What changed in this filing

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Item 1. Business

2023-12-01 compared with 2022-12-15 · 178 added, 126 removed, 79 unchanged (79% of the section changed)

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and its consolidated subsidiaries, unless otherwise indicated.

CleanSpark, Inc.

is a leading bitcoin mining company incorporated in Nevada, whose common stock is listed on the Nasdaq Capital Market.

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

The only cryptocurrency we mine is bitcoin.

Dollar amounts presented in this Annual Report on Form 10-K are presented in thousands, except per share amounts, bitcoin price, and information set forth under the heading “Bitcoin Mining Operations”.

CleanSpark is a bitcoin mining company.

We independently own and operate five data centers in Georgia for a total developed capacity of 230 megawatts (“MW”).

We are developing an additional 150 MW at our data center in Sandersville, GA, which is expected to energize in early 2024.

We do not currently host miners for any other companies.

A partner in Massena, NY, hosts 50 MW for us.

We design our proprietary infrastructure to responsibly support bitcoin, the world’s most important digital commodity and an essential tool for financial independence and inclusion.

Through CleanSpark and our wholly owned subsidiaries, we have operated in the bitcoin mining sector since December 2020.

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

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

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

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

Lines of Business

Bitcoin Mining

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

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

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

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

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

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

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

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

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

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

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

As of June 30, 2022, we discontinued our energy operations due to our strategic decision to strictly focus on our bitcoin mining operations.

Business Activity

Bitcoin mining is our principal revenue generating business activity.

As of September 30, 2023, we operated 88,954 bitcoin mining machines, with a hashrate capacity of approximately 9.6 exahashes per second (“EH/s”) and a fleetwide efficiency of 28.4 joules per terahash (“J/TH”).

In fiscal year 2023, we mined 6,903 bitcoins, an 84% increase over the 3,752 bitcoins we mined in fiscal year 2022.

We expect to continue increasing our computing power through 2024 and beyond as we expand our infrastructure at our owned sites in the State of Georgia, seek strategic acquisition targets, and through strategic co-location agreements.

Bitcoin was introduced in 2008 with the goal of serving as a digital means of exchanging and storing value.

Bitcoin is a form of digital currency that depends upon a consensus-based network and a public ledger called a “blockchain”, which contains a record of every bitcoin transaction ever processed.

The bitcoin network is the first decentralized peer-to-peer payment network, powered by users participating in the consensus protocol, with no central authority or middlemen, that has wide network participation.

Bitcoin depends on a consensus-based network and a public ledger called a “blockchain,”

which contains a record of every bitcoin transaction ever processed.

The bitcoin network is the first decentralized peer-to-peer payment network powered by users participating in the consensus protocol, with no central authority or intermediaries, that has wide network participation.

The authenticity of each bitcoin transaction is protected through digital signatures that correspond with addresses of users that send and receive bitcoin.

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All transactions on the bitcoin blockchain are transparent, allowing those running the appropriate software to confirm the validity of each transaction.

To be recorded on the blockchain, each bitcoin transaction is validated through a proof-of-work consensus method, which entails solving complex mathematical problems to validate transactions and post them on the blockchain.

This process is called

Miners are rewarded with bitcoins, both in the form of newly-created bitcoins and fees in bitcoin, for successfully solving the mathematical problems and providing computing power to the network.

To be recorded on the blockchain, each bitcoin transaction is broadcast across the network and validated by nodes.

Miners then compete, using a proof-of-work consensus method, to find a target hash value, or output of a cryptographic function, and thereby add a new block and its transactions to the blockchain.

This process is called mining.

Miners are rewarded with bitcoins, in the form of newly-created bitcoins from the block subsidy and transaction fees included in that block.

Factors such as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining.

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

In bitcoin mining, “hashrate”

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

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

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

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

We obtain bitcoin as a result of our mining operations, and we sell bitcoin from time to time, to support our operations and strategic growth.

A company’s hashrate determines its market share and is therefore generally considered one of the most important metrics for evaluating bitcoin mining companies.

We obtain bitcoin as a result of our mining operations by contributing all of our computing power (both owned locations and hosted locations) to one mining pool operator who is our sole customer.

The contract with our mining pool operator is terminable at any time by either party.

In exchange for providing computing power to the mining pool, we are entitled to bitcoin rewards from the mining pool operator, which is a variable consideration calculated based on a predetermined formula agreed to by us and the mining pool operator as a part of the arrangement.

The variable consideration is constrained until we can reasonably estimate the amount of mining rewards by the end of a

given day based on the actual amount of computing power provided to the mining pool operator.

