10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2022

☐	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number: 001-39187

CleanSpark, Inc.

(Exact name of Registrant as specified in its charter)


Nevada	87-0449945
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2370 Corporate Circle, Suite 160
Henderson, NV 89074

(Address of principal executive offices)

(702) 989-7692

(Registrant’s telephone number, including area code)

 _______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CLSK	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


☒ Large accelerated filer	☐ Accelerated filer
☐ Non-accelerated Filer	☐ Smaller reporting company
	☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 47,095,835 shares as of August 8, 2022.

TABLE OF CONTENTS


		Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	5
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4:	Controls and Procedures	13
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	15
Item 1A:	Risk Factors	15
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3:	Defaults Upon Senior Securities	18
Item 4:	Mine Safety Disclosures	18
Item 5:	Other Information	18
Item 6:	Exhibits	19

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, future hash rate capacity, industry and business trends, equity compensation, business strategy, plans, market growth and our objectives for future operations.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to: the success of our digital currency mining activities; the volatile and unpredictable cycles in the emerging and evolving industries in which we operate, increasing difficulty rates for bitcoin mining; bitcoin halving; new or additional governmental regulation; the anticipated delivery dates of new miners; the ability to successfully deploy new miners; the dependency on utility rate structures and government incentive programs; the successful deployment of energy solutions for residential and commercial applications; the expectations of future revenue growth may not be realized; ongoing demand for the Company's software products and related services; the impact of global pandemics (including COVID-19) on logistics and shipping and the demand for our products and services; and other risks described in the Company's prior press releases and in its filings with the Securities and Exchange Commission (SEC), including under the heading "Risk Factors" in the Company's Annual Report on Form 10-K and any subsequent filings with the SEC. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context requires otherwise, references to “CleanSpark,” the “Company,” “we,” “us,” and “our,” refer to CleanSpark, Inc. and its consolidated subsidiaries.

GENERAL

We may announce material business and financial information to our investors using our investor relations website at https://www.cleanspark.com/investor-relations/. We therefore encourage investors and others interested in CleanSpark to review the information that we make available on our website, in addition to following our filings with the SEC, webcasts, press releases and conference calls. Information contained on our website is not part of this Quarterly Report on Form 10-Q.

WHERE YOU CAN FIND MORE INFORMATION

All reports we file with the SEC are available for download free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC’s website at www.sec.gov. We also make electronic copies of our reports available for download, free of charge, through our website at https://www.cleanspark.com/investor-relations/ as soon as reasonably practicable after filing such material with the SEC. Information contained on our website is not part of this Quarterly Report on Form 10-Q.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our consolidated financial statements included in this Form 10-Q are as follows:


Consolidated Balance Sheets as of June 30, 2022 (unaudited) and September 30, 2021;	F-1
Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended June 30, 2022 and 2021 (unaudited);	F-3
Consolidated Statements of Stockholders’ Equity for the three and nine months ended June 30, 2022 and 2021 (unaudited);	F-5
Consolidated Statements of Cash Flow for the nine months ended June 30, 2022 and 2021 (unaudited);	F-8
Notes to Consolidated Financial Statements (unaudited).	F-10

This report on Form 10-Q for the quarter ended June 30, 2022, should be read in conjunction with the Company's annual report on Form 10-K for the year ended September 30, 2021, filed with the Securities and Exchange Commission (“SEC”) on December 14, 2021.

The accompanying consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2022 are not necessarily indicative of the results that can be expected for the full year.

CLEANSPARK, INC.

CONSOLIDATED BALANCE SHEETS


	June 30, 2022 (Unaudited)		September 30, 2021
ASSETS
Current assets
Cash and cash equivalents, including restricted cash	$	2,661,682	$	18,040,327
Accounts receivable, net		102,781		307,067
Inventory		—		79,811
Prepaid expense and other current assets		3,734,586		2,137,803
Digital currency		10,538,120		23,603,210
Derivative investment asset		2,761,780		4,905,656
Investment in equity security		250,000		260,772
Investment in debt security, AFS, at fair value		569,996		494,608
Current assets held for sale		8,829,728		7,897,067
Total current assets	$	29,448,673	$	57,726,321

Property and equipment, net	$	322,185,923	$	137,477,735
Operating lease right of use asset		1,285,146		1,488,240
Intangible assets, net		6,807,130		9,913,441
Deposits on mining equipment		31,856,635		87,959,910
Other long-term asset		6,587,274		875,536
Goodwill		12,048,419		12,048,419
Long-term assets held for sale		839,624		9,983,519
Total assets	$	411,058,824	$	317,473,121

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	12,995,578	$	6,982,517
Operating lease liability		323,951		256,195
Finance lease liability		274,222		403,410
Acquisition liability		—		300,000
Contingent consideration		—		820,802
Loans payable		5,359,904		—
Dividends payable		20,828		—
Current liabilities held for sale		1,011,811		1,300,098
Total current liabilities	$	19,986,294	$	10,063,022
Long-term liabilities
Operating lease liability, net of current portion		977,517		1,235,325
Finance lease liability, net of current portion		249,706		422,679
Loans payable, net of current portion		12,978,512		—
Long-term liabilities held for sale		—		35,629
Total liabilities	$	34,192,029	$	11,756,655

Stockholders' equity
Common stock; $0.001 par value; 100,000,000 shares authorized; 41,300,241 and 37,395,945 shares issued and outstanding as of June 30, 2022 and September 30, 2021, respectively		41,299		37,394
Preferred stock; $0.001 par value; 10,000,000 shares authorized; Series A shares; 2,000,000 authorized; 1,750,000 and 1,750,000 issued and outstanding as of June 30, 2022 and September 30, 2021, respectively		1,750		1,750
Additional paid-in capital		530,506,510		444,074,832

F-1


Accumulated other comprehensive income (loss)		69,996			(5,392	)
Accumulated deficit		(153,752,760	)		(138,392,118	)
Total stockholders' equity		376,866,795			305,716,466

Total liabilities and stockholders' equity	$	411,058,824		$	317,473,121

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-2

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)


	For the three months ended						For the nine months ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Revenues, net
Digital currency mining revenue, net	$	30,941,726		$	8,649,440		$	104,882,043		$	16,098,643
Other services revenue		86,055			402,628			469,518			1,209,616
Total revenues, net		31,027,781			9,052,068			105,351,561			17,308,259

Costs and expenses
Cost of revenues (exclusive of depreciation and amortization shown below)		10,341,026			1,147,281			24,607,950			2,161,937
Professional fees		1,432,747			1,939,907			5,588,980			5,835,434
Payroll expenses		7,617,576			10,959,362			24,209,787			15,418,166
General and administrative expenses		2,113,414			1,194,340			6,708,440			2,938,543
(Gain) on disposal of assets		—			—			(642,691	)		—
Other impairment expense (related to Digital Currency)		4,418,714			3,720,481			11,452,405			3,720,481
Realized (gain) loss on sale of digital currency		5,234,482			(36,438	)		(2,026,427	)		(672,065	)
Depreciation and amortization		14,811,291			2,107,449			32,659,747			3,553,945
Total costs and expenses		45,969,250			21,032,382			102,558,191			32,956,441

Income (loss) from operations		(14,941,469	)		(11,980,314	)		2,793,370			(15,648,182	)

Other income (expense)
Other income		—			1,414			308,038			542,235
Change in fair value of contingent consideration		—			—			345,791			—
Realized gain on sale of equity security		—			105,908			665			105,908
Unrealized gain (loss) on equity security		—			(170,586	)		(1,847	)		98,914
Unrealized gain (loss) on derivative security		(1,032,579	)		(2,060,774	)		(2,143,876	)		5,319,361
Interest income		52,355			48,242			137,608			150,705
Interest expense		(314,383	)		(18,885	)		(374,959	)		(46,299	)
Total other income (expense)		(1,294,607	)		(2,094,681	)		(1,728,580	)		6,170,824

Income (loss) before income tax (expense) or benefit		(16,236,076	)		(14,074,995	)		1,064,790			(9,477,358	)
Income tax expense		—			—			—			—
Income (loss) from continuing operations	$	(16,236,076	)	$	(14,074,995	)	$	1,064,790		$	(9,477,358	)

Discontinued operations
Loss from discontinued operations	$	(13,104,147	)	$	(2,602,132	)	$	(16,089,993	)	$	(6,967,261	)
Income tax (expense) or benefit		—			—			—			—
Loss on discontinued operations	$	(13,104,147	)	$	(2,602,132	)	$	(16,089,993	)	$	(6,967,261	)

Net loss	$	(29,340,223	)	$	(16,677,127	)	$	(15,025,203	)	$	(16,444,619	)

Preferred stock dividends		—			—			335,439			177,505

Net loss attributable to common shareholders	$	(29,340,223	)	$	(16,677,127	)	$	(15,360,642	)	$	(16,622,124	)

Other comprehensive income		28,796			—			75,388			—

F-3


Total comprehensive loss attributable to common shareholders	$	(29,311,427	)	$	(16,677,127	)	$	(15,285,254	)	$	(16,622,124	)

Income (loss) from continuing operations per common share - basic	$	(0.39	)	$	(0.41	)	$	0.02		$	(0.35	)

Weighted average common shares outstanding - basic		41,277,090			34,014,221			41,010,826			27,355,111

Income (loss) from continuing operations per common share - diluted	$	(0.39	)		(0.41	)	$	0.02			(0.35	)

Weighted average common shares outstanding - diluted		41,277,090			34,014,221			41,092,028			27,355,111

Loss on discontinued operations per common share - basic	$	(0.32	)	$	(0.08	)	$	(0.39	)	$	(0.25	)

Weighted average common shares outstanding - basic		41,277,090			34,014,221			41,010,826			27,355,111

Loss on discontinued operations per common share - diluted	$	(0.32	)	$	(0.08	)	$	(0.39	)	$	(0.25	)

Weighted average common shares outstanding - diluted		41,277,090			34,014,221			41,092,028			27,355,111

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-4

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)


	Preferred Stock				Common Stock
	Shares		Amount		Shares			Amount			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders' Equity
Balance, September 30, 2021		1,750,000	$	1,750		37,395,945		$	37,394		$	444,074,832	$	(5,392	)	$	(138,392,118	)	$	305,716,466
Options and restricted stock units issued for services		—		-		-			-			5,749,107		-			-			5,749,107
Shares issued for settlement of contingent consideration related to business acquisition		—		-		8,404			8			150,003		-			-			150,011
Exercise of options and warrants		—		-		52,061			52			281,564		-			-			281,616
Shares issued under equity offering, net of offering costs		—		-		4,017,652			4,021			67,984,972		-			-			67,988,993
Preferred stock dividends accrued		—		-		-			-			-		-			(314,611	)		(314,611	)
Net income		—		-		-			-			-		-			14,485,755			14,485,755
Other comprehensive income		—		-		-			-			-		18,113			-			18,113
Balance, December 31, 2021		1,750,000	$	1,750		41,474,062		$	41,475		$	518,240,478	$	12,721		$	(124,220,974	)	$	394,075,450
Options, restricted stock units and shares issued for services		—		-		1,874			2			6,553,982		-			-			6,553,984
Shares returned for settlement of contingent consideration and holdbacks related to business acquisition		—		-		(232,518	)		(233	)		233		-			-			-
Exercise of options and warrants		—		-		47,169			47			451,507		-			-			451,554
Preferred stock dividends accrued		—		-		-			-			-		-			(20,828	)		(20,828	)
Net loss		—		-		-			-			-		-			(170,735	)		(170,735	)
Other comprehensive income		—		-		-			-			-		28,479			-			28,479

F-5


Balance, March 31, 2022	1,750,000	$	1,750	41,290,587	$	41,291	$	525,246,200	$	41,200	$	(124,412,537	)	$	400,917,904
Options, restricted stock units and shares issued for services	—		-	3,364		3		5,212,776		-		-			5,212,779
Exercise of options	—		-	6,290		5		47,534		-		-			47,539
Net loss	—		-	-		-		-		-		(29,340,223	)		(29,340,223	)
Other comprehensive income	—		-	-		-		-		28,796		-			28,796
Balance, June 30, 2022	1,750,000	$	1,750	41,300,241	$	41,299	$	530,506,510	$	69,996	$	(153,752,760	)	$	376,866,795


	Preferred Stock				Common Stock
	Shares		Amount		Shares			Amount			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit			Total Stockholders' Equity
Balance, September 30, 2020		1,750,000	$	1,750		17,390,979		$	17,391		$	132,809,830	$	-	$	(116,402,606	)	$	16,426,365
Shares issued for services		—		-		501,437			501			3,011,133		-		-			3,011,634
Options and warrants issued for services		—		-		-			-			1,339,009		-		-			1,339,009
Shares issued for business acquisition		—		-		1,618,285			1,618			21,181,733		-		-			21,183,351
Exercise of options and warrants		—		-		115,385			116			192,540		-		-			192,656
Shares issued under underwritten offering, net of offering costs		—		-		4,444,445			4,445			37,045,160		-		-			37,049,605
Net loss		—		-		-			-			-		-		(7,167,530	)		(7,167,530	)
Balance, December 31, 2020		1,750,000	$	1,750		24,070,531		$	24,071		$	195,579,405	$	-	$	(123,570,136	)	$	72,035,090
Shares issued for services		—		-		19,429			19			71,478		-		-			71,497
Options and warrants issued for services		—		-		-			-			777,517		-		-			777,517
Shares issued for business acquisition		—		-		477,703			478			13,246,226		-		-			13,246,704
Exercise of options and warrants		—		-		223,650			223			3,153,680		-		-			3,153,903
Shares issued under underwritten offering, net of offering costs		—		-		9,090,910			9,091			187,204,122		-		-			187,213,213
Shares returned in relation to business acquisition		—		-		(8,072	)		(8	)		8		-		-			-

F-6


Preferred stock dividends accrued	—		-	-			-			-			-		(177,505	)		(177,505	)
Net income	—		-	-			-			-			-		7,400,040			7,400,040
Balance, March 31, 2021	1,750,000	$	1,750	33,874,151		$	33,874		$	400,032,436		$	-	$	(116,347,601	)	$	283,720,459
Shares issued for services	—		-	112,486			112			2,712,813			-		-			2,712,925
Options and warrants issued for services	—		-	-			-			686,447			-		-			686,447
Exercise of options and warrants	—		-	48,310			48			384,955			-		-			385,003
Shares issued under underwritten offering, net of offering costs	—		-	731,190			730			11,859,836			-		-			11,860,566
Shares returned in relation to business acquisition	—		-	(68,194	)		(68	)		(892,591	)		-		-			(892,659	)
Net loss	—		-	-			-			-			-		(16,677,127	)		(16,677,127	)
Balance, June 30, 2021	1,750,000	$	1,750	34,697,943		$	34,696		$	414,783,896		$	-	$	(133,024,728	)	$	281,795,614

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-7

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)


	Nine Months Ended
	June 30, 2022			June 30, 2021
Cash Flows from Operating Activities
Net loss	$	(15,025,203	)	$	(16,444,619	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Unrealized (gain) loss on equity security		1,847			(98,914	)
Realized gain on sale of equity security		(665	)		(105,908	)
Impairment of digital currency		11,452,405			3,720,481
Realized gain on sale of digital currency		(2,026,427	)		(672,065	)
Digital currency issued for services		450,948			162,038
Impairment of goodwill		7,000,779			—
Impairment of fixed assets		31,833			—
Impairment of intangibles		1,402,016			—
Impairment related to working capital		2,144,284			—
Unrealized (gain) loss on derivative asset		2,143,876			(5,319,361	)
Gain on fair value of contingent consideration		(345,791	)		—
Non-cash lease expense		203,094			271,715
Stock based compensation		17,515,870			8,599,029
Depreciation and amortization		34,942,187			6,883,020
Provision for bad debts		218,600			234,112
Amortization of debt discount		14,612			—
PPP loan forgiveness		—			(531,169	)
Gain on write-off and disposal of assets		(642,691	)		—
Income from in-kind receipts of miners		(308,038	)		—
Changes in operating assets and liabilities
Mining of digital currency		(104,882,043	)		(16,098,643	)
Proceeds from sale of digital currencies		108,070,207			2,499,757
Decrease in operating lease liabilities		(190,052	)		(272,123	)
Decrease in contract assets, net		—			4,103
Increase (decrease) in contract liabilities, net		(162,457	)		532,675
Increase in accounts payable and accrued liabilities		2,997,027			3,699,298
(Increase) in prepaid expenses and other current assets		(11,545,789	)		(2,914,993	)
(Increase) in accounts receivables		(1,812,892	)		(1,298,308	)
Decrease (Increase) in Inventory		831,752			(3,978,257	)
Net cash provided by (used in) operating activities	$	52,479,289		$	(21,128,132	)
Cash Flows from investing
Payments on miner deposits	$	(124,272,481	)	$	(125,855,501	)
Purchase of fixed assets		(32,104,835	)		(60,536,521	)
Settlement of holdbacks related to contingent consideration		(625,000	)		—
Investment in infrastructure development		—			(6,431,664	)
Proceeds from sale of miners		3,497,654			—
Proceeds from the sale of equity securities		9,590			182,044
Acquisition of Solar Watt Solutions, net of cash received		—			(1,000,337	)
Acquisition of ATL Data Center, net of cash received		—			45,783
Net cash used in investing activities	$	(153,495,072	)	$	(193,596,196	)
Cash Flows from Financing Activities
Payments on promissory notes	$	—		$	(5,865,476	)
Payments on preferred dividends		(314,611	)		—
Payments on finance leases		(448,291	)		(181,475	)
Payments on equipment backed loan		(974,572	)		—

F-8


Proceeds from equipment backed loan		18,704,416			—
Proceeds from exercise of options and warrants		681,203			3,731,563
Proceeds from equity offerings, net		67,988,993			236,123,384
Net cash provided by financing activities	$	85,637,138		$	233,807,996

Net increase (decrease) in cash and cash equivalents and restricted cash	$	(15,378,645	)	$	19,083,668

Cash and cash equivalents and restricted cash, beginning of period	$	18,040,327		$	3,126,202

Cash and cash equivalents and restricted cash, end of period	$	2,661,682		$	22,209,870
Supplemental disclosure of cash flow information
Cash paid for interest	$	353,098		$	51,463
Cash paid for tax	$	—		$	—
Non-cash investing and financing transactions
Day one recognition of right of use asset and liability	$	—		$	554,979
Right of use asset and liability written off due to lease termination	$	—		$	603,700
Shares and options issued for business acquisition	$	—		$	33,537,396
Cashless exercise of options and warrants	$	17		$	74
Receivables from exercise of options	$	99,506		$	—
Final payment withheld from equipment backed loan	$	643,960		$	—
Shares issued for settlement of seller agreements related to acquisition	$	150,011		$	—
Shares returned as part of settlement of seller agreements related to acquisition	$	233		$	—
Preferred shares dividends accrued	$	335,439		$	177,505
Unrealized gain on investment in available-for-sale debt security	$	75,388		$	—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-9

CLEANSPARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

ORGANIZATION

The Company – CleanSpark, Inc. (“CleanSpark,” “we,” “our,” or the "Company") was incorporated in the state of Nevada on October 15, 1987 as SmartData Corporation. In October 2016, the Company changed its name to CleanSpark, Inc.

CleanSpark, Inc. is a sustainable bitcoin mining company. The Company, through itself and its wholly owned subsidiaries, has operated in the digital currency mining sector since December 2020.

Through our wholly owned subsidiaries, ATL Data Centers LLC (“ATL”) and CleanBlok, Inc. (“CleanBlok”), the Company mines bitcoin. The Company entered the bitcoin mining industry through our acquisition of ATL in December 2020. It acquired a second data center in August 2021 and has had a co-location agreement with New York-based Coinmint, LLC in place since July 2021. Bitcoin mining has now become the Company’s principal revenue generating business activity. We currently intend to acquire additional facilities, equipment and infrastructure capacity to continue to expand our bitcoin mining operations.

Through our subsidiaries CSRE Properties Norcross, LLC, CSRE Property Management Company, LLC and CSRE Properties, LLC, we maintain real property holdings for ATL Data Centers LLC and CleanBlok Inc.

The Company provides energy solutions through our wholly owned subsidiaries CleanSpark, LLC, CleanSpark Critical Power Systems, Inc., GridFabric, LLC, and Solar Watt Solutions, Inc. These solutions consist of engineering, design and software solutions, custom hardware solutions, Open Automated Demand response (“OpenADR”), solar, energy storage for microgrid and distributed energy systems to military, commercial and residential customers in Southern California and throughout the world. The Company’s solutions are supported by a proprietary suite of software solutions that include microgrid energy modeling, energy market communications and energy management solutions. As of June 30, 2022, the Company deemed its energy operation to be discontinued operations due to its strategic shift to strictly focus on its bitcoin mining operations and divest of its energy assets.

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 ("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, 2021, filed with the SEC on December 14, 2021 (“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 its wholly owned operating subsidiaries, CleanSpark, LLC, CleanSpark II, LLC, CleanSpark Critical Power Systems Inc., p2kLabs, Inc, GridFabric, LLC, ATL Data Centers LLC, CleanBlok, Inc., CSRE Properties, LLC, Solar Watt Solutions, Inc, CSRE Properties Norcross, LLC and CSRE Property Management Company, LLC. All intercompany transactions have been eliminated upon consolidation of these entities.

F-10

As of June 30, 2022, the Company deemed its energy operations to be discontinued operation due to its strategic shift to strictly focus on its bitcoin mining operations and divest of its energy assets. The disposal groups related to the energy operations are part of the following entities: CleanSpark, LLC, CleanSpark Critical Power Systems Inc., GridFabric, LLC, and Solar Watt Solutions, Inc.

Liquidity

As shown in the accompanying unaudited consolidated financial statements, the Company generated a net income (loss) from continuing operations of $(16,236,076) and $1,064,790 respectively during the three months and nine months ended June 30, 2022. While the Company has experienced negative cash flows from investing activities due to its continued investments in capital expenditures in support of its bitcoin mining operations, it has generated positive cash flows from operating and financing activities. The Company has sufficient working capital to support its ongoing operations for the next twelve months. In addition, the Company has access to equity financing through its At-the-Market offering facility and debt financing through the lending arrangement the Company entered into in April 2022 (see Note 15 and Note 16). As of June 30, 2022, the Company had working capital of $9,462,379.

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 estimates used to review the Company’s goodwill and digital currency impairment, intangible assets acquired, impairments and estimations of long-lived assets, revenue recognition from digital currency mining, valuation of derivative assets and liabilities, available-for-sale investments, allowances for uncollectible accounts, valuation of digital currencies, valuation of contingent consideration, warranty, 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 in 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 COVID-19 pandemic may have on the Company’s operations.

