What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-12-17 compared with 2019-12-16 · 1506 added, 1610 removed, 379 unchanged (89% of the section changed)

4 unchanged sentences

Audited Consolidated Financial Statements:

Reports of Independent Registered Public Accounting

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of September 30, 2020 and 2019;

Consolidated Statements of Operations for the years ended September 30, 2020 and 2019;

Consolidated Statements of Stockholders’

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows for the years ended September 30, 2020 and 2019;

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Shareholders and Board of Directors of

CleanSpark, Inc.

Bountiful, Utah

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, 2019 and

2018, and the related consolidated statements of operations, stockholders’

equity, and cash flows for each of the two years

in the period ended September 30, 2019, 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, 2019 and 2018, and the results of their operations and their cash flows for each of the two years in the

period ended September 30, 2019, 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, 2019, based on criteria established in Internal Control —

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

report dated December 16, 2019 expressed an adverse opinion.

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 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

the Shareholders and Board of Directors of

on the Financial Statements

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

and its subsidiaries (collectively, the “Company”)

as of September 30, 2020 and 2019, and the related consolidated statements of operations, stockholders’ equity, and cash

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

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

30, 2020 and 2019, and the results of their operations and their cash flows for the years then ended, in conformity with accounting

principles generally accepted in the United States of America.

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.

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

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

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

we express no such opinion.

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.

MaloneBailey, LLP

www.malonebailey.com

We have served as the Company's auditor since

Houston, Texas

December 16, 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Shareholders and Board of Directors of

have served as the Company's auditor since 2018.

CLEANSPARK, INC.

Bountiful, Utah

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, 2019 based on

criteria established in Internal Control —

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations

of the Treadway Commission (“COSO”).

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

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

reporting as of September 30, 2019, based on criteria established in Internal Control —

Integrated Framework (2013)

issued by COSO.

We do not express an opinion or any other form

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

We also have audited, in accordance with the

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

of the Company as of September 30, 2019 and 2018 and for the years then ended and our report dated December 16, 2019 expressed

an unqualified opinion on those financial statements.

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.

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

Company in accordance with the U.S.

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

Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

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

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

Our audit of internal control over

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

material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that

our audit provides a reasonable basis for our opinion.

A material weakness is 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 timely basis.

The following

material weaknesses have been identified and included in management’s assessment:

(i) Lack of documentation around the components

of internal control and inadequate risk assessment over the Company’s internal controls;

(ii) Inadequate design of monitoring

controls resulting in insufficient levels of review over the financial reporting and business processes;

(iii) Inadequate segregation

(iv) Inadequate controls over information technology and (v) Insufficient board oversight and review.

These material

weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated

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

Definition and Limitations of Internal Control over Financial

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

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

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

and (3) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s

assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal

control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness

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

of compliance with the policies or procedures may deteriorate.

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

December 16, 2019

BALANCE SHEETS

Current assets

expense and other current assets

CONSOLIDATED BALANCE SHEETS

September 30, 2020

September 30, 2019

Current assets

Accounts receivable, net

Contract assets

Prepaid expense and other current assets

Derivative investment asset

Investment in equity securities

Investment in debt security, AFS, at fair value

Total current assets

Fixed assets, net

Capitalized software,

Intangible assets,

LIABILITIES AND STOCKHOLDERS'

Current liabilities

payable and accrued liabilities

notes, net of unamortized discounts

to related parties

from related parties

payable, net of unamortized discounts

Operating lease right of use asset

Capitalized software, net

Intangible assets, net

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable and accrued liabilities

Contract liabilities

Lease liability

Due to related parties

Contingent consideration

Loans payable, net of unamortized discounts

Total current liabilities

Long- term liabilities

notes, net of unamortized discounts

Convertible notes, net of unamortized discounts

Loans payable

Total liabilities

Stockholders' equity

Common stock;

20,000,000 shares authorized;

4,679,018 and 3,611,645 shares issued and outstanding as of September 30, 2019 and September

30, 2018, respectively

35,000,000 shares

17,390,979 and 4,679,018

shares issued and outstanding as of September 30, 2020 and September 30, 2019, respectively

Preferred stock;

10,000,000 shares authorized;

2,000,000 authorized;

1,000,000 and 1,000,000 issued and outstanding as of September 30, 2019 and September

30, 2018, respectively

10,000,000 shares

Series A shares;

2,000,000 authorized;

0 and 0 issued and outstanding as of September 30, 2019 and September 30, 2018,

paid-in capital

earnings (deficit)

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

and outstanding as of September 30, 2020 and September 30, 2019, respectively

Additional paid-in capital

Accumulated deficit

( 116,402,606 )

stockholders' equity

liabilities and stockholders' equity

Total stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral

part of these financial statements.

STATEMENTS OF OPERATIONS

For the Years Ended

part of these consolidated financial statements.

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

September 30, 2020

1 unchanged sentence

Revenues, net

Sale of goods

Sale of goods revenues $

Service, software and related revenues

1 unchanged sentence

Cost of revenues

Cost of goods sold

Cost of services

Product sale revenues

Service, software and related revenues

Total cost of revenues

3 unchanged sentences

Product development

Research and development

General and administrative expenses

4 unchanged sentences

( 15,143,116 )

( 16,613,845 )

Other income (expense)

Loss on settlement of debt

Loss on derivative liability

Interest expense

Unrealized gain/(loss) on equity security

Unrealized gain on derivative security

Loss on disposal of assets

Interest expense (net)

( 10,449,946 )

( 9,483,662 )

Total other income (expense)

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( 9,503,087 )

( 23,346,143 )

$ ( 26,116,932 )

Loss per common share - basic and diluted $

Weighted average common shares outstanding - basic and diluted

The accompanying notes are

an integral part of these financial statements.

STATEMENTS OF STOCKHOLDERS EQUITY

Weighted average common shares outstanding - basic

The accompanying

notes are an integral part of these consolidated financial statements.

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

For the Year ended September 30, 2020

Paid-in Capital

Stockholders' Equity

Preferred Stock

Additional Paid-in Capital

Accumulated Deficit

Total Stockholders' Equity

Balance, September 30, 2019

$ 111,936,125

$ ( 93,056,463 )

Shares issued for services

Options and warrants issued for services

Shares issued upon exercise of warrants

Beneficial conversion feature and shares and warrants issued with convertible debt

Shares issued for direct investment

Shares issued for settlement of debt

Commitment shares returned and cancelled

Shares issued upon conversion of debt and accrued interest

Shares and warrants issued under asset purchase agreement

Rounding shares issued for stock split

Shares returned and cancelled

Options issued for business acquisition

Shares issued for business acquisition

Shares issued upon exercise of warrants

Shares issued under registered direct offering

( 23,346,143 )

Balance, September 30, 2020

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Preferred Stock

Paid-in Capital

Stockholders' Equity

Additional Paid-in Capital

Accumulated Deficit

Total Stockholders' Equity

Balance, September 30, 2018

3 unchanged sentences

Shares issued upon exercise of warrants

Commitment and returnable shares issued with debt

Beneficial conversion feature and shares and warrants issued with convertible debt

Shares issued for direct investment

Shares issued for settlement of debt

Fair value of tainted warrants reclassified to derivative liability

Commitment shares returned and cancelled

Shares issued upon conversion of debt and accrued interest

Shares and warrants issued under asset purchase agreement

( 26,116,932 )

Resolution of derivative liability

Shares issued to escrow as collateral

Shares issued as settlement of accounts payable

( 26,116,932 )

1 unchanged sentence

$ 111,936,125

The accompanying notes are an integral part of these

financial statements.

$ ( 93,056,463 )

The accompanying notes are an integral part

of these consolidated financial statements.

STATEMENTS OF CASH FLOWS

For the Years Ended

For the Year Ended

September 30, 2020

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Impairment expense

Commitment issued for debt financing

Unrealized gain on equity security

Amortization of operating lease right of use asset

Depreciation and amortization

Amortization of capitalized software

Loss on derivative liability

Loss on settlement of debt

Provision for bad debts

Gain on derivative asset

( 2,115,269 )

Amortization of debt discount

Shares issued as interest expense

Changes in assets and liabilities

(Increase) decrease in prepaid expenses and other current assets

Increase in contract assets

Shares issued as interest

Loss on asset disposal

Changes in operating assets and liabilities

Decrease (increase) in prepaid expenses and other current assets

( 1,082,769 )

Decrease (increase) in contract assets

(Increase) decrease in contract liabilities, net

(Increase) decrease in accounts receivable

Increase in accounts payable

Increase (decrease) in due to related parties

Increase in accounts receivable

( 1,001,830 )

Increase in accounts payable and accrued liabilities

Decrease in lease liability

Decrease in due to related parties

Net cash used in operating activities

( 6,642,734 )

( 5,697,989 )

Cash Flows from investing

1 unchanged sentence

Purchase of fixed assets

Cash consideration for acquisition of p2kLabs, net of cash acquired

( 1,141,990 )

Cash consideration for acquisition of GridFabric, net of cash acquired

Investment in capitalized software

Investment in debt and equity securities

Net cash used in investing activities

( 2,383,623 )

Cash Flows from Financing Activities

7 unchanged sentences

Proceeds from issuance of common stock

Net cash from financing activities

Net increase in Cash

Net cash provided by financing activities

Net increase (decrease) in Cash

( 4,712,655 )

Cash, beginning of period

4 unchanged sentences

Non-cash investing and financing transactions

Day one recognition of right of use asset and liability

Shares and options issued for business

Shares issued as collateral returned to treasury

Stock issued to settle promissory notes

Stock issued to settle accounts payable

Stock issued to promissory notes

Debt discount on convertible debt

2 unchanged sentences

Financing of prepaid insurance

Debt discount on promissory note

Recognition of derivative due to tainted equity environment

Resolution of derivative liability reclassified to additional paid in capital

Shares issued and held in escrow as collateral

Cashless exercise of warrants

Cashless exercise of options/warrants

Option expense capitalized as software development costs

The accompanying notes are an integral

part of these financial statements.

part of these consolidated financial statements.

CLEANSPARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

CleanSpark, Inc.

(“CleanSpark”,

“we”, “our”, the "Company") was incorporated in the state of Nevada on October 15, 1987 as

SmartData Corporation.

SmartData conducted a 504-public offering in the State of Nevada in December 1987 and began trading

publicly in January 1988.

Due to a series of unfortunate events, including the untimely death of the founding CEO, SmartData

discontinued active business operations in 1992.

On March 25, 2014, we began operations in the alternative

energy sector.

In December 2014, the Company changed its name

to Stratean Inc.

(“CleanSpark”,

“we”, “our”, the "Company") was incorporated in the state of Nevada on October 15, 1987 as SmartData

SmartData conducted a 504-public offering in the State of Nevada in December 1987 and began trading publicly in January

Due to a series of unfortunate events, including the untimely death of the founding CEO, SmartData discontinued active business

operations in 1992.

On March 25, 2014, we began operations

in the alternative energy sector.

In December 2014, the Company changed

its name to Stratean Inc.

through a short-form merger in order to better reflect the new business plan.

On July 1, 2016, the Company

entered into an Asset Purchase Agreement, as amended (the “Purchase Agreement”), with CleanSpark Holdings LLC, CleanSpark

LLC, CleanSpark Technologies LLC and Specialized Energy Solutions, Inc.

(together, the “Seller”).

On July 1, 2016, the Company entered

into an Asset Purchase Agreement, as amended (the “Purchase Agreement”), with CleanSpark Holdings LLC, CleanSpark LLC,

CleanSpark Technologies LLC and Specialized Energy Solutions, Inc.

(together, the “Seller”).

Pursuant to the Purchase

Agreement, the Company acquired CleanSpark, LLC and all the assets related to the Seller and its line of business and assumed $200,000

in liabilities.

In October 2016, the Company changed its name to

CleanSpark, Inc.

Agreement, the Company acquired CleanSpark, LLC and all the assets related to the Seller and its line of business.

In October 2016, the Company changed

its name to CleanSpark, Inc.

through a short-form merger in order to better reflect the brand identity.

On January 22, 2019, CleanSpark

entered into an Agreement with Pioneer Critical Power, Inc., whereby it acquired certain intellectual property assets and clients

As consideration the Company issued to its sole shareholder (i) 175,000 of the common stock of CleanSpark, (ii) a five-year

warrant to purchase 50,000 shares of CleanSpark common stock at an exercise price of $16.00 per share, and (iii) a five-year warrant

to purchase 50,000 shares of CleanSpark common stock at an exercise price of $20.00 per share.

As a result of the transaction Pioneer

Critical Power Inc.

On January 22, 2019, CleanSpark entered

into an Agreement with Pioneer Critical Power, Inc., whereby it acquired certain intellectual property assets and client lists.

As a result of the transaction Pioneer Critical Power Inc.

became a wholly owned subsidiary of CleanSpark Inc.

On February 1, 2019, Pioneer Critical Power, Inc.

CleanSpark Critical Power Systems, Inc.

On December 5, 2019,

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

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

of the Company’s common stock.

On February 1, 2019,

Pioneer Critical Power, Inc.

was renamed CleanSpark Critical Power Systems, Inc.

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

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

reverse stock split of the Company’s common stock.

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

Unless otherwise noted, impacted

amounts and share information in the consolidated financial statements and notes thereto as of and for the fiscal years ended September

30, 2019 and 2018, have been adjusted for the stock split as if such stock split occurred on the first day of the first period

Line of Business

Through the acquisition of CleanSpark, LLC, the

Company provides microgrid solutions to military, commercial and residential properties.

The solutions offered consist

of software products and services, microgrid design and engineering, project consulting services.

The work is performed under fixed

price bid contracts and negotiated price contracts.

The Company performed the majority of its work in California during the year

ended September 30, 2019.

Through CleanSpark

Critical Power Systems, Inc., the Company provides customer hardware solutions for distributed energy systems that serve military

and commercial residential properties.

The equipment is generally sold under negotiated price contracts.

SIGNIFICANT POLICIES

This summary of significant

accounting policies of CleanSpark Inc.

is presented to assist in understanding the Company’s consolidated financial statements.

The consolidated financial statements and notes are representations of the Company’s management, who

Unless otherwise

noted, impacted amounts and share information in the consolidated financial statements and notes thereto as of and for the fiscal

years ended September 30, 2020 and 2019, have been adjusted for the stock split as if such stock split occurred on the first day

of the first period presented.

On January 31, 2020, the Company entered into a Stock

Purchase Agreement with p2klabs, Inc (“p2k”), and its sole stockholder, (“Seller”), whereby the Company

purchased all of the issued and outstanding shares of p2k from the Seller.

As a result of the transaction, p2k, is now a wholly-owned

subsidiary of the Company.

(See note 5 for details.)

On August 31, 2020, the Company

entered into a Membership Interest Purchase Agreement with GridFabric, LLC, (“GridFabric”), and its sole member (“Seller”),

whereby the Company purchased all of the issued and outstanding membership units of GridFabric from the Seller.

As a result of

the transaction, GridFabric, is now a wholly-owned subsidiary of the Company.

(See note 3 for details.)

Lines of Business

business Segment

CleanSpark, LLC, the Company provides microgrid engineering, design and software solutions to military, commercial and residential

Our services consist of distributed energy microgrid system engineering and design, and project consulting services.

CleanSpark Critical Power Systems, Inc., the Company provides custom hardware solutions for distributed energy systems that serve

military and commercial residential properties.

GridFabric, LLC the Company provides Open Automated Demand response (“OpenADR”) and other middleware communication

protocol software solutions to commercial and utility customers.

Agency Segment

p2kLabs, Inc., the Company provides design, software development and other technology-based consulting services.

SUMMARY OF SIGNIFICANT

This summary of significant accounting

policies of CleanSpark is presented to assist in understanding the Company’s consolidated financial statements.

The consolidated

financial statements and notes are representations of the Company’s management, who

are responsible for their integrity and objectivity.

1 unchanged sentence

accepted in the United States of America and have been consistently applied in the preparation of the consolidated financial statements.

The Company has incurred

losses for the past several years while developing infrastructure and its software platforms.

As shown in the accompanying audited

consolidated financial statements, the Company incurred net losses of $26,116,932 and $47,006,165 during the years ended September

Company has incurred losses for the past several years while developing infrastructure and its software platforms.

As shown in the accompanying consolidated financial

statements, the Company incurred net losses of $ 23,346,143

and $ 26,116,932

during the years ended September 30, 2020

and September 30, 2019, respectively.

In response to these conditions and to ensure the Company has sufficient capital

for ongoing operations for a minimum of 12 months we

have raised additional capital through the sale of debt and equity securities pursuant to a registration statement on Form

(See Note8 for additional details.) As of September 30, 2019, the Company had working capital of approximately $8,381,455.

In response to these conditions and to ensure the Company has sufficient capital for ongoing

operations for a minimum of 12 months we have

raised additional capital through the sale of debt and equity securities pursuant to a registration statement on Form S-3.

As of September 30, 2020, the Company had working capital of approximately $ 2,869,329 .

Principles of Consolidation

The accompanying consolidated

financial statements include the accounts of CleanSpark, Inc., and its wholly owned operating subsidiaries, CleanSpark, LLC, CleanSpark,

II, LLC and CleanSpark Critical Power Systems Inc.

All material intercompany transactions have been eliminated upon consolidation

of these entities.

The accompanying consolidated financial

statements include the accounts of CleanSpark, Inc., and its wholly owned operating subsidiaries, CleanSpark, LLC, CleanSpark,

II, LLC, CleanSpark Critical Power Systems Inc, p2kLabs, Inc, and GridFabric, LLC.

All material intercompany transactions have

been eliminated upon consolidation of these entities.

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 at the date of the consolidated financial statements, and the reported amounts

of revenues and expenses during the reporting period.

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 at the date of the consolidated financial statements, and the reported amounts of revenues

and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates include

estimates used to review the Company’s goodwill impairment, impairments and estimations of long-lived assets, revenue recognition

on percentage of completion type contracts, allowances for uncollectible accounts, and the valuations of non-cash capital stock

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

Significant estimates include estimates

used to review the Company’s goodwill impairment, intangible assets acquired, impairments and estimations of long-lived assets,

revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, and the valuations of non-cash

capital stock issuances.

Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the

circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that

are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions

including, but not limited to, the ultimate impact that COVID-10 may have on the Company’s operations.

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:

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;

identity the performance obligations in the contract;

(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.

We did not have a cumulative

impact as of October 1, 2019 due to the adoption of Topic 606 and there was not an impact to our consolidated statements of operations

for the years ended September 30, 2019 and 2018 as a result of applying Topic 606.

Our accounting policy

on revenue recognition by type of revenue is provided below.

and (v) recognize revenue when or

as the entity satisfied a performance obligation.

We did not have a cumulative impact

as of October 1, 2019 due to the adoption of Topic 606.

Our accounting policy on revenue recognition

by type of revenue is provided below.

Engineering & Construction

7 unchanged sentences

to date compared to total estimated contract cost (an input method).

The input method is the most faithful depiction of the Company’s

performance because it directly measures the value of the services transferred to the customer.

18 unchanged sentences

on engineering and construction contracts are typically due within 30 to 45 days of billing, depending on the contract.

For service contracts (including

maintenance contracts) in which the Company has the right to consideration from the customer in an amount that corresponds directly

with the value to the customer of the Company’s performance completed to date, revenue is recognized when services are performed

and contractually billable.

For service contracts (including maintenance

contracts) in which the Company has the right to consideration from the customer in an amount that corresponds directly with the

value to the customer of the Company’s performance completed to date, revenue is recognized when services are performed and

contractually billable.

