What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-12-15 compared with 2021-12-14 · 179 added, 444 removed, 26 unchanged (96% of the section changed)

As used in this Annual Report on Form 10-K, the terms

“we,” “us,” “our,” the “Company,” “CleanSpark, Inc.” and “CleanSpark”

As used in this Annual Report on Form 10-K, the terms “we,”

“us,”

“our,”

the “Company,”

“CleanSpark, Inc.”

and “CleanSpark”

mean CleanSpark, Inc.

1 unchanged sentence

CleanSpark, Inc.

a leading bitcoin mining and diversified energy company incorporated in Nevada, whose common stock is listed

on the Nasdaq Capital Market .

We sustainably mine bitcoin;

we also provide advanced energy technology

solutions to commercial and residential customers to solve modern energy challenges.

The Company, through itself and its wholly owned

subsidiaries, has operated in the digital currency mining sector since December 2020, and in the alternative energy sector since March

We are currently working with industry leaders and

other advisors in developing a long-term sustainability and clean energy plan.

We are also using all available clean and renewable energy

resources that we currently have reasonable access to in all of our bitcoin mining locations in order to further support our sustainability

Digital Currency Mining Segment

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 N ew York-based

Coinmint in place since July 2021.

Bitcoin mining has now become our principal revenue generating

business activity.

We currently intend to continue to acquire additional facilities,

equipment and infrastructure capacity to continue to expand our bitcoin mining operations.

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.

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.

as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity) and location

play important roles in mining.

As of the date of this filing, our mining units are currently capable of producing over 1.3 exahash/s

(“EH”) in hash rate capacity.

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 our portfolio of energy technologies 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 2.0 EH/s in hashrate capacity at or near the end

of December 31, 2021.

We expect to exceed 3 EH/s in capacity by mid-to-late 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 significant portion of the bitcoin, 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.

is a leading 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 bitcoin mining sector since December 2020.

The only cryptocurrency we mine is bitcoin.

From March 2014 to June 30, 2022, we provided advanced energy technology solutions to commercial and residential customers to solve modern energy challenges in the alternative energy sector.

As of June 30, 2022, we deemed our energy operations to be discontinued operations due to our strategic decision to strictly focus on its bitcoin mining operations and divest of our energy assets.

We are currently working on developing a long-term sustainability and clean energy plan with respect to our bitcoin mining operations.

We are using clean and renewable energy resources that we currently have reasonable access to in our bitcoin mining locations in order to further support our sustainability efforts.

Lines of Business

Bitcoin Mining

Through CleanSpark, Inc and our wholly owned subsidiaries ATL Data Centers LLC (“ATL”), CleanBlok, Inc.

(“CleanBlok”), CleanSpark DW, LLC, and CleanSpark GLP, LLC, we mine bitcoin.

We entered the bitcoin mining industry through our acquisition of ATL in December 2020, acquired a second data center in August 2021, a third data center and mining equipment in August 2022, a fourth data center and mining equipment in October 2022, and have had a co-location agreement with New York-based Coinmint in place since July 2021.

Bitcoin mining has now become our principal revenue generating business activity.

We currently intend to continue to acquire additional facilities, equipment and infrastructure capacity to continue to expand our bitcoin mining operations.

In August 2022, we completed the acquisition of certain real property located in Wilkes County, Georgia, and approximately 3,400 S19 and S19j Pro series bitcoin miners capable of providing computing power of approximately 341,000 terahash per second.

The property acquired provided us with a turn-key data center campus capable of supporting approximately 1 exahash per second of computing power, upon closing of the acquisition.

We expect to expand the campus to support approximately 2.6 exahash per second of computing power (collectively, the “WAHA and SPRE Assets”).

In October 2022, we acquired the lease for 16.35 acres of real property located in Sandersville, Washington County, Georgia, all personal property situated on such property, and 6,349 application specific integrated circuit miners (“ASICs”) capable of providing computing power of approximately 530,000 terahash per second from subsidiaries of Mawson Infrastructure Group, Inc.

The property acquired provided the Company with a turn-key data center campus capable of supporting approximately 2.4 exahash per second of computing power, upon closing of the acquisition.

The company expects to expand the campus to support approximately 7.0 exahash per second of computing power (collectively, the “Mawson Assets”).

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

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 location play important roles in mining.

As of the date of this filing, our operating mining units are currently capable of producing over 5.75 exahash per second (“EH/s”) of computing power.

In bitcoin mining, “hashrate”

is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the bitcoin network.

We are actively expanding our bitcoin mining business and as of the date of this filing reached 5.75 EH/s in computing power, which exceeded our target guidance as set in August, 2022 of reaching 5.0 EH/s in computing power by December 31, 2022.

We expect to continue increasing our computing power through 2023 and beyond as we expand our infrastructure at our owned sites in the State of Georgia, seek strategic acquisition targets, and through strategic co-location agreements.

