CLEANSPARK, INC. 10-K

Item 9A. Controls and Procedures EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer (CEO) and Chief Financial Officer (CFO), with assistance from other members of management, has reviewed the effectiveness of our disclosure controls and procedures as of September 30, 2020 and, based on his evaluation, has concluded that the disclosure controls and procedures were not effective as of such date due to a material weakness in internal control over financial reporting, described below. MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and the dispositions of our assets; (2) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with appropriate authorizations; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness for 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. Under the supervision of and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of September 30, 2020, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We identified a material weakness in the design of internal control related to the following areas: (i) Inadequate controls over information technology. This material weakness did not result in any identified material misstatements to the financial statements, and there were no changes to previously released financial results. Based on this material weakness, management concluded that at September 30, 2020, internal control over financial reporting was not effective. Following identification of the material weakness and prior to filing this Annual Report on Form 10-K, we completed substantive procedures for the year ended September 30, 2020. Based on these procedures, management believes that our consolidated financial statements included in this Form 10-K have been prepared in accordance with U.S. GAAP. Our CEO and CFO has certified that, based on their knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material respects the financial condition, results of operations and cash flows of CleanSpark as of, and for, the periods presented in this Form 10-K. MaloneBailey, LLP has issued an unqualified opinion on our financial statements, which appears on page F-1. 26 Table of Contents REMEDIATION Management has implemented and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: adopting a different financial reporting software that has increased controls built into the system functionality which began on the first day of fiscal 2021. We believe that this action will remediate the material weakness, once management has performed its assessment of our internal controls over financial reporting including the remedial measures described above. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING Except for the material weakness identified as of September 30, 2020, and except for the remedial measures described above, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of fiscal 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. INHERENT LIMITATIONS ON INTERNAL CONTROLS Notwithstanding the foregoing, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Limitations inherent in any control system include the following: · Judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes. · Controls can be circumvented by individuals, acting alone or in collusion with others, or by management override · The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. · Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. · The design of a control system must reflect the fact that resources are constrained, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm on the Company’s internal controls as the Company is a non-accelerated filer and is thus not required to provide such a report. Item 9B. Other Information None. 27 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance The following table sets forth the names, ages and positions of our current directors and executive officers. Name Age Position(s) Zachary K. Bradford 34 Chief Executive Officer, President, and Director Lori L. Love 39 Chief Financial Officer Amanda Kabak 45 Chief Technology Officer Amer Tadayon 49 Chief Revenue Officer S. Matthew Schultz 51 Executive Chairman, Chairman of the Board and Director (former Chief Executive Officer) Larry McNeill 78 Director Dr. Thomas L. Wood 55 Director Roger P. Beynon 75 Director Set forth below is a brief description of the background and business experience of our executive officers and directors. Zachary K. Bradford , Chief Executive Officer, is a licensed Certified Public Accountant in Nevada and a member of the American Institute of Certified Public Accountants. He served as the Company’s Chief Financial Officer from 2014 through October 2019. He has also served as a partner in a public accounting and consulting firm in Henderson, Nevada since June 2013. Mr. Bradford holds a B.S. in Accounting and a Masters of Accountancy from Southern Utah University. From March of 2015 to July 31, 2016, Mr. Bradford served as a member of the board of directors and Chief Financial Officer of Epic Stores Corp. Aside from that provided above, Mr. Bradford does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. Mr. Bradford is qualified to serve on our Board of Directors because of his experience and knowledge in public company reporting and accounting. Lori Love, Chief Financial Officer, is a licensed CPA and an experienced finance professional serving in roles in accounting, finance and risk management. Since July 2015, Ms. Love served as CFO of P2K Labs, a design, technology, and marketing agency based in Las Vegas, Nevada. Prior to 2015, Ms. Love served in the role of Senior Vice President of Finance at Provident Trust Group for over two years and as Vice President of Finance and Operations at WorldDoc, Inc. where she also served as a director. Ms. Love obtained her Bachelor of Business Administration (BBA) in Accounting from University of Nevada, Las Vegas and carries the CPA designation. 