What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-12-03 compared with 2023-12-01 · 1036 added, 777 removed, 686 unchanged (73% of the section changed)

Financial Statements and Supplementary Data

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

Index to Financial Statements

Audited Consolidated Financial Statements:

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

Reports of Independent Registered Public Accounting Firm (BDO USA, P.C.;

Las Vegas, Nevada;

PCAOB ID 243)

Report of Independent Registered Public Accounting Firm (MaloneBailey, LLP;

Houston, Texas;

PCAOB ID 206 )

Consolidated Balance Sheets as of September 30, 2024 and 2023

Consolidated Statements of Operations and Comprehensive Loss for the years ended September 30, 2024, 2023 and 2022

Consolidated Statements of Stockholders’

Equity for the years ended September 30, 2023 and 2022

Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2024, 2023 and 2022

Consolidated Statements of Cash Flows for the years ended September 30, 2024, 2023 and 2022

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Shareholders and Board of Directors

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, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2023, 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, 2023, 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 1, 2023 expressed an adverse opinion.

Las Vegas, Nevada

Opinion on the Consolidated Financial Statements

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

(the “Company”) as of September 30, 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended September 30, 2024, and the related notes and financial statement schedule listed in the accompanying index.

(collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2024, and the results of its operations and its cash flows for the year ended September 30, 2024 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of September 30, 2024, 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 3, 2024 expressed an adverse opinion thereon.

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 Reporting.

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 the U.S.

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

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

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 believe that our audits provide a reasonable basis for our opinions.

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 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 its mining pool and in exchange for providing such computing power, the Company is entitled to a pro-rata share of the fixed bitcoin awards earned over the measurement period, plus a pro-rata fractional share of the global transaction fee rewards for the respective measurement period, less net digital asset fees due to the mining pool operator over the measurement period.

The Company’s pro-rata share is based on the proportion of computing power the Company contributed to the mining pool operator as compared to the bitcoin network’s algorithmic difficulty.

During the year ended September 30, 2023, the Company recognized net bitcoin mining revenue of approximately $168.1 million.

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:

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, 2023, 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, 2023 amounted to approximately $56.2 million.

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 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 the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements.

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

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

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

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

Bitcoin Mining Revenue

As described in Note 2 to the consolidated financial statements, the Company participates in a third-party operated mining pool (the “mining pool”) by providing hashrate to the mining pool operator.

The Company recognizes bitcoin mining revenue as it fulfills its performance obligation over time by providing hashrate.

Once the hashrate is provided, the Company earns non-cash consideration in the form of bitcoin based on the Full-Pay-Per-Share (“FPPS”) payout method set forth by the mining pool operator.

Bitcoin mining revenue is comprised of the block reward and transaction fees earned by the Company net of the mining pool fees charged by the mining pool operator.

For the year ended September 30, 2024, bitcoin mining revenue, net (“mining revenue”) was approximately $379 million.

We identified the auditing of mining revenue as a critical audit matter due to the nature and extent of audit effort required to perform audit procedures over the Company’s hashrate provided to the mining pool operator and the associated contractual payouts based on the blockchain contractual inputs.

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

• With the assistance of our Information Technology (“IT”) professionals, we identified the key system used to monitor hashrate and tested the IT general controls over the system.

• We confirmed with the mining pool operator (i) the contractual terms used in the determination of mining revenue, (ii) hashrate provided to the mining pool operator by the Company, (iii) total mining revenue earned by the Company, and (iv) the Company’s digital asset wallet addresses in which the mining revenue is deposited.

• Using the Company’s digital asset wallet addresses confirmed by the mining pool operator, we reconciled the mining revenue earned from and paid by the mining pool operator against on-chain transactions independently obtained from the blockchain.

• Using data analytics, we recalculated the Company’s recorded mining revenue per the calculation prescribed in the FPPS payout method using independently obtained blockchain contractual inputs, the hashrate confirmed by the mining pool operator, and independent bitcoin prices.

• For the mining revenue generated through the Company’s owned facilities, we tested the completeness and accuracy of the hashrate provided to the mining pool operator by comparing it against the system used by the Company to monitor hashrate.

• For the mining revenue generated through colocation facilities, we performed analytical procedures to predict the hashrate provided to the mining pool operator and the mining revenue earned and recorded by the Company.

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2024.

Houston, Texas

Las Vegas, Nevada

December 3, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Shareholders and Board of Directors

CleanSpark, Inc.

Las Vegas, Nevada

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, 2023, 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 weakness 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, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the 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 assessment.

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, 2023 and 2022 and for the years then ended and our report dated December 1, 2023 expressed an unqualified opinion on those financial statements.

We have audited CleanSpark, Inc.’s (the “Company’s”) internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of September 30, 2024, based on the COSO criteria.

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 assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of September 30, 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended September 30, 2024, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as “the financial statements”) and our report dated December 3, 2024 expressed an unqualified opinion thereon.

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 Report”).

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

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 accompanying “Item 9A, Management’s Report on Internal Control over Financial Reporting”.

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

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

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

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

We conducted our audit of internal control over financial reporting 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 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 opinions.

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 weakness has been identified and included in management’s assessment:

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.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report on those financial statements.

We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material weaknesses regarding management’s failure to design and maintain controls over (1) program change management, logical access and maintaining appropriate segregation of duties within the general ledger system, and as a result, the internal controls related to various assertions in certain financial statement line items were not effective, (2) the accounting for property plant and equipment, and deposits on miners, (3) controls over payroll, including controls over the use of information from its third-party payroll service provider, maintaining appropriate segregation of duties and processing of payroll, (4) the safeguarding of cash have been identified and described in management’s assessment.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and this report does not affect our report dated December 3, 2024 on those consolidated 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;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, 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.

/s/ BDO USA, P.C .

Las Vegas, Nevada

December 3, 2024

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 sheet of CleanSpark, Inc.

and its subsidiaries (collectively, the “Company”) as of September 30, 2023, 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, 2023, 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, 2023, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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.

/s/ MaloneBailey, LLP

1 unchanged sentence

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

In 2024, we became the predecessor auditor.

Houston, Texas

December 1, 2023

December 1, 2023, except for the effects of the revision discussed in Note 3 to the consolidated financial statements, as to which the date is December 3, 2024.

CLEANSPARK, INC.

5 unchanged sentences

Cash and cash equivalents

Accounts receivable, net

Restricted cash

Receivable for equity offerings

Prepaid expense and other current assets

Derivative investment asset

Bitcoin (See Note 2 and Note 6)

Receivable for bitcoin collateral (See Note 2 and Note 12)

Note receivable from GRIID (see Note 7)

Derivative investments

Investment in debt security, AFS, at fair value

6 unchanged sentences

Other long-term asset

Long-term assets held for sale

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable and accrued liabilities

Current portion of operating lease liability

Current portion of finance lease liability

Current portion of long-term loans payable

Dividends payable

Accounts payable

Accrued liabilities

Other current liabilities

Current portion of loans payable

Current liabilities held for sale

5 unchanged sentences

Deferred income taxes

Long-term liabilities held for sale

Total liabilities

Commitments and contingencies - Note 18

CLEANSPARK, INC.

4 unchanged sentences

Stockholders' equity

Common stock;

$ 0.001 par value;

300,000,000 shares authorized;

160,184,921 and

55,661,337 shares issued and outstanding, respectively

Preferred stock;

1 unchanged sentence

10,000,000 shares authorized;

Series A shares;

2,000,000 authorized;

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

1,750,000 issued and outstanding

(liquidation preference $ 0.02 per share)

Series X shares;

1,000,000 and 0 authorized, issued and outstanding,

Common stock;

$ 0.001 par value;

300,000,000 shares authorized;

270,897,784 and 160,184,921 shares issued and outstanding, respectively

Additional paid-in capital

10 unchanged sentences

September 30,

Revenues, net

7 unchanged sentences

General and administrative expenses

Loss (gain) on disposal of assets

Loss on disposal of assets

Gain on fair value of bitcoin, net (see Note 2 and Note 6)

Other impairment expense (related to bitcoin)

Impairment expense - fixed assets

Impairment expense - other

6 unchanged sentences

Change in fair value of contingent consideration

Recognized gain on bitcoin collateral returned

Change in fair value of bitcoin collateral

Realized gain on sale of equity security

3 unchanged sentences

Interest expense

Total other (expense) income

Total other income (expense)

Loss before income tax expense

7 unchanged sentences

Net loss attributable to common shareholders

Other comprehensive income

Other comprehensive income, net of tax

Total comprehensive loss attributable to common shareholders

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (continued)

(in thousands, except per share and share amounts)

2 unchanged sentences

September 30,

Loss from continuing operations per common share - basic

8 unchanged sentences

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

8 unchanged sentences

Exercise of options

Shares issued under equity offering,

net of offering costs

Shares issued under equity offering, net of offering costs

Preferred stock dividends

2 unchanged sentences

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(in thousands, except share amounts)

12 unchanged sentences

Balance, September 30, 2023

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(in thousands, except share amounts)

Preferred Stock

Comprehensive

Stockholders'

Balance, September 30, 2023

Cumulative effect of change in accounting principle (See Note 2)

Options and restricted stock units issued for services

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

Exercise of options and warrants

Shares issued under equity offering, net of offering costs

Preferred stock dividends

Preferred stock Series X Issuance

Other comprehensive income

Balance, September 30, 2024

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

4 unchanged sentences

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:

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

Unrealized loss on equity security

1 unchanged sentence

Impairment of bitcoin

Bitcoin mining revenue, net

Gain on fair value of bitcoin, net (see Note 2 and Note 6)

Proceeds from sale of bitcoin

Realized gain on sale of bitcoin

Bitcoin issued for services

Impairment of goodwill

Impairment of investment in equity security

Impairment expense - fixed assets

Impairment expense - other

Impairment expense - goodwill

Unrealized loss on derivative asset

1 unchanged sentence

Non-cash lease expense

Recognized gain on bitcoin collateral returned

Change in fair value of bitcoin collateral

Stock based compensation

2 unchanged sentences

Amortization of debt discount

Loss (gain) on write-off and disposal of assets

Loss (gain) on disposal of assets

Changes in operating assets and liabilities

Mining of bitcoin

Proceeds from sale of bitcoin

Decrease in operating lease liabilities

Increase in accounts payable and accrued liabilities

(Increase) in prepaid expenses and other current assets

(Increase) in accounts receivables

(Increase) decrease in Inventory

Deferred income taxes

(Increase) decrease in prepaid expenses and other current assets

Increase in deferred income taxes

Long-term deposits paid

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

Net cash provided by (used in) operating activities of Discontinued Operations

Net cash (used in) provided by operating activities of continuing operations

Net cash (used in) provided by operating activities of discontinued operations

Net cash (used in) provided by operating activities

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

September 30,

Cash flows from investing activities

Payments on miners (including deposits)

Payments on miners and miner deposits

Purchase of fixed assets

Purchase of intangible assets

Proceeds from sale of bitcoin

Asset Acquisition - Tennessee Locations

Asset Acquisition - Clinton, MS Locations

Asset Acquisition - Wyoming Locations

Asset Acquisition - LN Energy

Asset Acquisition - Mississippi Locations

Asset Acquisition - Dalton 3

Asset Acquisition - Dalton 1 & 2

Asset Acquisition - land in Sandersville, GA

Acquisition of Mawson

Acquisition of WAHA, net of cash received

Notes receivable from GRIID

Settlement of holdbacks related to contingent consideration

Land acquisition in Sandersville, GA

Proceeds from sale of miners

Proceeds from the sale of equity securities

Acquisition of WAHA, net of cash received

Acquisition of Coinmaker LLC

Acquisition of Mawson

Net cash used in investing activities - Continuing Operations

Net cash provided by investing activities - Discontinued Operations

Purchase of software

Net cash used in investing activities of continuing operations

Net cash provided by investing activities of discontinued operations

Net cash used in investing activities

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

September 30,

Cash flows from financing activities

Proceeds from loans

Payments on loans

1 unchanged sentence

Payments on finance leases

Payments on equipment backed loan

Refund of loan commitment fee

Proceeds from loan payable

Proceeds from equipment backed loan

Payments of taxes on shares withheld for net settlement of restricted stock units

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 of continuing operations

Net cash provided by financing activities of discontinued operations

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Net increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash, beginning of period

Cash, cash equivalents, and restricted cash, end of period

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

September 30,

Supplemental disclosure of cash flow information

Cash paid for interest

Cash paid for income taxes

Non-cash investing and financing transactions

Shares issued for settlement of contingent consideration related to business acquisition

Receivable for equity proceeds

Fixed asset and miner purchases accrued not paid

2 unchanged sentences

Software purchased with bitcoin

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

Bitcoin transferred to collateral account

Bitcoin transferred from collateral account

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

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share amounts)

($ in thousands, except per share and bitcoin amounts)

ORGANIZATION AND LINE OF BUSINESS

CleanSpark is a bitcoin mining company.

The Company independently owns and operates five data centers in Georgia for a total developed capacity of 230 MW.

The Company is developing an additional 150 MW at its data center in Sandersville, GA.

CleanSpark, Inc.

(the “Company”) is a bitcoin mining company.

The Company independently owns and operates nine data centers in Georgia, three data centers in Mississippi and two data centers in Tennessee as of September 30, 2024 .

The Company also own three additional data centers in Tennessee which started operations in October 2024.

The Company is currently developing data centers in Cheyenne, Wyoming and Clinton, Mississippi.

As of September 30, 2024, the Company had agreements in which the Company's bitcoin miners were hosted in New York and Tennessee.

The Company does not currently host miners for any other companies.

A partner in Massena, NY, hosts 50 MW for the Company.

CleanSpark designs its infrastructure to responsibly support bitcoin, the world’s most important digital commodity and an essential tool for financial independence and inclusion.

The Company designs its infrastructure to responsibly secure and support the bitcoin network, the world’s most recognized digital commodity.

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.

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

(“CleanBlok”), CleanSpark DW, LLC, CleanSpark GLP, LLC, and CleanSpark TN, 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, CSRE Properties Sandersville, LLC, CSRE Properties Dalton, LLC, and CleanSpark HQ, LLC, the Company maintains real property holdings.

Through the Company’s 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, Dalton15, LLC, CleanSpark MS, LLC, CSRE Properties Mississippi, LLC, CSRE Properties Vicksburg, LLC, CSRE Properties Wyoming, LLC, CSRE Properties Tennessee, LLC and CleanSpark HQ, LLC, the Company maintains real property holdings.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 1, 2023 (“Form 10-K”).

As shown in the accompanying audited consolidated financial statements, the Company incurred a net loss from continuing operations of $ 132,160 and $ 40,089 during the years ended September 30, 2023 and September 30, 2022, 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 financing activities in fiscal year 2023.

The Company used $ 31,720 in cash from its operations for fiscal 2023, however, the Company made a decision to sell fewer bitcoin than it generated and the increase in bitcoin held at the end of the year (for which the Company classifies as a current asset) was $ 56,241 .

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 (see Note 12 - Stockholders' Equity).

As of September 30, 2023 and September 30, 2022, the Company had working capital of $ 28,117 and $ 16,735 , respectively.

Basis of Presentation

The accompanying audited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

The accompanying audited consolidated financial statements include the accounts of CleanSpark, Inc., and the Company’s wholly owned subsidiaries, ATL, CleanBlok, CleanSpark DW, LLC, CleanSpark GLP, LLC, CSRE Properties Norcross, LLC, CSRE Property Management Company, LLC, CSRE Properties, LLC, CSRE Properties Washington, LLC, CSRE Properties Sandersville, LLC, CSRE Properties Dalton, LLC, and CleanSpark HQ, LLC.

The accompanying consolidated financial statements include the accounts of CleanSpark, Inc.

and the Company’s wholly owned subsidiaries, ATL, CleanBlok, CleanSpark DW, LLC, CleanSpark GLP, LLC, CSRE Properties Norcross, LLC, CSRE Property Management Company, LLC, CSRE Properties, LLC, CSRE Properties Washington, LLC, CSRE Properties Sandersville, LLC, CSRE Properties Dalton, LLC, Dalton15, LLC, CleanSpark MS, LLC, CSRE Properties Mississippi, LLC, CSRE Properties Vicksburg, LLC, CSRE Properties Wyoming, LLC, CleanSpark TN, LLC, Tron Merger Sub, Inc., MS Data, LLC, and CleanSpark HQ, LLC.

All intercompany transactions have been eliminated upon consolidation of these entities.

The Company has a sole reporting segment which is the bitcoin mining segment.

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

The disposal groups related to the

energy operations are part of the following entities:

The disposal groups related to the energy operations are part of the following entities:

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

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 expansion and 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, 2023, the Company had $ 29,215 available cash on-hand and bitcoin with a fair market value of $ 56,241 .

After considering its current liquidity and future market and economic conditions, the Company has concluded there is no substantial doubt about the Company’s ability to continue as a going concern.

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 impairment, intangible assets acquired, impairments and estimations of long-lived assets, valuation of derivative assets and liabilities, available-for-sale investments, allowances for uncollectible accounts, valuation of contingent consideration, 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 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 for our bitcoin mining segment (sole reporting unit as of September 2023 and 2022) by type of revenue is provided below.

Revenue from Contracts with Customers - Revenue from Bitcoin Mining

The Company recognizes revenue in accordance with ASC Topic 606 –

Revenue from Contracts with Customers (ASC 606).

The Company participates in a third-party operated mining pool.

As a participant in the third-party operated mining pool, the Company provides a service to perform hash calculations for the third-party operated mining pool, which is an output of our ordinary activities.

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606 – Revenue from Contracts with Customers (ASC 606).

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

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Recognize revenue when the company satisfies a performance obligation

The Company enters into a contract with a bitcoin mining pool operator (i.e., the customer) 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 (which occurs daily at midnight Universal Time Coordinated (UTC)).

In exchange for providing computing power, the Company is entitled to a pro-rata share of the fixed bitcoin awards earned over the measurement period, plus a pro-rata fractional share of the global transaction fee rewards for the respective measurement period, less net digital asset fees due to the mining pool operator over the measurement period.

The Company’s pro-rata share is based on the proportion of computing power the Company contributed to the mining pool operator as compared to the bitcoin network’s algorithmic difficulty.

The proportionate share of the transaction fee rewards earned are based on the Company’s computing power as compared to the total computing power contributed to the global network.

Applying the criteria per ASC 606-10-25-1, the contract arises at the point that the Company provides computing power to the mining pool operator, which is beginning contract day at midnight UTC (contract inception), because customer consumption is in tandem with daily earnings of delivery of the computing power.

The Company has identified the third-party mining pool operator as its customer (the "Customer").

The Company enters into a contract with the Customer to provide its hash calculations to the Customer's mining pool.

