Company: CLSKW
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0000950170-25-015470
Chunk: 28

Company: CLEANSPARK, INC.
Filing Date: 2025-02-06
Form: 10-Q
Item: Item 1
Chunk 28
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 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 its 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 and has not been subsequently amended. 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. Changes in fair value as well as gains and losses from bitcoin transferred to and received from collateral are recorded as Gain on bitcoin collateral under the Other Income category in the condensed consolidated statements of operations and comprehensive income. During the three months ended December 31, 2024, the Company repaid the $50,000 outstanding balance on the line of credit and received 100% of the bitcoin transferred as collateral from the Lender. As of December 31