28 Table of Contents Aside from that provided above, Ms. Love does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. Amanda Kabak, Chief Technology Officer is an experienced technology professional. Before joining us, Ms. Kabak was a managing consultant for 10th Magnitude and she worked there from July 2016 to July 2017. From April to June of 2016, she worked as Sr. Software Engineer for Uptake and from 2013 to February 2016 she worked as Sr. Software Architect for OptiRTC, Inc. Aside from that provided above, Ms. Kabak does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. Amer Tadayon, Chief Revenue Officer is an experienced executive and entrepreneur. Mr. Tadayon joined us as part of the acquisition of p2kLabs where he was the founder and CEO. Mr. Tadayon has held various leadership positions at Fortune 500 companies including IBM, Cognizant, and frog design. In addition, he has worked with major global grants such as Nike, MTV, and Mattel. Aside from that provided above, Mr. Tadayon does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. S. Matthew Schultz , Executive Chairman, Chairman of the Board and Director, served as the Company’s Chief Executive Officer from 2014 through October 2019 and has been involved in many capacities with several publicly traded companies. He served as the President and CEO of Amerigo Energy, Inc., creating multiple syndicated offerings, as well as overseeing the operations from permitting through production. Since 1999, he has assisted numerous development and early stage companies to secure financing and experience significant growth. As the President of Wexford Capital Ventures, Inc., he was instrumental in funding companies both domestically and abroad. While serving as the Chairman of Pali Financial Group, Inc., he assisted in market development of dozens of public corporations. He was a founding member and the Vice President of the Utah Consumer Lending Association. Aside from that provided above, Mr. Schultz does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. Mr. Schultz is qualified to serve on our Board of Directors because of his experience and knowledge in public company reporting and financing and work in the energy sector. Larry McNeill , Director, has a master’s degree in Business Administration from Armstrong University, a BA in Business Administration, Economics, and Russian language from Minnesota State University, and has completed the course work towards his PhD in Business Management. Larry has a diverse business background that includes a range of broad business skills gained from his many roles in Real Estate, Finance, Research, Legal, Management, and Business Strategies. These roles include serving as the Director of Safeway Grocery Stores, Inc's Consumer, Sales, and Store Location research departments where he was responsible for the expansion of Safeway in Europe, Australia and Canada. The Director of Market Research for A&P where he was responsible for the Company's expansion into Saudi Arabia. An Executive Officer of Smiths Food and Drug Centers for 17 years; most recently as the Senior Vice President of Corporate Development overseeing the Research, Real Estate, and Legal Departments. Mr. McNeill retired from Smith’s Food & Drug Stores in 1996 after the Fred Meyer merger was completed. Aside from that provided above, Mr. McNeill does not hold and has not held over the past five years any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940. Mr. McNeill is qualified to serve on our Board of Directors because of his experience and knowledge in business management and financing. Dr. Thomas L. Wood , has over 33 years of highly successful experience in positions of increasing responsibility in planning and operations, policy development/implementation, construction management, defense acquisition, budgeting and programming, and managing large projects and programs. Dr. Wood previously served in the U.S. Navy rising to the role of 29 Table of Contents Deputy Operations for the Navy’s Pacific Engineering Command in which he was responsible for ensuring the successful execution through nine field offices of nearly $1 billion annually in construction and services contracts. After leaving the U.S. Navy, Dr. Wood served as a Subject Matter Expert (SME) supporting the U.S. Pacific Command (USPACOM) Joint Interagency Coordination Group (JIACG) as a Sr. Military Analyst and continued as a civil servant in senior roles thereafter. Dr. Wood graduated from Union College with a bachelor’s degree in Civil Engineering and master’s degree in Civil Engineering from University of Maryland, College Park. Dr. Wood then obtained a Doctor of Business Administration degree from Argosy