The contracts are terminable without penalty at any time by either party, and thus the contract term is shorter than a 24-hour period and the contracts are continuously renewed.

Applying the criteria per ASC 606-10-25-1, the contract arises at the point that the Company provides hash calculations to the Customer's mining pool, which is considered contract inception, because Customer consumption is in tandem with delivery of the hash calculations.

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct”

good or service (or bundle of goods or services) if both of the following criteria are met:

A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

• The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct);

The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

Based on these criteria, the Company has a single performance obligation in providing computing power services (i.e., hashrate) to the mining pool operator (i.e., customer).

The performance obligation of computing power services is fulfilled daily over-time, as opposed to a point in time, because the Company provides the hashrate throughout the day and the customer simultaneously obtains control of it and uses the asset to produce bitcoin.

The Company has full control of the mining equipment utilized in the mining pool and if the Company determines it will increase or decrease the processing power of its machines and/or fleet (i.e., for repairs or when power costs are excessive) the computing power provided to the customer will be reduced.

The transaction consideration the Company earns is non-cash digital consideration in the form of bitcoin, which the Company measures at fair value on the date earned at the daily closing price, which is not materially different from the fair value at contract inception, which is the daily opening price.

According to the customer contract, daily earnings are calculated from midnight-to-midnight UTC time, and the sub-account balance is credited one hour later at 1:00 AM UTC time.

The Company utilizes Greenwich Mean Time (GMT), which is also the midnight of UTC time, since this is consistent with our customer contract in calculating our daily earnings from midnight-to-midnight UTC time.

The transaction consideration the Company earns is all variable since it is dependent on the daily computing power provided by the Company.

The Company’s bitcoins earned through the contractual payout formula is not known until the Company’s computational hashrate contributed over the daily measurement period is fulfilled over-time daily between midnight-to-midnight UTC time.

The Company’s proportionate amount of the global network transaction fee rewards earned are calculated at the end of each transactional day (midnight to midnight).

• t he entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

Based on these criteria, the Company has identified a single performance obligation of providing hash calculations for the mining pool operator.

The continuous renewal options do not represent material rights because they do not provide the Customer with the right to purchase additional goods or services at a discount.

Specifically, the contract is renewed at the same terms, conditions, and rate as the current contract which is consistent with market rates, and there are no up front or incremental fees in the initial contract.

The Company has full control of the mining equipment used in the mining pool, and if the Company determines it will increase or decrease the hashrate calculations of its machines and/or fleet (i.e., for repairs or when power costs are excessive), the hashrate provided to the Customer will correspondingly increase or decrease.

The Company receives non-cash consideration in the form of bitcoin, fair value of which the Company measures at 23:59:59 UTC on the date of contract inception using the Company's principal market for bitcoin, Coinbase.

The contract renews continuously throughout the day, and thus the value of the consideration should be assessed continuously throughout the day, and the Company has concluded to use the 23:59:59 UTC bitcoin price each day.

According to the Customer contract, daily settlements are made to the Company by the Customer based on the hash calculations provided over the contract periods occurring over a 24 hour period and the payout is made the following day.

There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.

The Company fully constrains all variable consideration as a result of ASC 606-10-32-12a because the amount of consideration is highly susceptible to factors outside of our control as defined by the Company’s customer’s payout methodology.

The variable consideration is constrained until the Company can reasonably estimate the amount of mining rewards by the end of a given transactional day based on the actual amount of computing power provided to the mining pool operators.

By then, the Company considers it is highly probable that a significant reversal in the amount of revenues will not occur and includes such variable consideration in the transaction price.

The transaction price is allocated to the single performance obligation upon verification for the provision of computing power to the mining pool operator.

There is a single performance obligation (i.e., computing power or

hashrate) for the contract;

therefore, all consideration from the mining pool operator is allocated to this single performance obligation.

The Company’s performance is complete in transferring the hashrate service over-time (midnight to midnight) to the customer and the customer obtains control of that asset.

The transaction consideration the Company receives is non-cash consideration, in the form of bitcoin.

The Company measures the bitcoin at fair value on the date earned using the closing price of bitcoin on the date earned (midnight UTC).

There are no deferred revenues or other liability obligations recorded by the Company since there are no payments in advance of the performance.

At the end of the 24 hour “midnight-to-midnight”

period, there are no remaining performance obligations.

The Company earns non-cash consideration based on the Full-Pay-Per-Share (“FPPS”) payout method set forth by the Customer in the form of bitcoin.

The amount of bitcoin the Company is entitled to for providing hash calculations to the Customer's mining pool under the FPPS payout method is made up of block rewards and transaction fees less mining pool fees determined as follows:

• The non-cash consideration calculated as a block reward over the continuously renewed contract periods is based on the total blocks expected to be generated on the Bitcoin Network for the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula:

the hash calculations that the Company provides to the Customer as a percent of the Bitcoin Network’s implied hash calculations as determined by the network difficulty, multiplied by the total Bitcoin Network block rewards expected to be generated for the same period.

• The non-cash consideration calculated as transaction fees paid by transaction requestors is based on the share of total actual fees paid over the continuously renewed contract periods beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula:

total actual transaction fees generated on the Bitcoin Network during the contract period as a percent of total block rewards the Bitcoin Network actually generated during the same period, multiplied by the block rewards the Company earned for the same period noted above.

• The sum of the block reward and transaction fees earned by the Company is reduced by mining pool fees charged by the Customer for operating the mining pool based on a rate schedule per the mining pool contract.

The mining pool fee is only incurred to the extent the Company performs hash calculations and generates revenue in accordance with the Customer’s payout formula during the continuously renewed contract periods beginning mid-night UTC and ending 23:59:59 UTC daily.

The Customer provides services solely for bitcoin mining and the fees charged during the most recent fiscal year end were 0.16% of the total daily bitcoin mined.

This amount represents consideration paid to the Customer and is thus reported as a reduction in revenue as the Company does not receive a distinct good or service from the mining pool operator in exchange.

There is a single performance obligation (i.e., to provide hash calculations or hashrate to the customer) for the contract;

therefore, all consideration from the Customer is allocated to this single performance obligation.

The Company’s performance is completed over time as the customer obtains control of the contributed hashrate.

The performance obligation of hash calculations is fulfilled over time, as opposed to a point in time, because the Company provides the hash calculations throughout the contract period and the customer simultaneously obtains control of the service and uses it to produce bitcoin.

There are no deferred revenues or other liability obligations recorded by the Company since there are no payments in advance of the performance, and there are no remaining performance obligations after providing hash calculations.

Revenues from Data Center Services

The Company, through its wholly owned subsidiary ATL, previously provided 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, 2023 and September 30, 2022 is $ 287 and $ 525 , respectively.

As of September 30, 2023, data center services are no longer provided to external customers.

Effective as of September 30, 2023, data center services are no longer provided to external customers.

The Company formerly provided 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 were the services provided to a customer for the month based on the contract.

The transaction price was 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 included as Other services revenue in the Consolidated Statement of Operations and Comprehensive Loss for the years ended September 30, 2024, 2023 and 2022 was $ 0 , $ 287 and $ 525 , 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 includes cash in banks.

None of the Company’s cash was restricted as of September 30, 2023 or September 30, 2022 .

Accounts receivable

Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms.

They are initially recorded at the invoiced amount upon the sale of goods or services to customers, and do not bear interest.

The Company performs ongoing credit evaluation of its customers and management closely monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information.

The carrying amount of accounts receivable is reviewed periodically for collectability.

If management determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded.

Accounts receivable, net consists of the following:

($ in thousands)

September 30,

Accounts Receivable, gross

Provision for doubtful allowances

Total Accounts Receivable, net

Inventory balances mainly include supplies inventory used to maintain bitcoin mining facilities and are presented at net realizable value with cost being measured on a first-in, first-out basis.

The Company periodically reviews inventories for unusable and obsolete items.

Based on this evaluation, provisions are made to write inventories down to their net realizable value.

Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less.

These investments may include money market funds, certificates of deposit, and other short-term instruments.

Temporary cash investments are made with high credit quality financial institutions.

At times, such investments in U.S.

accounts may exceed Federal Deposit Insurance Corporation ("FDIC") insurance limits.

Restricted cash

The Company considers cash to be restricted when held in a separate bank account and withdrawal and general use is restricted legally or to restrict a portion cash as collateral for insurance carriers.

The Company had restricted cash of $ 3,056 and $ 0 as of September 30, 2024 and 2023, respectively, and held in a deposit account that accrues interest.

Amounts included in restricted cash represent those required to be set aside by contractual agreements with insurance carriers in relation to utility bonds for various utility companies.

Prepaid expense and other current assets

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Any costs expected to be incurred outside of one year would be considered other long-term assets.

Other current assets are assets that consist of supplies, deposits, and interest receivable.

Deposits and interest we expect to receive within one year are shown as short-term.

Those we expect to receive outside of one year are shown as other long-term assets.

Bitcoin are included in current assets in the consolidated balance sheets due to the Company’s ability to sell it in a highly liquid marketplace and its intent to liquidate its bitcoin to support operations when needed.

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 this 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.

Bitcoin are included in current assets in the Consolidated Balance Sheets due to the Company’s ability to sell bitcoin in a highly liquid marketplace, and such bitcoin holdings are expected to be realized in cash or sold or consumed during the normal operating cycle of the Company.

As a result of adopting ASC 350-60, Intangibles — Goodwill and Other , ("ASC 350-60") on October 1, 2023, bitcoin is measured at fair value as of each reporting period (see “Recently Issued Accounting Pronouncements below”).

The fair value of bitcoin is measured using the period-end closing bitcoin price from its principal market, Coinbase, in accordance with ASC 820, Fair Value Measurement ("ASC 820").

Since bitcoin is traded on a 24-hour period, the Company utilizes the price as of 23:59:59 UTC, which aligns with the Company's revenue recognition cut-off.

The changes in bitcoin valuation due to remeasurement in fair value within each reporting period are reflected on the Consolidated Statements of Operations and Comprehensive Loss as " Gain on fair value of bitcoin, net" .

In accordance with ASC 350-60, the Company discloses realized gains and losses from the sale of bitcoin and such gains and losses are measured as the difference between the cash proceeds and the cost basis of bitcoin as determined on a First In-First Out basis .

Prior to the adoption of ASC 350-60, bitcoin was recorded at cost less impairment and was classified as indefinite-lived intangible assets in accordance with ASC 350, Intangibles — Goodwill and Other ("ASC 350").

Bitcoin was accounted for in connection with the Company’s revenue recognition policy detailed above.

An intangible asset with an indefinite useful life was not amortized but was assessed for impairment annually, or more frequently, when events or changes in circumstances occurred indicating that it was more likely than not that the indefinite-lived asset was impaired.

Impairment exists when the carrying amount exceeds its fair value.

In testing for impairment of bitcoin, the Company does not perform a qualitative assessment as allowed under ASC350-30-35-18A, and therefore goes directly to the quantitative assessment at the end of each reporting period.

Quantitative impairment is measured using the lowest recognized selling 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 Company's principal market (Coinbase).

In testing for impairment for periods under the prior accounting guidance, the Company had the option to first perform a qualitative assessment to determine whether it was more likely than not that an impairment exists.

If it was determined that it was not more likely than not that an impairment exists, a quantitative impairment test was not necessary.

If the Company concluded otherwise, it was required to perform a quantitative impairment test.

The Company elected to perform the quantitative impairment test each period rather than first performing the qualitative assessment.

Quantitative impairment was measured using the intraday low bitcoin price from its principal market for bitcoin in accordance with ASC 820.

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.

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 included within operating activities as the Company sells its bitcoin within a short period of time subsequent to the mining of such bitcoin.

The Company will evaluate time periods when the Company holds bitcoin for a longer period of time and sale so such would be recorded as investing activities.

For the fiscal years ended September 30, 2023 and 2022 , all cash proceeds received from sale of bitcoin were classified as operating cash flows in the accompanying consolidated statements of cash flows.

Any realized gains or losses from such sales are included in total costs and expenses in the consolidated statements of operations and comprehensive loss.

The Company accounts for its gains or losses in accordance with the "first-in, first-out" method of accounting.

Subsequent reversal of impairment losses was not permitted as per ASC 350.

Bitcoin, which is non-cash consideration earned by the Company through its mining activities, is included as a reconciling item as a cash outflow within operating activities on the accompanying Consolidated Statements of Cash Flow.

The cash proceeds from the sales of bitcoin are classified based on the holding period in which the bitcoin is held.

ASC 350-60 provides guidance on classifying proceeds from bitcoin and concludes that bitcoin converted nearly immediately into cash would qualify as cash flows from operating activities.

All other sales would qualify as investing activities.

The Company did not hold its bitcoin for extended periods of time, and such sales proceeds prior to the adoption of ASC 350-60 were reported as cash flows from operating activities.

Upon adoption of ASC 350-60, the Company evaluates its sales of bitcoin and records bitcoin sold nearly immediately as operating cash flows and the remainder is recorded as investing activities.

During fiscal year 2024, all proceeds from bitcoin sales were classified as investing activities.

Receivable for bitcoin collateral

The Receivable for bitcoin collateral represents the bitcoin posted as collateral to lenders who have rights to sell, pledge and re-hypothecate such bitcoin at their sole discretion and for which the lenders have an obligation to return to the Company at the maturity of the loan.

The receivable is recorded at fair value and changes in fair value are recorded as “Change in fair value of bitcoin collateral”.

The receivable for bitcoin collateral is classified as current.

Realized gains on fair value of bitcoin collateral represent the difference between the fair value on the date the bitcoin was posted as collateral and the fair value on the date the bitcoin is returned to the Company.

The value and activity involving this asset is discussed in detail alongside the Coinbase line of credit in Note 12 - Loans.

At commencement and throughout the term of the arrangement, the Company considers and accounts for the credit risk associated with the bitcoin receivable collateral in accordance with the principles outlined in ASC 326, Financial Instruments - Credit Losses (“ASC 326”).

The Receivable for bitcoin collateral is presented net of any allowance for credit losses.

In estimating the allowance for credit losses, the Company applies the current expected credit loss (“CECL”) model, which requires the measurement of lifetime expected credit losses on financial assets measured at amortized cost.

As the Company has no historical experience with similar assets, the allowance is determined using a combination of industry data, peer analysis, and forward-looking information about economic conditions and the creditworthiness of the counterparty.

The Company incorporates relevant qualitative factors, such as the nature of the receivable, the characteristics of the counterparty, and any observable market indicators, to assess the expected collectability of the Receivable for bitcoin collateral.

The estimation process also includes reasonable and supportable forecasts to account for future economic conditions and any anticipated impact on the receivable.

For the years ended September 30, 2024 and September 30, 2023 , no amount of allowances for credit losses was deemed necessary.

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.

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 other comprehensive income (“OCI”).

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.

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 basis, a credit loss allowance is established, with the credit portion of the impairment recognized in earnings.

The allowance is measured as the difference between the security's amortized cost and the present value of expected cash flows, limited to the difference between the amortized cost basis and fair value at the balance sheet date.

Interest accruals, as well as amortization and accretion of premiums and discounts, are suspended if it becomes unlikely that the full amount due will be collected Interest received after accruals have been suspended is recognized in income on a cash basis.

The Company held 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.

All gains and losses on privately held equity securities, realized or unrealized, are recorded through gains or losses on equity securities on the Consolidated Statements of Operations and Comprehensive Loss.

Publicly held equity securities are based on fair value 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 Federal Deposit Insurance Corporation ("FDIC") limits.

At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits.

The cash balance in excess of the FDIC limits was $ 2,907 and $ 28,965 for the periods ended September 30, 2024 and September 30, 2023, respectively.

The accounts offered by the custodian of the Company’s bitcoin, which totaled $ 56,241 and $ 11,147 as of September 30, 2023 and September 30, 2022, respectively, are not insured by the FDIC.

The accounts offered by the custodian of the Company’s bitcoin, which totaled $ 431,661 and $ 56,241 as of September 30, 2024 and September 30, 2023, respectively, are not insured by the FDIC.

The Company has not experienced any losses in such 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, 2023 , revenue is concentrated with one mining pool operator and all bitcoins reside in one exchange.

The Company has certain customers and vendors who individually represented 10 % or more of the Company’s revenue or capital expenditures.

In the fiscal year ended September 30, 2024, revenue is concentrated with one mining pool operator and all bitcoins reside with one custodian.

Refer to Note 17 - Major Customers and Vendors.

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

In accordance with ASC 842-Leases, 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.

Finance leases are generally those leases that allow the Company 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.

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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, 2023.

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 certain leases for which the option to renew is reasonably certain, and therefore, options to renew were factored into the calculation of its right of use asset and lease liability as of September 30, 2024.

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

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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 14 –

Stock-Based Compensation.

For discussion of accounting for restricted stock units ("RSUs") and performance stock units (“PSUs”), please refer Note 16 – Stock-Based Compensation.

Loss per share

The Company reports loss per share in accordance with FASB ASC 260-10 “Earnings Per Share,”

which provides for calculation of “basic”

and “diluted”

earnings per share.

The Company reports 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.

Diluted earnings per share reflects 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, 2023 and 2022 , there were 300,698 and 7,069,706 , respectively, units of common stock equivalents that consist of options, warrants, and restricted stock units, as well as 5,250,000 shares issuable upo n 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, 2024, 2023 and 2022:

Ended September 30,

($ in thousands, except share and per share)

($ in thousands, except share and per share amounts)

Continuing Operations

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Loss from continuing operations attributable to common shareholders

Weighted- average common shares outstanding,

Dilutive impact of stock options and other share-based awards

Dilutive impact of contingent shares issued for business acquisition

Weighted- average common shares outstanding,

Weighted-average common shares outstanding, basic

Weighted-average common shares outstanding, diluted

Loss from continuing operations per common share attributable to common shareholders

Discontinued Operations

Loss on discontinued operations

Weighted- average common shares outstanding,

Loss income from discontinued operations

Weighted-average common shares outstanding, basic

Dilutive impact of stock options and other share-based awards

Dilutive impact of contingent shares issued for business acquisition

Weighted- average common shares outstanding,

Weighted-average common shares outstanding, diluted

Loss on discontinued operations per common share attributable to common shareholders

The number of shares that were not included in the calculation of net loss per diluted share because to do so would have been anti-dilutive, or for preferred stock, because the conversion contingency associated with the change in control had not occurred, and the contingency was not resolved for the years ended September 30, 2024, 2023 and 2022 are as follows:

Ended September 30,

Restricted stock awards

Stock options

Contingently issuable shares

Series A preferred stock conversion

Total anti-dilutive shares

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.

Construction in progress is the construction or development of assets that have not yet been placed in service for their intended use.

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

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Furniture and fixtures

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.

(1) Effective May 1, 2024, the Company reduced the useful life for miners from five years to three years .

