What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-12-15 compared with 2021-12-14 · 1219 added, 2125 removed, 185 unchanged (95% of the section changed)

Financial Statements and Supplementary

Index to Financial Statements Required by

Article 8 of Regulation S-X:

Audited Consolidated Financial

Reports of Independent Registered Public Accounting Firm

Financial Statements and Supplementary Data

Index to Financial Statements Required by Article 8 of Regulation S-X:

Audited Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID 206 )

Consolidated Balance Sheets as of September 30, 2022 and 2021;

Consolidated Statements of Operations and

Comprehensive Loss for the years ended September 30, 2021 and 2020;

Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2021 and 2020

Consolidated Statements of Operations and Comprehensive Loss for the years ended September 30, 2022 and 2021;

Consolidated Statements of Stockholders’

Equity for the years ended September 30, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended September 30, 2022 and 2021;

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

CleanSpark, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of CleanSpark, Inc.

and its subsidiaries (collectively, the “Company”) as of September 30, 2021 and 2020, and

the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two

years in the period ended September 30, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September

30, 2021 and 2020, and the results of their operations and their cash flows for each of the two years in the period ended September 30,

2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited the Company’s

internal control over financial reporting as of September 30, 2021, based on criteria established in Internal Control - Integrated

Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report

dated December 14, 2021 expressed an adverse opinion.

We have audited the accompanying consolidated balance sheets of CleanSpark, Inc.

and its subsidiaries (collectively, the “Company”) as of September 30, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, stockholders’

equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021 , and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Company’s management is responsible

for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness

of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s

internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the

financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial

reporting was maintained in all material respects.

Our audits of the financial statements included

performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing

procedures that responds to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management,

as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included

obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing

and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing

such other procedures as we considered necessary in the circumstances.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated

below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated

to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved

our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our

opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate

opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of the Accounting for and

Disclosure of Digital Currency Held

As disclosed in Note 2 to the consolidated

financial statements, the Company’s digital currency held as of September 30, 2021, which mainly consist of Bitcoin, are accounted

for as indefinite-lived intangible assets, and have been included in current assets on the consolidated balance sheet.

The Company’s

digital currency as of September 30, 2021 amounted to approximately $23,603,000.

We identified the accounting for and disclosure of the

digital currency held as a critical audit matter because, currently, no specific definitive guidance exists for the accounting for and

disclosure of digital currencies held in accordance with accounting principles generally accepted in the United States (“GAAP”).

The Company’s management has exercised significant judgment in their determination of how existing GAAP should be applied to the

accounting for its digital currency held, the associated financial statement presentation and accompanying footnote disclosures.

The primary procedures we performed to address

this critical audit matter included the following:

· Evaluated management’s rationale for the application of Accounting

Standards Codification (“ASC”) 350 to account for its digital currency held and examined management’s processes for

determining the amount of impairment expense recognized;

· Evaluated management’s rationale for the inclusion of digital currency

as a current asset on the balance sheet;

· Independently and directly confirmed the balance and ownership of digital

currency that is in the custody of a third party;

· Evaluated management’s disclosures of its digital currency activities

in the financial statement footnotes;

· Examined supporting sale and cash receipt evidence for digital currency

sales, including management’s processes for calculating any gains or losses on sales of its digital currency.

Evaluation of the Accounting for and

Disclosure of Digital Currency Mining Revenue Recognized

As disclosed in Note 2, the Company recognizes

revenue in accordance with ASC 606, Revenue from Contracts with Customers.

The Company provides computing power to the mining pools and

in exchange for providing such computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the pool

operator receives for successfully adding a block to the blockchain, plus a fractional share of the transaction fees attached to that

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.

During the year ended September

30, 2021, the Company recognized net digital currency mining revenue of approximately $38,846,000.

We identified the accounting for and

disclosure of digital currency mining revenue recognized as a critical audit matter because, currently, no specific definitive guidance

exists for the accounting for and disclosure of digital currency mining revenue recognized in accordance with GAAP.

The Company’s

management has exercised significant judgment in their determination of how existing GAAP should be applied to the accounting for and

disclosure of digital currency mining revenue recognized.

The primary procedures we performed to address

this critical audit matter included the following:

· Performed a site visitation of the facility where the Company’s mining

hardware is located.

The visitation included an observation of the physical and environmental controls and mining equipment inventory

observation procedures;

· Evaluated management’s rationale for the application of ASC 606 to

account for digital currency awards earned;

· Evaluated management’s disclosures of its digital currency activities

in the financial statement footnotes;

· Evaluated and tested management’s rationale and supporting documentation

associated with the valuation of digital currency awards earned;

· Independently confirmed certain financial data and wallet records directly

with the mining pools;

· Compared the Company’s wallet records of digital currency mining compensation

received to publicly available blockchain records;

· Undertook an analytical review of total digital currency mining revenue

expected to be recognized by the Company by assessing the total hash power contributed onto the network by the Company against total block

rewards and transaction fees issued over the year.

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor

Houston, Texas

December 14, 2021

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

CleanSpark, Inc.

Opinion on Internal Control Over

Financial Reporting

We have audited the internal control over

financial reporting of CleanSpark, Inc.

and its subsidiaries (collectively, the “Company”) as of September 30, 2021 based

on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of

the Treadway Commission (“COSO”).

In our opinion, because of the effect of the material weaknesses described below on the

achievement of the objectives of the control criteria, the Company did not maintain effective internal control over financial reporting

as of September 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We do not express an opinion or any other

form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s

We also have audited, in accordance with

the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements

of the Company as of September 30, 2021 and 2020 and for the years then ended and our report dated December 14, 2021 expressed an unqualified

opinion on those financial statements.

The Company acquired ATL Data Centers LLC

and Solar Watt Solutions, Inc.

(collectively, the “Acquired Businesses”) during the year ended September 30, 2021, and management

excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30,

2021, the Acquired Businesses’ internal control over financial reporting associated with total assets of $267.3 million (of

which $27.3 million represents goodwill and intangibles included within the scope of the assessment), and total revenues of $43.2 million

included in the consolidated financial statements of the Company as of and for the year ended September 30, 2021.

Our audit of internal

control over financial reporting of the Company also excluded an evaluation of the internal control over financial

reporting of the Acquired Businesses.

Basis for Opinion

The Company’s management is responsible

for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over

financial reporting, included in the Management’s Report on Internal Control over Financial Reporting (“Management’s

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in

accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and

We conducted our audit in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective

internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting

included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,

and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included

performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis

for our opinion.

A material weakness is a deficiency, or

combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material

misstatement of the company’s 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’s assessment:

(1) the Company did not adequately implement or

properly maintain controls over its financial close and reporting process, its process over the recording of energy and other services

revenue and its process over the accounting and valuation of certain aspects of business combinations involving significant estimates

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.

These material weaknesses were

considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 consolidated financial statements,

and this report does not affect our report on those financial statements.

Definition and Limitations of Internal

Control Over Financial Reporting

A company’s internal control over

financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance

of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with

accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being

made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material

effect on the financial statements.

Because of its inherent limitations, internal

control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future

periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of the Accounting for and Disclosure of Bitcoin Mining Revenue Recognized

As disclosed in Note 2, the Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers.

The Company provides computing power to the mining pools and in exchange for providing such computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the pool operator receives for successfully adding a block to the blockchain, plus a fractional share of the transaction fees attached to that block.

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.

During the year ended September 30, 2022, the Company recognized net bitcoin mining revenue of approximately $131.0 million.

We identified the accounting for and disclosure of bitcoin mining revenue recognized

as a critical audit matter because, currently, no specific definitive guidance exists for the accounting for and disclosure of bitcoin mining revenue recognized in accordance with GAAP.

The Company’s management has exercised significant judgment in their determination of how existing GAAP should be applied to the accounting for and disclosure of bitcoin mining revenue recognized.

The primary procedures we performed to address this critical audit matter included the following:

Performed a site visitation of the facilities where the Company’s mining hardware is located.

The visitation included an observation of the physical and environmental controls and mining equipment inventory observation procedures;

Evaluated management’s rationale for the application of ASC 606 to account for bitcoin awards earned;

Evaluated management’s disclosures of its bitcoin activities in the financial statement footnotes;

Evaluated and tested management’s rationale and supporting documentation associated with the valuation of bitcoin awards earned;

Independently confirmed certain financial data and wallet records directly with the mining pool;

Compared the Company’s wallet records of bitcoin mining revenue received to publicly available blockchain records;

Undertook an analytical review of total bitcoin mining revenue expected to be recognized by the Company by assessing the total hash power contributed onto the network by the Company against total block rewards and transaction fees issued over the year.

Evaluation of the Accounting for and Disclosure of Bitcoin Held

As disclosed in Note 2 to the consolidated financial statements, bitcoin held by the Company as of September 30, 2022, are accounted for as indefinite-lived intangible assets and have been included in current assets on the consolidated balance sheets.

The Company’s bitcoin as of September 30, 2022 amounted to approximately $11.1 million.

We identified the accounting for and disclosure of bitcoin held as a critical audit matter because, currently, no specific definitive guidance exists for the accounting for and disclosure of bitcoin held in accordance with accounting principles generally accepted in the United States (“GAAP”).

The Company’s management has exercised significant judgment in their determination of how existing GAAP should be applied to the accounting for bitcoin held, the associated financial statement presentation and accompanying footnote disclosures.

The primary procedures we performed to address this critical audit matter included the following:

Evaluated management’s rationale for the application of Accounting Standards Codification (“ASC”) 350 to account for bitcoin held and examined management’s processes for determining the amount of impairment expense recognized;

Evaluated management’s rationale for the inclusion of bitcoin as a current asset on the consolidated balance sheets;

Independently and directly confirmed the balance and ownership of bitcoin that is in the custody of a third party;

Evaluated management’s disclosures of its bitcoin activities in the financial statement footnotes;

Examined supporting sale and cash receipt evidence for bitcoin sales, including management’s processes for calculating any gains or losses on sales of its bitcoin.

/s/ MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor

We have served as the Company's auditor since 2018.

Houston, Texas

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

and cash equivalents, including restricted cash

receivable, net

expense and other current assets

investment asset

equity security

debt security, AFS, at fair value

September 30,

Current assets

and equipment, net

lease right of use asset

software, net

on mining equipment

long-term asset

AND STOCKHOLDERS' EQUITY

payable and accrued liabilities

lease liability

consideration

Cash and cash equivalents, including restricted cash

Accounts receivable, net

Prepaid expense and other current assets

Derivative investment asset

Investment in equity security

Investment in debt security, AFS, at fair value

Current assets held for sale

Total current assets

Property and equipment, net

Operating lease right of use asset

Intangible assets, net

Deposits on mining equipment

Other long-term asset

Long-term assets held for sale

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

lease liability, net of current portion

Stockholders'

100,000,000 shares

37,395,945 and 17,390,979 shares

issued and outstanding as of September 30, 2021 and September 30, 2020, respectively

10,000,000 shares

Series A shares;

Accounts payable and accrued liabilities

Operating lease liability

Finance lease liability

Acquisition liability

Contingent consideration

Current portion of long-term loans payable

Dividends payable

Current liabilities held for sale

Total current liabilities

Long-term liabilities

Operating lease liability, net of current portion

Finance lease liability, net of current portion

Loans payable, net of current portion

Long-term liabilities held for sale

Total liabilities

Stockholders' equity

Common stock;

$ 0.001 par value;

100,000,000 shares authorized;

55,661,337 and

37,395,945 shares issued and outstanding as of September 30, 2022 and

September 30, 2021, respectively

Preferred stock;

$ 0.001 par value;

10,000,000 shares authorized;

2,000,000 authorized;

1,750,000 and 1,750,000 issued

and outstanding as of September 30, 2021 and September 30, 2020 respectively

paid-in capital

other comprehensive loss

1,750,000 and 1,750,000 issued and outstanding

as of September 30, 2022 and September 30, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated deficit

( 196,053,911

( 138,392,118

stockholders' equity

liabilities and stockholders' equity

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

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

currency mining revenue, net

hardware, software and services revenue

services revenue

Total stockholders' equity

Total liabilities and stockholders' equity

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

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the year ended

September 30,

Revenues, net

Cost of revenues

(exclusive of depreciation and amortization shown below)

and administrative expenses

impairment expense (related to Intangible Assets)

and amortization

Bitcoin mining revenue, net

Other services revenue

Total revenues, net

Costs and expenses

from operations

( 28,577,053 )

( 15,143,116 )

income/(expense)

in fair value of contingent consideration

gain on sale of digital currency

gain on sale of equity securities

gain (loss) on equity security

gain on derivative security

( 10,758,750 )

on disposal of assets

Cost of revenues (exclusive of depreciation and amortization shown below)

Professional fees

Payroll expenses

General and administrative expenses

Gain on disposal of assets

Other impairment expense (related to bitcoin)

Impairment expense - other

Impairment expense - goodwill

Realized gain on sale of bitcoin

Depreciation and amortization

Total costs and expenses

Loss from operations

Other income (expense)

( 8,203,027 )

before income tax (expense) or benefit

( 21,812,010 )

( 23,346,143 )

tax (expense) or benefit

( 21,812,010 )

( 23,346,143 )

comprehensive loss

( 21,817,402 )

( 23,346,143 )

stock dividends

comprehensive loss attributable to common shareholders

( 21,994,904 )

( 23,346,143 )

per common share - basic and diluted

average common shares outstanding - basic and diluted

The accompanying

notes are an integral part of these consolidated financial statements.

STATEMENTS OF STOCKHOLDERS’ EQUITY

the Year Ended September 30, 2021

Paid-in Capital

Change in fair value of contingent consideration

Realized gain on sale of equity security

Unrealized loss on equity security

Unrealized (loss) gain on derivative security

Interest income

Interest expense

Total other (expense) income

Loss before income tax (expense) or benefit

Income tax expense

Loss from continuing operations

Discontinued operations

Loss from discontinued operations

Income tax (expense) or benefit

Loss on discontinued operations

Preferred stock dividends

Net loss attributable to common shareholders

Other comprehensive income (loss)

Total comprehensive loss attributable to common shareholders

Income (loss) from continuing operations per common share - basic

Weighted average common shares outstanding - basic

Income (loss) from continuing operations per common share - diluted

Weighted average common shares outstanding - diluted

Loss on discontinued operations per common share - basic

Weighted average common shares outstanding - basic

Loss on discontinued operations per common share - diluted

Weighted average common shares outstanding - diluted

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

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

Preferred Stock

Comprehensive

Stockholders' Equity

September 30, 2020

Stockholders'

Balance, September 30, 2020

( 116,402,606

1 unchanged sentence

Exercise of options and warrants

Shares returned for settlement

Shares returned for settlement of debt

Shares issued for business acquisition

1 unchanged sentence

Options and warrants issued for services

Shares issued under underwritten offering,

net of offering costs

Shares returned in relation to business

Shares issued under underwritten offering, net of offering costs

Shares returned in relation to business acquisition

Preferred stock dividends

( 21,812,010 )

Other comprehensive

Other comprehensive loss

Balance, September 30, 2021

( 138,392,118

the Year Ended September 30, 2020

Paid-in Capital

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

Preferred Stock

Comprehensive

Income (Loss)

Stockholders' Equity

September 30, 2019

$ 111,936,125

$ ( 93,056,463 )

Shares issued for services

Options and warrants issued for services

Shares issued upon conversion of debt and

accrued interest

Rounding shares issued for stock split

Shares returned and cancelled

Options issued for business acquisition

Shares issued for business acquisition

Shares issued upon exercise of warrants

Shares issued under registered direct offering

( 23,346,143 )

Other comprehensive

Stockholders'

Balance, September 30, 2021

( 138,392,118

The accompanying notes

are an integral part of these consolidated financial statements.