Service contracts that include multiple performance obligations are segmented between types of services.

9 unchanged sentences

at a point in time.

We recognize revenue on

agreements for non-customized equipment we sell on a standardized basis to the market at a point in time.

We recognize revenue

at the point in time that the customer obtains control of the good, which is generally upon shipment or when the customer has physical

possession of the product depending on contract terms.

We use proof of delivery for certain large equipment with more complex logistics,

whereas the delivery of other equipment is estimated based on historical averages of in-transit periods (i.e., time between shipment

and delivery).

In situations where arrangements

include customer acceptance provisions based on seller or customer-specified objective criteria, we recognize revenue when we have

concluded that the customer has control of the goods and that acceptance is likely to occur.

We recognize revenue on agreements

for non-customized equipment we sell on a standardized basis to the market at a point in time.

We recognize revenue at the point

in time that the customer obtains control of the good, which is generally upon shipment or when the customer has physical possession

of the product depending on contract terms.

We use proof of delivery for certain large equipment with more complex logistics, whereas

the delivery of other equipment is estimated based on historical averages of in-transit periods (i.e., time between shipment and

Generally, shipping costs are included in the price of equipment unless the customer requests a non-standard shipment.

In situations where an alternative shipment arrangement has been made, the Company recognizes the shipping revenue upon customer

receipt of the shipment.

In situations where arrangements include

customer acceptance provisions based on seller or customer-specified objective criteria, we recognize revenue when we have concluded

that the customer has control of the goods and that acceptance is likely to occur.

We generally do not provide for anticipated

losses on point in time transactions prior to transferring control of the equipment to the customer.

Our billing terms for these point

in time equipment contracts vary and generally coincide with shipment to the customer;

Our billing terms for these point in

time equipment contracts vary and generally coincide with shipment to the customer;

however, within certain businesses, we receive

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partners, which are recorded as contract liabilities.

Due to the customized nature of the equipment, the Company does

not allow for customer returns.

Service Performance obligations

satisfied over time.

We enter into long-term product

service agreements with our customers primarily within our microgrid segment.

These agreements require us to provide preventative

maintenance, and standby support services that include certain levels of assurance regarding system performance throughout the

contract periods, these contracts will generally range from 1 to 10 years.

We account for items that are integral to the maintenance

of the equipment as part of our service-related performance obligation, unless the customer has a substantive right to make a separate

purchasing decision (e.g., equipment upgrade).

Contract modifications that extend or revise contract terms are not uncommon and

generally result in our recognizing the impact of the revised terms prospectively over the remaining life of the modified contract

(i.e., effectively like a new contract).

Revenues are recognized for these arrangements on a straight-line basis consistent with

the nature, timing and extent of our services, which primarily relate to routine maintenance and as needed product repairs.

billing terms for these contracts vary, but we generally invoice periodically as services are provided.

Contract assets represent

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

$0 and contract work in progress (typically for fixed-price contracts) of $57,077 as of September 30, 2019.

Unbilled receivables,

which represent an unconditional right to payment subject only to the passage of time, are reclassified to accounts receivable

when they are billed under the terms of the contract.

Advances that are payments on account of contract assets of $0 and $0 as

of September 30, 2019 and September 30, 2018, respectively, have been deducted from contract assets.

Contract liabilities represent

amounts billed to clients in excess of revenue recognized to date.

The Company recorded $499,401 and $0 in contract liabilities

as of September 30, 2019 and September 30, 2018, respectively.

We enter into long-term product service

agreements with our customers primarily within our microgrid segment.

These agreements require us to provide preventative maintenance,

and standby support services that include certain levels of assurance regarding system performance throughout the contract periods,

these contracts will generally range from 1 to 10 years.

We account for items that are integral to the maintenance of the equipment

as part of our service-related performance obligation, unless the customer has a substantive right to make a separate purchasing

decision (e.g., equipment upgrade).

Contract modifications that extend or revise contract terms are not uncommon and generally

result in our recognizing the impact of the revised terms prospectively over the remaining life of the modified contract (i.e.,

effectively like a new contract).

Revenues are recognized for these arrangements on a straight-line basis consistent with the nature,

timing and extent of our services, which primarily relate to routine maintenance and as needed product repairs.

Our billing terms

for these contracts vary, but we generally invoice periodically as services are provided.

Contract assets represent revenue

recognized in excess of amounts billed and include unbilled receivables (typically for cost reimbursable contracts) of $ 0 and

contract work in progress (typically for fixed-price contracts) of $ 4,103 and $ 57,077 as of September 30, 2020 and September 30,

2019, respectively.

Unbilled receivables, which represent an unconditional right to payment subject only to the passage of time,

are reclassified to accounts receivable when they are billed under the terms of the contract.

Advances that are payments on account

of contract assets of $ 0 and $ 0 as of September 30, 2020 and September 30, 2019, respectively, have been deducted from contract

Contract liabilities represent amounts billed to clients in excess of revenue recognized to date.

The Company recorded

$ 64,198 and $ 499,401 in contract liabilities as of September 30, 2020 and September 30, 2019, respectively.

from software

The Company derives its software revenue from both subscription

fees from customers for access to its energy software offerings and software license sales and support services.

Revenues from

software licenses are generally recognized upfront when the software is made available to the customer and revenues from the related

support is generally recognized ratably over the contract term.

The Company’s policy is to exclude sales and other indirect

taxes when measuring the transaction price of its subscription agreements.

The Company’s subscription agreements

generally have monthly or annual contractual terms.

Revenue is recognized ratably over the related contractual term beginning on

the date that the platform is made available to a customer.

Access to the platform represents a series of distinct services as

the Company continually provides access to, and fulfills its obligation to the end customer over the subscription term.

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

Revenues from design, software

development and other technology-based consulting services

For service contracts performed under

Master Services Agreements (“MSA”) and accompanying Statement(s) of Work (“SOW”), revenue is recognized

based on the performance obligation(s) outlined in the SOW which is typically hours worked or specific deliverable milestones.

In the case of a milestone-based SOW, the Company recognizes revenues as each deliverable is signed off by the customer.

Variable Consideration

The nature of the Company’s

contracts gives rise to several types of variable consideration, including claims and unpriced change orders;

awards and incentive

The nature of the Company’s contracts

gives rise to several types of variable consideration, including claims and unpriced change orders;

awards and incentive fees;

and liquidated damages and penalties.

The Company recognizes revenue for variable consideration when it is probable that

a significant reversal in the amount of cumulative revenue recognized will not occur.

The Company estimates the amount of revenue

to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most

likely amount method, whichever is expected to better predict the amount.

Factors considered in determining whether revenue associated

with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized

include the following:

(a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused

by circumstances that were unforeseen at the contract date and not the result of deficiencies in the company’s performance,

(c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the

claim is objective and verifiable.

If the requirements for recognizing revenue for claims or unapproved change orders are met,

revenue is recorded only when the costs associated with the claims or unapproved change orders have been incurred.

to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is probable

and the amounts can be reliably estimated.

Disputed back charges are recognized when the same requirements described above for

claims accounting have been satisfied.

The Company recognizes revenue for variable consideration when it is probable that a significant

reversal in the amount of cumulative revenue recognized will not occur.

The Company estimates the amount of revenue to be recognized

on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount method,

whichever is expected to better predict the amount.

Factors considered in determining whether revenue associated with claims (including

change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized include the following:

(a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that

were unforeseen at the contract date and not the result of deficiencies in the company’s performance, (c) claim-related costs

are identifiable and

considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and

If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only

when the costs associated with the claims or unapproved change orders have been incurred.

Back charges to suppliers or subcontractors

are recognized as a reduction of cost when it is determined that recovery of such cost is probable and the amounts can be reliably

Disputed back charges are recognized when the same requirements described above for claims accounting have been satisfied.

generally provides limited warranties for work performed under its engineering and construction contracts.

The warranty periods

typically extend for a limited duration following substantial completion of the Company’s work on a project.

Historically,

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Practical Expedients

If the Company has a right

to consideration from a customer in an amount that corresponds directly with the value of the Company’s performance completed

to date (a service contract in which the company bills a fixed amount for each hour of service provided), the Company recognizes

revenue in the amount to which it has a right to invoice for services performed.

The Company does not adjust

the contract price for the effects of a significant financing component if the Company expects, at contract inception, that the

period between when the company transfers a service to a customer and when the customer pays for that service will be one year

The Company has made an

accounting policy election to exclude from the measurement of the transaction price all taxes assessed by governmental authorities

that are collected by the Company from its customers (use taxes, value added taxes, some excise taxes).

If the Company has a right to consideration

from a customer in an amount that corresponds directly with the value of the Company’s performance completed to date (a service

contract in which the company bills a fixed amount for each hour of service provided), the Company recognizes revenue in the amount

to which it has a right to invoice for services performed.

The Company does not adjust the contract

price for the effects of a significant financing component if the Company expects, at contract inception, that the period between

when the company transfers a service to a customer and when the customer pays for that service will be one year or less.

The Company has made an accounting

policy election to exclude from the measurement of the transaction price all taxes assessed by governmental authorities that are

collected by the Company from its customers (use taxes, value added taxes, some excise taxes).

For the year ended September 30, 2020

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Cash and cash equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid investments and short-term debt

instruments with original maturities of three months or less to be cash equivalents.

There was $7,838,857 and $412,777 in

cash and no cash equivalents as of September 30, 2019 and September 30, 2018, respectively.

For purposes of the statements of cash flows, the Company considers all highly liquid investments and short-term debt instruments

with original maturities of three months or less to be cash equivalents.

There was $ 3,126,202 and $ 7,838,857 in cash and no cash

equivalents as of September 30, 2020 and September 30, 2019, respectively.

Accounts receivable

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

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.

of uncollateralized customer obligations due under normal trade terms.

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 are presented net of an allowance for doubtful accounts of $254,570

and $0 at September 30, 2019, and September 30, 2018, respectively.

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 are presented net of an allowance for doubtful accounts of $ 42,970 and $ 254,570 at

September 30, 2020, and September 30, 2019, respectively.

Retention receivable is the

amount withheld by a customer until a contract is completed.

Retention receivables of $159,989 and $17,751 were included in

Retention receivables of $ 615

and $ 159,989 were included in

the balance of trade accounts receivable as of September 30, 2020 and September 30, 2019, respectively.

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

Sheet at their estimated fair value.

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

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

When AFS debt securities are sold, the unrealized

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

Securities classified as AFS are securities that the Company

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

Any decision to sell a security classified as

AFS would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Company’s

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

Interest income is recognized based on the coupon rate and increased

by accretion of discounts earned or decreased by the amortization of premiums paid over the contractual life of the security.

For individual debt securities where the Company either intends

to sell the security or more likely than not will not recover all of its amortized cost, the OTTI 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.

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.

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.

Concentration Risk

At times throughout the

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

As of September 30, 2019, the cash

balance in excess of the FDIC limits was $7,588,857.

The Company has not experienced any losses in such accounts and believes it

is not exposed to any significant credit risk in these accounts.

At times throughout the year, the

Company may maintain cash balances in certain bank accounts in excess of FDIC limits.

As of September 30, 2020, the cash balance

in excess of the FDIC limits was $ 2,876,202 .

The Company has not experienced any losses in such accounts and believes it is not

exposed to any significant credit risk in these accounts.

The Company had certain customers whose revenue individually represented

10% or more of the Company’s total revenue.

(See Note 18 for details.)

Warranty Liability

The Company establishes warranty liability reserves to provide for estimated future expenses as a result of installation

and product defects, product recalls and litigation incidental to the Company’s business.

Liability estimates are determined

based on management’s judgment, considering such factors as historical experience, the likely current cost of corrective

action, manufacturers’

and subcontractors’

participation in sharing the cost of corrective action, consultations with

third party experts such as engineers, and discussions with the Company’s general counsel and outside counsel retained to

handle specific product liability cases.

The Company’s manufacturers and service providers currently provide substantial

warranties between ten to twenty-five years with full reimbursement to replace and install replacement parts.

Warranty costs and

associated liabilities for the years ended September 30, 2019 and 2018 were $0 and $0, respectively.

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

defects, product recalls and litigation incidental to the Company’s business.

Liability estimates are

determined based on

management’s judgment, considering such factors as historical experience, the likely current cost of corrective action, manufacturers’

and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as

engineers, and discussions with the Company’s general counsel and outside counsel retained to handle specific product liability

The Company’s manufacturers and service providers currently provide substantial warranties between ten to twenty-five

years with full reimbursement to replace and install replacement parts.

Warranty costs and associated liabilities for the years

ended September 30, 2020 and 2019 were $ 0 and $ 0 , respectively.

Stock -based compensation

The Company follows the guidelines in FASB Codification Topic ASC 718-10 “

Compensation-Stock Compensation, ”

which requires companies to measure the cost of employee services received in exchange for an award of an equity instrument based

on the grant-date fair value of the award.

Stock-based compensation expense is recognized on a straight-line basis over the requisite

service period.

The Company accounts for non-employee share-based awards in accordance with FASB ASC 505-50 under which the awards

are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments,

and are recognized as expense over the service period.

The Company may issue compensatory shares for services including, but not

limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

Earnings (loss) per

share –

The Company reports earnings (loss) per share in accordance with Financial Accounting Standards Board’s

(“FASB”) Accounting Standards Codification (“ASC”) 260-10 “

Earnings Per Share, ”

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 the period.

Diluted earnings per share reflect the potential dilution of securities that could share in the earnings

of an entity.

The calculation of diluted net loss per share gives effect to common stock equivalents;

however, potential common

shares are excluded if their effect is anti-dilutive.

As of September 30, 2019, there are 5,508,400 shares issuable upon exercise

of outstanding options, warrants and convertible debt which have been excluded as anti-dilutive.

Company follows the guidelines in FASB Codification Topic ASC 718-10 “Compensation-Stock Compensation,” which requires

companies to measure the cost of employee and non-employee services received in exchange for an award of an equity instrument

based on the grant-date fair value of the award.

Stock-based compensation expense is recognized on a straight-line basis over

the requisite service period.

The Company may issue compensatory shares for services including, but not limited to, executive,

management, accounting, operations, corporate communication, financial and administrative consulting services.

Earnings (loss) per share

The Company reports earnings (loss) per share in accordance with Financial Accounting Standards Board’s (“FASB”)

Accounting Standards Codification (“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 the period.

Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity.

The calculation

of diluted net loss per share gives effect to common stock equivalents;

however, potential common shares are excluded if their

effect is anti-dilutive.

As of September 30, 2020, there are 1,577,013 shares issuable upon exercise of outstanding options and

warrants which have been excluded as anti-dilutive.

Property and equipment

Property and equipment are stated

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

Machinery and equipment

Leasehold improvements

Shorter of estimated lease term or 5 years

Furniture and fixtures

Long-lived Assets

In accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification (ASC) ASC

360-10, "Property, Plant and Equipment,"

the carrying value of intangible assets 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, 2019 the Company recorded an impairment expense of $6,915,186 related to impairment of software and during the year ended September

30, 2019 the Company recorded an impairment expense of $1,896,090 related to a patent and client lists acquired in 2016 which the

Company does not anticipate utilizing in future periods, respectively.

Intangible Assets

and Goodwill –

The Company accounts for business combinations under the acquisition method of accounting in accordance

with ASC 805, “Business Combinations,”

where the total purchase price is allocated to the tangible and identified intangible

assets acquired and liabilities assumed based on their estimated fair values.

The purchase price is allocated using the information

currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among

other things, asset valuations, liabilities assumed and revisions to preliminary estimates.

The purchase price in excess of the

fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company reviews its indefinite lived intangibles

and goodwill for impairment annually or whenever events or circumstances indicate that the carrying amount of the asset exceeds

its fair value and may not be recoverable.

In accordance with its policies, the Company performed an assessment of indefinite lived

intangibles and goodwill and determined there was no impairment for the years ended September 30, 2019 and 2018.

Software Development

Costs –

The Company capitalizes software development costs under guidance of ASC 985-20 “Costs of Software to be

Sold, Leased or Marketed”.

Software development costs include payments made to independent software developers under development

agreements, as well as direct costs incurred for internally developed products.

Software development costs are capitalized once

the technological feasibility of a product is established and such costs are determined to be recoverable.

Technological feasibility

of a product requires both technical design documentation and infrastructure design documentation, or the completed and tested

product design and a working model.

Significant management judgments and estimates are utilized in the assessment of when technological

feasibility is established, and the evaluation is performed on a product-by-product basis.

For products where proven technology

exists, such as mPulse and mVSO this may occur early in the development cycle.

Prior to a product's release, if and when we

believe capitalized costs are not recoverable, we expense the amounts as part

of "Product development."

Capitalized costs for products that are cancelled or are expected to be abandoned are charged

to "Product development"

accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property,

Plant and Equipment," the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for

the existence of facts or circumstances that may suggest impairment.

The Company recognizes impairment when the sum of the expected

undiscounted future cash flows is less than the carrying amount of the asset.

Impairment losses, if any, are measured as the excess

of the carrying amount of the asset over its estimated fair value.

During the year ended September 30, 2020 the Company did not

record an impairment expense and during the year ended September 30, 2019 the Company recorded an impairment expense of $ 6,915,186

related to software acquired in 2016 which the Company does not anticipate utilizing in future periods.

Intangible Assets and Goodwill

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

Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and

liabilities assumed based on their estimated fair values.

The purchase price is allocated using the information currently available,

and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset

valuations, liabilities assumed and revisions to preliminary estimates.

The purchase price in excess of the fair value of the

tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company reviews its indefinite

lived intangibles and goodwill for impairment annually or whenever events or circumstances indicate that the carrying amount of

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

In accordance with its policies, the Company performed an assessment

of indefinite lived intangibles and goodwill and determined there was no impairment for the years ended September 30, 2020 and

Development Costs

The Company capitalizes software development costs under guidance

of ASC 985-20 “Costs of Software to be Sold, Leased or Marketed” for our mPulse platform and under ASC 350-40 “Internal

Use Software” for our mVSO, Canvas & Plaid products.

Software development costs include payments made to independent

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

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

to be recoverable.

Technological feasibility of a product requires both technical design documentation and infrastructure design

documentation, or the completed and

tested product design and a working

Significant management judgments and estimates are utilized in the assessment of when technological feasibility is established,

and the evaluation is performed on a product-by-product basis.

For products where proven technology exists, this may occur early

in the development cycle.

Prior to a product's release, if and when we believe capitalized

costs are not recoverable, we expense the amounts as part of "Product development."

Capitalized costs for products that are cancelled or are expected to be abandoned are charged to "Product development"

in the period of cancellation.

Amounts related to software development, such as product enhancements

to existing features, which are not capitalized are charged immediately to "Product development."

Commencing upon a product's

release, capitalized software development costs are amortized to "Cost of revenues—software amortization "

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

of seven years for our current product offerings.

In accordance with ASC 985-35 in recognition of the uncertainties involved in

estimating future revenue, amortization will never be less than straight-line amortization of the products remaining estimated

economic life.

We evaluate the future

recoverability of capitalized software development costs on a quarterly basis.

For products that have been released in prior periods,

the primary evaluation criterion is the actual performance of the software platform to which the costs relate.

For products that

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

to which the costs relate.

Amounts related to software development, such as product enhancements to existing features, which

are not capitalized are charged immediately to "Product development."

Commencing upon a product's release,

capitalized software development costs are amortized to "Cost of revenues—software amortization " based on the

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

seven years for our current product offerings.