University, Honolulu.. Dr. Wood will serve as a member of the Board until his successor is elected and qualified, or until his earlier death, resignation, or removal. Mr. Wood is qualified to serve on our Board of Directors because of his experience and knowledge in business management and financing. Roger P. Beynon , is an experienced CPA and owner of Beynon & Associates, a public accounting firm that has been in operation for over 34 years. Mr. Beynon has provided accounting and tax services to businesses since 1984. Mr. Beynon is a Certified Public Accountant (CPA) and Certified Fraud Examiner (CFE) and is a past president of the Utah Association of CPA's. Mr. Beynon is currently the chairman of the board of directors of Transwest Credit Union. Mr. Beynon is a graduate from Weber State College in 1972 with a bachelor’s degree in accounting and a minor in banking and finance. Mr. Beynon will serve as a member of the Board until his successor is elected and qualified, or until his earlier death, resignation, or removal. Mr. Beynon is qualified to serve on our Board of Directors because of his experience and knowledge in public company reporting and accounting. Term of Office Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. Family Relationships There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers. Involvement in Certain Legal Proceedings To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. Committees of the Board The board of directors of the Company (the “Board”) has the authority to appoint committees to perform certain management and administrative functions. On January 24, 2020, and in connection with the Nasdaq listing, the Board created the following committees: (i) an Audit Committee, (ii) a Compensation Committee, and (iii) a Nominations and Governance Committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by the Board. 30 Table of Contents Audit Committee The Audit Committee oversees the integrity of the Company’s accounting and financial reporting process and the audits of its financial statements. The Audit Committee is directly responsible for, among other matters: - the selection, compensation, retention, and oversight of the Company’s independent registered public accounting firm; - reviewing the Company’s independent registered public accounting firm’s continuing independence; - approving the fees and other compensation to be paid to the Company’s independent registered public accounting firm; - pre-approving all audit and non-audit related services provided by the Company’s independent registered public accounting firm; - reviewing and discussing with management and the Company’s independent registered public accounting firm the results of the quarterly and annual financial statements; - reviewing and discussing with management and the Company’s independent registered public accounting firm the Company’s selection, application, and disclosure of its critical accounting policies; - discussing with the Company’s independent registered public accounting firm, both privately and with management, the adequacy of the Company’s accounting and financial reporting processes and systems of internal control; - reviewing any significant deficiencies and material weaknesses in the design or operation over internal control over financial reporting; and - annually reviewing and evaluating the composition and performance of the Audit Committee, including the adequacy of the Audit Committee’s charter. The Audit Committee shall have the authority, in its sole discretion, to select, employ, and retain the advice of experts and professionals as the Audit Committee shall deem appropriate from time to time to assist with the execution of its duties and responsibilities as set forth in its charter. The current members of the Audit Committee are: (i) Roger P. Beynon, who is the Chairman of the Audit Committee, (ii) Dr. Thomas L. Wood, and (iii) Larry McNeill. Each member of the Audit Committee meets the requirements for independence and can read and understand fundamental financial statements in accordance with the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and the listing requirements and rules of Nasdaq (“Nasdaq Rules”). In arriving at this determination, the Board has examined each Audit Committee member's professional experience and the nature of their employment in the corporate finance sector. The Board has also determined that Mr. Beynon qualifies as an “audit committee financial expert,” as defined under applicable SEC and Nasdaq Rules. Compensation Committee The Compensation Committee evaluates, recommends, and approves policy relating to compensation and benefits of the Company’s officers and employees. The Compensation Committee is directly responsible for, among other matters: - annually reviewing and approving corporate goals and objectives relevant to the compensation of the Company’s Chief Executive Officer and other executive officers; - evaluating the performance of these officers in light of those goals and objectives, and setting the compensation of these officers based on such evaluations; 31 Table of Contents - administering and interpreting the Company’s cash and equity-based compensation plans; - annually reviewing and making recommendations to the Board with respect to all cash and equity-based incentive