STATEMENTS OF CASH FLOWS

the Year Ended

Cash Flows from Operating

( 21,812,010 )

( 23,346,143 )

Adjustments to reconcile

net loss to net cash used in operating activities:

compensation including expenses in lieu of commission to brokers

Impairment expense on

digital currency

Unrealized gain on equity

Digital currency issued

Realized gain on sale

of equity security

Realized gain on digital

Options and restricted stock units issued for services

Shares withheld for net settlement of restricted stock units related to tax withholdings

Shares issued for settlement of contingent consideration related to business acquisition

Shares returned for settlement of contingent consideration and holdbacks related to business acquisition

Exercise of options

Shares issued under equity offering,

net of offering costs

Preferred stock dividends

Other comprehensive income

Balance, September 30, 2022

( 196,053,911

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

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30,

Cash Flows from Operating Activities

Loss from discontinued Operations

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Unrealized (gain) loss on equity security

Realized gain on sale of equity security

Impairment of Bitcoin

Realized gain on sale of Bitcoin

Bitcoin issued for services

Impairment of goodwill

Impairment of intangibles

Impairment of investment in equity security

Unrealized (gain) loss on derivative asset

Gain on fair value of contingent consideration

Non-cash lease expense

Stock based compensation

Depreciation and amortization

Provision for bad debts

Gain on derivative asset

( 2,790,387 )

( 2,115,269 )

Gain on forgiveness of debt

in fair value of contingent consideration

Amortization of debt

Shares issued as interest

Loss on asset disposal

Impairment expense on

capitalized software

Impairment of Goodwill

Noncash lease expense

Changes in operating

assets and liabilities

Decrease (increase)

in prepaid expenses and other current assets

( 3,216,288 )

Decrease in contract

in contract liabilities, net

(Increase) in accounts

( 2,011,250 )

Increase in accounts

payable and accrued liabilities

(Increase) in digital

( 38,846,633 )

(Decrease) in lease

( 2,238,378 )

in due to related parties

Net cash used in operating

( 35,429,342 )

Amortization of debt discount

PPP loan forgiveness

Gain on write-off and disposal of assets

Changes in operating assets and liabilities

Mining of bitcoin

( 130,999,686

Proceeds from sale of bitcoin

Change in contract liabilities

Decrease in operating lease liabilities

Increase in accounts payable and accrued liabilities

(Increase) in prepaid expenses and other current assets

(Increase) in accounts receivables

Decrease (Increase) in Inventory

Long -term deposits paid

Net cash provided by (used in) operating activities from Continuing Operations

Net cash used in operating activities of Discontinued Operations

Net cash provided by (used in) Operating Activities

Cash Flows from investing

Increase in deposits

on mining equipment

( 89,260,010 )

Proceeds from sale of

digital currencies

Proceeds from sale of

equity securities

in infrastructure development

Purchase of property

and equipment

( 139,234,948 )

Acquisition of ATL Data

Center, net of cash received

Acquisition of p2KLabs,

net of cash received

Payments on miners (incl.

( 171,181,268

Acquisition of Solar

Watt Solutions

Purchase of fixed assets

( 139,234,948

Cash consideration for

acquisition of GridFabric, net of cash acquired

Investment in capitalized

Investment in debt and

equity securities

Net cash used in investing

Purchase of intangible assets

Settlement of holdbacks related to contingent consideration

Investment in infrastructure development

Proceeds from sale of miners

Proceeds from the sale of equity securities

Acquisition of WAHA, net of cash received

Acquisition of ATL, net of cash received

Deposit on Acquisition of Mawson

Net Cash used in Investing Activities - Continuing Operations

( 210,981,538

( 228,157,922

Cash Flows from Financing

Payments on promissory

Net Cash used in Investing Activities - Discontinued Operations

Net Cash used in Investing Activities

( 210,981,538

Proceeds from promissory

Payments on finance

Proceeds from exercise

of options and warrants

Proceeds from

offerings, net

Dividend paid

Net cash provided by

financing activities

Net increase (decrease)

( 229,158,058

Cash and cash equivalents, including

restricted cash, beginning of period

and cash equivalents, including restricted cash, end of period

Supplemental disclosure of

cash flow information

Cash paid for

investing and financing transactions

recognition of right of use asset and liability

Remeasurement

of right of use asset and liability due to lease modification

and options issued for business acquisition

issued for services

issued for conversion of debt and accrued interest

Cashless exercise of

issued as collateral returned to treasury

The accompanying

notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Cash Flows from Financing Activities

Payments on loans

Payments on preferred dividends

Payments on finance leases

Proceeds from equipment backed loan

Proceeds from exercise of options and warrants

Proceeds from equity offerings, net

Net cash provided by financing activities - Continued Operations

Net cash provided by financing activities - Discontinued Operations

Net cash provided by financing activities

Net increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash, beginning of period

Cash and cash equivalents and restricted cash, end of period

Supplemental disclosure of cash flow information

Cash paid for interest

Cash paid for tax

Non-cash investing and financing transactions

Day one recognition of right of use asset and liability

Right of use asset and liability written off due to lease termination

Shares and options issued for business acquisition

Cashless exercise of options and warrants

Shares issued as collateral returned to treasury

Shares and options issued for services

Shares withheld for net settlement of restricted stock units related to tax withholdings

Fixed assets purchased through finance transactions

Shares issued for settlement of seller agreements related to acquisition

Shares returned as part of settlement of seller agreements related to acquisition

Preferred shares dividends accrued

Unrealized gain on investment in available-for-sale debt security

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

CLEANSPARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND LINE OF BUSINESS

The Company –

CleanSpark, Inc.

(“CleanSpark,” “we,” “our,” "Company") was incorporated in the state of

Nevada on October 15, 1987

as SmartData Corporation.

(“CleanSpark,”

“we,”

“our,”

"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.

a bitcoin mining and diversified energy company incorporated in Nevada.

The Company sustainably mines bitcoin and provides 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 2014.

CleanSpark, Inc.

to develop a long-term sustainability and clean energy plan to support its bitcoin mining operations.

Digital Currency

Mining Segment

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.

a second data center in August 2021 and have had a co-location agreement with N ew York-based Coinmint in place since

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.

subsidiaries CSRE Properties Norcross, LLC and CSRE Property Management Company, LLC and CSRE Properties, LLC, we maintain real property

holdings for ATL Data Centers LLC and CleanBlok Inc.

Company provides energy solutions through our wholly owned subsidiaries CleanSpark,

LLC, CleanSpark Critical Power Systems, Inc., GridFabric, LLC, and Solar Watt Solutions, Inc.

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.

business activities

Through our wholly

owned subsidiary p2kLabs, Inc., we provide design, software development, and other technology-based consulting 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.

is a sustainable bitcoin mining company.

The Company, through itself and its wholly owned subsidiaries, has operated in the bitcoin mining sector since December 2020.

Lines of Business

Bitcoin Mining Business

Through CleanSpark, Inc., and the Company’s wholly owned subsidiaries, ATL Data Centers LLC (“ATL”), CleanBlok, Inc.

(“CleanBlok”), CleanSpark DW, LLC, and CleanSpark GLP, LLC, the Company mines bitcoin.

The Company entered the bitcoin mining industry through its 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.

The Company currently intends to acquire additional facilities, equipment and infrastructure capacity to continue to expand our bitcoin mining operations.

Through the Company’s subsidiaries CSRE Properties Norcross, LLC, CSRE Property Management Company, LLC, CSRE Properties, LLC, CSRE Properties Washington, LLC and CSRE Properties Sandersville, LLC the Company maintains real property holdings.

Discontinued Operations

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

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

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

The Company has since sold the majority of its software and intellectual property assets related to the Energy Segment, and is in the process of selling additional remaining inventory and 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, the Company also provides traditional data center services to a small number of remaining customers, such as providing customers with rack space, power and equipment, and offers several cloud services including virtual services, virtual storage, and data backup services.

The Company is in the process of offloading those customers.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation and Liquidity

The accompanying audited

financial statements of the Company have been prepared by the Management in accordance with accounting principles generally accepted

in the United States of America and the rules of the Securities and Exchange Commission and have been filed with the SEC on December

14, 2021 (“Form 10-K”).

As shown in the accompanying

audited consolidated financial statements, the Company incurred a net loss of $ 21,812,010

and $ 23,346,143

during the years ended September 30, 2021 and September 30, 2020, respectively.

Company has experienced negative cash flows from operations, the Company has sufficient capital to support its ongoing operations from

cash flows provided from operational activities, including potential sale of digital currency, and has access to additional capital through

the registered sale of equity securities pursuant to a registration statement on Form S-3.

In addition, the Company is continuing to

grow its business segments through which it expects to grow its working capital base.

As of September 30, 2021 and September 30, 2020,

the Company had working capital of $ 47,663,299 and

$ 2,869,329 , respectively.

of Consolidation

The accompanying audited

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.

The accompanying consolidated

financial statements of the Company have been prepared assuming the Company will continue as a going concern.

The going concern basis

of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and

will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

The evaluation of

going concern under the accounting guidance requires significant judgment which involves the Company to consider that it has historically

incurred losses in recent years as it has prepared to grow its business through acquisition opportunities.

The Company must also consider

its current liquidity as well as future market and economic conditions that may be deemed outside the control of the Company as it relates

to obtaining financing and generating future profits.

As of September 30, 2021, the Company had approximately $ 18

million of available cash on-hand and Bitcoin with a fair market value of $ 27.5

In determining whether there is substantial doubt about the Company’s ability

to continue as a going concern, the Company may consider the effects of any mitigating plans for additional sources of financing.

Company identified additional financing sources it believes are currently available to fund its operations and drive future growth that

include (i) the ability to access capital using the at-the-market (“ATM”) equity offering program available to the Company

whereby the Company may sell additional shares of its common stock (discussed in Note 11 – Stockholders’ Equity), and (ii) the ability

to raise additional financing from other sources.

Basis of Presentation and Liquidity

The accompanying audited 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 and have been filed with the SEC on December 14, 2022 (“Form 10-K”).

As shown in the accompanying audited consolidated financial statements, the Company incurred a net loss from continuing operations of $ 40,089,393 and $ 8,229,162 during the years ended September 30, 2022 and September 30, 2021, respectively.

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 in fiscal 2022.

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 ("ATM") offering facility and debt financing through the lending arrangement the Company entered into in April 2022 (see Note 9 and Note 11).

As of September 30, 2022 and September 30, 2021, the Company had working capital of $ 16,735,199 and $ 47,663,299 , respectively.

Principles of Consolidation

The accompanying audited 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.

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.

Going Concern

The accompanying consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern.

The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

The evaluation of going concern under the accounting guidance requires significant judgment which involves the Company to consider that it has historically incurred losses in recent years as it has prepared to grow its business through acquisition opportunities.

The Company must also consider its current liquidity as well as future market and economic conditions that may be deemed outside the control of the Company as it relates to obtaining financing and generating future profits.

As of September 30, 2022, the Company had $ 20,462,570 of available cash on-hand and Bitcoin with a fair market value of $ 11,147,478 .

In determining whether there is substantial doubt about the Company’s ability to continue as a going concern, the Company may consider the effects of any mitigating plans for additional sources of financing.

The Company identified additional financing sources it believes are currently available to fund its operations and drive future growth that include (i) the ability to access capital using the ATM equity offering program available to the Company whereby the Company may sell additional shares of its common stock (discussed in Note 11 –

Stockholders’

Equity), and (ii) the ability to raise additional financing from other sources.

(Refer to Note 11 for further details).

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 on percentage of completion type contracts,

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 COVID-19 may have

on the Company’s operations.

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:

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 bitcoin impairment, intangible assets acquired,

impairments and estimations of long-lived assets, revenue recognition from bitcoin mining, valuation of derivative assets and liabilities, available-for-sale investments, allowances for uncollectible accounts, valuation of bitcoin, 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.

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

(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.

from digital currency mining

The Company has entered in digital asset mining

pools 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

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 block..

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.

The consideration is dependent on the number of digital assets mined on any given day.

Fair value of the

digital currency award received is determined using the spot price of the related digital currency on the date earned.

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.

The total revenue recognized from digital currency mining for the years

ended September 30, 2021 and September 30, 2020 is $ 38,846,633

respectively.

& Construction Contracts and Service Contracts

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.

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

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.

The total revenue

recognized from sale of residential battery, residential solar and commercial solar for the years ended September 30, 2021 and September

30, 2020 is $ 3,727,335

respectively.

from Sale of Equipment

Obligations Satisfied at a point in time.

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 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.

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.

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

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, 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.

assets represent revenue recognized in excess of amounts billed and include unbilled receivables (typically for cost reimbursable

contracts) of $ 0 and

contract work in progress (typically for fixed-price contracts) of $ 0 and $ 4,103 as

of September 30, 2021 and September 30, 2020, respectively.

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.

There are no advances that are payments on account of contract assets that have been deducted from contract assets as of September

30, 2021 and September 30, 2020.

Contract liabilities mostly represent customer deposits.

The Company recorded $ 296,964 and $ 64,198 in

contract liabilities as of September 30, 2021 and September 30, 2020, respectively.

The total revenue

recognized from sale of switchgear for the years ended September 30, 2021 and September 30, 2020 is $ 4,448,726

and $ 7,505,761

respectively.

from software

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.

series of distinct services represents a single performance obligation that is satisfied over time.

The total revenue recognized from design,

software development and other technology-based consulting services for the years ended September 30, 2021 and September 30, 2020 is

and $ 2,431,419 ,

respectively.

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.

The total revenue

recognized from design, software development and other technology-based consulting services for the years ended September 30, 2021 and

September 30, 2020 is $ 1,676,505

and $ 2,431,419 ,

respectively.

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.

The total revenue

recognized from data center services for the years ended September 30, 2021 and September 30, 2020 is $ 554,345

respectively.

Consideration

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.

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.

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.

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

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).

ended September 30, 2021 and 2020, the Company reported revenues of $ 49,438,115

and $ 10,028,701 ,

respectively.

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:

Delivered at a Point in Time.

Cost of revenue from these products is recognized when the

Company transfers control of the product to the customer, which is generally upon shipment.

Delivered Over Time.

Cost of revenue from these products is recognized over the related service

and cash equivalents including restricted cash

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

The following table sets forth a reconciliation of cash, cash equivalents, and restricted

cash reported in the consolidated balance sheets that agrees to the total of those amounts as presented in the consolidated statements

of cash flows.

Our accounting policy on revenue recognition for our bitcoin mining segment (sole reporting unit as of September 2022) by type of revenue is provided below.

Revenues from bitcoin 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 transaction consideration the Company receives is noncash consideration, in the form of bitcoin, 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 bitcoin award received is determined using the spot price of the related bitcoin on the date earned.

There is currently no definitive guidance under GAAP or alternative accounting framework for the accounting for bitcoin 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.

The total revenue recognized from bitcoin mining for the years ended September 30, 2022 and September 30, 2021 is $ 130,999,686 and $ 38,846,633 , respectively.

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.

The total revenue recognized from data center services for the years ended September 30, 2022 and September 30, 2021 is $ 524,759 and $ 440,472 , respectively.

Cost of Revenues

Bitcoin mining segment (sole reportable segment)

The Company includes energy costs and external co-location mining hosting fees in cost of revenues.

Cash and cash equivalents

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 sheets that agrees to the total of those amounts as presented in the consolidated statements of cash flows.

September 30,

Cash and cash equivalents, excluding restricted cash

Restricted cash - construction escrow account

Cash and cash equivalents per consolidated Balance

Cash and cash equivalents, including restricted cash

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.

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

Accounts receivable,

net consists of the following:

Accounts Receivable,

Other receivables

Retainage receivable

for doubtful allowances

Total Accounts Receivable,

Inventory is stated at the lower 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.

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:

September 30,

Accounts Receivable, gross

Provision for doubtful allowances

Total Accounts Receivable, net

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.

There were no write-downs of inventory as of September 30, 2022 and 2021 , respectively.

The composition of inventory for the years ended as of September 30, 2021 and 2020 are as follows:

Batteries and solar panels

Supplies and other

Total inventory

has presented inventory amounting to $ 247,500 separate

from Prepaid and other current assets to Inventory as of September 30, 2020.

expense and other current assets

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.

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.

current assets are assets that consist of deposits and interest receivable.

Deposits and interest we expect to receive within one year

are shown as short-term.

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.

Investment securities include debt securities

and equity securities.

Debt securities are classified as available for sale (“AFS”) and are reported as an asset in the Consolidated

Balance Sheets at their estimated fair value.

As the fair values of AFS debt securities change, the changes are reported net of income

tax as an element of OCI, except for other-than-temporarily-impaired securities.

When AFS debt securities are sold, the unrealized gains

or losses are reclassified from OCI to non-interest income.