A company’s computing power measured in Hashrate is generally considered to be one of the most important metrics for evaluating bitcoin mining companies.

We obtain bitcoin as a result of our mining operations, and we 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) or to engage in hedging activities related to our holding of bitcoin;

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 and monitoring the market in real time.

Through our recently formed 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.

Energy Segment

We provide 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 through the world .

Our solutions are supported by our proprietary suite

of software platforms (collectively, the “Platforms”) that include microgrid energy modeling, energy market communications

and energy management solutions as summarized below:

mPulse and mVoult:

Patented, proprietary controls platforms that enable integration and optimization of multiple energy sources.

Middleware used by grid operators and aggregators to administrate load shifting programs.

Middleware used by controls and IoT (internet-of-things) product companies to participate in load shifting programs.

Energy modeling software for internal microgrid design .

The Platforms were developed to enable the designing,

building, and operating of distributed energy systems and microgrids which efficiently manage energy assets.

These strategies are generally

targeted to achieve resiliency and economic optimization.

We also own patented gasification energy technologies.

Our technology converts organic material into synthesis gas, which can be used as fuel for a variety of applications and as feedstock

for the generation of DME (Di-Methyl Ether).

As previously disclosed, we currently plan to continue to focus on our other offerings.

Other business

Through p2kLabs, Inc., we provide design, software

development, and other technology-based consulting services.

The services provided are generally hourly or fixed-fee project-based arrangements.

Through ATL, we also provide traditional data center

services, such as providing customers with rack space, power and equipment, and offer several cloud services including virtual services,

virtual storage, and data backup services.

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 management by analyzing forecasts and monitoring the market in real time.

Through our wholly owned subsidiaries CSRE Properties, LLC, CSRE Property Management Company LLC, CSRE Properties Norcross, LLC, CSRE Properties Washington, LLC and CSRE Properties Sandersville, LLC we maintain real property holdings.

Markets, Geography and Major Customers

Digital Currency Mining Segment

Bitcoin is a global store and exchange of value used

by people across the world as an asset and to conduct daily transactions.

Mining bitcoin supports the global bitcoin blockchain and the

millions of people that depend on it for economic security and other benefits.

Strictly speaking, there is no customer market for mining

bitcoin but we consider our mining pool operators as customers because they compensate us for providing processing power to the mining

pool (see Item 1A.

Risk Factors for more information on our mining pool operators).

We own and operate our own facilities and do not lease

mining space to other mining companies or private individuals that mine.

Our wholly-owned mining operations are located in the State of

Georgia in the United States.

Bitcoin is a global store and exchange of value used by people across the world as an asset and to conduct daily transactions.

Mining bitcoin supports the global bitcoin blockchain and the millions of people that depend on it for economic security and other benefits.

Strictly speaking, there is no customer market for mining bitcoin but we consider our mining pool operators as customers because they compensate us for providing processing power to the mining pool (see Item 1A.

Risk Factors- “Our reliance on a third-party mining pool service provider for our mining revenue payouts may adversely affect an investment in us .

We own and operate our own facilities and do not lease mining space to other mining companies or private individuals that mine.

Our wholly-owned mining operations are located in the State of Georgia in the United States.

We also have a relationship with a facility located in New York State that hosts a portion of our miners.

Energy Segment

Around the world, an aging energy infrastructure is

becoming unstable and unreliable due to increases in loads and limited new, large-scale generation facilities.

This inherent instability

is compounded by the push to integrate a growing number and variety of renewable but intermittent energy generation assets and advanced

technologies into outdated electrical grid systems.

Defense installations, industrial complexes, communities, campuses and other aggregators

across the world are turning to microgrids as a means to decrease their reliance on the grid, reduce utility costs, utilize cleaner power,

and enhance energy security.

The Company’s products and services predominantly

serve the energy markets throughout the Americas in the residential, commercial, and industrial sectors.

Federal, state and local governmental

bodies provide incentives to owners and system integrators of solar energy systems to promote renewable energy in the form of rebates,

tax credits, and other similar incentives.

These incentives help to catalyze customer acceptance of renewable energy systems as an alternative

to utility-provided power.

Over the most recent year, our energy business operated extensively in California’s residential energy

markets by participating in the state’s Self-Generation Incentive Program (“SGIP”).

For the years ended September 30, 2021 and 2020,

respectively, 61.2% and 64.8% of our total energy revenues were associated primarily with three customers.

A loss or decline in business

with these customers could have an adverse impact on our business, financial condition, and results of operations.

We provide our hardware

products under manufacturing and distribution agreements.

We provide our software and services at customer locations and from our office

located in Carlsbad, California .

Working Capital Items

Digital Currency Mining Segment

The bitcoin mining industry is highly competitive

and dependent on specialized mining machines that have few manufacturers.

Machine purchases require large down payments and miner deliveries

often arrive many months after initial orders are placed.