compensation plans and arrangements; and - annually reviewing and evaluating the composition and performance of the Compensation Committee, including the adequacy of the Compensation Committee’s charter. The Compensation Committee shall have the authority, in its sole discretion, to select, employ, and retain the advice of experts and professionals as the Compensation Committee shall deem appropriate from time to time to assist with the execution of its duties and responsibilities as set forth in its charter. The Compensation Committee consists of entirely “independent directors” (as defined below), and no executive officers have a role in determining or recommending the amount or form of executive and director compensation. The current members of the Compensation Committee are: (i) Larry McNeill, who is the Chairman of the Compensation Committee, and (ii) Dr. Thomas L. Wood. Each member of the Compensation Committee is an “independent director” under the applicable rules and regulations of the SEC and Nasdaq Rules. Furthermore, each member of the Compensation Committee is a “non-employee director” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, and an “outside director”, as that term is defined under Section 162(m) of the Internal Revenue Code of 1986. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of the Company’s knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended September 30, 2020, the following persons have not filed on a timely basis, the identified reports required by Section 16(a) of the Exchange Act during fiscal year ended September 30, 2020: Name and principal position Number of late reports Transactions not timely reported Known failures to file a required form S. Matthew Schultz, Chairman and Director 0 0 0 Zachary Bradford, Chief Executive Officer 0 0 0 Larry McNeill, Director 0 1 0 Amanda Kabak, Chief Technology Officer 0 0 0 Amer Tadayon, Chief Revenue Officer 0 1 0 Dr. Thomas L. Wood, Director 0 0 0 Roger P. Beynon, Director 0 0 0 Lori Love, Chief Financial Officer 0 0 0 Code of Ethics We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller. We will provide, at no cost, a copy of the Code of Ethics to any shareholder upon receiving a written request sent to the Company’s address shown on Page 1 of this report. 32 Table of Contents Item 11. Executive Compensation The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended September 30, 2020 and 2019. SUMMARY COMPENSATION TABLE Name and principal position Year Salary ($) Non-Equity Nonqualified Stock Option Incentive Plan Deferred All Other Bonus Awards Awards Compensation Compensation Compensation Total ($) ($) ($) ($) Earnings ($) ($) ($) Zachary Bradford 2019 - 193,437 - - - - 237,000 430,437 CEO 2020 335,000 360,000 615,250 274,000 - - - 1,584,250 Amanda Kabak 2019 183,437 25,000 - 100,000 - - - 308,437 CTO 2020 190,000 110,000 104,910 134,550 - - - 539,460 Lori Love 2019 - - - - - - - - CFO 2020 200,000 190,000 316,660 250,958 - - - 957,618 Amer Tadayon 2019 - - - - - - - - CRO 2020 166,667 - - 99,000 - - 33,333 299,000 S. Matthew Schultz 2019 - 193,437 - - - - 237,000 430,437 Former CEO 2020 - 350,000 484,200 239,450 - - 252,000 1,325,650 Bryan Huber 2019 - 2,432 - 496,590 - - 168,769 667,791 Former CIO 2020 - 273 - 1,158,709 - - 167,731 1,326,713 Anthony Vastola 2019 161,506 17,208 - 170,000 - - - 348,714 Former COO 2020 72,000 273 - - - - 80,000 152,273 Narrative Disclosure to the Summary Compensation Table Zachary Bradford –Chief Executive Officer and Director and former Chief Financial Officer On October, 1, 2019, the Company entered into an employment agreement whereas Mr. Bradford accepted the position of Chief Executive Officer. Under this agreement, Mr. Bradford is compensated by a base salary of $335,000 per year. During the year ended September 30, 2020, Mr. Bradford earned $335,000 in annual compensation plus bonuses of $360,000, stock awards of $615,250, and option awards of $274,000. During the fiscal year ending September 30, 2019, the Company had a consulting agreement with ZRB Holdings, Inc, an entity wholly owned by Zachary Bradford, our Chief Executive Officer, director and former Chief Financial Officer, for management services. In accordance with this agreement, as amended, Mr. Bradford provided services to us in exchange for $20,000 in compensation for services plus a $1,000 medical insurance stipend, each month plus a bonus of 0.5% of gross revenue and additional bonuses as the board authorizes. The Company has also agreed to reimburse Mr. Bradford for expenses incurred. During the year ended September 30, 2019, Mr. Bradford earned $237,000 in base compensation plus bonuses of $193,437 in accordance with this agreement. The agreement was terminated in October of 2019 when Mr. Bradford accepted the position of Chief Executive Officer and accepted the associated employment agreement. 