Securities classified as AFS are securities that the Company intends to hold

for an indefinite period of time, but not necessarily to maturity.

Any decision to sell a security classified as AFS would be based on

various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities,

liquidity needs, decline in credit quality, and regulatory capital considerations.

Interest income

is recognized based on the coupon rate and increased by accretion of discounts earned or decreased by the amortization of premiums paid

over the contractual life of the security.

For individual

debt securities where the Company either intends to sell the security or more likely than not will not recover all of its amortized cost,

OTTI (other than temporary impairment) is recognized in earnings equal to the entire difference between the security's cost basis and

its fair value at the balance sheet date.

For individual debt securities for which a credit loss has been recognized in earnings, interest

accruals and amortization and accretion of premiums and discounts are suspended when the credit loss is recognized.

Interest received

after accruals have been suspended is recognized in income on a cash basis.

The Company holds investments in both publicly

held and privately held equity securities.

However, as described in Note 1, the Company is primarily doing business of in the digital

currency mining sector and alternative energy sector, and not in the business of investing in securities.

Privately held equity securities are recorded

at cost and adjusted for observable transactions for same or similar investments of the issuer (referred to as the measurement alternative)

or impairment.

All gains and losses on privately held equity securities, realized or unrealized, are recorded through gains or losses

on equity securities on the consolidated statement of operations and comprehensive loss.

Publicly held equity securities are based

on fair value accounting with unrealized gains or losses resulting from changes in fair value reflected as unrealized gains or losses

on equity securities in our consolidated statements of operations and comprehensive loss.

Concentration

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 $ 17,790,327

and $ 2,876,202

for periods ended September 30, 2021 and September 30, 2020, 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 covered by FDIC limits was $ 27,554,031

for the periods ended September 30, 2021 and 2020, respectively.

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.

(see Note 16 for details)

In accordance with ASC 842, the Company

assesses whether an arrangement contains a lease at contract inception.

When an arrangement contains a lease, the Company categorize

leases with contractual terms longer than twelve months as either operating or finance.

Finance leases are generally those leases that

allow us to substantially utilize or pay for the entire asset over its estimated life.

Assets acquired under finance leases are recorded

in “Fixed Assets, net.” All other leases are categorized as operating leases.

The Company records right-of use ("ROU")

assets and lease obligations for its finance and operating leases, which are initially recognized based on the discounted future lease

payments over the term of the lease.

As the rate implicit in the Company's leases is not easily determinable, the Company’s applicable

incremental borrowing rate is used in calculating the present value of the sum of the lease payments.

Lease term is defined as the non-cancelable

period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the

The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined as leases

with an initial term of 12 months or less.

Some leases include multiple year renewal

The Company’s decision to exercise these renewal options is based on an assessment of its current business needs and market

factors at the time of the renewal.

Currently, the Company has no leases for which the option to renew is reasonably certain and therefore,

options to renew were not factored into the calculation of its right of use asset and lease liability as of September 30, 2021.

For all classes of underlying assets, the

Company has elected to not separate lease from non-lease components.

establishes warranty liability reserves to provide for estimated future expenses as a result of installation and product defects, product

recalls and litigation incidental to the Company’s business.

Liability estimates are determined based on management’s judgment,

considering such factors as historical experience, the likely current cost of corrective action, manufacturers and subcontractors participation

in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with the Company’s

general counsel and outside counsel retained to handle specific product liability cases.

The Company’s manufacturers and service

providers currently provide substantial warranties between ten to twenty-five years with full reimbursement to replace and install replacement

While it is probable that the Company will incur costs associated with future warranty claims, the Company cannot reasonably estimate

the loss of future warranty claims.

Thus, the loss on warranty claims will be charged to the income of the period in which the loss can

be reasonably estimated and shall not be charged retroactively to an earlier period, in accordance with the provisions of ASC 450.

were no warranty

costs and associated liabilities as of September 30, 2021 and September 30, 2020.

-based compensation

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.

Investment securities

Investment securities include debt securities and equity securities.

Debt securities are classified as available for sale (“AFS”) and are reported as an asset in the Consolidated Balance Sheets at their estimated fair value.

As the fair values of AFS debt securities change, the changes are reported net of income tax as an element of OCI, except for other-than-temporarily-impaired securities.

When AFS debt securities are sold, the unrealized gains or losses are reclassified from OCI to non-interest income.

Securities classified as AFS are securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity.

Any decision to sell a security classified as AFS would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, decline in credit quality, and regulatory capital considerations.

Interest income is recognized based on the coupon rate and increased by accretion of discounts earned or decreased by the amortization of premiums paid over the contractual life of the security.

For individual debt securities where the Company either intends to sell the security or more likely than not will not recover all of its amortized cost, OTTI (other than temporary impairment) is recognized in earnings equal to the entire difference between the security's cost basis and its fair value at the balance sheet date.

For individual debt securities for which a credit loss has been recognized in earnings, interest accruals and amortization and accretion of premiums and discounts are suspended when the credit loss is recognized.

Interest received after accruals have been suspended is recognized in income on a cash basis.

The Company holds investments in both publicly held and privately held equity securities.

However, as described in Note 1, the Company is primarily doing business of in the bitcoin mining sector, and not in the business of investing in securities.

Privately held equity securities are recorded at cost and adjusted for observable transactions for same or similar investments of the issuer (referred to as the measurement alternative) or impairment.

All gains and losses on privately held equity securities, realized or unrealized, are recorded through gains or losses on equity securities on the consolidated statement of operations and comprehensive loss.

Publicly held equity securities are based on fair value accounting with unrealized gains or losses resulting from changes in fair value reflected as unrealized gains or losses on equity securities in our consolidated statements of operations and comprehensive loss.

Concentration Risk

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 $ 20,212,570 and $ 17,790,327 for periods ended September 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 covered by FDIC limits was $ 11,147,478 and $ 23,603,210 for the periods ended September 30, 2022 and 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.

In fiscal year ended September 30, 2022 , revenue is concentrated with one mining pool operator and all bitcoin reside in one exchange.

Refer to Note 16 - Major Customers and Vendors.

In accordance with ASC 842, the Company assesses whether an arrangement contains a lease at contract inception.

When an arrangement contains a lease, the Company categorizes leases with contractual terms longer than twelve months as either operating or finance.

Finance leases are generally those leases that allow us to substantially utilize or pay for the entire asset over its estimated life.

Assets acquired under finance leases are recorded in “Fixed Assets, net.”

All other leases are categorized as operating leases.

The Company records right-of use ("ROU") assets and lease obligations for its finance and operating leases, which are initially recognized based on the discounted future lease payments over the term of the lease.

As the rate implicit in the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments.

Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.

The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less.

Some leases include multiple year renewal options.

The Company’s decision to exercise these renewal options is based on an assessment of its current business needs and market factors at the time of the renewal.

Currently, the Company has no leases for which the option to renew is reasonably certain and therefore, options to renew were not factored into the calculation of its right of use asset and lease liability as of September 30, 2022.

For all classes of underlying assets, the Company has elected to not separate lease from non-lease components.

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 discussion of accounting for RSUs, please refer Note 13 – Stock-Based Compensation.

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 13 –

Stock-Based Compensation.

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”

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.

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 September 30, 2021 and 2020, there were 2,173,578 shares

and 1,577,013 shares, respectively, issuable upon exercise of outstanding options warrants and restricted stock units, as well

as 5,250,000 shares issuable upon preferred stock conversions, that were excluded from the current and prior period calculations of diluted

net loss per share as their inclusion would have been anti-dilutive to the Company’s net loss.

and equipment

In accordance with the Financial Accounting

Standards Board 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 year ended September

30, 2021 and September 30, 2020 the Company did not record an impairment expense.

Property and equipment are stated at cost less accumulated

depreciation.

Construction in progress is the construction or development of assets that has not yet been placed in service for its intended

Depreciation for machinery and equipment, mining equipment, buildings, furniture and fixtures and leasehold improvements commences

once they are ready for its intended use.

As of September 30, 2022 and 2021 , there were 7,069,706 and 2,173,578 , respectively, units of common stock equivalents that consist of options, warrants, and restricted stock units, as well as 5,250,000 shares issuable upon preferred stock conversions, that were excluded from the current and prior period diluted (loss) per share calculation as their effect is anti-dilutive.

Provided below is the loss per share calculation for the years ended September 30, 2022 and 2021:

Ended September 30,

Continuing Operations

Income (loss) from continuing operations

Preferred stock dividends

Income (loss) from continuing operations attributable to common shareholders

Weighted- average common shares outstanding,

Dilutive impact of stock options and other share-based awards

Weighted- average common shares outstanding,

Income (loss) from continuing operations per common share attributable to common shareholders

Discontinued Operations

Loss on discontinued operations

Weighted- average common shares outstanding,

Dilutive impact of stock options and other share-based awards

Weighted- average common shares outstanding,

Loss on discontinued operations per common share attributable to common shareholders

Property and equipment

Property and equipment are stated at cost less accumulated depreciation.

Construction in progress is the construction or development of assets that has 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.

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

Machinery and equipment

Mining equipment

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

Useful life (years)

Land Improvements

Leasehold improvements

Shorter of estimated lease term or 5

Shorter of lease term or 15 years

Mining Equipment

Infrastructure asset

Shorter of lease term or 5 years

Machinery and equipment

Furniture and fixtures

combinations, Intangible Assets and Goodwill

Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, Business Combi nations,

where the total purchase price is allocated to the identified assets acquired and liabilities assumed based on their estimated fair values.

The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date,

after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates.

The difference between the purchase price, including any contingent consideration, and the fair value of net assets acquired is recorded

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 years ended September 30, 2022 and September 30, 2021 the Company did not record an impairment expense for assets within its continuing operations.

However, in connection with property and equipment in our discontinued operations, an impairment expense in the approximate amount of $ 32,000 was recognized and included in loss from discontinued operations in the consolidated statements of operations and comprehensive loss.

Business combinations, Intangible Assets and Goodwill

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, Business Combinations, where the total purchase price is allocated to the identified assets acquired and liabilities assumed based on their estimated fair values.

The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates.

The difference between the purchase price, including any contingent consideration, and the fair value of net assets acquired is recorded as goodwill.

Contingent consideration transferred is initially recognized at fair value.

Contingent consideration classified as a liability

or an asset is remeasured to fair value each period until settlement, with changes recognized in profit or loss.

Contingent consideration

classified as equity is not remeasured.

Acquisition-related costs are recognized separately from the acquisition and are expensed as

reviews its indefinite lived intangibles and goodwill for impairment annually or whenever events or circumstances indicate that the carrying

amount of the asset exceeds its fair value and may not be recoverable.

In accordance with its policies, the Company performed an assessment

of indefinite lived intangibles and goodwill as of the year end September 30, 2021.

(See Note 6 for impairment related to indefinite

lived intangibles and goodwill).

Contingent consideration classified as a liability or an asset is remeasured to fair value each period until settlement, with changes recognized in profit or loss.

Contingent consideration classified as equity is not remeasured.

Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.

The Company reviews its indefinite lived intangibles and goodwill for impairment annually or whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.

In accordance with its policies, the Company performed an assessment of indefinite lived intangibles and goodwill for the year end September 30, 2022.

During the years ended September 30, 2022 and 2021, the Company incurred the following impairment losses:

September 30, 2022

September 30, 2021

Impairment of bitcoin

Impairment of goodwill

Total impairment loss

2022 Goodwill Impairment analysis

In completing the 2021 annual goodwill

impairment analysis, the Company elected to perform both qualitative and quantitative assessments for our goodwill.

The assessments

involve comparing the carrying value of the entity, including goodwill, to its estimated fair value.

In accordance with ASU 2017-04,

a goodwill impairment charge is recorded for the amount by which the carrying value unit exceeds the fair value of the reporting

In determining the fair value for which the quantitative assessment was performed, the Company obtained an independent

evaluation of goodwill.

The independent evaluation agency has utilized the income approach to test for goodwill impairment.

income approach is a valuation technique under which we estimate future cash flows using the financial forecast from the perspective

of an unrelated market participant.

Using historical trending and internal forecasting techniques, revenue is projected and applied

to fixed and variable cost experience rates to arrive at the future cash flows.

A terminal value was then applied to the projected

cash flow stream.

In completing the 2022 annual goodwill impairment analysis, the Company elected to perform a quantitative assessment for our goodwill.

The assessment involves comparing the carrying value of the entity, including goodwill, to its estimated fair value.

In accordance with ASU 2017-04, a goodwill impairment charge is recorded for the amount by which the carrying value unit exceeds the fair value of the reporting unit.

In determining the fair value for which the quantitative assessment was performed, the Company engaged a valuation specialist to perform the quantitative impairment analysis.

The valuation report included a combination of the market and income approach to test for goodwill impairment.

The income approach is a valuation technique under which we estimate future cash flows using the financial forecast from the perspective of an unrelated market participant.

Using historical trending and internal forecasting techniques, revenue is projected and applied to fixed and variable cost experience rates to arrive at the future cash flows.

A terminal value was then applied to the projected cash flow stream.

Future estimated cash flows were discounted to their present value to calculate the estimated fair value.

discount rate used was the value-weighted average of our estimated cost of capital derived using both known and estimated customary

market metrics.

In determining the estimated fair value, several factors were estimated, including projected operating results,

growth rates, economic conditions, anticipated future cash flows and the discount rate.

assessment indicated that impairment of goodwill was necessary.

Based on the assessment for impairment, the

Company reported an impairment expense of goodwill of $ 5,723,388 for

the year ended September 30, 2021.

There was no impairment

expense for the year ended September 30, 2020.

following table reflects segment wise goodwill activity for the years ended September 30, 2021 and 2020, respectively:

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment Wise Goodwill Activity (Details)

Goodwill- October 1, 2019

The discount rate used was the value-weighted average of our estimated cost of capital derived using both known and estimated customary market metrics.

In determining the estimated fair value, several factors were estimated, including projected operating results, growth rates, economic conditions, anticipated future cash flows and the discount rate.

The market valuation approach evaluated the company's market value as compared to the net asset balance.

The assessment indicated that impairment of goodwill was necessary.

Based on the assessment for impairment, the Company recognized an impairment expense of goodwill of $ 12,048,419 for the year ended September 30, 2022.

In completing the 2021 annual goodwill impairment analysis, there were no impairments recognized.

The following table reflects goodwill activity for the years ended September 30, 2022 and 2021, respectively:

Goodwill- September 30, 2020

New Acquisitions

1 unchanged sentence

New Acquisitions

( 4,746,000 )

( 5,723,388 )

September 30, 2021

Company amortizes intangible assets with finite lives over their estimated useful lives, which range between two and twenty years as

Customer list and non-compete agreement

Design assets

Engineering trade secrets

Goodwill- September 30, 2022

The Company amortizes intangible assets with finite lives over their estimated useful lives, which range between two and twenty years as follows:

Useful life (years)

Strategic contract

Infrastructure asset

Capitalized software

Digital currencies are included in current assets

in the consolidated balance sheets.

Digital currencies 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 Footnote 2 – 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.

Quantitative impairment exists when the carrying amount exceeds its fair value,

which 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.

Bitcoin are included in current assets in the consolidated balance sheets.

Bitcoin is 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 bitcoin 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.

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

The Company accounts for its gains or losses in accordance with the first in first out (“FIFO”) method of accounting.

following table presents the activities of the digital currencies for the year ended September 30, 2021:

Subsequent reversal of impairment losses is not permitted as per ASC 350, Intangibles –

Goodwill and Other.

Bitcoin earned by the Company through its mining activities are included within operating activities on the accompanying consolidated statements of cash flows.

The sales of bitcoin are also included within operating activities in the accompanying consolidated statements of cash flows and any realized gains or losses from such sales are included in operating costs and expenses 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 bitcoin for the years ended September 30, 2022 and 2021:

Balance as on September 30, 2020

Additions to digital currencies

Sale of digital currencies

Addition of bitcoin

Sale of bitcoin

Bitcoin issued for services

Realized gain on sale of bitcoin

Impairment loss

Balance as on September 30, 2021

Additions of digital currencies

Sale of digital currencies

Addition of bitcoin

Sale of bitcoin

( 133,201,006

Realized gain on sale of digital currencies

Digital currencies issued for services

Bitcoin issued for services

Realized gain on sale of bitcoin

Impairment loss

( 6,608,076 )

Balance as on September 30, 2022

Development Costs

Company capitalizes software development costs under guidance of ASC 985-20 Costs of Software to be Sold, Leased or Marketed for our

mPulse, Canvas & Plaid platforms and under ASC 350-40 Internal Use Software.