Revenue Recognition

We recognize revenue in accordance with generally accepted accounting principles as outlined in the Financial Accounting Standard Board's (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers, which requires that five steps be followed in evaluating revenue recognition: (i) identify the contract with the customer; (ii) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation.

Our accounting policy on revenue recognition by type of revenue is provided below.

Revenues from digital currency mining

The Company has entered into contracts with digital asset mining pool operators to provide computing power to the mining pools. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company starts providing computing power to the mining pool operator. In exchange for providing computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less net digital asset transaction fees to the mining pool operator), for successfully adding a block to the blockchain, plus a fractional share of the transaction fees attached to that blockchain. The Company’s fractional share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm. The transaction consideration the Company receives is noncash consideration, in the form of digital currency, which the Company measures at fair value on the date received which is not materially different than the fair value at contract inception or time the Company has earned the award from the mining pools. Fair value of the digital currency award received is determined using the spot price of the related digital currency on the date earned.

F-11

There is currently no definitive guidance under GAAP or alternative accounting framework for the accounting for digital currencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.

Engineering & Construction Contracts and Service Contracts

The Company recognizes engineering and construction contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Engineering and construction contracts are generally accounted for as a single unit of account (a single performance obligation) and are not segmented between types of services. The Company recognizes revenue based primarily on contract cost incurred to date compared to total estimated contract cost (an input method). The input method is the most faithful depiction of the Company’s performance because it directly measures the value of the services transferred to the customer. Customer-furnished materials, labor and equipment and, in certain cases, subcontractor materials, labor and equipment, are included in revenue and cost of revenue when management believes that the Company is acting as a principal rather than as an agent (i.e., the Company integrates the materials, labor and equipment into the deliverables promised to the customer). Customer-furnished materials are only included in revenue and cost when the contract includes construction activity and the Company has visibility into the amount the customer is paying for the materials or there is a reasonable basis for estimating the amount. The Company recognizes revenue, but not profit, on certain uninstalled materials that are not specifically produced, fabricated, or constructed for a project. Revenue on these uninstalled materials is recognized when the cost is incurred (when control is transferred). Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the client. Project mobilization costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred to the client. Customer payments on engineering and construction contracts are typically due within 30 to 45 days of billing, depending on the contract.

The Company recognizes energy (solar panel and battery) installation contract revenue for residential customers at a point in time upon completion of the installation. The revenues associated with energy installations for commercial customers are recognized over a period of time as noted in the engineering and construction contract revenue disclosure above.

For service contracts (including maintenance contracts) in which the Company has the right to consideration from the customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date, revenue is recognized when services are performed and contractually billable. Service contracts that include multiple performance obligations are segmented between types of services.

For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using an estimate of the stand-alone selling price of each distinct service in the contract. Revenue recognized on service contracts that have not been billed to clients is classified as a current asset under contract assets on the Consolidated Balance Sheets. Amounts billed to clients in excess of revenue recognized on service contracts to date are classified as a current liability under contract liabilities. Customer payments on service contracts are typically due within 30 days of billing, depending on the contract.

Revenues from Sale of Equipment

Performance Obligations Satisfied at a point in time.

We recognize revenue on agreements for equipment we sell on a standardized basis to the market at a point in time. We recognize revenue at the point in time that the customer obtains control of the good, which is generally upon shipment or when the customer has physical possession of the product depending on contract terms. We use proof of delivery for certain large equipment with more complex logistics, whereas the delivery of other equipment is estimated based on historical averages of in-transit periods (i.e., time between shipment and delivery). Generally, shipping costs are included in the price of equipment unless the customer requests a non-standard shipment. In situations where an

F-12

alternative shipment arrangement has been made, the Company recognizes the shipping revenue upon customer receipt of the shipment.

In situations where arrangements include customer acceptance provisions based on seller or customer-specified objective criteria, we recognize revenue when we have concluded that the customer has control of the goods and that acceptance is likely to occur. We generally do not provide for anticipated losses on point in time transactions prior to transferring control of the equipment to the customer.

Our billing terms for these point in time equipment contracts vary and generally coincide with shipment to the customer; however, within certain businesses, we receive progress payments from customers for large equipment purchases, which is generally to reserve production slots with our manufacturing partners, which are recorded as contract liabilities.

Due to the customized nature of the equipment, the Company does not allow for customer returns.

Service Performance obligations satisfied over time.

We enter into long-term product service agreements with our customers primarily within our microgrid segment. These agreements require us to provide preventative maintenance, and standby support services that include certain levels of assurance regarding system performance throughout the contract periods, and these contracts will generally range from 1 to 10 years. We account for items that are integral to the maintenance of the equipment as part of our service-related performance obligation, unless the customer has a substantive right to make a separate purchasing decision (e.g., equipment upgrade). Contract modifications that extend or revise contract terms are not uncommon and generally result in our recognizing the impact of the revised terms prospectively over the remaining life of the modified contract (i.e., effectively like a new contract). Revenues are recognized for these arrangements on a straight-line basis consistent with the nature, timing and extent of our services, which primarily relate to routine maintenance and as needed product repairs. Our billing terms for these contracts vary, but we generally invoice periodically as services are provided.

Contract assets represent revenue recognized in excess of amounts billed and include unbilled receivables (typically for cost reimbursable contracts) and contract work in progress (typically for fixed-price contracts). Unbilled receivables, which represent an unconditional right to payment subject only to the passage of time, are reclassified to accounts receivable when they are billed under the terms of the contract.

Revenues from software

The Company derives its software revenue from both subscription fees from customers for access to its energy software offerings and software license sales and support services. Revenues from software licenses are generally recognized upfront when the software is made available to the customer and revenues from the related support is generally recognized ratably over the contract term. The Company’s policy is to exclude sales and other indirect taxes when measuring the transaction price of its subscription agreements.

The Company’s subscription agreements generally have monthly or annual contractual terms. Revenue is recognized ratably over the related contractual term beginning on the date that the platform is made available to a customer. Access to the platform represents a series of distinct services as the Company continually provides access to, and fulfills its obligation to the end customer over the subscription term. The series of distinct services represents a single performance obligation that is satisfied over time.

Revenues from design, software development and other technology-based consulting services

For service contracts performed under Master Services Agreements (“MSA”) and accompanying Statement(s) of Work (“SOW”), revenue is recognized based on the performance obligation(s) outlined in the SOW which is typically hours worked or specific deliverable milestones. In the case of a milestone-based SOW, the Company recognizes revenues as each deliverable is signed off by the customer.

F-13

Revenues from data center services

The Company provides 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 are the services provided to a customer for the month based on the contract. The transaction price is 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.

Variable Consideration

The nature of the Company’s contracts gives rise to several types of variable consideration, including claims and unpriced change orders; awards and incentive fees; and liquidated damages and penalties. The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company estimates the amount of revenue to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount method, whichever is expected to better predict the amount. Factors considered in determining whether revenue associated with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized include the following: (a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the Company’s performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable. If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only when the costs associated with the claims or unapproved change orders have been incurred. Back charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is probable and the amounts can be reliably estimated. Disputed back charges are recognized when the same requirements described above for claims accounting have been satisfied.

The Company generally provides limited warranties for work performed under its engineering and construction contracts. The warranty periods typically extend for a limited duration following substantial completion of the Company’s work on a project. Historically, warranty claims have not resulted in material costs incurred.

Practical Expedients

If the Company has a right to consideration from a customer in an amount that corresponds directly with the value of the Company’s performance completed to date (a service contract in which the Company bills a fixed amount for each hour of service provided), the Company recognizes revenue in the amount to which it has a right to invoice for services performed.

The Company does not adjust the contract price for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a service to a customer and when the customer pays for that service will be one year or less.

The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by governmental authorities that are collected by the Company from its customers (use taxes, value added taxes, some excise taxes).

Cost of Revenues

The Company includes the following in cost of revenues: energy costs, materials costs, manufacturing and logistics costs, freight costs, inventory write-downs, hosting services costs. The recognition of cost of revenue for our energy segment is dependent upon the revenue stream that it pertains to, refer below:

Products and related services delivered at a point in time. Cost of revenue from these products and related services is recognized when the Company transfers control of the product to the customer, which is generally upon shipment.

F-14

Products and related services delivered over time. Cost of revenue from these products and related services is recognized over the related service period.

Cash and cash equivalents

Cash and cash equivalents include cash and amounts due from banks and restricted cash. The Company’s restricted cash represents amounts held in trust for certain construction projects. The following table sets forth a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet that agrees to the total of those amounts as presented in the consolidated statements of cash flows.


	June 30, 2022		September 30, 2021
Cash and cash equivalents, excluding restricted cash	$	2,661,682	$	14,571,198
Restricted cash - construction escrow account		—		3,469,129
Cash and cash equivalents, including restricted cash	$	2,661,682	$	18,040,327

Accounts receivable

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:


	June 30, 2022			September 30, 2021
Accounts Receivable, gross	$	320,133		$	307,067
Other receivables		1,248			—
Provision for doubtful allowances		(218,600	)		—
Total Accounts Receivable, net	$	102,781		$	307,067

Inventory

Inventory is stated at the lower of cost or net realizable value with cost being measured on a first-in, first-out basis. For solar panel and battery installations, the Company transfers component parts from inventories to cost of goods sold once installation is complete. The Company periodically reviews inventories for unusable and obsolete items based on assumptions about future demand and market conditions. Based on this evaluation, provisions are made to write inventories down to their net realizable value.

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

F-15

At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. The cash balance, in excess of the FDIC limits was $2,194,328 and $17,790,327 as of June 30, 2022 and September 30, 2021, respectively. The accounts offered by custodians of the Company’s bitcoin are not insured by the FDIC. The fair market value of bitcoin held in accounts not covered by FDIC limits was $10,538,120 and $23,603,210 as of June 30, 2022 and September 30, 2021, respectively. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these 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 13 - 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 11 – 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. As of June 30, 2022, 846,537 units of 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 June 30, 2022 as their effect is

F-16

anti-dilutive. Provided below is the income (loss) per share calculation for the three and nine months ended June 30, 2022 and 2021:


	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2022			2021			2022			2021
Continuing Operations
Numerator
Income (loss) from continuing operations	$	(16,236,076	)	$	(14,074,995	)	$	1,064,790		$	(9,477,358	)
Preferred stock dividends		—			—			335,439			177,505
Income (loss) from continuing operations attributable to common shareholders		(16,236,076	)		(14,074,995	)		729,351			(9,654,863	)

Denominator
Weighted- average common shares outstanding, basic		41,277,090			34,014,221			41,010,826			27,355,111
Dilutive impact of stock options and other share-based awards		—			—			81,202			—
Weighted- average common shares outstanding, diluted		41,277,090			34,014,221			41,092,028			27,355,111
Income (loss) from continuing operations per common share attributable to common shareholders
Basic	$	(0.39	)	$	(0.41	)	$	0.02		$	(0.35	)
Diluted	$	(0.39	)	$	(0.41	)	$	0.02		$	(0.35	)

Discontinued Operations
Numerator
Loss on discontinued operations		(13,104,147	)		(2,602,132	)		(16,089,993	)		(6,967,261	)
Denominator
Weighted- average common shares outstanding, basic		41,277,090			34,014,221			41,010,826			27,355,111
Dilutive impact of stock options and other share-based awards		—			—			81,202			—
Weighted- average common shares outstanding, diluted		41,277,090			34,014,221			41,092,028			27,355,111
Loss on discontinued operations per common share attributable to common shareholders
Basic	$	(0.32	)	$	(0.08	)	$	(0.39	)	$	(0.25	)
Diluted	$	(0.32	)	$	(0.08	)	$	(0.39	)	$	(0.25	)

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 its intended use. Depreciation for machinery and equipment, mining equipment, buildings, furniture and fixtures and leasehold improvements commences once they are ready for its 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.

F-17

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:


		Useful Life (years)
Building		30
Land improvements		15
Machinery and equipment		1-10
Office equipment		3-7
Miners		3-5
Mining equipment		3-15
Leasehold improvements		Shorter of estimated lease term or 15 years
Infrastructure asset		Shorter of estimated lease term or 5 years
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 and nine months ended June 30, 2022 and June 30, 2021 the Company did not record an impairment expense.

Digital Currency

Digital currencies are included in current assets in the consolidated balance sheets. Digital currencies are recorded at cost less impairment. They are classified as indefinite-lived intangible assets in accordance with ASC 350, Intangibles — Goodwill and Other, and are accounted for in connection with the Company’s revenue recognition policy detailed above and in Note 2 – Summary of Significant Accounting Policies. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. Quantitative impairment is measured using the quoted price of the digital currency at the time its fair value is being measured in accordance with ASC 820, Fair Value Measurement. Quoted prices are obtained from the principal market. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted as per ASC 350, Intangibles – Goodwill and Other.

Digital currencies earned by the Company through its mining activities are included within operating activities on the accompanying consolidated statements of cash flows. The sales of digital currencies are included within investing activities in the accompanying consolidated statements of cash flows and any realized gains or losses from such sales are included in other income (expense) in the consolidated statements of operations and comprehensive income (loss). The Company accounts for its gains or losses in accordance with the first in first out (“FIFO”) method of accounting.

The following table presents the activities of the digital currencies for the nine months ended June 30, 2022:


	Amount
Balance as on September 30, 2021	$	23,603,210
Addition of digital currencies		104,882,043
Sale of digital currencies		(108,070,207	)
Digital currencies issued for services		(450,948	)
Realized gain on sale of digital currencies, including services		2,026,427
Impairment loss		(11,452,405	)
Balance as on June 30, 2022	$	10,538,120

F-18

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 inputs, 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 in 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 these 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 June 30, 2022 and September 30, 2021:


June 30, 2022
	Amount		Level 1		Level 2		Level 3
Derivative asset	$	2,761,780	$	-	$	-	$	2,761,780
Investment in debt security		569,996		-		-		569,996
Total	$	3,331,776	$	-	$	-	$	3,331,776

September 30, 2021
	Amount		Level 1		Level 2		Level 3
Derivative asset	$	4,905,656	$	-	$	-	$	4,905,656
Investment in equity security		10,772		10,772		-		-
Investment in debt security		494,608		-		-		494,608
Contingent cash consideration		-		-		-		-
Total	$	5,411,036	$	10,772	$	-	$	5,400,264

There were no transfers between Level 1, 2 or 3 during the three and nine months ended June 30, 2022 and 2021.

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 nine months ended June 30, 2022 is included in Note 4 - Investments.

Income taxes

The Company’s calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. The Company recognizes tax liabilities for uncertain tax positions based on management’s estimate of whether it is more likely than not that additional taxes will be required. The Company had no uncertain tax positions as of June 30, 2022 and September 30, 2021.

F-19

Deferred income taxes are recognized in the consolidated financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates. Temporary differences arise from net operating losses, differences in depreciation methods of archived images, and property and equipment, stock-based and other compensation, and other accrued expenses. A valuation allowance is established when it is determined that it is more likely than not that some or all of the deferred tax assets will not be realized.

The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability for U.S., or the various state jurisdictions, may be materially different from managements estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities. Interest and penalties are included in tax expense.

The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes. As of June 30, 2022 and September 30, 2021, the Company had no accrued interest or penalties related to uncertain tax positions.

Income tax expense/(benefit) from operations for the three and nine months ended June 30, 2022 and 2021 was $0 in each period, which resulted primarily from maintaining a full valuation allowance against the Company's deferred tax assets.

Segment Reporting

The Company determines its operating segments based on how the Chief Operating Decision Maker ("CODM") views and evaluates operations, performance and allocates resources. As of June 30, 2022, the Company only has the bitcoin mining business as its operating segment due to its determination to consider the energy business as discontinued operation based on its decision to make a strategic shift to focus on the digital currency mining business and divest of its energy assets.

Discontinued Operations

The Company deems it appropriate to classify a business as a discontinued operation if the related disposal group meets all the following criteria: 1) The disposal group is a component of the Company; 2) The component meets the held-for-sale criteria; and 3) The disposal of the component represents a strategic shift that has a major effect on the Company's operations and financial results. As of June 30, 2022, the Company deemed its energy operations to be discontinued operation due to its strategic shift to strictly focus on its bitcoin mining operations and divest of its energy assets.

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations or net assets of the Company.

Recently issued accounting pronouncements

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. This new guidance is effective for the Company for its fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The

F-20

Company is evaluating its potential impact but does not expect the new standard to have a material impact on the Company's results of operations or cash flows.

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. As the Company was a Smaller Reporting Company at the time of issuance of the ASU, the Company expects to adopt the ASU effective October 1, 2023, including the interim periods within the fiscal year. Early application of the adoption is permitted. The Company is evaluating its potential impact but does not expect the new standard to have a material impact on the Company's results of operations or cash flows.

In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (subtopic 815-40),” which reduces the number of accounting models in ASC 470-20 that require separate accounting for embedded conversion features. As a result, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. By removing those separation models, the effective interest rate of convertible debt instruments will be closer to the coupon interest rate. Further, the diluted net income per share calculation for convertible instruments will require the Company to use the if-converted method. The treasury stock method should no longer be used to calculate diluted net income per share for convertible instruments. The amendment will be effective for the Company for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We expect the adoption of ASU 2020-06 to not have a material impact on the Company’s financial statements or disclosures.

ACQUISITIONS

SOLAR WATT SOLUTIONS, INC.

On February 23, 2021, the Company entered into an Agreement and Plan of Merger (the “SWS Merger Agreement”) with Solar Watt Solutions, Inc. (“SWS”) and its owners (the “Sellers”). The Company accounted for the acquisition of SWS as an acquisition of a business under ASC 805 – Business Combination.

At the closing on February 24, 2021, SWS became a wholly owned subsidiary of the Company. In exchange, the Company issued (i) 477,703 shares of restricted common stock with a deemed value of $15,640,000 calculated based on the five-day average closing price of the Company's common stock for the trading days including and immediately preceding the closing date of $32.74 per share to the Sellers, of which (a) 167,685 shares with a deemed value of $5,490,000 would be fully earned on closing, and (b) an additional 310,018 shares with a deemed fair value of $10,150,000 were issued to an escrow agent and only earned by Sellers, subject to holdback pending Sellers’ satisfaction of certain future milestones with all such shares subject to a lock up of no less than 180 days and a leak out of no more than 10% of average daily trading value of the prior 30 days for a period of 36 months following the closing, and (ii) up to $3,850,000 in cash to the Sellers, minus the Sellers’ debt, minus the difference between the Actual Amount and Expected Amount consisting of: (a) $1,350,000 (no changes post acquisition date) in cash payable on a pro rata basis to Sellers at closing, less payment of $500,000 (no changes post acquisition date) to settle Sellers’ debt at closing, which includes (x) $200,000 (no changes post acquisition date) in cash held back by the Company to satisfy potential damages from indemnification claims and any amounts owed pursuant to post-closing adjustments, (y) an additional $100,000 (no changes post acquisition date) in cash held back by the Company to satisfy any amounts owed pursuant to post-closing adjustments, and (b) up to $2,500,000 (fair valued at $155,000 at acquisition date) in cash held back by the Company and only payable pro rata to Sellers upon meeting certain future milestones and subject to satisfaction of any amounts owing from SWS to the Company resulting from damages required to be indemnified under the SWS Merger Agreement.

The Company determined the fair value of the consideration given to the sellers of SWS in connection with the transaction in accordance with ASC 820 was as follows:

F-21


Consideration:	Fair Value
Cash	$	1,350,000
Contingent consideration		155,000
310,018 shares of common stock as contingent equity consideration	$	533,002
167,685 shares of common stock		4,649,905
Total Consideration	$	6,687,907


	Preliminary Allocation at Acquisition Date			Adjustments to Fair Value			Final Allocation at Acquisition Date
Customer List	$	5,122,733		$	(4,932,733	)	$	190,000
Goodwill		1,642,409			5,178,126			6,820,535
Other Assets and Liabilities assumed, net		(77,235	)		(245,393	)		(322,628	)
Total	$	6,687,907		$	—		$	6,687,907

The goodwill recorded as result of the acquisition represents the strategic benefits of growing the Company’s service portfolio and the expected revenue growth from increased market penetration. Acquired goodwill is not deductible for income tax purposes. The total purchase price was allocated to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair values.

The amortization period for customer list is estimated to be 1.5 years. The Company estimated the fair value of the identified customer list using a discounted cash flow model. These fair value measurements were based on significant inputs not observable in the market and thus represent a Level 3 measurement. Key assumptions include the level and timing of expected incremental future cash flows over its remaining useful life, and discount rates the Company believe to be consistent with the inherent risks associated with customer list, which is 14%. The Company believes the level and timing of expected future cash flows appropriately reflects market participant assumptions.

On January 31, 2022, the Company entered into a Merger Satisfaction and Release Agreement (the "Merger Satisfaction Agreement") with the Sellers of SWS. In consideration of fully satisfying the terms under the SWS Merger Agreement, the Company paid the Sellers $625,000 and released from escrow 77,500 shares of the Company's common stock. Additionally, the Sellers agreed to release back to the Company 232,518 shares of the Company's common stock held in escrow. Upon delivery of such consideration, the parties agreed that the shares and cash holdbacks contained in the original merger agreement were fully satisfied.

ATL DATA CENTERS, LLC

On December 9, 2020, the Company entered into an Agreement and Plan of Merger (the “ATL Merger”) with ATL Data Centers LLC (“ATL”) and its members. The Company accounted for the acquisition of ATL as an acquisition

of a business under ASC 805 – Business Combination.

At the closing, ATL became a wholly owned subsidiary of the Company. In exchange, the Company issued 1,618,285 shares of restricted common stock to the selling members of ATL, of which: (i) 642,309 shares were fully earned on closing, and (ii) an additional 975,976 shares were issued and held in escrow, subject to holdback pending satisfaction of certain indemnification claims and future milestones, with all such shares subject to a lock up of no less than 180 days and a leak out of no more than 10% of the average daily trading value of the prior 30 days.

Of the 975,976 shares held in escrow, 515,724 shares were released to the selling members of ATL and 68,194 shares were returned to the Company and canceled due to satisfy nonsatisfaction of certain indemnification matters during the year ended September 30, 2021. The remaining 392,058 shares held in escrow consist of 72,989 shares subject to holdback pending satisfaction of further indemnification matters and 319,069 shares subject to satisfaction of future milestones.

F-22

In connection with the return of the 68,194 shares held in escrow that were cancelled to satisfy certain indemnification matters, total consideration and the related goodwill, decreased by $892,659 during the year ended September 30, 2021.

On June 14, 2022, of the 156,406 shares held in escrow, 59,480 shares were released to selling members of ATL and 13,509 shares were returned to the Company and canceled due to satisfy nonsatisfaction of certain indemnification matters.