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, 2023 and September 30, 2022 the Company did not record an impairment expense for assets within its continuing operations.

In connection with property and equipment in our discontinued operations, an impairment expense in the approximate amount of $ 32 was recognized in fiscal year ended September 30, 2022 and included in loss from discontinued operations in the consolidated statements of operations and comprehensive loss.

During the year ended September 30, 2024 , the Company recorded an impairment expense of approximately $ 197,000 due to the reduction of the useful life of miners that were removed from service prior to the originally estimated life and due to the subsequent change in salvage value (see Note 9 - Property and Equipment).

In connection with property and equipment in the Company’s discontinued operations, an impairment expense in the approximate amou nt of $ 32 wa s recognized in the fiscal year ended September 30, 2022 and included in loss from discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss.

Business Combinations, Intangible Assets and Goodwill

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In accordance with its policies, the Company performed an assessment of indefinite lived intangibles and goodwill for the year end September 30, 2024.

During the years ended September 30, 2023 and 2022, the Company incurred the following impairment losses:

The Company amortizes intangible assets with finite lives over their estimated useful lives as follows:

Useful life (years)

Strategic contract

During the years ended September 30, 2024, 2023 and 2022, the Company incurred the following impairment losses related to bitcoin and goodwill:

Years ended September 30,

($ in thousands)

September 30, 2023

September 30, 2022

Impairment of bitcoin

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In accordance with ASC 350-30-35-18A, an entity may first perform a qualitative assessment to determine whether it is necessary to perform the quantitative impairment test, and has the unconditional option to bypass the qualitative assessment in any period and proceed directly to performing the quantitative analysis.

In completing the 2023 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 completing the 2024 annual goodwill impairment analysis, the Company elected to perform a qualitative assessment for its goodwill.

For the qualitative assessment, the Company considered the most recent quantitative analysis, which was performed during the fourth quarter of fiscal year 2023, including assumptions used, such as discount rates, indicated fair values, and the amounts by which those fair values exceeded their carrying amounts.

Further, the Company compared actual performance in fiscal year 2024 to the internal financial projections used in the prior quantitative analyses.

Additionally, the Company considered various other factors, including macroeconomic conditions, relevant industry and market trends, and factors specific to the Company that could indicate a potential change in the fair value of the reporting units.

Lastly, the Company evaluated whether any events have occurred or any circumstances have changed since that time that would indicate that goodwill may have become impaired since the last quantitative tests.

In completing the 2023 and 2022 annual goodwill impairment analysis, the Company elected to perform a quantitative assessment for its goodwill.

The assessments involved comparing the carrying value of the entity, including goodwill, to its estimated fair value.

In accordance with ASU 2017-04:

Intangibles - Goodwill and Other:

Simplifying the test for Goodwill Impairment , 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.

The income approach is a valuation technique under which the Company estimates 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.

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

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

The discount rate used was the value-weighted average of the Company’s 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 fiscal year 2023 assessment indicated that no impairment of goodwill was necessary.

In completing the 2022 annual goodwill impairment analysis, there was an impairment recognized.

In fiscal 2022, there was a sustained downturn in the price of bitcoin which resulted in the carrying value of the Company's goodwill to exceed the fair value.

The fiscal year 2024 and 2023 assessments indicated that no impairment of goodwill was necessary.

In completing the 2022 annual goodwill impairment analysis, there was a $ 12,048 impairment recognized.

In fiscal 2022, there was a sustained downturn in the price of bitcoin which caused the carrying value of the Company’s goodwill to exceed the fair value.

The following table reflects goodwill activity for the years ended September 30, 2024, 2023 and 2022, respectively:

($ in thousands)

For the year ended September 30,

Balance at beginning of Fiscal Year

New Acquisitions

Balance at end of Fiscal Year

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

Fair Value Measurement of financial instruments, derivative asset and contingent consideration

($ in thousands)

Beginning of year balance

End of year balance

Fair Value Measurement of financial instruments, derivative asset and liability, 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.

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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, 2023 and September 30, 2022:

September 30, 2023:

Due to the use of significant unobservable inputs, a change in those inputs to a different amount might result in a significantly higher or lower fair value measurement.

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, 2024 and September 30, 2023:

September 30, 2024

($ in thousands)

Derivative investment asset

Cash equivalents (1)

Receivable from bitcoin collateral (2)

ILAL derivative asset

Investment in debt security

September 30, 2022:

Interest rate swap derivative

(1) Represents money market funds.

(2) See Note 12 - Loans for more information.

September 30, 2023

($ in thousands)

Derivative investment asset

ILAL derivative asset

Investment in debt security

There were no transfers between Level 1, 2 or 3 during the years ended September 30, 2024 and 2023.

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, 2023 and 2022 are included in Note 6 - 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.

Assets and liabilities measured and recorded at fair value on a non-recurring basis

The Company’s non-financial assets, such as goodwill, intangible assets, and property and equipment are adjusted to fair value when an impairment charge is recognized.

The Company’s impairment related to its miners held in property and equipment in the year ended September 30, 2024 utilized Level 3 inputs including future bitcoin prices, transaction fees, and the future global hashrate.

The Company’s strategic investments are also measured at fair value on a non-recurring basis.

Such fair value measurements are based predominantly on Level 3 inputs.

The carrying value of the Company’s strategic investments is predominantly adjusted based on internal discounted cash flow models that use available market data of comparable companies and other unobservable inputs including expected volatility, expected time to liquidity, and adjustments for other company-specific developments.

Assets and liabilities not measured and recorded at fair value

The Company’s financial instruments, including certain cash and cash equivalents, restricted cash, accounts receivable, the GRIID note receivable, and loans payable are not measured at fair value.

The car rying values of these instruments approximate their fair values due to their liquid or short term nature.

The fair value of these financial instruments are based on Level 1 inputs, except for short-term borrowings and loans receivable which would be based on Level 2 and Level 3 inputs, respectively.

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, 2024 and 2023.

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.

Temporary differences arise from net operating losses, differences in depreciation methods of archived images and property and equipment, stock-based and other compensation, other accrued expenses, and the tax treatment of gains or losses on the value of digital currency.

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.

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As of September 30, 2024 and 2023 , 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, 2023 and 2022 was $ 0 and $ 0 in each period, which resulted primarily from maintaining a full valuation allowance against the Company's deferred tax assets.

Income tax expense from operations for the years ended September 30, 2024, 2023 and 2022 was $ 3,344 , $ 2,416 and $ 0 , respectively, 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 views and evaluates operations, performance and allocates resources.

The Company determines its operating segments based on how the Chief Operating Decision Maker, the Chief Executive Officer, views and evaluates operations, performance and allocates resources.

Since June 30, 2022, the Company's only operating segment is the bitcoin mining business.

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

Through its discontinued operations segment, the Company previously provided energy solutions through its wholly-owned subsidiaries CleanSpark LLC, CleanSpark II, 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, solar, energy storage for microgrid and distributed energy systems.

The Company has since sold the majority of its assets related to the energy segment, which included software and intellectual property, and inventory.

See Note 3 –

Discontinued Operations.

See Note 4 – Discontinued Operations.

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.

Reclassifications

Certain prior-year amounts have been reclassified to conform to the current-year presentation.

This includes the grouping of certain balance sheet and statement of cash flow items into new or revised categories to improve clarity and consistency with current-year classifications.

Recently Issued and Adopted Accounting Pronouncements

On March 21, 2024, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update ("ASU") No.

2024-01, Scope Application of Profits Interest and Similar Awards ("ASU 2024-01"), which clarifies how an entity determines whether a profits interest or similar award is (1) within the scope of ASC 718 - Compensation - Stock Compensation or (2) not a share-based payment arrangement and therefore within the scope of other guidance.

The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or nonemployees in exchange for goods or services.

ASU 2024-01 is effective for public business entities for annual periods beginning after December 15, 2024, including interim periods within those periods.

The Company is currently evaluating the impact of the adoption of ASU 2024-01 on its consolidated financial statements.

In December 2023, the FASB issued ASC 350-60 which requires entities with certain crypto assets to subsequently measure such assets at fair value, with changes in fair value recorded in net income (loss) in each reporting period.

Crypto assets that meet all the following criteria are within the scope of ASC 350-60:

(1) meet the definition of intangible assets as defined in the Codification;

(2) do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets;

(3) are created or reside on a distributed ledger based on blockchain or similar technology;

(4) are secured through cryptography;

(5) are fungible;

(6) are not created or issued by the reporting entity or its related parties.

In addition, entities are required to provide additional disclosures about the holdings of certain crypto assets.

Bitcoin, which is the sole crypto asset mined by the Company, meets each of these criteria.

For all entities, the ASC 350-60 amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those years.

Early adoption is permitted for both interim and annual consolidated financial statements that have not yet been issued (or made available for issuance).

If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period.

The Company has elected to early adopt the new guidance effective October 1, 2023, resulting in a $ 4,183 cumulative-effect change to adjust the Company's bitcoin held on October 1, 2023 with the corresponding entry to accumulated deficit as of October 1, 2023.

The tax effect of the adjustment to record the adoption of ASU 2023-08 was to both decrease the deferred tax asset related to cumulative losses from the fair value adjustments of bitcoin held by the company and decrease the valuation allowance for gross deferred tax assets by the same amount as the adjustment to record the adoption of the ASU.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which established a new income tax disclosure requirement in addition to modifying and eliminating certain existing requirements.

Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation.

Companies must also further disaggregate income taxes paid.

Companies are required to apply the guidance to annual periods beginning after December 15, 2024.

The Company does not intend to early adopt this standard.

The Company is currently evaluating the impact of the adoption of ASU 2023-09 on its consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Improvements to Disclosures About Reportable Segments (“ASU 2023-07”), which requires enhanced disclosures about significant segment expenses.

In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements.

The new guidance is effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact of the adoption of ASU 2023-07 on its consolidated financial statements and expects to implement the provision for fiscal year ending September 30, 2025.

In October 2021, the FASB issued ASU 2021-08, 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, 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 adopted the ASU effective October 1, 2023, and adoption of the new standard did not 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 was effective for the Company effective October 1, 2022, including interim periods.

The adoption did not have a material impact on the Company’s financial statements or disclosures.

The Company adopted the provisions of the accounting pronouncement as of October 1, 2023 and t he new standard did not have a material impact on the Company's consolidated financial statements.

In November 2024, the FASB issued Accounting Standards Update ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

This ASU requires public business entities to provide additional disclosures in the notes to financial statements, disaggregating specific expense categories within relevant income statement captions.

The prescribed categories include purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depreciation, depletion, and amortization related to oil-and-gas producing activities.

The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU on its financial statement disclosures.

REVISIONS TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS

In connection with the preparation of the Company’s Consolidated Financial Statements as of and for the period ended September 30, 2024, the Company identified errors in relation to the accounting for income taxes, primarily due to the application of Internal Revenue Service (“IRS”) section 162(m) excess executive compensation and the ability to utilize federal and state net operating loss carryforwards under the provisions of Internal Revenue Code Section 382.

The errors had an impact on net deferred tax liabilities and income tax expense for the fiscal year ended September 30, 2023.

The error did not impact total revenues or loss before income tax expense for any of the fiscal years ended September 30, 2024, 2023 and 2022.

The Company also reclassified transactions in the September 30, 2023 and 2022 consolidated statements of cash flows from cash used in operating activities to cash used in financing activities.

One of the transactions related to the impact of cash receipts from shares issued under equity offerings but for which the Company has recorded receivables, which resulted an understatement of cash flows from operating activities in the amounts of $ 7,576 and $ 2,014 , for the years ended September 30, 2023 and 2022, respectively, but should have been reflected as decreases in cash flows from financing activities.

The second transaction relates to $ 5,571 of taxes paid on behalf of employees on shares withheld for net settlement of restricted stock awards at vesting date and was incorrectly recorded as cash used in operating activities, when it represented cash used in financing activities.

The Company assessed the materiality of the errors, including the presentation on prior periods consolidated financial statements, on a qualitative and quantitative basis in accordance with SEC Staff Accounting Bulletin (“SAB”) No.

99, Materiality and SAB No.

108 on Quantifying Financial Statement Errors, codified in Accounting Standards Codification Topic 250, Accounting Changes and Error Corrections.

The Company concluded that these errors and the related impacts did not result in a material misstatement of our previously issued consolidated financial statements as of and for the years ended September 30, 2023 and 2022 and our previously issued unaudited consolidated interim financial statements as of and for the periods ended December 31, 2021, March 31, 2022, June 30, 2022, December 31, 2022, March 31, 2023, June 30, 2023, December 31, 2023, March 31, 2024 and June 30, 2024

The Company has corrected the relevant prior periods of our consolidated financial statements and adjusted the disclosures included within Note 13 - Income Taxes, including our significant components of the Company’s deferred tax assets and liabilities.

A summary of the corrections to the impacted financial statement line items from our previously issued financial statements are presented below:

Consolidated Balance Sheet

As of September 30, 2023

($ in thousands)

As previously reported

Deferred income taxes

Total liabilities

Accumulated deficit

Total stockholders' equity

Consolidated Statement of Operations and Comprehensive Loss

For the year ended September 30, 2023

($ in thousands)

As previously reported

Income tax expense

Loss from continuing operations

Net loss attributable to common shareholders

Total comprehensive loss attributable to common shareholders

Loss from continuing operations per common share

The consolidated statement of stockholders' equity for the year ended September 30, 2023 has been adjusted to reflect the impact to Net loss in both the accumulated deficit and total stockholders' equity columns as well as the corresponding totals in the row captioned Balance, September 30, 2023.

Consolidated Statements of Cash Flows

For the year ended September 30, 2023

For the year ended September 30, 2022

($ in thousands)

As previously reported

Increase in accounts payable and accrued liabilities

(Increase) decrease in prepaid expenses and other current assets

Increase in deferred income taxes

Net cash (used in) provided by operating activities of continuing operations

Net cash (used in) provided by operating activities

Payments of taxes on shares withheld for net settlement of restricted stock units

Proceeds from equity offerings, net

Net cash provided by financing activities of continuing operations

Net cash provided by financing activities

For any rows left blank in the tables above, no changes were identified from that prior period.

All referenced amounts for prior periods in these financial statements and the notes herein reflect the balances and amounts as revised.

The footnote under Note 13 - Income Taxes has been revised to incorporate the changes discussed above and is presented herein as updated.

DISCONTINUED OPERATIONS

The Company determined to make available for sale the asset groups related to its energy segment due to its strategic shift to strictly focus on its bitcoin mining operations.

In June 2022, the Company determined to make available for sale the asset groups related to its energy segment due to its strategic shift to strictly focus on its bitcoin mining operations.

As a result, the energy segment's 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, 2023 and 2022 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 .

Accordingly, the assets and liabilities of this segment are separately reported as “assets and liabilities held for sale” as of September 30, 2023 in the Consolidated Balance Sheets.

Through September 2023, the Company sold the majority of its software and intellectual property assets related to the energy segment and is in the process of winding-down the remaining assets and liabilities.

As of September 30, 2024, the Company has impaired the assets held for sale and reclassified the remaining warranty liability of $ 546 to continuing operations as it winds down the former energy segment, and such liabilities are recorded within accrued liabilities.

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,

($ in thousands)

September 30,

1 unchanged sentence

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 twelve months ended

($in thousands)

September 30,

Revenues, net

Energy hardware, software and services revenue

September 30,

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

4 unchanged sentences

Total other income (expense)

Loss before income tax (expense) benefit

Loss before income tax benefit (expense)

Income tax benefit (expense)

Net loss attributable to common shareholders

Coinmaker LLC Acquisition - Dalton, GA

On June 21, 2023, the Company completed the acquisition of two bitcoin mining facilities in Dalton, GA for $ 9,389 .

Pending Acquisitions

GRIID Infrastructure Inc.

On June 26, 2024, the Company entered into an Agreement and Plan of Merger (the “GRIID Agreement”) with GRIID Infrastructure Inc., Nasdaq ticker “GRDI”, a Delaware corporation (“GRIID”), and Tron Merger Sub, Inc.

(“Merger Sub”), a Delaware corporation and a wholly owned subsidiary of the Company.

The transaction closed on October 30, 2024 (the “Effective Time” of the merger).

Concurrent with the GRIID Agreement, the Company and GRIID entered into a senior secured term loan credit agreement (the “GRIID Credit Agreement”) and a co-location mining service agreement (the “Hosting Agreement”) on June 26, 2024.

See Note 7 - Note Receivable from GRIID for more information on the GRIID Credit Agreement.

Pursuant to the Hosting Agreement, GRIID hosted certain of the Company’s bitcoin mining equipment at GRIID facilities for a fee defined in the Hosting Agreement.

The Hosting Agreement had an initial service term of one year with seven additional renewal terms, each for six months.

The GRIID Agreement provided that, among other things and subject to the terms and conditions of the GRIID Agreement, (1) Merger Sub will be merged with and into GRIID (the “Merger”), with GRIID surviving and continuing as the surviving corporation in the Merger, and, (2) at the Effective Time of the Merger, holders of each outstanding share of common stock, par value $ 0.0001 per share, of GRIID (“GRIID Common Stock”) would receive, in exchange for each share of GRIID Common Stock held immediately prior to the Merger (other than certain excluded shares), that number of shares of common stock, par value $ 0.001 per share, of the Company’s common stock (“Company Common Stock”) equal to the quotient obtained by dividing the Aggregate Merger Consideration (as defined in the GRIID Agreement) by the total number of shares of GRIID Common Stock issued and outstanding as of the closing date of the Merger (the “Exchange Ratio”).

Pursuant to the Merger Agreement, at the Effective Time:

• each GRIID restricted stock unit award that was outstanding immediately prior to the Effective Time immediately vested with respect to 100 % of the shares of GRIID Common Stock subject to such GRIID restricted stock unit award, which shares of GRIID Common Stock were converted into the right to receive the merger consideration with respect to each share of GRIID Common Stock.

Further, each outstanding vested compensatory option to purchase shares of GRIID Common Stock was canceled and converted into the right to receive approximately 0.01 of a share of Company Common Stock, which is the number of shares equal to the quotient of (i) the product of (A) the excess, if any, of the Merger Consideration Value (as defined in the GRIID Agreement) over the per share exercise price of the applicable option, multiplied by (B) the number of shares of GRIID Common Stock subject to such option immediately prior to the Effective Time, divided by (ii) $ 16.587 , which represents the volume-weighted average price of Company Common Stock for the two consecutive trading days prior to the date of the GRIID Agreement.