Software development costs include payments made to

independent software developers under development agreements, as well as direct costs incurred for internally developed products.

development costs are capitalized once the technological feasibility of a product is established and such costs are determined to be

Technological feasibility of a product requires both technical

documentation and infrastructure design documentation, or the completed and tested product design and a working model.

Significant management

judgments and estimates are utilized in the assessment of when technological feasibility is established, and the evaluation is performed

on a product-by-product basis.

For products where proven technology exists, this may occur early in the development cycle.

product's release, if and when we believe capitalized costs are not recoverable, we

expense the amounts as part of "Product development." Capitalized costs for products that are cancelled or are expected

to be abandoned are charged to "Product development" in the period of cancellation.

upon a product's release, capitalized software development costs are amortized to "Cost of revenues software amortization"

based on the ratio of current revenues to total projected revenues for the specific product, generally resulting in an amortization period

of seven years for our current product offerings.

In recognition of the uncertainties involved in estimating future revenue, amortization

will never be less than straight-line amortization of the products remaining estimated economic life.

evaluate the future recoverability of capitalized software development costs on a quarterly basis.

For products that have been released

in prior periods, the primary evaluation criterion is the actual performance of the software platform to which the costs relate.

products that are scheduled to be released in future periods, recoverability is evaluated based on the expected performance of the specific

products to which the costs relate.

Criteria used to evaluate expected product performance include:

historical performance of comparable

products developed with comparable technology;

market performance of comparable software;

orders for the product prior to its release;

pending contracts and general market conditions.

management judgments and estimates are utilized in assessing the recoverability of capitalized costs.

In evaluating the recoverability

of capitalized costs, the assessment of expected product performance utilizes forecasted sales amounts and estimates of additional costs

to be incurred.

If revised forecasted or actual product sales are less than the originally forecasted amounts utilized in the initial

recoverability analysis, the net realizable value may be lower than originally estimated in any given quarter, which could result in

an impairment charge.

Material differences may result in the amount and timing of expenses for any period if matters resolve in a manner

that is inconsistent with management's expectations.

If an impairment occurs the reduced amount of the capitalized software costs that

have been written down to the net realizable value at the close of each annual fiscal period will be considered the cost for subsequent

accounting purposes.

Value Measurement of financial instruments, derivative asset and contingent consideration

carrying value of cash, accounts payable and accrued expenses, and debt approximate their fair values because of the short-term nature

of these instruments.

Management believes the Company is not exposed to significant interest or credit risks arising from these financial

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.

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.

Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last

unobservable.

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.

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.

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.

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.

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.

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.

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 September 30, 2021 and September 30, 2020:

in equity security

in debt security

cash consideration

in equity security

in debt security

cash consideration

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 September

30, 2021 and 2020.

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.

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.

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

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.

and penalties are included in tax expense.

Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision

for income taxes.

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 consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of September 30, 2022 and September 30, 2021:

September 30, 2022:

Derivative asset

Investment in debt security

September 30, 2021:

Derivative asset

Investment in equity security

Investment in debt security

Contingent cash consideration

There were no transfers between Level 1, 2 or 3 during the years ended September 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 years ended September 30, 2022 and 2021 are included in Note 5 - Investments.

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 September 30, 2022 and 2021.

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 consolidated statements of operations and comprehensive loss in the provision for income taxes.

As of September 30, 2022 and 2021, the Company had no accrued interest or penalties related to uncertain tax positions.

Income tax expense/(benefit) from operations for the years ended September 30, 2022 and 2021 was $ 0 and $ 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 bitcoin 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 and are as follows:

Company has reclassified interest receivable on investment in debt securities from Accounts Receivable to Prepaid expense and other current

assets amounting to $ 399,863

and $ 187,562

as of September 30, 2021 and 2020, respectively.

revenue presentation is updated to remain consistent with the business segments of the Company.

In 2020, revenues were categorized into hardware and software related sales.

Company has realigned its focus and accordingly revenue is reported based upon business segments

of digital currency mining, energy and others.

development expense for the year ended September 30, 2020 has been reclassified to be included

in depreciation and amortization expense.

and contingencies

Company is subject to the possibility of various loss contingencies and loss recoveries, such as legal proceedings and claims arising

out of its business.

The Company considers the likelihood of loss or impairment of an asset, or the incurrence of a liability, as well

as the Company’s ability to reasonably estimate the amount of loss, in determining loss contingencies.

An estimated loss contingency

is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably

The Company regularly evaluates current information available with its external and internal counsel to determine whether

an accrual is required, an accrual should be adjusted or a range of possible loss should be disclosed.

segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by

the chief operating decision maker, or decision-making group, in deciding the method to allocate resources and assess performance.

To better align with the Company’s strategic objectives, the Company optimized its reportable segments down to two, (1)

Digital Currency Mining Segment and (2) Energy Segment;

by eliminating the digital agency segment.

Results associated with that

component are now being reported under other revenue and eliminations.

issued accounting pronouncements

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 year beginning February 1, 2023 and

interim periods within that fiscal year, and early 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 March 2020, the FASB issued ASU 2020-04,

Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting and issued subsequent amendments

to the initial guidance (collectively, “Topic 848”).

Topic 848 became effective immediately and expires on December 21, 2022.

Topic 848 allows eligible contracts that are modified to be accounted for as a continuation of those contracts, permits companies to preserve

their hedging accounting during the transition period and enables companies to make a one-time election to transfer or sell held-to-maturity

debt securities that are affected by rate reform.

Topic 848 provides optional expedients and exceptions for contracts, hedging relationships

and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be

discontinued because of reference rate reform if certain criteria are met.

The adoption of ASU 2020-04 is not expected to have a material

impact on the Company’s financial statements or disclosures.

The Company adopted 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.

In August 2020, the FASB issued

ASU2020-06, “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.

removing those separation models, the effective interest rate of convertible debt instruments will be closer to the coupon interest

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

The amendment will be effective for the Company with annual periods beginning January 1, 2022 and early adoption is

The adoption of ASU 2020-06 is not expected to have a material impact on the Company’s financial statements or

August 2020, the FASB issued Account Standard Update (“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 with annual periods beginning January 1, 2022 and early

adoption is permitted.

The adoption of ASU 2020-06 is not expected to have a material impact on the Company’s financial statements

or disclosures.

WATT SOLUTIONS, INC.

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 price 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 (I)

$200,000 (no changes post acquisition date) in cash was held back by the Company to satisfy potential damages from indemnification claims

and any amounts owed pursuant to post-closing adjustments, (II) an additional $100,000 (no changes post acquisition date) in cash was

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 rom SWS to the Company resulting from damages required to be indemnified under the SWS Merger

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:

Certain prior year amounts have been reclassified for consistency with the current year presentation.

In June 2022, the Company made a strategic shift to focus on the bitcoin mining business and divest its energy assets.

As a result, assets and liabilities related to the energy segment have been classified as held for sale for all periods presented.

Additionally, amounts previously presented as part of continuing operations have been reclassified into discontinued operations for all periods presented.

Additionally, the following reclassifications had no effect on the reported results of operations or net assets of the Company and are as follows:

The intangible assets, net presentation has been updated to include capitalized software, net, which was previously presented separately on the balance sheet.

Additionally, infrastructure asset has been reclassified from intangible assets, net to property and equipment, net in the current year.

Commitments and contingencies

The Company is subject to the possibility of various loss contingencies and loss recoveries, such as legal proceedings and claims arising out of its business.

The Company considers the likelihood of loss or impairment of an asset, or the incurrence of a liability, as well as the Company’s ability to reasonably estimate the amount of loss, in determining loss contingencies.

An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated.

The Company regularly evaluates current information available with its external and internal counsel to determine whether an accrual is required, an accrual should be adjusted or a range of possible loss should be disclosed.

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 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.

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 September 30, 2022 and 2021 in the consolidated balance sheets.

The results of operations of this segment, for all periods, are separately reported as “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:

September 30, 2022

September 30, 2021

Current assets

Accounts receivable, net

Prepaid expense and other current assets

Total current assets held for sale

Property and equipment, net

Operating lease right of use asset

Intangible assets, net

Long-term assets held for sale

Total assets held for sale

Current liabilities

Accounts payable and accrued liabilities

Contract liabilities

Operating lease liability

Total current liabilities held for sale

Long-term liabilities

Operating lease liability, net of current portion

Total liabilities held for sale

For the year ended

September 30,

Revenues, net

Energy hardware, software and services revenue

Total revenues, net

Costs and expenses

Cost of revenues (exclusive of depreciation and amortization shown below)

Professional fees

Payroll expenses

General and administrative expenses

Impairment expense - fixed assets

Impairment expense - intangibles

Impairment expense - other

Impairment expense - goodwill

Depreciation and amortization

Total costs and expenses

Loss from operations

Other income (expense)

Interest expense

Total other income (expense)

Loss before income tax (expense) or benefit

Income tax (expense) or benefit

Acquisitions Relating to Continuing Operations

SPRE COMMERCIAL GROUP, INC.

AND WAHA TECHNOLOGIES, INC.

On August 17, 2022, the Company, through its wholly owned subsidiary, CSRE Properties Washington, LLC, (“CSRE”), completed the purchase of real property, together with all improvements situated thereon and all rights, easements and appurtenances belonging thereto (collectively, the “Property”), from SPRE Commercial Group, Inc.

f/k/a WAHA, Inc.

(“SPRE”), (the “Seller”), pursuant to a Land Purchase and Sale Agreement dated as of August 5, 2022 and amended on August 17, 2022.

Additionally, on August 17, 2022, in connection with the Land Purchase and Sale Agreement, the Company completed the purchase of a mix of S19 and S19 J Pro bitcoin miners with a total processing power equal to approximately 341,985 terahashes, pursuant to an equipment purchase and sale agreement (together with the Land Purchase and Sale Agreement, the “Acquisition”), from Waha Technologies, Inc., a Georgia corporation (“WAHA”, collectively with the Seller "WAHA & SPRE" or the "Sellers"), an affiliate of the Seller.

Pursuant to the Land Purchase and Sale Agreement and the Equipment Purchase and Sale Agreement the Company acquired substantially all of WAHA & SPRE's assets.

The transaction was accounted for as an acquisition of a business.

Total consideration for the Property and miners consisted of (i) $1,961,747 in financing provided by the Seller to the Company at an interest rate of 12% per annum, to be repaid in 12 monthly installments of $173,651, (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) $19,771,610 of cash consideration paid by the Company to the Seller.

Acquisition related costs of $118,058, consisting primarily of legal and recording fees, were expensed as incurred in accordance with ASC 805 and are reflected in professional fees on the Consolidated Statements of Operations and Comprehensive Loss.

The Company determined the fair value of the consideration given to the Sellers in connection with the transaction and the allocation of the purchase price in accordance with ASC 820 were as follows:

Consideration:

Contingent consideration

310,018 shares of common stock as contingent equity consideration

shares of common stock

Financing provided by Seller

Mortgage assumed

Total Consideration

Purchase Price Allocation

Allocation at Acquisition Date

to Fair Value

Allocation at Acquisition Date

Customer List

$ ( 4,932,733 )

Other Assets and Liabilities assumed, net

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

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.

In connection with the preparation of our financial statements, the Company

determined that the accounting treatment of the contingent consideration as reported in the March 31, 2021 and June 30, 2021 consolidated

financial statements needed to be revised.

Specifically, the contingent cash consideration liability recorded at acquisition date

of $ 2,500,000

should be adjusted to $ 155,000

due to probability of non-satisfaction of future milestones.

As a result, the contingent cash consideration liability recorded at acquisition

date of $ 2,500,000 was adjusted to $ 155,000 due to probability of non-satisfaction of future milestones.

The Company also estimated that

based upon the milestones, only 19,221 contingent shares will be earned out of the 310,018 total contingent shares, and as a result, the

Company adjusted the contingent stock consideration to $533,002.

The Company assessed the materiality of these adjustments and determined

that these were not material to previously issued financial statements for the quarters ended March 31, 2021 and June 30, 2021.

The immaterial

impacts of these adjustments for the quarters ended March 31, 2021 and June 30, 2021 are as follows:

Condensed Consolidated

Balance Sheet (unaudited)

March 31, 2021

June 30, 2021

As Reported ($)

As Revised ($)

As Reported ($)

As Revised ($)

( 10,408,798 )

Contingent consideration - Current

( 1,319,751 )

Total current liabilities

( 1,319,751 )

Contingent consideration - Non Current

( 2,000,000 )

Total Liabilities

( 2,153,084 )

( 2,000,855 )

Additional paid-in capital

( 8,063,798 )

Total Stockholders' equity

( 8,255,714 )

( 8,407,943 )

Total Liabilities and Stockholders' equity

( 10,408,798 )

Condensed Consolidated Statement of operations (unaudited)

For the Three Months Ended March 31, 2021

For the Three Months Ended June 30, 2021

As Reported ($)

As Revised ($)

As Reported ($)

As Revised ($)

Change in fair value of contingent consideration

Total other income (expense)

( 2,058,948 )

( 2,211,177 )

Net Income/(loss)

( 16,677,127 )

( 16,829,356 )

Net Income (loss) attributable to the Company’s common shareholders

( 16,677,127 )

( 16,829,356 )

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

The Company believes the level and timing of expected future cash flows appropriately reflects market participant assumptions.

The contingent

cash consideration was re-measured to $ 320,802

at September 30, 2021.

The company estimates the total

contingent cash consideration to be between $ 320,000 and $ 550,000 based on the range of possible outcomes.

In addition, the Company estimates

the total stock consideration to be between $ 1,100,000 and $ 1,900,000 based on the range of possible outcomes.

Net sales and net loss of this business included in the Company’s

consolidated results of operations in fiscal year 2021 were approximately $ 3,806,007 and $ 811,727 , respectively.

DATA CENTERS, LLC

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

a business under ASC 805 – Business Combination.

At the closing, ATL became a wholly owned subsidiary

of the Company.

Allocation at

Building/Improvements

The total purchase price was allocated to identifiable assets deemed acquired based on their estimated fair values.

The fair values of the assets have been recorded and are reflected in property and equipment, net on the Company's Consolidated Balance Sheets in this annual report.

The useful life for the building and improvements is estimated to be 30 years consistent with the Company's policy.

The useful life for miners was estimated to be 3 years consistent with the Company's policy for depreciating used miners.

Land is not depreciated.

Financing provided by the Seller and the mortgage assumed have been recorded as loans payable and are reflected in the Company's Consolidated Balance Sheets.

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:

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.

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:

(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 .

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

Consideration

Allocation at Acquisition Date

to Fair Value

Preliminary Allocation at Acquisition Date

Adjustments to Fair Value

Final Allocation at Acquisition Date

642,309 shares of common stock

975,976 shares of common

stock – held in escrow

975,976 shares of common stock –

held in escrow

Total Consideration

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 nonsatisfaction of certain

indemnification claims 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 claims and 319,069 shares subject to satisfaction of future milestones.

In connection with the return of the 68,194 shares

held in escrow that were cancelled due to the non-satisfaction of certain indemnification claims, total consideration and the related

goodwill, decreased by $ 892,659 during the year ended September 30, 2021.

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.

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 nonsatisfaction of certain indemnification claims 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 claims and 319,069 shares subject to satisfaction of future milestones.

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

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 $ 6.9 million 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.

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

Allocation at Acquisition Date

Allocation at

to Fair Value

Allocation at Acquisition Date

Allocation at

Strategic Contract

( 1,264,167 )

Other Assets and Liabilities assumed, net

( 1,077,833 )

( 1,557,697 )

Company made measurement period adjustments, primarily to strategic contract and goodwill, to better reflect the facts and circumstances

that existed at the acquisition date.

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 mcarket penetration.

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.

total purchase price was allocated to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair

The strategic contract relates to supply of a

critical input to our digital currency mining business.

The other assets and liabilities assumed include $ 5.67

million of digital currency mining equipment and $ 5.475

million of notes payable related to this equipment, which was settled by the Company during the year ended September 30, 2021.

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 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 bitcoin mining business.