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

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

We evaluate the future recoverability

of capitalized software development costs on a quarterly basis.

For products that have been released in prior periods, the primary

evaluation criterion is the actual performance of the software platform to which the costs relate.

For products that are scheduled

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

the costs relate.

Criteria used to evaluate expected product performance include:

historical performance of comparable

products developed with comparable technology;

historical performance of comparable products

developed with comparable technology;

market performance of comparable software;

orders for the product prior to its release;

pending contracts and general market conditions.

Significant management

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

In evaluating the recoverability of

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

costs to be incurred.

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

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

could result in an impairment charge.

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

resolve in a manner that is inconsistent with management's expectations.

If an impairment occurs the reduced amount of the capitalized

software costs that have been written down to the net realizable value at the close of each annual fiscal period will be considered

the cost for subsequent accounting purposes.

Fair Value of financial

instruments –The carrying value of cash, accounts payable and accrued expenses, and debt (See Notes 7 & 8) approximate

their fair values because of the short-term nature of these instruments.

Management believes the Company is not exposed to significant

interest or credit risks arising from these financial instruments.

The carrying amount of the Company’s long-term convertible

debt is also stated at fair value since the stated rate of interest approximates market rates.

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.

techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs.

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

unobservable.

Level 1 Quoted prices in active markets for identical assets or liabilities.

are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

Level 2 Quoted prices for similar assets and liabilities in active markets;

prices included for identical or similar assets and liabilities that are not active;

and model-derived valuations in which all

significant inputs and significant value drivers are observable in active markets.

These are typically obtained from readily-available

pricing sources for comparable instruments.

Level 3 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.

Income taxes –

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, 2019 and 2018.

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.

contracts and general market conditions.

Significant management judgments and

estimates are utilized in assessing the recoverability of capitalized costs.

In evaluating the recoverability of capitalized costs,

the assessment of expected product performance utilizes forecasted sales amounts and estimates of additional costs to be incurred.

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

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

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

is inconsistent with management's expectations.

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

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

accounting purposes.

Fair Value of financial instruments

and derivative asset

The carrying value of cash, accounts payable and accrued expenses, and debt (See Notes 9 &

10) approximate their fair values because of the short-term nature of these instruments.

Management believes the Company is not

exposed to significant interest or credit risks arising from these financial instruments.

The carrying amount of the Company’s

long-term convertible debt is also stated at fair value since the stated rate of interest approximates market rates.

Fair value is defined as the exchange

price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous

market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques

used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company utilizes

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

Quoted prices in active markets for identical assets or liabilities.

These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

Quoted prices for similar assets and liabilities in active markets;

quoted prices included for identical or similar assets and liabilities that are not active;

and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

These are typically obtained from readily-available pricing sources for comparable instruments.

Unobservable inputs, where there is little or no market activity for the asset or liability.

These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

The following table presents the Company’s

financial instruments that are measured and recorded at fair value on the Company’s balance sheets on a recurring basis,

and their level within the fair value hierarchy as of September 30, 2020:

Derivative asset

Investment in equity security

Investment in debt security

The below table presents the change in the fair value

of the derivative asset and investment in debt security during the year ended September 30, 2020:

Balance at September 30, 2019

Fair value at issuance, net of premium

Gain on derivative asset

Balance at September 30, 2020

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, 2020 and 2019.

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

3 unchanged sentences

likely than not that some or all of the deferred tax assets will not be realized.

The application of tax laws

and regulations is subject to legal and factual interpretation, judgment and uncertainty.

Tax laws and regulations themselves are

subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings.

Therefore, the actual liability for U.S., or the various state jurisdictions, may be materially different from management’s

estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

Interest and penalties are included in tax expense.

The Company includes interest

and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes.

of September 30, 2019, and 2018, the Company had no accrued interest or penalties related to uncertain tax positions.

The application of tax laws and regulations

is subject to legal and factual interpretation, judgment and uncertainty.

Tax laws and regulations themselves are subject to change

as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings.

Therefore, the

actual liability for U.S., or the various state jurisdictions, may be materially different from management’s estimates, which

could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities.

and penalties are included in tax expense.

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

for income taxes.

As of September 30, 2020, and 2019, the Company had no accrued interest or penalties related to uncertain tax

Reclassifications

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

These reclassifications

had no effect on the reported results of operations or net assets of the Company.

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

These reclassifications had no effect

on the reported results of operations or net assets of the Company.

Segment Reporting

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

evaluated regularly by the chief operating decision maker, or decision-making group, in deciding the method to allocate resources

and assess performance.

The Company currently has one reportable segment for financial reporting purposes, which represents the

Company's core business.

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

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

The Company currently has two reportable segments for financial reporting purposes.

Recently issued accounting pronouncements

In June 2018, the FASB

issued ASU 2018-07, "Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting,"

which modifies the accounting for share-based payment awards issued to nonemployees to largely align it with the accounting for

share-based payment awards issued to employees.

In June 2018, the FASB issued ASU 2018-07,

"Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based Payment Accounting," which modifies

the accounting for share-based payment awards issued to nonemployees to largely align it with the accounting for share-based payment

awards issued to employees.

ASU 2018-07 is effective for us for annual periods beginning October 1, 2019.

are evaluating the potential impact to our financial position or results of operations.

In August 2018, the FASB

issued ASU 2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for

Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,"

which allows for the capitalization

of certain implementation costs incurred in a hosting arrangement that is a service contract.

The new standard did

not have a material impact on the Company’s results of operations or cash flows.

In August 2018, the FASB issued ASU

2018-15, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation

Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," which allows for the capitalization of certain

implementation costs incurred in a hosting arrangement that is a service contract.

ASU 2018-15 allows for either retrospective

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on our financial position and results of operations.

In February 2016, the FASB

issued ASU 2016-02, “Leases”

(“ASC 842”).

The guidance requires lessees to recognize almost all leases

on their balance sheet as a right-of-use asset and a lease liability.

For income statement purposes, the FASB retained a dual model,

requiring leases to be classified as either operating or finance.

Lessor accounting is similar to the current model but updated

to align with certain changes to the lessee model and the new revenue recognition standard.

Existing sale-leaseback guidance, including

guidance for real estate, is replaced with a new model applicable to both lessees and lessors.

ASC 842 is effective for fiscal

years beginning after December 15, 2018.

We are currently evaluating the impact the adoption of this new standard will have on

our financial position and results of operations.

The Company has evaluated

all other recent accounting pronouncements and believes that none of them will have a material effect on the Company's financial

position, results of operations or cash flows.

ACQUISITION OF PIONEER CRITICAL

AND RELATED ASSETS

On January 22, 2019, CleanSpark

entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Pioneer Critical Power, Inc., a Delaware

corporation (the “Pioneer”), and CleanSpark Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of

CleanSpark (“Merger Sub”).

The Merger Agreement

provides that, subject to the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company

(the “Merger”), with Pioneer surviving the Merger as a wholly-owned subsidiary of CleanSpark.

At the effective time

of the Merger, the issued and outstanding common shares of Pioneer were automatically converted into the right to receive:

175,000 of the common stock of CleanSpark, (ii) a five-year warrant to purchase 50,000 shares of CleanSpark common stock at an

exercise price of $16.00 per share, and (iii) a five-year warrant to purchase 50,000 shares of CleanSpark common stock at an exercise

price of $20.00 per share.

The Merger closed on January 22, 2019 with the filing of a Certificate of Merger in Delaware.

The Company accounted

for the acquisition of Pioneer as an asset acquisition under ASC 805, because the assets acquired did not meet the definition of

a business under ASC 805-10-55-4 as it lacked a substantive process at the time of the acquisition.

The Company determined the fair

value of the consideration in accordance with ASC 820 as follows:

In February 2016, the FASB issued guidance

within ASU 2016-02, Leases .

The amendments in ASU 2016-02 to Topic 842, Leases , require lessees to

recognize the lease assets and lease liabilities arising from operating leases in the statement of financial position.

The accounting

applied by a lessor is largely unchanged from that applied under previous GAAP.

The Company adopted the amendments to Topic 842

on October 1, 2019 using the modified retrospective approach.

The Company elected the transition option issued under ASU 2018-11, Leases

(Topic 842) Targeted Improvements , which allows entities to continue to apply the legacy guidance in ASC 840, Leases ,

to prior periods, including disclosure requirements.

Accordingly, prior period financial results and disclosures have not been

The Company also elected to apply the package of practical expedients permitting entities to forgo reassessment

1) expired or existing contracts that may contain leases;

2) lease classification of expired or existing leases;

and 3) initial

direct costs for any existing leases.

The Company has also elected to apply the short term lease measurement and recognition exemption

to leases with an initial term of 12 months or less.

The most significant impact of the new standard on the Company’s Consolidated

Financial Statements was the recognition of a right of use asset and lease liability for operating leases for which the Company

is the lessee.

Upon adoption of this guidance, on October 1, 2019, the Company recorded a Right of use asset and corresponding

lease liability of $85,280 and $85,280, respectively, on the Consolidated Balance Sheet.

No cumulative effect adjustment to retained

earnings resulted from adoption of this guidance.

The new standard did not have a material impact on the Company’s results

of operations or cash flows.

In August 2018, the FASB issued ASU

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value

The purpose of the standard is to improve the overall usefulness of fair value disclosures to financial statement

users and reduce unnecessary costs to companies when preparing the disclosures.

ASU 2018-13 is effective for for fiscal years beginning

after December 15, 2019 and requires the application of the prospective method of transition (for only the most recent interim

or annual period presented in the initial fiscal year of adoption) to the new disclosure requirements for (1) changes in unrealized

gains and losses included in other comprehensive income and (2) the range and weighted average used to develop significant unobservable

inputs for Level 3 fair value measurements.

ASU 2018-13 also requires prospective application to any modifications to disclosures

made because of the change to the requirements for the narrative description of measurement uncertainty.

The effects of all other

amendments made by ASU 2018-13 must be applied retrospectively to all periods presented.

We are currently in the process of evaluating

the impact of adoption on our Consolidated Financial Statements.

In January 2017, the FASB issued guidance

within ASU 2017-04, Intangibles-Goodwill and Other.

The amendments in ASU 2017-04 simplify the subsequent measurement of goodwill

by comparing the fair value of a reporting unit with its carrying amount.

ASU 2017-04 is effective for fiscal years beginning after

December 15, 2019.

We are currently evaluating the impact the adoption of this new standard will have on our financial position

and results of operations.

In June 2016, the FASB issued guidance within

ASU 2016-13, Financial Instruments – Credit Losses.

The amendments in ASU 2016-13 require assets measured at amortized cost

and establishes an allowance of credit losses for available for sale debt securities.

ASU 2016-13 is effective for fiscal years

beginning after December 15, 2022.

We are currently evaluating the impact the adoption of this new standard will have on our financial

position and results of operations.

The Company has evaluated all other

recent accounting pronouncements and believes that none of them will have a material effect on the Company's financial position,

results of operations or cash flows.

ACQUISITION OF GRIDFABRIC, LLC.

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

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

Hale Holdings, LLC (“Seller”), whereby the Company purchased all of the issued and outstanding membership units of

GridFabric from the Seller (the “Transaction”) in exchange for an aggregate purchase price of cash and stock of up

to $ 1,400,000 (the “Purchase Price”).

The Transaction closed simultaneously with execution on August 31, 2020.

result of the Transaction, GridFabric, an OpenADR software solutions provider, is now a wholly-owned subsidiary of the Company.

Pursuant to the terms of the Agreement, the

Purchase Price was as follows:

a) $ 360,000 in cash was paid to the Seller at closing;

$ 400,000 in cash was delivered to an independent third-party escrow where such cash is subject

to offset for adjustments to the Purchase Price and indemnification purposes for a period of 12 months;

26,427 restricted shares of the Company’s common stock, valued at $ 250,000 , were

issued to the Seller (the “Shares”).

The Shares are subject to certain leak-out provisions whereby the Seller may sell

an amount of Shares equal to no more than ten percent (10%) of the daily dollar trading volume of the Company’s common stock

on its principal market for the prior 30 days (the “Leak-Out Terms”);

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

be issuable to Seller if GridFabric achieves certain revenue and product release milestones related to the future performance

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

The Earn-Out Shares are also subject to the Leak-Out Terms.

The Shares were issued at a fair market value of $ 9.46

The Earn-Out Shares are accounted for as contingent consideration and the number of shares to be issued will be

determined based on the closing price of the Company’s common stock on the date such milestone event occurs.

The Agreement contains standard representations, warranties, covenants,

indemnification and other terms customary in similar transactions.

In connection with the transaction, the Company also entered into

employment relationships and non-compete agreements with GridFabric’s key employees for a period of 36 months and plans to

issue future equity compensation to said employees, subject to approval of the Company’s board of directors.

The Company accounted for the acquisition of GridFabric

as an acquisition of a business under ASC 805.

The Company determined the fair value of the consideration

given to the Seller in connection with the Transaction in accordance with ASC 820 was as follows:

Consideration:

26,427 shares of common stock

50,000 warrants @$16.00

50,000 warrants @$20.00

Contingent consideration - common stock issuable upon achievement of

Total Consideration

The Company allocated the purchase

price to the identifiable assets as follows:

The total purchase price of the Company’s acquisition

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

as indicated below.

Purchase Price Allocation:

Product drawings and diagrams

Customer list & non-compete agreement

On February 1, 2019, Pioneer Critical

was renamed CleanSpark Critical Power Systems, Inc.

Support Agreements

As a condition to the Merger

Agreement, on January 22, 2019, CleanSpark and Pioneer Power Solutions, Inc.

(“Pioneer Power”), a Delaware corporation

and sole shareholder of Pioneer prior to the Merger, entered into a Non-Competition and Non-Solicitation Agreement whereby Pioneer

Power agreed, among other things, to not compete with the Company or solicit employees or customers of the Company for a period

of four years.

As another condition to

the Merger Agreement, on January 22, 2019, CleanSpark, the Company and Pioneer Power entered into an Indemnity Agreement, whereby

Pioneer Power agreed to indemnify CleanSpark for any claims made by Myers Power Products, Inc.

in the case titled Myers Power

Products, Inc.

Pioneer Power Solutions, Inc., Pioneer Custom Electrical Products, Corp., et al ., Los Angeles County Superior

Court Case No.

BC606546 (“Myers Power Case”) as they may relate to Pioneer or CleanSpark post-closing of the Merger

Finally, as another condition

to the Merger Agreement, on January 22, 2019, CleanSpark and Pioneer Power entered into a Contract Manufacturing Agreement, whereby

Pioneer Power shall exclusively manufacture parallel switchgears, automatic transfer switches and related control and circuit protective

equipment for CleanSpark for a period of eighteen months.

The agreement did not create exclusivity for Pioneer and CleanSpark may

have other providers perform contract manufacturing services, as desired.

As of September 30, 2019, CleanSpark had $1,000,608 on

deposit for manufacturing progress payments with Pioneer Power which is reflected on the consolidated balance sheet in prepaid

expense and other current assets.

Customer list

The following is the unaudited

pro forma information assuming the acquisition of GridFabric occurred on October 1, 2018:

For the Year Ended

September 30, 2020

September 30, 2019

( 23,272,538 )

$ ( 26,116,932

Loss per common share - basic and diluted

Weighted average common shares outstanding - basic

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 actually would have resulted had the acquisition occurred on the first day of the earliest period presented,

or of future results of the consolidated entities.

The unaudited pro forma consolidated financial information does not reflect

any operating efficiencies and cost savings that may be realized from the integration of the acquisition.

All transitions that

would be considered inter-company transactions for proforma purposes have been eliminated.

ACQUISITION OF P2KLABS, INC.

On January 31, 2020, the Company,

entered into an agreement with p2k, and its sole stockholder, Amer Tadayon, whereby the Company purchased all of the issued and

outstanding shares of p2k in exchange for an aggregate purchase price of cash and equity of $ 1,688,935 .

The transaction closed

simultaneously upon the execution of the agreement by the parties on January 31, 2020.

As a result of the transaction, p2k is now a wholly-owned

subsidiary of the Company.

Pursuant to the terms of the Agreement, the purchase

price was as follows:

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

b) 31,183 restricted shares of the Company’s common stock, valued

at $ 145,000 , were issued to the Seller (the “Shares”).

The Shares are subject to certain lock-up and leak-out provisions

whereby the Seller may sell an amount of Shares equal to ten percent (10%) of the daily dollar trading volume of the Company’s

common stock on its principal market for the prior 30 days (the “Leak-Out Terms”);

c) $ 115,500 in cash was paid to an independent third-party escrow where

such cash is subject to offset for adjustments to the purchase price and indemnification purposes;

d) 64,516 restricted shares of the Company’s common stock, valued

at $ 300,000 , were issued to an independent third-party escrow (the “Holdback Shares”).

The Holdback Shares will be

released to Seller once p2k achieves certain revenue milestones for the future performance of p2k.

The Holdback Shares will also

be subject to the Leak-Out Terms once they are released from escrow 12 months from closing.

The Shares and Holdback Shares were deemed to

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

e) 26,950 Common Stock options which were deemed to have a fair market value of $ 88,935 on the date

of the closing of the Transaction.

The Company accounted for the acquisition of p2k as

an acquisition of a business under ASC 805.

The Company determined the fair value of the consideration

given to the Seller in connection with the transaction in accordance with ASC 820 was as follows:

Consideration:

95,699 shares of common stock

26,950 common stock options

Total Consideration

The total purchase price of the Company’s

acquisition of p2k was allocated to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair

values as indicated below.

Purchase Price Allocation:

Customer list

Design and other assets

Other assets and liabilities assumed, net

$ ( 121,453 )

The following is the unaudited

pro forma information assuming the acquisition of p2k occurred on October 1, 2018:

For the Year Ended

September 30, 2020

September 30, 2019

( 23,353,924 )

( 26,003,965 )

Loss per common share - basic and diluted

Weighted average common shares outstanding - basic

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 actually would have resulted had the acquisition occurred on the first day of the earliest period presented, or of future

results of the consolidated entities.

The unaudited pro forma consolidated financial information does not reflect any operating

efficiencies and cost savings that may be realized from the integration of the acquisition.

All transitions that would be considered

inter-company transactions for proforma purposes have been eliminated.

INVESTMENT IN INTERNATION AL

LAND ALLIANCE

International Land Alliance, Inc.

On November 5, 2019, the Company entered

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

corporation (“ILAL”), in order 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 in order to

support the power and energy needs of ILAL’s development and construction of certain projects, the Company entered into a

Securities Purchase Agreement, dated as of November 6, 2019, with ILAL (the “SPA”).

Pursuant to the terms of the SPA, ILAL sold, and the Company purchased

1,000 shares of Series B Preferred Stock (the “Preferred Stock”) for an aggregate purchase price of US $ 500,000 (the

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

The Company also received 350,000 shares (“commitment shares”)

of ILAL’s common stock.

The Series B Preferred Stock will accrue cumulative in-kind accruals at a rate of 12% per annum and

may increase upon the occurrence of certain events.

The Preferred Stock is now convertible into common stock at a variable rate

as calculated under the agreement terms.

The commitment shares are recorded at fair value as of September

30, 2020 of $ 210,000 .

The Preferred Stock is recorded as an AFS debt

security and is reported at its estimated fair value as of September 30, 2020.

As of September 30, 2020, the Company has identified

a derivative instrument in accordance with ASC Topic No.

815 due to the variable conversion feature.

815 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.

The Black-Scholes model utilized the following

inputs to value the derivative asset at the date in which the derivative asset was determined through September 30, 2020.