By then, we consider it a high probability that a significant reversal in the amount of revenue will not occur and include such variable consideration in the transaction price.

Providing computing power is an output of our ordinary activities and the only performance obligation in our contracts with our mining pool operator.

We recognize the revenue when the variable consideration is no longer constrained and the performance obligation of providing computing power has been satisfied.

As a result, we do not present disaggregated revenue information on block rewards and transaction verification fees.

We sell bitcoin from time to time, to support our operations and strategic growth.

We do not currently plan to engage in regular trading of bitcoin (other than as necessary to convert our bitcoin to U.S.

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however, our decisions to hold or sell bitcoin at any given time may be impacted by the bitcoin market, which has been historically characterized by significant volatility.

Currently, we do not use a formula or specific methodology to determine whether or when we will sell bitcoin that we hold, or the number of bitcoins we will sell.

Rather, decisions to hold or sell bitcoins are currently determined by management by analyzing forecasts and monitoring the market in real time.

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

Decisions to hold or sell bitcoins are determined by management by analyzing forecasts and monitoring the market in real time.

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

Markets, Geography and Major Customers

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

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

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

Strictly speaking, there is no customer market for mining bitcoin but we consider our mining pool operator a customer because it compensates us for providing processing power to the mining pool (see Part I, Item 1A., “Risk Factors”—“Our reliance on a third-party mining pool service provider for our mining revenue payouts may adversely affect an investment in us .

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

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

College Park, GA Facility

CleanSpark’s first ever bitcoin mining facility is in College Park, GA.

It sits on six acres near the Hartsfield-Jackson Atlanta International Airport and features at its heart 48 new generation air-cooled pods.

Machines are also housed in 20 Ant boxes, an annex building and within the original data center.

As of September 30, 2023, the facility maintained an operational hashrate of 1.7 EH/s.

Norcross, GA Facility

An 87,000-square-foot data center in Norcross, GA was purchased and transformed into CleanSpark’s second bitcoin mining facility.

Situated on over seven acres, the immersion-cooled site participates in Georgia’s Flex REC program and is 100% net carbon-neutral.

There are two large rooms that house 20 MW of single-phase immersion—about 4,300 machines.

Liquid immersion cooling, where bitcoin mining machines are fully immersed in a specialized oil, has proven to significantly improve efficiency by reducing power consumption and extending the life of the machines—thereby maximizing financial gains.

As of September, 30, 2023, the facility maintained an operational hashrate of 0.5 EH/s.

Washington, GA Facility

Nestled between Augusta and Athens, the historic town of Washington is home to CleanSpark’s third bitcoin mining facility.

It was purchased during the summer 2022 bear market from another bitcoin miner as an already-operational site.

Bitcoin mining machines are set up in multiple air-cooled buildings.

A completed 50 MW expansion in July 2023 created four more buildings filled with an additional 14,000 latest-generation miners.

It draws power predominantly from low-carbon sources, such as nuclear energy.

As of September 30, 2023, the facility maintained an operational hashrate of 3.0 EH/s.

Sandersville, GA Facility

CleanSpark’s fourth bitcoin mining site (and second to be purchased during the summer 2022 bear market) is the largest facility in our portfolio.

The turnkey operation in Sandersville, GA was acquired from another bitcoin miner with room to almost triple its capacity.

The site is undergoing a 150 MW expansion with expected completion early in our second fiscal quarter ending March 2024.

Each building will house thousands of high-performance bitcoin mining machines and, once completed, will add over 6.0 EH/s to our hashrate.

As of September 30, 2023, the facility maintained an operational hashrate of 2.1 EH/s.

Dalton, GA Facility

Dalton marks CleanSpark’s fifth campus in Georgia.

It collaborates closely with the local utility, which is owned and operated by the City of Dalton.

This campus is made of two separate sites a few miles from each other.

As of September 30, 2023, the facility maintained an operational hashrate of 0.8 EH/s.

Massena, NY Hosting Site

We also co-locate some of our machines at the facilities of Coinmint, LLC ("Coinmint") in Massena, NY.

The facility runs on hydroelectric power.

As of September 30, 2023, our machines there maintained an operational hashrate of 1.5 EH/s.

Working Capital Items

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

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

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

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

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

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

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

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

We purchase mining machines through re-sellers and directly from manufacturers.

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

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

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

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

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

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

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

In addition to the approximate 88,000 miners (application-specific integrated circuits or “ASIC”) in operation as of the date of this filing, the Company has received, and will be installing in the coming months approximately 45,000 more miners in our soon-to-be-completed 150 MW expansion of our Sandersville location.