The other assets and liabilities assumed include $ 5,670,000 of bitcoin 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 % .

believe the level and timing of expected future cash flows appropriately reflects market participant assumptions.

Net sales and net income of this business included in

CleanSpark’s consolidated results of operations in fiscal year 2021 were approximately $ 30,234,683

and $ 14,449,160 ,

respectively.

January 31, 2020, the Company, entered into an Agreement with p2k, and its sole stockholder, Amer Tadayon (the “Seller”),

whereby the Company purchased all of the issued and outstanding shares of p2k in exchange for an aggregate adjusted purchase price of

cash and equity of $ 1,688,935 .

The transaction closed simultaneously upon the execution of the Agreement by the parties on January 31,

a result of the transaction, p2k became a wholly owned subsidiary of the Company.

Pursuant to the terms of the Agreement, the purchase

price was as follows:

$ 1,039,500 in cash was paid to the Seller;

31,183 restricted shares of the Company’s common stock, valued at $ 145,000 , were issued to the Seller (the “Shares”).

The Shares are subject to certain lock-up and leakout provisions whereby the Seller may sell an amount of Shares equal to ten percent

(10%) of the daily dollar trading volume of the Company’s common stock on its principal market for the prior 30 days (the “Leak-Out

$ 115,500 in cash was paid to an independent third-party escrow where such cash is subject to offset for adjustments to the purchase price

and indemnification purposes;

restricted shares of the Company’s common stock, valued

at $ 300,000 ,

were issued to an independent third-party escrow agent (the “Holdback Shares”) and will be released to the Seller upon achievement

of certain revenue milestones.

During the year ended September 30, 2021, 56,444 restricted shares of the Company’s common stock

were released to the Seller and the balance of 8,072 shares of the Company’s common stock were returned and cancelled.

Shares are subject to the Leak-Out Terms.

The Shares and Holdback Shares were deemed to have

a fair market value of $ 4.65 per share, which was the closing price of the Company’s common stock on January 31, 2020;

e) 26,950 common stock options that were deemed

to have a fair market value of $ 88,935 on the date of the closing of the transaction.

The Company accounted for the acquisition of p2k as

an acquisition of a business under ASC 805 – Business Combinations.

The Company determined the fair value of the consideration

given to the Seller in connection with the transaction in accordance with ASC 820 – Fair Value Measurement was as follows:

Cash Consideration ($):

95,699 shares of common stock

26,950 common stock options

Total Consideration

total purchase price of the Company’s acquisition of p2k was allocated to identifiable assets deemed acquired, and liabilities

assumed, based on their estimated fair values as indicated below.

Purchase Price Allocation ($):

Customer list

Design and other assets

Other assets and liabilities assumed, net

sales and net loss of this business included in the Company’s consolidated results of operations in fiscal year 2021

were approximately $ 1,241,641 and $ 1,201,753 , respectively.

On August 31, 2020, the Company entered into a Membership

Interest Purchase Agreement (the “Agreement”) with GridFabric, and its sole member, Dupont Hale Holdings, LLC (the “Seller”),

whereby the Company purchased all of the issued and outstanding membership units of GridFabric from the Seller (the “Transaction”)

in exchange for an aggregate purchase price of cash and stock of up to $ 1,400,000 (the “Purchase Price”).

The Transaction

closed simultaneously with execution on August 31, 2020.

As a result of the Transaction, GridFabric, became a wholly owned subsidiary

of the Company.

to the terms of the Agreement, the Purchase Price was as follows:

in cash was paid to the Seller at closing;

in cash was delivered to an independent third-party escrow agent where such cash is subject

to offset for adjustments to the Purchase Price and indemnification purposes for a period

of 12 months;

restricted shares of the Company’s common stock, valued at $ 250,000 ,

were issued to the Seller.

The shares issued are subject to certain leak-out provisions whereby the Seller may sell an amount of shares

equal to no more than ten percent (10%) of the daily dollar trading volume of the Company’s common stock on its principal market

for the prior 30 days (the “Leak-Out Terms”);

shares of the Company’s common stock, valued at up to $ 750,000 , will be issuable to

Seller if GridFabric achieves certain revenue and product release milestones related to the

future performance of GridFabric (the “Earn-out Shares”).

The Earn-Out Shares

are also subject to the Leak-Out Terms.

Shares were issued at a fair market value of $9.46 per share.

The Earn-Out Shares are accounted for as contingent consideration and the

number of shares to be issued will be determined based on the closing price of the Company’s common stock on the date such milestone

event occurs.

Agreement contains standard representations, warranties, covenants, indemnification and other terms customary in similar transactions.

connection with the transaction, the Company also entered into employment relationships and non-compete agreements with GridFabric’s

key employees for a period of 36 months and plans to issue future equity compensation to said employees, subject to approval of the Company’s

board of directors.

Company accounted for the acquisition of GridFabric as an acquisition of a business under ASC 805 – Business Combinations.

Company determined the fair value of the consideration given to the Seller in connection with the Transaction in accordance with ASC

820 – Fair Value Measurement was as follows:

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.

Net sales and net income of this business included in CleanSpark’s consolidated results of operations in fiscal year 2021 were approximately $ 30,234,683 and $ 14,449,160 , respectively.

Acquisitions Relating to Discontinued Operations

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:

Consideration:

Contingent consideration

310,018 shares of common stock as contingent equity consideration

167,685 shares of common stock

Contingent consideration - common stock issuable

upon achievement of milestone(s)

Total Consideration

During the year ended September 30, 2021, the Company reassessed

the contingent consideration due to GridFabric to $ 500,000 .

A change in the fair value of the contingent

consideration of $ 250,000

is included in change in fair value of contingent consideration in

Consolidated Statement of Consolidated Operations and Comprehensive Loss.

The total purchase price of the Company’s acquisition

of GridFabric was allocated to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair values as indicated

Purchase Price Allocation:

Allocation at

Acquisition Date

Allocation at

Customer List

Net sales and operating loss of this business included

in the Company’s consolidated results of operations in fiscal year 2021 were approximately $ 299,606 and $ 794,805 , respectively.

following is the unaudited pro forma information assuming the acquisition of GridFabric, p2k Labs, ATL, and SWS occurred on October 1,

Net income (loss)

( 47,333,110 )

Net profit / (loss) per common share – basic and diluted

average common shares outstanding – basic and

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 proforma purposes have been eliminated.

of September 30, 2021 and September 30, 2020, the Company had total investments of $ 5,661,036 and $ 3,075,269 that

comprise of the following:

International

Land Alliance, Inc.

On November 5, 2019, the Company entered in a

binding Memorandum of Understanding (the “MOU”) with International Land Alliance, Inc.

(“ILAL”), a Wyoming corporation,

to lay a foundational framework where the Company will deploy its energy solutions products and services to ILAL, 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.

in Debt Securities (Preferred Stock) and related Embedded Derivative Asset

to the terms of the SPA with ILAL, the Company purchased 1,000 shares

of Series B Preferred Stock of ILAL (the “Preferred Stock”) an aggregate purchase price of $ 500,000

(the “Stock Transaction”), less certain expenses and fees.

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 September 30, 2021.

Any change in the fair values of AFS debt securities are reported net of income tax as an element

of Other Comprehensive income.

accrued interest on our available-for-sale debt securities totaling $ 399,863 and $ 187,562 ,

as of September 30, 2021 and 2020, respectively, presented as prepaid expense and other current assets on

the Consolidated Balance Sheets .

The fair value of investment in Debt Securities is $ 494,608 and $ 500,000 as

of September 30, 2021 and 2020.

The Company has presented loss on fair value of preferred stock amounting to $ 5,392 for

the year ended September 30, 2021 as part of other comprehensive loss in the Consolidated Statement of Operations and Comprehensive

There was an immaterial loss or gain on the fair value of preferred stock for the year ended September 30, 2020.

The Company has deemed this variable conversion feature

of ILAL preferred stock as an embedded derivative instrument in accordance with ASC Topic No.

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.

gain or loss on fair valuation of this embedded feature is recognized as an income in Consolidated statements of Operations and Comprehensive

Total fair value

of investment in Derivative assets as of September 30, 2021 and 2020 is $ 4,905,656 and $ 2,115,269 .

Other Assets and Liabilities assumed, net

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.

Pro forma of Consolidated Financial Statements (Unaudited)

The following is the unaudited pro forma information for continuing operations assuming the acquisition of WAHA & SPRE occurred on October 1, 2020:

For the Year Ended

September 30,

September 30, 2021

Net sales from continuing operations

Loss from continuing operations

Loss from continuing operations per common share - basic

Weighted average common shares outstanding –

Loss from continuing operations per common share - diluted

Weighted average common shares outstanding –

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.

As of September 30, 2022 and September 30, 2021, the Company had total investments of $ 3,565,998 and $ 5,661,040 that comprise of the following:

International Land Alliance, Inc.

On November 5, 2019, the Company entered in a binding Memorandum of Understanding (the “MOU”) with International Land Alliance, Inc.

(“ILAL”), a Wyoming corporation, to lay a foundational framework where the Company will deploy its energy solutions products and services to ILAL, 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.

Investment in Debt Securities (Preferred Stock) and related Embedded Derivative Asset

Pursuant to the terms of the SPA with ILAL, the Company purchased 1,000 shares of Series B Preferred Stock of ILAL (the “Preferred Stock”) 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 September 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 (net of allowance) on our available-for-sale debt securities totaling $ 0 and $ 399,863 , as of September 30, 2022 and 2021, respectively, is included in prepaid expense and other current assets on the Consolidated Balance Sheets.

The fair value of our investment in Debt Securities is $ 610,108 and $ 494,608 as of September 30, 2022 and 2021 , respectively.

The Company has included gain (loss) on fair value of preferred stock amounting to $ 115,500 and ( $ 5,392 ) for the years ended September 30, 2022 and 2021, respectively, as part of other comprehensive loss in the Consolidated Statements of Operations and Comprehensive Loss.

The Company has deemed this variable conversion feature of ILAL preferred stock as an embedded derivative instrument in accordance with ASC Topic No.

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 an income in the Consolidated Statements of Operations and Comprehensive Loss.

Total fair value of investment in Derivative assets as of September 30, 2022 and 2021 is $ 2,955,890 and $ 4,905,660 .

The Company fair values the debt security as a straight debt instrument based on liquidation value and accrued interest to date.

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.

shares - Common stock of ILAL

to the terms of the SPA with ILAL, the Company also received 350,000 shares

(commitment shares) of ILALs common stock.

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.

Commitment shares - Common stock of ILAL

Pursuant to the terms of the SPA with ILAL, the Company received 350,000 shares (commitment shares) of ILALs common stock.

The commitment shares were fully earned at the time of execution of the agreement.

During the year ended September 30, 2021, out of 350,000 commitment

shares, the Company sold 334,611 shares

at various prices and fair valued the remaining 15,389 shares

at the closing stock price of ILAL as of September 30, 2021.

Realized gain on sale of shares and the unrealized loss on fair value

of the remaining shares amounted to $ 179,046

and $ 5,153 ,

Total fair value of investment in equity securities as on September

30, 2021 and 2020 is $ 10,772

and $ 210,000 ,

respectively.

in Equity Securities- LawClerk

February 2020, the Company made a $ 250,000

strategic relationship investment in LawClerk for 200,000 Series

A Preferred Shares of LawClerk.

This investment is recorded on a cost basis and adjusted for observable transactions for same or similar

investments of the issuer (referred to as the measurement alternative) or impairment.

The Company annually performs impairment analysis

on this investment and there were no

impairments required for the years ended September 30, 2021

Total value of this investment as of September 30, 2021 and 2020

is $ 250,000 ,

respectively.

the table below for a reconciliation of carrying value of all investments for the year ended September 30 , 2021 and 2020:

Debt Securities

Derivative asset

Equity Securities

Clerk Equity Securities

as of October 1, 2019

during the year

gain on fair value recognized in income

The Company sold 334,611 shares at various prices and fair valued the remaining 15,389 shares at the closing stock price of ILAL as of September 30, 2021.

During the year ended September 30, 2022 , the Company sold 15,389 commitment shares, and recorded realized gain on sale of shares for $ 665 .

Investment in Equity Securities- LawClerk

In February 2020, the Company made a $ 250,000 strategic relationship investment in LawClerk for 200,000 Series A Preferred Shares of LawClerk.

This investment is recorded on a cost basis and adjusted for observable transactions for same or similar investments of the issuer (referred to as the measurement alternative) or impairment.

The Company annually performs impairment analysis on this investment and concluded that the investment was not recoverable and accordingly recorded an impairment of $ 250,000 for the year ended September 30, 2022.

Refer the table below for a reconciliation of carrying value of all investments for the year ended September 30, 2022 and 2021:

Balance as of September 30, 2020

sold during the year

gain on fair value recognized income

gain (loss) recognized in net income

loss on fair value recognized in other comprehensive loss

Shares sold during the year

Realized gain on fair value recognized in other income (expense)

Unrealized gain (loss) recognized in other income (expense)

Unrealized loss on fair value recognized in Other comprehensive income

Balance as of September 30, 2021

Shares sold during the year

Realized gain on fair value recognized in other income (expense)

Unrealized loss recognized in other income (expense)

Impairment loss

Unrealized gain on fair value recognized in Other comprehensive income

Balance as of September 30, 2022

INTANGIBLE ASSETS

assets consist of the following as of September 30, 2021 and September 30, 2020:

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

September 30, 2022

Customer list and non-compete agreement

Design assets

Engineering trade secrets

September 30, 2021

Intangible assets

Accumulated amortization

Net intangible assets

Intangible assets

Accumulated amortization

Net intangible assets

Strategic Contract

Infrastructure asset

mPulse software

Amortization expense for the years ended September 30, 2022 and 2021 was $ 1,963,328 and $ 1,577,098 , respectively.

During the years ended September 30, 2022 and 2021 the Company did no t incur impairment losses related to the above intangible assets.

The strategic contract relates to supply of a critical input to our bitcoin mining business at significantly low prices compared to market.

During the year ended September 30, 2021, the initial allocation of $ 7,457,970 was adjusted by $ 2,342,000 .

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

September 30, 2022

Customer list and non-compete agreement

Design assets

Engineering trade secrets

mVSO software

mPulse software

expense for the years ended September 30, 2021 and 2020 was $ 4,848,179

and $2,767,345,

respectively.

the year ended September 30, 2021, the Company recorded an impairment of $ 554,322

related to write-off of software.

impairment during the year ended September 30, 2020.

strategic contract relates to supply of a critical input to our digital currency mining business at significantly low prices compared

During the year September 30, 2021, the initial allocation of $ 7,457,970

was adjusted by $ 2,342,000 .

The strategic contract is now carried at $ 9,799,970

net of accumulated amortization of $ 1,577,098 .

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

the year ended September 30, 2021, the Company has incurred the following impairment loss on goodwill, digital currency and software.

The Company did not incur any impairment loss for the year ended September 30, 2020.

Impairment of digital currency

Impairment of goodwill

Impairment of software

Total impairment loss

impairment relating to digital currency and goodwill, refer to Digital Currency and Business combinations, Intangible Assets and Goodwill.

AND EQUIPMENT

and equipment consist of the following as of September 30, 2021 and September 30, 2020:

PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of September 30, 2022 and September 30, 2021:

September 30, 2022

September 30, 2021

Land improvements

Building and improvements

Leasehold improvements

Mining equipment

$ 123,147,843

Land and building

Infrastructure

Machinery and equipment

Leasehold improvements

Furniture and fixtures

1 unchanged sentence

accumulated depreciation

( 7,657,982 )

Property and equipment, net

$ 137,592,871

expense for the years ended September 30, 2021 and 2020 was $ 7,396,189

and $ 68,904 ,

respectively.

During the year ended September 30, 2020, the Company disposed of $ 48,898

of property and equipment resulting in a loss on disposal of

There was no disposal

made during the year ended September 30, 2021.

Company has purchased mining equipment for approximately $ 123.15

million during the year ended September 30, 2021.

This primarily

consisted of miners of $ 120.4

million with the remaining consisting of ancillary mining equipment.

Park Data Center:

On May 19, 2021, the Company exercised its purchase option on the ATL lease agreement to purchase property for $ 4.4

million in College Park, Georgia.

The property contains

approximately six acres of land and includes approximately 41,000 square feet of office and warehouse space.