Fair value assumptions:

September 30, 2020

Risk free interest rate

Expected term (months)

Expected volatility

Expected dividends

CAPITALIZED SOFTWARE

Capitalized software consists of the following as of

September 30, 2019 and September 30, 2018:

Capitalized software consists of the

following as of September 30, 2020 and September 30, 2019:

September 30, 2020

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Capitalized Software, net

In accordance with ASC

985-20 the Company capitalized $637,792 in software development costs (including capitalized stock compensation cost of $68,750)

related to the enhancements created for our mPulse and mVSO platforms during the year ended September 30, 2019.

Capitalized software amortization recorded as

product development expense for the years ended September 30, 2019 and 2018 was $1,453,635 and $1,379,483, respectively.

During the year ended September 30, 2019, the Company

recorded an impairment of $6,915,186 related directly to components of our original software that were replaced.

The Company capitalized $ 84,924 in

enhancements to its mVSO software during the year ended September 30, 2020.

Capitalized software amortization recorded

as product development expense for the years ended September 30, 2020 and 2019 was $ 163,918 and $ 1,453,635 , respectively.

During the year ended September 30,

2019, the Company recorded an impairment of $ 6,915,186 related directly to components of our original software that was replaced.

INTANGIBLE ASSETS

Intangible assets consist of the following as of September

30, 2019 and September 30, 2018:

The Company amortizes intangible assets

with finite lives over their estimated useful lives, which range between two and twenty years as follows:

Customer list and non-compete agreement

Design assets

Engineering trade secrets

Intangible assets consist of the following

as of September 30, 2020 and September 30, 2019:

September 30, 2020

September 30, 2019

Customer list and non-compete agreement

Design assets

Engineering trade secrets

Intangible assets:

accumulated amortization

( 5,353,792 )

( 2,758,733 )

Intangible assets, net

Amortization expense for the years ended September 30,

2019 and 2018 was $1,858,559 and $802,287, respectively.

Amortization expense for the years

ended September 30, 2020 and 2019 was $ 2,603,427 and $ 1,858,559 , respectively.

The Company expects to record amortization

expense of intangible assets over the next 5 years and thereafter as follows:

Fixed assets consist of the following as of September 30,

2020 and September 30, 2019:

and equipment

accumulated depreciation

Depreciation expense for the years

ended September 30, 2020 and 2019 was $ 68,904 and $ 44,422 , respectively.

During the year ended September 30, 2020, the Company

disposed of $ 48,898 of fixed assets resulting in a loss on disposal of $ 5,218 .

September 30, 2020

September 30, 2019

Machinery and equipment

Furniture and fixtures

accumulated depreciation

Fixed assets, net

Depreciation expense for the years ended September

30, 2019 and 2018 was $44,422 and $52,694, respectively.

During the years ended September 30, 2019 and 2018 the Company recorded

an impairment of fixed assets of $0 and $1,243.

Long-term loans

payable consist of the following:

Long-term loans payable consist of the following:

Promissory notes

September 30, 2020

September 30, 2019

Current loans payable consist of the following:

Promissory notes

financing loans

Insurance financing loans

Current loans payable

debt discount

net of unamortized discount

Unamortized debt discount

Total, net of unamortized discount

Promissory Notes

On September 5, 2017,

the Company executed a 9% secured promissory note with a face value of $150,000 with an investor.

Under the terms of the promissory

note, the Company received $150,000 and agreed to make monthly interest payments and repay the note principal 24 months from the

date of issuance.

On September 5, 2019, the investor extended the maturity date to September 5, 2021 and the modification was not

deemed substantial.

The note is secured by 15,000 shares which are held in escrow and would be issued to the note holder only in

the case of an uncured default.

As of September 30, 2019, the Company owed $150,000 in principal and $0 in accrued interest under

the terms of the agreement and recorded interest expense of $10,096 and $13,500 during the years ended September 30, 2019 and 2018,

respectively.

On October 6, 2017, the Company

executed an unsecured variable interest rate promissory note with a maximum interest

rate of 58.3% and a face value of $45,000 with a financial institution.

Under the terms of the promissory note the Company received

$45,000 and agreed to repay the note evenly over 12 months.

The Company repaid all principal and outstanding interest on October

The Company recorded interest expense of $0 and $14,175 for the years ended September 30, 2019 and 2018, respectively.

On November 11, 2017, the Company executed a

10% secured promissory note with a face value of $100,000 with an investor.

On September 5, 2017, the Company executed

a 9 % secured promissory note with a face value of $ 150,000 with an investor.

Under the terms of the promissory note, the Company

received $ 150,000 and agreed to make monthly interest payments and repay the note principal 24 months from the date of issuance.

On September 5, 2019, the investor extended the maturity date to September 5, 2021 and the modification was not deemed substantial.

The note is secured by 15,000 shares which are held in escrow and would be issued to the note holder only in the case of an uncured

As of September 30, 2020, the Company owed $ 0 in principal and $ 0 in accrued interest under the terms of the agreement

and recorded interest expense of $ 12,426 and $ 10,096 during the years ended September 30, 2020 and 2019, respectively.

On December 5, 2017, the Company executed

a 9 % secured promissory note with a face value of $ 50,000 with an investor.

Under the terms of the promissory note the Company

received $50,000 and agreed to make monthly interest payments and repay the note principal 24 months from the date of issuance.

The note was secured by 5,000 shares which would be issued to the note holder only in the case of an uncured default.

repaid all principal and outstanding interest on August 13, 2019 and the 10,000 shares of common stock held as collateral were

returned to treasury and cancelled on August 26, 2019.

The Company recorded interest expense of $7,478 and $6,411 and for the years

repaid all principal and outstanding interest on December 5, 2019 and the 5,000 shares of common stock held as collateral were

returned to treasury and cancelled on January 13, 2020.

The Company recorded interest expense of $ 802 and $ 3,367 for the years

ended September 30, 2020 and 2019, respectively.

On November 20,

2017, the Company executed a 10% unsecured promissory note with a face value of $80,000 with an investor.

Under the terms of

the promissory note the Company received $80,000 and agreed to make monthly interest payments and repay the note principal 12

months from the date of issuance.

On November 21, 2018, the investor extended the maturity date to December 31, 2018.

Company repaid all principal and outstanding interest on December 31, 2018.

The Company recorded interest expense of $2,017

and $6,882 during the years ended September 30, 2019 and 2018, respectively.

On December 5, 2017,

the Company executed a 9% secured promissory note with a face value of $50,000 with an investor.

Under the terms of the promissory

note the Company received $50,000 and agreed to make monthly interest payments and repay the note principal 24 months from the

date of issuance.

The note is secured by 5,000 shares which would be issued to the note holder only in the case of an uncured default.

As of September 30, 2019, the Company owed $50,000 in principal and $0 in accrued interest under the terms of the agreement and

recorded interest expense of $3,367 and $2,552 for the years ended September 30, 2019 and 2018, respectively.

The Company repaid

all principal and outstanding interest on December 4, 2019

On January 12, 2018, the

Company executed an unsecured variable interest rate promissory note with a maximum interest

rate of 58.5% and a face value of $18,400 with a financial institution.

Under the terms of the promissory note the Company received

$18,400 and agreed to repay the note and interest evenly over 12 months.

The Company repaid all principal and outstanding interest

on October 1, 2018.

The Company recorded interest expense of $0 and $3,680 for the years ended September 30, 2019 and 2018, respectively.

On May 7, 2020, the Company

executed an unsecured variable interest rate promissory note with a maximum interest rate of 51.0% and a face value of $24,500

with a financial institution.

Under the terms of the promissory note the Company received $24,500 and agreed to repay the note

and interest evenly over 12 months.

The Company repaid all principal and outstanding interest on October 1, 2018.

The Company recorded

interest expense of $0 and $0 and for the years ended September 30, 2019 and 2018, respectively.

On June 15, 2018, the Company

entered into a 10% secured promissory note with a face value of $116,600 pursuant to which the Company received $110,000, net of

an original issue discount of 6% ($6,600).

The Company also issued 11,660 5-year warrants exercisable at $8.00 in connection with

issuance of the promissory note.

The note is secured by the Company’s accounts receivable.

Under the terms of the promissory

note, the Company agreed to make monthly interest payments and repay the note principal on January 31, 2019.

As of September 30,

2019, the Company owed $0 in principal and $0 in accrued interest under the terms of the agreement and recorded interest expense

of $3,217 during the year ended September 30, 2019.

The Company determined the value associated with the warrants issued in connection

with the note to be $110,000 which was recorded as a debt discount.

The aggregate original issue discount, and debt discount related

to the warrants have been accreted and charged to interest expenses as a financing expense in the amount of $48,424 and $479 for

the years ended September 30, 2019 and 2018, respectively.

The unamortized discount as of September 30, 2019 amounted to $0.

Company repaid all principal and outstanding interest on January 2, 2019.

August 1, 2018, the Company entered into a 10% secured promissory note with a face value of $130,625 pursuant to which the

Company received $125,000, net of an original issue discount of 4.5% ($5,625).

The Company also issued 2,500 5-year warrants

exercisable at $8.00 in connection with purchase of the promissory note.

The proceeds of the note were used to settle in full

a note issued on February 27, 2018.

The Company determined the value associated with the warrants issued in connection with

the note to be $71,373 which was recorded as a debt discount.

The aggregate original issue discount, and debt

discount related to the warrants have been accreted and charged to interest expenses as a financing expense in the amount of

$38,499 for the year ended September 30, 2019.

The unamortized discount as of September 30, 2019 amounted to $0.

The Company repaid all principal and outstanding interest on January 2, 2019.

As of September 30, 2019, the Company

owed $0 in principal and $0 in accrued interest under the terms of the agreement and recorded interest expense of

$3,003 and $0 and for the year ended September 30, 2019 and 2018, respectively.

On August 14, 2018, the Company

executed an unsecured variable interest rate promissory note with a maximum interest rate of 58.57% and a face value of

$19,600 with a financial institution.

Under the terms of the promissory note the Company received $19,600 and agreed to repay

the note and interest evenly over 12 months.

As of September 30, 2018, the Company owed $17,967 in principal and $784 in

accrued interest under the terms of the agreement.

The Company repaid all principal and outstanding interest on October 1,

The Company recorded interest expense of $0 and $0 and for the years ended September 30,

2019 and 2018, respectively.

September 20, 2018, the Company executed a 10% unsecured promissory note with a face value of $52,500 with an investor, net of

an original issue discount of 5% ($2,500).

Under the terms of the promissory note the Company received $50,000 and agreed to repay

the note principal and all accrued interest on December 31, 2018.

The Company also issued 2,500 5-year warrants exercisable at

$8.00 in connection with purchase of the promissory note.

The Company determined the value associated with the warrants issued in connection

with the notes to be $50,000 which was recorded as a debt discount.

The aggregate original issue discount, and debt discount related

to the warrants have been accreted and charged to interest expenses as a financing expense in the amount of $47,353 the year

ended September 30, 2019.

The Company repaid all principal and outstanding interest on December 31, 2018.

The Company recorded

interest expense of $1,323 and $0 and for the year ended September 30, 2019 and 2018, respectively.

On September 21, 2018,

the Company executed a 10% unsecured promissory note with a face value of $52,500 with an investor, the note included an original

issue discount of 5% ($2,500).

Under the terms of the promissory note the Company received $50,000 and agreed to repay the note

principal and all accrued interest on December 31, 2018.

The Company also issued 2,500 5-year warrants exercisable at $8.00 in

connection with purchase of the promissory note.

The Company has determined the value associated with the warrants issued in connection

with the notes to be $50,000 which has been recorded as a debt discount.

The aggregate original issue discount, and debt discount

related to the warrants have been accreted and charged to interest expenses as a financing expense in the amount of $47,353 the

year ended September 30, 2019.

On December 31, 2018, the Company settled all obligations under the promissory note through the

issuance of 2,500 shares of the Company’s common stock and payment of $25,000 in outstanding principal and interest then

outstanding of $1,467.

A loss on settlement of debt of $26,225 was recorded related to the settlement of debt for the year ended

September 30, 2019.

The Company recorded interest expense of $1,323 and $0 and for the year ended September 30, 2019 and 2018,

respectively.

Insurance financing

In February 2018,

the Company executed two unsecured 6.1% installment loans with a total face value of $35,089 with a financial institutional to

finance its insurance policies.

Under the terms of the installment notes the Company received $35,089 and agreed to make equal

payments and repay the notes’

principal 10 months from their dates of issuance.

As of September 30, 2018, the Company owed

$10,257 in principal and $0 in accrued interest under the terms of the agreement.

The Company repaid all principal and outstanding

interest on December 1, 2018.

On February 11, 2019,

the Company executed an unsecured 5.6% installment loan with a total face value of $78,603 with a financial institutional to finance

its insurance policies.

Under the terms of the installment notes the Company received $76,800 and agreed to make equal payments

and repay the note 10 months from the date of issuance.

As of September 30, 2019, $17,467 in principal remained

The Company repaid all principal and outstanding interest on November 4th, 2019.

NOTES PAYABLE

Labrys Fund, LP –

2018 Promissory Note Funding

On March 23, 2018, we

entered into a master convertible promissory note pursuant to which we could

borrow up to $500,000.

On March 23, 2018 the Company borrowed $200,000, less debt issuance costs of $15,750.

The note carries an

original issue discount of 10% ($20,000).

Interest under the convertible promissory note is 12% per annum, and the principal and

all accrued but unpaid interest is due on September 23, 2018.

The Lender also received 23,750 commitment shares at execution as

an inducement for entering into the agreement.

The Company also incurred $15,750 of debt issuance costs on the note which was recorded

as a debt discount.

The note was convertible at any date after the issuance date at the noteholder’s option into shares of

our common stock at a variable conversion price, The Conversion price equals the lesser of (1) 70% multiplied by the lowest "Trading

during the previous 20 Trading Day period ending on the latest complete Trading Day prior to the date of this Note

and (2) 70% multiplied by the lowest "Trading Price"

for the Common Stock during the 20 Trading Day period ending on

the latest complete Trading Day prior to the Conversion Date.

The "Trading Price"

as defined by the agreement is the lesser of:

(a) the lowest trade price on the OTC Pink, OTCQB, or applicable trading market (the

“OTC Market”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder

and (b) the lowest closing bid price on the OTC Market as reported by a Reporting Service designated by the Holder.

recorded a debt discount in the amount of $85,348 in connection with the commitment shares and $98,902 in connection with the initial

valuation of the derivative liability related to the embedded conversion option of the note to be amortized utilizing the effective

interest method of accretion over the term of the note.

On September 19, 2018, all principal and accrued interest of $220,000 and

$12,730, respectively was converted into 25,859 shares of the Company’s common stock resulting to an outstanding balance

of $0 as of September 30, 2018.

The aggregate debt discount have been accreted and charged to interest expenses as a financing expense in the amount of $220,000

during the year ended September 30, 2018.

Fund, LLC –

July 2, 2018 Promissory Note Funding

On July 2, 2018 the Company

entered into a Securities Purchase Agreement with Auctus Fund, LLC (“Auctus”), which was later amended on July 6,

2018, pursuant to which the Company issued to Auctus a Master Convertible Promissory Note (“Note”) pursuant to

which the Company could borrow up to $500,000.

The Company also incurred $11,900 of debt issuance costs on the note which was

recorded as a debt discount.

On July 11, Auctus paid $225,000 less $26,000 in legal and due diligence fees.

The Note has a

maturity date of six months for each tranche funded and the Company has agreed to pay interest on the unpaid principal

balance of the Note at the rate of twelve percent (12%) per annum from the date on which the Note is issued (the “Issue

Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.

The Company has the right to prepay the Note, provided it makes a payment to Auctus as set forth in the Note within 180 days

of its Issue Date.

In connection with the issuance of the Note, the Company issued to Auctus, as a commitment fee, 13,750

shares of its common stock (the “Returnable Shares”) as well as 15,000 shares of its common stock (the

“Non-Returnable Shares”), as further provided in the Note.

The Returnable Shares shall be returned to the

Company’s treasury if the Note is fully repaid and satisfied prior to the date, which is one hundred eighty (180) days

following the Issue Date, subject further to the terms and conditions of the Note.

The Note is convertible at any date after

the issuance date at the noteholder’s option into shares of our common stock at a variable conversion price of 70% of

the lowest closing market price of our common stock during the previous 20 days to the date of the notice of conversion,

subject to adjustment in the case of default.

The Note contains certain covenants, such as restrictions on:

(i) distributions

on capital stock, (ii) stock repurchases, (iii) certain loans, (iii) sales and the transfer of assets, and (iv) participation

in 3(a)(10) transactions.

The Note also contains certain anti-dilution provisions that apply in connection with any stock

split, stock dividend, stock combination, recapitalization or similar transactions.

In addition, subject to

limited exceptions, Auctus will not have the right to convert any portion of the Note if Auctus, together with its

affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock outstanding

immediately after giving effect to its conversion.

The Company recorded a debt discount in the amount of $130,829 in

connection with the Non-returnable shares and $56,271 in connection with the initial valuation of the derivative liability

related to the embedded conversion option of the Note to be amortized utilizing the effective interest method of accretion

over the term of the Note.

On September 21, 2018, all principal and accrued interest of $225,000 and $5,474, respectively was

converted into 25,608 shares of the Company’s common stock resulting to an outstanding balance of $0 as of September

The aggregate debt

discount have been accreted and charged to interest expenses as a financing expense in the amount of $225,000 during the year ended

September 30, 2018.

EMA Financial,

August 21, 2018 Promissory Note Funding

On August 21, 2018

we entered into a Securities Purchase Agreement with EMA Financial, LLC, (“EMA”), pursuant to which we issued and sold

to EMA a convertible promissory note, dated August 21, 2018 in the principal amount of $225,000 (the “Note”).

is due six months from the date of issuance and bears interest at the rate of 12% per annum.

The Company received $199,000 from

the investment less fees and debt issuance costs of $26,000 which was recorded as a debt discount.

In connection with the issuance

of the Note, the Company issued to EMA, as a commitment fee, 13,750 shares of its common stock (the “Returnable Shares”)

as well as 10,000 shares of its common stock (the “Non-Returnable Shares”), as further provided in the Note.

The Returnable

Shares shall be returned to the Company’s treasury if the Note is fully repaid and satisfied prior to the date, which is

one hundred eighty (180) days following August 21, 2018, subject further to the terms and conditions of the Note.

The Note as amended

on September 27, 2018, is convertible at any date after the issuance date at the noteholder’s option into shares of our common

stock at a variable conversion price, equal to the lesser of (i) 70% of the lowest trading price during the previous 20 days and

ending on the latest trading date prior to the date of the Note, or (ii) a 70% of the lowest trading price for our common stock

during the 20 trading day period immediately prior to conversion but subject to a conversion floor price of $30.50.

The floor price

is subject to reset under certain conditions.

We have the right to prepay the Note at any time prior to 180 days following the

closing date.

If we pay after September 24, 2018, we must pay an additional $25,000 as a prepayment penalty.

The Note contains

customary default events which, if triggered and not timely cured, will result in default interest and penalties.

The Note also

contains a right of first refusal provision with respect to future financings by us.

The Company recorded a debt discount in the

amount of $113,727 in connection with the Non-returnable shares and $73,373 in connection with the initial valuation of the derivative

liability related to the embedded conversion option of the Note to be amortized utilizing the effective interest method of accretion

over the term of the Note.

The aggregate debt discount have been accreted and charged to interest expenses as a financing expense

in the amount of $48,955 during the year ended September 30, 2018.

