CLEANSPARK, INC. 10-Q

Item 4. Controls and Procedures Disclosure Controls and Procedures We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2020. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2020, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified material weaknesses in the design of internal control related to the following areas: (i) Lack of documentation around the components of internal control and inadequate risk assessment process over the Company’s internal controls; and (ii) Inadequate controls over information technology. Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting Management has implemented and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) we intend to adopt a different financial reporting software that has increased controls built into the system functionality by the end of the current fiscal year, in the interim we plan to implement additional controls to mitigate existing controls risks inherent to our existing accounting software; (ii) additional controls to improve risk assessment procedures to ensure all risks have been addressed. We believe that these actions will remediate the material weaknesses, once management has performed its assessment of our internal controls over financial reporting including the remedial measures described above. The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed prior to the end of fiscal 2020. Changes in Internal Control over Financial Reporting Other than continuing with the remediation actions described above related to the material weakness in our internal controls, there has been no change in our internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 11 Table of Contents PART II – OTHER INFORMATION Item 1. Legal Proceedings We are not a party to any pending legal proceeding which would have a material impact to the Company. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.