The consideration remitted in connection with the ATL Merger is subject to adjustment based on post-closing adjustments to closing cash, indebtedness, and transaction expenses of ATL within 90 days of closing. The Company also assumed approximately $6,900,000 in debts of ATL at closing. As part of the transaction costs, the Company issued 41,708 shares of common stock for an aggregate value of $545,916 to the broker which were expensed upon issuance of the shares.


Purchase Price Allocation	Preliminary Allocation at Acquisition Date			Adjustments to Fair Value			Final Allocation at Acquisition Date
Strategic Contract	$	7,457,970		$	2,342,000		$	9,799,970
Goodwill		14,205,245			(1,264,167	)		12,941,078
Other Assets and Liabilities assumed, net		(479,864	)		(1,077,833	)		(1,557,697	)
Total	$	21,183,351		$	—		$	21,183,351

The Company made measurement period adjustments, primarily to strategic contract and goodwill, to better reflect the facts and circumstances that existed at the acquisition date.

The goodwill recorded as a result of the acquisition represents the strategic benefits of growing the Company’s service portfolio and the expected revenue growth from increased market penetration. Acquired goodwill is not deductible for income tax purposes. The total purchase price was allocated to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair values.

The strategic contract relates to supply of a critical input to our digital currency mining business. The other assets and liabilities assumed include $5,670,000 of digital currency mining equipment and approximately $5,475,000 of notes payable related to this equipment, which was settled by the Company in December 2020. In connection with the acquisition, the Company had acquired an operating lease related to a rental building, which had a purchase option associated with the lease agreement. The Company exercised the purchase option to buy the property in May 2021 and, as a result, terminated the lease.

The amortization period for strategic contracts is estimated to be 5 years. The Company estimated the fair value of the identified strategic contract using a discounted cash flow model. These fair value measurements were based on significant inputs not observable in the market and thus represent a Level 3 measurement. Key assumptions include the level and timing of expected future cash flows, conditions and demands over its remaining useful life, and discount rates the Company believe to be consistent with the inherent risks associated with strategic contract, which is 6.4%. The Company believes the level and timing of expected future cash flows appropriately reflects market participant assumptions.

Pro forma of Consolidated Financial Statements (Unaudited)

The following is the unaudited pro forma information assuming the acquisition of ATL and SWS occurred on October 1, 2020:

F-23


	For the nine months ended
	June 30, 2021
Net sales from continuing operations	$	18,638,887
Income from continuing operations	$	(9,266,397	)
Income from continuing operations per common share - basic	$	(0.34	)
Weighted average common shares outstanding – basic		27,355,111
Income from continuing operations per common share - diluted	$	(0.34	)
Weighted average common shares outstanding – diluted		27,355,111
Net sales from discontinued operations	$	6,244,406
Loss on discontinued operations	$	(7,784,411	)
Loss on discontinued operations per common share - basic	$	(0.28	)
Weighted average common shares outstanding – basic		27,355,111
Loss on discontinued operations per common share - diluted	$	(0.28	)
Weighted average common shares outstanding – diluted		27,355,111

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.

INVESTMENTS

As of June 30, 2022 and September 30, 2021, the Company had total investments of $3,581,776 and $5,661,036, respectively that comprise of the following:

International Land Alliance, Inc.

On November 5, 2019, the Company entered into a binding Memorandum of Understanding (the “MOU”) with International Land Alliance, Inc. (“ILAL”), a Wyoming corporation, to lay a foundational framework where the Company expects to deploy its energy solutions across the portfolio of ILAL, including its energy projects, and its customers.

In connection with the MOU, and to support the power and energy needs of ILALs development and construction of certain projects, the Company entered into a Securities Purchase Agreement (“SPA”), dated as of November 6, 2019, with ILAL.

Pursuant to the terms of the SPA with ILAL, the Company purchased 1,000 shares of Series B Preferred Stock of ILAL (the “Preferred Stock”) for an aggregate purchase price of $500,000 (the “Stock Transaction”), less certain expenses and fees. The Series B Preferred Stock accrue cumulative in-kind accruals at a rate of 12% per annum and were redeemable on August 6, 2020. The Preferred Stock can be converted into common stock at a variable rate (refer 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 Preferred Stock is recorded as an AFS debt security and is reported at its estimated fair value as of June 30, 2022. Any change in the fair values of AFS debt securities are reported net of income tax as an element of Other Comprehensive income.

The Company accrued interest on our available-for-sale debt securities totaling $536,356 and $399,863 as of June 30, 2022 and September 30, 2021, respectively, presented as prepaid expense and other current assets on the Consolidated Balance Sheets. The fair value of investment in Debt Securities is $569,996 and $494,608 as of June 30, 2022 and September 30, 2021, respectively. The Company has included gain on change in fair value of preferred stock amounting to $28,796 and $75,388 respectively for the three month and nine month periods ended June 30, 2022, and $0 and $0 respectively for the three month and nine month periods ended June 30, 2021, as part of other comprehensive income in the Consolidated Statements of Operations and Comprehensive Income (Loss).

F-24

The Company has deemed this variable conversion feature of ILAL preferred stock as an embedded derivative instrument in accordance with ASC Topic No. 815. This topic requires the Company to account for the conversion feature on its balance sheet at fair value and account for changes in fair value as a derivative gain or loss. Unrealized gain or loss on fair valuation of this embedded feature is recognized as income in the Consolidated Statements of Operations and Comprehensive Loss.

Total fair value of investment in derivative assets as of June 30, 2022 and September 30, 2021, respectively was $2,761,780 and $4,905,656. The Company fair values the debt security as a straight debt instrument based on liquidation value and accrued interest to date. The fair value of the derivative asset is based on the difference in the fair value of the debt security determined as a straight debt instrument and the fair value of the debt security if converted as of the reporting date. The Company recorded an unrealized loss on derivative assets for $1,032,579 and $2,143,876 respectively for the three and nine month periods ended June 30, 2022, compared to an unrealized gain (loss) on derivative assets for ($2,060,774) and $5,319,361 for the three and nine month periods ended June 30, 2021.

The following table sets forth a reconciliation of carrying value of all investments as of June 30, 2022:


	ILAL Debt Securities		ILAL Derivative Asset			ILAL Equity Securities			Law Clerk Equity Securities
Balance as of September 30, 2021	$	494,608	$	4,905,656		$	10,772		$	250,000
Shares sold during the year		—		—			(9,590	)		—
Realized gain on fair value recognized in other income (expense)		—		—			665			—
Unrealized loss recognized in other income (expense)		—		(2,143,876	)		(1,847	)		—
Unrealized gain on fair value recognized in Other comprehensive income		75,388		—			—			—
Balance as of June 30, 2022	$	569,996	$	2,761,780		$	—		$	250,000

INTANGIBLE ASSETS

Intangible assets consist of the following as of June 30, 2022 and September 30, 2021:


June 30, 2022
	Intangible assets		Accumulated amortization		Total
Patents	$	74,112	$	31,226	$	42,886
Websites		23,115		10,198		12,917
Strategic Contract		9,799,970		3,048,643		6,751,327
Total	$	9,897,197	$	3,090,067	$	6,807,130


September 30, 2021
	Intangible assets		Accumulated amortization		Total
Patents	$	74,112	$	28,329	$	45,783
Websites		8,115		8,115		—
Customer list and non-compete agreement		6,432,024		4,787,238		1,644,786
Design assets		123,000		123,000		—
Engineering trade secrets		350,000		350,000		—
Strategic Contract		9,799,970		1,577,098		8,222,872
Total	$	16,787,221	$	6,873,780	$	9,913,441

F-25

Amortization expense for the three and nine months ended June 30, 2022 was $492,097 and $1,474,627, respectively. Amortization expense for the three and nine months ended June 30, 2021 was $523,290 and $1,050,790, respectively.

The Company expects to record amortization expense of intangible assets over the next 5 years and thereafter as follows:


Year	June 30, 2022
2022 (three months remaining)	$	492,214
2023		1,968,857
2024		1,968,857
2025		1,965,523
2026		386,759
Thereafter		24,920
	$	6,807,130

PROPERTY AND EQUIPMENT

Property and equipment consist of the following:


	June 30, 2022			September 30, 2021
Mining equipment	$	12,161,401		$	2,817,074
Miners		313,410,536			120,330,769
Land Improvements		1,529,937			—
Office Equipment		206,101			—
Land and building		12,744,992			11,048,299
Machinery and equipment		231,609			63,978
Leasehold improvements		144,647			63,447
Furniture and fixtures		118,358			39,313
Infrastructure		12,338,191			81,868
Construction in progress		6,572,849			10,498,311
Less: accumulated depreciation		(37,272,698	)		(7,465,324	)
Property and equipment, net	$	322,185,923		$	137,477,735

Depreciation expense for the three months ended June 30, 2022 and 2021 was $14,319,194 and $1,584,159, respectively. Depreciation expense for the nine months ended June 30, 2022 and 2021 was $31,185,120 and $2,503,155, respectively. There were no disposals during the three months ended June 30, 2022. For the nine months ended June 30, 2022, $4,390,160 of property and equipment was disposed of for a gain of $642,691, which included $411,484 of property and equipment that was written-off resulting in a loss of $278,170. There were no disposals during the three and nine months ended June 30, 2021.

The Company placed-in service property and equipment of $218,441,023 during the nine months ended June 30, 2022. This increase in fixed assets primarily consisted of miners amounting to $214,680,416, which also includes miners received in-kind under miner purchase agreements valued at $308,038, mining equipment of $9,344,327, and infrastructure of $12,256,322.

Construction in progress: The Company is expanding its facilities in Georgia.

As of June 30, 2022, the Company has outstanding deposits totaling $31,856,635 for mining equipment. These deposits are in prepayments paid to premier suppliers and manufacturers to purchase mining ASICs and equipment. The prepayments will be applied to the purchase price when the vendor ships the miners.

F-26

LEASES

On October 1, 2019, the Company adopted the amendments to ASC 842, Leases, which requires lessees to recognize lease assets and liabilities arising from operating leases on the balance sheet. The Company adopted the new lease guidance using the modified retrospective approach and elected the transition option issued under ASU 2018-11, Leases (Topic 842) Targeted Improvements, allowing entities to continue to apply the legacy guidance in ASC 840, Leases, to prior periods, including disclosure requirements.

The Company has operating leases which are office spaces and finance leases which are primarily related to equipment used at its data center.

The Company's lease costs recognized during the three and nine months ended June 30, 2022 and 2021 in the unaudited Consolidated Statements of Operations and Comprehensive Loss consist of the following:


	For the three months ended				For the nine months ended
	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Operating lease cost (1)	$	83,236	$	58,446	$	249,711	$	247,452
Finance lease cost:
Amortization of right-of-use assets	$	94,815	$	94,815	$	284,445	$	207,544
Interest on lease obligations	$	8,837	$	13,868	$	30,349	$	32,091

(1) Included in general and administrative expenses

Other lease information is as follows:


	For the nine months ended
	June 30, 2022		June 30, 2021
Cash paid for amounts included in measurement of lease obligations:
Operating cash flows from operating leases	$	236,670	$	287,336
Financing cash flows from finance leases	$	448,291	$	181,475


	June 30, 2022			September 30, 2021
Weighted-average remaining lease term - operating leases	4.3 years			5 years
Weighted-average remaining lease term - finance leases	1.53 years			3.2 years
Weighted-average discount rate - operating leases		4.50	%		4.50	%
Weighted-average discount rate - finance leases		5.50	%		5.50	%

F-27

The following is a schedule of the Company's lease liabilities by contractual maturity as of June 30, 2022:


Fiscal Year	Operating Leases			Finance Leases
2022 (three months remaining)	$	80,235		$	32,806
2023		324,949			321,887
2024		333,234			179,572
2025		341,767			21,728
2026		299,039			-
Thereafter		50,659			-
Gross lease liabilities		1,429,883			555,993
Less: imputed interest		(128,415	)		(32,065	)
Present value of lease liabilities	$	1,301,468		$	523,928
Less: Current portion of lease liabilities		(323,951	)		(274,222	)
Total lease liabilities, net of current portion	$	977,517		$	249,706

8. RELATED PARTY TRANSACTIONS

Zachary K. Bradford - Chief Executive Officer and Director

During the three and nine months ended June 30, 2022, the Company paid Blue Chip Accounting, LLC (“Blue Chip”) $0 and $47,075, respectively, for accounting, tax, administrative services and reimbursement for office supplies. During the three and nine months ended June 30, 2021, the Company paid Blue Chip Accounting, LLC (“Blue Chip”) $41,525 and $131,890, respectively, for accounting, tax, administrative services and reimbursement for office supplies. Blue Chip is 50% beneficially owned by Mr. Bradford. None of the services were associated with work performed by Mr. Bradford. The services consisted of preparing and filing tax returns, bookkeeping, accounting and administrative support assistance. During the three and nine months ended June 30, 2022, $0 and $4,575, respectively, was paid to Blue Chip for rent. During the three and nine months ended June 30, 2021, $4,575 and $13,725, respectively, was paid to Blue Chip for rent. The sublease and engagement for accounting services was terminated on December 31, 2021.

STOCKHOLDERS’ EQUITY

Overview

The Company’s authorized capital stock consists of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock, par value $0.001 per share. As of June 30, 2022, there were 41,300,241 shares of common stock issued and outstanding and 1,750,000 shares of preferred stock issued and outstanding. As of September 30, 2021, there were 37,395,945 shares of common stock issued and outstanding and 1,750,000 shares of preferred stock issued and outstanding.

Common Stock issuances during the nine months ended June 30, 2022

The Company issued 105,520 common shares in relation to exercise of options.

The Company issued 5,238 common shares valued at $60,048 as compensation for Director services.

The Company issued 8,404 common shares valued at $150,011 for settlement of contingent consideration related to business acquisition.

The Company issued 4,017,652 common shares in relation to equity raises through its At-the-Market offering facility, net of offering costs, for net proceeds of $67,988,993.

F-28

Common stock returned during the nine months ended June 30, 2022

The Company had 232,518 shares of common stock returned back to the Company as part of the settlement of contingent consideration and holdbacks related to business acquisition.

10.

STOCK WARRANTS

The following is a summary of stock warrant activity during the nine months ended June 30, 2022:


	Number of Warrant Shares			Weighted Average Exercise Price ($)
Balance, September 30, 2021		615,704		$	30.72
Warrants granted		—			—
Warrants expired		(413,334	)	39.38
Warrants canceled		—			—
Warrants exercised		—			—
Balance, June 30, 2022		202,370		$	13.03

As of June 30, 2022, there are warrants exercisable to purchase 202,370 shares of common stock in the Company and there are no warrants that are unvested. As of June 30, 2022, the outstanding warrants have a weighted average remaining term of 0.87 years and an intrinsic value of $2,236.

During the three and nine months ended June 30, 2022, there were no exercise of warrants.

11.

STOCK-BASED COMPENSATION

The Company sponsors a stock-based incentive compensation plan known as the 2017 Incentive Plan (the “Plan”), which was established by the Board of Directors of the Company on June 19, 2017. On October 7, 2020, the Company executed a first amendment to the Plan to increase its share pool from 300,000 to 1,500,000 shares of common stock.

Effective September 15, 2021, following approval by our stockholders, the Plan was amended to (i) increase the number of shares of common stock authorized for issuance under the Plan by an additional 2,000,000 shares, resulting in an aggregate of 3,500,000 shares of common stock authorized for issuance under the Plan, and (ii) revise Section 19 of the Plan to more closely align with the provisions of Section 422 of the Internal Revenue Code of 1986, as amended, and Section 17.2 of the Plan.

As of June 30, 2022, there were 450,854 shares available for issuance under the Plan.

The Plan allows the Company to grant incentive stock options, non-qualified stock options, stock appreciation rights, common stock, units of common stock, restricted stock, performance shares and performance units. Other than incentive stock options that are granted to participants who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations (a “Ten Percent Stockholder”), stock options are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option is granted. The incentive stock options are limited to persons who are regular full-time employees of the Company or Ten Percent Stockholders at the date of the grant of the option. Non-qualified stock options and the other types of awards issuable under the Plan may be granted to any person, including, but not limited to, employees, independent agents, consultants and attorneys, who the Company’s Compensation Committee believes have contributed, or will contribute, to the success of the Company. The option vesting schedule for options granted is determined by the Compensation Committee at the time of the grant. The Plan provides for accelerated vesting of unvested options if there is a change in control, as defined in the Plan.

The Company granted 64,000 non-qualified options pursuant to the Plan during the nine months ended June 30, 2022.

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The Company recognized $17,515,870 and $8,599,029 respectively for the nine months ended June 30, 2022 and June 30, 2021 in stock-based compensation under the Plan.

STOCK OPTIONS

The following is a summary of stock option activity during the nine months ended June 30, 2022:


	Number of Option Shares			Weighted Average Exercise Price ($)
Balance, September 30, 2021		1,547,029			18.35
Options granted		197,750			15.27
Options expired		-			-
Options canceled/forfeited		(238,418	)		15.40
Options exercised		(105,520	)		7.43
Balance, June 30, 2022		1,400,841		19.28

As of June 30, 2022, there are options exercisable to purchase 666,043 shares of common stock in the Company and 734,798 unvested options outstanding that cannot be exercised until vesting conditions are met. As of June 30, 2022, the outstanding options have a weighted average remaining term of 1.48 years and no intrinsic value.

During the nine months ended June 30, 2022, a total of 105,520 shares of the Company’s common stock were issued in connection with the exercise of common stock options at exercise prices ranging from $4.65 to $15.10, for net proceeds of $780,709. For the nine months ended June 30, 2022, the Company also granted 197,750 options with a total fair value of $2,980,668 to purchase shares of common stock to employees.

The Black-Scholes model utilized the following inputs to value the options granted during the nine months ended June 30, 2022:


Fair value assumptions Options:	June 30, 2022
Risk free interest rate	0.10% - 2.93%
Expected term (years)	1.50 - 6.02
Expected volatility	140% - 533%
Expected dividends		0	%

As of June 30, 2022, the Company expects to recognize $11,291,763 of stock-based compensation for the non-vested outstanding options over a weighted-average period of 1.84 years.

RESTRICTED STOCK UNITS

The Company grants RSUs that contain (a) service conditions, (b) performance conditions, or (c) market performance conditions. RSUs containing service conditions vest monthly or annually. RSUs containing performance conditions generally vest over 1 year, and the number of shares earned depends on the achievement of predetermined Company metrics.

When the criteria for vesting is met, the Company recognizes the expense equal to the total fair value of the common stock price on the grant date. All of the RSUs issued prior to September 30, 2021 were either vested or forfeited and cancelled.

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The following table summarizes the performance-based restricted stock units at the maximum award amounts based upon the respective performance share agreements. Actual shares that will vest depend on the attainment of the performance-based criteria.


	Number of Shares			Weighted Average Fair Value Per Share		Aggregate Intrinsic Value
Outstanding at September 30, 2021		10,995		$	11.59	$	84,839
Granted		1,106,250			14.68		4,336,500
Vested		(133,094	)		20.31		2,703,336
Forfeited		(40,759	)		20.48		145,369
Outstanding at June 30, 2022		943,392		$	13.75	$	3,698,097

During the nine months ended June 30, 2022, the Company granted 1,106,250 RSUs, which comprised of 90,000 that are service period based, 146,250 that are performance condition based, and 870,000 that are market condition based awards. The market condition based RSUs consist of 60,000 units that are perpetual in nature, and therefore, are given a derived service period of 5 years. The remaining 810,000 RSUs have a stated service period of 1 year. The fair value of the market based RSUs are determined using the Monte Carlo simulation and is in the following range: $11.03 - $17.89 per unit. The risk free rate, volatility, expected term, and cost of equity of these market based RSUs are as follows: 0.14-1.26%, 111.37-172.18%, 1-5 years, and 20.00-21.00%.

As of June 30, 2022, the Company had $4,055,805 in unrecognized compensation costs related to RSU awards that it expects to recognize over a weighted average period of 0.52 years.

12.

COMMITMENTS AND CONTINGENCIES

Purchase of bitcoin mining equipment

The Company has cancellable purchase commitments totaling approximately $36,500,000 related to purchase of miners and approximately $16,700,000 related to purchase of mining operations related equipment and construction projects as of June 30, 2022, and the Company has paid approximately $39,000,000 towards these commitments as of the end of this period. As of June 30, 2022, the remaining commitment for future payments was approximately $14,200,000.

Future hosting agreements

On March 29, 2022, the Company entered into a Hosting Agreement (the "Lancium Agreement") with Lancium LLC (“Lancium”). Pursuant to the Lancium Agreement, Lancium has agreed to host, power and provide maintenance and other related services to the Company’s mining equipment to be placed at Lancium facilities. Pursuant to the Agreement, Lancium will provide 200 megawatts in support of Company’s mining equipment. In addition, for a period of two and a half years following the operations commencement date under the Agreement, the Company will have an option to increase the power capacity supplied to the Company up to 500 MW or 40% of the aggregate capacity of all facilities owned and operated by Lancium, whichever is lesser. As consideration for the Services, the Company shall pay Lancium a power charge fee based on kilowatt hours consumed by the Company’s equipment and a hosting fee based on power consumed, subject to service level adjustments and credits, if any.

The Agreement further provides that through December 31, 2023, Lancium, subject to certain limited exceptions, will not enter into any all-in fixed price agreements with other customers with the same or less power draw as the Company that contains more favorable terms for the fixed all-in price than those in the Lancium Agreement, unless the Company is provided with the same lower fixed price under the Lancium Agreement. The Agreement has an initial term of five years from the operations commencement date (unless terminated earlier in accordance with the terms of the Agreement), after which it will renew automatically for two-year periods unless either party provides notice of non-renewal at least ninety days prior to the expiration of the term or renewal term, as applicable. As of June 30, 2022, the Company did not have any contractual future payment obligations under the terms of the Agreement.

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Contractual future payments

The following table sets forth certain information concerning our obligations to make contractual future payments towards our agreements as of June 30, 2022:


	2022		2023		2024		2025		2026		Thereafter		Total
Recorded contractual obligations:
Operating lease obligations	$	80,235	$	324,949	$	333,234	$	341,767	$	299,039	$	50,659	$	1,429,883
Finance Lease obligations		32,806		321,887		179,572		21,728		-		-		555,993
Mining equipment		5,931,636		1,890,000		-		-		-		-		7,821,636
Mining operations related equipment		6,373,976		-		-		-		-		-		6,373,976
Total	$	12,418,653	$	2,536,836	$	512,806	$	363,495	$	299,039	$	50,659	$	16,181,488

Contingent consideration

GridFabric

On August 31, 2020, the Company acquired GridFabric, LLC. Pursuant to the terms of the purchase agreement, additional shares of the Company’s common stock valued at up to $750,000 were issuable if GridFabric achieves certain revenue and product release milestones. On September 30, 2021, the contingent consideration was re-measured to $500,000.

