What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-02-12 compared with 2020-08-04 · 319 added, 349 removed, 10 unchanged (99% of the section changed)

1 unchanged sentence

Forward-Looking Statements

Certain statements,

other than purely historical information, including estimates, projections, statements relating to our business plans, objectives,

and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements”

within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section

21E of the Securities Exchange Act of 1934.

These forward-looking statements generally are identified by the words “believes,”

“project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,”

“plan,” “may,” “will,” “would,” “will

be,” “will continue,” “will

likely result,” and similar expressions.

We intend such forward-looking statements to be covered by the safe-harbor

provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including

this statement for purposes of complying with those safe-harbor provisions.

Forward-looking statements are based on current expectations

and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking

Certain statements, other than purely historical

information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results,

and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the

Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange

These forward-looking statements generally are identified by the words “believes,” “project,”

“expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,”

“would,” “will be,” “will continue,” “will likely

result,” and similar expressions.

We intend such forward-looking statements to be covered by the safe-harbor provisions for

forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement

for purposes of complying with those safe-harbor provisions.

Forward-looking statements are based on current expectations and assumptions

that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.

Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.

which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not

changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition,

and generally accepted accounting principles.

These risks and uncertainties should also be considered in evaluating forward-looking

statements and undue reliance should not be placed on such statements.

We undertake no obligation to update or revise publicly

any forward-looking statements, whether as a result of new information, future events or otherwise.

Further information concerning

our business, including additional factors that could materially affect our financial results, is included herein and in our other

filings with the SEC.

Factors which could

have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to:

changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally

accepted accounting principles.

These risks and uncertainties should also be considered in evaluating forward-looking statements

and undue reliance should not be placed on such statements.

We undertake no obligation to update or revise publicly any forward-looking

statements, whether as a result of new information, future events or otherwise.

Further information concerning our business, including

additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Company Overview

are in the business of providing advanced energy software and control technology that enables a plug-and-play enterprise solution

to modern energy challenges.

Our services consist of intelligent energy monitoring and controls, microgrid design and engineering

and consulting services.

Our software allows energy users to obtain resiliency and economic optimization.

Our software is uniquely

capable of enabling a microgrid to be scaled to the user's specific needs and can be widely implemented across commercial, industrial,

military and municipal deployment.

We refer to the operations

surrounding the above plug-and-play energy solution as our Distributed Energy Management Business (the “DER Business”).

The main assets of our DER Business include our propriety software systems (“Systems”) and also our engineering and

methodology trade secrets.

The Distributed Energy Systems and microgrids that utilize our Systems are capable of providing secure,

sustainable energy with significant cost savings for our energy customers.

The Systems allow customers to design, engineer, construct

and then efficiently manage renewable energy generation, storage and consumption.

to our business is our mPulse and mVSO software platforms (the “Platforms”).

When the Platforms are implemented on

a customer’s power system, they are able to control the distributed energy resources on site to provide secure, sustainable

energy often at significant cost savings for our energy customers.

The Platforms allows customers to efficiently manage renewable

energy generation, other distributed energy generation technologies including energy generation assets, energy storage assets,

and energy consumption assets.

By having autonomous control over the distributed facets of energy usage and energy storage, customers

are able to reduce their dependency on utilities, thereby keeping energy costs relatively constant over time.

The overall aim

is to transform energy consumers into energy producers by supplying power that anticipates their routine instead of interrupting

Our Switchgear

technology company, part of our business model is to assess our technologies, product offerings and business direction and determine

whether any strategic acquisitions would benefit us.

In line with our focus, on January 22, 2019, we acquired the outstanding

capital stock of Pioneer Critical Power, Inc., a Delaware corporation (“Pioneer”), which we have since renamed and

redomiciled to the State of Nevada and changed the name to CleanSpark Critical Power Systems Inc.

consideration for the transaction, we issued to its sole shareholder Pioneer Power

Solutions, Inc.

(“Pioneer Power”) a total of 175,000 shares of our common stock, a 5-year warrant to purchase 50,000

shares of our common stock at an exercise price of $16.00 per share and a 5-year warrant to purchase 50,000 shares of our common

stock at an exercise price of $20.00 per share.

also signed additional agreements in connection with the transaction, as previously disclosed in our SEC filings, mainly requiring

Pioneer Power to indemnify us in certain circumstances and restricting Pioneer Power from engaging in a competing business.