As of September 30, 2018, the Company owed $225,000 in principal

and $2,959 in accrued interest under the terms of the agreement and recorded interest expense of $2,959 during the year ended September

On January 3, 2019,

the Company settled all remaining obligations under the EMA note through the payment of all outstanding principal, prepayment penalties

and interest then outstanding of $225,000, $35,000 and $10,736, respectively.

The unamortized debt discount on the note of $176,045

was fully amortized to interest expense during the year ended September 30, 2019.

In connection with the issuance of the Note,

the Company issued to the Purchaser, as a commitment fee, 13,750 returnable shares of its common stock.

As a result of the repayment

the shares were returned to treasury and cancelled on January 8, 2019.

EMA loans payable consist of the following as of:

September 30,

Current loan payable:

Unamortized debt discount

Total, net of unamortized discount

Labrys Fund, LP

September 19, 2018 Promissory Note Funding

On March 23, 2018,

we entered into a master convertible promissory note pursuant to which we could borrow up to $500,000.

On September 19, 2018 borrowed

$330,000, less debt issuance costs of $20,700.

The note also carries an original issue discount of 10% ($30,000).

Interest under

the convertible promissory note is 12% per annum, and the principal and all accrued but unpaid interest is due six months from

the date of issuance.

The Note, as amended on September 27, 2018, is convertible at any date after the issuance date at the noteholder’s

option into shares of our common stock at a variable conversion price subject to a conversion floor price of $30.50, The Conversion

price equals the lesser of (1) 70% multiplied by the lowest "Trading Price"

during the previous 20 Trading Day period

ending on the latest complete Trading Day prior to the date of this Note and (2) 70% multiplied by the lowest "Trading Price"

for the Common Stock during the 20 Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

"Trading Price"

as defined by the agreement is the lesser of:

(a) the lowest trade price on the OTC Pink, OTCQB, or applicable

trading market (the “OTC Market”) as reported by a reliable reporting service (“Reporting Service”) designated

by the Holder and (b) the lowest closing bid price on the OTC Market as reported by a Reporting Service designated by the Holder.

If the note is not repaid within 180 days of issuance the floor will cease to apply.

The Company recorded a debt discount in the

amount of $279,300 in connection with the initial valuation of the derivative liability related to the embedded conversion option

of the note to be amortized utilizing the effective interest method of accretion over the term of the note.

The aggregate debt

discount have been accreted and charged to interest expenses as a financing expense in the amount of $20,166 during the year ended

September 30, 2018.

On January 3, 2019, the Company

settled all remaining obligations under the Labrys Fund, LP note through the payment of all outstanding principal and

interest then outstanding of $330,000 and $11,609, respectively.

The unamortized discount on the note of $309,834 was fully

amortized to interest expense during the year ended September 30, 2019.

Labrys loans payable consist of the following as of:

Current loan payable:

Unamortized debt discount

Total, net of unamortized discount

Summary of all short-term convertible

Short term convertible notes payable consist of the following as of:

September 30,

Current loan payable:

Unamortized debt discount

Total, net of unamortized discount

Long-Term convertible notes

Securities Purchase Agreement

December 31, 2018

On December 31, 2018,

the Company entered into a Securities Purchase Agreement (the “SPA”) with an otherwise unaffiliated third-party institutional

investor (the “Investor”), pursuant to which the Company issued to the Investor a Senior Secured Redeemable Convertible

Debenture (the “Debenture”) in the aggregate face value of $5,250,000.

applied for a loan from Celtic Bank Corporation, as lender, pursuant to the Paycheck Protection Program of the Coronavirus

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

Small Business

Administration (the "SBA").

On May 15, 2020, the loan was approved and the Company received the proceeds from the

loan in the amount of $ 531,169 (the “PPP Loan”).

The PPP Loan took the form of a promissory note issued by the

Company that matures on May 7, 2022 and bears interest at a rate of 1.0 % per annum.

Monthly principal and interest payments,

less the amount of any potential forgiveness (discussed below), will commence on December 7, 2020.

The PPP Loan provides for

customary events of default, including, among others, those relating to failure to make payments thereunder.

prepay the principal of the PPP Loan at any time without incurring any prepayment penalties.

The PPP Loan is non-recourse

against any individual shareholder, except to the extent that such party uses the loan proceeds for an unauthorized

All or a portion of the PPP Loan may

be forgiven by the SBA and lender upon application by the Company and upon documentation of expenditures in accordance with the

SBA requirements.

Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments,

and covered utilities during the applicable period beginning on the date of loan approval.

For purposes of the CARES Act, payroll

costs exclude compensation of an individual employee in excess of $100,000, prorated annually.

Not more than 25% of the forgiven

amount may be for non-payroll costs.

Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees

with salaries of $100,000 or less annually are reduced by more than 25% .

In the event the PPP Loan, or any portion thereof, is

forgiven pursuant to the PPP, the amount forgiven is applied to outstanding principal.

The Company recorded interest expense of

$ 2,125 and $ 0 for the years ended September 30, 2020 and 2019, respectively.

Insurance financing loans

February 11, 2019, the Company executed an unsecured 5.6% installment loan with a total face value of $ 78,603 with a financial

institutional to finance its insurance policies.

Under the terms of the installment notes the Company received $ 76,800 and agreed

to make equal payments and repay the note 10 months from the date of issuance.

As of September 30, 2019, $ 17,467 in

principal remained outstanding.

The Company repaid all principal and outstanding interest on November 4, 2019.

CONVERTIBLE NOTES

Purchase Agreement – December 31, 2018

On December 31, 2018, the Company entered

into a Securities Purchase Agreement (the “SPA”) with an otherwise unaffiliated third-party institutional investor

(the “Investor”), pursuant to which the Company issued to the Investor a Senior Secured Redeemable Convertible Debenture

(the “Debenture”) in the aggregate face value of $ 5,250,000 .

The note is secured by all assets of the Company.

The Debenture has a maturity date of two years from the issuance date and the Company

has agreed to pay compounded interest on the unpaid principal balance of the Debenture at the rate equal 7.5% per annum.

is payable on the date the applicable principal is converted or on maturity.

The interest must be paid in cash and, in certain

circumstances, may be paid in shares of common stock.

transactions described above closed on December 31, 2018.

In connection with the issuance of the Debenture and pursuant to

the terms of the SPA, the Company issued to the Investor 10,000 shares of common stock and a Common Stock Purchase Warrant to

acquire up to 308,333 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an

exercise price of $20.00 per share with respect to 125,000 Warrant Shares, $25.00 with respect to 100,000 Warrant Shares,

$50.00 with respect to 50,000 Warrant Shares and $75.00 with respect to 33,333 Warrant Shares.

The warrants and shares issued

were fair valued and a debt discount of $4,995,000 was recorded as a result of the issuance of the warrants and shares and

the recognition of a beneficial conversion feature on the Debenture.

The Company also paid a $5,000 due diligence fee prior

to receiving the funding which was also recorded as a debt discount.

Pursuant to the terms of the

SPA, the Investor agreed to tender to the Company the sum of $5,000,000, of which the Company received the full amount as of the

Prior to the maturity date,

provided that no trigger event has occurred, the Company will have the right at any time upon 30 trading days’

prior written

notice, in its sole and absolute discretion, to redeem all or any portion of the Debenture then outstanding by paying to the Investor

an amount equal to 140% of the of the portion of the Debenture being redeemed.

The Investor may convert

the Debenture into shares of the Company’s common stock at a conversion price equal to 95% of the mathematical average of

the 5 lowest individual daily volume weighted average prices of the common stock, less $0.50 per share, during the period beginning

on the issuance date and ending on the maturity date subject to certain floor price restrictions.

In the event certain equity conditions

exist, the Company may require that the Investor convert the Debenture.

In no event shall the Debenture be allowed to affect a

conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Investor and its affiliates

would exceed 4.99% of the outstanding shares of the common stock of the Company.

While the note is outstanding

if Triggering Events occur the conversion rate may be decreased by 10% and the interest rate increased by 10% for each Triggering

On January 7, 2019, the

investor converted $2,500,000 in principal and $875,000 in interest as a conversion premium, for 178,473 shares of the Company

common stock at an effective conversion price of $18.90, due to a trigger event for the Company not filing its annual report on

Form 10-K for the fiscal year ended September 30, 2018 on or before December 31, 2018.

On March 6, 2019, the investor

converted $1,000,000 in principal and $350,000 in interest as a conversion premium, for 71,389 shares of the Company common stock

at an effective conversion price of $18.90, due to a trigger event for the Company not filing its annual report on Form 10-K for

the fiscal year ended September 30, 2018 on or before December 31, 2018.

On July 9, 2019, in

accordance with the terms of the agreement the investor was issued an additional 45,614 shares of common stock due to the decrease

in stock price resulting in an effective conversion price of $15.06.

Debenture has a maturity date of two years from the issuance date and the Company has agreed to pay compounded interest on the

unpaid principal balance of the Debenture at the rate equal 7.5 % per annum.

Interest is payable on the date the applicable principal

is converted or on maturity.

The interest must be paid in cash and, in certain circumstances, may be paid in shares of common stock.

The transactions described above closed

on December 31, 2018.

In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued

to the Investor 10,000 shares of common stock and a Common Stock Purchase Warrant to acquire up to 308,333 shares of common stock

for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $ 20.00 per share with respect

to 125,000 Warrant Shares, $ 25.00 with respect to 100,000 Warrant Shares, $ 50.00 with respect to 50,000 Warrant Shares and $ 75.00

with respect to 33,333 Warrant Shares.

The warrants and shares issued were fair valued and a debt discount of $ 4,995,000 was recorded

as a result of the issuance of the warrants and shares and the recognition of a beneficial conversion feature on the Debenture.

The Company also paid a $ 5,000 due diligence fee prior to receiving the funding which was also recorded as a debt discount.

Pursuant to the terms of the SPA, the

Investor agreed to tender to the Company the sum of $ 5,000,000 , of which the Company received the full amount as of the closing.

Prior to the maturity date, provided

that no trigger event has occurred, the Company will have the right at any time upon 30 trading days’ prior written notice,

in its sole and absolute discretion, to redeem all or any portion of the Debenture then outstanding by paying to the Investor an

amount equal to 140% of the of the portion of the Debenture being redeemed .

The Investor may convert the Debenture

into shares of the Company’s common stock at a conversion price equal to 95% of the mathematical average of the 5 lowest

individual daily volume weighted average prices of the common stock, less $0.50 per share, during the period beginning on the issuance

date and ending on the maturity date subject to certain floor price restrictions.

In the event certain equity conditions exist,

the Company may require that the Investor convert the Debenture.

In no event shall the Debenture be allowed to affect a conversion

if such conversion, along with all other shares of Company common stock beneficially owned by the Investor and its affiliates would

exceed 4.99% of the outstanding shares of the common stock of the Company.

While the note is outstanding if Triggering

Events occur the conversion rate may be decreased by 10% and the interest rate increased by 10% for each Triggering Event which

may result in the issuance of additional shares.

On March 4, March 13, and May 1, 2020

the Company entered into amendments (the “Amendments”) with the Investor.

The Amendments amended the SPA and

Debenture, as follows:

1) A Floor Price of $ 1.50 per share of Common Stock was placed on conversions

by the Investor under the Debenture, with the Floor Price on the First Debenture not applying in the occurrence of an event of

2) Lowered the closing price of the Common Stock which may trigger an

event of default from $ 5.00 per share to $ 1.75 per share for 5 consecutive trading days provided that any event of default will

not be triggered, if at all, until after September 29, 2020;

3) Deleted the requirement that the Investor convert the Debenture at

maturity and;

4) Allowed the Company, to not reserve or issue to the Investor more

shares of Common Stock than were reserved for the Investor prior to the amendment date until September 29, 2020.

January 7, 2019, the Investor converted $ 2,500,000 in principal and $ 875,000 in

interest as a conversion premium, for 178,473 shares of the Company common stock at an effective conversion price of $ 18.90 , due

to a trigger event for the Company not filing its annual report on Form 10-K for the fiscal year ended September 30, 2018 on or

before December 31, 2018.

On March 6, 2019, the Investor converted

$ 1,000,000 in principal and $ 350,000 in interest as a conversion premium, for 71,389 shares of the Company common stock at an effective

conversion price of $ 18.90 , due to a trigger event for the Company not filing its annual report on Form 10-K for the fiscal year

ended September 30, 2018 on or before December 31, 2018.

On July 9, 2019, in accordance

1 unchanged sentence

price resulting in an effective conversion price of $ 15.06 .

On July 19, 2019, an investor

converted $500,000 in principal and $175,000 in interest as a conversion premium, for 45,109 shares of the Company common stock

at an effective conversion price of $15.00.

On August 23, 2019, in

accordance with the terms of the agreement the investor was issued an additional 43,721 shares of common stock due to the decrease

in stock price resulting in an effective conversion price of $7.60.

On September 16, 2019,

in accordance with the terms of the agreement the investor was issued an additional 61,500 shares of common stock due to the decrease

in stock price resulting in an effective conversion price of $7.30.

On July 16, 2019, in accordance

with the terms of the agreement the Investor was issued an additional 18,246 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $15.06.

On July 19, 2019, the Investor converted

$ 500,000 in principal and $ 175,000 in interest as a conversion premium, for 45,109 shares of the Company common stock at an effective

conversion price of $ 15.00 due to a trigger event for the Company not filing its annual report on Form 10-K for the fiscal year

ended September 30, 2018 on or before December 31, 2018.

On August 23, 2019, in accordance

with the terms of the agreement the Investor was issued an additional 43,721 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $ 7.60 .

On September 16, 2019, in accordance

with the terms of the agreement the Investor was issued an additional 61,500 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $ 7.30 .

On October 17, 2019, in accordance

with the terms of the agreement the Investor was issued an additional 90,000 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $ 3.74 .

On December 5, 2019, in accordance

with the terms of the agreement the Investor was issued an additional 97,100 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $ 3.15 .

On February 10, 2020, in accordance

with the terms of the agreement the Investor was issued an additional 100,000 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $ 3.15 .

On February 21, 2020, in accordance

with the terms of the agreement the Investor was issued an additional 108,770 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of 2.69 .

On March 2, 2020, in accordance

with the terms of the agreement the Investor was issued an additional 167,100 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $ 1.87 .

On March 5, 2020, in accordance

with the terms of the agreement the Investor was issued an additional 154,835 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $ 1.83 .

On March 13, 2020, in accordance

with the terms of the agreement the Investor was issued an additional 116,000 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $ 1.50 .

On March 20, 2020, in accordance with

the terms of the agreement the Investor was issued an additional 163,800 shares of common stock due to the decrease in stock price

resulting in an effective conversion price of $ 1.50 .

On April 7, 2020, in accordance with

the terms of the agreement the Investor was issued an additional 172,400 shares of common stock due to the decrease in stock price

resulting in an effective conversion price of $ 1.50 .

On April 9, 2020, in accordance with

the terms of the agreement the Investor was issued an additional 794,308 shares of common stock due to the decrease in stock price

resulting in an effective conversion price of $ 1.50 .

On April 15, 2020, the Investor

converted $ 1,250,000 in principal and $ 437,500 in interest, for 1,125,000 shares of the Company common stock at an effective conversion

price of $ 1.50 due to a trigger event for the Company not filing its annual report on Form 10-K for the fiscal year ended September

30, 2018 on or before December 31, 2018.

As of September 30, 2020, the Debenture was fully converted into shares of the Company’s

common stock.

The aggregate debt discount

has been accreted and charged to interest expenses as a financing expense in the amount of $4,466,526 during the year ended September

The Debenture at September 30,

2019 consists of:

Unamortized debt discount

Total, net of unamortized discount

Securities Purchase Agreement –

has been accreted and charged to interest expenses as a financing expense in the amount of $ 783,474 and $ 4,466,526 during the year

ended September 30, 2020 and 2019, respectively.

Securities Purchase Agreement –

April 17, 2019

On April 17, 2019, the

Company entered into a Securities Purchase Agreement (the “Agreement”) with an otherwise unaffiliated third-party institutional

investor (the “Investor”), pursuant to which the Company agreed to issue to the Investor a $10,750,000 face value Senior

Secured Redeemable Convertible Promissory Note (the “Debenture”) with a 7.5% original issue discount, 215 shares of

our Series B Preferred Stock with a 7.5% original issue discount, a Common Stock Purchase Warrant (the “Warrant”) on

a cash-only basis to acquire up to 230,000 shares (the “Warrant Shares”) of our common stock and 125,000 shares of

our Common Stock.

The aggregate purchase price for the Debenture, the Series B Preferred Stock the Warrant and the Common Stock

is $20,000,000.

(See Notes 10 and 11 for additional details.)

The Debenture is secured by all assets of the Company.

Pursuant to the first

closing of the agreement, which occurred on April 18, 2019, the Investor agreed to tender to the Company the sum of $10,000,000,

for the Debenture, the Common Stock and the Warrant.

No additional closings to sell the preferred stock had occurred as of September

The Debenture has a maturity

date of two years from the issuance date and the Company has agreed to pay compounded

interest on the unpaid principal balance of the Debenture at the rate equal 7.5% per annum.

Interest is payable on the date the

applicable principal is converted or on maturity.

The interest must be paid in cash and, in certain circumstances, may be paid

in shares of common stock.

Prior to the maturity date,

provided that no trigger event has occurred, the Company will have the right at any time upon 30 trading days’

prior written

notice, in its sole and absolute discretion, to redeem all or any portion of the Debenture then outstanding by paying to the Investor

an amount equal to 145% of the of the portion of the Debenture being redeemed.

The Investor may convert

the Debenture into shares of the Company’s common stock at a conversion price equal to 90% of the mathematical average of

the 5 lowest individual daily volume weighted average prices of the common stock, less $0.75 per share, during the period beginning

on the issuance date and ending on the maturity date subject to certain floor price restrictions.

In the event certain equity conditions

exist, the Company may require that the Investor convert the Debenture.

In no event shall the Debenture be allowed to effect a

conversion if such conversion, along with all other shares of Company common stock beneficially owned by the Investor and its affiliates

would exceed 4.99% of the outstanding shares of the common stock of the Company.

While the note is outstanding

if Triggering Events occur the conversion rate may be decreased by 10% and the interest rate increased by 10% for each Triggering

The Debenture at September 30,

2019 consists of:

Unamortized debt discount

Total, net of unamortized discount

On April 17, 2019, the Company entered

into a Securities Purchase Agreement (the “Agreement”) with an otherwise unaffiliated third-party institutional investor

(the “Investor”), pursuant to which the Company agreed to issue to the Investor a $ 10,750,000 face value Senior Secured

Redeemable Convertible Promissory Note (the “Note”) with a 7.5 % original issue discount, 215 shares of our Series

B Preferred Stock with a 7.5 % original issue discount, a Common Stock Purchase Warrant (the “Warrant”) on a cash-only

basis to acquire up to 230,000 shares (the “Warrant Shares”) of our common stock and 125,000 shares of our Common Stock.

The aggregate purchase price for the Note, the Series B Preferred Stock the Warrant and the Common Stock is $ 20,000,000 .

Notes 13 and 14 for additional details.) The Note was secured by all assets of the Company.

Pursuant to the first closing of

the Agreement, which occurred on April 18, 2019, the Investor agreed to tender to the Company the sum of $ 10,000,000 ,

for the Note, the Common Stock and the Warrant.

No additional closings to sell the preferred stock have occurred and the

Series B preferred stock was removed under the amendments to the Agreement discussed below.