33 Table of Contents Amanda Kabak – Chief Technology Officer On February 8, 2019 the Company entered into an employment agreement whereas Ms. Kabak was promoted to Chief Technology Officer. Under this agreement, Ms. Kabak is compensated by a base salary of $190,000 per year and $100,000 shares of our stock for each annual period she is with the company. A portion of the options vest each month and are exercisable at market price. During the year ended September 30, 2019, Ms. Kabak earned $183,437 in annual compensation plus bonuses of $25,000, and option awards of $100,00. During the year ended September 30, 2020, Ms. Kabak earned $190,000 in annual compensation plus bonuses of $110,000, stock awards of $104,910 and option awards of $100,000. Lori Love- Chief Financial Officer On October 1, 2019 the Company entered into an employment agreement whereas Ms. Love accepted the position of Chief Financial Officer. Under this agreement, Ms. Love is compensated by a base salary of $200,000 per year, 20% bonus and 25,000 stock options. During the year ended September 30, 2020, Ms. Love earned $200,000 in annual compensation plus bonuses of $190,000, stock awards of $316,660 and option awards of $250,958. Amer Tadayon- Chief Revenue Officer On February 1, 2020 the Company entered into an employment agreement whereas Mr. Tadayon accepted the position of Chief Revenue Officer. Under this agreement, Mr. Tadayon is compensated by a base salary of $250,000 per year plus $50,000 non-recoverable draw against commission, and 30,000 stock options. During the year ended September 30, 2020, Mr. Tadayon earned $166,667 in annual compensation plus option awards of $99,000 and other compensation of $33,333. Matthew Schultz- Executive Chairman, Chairman of the Board and Director and former Chief Executive Officer The Company had a consulting agreement with Matthew Schultz, our former Chief Executive Officer, for management services. Mr. Schultz provides services to us in exchange for $20,000 in compensation for services plus a $1,000 medical insurance stipend, each month plus a bonus of 0.5% of gross revenue and additional bonuses as the board authorizes. The Company also agreed to reimburse Mr. Schultz for expenses incurred. The agreement was terminated in October of 2019 when Mr. Schultz accepted the position of Chairman of the board. During the year ended September 30, 2020, Mr. Schultz earned $252,000 in base compensation, bonus grants of $350,000, stock awards of $484,200, and option awards of 239,450.During the year ended September 30, 2019, Mr Schultz $237,000 in base compensation plus bonuses of $193,437. Bryan Huber – Former Chief Innovation Officer and former Director The Company had a consulting agreement with Zero Positive, LLC., an entity owned by Bryan Huber for management services. On March 12, 2020, the Company terminated the agreement. During the year ended September 30, 2020, Mr. Huber and Zero positive earned $167,731 in compensation and a $273 bonus, During the year ended September 30, 2020, Mr. Huber and Zero Positive earned $171,202 in compensation, respectively, in accordance with the agreement. 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 the forty-two months beginning August 31, 2018. As of September 30, 2020, 67,143 warrants had vested due to the passage of time, and the Company recorded an expense of $1,158,709 during the year ended September 30, 2020. Anthony Vastola – Former Chief Operations Officer On March 12, 2020, the Company terminated the employment of Anthony Vastola. During the year ended September 30, 2020, Mr. Vastola earned $72,000 in compensation a bonus of $273 and other compensation of $80,000. During the year ended September 30, 2020, Mr. Vastola earned $161,506 in compensation, a bonus of $17,206, and option awards of $170,000, respectively. Outstanding Equity Awards at Fiscal Year-End On June 9, 2017, our Board of Directors adopted the 2017 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain the best available personnel for positions of substantial responsibility with us, to provide additional incentive to employees, directors and consultants, and to promote our success. Under the Plan, we are able to issue up to an aggregate total of 1,500,000 incentive or non-qualified options to purchase our common stock, or stock awards. 34 Table of Contents The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of September 30, 2020. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END OPTION AWARDS STOCK AWARDS Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) S. Matthew Schultz 25,000 - - $5.60 12/20/2022 - - - - Zachary Bradford 25,000 - - $5.60 12/20/2022 - - - - Amanda Kabak 36,912 0 Varies Varies - - - - Lori Love 33,333 16,667 Varies Varies - - - - Amer Tadayon 20,000 10,000 $4.65 01/31/2023 - - - - Director Compensation The table below summarizes all compensation of our directors for the year ended September 30, 2020. DIRECTOR COMPENSATION Name Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Non-Qualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) Larry McNeill $30,000 - $101,250 - - - $131,250 Roger Beynon - $30,000 - - - - $30,000 Dr. Thomas Wood $7,500 $22,500 - - - - $30,000 35 Table of Contents Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table sets forth, as of December 16, 2020, the number and percentage of the 23,964,093 shares of outstanding common stock which, according to the information supplied to the Company, were beneficially owned by (i) each person who is currently a director of the Company, (ii) each executive officer, (iii) all current directors and executive officers of the Company as a group, and (iv) each person who, to the knowledge of the Company, is the beneficial owner of more than 