At the time the Company

acquired ATL in December 2020, the Company had approximately 3,471 bitcoin mining units with application-specific integrated circuits

(“ASICs”) in operation, which produced approximately 190 petahash/s.

Since acquiring ATL, the Company has expanded its operations

and purchased additional ASICs.

The Company now has 12,900 ASICs (as of the date of this filing )

in daily operation, which are producing approximately 1.3 EH/s.

In addition to the ASICs in operation, the

Company has also entered into futures contracts, pursuant to which it has pre-paid significant down payments to acquire additional mining

The majority of miners we operate and expect to operate once received are the latest generation Antminers manufactured by Bitmain,

including the S19, S19-Pro, and S19j-Pro.

We believe that Bitmain’s miners are the most efficient and productive miners currently

on the market, though that may change as new manufacturers enter the market.

In addition to our currently deployed fleet of approximately

12,900 latest-generation miners (as of the date of this filing), we have purchased an additional 26,830 miners that are slated for delivery

over the next 12 months.

With the full deployment of these miners, our total fleet will consist of approximately 38,610 miners.

Energy Segment

We currently possess a significant amount of inventory,

however, our short-term demand currently exceeds our current inventory levels.

We are actively working with our current suppliers to satisfy

our short-term and anticipated long-term needs.

Due to current supply chain dynamics worldwide constraining our ability to secure certain

inventory, these constraints have resulting in a significant customer backlog.

The bitcoin mining industry is highly competitive and dependent on specialized mining machines that have few manufacturers.

Machine purchases require large down payments and miner deliveries often arrive many months after initial orders are placed.

However, over the last 12 months, we have seen a significant improvement in the availability and pricing for bitcoin mining machines.

The current market conditions have provided opportunities to purchase both new and used machines on the spot-market from other miners or retail-dealers of machines for better financial terms and delivery terms, but there can be no guarantee that such opportunities will continue on a long-term basis.

Currently, we are purchasing more mining machines through re-sellers than direct through manufacturers.

Whether re-sellers or manufacturers have better purchase and delivery terms or more/superior inventory available is likely to change from time to time.

At the time we acquired ATL in December 2020, we had approximately 3,471 bitcoin mining units with application-specific integrated circuits (“ASICs”) in operation, which produced approximately 190 petahash/s.

Since acquiring ATL, we have expanded its operations and purchased additional ASICs.

As of September 30, 2022, we had over 42,000 ASICs in daily operation, which are producing approximately 4.1 EH/s (approximately 58,500 producing 5.75 EH/s as of the date of this filing )

In addition to the 58,500 ASICs in operation as of the date of this filing, the Company has received and is in the process of installing approximately 1,000 additional miners, and expect to receive an additional 6,400 miners in the coming weeks, which have been fully pre-paid.

The Company expects to enter into additional agreements to purchase more miners and infrastructure in the coming year.

The majority of miners we operate and expect to operate once received are the latest generation of miners manufactured by Bitmain, including the S19, S19-Pro, S19j-Pro and S19 XP.

Distribution, Marketing and Strategic Relationships

Digital Currency Mining Segment

We have developed strategic relationships with well-established

companies in key areas including traditional and renewable energy, infrastructure, and bitcoin mining equipment procurement.

In addition to operating our own mining facilities,

we may engage with third-parties to operate mining equipment on behalf of the Company.

On July 8, 2021, CleanBlok entered into a services

agreement with Coinmint, LLC (“Coinmint”).

Pursuant to the agreement, Coinmint has agreed to house and power certain of our

cryptocurrency mining equipment in its facilities, and to use commercially reasonable efforts to mine bitcoin on our behalf.

mining services performed by Coinmint are conducted using mining equipment owned by the Company.

As of the date of this filing, we have

received and deployed approximately 6,700 total miners pursuant to the co-location mining services agreement at Coinmint’s facility

Pursuant to the agreement, as consideration for the

services, we pay Coinmint certain services fees, which are based on the operating costs incurred by Coinmint in performing the services,

and a variable fee calculated based on the profitability of the bitcoin mined during the relevant payment period, subject to uptime performance

The agreement has an initial term of one year, after which it will renew automatically for three-month periods until terminated

in accordance with the terms of the agreement.

Energy Segment

We have developed strategic relationships with well-established

companies in key areas including distribution and manufacturing.

We sell our products worldwide, with a primary focus on Southern California

and the Americas, through our direct product sales force, and partner networks.

We have developed strategic relationships with well-established companies in key areas including traditional and renewable energy, infrastructure, construction, and bitcoin mining equipment procurement.

In addition to operating our own mining facilities, we may engage with third-parties to host and operate mining equipment on behalf of the Company.

On July 8, 2021, CleanBlok entered into a services agreement with Coinmint, LLC (“Coinmint”).

Pursuant to the agreement, Coinmint has agreed to house and power certain of our cryptocurrency mining equipment in its facilities, and to use commercially reasonable efforts to mine bitcoin on our behalf.