The Note has a maturity date of two

years from the issuance date and the Company has agreed to pay compounded interest on the unpaid principal balance of

the Note at the rate equal 7.5 %

Interest is payable on the date the applicable principal is converted or on maturity.

The interest must be paid in

cash and, in certain circumstances, may be paid in shares of common stock.

Prior to the maturity date, provided

that no trigger event has occurred, the Company will have the right at any time upon 30 trading days’ prior written notice,

in its sole and absolute discretion, to redeem all or any portion of the Note then outstanding by paying to the Investor an

amount equal to 145% of the of the portion of the Note being redeemed.

The Investor may convert the Note

into shares of the Company’s common stock at a conversion price equal to 90% of the mathematical average of the 5 lowest

individual daily volume weighted average prices of the common stock, less $0.75 per share, during the period beginning on the issuance

date and ending on the maturity date subject to certain floor price restrictions.

In the event certain equity conditions exist,

the Company may require that the Investor convert the Note.

In no event shall the Note be allowed to effect a conversion

if such conversion, along with all other shares of Company common stock beneficially owned by the Investor and its affiliates would

exceed 4.99% of the outstanding shares of the common stock of the Company.

While the Note is outstanding if Triggering

Events occur the conversion rate may be decreased by 10% and the interest rate increased by 10% for each Triggering Event which

may result in the issuance of additional shares.

On March 4, March 13, and May 1, 2020

the Company entered into amendments (the “Amendments”) with the Investor.

The Amendments amended the Agreement and Note, as

1) A Floor Price of $ 1.50 per share of Common Stock was placed on conversions

by the Investor under the Note, not applying in the occurrence of an event of default;

2) Lowered the closing price of the Common Stock which may trigger an

event of default from $ 5.00 per share to $ 1.75 per share for 5 consecutive trading days provided that any event of default will

not be triggered, if at all, until after September 29, 2020;

3) Deleted the requirement that the Investor convert the Note at maturity and

4) Allowed the Company, to not reserve or issue to the Investor more shares of Common Stock than

were reserved for the Investor prior to the amendment date until September 29, 2020.

5) The Company and the Investor also agreed to remove

the Second Closing and Company Option to sell an aggregate of an additional $10,000,000 in securities under the Note.

result of these changes, the Company was authorized to terminate any and all documentation related to the 100,000 shares of Series

B Preferred Stock that the Company's Board of Directors had previously voted to designate back on April 16, 2019.

During the year ended September

30, 2020, the Investor converted $ 10,750,000 in principal and $ 1,612,500 in interest, for 8,241,665 shares of the Company common

stock at an effective conversion price of $ 1.50 .

As of September 30, 2020, the Note was fully converted

into shares of the Company’s common stock.

The aggregate debt discount

has been accreted and charged to interest expenses as a financing expense in the amount of $2,429,795 during the year ended September

Summary of all long term convertible

Principal –

December 31, 2018 Note

Principal –

April 17, 2019 Note

Total principal on convertible notes (long-term)

Unamortized debt discount

Total convertible notes, net of unamortized discount (long-term)

PARTY TRANSACTIONS

Zachary Bradford –

Chief Executive Officer, Director and Former Chief Financial Officer

The Company had a consulting

agreement with ZRB Holdings, Inc, an entity wholly owned by Zachary Bradford, our Chief Executive Officer and director, for management

In accordance with this agreement, as amended, Mr.

Bradford earned $430,437 and $194,527, respectively during the years

ended September 30, 2019 and 2018.

The Company owed Mr.

Bradford $0 and $89,351 in deferred compensation and reimbursable expenses

as of September 30, 2019 and 2018, respectively.

Deferred compensation is reported under due to related parties in the consolidated

balance sheets.

The agreement was terminated in October 2019 when Mr.

Bradford stepped down as the CFO and took the position of

CEO and accepted the associated employment agreement.

has been accreted and charged to interest expenses as a financing expense in the amount of $ 8,320,205 and $ 2,429,795 during the

year ended September 30, 2020 and 2019, respectively.

On October 1, 2019, the Company adopted

the amendments to ASC 842, Leases, which requires lessees to recognize lease assets and liabilities arising from operating leases

on the balance sheet.

The Company adopted the new lease guidance using the modified retrospective approach and elected the transition

option issued under ASU 2018-11, Leases (Topic 842) Targeted Improvements, allowing entities to continue to apply the legacy guidance

in ASC 840, Leases, to prior periods, including disclosure requirements.

Accordingly, prior period financial results and disclosures

have not been adjusted.

The Company has operating leases under

which it leases its branch offices and corporate headquarters, one of which is with a related party.

Upon adoption of the new lease

guidance, on October 1, 2019, the Company recorded a right of use asset and corresponding lease liability of $ 85,280 and $ 85,280 ,

respectively, on the consolidated balance sheet.

As of September 30, 2020, the Company's operating lease right of use asset and

operating lease liability totaled $ 40,711 and $ 41,294 , respectively.

A weighted average discount rate of 10 % was used in the measurement

of the right of use asset and lease liability as of October 1, 2019.

As the rate implicit in the lease is not readily determinable,

the Company's incremental collateralized borrowing rate is used to determine the present value of lease payments.

This rate gives

consideration to the applicable Company collateralized borrowing rates and is based on the information available at the commencement

The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term

of 12 months or less;

therefore, these leases are not recorded on the Company’s Consolidated Balance Sheet, but rather, lease

expense is recognized over the lease term on a straight-line basis.

The Company's leases have remaining

lease terms between one year to two years , with a weighted average lease term of 0.4 years at September 30, 2020.

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 October 1, 2019.

The following is a schedule of the

Company's operating lease liabilities by contractual maturity as of September 30, 2020:

Fiscal year ending September 30, 2021

Total Lease Payments

imputed interest

Total present value of lease liabilities

Total operating lease costs of $ 117,223

and $ 76,220 the years ended September 30, 2020 and 2019, respectively, were included as part of administrative expense.

RELATED PARTY TRANSACTIONS

Zachary Bradford – Chief

Executive Officer, Director and Former Chief Financial Officer

Fiscal year ending September 30, 2019

Agreement - During the year ended September 30, 2019, the Company had a consulting agreement with ZRB Holdings, Inc., an entity

wholly owned by Zachary Bradford, our Chief Executive Officer and director, for management services.

In accordance with this agreement,

as amended, Mr.

Bradford earned $ 430,437 during the year ended September 30, 2019.

The agreement was terminated in at the end of

the fiscal year ending September 30, 2019 when Mr.

Bradford took the position of CEO and accepted the associated employment agreement.

During the year ended September 30, 2020, the Company paid Blue

Chip Accounting, LLC (“Blue Chip”) $ 131,248 for accounting, tax, administrative services and reimbursement for office

Blue Chip is 50 % beneficially owned by Mr.

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

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

The Company also sub-leases office space from Blue Chip (see note 11 for additional details).

During the year ended September 30,

30, 2018, the Company executed eleven 15% promissory notes with a total face value of $189,690 and executed two

additional 15% promissory notes with a total face value of $25,030 during the year ended September 30, 2019 with Zachary Bradford,

its Chief Executive Officer.

Under the terms of the promissory notes the Company received a total of $214,720 and agreed to repay

the notes on demand.

The Company recorded interest expense of $7,648 during the year ended September 30, 2019.

On January 3, 2019,

the Company settled all remaining obligations under the notes through the payment of all outstanding principal and interest then

As of September 30, 2019, Company owed $0 in principal and $0 in accrued interest under the terms of the agreement.

Bryan Huber –

Innovation Officer and Former Chief Operations Officer and Director

On August 28, 2018, the Company

executed an agreement with Zero Positive, LLC an entity controlled by Mr.

In accordance with the agreement with Zero Positive,

Huber earned $171,202, during the year ended September 30, 2019.

Under the agreement Mr.

was also granted a one-time bonus of $50,000 on August 28, 2018, payment of which will be deferred until certain conditions are

As of September 30, 2019, the bonus had not been paid.

The term of the agreement is one year and automatically renews until

cancelled by either party.

2020, $ 14,725 was paid to Blue Chip for rent.

Bryan Huber – Former Officer and Director

On August 28, 2018, the Company executed an agreement with Zero

Positive, LLC an entity controlled by Mr.

In accordance with the agreement with Zero Positive, LLC, Mr.

Huber earned $ 125,154

and $ 171,202 , during the year ended September 30, 2020 and 2019.

On March 12, 2020, the Agreement was terminated upon the execution

of a separation agreement.

All amounts owed from all agreements totaling $ 90,000 were paid in full.

On September 28, 2018, in

connection with the consulting agreement executed with Zero Positive, LLC Company issued warrants to purchase 90,000 shares

of common stock at an exercise price of $8.00 per share to Zero Positive.

The warrants were valued at $2,607,096 using the

Black Scholes option pricing model based upon the following assumptions:

term of 10 years, risk free interest rate of 3.05%,

a dividend yield of 0% and volatility rate of 191%.

The warrants vest as follows:

30,000 vested immediately, the balance vest

evenly on the last day of each month over forty-two months beginning August 31, 2018.

connection with the consulting agreement executed with Zero Positive, LLC, the Company issued warrants to purchase 90,000

shares of common stock at an exercise price of $ 8.00

per share to Zero Positive.

The warrants were valued at $ 2,607,096

using the Black Scholes option pricing model based upon the following assumptions:

years , risk free interest rate of 3.05 % ,

a dividend yield of 0 %

and volatility rate of 191 % .

warrants vest as follows:

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

months beginning August 31, 2018 .

As of September 30, 2020, 62,857

warrants had vested, and the Company recorded an expense of $496,590 during the year ended September 30, 2019.

year ended September 30, 2018, the Company had a consulting agreement with Bryan Huber, for management services.

accordance with this agreement, as amended, Mr.

Huber earned $180,612 during year ended September 30, 2018.

Larry McNeill –

and former Chairman of the Board of Directors

During the year ended September

30, 2018, the Company executed eight 15% promissory notes with a total face value of $163,100 and executed an additional 15% promissory

note with a total face value of $50,000 during the year ended September 30, 2019 with Larry McNeill, a Director of the Company.

Under the terms of the promissory notes the Company received a total of $213,100 and agreed to repay the notes on demand.

recorded interest expense of $8,016 during the year ended September 30, 2019.

On December 31, 2018, the Company settled all remaining

obligations under the note through the payment of all outstanding principal and interest then outstanding.

Effective January 1, 2019,

the Company agreed to pay non-executive board members $2,500 per month.

McNeil earned $22,500 in Board compensation during

the year ended September 30, 2019.

Matthew Schultz- Former

Chief Executive Officer and Director

The Company has a consulting agreement

warrants had vested, and the Company recorded an expense of $ 1,158,709

during the year ended September 30, 2020 and 2019, respectively.

Matthew Schultz- Executive Chairman of the Board

and Former Chief Executive Officer

The Company had a consulting agreement

with Matthew Schultz, our former Chief Executive Officer, for management services.

1 unchanged sentence

Schultz earned $ 0 and $ 445,437 , respectively during years ended September 30, 2020 and 2019.

The agreement was terminated

on October 7, 2019 when Mr.

The agreement was terminated on

October 7, 2019 when Mr.

Schultz stepped down as the CEO and took the position of Chairman of the Board.

During the year ended

September 30, 2018, the Company executed two 15% promissory notes with a total face value of $30,000 with the spouse of the former

CEO of our Company.

Under the terms of the promissory notes the Company received $30,000 and agreed to repay the note on demand.

On January 1, 2019, the Company settled all remaining obligations under the notes through the payment of all outstanding principal

and interest then outstanding.

As of September 30, 2019, Company owed $0 in principal and $0 in accrued interest under the terms

of the agreements.

The Company recorded interest expense of $1,147 during the year ended September 30, 2019.

STOCKHOLDERS’

The Company’s authorized

capital stock consists of 20,000,000 shares of common stock and 10,000,000 shares of preferred stock, par value $0.001 per share.

As of September 30, 2019, there were 4,679,018 shares of common stock issued and outstanding and 100,000 shares of preferred stock

issued and outstanding.

On December 10, 2019, the

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

common stock.

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

Unless otherwise noted, impacted amounts and share information

in the consolidated financial statements and notes thereto as of and for the fiscal years ended September 30, 2019 and 2018, have

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

Amendment to Articles of Incorporation

On August 9, 2019, the Company

filed a Certificate of Amendment to its Articles of Incorporation to increase its authorized shares of common stock from

Schultz received $ 1,086,200

as compensation for his services as chairman of the board during the year ended September 30, 2020.

The Company additionally entered

into an agreement on November 15, 2019 with an organization to provide general investor relations and consulting services that

Schultz is affiliated with.

The Company paid the organization $ 49,500 in fees plus $ 176,000 in expense reimbursements for the

year ended September 30, 2020.

The agreement was terminated in March 2020.

STOCKHOLDERS’

The Company’s authorized capital stock consists of 35,000,000

shares of common stock and 10,000,000 shares of preferred stock, par value $ 0.001 per share.

As of September 30, 2020, there were

17,390,979 shares of common stock issued and outstanding and 100,000 shares of preferred stock issued and outstanding.

Amendment(s) to Articles of Incorporation

On August 9, 2019, the Company filed

a Certificate of Amendment to its Articles of Incorporation to increase its authorized shares of common stock from 100,000,000

to 200,000,000 .

The amendment was previously approved by written consent of the Company’s Board and

more than a majority of the voting power of its stockholders and delivered to stockholders of record as of the close of

business July 2, 2019 pursuant to a Definitive Information Statement on Schedule 14C.

As a result, of the reverse split

mentioned above, the effect of the filed amendment reduced the authorized shares to 20,000,000.

On October 4, 2019, pursuant to Article IV

of our Articles of Incorporation, our Board of Directors voted to increase the number of shares of preferred stock designated as

Series A Preferred Stock from one million (1,000,000) shares to two million (2,000,000) shares, par value $0.001.

Under the Certificate of Designation, holders

of Series A Preferred Stock will be entitled to quarterly dividends on 2% of our earnings before interest, taxes and amortization.

The amendment was previously approved by written consent of the Company’s Board and more than a majority

of the voting power of its stockholders and delivered to stockholders of record as of the close of business July 2, 2019 pursuant

to a Definitive Information Statement on Schedule 14C.

As a result of the reverse split mentioned above, the effect of the filed

amendment reduced the authorized shares to 20,000,000 .

On October 4, 2019, pursuant to Article

IV of our Articles of Incorporation, our Board of Directors voted to increase the number of shares of preferred stock designated

as Series A Preferred Stock from one million ( 1,000,000 ) shares to two million ( 2,000,000 ) shares, par value $ 0.001 .

Under the Certificate of Designation,

holders of Series A Preferred Stock will be entitled to quarterly dividends on 2% of our earnings before interest, taxes and amortization.

The dividends are payable in cash or common stock.

4 unchanged sentences

of our common stock on all matters submitted to shareholders at a rate of forty-five (45) votes for each share held.

The rights of the holders of Series A Preferred

Stock are defined in the relevant Amendment to the Certificate of Designation filed with the Nevada Secretary of State on October

9, 2019, attached hereto as Exhibit 3.11, and is incorporated by reference herein.

The rights of the holders of

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

of State on October 9, 2019.

On October 2, 2020, the Company filed a Certificate of Amendment

to its Articles of Incorporation with the Nevada Secretary of State to increase its authorized shares of common stock to 35,000,000 .

Certificate of Preferred Stock Designation

On April 16, 2019,

pursuant to Article IV of our Articles of Incorporation, the Company’s Board of Directors voted to designate a class of

preferred stock entitled Series B Preferred Stock, consisting of up to one hundred thousand (100,000) shares, par value

Under the Certificate of Designation, the holders of Series B Preferred Stock are entitled to the following powers,

designations, preferences and relative participating, optional and other special rights, and the following qualifications,

limitations and restrictions, among others as set forth in the Certificate of Designation:

holders of shares of Series B Preferred Stock will have no right to vote on any matters, questions or proceedings of the Company

including, without limitation, the election of directors;

on the date of issuance, the Series B Preferred Stock will accrue cumulative in kind accruals (“the Accruals”) at the

rate of 7.5% per annum;

any liquidation, dissolution or winding up of the Company, the holders of the Series B Preferred Stock will be entitled to be paid

out of the assets of the Company available for distribution to its stockholders an amount with respect to each share of Series

B Preferred Stock equal to $5,000.00 (the “Face Value”), plus an amount equal to any accrued but unpaid Accruals thereon

(the “Liquidation Value”);

maturity, the Company may redeem the Series B Preferred Stock by paying the holder the Liquidation Value;

maturity, the Company may redeem the Series B Preferred stock on 30 days’

notice by paying 145% of the outstanding Face Value

the Company determines to liquidate, dissolve or wind-up its business and affairs, the Company will, within three trading days

of such determination and prior to effectuating any such action, redeem all outstanding shares of Series B Preferred Stock;

the event of a conversion of any shares of Series B Preferred Stock, the Company will (a) satisfy the payment of the Conversion

Premium, which is defined as the Face Value of the shares converted multiplied by the product of 7.5% and the number of whole years

between issuance and maturity, and (b) issue to the holder of the shares of Series B Preferred Stock a number of conversion shares

equal to the Face Value divided by the applicable Conversion Price (defined as 90% of the of the 5 lowest individual daily volume

weighted average prices of the Common Stock from issuance to conversion less $0.75 per share, but no less than the Floor Price

respect to the number of shares converted;

While the note is outstanding if Triggering Events occur the conversion rate may be

decreased by 10% and the interest rate increased by 10% for each Triggering Event.

In the event of certain defaults, conversion

price may not be subject to a floor.

at any time the Company grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities

or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then

holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which holder

could have acquired if holder had held the number of shares of Common Stock acquirable upon conversion of Series B Preferred Stock;

maturity (2 years from issuance), all outstanding shares of Series B Preferred Stock shall automatically convert into common stock

at the Conversion Price;

At no time may the holders of Series B Preferred Stock own more than 4.99% of the outstanding common stock

in the Company.

On April 16, 2019, pursuant to Article

IV of our Articles of Incorporation, the Company’s Board of Directors voted to designate a class of preferred stock entitled

Series B Preferred Stock, consisting of up to one hundred thousand ( 100,000 ) shares, par value $ 0.001 .

Shares of the Series B Preferred

Stock were never issued and on March 6, 2020, the Company withdrew the Certificate of Designation for the Series B Preferred Stock.

At the time of withdrawal, no shares of Series B Preferred Stock were issued and outstanding.

Stock issuances during the year ended September 30, 2020

The Company issued 1,964,313 shares

of common stock in accordance with the terms of the convertible debt agreement due to the decrease in stock price.

for additional details.)

The Company issued 22,000 shares of common stock for

services rendered to independent consultants at a fair value of $ 54,000 .

The Company issued 793 shares of common

stock as a result of rounding related to the reverse stock split.

The Company issued 95,699 shares of

common stock in relation to the acquisition of p2k (See Note 5 for additional details.)

In relation to the Securities Purchase

Agreement dated December 31, 2018, the Company issued 1,125,000 shares of common stock for the conversion of $ 1,250,000 in principal

and $ 437,500 in interest at an effective conversion price of $ 1.50 .

(See Note 10 for additional details)

In relation to the Securities Purchase Agreement dated

April 17, 2019, the Company issued 8,241,665 shares of common stock for the conversion of $ 10,750,000 in principal and $ 1,612,500

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

(See Note 10 for additional details)

The Company issued 28,381 shares of common stock as board

and executive compensation at a fair value of $ 71,600 .