Any GRIID options that had an exercise price per share of GRIID Common Stock that was equal to or greater than the Merger Consideration Value were canceled for no consideration;

• each outstanding and unexercised warrant (each, a “GRIID Warrant”) to purchase shares of GRIID Common Stock was converted into a warrant to purchase a number of shares of Company Common Stock (each, a “Company Warrant”), rounded down to the nearest whole share, that is equal to the product of (A) the number of shares of GRIID Common Stock subject to such GRIID Warrant as of immediately prior to the Effective Time, multiplied by (B) the Exchange Ratio.

The exercise price per share of Company Common Stock underlying such converted Company Warrant is equal to the quotient obtained by dividing (x) the per share exercise price applicable to such warrant immediately prior to the Effective Time by (y) the Exchange Ratio, rounded up to the nearest whole cent.

Each such Company Warrant is on the same terms and conditions as were applicable under such GRIID Warrant immediately prior to the Effective Time, except for such terms rendered inoperative by reason of the Merger or as otherwise set forth in the GRIID Agreement.

Upon closing, the Company issued 5,031,254 shares of Company Common Stock on October 30, 2024 with a $ 12.06 per common share value for a total approximate value of $ 60,600 .

GRIID RSUs were converted, vested GRIID options were converted or cancelled, and the GRIID Warrants outstanding and unexercised immediately prior to the Effective Time were automatically converted into warrants to purchase 960,395 shares of the Company’s common stock (the “Common Stock”), at an exercise price of $ 165.24 per share of Common Stock (the “Company Public Warrants”), and the GRIID private warrants were converted or assumed.

Due to the timing of the transaction closing on October 30, 2024, the Company is evaluating the impact of this acquisition on its consolidated financial statements;

it is impracticable to disclose the preliminary purchase price allocation.

Therefore, disclosures related to the acquisition, including the pro forma consolidated results and adjustments, amounts of major assets acquired and liabilities assumed, valuation method used to determine the fair value of the consideration transferred, qualitative factors about the goodwill recognized, and goodwill expected to be deductible for tax purposes are not yet available.

Disclosures regarding the impact of the acquisition will be provided in subsequent filings as the evaluation is finalized.

The primary purpose of the acquisition is to expand its mining capacity geographically.

The acquisition will be accounted for as a business combination.

Completed Asset Acquisitions

Tennessee Acquisition

On September 10, 2024, CleanSpark TN, LLC, a wholly-owned subsidiary of the Company (the “TN MIPA Buyer”), entered into three definitive Membership Interest Purchase Agreements (each, a “MIPA”, and collectively, the “TN MIPAs”) with Exponential Digital, LLC (the “TN MIPA Seller”) to acquire seven bitcoin mining facilities located in Tennessee for a total purchase price of $ 25,000 .

Also on September 10, 2024, CSRE Properties Tennessee, LLC, a wholly-owned subsidiary of the Company, entered into a Real Estate Purchase and Sale Agreement (the “RE PSA”) with US Farms & Mining, Inc.

to purchase real property that was leased by the TN MIPA Seller for purposes of conducting operations of four of the mining locations.

Under the terms of the RE PSA, CSRE Properties Tennessee, LLC will pay US Farms & Mining, Inc.

an aggregate consideration of $ 2,500 .

The total consideration set forth to be paid per the agreements is $ 27,500 .

The cities of the bitcoin mining facilities for each MIPA are as follows:

Jellico, TN and West Crossville, TN;

Campbell Junction, TN and Decatur, TN;

Winfield, TN;

and Tazewell, TN.

The Company completed the acquisition of MIPA 1 and MIPA 3 on September 16, 2024 and September 25, 2024, respectively.

Meanwhile, the Company closed on MIPA 2 and the RE PSA in October 2024;

see Note 19 - Subsequent Events.

The transaction was accounted for as an asset acquisition, whereby the total purchase price is allocated first to the fair value of the assets acquired and any excess purchase price is allocated to the acquired assets pro-rata.

No goodwill is calculated in an asset acquisition.

T he combined purchase price is $ 28,103 , which includes $ 27,500 in cash considerations payable to the TN MIPA Seller per the MIPAs and RE PSA, $ 231 incurred for direct acquisition costs, and $ 372 in assumed lease liabilities.

As of September 30, 2024 , the Company has paid or incurred $ 18,376 of the total purchase price and the difference between (1) the amount paid and incurred pursuant to direct transaction costs and (2) the amount allocated for completed components of the asset acquisition is recorded in Other long-term asset on the Consolidated Balance Sheets in the amount of $ 4,731 .

The expected total purchased assets and liabilities upon completion of all MIPAs and RE PSA is presented below as “ Expected Total Allocation Including Subsequent Periods ” and the allocation of the assets associated with MIPA 1 and MIPA 3 is included in “ Allocation as of September 30, 2024 ” in the table below:

($ in thousands)

Allocation as of September 30, 2024

Expected Incremental Acquisitions In Subsequent Periods

Expected Total Allocation Including Subsequent Periods

Land improvements

Infrastructure

Right of use assets

Operating lease liability

The Company assumed lease liabilities as of September 30, 2024 of $ 344 .

Under the terms of the TN MIPAs, the TN MIPA Buyer will pay the TN MIPA Seller the respective consideration under each MIPA described above (less an aggregate holdback amount of $ 1,250 , subject to adjustment as set forth in the TN MIPAs) at the respective closing of each MIPA.

The holdback amount is payable 60 days following the close of each MIPA, the total holdback amount of $ 955 attributable to MIPA 1 and MIPA 3 is due in November 2024 (included in Accrued liabilities in the Consolidated Balance Sheets as of September 30, 2024).

Mississippi Acquisition - Clinton, MS

On September 16, 2024, CSRE Properties Mississippi, LLC, a Mississippi limited liability company and wholly-owned subsidiary of the Company, entered into definitive agreements with Eyas Investment Group and Makerstar Capital, Inc.

(“Makerstar”) to acquire bitcoin mining facilities in Clinton, Mississippi (the “Clinton Property”).

The combined purchase price (including direct acquisition costs of $ 129 ) for the real property, construction in progress and personal property was approximatel y $ 3,020 .

The transaction was consummated in September 2024 and accounted for as an asset acquisition, whereby the total purchase price is allocated first to the fair value of the assets acquired and any excess purchase price is allocated to the acquired assets pro-rata.

No goodwill is calculated in an asset acquisition.

The allocation of the purchase price of the assets acquired are summarized below:

($ in thousands)

Allocation at

Construction in progress

In connection with the acquisition of the Clinton Property, CSRE Properties Mississippi, LLC entered into a Construction Management Services Agreement dated September 16, 2024 with Beast Power, Inc.

(“Beast Power”), pursuant to which Beast Power was engaged to manage the completion of the con struction of a data center facility on the Clinton Property for aggregate consideration of $ 2,888 .

The construction is expected to be substantially complete by December 2024.

Wyoming Acquisition - Cheyenne, WY

On May 8, 2024, CSRE Properties Wyoming, LLC, a Wyoming limited liability company and wholly-owned subsidiary of the Company (the “Wyoming Buyer”) entered into a Purchase and Sale Agreement with MineOne Wyoming Data Center LLC (“MineOne”), pursuant to which the Wyoming Buyer agreed to purchase real property located in Wyoming.

On May 29, 2024, the Wyoming Buyer entered into new purchase and sale agreements with MineOne, collectively amending and restating the original agreement dated May 8, 2024 due to federal regulatory consent requirements

relating to Parcel 1.

As a result, the agreement was renegotiated and split into two agreements:

the first agreement for Parcel 1, with a purchase price of $ 11,250 , and the second agreement for Parcel 2, with a purchase price of $ 11,250 , with no contingent payment requirements for either parcel.

In order for the federal agency to approve the transaction and for the Company to complete the acquisition of the land from MineOne, the assets on-site had to be demolished and the personal property had to be removed.

On August 2, 2024, the Company and MineOne entered into an Asset Purchase Agreement (“APA”) with a purchase price of $ 1,500 , subsequently amended to $ 1,300 , to acquire infrastructure assets.

The Company closed on the purchase of Parcel 2 on July 11, 2024 with a combined purchase price (including direct acquisition costs of $ 147 ) of $ 11,397 .

The Company closed on the purchase of Parcel 1 on September 11, 2024 with a combined purchase price (including direct acquisition costs of $ 470 ) of $ 11,720 .

The direct acquisition costs for Parcel 1 included the cost of demolition.

In addition, the Company purchased a parcel of raw land adjacent to Parcel 2 from Campstool Land Company, LLC on August 7, 2024 for a purchase price (including direct acquisition costs of $ 23 ) $ 1,523 .

The Wyoming transactions were accounted for as asset acquisitions, whereby the total purchase price is allocated first to the fair value of the assets acquired and any excess purchase price is allocated to the acquired assets pro-rata.

No goodwill is calculated in an asset acquisition.

As a result, the total cost of the Wyoming land purchased was $ 24,640 , 100 % of which was allocated to land.

LN Energy LLC Acquisition - Georgia

On June 17, 2024, CleanSpark, Inc., through its wholly-owned subsidiary, CSRE Properties Sandersville, LLC (the "LN Energy Buyer"), entered into six (6) definitive agreements to acquire bitcoin mining facilities located in Georgia from, respectively, LN Energy 1 LLC, LN Energy 3 LLC, LN Energy 4 LLC, LN Energy 5 LLC, LN Energy 6 LLC and LN Energy 7 LLC (collectively, the “LN Energy Seller”) .

The definitive agreements include the purchase of mining data centers, the assumption of the underlying real property leases and one power agreement.

The combined purchase price was $ 26,177 , which included $ 25,800 paid to the LN Energy Seller, $ 132 incurred for direct acquisition costs, and $ 244 in assumed lease liabilities.

T he transaction is accounted for as an asset acquisition, whereby the total purchase price is allocated first to the fair value of the assets acquired and any excess purchase price is allocated to the acquired assets pro-rata.

No goodwill is calculated in an asset acquisition.

The allocation of the purchase price of the assets acquired and liabilities assumed are summarized below:

($ in thousands)

Allocation at

Building/Improvements

Infrastructure

Right of use assets

Operating lease liability

Mississippi Locations Acquisition - Meridian, Vicksburg and Wiggins, MS

On February 26, 2024, the Company, through its wholly-owned subsidiary CSRE Properties Mississippi, LLC, closed on the Purchase and Sale Agreement entered into with Makerstar on February 5, 2024, pursuant to which the Company agreed to purch ase three bitcoin mining facilities in Mississippi for $ 19,771 (including direct acquisition costs of $ 148 ).

The three facilities are located in Meridian, Vicksburg, and Wiggins, respectively .

No goodwill is calculated in an asset acquisition.

The allocation of the purchase price of the assets acquired is summarized below:

($ in thousands)

Allocation at

Building/Improvements

Infrastructure

Dalton 3 Acquisition - Dalton, GA

On February 2, 2024, the Company, through its wholly-owned subsidiary CSRE Properties Dalton, LLC, entered into two purchase agreements with Makerstar.

and its wholly-owned subsidiary, Eyas Investment Group, respectively, for approximately two acres of real property (the “Dalton Property”) located in Dalton, Whitfield County, Georgia and all improvements, fixtures and personal property situated on the Dalton Property.

The Dalton Property was in the early stages of construction and included a concrete foundation and in-process electrical infrastructure at the time of entry into the respective agreements .

The combined purchase price (including direct acquisition costs of $ 132 ) for the real property and improvements, fixtures and personal property was approximatel y $ 3,569 .

The transaction was consummated in February 2024 and accounted for as an asset acquisition, whereby the total purchase price is allocated first to the fair value of the assets acquired and any excess purchase price is allocated to the acquired assets pro-rata.

No goodwill is calculated in an asset acquisition.

The allocation of the purchase price of the assets acquired is summarized below:

Purchase Price Allocation:

($ in thousands)

Allocation at

Building/Improvements

Infrastructure

In connection with the acquisition of the Dalton Property, the Company entered into a Construction Management Services Agreement dated February 1, 2024 with Makerstar, pursuant to which the Company engaged Makerstar to manage the completion of the con struction of a data center facility on the Dalton Property for aggregate consideration of $ 3,435 .

The construction was substantially completed, and the facility began bitcoin mining operations, on April 4, 2024.

Dalton 1 & 2 Acquisition - Dalton, GA

On June 21, 2023, the Company completed the acquisition of two bitcoin mining facilities in Dalton, Georgia for $ 9,389 .

Each of the facilities are located on separate one acre sites, each of which are under land leases.

The combined facilities are able to currently utilize 20 megawatts of power and are expected to host a total of approximately 6,000 miners.

No goodwill is calculated in an asset acquisition.

The preliminary allocation of the purchase price of the assets acquired are summarized below:

The allocation of the purchase price of the assets acquired and liabilities assumed are summarized below:

($ in thousands)

Allocation at

Acquisition Date

Infrastructure

Land lease - right of use asset

Operating lease liability

Infrastructure

Total purchase price

There have been no subsequent adjustments to the allocation of the purchase price after the preliminary allocation.

Mawson Infrastructure Group - Sandersville, GA

a Delaware corporation (“Mawson”), all pursuant to a Purchase and Sale Agreement dated September 8, 2022 and an Equipment Purchase and Sale Agreement dated September 8, 2022 (the "Mawson Transaction").

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 “Mawson Property”), all personal property located on the Mawson Property, and 6,349 application-specific integrated circuit miners (the “ASICs”) from subsidiaries of Mawson Infrastructure Group, Inc., a Delaware corporation (“Mawson”), all pursuant to a Purchase and Sale Agreement dated September 8, 2022 and an Equipment Purchase and Sale Agreement dated September 8, 2022 (the "Mawson Transaction").

The Company paid the following consideration to Mawson for the Mawson Property:

(i) $ 13,500 in cash;

(ii) 1,590,175 shares (the “Closing Shares”) of the Company's common stock (which had a value of $ 4,803 based upon the closing price of the common stock on October 7, 2022), and (iii) $ 6,500 in seller financing in the form of a promissory note.

The Company also paid $ 9,018 in cash within 15 days of the closing for the ASICs.

The following additional contingent consideration was included in the purchase price:

up to 1,100,890 shares of the Company's common stock (the “Earn-out Shares”) (which have a value of approximately $ 3,325 based upon the closing price of the Company's common stock on October 7, 2022), based upon the number of modular data centers on the Mawson Property occupied by Mawson being emptied and made available for our use.

These Earn-out Shares had been classified as a liability in the Consolidated Balance Sheets in accordance with ASC 480, and accordingly was reported at fair value at the end of each reporting period.

• up to 1,100,890 shares of the Company's common stock (the “Earn-out Shares”) (which have a value of approximately $ 3,325 based upon the closing price of the Company's common stock on October 7, 2022), based upon the number of modular data centers on the Mawson Property occupied by Mawson being emptied and made available for the Company’s use.

These Earn-out Shares had been classified as a liability in the Consolidated Balance Sheets in accordance with ASC 480, and accordingly, were reported at fair value at the end of each reporting period.

As of December 31, 2022, the fair value of this contingent liability was reduced to $ 2,840 from $ 3,325 , resulting in a change in fair value of contingent consideration of $ 484 in Other Income (expense) in the Consolidated Statements of Operations and Comprehensive Loss.

The shares associated with the earn-out were issued to Mawson in January 2023 (see Note 14 - Stockholders' Equity).

up to an additional $ 2,000 in a seller-financed earn-out payable at least 60 days post-closing if the Company receives written confirmation that it will be able to utilize at least an additional 150 megawatts ("MW") of power on the Mawson Property by the six month anniversary of the closing, April 8, 2023.

Such written confirmation was not received by April 8, 2023 and accordingly, the Company determined t his contingency criteria was not met by April 8, 2023 and it has not paid the additional consideration;

however, Mawson has expressed the position, with which the Company disagrees, that this contingency criteria was in fact met.

The Company is currently negotiating with the power provider and is confident that it will be able to reach an agreement to access at least 150 MW of power at the site later this year.

The Company has adjusted the contingency liability to $ 0 as of June 30, 2023 and recognized $ 2,000 gain in Change in Fair Value of Contingent Consideration on the Statement of Operations and Comprehensive Loss.

• up to an additional $ 2,000 in a seller-financed earn-out payable at least 60 days post-closing if the Company receives written confirmation that it will be able to utilize at least an additional 150 MW of power on the Mawson Property by the six-month anniversary of the closing, April 8, 2023.

Such written confirmation was not received by April 8, 2023, and accordingly, the Company determined t his contingency criteria was not met by April 8, 2023 and has not paid the additional consideration.

The Company adjusted the contingency liability to $ 0 as of June 30, 2023 and recognized $ 2,000 gain in Change in Fair Value of Contingent Consideration on the Consolidated Statements of Operations and Comprehensive Loss.

The Company accounted for this transaction as an acquisition of a business.

17 unchanged sentences

There were no subsequent adjustments to the allocation of the purchase price after the preliminary allocation.

SPRE Commercial Group Inc.

and WAHA Technologies Inc.

- Washington, GA

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) $1,962 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 $174, (ii) the Company’s assumption of a mortgage with a maximum principal amount of $2,158 and an interest rate of 13% and (iii) $19,772 of cash consideration paid by the Company to the Seller.

Acquisition related costs of $118, 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:

($ in thousands)

Financing provided by SPRE

Mortgage assumed

Total Consideration

Purchase Price Allocation:

($ in thousands)

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.

Pro forma of Consolidated Financial Statements (Unaudited)

The following is the unaudited pro forma information assuming the consummation of each of the Mawson Transaction and WAHA Transaction occurred on October 1, 2021:

For the Year Ended

($ in thousands, except share and per share)

September 30, 2022

Net sales from continuing operations

Loss from continuing operations attributable to common shareholders

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 –

Pro forma results of operations for the Mawson Transaction for the year ended September 30, 2023 were not presented since the Mawson Transaction occurred on October 8, 2022 and the results for the 8-day period would be immaterial.

The WAHA Transaction was included during the entire year ended September 30, 2023.

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 acquisitions 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, 2024 and 2023 , the Company held 6,819 and 2,243 bitcoin, respectively.

The following table presents the activities of the Company's bitcoin holdings for the years ended September 30, 2023 and 2022:

($ in thousands)

The following table presents a description of the Company's bitcoin holdings as of September 30, 2024 and 2023:

Bitcoin holdings

September 30, 2024

September 30, 2023

Number of bitcoin held

Cost basis - per bitcoin

Fair value - per bitcoin

Cost basis of bitcoin (in '000s)

Fair value of bitcoin (in '000s)

The cost basis represents the valuation of bitcoin at the time the Company earns the bitcoin through mining activities.

The cost basis for 2,243 bitcoin held as of the date prior to the adoption of ASC 350-60 was determined on the "cost less impairment" basis.