On November 23, 2021, the Company settled all contingent consideration due to GridFabric resulting in a payment of 8,404 shares of common stock valued at $150,000.

Solar Watt Solutions

On February 24, 2021, the Company acquired Solar Watt Solutions, Inc. Pursuant to the terms of the purchase agreement, additional cash consideration of up to $2,500,000 (fair valued at $155,000 at acquisition date) in cash held back by the Company and only payable pro rata to Sellers upon meeting certain future milestones and subject to satisfaction of any amounts owing from SWS to the Company resulting from damages required to be indemnified under the SWS Merger Agreement. The contingent cash consideration was re-measured to $615,249 at December 31, 2021.

On January 31, 2022, the Company settled all contingent consideration due to the SWS sellers, resulting in a payment of $625,000, 77,500 shares of common stock released out of escrow to the SWS sellers, and SWS sellers releasing 232,518 shares of common stock back the Company.

Legal contingencies

From time to time we may be subject to litigation arising in the ordinary course of business. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. Based on the opinion of legal counsel and other factors, management believes that the final disposition of these existing matters will not have a material adverse effect on the business, results of operations, financial condition, or cash flows of the Company. The Company has identified certain claims as a result of which a loss may be incurred, but in the aggregate the loss is expected to be insignificant. This assessment is based on our

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current understanding of relevant facts and circumstances. As such, our view of these matters is subject to inherent uncertainties and may change in the future. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Actual outcomes of these legal and regulatory proceedings may materially differ from our current estimates. For other claims regarding proceedings that are in an initial phase, the Company is unable to estimate the range of possible loss, if any, but at this time believes that any loss related to such claims will not be material. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. We maintain liability insurance to reduce such risk exposure to the Company. Despite the measures taken, such policies may not cover future litigation, or the damages claimed may exceed our coverage which could result in contingent liabilities.

Bishins v. CleanSpark, Inc. et al.

On January 20, 2021, Scott Bishins (“Bishins”), individually, and on behalf of all others similarly situated (together, the “Class”), filed a class action complaint (the “Class Complaint”) in the United States District Court for the Southern District of New York against the Company, its Chief Executive Officer, Zachary Bradford (“Bradford”), and its Chief Financial Officer, Lori Love (“Love”) (such action, the “Class Action”). The Class Complaint alleged that, between December 31, 2020 and January 14, 2021, the Company, Bradford, and Love “failed to disclose to investors: (1) that the Company had overstated its customer and contract figures; (2) that several of the Company’s recent acquisitions involved undisclosed related party transactions; and (3) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.” The Class Complaint sought: (a) certification of the Class, (b) an award of compensatory damages to the Class, and (c) an award of reasonable costs and expenses incurred by the Class in the litigation.

On December 2, 2021, the Court appointed Darshan Hasthantra as lead Plaintiff (together, with Bishins, the “Plaintiffs”), and Glancy, Prongay and Murray LLP as class counsel.

Hasthantra filed an Amended Complaint on February 28, 2022 (the “Amended Class Complaint”). In the Amended Class Complaint, Love is no longer a defendant and S. Matthew Schultz (“Schultz”) has been added as a defendant (the Company, Bradford and Schultz, collectively, the “Defendants”). The Amended Class Complaint alleges that, between December 10, 2020 and August 16, 2021 (the “Class Period”), Defendants made material misstatements and omissions regarding the Company’s acquisition of ATL Data Centers, Inc. (“ATL”) and its anticipated expansion of bitcoin mining operations. In particular, Plaintiffs allege that Defendants: (1) were misleading in their various public announcements related to the timeline for expanding ATL’s mining capacity; and (2) failed to disclose other material conditions purportedly related to the Company’s acquisition of ATL, including that an ATL predecessor had filed for bankruptcy about six months prior to the acquisition, that another bitcoin miner had declined to acquire ATL, and that a related party had performed an audit of ATL for the Company. The Amended Class Complaint seeks: (a) certification of the Class, (b) an award of compensatory damages to the Class, and (c) an award of reasonable costs and expenses incurred by the Class in the litigation.

To date, no class has been certified in the Class Action.

The Company filed its Motion to Dismiss on April 28, 2022. The Motion to Dismiss seeks dismissal of all claims asserted in the Amended Class Complaint with prejudice and without leave to amend on the grounds that Plaintiffs fail to state a claim upon which relief can be granted under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder. Plaintiffs filed their opposition on June 27, 2022. Defendants’ reply in further support of their Motion to Dismiss is due on August 11, 2022.

Although the ultimate outcome of the Class Action cannot be determined with certainty, the Company stands behind all of its prior statements and disclosures and believes that the claims raised in the Amended Class Complaint and the Class Complaint are entirely without merit. The Company intends to both defend itself vigorously against these claims and to vigorously prosecute any counterclaims.

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Notwithstanding Plaintiffs’ allegations’ lack of merit, however, the Class Action may distract the Company and cost the Company’s management time, effort and expense to defend against the claims made in the Amended Class Complaint. Notwithstanding the Company’s belief that the Company and its management have complied with all of their obligations under applicable securities regulations, no assurance can be given as to the outcome of the Class Action, and in the event the Company does not prevail in such action, the Company, its business, financial condition and results of operations could be materially and adversely affected.

Ciceri, derivatively on behalf of CleanSpark, Inc., v. Bradford, Love, Schultz, Beynon, McNeill, and Wood (consolidated with Perna, derivatively on behalf of CleanSpark, Inc., v. Bradford, Love, Schultz, Beynon, McNeill, and Wood)

On May 26, 2021, Andrea Ciceri (“Ciceri”), derivatively on behalf of CleanSpark, Inc., filed a verified shareholder derivative action (the “Ciceri Derivative Action”) in the United States District Court in the District of Nevada against Chief Executive Officer, Zachary Bradford (“Bradford”), Chief Financial Officer, Lori Love (“Love”) and Directors Matthew Schultz, Roger Beynon, Larry McNeill and Tom Wood (Bradford, Love and Directors collectively referred to as “Ciceri Derivative Defendants.”) On June 22, 2021, Mark Perna (“Perna”) (Ciceri, Perna, and Ciceri Derivative Defendants collectively referred to as the “Parties”) filed a verified shareholder derivative action (the “Perna Derivative Action”) in the same Court against the same Ciceri Derivative Defendants, making substantially similar allegations. On June 29, 2021, the Court consolidated the Ciceri Derivative Action with the Perna Derivative Action in accordance with a stipulation among the parties (the consolidated case referred to as the “Derivative Action”). The Derivative Action alleges that Ciceri Derivative Defendants: (1) made materially false and misleading public statements about the Company’s business and prospects; (2) did not maintain adequate internal controls; and (3) did not disclose several related party transactions benefitting insiders, questionable uses of corporate assets, and excessive compensation. The claims asserted against all Ciceri Derivative Defendants include breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. A claim for contribution under Sections 10(b) and 21D of the Securities and Exchange Act is asserted against only Bradford and Love. The Derivative Action seeks declaratory relief, monetary damages, and imposition of adequate corporate governance and internal controls. Plaintiffs were given the opportunity to submit an Amended Complaint by November 25, 2021, but elected not to. In January 2022, the Parties agreed to stay the entirety of the case pending the outcome of the Motion to Dismiss in the Class Action. Any of the Parties may also terminate the stay on 20 days’ notice.

Although the ultimate outcome of the Derivative Action cannot be determined with certainty, the Company stands behind all of its prior statements and disclosures, and believes that the claims raised in that case are entirely without merit. The Company intends to both defend itself vigorously against these claims and to vigorously prosecute any counterclaims.

Notwithstanding the Derivative Action’s lack of merit, however, it may distract the Company and cost the Company’s management time, effort and expense to defend against the claims. Notwithstanding the Company’s belief that the Company and its management have complied with all of their obligations under applicable securities regulations, no assurance can be given as to the outcome of the Derivative Action, and in the event the Company does not prevail in such action, the Company, its business, financial condition and results of operations could be materially and adversely affected.

Solar Watt Solutions, Inc., v. Pathion, Inc.

On January 6, 2022, Solar Watt Solutions, Inc., (“SWS”) filed suit in the Superior Court of the State of California in the County of Santa Clara against Pathion, Inc., (“Pathion”) for breach of contract, conversion, unjust enrichment and negligent misrepresentation. Prior to its acquisition by the Company, SWS paid Pathion $418,606 for solar batteries and related equipment for delivery in August 2019, later amended to November 2019. Pathion never delivered any of the items purchased by SWS. Pathion’s breach resulted in SWS being unable to complete a separate contract and cost the end-user client over $15,000 per month in electricity costs. SWS is seeking an award of compensatory damages totaling over $500,000. Pathion filed an answer on or around February 16, 2022, generally denying the claims asserted

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by SWS. SWS served discovery on Pathion in May 2022; Pathion did not serve responses. Accordingly, SWS filed a Motion for Order Establishing Admissions and for Sanctions on July 25, 2022, and is awaiting a response.

13.

MAJOR CUSTOMERS AND VENDORS

For the three months ended June 30, 2022 and 2021, the digital currency mining business had the following customers that represented more than 10% of revenue. For these purposes customers are defined as the Company’s mining pool operators.


	Three Months Ended
		June 30, 2022			June 30, 2021
Mining Pool Operator A			100.00	%		—
Mining Pool Operator B			0.00	%		100.00	%

For the nine months ended June 30, 2022 and 2021, the digital currency mining business had the following customers that represented more than 10% of revenue. For these purposes customers are defined as the Company’s mining pool operators.


	Nine Months Ended
		June 30, 2022			June 30, 2021
Vendor A			72.98	%		30.03	%
Vendor B			20.09	%		—
Vendor C			—			37.44	%
Vendor D			—			19.97	%

For the three months ended June 30, 2022 and 2021, the Company had the following significant suppliers of mining equipment.


	Three Months Ended
		June 30, 2022			June 30, 2021
Vendor A			80.05	%		49.98	%
Vendor B			19.95	%		0.00	%
Vendor C			0.00	%		50.02	%

For the nine months ended June 30, 2022 and 2021, the Company had the following significant suppliers of mining equipment.


	Nine Months Ended
		June 30, 2022			June 30, 2021
Mining Pool Operator A			99.97	%		—
Mining Pool Operator B			0.03	%		100.00	%

14.

DISCONTINUED OPERATIONS

The Company determined to make available for sale the asset groups related to the energy segment due to its strategic shift to strictly focus on its bitcoin mining operations. As a result, the Energy segments' results of operations have been reclassified as discontinued operations on a retrospective basis for all periods presented. Accordingly, the assets and liabilities of this segment are separately reported as “assets and liabilities held for sale” as of June 30, 2022 in the consolidated balance sheets. The results of operations of this segment, for all periods, are separately reported as

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“discontinued operations” in the consolidated statements of operations and comprehensive loss. Provided below are the key areas of the financials that constitute the discontinued operations:


	June 30, 2022 (Unaudited)		September 30, 2021
ASSETS
Current assets
Accounts receivable, net	$	3,412,432	$	2,312,890
Inventory		1,300,609		2,592,933
Prepaid expense and other current assets		4,116,687		2,991,244
Total current assets held for sale	$	8,829,728	$	7,897,067

Property and equipment, net		11,284		197,004
Intangible assets, net		828,340		2,785,736
Goodwill		—		7,000,779
Total assets held for sale	$	9,669,352	$	17,880,586

LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	$	877,304	$	992,746
Contract liabilities		134,507		296,964
Finance lease liability		—		10,388
Total current liabilities held for sale		1,011,811		1,300,098
Long-term liabilities
Finance lease liability, net of current portion		—		35,629
Total liabilities held for sale	$	1,011,811	$	1,335,727

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	For the three months ended						For the nine months ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Revenues, net
Energy hardware, software and services revenue	$	601,001		$	2,863,997		$	9,157,184		$	4,985,062
Total revenues, net		601,001			2,863,997			9,157,184			4,985,062

Costs and expenses
Cost of revenues (exclusive of depreciation and amortization shown below)		658,890			2,701,536			7,317,012			4,566,077
Professional fees		1,257			107,747			63,819			381,497
Payroll expenses		1,172,738			870,834			4,005,599			2,988,328
General and administrative expenses		520,574			235,999			996,595			685,089
Impairment expense - fixed assets		31,833			—			31,833			—
Impairment expense - intangibles		1,402,016			—			1,402,016			—
Impairment expense - other		2,144,284			—			2,144,284			—
Impairment expense - goodwill		7,000,779			—			7,000,779			—
Depreciation and amortization		771,695			1,549,308			2,282,440			3,329,075
Total costs and expenses		13,704,066			5,465,424			25,244,377			11,950,066

Loss from operations		(13,103,065	)		(2,601,427	)		(16,087,193	)		(6,965,004	)

Other income (expense)
Other income		—			27			—			782
Interest expense		(1,082	)		(732	)		(2,800	)		(3,039	)
Total other income (expense)		(1,082	)		(705	)		(2,800	)		(2,257	)

Loss before income tax (expense) or benefit		(13,104,147	)		(2,602,132	)		(16,089,993	)		(6,967,261	)
Income tax (expense) or benefit		—			—			—			—
Net loss	$	(13,104,147	)	$	(2,602,132	)	$	(16,089,993	)	$	(6,967,261	)


	Nine Months Ended
	June 30, 2022			June 30, 2021
Cash Flows from Operating Activities
Net loss	$	(16,089,993	)	$	(6,967,261	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of goodwill		7,000,779			—
Impairment of fixed assets		31,833			—
Impairment of intangibles		1,402,016			—
Impairment related to working capital		2,144,284			—
Non-cash lease expense		—			40,711
Depreciation and amortization		2,282,440			3,329,075
Changes in operating assets and liabilities
Decrease in operating lease right of use liabilities		—			513,375
Decrease (increase) in contract assets, net		(162,456	)		(5,500	)
Increase (decrease) in accounts payable and accrued liabilities		(115,442	)		3,845,536
(Increase) in prepaid expenses and other current assets		(1,848,801	)		(2,200,226	)
(Increase) in accounts receivables		(1,898,084	)		(937,789	)
Decrease (Increase) in Inventory		669,938			(3,636,107	)
Change in intercompany receivables and payables		6,583,486			6,018,186
Net cash used in operating activities	$	-		$	-

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15.

LOAN

On April 22, 2022, the Company entered into a Master Equipment Financing Agreement with Trinity Capital Inc., as the Lender (the “Financing Agreement”). The Financing Agreement provides for up to $35 million of borrowings to finance the Company’s acquisition of blockchain computing equipment. The Company received a loan of $20 million at closing, with the remaining $15 million fundable upon the Company's request, if requested no later than December 31, 2022, subject to certain customary conditions. The loan draws have a term of 36 months from issuance with a monthly rate factor of at least 0.032198 payable monthly on the total cost of the equipment purchased with such borrowing. The Financing Agreement contains standard financial reporting requirements and certain other affirmative obligations, failure of which to comply with could result in an event of default under the Financing Agreement. In such an event, the Lender could exercise certain remedies including, but not limited to, declaring that all amounts outstanding under the Financing Agreement, together with accrued interest, be declared immediately due and payable. The Company received funding of $20 million at close, which included closing costs of $701,624 and security deposit of $643,960. The loan is collateralized with 3,336 S19j Pro miners and carries and effective interest rate of 13.80%.

As of June 30, 2022, the Company had a gross balance outstanding of $18,703,448, netted against discount on the loans payable of $365,032.

The following is a schedule of the Company's future loan payments and loan balance, net of debt discount, as of June 30, 2022:


Fiscal Year	Cash Payments		Principal		Interest		Debt Discount			Loan Balance, net
2022 (three months remaining)	$	1,931,880	$	1,296,604	$	635,276	$	(31,298	)	$	1,265,306
2023		7,727,520		5,677,314		2,050,206		(124,664	)		5,552,650
2024		7,727,520		6,508,398		1,219,122		(125,799	)		6,382,599
2025		5,507,720		5,221,132		286,588		(83,271	)		5,137,861
2026		-		-				-			-
Thereafter		-		-				-			-
Total	$	22,894,640	$	18,703,448	$	4,191,192	$	(365,032	)	$	18,338,416

16.

SUBSEQUENT EVENTS

On July 12, 2022, the Company purchased 1,061 Whatsminer M30S machines that are already mining bitcoin at Coinmint's renewable-powered co-location facility.

On August 5, 2022, the Company entered into a definitive agreement (the "Transaction") to purchase certain assets for total consideration of $25,091,610, including cash, assumption of a real estate mortgage and a seller issued note payable. The assets acquired include 27 acres of real property and related electrical infrastructure currently providing 36 megawatts of power, with an additional 50 megawatts of capacity expected to be available in mid-2023, located in Washington, GA. The Transaction also included mining machines with computing power of approximately 342 petahash. The Transaction is currently expected to close on or before September 5, 2022.

From July 1, 2022, through the date of filing, the Company issued 5,809,774 shares under its At-the-Market Offering Agreement resulting in net proceeds of $24,780,718.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 ("Form 10-K"). This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part II, Item 1A “Risk Factors” or in other parts of this Quarterly Report on Form 10-Q, as well as those identified in the “Risk Factors” section of our Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. See “Forward-Looking Statements.”

Company Overview

CleanSpark, Inc. is a leading sustainable bitcoin mining company incorporated in Nevada, whose common stock is listed on the Nasdaq Capital Market. The Company, through itself and its wholly owned subsidiaries, has operated in the digital currency mining industry since December 2020.

We are currently working with various industry participants in developing a long-term sustainability and clean energy plan for our bitcoin mining operations. As part of this plan, we are using the available clean and renewable energy resources that we currently have reasonable access to at our bitcoin mining locations in order to further support our sustainability efforts.

Through our wholly owned subsidiaries, ATL Data Centers LLC (“ATL”) and CleanBlok, Inc. (“CleanBlok”), we mine bitcoin. We entered the bitcoin mining industry through our acquisition of ATL in December 2020. We acquired a second data center in August 2021 and have had a co-location agreement with New York-based Coinmint in place since July 2021. In March 2022, we entered into a colocation agreement with Lancium LLC pursuant to which we have access to up to 500 MWs of power. Bitcoin mining has now become our principal revenue generating business activity, and consistent with our current business strategy, we intend to explore and opportunistically continue to acquire additional facilities, equipment and infrastructure capacity as well as evaluate other colocation opportunities, with the intention of expanding our bitcoin mining operations. In line with our business strategy, on August 5, 2022, the Company entered into a definitive agreement (the "Transaction") to purchase certain assets for total consideration of $25,091,610, including cash, assumption of a real estate mortgage and a seller issued note payable. The assets acquired include 27 acres of real property and related electrical infrastructure currently providing 36 megawatts of power, with an additional 50 megawatts of capacity expected to be available in mid-2023, located in Washington, GA. The Transaction also included mining machines with computing power of approximately 341 petahash.

Bitcoin was introduced in 2008 with the goal of serving as a digital means of exchanging and storing value. Bitcoin is a form of digital currency that depends upon a consensus-based network and a public ledger called a “blockchain,” which contains a record of every bitcoin transaction ever processed. The bitcoin network is the first decentralized peer-to-peer payment network, powered by users participating in the consensus protocol, with no central authority or middlemen, that has wide network participation. The authenticity of each bitcoin transaction is protected through digital signatures that correspond with addresses of users that send and receive bitcoin. Users have full control over remitting bitcoin from their own sending addresses. All transactions on the bitcoin blockchain are transparent, allowing those running the appropriate software to confirm the validity of each transaction. To be recorded on the blockchain, each bitcoin transaction is validated through a proof-of-work consensus method, which entails solving complex mathematical problems to validate transactions and post them on the blockchain. This process is called mining. Miners are rewarded with bitcoins, both in the form of newly-created bitcoins and fees in bitcoin, for successfully solving the mathematical problems and providing computing power to the network.

Factors such as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity) and geographic location play important roles in mining. As of the date of this filing, our mining units are currently capable of producing over 2.8 exahash per second (“EH/s”). In cryptocurrency mining, “hash rate” is a measure of the processing capacity and speed by which a mining computer mines and processes transactions on the bitcoin network. Our activities in this area are complemented by our energy background and planning is underway

to deploy certain energy technologies from our portfolio to advance our bitcoin mining business, with the goal of maximizing energy savings, increasing total power capacity, providing resilient electricity, and reducing greenhouse gas emissions. We are expanding our bitcoin mining business with the goal of reaching 4.0 to 5.0 EH/s in hash rate capacity by December 31, 2022. We expect to exceed 3 EH/s in capacity by September 30, 2022. Hash rate capacity is one of the most important metrics for evaluating bitcoin mining companies.

We obtain bitcoin as a result of our mining operations; while we retain a portion of the bitcoin we mine, we have sold, and intend to sell bitcoin from time to time, to support our operations and strategic growth. We do not currently plan to engage in regular trading of bitcoin (other than as necessary to convert our bitcoin to U.S. dollars). We do expect in the near future to engage in hedging and yield generating activities related to our holding of bitcoin; however, our decisions to hold or sell bitcoin at any given time may be impacted by the bitcoin market, which has been historically characterized by significant volatility. Currently, we do not use a formula or specific methodology to determine whether or when we will sell bitcoin that we hold, or the number of bitcoins we will sell. Rather, decisions to hold or sell bitcoins are currently determined by analyzing forecasts, our operating needs and monitoring the market in real time.

Through our wholly-owned subsidiaries, CSRE Properties, LLC, CSRE Property Management Company LLC, and CSRE Properties Norcross, LLC, we maintain real property holdings for ATL and CleanBlok.

The Company provides energy solutions through our wholly owned subsidiaries CleanSpark, LLC, CleanSpark Critical Power Systems, Inc., GridFabric, LLC, and Solar Watt Solutions, Inc. These solutions consist of engineering, design and software solutions, custom hardware solutions, Open Automated Demand response (“OpenADR”), solar, energy storage for microgrid and distributed energy systems to military, commercial and residential customers in Southern California and throughout the world. The Company’s solutions are supported by a proprietary suite of software solutions that include microgrid energy modeling, energy market communications and energy management solutions. As of June 30, 2022, the Company deemed its energy operations to be discontinued operations due to its strategic shift to strictly focus on its bitcoin mining operations and divest of its energy assets.

Results of continuing operations for the three months ended June 30, 2022 and 2021

Revenues

Revenues increased to $31,027,781 during the three months ended June 30, 2022, as compared with $9,052,068 in revenues for the same period ended 2021 primarily due to increase in revenues from our digital currency mining operations.

Costs and Expenses

We had costs and expenses of $45,969,250 for the three months ended June 30, 2022, as compared with $21,032,382 for the three months ended June 30, 2021.

