind. Derivative contracts are measured at fair value, with changes in fair value and settlements recognized in earnings in the period in which they occur. The instruments are not designated as hedging instruments for accounting purposes under ASC 815, Derivatives and Hedging. The Company evaluates all financing and service agreements for potential embedded derivative features that may require bifurcation. All derivative instruments are recorded in the Condensed Consolidated Balance Sheets at fair value and are classified as current or noncurrent based on the expected timing of settlement. Gains and losses related to a derivative executed as part of the Company’s bitcoin treasury management strategy, both realized and unrealized, are reported on the Condensed Consolidated Statements of Operations within other income. The Company has not designated any derivatives for hedge accounting treatment under ASC 815. Covered call contracts that were settled through physical delivery of bitcoin resulted in total cash proceeds of $5,175 during the nine months ended June 30, 2025. These proceeds are included within the "Proceeds from sale of bitcoin" line item in the Condensed Consolidated Statements of Cash Flows. Total gains recognized from covered call activity were $205 during the same period and are included in (Loss) gain on derivative securities in the Condensed Consolidated Statements of Operations. During the quarter, the Company entered into a miner procurement arrangement with Bitmain that included a contractual option to repurchase an equivalent amount of bitcoin at a fixed U.S. dollar price. These repurchase rights are accounted for as derivatives and presented above as Bitcoin derivative - Bitmain contracts and are recorded at fair value in the Condensed Consolidated Balance Sheets. The loss on fair value of $605 for the nine months ended June 30, 2025 is included in (Loss) gain on derivative securities in the Condensed Consolidated Statements of Operations and had a fair value of $7,717 as of June 30, 2025. Additional details on these agreements are provided in Note 7 - Property and Equipment. Other Derivatives Interest Rate Swap Derivative The Company is party to two interest rate swap agreements, neither of which is designated as a hedge for accounting purposes. These derivatives are recorded at fair value on the balance sheet with changes in fair value recognized in current earnings within “(Loss) gain on derivative securities.” In relation to the Company’s Western Alliance Bank Credit Agreement entered into in August 2024, the Company holds an interest rate swap agreement (see Note 9 - Loans). As of June 30, 2025, this interest rate swap derivative was recorded as a fair value liability of $61, reflecting a loss of $38 and a gain of $39 during the three and nine months ended June 30, 2025, respectively. As of September 30, 2024, the derivative was recorded as a fair value liability of $100. In April 2025, the Company entered into a second interest rate swap agreement in connection with the refinancing of its corporate headquarters mortgage (see Note 9 - Loans). As of June 30, 2025, the swap derivative was recorded as a fair value liability of $25, reflecting a loss of $25 during the three months ended June 30, 2025. As of June 30, 2025, the interest rate swap derivatives were recorded as a combined fair value liability of $86. Changes in the fair value of the swaps resulted in a net loss of $63 and a net gain of $14 for the three and nine months ended June 30, 2025, respectively. International Land Alliance, Inc. On November 6, 2019, the Company entered into a Securities Purchase Agreement (“SPA”) with International Land Alliance, Inc. (“ILAL”), a Wyoming corporation, to support the power and energy needs of ILAL's development and construction of certain projects. ILAL Series B Preferred Stock (Investment in Debt Securities) and Embedded ILAL Derivative Asset Pursuant to the terms of the SPA with ILAL, the Company purchased 1,000 shares of Series B Preferred Stock of ILAL (the “Series B Preferred Stock”) for an aggregate purchase price of $500 less certain expenses and fees. The Series B Preferred Stock accrues cumulative dividends in-kind at a rate of 12% per annum and was redeemable on August 6, 2020. The Series B Preferred Stock can be converted into common stock at a variable rate (refer to the discussion on embedded derivative assets below). This variable conversion ratio will increase by 10% with the occurrence of certain events. Since the investments were not redeemed on August 6, 2020, they are now redeemable at the Company’s option in cash or into common stock, based on the conversion ratio. The Series B Preferred Stock is recorded as an available for sale (“AFS”) debt security and is reported at its estimated fair value as of June 30, 2025. Any change in the fair values of AFS debt securities are reported net of income tax as an element of Other Comprehensive income. During March 2025, the Company sent ILAL a notice to convert a portion of its Series B Preferred Stock into shares of common stock of ILAL. ILAL did not issue the shares in accordance with its obligations under the Series B Preferred Stock. On April 8, 2025, the Company filed a case in the U.S. District Court for the Southern District of California. Among other claims, the Company has alleged ILAL’s breach of contract and has demanded $9,561 in cash as the liquidation value. Given ILAL’s recent going concern disclosure, delinquency in filing its Form 10-K, and non-responsiveness to the Company's notice, the Company reassessed the investment’s collectability and reduced its estimated fair value. The updated valuation reflects increased credit risk and diminished confidence in recovery—whether through conversion or redemption—due to the issuer’s deteriorating financial condition. The Company accrued no interest (net of allowance) on its available-for-sale debt securities as of June 30, 2025 and September 30, 2024, respectively. The fair value of the Company’s investment in the Series B Preferred Stock was $4,405 and $918 as of June 30, 2025 and September 30, 2024, respectively. The Company has included gain on fair value of Series B Preferred Stock amounting to $2,755 and $28 for the nine months ended June 30, 2025 and 2024, respectively, as part of other comprehensive income in the condensed consolidated statement of operations and comprehensive income. The Company has deemed the variable conversion feature (the “ILAL Derivative Asset”) of Series B Preferred Stock an embedded derivative instrument in accordance with ASC 815, Derivatives and Hedging. This topic requires the Company to account for the ILAL Derivative Asset on its balance sheet at fair value and account for changes in fair value as a derivative gain or loss. Changes in fair value of the ILAL Derivative Asset are presented as Other income (expense) in the condensed consolidated statement of operations and comprehensive income. Total fair value of investment in ILAL Derivative Asset as of June 30, 2025 and September 30, 2024 was $126 and $1,832, respectively, and as included in “Derivative investments” on the condensed consolidated balance sheets. The Company fair values the debt security as a straight debt instrument based on liquidation value, accrued interest to date, and an estimated 40% recovery rate for first-lien debt, which is an unobservable input. This recovery rate reflects a downward revision from prior estimates due to the recoverability risks discussed above. The fair value of the ILAL Derivative Asset is based on the difference in the fair value of the Series B Preferred Stock determined as a straight debt instrument and the fair value of the Series B Preferred Stock if converted as of the reporting date.

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- Definition The entire disclosure for investment holdings. This includes the long positions of investments for the entity. It contains investments in affiliated and unaffiliated issuers. The investments include securities and non securities (i.e. commodities and futures contracts). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 210 -Name Accounting Standards Codification -Section 50 -Paragraph 12 -Publisher FASB -URI https://asc.fasb.org/1943274/2147478795/946-210-50-12 + Details
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