The following table presents information based on the activity of bitcoin for the years ended September 30, 2024 and 2023:

For the year ended September 30,

Balance at beginning of Fiscal Year

Addition of bitcoin

Carrying amount of bitcoin sold

Bitcoin issued for services

Bitcoin issued for software

($ in thousands)

Balance at beginning of the year

Cumulative effect of the adoption of ASC 350-60

Adjusted beginning balance - at fair value

Addition of bitcoin from mining activities (1)

Bitcoin sold & issued for services and purchase of software

Bitcoin transferred to collateral account

Bitcoin received from collateral account

Impairment loss

Balance at end of Fiscal Year

The Company's bitcoin holdings are not subject to rehypothecation and do not serve as collateral for any existing loans or agreements.

As of September 30, 2023, the Company held 95 % of its bitcoin in cold storage and 5 % in hot wallets.

As of September 30, 2023 and September 30, 2022, the Company had total investments of $ 3,423 and $ 3,566 , respectively, that comprise of the following:

Gain on fair value of bitcoin, net

Balance at end of the year

(1) Net of mining pool fees as described in Note 2 - Summary of Significant Accounting Policies

The Company's bitcoin holdings shown in this note, excluding the bitcoin posted as collateral to the Coinbase Line of Credit as described in Note 12 - Loans, are not subject to rehypothecation and do not serve as collateral for any existing loans or agreements.

As of September 30, 2024, the Company held approximately 99 % of its bitcoin in cold storage and 1 % in hot wallets.

The cumulative realized gains from dispositions of bitcoin during the year ended September 30, 2024 w as $ 63,878 .

There were no cumulative realized losses from dispositions of bitcoin during the year ended September 30, 2024 .

NOTE RECEIVABLE FROM GRIID

On June 26, 2024, concurrent with the GRIID Agreement (see Note 5 - Acquisitions), the Company entered into the GRIID Credit Agreement, which is a senior secured term loan under which the Company provided a term loan of $ 55,919 to GRIID, which GRIID is permitted to use solely for certain purposes as set forth in the GRIID Credit Agreement.

On August 2, 2024, the Company and GRIID amended and restated the GRIID Credit Agreement (as amended and restated, the “A&R GRIID Credit Agreement”) to include, in addition to the term loan amount, a new delayed draw term loan facility of $ 40,000 , which amounts GRIID is permitted to request pursuant to the terms of the A&R GRIID Credit Agreement and use solely for certain purposes as set forth in the A&R GRIID Credit Agreement.

The Company may make one or more delayed draw term loans (each, a "Draw Loan") to GRIID from August 2, 2024 until the earlier of June 26, 2025 or the termination of the merger transaction defined in Note 5 - Acquisitions.

Each borrowing shall be in a principal amount of $ 250 or a whole multiple of $ 100 in excess thereof.

The outstanding amount of Draw Loans shall bear an interest of 8.5 % per annum from the date any such Draw Loan is made to the day it is paid in full.

Pursuant to the A&R GRIID Credit Agreement, any amounts borrowed and repaid prior to the maturity date cannot be reborrowed.

Nearing the end of fiscal year 2024, the Company continued to assess the credit risk associated with a note receivable from GRIID.

This note primarily financed infrastructure improvements expected to provide long-term utility and strategic benefit to the Company, which significantly reduces the likelihood of credit loss.

Based on this evaluation, the Company has determined that the risk of credit loss is immaterial and, accordingly, has not recognized a material allowance for credit losses related to this note.

The Company monitored this exposure, but has acquired GRIID prior to the report date as discussed in the Note 5 - Acquisitions and Note 19 - Subsequent Events.

The maturity date of the term loan is deemed to be the earlier of (i) June 26, 2025, or (ii) 90 days after the termination of the merger transaction between the Company and GRIID under the GRIID Agreement (other than a termination resulting solely from the breach of the Company).

On the maturity date, the principal and any accrued but unpaid interest will be due and payable.

The term loan bears interest at a rate of 8.5 % per annum.

This note matured as part of the acquisition of GRIID, subsequent to the balance sheet date, as noted above.

The GRIID Credit Agreement contains customary representations, warranties, covenants, and events of default for a term loan of this type.

As of September 30, 2024, the Note receivable from GRIID balance was $ 60,919 and interest receivable balance included in Prepaid expenses and other current assets was $ 1,286 , within the Consolidated Balance Sheet.

INVESTMENTS AND DERIVATIVES

As of September 30, 2024 and September 30, 2023, the Company had total investments of $ 2,750 and $ 3,423 , respectively, comprised of the following:

Interest Rate Swap Derivative

In relation to the Company’s Western Alliance Bank Credit Agreement entered into in August 2024, the Company has an interest rate swap agreement (see Note 12 - Loans) for which the interest rate swap is not a designated hedge.

As of September 30, 2024, the Interest Rate Swap Derivative was fair valued at a $ 100 unrealized loss which is included in Other current liabilities on the Consolidated Balance Sheet.

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 ILAL's 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 “Series B Preferred Stock”) for an aggregate purchase price of $ 500 (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.

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.

ILAL Series B Preferred Stock (Investment in Debt Securities) and Embedded ILAL Derivative Asset

The Series B Preferred Stock accrues cumulative dividends in-kind at a rate of 12% per annum and was redeemable on August 6, 2020.

The Series B Preferred Stock can be converted into common stock at a variable rate (refer the discussion on embedded derivative assets below).

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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 no interest (net of allowance) on our available-for-sale debt securities, as of September 30, 2023 and 2022, respectively.

The fair value of our investment in debt securities is $ 726 and $ 610 as of September 30, 2023 and 2022, respectively.

The Company has included gain on fair value of preferred stock amounting to $ 116 and $ 115 for the years ended September 30, 2023 and 2022, respectively, as part of other comprehensive income 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, 2023 and 2022 is $ 2,697 and $ 2,956 , respectively.

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

The fair value of the derivative asset is based on the difference in the fair value of the debt security determined as a straight debt instrument and the fair value of the debt security if converted as of the reporting date.

The Company accrued no interest (net of allowance) on its available-for-sale debt securities, as of September 30, 2024 and 2023, respectively.

The fair value of the Company’s investment in the Series B Preferred Stock was $ 918 and $ 726 as of September 30, 2024 and 2023, respectively.

The Company has included gain on fair value of Series B Preferred Stock amounting to $ 192 and $ 116 for the years ended September 30, 2024 and 2023, respectively, as part of other comprehensive income in the Consolidated Statements of Operations and Comprehensive Loss.

The Company has deemed the variable conversion feature (the “ILAL Derivative Asset”) of Series B Preferred Stock an embedded derivative instrument in accordance with ASC 815, Derivatives and Hedging .

This topic requires the Company to account for the ILAL Derivative Asset on its balance sheet at fair value and account for changes in fair value as a derivative gain or loss.

Changes in fair value of the ILAL Derivative Asset are presented as Other income (expense) in the Consolidated Statements of Operations and Comprehensive Loss.

Total fair value of investment in ILAL Derivative Asset as of September 30, 2024 and 2023 was $ 1,832 and $ 2,697 , respectively and as included in Derivative assets on the Consolidated Balance Sheet.

The Company fair values the debt security as a straight debt instrument based on liquidation value, accrued interest to date , and an estimated 60 % recovery rate for first-lien debt, which is an unobservable input .

The fair value of the ILAL Derivative Asset is based on the difference in the fair value of the Series B Preferred Stock determined as a straight debt instrument and the fair value of the Series B Preferred Stock if converted as of the reporting date.

Commitment shares - Common stock of ILAL

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

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.

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 $ 1 .

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The Company annually performs impairment analysis on this investment and concluded that the investment was not recoverable and accordingly recorded an impairment of $ 250 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, 2023 and 2022:

Refer to the table below for a roll forward of assets carried at fair value on a recurring basis that utilize level 3 inputs to determine fair value:

($ in thousands)

Interest Rate

Swap Derivative (1)(3)

ILAL Equity Securities

Balance as of September 30, 2021

5 unchanged sentences

Balance as of September 30, 2022

Unrealized loss recognized in other income (expense)

Unrealized gain on fair value recognized in Other comprehensive income

Balance as of September 30, 2023

Unrealized loss on derivative asset

1 unchanged sentence

Balance as of September 30, 2024

(1) The "Other current liabilities" caption in the Consolidated Balance Sheet includes the Interest Rate Swap Derivative.

(2) The "Derivative investments" caption in the Consolidated Balance Sheet consists of ILAL Derivative Asset.

(3) See Note 12 - Loans

PROPERTY AND EQUIPMENT

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Depreciation expense for the years ended September 30, 2024, 2023 and 2022 was $ 152,469 , $ 118,615 and $ 47,082 , respectively.

During the year ended September 30, 2023 , $ 1,966 of property and equipment was disposed of for a loss of $ 1,931 .

The Company placed in service property and equipment of $ 231,135 during the year ended September 30, 2023.

During the year ended September 30, 2024 , $ 6,903 of property and equipment, net was disposed of for a loss of $ 5,466 , and during the year ended September 30, 2023 $ 1,966 of property and equipment, net was disposed of for a loss of $ 1,931 .

In April 2024, a bitcoin halving event took place.

A bitcoin halving event, which occurs approximately every four years, reduces the block reward for bitcoin miners by 50 %.

This directly impacts the Company’s revenue generation from mining activities.

As a result of the bitcoin halving event and the execution of the 100,000 miner purchase option for new Bitmain Antminer S21 Pro models (see Note 18 - Commitments and Contingencies), the Company concluded that various miner models (S19J, S19 J Pro and S19 J Pro+) would be removed from service and replaced with newer, more efficient miner models.

The planned replacement is expected to be completed by December 31, 2024.

Accordingly, the Company performed an impairment test on the miners planned for replacement, resulting in an impairment charge of approximately $ 189,000 .

The fair value less residual value of the impaired miners will depreciated over the remaining period in which they are operating.

Significant inputs in the fair value calculation was future bitcoin prices, forecasted global hashrate and estimated future power prices.

Effective May 1, 2024, as a result of new information about actual lives of its bitcoin miners based on historical experience and advancements in overall miner efficiency, the Company has reduced the useful lives of miners from five years to three years .

The impact of the change in useful lives of miners from five to three years increased depreciation expense and loss before income tax expense by approximately $ 7,261 for the year ended September 30, 2024 , and decreased basic and diluted earnings per share by $ 0.03 for the year ended September 30, 2024.

In the fourth quarter of fiscal 2024, the Company began to engage in transactions to sell off certain miners that had been removed from service.

The Company noted that the prevailing re-sell market rates decreased between June 2024 to September 2024, and as a result, the Company further changed its estimated salvage value of all of its out of service miners and recorded an impairment charge of approximately $ 7,800 in the fourth quarter of fiscal year 2024.

The combined impairment charges for the year ended September 30, 2024 totaled approximately $ 197,000 , which is recorded in the Consolidated Statements of Operations and Comprehensive Loss as "Impairment expense - fixed assets".

The Company placed in service property and equipment of $ 570,931 during the year ended September 30, 2024, which included $ 7,190 in machinery and equipment acquired in equipment loan transactions.

This increase in fixed assets primarily consisted of miners and mining equipment amounting to $ 472,670 .

On April 7, 2023, CleanSpark HQ, LLC (“HQLLC”), a single member limited liability company and subsidiary wholly owned by the Company, purchased certain real property located at 10424 South Eastern Ave., Suite 200, Henderson, Nevada (the "Eastern Property") for $ 4,100 .

The property consists of approximately 15,000 square feet of office space.

The Company intends to utilize this office space as its new corporate headquarters.

The real property is recorded in construction in progress as of September 30, 2023, and includes an additional $ 560 in building improvements.

The completion is expected to occur in the first quarter of fiscal year 2024.

On May 1, 2023, the Company entered into a Purchase and Sale agreement with the Development Authority of Washington County to purchase 16.35 acres of land that was previously leased by the Company and an additional 10 acres of parcels in Sandersville, GA ("Sandersville Land") for a purchase price of $ 1,300 (the agreement was subsequently amended in June 2023 to increase the purchase price to $ 1,400 ).

Assets acquired through acquisition transactions (see Note 5 - Acquisitions) resulted in an additional $ 87,239 in total assets placed in service.

Additionally, in January 2024, the Company purchased raw land next to the Sandersville, GA location for approximately $ 1,038 .

On April 7, 2023, CleanSpark HQ, LLC (“HQLLC”), a single member limited liability company and subsidiary wholly owned by the Company, purchased certain real property located in Henderson, Nevada (the "Eastern Property") for $ 4,100 .

The property consists of office space.

The Company utilizes this office space as its new corporate headquarters.

The real property is recorded in building and building improvements and was placed in service in the first quarter of fiscal 2024.

On May 1, 2023, the Company entered into a Purchase and Sale agreement with the Development Authority of Washington County to purchase 16.35 acres of land that was previously leased by the Company and an additional 10 acres of parcels in Sandersville, GA for a purchase price of $ 1,300 (the agreement was subsequently amended in June 2023 to increase the purchase price to $ 1,400 ).

The leased land had been subject to an operating lease which was acquired by the Company under the Mawson Transaction.

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Construction in progress:

The Eastern Property is recorded in construction in progress.

The Company is also expanding its facilities in Georgia, including infrastructure, building, and land improvements to expand its mining operations.

The Company is expanding its facilities in Georgia, Wyoming and Mississippi, including infrastructure, building, and land improvements to expand its mining operations.

As of September 30, 2024 and September 30, 2023 , the Company has outstanding deposits for miners and mining equipment totaling $ 359,862 and $ 75,959 , respectively.

These deposits are paid to vendors and manufacturers to purchase miners.

The deposits are to be applied to the purchase price when either the vendor ships the miners or when the miners are received, depending on the contracted terms.

Such deposits are recorded in long-term assets on the Consolidated Balance Sheets.

If miners are purchased with terms that pass title to the goods at time of shipment, then such miners are recorded in construction in progress until they are physically received and placed in service.

Such deposits are recorded as long-term assets on the Consolidated Balance Sheets.

INTANGIBLE ASSETS

Intangible assets consist of the following as of September 30, 2023 and 2022:

Intangible assets consisted of the following as of September 30, 2024 and 2023:

September 30, 2024

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Strategic Contract

The strategic contract relates to the supply of a critical input to the Company’s bitcoin mining business at significantly lower prices compared to market.

Amortization expense for the years ended September 30, 2024, 2023 and 2022 was $ 2,140 , $ 2,113 and $ 1,963 , respectively.

During the years ended September 30, 2024 and 2023 , 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 lower prices compared to market.

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

The following table presents the estimated amortization expense based on the Company’s amortizing intangible assets as of September 30, 2024:

($ in thousands)

September 30, 2024

On October 1, 2019, the Company adopted the amendments to ASC 842, leases which require 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.

As of September 30, 2024, the Company had operating leases primarily for the land leases of its mining facilities in Georgia and Tennessee and finance leases primarily related to equipment used at its data center.

The mining facilities comprise the Company’s material underlying asset class under operating lease agreements.

The Company has no material finance leases.

In September 2024, the Company assumed two land leases and three short-term leases in connection with the acquisition of the locations in Tennessee.

The lease terms of the land leases range from 1.8 to 12 years.

As a result of the acquisition, the Company recognized operating lease liabilities of $ 344, and based upon acquisition cost allocation, recorded right of use assets, net unfavorable terms of $ 47 .

The short term leases are expiring in October 2024.

As such, the lease payments are recognized on a straight-line basis on the consolidated statements of operations and comprehensive loss.

In June 2024, the Company assumed four land leases in connection with the acquisition of the LN Energy locations in Georgia.

The lease terms of the LN Energy land leases range from 2.6 to 14.7 years.

As a result of the acquisition, the Company recognized operating lease liabilities of $ 243, and based upon acquisition cost allocation, recorded right of use assets of $ 2,550 .

In April 2024, the Company entered into a new operating land lease in Dalton, GA for the expansion of a fourth bitcoin mining location.

The lease is for a total of $ 18 per year with an initial lease term of five years and one renewal period of five years , for which the Company recorded a right of use asset and operating lease liability of $ 122 .

Office Space Operating Lease and Sublease

The Company also has an operating lease for office space which was previously utilized as its corporate headquarters.

In January 2024, the Company ceased usage of the office space.

In the quarter ended March 31, 2024, the Company wrote down the right of use asset as it considered the asset to be impaired since the space was not utilized and the efforts to find a sub-lessee at the time were unsuccessful.

The Company impaired the right of use asset in the amount of $ 396 and has recorded this as "impairment expense - other" on the Consolidated Statements of Operations and Comprehensive Loss.

In July 2024, the Company entered into a sublease agreement in which it sublets the office space to the sublessee for the remainder of the original lease term expiring in April 2027.

Sublease income for the year ended September 30, 2024 was approximately $ 15 .

The sublease did not relieve the Company from its original lease obligation.

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

For the year ended

For the year ended September 30,

($ in thousands)

September 30,

Operating lease cost (1)

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Interest on lease obligations

Short-term rent expense

(1) Included in general and administrative expenses.

Other lease information is as follows:

For the year ended

For the year ended September 30,

($ in thousands)

September 30,

Cash paid for amounts included in

measurement of lease obligations:

Cash paid for amounts included in measurement of lease obligations:

Operating cash outflows from operating leases

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September 30,

Weighted-average remaining lease term -

operating leases

Weighted-average remaining lease term -

finance leases

Weighted-average remaining lease term - operating leases

Weighted-average remaining lease term - finance leases

Weighted-average discount rate - operating leases

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The following is a schedule of the Company's lease liabilities by contractual maturity as of September 30, 2024:

($ in thousands)

Fiscal Year ($ in thousands)

Gross lease liabilities

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Total lease liabilities, net of current portion

As of September 30, 2023 , the Company had a gross balance outstanding of $ 16,080 , netted against discount on the loans payable of $ 177 .

Total principal payments on loans during the years ended September 30, 2023 and 2022 was $ 14,466 and $ 2,779 , resp ectively.

As of September 30, 2024, the Company had a gross balance of loans payable outstanding of $ 66,120 , netted against discount on the loans payable of $ 163 .

Total principal payments on loans during the years ended September 30, 2024 and 2023 was $ 7,283 and $ 14,466 , respectively.

The following table reflects our outstanding loans as of September 30, 2024 and September 30, 2023:

September 30, 2023

September 30, 2022

Loans Payable Balance, Net

as of September 30,

($ in thousands)

Maturity Date

Debt Balance, Net

Master Equipment Financing Arrangement

Coinbase Line of Credit

Not specified

Western Alliance Bank Credit Agreement

Trinity Master Equipment Financing Arrangement

Mortgage - Corporate Facility

SPRE Commercial Group, Inc.