ATL utilizes, and intends

to continue utilizing, this space for cryptocurrency mining activities.

The Company is expanding its facility in Atlanta, a build out adjacent to the ATL data center mentioned

Norcross Data Center :

On August 6, 2021, CSRE

Properties Norcross, LLC, the Company’s wholly owned subsidiary, purchased certain real property located in Norcross, Georgia for

$ 6,550,000 plus transaction and settlement costs.

The property consists of approximately seven acres of land and includes an approximately

87,000 square foot office building.

The Company intends to utilize this office space to conduct certain of its cryptocurrency mining

Company has purchase commitments for approximately $ 144.04

million related to purchase of miners as of September 30, 2021,

and the Company has paid $ 85.11

million towards these commitments as of the end of this period.

As of September 30, 2021, the remaining commitment for future payments was $ 58.93

of September 30, 2021, the Company has outstanding deposits worth $ 87.9 million to premier suppliers and manufacturers for securing our

purchases of mining equipment.

Long-term loans as of September 30, 2021

and 2020 consist of the following:

Promissory notes

May 7, 2020, the Company applied for a loan from Celtic Bank Corporation, as lender, pursuant to the Paycheck Protection Program of the

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as administered by the U.S.

Small Business Administration

On May 15, 2020, the loan was approved, and the Company received the proceeds from the loan in the amount of $ 531,169

(the “PPP Loan”).

The Company applied for and received

loan forgiveness from the SBA on March 23, 2021.

The entire principal balance and interest charges were forgiven.

The gain on loan forgiveness

is included in other income in the consolidated statements

of operations and comprehensive loss for the year ended September 30,

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.

Company’s operating leases are office spaces and finance leases primarily in relation to the equipment used at its data center.

The Company's lease costs recognized in the Consolidated Statements

of Income and Comprehensive Loss consist of the following:

Depreciation expense for the years ended September 30, 2022 and 2021 was $ 47,081,550 and $ 7,405,025 , respectively.

During the year ended September 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 year ended September 30, 2021.

The Company placed-in service property and equipment of $ 265,204,734 during the year ended September 30, 2022.

This increase in fixed assets primarily consisted of miners and mining equipment amounting to $ 245,706,410 .

Construction in progress:

The Company is expanding its facilities in Georgia.

The Company has cancellable purchase commitments for approximately $ 30 million related to purchase of miners as of September 30, 2022 , and the Company has paid $ 3 million towards these commitments as of the end of this period.

As of September 30, 2022 , the remaining commitment for future payments was $ 27 million.

As of September 30, 2022 and September 30, 2021, the Company has outstanding deposits for miners and mining equipment totaling $ 12.5 million a nd $ 88 million, resp ectively.

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.

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’s operating leases are office spaces and finance leases which are primarily related to equipment used at its data center.

The Company's lease costs recognized in the Consolidated Statements of Operations and Comprehensive Loss consist of the following:

For the year ended

September 30,

Operating lease cost (1)

Finance lease cost:

Amortization of right-of-use assets

Depreciation expense financed assets

Interest on lease obligations

(1) Included in general and administrative expenses

lease information is as follows:

Fiscal Years Ended September

Cash paid for amounts included in measurement of lease

Operating cash flows from operating leases

Financing cash flows from finance leases

Operating cash flows from finance leases is $ 42,992

for the year ended September 30, 2021.

Weighted-average remaining lease term -operating leases

Weighted-average remaining lease term - finance leases

Weighted-average discount rate -

operating leases

Weighted-average discount

rate - finance leases

following is a schedule of the Company's lease liabilities by contractual maturity as of September 30, 2021:

Other lease information is as follows:

For the year ended

September 30,

Cash paid for amounts included in

measurement of lease obligations:

Operating cash outflows from operating leases

Operating cash outflows from finance leases

Financing cash outflows from finance leases

September 30,

Weighted-average remaining lease term -

operating leases

Weighted-average remaining lease term -

finance leases

Total undiscounted lease obligations

Less imputed interest

Total presnet value of lease liabilities

Current portion of lease obligations

Total lease obligations, net of current portion

PARTY TRANSACTIONS

Bradford Chief Executive Officer, Director and Former Chief Financial Officer

the years ended September 30, 2021 and 2020, the Company paid Blue Chip Accounting, LLC (“Blue Chip”) $ 183,075

and $ 131,248 ,

respectively, for accounting, tax, administrative services and reimbursement for office supplies.

Blue Chip is 50 %

beneficially owned by Mr.

None of the services were

associated with work performed by Mr.

The services consisted of preparing and filing tax returns, bookkeeping, accounting and

administrative support assistance.

The Company also sub-leases office space from Blue Chip.

During the years ended September 30, 2021

and 2020, $ 18,300

and $ 14,725 ,

respectively, was paid to Blue Chip for rent.

Huber – Former Officer and Director

August 28, 2018, the Company executed an agreement with Zero Positive, LLC an entity controlled by Mr.

In accordance with the

agreement with Zero Positive, LLC, Mr.

Huber earned $ 125,154

during the year ended September 30, 2020.

March 12, 2020, the Agreement was terminated upon the execution of a separation agreement.

All amounts owed from all agreements totaling,

were paid in full.

September 28, 2018, in connection with the consulting agreement executed with Zero Positive, LLC, the Company issued warrants to purchase

shares of common stock at an exercise price of $ 8.00

per share to Zero Positive.

The warrants were valued at $ 2,607,096

using the Black Scholes option pricing model based upon the

following assumptions:

years , risk free interest rate of 3.05 % ,

a dividend yield of 0 %

and volatility rate of 191 % .

warrants vest as follows:

30,000 vested immediately, the balance vest evenly on the last day of each month over forty-two months beginning

August 31, 2018.

As of September 30, 2020, 62,857

warrants had vested, and the Company recorded an expense of

during the year ended September 30, 2020.

were no transactions during the year ended September 30, 2021.

Schultz- Executive Chairman of the Board and Former Chief Executive Officer

Company had a consulting agreement with Matthew Schultz, for management services.

Schultz, for management services.

Schultz received

as compensation for his services as chairman of the board during

the year ended September 30, 2020.

The agreement was terminated at the conclusion of fiscal year ending September 30, 2020 when Mr.

Schultz’s position was changed from Chairman to Executive Chairman and he accepted the associated employment agreement.

Company additionally entered into an agreement on November 15, 2019 with an organization to provide general investor relations and consulting

services that Mr.

Schultz is affiliated with.

The Company paid the organization $ 49,500

in fees plus $ 176,000

in expense reimbursements for the year ended September 30,

The agreement was terminated in March 2020.

STOCKHOLDERS’

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 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.

As of September 30, 2020, there were 17,390,979 shares of common stock issued and outstanding

and 1,750,000 shares of preferred stock issued and outstanding.

December 5, 2019, the Board of Directors approved a reverse stock split of the Company’s common stock, par value $ 0.001 per share.

On December 10, 2019, Financial Industry Regulatory Authority (“FINRA”) approved the 1:10 reverse stock split of the Company’s

common stock.

The reverse stock split took effect on December 11, 2019.

Unless otherwise noted, impacted amounts and share information

in the consolidated financial statements and notes thereto as of and for the fiscal year ended September 30, 2020, have been adjusted

for the stock split as if such stock split occurred on the first day of the first period presented.

There is no impact of this transaction

in the year ended September 30, 2021.

to Articles of Incorporation

October 4, 2019, pursuant to Article IV of our Articles of Incorporation, our Board of Directors voted to increase the number of

shares of preferred stock designated as Series A Preferred Stock from one million ( 1,000,000 )

shares to two million ( 2,000,000 )

shares, par value $ 0.001

the Certificate of Designation for the Series A Preferred Stock, holders of shares of Series A Preferred Stock are

entitled to quarterly dividends on 2% of our earnings before interest, taxes and amortization.

The dividends are payable in cash or common

The company paid $177,502 in preferred stock dividends during the year ended September 30, 2021.

The holders will also have a

liquidation preference on the stated value of $0.02 per share plus any accumulated but unpaid dividends.

The holders are further entitled

to have us redeem their Series A Preferred Stock for three shares of common stock in the event of a change of control and they are entitled

to vote together with the holders of our common stock on all matters submitted to shareholders at a rate of forty-five (45) votes for

each share held.

rights of the holders of Series A Preferred Stock are defined in the relevant Amendment to the Certificate of Designation filed with

the Nevada Secretary of State on October 9, 2019.

On October 2, 2020, the Company filed a Certificate

of Amendment to its Articles of Incorporation with the Nevada Secretary of State to increase its authorized shares of common stock to

March 16, 2021, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State to increase

its authorized shares of common stock to 50,000,000 .

On September 17, 2021, the Company filed

its First Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) with the Secretary of State

of the State of Nevada, which Amended and Restated Articles became effective upon filing.

The Amended and Restated Articles were previously

approved by the Company’s Board, subject to stockholder approval, on July 16, 2021, and were approved by the Company’s stockholders

at the Company’s Annual Meeting and, among other things, increased the Company’s authorized shares of common stock to 100,000,000 .

Stock issuances for the year ended September 30, 2021

Company issued 4,444,445 shares of the Company’s common stock in connection with its underwritten equity offering at a price of

$ 9.00 per share for net proceeds of approximately $ 37.05 million.

Company issued 9,090,910 shares of the Company’s common stock in connection with its underwritten public equity offering at a price

of $ 22.00 per share for net proceeds of approximately $ 187.2 million.

Company issued 236,000 shares of common stock as settlement of accrued bonus compensation related to the year ended September 30, 2020.

Weighted-average discount rate - operating

Weighted-average discount rate - finance

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

Gross lease liabilities

imputed interest

Present value of lease liabilities

Current portion of lease liabilities

Total lease liabilities, net of current portion

The following table reflects our outstanding loans as of September 30, 2022:

Maturity Date

Debt Balance, Net

Master Equipment Financing Arrangement

SPRE Commercial Group, Inc.

Marquee Funding Partners

Jul-26 - Feb-27

9.00 - 9.20 %

Total Loans Outstanding

current portion of long-term loans

Long-term loans, excluding current portion

The following table reflects the principal amount of loan maturities due over the next five years and beyond as of September 30, 2022:

5-Year Loan Maturities

Outstanding Loan

Master Equipment Financing Arrangment

SPRE Commercial Group, Inc.

Marquee Funding Partners

Total principal amount of loan payments by fiscal year

Unamortized deferred financing costs and discounts on Master Equipment Financing Arrangement

Total loan book value as of September 30, 2022

Description of Outstanding Loans

Master Equipment Financing Agreement

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 %.

The Company recorded a loan discount of approximately $ 379,000 , of which $ 46,000 was amortized and recorded to interest expense during the year ended September 30, 2022.

SPRE Commercial Group, Inc.

In connection with the acquisition of WAHA, the Company entered into a financing arrangement with the seller.

The loan has a term of 12 months with monthly payments of $ 173,651 and a stated interest rate of 12 %.

Marquee Funding Partners

In connection with the acquisition of WAHA, certain assets were encumbered with mortgages which the Company assumed.

The mortgages assumed have a combined balance of $ 2,158,253 and remaining payment terms ranging from 47 - 54 months and annual interest of 13 %.

In September 2022, the Company purchased vehicles through financing arrangements with combined principal amount of $ 212,421 .

The loans are for a term of 72 months with annual interest of 9 %.

The loans are secured with the purchased vehicles.

Paycheck Protection Program Loan

On May 7, 2020, the Company applied for a loan from Celtic Bank Corporation, as lender, pursuant to the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as administered by the U.S.

Small Business Administration (the "SBA").

On May 15, 2020, the loan was approved, and the Company received the proceeds from the loan in the amount of $ 531,169 (the “PPP Loan”).

The Company applied for and received loan forgiveness from the SBA on March 23, 2021.

The entire principal balance and interest charges were forgiven.

The gain on loan forgiveness of $ 531,169 is included in other income in the consolidated statements of operations and comprehensive loss for the year ended September 30, 2021 .

RELATED PARTY TRANSACTIONS

Zachary Bradford Chief Executive Officer, Director and Former Chief Financial Officer

During the years ended September 30, 2022 and 2021, the Company paid Blue Chip Accounting, LLC (“Blue Chip”) $ 47,075 and $ 183,075 , respectively, for accounting, tax, administrative services and reimbursement for office supplies.

Blue Chip is 50 % beneficially owned by Mr.

None of the services were associated with work performed by Mr.

The services consisted of preparing and filing tax returns, bookkeeping, accounting and administrative support assistance.

During the years ended September 30, 2022 and 2021 , $ 4,575 and $ 18,300 , respectively, was paid to Blue Chip for rent.

The sublease and engagement for accounting services was terminated on December 31, 2021.

STOCKHOLDERS’

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 September 30, 2022, there were 55,661,337 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.

Under the Certificate of Designation for the Series A Preferred Stock, holders of shares of Series A Preferred Stock are entitled to quarterly dividends on 2 % of our earnings before interest, taxes and amortization.

The dividends are payable in cash or common stock.

The preferred stock dividend for the year ended September 30, 2022 was $ 335,439 , which the Company paid $ 314,611 and has a preferred stock dividend payable in the amount of $ 20,828 .

The preferred dividend was $ 177,502 for the year ended September 30, 2021 and was paid in the 2021 fiscal year.

The holders will also have a liquidation preference on the stated value of $ 0.02 per share plus any accumulated but unpaid dividends.

The holders are further entitled to have us redeem their Series A Preferred Stock for three shares of common stock in the event of a change of control and they are entitled to vote together with the holders of our common stock on all matters submitted to shareholders at a rate of forty-five (45) votes for each share held.

Amendment to Articles of Incorporation

On October 2, 2020, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State to increase its authorized shares of common stock to 35,000,000 .

On March 16, 2021, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State to increase its authorized shares of common stock to 50,000,000 .

On September 17, 2021, the Company filed its First Amended and Restated Articles of Incorporation (the “Amended and Restated Articles”) with the Secretary of State of the State of Nevada, which Amended and Restated Articles became effective upon filing.

The Amended and Restated Articles were previously approved by the Company’s Board, subject to stockholder approval, on July 16, 2021, and were approved by the Company’s stockholders at the

Company’s Annual Meeting and, among other things, increased the Company’s authorized shares of common stock to 100,000,000 .

Common Stock issuances for the year ended September 30, 2022

The Company issued 638,764 common shares in relation to restricted stock units issued for service.

The Company issued 105,423 common shares in relation to the exercise of stock options with proceeds received of 816,602 .

The Company issue d 5,238 common shares valued at $ 60,043 as c ompensation for Director services.

The Company is sued 8,404 common shares valued at $ 150,011 for settlemen t of contingent consideration related to business acquisition.

The Company issued 17,740,081 common shares in relation to equity raises through its At-the-Market offering facility, net of offering costs, for net proceeds of $ 125,047,987 .

Common stock returned during the year ended September 30, 2022

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

Common Stock issuances for the year ended September 30, 2021

The Company issued 4,444,445 shares of the Company’s common stock in connection with its underwritten equity offering at a price of $ 9.00 per share for net proceeds of approximately $ 37.05 million.

The Company issued 9,090,910 shares of the Company’s common stock in connection with its underwritten public equity offering at a price of $ 22.00 per share for net proceeds of approximately $ 187.2 million.

The Company issued 236,000 shares of common stock as settlement of accrued bonus compensation related to the year ended September 30, 2020.

The fair value of these shares was approximately $ 1.9 million and was fully expensed for in the prior year.

The Company issued 327,725

shares of common stock for the current year related to bonus compensation.

The Company issued 327,725 shares of common stock for the current year related to bonus compensation.

The fair value of these shares is approximately $ 3.07 million.

Company issued 1,618,285

shares of common stock in relation to the acquisition of ATL, which includes

809,142 shares held in escrow.

The Company issued 477,703

shares of common stock in relation to the acquisition of SWS ,

which includes 310,000 shares held in escrow.

The Company issued 1,618,285 shares of common stock in relation to the acquisition of ATL, which includes 809,142 shares held in escrow.

The Company issued 477,703 shares of common stock in relation to the acquisition of SWS, which includes 310,000 shares held in escrow.

(See Note 4 for additional details)

Company issued 57,045 shares of common stock for services rendered for a total fair value of approximately $ 815,000 which has been fully

expensed during the year ended September 30, 2021.