5% of the outstanding common stock. Except as otherwise indicated, the persons named in the table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable. Except as otherwise indicated, the address of each of the persons named in the table below is c/o CleanSpark, Inc., 1185 S. 1800 W. Suite 3, Woods Cross, Utah 84087. Number of Shares of Par Value $0.001 Common Stock Percentage Name of Beneficial Owner Beneficially Owned of Class Directors and named executive officers S. Matthew Schultz 734,796 (1) 3.06% Zachary Bradford 595,695 (2) 2.48% Larry McNeill 189,836 (3) 0.79% Amer Tadayon 138,199 (4) 0.58% Amanda Kabak 75,824 (5) 0.32% Lori Love 114,387 (6) 0.48% Dr. Thomas L. Wood 53,960 (7) 0.23% Roger P. Beynon 9,955 (8) 0.04% All Officers and Directors as a Group 1,912,652 (9) 7.87% (1) Includes 480,000 shares of common stock held in the S M Schultz IRRV TR to which Mr. Schultz is the beneficial owner, 85,000 shares of common stock held in his name, 79,000 shares of common stock held in his name subject to future vesting in accordance with company milestones, 40,996 shares of common stock held by his spouse, 49,800 vested options to purchase common stock. (2) Includes 79,831 shares of common stock held in his name, 99,000 shares of common stock held in his name subject to future vesting in accordance with company milestones, 323,863 shares of common stock held in ZRB Holdings Inc. in which Mr. Bradford is the beneficial owner, 12,000 shares of common stock held in BlueChip Advisors LLC in which Mr. Bradford shares beneficial ownership, warrants to purchase 25,000 shares of common stock, and 56,000 vested options to purchase common stock. (3) Includes 42,000 shares of common stock held in his name, 71,636 shares of common stock held in his Roth IRA, 25,000 options to purchase common stock and warrants to purchase 51,200 shares of common stock. (4) Includes 31,183 shares of common stock held in his name, 64,516 shares of restricted stock subject to company milestones and 42,500 vested options to purchase common stock. (5) Includes 13,000 shares of common stock held in her name, 22,250 shares of common stock subject to future vesting in accordance with company milestones 40,824 vested options to purchase common stock. (6) Includes 42,831 shares of common stock held in her name, 22,250 shares of common stock subject to future vesting in accordance with company milestones, and 49,306 vested options to purchase common stock. (7) Includes 8,764 shares of common stock held in his name and 45,196 shares of common stock held in the name of his spouse. (8) Includes 9,955 shares of common stock held in his name. (9) Includes, 1,573,002 shares of common stock, 76,200 warrants and 263,430 options held by officers and directors 36 Table of Contents The following table sets forth, as of December 13, 2020, the number and percentage of the 1,750,000 shares of outstanding Series A Preferred Stock which, according to the information supplied to the Company, were beneficially owned by (i) each person who is currently a director of the Company, (ii) each executive officer, (iii) all current directors and executive officers of the Company as a group, and (iv) each person who, to the knowledge of the Company, is the beneficial owner of more than 5% of the outstanding shares of Series A Preferred Stock. Except as otherwise indicated, the persons named in the table have sole voting and dispositive power with respect to all shares beneficially owned, subject to community property laws where applicable. Except as otherwise indicated, the address of each of the persons named in the table below is c/o CleanSpark, Inc., 1185 S. 1800 W. Suite 3, Woods Cross, Utah 84087. Number of Shares of Par Value $0.001 Series A Preferred Stock Percentage Name of Beneficial Owner Beneficially Owned of Class Directors and named executive officers S. Matthew Schultz 500,000 28.57% Zachary Bradford 500,000 28.57% Larry McNeill 500,000 28.57% All Officers and Directors as a Group 1,500,000 85.71% Securities Authorized for Issuance under Equity Compensation Plans In June of 2017, our Board of Directors adopted the 2017 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain the best available personnel for positions of substantial responsibility with us, to provide additional incentive to employees, directors and consultants, and to promote our success. As of the date of this filing, under the Plan (as amended), we are able to issue up to an aggregate total of 1,500,000 incentive or non-qualified options to purchase our common stock, or stock award s. Equity Compensation Plans Not Approved by the Shareholders Number of Securities to be issued upon exercise of outstanding options Weighted-average exercise price of outstanding options Number of Securities remaining available for future issuance under equity compensation plans (a) (b) (c) Equity compensation plans approved by security holders — — — Equity compensation plans not approved by security holders The Plan 277,948 $6.34 1,222,052 Total 277,948 $6.34 1,222,052 Item 13. Certain Relationships and Related Transactions, and Director Independence Except as provided in “Executive Compensation” set forth above, or listed in Note 12 to the financial statements, for the past two fiscal years there have not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a participant in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years ($228,670), and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. Item 14. Principal Accounting Fees and Services Below is the table of Audit and audit-related Fees billed by MaloneBailey, LLP in connection with the audits of the Company’s annual financial statements for the years ended: Financial Statements for the Year Ended September 30 Audit Services Audit Related Fees Tax Fees Other Fees 2020 $ 145,160 $ 0 $ 0 $ 0 2019 $ 101,099 $ 0 $ 0 $ 0 37 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a) 1. Financial Statements. The consolidated financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K beginning on page F-2. 