We also signed

a Contract Manufacturing Agreement, whereby Pioneer Power shall exclusively manufacture parallel switchgears, automatic transfer

switches and related control and circuit protective equipment for us, for a period of eighteen months.

We plan to utilize

the new intellectual property we gained from the acquisition and the manufacturing agreement in place to enter into the switchgear

equipment sales industry.

We acquired executed contracts and purchase orders, which we expect will result in significant gross

sales, as well as hired personnel to operate this new line of business.

of this transaction, the parties terminated a contemplated asset purchase arrangement previously disclosed in our SEC filings.

Our acquisition

of p2kLabs, Inc.

As CleanSpark

continues to drive towards profitability and further market and sell CleanSpark software and controls, our acquisition of p2kLabs,

not only contributes additional revenues, but also adds depth to our team in sales, marketing, design and software development.

We plan to maximize

the value of our offering, internalize what would otherwise be expenses, and diversify our ability to better serve our valued

As consideration

for the transaction, we issued to its sole shareholder, Amer Tadayon, a total of

95,699 shares of our common stock and paid $1,155,000 in cash.

also signed additional agreements in connection with the transaction, as previously disclosed in our SEC filings, mainly an employment

agreement with Amer Tadayon.

See note 3 for details.

Nasdaq Listing

On January 24, 2020, the Company

was approved for listing on the Nasdaq Capital Market (“Nasdaq”).

Our Contractual Joint

entered into an agreement with partners to procure, distribute and supply Personal Protective Equipment (PPE) for hospitals and

frontline medical personnel.

The agreement is effective until December 31, 2020, unless otherwise extended by mutual consent.

Company contributed capital in the amount of $660,000 on April 6, 2020 to assist with the procurement of these products, with

the potential for additional monies to be lent by the Company to the contractual joint venture, upon mutual consent if necessary.

the agreement, the Company will receive $0.20 per unit for each mask sold and a mutually agreeable amount for other types of PPE’s

sold through the use of its funds.

Such proceeds are distributed to the Company as soon as commercially reasonable after receipt

from such customer or at the Company’s option reinvested for additional purchases.

recognized and received $20,000 in other income from this agreement for the period ended June 30, 2020.

See note 5 for details.

On July 7, 2020, the Company received its

$660,000 in initial capital from the JV.

The Company plans to continue to evaluate opportunities under the JV and will continue

to provide capital for the procurement of PPE under this agreement as future opportunities continue to arise.

Results of operations

for the three months ended June 30, 2020 and 2019

increased to $3,438,674 during the three months ended June 30, 2020, as compared with $1,222,736 in revenues for the same period

ended 2019 primarily due to revenue from our switchgear products and mPulse sales.

revenues was $2,893,939 for the three months ended June 30, 2020, resulting in gross profit of $544,735, as compared with cost

of revenues of $1,006,144 for the three months ended June 30, 2019, resulting in gross profit of $216,592.

revenues for the three months ended June 30, 2020 was mainly the result of manufacturing, hardware, and service expenses.

of goods sold increased to $2,751,964 for the three months ended June 30, 2020, from $914,220 for the same period ended 2019.

Our product sale expense consisted mainly of the cost of contract manufacturing for our switchgear products and hardware costs.

We are in the business of providing advanced

software and controls technology solutions to solve modern energy challenges.

We have a suite of software solutions that provide

end-to-end microgrid energy modeling, energy market communications, and energy management solutions.

Our offerings consist of intelligent

energy monitoring and controls, intelligent microgrid design software, middleware communications protocols for the energy industry,

energy system engineering, and software consulting services.

The software platforms (the “Platforms”)

which are integral to our business are summarized as follows:

mVSO Platform:

Energy modeling software for microgrid design and sales

mPulse Platform:

Patented, proprietary controls platform that enables integration and optimization of multiple energy sources.

Middleware used by Grid Operators and Aggregators to administrate load shifting programs.

Middleware used by Controls and IoT Product Companies to participate in load shifting programs

The Platforms are designed to allow customers

to design, build, and operate distributed energy systems and microgrids which efficiently manage energy generation assets, energy

storage assets, and energy consumption assets.

Our software products enable users to implement software solutions to execute on

these strategies.

These strategies are generally targeted to operate distributed energy assets in a manner that provides resiliency

and economic optimization and/or revenue generation through wholesale market activities.

We also own patented gasification technologies.