Company issued 389,745 shares of common stock in relation to the exercise of stock options and warrants.

(See Notes 12 and 13 for additional

Company issued 15,577 restricted stock units to certain SWS employees as part of the transaction to incentivize the employees

for retention purposes.

The Company issued 57,045 shares of common stock for services rendered for a total fair value of approximately $ 815,000 which has been fully expensed during the year ended September 30, 2021.

The Company issued 389,745 shares of common stock in relation to the exercise of stock options and warrants.

(See Notes 12 and 13 for additional details)

The Company issued 15,577 restricted stock units to certain SWS employees as part of the transaction to incentivize the employees for retention purposes.

These restricted stock units vest over a period of one year .

As of September 30, 2021, 4,582 of the restricted

stock units had been forfeited.

As of September 30, 2021, 4,582 of the restricted stock units had been forfeited.

(See Note 13 for additional details)

June 3, 2021, the Company entered into an At The Market Offering Agreement (“ATM”) with H.C.

Wainwright & Co., LLC, to

create an at-the-market equity program under which the Company may, from time to time, offer and sell shares of its common stock having

an aggregate gross offering price of up to $ 500,000,000 to or through H.C.

On June 3, 2021, the Company entered into an At-the-Market Offering Agreement (“ATM”) with H.C.

Wainwright & Co., LLC, to create an at-the-market equity program under which the Company may, from time to time, offer and sell shares of its common stock having an aggregate gross offering price of up to $ 500,000,000 to or through H.C.

Wainwright & Co., LLC.

During the year ended September

30, 2021, the Company issued 3,443,379 shares of the Company’s common stock under the ATM for net proceeds of $ 46.4 million.

shares were sold pursuant to a prospectus dated March 15, 2021 and a prospectus supplement dated June 3, 2021 filed with the SEC.

stock returned during the year ended September 30, 2021

a result of an adjustment of holdback shares to actual milestones earned in relation to the p2k acquisition, 8,072 shares were returned

and cancelled.

(See Note 3 for additional details)

a result of an adjustment of holdback shares pursuant to Article II and Schedule A of that certain Agreement and Plan of ATL Merger in

connection with the acquisition of ATL, 68,194 shares were returned and cancelled.

During the year ended September 30, 2021, the Company issued 3,443,379 shares of the Company’s common stock under the ATM for net proceeds of $ 46.4 million.

The shares were sold pursuant to a prospectus dated March 15, 2021 and a prospectus supplement dated June 3, 2021 filed with the SEC.

Common stock returned during the year ended September 30, 2021

As a result of an adjustment of holdback shares to actual milestones earned in relation to the p2k acquisition, 8,072 shares were returned and cancelled.

As a result of an adjustment of holdback shares pursuant to Article II and Schedule A of that certain Agreement and Plan of ATL Merger in connection with the acquisition of ATL, 68,194 shares were returned and cancelled.

(See Note 4 for additional details)

15,000 shares,

held in escrow as collateral, were returned from a lender on September 30, 2021.

Stock issuances during the year ended September 30, 2020

Company issued 1,964,313 shares of common stock in accordance with the terms of the convertible debt agreement due to the decrease in

Company issued 22,000 shares of common stock for services rendered to independent consultants at a fair value of $ 54,000 .

Company issued 793 shares of common stock as a result of rounding related to the reverse stock split.

Company issued 95,699 shares of common stock in relation to the acquisition of p2k.

relation to the Securities Purchase Agreement dated December 31, 2018, the Company issued 1,125,000

shares of common stock for the conversion of $ 1,250,000

in principal and $ 437,500

in interest at an effective conversion price of $ 1.50

relation to the Securities Purchase Agreement dated April 17, 2019, the Company issued 8,241,665

shares of common stock for the conversion of $ 10,750,000

in principal and $ 1,612,500

in interest as a conversion premium at an effective conversion price of $ 1.50

Company issued 28,381 shares of common stock as board and executive compensation at a fair value of $ 71,600 .

Company issued 1,230,770 shares of common stock as a result of a registered direct offering resulting in total consideration of $ 4,000,000 .

Company issued 6,913 shares of common stock as a result of a cashless exercise of 15,000 common stock warrants.

Company issued 26,427 shares of common stock in relation to the acquisition of GridFabric

stock returned during the year ended September 30, 2020

a result of a note payoff on December 5, 2019, 5,000 shares common stock were returned to treasury and cancelled on January 13, 2020.

a result of the cancellation of an investor relations services contract, 25,000 shares were returned to treasury and cancelled on February

A Preferred Stock issuances during the year ended September 30, 2020

October 4, 2019, the Company authorized the issuance of a total of seven hundred and fifty thousand ( 750,000 ) shares of its designated

Series A Preferred Stock to members of its board of directors for services rendered.

A fair value of $ 0.02 per share was determined by

Director fees of $ 15,000 was recorded as a result of the stock issued.

following is a summary of stock warrant activity during the years ended September 30, 2021 and September 30, 2020.

of Warrant Shares

Average Exercise Price ($)

15,000 shares, held in escrow as collateral, were returned from a lender on September 30, 2021.

STOCK WARRANTS

The following is a summary of stock warrant activity during the years ended September 30, 2022 and September 30, 2021.

Balance, September 30, 2020

9 unchanged sentences

Balance, September 30, 2022

of September 30, 2021, the outstanding warrants have a weighted average remaining term of 0.71 years and an intrinsic value of $ 389,243 .

the year ended September 30, 2021, a total of 173,990 shares of the Company’s common stock were issued in connection with the exercise

of common stock warrants at exercise prices ranging from $ 3.36 and $ 20.00 , for total consideration of $ 2,883,623 .

September 30, 2021, a total of 74,437 shares of the Company’s common stock were issued in connection with the cashless exercise

of 76,800 common stock warrants at exercise prices ranging from $ 0.83 to $ 3.67 .

of September 30, 2021, there are warrants exercisable to purchase 609,840 shares

of common stock in the Company and 5,714 unvested

warrants outstanding that cannot be exercised until vesting conditions are met.

the warrants require a cash investment to exercise as follows:

2,500 required

a cash investment of $ 8.00 per

103,000 require

a cash investment of $ 25.00 per

share, 200,000 require

a cash investment of $ 35.00 per

share, 10,000 require

a cash investment of $ 40.00 per

share, 60,000 require

a cash investment of $ 50.00 per

share, 38,334 require

a cash investment of $ 75.00 per

share and 5,000 require

a cash investment of $ 100.00 per

the outstanding warrants contain provisions allowing a cashless exercise at their respective

exercise prices.

activity for the year ended September 30, 2020

September 25, 2020, a total of 6,913 shares of the Company’s common stock were issued in connection with the cashless exercise

of 15,000 common stock warrants at an exercise price of $ 8.00 .

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.

September 15, 2021, the shareholders approved and the Company executed a second amendment 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.

of September 30, 2021, there were 1,225,351 shares available for issuance under the Plan.

Plan allows the Company to grant incentive stock options, non-qualified stock options, stock appreciation rights, or restricted stock

The incentive 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 full-time employees of the Company at the

date of the grant of the option.

The option vesting schedule for options granted is determined by the Board of Directors at the time

of the grant.

As of September 30, 2022, there are warrants exercisable to purchase 202,220 shares of common stock in the Company and there are no w arrants that are unvested.

All outstanding warrants contain provisions allowing a cashless exercise at their respective exercise prices.

As of September 30, 2022 , the outstanding warrants have a weighted average remaining term of 2.92 years and an intrinsic value of $ 0 .

During the year ended September 30, 2022, there were no exercise of warrants.

Warrant activity for the year ended September 30, 2021

During the year ended September 30, 2021, a total of 173,990 shares of the Company’s common stock were issued in connection with the exercise of common stock warrants at exercise prices ranging from $ 3.36 and $ 20.00 , for total consideration of $ 2,883,623 .

Additionally, a total of 74,437 shares of the Company’s common stock were issued in connection with the cashless exercise of 76,800 common stock warrants at exercise prices ranging from $ 0.83 to $ 3.67 .

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 September 30, 2022 , there were 89,889 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.

Non-qualified

options may be granted to any person, including, but not limited to, employees, independent agents, consultants and attorneys, who the

Company’s Board believes have contributed, or will contribute, to the success of the Company.

Non-qualified options may be issued

at option prices of less than fair market value on the date of grant and may be exercisable for up to ten years from date of grant.

of September 30, 2021, no non-qualified options were granted to any person.

Company recognized $ 3,868,927 and $ 3,608,885 for the years ended September 30, 2021 and September 30, 2020, respectively, in stock-based

compensation under the stock-based incentive compensation plan.

following is a summary of stock option activity during the year ended September 30, 2021:

of Option Shares

Average Exercise Price ($)

The Company grant ed 89,445 n on-qualified options pursuant to the Plan during the year ended September 30, 2022.

The Company recognized $ 31,464,994 and $ 8,546,712 for the years ended September 30, 2022 and September 30, 2021, respectively, in stock-based compensation.

STOCK OPTIONS

The following is a summary of stock option activity during the year ended September 30, 2022 and 2021:

Option Shares

Weighted Average

Exercise Price ($)

Balance, September 30, 2020

1 unchanged sentence

Options expired

Options canceled

Options canceled/forfeited

Options exercised

1 unchanged sentence

Options granted

Options expired

Options canceled

Options canceled/forfeited

Options exercised

Balance, September 30, 2022

of September 30, 2021, there are options exercisable to purchase 525,646 shares of common stock in the Company and 1,028,383 unvested

options outstanding that cannot be exercised until vesting conditions are met.

As of September 30, 2021, the outstanding options have

a weighted average remaining term of 4.03 years and an intrinsic value of $ 1,579,336 .

activity for the year ended September 30, 2021

the year ended September 30, 2021, a total of 141,318

shares of the Company’s common stock were issued in connection with the exercise of 141,318

common stock options at exercise prices ranging from $ 4.65 to

$ 24.40 , for a total consideration of $ 867,308 .

the year ended September 30, 2021, the Company granted 1,469,250

options with a total fair value of $ 21,582,485

to purchase shares of common stock to employees.

offset $ 953,125

of stock compensation expense against bonuses accrued during

the prior year and recognized $7,731,606 during the year.

The shares were granted at quoted market prices ranging from $ 7.55

and were valued at issuance using the Black Scholes model.

Black-Scholes model utilized the following inputs to value the options granted during year ended September 30, 2021:

As of September 30, 2022 , there are options exercisable to purchase 784,785 shares of common stock in the Company and 634,153 unvested options outstanding that cannot be exercised until vesting conditions are met.

As of September 30, 2022 , the outstanding options have a weighted average remaining term of 3.86 years and an no intrinsic value.

Option activity for the year ended September 30, 2022

During the year ended September 30, 2022 , a total of 105,423 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 $ 816,602 .

For the year ended September 30, 2022 , the Company also granted 215,750 options with a total fair value of $ 3,121,350 to purchase shares of common stock to employees.

The Black-Scholes model utilized the following inputs to value the options granted during year ended September 30, 2022:

Fair value assumptions Options:

September 30, 2022

Risk free interest rate

2 unchanged sentences

Expected volatility

187.18 % - 533.00 %

Expected dividends

September 30, 2021, the Company expects to recognize $ 16,434,789 of

stock-based compensation for the non-vested outstanding options over a weighted-average period of 2.47 years.

activity for the year ended September 30, 2020

the year ended September 30, 2020, the Company issued 233,233 options to purchase shares of common stock to employees, the options were granted with exercise prices equal to the then current

quoted market prices ranging from $ 4.50 to $ 8.50 .

The options were valued at issuance using the Black Scholes model and stock

compensation expense of $ 716,740 was recorded as a result of the issuances.

Black-Scholes model utilized the following inputs to value the options granted during year ended September 30, 2020:

As of September 30, 2022 , the Company expects to recognize $ 14,206,420 of stock-based compensation for the non-vested outstanding options over a weighted-average period of 1.63 years.

Option activity for the year ended September 30, 2021

During the year ended September 30, 2021, a total of 141,318 shares of the Company’s common stock were issued in connection with the exercise of 141,318 common stock options at exercise prices ranging from $ 4.65 to $ 24.40 , for a total consideration of $ 867,308 .

During the year ended September 30, 2021, the Company granted 1,469,250 options with a total fair value of $ 21,582,485 to purchase shares of common stock to employees.

The Company offset $ 953,125 of stock compensation expense against bonuses accrued during the prior year and recognized $ 7,731,606 during the year.

The shares were granted at quoted market prices ranging from $ 7.55 to $ 34.67 and were valued at issuance using the Black Scholes model.

The Black-Scholes model utilized the following inputs to value the options granted during year ended September 30, 2021:

Fair value assumptions Options:

September 30, 2021

Risk free interest rate

0.10 % - 0.41 %

Expected term (years)

Expected volatility

140 % - 239 %

Expected dividends

The Company grants RSUs that contain either

a) service conditions, or b) performance conditions, or c) market performance conditions.

RSUs containing service conditions vest monthly

RSUs containing performance conditions generally vest over 1 year, and the number of shares earned depends on the achievement

of predetermined Company metrics.

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

All of the RSUs issued prior to September 30, 2021 were either vested or forfeited and cancelled.

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

RESTRICTED STOCK UNITS

The Company grants restricted stock units ("RSU"s) that contain either a) service conditions, or 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.

RSU's that contain market conditions will vest based on the terms of the agreement and generally are either 1 year or over the employee's term of employment.

The Company recognizes the expense equal to the total fair value of the common stock price on the grant date.

The expense is recorded ratably over the service period.

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.

Intrinsic Value

Outstanding at September 30, 2020

Outstanding at September 30, 2021

of September 30, 2021, the Company had $ 123,216

unrecognized compensation cost related to restricted stock unit awards that will be recognized over a weighted average period of 0.4

Company recognized stock-based compensation expenses related to restricted stock units, of $ 3,862,679

for fiscal 2021.

The Company recognized $ 1,904,520

in stock-based compensation expense for restricted stock units issued in 2021 related to 2020 bonuses.

Company provides for income taxes under FASB ASC 740, Accounting for Income Taxes.

FASB ASC 740 requires the use of an asset and liability

approach in accounting for income taxes.

Deferred tax assets and liabilities are recorded based on the differences between the financial

statement and tax bases of assets and liabilities and the tax rates in effect currently.

requires the reduction of deferred tax assets by a valuation allowance, if, based on the weight of available evidence, it is more likely

than not that some or all of the deferred tax assets will not be realized.

In the Company’s opinion, it is uncertain whether they

will generate sufficient taxable income in the future to fully utilize the net deferred tax asset.

Accordingly, a valuation allowance

equal to the deferred tax asset has been recorded.

The total deferred tax asset is approximately $ 38.8 million as of September 30, 2021

which is calculated by multiplying a 21 % estimated tax rate by the cumulative net operating loss (“NOL”) of approximately $ 184.6 million.

to the enactment of the Tax Reform Act of 2017, we have calculated our deferred tax assets using an estimated corporate tax rate of 21 % .

Tax codes and laws may be subject to further reform or adjustment which may have a material impact to the Company’s deferred

tax assets and liabilities.

significant components of the Company's deferred tax assets and liabilities as of September 30, 2021 and 2020 are as follows:

As of September 30,

Cumulative tax net operating losses

(in millions)

Deferred tax asset (in millions)

Valuation allowance (in millions)

Current taxes payable

Income tax expense

As of September

30, 2021, and 2020, the Company had gross federal net operating loss carryforwards of approximately $ 184.6 million and $ 52.5 million,

respectively.

Company plans to file its U.S.

federal return for the year ended September 30, 2021 upon the issuance of this filing.

Upon filing of

the tax return for the year ended September 30, 2021 the actual deferred tax asset and associated valuation allowance available to the

Company may differ from managements estimates.

The tax years 2015-2019 remained open to examination for federal income tax purposes by

the major tax jurisdictions to which the Company is subject.

No tax returns are currently under examination by any tax authorities.

AND CONTINGENCIES

The Company has purchase commitments

that are cancellable of approximately $ 144.04

million related to purchase of miners as of September 30, 2021, and the Company has paid $ 85.11 million

towards these commitments as of the end of this period.