All bitcoin mining services performed by Coinmint are conducted using mining equipment owned by the Company.

As of the date of this filing, we have deployed approximately 16,400 total miners pursuant to the co-location mining services agreement at Coinmint’s facility in New York.

Pursuant to the agreement, as consideration for the services, we pay Coinmint certain services fees, which are based on the operating costs incurred by Coinmint in performing the services, and a variable fee calculated based on the profitability of the bitcoin mined during the relevant payment period, subject to uptime performance commitments.

The agreement had an initial term of one year, after which it renews automatically for three-month periods until terminated in accordance with the terms of the agreement.

On March 29, 2022, the Company entered into a hosting agreement with Lancium LLC (“Lancium”).

Pursuant to the agreement, Lancium has agreed to host, power and provide maintenance and other related services to our mining equipment to be placed at Lancium facilities.

Further, Lancium committed to provide 200 megawatts in support of our mining equipment.

In addition, for a period of two and a half years following the operations commencement date, we will have an option to increase the power capacity supplied to the equipment up to 500 MW or 40% of the aggregate capacity of all facilities owned and operated by Lancium, whichever is lesser.

As of the date of this filing, we have not deployed any miners pursuant to the co-location mining services at Lancium’s facility in Texas.

Lancium has informed us that they are experiencing significant delays due to the tightening of capital in the current market climate.

We now expect the readiness of these facilities to be late calendar 2023, and based on market conditions, perhaps even later.

If Lancium’s situation improves in a timeline acceptable to us, we anticipate utilizing Lancium as intended but there can be no assurance that their situation or market conditions will improve.

As of the date of this filing, we have paid no consideration or deposits to Lancium and, accordingly, there is no direct financial risk with respect to the delays Lancium is currently experiencing.

To the extent services are provided in the future, the Company has agreed to compensate Lancium based on a power and hosting fee based on kilowatt hours consumed by the Company’s equipment, subject to service level adjustments and credits, if any.

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.

Materials and Suppliers

Digital Currency Mining Segment

We engage in high efficiency bitcoin mining by using

We engage in high efficiency bitcoin mining by using ASICs.

These specialized computers, often called mining rigs, have few manufacturers.

A majority of the machines we purchased this year

were manufactured by Bitmain, a Chinese company and the preeminent manufacturer of bitcoin mining rigs.

In addition to ASICS, mining equipment includes networking

equipment, power cords, racking, other specialized storage, transformers, and energy.

A majority of the machines we purchased this year were manufactured by Bitmain, MicroBT

or Canaan, the top three preeminent manufacturers of bitcoin mining rigs.

All three companies are headquartered in China and manufacture throughout Asia.

In addition to ASICS, mining equipment includes networking equipment, power cords, racking, other specialized storage, transformers, and energy equipment.

We rely on utility providers for our power needs.

These utilities buy into local energy mixes to source power.

We make every effort to establish our facilities in locations serviced by

utilities that generate a substantial portion of their energy from clean and renewable sources.

We supplement the energy mix provided

by our partners with the purchase of renewable energy credits because the precise ratio of renewable energy in local energy mixes is not

within our control.

We also intend to generate a portion of our own power through renewable solar energy by installing our microgrid solutions

at our mining centers.

Historically, we have been able to manage our supply

chains effectively, but global supply chains are highly constrained, and we are experiencing substantial increases in shipping costs and

unprecedented logistical delays as we make efforts to ensure timely delivery of equipment.

There can be no certainty that we will not

be affected in the future, and we believe that there is significant risk that equipment supply chains will be affected in 2022.

pressures may also impact our fiscal year 2022.

Energy Segment

Although most components essential to our energy business

are generally available from multiple sources, we believe there are component suppliers and manufacturing vendors whose loss to us could

have an adverse effect on our business and financial condition.

The Company also currently engages a contract manufacturer, whereby they

exclusively manufacture parallel switchgear, automatic transfer switches and related control and circuit protective equipment for us.

The Company sources energy storage devices (batteries) from a variety of vendors based on availability, cost, and quality.

to maintain or expand our relationships with our suppliers and manufacturers, or if one or more that we rely upon to meet anticipated

demand reduces or ceases production, it may be difficult to quickly identify and qualify alternatives on acceptable terms.

equipment prices may increase in the coming years, or not decrease at the rates we historically have experienced, due to tariffs or other

In 2021, we experienced periodic supply chain constraints

around certain inventory items, most notably battery energy supply systems.

Global supply chains are highly constrained, and unprecedented

logistical delays have the potential to impact our abilities timely delivery of equipment.

There can be no certainty that we will not

be affected in the future, and we believe that there is significant risk that equipment supply chains will be affected in 2022.

pressures may also impact our fiscal year 2022.

We make every effort to establish our facilities in locations serviced by utilities that generate a substantial portion of their energy from clean and renewable sources.