Our cost of revenues was $10,341,026 for the three months ended June 30, 2022, as compared with cost of revenues of $1,147,281 for the three months ended June 30, 2021. Our cost of revenues during the three months ended June 30, 2022 was primarily the result of mining energy costs at owned facilities of $3,462,742 and mining hosting and associated energy fees of $1,147,281. Our cost of revenues during the three months ended June 30, 2021 was primarily the result of mining energy costs at owned facilities of $912,036. The increase in cost of revenues between the comparative periods was mainly the result of revenue growth over the same period.

Professional fees decreased to $1,432,747 for the three months ended June 30, 2022 from $1,939,907 for the three months ended June 30, 2021. Our professional fees expenses for the three months ended June 30, 2022 consisted primarily of legal expenses of $1,153,594. Our professional fees expenses for the three months ended June 30, 2021 consisted mainly of legal fees of $1,317,261.

Payroll expenses decreased to $7,617,576 for the three months ended June 30, 2022 from $10,959,362 for the three months ended June 30, 2021. Our payroll expenses for the three months ended June 30, 2022 consisted primarily of employee and officer stock-based compensation of $5,182,763, with primarily salary and wages expense constituting remaining amounts. Our payroll expenses for the three months ended June 30, 2021 consisted primarily of employee and officer stock-based compensation of $3,189,389, with primarily salary and wages expense constituting remaining amounts including non-recurring executive compensation of $4,700,000.

General and administrative expenses increased to $2,113,414 for the three months ended June 30, 2022 from $1,194,340 for the three months ended June 30, 2021. Our general and administrative expenses for the three months ended June 30, 2022 consisted primarily of insurance expenses of $866,994, marketing expenses of $518,985, travel expenses of $273,891 and dues and subscriptions of $265,777. Our general and administrative expenses for the three months ended June 30, 2021 consisted primarily of marketing expenses of $791,708, dues and subscription expenses of $235,256, and insurance expenses of $212,630.

Impairment expenses recorded for the three months ended June 30, 2022 were $4,418,714, and $3,720,481 impairment expenses were recorded for the three months ended June 30, 2021. Impairment expense for both periods consisted of bitcoin impairment expenses.

Realized loss on sale of digital currency increased to $5,234,482 for the three months ended June 30, 2022 from a realized gain of $36,438 for the three months ended June 30, 2021 due to the decrease in bitcoin prices during the period.

Depreciation and amortization expense increased to $14,811,291 for the three months ended June 30, 2022, from $2,107,449 for the three months ended June 30, 2021 due to increase in mining related equipment being placed in service during the comparative period.

Other income (expenses)

Other expense decreased to $1,294,607 for the three months ended June 30, 2022 compared to other expenses of $2,094,681 for the three months ended June 30, 2021. Our other expenses for the three months ended June 30, 2022 consisted primarily of an unrealized loss on derivative security of $1,032,579. Our other income for the three months ended June 30, 2021 consisted primarily of an unrealized loss on derivative loss of $2,060,774.

Net Income

We recorded a net loss of $16,236,076 for the three months ended June 30, 2022, as compared with a net loss of $14,074,995 for the three months ended June 30, 2021. The increase was due primarily to the increased losses from sale of digital currency and increased depreciation expense when compared to gain on the sale of digital currency and significantly lesser depreciation during the prior period.

Results of discontinued operations for the three months ended June 30, 2022 and 2021

The revenues from discontinued operations for the three months ended June 30, 2022 decreased to $601,001 from $2,863,997 for the three months ended June 30, 2021 primarily due to the Company's strategic shift to strictly focus on its bitcoin mining operations. The total costs and expenses for the three months ended June 30, 2022 increased to $13,704,066 from $5,465,424 for the three months ended June 30, 2021 primarily due to impairment expenses related to the energy business and severance related payroll expenses. As a result, the net loss for the three months ended June 30, 2022 increased to $13,104,147 from $2,602,132 for the three months ended June 30, 2021.

Results of continuing operations for the nine months ended June 30, 2022 and 2021

Revenues

Revenues increased to $105,351,561 during the nine months ended June 30, 2022, as compared with $17,308,259 in revenues for the same period ended 2021 primarily due to increase in revenues from our digital currency mining operations.

Costs and Expenses

We had costs and expenses of $102,558,191 for the nine months ended June 30, 2022, as compared with $32,956,441 for the nine months ended June 30, 2021.

Our cost of revenues was $24,607,950 for the nine months ended June 30, 2022, as compared with cost of revenues of $2,161,937 for the nine months ended June 30, 2021. Our cost of revenues during the nine months ended June 30, 2022 was primarily the result of mining energy costs at owned facilities of $7,375,070, and mining hosting and associated energy fees of $16,626,999. Our cost of revenues during the nine months ended June 30, 2021 was primarily the result of mining energy costs at owned facilities of $1,802,556. The increase in cost of revenues between the comparative periods was mainly the result of revenue growth over the same period.

Professional fees increased to $5,588,980 for the nine months ended June 30, 2022 from $5,835,434 for the nine months ended June 30, 2021. Our professional fees expenses for the nine months ended June 30, 2022 consisted primarily of legal expenses of $2,013,440, accounting and tax expenses of $1,778,227, and subcontractor expenses of $736,653. Our professional fees expenses for the nine months ended June 30, 2021 consisted mainly of legal expenses of $4,143,460 largely related with litigation expenses and consulting fees of $988,393.

Payroll expenses increased to $24,209,787 for the nine months ended June 30, 2022 from 15,418,166 for the nine months ended June 30, 2021. Our payroll expenses for the nine months ended June 30, 2022 consisted primarily of employee and officer stock-based compensation of $17,441,828, with primarily salary and wages expense constituting remaining amounts. Our payroll expenses for the nine months ended June 30, 2021 consisted primarily of employee and officer stock-based compensation of $4,751,747, with primarily salary and wages expense constituting remaining amounts including non-recurring executive compensation of $4,700,000.

General and administrative expenses increased to $6,708,440 for the nine months ended June 30, 2022 from $2,938,543 for the nine months ended June 30, 2021. Our general and administrative expenses for the nine months ended June 30, 2022 consisted primarily of insurance expenses of $2,319,797, marketing expenses of $1,510,671, dues and subscriptions expenses of $696,278, travel expenses of $555,277, and utilities expenses of $352,949. Our general and administrative expenses for the nine months ended June 30, 2021 consisted primarily of marketing expenses of $1,730,489, dues and subscriptions of $569,187, and insurance expenses of $450,458.

Impairment expenses recorded for the nine months ended June 30, 2022 were $11,452,405 and $3,720,481 impairment expenses were recorded for the nine months ended June 30, 2021. Impairment expense for both periods consisted of bitcoin impairment expenses.

Realized gain on sale of digital currency increased to $2,026,427 for the nine months ended June 30, 2022 from a realized gain of $672,065 for the nine months ended June 30, 2021 due to the decrease in bitcoin prices during the period.

Depreciation and amortization expense increased to $32,659,747 for the nine months ended June 30, 2022, from $3,553,945 for the nine months ended June 30, 2021 due to increase in mining related equipment being placed in service during the comparative period.

Other income (expenses)

Other expense increased to $1,728,580 for the nine months ended June 30, 2022 compared to other income of $6,170,824 for the nine months ended June 30, 2021. Our other expense for the nine months ended June 30, 2022 consisted primarily of an unrealized loss on derivative security of $2,143,876. Our other income for the nine months ended June 30, 2021 consisted primarily of unrealized gain on derivative security of $5,319,361.

Net Income

We recorded a net income of $1,064,790 for the nine months ended June 30, 2022, as compared with a net loss of $9,477,358 for the nine months ended June 30, 2021. The increase was primarily due to increase in revenues from our digital mining operations.

Results of discontinued operations for the nine months ended June 30, 2022 and 2021

The revenues from discontinued operations for the nine months ended June 30, 2022 increased to $9,157,184 from $4,985,062 for the nine months ended June 30, 2021. The total costs and expenses for the nine months ended June 30, 2022 increased to $25,244,377 from $11,950,066 for the nine months ended June 30, 2021 primarily due to impairment expenses related to the energy business and severance related payroll expenses. As a result, the net loss for the nine months ended June 30, 2022 increased to $16,089,993 from $6,967,261 for the nine months ended June 30, 2021.

Liquidity and Capital Resources

Our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, public company costs and general corporate needs. We expect these needs to continue as we further develop and grow our business. Our principal sources of liquidity have been and are expected to be our cash and cash equivalents and digital currency inventory.

As of June 30, 2022, we had total current assets of $29,448,673, consisting of cash and cash equivalents, accounts receivable, inventory, prepaid expenses and other current assets, digital currency, investment in equity security, investment in debt security and related derivative asset, and current assets held for sale, and total assets in the amount of $411,058,824. Our total current liabilities and total liabilities as of June 30, 2022 were $19,986,294 and $34,192,029 respectively. We had working capital of $9,462,379 as of June 30, 2022. In addition, we have access to equity financing through our At-the-Market offering facility and debt financing through the lending arrangement we entered into in April 2022 (see Note 15 - Loan and Note 16 - Subsequent Events to our consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

We believe our cash and cash equivalents on hand, together with cash we expect to generate from future operations, will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of this Quarterly Report on Form 10-Q. We are likely to require additional capital to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances and in either the short-term or long-term may determine to engage in equity or debt financings or enter into credit facilities for other reasons. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. In particular, the widespread COVID-19 pandemic, including variants, rising inflation and interest rates, and the conflict between Russia and Ukraine have resulted in, and may continue to result in, significant disruption and volatility in the global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.

Material Cash Requirements

We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the consolidated balance sheet as of June 30, 2022, while others are considered future commitments. Our contractual obligations primarily consist of cancelable purchase commitments with various parties to purchase goods or services, primarily miners and equipment, entered into in the normal course of business and operating leases.

For information regarding our other contractual obligations, refer to Note 12, Commitments and Contingencies on the Form 10-Q for the quarterly period ended June 30, 2022, and Note 15, Commitments and Contingencies included in our Annual Report on Form 10-K as filed with the SEC on December 14, 2021.

Operating Activities

Operating activities provided $52,479,289 in cash for the nine months ended June 30, 2022, as compared with using $21,128,132 in cash for the nine months ended June 30, 2021. Our sale of digital currencies of $108,070,207, depreciation and amortization of $34,805,307, stock based compensation of $17,515,870, and impairment of digital currency of $11,452,405 were the main components of our operating cash flow for the nine months ended June 30, 2022, offset primarily by the increase in digital currency mining of $104,882,043, net loss of $15,025,203, and increase in prepaid and other current assets of $11,545,789. Our use of net cash in operating activities during the nine months ended June 30, 2021 were primarily driven by net loss for the period of $16,444,619, digital currency mining of $16,098,643, and unrealized gain on derivative asset of $5,319,361, offset by stock based compensation of $8,599,029, depreciation and amortization of $6,883,020, impairment of digital currency of $3,720,481, and increase in accounts payable and accrued liabilities of $3,699,298.

Investing Activities

Investing activities used $153,495,072 during the nine months ended June 30, 2022, as compared with using $193,596,196 for the nine month period ended June 30, 2021. Our payments on miner deposits of $124,272,481, purchase of fixed assets of $32,104,835, and sale of miners of $3,497,654 were the main components of our investing cash flow for the nine months ended June 30, 2022. Our payments on miner deposits of 125,855,501, purchase of fixed assets of $60,536,521, and our investment in infrastructure development of $6,431,664 were the main components of our investing cash flow for the nine months ended June 30, 2021.

Financing Activities

Cash flows generated from financing activities during the nine months ended June 30, 2022 amounted to $85,637,138, when compared to $233,807,996 for the nine months ended June 30, 2021. Our cash flows from financing activities for the nine months ended June 30, 2022 consisted primarily of proceeds from underwritten offering of $67,988,993 and equipment backed loan of $18,704,416. Our cash flows from financing activities for the nine months ended June 30, 2021 consisted of repayments of $5,865,476 on promissory notes, proceeds from exercise of options and warrants of $3,731,563 and proceeds from underwritten offerings of $236,123,384.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We evaluate our estimates and assumptions on an ongoing basis, and base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for the judgments we make about the carrying value of assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and statement of cash flows.

There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our Form 10-K. For a description of our critical accounting policies and estimates, see Part I, Item 1, Note 2, "Summary of Significant Accounting Policies" in our notes to the consolidated financial statements in this Quarterly Report.

Recent Accounting Pronouncements

Please refer to Note 2 in our unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to several market risks in its normal business activities. The types of market risks the Company is exposed to are the market price of bitcoin, banking, costs of mining, and liquidity risk. We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Because our assets are primarily short-term and liquid in nature, they are generally not significantly impacted by inflation. The rate of inflation does, however, affect our expenses, including employee compensation, communications and information processing and office leasing costs, which may not be readily recoverable. To the extent inflation results in rising interest rates and has adverse impacts upon securities markets, it may adversely affect our results of operations and financial condition.

We continue to monitor rising inflationary pressures, including rising freight and import costs, in an attempt to minimize its effect through pricing strategies and cost reductions. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and operating results.

Market Price Risk of Bitcoin. We acquire bitcoin from our daily operations of mining and, as of June 30, 2022, we held approximately 562.87 bitcoins. The carrying value of our bitcoins as of June 30, 2022 was $10,538,120 on our Consolidated Balance Sheet. We account for our bitcoin as indefinite-lived intangible assets, which are subject to impairment losses if the fair value of our bitcoin decreases below their carrying value at any time since their acquisition. Impairment losses cannot be recovered for any subsequent increase in fair value. For example, the market price of one bitcoin in our principal market ranged from $17,733 - $68,205 during the nine months ended June 30, 2022, but the carrying value of each bitcoin we held at the end of the reporting period reflects the lowest price of one bitcoin quoted on the active exchange at any time since its acquisition. Therefore, negative swings in the market price of bitcoin could have a material impact on our earnings and on the carrying value of our digital assets.

Banking Risk. A number of companies that engage in bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services. Similarly, a number of companies and individuals or businesses associated with cryptocurrencies may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions. To the extent that such events may happen to us, they could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.

Costs of Mining Risk. Mining operations are costly and our expenses may increase in the future. Increases in mining expenses may not be offset by corresponding increases in revenue. Our expenses may become greater than we anticipate, and our investments to make our business more cost-efficient may not succeed. Bitcoin mining operations are also subject to increased costs as a result of the periodically increasing mining difficulty rates. Increases in our costs without corresponding increases in our revenue would adversely affect our profitability and could seriously harm our business and an investment in us.

We do not believe that inflation has had a material adverse effect on our business, financial condition or results of operations. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

Liquidity Risk. Liquidity risk arises from the general funding needs of the Company's activities and in the management of the Company's assets and liabilities.

Item 4. Controls and Procedures

Limitation on Effectiveness of Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting described below.

Material Weaknesses and Remediation Plan

We identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management assessment: (1) The Company did not adequately implement or properly maintain controls over its financial close and reporting process and its process over the recording of energy and other services revenue and (2) the Company did not adequately design and maintain effective general information technology controls over third-party information systems and applications that are relevant to the preparation of the Company’s financial statements. Specifically:

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Financial Close and Reporting: Controls over financial statement reviews, specific to the appropriate reconciliation of certain balance sheet accounts, were not operating effectively.

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Recording of Revenues for certain non-principal revenue generating subsidiaries: Controls over the recording and processing of revenue for certain non-principal revenue generating entities, specifically, p2kLabs, Inc, GridFabric, LLC and CleanSpark, LLC, lack the level of precision necessary to ensure the completeness and accuracy of revenue recorded.

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Information and Technology Controls: Certain individual control deficiencies related to information technology (“IT”) general controls and report reviews aggregate into a material weakness, as follows:

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Certain process-level and IT-dependent controls over user access to IT programs and applications, specifically utilized for hosting services and file storage, were not effective.

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Controls relating to the evaluation of service organization controls reports were not performed over certain third-party service providers to cover the entire fiscal year.

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. To date, the remediation actions include the following:

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appointment of additional qualified staff;

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implementation of additional monitoring of controls to improve documentation of internal control procedures;

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expanding the management and governance over IT system controls; and

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implementation of enhanced process controls around internal user access management including provisioning, removal, and periodic review.

While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period, we are committed to continuous improvement and will continue to diligently review our internal control over financial reporting.

Changes in Internal Control over Financial Reporting

Other than remediation actions related to the material weaknesses in our internal controls described above, there has been no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to various claims, lawsuits, and other legal and administrative proceedings arising in the ordinary course of business. See Note 12 - Commitments and Contingencies to our consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Please carefully consider the information set forth in this Quarterly Report on Form 10-Q and the risk factors discussed in Part I, Item I A. of our Annual Report on Form 10-K for the year ended September 30, 2021, which could materially affect our business, financial condition or future results. In evaluating our business, you should carefully consider the risk factors discussed in our Annual Report on Form 10-K, as updated below and by our other filings under the Exchange Act. Except as disclosed below, there have been no material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended September 30, 2021. The occurrence of any of the risks discussed in such filings, or other events that we do not currently anticipate or that we currently deem immaterial, could harm our business, prospects, financial condition and results of operations. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Bitcoins and other digital assets we mine or hold for our own account may be subject to loss, theft or restriction on access.

There is a risk that some or all of our bitcoins could be lost or stolen. Bitcoins are stored in and accessed by cryptocurrency sites commonly referred to as “wallets.” A hot wallet refers to any cryptocurrency wallet that is connected to the Internet. Generally, hot wallets are easier to set up and access than wallets in cold storage, but they are also more susceptible to hackers and other technical vulnerabilities. Cold storage refers to any cryptocurrency wallet that is not connected to the Internet. Cold storage is generally more secure than hot storage, but is not ideal for quick or regular transactions. When we keep our bitcoin in cold storage, we may experience lag time in our ability to respond to market fluctuations in the price of our cryptocurrency assets.

We currently mine bitcoin by contributing to and benefiting from our pools’ processing power. Our share of bitcoins mined from our pools are initially received by us in wallets we control, which are maintained by Coinbase Custody Trust Company, LLC, a New York State limited purpose trust company and an affiliate of Coinbase Inc., a U.S. based digital assets exchange. We maintain the majority of our bitcoin in cold storage with a minority allocation kept in hot wallets for working capital purposes. Bitcoins we mine or hold for our own account may be subject to loss, theft or restriction on access. Hackers or malicious actors may launch attacks to steal, compromise or secure bitcoins, such as by attacking the bitcoin network source code, exchange miners, third-party platforms (including Coinbase), cold and hot storage locations or software, or by other means. We may be in control and possession of substantial holdings of bitcoin, and as we increase in size, we may become a more appealing target of hackers, malware, cyber-attacks or other security threats. Any of these events may adversely affect our operations and, consequently, our investments and profitability.

Furthermore, if Coinbase or another bitcoin custodian where we deposit our bitcoins experiences financial difficulties, there is a risk that creditors of such custodian will be able to treat its bitcoin as an asset of the custodian which may result in a loss of some or all of our bitcoin. For example, as disclosed in Coinbase’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 10, 2022, in the event of Coinbase’s bankruptcy, the crypto assets Coinbase holds in custody on behalf of its customers could be considered to be a part of the bankruptcy estate and subject to bankruptcy proceedings, and such customers could be treated as Coinbase’s general unsecured creditors. If our bitcoin held in custody by Coinbase is subject to bankruptcy proceedings, we may be treated as a general unsecured creditor of Coinbase or another crypto custodian, and we may lose some or all of our bitcoin held at Coinbase.

Inflation in the global economy could negatively impact our business and results of operations.

General inflation in the United States, Europe and other geographies has risen to levels not experienced in recent decades. General inflation, including rising prices for energy, metals, components, and other inputs as well as rising wages negatively impact our business by increasing our operating costs.

As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations, and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and share price.

The global economy, including credit and financial markets, has recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, rising interest and inflation rates, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If the equity and credit markets continue to deteriorate, or the United States enters a recession, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. As a result, our business, results of operations and price of our common stock may be adversely affected.

If we engage in acquisitions to grow our business, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations and cause our stock price to decline.

If appropriate opportunities become available, we may seek to acquire businesses, assets, technologies or products to enhance our business. In connection with any acquisitions, we could issue additional equity securities, which would dilute our stockholders, incur substantial debt to fund the acquisitions or assume significant liabilities.

Acquisitions involve many and diverse risks and uncertainties, including problems integrating the purchased operations, assets, technologies or products as well as unanticipated costs, liabilities, and economic, legal and regulatory challenges and we may fail to successfully integrate acquired companies, or retain key personnel from the acquired company. Acquisitions may require us to record goodwill and non-amortizable intangible assets that will be subject to testing on a regular basis and potential period impairment charges, incur amortization expenses related to certain intangible assets, and incur write offs and restructuring and other related expenses, any of which could harm our operating results and financial condition.

New business strategies, especially those involving acquisitions, are inherently risky and may not be successful. Failure to successfully identify, complete, manage and integrate acquisitions could materially and adversely affect our business, financial condition and results of operations and could cause our stock price to decline.

The definitive agreement with Waha, Inc. and Waha Technologies, Inc. may not be consummated, and even if consummated, may not be successful.

There can be no assurance that the proposed transaction with Waha, Inc. and Waha Technologies, Inc. will be consummated. The transaction is subject to the satisfaction or waiver of specific and other customary closing conditions. The failure to satisfy all of the required conditions could delay the completion of the transaction for a significant period of time or prevent them from occurring at all. There can be no assurance that these and other conditions to closing will be satisfied in a timely manner or at all. We are also subject to restrictions on our business while the transaction is pending, including by conducting the business only in the ordinary course and conferring with Waha, Inc. and Waha Technologies, Inc. regarding any material matters relating to the business. These restrictions may prevent us from pursuing attractive business opportunities or responding effectively to competitive pressures and industry developments that may arise prior to the completion of the pending transaction or otherwise adversely affect our ability to execute on our business strategy, which could adversely affect our business or financial condition. Our failure to consummate the transaction could result in negative publicity and a negative impression of our company. Further, any disruptions to our business resulting from the proposed transaction, including any adverse changes in our relationships with our employees and customers, could continue or accelerate in the event that the transaction is not

completed. Also, we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed transaction. Many of these fees and costs will be payable by us even if the proposed transaction is not completed and may relate to activities that we would not have undertaken in the absence of the transactions contemplated by the agreement with Waha, Inc. and Waha Technologies, Inc. Even if we complete the transaction with Waha, Inc. and Waha Technologies, Inc., we may not realize the expected benefits of the transaction. In changing the distribution system we have relied on in the past, we may disrupt our operations and cause delays in sourcing products for our customer or in completing services for them. While we believe we will experience cost savings because of this transaction, we may never realize those savings. Any of these risks could materially and adversely impact our ongoing business, financial condition, financial results, and stock price.

The optimization of our company’s future profitability depends, in part, upon the success of our evaluation of strategic alternatives for our energy business operations.