As of September 30, 2021, the remaining commitment for future payments was $ 58.93

Company has purchase commitments for infrastructure assets and other mining equipment of approximately $ 6,512,000

as of September 30, 2021 and the Company has paid $ 4,576,000

towards these commitments as of end of this period.

following table sets forth certain information concerning our obligations to make contractual future payments towards our agreements

as of September 30, 2021:

contractual obligations:

lease obligations

Lease obligations

Infrastructure

consideration

Outstanding at September 30, 2022

During the year ended September 30, 2022 , the Company granted 1,176,250 RSUs, which comprised of 120,000 that were service condition based, 146,250 that were performance condition based, and 910,000 that were market condition based awards.

The market condition based RSUs consist of 60,000 units that were perpetual in nature, and therefore, are given a derived service period of 5 years.

The remaining 810,000 RSUs had 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 inputs of these market based RSUs are as follows:

Fair value assumptions RSUs:

September 30, 2022

Risk free interest rate

0.14 % - 1.26 %

Expected term (years)

Expected volatility

111.37 % - 172.18 %

Cost of equity

20.00 % - 21.00 %

On September 12, 2022, the Compensation Committee approved to immediately vest the 810,000 market based RSUs that were subject to the 1 -year stated service period.

Accordingly, the Company recorded an incremental stock-based compensation expense of $ 3.96 million in the fiscal year September 30, 2022.

Additionally, on September 12, 2022, the Compensation Committee approved the following modifications and grants, each of which are pending ratification by shareholders:

(1) to grant 2,565,000 service condition based RSUs which will vest over a 3-year period beginning on the grant date,

(2) to grant 2,565,000 performance based RSUs which are expected to vest within a 12-month period,

(3) to modify the market condition based 60,000 units that were perpetual in nature, and 10,000 unvested service condition RSUs, and were replaced with;

(3a) 120,000 service condition based RSUs that vest over a 3-year period,

(3b) 120,000 performance based RSUs, which are expected to vest within 12 months from date of modification.

(4) to grant 760,000 restricted stock units, which shall vest on the later of the grant date and the Shareholder Approval Date.

As of September 30, 2022 , the Company had approximately $ 26 million unrecognized compensation cost related to restricted stock unit awards that will be recognized over a weighted average period of 2 years.

The Company recognized stock-based compensation expenses related to restricted stock units, of $ 23,661,327 and $ 3,862,679 for fiscal years ended 2022 and 2021 .

The Company recognized $ 1,904,520 in stock-based compensation expense for restricted stock units issued in 2021 related to 2020 bonuses.

The Company provides for income taxes under FASB ASC 740, Accounting for Income Taxes.

FASB ASC 740 requires the use of an asset and liability approach in accounting for income taxes.

Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently.

FASB ASC 740 requires the reduction of deferred tax assets by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

In the Company’s opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset.

Accordingly, a valuation allowance equal to the deferred tax asset has been recorded.

Due to the enactment of the Tax Reform Act of 2017, we have calculated our deferred tax assets using an estimated corporate tax rate of 21 %.

Tax codes and laws may be subject to further reform or adjustment which may have a material impact to the Company’s deferred tax assets and liabilities.

For the years ended September 30, 2022 and 2021 the Company's income (loss) from continuing operations before provision for income taxes were as follows:

September 30, 2022

September 30, 2021

Loss before income taxes

The component of the provision for income taxes in the years ended September 30, 2022, 2021, and 2020 were as follows:

September 30, 2022

September 30, 2021

Provision for income taxes

Income tax benefit attributable to loss from continuing operations differed from the amounts computed by applying the statutory U.S federal income tax rate of 21 % to pretax loss from continuing operations as a result of the following:

September 30, 2022

September 30, 2021

Tax Benefit at Federal statutory rate

Tax Benefit at State rate

Meals and Entertainment

Stock Based Compensation

Non deductible Payroll expense

ISO - Disqualifying Dispositions

Discontinued Operations

Change in Valuation Allowance

The significant components of the Company's deferred tax assets and liabilities as of September 30, 2022 and 2021 were as follows:

September 30, 2022

September 30, 2021

Deferred Tax Assets:

Right of Use - Lease Liability

Charitable Contributions

Section 1231 Loss Carryforwards

Stock Based Compensation

Interest Expense Carryforwards

Net Operating Loss carryforwards

Gross Deferred Tax Assets

Valuation Allowance

Total deferred tax assets, net of valuation allowance

Deferred Tax Liabilities

Right of Use - Lease Asset

Prepaid Expenses

Unrealized Gain on Derivative Asset

Unrealized Gain on Equity Security

Gain/Loss on Sale of Assets not on TR

Fixed Assets & Intangible Assets

Net Deferred Tax Assets

For the year ended September 30, 2022, based on all available objective evidence, including the existence of cumulative losses, the Company determined that it was not more likely than not that the net deferred tax assets were fully realizable as of September 30, 2022.

Accordingly, the Company established a full valuation allowance against its deferred tax assets.

As of September 30, 2022, the Company had $ 417.8 million of federal and $ 91.6 million of state net operating loss carryforwards available to reduce future taxable income, of which federal net operating loss carryforwards of $ 358.6 million have an indefinite life.

The federal net operating losses began to expire in 2007, while state net operating losses begin to expire in 2025.

The Company's ability to utilize its federal and state net operating loss carryforwards and federal tax credit carryforwards to reduce future taxable income and future taxes, respectively, may be subject to restrictions attributable to equity transactions that may have resulted in a change in ownership as defined by Internal Revenue Code ("IRC") Section 382, for which the Company is in the process of completing a study.

In the event that the Company has such a change in ownership, the Company's utilization of these carryforwards could be severely restricted and could result in the expiration of a significant amount of these carryforwards prior to the Company recognizing their benefit.

The Company files income tax returns in the U.S.

federal and state jurisdictions.

The 2018-2021 tax years generally remain subject to examination by the IRS and various state taxing authorities, although the Company is not currently under examination in any jurisdiction.

The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted March 27, 2020.

Among the business provisions, the CARES Act provided for various payroll tax incentives, changes to net operating loss carryback and carryforward rules, business interest expense limitation increases, and bonus depreciation on qualified improvement property.

Additionally, the Consolidated Appropriations Act of 2021 was signed on December 27, 2020 which provided additional COVID relief provisions for businesses.

The Company has evaluated the impact of both the Acts and has determined that any impact is not material to its financial statements.

COMMITMENTS AND CONTINGENCIES

Purchase of bitcoin mining equipment

The Company has cancellable purchase commitments totaling approximately $ 27 million related to purchase of miners and approximately $ 1.5 million related to purchase of mining operations related equipment and construction projects as of September 30, 2022 , and the Company has paid approximately $ 3 million towards these commitments as of the end of this period.

As of September 30, 2022 , the remaining commitment for future payments was approximately $ 28.5 million.

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 September 30, 2022, the Company did not have any contractual future payment obligations under the terms of the Agreement.

Contractual future payments

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

Recorded contractual obligations:

Operating lease obligations

Finance Lease obligations

Mining equipment

Mining operations related equipment

Contingent Consideration

GridFabric, LLC

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.

30, 2021, the contingent consideration was re-measured to $ 500,000 .

to September 30, 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 .

Watt Solutions:

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, LLC 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, LLC resulting in a payment of 8,404 shares of common stock valued at $ 150,000 .

Solar Watt Solutions, Inc.

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 $ 320,802 at September 30, 2021.

contingencies

time to time we may be subject to litigation.

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 have acquired liability insurance to reduce such risk exposure to

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.

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 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..

CleanSpark, Inc.

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”) (the “Class Action”).

The Class Complaint alleges 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 Allegations”).

The Class Complaint

(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 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.

Currently, there is a pending motion

to appoint lead class plaintiff, at which point dispositive motions may be filed.

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 Class Complaint are entirely without merit.

The Company intends to both defend

itself vigorously against these claims and to vigorously prosecute any counterclaims.

Notwithstanding

the Class 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 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 would be materially and adversely affected.

derivatively on behalf of CleanSpark, Inc., v.

Bradford, Love, Schultz, Beynon, McNeill, and Wood (consolidated with Perna, derivatively

on behalf of CleanSpark, Inc., v.

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 was filed on August 11, 2022.

The parties are awaiting a decision or oral argument on the Motion to Dismiss.

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.

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 “Defendants.”) On June 22, 2021, Mark Perna

(“Perna”) filed a verified shareholder derivative action (the “Perna Derivative Action”) in the same Court against

the same 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

The Derivative Action alleges that Defendants:

(1) made materially false and misleading public statements about the Company’s

business and prospects;

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 Defendants include breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate

A claim for contribution under Sections 10(b) and 21D of the Securities and Exchange Act is asserted against only Bradford and

The Derivative Action seeks declaratory relief, monetary damages, and imposition of adequate corporate governance and internal

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.

Motion to Dismiss will be due by January 20, 2022.

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

would be materially and adversely affected.

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’

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 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 was awarded $ 1,750 in sanctions.

The parties are currently engaged in discovery process.

Darfon America Corp., etc.

CleanSpark, Inc., etc., et al.

On August 18, 2022, Darfon America Corp filed a breach of contract suit in connection with a purchase contract for batteries.

In short, Plaintiff contends that the Company ordered batteries and did not pay for them.

Plaintiff is seeking $ 5.4 million in damages and additional co sts and fees.

The Company contends, among other things, that the batteries did not meet the necessary specifications.

This case is in a very early stage as discovery has only just commenced.

The Company is confident in its legal position and does not anticipate a loss.

MAJOR CUSTOMERS AND VENDORS

Currency Mining Segment

the year ended September 30, 2021, the digital currency mining business had the following customers that represented more than 10% of

For these purposes customers are defined as the Company’s mining pool operators.

The bitcoin 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.

September 30, 2022

September 30, 2021

Mining Pool Operator A

Mining Pool Operator B

the year ended September 30, 2021, the Company had the following significant suppliers of mining equipment.

the years ended September 30, 2021 and September 2020, the energy business had the following customers that represented more than 10%

the years ended September 30, 2021 and 2020, the Company had the following suppliers that represented more than 10% of direct

material costs.

September 30, 2020

We disclose segment information that is consistent

with the way in which management operates and views the business.

Our operating structure contains two reportable segments:

Digital Currency

The Company measures the results of its segments using, among other measures, each segment's sales and operating income, which

includes certain corporate overhead allocations.

Digital Currency.

consists of operation related to Bitcoin mining.

The Company provides computing power through ATL Data Centers LLC and CleanBlok Inc.

to the mining pools.

This segment also includes operation related to maintenance of real property holdings for company purposes through

CSRE properties Norcross LLC and CSRE properties LLC.

This segment revenue represents fractional share of the fixed cryptocurrency award

received from the mining pool operator in exchange of computing power.

This segment provides services,

equipment, and software to the energy industry.

This segment includes revenue from providing engineering and construction services, selling

equipment such as residential battery, residential solar, commercial solar and non-customized equipment and providing access to its energy

software offerings and software license sales and support services.

Corporate and Other.

This includes

revenue from providing design, software development, and other technology-based consulting services through p2k Labs and data center

services through ATL Data Center.

We allocate expenses related to corporate

activities to the segments, and corporate overhead to CleanSpark Inc.

Corporate Items and eliminations consist of corporate overhead and

other items not allocated to any of the Company's segments as in the table below.

Intersegment transactions, which were at market price,

are included in the “Other revenue and eliminations” and “Corporate items and eliminations” in the table below.

SEGMENT REPORTING - Segment Information

Digital Currency Mining

Total segment revenues

Other revenue and eliminations

Consolidated Revenues

( 8,111,138 )

( 13,554,515 )

Digital Currency Mining

Total segment profit/(loss)

( 13,554,515 )

Corporate items and eliminations (including depreciation and amortization)

( 36,899,142 )

( 9,791,628 )

$ ( 21,812,010 )

$ ( 23,346,143 )

details on major customers of Digital currency and Energy segment, see Note 16.

summary of segment assets is as follows:

Digital Currency Mining

$ 270,995,942

Other and Corporate assets

$ 317,473,121

Company has its geographic operations only in United States.

additions in long-lived assets during the years ended September 30, 2021 and 2020:

The Company had the following significant suppliers of mining equipment.

September 30, 2022

September 30, 2021

Digital Currency

Property Plant and Equipment

$ 144,743,498

Capitalized software

$ 154,625,336

SUBSEQUENT EVENTS

have evaluated events occurring between the end of the most recent fiscal year and the date the financial statements were issued through

December 14, 2021.

We have evaluated events occurring between the end of the most recent fiscal year and the date the financial statements were issued through December 14, 2022.

There were no material subsequent events except as disclosed below:

Power Agreement

October 1, 2021, the Company entered into certain agreements with Georgia Power Company (“Georgia Power”), for electrical

services to the Company’s facilities in Norcross, Georgia.

The agreements have an initial term of five years, during which time

the power utilized by the Company will be billed under the Georgia Power Real Time Pricing (“RTP”) rate, where a portion

of the usage is priced hourly and another portion is billed at a conventional rate.

In addition, the Company agreed to pay Georgia

Power a one-time fee of approximately $2.0 million to install additional power equipment on the property.

Mining Equipment Purchase Agreements

October 6 and October 14, 2021, the Company entered into agreements that are cancellable with a mining equipment supplier to purchase

an aggregate of 6,750 mining servers.

As compensation for the mining equipment, the Company agreed to pay the supplier up to an aggregate

amount of approximately $49.5 million, of

which, approximately $28.6 was

paid upon execution of the agreements, with the remainder to be paid in monthly installments through June 2022.

The Company currently

expects to receive the mining equipment in nine equal monthly shipments from November 2021 through July 2022 and plans to use the mining

equipment to expand its digital currency mining activities through its wholly owned subsidiaries.

November 2021, the Company entered into a new purchase agreement that is cancellable for a total of 2,597 mining machines with an aggregate

purchase price of approximately $26.5 million.

Immersion Cooling System Purchase

On December 1, 2021, the Company entered into

an agreement to purchase an immersion cooling system and related equipment with a purchase price of approximately $9.6 million.

Company issued 4,017,652 shares under its At the Market financing instrument resulting in proceeds of approximately $68 million.

The Company issued 25,775 shares as a result

of stock option exercises resulting in proceeds of $189,677.

November 23, 2021, the

Company settled all contingent consideration due to GridFabric resulting in the issuance of 8,404 shares of Company common stock valued

Mawson Purchase Agreement

On October 8, 2022, the Company completed the acquisition of a lease for approximately 16.35 acres of real property located in Sandersville, Washington County, Georgia (the “Property”), all personal property located on the Property and 6,349 application-specific integrated circuit miners (the “ASICs”) from subsidiaries of Mawson Infrastructure Group, Inc.

a Delaware corporation (“Mawson”), who is the selling shareholder named herein (the “Mawson

Transaction”), all pursuant to a Purchase and Sale Agreement dated September 8, 2022 (the “Purchase Agreement”) and an Equipment Purchase and Sale Agreement dated September8, 2022.

The Company paid the following consideration to Mawson for the Property:

(i) $ 13.5 million in cash;

(ii) 1,590,175 shares (the “Closing Shares”) of our common stock, par value $ 0.001 per share (which had a value of approximately

$ 4.8 million based upon the closing price of the common stock on October 7, 2022), and (iii) $ 6.5 million in seller financing in the form of a promissory note.

We also agreed to pay up to $ 9.02 million in cash within 15 days of the closing for the ASICs.

The following additional consideration may be payable to Mawson following the closing:

up to 1,100,890 shares of our common stock (the “Earn-out Shares”

and, together with the Closing Shares, the “Company Shares”) (which have a value of approximately $ 3.3 million based upon the closing price of our common stock on October 7, 2022), based upon the number of modular data centers on the Property occupied by Mawson being emptied and made available for our use;

up to an additional $ 2.0 million in a seller-financed earn-out payable at least 60 days post-closing if we are able to utilize at least an additional 150 MW of power on the Property by the six month anniversary of the closing.

Disposal of Certain Energy Assets

On November 18, 2022, the Company completed the sale of certain assets of its discontinued energy business.

The transaction involved the sale of certain software rights and assets for approximately $ 2.75 million.

At-the-Market Equity Issuances

Subsequent to September 30, 2022, the Company issued 14,481,208 common shares in relation to equity raises through its At-the-Market offering facility, net of offering costs, for net proceeds of approximat ely $ 41,344,000 .

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data