Our technology converts any organic material into SynGas, which can be used as fuel for a variety of applications and as feedstock

for the generation of DME (Di-Methyl Ether).

As previously disclosed, we plan to continue to focus on our other product offerings,

as opposed to expending significant efforts on the Gasifier side of the business.

Distributed Energy Management and Microgrid Industry

to our business is our Distributed Energy Management Business (the “DER Business”).

The main assets of our DER Business

include our propriety software systems (“Systems”) and also our engineering and methodology trade secrets.

The Distributed

Energy systems and microgrids that utilize our Systems are capable of providing secure, sustainable energy with significant cost

savings for its energy customers.

The Systems allows customers to design, engineer, and then efficiently communicate with and manage

renewable energy generation, storage and consumption.

By having autonomous control over the multiple facets of energy usage and

storage, customers are able to reduce their dependency on utilities, thereby keeping energy costs relatively constant over time.

The overall aim is to transform energy consumers into intelligent energy producers by supplying and managing power in a manner

that anticipates their routine instead of interrupting it.

the world, the aging grid is becoming unstable and unreliable due to increases in loads and lack of new large-scale generation

This inherent instability is compounded by the push to integrate a growing number and variety of renewable but intermittent

energy generation assets and advanced technologies into outdated electrical grid systems.

Simultaneously, defense installations,

industrial complexes, communities, campuses and other aggregators across the world are turning to virtual power plants and microgrids

as a means to decrease their reliance from the grid, reduce utility costs, utilize cleaner power, and enhance energy security and

The convergence

of these factors is creating significant opportunities in the power supply optimization and energy management industry.

operating and managing the distributed energy management systems and microgrids of tomorrow, while maximizing the use of sustainable

energy to produce affordable, stable, predictable and reliable power on a large scale, is a significant opportunity that early-movers

can leverage to capture a large share of this emerging global industry.

is comprised of any number of energy generation, energy storage, and smart distribution assets that serve a single or multiple

loads, both connected to the utility grid and separate from the utility grid “islanded”.

In the past, distributed energy

management systems and microgrids have consisted of off-grid generators organized with controls to provide power where utility

lines cannot run.

Today, modern distributed energy management systems and microgrids integrate renewable energy generation systems

(REGS) with advanced energy storage devices and interoperate with the local utility grid.

Advanced autonomous cyber-secure microgrids

controls relay information between intelligent hardware and servers to make decisions in real-time that deliver optimum power where

it is needed, when it is needed.

software suite is an integrated distributed energy management control platform that seamlessly integrates and controls all forms

of energy generation with energy storage devices to provide energy security in real time free of cyber threats to service facility

DER systems are able to interoperate with the local utility grid and bring users the ability to choose when to buy or sell

power to and from the utility grid.

mPulse suite is an ideal DER system for commercial, industrial, defense, campus and residential

users and ranges in size from 4KW to 100MW and beyond.

mPulse Software Suite

is a modular platform that provides intelligent control of a microgrid based on a systems operational goals, energy assets, and

forecasted energy load and generation.

mPulse performs high-frequency calculations, threshold-based alarming, execution of domain-specific

business rules, internal and external health monitoring, historical data persistence, and system-to-operator notifications.

modular design increases system flexibility and extensibility.

In addition, the deployment of the mPulse system follows a security-conscious

posture by deploying hardware-based firewalls as well as encryption across communication channels.

mPulse allows configuration

for site-specific equipment and operation and provides a clean, informative user interface to allow customers to monitor and analyze

the data streams that describe how their microgrid is operating.

supports our innovative fractal approach to microgrid design, which enables multiple microgrids on a single site to interact in

a number of different ways, including as peers, in a parent-child relationship, and in parallel or completely disconnected.

grid can have different operational objectives, and those operational objectives can change over time.

Any microgrid can be islanded

from the rest of the microgrid as well as the larger utility grid.

The mPulse software can control the workflow required in both

the islanding steps as well as the reconnecting steps of this maneuver and coordinate connected equipment such that connections

are only made when it is safe to do so.

Value Stream Optimizer (mVSO)

The Microgrid

Value Stream Optimizer (mVSO) software platform provides a robust distributed energy and microgrid system modeling solution.

takes utility rate data and load data for a customer site and helps automate the sizing and analysis of potential microgrid solutions

as well as providing a financial analysis around each grid configuration.

mVSO uses historical data to generate projected energy

performance of generation assets and models how storage responds to varying operational modes and command logics based upon predicted

generation and load curves.

mVSO analyzes multiple equipment combinations and operational situations to determine the optimal configuration

for a site based on the financial and economic results, equipment outlay, utility cost savings, etc., to arrive at payback and

This ultimately provides the user with data to design a distributed energy and/or microgrid system that will meet the

customers’ performance benchmarks.