Marquee Funding Partners

Jul-26 - Feb-27

Aug-26 to Mar-27

Auto & Equipment Loans

Oct-26 - Jun -29

0.99 - 9.60 %

Total Loans Outstanding

current portion of long-term loans

Long-term loans, excluding current portion

Jun-26 to Dec-29

Total Loans Payable

current portion of loans payable

Loans payable, net of current portion

The following table reflects the principal amount of loan maturities due over the next five years and beyond as of September 30, 2024:

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Outstanding Loan

Master Equipment Financing Arrangement

Coinbase Line of Credit

Western Alliance Bank Credit Agreement

Trinity Master Equipment Financing Arrangement

Mortgage - Corporate Facility

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Description of Outstanding Loans

Master Equipment Financing Agreement

Coinbase Line of Credit and Receivable For Bitcoin Collateral

On August 7, 2024, the Company signed a Master Loan Agreement (the “Master Loan”) with Coinbase Credit, Inc.

(the “Lender”) for a line of credit in which the Lender will lend the Company certain digital assets or cash.

The Master Loan provided has a credit limit of $ 50,000 .

On or prior to a drawdown, the Company is required to pledge collateral, and the Company has opted to pledge bitcoin to be held in a segregated custody account, such that the loan-to-value ratio of principal outstanding of the loan and the fair value of collateral is equal to or less than 64 %.

If the value of the collateral under the credit facility decreases past a specified margin, the Company may be required to post additional bitcoin as collateral.

The Master Loan includes embedded redemption features, which allows the lender to redeem the security before its maturity date (“redemption feature”).

The Master Loan also includes a contingent interest feature that requires additional interest to be paid only if certain conditions are met.

One such redemption feature and contingent interest feature is in the event of default, including failure to maintain sufficient collateral, the Lender may liquidate the collateral to satisfy the outstanding loan balance or charge incremental interest at the federal funds rate upon the under-collateralized portion of the loan.

The Company assessed the embedded redemption features and the contingent interest feature and determined the features are clearly and closely related to the line of credit and do not require bifurcation.

Upon transfer of the bitcoin, the Lender has the exclusive right to sell, pledge and rehypothecate the bitcoin without notice to the Company.

Either party can terminate a loan with two days’ notice to the other party.

As of the date of this report, no such termination has occurred.

The Company drew $ 50,000 from the line of credit in August 2024, and concurrently transferred bitcoin to the Lender as collateral at fair value of $ 78,130 .

Pursuant to the terms, the line of credit initially bore interest of 9 % per annum and has no defined maturity date but is terminable by either the Lender or the Company with notice.

During September 2024, the interest rate on the line of credit was adjusted to 8.5 % per annum.

As of September 30, 2024, the outstanding balance on the Coinbase line of credit was $ 50,000 at a rate of 8.5 % per annum.

Since the Lender has the rights to sell, pledge and rehypothecate the bitcoin during the term of the Master Loan, the Company derecognized the bitcoin transferred as collateral.

As the Company has the right to receive the bitcoin back from the Lender upon the repayment of the line of credit, the Company recorded a corresponding Receivable for bitcoin collateral.

The Receivable for bitcoin collateral is measured at fair value and changes in fair value are recorded as Change in fair value of bitcoin collateral under the Other Income category.

As of September 30, 2024, 1,229 bitcoin was posted as collateral for the line of credit at a total cost basis of $ 76,444 and a fair value of $ 77,827 .

Western Alliance Bank Credit Agreement

On August 14, 2024, the Company entered into a credit agreement that provides for borrowings under a promissory note with Western Alliance Bank.

Pursuant to this agreement, the Company executed a promissory note in the amount of $ 7,000 in order to finance the purchase of an aircraft for operational use.

The aircraft is pledged as collateral for the note.

The notes bears a variable interest rate equal to the 30 day Secured Overnight Financing Rate (“ SOFR”) plus 3 % per annum, payable monthly , and matures on August 14, 2029 .

The credit agreement contains financial covenants, including a minimum loan-to-value ratio, a minimum debt service coverage ratio, and a minimum average deposit balance.

As of September 30, 2024, the Company was in compliance with all covenants, and no events of default had occurred under the credit agreement.

Concurrently with the credit agreement, on August 14, 2024, the Company entered into a plain vanilla interest rate swap agreement with a counterparty in which the company will pay a fixed rate of 6.75 % and receive a variable rate equal to 30 day SOFR plus 3 % per annum on the initial notional value of $ 7,000 .

This interest rate swap has a maturity date of August 14, 2029 .

This interest rate swap was not designated as a hedge and is presented within Note 8 - Investments and Derivatives.

Trinity Master Equipment Financing Agreement

On April 22, 2022, the Company entered into a Master Equipment Financing Agreement with Trinity Capital Inc.

(the "Lender").

The Master Equipment Financing Agreement provided for up to $ 35,000 of borrowings to finance the Company’s acquisition of blockchain computing equipment.

(the "Trinity").

The Master Equipment Financing Agreement provided for up to $ 35,000 of borrowings to finance the Company’s acquisition of blockchain computing equipment.

The Company received a loan of $ 20,000 at closing, with the remaining $ 15,000 fundable upon the Company's request, if requested no later than December 31, 2022, subject to certain customary conditions.

The Company did not request the funding and agreed with the Lender that the related 1 % loan commitment fee for the unused portion would be refunded to the Company, which was received in December 2022.

The Company did not request the funding and agreed with the Trinity that the related 1 % loan commitment fee for the unused portion would be refunded to the Company, which was received in December 2022.

The borrowings under the Master Equipment Financing Agreement are collateralized by 3,336 S19j Pro miners, which are located at the Company's College Park, GA and Norcross, GA sites.

The Company recorded an original loan discount of approximately $ 379 , of which $ 150 was refunded and $ 56 an d $ 46 was amortized and recorded to interest expense during the years ended September 30, 2023 and 2022.

The Company recorded an original loan discount of approximately $ 379 , of which $ 150 was refunded and $ 76 and $5 6 was amortized and recorded to interest expense during the years ended September 30, 2024 and 2023, respectively.

Mortgage - Corporate Office

On May 10, 2023, HQLLC completed a refinancing transaction whereby it borrowed a net $ 1,937 against the equity of the real property purchased in April that is intended for the future Corporate Office (see Note 7 - Property and Equipment).

On May 10, 2023, HQLLC completed a refinancing transaction whereby it borrowed a net $ 1,937 against the equity of the real property purchased in April 2023 that now serves as the Company’s Corporate Office (see Note 9 - Property and Equipment).

The loan agreement has a two-year term, 10 % interest rate and monthly interest only payments until maturity.

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 $ 1,725 , remaining payment terms ranging from 35 - 42 months and annual interest of 13 %.

In connection with the acquisition of WAHA in August 2022, certain assets were encumbered with mortgages which the Company assumed.

The mortgages assumed have a current unpaid principal balance of $ 1,267 , remaining payment terms rang ing from 23 - 29 month s and an annual interest rate of 13 % .

The last mortgage matures on March 1, 2027.

The Company has entered into various financing arrangements to purchase vehicles and non-miner equipment with combined principal amount of $ 699 as of September 30, 2024 .

The loans vary in terms from 12 - 72 months with annual interest rates ranging from 0.0 % - 11.3 %.

The loans are secured by the purchased vehicles and equipment.

During the year ended September 30, 2024, the Company entered into seven separate agreements for the purchase of machinery and equipment and mining equipment with a combined principal of $ 287 , with terms ranging from 12 - 72 months and interest rates ranging from 0.0 %- 11.3 %.

The last auto loan will mature on December 18, 2029.

Western Alliance Equipment Financing Agreement

On August 28, 2024, the Company entered into an equipment financing agreement with Western Alliance Bank for borrowings of up to $ 1,000 to finance new equipment for operational purposes.

The Company can continue to secure equipment with this equipment financing agreement until February 28, 2025.

This instrument bears interest at the Floating Wall Street Journal Prime Rate plus 1.00 % per annum, calculated on the basis of a 360-day year consisting of twelve (12) consecutive thirty (30)-day months, and will be charged for each day there is an outstanding balance .

As of September 30, 2024, the financing agreement had no outstanding balance.

The Floating Wall Street Journal Prime Rate was 8.00 % at the end of the period, resulting in an interest rate of 9.00 % per annum as of September 30, 2024.

The financing agreement contains financial covenants, including a minimum loan-to-value ratio, a minimum debt service coverage ratio, and a minimum average deposit balance.

As of September 30, 2024, the Company was in compliance with all covenants, and no events of default had occurred under the financing agreement.

SPRE Commercial Group, Inc.

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The loan matured in fiscal year 2023, and no amount is outstanding as of September 30, 2023.

The Company has entered into various financing arrangements to purchase vehicles and non-miner equipment with combined principal amount of $ 625 as of September 30, 2023 .

The loans vary in terms from 36 - 72 months with annual interest rates ranging from 0.99 % - 9.60 %.

The loans are secured with the purchased vehicles and equipment.

During the year ended September 30, 2023 , the Company entered into five separate agreements for the purchase of machinery and equipment and mining equipment with a combined principal of $ 493 , with terms ranging from 36 - 72 months and interest rates ranging from 0.99 %- 9.60 %.

As of September 30, 2024 , the weighted average interest rate on all short-term obligations outstanding was approximately 9.0 %, and the carrying values of all loans approximate fair values based on the borrowing rates currently available for loans with similar terms and average maturities.

The Company provides for income taxes under FASB ASC 740, Accounting for Income Taxes.

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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 has been recorded.

Due to the enactment of the Tax Reform Act of 2017, we have calculated our federal taxes 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.

Due to the enactment of the Tax Reform Act of 2017, the Company has calculated its federal taxes 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, 2024, 2023 and 2022 the Company's loss from continuing operations before provision for income taxes were as follows:

For the year ended September 30,

($ in thousands)

September 30, 2023

September 30, 2022

Loss before income taxes

The components of the provision for income taxes in the years ended September 30, 2024, 2023 and 2022 were as follows:

For the year ended September 30,

($ in thousands)

September 30, 2023

September 30, 2022

Provision for income taxes

The effective income tax rate for the periods ended September 30, 2024, 2023 and 2022 as a percentage of pre-tax income is ( 2.3 %), ( 1.8 %) and 0 %, respectively.

The significant reconciling items between the effective tax rate and the statutory tax rate for the period ended September 30, 2023 consist of valuation allowance, adjustments to deferred taxes, state taxes and permanent items.

The significant reconciling items between the effective tax rate and the statutory tax rate for the periods ended September 30, 2024, 2023 and 2022 consist of valuation allowance, adjustments to deferred taxes, state taxes, and permanent items.

A detailed breakout is provided below:

For the year ended September 30,

($ in thousands)

September 30, 2023

September 30, 2022

Tax benefit at federal statutory rate

State taxes (net of federal benefit)

Meals and entertainment

Stock based compensation

162(m) Excess Executive Compensation

ISO - Disqualifying Dispositions

Deferred only adjustment

Stock Option (Windfall)/Shortfall

Return to Provision Adjustments

Deferred Only Adjustments

Discontinued Operations

Change in Valuation Allowance

Deferred income taxes are the result of timing differences between GAAP accounting and tax basis of certain assets and liabilities, timing of income and expense recognition of certain items, and net operating loss carry-forwards.

These differences result in deferred tax assets and liabilities, which are recorded in the balance sheet, net of valuation allowance.

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Charitable Contributions

Section 1231 Loss Carryforwards

Stock Based Compensation

8 unchanged sentences

Prepaid Expenses

Unrealized Gain on Derivative Asset

Unrealized Gain on Equity Security

Gain/Loss on Sale of Assets not on TR

Change in Fair Value of Digital Currency

Fixed Assets & Intangible Assets

Net Deferred Tax Liability

Gross Deferred Tax Liabilities

Net Deferred Tax Liabilities

For balance sheet presentation, the Company nets non-current deferred tax assets (net of valuation allowance) and liabilities.

5 unchanged sentences

Pursuant to U.S.

income tax accounting standards, companies assess whether valuation allowances should be established against their deferred tax assets based on the consideration of all available evidence using a “more-likely-than-not”

The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible.

The Company considers the scheduled reversal of deferred tax liabilities.

To fully utilize the net operating loss (“NOL”) carryforward, the Company will need to generate sufficient future taxable income in each respective jurisdiction.

Due primarily to the Company’s history of losses, it is more likely than not that all or a portion of its deferred tax assets as of September 30, 2023 will not be realized.

To fully utilize the net operating loss (“NOL”) carryforward, the Company will need to generate sufficient future taxable income in each respective jurisdiction.

Due primarily to the Company’s history of losses, it is more likely than not that all or a portion of its deferred tax assets as of September 30, 2024 will not be realized.

The Company recorded a valuation allowance to offset the DTA that is not considered realizable for the tax year ended September 30, 2024 and September 30, 2023.

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Valuation Allowance

As of September 30, 2023, the Company had approximately $ 270,400 of federal and $ 96,400 of state net operating loss carryforwards available to reduce future taxable income, of which federal net operating loss carryforwards of approximately $237 ,700 have an indefinite life.

As of September 30, 2024 , the Company had $ 332,586 of federal and $ 146,973 of state net operating loss carryforwards available to reduce future taxable income, of which federal net operating loss carryforwards of $ 325,943 have an indefinite life.

The federal net operating losses will begin to expire on September 30, 2025, while state net operating losses will begin to expire in the year ending September 30, 2036.

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.

The Company is in the process of completing a detailed study for the year ended September 30, 2023, but does not expect that the results of this study will have a material impact on its financial statements.

Tax attributes that exceed the Section 382 limitation in any year continue to be allowed as carryforwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year.

Given the Company’s significant U.S.

tax attributes, we continuously monitor potential ownership changes under Section 382.

During the year, the Company completed a detailed study and determined an ownership change (as defined under Section 382) occurred during the third quarter of 2020, fourth quarter of 2020, and second quarter of 2023, triggering the application of Section 382.

We do not currently expect any resulting Section 382 limitations on the use of our tax attributes to have a significant impact on our financial statements.

The Company recognizes the effect of income tax positions only if those positions are more likely than not to be sustained.

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Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

The Company records interest and penalties related to unrecognized tax benefits in income tax expense, if any exist.

The Company records interest and penalties related to unrecognized tax benefits in income tax expense, if applicable.

The Company has no liability, interest or penalties for unrecognized tax benefits as of September 30, 2024.

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The 2020-2023 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.

In August 2022, two pieces of U.S.

tax legislation that have significant tax-related provisions were signed into law:

(1) the Creating Helpful Incentives to Produce Semiconductors Act of 2022 (the “CHIPS Act”), which creates a new advanced manufacturing investment credit under new Internal Revenue Code Section 48D, and (2) the Inflation Reduction Act of 2022 (the “IRA”), which has a number of tax-related provisions, including:

(a) a 15 percent book minimum tax on “adjusted financial statement income of applicable corporations,”

(b) a plethora of clean energy tax incentives in the form of tax credits, and (c) a one percent excise tax on certain corporate stock buybacks.

The Company will monitor additional guidance and impact that the CHIPS Act, the IRA and other potential legislation may have on its income taxes.

For the period ended September 30, 2023, the Company does not believe the provisions from these legislative updates will have any material impact on the Company's income taxes.

STOCKHOLDERS’

The Company’s authorized capital stock consists of 300,000,000 shares of common stock and 10,000,000 shares of preferred stock, par value $ 0.001 per share.

As of September 30, 2023, there were 160,184,921 shares of common stock issued and outstanding and 1,750,000 shares of preferred stock issued and outstanding.

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.

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.

STOCKHOLDERS’ EQUITY

As of September 30, 2024, the Company’s authorized capital stock consisted of 300,000,000 shares of common stock, par value $ 0.001 per share, and 10,000,000 shares of preferred stock, par value $ 0.001 per share.

Under the Certificate of Designation for the Series A Preferred Stock, holders of shares of the Company’s Series A Preferred Stock are entitled to quarterly dividends on 2 % of the Company’s 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, 2023 was $ 0 .

The preferred stock dividend for fiscal year ended September 30, 2022 was $ 335 , which the Company paid $ 314 and had a preferred stock dividend payable in the amount of $ 21 , which was subsequently paid in fiscal year 2023.

The preferred stock dividend for the years ended September 30, 2024, 2023 and 2022 was $ 3,421 , $ 0 and $ 336 , respectively.

The holders of the Series A Preferred Stock 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 stockholders at a rate of forty-five (45) votes for each share held.

Amendment to Articles of Incorporation

In March 2023, the Company's stockholders approved an amendment to the Company's Articles of Incorporation to increase the number of shares of common stock authorized and outstanding from 100,000,000 to 300,000,000 .

The holders are further entitled to have the Company redeem each share of 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 stockholders at a rate of forty-five (45) votes for each share of Series A Preferred Stock held.

The Company’s Series X Preferred Stock is not entitled to receive any dividends or other distributions of any kind, has voting rights to cast 1,000 votes per share, and is required to vote together with the outstanding shares of common stock and Series A Preferred Stock, as a single class, exclusively with respect to any proposal to increase the number of shares of common stock that the Company is authorized to issue, together with any ancillary, administrative or related matters necessary or advisable in connection with the implementation of such increase.

The Series X Preferred Stock will be voted, without action by the holder, on any such proposal in the same proportion as the aggregate votes cast by holders of common stock and Series A Preferred Stock (excluding any shares of common stock and Series A Preferred Stock that are not voted “for” or “against” such proposal for any reason, including, without limitation, any abstentions or broker non-votes).

Upon completion of that vote, the Series X Preferred Stock will be redeemed for cash at the aggregate $ 1 par value.

As of September 30, 2024, a total of 1,000,000 Series X Preferred Stock was outstanding.

On October 25, 2024, the Company held a special meeting of stockholders at which its stockholders approved a proposal to amend the Company’s articles of incorporation to effectuate an increase in the number of shares of the Company’s common stock authorized for issuance from 300,000,000 shares to 600,000,000 shares.

Each outstanding share of the Company’s Series X Preferred Stock was redeemed for an aggregate of $ 1 following the announcement of the vote on the authorized stock increase.

See Note 19 - Subsequent Events.

Amendments to Articles of Incorporation

In March 2023, the Company's stockholders approved an amendment to the Company's articles of incorporation to increase the number of shares of common stock authorized for issuance from 100,000,000 shares to 300,000,000 shares.

On October 25, 2024, the Company’s stockholders approved another amendment to the Company’s articles of incorporation to increase the number of shares of common stock authorized for issuance to 600,000,000 .

At The Market Offering Agreement

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

Wainwright & Co., LLC (the “Agent”) 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, to or through the Agent.

On December 14, 2022, the Company entered into Amendment No.

1 to the Original ATM Agreement with the Agent (the “ATM Agreement Amendment” and, together with the Original ATM Agreement, the “ATM Agreement”).