We have been evaluating strategic alternatives for the energy business operations, as we made a strategic decision to streamline our business and focus on our bitcoin mining operations. As of June 30, 2022 and September 30, 2021, we classified the assets within the energy business as held for sale on our consolidated balance sheets. We are evaluating strategic exit opportunities for the energy business operations and are committed to exiting this business in a manner that is in the best interest of our shareholders. It is possible that our exit strategy may ultimately include winding-down or closing the remaining energy business operations.

If our evaluation process does not result in the successful consummation of strategic alternatives, or if we are otherwise unable through such consummation to realize our goals for the energy business operations, we may not be able to optimize our future profitability, which could adversely affect our results of operations and financial condition.

We may not be able to recover a significant portion of our carrying value of our assets held for sale associated with our energy business operations.

We have been evaluating strategic alternatives for the energy business operations, as we made a strategic decision to streamline our business and focus on our bitcoin mining operations. As of June 30, 2022 and September 30, 2021, we classified the assets within the energy business as held for sale on our consolidated balance sheets. We may not be able to realize as much value from the sale of the assets as we expect and we may incur higher than expected, or unforeseen, costs associated with the disposal related activities. Any of the foregoing could have a material adverse effect on our business, financial position and results of operations.

We may be unable to effectuate a sale of energy assets in a timely manner or receive consideration that exceeds the carrying value of the assets that are currently held for sale.

We have been evaluating strategic alternatives for the energy business operations, as we made a strategic decision to streamline our business and focus on our bitcoin mining operations. As of June 30, 2022 and September 30, 2021, we classified the assets within the energy business as held for sale on our consolidated balance sheets. We cannot provide any assurance that we will be successful in selling our energy business operations for a price in excess of the carrying value of the assets that are currently classified as “held for sale,” if at all. In the event we are unable to sell our energy assets for a price at least equal to the carrying value of the assets, then we will have to record a charge and the amount of the charge could be material.

We are subject to various risks associated with our decision to streamline our business and dispose of operations classified as discontinued operations.

We have been evaluating strategic alternatives for the energy business operations, as we made a strategic decision to streamline our business and focus on our bitcoin mining operations. Accordingly, our discontinued operations, consisting of energy assets are classified as assets and liabilities held for sale. We now have one segment which is focused on the bitcoin mining operations. As a result of this decision, our revenue and profitability are concentrated in one industry. Downturns, adverse events and other circumstances that may affect this industry and which are largely beyond our control will now uniquely and materially affect us. For instance, if the prices of bitcoins decrease or the

power prices increase significantly, this would have a more material adverse effect on our results of operations, liquidity and our potential growth than in prior years.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

The Company is reporting the following information in lieu of reporting on a Current Report on Form 8-K under Item 1.01 – Entry into a Material Definitive Agreement.

On August 5, 2022 (the “Agreement Date”), the Company, through its wholly owned subsidiary, CSRE Properties Washington, LLC, a Georgia limited liability company, agreed to purchase certain real property, together with all improvements situated thereon and all rights, easements and appurtenances belonging thereto (collectively, the “Property”), as further described below, pursuant to a purchase and sale agreement (the “Land Purchase Agreement”), from SPRE Commercial Group, Inc. f/k/a Waha, Inc., a Georgia corporation (the “Seller”), for a purchase price of $16,200,000 (the “Land Purchase”). Under the terms of the Land Purchase Agreement, at closing, the Company will pay the Seller the purchase price as follows: (i) $3,161,747 in financing provided by the Seller at an interest rate of 12%, to be repaid in 12 monthly installments of $280,917, (ii) the Company’s assumption of a mortgage with a maximum principal amount of $2,158,253 and an interest rate of 13% and (iii) $10,880,000 of cash consideration. Purchaser delivered an earnest money deposit of $500,000 to Seller on July 25, which is refundable in certain circumstances and will reduce the amount of the cash consideration due at closing. At closing, the Seller will convey fee simple title to the Property to the Company by limited warranty deed.

The Property is located in Wilkes County, Georgia and contains approximately 27 acres. The Company intends to utilize the Property to conduct certain of its cryptocurrency mining activities.

The Land Purchase is expected to close on or before September 5, 2022, subject to customary inspection and closing conditions, including the closing of the Equipment Purchase described below. The Company has the right to terminate the Land Purchase Agreement for any reason or no reason by delivering written notice to the Seller on or before the date that is 30 days after the Agreement Date.

In connection with the Company’s entry into the Land Purchase Agreement, on August [5], 2022, the Company, through its wholly owned subsidiary, CleanSpark DW, LLC, a Georgia limited liability company, agreed to purchase a mix of S19 and S19 J Pro bitcoin miners equal to approximately 341,985 terahashes, pursuant to an equipment purchase and sale agreement (the “Equipment Purchase Agreement”), from Waha Technologies, Inc., a Georgia corporation (“Equipment Seller”), an affiliate of the Seller, for a purchase price of $8,891,610 (the “Equipment Purchase”), which will be payable in full in cash to the Equipment Seller upon closing.

The closing of the Equipment Purchase shall occur contemporaneously with the closing of the Land Purchase and is subject to the closing of the Land Purchase. If the Land Purchase is not consummated for any reason, either the Company or the Equipment Seller, in its sole discretion, may terminate the Equipment Purchase Agreement without further liability to the other party.

The foregoing descriptions of the Land Purchase Agreement and Equipment Purchase Agreement do not purport to be complete, and are qualified in their entirety by reference to the complete text of such Land Purchase Agreement and Equipment Purchase Agreement, respectively, copies of which are filed as Exhibit 10.3 and Exhibit 10.4, respectively, to this Quarterly Report on Form 10-Q.

Item 6. Exhibits


		Incorporated by Reference				Filed/
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Furnished Herewith

3.1	First Amended and Restated Articles of Incorporation of CleanSpark, Inc., dated September 17, 2021	8-K	001-39187	3.1	9/17/2021
3.2	First Amended and Restated Bylaws of CleanSpark, Inc., dated September 17, 2021	8-K	001-39187	3.2	9/17/2021
4.1	Form of Senior Secured Redeemable Convertible Debenture, dated December 31, 2018 issued to the Investor	8-K	000-53498	4.1	12/31/2018
4.2	Form of Common Stock Purchase Warrant, dated December 31, 2018, issued to the Investor	8-K	000-53498	4.2	12/31/2018
4.3	Form of Senior Secured Redeemable Convertible Promissory Note, dated April 17, 2019, issued to the Investor	8-K	000-53498	4.1	4/18/2019
4.4	Form of Common Stock Purchase Warrant, dated December 31, 2018, issued to the Investor	8-K	000-53498	4,2	4/18/2019
10.1	Master Equipment Financing Agreement by and between CleanSpark, Inc. and Trinity Capital Inc. dated as of April 22, 2022	8-K	001-39187	10.1	4/26/2022
10.2	Form of Equipment Financing Schedule by and between CleanSpark, Inc. and Trinity Capital Inc.	8-K	001-39187	10.2	4/26/2022
10.3	Purchase and Sale Agreement by and between CSRE Properties Washington, LLC, SPRE Commercial Group, Inc. F/K/A, WAHA, Inc. and WAHA Technologies, Inc., dated as of August 5, 2022					*
10.4	Equipment Purchase and Sale Agreement by and between CleanSpark DW, LLC and WAHA Technologies, Inc., dated as of August 5, 2022					*
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)					*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)					*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350					**
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350					**


101 INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101 SCH	Inline XBRL Taxonomy Extension Schema Document
101 CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101 DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101 LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101 PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*	Filed herewith.
**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date: August 9, 2022	By: /s/ Zachary K. Bradford Zachary K. Bradford Title: Chief Executive Officer (Principal Executive Officer)



Date: August 9, 2022	By: /s/ Gary A. Vecchiarelli Gary A. Vecchiarelli Title: Chief Financial Officer (Principal Financial and Accounting Officer)

EX-10.3

Exhibit 10.3

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into by and among CSRE PROPERTIES WASHINGTON, LLC, a Georgia limited liability company, having a mailing address at 2380 Godby Road, College Park, Georgia 30349 (“Purchaser”), and SPRE COMMERCIAL GROUP, INC. F/K/A WAHA, INC., a Georgia corporation, having a mailing address of 2146 Roswell Road #108-851, Marietta, Georgia 30062 (“Seller”). The effective date of this Agreement (the “Effective Date”) shall be the day on which this Agreement is fully executed by Purchaser and Seller.

WITNESSETH:

WHEREAS, Seller is the owner of approximately 27.37 acres of land located at 197 Dixie Wood Road, Wilkes County, Georgia 30673, as described on Exhibit A attached hereto and incorporated herein by these references (the “Land”); and

WHEREAS, Seller has agreed to sell to Purchaser the Land and all improvements situated thereon, and all rights, easements and appurtenances now or hereafter belonging thereto (collectively, the “Property”), in accordance with the terms and conditions described herein;

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

PURCHASE AND SALE. Seller agrees to sell and convey the Property to Purchaser, and Purchaser agrees to purchase the Property from Seller, on the terms and conditions provided in this Agreement.

PURCHASE PRICE. The purchase price of the Property shall be Sixteen Million Two Hundred Thousand and No/100’s Dollars ($16,200,000.00).

PAYMENT OF PURCHASE PRICE. At the Closing (as defined in Section 10.1 below), Purchaser shall pay Seller the Purchase Price, less a credit against the Cash Consideration, defined below, in the amount of the Earnest Money, defined in Section 4 below, and as adjusted to reflect the prorations provided for herein. Payment shall be made as follows: (i) $3,161,747.05 in Seller Financing, defined and described in Section 17 below, (ii) assumption of the MFP Loan, as defined and described in Section 16 below, with assumed principal to be no greater than $2,158,252.95, and (iii) $10,880,000.00 in cash or by wire transfer of immediately available funds (the “Cash Consideration”). The Purchaser and Seller acknowledge that the Seller has reached a settlement agreement with the City of Washington, Georgia relating to that certain Contract for Electric Power Services, dated April 11th, 2022, between the City of Washington, Georgia and Seller for an amount of $2,000,000 to be paid by Seller to the City of Washington, Georgia. At Closing, Purchaser and Seller agree that

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Purchaser shall cause to be wired $2,000,000 from the Cash Consideration to an account designated in writing by the City of Washington, Georgia to pay in full the amounts due the City of Washington, Georgia pursuant to said settlement.

EARNEST MONEY.

4.1

Purchaser and Seller acknowledge and agree that Purchaser has delivered to Seller and Seller has received an earnest money deposit in the sum of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) (the “Earnest Money”).

4.2

The Earnest Money will be applied in partial payment of the Cash Consideration portion of the Purchase Price at Closing. If this Agreement is terminated, canceled or rescinded, the Earnest Money shall be refunded to Purchaser by Seller or held by Seller as liquidated damages as provided herein. Additionally, as contemplated in Section 7.2 hereof, additional earnest money may be deposited by Purchaser with Seller and such funds shall be considered Earnest Money hereunder. The Earnest Money shall only become non-refundable to Purchaser upon consummation of the Closing.

SURVEY AND LEGAL DESCRIPTION.

5.1

Prior to the Inspection Date (as herein defined), Purchaser, in its sole discretion and at its sole cost and expense, may obtain a current ALTA/NSPS survey of the Property by a surveyor licensed in the State of Georgia (the “Survey”). If the legal description of the Land prepared on the basis of the Survey differs from the legal description attached hereto as Exhibit A, Seller shall, at the Purchaser’s request, execute and deliver to Purchaser at Closing a quitclaim deed, in recordable form, containing a legal description of the Land based upon the Survey.

TITLE TO THE PROPERTY

6.1

Seller’s Title. At the Closing, Seller shall convey to Purchaser fee simple title to the Property subject only to the following exceptions (the “Permitted Exceptions”): (i) the lien of ad valorem taxes for the calendar year of the Closing which are not due and payable as of the date of the Closing, and (ii) those title matters approved by Purchaser as provided herein.

6.2

Title Examination. Purchaser shall have Seller’s title to the Property examined and give written notice to Seller of any objections to title, including any objections based on the Survey, on or before the Inspection Date, as defined in Section 7.1 below. In addition, Purchaser may reexamine Seller’s title to the Property from time to time and give Seller written notice of any additional objections to matters placed of record after the effective date of such initial title examination. Purchaser may object to any deed to secure debt, mortgage, lien, financing statement, security interest, easement, lease, restrictive covenant, agreement, option, or other instrument or matter which impairs the marketability or development of or encumbers title to the Property. Upon receipt of any written notice of title objections from Purchaser, Seller shall within five (5) business days after receipt of such objections, deliver notice to Purchaser (“Seller’s Objection Response”) whether Seller will or will not satisfy such title objections; provided that Seller shall satisfy or correct, at Seller’s expense, any title objections arising from any breach of the covenants in Section 6.4 by Seller which breach is material in nature (each, a “Breach

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Objection”). In addition, notwithstanding anything to the contrary herein contained, Seller covenants and agrees that at or prior to Closing, Seller shall (i) pay in full and cause to be canceled and discharged or otherwise cause Purchaser’s title company to insure over all mechanics’ and contractors’ liens which encumber the Property as of the date of Closing and which have been placed on the Property by a contractor of Seller or by a subcontractor of Seller’s contractor; (ii) pay in full all past due ad valorem taxes and assessments of any kind constituting a lien against the Property; and (iii) other than in connection with the assumption of the MFP Loan, as defined below, cause to be released all loan security documents which encumber the Property and any other monetary lien or encumbrance against the Property (the liens in (i), (ii) and (iii) collectively, “Monetary Liens”). In the event that Seller does not timely provide Seller’s Objections Response to Purchaser, it shall be deemed all objections other than Breach Objections and Monetary Liens will not be satisfied by Seller. Within ten (10) days following receipt of written notice that Seller shall not satisfy such title objections, or Seller is deemed not to satisfy such title objections, Purchaser shall deliver written notice to Seller that it elects either to (a) waive such objections and close the transaction in accordance with the terms of this Agreement, and any such waived objections shall become Permitted Exceptions; or (b) terminate this Agreement, in which event the Earnest Money shall be promptly refunded to Purchaser by Seller, and neither Seller nor Purchaser shall have any further rights or obligations hereunder except those which expressly survive termination of this Agreement.

6.3

Failure to Correct Title Objections. If Seller fails to satisfy and correct any title objection which it has agreed to satisfy prior to the Closing Date or which it is otherwise required to satisfy and correct pursuant to the terms of this Agreement, then Purchaser may elect one of the following: (i) to waive such objection and close the transaction in accordance with the terms of this Agreement; or (ii) to terminate this Agreement, in which event the Earnest Money shall be promptly returned or delivered to Purchaser by Seller, and neither Seller nor Purchaser shall have any further rights or obligations hereunder except those which expressly survive termination of this Agreement.

6.4

Agreements Affecting the Property. Seller agrees that so long as this Agreement remains in force and effect, Seller will not sell, assign, lease, convey, or otherwise restrict, encumber, or grant any rights in, the Property, or any portion thereof (or any interest or estate therein) without the prior consent of Purchaser, which consent may be withheld by Purchaser for any or no reason. In addition, Seller agrees that so long as this Agreement remains in force and effect, Seller will not apply for or consent to any zoning, land use, or development change or restriction with respect to the Property, without the prior consent of Purchaser, which consent may be withheld by Purchaser for any or no reason.

6.5

Notice of Violations. Seller, until Closing (or termination of this Agreement) shall notify Purchaser immediately and in writing of any proceedings, actions, suits or claims pending or threatened against Seller related to any violation or alleged violation of any laws, codes, ordinances or rules with respect to the Property or the operation of Seller’s business thereat, or of any proceedings, actions, suits or claims pending or threatened against Seller related to any violation or alleged violation of any laws, codes, ordinances or rules with respect to the Property or the operation of Seller’s business thereat.

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INSPECTION.

7.1

In addition to any other conditions contained herein, Purchaser’s obligations under this Agreement are subject to and conditioned upon, in addition to any other conditions contained herein, Purchaser’s determination that the Property is suitable for operation of Purchaser’s intended business thereon or future development/expansion as may be contemplated by Purchaser, and that the operation of Purchaser’s intended business thereon and such development/expansion are both physically and economically feasible on terms satisfactory to Purchaser. Purchaser’s determination may be based, in part, on Purchaser’s satisfaction as to (i) the availability, capacity and location of utilities necessary to serve improvements and Purchaser’s intended business operations on the Property, (ii) the adequacy of access to the Property, (iii) the soil conditions of the Property, (iv) the effect of matters of title that will remain after Closing, if any, (v) the suitability of zoning, and (vi) the availability of suitable financing for Purchaser’s proposed acquisition of the Property. In the event that Purchaser is not satisfied with the Property for any reason or no reason, Purchaser shall have the right to deliver to Seller written notice (the “Termination Notice”) of Purchaser’s intention to terminate this Agreement on or before the date that is thirty (30) days after the Effective Date (the “Inspection Date”). In the event that Purchaser fails to deliver the Termination Notice to Seller on or before the Inspection Date, this Agreement shall automatically continue toward Closing pursuant and subject to the terms and conditions of this Agreement. In the event that Purchaser timely delivers the Termination Notice to Seller, the Earnest Money shall be returned and delivered to Purchaser by Seller, and neither Seller nor Purchaser shall have any further rights or obligations hereunder, other than the indemnities contained in Sections 8, 9 and 14.6 hereof and obligations which expressly survive termination of the Agreement.

7.2

At Purchaser’s option, Purchaser may extend the Inspection Date for one additional period of thirty (30) days by providing written notice to Seller and depositing an additional One Hundred Thousand and No/100 Dollars ($100,000.00) with Seller for such extension on or before 5:00 PM eastern time on the Inspection Date. Such deposit shall become part of the Earnest Money, and shall be held by Seller and disbursed in accordance with the terms of this Agreement.

ENGINEERING STUDIES.

8.1

Property Inspections. Subject to Section 7.1 hereof, Purchaser, personally or through its agents, employees or contractors, may go upon the Property from time to time prior to the Closing to make boundary line and topographical surveys and to conduct such soil, engineering, environmental, and other studies of the Property as Purchaser wishes, including without limitation, a Phase I environmental report and, if recommended by the Phase I environmental report, a Phase II environmental report. In addition, Purchaser shall be entitled to make inquiries concerning the Property to third parties, including lenders, contractors and governmental officials and representatives. Purchaser shall pay all costs incurred in making such surveys, tests, studies and investigations and shall indemnify, defend, and hold Seller harmless from any liens or claims for the cost of any such surveys, tests, analyses and investigations, and any claims with respect to personal injury, death or damage to personal property arising out of such surveys, tests, analyses and investigations, but excluding any liability relating to the existing environmental condition of the Property. Purchaser shall provide Seller with at least twenty-four

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(24) hour notice prior to accessing the Property and agrees to maintain and cause any of its representatives or agents conducting any tests or investigations of the Property pursuant to this Agreement to maintain, commercial general liability insurance with limits of not less than One Million Dollars ($1,000,000) per occurrence, and Purchaser shall provide Seller with certificates evidencing such coverage upon Seller’s request. The indemnity contained in this Section 8 shall survive the rescission, cancellation, termination or consummation of this Agreement.

8.2

Seller’s Obligation to Provide Documents. In addition to any other obligation to assist Purchaser in the inspection of the Property, Seller hereby agrees to provide Purchaser within five (5) days following the Effective Date the following materials in Seller’s possession or control as of the Effective Date (the “Property Documents”): (i) all soil reports, environmental reports relating to the Property and/or the pond and/or the buildings thereon, engineering studies and reports, any information related to the geotechnical condition of the Property and/ or the pond and/or buildings thereon, boundary surveys, topographical surveys or maps , tree surveys, site plans, maps, plats, permits (including without limitation, permits enabling Seller to conduct its business on the Property), approvals, zoning materials, including governmental zoning letters, all information regarding County zoning requests and or approvals whether current or formerly submitted, subdivision reports, and other similar materials with respect to the Property, (ii) all title examination reports, title insurance commitments, title policies, copies of title exception documents, including, without limitation, all covenants, conditions and restrictions affecting the Property, and copies of all tax bills, including but not limited to, property, personal, rental and special assessments, and value renditions relating to the Property (iii) copies of all expenses for the Property; and (iv) insurance certificates for the Property. In addition, during the term of this Agreement, Seller shall provide to Purchaser such other Property Documents relating to the Property and the operation of business thereon which come into the possession of Seller, or which are in Seller’s possession, but have not previously been provided to Purchaser.

Further, in addition to any other obligation to assist Purchaser in connection with Purchaser’s due diligence, Seller shall provide Purchaser with access during normal business hours (where records, information and other materials cannot be sent electronically or via hard photocopies, which information should be sent electronically or via photocopies where practical) to Seller’s business and financial records, and the Property, including physical, title, environmental studies and other real estate records and such other business information reasonably requested by Purchaser that are in Seller’s possession or reasonably, readily available to Seller. Seller will coordinate all site visits with Purchaser.

BROKERAGE.

9.1

Brokerage Representations. Seller and Purchaser each represent and warrant to the other party that the party making such representation and warranty has not employed, retained or consulted with any broker, agent or other finder with respect to the transaction contemplated by this Agreement. Seller shall indemnify and hold Purchaser harmless from all claims, losses, liabilities and expenses (including, but not limited to, reasonable attorneys’ fees and court costs actually incurred) which Purchaser may incur on account of any claim which may be asserted against Purchaser, by any broker or other person on the basis of any agreements made or alleged to have been made by or on behalf of Seller. Likewise, Purchaser shall indemnify and hold Seller harmless from all claims, losses, liabilities and expenses (including, but not limited to,

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reasonable attorneys’ fees and court costs actually incurred) which Seller may incur on account of any claim which may be asserted against Seller, by any broker or other person on the basis of any agreements made or alleged to have been made by or on behalf of Purchaser.

9.2

Survival. The indemnities contained in Section 9.1 above shall survive the rescission, cancellation, termination or consummation of this Agreement.

10.

THE CLOSING.

10.1

Closing Date. The purchase and sale of the Property (the “Closing”) shall be held in the offices of the Purchaser’s attorney by “mail away” closing process, on or prior to the date that is thirty (30) days after the Inspection Date, as such date may be extended pursuant to Section 7.2 above, (the “Closing Date”).