We supplement a portion of the energy mix provided by our utility providers with the purchase of renewable energy credits because the precise ratio of renewable energy in local energy mixes is not within our control.

We have significant exposure to market fluctuations in energy prices through our power providers.

We actively manage these risks through activities such as deployment of advanced software solutions to increase unit efficiency and energy curtailment when appropriate.

These energy market prices are also significantly impacted by ongoing inflation and the war in Ukraine.

Historically, our methodology and operations have been efficient and resilient enough to withstand these market pressures and global events, but there can be no certainty that we will not be negatively affected in the future.

We believe that there is significant risk that energy prices will continue to be elevated in 2023.

Historically, we have been able to manage our supply chains effectively, but global supply chains continue to be constrained, and from time-to-time experience substantial increases in shipping costs and logistical delays as we make efforts to ensure timely delivery of equipment.

There can be no certainty that we will not be affected in the future, and we believe that there is a significant risk that equipment supply chains will continue to be affected in 2023.

While some macro-economic indicators available as of the date of this filing suggest that inflation may be slowing, inflationary pressures impact virtually all aspects of our materials and suppliers, including power prices, and are likely to impact our fiscal year 2023.

Environmental Issues

Digital Currency Mining and Energy Segments

No significant pollution or other types of hazardous

emission result from the Company’s direct operations and it is not anticipated that our operations will be materially affected by

federal, state or local provisions concerning environmental controls.

Our costs of complying with environmental, health and safety requirements

have not been material.

Starting in the fourth calendar quarter of 2021, we began to voluntarily purchase renewable energy credits to

offset a significant portion of our energy usage that is derived from non-renewable sources.

The Company has also engaged market professionals

to enhance and build a comprehensive environmental, social and governance (“ESG”) strategy.

We do not believe that existing or pending climate

change legislation, regulation, or international treaties or accords are reasonably likely to have a material effect in the foreseeable

future on our business or markets that we serve, nor on our results of operations, capital expenditures or financial position.

continue to monitor emerging developments in this area.

Digital Currency Mining Segment

No significant pollution or other types of hazardous emission result from the Company’s direct operations and it is not anticipated that our operations will be materially affected by federal, state or local provisions concerning environmental controls.

Our costs of complying with environmental, health and safety requirements have not been material.

Starting in the fourth calendar quarter of 2021, we began to voluntarily purchase renewable energy credits to offset a significant portion of our energy usage that is derived from non-renewable sources.

The Company has also engaged market professionals to enhance and build a comprehensive environmental, social and governance (“ESG”) strategy.

There are increasing concerns over the large energy usage of bitcoin mining and its effects on the environment.

Many media reports focus exclusively on the energy requirements of bitcoin mining and cite it as an environmental concern.

However, we do not believe that existing or pending climate change legislation, regulation, or international treaties or accords are reasonably likely to have a material effect in the foreseeable future on our business or markets that we serve, nor on our results of operations, capital expenditures or financial position.

We continue to monitor emerging developments in this area.

Bitcoin mining is a global activity.

During our most

recent fiscal year, a majority of bitcoin mining occurred in China.

After China banned bitcoin mining in May 2021, the center of mining

moved to North America.

During fiscal year 2021, a majority of bitcoin mining occurred in China.

After China banned bitcoin mining in May 2021, the center of mining moved to North America.

Although bitcoin mining by its nature is not a directly competitive business, all miners compete for bitcoin rewards;

based on this, we define competitors as other bitcoin miners.

Our competitors include large, publicly-listed mining companies, large private

mining companies, and, in some cases, independent, individual miners who pool resources.

We believe our principal competitive factors

include our energy technology background, a combination of owned, operated, and co-located miners and facilities, our strategic use of

the bitcoin we mine to fund growth, and our commitment to sustainable business practices, including sourcing renewable energy.

North America, our major competitors include:

Our competitors include large, publicly-listed mining companies, large private mining companies, and, in some cases, independent, individual miners who pool resources.

We believe our principal competitive advantages include our energy background, a combination of owned, operated, and co-located miners and facilities, our strategic use of the bitcoin we mine to fund operations growth, and our commitment to sustainable business practices, including sourcing renewable energy.

Within North America, our major competitors include:

Marathon Digital Holdings

Riot Blockchain, Inc.

3) Greenidge Generation Holdings

4) Bit Digital, Inc.

5) Hut 8 Mining Corp.

6) Hive Blockchain Technologies

7) Compute North

8) Core Scientific

Core Scientific, Inc.

Bitfarms LTD.

In addition to the foregoing, we compete with other

companies that focus all or a portion of their activities on mining activities at scale.

We face significant competition in certain operational

aspects of our business, including, but not limited to, the acquisition of new miners, obtaining the lowest cost of electricity, obtaining

clean energy sources, obtaining access to energy sites with reliable sources of power, and evaluating new technology developments in the

Energy Segment

markets we address in our energy operations are characterized by the presence of both new start-ups and well-established product providers.

industry is capital intensive and highly competitive.