The Company entered into an additional agreement to purchase 4.4 EH/s of S21 miners in October 2023 and is scheduled to receive these miners beginning in January 2024.

Most miners we operate and expect to operate once received are the latest generation of miners manufactured by Bitmain Technologies Ltd.

(“Bitmain”), including the S19-Pro, S19j-Pro, S19j-Pro+, S19 XP and S21.

Distribution, Marketing and Strategic Relationships

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

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

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

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

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

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

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

On July 8, 2021, our subsidiary CleanBlok, Inc., a wholly owned subsidiary of the Company ("CleanBlok"), entered into a services agreement with Coinmint.

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

All bitcoin mining services performed by Coinmint are conducted using our own mining equipment.

All computing power generated by our ASICs is contributed to our mining pool operator, Foundry Digital.

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

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

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

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

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

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

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

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

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

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

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

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

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

The agreement has an initial term of five years from the operations commencement date (unless terminated earlier in accordance with the terms of the Agreement), after which it will renew automatically for two-year periods unless either party provides notice of non-renewal at least ninety days prior to the expiration of the term or renewal term, as applicable.

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

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

Materials and Suppliers

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

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

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

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

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

Most of the machines we purchased this year were manufactured by Bitmain, one of the top three preeminent manufacturers of bitcoin mining rigs.

Bitmain manufactures ASICs throughout Asia, and is headquartered in China with subsidiaries in the United States, Singapore, Malaysia, Kazakhstan and other locations.

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

We rely on utility providers for our power needs.

These utilities buy into local energy mixes to source power.

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

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

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

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

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

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

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

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

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

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

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

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

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

These energy market prices may be significantly impacted by market conditions and geopolitical events.

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

While some macro-economic indicators available as of the date of this filing suggest that inflation may be slowing, inflationary pressures impact virtually all aspects of our materials and suppliers, including power prices, and are likely to impact our fiscal year 2024.

Environmental Issues

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

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

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

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

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

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

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

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

We have engaged market professionals to enhance and build a comprehensive corporate social responsibility strategy, which we began executing in 2023.

Some policymakers have expressed concerns over the high energy consumption of data centers, including bitcoin miners, and the ancillary effects on the environment from that energy consumption.

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

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

We continue to monitor emerging developments in this area.

We carefully monitor existing and pending climate change legislation, regulation, and international treaties or accords for any material effect on our business or markets that we serve, our operational results, our capital expenditures or our financial position.

The table below describes the energy sources of our electricity use for each of our owned locations as of September 30, 2023, as reported to us by our power providers.

Percentage of energy usage by each owned location (4)

College Park, GA (3)

Norcross, GA (3)

Washington, GA

Sandersville, GA

Non-Carbon (1)

(1) Non-carbon usage includes hydro, nuclear, wind and solar

(2) Carbon usage includes coal and natural gas

(3) Norcross and College Park are offset by renewable energy credit purchases

(4) Energy reported by grid operators as uncategorized is excluded from the percentages above

We purchase energy from the electrical grid, and as a result our energy mix will vary from period to period based on a variety of factors including weather, temperature, demand, and how the grid operator ultimately procures and utilizes energy resources.

The table breaks out energy sources as reported to the Company by the grid operators.

Bitcoin mining is a global activity.

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

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

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

Bitcoin mining by its nature is a competitive business;

all miners compete for the same number of bitcoin rewards.

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

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

We define our principal competitors as other publicly traded bitcoin miners because there is widely available information about their operations.

We believe our principal competitive advantages include our energy background, a combination of owned, operated, and co-located miners and facilities, our strategic use of the bitcoin we mine to fund operational growth and our commitment to responsible business practices, including building in communities that source renewable energy.

Within North America, our major competitors include:

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Iris Energy Limited

Cipher Mining Inc.

Terawulf Inc.

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

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Government Regulation

Bitcoin Mining

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We are unable to predict the impact that any new regulations may have on our business at the time of filing this Annual Report on Form 10-K.

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

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

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

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

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to write rules for digital asset trading and lending.

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

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

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

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

For those reasons, we carefully vet our custodians

for adequate compliance with U.S.

Since that time, Congress has considered a number of legislative proposals for regulating the digital asset industry.

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

In addition, federal regulators have increased their enforcement activity in the digital asset industry.

Federal agencies such as the SEC and Commodity Futures Trading Commission (“CFTC”) have brought a number of enforcement actions, including actions against significant players in the industry.

In fiscal year 2023, for example, the CFTC brought 47 actions involving conduct related to digital asset commodities, representing more than 49 percent of all actions filed by the CFTC during that time period.