Under the ATM Agreement, the Company may, but has no obligation to, issue and sell up to the lesser number of shares (the “Shares”) of the Company’s common stock that does not exceed (a) $ 500,000 of shares of common stock, exclusive of any amounts previously sold under the Original ATM Agreement, (b) the number of authorized but unissued shares of common stock (less the number of shares of common stock issuable upon exercise, conversion or exchange of any outstanding securities of the Company or otherwise reserved from the Company’s authorized capital stock), or (c) if applicable, the maximum number or dollar amount of shares of common stock that can be sold without causing the Company or the offering of the Shares to fail to satisfy the eligibility and transaction requirements for use of Form S-3, including General Instruction I.B.6 of Registration Statement on Form S-3, from time to time through the Agent, or to them, as sales agent and/or principal.

On January 5, 2024 , the Company entered into a new At The Market Offering Agreement (the “Original 2024 ATM Agreement”) with the Agent to create an at-the-market equity program under which the Company may, but has no obligation to, issue and sell up to the lesser number of shares of the Company’s common stock that does not exceed (a) $ 500,000 of shares of common stock, or (b) the number of authorized but unissued shares of common stock (less the number of shares of common stock issuable upon exercise, conversion or exchange of any outstanding securities of the Company or otherwise reserved from the Company’s authorized capital stock).

In connection with the Company’s entry into the 2024 ATM Agreement, the ATM Agreement was terminated.

From the inception of the Original 2024 ATM Agreement through March 31, 2024, the Company issued and sold 34,075,408 shares under the 2024 ATM Agreement for net proceeds of $ 487,500 .

On March 28, 2024, the Company entered into Amendment No.

1 to the At the Market Offering Agreement with the Agent (the “March 2024 ATM Amendment”).

Under the March 2024 ATM Amendment, the Company may, but has no obligation to, issue and sell up to the lesser number of shares of the Company’s common stock that does not exceed (a) $ 800,000 of shares of common stock, or (b) the number of authorized but unissued shares of common stock (less the number of shares of common stock issuable upon exercise, conversion or exchange of any outstanding securities of the Company or otherwise reserved from the Company’s authorized capital stock).

From the inception of the March 2024 ATM Amendment through September 30, 2024, the Company issued and sold 44,415,161 shares under the 2024 ATM Agreement for net proceeds of $ 593,200 .

As of September 30, 2024 , the Company had $ 191,605 of remaining capacity to issue shares under the March 2024 ATM Amendment.

The Company had issued all of the ATM’s remaining capacity through the date of these consolidated financial statements as noted in Note 19 - Subsequent Event.

The Company paid an average of 3 % in fees related to all gross proceeds received from the ATM agreements entered into since 2021, collectively, “the ATM offering facility”.

Common stock issuances for the year ended September 30, 2024

The Company issued 98,829,525 shares of common stock through its ATM offering facility, net of offering costs, resulting in net proceeds of $ 383,776 .

The Company issued 106,969,819 shares of common stock through its ATM offering facility, with gross proceeds of $ 1,253,697 and offering costs of $ 31,454 , resulting in net proceeds of $ 1,222,243 .

The Company issued 5,357,166 shares of common stock in relation to the settlement of restricted stock awards and withheld 1,763,415 shares of common stock of $ 22,555 for net settlement.

The Company issued 149,293 shares of common stock in connection with the exercise of stock options and warrants.

Cash received from such issuance was $ 752 .

Common stock issuances for the year ended September 30, 2023

The Company issued 98,829,525 shares of common stock through its ATM offering facility, with gross proceeds of $ 395,977 and offering costs of $ 12,202 , resulting in net proceeds of $ 383,776 .

The Company issued 4,483,669 shares of common stock in relation to the settlement of restricted stock awards and withheld 1,397,258 shares of common stock of $ 5,873 for net settlement.

The Company issued 1,590,175 shares of common stock valued at $ 4,802 as consideration in connection with business acquisitions.

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The Company issued 105,423 shares of common stock in relation to the exercise of stock options with proceeds received of $ 817 .

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

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

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

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

The Company issued 17,740,081 shares of common stock through its ATM offering facility, net of offering costs, for net proceeds of $ 125,048 .

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.

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

STOCK WARRANTS

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Balance, September 30, 2021

Warrants granted

Warrants expired

Warrants exercised

Balance, September 30, 2022

Warrants granted

Warrants expired

Warrants exercised

Balance, September 30, 2023

As of September 30, 2023, there are warrants exercisable to purchase 185,560 shares of common stock in the Company and there are no w arrants that are unvested.

Warrants expired

Warrants exercised

Balance, September 30, 2024

As of September 30, 2024, there were warrants exercisable to purchase 17,560 shares of common stock in the Company and there were no w arrants that were unvested.

All outstanding warrants contain provisions allowing a cashless exercise at their respective exercise prices.

As of September 30, 2023 , the outstanding warrants have a weighted average remaining term of 2.15 years and an intrinsic value of $ 2 .

During the years ended September 30, 2023 and 2022 , there were no exercise of warrants.

As of September 30, 2024 , 10,000 of the outstanding warrants had a remaining term of 3.9 years and an intrinsic value of $ 13 .

The remaining 17,560 of the outstanding warrants do not have expiration dates and have an intrinsic value of $ 43 .

During the fiscal year ended September 30, 2024 , there were 65,000 warrants exercised on a cash-less basis, with 42,777 net shares issued.

There were no warrants issued for fiscal years ended September 30, 2023 or 2022 .

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.

In March 2023, the stockholders approved an amendment to the Plan, as amended to date, to (i) increase the number of shares authorized for issuance thereunder from 3,500,000 shares of common stock to 11,512,000 shares and (ii) add an evergreen provision to, on April 1st and October 1st of each year, automatically increase the maximum number of shares of common stock available under the Plan to fifteen percent ( 15 % ) of the Company's outstanding shares of common stock, in each case as of the last day of the immediately preceding month.

On March 31, 2023, there were 96,950,555 outstanding shares of common stock, and accordingly on April 1, 2023, the total shares authorized for issuance under the Plan increased to 14,542,583 .

As of September 30, 2023 , there were 715,896 shares available and authorized for issuance under the Plan.

The Plan allows the Company to grant incentive stock options, non-qualified stock options, stock appreciation rights, common stock, units of common stock, restricted stock, performance shares and performance units.

Other than incentive stock options that are granted to participants who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations (a “Ten Percent Stockholder”), stock options are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option is granted.

The incentive stock options are limited to persons who are regular full-time employees of the Company or Ten Percent Stockholders at the date of the grant of the option.

Non-qualified stock options and the other types of awards issuable under the Plan may be granted to any person, including, but not limited to, employees, independent agents, consultants and attorneys, who the Company’s Compensation Committee believes have contributed, or will contribute, to the success of the Company.

The option vesting schedule for options granted is determined by the Compensation Committee at the time of the grant.

The Plan provides for accelerated vesting of unvested options if there is a change in control, as defined in the Plan.

The Company grant ed 24,482 and 89,445 n on-qualified options pursuant to the Plan during the years ended September 30, 2023 and 2022.

The Company recognized $ 24,142 and $ 31,466 for the years ended September 30, 2023 and September 30, 2022, respectively, in stock-based compensation.

The Company sponsors a stock-based incentive compensation plan known as the 2017 Incentive Plan, as amended, (the “Plan”), with an evergreen provision that allows for the increase of the maximum number of shares of common stock available under the Plan to fifteen percent ( 15 %) of the Company's outstanding shares of common stock.

As of September 30, 2024 , prior to giving any effect to the evergreen provision that allows for the increase of shares on October 1, 2024, there were 8,300,575 shares available and authorized for issuance under the Plan.

Although the Board is authorized to increase the number of shares in the Plan up to 15 % of the Company’s outstanding common shares, as of September 30, 2024 it has not authorized any increased in Plan shares since the Company filed its latest Registration Form on Form S-8 on December 8, 2023.

The Company grant ed 174 , 24,482 and 89,445 n on-qualified options pursuant to the Plan during the fiscal years ended September 30, 2024, 2023 and 2022, respectively.

The Company recognized $ 29,555 , $ 24,142 and $ 31,466 for the fiscal years ended September 30, 2024, 2023 and 2022, respectively, in stock-based compensation.

STOCK OPTIONS

The following is a summary of stock option activity during the year ended September 30, 2023 and 2022:

The following is a summary of stock option activity during the fiscal years ended September 30, 2024, 2023 and 2022:

Option Shares

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Balance, September 30, 2023

As of September 30, 2023 , there are options exercisable to purchase 1,065,882 shares of common stock in the Company and 904,576 unvested options outstanding that cannot be exercised until vesting conditions are met.

Options granted

Options expired

Options forfeited

Options exercised

Balance, September 30, 2024

As of September 30, 2024 , there were options exercisable to purchase 1,394,604 shares of common stock in the Company and 890,858 unvested options outstanding that cannot be exercised until vesting conditions are met.

As of September 30, 2024 , the outstanding options have a weighted average remaining term of 7.55 years and an aggregate intrinsic value of $ 2,453 .

Forfeitures of options are recognized as they occur.

Option activity for the year ended September 30, 2024

During the year ended September 30, 2024 , 106,516 stock options were exercised for net cash proceeds to the Company of $ 752 .

For the year ended September 30, 2024 , the Company also granted 611,823 options to purchase shares of common stock to employees with a total fair value of $ 8,030 .

Option activity for the year ended September 30, 2023

During the year ended September 30, 2023 , no stock options were exercised.

For the year ended September 30, 2023 , the Company also granted 789,750 options with a total fair value of $ 4,513 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, 2023:

Fair value assumptions Options:

September 30, 2023

Risk free interest rate

2.65 % - 4.44 %

Expected term (years)

Expected volatility

157.1 % - 194.9 %

Expected dividends

As of September 30, 2023 , the Company expects to recognize $ 6,923 of stock-based compensation for the non-vested outstanding options over a weighted-average period of 2.17 years.

For the year ended September 30, 2023 , the Company also granted 789,750 options to purchase shares of common stock to employees with a total fair value of $ 4,513 .

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 $ 817 .

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 $ 817 .

For the year ended September 30, 2022 , the Company also granted to employees 215,750 options with a total fair value of $ 3,121 to purchase shares of common stock.

The Black-Scholes model utilized the following inputs to value the options granted during year ended September 30, 2022:

Fair value for stock options is determined using the Black-Scholes option model.

The Black-Scholes model utilized the following inputs to value the options granted during years ended September 30, 2024, 2023 and 2022:

For the year ended September 30,

Fair value assumptions Options:

September 30, 2022

Risk free interest rate

3.46 % - 4.82 %

2.65 % - 4.44 %

1.04 % - 3.65 %

Expected term (years)

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122.1 % - 176.0 %

157.1 % - 194.9 %

187.2 % - 533.0 %

Expected dividends

As of September 30, 2024 , the Company expects to recognize $ 8,503 of stock-based compensation for the non-vested outstanding options over a weighted-average period of 2.39 years.

RESTRICTED STOCK UNITS

The Company grants restricted stock units ("RSU"s) that contain either a) service conditions, b) performance conditions, or c) market performance conditions.

RSUs containing service conditions vest monthly or annually.

RSUs containing performance conditions generally vest over 1 year, and the number of shares earned depends on the achievement of predetermined Company metrics.

The Company grants RSUs that contain either a) service conditions, b) performance conditions, or c) market performance conditions.

RSUs containing service conditions vest monthly, quarterly 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 and may also include a service condition.

RSUs 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 recognized 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.

The Company recognizes the expense equal to the total fair value of the RSUs on the grant date.

The time-based RSUs granted were valued equal to the stock price on the grant date and the value of market-based and performance based RSUs were valued utilizing the Monte-Carlo valuation model.

The expense is recognized ratably over the requisite service period and forfeitures are recognized as they occur.

The following table summarizes the activity for all RSUs during the fiscal years ended September 30, 2024, 2023 and 2022 :

Intrinsic Value

Outstanding at October 1, 2021

Outstanding at September 30, 2022

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Outstanding at September 30, 2024

During the year ended September 30, 2023 , the Company granted 3,880,552 RSUs, which consisted of 360,552 time-based RSUs, 60,000 performance-based RSUs (of which 40,000 market-based awards were exchanged and reflected in the table above as cancelled).

During the year ended September 30, 2024 , the Company granted 1,493,556 RSUs to employees, all of which were time-based RSUs.

During the year ended September 30, 2023 , the Company granted 3,880,552 RSUs, which consisted of 360,552 time-based RSUs and 60,000 performance-based RSUs (of which 40,000 market-based awards were exchanged and reflected in the table above as cancelled).

Additionally, on September 29, 2023, the Compensation Committee granted 3,460,000 market-based restricted stock units to senior leadership of the Company.

The market-based awards vest 33% each tranche based upon the Company's stock price reaching 200%, 300% and 400% of the stock price on the date of grant.

Each tranche will vest upon the target stock price being met for at least 10 of 20 consecutive trading days and the awards are not dependent on a defined service period.

The total fair value of the award is approximately $ 13,160 and is amortized over a weighted average period of less than 1 year.

During the year ended September 30, 2022 , the Company granted 7,306,250 share of restricted stock awards.

Certain of the awards were issued in the first quarter of fiscal year 2022, and comprised of 120,000 service condition based awards, 146,250 that were performance condition-based awards, 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, were given a derived service period of 5 years.

Each tranche vested upon the target stock price being met for at least 10 of 20 consecutive trading days and the awards were not dependent on a defined service period.

The total fair value of the award was approximately $ 13,160 and all the market-based awards were vested, expensed and issued through March 2024.

During the year ended September 30, 2022, the Company granted 7,306,250 restricted stock awards.

Certain of the awards were issued in the first quarter of fiscal year 2022 comprised of 120,000 service condition based awards, 146,250 that were performance condition-based awards, and 910,000 that were market condition-based awards.

The market condition based RSUs consisted of 60,000 units that were perpetual in nature, and therefore, were given a derived service period of 5 years.

The remaining 810,000 RSUs had a stated service period of 1 year.

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(1) granted immediate vesting of the 810,000 market based awards;

(2) modified the market condition based 60,000 units that were perpetual in nature, and 10,000 unvested service condition RSUs, and were replaced with

(2) modified the market condition based 60,000 units that were perpetual in nature, and 10,000 unvested service condition RSUs, which were replaced with

(a) 120,000 service condition-based RSUs that vest over a 3-year period, and

(b) 120,000 performance-based RSUs, of which $ 111,429 vested in fiscal year 2023.

The fair value of the market based RSUs were determined using the Monte Carlo simulation and is in the following range:

$ 11.03 - $ 17.89 per unit.

The inputs of market-based RSUs for each of the fiscal years are as follows:

The fair value of the market based RSUs were determined using the Monte Carlo simulation and the inputs of market-based RSUs for each of the fiscal years in which market-based RSUs were issued were as follows:

Fair value assumptions - Market-based RSUs granted:

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20.00 % - 21.00 %

As of September 30, 2023 , the Company had approximately $ 22,300 unrecognized compensation cost related to restricted stock unit awards that will be recognized over a weighted average period of 1.6 years.

The Company recognized stock-based compensation expenses related to restricted stock units, of $ 17,720 and $ 23,661 for fiscal years ended 2023 and 2022 .

RELATED PARTY TRANSACTIONS

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

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

Blue Chip was 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 year ended September 30, 2022 , $ 5 was paid to Blue Chip for rent.

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

As of September 30, 2024 , the Company had approximately $ 12,412 in unrecognized compensation cost related to restricted stock unit awards that will be recognized over a weighted average period of 2.22 years.

The Company recognized stock-based compensation expenses related to restricted stock units, of $ 23,992 , $ 17,720 and $ 23,661 for the fiscal years ended 2024, 2023 and 2022 , respectively.

MAJOR CUSTOMERS AND VENDORS

The Company had one mining pool operator (Foundry Digital) in fiscal years ended September 30, 2023 and 2022.

The Company had one mining pool operator (Foundry Digital) during the fiscal years ended September 30, 2024, 2023 and 2022.

The Company had the following significant suppliers of mining equipment, with the percentage based on purchase amounts.

September 30, 2023

September 30, 2022

For the Year Ended September 30,

Bitmain Technologies

Cryptech Solutions

Bitmain Technologies Ltd.

COMMITMENTS AND CONTINGENCIES

Future hosting agreements

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 the Company's mining equipment to be placed at Lancium facilities.

Further, Lancium committed to provide 200 megawatts in support of the Company's mining equipment.

In addition, for a period of two and a half years following the operations commencement date, the Company 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, the Company has not deployed any miners pursuant to the co-location mining services at Lancium’s facility in Texas.

Lancium has informed the Company that it is experiencing significant delays due to the tightening of capital in the current market climate.

The Company does not have any expected timeline on the readiness of these facilities for the foreseeable future.

If Lancium’s situation improves in a timeline acceptable to the Company, it would anticipate utilizing Lancium as intended but there can be no assurance that Lancium's situation or market conditions will improve.

Purchase of modular immersion data centers

The Company entered into a $ 165,000 contract subject to certain discounts in June 2024 for the purchase and on-site construction and installation of modular immersion data centers.

The contract includes two phases for which only phase 1 is a firm commitment to the Company in the amount of $ 66,000 (before taxes and discounts), for which $ 30,000 of phase 1 was paid in July 2024 and is included in Deposits on miners and mining equipment in the Consolidated Balance Sheet as of September 30, 2024.

The remainder is expected to be paid before the end of the first quarter in the 2025 fiscal year.

In August 2024, the Company elected to undertake phase 2 for $99,000 (before taxes and discounts), an advanced payments of approximately 50 % are due in November 2024 and the remainder is expected to be paid in installments between December 2024 through April 2024.

Upon timely payment of the first installments due for both phase 1 and phase 2, discounts of $ 3,000 and $ 4,500 , respectively, are applied to the obligation.

Purchase of bitcoin miners

The Company had $ 115,299 in unrecorded open purchase commitments for miners or mining equipment as of September 30, 2024 .

These commitments pertain to the purchase transactions with Bitmain Technologies Delaware Limited ("Bitmain Technologies") signed in April 2024 and August 2024 for the purchase of 100,000 S21 Pro bitcoin mining machines for a total purchase price of $ 374,400 and 26,000 S21 XP Immersion bitcoin mining machines for a total purchase price of $ 167,700 .

The Company had made $ 376,883 in combined payments in relation to these miners.

As of September 30, 2024, the Company had $ 49,918 in Accounts payable in relation to these agreements on the Consolidated Balance Sheets.

Commitments under open construction projects

The Company has open commitments relating to the construction and development of new mining locations and operational facilities of $ 15,261 , which includes $ 2,888 for the construction of the data center in Clinton, MS.

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, 2023:

The contractual future payment related to the Company’s leases and loans payable are disclosed in Note 11 - Leases and Note 12 - Loans, respectively, to the Consolidated Financial Statements.