2. Financial Statement Schedules. Schedules are not submitted because they are not applicable or not required under Regulation S-X or because the required information is included in the financial statements or notes thereto. 3. Exhibits required to be filed by Item 601 of Regulation S-K. The information called for by this Item is incorporated by reference from the Index to Exhibits included in this Annual Report on Form 10-K. (b) Exhibits Exhibit Number Description 2.1 Agreement and Plan of Merger by and between the Company and Pioneer Critical Power, Inc., dated January 22, 2019, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 24, 2019. 2.2 Stock Purchase Agreement by and between p2klabs, Inc., Amer Tadayon and the Company, dated January 31, 2020, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 6, 2020. 2.3 † Agreement and Plan of Merger, dated as of December 9, 2020, by and among CleanSpark, Inc., ATL Data Centers LLC, CLSK Merger Sub, LLC and the Sellers incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 10, 2020. 3.1 Articles of Incorporation, incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10-12G, filed with the Securities and Exchange Commission on November 17, 2008. 3.2 Amendment to Articles of Incorporation, incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10-12G, filed with the Securities and Exchange Commission on November 17, 2008. 3.3 Bylaws, incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form 10-12G, filed with the Securities and Exchange Commission on November 17, 2008. 3.4 Amended Bylaws, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 12, 2013. 3.5 Certificate of Change, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 26, 2013. 3.6 Articles of Merger, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 1, 2014. 3.7 Certificate of Change, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 12, 2015. 3.8 Certificate of Amendment and Certificate of Designation, incorporated by reference to Exhibits 3.1 and 3.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 16, 2015. 38 Table of Contents 3.9 Certificate of Change, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 13, 2015. 3.10 Articles of Merger, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 14, 2016. 3.11 Certificate of Designation, dated April 16, 2019, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 18, 2019. 3.12 Certificate of Amendment to Articles of Incorporation, dated August 9, 2019, incorporated by reference to Appendix A to the Company’s Definitive Information Statement on Schedule 14C, filed with the Securities and Exchange Commission on July 12, 2019. 3.13 Amendment to Certificate of Designation, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 9, 2019. 3.14 Certificate of Change, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 10, 2019. 3.15 Certificate of Withdrawal of Series B Preferred Stock Certificate of Designation, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 10, 2020. 3.16 Certificate of Amendment to Articles of Incorporation of CleanSpark, Inc., filed on October 2, 2020, incorporated by reference to Appendix A to our definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on July 28, 2020. 4.1 Form of Senior Secured Redeemable Convertible Debenture dated December 31, 2018 issued to the Investor, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 31, 2018. 4.2 Form of Common Stock Purchase Warrant dated December 31, 2018 issued to the Investor, incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 31, 2018. 4.3 Form of Senior Secured Redeemable Convertible Promissory Note dated April 17, 2019 issued to the Investor, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 18, 2019. 4.4 Form of Common Stock Purchase Warrant dated April 17, 2019 issued to the Investor, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 18, 2019. 10.1 CleanSpark, Inc. 2017 Equity Incentive Plan, incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 19, 2017. 10.2 Form of Securities Purchase Agreement dated December 31, 2018 between CleanSpark Inc. and the Investor incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 31, 2018. 10.3 Form of IP Security Agreement dated December 31, 2018 between CleanSpark, Inc. and the Investor incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on December 31, 2018. 10.4 Termination of Asset Purchase Agreement, dated January 22, 2019, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 24, 2019. 10.5 Non-Competition and Non-Solicitation Agreement, dated January 22, 2019, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 24, 2019. 