The system also provides users with business development and proposal generation tools

to more efficiently present the results to end-customers.

Critical power switchgear and hardware solutions – CleanSpark

Critical Power Systems, Inc.

Through the Company’s wholly-owned subsidiary,

CleanSpark Critical Power Systems, Inc., we provide parallel switchgear, automatic transfer switches, and related control and circuit

protective equipment solutions for commercial, industrial, defense, campus, and residential

We utilize Pioneer Power Solutions, Inc.

for contract manufacturing of our parallel switchgear, automatic transfer

switches, and related control and circuit protective equipment.

OpenADR and communication protocol software

solutions – GridFabric

Through the Company’s wholly-owned subsidiary,

GridFabric, LLC, we offer OpenADR solutions to commercial and utility customers.

GridFabric provides middleware software solutions

for utilities and IoT (Internet of Things) products that manage energy loads.

OpenADR 2.0b is now the basis for the standard

to be developed by the International Electrotechnical Commission.

GridFabric's core products are Canvas and Plaid.

Canvas is an OpenADR 2.0b Virtual

Top Node ('VTN') built for testing and managing Virtual End Nodes ('VENs') that are piloting and running load shifting programs.

Canvas is offered to customers in the Cloud as a SaaS solution or as a licensed software.

Plaid is a licensed software solution that

allows any internet connected product that uses energy (i.e.

Solar, Storage & Inverters, Demand Response, EV Charging, Lighting,

Industrial controls, Building Management Systems, etc.) to add load shifting capabilities by translating load shifting

protocols into their existing APIs.

Companies that implement Plaid through GridFabric get a Certified OpenADR 2.0b Virtual

End Node (VEN) upon completion of the implementation process.

Digital Agency Segment – p2kLabs

Through the Company’s wholly-owned subsidiary,

p2kLabs, Inc., we provide a suite of digital services from creative design to technical development for products and services through

the entire product/service lifecycle.

P2k is made up of “labs” whereas each lab contains its own unique offering including

design, marketing/digital content, engineering & SalesForce development, and strategy services.

Legacy Gasifier Business

Our Gasification technologies and prototype will need

to undergo further additional testing to further establish its commercial capability of producing large

volumes of clean, renewable energy from any carbon compound (Municipal Solid Waste (MSW), Coal, Sewage Sludge)

into clean Synthesis Gas(“SynGas”).

Our prototype Gasifier is still under development and a commercially

viable Gasifier is not expected to be sellable until we expend additional resources on its testing and development.

A third-party consulting

firm has independently tested the Gasifer's performance and certified the results of its performance.

Upon completion of the

testing, an initial white paper was published outlining the results and suggested improvements

for commercialization.

We anticipate that the investment to complete these improvements would be between approximately

Upon completion of the improvements, we would be required to conduct an extended test run with an independent

third party to verify the results needed to prove its commercial viability, at which time we could begin

to actively market our Gasifier units.

mining and Data Center business

Through its wholly-owned subsidiary,

ATL Data Centers LLC, CleanSpark owns and operates a data center that provides customers with traditional on-site and cloud-based

data center services.

The Company also owns and operates a fleet of Bitcoin miners producing over 200 PH/s.

Mining capacity is

expected to increase to over 300 PH/s in early 2021.

CleanSpark plans to apply its energy technologies to these divisions with

a goal of mining bitcoins at the lowest energy prices in the United States.

Results of operations for the three months ended December

31, 2020 and 2019

increased to $2,257,570 during the three months ended December 31, 2020, as compared with $976,824 in revenues for the same period

ended 2019 primarily due to revenues from our digital agency and digital currency mining segments.

Our cost of revenues was $1,332,890 for the

three months ended December 31, 2020, resulting in gross profit of $924,680, as compared with cost of revenues of $882,721 for

the three months ended December 31, 2019, resulting in gross profit of $94,103.