The ability to compete effectively is determined by product features, scalability,

relative price, lifetime operating cost, product durability and reliability, safety, ease

of integration, customer support, design innovation, marketing and distribution capability, service and support and corporate reputation.

We offer turnkey energy solutions which include

system design, installation and grid integration.

Our P latforms are capable of interoperating

with the local utility

grid to help users optimize power for their homes or businesses.

Our solutions are vendor agnostic .

Our solutions are ideal for commercial,

industrial, mining, defense, campus and

community users, both small and large,

with an aim to deliver power at or below the customers

cost of utility power.

These attributes contribute to our ability

to compete with larger,

more established competitors.

Our major competitors include:

5) PowerSecure

Iris Energy Limited

In addition to the foregoing, we compete with other companies that focus all or a portion of their activities on mining activities at scale.

We face significant competition in certain operational aspects of our business, including, but not limited to, the acquisition of new miners, obtaining low cost electricity, obtaining clean energy sources, obtaining access to energy sites with reliable sources of power, and evaluating new technology developments in the industry.

Intellectual Property

Digital Currency Mining Segment

We do not currently own any patents in connection

with our existing and planned digital currency mining related operations.

We do rely, and expect to continue relying, upon trade secrets,

trademarks, service marks, trade names, copyrights and other intellectual property rights.

Energy Segment

to our microgrid business, we own

the following patent:

9,941,696 B2 “ Establishing

Communication and Power

Sharing Links Between Components of a

Distributed Energy System,” awarded

April 10, 2018, which addresses our engineering and

data-analytics technologies, processes and procedures.

The patent covers our ability to receive

data from a plurality of sources within a

microgrid, which is then

analyzed to forecast power needs across the

microgrid, or a combination of multiple 'fractal'

microgrids, and then determining whether

or when to share power with

the requesting module.

In relation to our legacy gasifier business,

we own the following patents:

9,359,567 “Gasification Method Using Feedstock Comprising Gaseous Fuels;” Patent

8,518,133 “Parallel Path, Downdraft Gasifier Apparatus and Method;” Patent No.

8,105,401 “Parallel Path, Downdraft

Gasifier Apparatus and Method;” Patent No.

8,347,829 “Electrolytic Reactor and Related Methods for Supplementing the Air Intake

of an Internal Combustion Engine.” Another patent, "Parallel Path Downdraft Gasifier Apparatus and Method, US 9,890, 340 B2,"

awarded February 13, 2018, further enhanced our patent portfolio surrounding our proprietary gasification and waste-to-energy technologies.

Our patents begin to expire between 2028 and 2035.

We do not currently own any patents in connection with our existing and planned bitcoin mining related operations.

We do rely, and expect to continue relying, upon trade secrets, trademarks, service marks, trade names, copyrights and other intellectual property rights.

Government Regulation

Digital Currency Mining and Energy Segments

We are subject to federal,

state and local laws

and regulations governing environmental quality

and pollution control.

It is anticipated

that, absent the occurrence of an extraordinary

event, compliance with existing federal,

state and local laws,

rules and regulations

concerning the protection of the environment and

human health will

not have a material effect upon us,

our capital expenditures, or earnings.

cannot predict the effects

of any additional regulation or legislation,

enforcement policies thereunder and claims

for damages for injuries to property,

employees, other persons and the

environment resulting from our

Our operations are subject to environmental

regulation by state and federal authorities

including the Environmental Protection Agency (“EPA ” ).

This regulation has not increased

the cost of planning, designing and operating

Although we believe

that compliance with environmental regulations

will not have a material

adverse effect on our operations or results

of these operations, there can be no

assurance that significant costs and liabilities,

including criminal or civil penalties, will not

Moreover, it is possible that other

developments, including stricter environmental laws

and regulations, and

claims for damages for injuries

to property or persons resulting from our activities

could result in substantial costs and

conduct of our activities, our operations will

be subject to the requirements of the federal

Occupational Safety and Health

Act ( “ OSHA ” ) and

comparable state statutes.

The OSHA hazard

communication standard, the

EPA community right-to-know regulations under

Title III of the federal Superfund Amendment

and Reauthorization Act and

similar state statutes require us to organize

information about hazardous materials used,

released or produced in our operations.

Certain of this

information must be provided to employees, state

and local governmental authorities and

local citizens.

We are also subject to the requirements

and reporting set forth in OSHA workplace standards.

Blockchain technologies

and digital currencies, including bitcoin, are increasingly becoming subject to governmental regulation, both in the U.S.

and internationally.

B lockchain technologies and cryptocurrency are under review with a number of U.S.

governmental agencies,

including, without limitation, the SEC, the Commodity Futures Trading Commission, the Federal Trade Commission and the Financial Crimes

Enforcement Network of the U.S.

Department of the Treasury.