10.6 Indemnity Agreement, dated January 22, 2019, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 24, 2019. 10.7 Contract Manufacturing Agreement, dated January 22, 2019, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 24, 2019. 39 Table of Contents 10.8 Form of Purchase Agreement dated April 17, 2019 between the Company and the Investor, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 18, 2019. 10.9 Form of Voting Agreement dated April 17, 2019 between the Company and shareholders holding 51% of the voting power of the Company, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 18, 2019. 10.10 IP Security Agreement dated April 17, 2019, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 18, 2019. 10.11† Memorandum of Understanding, dated as of November 5, 2019, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 12, 2019. 10.12 Securities Purchase Agreement, dated as of November 6, 2019, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 12, 2019. 10.13 Escrow Agreement, dated January 31, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 6, 2020. 10.14 Amendment to Transaction Documents, dated as of March 10, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 10, 2020. 10.15 Second Amendment to Transaction Documents, dated as of March 13, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 16, 2020. 10.16 Joint Venture Agreement, dated as of April 6, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on August 4, 2020. 10.17 Third Amendment to Transaction Documents, dated as of May 1, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 6, 2020. 10.18 Promissory Note, dated as of May 7, 2020, by and between the Company and Celtic Bank Corp., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 20, 2020. 10.19 First Amendment to CleanSpark, Inc. 2017 Equity Incentive Plan, dated as of October 7, 2020, incorporated by reference to Appendix A to the Company’s Definitive Information Statement on Schedule 14C, filed with the Securities and Exchange Commission on July 28, 2020. 10.20 Form of Securities Purchase Agreement, dated July 20, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 21, 2020. 10.21 Exclusive Partner Agreement, by and between the Company and Sunshine Energy Corp., dated August 6, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 7, 2020. 10.22† Membership Interest Purchase Agreement, dated as of August 31, 2010, by and between the Company, GridFabric, LLC and its sole member, DuPont Hale Holdings, LLC, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 1, 2020. 10.23+ Employment Agreement, entered into by and between CleanSpark, Inc. and Zachary K. Bradford, dated October 26, 2020, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 28, 2020. 10.24+ Employment Agreement, entered into by and between CleanSpark, Inc. and Lori Love, dated October 26, 2020, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 28, 2020. 10.25+ Employment Agreement, entered into by and between CleanSpark, Inc. and Amanda Kabak, dated October 26, 2020, incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 28, 2020. 10.26+ Amended and Restated Employment Agreement, entered into by and between CleanSpark, Inc. and Amer Tadayon, dated October 26, 2020, incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 28, 2020. 40 Table of Contents 10.27+ Employment Agreement, entered into by and between CleanSpark, Inc. and S. Matthew Schultz, dated October 26, 2020, incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 28, 2020. 21.1* List of Subsidiaries 23.1* Consent of MaloneBailey 31.1* Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certfication of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS** Inline XBRL Instance Document 101.SCH** Inline XBRL Taxonomy Extension Schema Document 101.CAL** Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB** Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE** Inline XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF** Inline XBRL Taxonomy Extension Definition Linkbase Document 104** Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 attachments) * Filed herewith ** The XBRL related information in Exhibit 101 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document. + Indicates a management contract or compensatory plan or arrangement. † Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10). Item 16. Form 10-K Summary Not applicable. 41 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CLEANSPARK, INC. By: /s/ Zachary Bradford Zachary Bradford Chief Executive Officer, Principal Executive Officer and Director December 16, 2020 By: /s/ Lori Love Lori Love Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer December 16, 2020 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: By: /s/ Zachary Bradford Zachary Bradford Chief Executive Officer, Principal Executive Officer and Director December 16, 2020 By: /s/ Lori Love Lori Love Chief Financial Officer, Principal Financial Officer, Principal Accounting Officer December 16, 2020 By: /s/ S. Matthew Schultz S. Matthew Schultz Executive Chairman and Chairman of the Board December 16, 2020 By: /s/ Larry McNeill Larry McNeill Director December 16, 2020 By: /s/ Roger Beynon Roger Beynon Director December 16, 2020 By: /s/ Dr. Thomas Wood Dr. Thomas Wood Director December 16, 2020 42