This increased enforcement by agencies like the SEC and CFTC has resulted in part from the failure of FTX Trading Ltd.

(“FTX”) in November 2022 and the resulting market turmoil that failure caused.

While these statements tend to focus more on digital asset exchanges and other players in the digital asset space and less on bitcoin miners, the failure of large exchanges may impact the adoption and value of bitcoin.

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

For those reasons, we carefully vet the exchanges we use for adequate compliance with U.S.

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

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“Risk Factors”

beginning on page 11 of this Annual Report.

beginning on page 13 of this Annual Report on Form 10-K.

Cybersecurity

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

based digital assets exchange.

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

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

(“Coinbase”), a U.S.-based digital assets exchange.

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

We hold any remainder of our bitcoin in cold storage.

Bitcoin in cold wallets are reconciled monthly and are considered “on-chain.”

In other words, the cold wallets have a unique blockchain address and their activity is tracked through the blockchain by the Company if there are any reconciling issues.

For security reasons, Coinbase does not disclose the geographic location of its cold storage wallets to its customers.

Our custody agreement with Coinbase provides that Coinbase will obtain and maintain at its sole expense insurance coverage in such types and amounts as are commercially reasonable for the custodial services provided under the custody agreement.

We do not carry additional insurance coverage on our bitcoin holdings.

Further we are not aware of any insurance providers or other third parties (e.g.

auditors) having inspection or other verification rights associated with digital assets held in storage.

We recognize the importance of assessing, identifying and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K.

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

Hackers or malicious actors may launch attacks to steal, compromise or secure bitcoins, such as by attacking the bitcoin network source code, exchange miners, third-party platforms (including Coinbase), cold and hot storage locations or software, or by other means.

We may be in control and possession of substantial holdings of bitcoin, and as we increase in size, we may become a more appealing target of hackers, malware, cyber-attacks or other security threats.

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

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

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

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

Human Capital Resources;

We may be in control and possession of substantial holdings of bitcoin, and as we increase in size, we may become a more appealing target of

hackers, malware, cyberattacks or other security threats.

We have an established IT Steering Committee, formed of senior Company leadership, which evaluates all cybersecurity matters, with the purpose of meeting at least semi-annually and providing recommendations with respect to our information technology use and protection, including, but not limited to, data governance, privacy, compliance and cybersecurity.

We have implemented controls, policies, procedures and technological safeguards to maintain and protect the integrity, continuous operation, redundancy and security of our IT systems and data that we believe to be reasonably consistent with industry standards and practices, or as required by applicable regulatory standards.

We are also required to comply with applicable laws, rules, regulations and contractual obligations relating to the privacy and security of our IT systems and data and to the protection of such IT systems and data from unauthorized use, access, misappropriation or modification.

We have property insurance coverage for our bitcoin miners under a multi-tiered insurance program with 18 different underwriters for a total of $100,000 in limits.

This insurance coverage covers all the Company’s bitcoin miners and includes Earthquake/Flood insurance with a $5,000 limit and Storm/Wind/Hail coverage with a limit of 3% Value at Risk of Time of Loss.

We also maintain equipment breakdown coverage, with a property damage limit of $100,000.

We do not maintain Business Interruption Coverage, which is currently not being provided by underwriters to any bitcoin mining companies.

The policies also exclude coverage of our bitcoin holdings and cybersecurity coverage.

We engage our insurance broker annually to solicit underwriters to provide proposals to renew our current coverage or update our policies to meet our needs, prior to the policies’

expiration on November 1st of each year.

Human Resources

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

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

As of September 30, 2023, we had 131 staff members, all located in the United States, and 130 of which were full time.

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

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

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

We cultivate trust and transparency among our employees, the communities we operate in, and the people around the world who depend on bitcoin as we jointly strive to build the infrastructure of the future.

Discontinued Operations

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

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

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

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

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

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

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

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

We have since sold or disposed of the majority of our software and intellectual property assets related to the Energy Segment (including mPulse, mVoult and GridFabric LLC) and sold all additional inventory and other assets.

Other Business Activities

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

ATL is in the process of offloading these customers.

Company Websites

Through our wholly owned subsidiary ATL Data Centers LLC ("ATL"), we previously provided traditional data center services to a small number of remaining clients, such as providing customers with rack space, power and equipment, and offered several cloud services including virtual services, virtual storage, and data backup services.

As of September 30, 2023, ATL no longer provides data center services to external customers and all capacity of the location is now dedicated to bitcoin mining activities.

What changed 10-K

Item 1. Business