The Company issued 1,230,770 shares of common stock as a result

of a registered direct offering resulting in total consideration of $ 4,000,000 .

The Company issued 6,913 shares of common stock as a

result of a cashless exercise of 15,000 common stock warrants.

The Company issued 26,427 shares of

common stock in relation to the acquisition of GridFabric (See Note 3 for additional details.)

Common stock returned during the year ended September

As a result of a note payoff on December 5, 2019, 5,000

shares common stock were returned to treasury and cancelled on January 13, 2020.

As a result of the cancellation of an investor relations

services contract, 25,000 shares were returned to treasury and cancelled on February 10, 2020.

Series A Preferred Stock issuances during the year

ended September 30, 2020

On October 4, 2019, the Company

authorized the issuance of a total of seven hundred and fifty thousand ( 750,000 ) shares of its designated Series A Preferred Stock

to members of its board of directors for services rendered.

A fair value of $ 0.02 per share was determined by the Company.

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

Common Stock issuances during the

year ended September 30, 2019

During the period commencing

October 1, 2018 through December 31, 2018, the Company received $361,800 from 14 investors pursuant to private placement agreements

with the investors to purchase 45,225 shares of the Company’s $0.001 par value common stock at a purchase price equal to

During the period commencing October

1, 2018 through December 31, 2018, the Company received $ 361,800 from 14 investors pursuant to private placement agreements with

the investors to purchase 45,225 shares of the Company’s $ 0.001 par value common stock at a purchase price equal to $ 8.00

for each share of common stock.

On September 11, 2018,

the Company entered into an agreement with Regal Consulting, LLC for investor relations services.

Under this agreement the Company

agreed to issue 3,000 shares of the Company’s common stock per month as compensation for services plus additional cash compensation.

On September 11, 2018, the Company

entered into an agreement with Regal Consulting, LLC for investor relations services.

Under this agreement the Company agreed to

issue 3,000 shares of the Company’s common stock per month as compensation for services plus additional cash compensation.

During the year ended September 30, 2019, the Company issued a total of 36,000 shares of its common stock in accordance with the

2 unchanged sentences

entered into an agreement with a consultant for services.

Under this agreement the Company agreed to issue 3,000 shares of the

Company’s common stock which vest evenly over a six-month period from the agreement date.

During the year ended September

30, 2019, the Company recorded stock compensation of $68,818 was recorded as a result of the stock issued under the agreement.

On October 2, 2018, an investor

exercised warrants to purchase 300 shares of the Company’s $0.001 par value common stock at a purchase price equal to $3.63

for each share of Common stock.

Under this agreement the Company agreed to issue 3,000

shares of the Company’s common stock which vest evenly over a six month period from the agreement date.

During the year

ended September 30, 2019, the Company recorded stock compensation of $ 68,818 was recorded as a result of the stock issued

under the agreement.

On October 2, 2018, an investor exercised

warrants to purchase 300 shares of the Company’s $ 0.001 par value common stock at a purchase price equal to $ 3.63 for each

share of Common stock.

The Company receive $ 1,088 as a result of this exercise.

The Company issued 10,000

shares in relation to a Securities purchase agreement executed on December 31, 2018.

The Company issued 10,000 shares in

relation to a Securities purchase agreement executed on December 31, 2018.

(See Note 10 for additional details.)

On December 31, 2018,

the Company settled $25,000 of a promissory note (See Note 7) through

the issuance of 2,500 shares of the Company’s common stock.

The shares were valued at $51,225 and a $26,225 loss on settlement

of debt was recorded as a result of the issuance.

On January 7, 2019, a total

of 144,417 shares of the Company’s common stock were issued in connection with the cashless exercise of 150,000 common stock

warrants at an exercise price of $0.83.

On January 7, 2019,

an investor converted $2,500,000 in principal and $875,000 in interest as a conversion premium, for 178,473 shares of the Company

common stock at an effective conversion price of $18.90.

On January 22, 2019, in accordance

with a merger agreement the Company issued 175,000 shares of the Company’s common stock.

(see Note 3 for

additional details.)

On February 26, 2019, a total

of 24,622 shares of the Company’s common stock were issued in connection with the cashless exercise of 25,000 common stock

warrants at an exercise price of $0.83.

On March 6, 2019, an investor

converted $1,000,000 in principal and $350,000 in interest as a conversion premium, for 71,389 shares of the Company common stock

at an effective conversion price of $18.90.

On December 31, 2018, the Company

settled $ 25,000 of a promissory note through the issuance of 2,500 shares of the Company’s common stock.

The shares were

valued at $ 51,225 and a $ 26,225 loss on settlement of debt was recorded as a result of the issuance.

During the year ended September 30,

2019, the Company issued 217,896 shares of common stock to three investors in connection with the cashless exercise of 225,000

common stock warrants at an exercise price of $ 0.83 .

On January 7, 2019, an investor converted

$ 2,500,000 in principal and $ 875,000 in interest as a conversion premium, for 178,473 shares of the Company common stock at an

effective conversion price of $ 18.90 .

January 22, 2019, in accordance with a merger agreement the Company issued 175,000 shares of the Company’s common stock.

March 6, 2019, an investor converted $ 1,000,000 in principal and $ 350,000 in interest as a conversion premium, for 71,389 shares

of the Company common stock at an effective conversion price of $ 18.90 .

(See Note 10 for additional details.)

On March 26, 2019, a total of

48,857 shares of the Company’s common stock were issued in connection with the cashless exercise of 50,000 common

stock warrants at an exercise price of $0.83.

On April 9, 2019, an

investor exercised warrants to purchase 900 shares of the Company’s $0.001 par value common stock at a purchase price equal

to $3.63 for each share of Common stock.

April 9, 2019, an investor exercised warrants to purchase 900 shares of the Company’s $ 0.001 par value common stock at a

purchase price equal to $ 3.63 for each share of Common stock.

The Company received $ 3,268 as a result of this exercise.

The Company issued 125,000

shares in relation to a Securities purchase agreement executed on April 17, 2019.

(See Note 8 for additional details.)

On June 12, 2019, the Company

entered into an agreement with SylvaCap Media for investor relations services.

Under this agreement the Company agreed to issue

25,000 shares of the Company’s common stock as compensation for services for a six month period plus additional cash compensation.

The 25,000 shares vest upon issuance but if the agreement is terminated within 90 days of execution the shares are to be returned

and cancelled.

On September 10, 2019, the Company terminated the agreement and as a result the shares are required to be returned

and cancelled.

No stock compensation expense has been recognized as the shares did not vest as a result of the termination.

September 30, 2019, the shares had not yet been returned.

On July 9, 2019, in accordance

with the terms of the agreement the investor was issued an additional 45,614 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $15.06.

Company issued 125,000 shares in relation to a Securities purchase agreement executed on April 17, 2019.

(See Note 10 for additional

June 12, 2019, the Company entered into an agreement with SylvaCap Media for investor relations services.

Under this agreement

the Company agreed to issue 25,000 shares of the Company’s common stock as compensation for services for a six month period

plus additional cash compensation.

The 25,000 shares vest upon issuance but if the agreement is terminated within 90 days of execution

the shares are to be returned and cancelled.

On September 10, 2019, the Company terminated the agreement and as a result the shares

are required to be returned and cancelled.

No stock compensation expense has been recognized as the shares did not vest as a result

of the termination.

As of September 30, 2019, the shares had not yet been returned.

July 9, 2019, in accordance with the terms of the agreement the investor was issued an additional 45,614 shares of common stock

due to the decrease in stock price resulting in an effective conversion price of $ 15.06 .

(See Note 10 for additional details.)

On July 16, 2019, in accordance

with the terms of the agreement the investor was issued an additional 18,246 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $15.06.

July 16, 2019, in accordance with the terms of the agreement the investor was issued an additional 18,246 shares of common stock

due to the decrease in stock price resulting in an effective conversion price of $ 15.06 .

(See Note 10 for additional details.)

On July 19, 2019, an investor

converted $500,000 in principal and $175,000 in interest as a conversion premium, for 45,109 shares of the Company common stock

at an effective conversion price of $14.96.

July 19, 2019, an investor converted $ 500,000 in principal and $ 175,000 in interest as a conversion premium, for 45,109 shares

of the Company common stock at an effective conversion price of $ 14.96 .

(See Note 10 for additional details.)

On August 23, 2019, in

accordance with the terms of the agreement the investor was issued an additional 43,721 shares of common stock due to the decrease

in stock price resulting in an effective conversion price of $7.60.

August 23, 2019, in accordance with the terms of the agreement the investor was issued an additional 43,721 shares of common stock

due to the decrease in stock price resulting in an effective conversion price of $ 7.60 .

(See Note 10 for additional details.)

On September 16, 2019, in accordance

with the terms of the agreement the investor was issued an additional 61,500 shares of common stock due to the decrease in stock

price resulting in an effective conversion price of $7.30.

September 16, 2019, in accordance with the terms of the agreement the investor was issued an additional 61,500 shares of common

stock due to the decrease in stock price resulting in an effective conversion price of $ 7.30 .

(See Note 10 for additional details.)

Common stock returned during

the year ended September 30, 2019

In connection with

the issuance of the Auctus Fund, LLC Convertible Note, the Company issued to Auctus, as a commitment fee 13,750 returnable shares

of its common stock.

As a result of the conversion of the note on September 21, 2018, the shares were returned to treasury and

cancelled on December 21, 2018.

In connection with the issuance of the EMA Financial, LLC Convertible Note, the Company issued

to EMA, as a commitment fee 13,750 returnable shares of its common stock.

As a result, of the repayment of the note on January

3, 2019, the shares were returned to treasury and cancelled on January 8, 2019.

In connection with

the issuance of the Note dated November 11, 2017, the Company issued, as a commitment fee 10,000 returnable shares of its common

As a result, of the repayment of the note on August 13, 2019, the shares were returned to treasury and cancelled.

Common Stock issuances during

the year ended September 30, 2018

During the period commencing

October 1, 2017 through September 30, 2018, the Company received $271,900 from 16 investors pursuant to private placement agreements

with the investors to purchase 33,988 shares of the Company’s $0.001 par value common stock at a purchase price equal to

$8.00 for each share of common stock.

During the year ended September

30, 2018, the Company issued 4,164 shares of the Company’s $0.001 par value common stock to settle accounts payable.

shares were valued at $75,734 and the Company recorded a loss on settlement of debt of $41,092 result of the issuance.

In connection with the issuance

of the March 23, 2018, Labrys Fund, LP Convertible Note, the Company issued, as a commitment fee, 13,750 shares of its common stock

(the “Returnable Shares”) as well as 10,000 shares of its common stock (the “Non-Returnable Shares”).

agreement was amended on June 29, 2018 and as a result the returnable shares were no longer returnable.

Consequently, the fair

value of the returnable shares of $218,626 was charged to interest expense.

On September 19, 2018, all principal and accrued interest

of $220,000 and $12,730, respectively was converted into 25,859 shares of the Company’s common stock.

(See Note 8 for additional

In connection with the issuance

of the Auctus Fund, LLC Convertible Note, the Company issued to Auctus, as a commitment fee, 13,750 shares of its common stock

(the “Returnable Shares”) as well as 15,000 shares of its common stock (the “Non-Returnable Shares”).

September 21, 2018, all principal and accrued interest of $225,000 and $5,474, respectively was converted into 25,608 shares of

the Company’s common stock.

Subsequent to September 30, 2018, as a result of the conversion the 13,750 returnable shares

were returned to the Company and cancelled.

In connection with the issuance

of a the EMA Financial, LLC Convertible Note, the Company issued EMA, as a commitment fee, 13,750 shares of its common stock (the

“Returnable Shares”) as well as 10,000 shares of its common stock (the “Non-Returnable Shares”).

to September 30, 2018, the Company repaid all obligations under the note and the 13,750 returnable shares were returned to the

Company and cancelled on January 8, 2019.

On September 11, 2018, the

Company entered into an agreement with Regal Consulting, LLC for investor relations services.

Under this agreement the Company

agreed to issue 3,000 shares of the Company’s common stock per month as compensation for services plus $20,000 per month

As of September 30, 2018, the Company had issued 3,000 shares of its common stock in accordance with the agreement.

compensation of $55,100 was recorded as a result of the stock issued under the agreement.

STOCK WARRANTS

The following is a summary of

stock warrant activity during the years ended September 30, 2019 and September 30, 2018.

stock returned during the year ended September 30, 2019

a result of a conversion of a note on September 21, 2018, 13,750 shares common stock which were previously issued as a commitment

fee were returned to treasury and cancelled on December 21, 2018.

a result of note payoffs, 23,750 shares of common stock which were previously issued as a commitment fee returned to treasury

and cancelled.

The following is a summary of stock

warrant activity during the years ended September 30, 2020 and September 30, 2019.

Number of Warrant Shares

11 unchanged sentences

Balance, September 30, 2020

As of September 30, 2019,

the outstanding warrants have a weighted average remaining term of was 2.86 years and an intrinsic value of $880,574.

of September 30, 2019, there are warrants exercisable to purchase 1,274,063 shares of common stock in the Company and 40,000 unvested

As of September 30, 2020, the outstanding

warrants have a weighted average remaining term of was 1.96 years and an intrinsic value of $ 1,702,464 .

September 30, 2020, there are warrants exercisable to purchase 1,276,208 shares of common

stock in the Company and 22,857 unvested

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

the warrants require a cash investment to exercise as follows, 5,000 required

a cash investment of $8.00 per share, 449,865 require a cash investment of $15.00 per share, 125,000 require a cash investment

of $20.00 per share, 103,000 require a cash investment of $25.00 per share, 200,000 require an investment of $35.00 per share,

10,000 require an investment of $40.00 per share, 60,000 require an investment of $50.00 per share, 38,333 require a cash investment

of $75.00 per share and 5,000 require a cash investment of $100.00 per share.

317,865 of the outstanding warrants contain provisions

allowing a cashless exercise at their respective exercise prices.

Warrant activity for the year ended

September 30, 2019

On October 15, 2018,

the Company entered into an agreement with a consultant for services.

Under this agreement the Company agreed to issue 3,000 warrants

to purchase shares of the Company’s common stock at an exercise price of $25.00 for a period of five years which vest evenly

over a six-month period from the agreement date.

During the year ended September 30, 2019, the Company recorded stock compensation

of $68,643 as a result of the stock issued under the agreement.

the warrants require a cash investment to exercise as follows ,

5,000 required a cash investment of $ 8.00 per share, 449,865 require a cash investment of $ 15.00 per share, 125,000 require a cash

investment of $ 20.00 per share, 103,000 require a cash investment of $ 25.00 per share, 200,000 require an investment of $ 35.00

per share, 10,000 require an investment of $ 40.00 per share, 60,000 require an investment of $ 50.00 per share, 38,333 require a

cash investment of $ 75.00 per share and 5,000 require a cash investment of $ 100.00 per share.

302,867 of the outstanding warrants

contain provisions allowing a cashless exercise at their respective exercise prices.

During the year ended September

30, 2020, the Company recognized $ 1,158,709 in stock-based compensation for the outstanding warrants.

As of September 30, 2020, there was

no remaining unamortized stock-based compensation related to outstanding warrants.

Warrant activity for the year ended September 30, 2020

On September 25, 2020, a total of 6,913

shares of the Company’s common stock were issued in connection with the cashless exercise of 15,000 common stock warrants

at an exercise price of $ 8.00 .

Warrant activity for the year ended September 30, 2019

On October 15, 2018, the Company entered

into an agreement with a consultant for services.

Under this agreement the Company agreed to issue 3,000 warrants to purchase shares

of the Company’s common stock at an exercise price of $ 25.00 for a period of five years which vest evenly over a six-month

period from the agreement date.

During the year ended September 30, 2019, the Company recorded stock compensation of $ 68,643 as

a result of the stock issued under the agreement.

The warrants were valued using the Black-Scholes valuation model.

On December 31, 2018, in

connection with a Securities purchase agreement (see Note 8 for additional details) the Company issued Common Stock Purchase Warrants

to acquire up to 308,333 shares of common stock for a term of three years on a cash-only basis at an exercise price of $20.00 per

On December 31, 2018, in connection

with a Securities purchase agreement (see Note 10 for additional details) the Company issued Common Stock Purchase Warrants to

acquire up to 308,333 shares of common stock for a term of three years on a cash-only basis at an exercise price of $ 20.00 per

share with respect to 125,000 Warrant Shares, $ 25.00 with respect to 100,000 Warrant Shares, $ 50.00 with respect to 50,000 Warrant

Shares and $ 75.00 with respect to 33,333 Warrant Shares.

On April 18, 2019, in connection

with a Securities purchase agreement (see Note 8 for additional details) the Company issued Common Stock Purchase Warrants to

acquire up to 230,000 shares of common stock for a term of three years on a cash-only basis at an exercise price of $35.00

per share with respect to 200,000 Warrant Shares, $40.00 with respect to 10,000 Warrant Shares, $50.00 with respect to 10,000

Warrant Shares, $75.00 with respect to 5,000 Warrant Shares and $100.00 with respect to 5,000 Warrant Shares.

On August 28, 2018, in

connection with the Consulting agreement executed with Zero Positive, LLC the Company issued warrants to purchase 90,000

shares of common stock at an exercise price of $8.00 per share to Zero Positive.

The warrants were valued at $2,607,096 using

the Black Scholes option pricing model.

On August 28, 2018, in connection with

the Consulting agreement executed with Zero Positive, LLC the Company issued warrants to purchase 90,000 shares of common stock

at an exercise price of $ 8.00 per share to Zero Positive.

The warrants were valued at $ 2,607,096 using the Black Scholes option

pricing model.

The warrants vest as follows:

30,000 warrants vested immediately, the balance vest

evenly on the last day of each month over the forty-two months beginning August 31, 2018.

As of September 30, 2019, 50,000

warrants had vested, and the Company recorded an expense of $496,590 during the year ended September 30, 2019.

for additional details.)

30,000 warrants vested immediately, the balance vest evenly on the last day of each

month over the forty-two months beginning August 31, 2018 .

As of September 30, 2019, 50,000 warrants had vested, and the Company

recorded an expense of $ 496,590 during the year ended September 30, 2019.

On January 22, 2019, in

accordance with a merger agreement, CleanSpark issued;

a five-year warrant to purchase 50,000 shares of CleanSpark common

stock at an exercise price of $16.00 per share, and a five-year warrant to purchase 50,000 shares of CleanSpark common stock

at an exercise price of $20.00 per share.

(see note 3 for additional details.) The warrants were valued at $1,102,417 and

$1,102,107, respectively.

year warrant to purchase 50,000

shares of CleanSpark common stock at an exercise price of $ 16.00

per share, and a five year warrant to purchase 50,000 shares of CleanSpark common stock at an exercise price of $ 20.00 per

The warrants were valued at $ 1,102,417 and $ 1,102,107 , respectively.

On April 18, 2019, in connection with

a Securities purchase agreement (see Note 10 for additional details) the Company issued Common Stock Purchase Warrants to acquire

up to 230,000 shares of common stock for a term of three years on a cash-only basis at an exercise price of $ 35.00 per share with

respect to 200,000 Warrant Shares, $ 40.00 with respect to 10,000 Warrant Shares, $ 50.00 with respect to 10,000 Warrant Shares,

$ 75.00 with respect to 5,000 Warrant Shares and $ 100.00 with respect to 5,000 Warrant Shares.