10.2

Deliveries at Closing. The purchase and sale of the Property shall be closed by Seller’s delivery of a properly executed limited warranty deed, in recordable form, conveying good and marketable fee simple title to the Property to Purchaser, free and clear of all liens, encumbrances, easements, and restrictions except the Permitted Exceptions, together with the appropriate transfer tax declarations. Seller shall also execute and deliver (i) a title affidavit satisfactory to Purchaser’s title insurer and such other documents as shall be reasonably required by Purchaser’s title insurer to issue its owner’s title insurance policy insuring Purchaser’s fee simple title to the Property subject only to the Permitted Exceptions; (ii) a certificate reaffirming Seller’s representations and warranties herein as of the Closing Date; (iii) a blanket bill of sale and assignment conveying to Purchaser all zoning, land use and business operation permits and approvals and all intangible rights relating to the Property; (iv) a bill of sale and assignment conveying to Purchaser all of Seller’s personal property used at the Property, except for those items of personal property which are (a) addressed and conveyed by separate agreement between Seller and Purchaser or their respective affiliates, (b) not being conveyed pursuant to the mutual agreement of Seller and Purchaser; (v) such certificates and affidavits as are necessary to assure Purchaser that no withholding is required for federal and state income and sales tax purposes (in the absence of which Purchaser shall be entitled to withhold applicable federal and state sales and income taxes from the Purchase Price as required by law); (vi) evidence reasonably satisfactory to Purchaser’s title insurer of the power and authority of the individual(s) executing and delivering the instruments and certificates described herein to act for and bind Seller; and (vii) such other instruments and documents as shall be reasonably necessary for the consummation of the sale and conveyance of the Property to Purchaser in accordance with the terms of this Agreement.

10.3

Closing Costs. At the Closing, Purchaser shall pay all recording and filing fees (other than those required to clear title), all title examination fees and title insurance premiums for Purchaser’s title insurance, the cost of the Survey, the cost of Purchaser’s due diligence, Purchaser’s attorneys’ fees, and all other costs and expenses actually incurred by Purchaser. Seller shall pay the Georgia transfer taxes due with respect to the deed by which the Property is to be conveyed to Purchaser, all costs associated with recording of instruments to clear title, Seller’s attorneys’ fees, and all costs and expenses actually incurred by Seller.

10.4

Proration of Ad Valorem Taxes. All state, city and county ad valorem taxes due with respect to the Property for the calendar year of the Closing shall be prorated between

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Seller and Purchaser as of 11:59 P.M. on the day immediately preceding the Closing Date. If the actual amount of taxes for the calendar year of Closing is not known as of the Closing Date, the proration at the Closing will be based on the most current ad valorem tax billing information available and Purchaser and Seller agree to adjust said proration after the Closing upon receipt of the actual bills. The agreement to adjust such proration shall survive Closing.

11.

CASUALTY AND CONDEMNATION. Until the purchase of the Property has been consummated by Purchaser, all risk of loss, damage, or destruction respecting the Property (whether by fire, flood, tornado, or other casualty, or by the exercise of the power of eminent domain, or otherwise) shall be borne by Seller. In the event of any material damage to or destruction of the Property or any material portion thereof or in the event of any taking or threat of taking by condemnation (or any conveyance in lieu thereof) of the Property or any material portion thereof by anyone having the power of eminent domain, Purchaser shall, by written notice to Seller delivered within twenty (20) business days of receiving written notice from Seller of such event, elect to: (a) terminate this Agreement and all of Purchaser’s obligations under this Agreement, whereupon the Earnest Money shall be returned to Purchaser by Seller, and this Agreement shall terminate and neither Seller nor Purchaser shall have any right, duty or obligation under this Agreement, except for the indemnities contained in Sections 8, 9 and 14.6; or (b) consummate the purchase of the Property without a reduction in the Purchase Price due to any reduction in the acreage of the Property. The Closing Date shall be extended to allow the running of such twenty (20) business day period. If Purchaser does not elect to terminate this Agreement pursuant to clause (a) of this Section 11, then Seller shall on the Closing Date pay to Purchaser all insurance proceeds then received by Seller and all condemnation awards and compensation then received by Seller with respect to the Property. In addition, Seller shall transfer and assign to Purchaser, in form reasonably satisfactory to Purchaser, all rights and claims of Seller with respect to payment for damages and compensation relating to the Property on account of such damage, destruction or taking.

12.

DEFAULT.

12.1

Seller’s Default. If the sale and purchase of the Property contemplated by this Agreement is not consummated on account of Seller’s default hereunder, Purchaser may, at Purchaser’s sole election and as Purchaser’s sole and exclusive remedies, either (i) obtain specific performance of this Agreement against Seller including reasonable attorneys’ fees related to such matter; or (ii) terminate this Agreement by written notice delivered to Seller, in which case Seller shall refund to Purchaser the Earnest Money. Further, in any case where Seller's default is the result of a willful misrepresentation or a willful act or refusal to act and, as a result, specific performance is not a practically available remedy for Purchaser, in addition to Seller returning or delivering to Purchaser the full amount of the Earnest Money, Purchaser may recover from Seller all out-of-pocket costs and expenses incurred by Purchaser in connection with this Agreement, including but not limited to due diligence costs.

12.2

Purchaser’s Default. If the sale and purchase of the Property contemplated by this Agreement is not consummated because of Purchaser’s default hereunder, Seller shall be entitled to keep the Earnest Money as Seller’s sole and exclusive remedy hereunder (except with respect to the indemnities contained in Sections 8, 9 and 14.6 hereof) for such default of Purchaser, the Seller and Purchaser acknowledging that it is impossible to estimate more precisely the

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damages which might be suffered by Seller upon Purchaser’s default. Seller’s retention of said Earnest Money is intended not as a penalty, but as liquidated damages. The right to receive and retain the Earnest Money as liquidated damages is Seller’s sole and exclusive remedy in the event of default hereunder by Purchaser, the parties agreeing that the Earnest Money is a reasonable pre‑estimate of Seller’s probable loss in the event of a default by Purchaser, and upon such payment of the Earnest Money to Seller, Seller hereby waives and releases any right to (and hereby covenants that it shall not) sue Purchaser: (a) for specific performance of this Agreement, or (b) to recover actual damages in excess of the Earnest Money. Purchaser hereby waives and releases any right to (and hereby covenants that it shall not) sue Seller or seek or claim a refund of said Earnest Money (or any part thereof) on the grounds it is unreasonable in amount and exceeds Seller’s actual damages or that its retention by Seller constitutes a penalty and not agreed upon and reasonable liquidated damages.

12.3

Prevailing Party. Nothing herein shall limit Seller’s and Purchaser’s respective rights and remedies against the other with respect to each party’s respective obligations to indemnify and hold the other harmless pursuant to any provision contained in this Agreement, or with respect to any other obligation which survives the Closing under the terms of this Agreement. Further, it is expressly agreed that the prevailing party in any litigation between the parties hereto, including any action to enforce the remedies provided for in Sections 12.1 and 12.2 above, shall be entitled to recover its reasonable attorneys’ fees and expenses actually incurred, in addition to the amounts specified in Sections 12.1 and 12.2.

12.4

Return of Seller Held Earnest Money. Seller and Purchaser agree that the terms in this Section 12.4 shall apply to all instances within this Agreement which contemplate the return or delivery to Purchaser of the Earnest Money by Seller, including but not limited to those provisions herein which may contemplate that Seller shall promptly return or deliver the Earnest Money to Purchaser. If Seller fails to return or deliver the Earnest Money to Purchaser within five (5) business days after the date on which the obligation for Seller to return or deliver the Earnest Money arises, Seller shall pay Purchaser the sum of Ten Thousand and No/100’s Dollars ($10,000.00) per day as liquidated damages, the parties agreeing that such daily amount is a reasonable pre‑estimate of Purchaser’s probable loss in the event of Seller’s failure to timely return or deliver the Earnest Money, and acknowledging the fact that a third party escrow agent, such as a title insurance company, was not utilized to hold the Earnest Money. Moreover, Seller hereby grants to Purchaser a lien on and security interest in all of Seller’s assets until such time as the Earnest Money is returned or delivered as contemplated in this Section 12.4. Purchaser shall have the right to file any real property liens and/or UCC financing statements or liens in connection with Seller’s grant of lien rights and security interest as described above in order to protect its interest in the Earnest Money.

13.

SELLER’S REPRESENTATIONS. As an inducement to Purchaser to enter into this Agreement and to purchase the Property, Seller warrants and represents to Purchaser as follows:

13.1

Title to Property. Seller owns fee simple title to the Property.

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13.2

Existing Agreements. Seller is not aware of any tenant, lessee or other occupant of the Property having any right or claim to possession or use of the Property other than pursuant to easement rights of record.

13.3

Condemnation. Seller has received no notice of, nor, to the best of Seller’s knowledge is there, any pending, threatened or contemplated action by any governmental authority or agency having the power of eminent domain, which might result in any part of the Property being taken by condemnation or conveyed in lieu thereof. Seller shall, promptly after receiving any such notice or learning of any such action, give Purchaser written notice thereof.

13.4

Existence of Hazardous Waste. Seller has received no notice of, nor are there any areas on the Property where hazardous substances or waste have been generated, stored, disposed of, released, existed, found or exist, and there are no areas on the Property used for the generation, storage, disposal, release or existence of any hazardous substances or waste whether from the Property or any neighboring property. For purposes of this Agreement, the term “hazardous substances or waste” means petroleum (including gasoline, crude oil or any crude oil fraction), waste, trash, garbage, industrial by-product, and chemical or hazardous substance of any nature, including without limitation radioactive material, PCBs, asbestos and asbestos-containing-materials, radon, pesticides, herbicides, pesticide or herbicide containers, untreated sewerage, industrial process sludge, and any other substance identified in the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (commonly known as “CERCLA”), as amended, the Superfund Amendment and Reauthorization Act (commonly known as “SARA”), the Resource Conservation and Recovery Act (commonly known as “RCRA”), or any other federal, state, or other governmental legislation or ordinance identified by its terms as pertaining to the disposal of hazardous substances or waste.

13.5

Governmental Compliance. To Seller’s actual knowledge, Seller has received no notice that any municipality or any governmental or quasi-governmental authority has determined that there are any violations of zoning, health, environmental or other statutes, ordinances or regulations affecting the Property or the operation of Seller’s business on the Property, and Seller has no knowledge of any such violations. In the event Seller receives notice of any such violations affecting the Property or the operation of Seller’s business at the Property prior to the Closing, Seller promptly shall notify Purchaser thereof.

13.6

Underground Tanks or Pipelines. There are no storage tanks located on the Property, either above or below ground, or any underground pipes or lines on the Property, and Seller has no knowledge that the Property previously has been used as a landfill or as a dump for garbage or refuse.

13.7

Boundary Line Disputes; Encroachments. There are no disputes concerning the location of the lines and corners of the Property, and there are now encroachments onto or off of the Property as relates to neighboring properties.

13.8

Pending Litigation. There is no pending litigation, individual or administrative proceeding, pending or threatened, relating to the Property or against Seller relating to the Property or the operation of its business at the Property.

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13.9

No Other Contracts. Seller is not a party to any other contracts for the sale of the Property, nor do there exist any rights of first refusal or options to purchase the Property.

13.10

Agreements. There are no leases, use agreements, operating agreements, management agreements, service agreements, or other agreements or instruments in force or effect that grant to any person whomsoever or any entity whatsoever any right, title, interest or benefit in or to all or any part of the Property or any rights relating to the use, operation, management, maintenance or repair of all or any part of the Property other than as may be evidenced in the real property records for the Property in Wilkes County, Georgia.

13.11

Seller has complied in all material respects with applicable Federal and state employment laws relating to its employees. It has paid all compensation and benefits that are owed to its employees. All employment related taxes with respect to its employees have been paid.

13.12

The representations and warranties of Waha Tech (as defined in Section 19) contained in that certain Equipment Purchase and Sale Agreement, having a date even herewith, made and entered into by and between Waha Tech and CleanSpark DW, LLC (“EPSA”) are true, complete and correct.

13.13

No representation or warranty of the Seller or its principals in this Agreement, and no statement made in any document or other writing made or furnished or to be furnished to Purchaser or its representatives pursuant to the provisions of this Agreement, contains or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary in order to make the statements made herein or therein not misleading. For avoidance of doubt, this specifically includes knowledge whether written or otherwise known by Seller and its principals relating to the Property or operations taking place on the Property which materially impact the transactions contemplated by this Agreement that either contain any untrue statement of material fact or omits or will omit to state any material fact that adversely impacts the transactions contemplated by this Agreement. All copies of contracts and other documents delivered to Purchaser or its representatives pursuant to this Agreement are true, correct, complete and accurate in all material respects. Seller hereby acknowledges that, regardless of any investigation made (or not made) by or on behalf of Purchaser, and regardless of the results of any such investigation, Purchaser has entered into this Agreement and the other transaction documents in express reliance upon the representations and warranties of Seller made in this Agreement, the documentation provided in its data room and the transaction documents.

14.

PURCHASER’S CONDITIONS. The obligations of Purchaser to consummate the transactions contemplated under this Agreement are subject to the following additional conditions in this Section 14.

14.1

Seller shall, as of the date and time for Closing, have performed and complied fully with all agreements and obligations that are required to be performed or complied with by Seller on or before the Closing Date, including execution and delivery of all of the documents, instruments, papers, and materials that are required by Section 10.2 above to be executed and/or delivered by Seller prior to or at the date and time of Closing.

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14.2

There shall not have occurred and be continuing at the date and time of Closing any material change in any of the representations and warranties of Seller set forth in this Agreement or to the condition of the Property or the business conducted at the Property by Seller, including, without limitation any dumping of refuse or the occurrence of environmental contamination at the Property occurring after the Effective Date.

14.3

There shall be no material adverse change in the condition of or affecting the Property or Seller’s business conducted thereon, not caused by Purchaser between the Effective Date and the Closing Date, including, but not limited to, zoning, access and permitting.

14.4

There shall be no administrative agency, litigation or governmental proceeding of any kind whatsoever, pending or threatened, that would, in Purchaser’s reasonable judgment, adversely affect the value or marketability of the Property or the business operations conducted at the Property.

14.5

Purchaser shall have received documentation evidencing the availability of utilities in adequate capacities to serve Purchaser’s intended use of the Property.

14.6

The obligations of Seller and any applicable affiliates of Seller regarding hosting services for cryptocurrency miners shall be terminated and associated miners shall have been removed from the Property, unless the Seller and Purchaser mutually agree otherwise. Seller hereby indemnifies Purchaser and its affiliates, including but not limited to CleanSpark, Inc. from any and all cost and liability associated with such hosting services, the termination thereof and the removal of the miners.

14.7

Purchaser or its affiliate, including but not limited to CleanSpark, Inc., in its sole discretion, enters into a Contract for Electrical Power Service (a “CEPS”) with the City of Washington, Georgia, or assumes the existing CEPS with the City of Washington, Georgia.

14.8

The Property and assets transferred in connection therewith, in Purchaser’s sole discretion, are capable of providing 36 MW of power to support bitcoin mining, with 35 MW plug-in ready.

14.9

Seller transfers or assigns to Purchaser or its affiliate, including but not limited to CleanSpark, Inc., Seller’s exclusive rights to an additional 50 MW of power provided under Section 5(B) of the CEPS, including Seller obtaining any consents or approvals required to effect such transfer or assignment, or Purchaser or its affiliate, including but not limited to CleanSpark, Inc., enters into a new agreement that provides for an additional 50 MW of power with the City of Washington, Georgia.

14.10

Seller causes the termination of hosting services for all third party cryptocurrency miners and all such miners have been removed from the Property, unless otherwise mutually agreed to by the parties.

14.11

All of the Property and any personal or chattel property of Seller to be conveyed pursuant to this Agreement or under a separate related agreement with Purchaser or its affiliate shall be conveyed in good working order and have been properly maintained according to any manufacturer’s specifications.

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14.12

Simultaneous closing of that certain EPSA relating to the purchase of cryptocurrency mining equipment and property for a purchase price of Eight Million, Eight Hundred Ninety-One Thousand, Six Hundred Ten and No/Dollars ($8,891,610.00).

14.13

Simultaneous closing of (i) the Seller Financing; (ii) assumption of the MFP Loan; (iii) purchase by Purchaser or it's affiliate of the personal property associated with the Property from Seller or its affiliates on terms acceptable to Purchaser; and (iv) assumption by Purchaser or it's affiliate of any liabilities or payables of Seller or its affiliate (as contemplated in Section 3), as determined by Purchaser on terms acceptable to Purchaser.

15.

MISCELLANEOUS.

15.1

Time of Essence. Time is of the essence of this Agreement.

15.2

Notices. Any notices, requests, or other communications required or permitted to be given hereunder shall be in writing and shall be (i) delivered by hand, (ii) sent by a nationally recognized next-business day delivery service, or (iii) sent by electronic transmission during normal business hours of recipient, provided that the original thereof shall be promptly sent by overnight courier for next business day delivery. Any such notice, request, or other communication shall be considered given on the date of hand delivery, on the date the same is deposited with a nationally recognized overnight delivery service, on the date of deposit in the United States mail as provided above, or the date of electronic transmission in the case of delivery by facsimile or electronic mail during normal business hours of recipient, otherwise on the next business day, but the time period, if any, provided herein to respond thereto shall begin to run only upon the date of actual receipt. Notices to Purchaser shall be sent with a copy to Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, 3414 Peachtree Road, NE, Suite 1500, Atlanta, GA 30326, Attn: Justin Daniels, Esq., jdaniels@bakerdonelson.com.

15.3

Entire Agreement; Modification. This Agreement supersedes all prior discussions and agreements between Seller and Purchaser with respect to the Property and contains the sole and entire understanding between Seller and Purchaser with respect to the Property. This Agreement shall not be modified or amended in any respect except by a written instrument executed by or on behalf of each of the parties to this Agreement.

15.4

Counterparts. This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument.

15.5

Waiver. Any condition, right, election, or option of termination, cancellation, or rescission granted by this Agreement to Purchaser or Seller may be waived by such party.

15.6

Date for Performance. If the time period by which any right, option or election provided under this Agreement must be exercised, or by which any act required hereunder must be performed, or by which the Closing must be held, expires on a Saturday, Sunday or legal holiday observed in the State of Georgia or under federal law, then such time period shall be automatically extended through the close of business on the next regularly scheduled business day.

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15.7

Survival. Each representation and warranty of Seller contained this Agreement and each unperformed obligation of Seller arising under the terms of the Agreement shall survive the Closing for a period of one (1) year and shall not be merged into any of the instruments or documents executed and delivered at Closing but shall remain in full force and effect and shall be binding on Seller. Seller shall have no liability with respect to any breach of such representations and warranties unless Purchaser shall have asserted such breach in a written notice delivered to Seller prior to the expiration of such one (1) year period.

15.8

Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. Seller expressly agrees that Purchaser shall have the right to assign this Agreement to any corporation, partnership, joint venture or other entity controlled by or under common control with Purchaser. Any other assignment by Purchaser shall be made only with the prior written consent of Seller, which consent may not be unreasonably withheld, conditioned or delayed.

15.9

Confidentiality. Seller and Purchaser agree to treat the contents in this Agreement as confidential and shall not, without the express written consent of the other party, release any information contained in this Agreement, or that is otherwise provided by a party in respect of the transactions contemplated in this Agreement, to any persons other than the receiving party’s directors, officers, partners, members, managers, employees, agents, attorneys, accountants, representatives, parent entity, subsidiaries and/or affiliates (collectively, “Representatives”) who each (i) has a need to know such information for the purposes of evaluating, facilitating, implementing, and/or consummating the transactions contemplated in this Agreement, and (ii) is informed by such receiving party of the confidential nature of such information and the obligations of this Agreement, and all such Representatives agree to abide by the terms hereof as if they were a receiving party hereunder. Notwithstanding anything herein to the contrary the parties agree that that the Purchaser shall be entitled to make any disclosures required by it as a public company under applicable law, regulation or stock exchange rule without any consent of Seller, including the filing of this Agreement as an exhibit thereto.

15.10

Exclusivity. Seller shall not solicit, market or entertain other offers to buy the Property or any portion thereof, nor sell, lease or otherwise transfer the Property or any portion thereof, to any person or entity other than Purchaser or Purchaser’s affiliates during the Exclusivity Period. The “Exclusivity Period” shall be the period of time from the Effective Date to consummation of the Closing.

15.11

Arbitration. All disputes, controversies, or claims arising out of or relating to this Agreement or a breach of this Agreement shall be submitted to and finally resolved by arbitration under the rules of the American Arbitration Association (“AAA”) then in effect. There shall be one arbitrator, such arbitrator shall be chosen by mutual agreement of the parties in accordance with AAA rules. The arbitration shall be conducted in Atlanta, Georgia. The findings of the arbitrator shall be final and binding on the parties, and may be entered in any court of competent jurisdiction for enforcement. Nothing herein shall prevent a party from seeking any provisional or equitable remedy (including, but not limited to, an injunction) from any court having jurisdiction over the parties and the subject matter of the dispute as is necessary to protect such Party’s rights.

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15.12

Like-Kind Exchange. Seller and Purchaser hereby agree to cooperate with the other party to the extent necessary to enable Seller and/or Purchaser to structure and qualify for a tax deferred exchange pursuant to Section 1031 of the Internal Revenue Code in connection with Purchaser’s acquisition and Seller’s conveyance of the Property; provided that the party which is not attempting to structure this transaction as a part of a tax deferred exchange shall not be required to incur any additional expense or liability in connection with any such exchange transaction.

16.

LOAN ASSUMPTION. Purchaser shall have the right to assume that certain loan evidenced by that certain Amended and Restated Promissory Note made by WAHA, INC, as Borrower, in favor of lender, Marquee Funding Partners, LLC, with the effective date of June 11, 2021 with an interest rate of thirteen percent (13%) (the “MFP Loan”). Assumption of the MFP Loan shall be evidenced by such documentation in form reasonably acceptable to Purchaser. Notwithstanding anything to the contrary contained in this Agreement or any document related to the MFP Loan or the assumption thereof, the maximum principal amount of the MFP Loan, if assumed, shall be Two Million One Hundred Fifty-Eight Thousand Two Hundred Fifty-Two and 95/100’s Dollars ($2,158,252.95) (such amount, the “Loan Assumption Cap”). To the extent that the principal amount of the MFP Loan exceeds the Loan Assumption Cap, Seller shall pay down the MFP Loan and any fees or charges to effect such pay down, so that the remaining principal loan amount of the MFP Loan, as assumed, shall not exceed the Loan Assumption Cap.

17.