State and local regulations also may

apply to our digital currency mining.

Other governmental or quasi-governmental regulatory bodies have shown an interest in regulating

or investigating companies engaged in digital currency related business.

For instance, the Cyber-Digital Task Force of the U.S.

of Justice (the “DOJ”) published a report entitled “Cryptocurrency:

An Enforcement Framework” in October 2020.

This report provides a comprehensive overview of the possible threats and enforcement challenges the DOJ views as associated with the

use and prevalence of digital currencies, amongst other things.

Further, in early March 2021, the SEC chairperson nominee expressed an

intent to focus on investor protection issues raised by cryptocurrencies.

Presently, we do not believe any U.S.

or State regulatory

body has taken any action or position adverse to our digital currency mining activities;

however, future changes to existing regulations

or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree

of reliability.

In addition, regulators and the media have

expressed concerns related to the potential environmental impacts of bitcoin mining, and its energy-intensive nature in particular.

are not materially impacted by any current regulations targeted toward the digital currency mining industry.

Other than the above regulations and maintaining

our good standing in the states in which we operate, complying with applicable local business licensing requirements, complying with all

state and federal tax requirements, preparing our periodic reports under the Securities Exchange Act of 1934, as amended, and complying

with other applicable securities laws, rules, and regulations, we do not believe that existing governmental regulations will have a material

effect on our operations.

Certain governmental and quasi-governmental bodies are considering additional regulations in the bitcoin mining

and energy industries;

it is not currently known whether any such regulations would have a material impact on our businesses.

currently require the approval of any governmental agency or affiliated program for our operations.

In the future we may become subject to new

laws and/or regulations, such as further regulation by the SEC and other agencies, which may affect our digital currency mining and other

For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business,

see the Section entitled “Risk Factors,” below.

Product Development

Digital Currency Mining and Energy Segments

Because the distributed energy and related

software industry is still in a relatively early state of adoption, our ability to compete successfully is heavily dependent upon our

ability to ensure a continual and timely flow of competitive products, services, and technologies to the marketplace.

We continue to enhance

our existing products in order to drive further commercialization.

We may also expand the range of our product offerings and intellectual

property through licensing and/or acquisition of third-party business and technology.

Bitcoin mining by its nature has no products.

Bitcoin Mining

Cryptocurrency mining is largely an unregulated activity at both the state and federal level.

We anticipate that cryptocurrency mining will be a focus for increased regulation in the near- and long-term, and we cannot predict how future regulations may affect our business or operations.

State regulation of cryptocurrency mining is important with respect to where we conduct our mining operations.

The majority of our mining facilities are located in Georgia, which is one of the most favorable regulatory environments for cryptocurrency miners.

However, we also have co-location operations in New York, which has generally been more aggressive in its regulation of cryptocurrency.

Current New York regulation, including a recent moratorium on certain bitcoin mining operations that run on carbon-based power sources signed into law on November 22, 2022, in our view, do not impact our decision to operate our miners at the Coinmint facility in New York in the foreseeable future;

however, if the regulatory landscape changes, we would have to evaluate whether to relocate our hosted miners to one of our facilities in Georgia or to other facilities outside of New York State, which could be costly and we would not be able to operate the miners while they are being relocated.

Further, in March 2022, the United States announced plans to establish a unified federal regulatory regime for cryptocurrency, and a group of United States Senators sent a letter to the United States Treasury Department asking Treasury Secretary Yellen to investigate Treasury’s ability to monitor and restrict the use of cryptocurrencies to evade sanctions imposed by the United States.

We are unable to predict the impact that any new regulations may have on our business at the time of filing this Annual Report.

We continue to monitor and proactively engage in dialogue on legislative matters related to our industry.

In August 2021, the chair of the SEC stated that he believed investors using digital asset trading platforms are not adequately protected, and that activities on the platforms can implicate the securities laws, commodities laws and banking laws, raising a number of issues related to protecting investors and consumers, guarding against illicit activity, and ensuring financial stability.

The chair expressed a need for the SEC to have additional authorities to prevent transactions, products, and platforms from “falling between regulatory cracks,”

as well as for more resources to protect investors in “this growing and volatile sector.”

The chair called for federal legislation centering on digital asset trading, lending, and decentralized finance platforms, seeking “additional plenary authority”

to write rules for digital asset trading and lending.

In addition, it is possible the failure of FTX Trading Ltd.

(“FTX”) in November 2022 and the resulting market turmoil could lead to increased SEC, CFTC, or criminal investigations, enforcement, and/or other regulatory activity.

While these statements are focused on digital asset exchanges (not bitcoin miners), the failure of large exchanges may impact the adoption and value of bitcoin.

Additionally, because we store and sell our bitcoin on exchanges, we may also be potentially impacted by exchange failures in that respect.