The increase in our cost of revenues for the

three months ended December 31, 2020 was mainly the result of an increase in manufacturing and hardware expenses.

sale revenue costs increased to $1,014,931 for the three months ended December 31, 2020, from $784,574 for the same period ended

The increase in our product sale expense consisted mainly as a result of an increase in the cost of contract manufacturing

for our switchgear products and hardware costs.

cost of services increased

to 141,975 for the three months ended June 30, 2020, from $91,924 for the same period ended 2019.

Our service, software and related

revenues expenses for the three months ended June 30, 2020, and 2019 consisted mainly of allocated payroll costs of employees

and consultants and subcontractors for services rendered from our acquisition of p2k and installation of solar panels and energy

We had operating

expenses of $2,688,334 for the three months ended June 30, 2020, as compared with $2,693,290 for the three months ended June 30,

fees decreased to $709,367 for the three months ended June 30, 2020, from $1,296,993 for the same period ended June 30, 2019.

Our professional fees expenses for the three months ended June 30, 2020 consisted mainly of officers and directors’ consulting

fees of $105,500, consulting fees of $434,236, and accounting, audit and review fees of $25,900 and stock-based compensation of

Our professional fees expenses for the three months ended June 30, 2019 consisted mainly of officers’ consulting

fees of $375,500, consulting fees of $436,653, and audit and review fees of $11,000 and stock-based compensation of $431,721.

Professional fees decreased in 2020 mainly as a result of decreased stock-based compensation and officers and directors’

consulting fees.

Payroll expenses

increased to $996,555 for the three months ended June 30, 2020, from $211,129 for the same period ended 2019.

Our payroll expenses

for the three months ended June 30, 2020 consisted mainly of salary and wages expense of $967,355 and employee stock-based compensation

Our payroll expenses for the three months ended June 30, 2019 consisted mainly of salary and wages expense of $209,879

and employee stock-based compensation of $1,250.

administrative fees increased to $279,045 for the three months ended June 30, 2020, from $222,167 for the same period ended 2019.

Our general and administrative expenses for the three months ended June 30, 2020 consisted mainly of marketing expenses of $32,322,

rent expenses of $34,445, insurance expenses of $65,833, dues and subscriptions of $61,675 and office expense of $6,267.

and administrative expenses for the three months ended June 30, 2019 consisted mainly of travel expenses of $32,994, rent expenses

to 148,913 for the three months ended December 31, 2020, from $98,147 for the same period ended 2019.

The increase in our service,

software, and related revenues expenses for the three months ended December 31, 2020, and 2019 consisted mainly as a result of

an increase in the cost of allocated payroll costs of employees and consultants and subcontractors for services rendered through

our digital agency services and installation of solar panels and energy storage.

Our cost of mining and data center revenue

increased to $169,046 for the three months ended December 31, 2020 from $0 for the same period ended 2019.

The increase in these

costs consisted mainly as a result of an increase in the utility costs and labor for data center services rendered.

Operating Expenses

We had operating expenses of $7,094,778

for the three months ended December 31, 2020, as compared with $3,085,564 for the three months ended December 31, 2019.

Professional fees increased to $1,712,723 for

the three months ended December 31, 2020, from $1,516,587 for the same period ended December 31, 2019.

Our professional fees expenses

for the three months ended December 31, 2020 consisted mainly of legal fees of $1,230,362, consulting fees of $226,450, external

marketing fees of $120,838, and accounting, audit and review fees of $97,350.

Our professional fees expenses for the three months

ended December 31, 2019 consisted mainly of officers and directors’ consulting fees of $150,000, consulting fees of $62,818,

and accounting, audit and review fees of $71,655 and stock-based compensation of $586,181.

Professional fees increased in

2020 mainly as a result of increased legal fees.

Payroll expenses increased to $3,314,201

for the three months ended December 31, 2020, from $711,539 for the same period ended 2019.

Our payroll expenses for the three

months ended December 31, 2020 consisted mainly of salary and wages expense of $2,382,161 and employee stock-based compensation

The increase in our payroll expenses for the three months ended December 31, 2019 consisted mainly as a result of

an increase in salary and wages expense of $680,551 and employee stock-based compensation of $30,988.

General and administrative fees increased

to $950,139 for the three months ended December 31, 2020, from $230,661 for the same period ended 2019.