T he following table sets forth certain information concerning the Company’s unconditional obligations to make contractual future payments towards our agreements as of September 30, 2024 (these amounts are not recorded in the Consolidated Balance Sheets):

($ in thousands)

4 unchanged sentences

Fiscal Year 2029

Recorded contractual obligations:

Operating lease obligations

Finance lease obligations

Contractual obligations:

Modular immersion data centers (net discounts)

Miners and mining equipment contracts

Construction in progress

Contingent consideration

Mawson Property Acquisition

In connection with the Mawson Transaction (as discussed in Note 4), the Company and seller agreed to up to $ 2,000 of seller financing if the Company received, by April 8, 2023, written confirmation reasonably acceptable to it that it will be able to utilize at least 150 MW of additional power at the site.

Such written confirmation was not

received by April 8, 2023.

See Note 4 for additional description of the resolution of this contingency.

As of September 30, 2023, the Company has $ 0 recorded as contingent liability associated with the Mawson Transaction.

Tennessee Real Estate (Note 5)

Obligation to return of power deposits

Upon receiving power bills pertaining to the month in which each MIPA (Note 5 - Acquisitions) closed, the Company has an obligation to pay the TN MIPA Seller an amount equal to the deposits the TN MIPA Seller had made to power providers for each location less the portion of power bill covering the power utilized by TN MIPA Seller and any other remedies identified within 10 days.

In aggregate, the power providers held $ 6,012 in power deposits from the TN MIPA Seller.

State Tax Incentives

When the Company enters new jurisdictions, it seeks incentives on taxes including;

sales and use taxes, property taxes, employment taxes and income taxes.

The Company has been previously successful obtaining such incentives and is currently seeking incentives, which if the Company is unsuccessful may result in a liability of approximately $ 6,300 .

Legal contingencies

In addition to the legal matters disclosed below, the Company may from time to time be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

The outcome of litigation is inherently uncertain.

If one or more legal matters were resolved against the Company in a reporting period for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected.

Hasthantra v.

CleanSpark, Inc.

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 at the time, Lori Love (“Love”) (such action, the “Class Action”).

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 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.

On January 20, 2021, Scott Bishins (“Bishins”), individually, and on behalf of all others similarly situated (together, the “Class”), filed a class action complaint in the United States District Court for the Southern District of New York against the Company and certain of its officers, including the Company’s CEO and the Executive Chair (such action, the “Class Action”).

On December 2, 2021, the court appointed Bishins and Darshan Hasthantra as lead plaintiffs, and on February 1, 2024, the Court entered a voluntary dismissal on behalf of Bishins.

The plaintiffs filed an Amended Complaint on February 28, 2022 alleging that, between December 10, 2020 and August 16, 2021, defendants made material misstatements and omissions in relation to disclosures surrounding the Company’s acquisition of ATL and its anticipated expansion of bitcoin mining operations.

The plaintiffs seek certification of the Class, an award of compensatory damages and an award of reasonable costs and expenses incurred by the Class in the litigation.

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

The Company filed a Motion to Dismiss in April 2022 which, after briefing, was denied in January 2023.

On February 15, 2023, the Company filed its answer responding to Plaintiffs’

claims and asserting affirmative defenses.

The case is moving forward in discovery.

The Company believes that the claims raised in the Amended Class Complaint are without merit.

The Company intends to both defend itself vigorously against these claims and to vigorously prosecute any counterclaims.

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 claims are without merit, 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.

Shareholder Derivative Actions

Discovery is currently proceeding.

The Company believes that the claims asserted are without merit and intends to defend against them vigorously.

At this time, the Company is unable to estimate potential losses, if any, that may arise.

Consolidated Ciceri Derivative Actions

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 certain of the Company’s officers and directors (collectively referred to as “Ciceri Derivative Defendants”) ( Ciceri v.

Bradford, Schultz, Love, Beynon, McNeill and Wood ).

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 “Consolidated Ciceri Derivative Action”).

The Consolidated Ciceri Derivative Action alleges that Ciceri Derivative Defendants:

(1) made materially false and misleading public statements about the Company’s business and prospects;

(2) did not maintain adequate internal controls;

and (3) did not disclose several related party transactions benefitting insiders, questionable uses of corporate assets, and excessive compensation.

The claims asserted against all Ciceri Derivative

Defendants include breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.

On or about November 2, 2021, plaintiffs in the Consolidated Ciceri Derivative Action withdrew their claim for contribution under Sections 10(b) and 21D of the Securities and Exchange Act, which had been asserted against only Bradford and Love.

The Consolidated Derivative Action seeks declaratory relief, monetary damages, and imposition of adequate corporate governance and internal controls.

Plaintiffs were given the opportunity to submit an Amended Complaint by November 25, 2021, but elected not to.

In January 2022, the Parties agreed to stay the entirety of the case pending the outcome of the Motion to Dismiss in the Class Action.

On January 5, 2023, the Class Action Motion to Dismiss was denied, thereby terminating the stay in this matter.

On April 20, 2023, the Ciceri Derivative Defendants filed a Motion to Dismiss the Consolidated Derivative Action.

Plaintiffs’

filed their opposition on June 12, 2023 and Defendants’

filed their reply in further support of their Motion to Dismiss on July 13, 2023.

In June 2023, the Company’s Board of Directors appointed a special litigation committee (the “SLC”), comprised of independent Directors and represented by independent counsel.

The SLC was established to investigate, evaluate and prosecute as appropriate any and all claims asserted in the Consolidated Ciceri Derivative Action as well as the Consolidated Smith Derivative Actions (defined below).

In October 2023, the SLC moved to intervene and stay the Consolidated Ciceri Derivative Action.

The Ciceri Plaintiffs did not oppose that motion and, accordingly, on October 23, 2023, the Court granted it, staying the case until July 23, 2024, pending the completion of the SLC’s investigation.

The Ciceri Defendants’

Motion to Dismiss was denied as moot, but may be re-filed if and when the stay is lifted.

The Company believes that the claims raised in that case are without merit.

The Company intends to both defend itself vigorously against these claims and to vigorously prosecute any counterclaims.

The Consolidated Ciceri Derivative Action 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 claims are without merit, no assurance can be given as to the outcome of the Consolidated 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.

On May 26, 2021, Andrea Ciceri (“Ciceri”) filed a shareholder derivative action in the United States District Court for the District of Nevada against officers and directors of the Company, including the Company’s Executive Chair, CEO, former CFO, and certain other members of the Board of Directors.

This and other related filings were consolidated by the Court on June 29, 2021 (the “Consolidated Ciceri Action”).

The claims asserted in the Consolidated Ciceri Action include breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets.

The plaintiffs seek declaratory relief, monetary damages and the imposition of additional corporate governance and internal controls.

On June 27, 2023, the Company’s Board of Directors appointed a Special Litigation Committee (“SLC”) comprised of independent directors to intervene in the case, investigate, evaluate and prosecute as appropriate any and all claims asserted in the Consolidated Ciceri Action as well as the Consolidated Smith Action (as defined below).

On October 23, 2023, the Consolidated Ciceri Action was stayed to allow the SLC to intervene, investigate and determine an appropriate course of action for the claims alleged, which stay was later extended up to November 30, 2024.

On October 16, 2024, the SLC filed a motion to defer to the SLC’s determination that the claims in the Consolidated Ciceri Action should be dismissed.

On October 28, 2024, the court ordered the parties’ stipulation wherein the parties agreed to submit a status update to the court by November 30, 2024 and meet and confer regarding a proposed briefing schedule.

The Company believes that the claims raised in the Consolidated Ciceri Action are without merit and intends to defend itself vigorously.

At this time, the Company is unable to estimate potential losses, if any, related to the Consolidated Ciceri Action.

Consolidated Smith Derivative Actions

On February 21, 2023, Brandon Smith (“Smith”), derivatively on behalf of CleanSpark, Inc., filed a verified shareholder derivative action in the Eighth Judicial District Court of the State of Nevada in and for Clark County against certain of the Company’s officers and directors ( Smith v.

Bradford, Love, Schultz, Beynon, McNeill and Wood).

On February 24, 2023, Plaintiff Nicholas Iraci (“Iraci”), derivatively on behalf of CleanSpark, Inc., filed a verified shareholder derivative action (the “Iraci Derivative Action”) in the Eighth Judicial District Court of the State of Nevada in and for Clark County against certain of the Company’s officers and directors ( Iraci v.

Bradford, Love, Schultz, Beynon, McNeill and Wood) .

On March 1, 2023, Plaintiff Eric Atanasoff (“Atanasoff”), derivatively on behalf of CleanSpark, Inc., filed a verified shareholder derivative action (the “Atanasoff Derivative Action”) in the Eighth Judicial District Court of the State of Nevada in and for Clark County against certain of the Company’s Officers and Directors ( Atanasoff v.

Bradford, Schultz, Beynon, McNeill, and Wood ).

On March 8, 2023, Plaintiff Travis France (“France”), derivatively on behalf of CleanSpark, Inc., filed a verified shareholder derivative action (the “France Derivative Action”) in the Eighth Judicial District Court of the State of Nevada in and for Clark County against certain of the Company’s officers and directors ( France v.

Bradford, Love, Tadayon, Schultz, Beynon, McNeill and Wood ).

The Smith Derivative Action, Iraci Derivative Action, Atanasoff Derivative Action and France Derivative Action each contain substantially similar allegations, namely that the defendants:

(1) made materially false and misleading public statements about the Company’s business and prospects;

(2) were misleading in their various public announcements related to the timeline for expanding ATL’s mining capacity;

(3) 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;

(4) did not maintain adequate internal controls;

and (5) did not disclose several related party transactions benefitting insiders and excessive compensation.

Between February and June 2023, the respective parties to the Smith Derivative Action, Iraci Derivative Action, Atanasoff Derivative Action and France Derivative Action litigated federal court versus state court jurisdictional

issues and, ultimately, each of the aforementioned derivative actions were consolidated into the Smith Derivative Action in the Eighth Judicial District Court of Nevada (the “Consolidated Smith Derivative Actions”).

The claims asserted in the operative Consolidated Smith Derivative Actions include breach of fiduciary duties, unjust enrichment and corporate waste.

The damages sought include monetary damages, restitution, declaratory relief, litigation costs, and imposition of adequate corporate governance and internal controls.

In September 2023, the Consolidated Smith Derivative Action filed a Motion to Dismiss the case based on the fact that the Plaintiffs lack standing, do not successfully rebut the business judgment rule, and fail to allege certain elements of the claims they assert.

In June 2023, the Company’s Board of Directors appointed the SLC, comprised of independent Directors and represented by independent counsel.

The SLC was established to investigate, evaluate and prosecute as appropriate any and all claims asserted in the Consolidated Ciceri Derivative Action (defined above) as well as the Consolidated Smith Derivative Actions.

In October 2023, the SLC moved to intervene and stay the Consolidated Smith Derivative Action, which the Plaintiffs opposed.

On November 6, 2023, the Court held a hearing on the SLC’s motion during which it granted the SLC’s motion to intervene and stayed the Consolidated Smith Derivative Action for five months.

The Court has not yet entered an order memorializing its decision.

The Company believes that the claims raised in Consolidated Smith Derivative Actions are without merit.

The Company intends to both defend itself vigorously against these claims and to vigorously prosecute any counterclaims.

The Consolidated Smith Derivative Actions 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 claims are without merit, no assurance can be given as to the outcome of the Consolidated Smith Derivative Actions, 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 $ 419 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 per month in electricity costs.

SWS is seeking an award of compensatory damages totaling over $ 500 .

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 $ 2 in sanctions.

The parties are currently engaged in the discovery process and a trial date is scheduled for March 2024.

Darfon America Corp.

CleanSpark, Inc.

On August 18, 2022, Darfon America Corp.

("Darfon") filed a breach of contract suit in connection with a purchase contract for batteries.

Plaintiff contends that the Company ordered batteries and did not pay for them.

Plaintiff was seeking $ 5,400 in damages and additional costs and fees.

The Company contends, among other things, that the batteries did not meet the necessary specifications.

On January 27, 2023, the Superior Court of the State of California in the County of San Diego orally granted Plaintiff’s Motion for a pre-judgment Writ of Attachment.

While no written order has been received as of the date of this filing, this Writ of Attachment will likely provide Plaintiff with right to seek a lien on any Company assets located in California.

The Company had recorded a legal reserve of $ 1,100 in December 2022 in connection with this matter, which had represented the Plaintiff’s unmitigated damages less what the Company has already paid.

In April 2023, the Company settled the suit with Darfon for a total amount of $ 3,800 .

The Company recorded the additional settlement expense of $ 2,700 in March 2023, which is included in professional fees on the consolidated statement of operations and comprehensive loss.

The case was dismissed with prejudice effective July 27, 2023.

The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business and that have not been fully resolved.

The outcome of litigation is inherently uncertain.

In the opinion of management,

there was not at least a reasonable possibility the Company may have incurred a material loss, or a material loss greater than a recorded accrual, concerning loss contingencies for asserted legal and other claims.

Starting with a February 21, 2023 filing by Brandon Smith, and continuing through March 8, 2023, four shareholder derivative actions were filed in the Eighth Judicial District Court of the State of Nevada in Clark County against officers and directors of the Company, including the Company’s Executive Chair, CEO, former CFO, and certain other members of the Board of Directors.

Each of these actions was consolidated in the Eighth Judicial District Court of Nevada in Clark County (the “Consolidated Smith Action”).

The claims asserted in the Consolidated Smith Action include breach of fiduciary duties, unjust enrichment and corporate waste.

The plaintiffs seek monetary damages, restitution, declaratory relief, litigation costs and the imposition of adequate corporate governance and internal controls.

On December 1, 2023, the Court granted the SLC’s motion to intervene and stay the case pending the SLC’s investigation, staying the case through April 6, 2024, which was later extended to November 30, 2024.

On October 16, 2024, the SLC filed a motion to defer to the SLC’s determination that the claims in the Consolidated Smith Action should be dismissed.

On October 31, 2024, the court ordered the parties’ stipulation, wherein the parties agreed to submit a status update to the court by November 30, 2024, and meet and confer regarding a proposed briefing schedule.

The Company believes that the claims raised in the Consolidated Smith Action are without merit and intends to defend itself vigorously against them.

At this time, the Company is unable to estimate potential losses, if any, related to the Consolidated Smith Action.

SUBSEQUENT EVENTS

We have evaluated events occurring between the end of the most recent fiscal year and the date the financial statements were issued through December 1, 2023.

There were no material subsequent events except as disclosed below:

At-the-Market Equity Issuances

From October 1, 2023 through December 1, 2023, the Company issued 24,475,832 shares under its ATM offering facility resulting in net proceeds of $ 99,336 .

Issuance of Shares under Restricted Stock Grants

In October 2023, the Company settled and issued 88,888 shares to members of its Board of Directors in connection with time-based RSUs that vested on September 30, 2023.

Purchase Agreement

On October 6, 2023, the Company executed an agreement to purchase 4.4 exahashes per second (EH/s) of the recently announced Antminer S21 bitcoin mining machines, which have an efficiency rating of 17.5 joules per terahash (J/TH).

The delivery of the mining machines are set to begin in January 2024.

The agreement allows for 20% of the purchase price to be paid to the seller 365 days after the date that machines are ready-to-ship.

The purchase was made pursuant to the terms of a Future Sales and Purchase Agreement entered into by and between the Company and BITMAIN TECHNOLOGIES DELAWARE LIMITED on October 6, 2023.

The Company plans to use the mining machines to expand its digital currency mining activities through its wholly-owned subsidiaries.

From October 1, 2024 through December 3, 2024 , the Company issued 16,619,631 shares under its ATM offering facility resulting in gross proceeds of $ 191,603 and issuance costs of $ 4,795 .

GRIID Acquisition

On October 30, 2024, the Company completed its acquisition of GRIID pursuant to the GRIID Agreement;

see Note 5 - Acquisitions.

Long-Term Incentive Plan and Awards

On October 1, 2024, the Company’s Compensation Committee of Board of Directors (the “Committee”) approved the establishment of the Company’s Long-Term Incentive Program (the “LTIP”) under the Plan and the 2025 LTIP Awards which permits the issuance of RSUs to executive officers and other executives pursuant to the Plan.

Awards granted pursuant to the 2025 LTIP are in addition to cash annual bonus awards and annual time-based RSU awards, if any, and are a key element of the Company’s compensation program.

On October 2, 2024, the Committee granted 2025 LTIP Awards to the executive officers and other executives.

The value of these awards is based on the Company’s achievement of pre-determined performance metrics, including total growth, uptime, efficiency, and stockholder return.

The Company’s performance on these metrics will be evaluated relative to its peer group, expressed as a percentile.

This relative performance determines the percentage of granted RSUs that recipients will earn, ranging from 0 % to 200 % of the awarded amount.

If the Company achieves 100 % of the target performance, the total RSUs earned would be approximately 4,967,000 .

Increase in Authorized Shares of Common Stock

On October 25, 2024, the Company’s stockholders approved an amendment to the Company’s articles of incorporation, which amendment increased the number of shares of common stock authorized for issuance from 300,000,000 shares to 600,000,000 shares.

The 1,000,000 outstanding shares of the Company’s Series X Preferred Stock was redeemed for an aggregate of $ 1 following the announcement of the vote on the authorized stock increase.

Sale of Miners

In Octob er and November 2024, the Company entered into sale and purchase agreements with third party companies and completed sales of miners for approximately $ 29,000 .

Tennessee Acquisitions

On October 11, 2024, t he Company paid the TN MIPA Seller $ 5,605 to close on the acquisition of the final two sites out of the seven sites purchased.

On October 21, 2024, the Company closed on the acquisition of the four real estate properties in Tennessee for approximately $ 2,500 .

On October 29, 2024, the Company paid the TN MIPA Seller $ 5,484 in exchange for utility deposits with power providers of all seven Tennessee locations and such deposits are now held by the Company ;

see Note 5 - Acquisitions.

Coinmint Colocation Agreement Non-renewal

On October 1, 2024, the Company and Coinmint, LLC mutually agreed to the non-renewal of the Colocation Mining Services Agreement dated July 1, 2021, as amended on March 17, 2022 and May 25, 2023 (the "Agreement").

Under the Agreement, Coinmint, LLC provided colocation services for the Company's bitcoin mining equipment at Coinmint, LLC's facility in Massena, New York.

The Agreement is scheduled to expire on January 1, 2025.

CLEANSPARK, INC.

Schedule II - Valuation and Qualifying Accounts

(in thousands)

Balance at Beginning of Period

Additions Charged to Costs and Expenses

Balance at End of Period

Year ended September 30, 2024

Deferred tax valuation allowance

Year ended September 30, 2023

Deferred tax valuation allowance

Year ended September 30, 2022

Deferred tax valuation allowance

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