For those reasons, we carefully vet our custodians

for adequate compliance with U.S.

laws as well as liquidity, using the information available to us, but we cannot be certain that we will be able to avoid the negative effects of a large exchange failure.

As the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC, CFTC, and other agencies, which may affect our mining and other activities.

For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see Part I, Item 1A.

“Risk Factors”

beginning on page 11 of this Annual Report.

Cybersecurity

Our share of bitcoins mined from our pools are initially received by us in wallets we control, which are maintained by Coinbase Inc., a U.S.

based digital assets exchange.

We currently sell the majority of the bitcoin we mine and utilize hot wallets to hold this bitcoin immediately prior to selling for working capital purposes.

We hold any remainder of our bitcoin in cold storage.

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.

We have established a Cybersecurity Committee, with the purpose of meeting at least semi-annually and providing recommendations to Executive Management with respect to our information technology use and protection, including but not limited to data governance, privacy, compliance and cybersecurity.

To our knowledge there has been no security breach or incident, unauthorized access or disclosure, or other compromise of or relating to the Company or its subsidiaries hard wallets, cold wallets, information technology and computer systems, networks, hardware, software, data and databases, equipment or technology.

We have not been notified of, and has no knowledge of any event or condition that could result in, any security breach or incident, unauthorized access or disclosure or other compromise to their IT Systems and Data, and we have implemented appropriate controls, policies, procedures, and technological safeguards to maintain and protect the integrity, continuous operation, redundancy and security of our IT Systems and Data reasonably consistent with industry standards and practices, or as required by applicable regulatory standards.

We are presently in material compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification.

Human Capital Resources;

Digital Currency Mining and Energy Segments

We believe that our future success depends,

in part, on our ability to continue to attract, hire, and retain qualified personnel.

As of December 1, 2021, we had 87 staff members,

86 of which were full time.

Employees participate in equity incentive plans and receive generous compensation in the form of salary and

We continually seek to hire and retain talented professionals, although the competition for such personnel in our segments is

We believe that our future success depends, in no small part, on our ability to continue to attract, hire, and retain qualified personnel.

As of December 1, 2022, we had 130 staff members, 121 of which were full time and all located in the United States.

We believe that we have adequate personnel and resources with the specialized skills required to carry out our operations successfully.

Employees participate in equity incentive plans and receive generous compensation in the form of salary and benefits.

We continually seek to hire and retain talented professionals, although the competition for such personnel in our segments is significant.

None of our employees are represented by a labor union, and we have never experienced a work stoppage.

We believe we have a strong and engaging relationship with our employees.

We cultivate trust and transparency among our employees, the communities we operate in, and the people around the world who depend on Bitcoin as we jointly strive to leave the world better than we found it, build the infrastructure of the future, and value growth for the greater good.

Discontinued Operations

As of June 30, 2022, we deemed our energy operations to be discontinued operations due to our strategic decision to strictly focus on bitcoin mining operations and divest of the majority of our energy assets.

Through our discontinued operations segment, we previously provided energy solutions through our wholly-owned subsidiaries CleanSpark, LLC, CleanSpark Critical Power Systems, Inc., GridFabric, LLC, and through ATL Solar Watt Solutions, Inc.

These solutions consisted of engineering, design and software solutions, custom hardware solutions, Open Automated Demand response (“OpenADR”), solar, energy storage for microgrid and distributed energy systems.

We have since sold the majority of oursoftware and intellectual property assets related to the Energy Segment (including mPulse, mVoult and GridFabric LLC), and we are in the process of selling additional inventory and other assets.

We still own patented gasification energy technologies and are not currently planning to sell or market these technologies.

Our technology converts organic material into synthesis gas, which can be used as fuel for a variety of applications and as feedstock for the generation of DME (Di-Methyl Ether).

Other business activities

Through ATL, we also provide traditional data center services to a small number of remaining clients, such as providing customers with rack space, power and equipment, and offer several cloud services including virtual services, virtual storage, and data backup services.

ATL is in the process of offloading these customers.

Company Websites

1 unchanged sentence

www.cleanspark.com.

and informational websites for our subsidiaries at www.cleanblok.com, www.gridfabric.io , and www.p2klabs.com.

The contents of these websites are not incorporated

in, or otherwise to be regarded as part of, this Annual Report.

We file reports with the SEC, which are available

on our website free of charge.

These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form

8-K, Section 16 filings on Form 3, Form 4, and Form 5, and other related filings, each of which is provided on our website as soon as

reasonably practical after we electronically file such materials with or furnish them to the SEC.

In addition, the SEC maintains a website

(www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically

with the SEC, including the Company.

The contents of these websites are not incorporated in, or otherwise to be regarded as part of, this Annual Report.

We file reports with the SEC, which are available on our website free of charge.

These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Section 16 filings on Form 3, Form 4, and Form 5, and other related filings and exhibits, each of which is provided on our website free of charge as soon as reasonably practical after we electronically file such materials with or furnish them to the SEC.

In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business