SELLER FINANCING; SETOFF. Seller shall provide seller financing for a portion of the Purchase Price as described in Section 3 above pursuant to the following terms (the “Seller Financing”). Seller shall provide a loan to be funded at Closing in the principal amount of Three Million One Hundred Sixty-One Thousand Seven Hundred Forty-Seven and 05/100’s Dollars ($3,161,747.05). The interest rate shall be twelve percent (12%) and shall be for a term of twelve (12) months to be repaid in twelve (12) monthly installments of Two Hundred Eighty Thousand Nine Hundred Seventeen and 39/100’s Dollars ($280,917.39). The Seller Financing shall be evidenced by a promissory note made payable to Seller or its designee, in form reasonably acceptable to Purchaser and Seller. In the event that any Phase I environmental report obtained by Purchaser recommends conducting a Phase II environmental assessment, and Purchaser elects to have such Phase II environmental assessment performed, Purchaser shall have the right to set off all such costs together with all costs associated with any related remediation as credits against the monthly payments of principal and interest contemplated by the Seller Financing. Additionally, in the event that the Survey evidences any encroachments either onto or off of the Property, and Purchaser elects to have such encroachments removed or otherwise remedied or cured, Purchaser shall have the right to set off all such costs as credits against the monthly payments of principal and interest contemplated by the Seller Financing. Finally, Purchaser shall have the right to offset costs it incurs as a result of Seller’s breach of a representation, warranty, agreement or covenant under this Agreement or the EPSA against the monthly payments of principal and interest contemplated by the Seller Financing. In the event that the amount of any such costs described in this Section 17 exceed the amount of Seller Financing payments, such that the aggregate amount of setoffs are not sufficient to cover all such costs, Seller shall be obligated to reimburse Purchaser for such deficiency promptly upon demand therefor from Purchaser.

18.

MINING HOSTING AGREEMENTS. Seller covenants and agrees that it shall cause the termination of hosting services for all third party cryptocurrency miners and all such

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miners have been removed from the Property by Closing, unless otherwise mutually agreed to by the parties. Seller shall defend, indemnify, and hold harmless Purchaser and its officers, agents, representatives, successors and assigns from and against any loss, damage, injury, settlement, judgment, award, fine, penalty, fee, charge, cost or expense (including interest, investigative expenses and costs of experts and other witnesses and reasonable attorneys’ fees), and any claims or other liabilities or obligations (collectively, “Losses”) arising from or related to a breach of the covenant contained in this Section 18.

19.

EQUIPMENT PURCHASE. Seller and Purchaser hereby agree that the consummation of this Agreement is, in all respects, conditioned upon the consummation of the sale of certain chattel property by WAHA TECHNOLOGIES, INC, a Georgia corporation (“Waha Tech, and the purchase of the same by CleanSpark DW, LLC, pursuant to and as more particularly set forth in that certain Equipment Purchase and Sale Agreement, having a date even herewith, made and entered into by and between Waha Tech and CleanSpark DW, LLC.

20.

EMPLOYEES. On or before two days prior to Closing, Purchaser may interview Seller employees involved in operations at the Property, provided that Purchaser is not obligated to hire any of those employees. Subject to applicable legal requirements, Purchaser will have reasonable access to personnel records (including employment eligibility verification, performance appraisals and disciplinary actions) for the purpose of preparing for and conducting employment interviews with relevant employees and will conduct the interviews as expeditiously as reasonably possible prior to the Closing Date. Access will be provided by Seller upon reasonable prior notice during normal business hours. On or prior to the Closing Date, Purchaser will provide Seller with a list of Seller employees that Purchaser may offer to employ, subject to satisfactory completion of Purchaser’s customary pre-employment screening procedures. All such employees who accept Buyer’s offer of employment are referred to herein as the “Hired Employees.” Seller shall terminate on the Closing Date the Hired Employees. It is understood and agreed that (A) Purchaser’s expressed intention to extend offers of employment as set forth in this section shall not constitute any commitment, contract or understanding (expressed or implied) of any obligation on the part of Purchaser to have a post-Closing employment relationship of any fixed term or duration or upon any terms or conditions other than those that Purchaser may establish pursuant to individual offers of employment

21.

RECITALS. The recitals are incorporated into this Agreement by reference as if fully set forth in the body of this Agreement.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties hereto have duly signed, sealed, and delivered this Agreement on the dates set forth opposite their signatures.


Dated as to Purchaser: August 5, 2022	PURCHASER: CSRE PROPERTIES WASHINGTON, LLC, a Georgia limited liability company By: CSRE Property Management Company, LLC, a Georgia limited liability company, its Manager By: CleanSpark, Inc., a Nevada corporation, its Manager By: /Zachary K. Bradford/
	Zachary K. Bradford, President


Dated as to Seller: August 5, 2022	SELLER: SPRE COMMERCIAL GROUP, INC. f/k/a WAHA, INC, a Georgia corporation By: /Robert C. Bissell/ Robert C. Bissell, Director and Chief Executive Officer

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EXHIBIT A

Legal Description

LEGAL DESCRIPTION @ Book 363, Page 398:

ALL THAT TRACT OR PARCEL OF LAND WITH IMPROVEMENTS THEREON, LYING AND BEING IN THE 164 GMD OF WILKES COUNTY, GEORGIA AND FRONTING ON THE WEST SIDE OF GEORGIA HIGHWAY 47 AND THE NORTH SIDE OF DIXIE WOOD ROAD CONTAINING 27.64 NET ACRES MORE OR LESS AND BEING MORE PARTICULARLY DESCRIBED BY THAT PLAT OF SURVEY OF A TRACT OF 34.11 ACRES MORE OR LESS PREPARED BY T. LARRY RACHELS, RLS, DATED 5/16/89 AND RECORDED IN PLAT BOOK 8 PAGE 218, LESS AND EXCEPT THAT TRACT OF 6.47 ACRES AS SHOWN BY THAT PLAT OF SURVEY PREPARED BY JAMES F. MATTISON, IV RLS, DATED 4/14/06 AND RECORDED IN PLAT BOOK 12, PAGE 388 WILKES COUNTY DEED RECORDS, SAID PLATS OF SURVEY ARE INCORPORATED HEREIN FOR A MORE COMPLETE DESCRIPTION OF THE SUBJECT TRACT.

SAID TRACT IS BOUNDED NOW OR FORMERLY AS FOLLOWS: NORTH BY LANDS OF ANTHONY FOREST PRODUCTS, LLC AND BY EDISON DRIVE AND BY THE 6.47 ACRE ALLWOOD PARCEL; EAST BY HIGHWAY 47 AND BY THE LOTS OF ALERENDRO AND KIRKLAND; SOUTH BY DIXIE WOOD DRIVE AND BY THE MEAG SUBSTATION, WEST BY LANDS OF SUNOCO, FORMERLY DIXIE WOOD, INC. AND BY THE GEORGIA WOODLANDS RAILROAD RIGHT OF WAY.

THIS TRACT IS ALSO IDENTIFIED AS TAX MAP 63, PARCEL 43.

THIS IS THAT SAME TRACT ACQUIRED BY AW REAL ESTATE HOLDINGS, LLC FROM CHARLES P. HARRIS, ET AL BY DEED DATED 5/20/16 AND RECORDED IN DEED BOOK 335, PAGE 260, WILKES COUNTY DEED RECORDS.

LESS AND EXCEPT: ALL THAT TRACT OR PARCEL OF LAND BEING DESCRIBED IN DEED Book 385, Page 562, WILKES COUNTY, GEORGIA RECORDS.

14965479 v5

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EX-10.4

Exhibit 10.4

EQUIPMENT PURCHASE AND SALE AGREEMENT

THIS EQUIPMENT PURCHASE AND SALE AGREEMENT (together with all Schedules and Exhibits hereto which are incorporated herein by reference, this “Agreement”), dated as of August 5, 2022 (the “Effective Date”), is entered into by and between CleanSpark DW, LLC, a Georgia Limited Liability Company, with its mailing address at 2380 Godby Road, College Park, Georgia 30349 (“Buyer”), and WAHA TECHNOLOGIES, INC., a Georgia corporation, with its corporate address at 2146 Roswell Road #108-851, Marietta, Georgia 30062 (“Seller”).

RECITALS:

WHEREAS, CSRE Properties Washington, LLC, a Georgia limited liability company, an affiliate of Buyer, and SPRE Commercial Group, Inc. f/k/a WAHA, INC, a Georgia corporation, an affiliate of Seller, have entered into a Purchase and Sale Agreement (“Land Purchase Agreement”) on August 5, 2022; and

WHEREAS, as part of the Land Purchase Agreement, it is contemplated that Buyer shall purchase certain of Seller’s Bitcoin mining equipment and other assets in addition to the Land Purchase Agreement on the terms and conditions of this Agreement; and

WHEREAS, Seller desires to sell such assets to Buyer on the terms and conditions of this Agreement.

NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

Article I

description AND delivery OF ASSETS

1.1 Purchased Assets. Subject to the terms of this Agreement, Buyer agrees to purchase the assets from Seller that are listed on listed on Schedule 1.1 (“Purchased Assets”):

I.1

Delivery of Purchased Assets. Buyer shall take possession of the Purchased Assets at 197 Dixie Wood Road, Washington, Georgia 30673 upon the Closing (as defined in Section 3.2 below).

1.3 Land Purchase Agreement. The consummation of this Agreement is subject to the execution, delivery and consummation of the transactions contemplated by the Land Purchase Agreement. If the Land Purchase Agreement is not consummated for any reason, either party hereto, in its sole discretion, may terminate this Agreement without further liability to the other party.

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Article II

PURCHASE AND SALE OF ASSETS

2.1 Purchase and Sale of Assets. Subject to the terms of this Agreement, Seller agrees to sell, assign, transfer and deliver to Buyer, and Buyer agrees to purchase and accept from Seller, at the Closing (as defined in Section 3.2 below), all of Seller’s right, title and interest to the Purchased Assets listed on Schedule 1.1.

II.1

Liabilities. The Purchased Assets shall be sold and conveyed to Buyer free and clear of all liens, charges, claims, counterclaims, rights of set off, rights of recoupment and similar rights, encumbrances, security interests, mortgages, pledges or other claims or interests of any nature (collectively, “Liens”), unless otherwise expressly agreed upon in writing by the parties hereto.

II.2

Conveyance of Purchased Assets. The Buyer and Seller shall enter into a bill of sale or other instruments of conveyance as shall be reasonably requested by Buyer for the transfer by Seller to Buyer of all of Seller’s right, title and interest in and to the Purchased Assets. The bill of sale to be signed by the Buyer and Seller shall be in the form as attached hereto as Exhibit “A” (the “Bill of Sale”).

2.4 Warranty. Seller hereby transfers and assigns to Buyer any and all warranties with respect to the Purchased Assets provided by the manufacturers to Seller in connection with its original purchase of the Purchased Assets, and Seller provides the Buyer with full benefit of the warranty over the assets provided by the manufacturers. Seller is the true and lawful owner, and has good title to, all of the Assets, free and clear of all encumbrances. As of the Closing, there will be no restrictions on the Buyer’s right or ability to modify, relocate, or dispose of the Purchased Assets as the Buyer sees fit.

Article III

CONSIDERATION; Closing

3.1 Purchase Price. The purchase price (the “Purchase Price”) for the Purchase Assets shall be Eight Million, Eight Hundred Ninety-One Thousand, Six Hundred Ten and No/Dollars ($8,891,610.00).

III.1

Closing. The consummation of the transactions contemplated by this Agreement shall occur contemporaneously with the consummation of the transactions contemplated by the Land Purchase Agreement. Upon closing, Buyer and Seller shall execute and delivery the Bill of Sale and Buyer shall pay the Seller the Purchase Price via wire transfer to an account designated in writing by Seller.

Article IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer as follows:

4.1 Organization and Good Standing. Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Georgia. Seller has all requisite power and

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authority to own, occupy and operate the Purchased Assets. Seller is duly qualified to do business and is in good standing in all other jurisdictions in which the ownership of the Purchased Assets make such qualification necessary.

IV.1

Authority. Seller has all requisite power and authority to execute and deliver this Agreement and all agreements contemplated hereunder and to consummate the transactions contemplated hereunder. The execution, delivery and performance of the Agreement and all agreements contemplated hereunder, and the consummation of the transactions contemplated hereunder, have been duly and validly authorized by all necessary action on the part of Seller. The Agreement and all agreements contemplated hereunder have been duly executed and delivered by Seller and constitute or will constitute when executed and delivered the valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, except that enforceability thereof may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditor’s rights generally and by principles of equity.

IV.2

Effect of Agreement. The execution, delivery and performance of the Agreement and all agreements contemplated hereunder, and the consummation of the transactions contemplated hereunder, do not violate or result in a breach of the terms or provisions of, or constitute a default under, create a Lien under, or conflict with or result in the termination of, or require Seller to obtain any consent or approval under any agreements to which the Seller is bound, or the certificate of formation, governing documents or any documents comparable thereto or any amendments or modifications thereto of Seller.

IV.3

Consents. All consents, approvals, authorizations, and other requirements that must be obtained or satisfied by Seller that are necessary for the execution of this Agreement, the agreements contemplated hereunder, and the consummation of the transactions contemplated hereunder, have been obtained and satisfied.

IV.4

Title to Purchased Assets. Seller has good title to the Purchased Assets, and the right to transfer such title free and clear of all Liens.

IV.5

Taxes. All taxes owed by Seller in connection with the Purchased Assets have been paid and there are no Liens on the Purchased Assets in connection with, or otherwise related to, any failure to pay any tax.

IV.6

Brokers. No finder, broker, agent or other intermediary has acted for or on behalf of the Seller in connection with the negotiation or consummation of this Agreement, and there are no claims for any brokerage commission, finder’s fee or similar payment due from Seller.

IV.7

Warranty. The Seller expressly warrants that the Purchased Assets are (i) free of liens or encumbrances; (ii) merchantable and good for ordinary purpose for which they are used; and (iii) fit for the particular purpose for which they are intended.

4.8 Terahash Warranty. Seller warrants that the Purchased Assets consisting of Bitcoin miners will provide no less than 341,985 terahash of computing power (the "Guaranteed Hashrate"). Purchaser shall be satisfied in its sole discretion that Purchased Assets meet the Guaranteed Hashrate requirements as a condition to Closing.

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Article V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller as follows:

5.1 Organization and Good Standing. Buyer is a Limited Liability Company duly organized, validly existing and in good standing under the laws of the State of Georgia.

V.1

Authority. Buyer has all requisite power and authority to execute and deliver this Agreement and all agreements contemplated hereunder, and to consummate the transactions contemplated hereunder. The execution, delivery and performance of the Agreement and all agreements contemplated hereunder and the consummation of the transactions contemplated hereunder have been duly and validly authorized by all necessary action on the part of Buyer. The Agreement and all agreements contemplated hereunder have been duly executed and delivered by Buyer and constitute or will constitute when executed and delivered valid and binding obligations of Buyer enforceable against Buyer in accordance with their terms, except that enforceability thereof may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally and by principles of equity.

V.2

V.3

Brokers. No finder, broker, agent or other intermediary has acted for or on behalf of Buyer in connection with the negotiation or consummation of this Agreement, and there are no claims for any brokerage commission, finder’s fee or similar payment due from Buyer.

Article VI

CERTAIN COVENANTS AND UNDERSTANDINGS

6.1 Transfer Taxes. Any and all Transfer Taxes (as defined below) shall be borne by Seller. Seller shall timely and accurately file all necessary tax returns and other documentation with respect to Transfer Taxes (the “Transfer Tax Returns”) and timely pay all such Transfer Taxes. If required by applicable law, Seller will join in the execution of any Transfer Tax Return. For purposes of this Agreement, “Transfer Taxes” means all sales (including bulk sales), use, transfer, recording, value added, ad valorem, privilege, documentary, gross receipts, registration, conveyance, excise, license, stamp or similar Taxes and fees arising out of, in connection with or attributable to the transactions effectuated pursuant to this Agreement.

VI.1

Title and Risk of Loss. Seller and Buyer understand and agree that title to the Purchased Assets and the risk of loss with respect to the Purchased Assets shall pass from Seller to Buyer upon Closing.

VI.2

Further Assurances. Seller shall, at any time on or after a Closing Date and at Seller’s expense, execute, acknowledge and deliver all such further acts, deeds and instruments as may be

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reasonably required for the effective transfer to and possession by Buyer, or its successors or assigns, of any of the respective Purchased Assets.

Article VII

INDEMNIFICATION

7.1 Survival of Representations and Warranties. All representations, warranties, covenants and agreements set forth in this Agreement or in any other certificate or document delivered pursuant to this Agreement shall survive the Closing and for a period of one year (1) year.

VII.1

Indemnification by Seller. Seller shall defend, indemnify, and hold harmless Buyer and its officers, agents, representatives, successors and assigns from and against any loss, damage, injury, settlement, judgment, award, fine, penalty, fee, charge, cost or expense (including interest, investigative expenses and costs of experts and other witnesses and reasonable attorneys’ fees), and any claims or other liabilities or obligations (collectively, “Losses”) arising from or related to (a) any misrepresentation or breach of any representation or warranty by Seller contained in this Agreement or any of the agreements contemplated hereunder; (b) the use, ownership, or operation by Seller of the Purchased Assets prior to the Closing; (c) Seller’s breach or failure to perform any covenant, undertaking or other agreement contained in this Agreement; (d) any and all Taxes and assessments related to the Purchased Assets for periods prior to the applicable Closing Date(s); and (e) any liabilities, debts or obligations of Seller.

VII.2

Indemnification by Buyer. Buyer shall defend, indemnify, and hold harmless Seller, its officers, agents, representatives, successors and assigns from and against any Losses arising from or related to (a) any misrepresentation or breach of any representation or warranty by Buyer contained in this Agreement or any of the agreements contemplated hereunder; (b) the use, ownership, or operation of the Purchased Assets by Buyer after the Closing Date; (c) Buyer’s breach or failure to perform any covenant, undertaking or other agreement contained in this Agreement; and (d) any and all Taxes and assessments of Buyer on the Purchased Assets related to periods after the Closing Date applicable thereto.

VII.3

Limitation on Liability. The maximum aggregate amount of all Losses for which Seller or Buyer shall be liable under this Agreement shall not exceed the Purchase Price.

VII.4

No Consequential Damages. Notwithstanding anything to the contrary elsewhere in this Agreement, no party shall, in any event, be liable to any other person for any consequential, incidental, indirect, special or punitive damages of such other person, including loss of future revenue, income or profits, diminution of value or loss of business reputation or opportunity relating to the breach or alleged breach hereof.

VII.5

Fraud or Intentional Representation. Nothing in this Article VII shall be deemed to limit any claim(s) based upon fraud or intentional misrepresentation (but not, for the avoidance of doubt, claims for negligent misrepresentation).

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Article VIII

MISCELLANEOUS

I.1

Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); or (b) when received by the addressee if sent by a nationally recognized overnight courier, for delivery the next day (receipt requested). Such communications must be sent to the respective parties at the following addresses:

If to Seller: WAHA Technologies, Inc.

2146 Roswell Road, #108-851

Marietta, GA 30062

If to Buyer: CleanSpark, Inc.

2370 Corporate Circle, Suite 160

Henderson, NV 89074

Attn: Legal Department

With a copy to: Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, 3414 Peachtree Road, NE, Suite 1500,

Atlanta, GA 30326,

Attn: Justin Daniels, Esq.

Email: jdaniels@bakerdonelson.com.

The above addresses may be changed by written notice to the other party in the manner provided above; however, that no notice of a change of address shall be effective until actual receipt of such notice.

VIII.1

Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Georgia without giving effect to any choice or conflict of law provision or rule of such jurisdiction.

VIII.2

Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. Any signature page of this Agreement may be detached from any counterpart of this Agreement without impairing the legal effect of any signatures thereon any may be attached to another counterpart of this Agreement identical in form hereto but having attached to it one or more additional signature pages. Counterparts hereof which are transmitted by facsimile or electronic transmission shall be given identical legal effect as an original.

VIII.3

Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither this Agreement nor any of the rights, interest or obligations hereunder shall be assigned by Seller or Buyer without the prior written consent of the non-assigning party. Any purported assignment without such consent shall be void.

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VIII.4

Third Party Beneficiaries. None of the provisions of this Agreement or any document contemplated hereby is intended to grant any right or benefit to any person or entity which is not a party to this Agreement.

VIII.5

Headings. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of this Agreement and shall not in any way affect the meaning or interpretation of this Agreement.

VIII.6

Amendments; Waivers. This Agreement may not be amended, changed, supplemented or otherwise modified except by an instrument in writing signed on behalf of all of the parties hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

VIII.7

Confidentiality. The parties shall hold in strictest confidence any information and material which is related to either Buyer or Seller’s business or is designated by either Buyer or Seller as proprietary and confidential, herein or otherwise. Seller further covenants not to disclose or otherwise make known to any individual or entity nor to issue or release for publication any articles or advertising or publicity matter relating to this Agreement in which the name of Buyer or any of its affiliates is mentioned or used, directly or indirectly, unless prior written consent is granted by the other party; provided, however, that the Buyer shall be entitled to make any disclosures required by it as a public company under applicable law, regulation or stock exchange rule without any consent of Seller, including the filing of this Agreement as an exhibit thereto.

VIII.8

Severability. In the event that any provision in this Agreement shall be determined to be invalid, illegal or unenforceable, in any respect, the remaining provisions of this Agreement shall not be in any way impaired, and the illegal, invalid or unenforceable provision shall be fully severed from this Agreement and there shall be automatically added in lieu thereof a provision as similar in terms and intent to such severed provision as may be legal, valid and enforceable.

VIII.9

Entire Agreement. This Agreement and the Schedules and Exhibits hereto constitute the entire contract between the parties hereto pertaining to the subject matter hereof, and supersede all prior and contemporaneous agreements and understandings between the parties with respect to such subject.

VIII.10

Fees and Expenses. Each party shall bear his or its own commissions, expenses and legal fees incurred on his or its behalf with respect to this Agreement and the closing of the transactions contemplated hereby.

[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed by its duly authorized officer as of the date first above written.

SELLER: WAHA TECHNOLOGIES, INC, a Georgia corporation

/Robert C. Bissell/

By: Robert C. Bissell

Its: Director & C.E.O.

Counterpart Signature Page to

Equipment Purchase and Sale Agreement

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed by its duly authorized officer as of the date first above written.

BUYER: CleanSpark DW, LLC, a Georgia limited liability company

By: CSRE Property Management Company, LLC, a Georgia limited liability company, its Manager

By: CleanSpark, Inc., a Nevada corporation, its Manager

By: /Zachary K. Bradford/
Zachary K. Bradford, its President

Counterpart Signature Page to

Equipment Purchase and Sale Agreement

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Zachary K. Bradford, certify that:


1.		I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022 of CleanSpark, Inc.;


2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.		The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 9, 2022	By:	/s/ Zachary K. Bradford
		Zachary K. Bradford
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Gary A Vecchiarelli, certify that:


1.		I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022 of CleanSpark, Inc.;


2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.		The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 9, 2022	By:	/s/ Gary A. Vecchiarelli
		Gary A. Vecchiarelli
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of CleanSpark, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zachary K. Bradford, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:


	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: August 9, 2022	By:	/s/ Zachary K. Bradford
		Zachary K. Bradford
		Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of CleanSpark, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary A. Vecchiarelli, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:


	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: August 9, 2022	By:	/s/ Gary A. Vecchiarelli
		Gary A. Vecchiarelli
		Chief Financial Officer

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