The increase in our general

and administrative expenses for the three months ended December 31, 2020 consisted mainly as a result of an increase in our marketing

expenses of 555,429, dues and subscriptions of $171,992, insurance expenses of $72,159, and rent expenses of $30,393.

and administrative expenses for the three months ended December 31, 2019 consisted mainly of travel expenses of $31,585, rent expenses

of $21,318, insurance expenses of $42,901, dues and subscriptions of $51,367 and office expense of $10,445.

development expense decreased to $0 for the three months ended June 30, 2020, from $344,871 for the same period ended 2019.

product development expenses for the three months ended June 30, 2020 and 2019 consisted mainly of amortization of capitalized

and amortization expense increased to $703,367 for the three months ended June 30, 2020, from $618,130 for the same period ended

We expect that

our operating expenses will increase in future quarters as we further implement our business plan.

As we execute on customer contracts

we may be required to hire and compensate additional personnel and support increased operational costs.

income (expenses)

income/(expenses) increased to ($6,407,702) for the three months ended June 30, 2020, from ($1,495,213) for the same period ended

June 30, 2019.

Our other income/(expenses) for the three months ended June 30, 2020 consisted mainly of an unrealized loss on

equity securities of ($80,500), derivative gain of $719,294 and

interest expense of ($7,066,496).

Our other expenses for the three months ended June 30, 2019 consisted of interest expense of

($1,495,213).

a net loss of $8,551,301 for the three months ended June 30, 2020, as compared with a net loss of $3,971,911 for the same period

ended June 30, 2019.

Results of operations

for the nine months ended June 30, 2020 and 2019

increased to $8,073,781 during the nine months ended June 30, 2020, as compared with $2,209,542 in revenues for the same period

ended 2019 primarily due to revenue from our switchgear products and mPulse sales.

revenues was $6,730,906 for the nine months ended June 30, 2020, resulting in gross profit of $1,342,875, as compared with cost

of revenues of $1,821,488 for the nine months ended June 30, 2019, resulting in gross profit of $388,054.

revenues for the nine months ended June 30, 2020 was mainly the result of product sale and service, software and related revenues

of goods sold increased

to $6,458,086 for the nine months ended June 30, 2020, from $1,245,102 for

the same period ended 2019.

Our product sale expense for the nine months ended June 30, 2020 consisted mainly of the cost of contract

manufacturing for our switchgear products.

of services decreased to $272,820 for

the nine months ended June 30, 2020, from $576,386 for the

same period ended 2019.

Our service, software and related revenues expenses for the nine months ended June 30, 2020, and 2019

consisted mainly of allocated payroll costs of employees and consultants and subcontractors for services rendered from our acquisition

of p2k and installation of solar panels and energy storage.

We had operating

expenses of $8,749,987 for the nine months ended June 30, 2020, as compared with $7,192,344 for the nine months ended June 30,

Professional fees increased to $3,231,945 for the nine

months ended June 30, 2020, from $3,719,269 for the same period ended June 30, 2019.

Our professional fees expenses for the nine

months ended June 30, 2020 consisted mainly of officers and directors’ consulting fees of $571,654, consulting fees of $1,233,008,

legal fees of $332,020 and accounting, audit and review fees of $120,060 and stock-based compensation of $975,143.

Our professional

fees expenses for the nine months ended June 30, 2019 consisted mainly of officers’ consulting fees of $848,489, consulting

fees of $1,071,107, legal fees of $146,682, and audit and review fees of $95,349 and stock-based compensation of $1,540,503.

fees increased in 2019 mainly as a result of increased stock-based compensation and other consulting related to increased business

development efforts and audit and legal fees in connection with our SEC reporting obligations.

Payroll expenses

increased to $2,692,474 for the nine months ended June 30, 2020, from $684,650 for the same period ended 2019.

Our payroll expenses

for the nine months ended June 30, 2020 consisted mainly of salary and wages expense of $2,606,586 and employee stock-based compensation

Our payroll expenses for the nine months ended June 30, 2019 consisted mainly of salary and wages expense of $508,400

and employee stock-based compensation of $176,250.

administrative fees increased to $820,837 for the nine months ended June 30, 2020, from $478,564 for the same period ended 2019.

Our general and administrative expenses for the nine months ended June 30, 2020 consisted mainly of marketing expenses of $108,869,

travel expenses of $80,648, rent expenses of $82,904, insurance expenses of $159,519, dues and subscriptions of $230,713 and office

expense of $27,467.

Our general and administrative expenses for the nine months ended June 30, 2019 consisted mainly of travel

expenses of $60,028, rent expenses of $52,378, insurance expenses of $79,939, dues and subscriptions of $136,092 and office expense

Product development

expense decreased to $0 for the nine months ended June 30, 2020, from $1,034,612 for the same period ended 2019.