The Black-Scholes model utilized the

following inputs to value the warrants granted during the year ended September 30, 2019:

Fair value assumptions –

Fair value assumptions – Warrants:

September 30, 2019

3 unchanged sentences

Expected volatility

Expected dividends

On January 7, 2019, a total

of 144,417 shares of the Company’s common stock were issued in connection with the cashless exercise of 150,000 common stock

warrants with an exercise prices of $0.83.

On February 26, 2019, a

total of 24,623 shares of the Company’s common stock were issued in connection with the cashless exercise of 25,000 common

stock warrants at an exercise price of $0.83.

On March 26, 2019, a total

of 48,857 shares of the Company’s common stock were issued in connection with the cashless exercise of 50,000 common stock

warrants at an exercise price of $0.83.

As of September 30, 2019,

the Company expects to recognize $1,158,709 of stock-based compensation for the non-vested outstanding warrants over a weighted-average

period of 2.26 years.

Warrant activity for the year

ended September 30, 2018

During the year ended

September 30, 2018, certain investors exercised warrants to purchase 25,840 shares of the Company’s common stock at purchase

prices ranging from $0.83 to $15.00.

The Company received total proceeds of $44,938 from the warrant exercises.

During the year ended September

30, 2018, a total of 45,989 shares of the Company’s common stock were issued in connection with the cashless exercise of

55,600 common stock warrants with an exercise prices of $3.60.

On January 1, 2018, the Company

issued warrants to purchase 10,000 shares of common stock at an exercise price of $8.00 per share to an advisor for business advisory

The warrants were valued at $234,095 using the Black Scholes option pricing model.

The warrants vest evenly over the

six-month service period ended September 30, 2018.

On June 15, 2018, the Company

issued 11,660 5-year warrants exercisable at $8.00 to a lender in connection with a promissory note agreement.

(See Note 8 for

additional details.)

On August 1, 2018, the

Company issued 2,500 5-year warrants exercisable at $8.00 to a lender in connection with a promissory note agreement.

8 for additional details.)

On August 28, 2018, in

connection with the Consulting agreement executed with Zero Positive, LLC.

the Company issued warrants to purchase 90,000

shares of common stock at an exercise price of $8.00 per share to Zero Positive.

The warrants were valued at $2,607,096 using

the Black Scholes option pricing model.

The warrants vest as follows:

30,000 warrants vested immediately, the balance vest

evenly on the last day of each month over the forty-two months beginning August 31, 2018.

As of September 30, 2018, 32,857

warrants had vested, and the Company recorded an expense of $951,797 during the year ended September 30, 2018.

for additional details.)

On September 20, 2018, the

Company issued 2,500 5-year warrants exercisable at $8.00 to a lender in connection with a promissory note agreement.

8 for additional details.)

On September 21, 2018, the

Company issued 2,500 5-year warrants exercisable at $8.00 to a lender in connection with a promissory note agreement.

8 for additional details.)

The Black-Scholes model utilized the

following inputs to value the warrants granted during the year ended September 30, 2018:

Fair value assumptions –

September 30, 2018

Risk free interest rate

254 % - 268 %

Expected term (years)

Expected volatility

Expected dividends

During the year ended September 30,

2019, the Company issued 217,896 shares of common stock in connection with the cashless exercise of 225,000 common stock warrants

at an exercise price of $ 0.83 .

STOCK OPTIONS

The Company adopted 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.

The Company adopted 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.

A total of 300,000 shares were initially reserved for issuance under the Plan.

1 unchanged sentence

2020, there were 22,052 shares available for issuance under the plan.

The Plan allows the Company

to grant incentive stock options, non-qualified stock options, stock appreciation right, or restricted stock.

The incentive stock

options are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option

to 2017 Incentive Plan

October 7, 2020, the Company executed that certain first amendment to the 2017 Equity Incentive Plan to increase its option pool

from 300,000 to 1,500,000 shares of common stock.

(See Note 20 for additional details)

The Plan allows the Company to grant

incentive stock options, non-qualified stock options, stock appreciation right, or restricted stock.

The incentive stock options

are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option is

The incentive stock options are limited to persons who are regular full-time

2 unchanged sentences

but not limited to, employees, independent agents, consultants and attorneys, who the

Company’s Board believes have contributed, or will contribute, to the success of the Company.

Non-qualified options may be

17 unchanged sentences

Balance, September 30, 2020

As of September 30,

2019, there are options exercisable to purchase 55,241 shares of common stock in the Company and 26,000 unvested options outstanding

that cannot be exercised until vesting conditions are met.

As of September 30, 2019, the outstanding options have a weighted average

remaining term of was 2.87 years and an intrinsic value of $4,438.

As of September 30, 2020, there are

options exercisable to purchase 225,451 shares of common stock in the Company and 52,497 unvested options outstanding that cannot

be exercised until vesting conditions are met.

As of September 30, 2020, the outstanding options have a weighted average remaining

term of 2.37 years and an intrinsic value of $ 1,808,181 .

During the year ended September 30,

2020, the Company recognized $ 753,923 in stock-based compensation for the outstanding stock options.

Option activity for the year ended September 30, 2020

During the year ended

September 30, 2019, the Company issued 49,321 options to purchase shares of common stock to employees, the shares were granted

at quoted market prices ranging from $8.50 to $59.00.

The options were valued at issuance using the Black Scholes model and stock

compensation expense of $326,100 was recorded as a result of the issuances.

The Black-Scholes model utilized the following inputs

to value the options granted during the year ended September 30, 2019:

Fair value assumptions –

During the year ended September

30, 2020, the Company issued 233,233 options to purchase shares of common stock to employees, the shares were granted at quoted

market prices ranging from $ 4.50 to $ 8.50 .

The options were valued at issuance using the Black Scholes model and stock compensation

expense of $ 716,740 was recorded as a result of the issuances.

The Black-Scholes model utilized the

following inputs to value the options granted during year ended September 30, 2020:

Fair value assumptions – Options:

September 30, 2020

3 unchanged sentences

Expected volatility

124 % - 209 %

Expected dividends

As of September 30, 2019, the

Company expects to recognize $171,600 of stock-based compensation for the non-vested outstanding options over a weighted-average

period of 2.9 years.

Option activity for the year

ended September 30, 2018

During the year ended

September 30, 2018, the Company issued 6,230 options to purchase shares of the common stock to employees, the shares were granted

at quoted market prices ranging from $15.70 to $34.50.

The shares were valued at issuance using the Black Scholes model and stock

compensation expense of $130,000 was recorded as a result of the issuances.

On March 10, 2018 the Company

issued a total of 25,000 options to four consultants for advisory services.

The options vest evenly 12 months from issuance.

options expire 24 months after issuance and require a cash investment to exercise.

The options were valued at issuance using the

Black Scholes model at $342,500 and amortized of the term of the agreement.

As of September 30, 2020, the Company expects to recognize

$ 180,334 of stock-based compensation for the non- vested outstanding options over a weighted-average period of 2.37 years.

Option activity for the year ended

September 30, 2019

During the year ended September 30,

was been expensed as stock-based compensation.

The Black-Scholes model utilized the following inputs

to value the options granted during the year ended September 30, 2018:

Fair value assumptions –

2019, the Company issued 49,321 options to purchase shares of common stock to employees, the shares were granted at quoted market

prices ranging from $ 8.50 to $ 59.00 .

The options were valued at issuance using the Black Scholes model and stock compensation expense

of $ 326,100 was recorded as a result of the issuances.

The Black-Scholes model utilized the

following inputs to value the options granted during the year ended September 30, 2019:

Fair value assumptions – Options:

September 30, 2019

3 unchanged sentences

Expected volatility

145 % - 271 %

Expected dividends

The Company provides for

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

FASB ASC 740 requires the use of an asset and liability approach

in accounting for income taxes.

Deferred tax assets and liabilities are recorded based on the differences between the financial

statement and tax bases of assets and liabilities and the tax rates in effect currently.

FASB ASC 740 requires the

reduction of deferred tax assets by a valuation allowance, if, based on the weight of available evidence, it is more likely

than not that some or all of the deferred tax assets will not be realized.

In the Company’s opinion, it is uncertain

whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset.

a valuation allowance equal to the deferred tax asset has been recorded.

The total deferred tax asset is approximately $8.9

million as of September 30, 2019 which is calculated by multiplying a 21% estimated tax rate by the cumulative net operating

loss (NOL) of approximately $42.3 million.

Due to the enactment of

the Tax Reform Act of 2017, we have calculated our deferred tax assets using an estimated corporate tax rate of 21%.

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.

The significant components

of the Company's deferred tax assets and liabilities as of September 30, 2019 and 2018 are as follows:

The Company provides for income taxes

under FASB ASC 740, Accounting for Income Taxes.

FASB ASC 740 requires the use of an asset and liability approach in accounting

for income taxes.

Deferred tax assets and liabilities are recorded based on the differences between the financial statement and

tax bases of assets and liabilities and the tax rates in effect currently.

FASB ASC 740 requires the reduction

of deferred tax assets by a valuation allowance, if, based on the weight of available evidence, it is more likely than not that

some or all of the deferred tax assets will not be realized.

In the Company’s opinion, it is uncertain whether they will

generate sufficient taxable income in the future to fully utilize the net deferred tax asset.

Accordingly, a valuation allowance

equal to the deferred tax asset has been recorded.

The total deferred tax asset is approximately $ 11.0 million as of September

30, 2020 which is calculated by multiplying a 21 % estimated tax rate by the cumulative net operating loss (NOL) of approximately

$ 52.5 million.

Due to the enactment of the Tax Reform

Act of 2017, we have calculated our deferred tax assets using an estimated corporate tax rate of 21 % .

US 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.

The significant components of the

Company's deferred tax assets and liabilities as of September 30, 2020 and 2019 are as follows:

As of September

Cumulative tax net operating losses (in millions)

Cumulative tax net operating losses

(in millions)

Deferred tax asset (in millions)

8 unchanged sentences

ended September 30, 2020 the actual deferred tax asset and associated valuation allowance available to the Company may differ

from management’s estimates.

The tax years 2015-2019 remained open to examination for federal income tax purposes by the

2 unchanged sentences

AND CONTINGENCIES

Office leases

The Company’s corporate

offices are located at 70 North Main Street, Suite 105, Bountiful, Utah 84010.

The Company occupies the leased space on a month

to month basis at a rate of $850 per month.

Future minimum lease payments under the

operating leases for the facilities as of September 30, 2019, are $0.

On May 15, 2018, the Company

executed a 37-month lease agreement, which commenced on July 1, 2018 at 4360 Viewridge Avenue, Suite C, San Diego,

The agreement calls for the Company to make payments of $4,057 in base rent per month through July 31, 2021

subject to an annual 3% rent escalation.

Future minimum lease payments under the

operating leases for the facilities as of September 30, 2019, are as follows:

Fiscal year ending September 30, 2020

Fiscal year ending September 30, 2021

Utah Corporate Office

November 22, 2019, the company entered into a lease to relocate the corporate office to 1185 South 1800 West, Suite 3, Woods Cross,

The agreement calls for the Company to make payments of $ 2,300 in base rent per month through February 28, 2021.

lease term is on an annual basis beginning on March 1, 2020.

May 15, 2018, the Company executed a 37 month lease agreement, which commenced on July 1, 2018 at 4360 Viewridge Avenue,

Suite C, San Diego, California.

The agreement calls for the Company to make payments of $ 4,057 in base rent per month through

July 31, 2021 subject to an annual 3 % rent escalation.

Future minimum lease payments under the operating leases for the

facilities as of September 30, 2020, are as follows:

year ending September 30, 2021 $ 43,170

Vegas Offices

January 2, 2020, the Company entered into a sublease agreement for office space at 8475 S.

Eastern Ave., Suite 200, Las Vegas,

The agreement cal ls for the Company to make monthly payments of $ 1,575 in base rent through January 1, 2021.

The lease term is on an annual basis beginning January 2, 2020.

The Company assumed p2k’s lease

agreement entered into on October 17, 2017 at 7955 W.

Badura Ave., Suite 1040, Las Vegas, NV 89113.

The agreement calls for $ 1,801

in base rent through October 31, 2020.

The lease expired on October 31, 2020.

The Company did not renew this lease.

Contractual contingencies

On April 6, 2020, the Company entered

into a joint venture agreement with a third party to procure, distribute, and supply Personal Protective Equipment (PPE) for hospitals

and frontline medical personnel.

The agreement is effective until December 31, 2020.

The Company contributed capital in

the amount of $ 660,000 to assist with the procurement of these products.

The agreement resulted in income of $ 20,000 for the year

ended September 30, 2020 and the return of all capital contributed.

The income is reported as other income, net of all other costs.

Contingent consideration

On August 31, 2020, the Company

acquired GridFabric, LLC.

Pursuant to the terms of the purchase agreement, additional shares of the Company’s common

stock valued at up to $ 750,000

will be issuable if GridFabric achieves certain revenue and product release milestones.

(See note 3 for additional

Legal contingencies

From time to time we may be

subject to litigation.

Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude

can remain unknown for significant periods of time.

From time to time we may be subject

to litigation.

Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can

remain unknown for significant periods of time.

We have acquired liability insurance to reduce such risk exposure to the Company.

Despite the measures taken, such policies may not cover future litigation, or the damages claimed may exceed our coverage which

could result in continent liabilities.

CUSTOMERS AND VENDORS

For the years ended September 30, 2019 and 2018, the

Company had the following customers that represented more than 10% of sales.

could result in contingent liabilities.

For a description of our material pending legal proceedings, please

see Part I, Item III of this Annual Report on Form 10-K.

MAJOR CUSTOMERS AND VENDORS

For the years ended September 30, 2020

and 2019, the Company had the following customers that represented more than 10% of sales.

September 30, 2020

September 30, 2019

For the years ended September 30, 2020

and 2019, the Company had the following suppliers that represented more than 10% of direct material costs.

1 unchanged sentence

September 30, 2019

SEGMENT REPORTING

We disclose segment information that is consistent with

the way in which management operates and views the business.

Our operating structure contains the following reportable segments:

Energy Segment – Consisting of our CleanSpark,

LLC., CleanSpark Critical Power Systems, Inc.

and GridFabric, LLC lines of business, this segment provides services, equipment

and software to the energy industry.

Digital Agency Segment – p2kLabs, Inc.

design, software development and other technology-based consulting services.

SEGMENT REPORTING - Segmnent Reporting Assets

For the Year Ended September 30,

Inter-segment

$ ( 119,555 )

Cost of revenues

Operating expenses

Segment Income/(loss) from operations

( 15,375,581 )

( 15,143,116 )

Capital expenditures

Depreciation and amortization

As of September 30, 2020

Accounts Receivable

SUBSEQUENT EVENTS

International Land Alliance, Inc.

On November 5, 2019, CleanSpark entered into a binding Memorandum

of Understanding (the “MOU”) with International Land Alliance, Inc., a Wyoming corporation (“ILAL”), in

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

projects, and its customers.

Pursuant to the terms of the MOU, the parties will work

in good faith and pursue the following priorities over the next twelve (12) months:

The Company will perform feasibility studies to outline the details and scope of developing microgrid energy solutions to support ILAL projects.

ILAL will (a) exclusively sell the Company’s products and services as part of ILAL’s power solution for its offering of off-grid properties, and (b) include the Company’s mPulse DER Energy Manager within the off-grid energy project bids;

The Company will provide on-site testing, training, and support services to ILAL’s projects and operations

Strategic Investment

In connection with the MOU, and in order to support the

power and energy needs of ILAL’s development and construction of certain projects, the Company entered into a Securities

Purchase Agreement, dated as of November 6, 2019, with ILAL (the “SPA”).

Pursuant to the terms of the

SPA, ILAL sold, and the Company purchased 1,000 shares of Series B Preferred Stock of ILAL for an aggregate purchase price of $500,000,

less certain expenses and fees.

In connection with the Stock Transaction, ILAL also issued 350,000 shares of its common stock to

the Company as commitment shares.

ILAL may issue additional shares of its common stock to the Company if certain conditions are

not satisfied.

Increase in Authorized Number of Series A Preferred Stock

On October 4, 2019, pursuant to Article IV of the Company’s Articles of Incorporation, the Company’s Board of Directors

voted to increase the number of shares of preferred stock designated as Series A Preferred Stock from one million (1,000,000) shares

to two million (2,000,000) shares, par value $0.001.

Under the Certificate of Designation, holders of Series A Preferred Stock will be entitled to quarterly dividends on 2% of our

earnings before interest, taxes and amortization.

The dividends are payable in cash or common stock.

The holders will also have

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

The holders are further

entitled to have the Company 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 the Company’s common stock on all matters submitted to

shareholders at a rate of forty-five (45) votes for each share held.

Issuance of Series A Preferred Stock

On October 4, 2019, the Company authorized the issuance

of a total of seven hundred and fifty thousand (750,000) shares of its designated Series A Preferred Stock to members of its board

of directors for services rendered.

Issuance of Common stock for convertible debt

On December 5, 2019, in accordance with the terms of the

agreement the investor was issued an additional 97,100 shares of common stock due to the decrease in stock price resulting in an

effective conversion price of $3.20.

(see Note8 for additional details.)

Reverse stock split

On December 10, 2019, the Financial

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

common stock.

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

On October 2, 2020, the Company filed a Certificate

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

to 35,000,000 .

On October 7, 2020, the Company executed a first amendment

to its 2017 Equity Incentive Plan to increase its option pool from 300,000 to 1,500,000 shares of common stock.

On November 9,

2020, we filed a registration statement on Form S-8 to register the additional shares under the first amendment to the 2017 Equity

Incentive Plan.

On October 6, 2020, the Company, issued 4,444,445 shares

of the Company’s common stock in connection with a firm commitment underwritten public offering at a price to the public

of $ 9.00 per share.

The Company received net proceeds from the sale of the shares, after deducting underwriting discounts and commissions

and other offering expenses payable by the Company, of $ 37.2 million.

The offering closed on October 9, 2020.

October 26, 2020, the Company issued 236,000 shares

to employees, officers and directors with a fair value of $ 1,904,520 and 142,500 fully

vested options with a fair value of $ 987,675 for

performance during the 2020 fiscal year.

The options have exercise prices ranging from $ 8.07 to $ 9.00 and

In addition, the

Company granted 222,250 shares and 84,000 options to purchase common stock to officers which are subject to future vesting

conditions in accordance with Company goals and milestones.

On December 9, 2020, the Company, entered into an

Agreement and Plan of Merger with ATL Data Centers LLC, (“ATL”), CLSK Merger Sub, LLC, a wholly-owned subsidiary

of the Company (“Merger Sub”), and Sellers.

The Merger closed on December 10, 2020.

At the closing, Merger Sub

merged with and into ATL, and ATL survived the Merger, continuing its existence as a wholly-owned subsidiary of the Company.

In exchange, at closing, the Company issued 1,618,285 shares

of restricted common stock of the Company valued at $ 19.4

million based on the

average closing price of the common stock for the five trading days including and immediately preceding the closing date of

$11.988 per share, to the Sellers, of which:

(i) 642,309 Shares valued at $7.7 million would be fully earned on closing, and

(ii) an additional 975,976 Shares valued at $11.7 million being issued to escrow and subject to holdback pending satisfaction

of certain future milestones, with all such shares subject to a lock up of no less than 180 days and a leak out of no more

than 10% of average daily trading value of the prior 30 days.

The Company also assumed approximately $6.9 million in existing

debt of ATL at closing.

In connection with the acquisition, the Company issued 41,708 shares to the broker of the

transaction and has agreed to issue an additional 10,427 shares upon achievement of certain revenue milestones.

Changes in and Disagreements

1 unchanged sentence

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