Our product development

expenses for the nine months ended June 30, 2020 and 2019 consisted mainly of amortization of capitalized software.

and amortization expense increased to $2,004,731 for the nine months ended June 30, 2020, from $1,275,249 for the same period

We expect that

our operating expenses will increase in future quarters as we further implement our business plan.

As we execute on customer contracts

we may be required to hire and compensate additional personnel and support increased operational costs.

income (Expenses)

income/(expenses) increased to

($8,875,541) for the nine months

ended June 30, 2020, from ($7,215,712) for the same period ended June 30, 2019.

Our other income/(expenses) for the nine months

ended June 30, 2020 consisted mainly of an unrealized gain on equity securities of $78,368, derivative gain of $1,544,185 and

development expense was $39,286 for the three months ended December 31, 2020, and $39,287 for the same period ended 2019.

development expenses for the three months ended December 31, 2020 and 2019 consisted mainly of amortization of capitalized software.

Depreciation and amortization expense increased

to $1,078,429 for the three months ended December 31, 2020, from $587,490 for the same period ended 2019 mainly due to the depreciation

expense related to the equipment used in the data center and digital currency miners.

We expect that our operating expenses will

increase in future quarters as we further implement our business plan.

As we execute on customer contracts we may be required to

hire and compensate additional personnel and support increased operational costs.

Other income (expenses)

income/(expenses) decreased to ($997,432) for the three months ended December 31, 2020, from $1,075,207 for the same period ended

December 31, 2019.

Our other income/(expenses) for the three months ended December 31, 2020 consisted mainly of a realized gain

on sales of digital currency of $49,918, net interest income of $46,644, an unrealized loss on equity securities of ($73,500),

and derivative loss of ($1,020,494).

Our other income/(expenses) for the three months ended December 31, 2019 consisted mainly

of an unrealized gain on equity security of $368,868, derivative income of $2,266,654 and

interest expense of ($1,560,315).

Our other expenses for

the nine months ended June 30, 2019 consisted of interest expense of ($7,196,287), and loss on settlement of debt of (19,425).

a net loss of $16,282,653 for the nine months ended June 30, 2020, as compared with a net loss of $14,020,002 for the same period

ended June 30, 2019.

and Capital Resources

As of June 30,

2020, we had total current assets of $7,220,044, consisting of cash, accounts receivable, and prepaid expenses and other current

assets, and total assets in the amount of $20,628,304.

Our total current and total liabilities as of June 30, 2020 were $1,588,880

We recorded a net loss of $7,167,530 for

the three months ended December 31, 2020, as compared with a net loss of $1,916,254 for the same period ended December 31, 2019

mainly due to increase in payroll expenses, general and administrative expenses, and depreciation and amortization expenses.

Liquidity and Capital Resources

As of December 31, 2020, we had total current

assets of $33,306,373, consisting of cash, digital currency, accounts receivable, and prepaid expenses and other current assets,

and total assets in the amount of $78,172,736.

Our total current and total liabilities as of December 31, 2020 were $4,594,815

and $6,137,646 respectively.

We had working capital of $5,631,164 as of June 30, 2020.

We had working capital of $28,711,558 as of December 31, 2020.

Operating Activities

used $3,679,081 in cash for the nine months ended June 30, 2020, as compared with $5,792,028 for the same period ended June 30,

Our net loss of $16,282,653 was the main component of our negative operating cash flow for the nine months ended June

30, 2020, offset mainly by unrealized gain on equity security of ($78,368), gain on derivative asset of ($1,544,185), depreciation

and amortization of $2,004,731, amortization of capitalized software of $121,582, amortization of debt discounts of $9,022,759,

accounts payable of $2,347,566, and stock-based compensation of $1,171,632.

Our net loss of $14,020,002 was the main component

of our negative operating cash flow for the nine months ended June 30, 2019, offset mainly by loss on settlement of debt of $19,425,

depreciation and amortization of $1,275,249, amortization of capitalized software of $1,034,612, amortization of debt discounts

of $5,674,800, stock based compensation of $1,716,753 and an increase in accounts payable of $1,653,821.

Cash flows used

by investing activities during the nine months ended June 30, 2020 was $2,667,702, as compared with $598,763 for the same period

ended June 30, 2019.

Our acquisition of p2kLabs, Inc.

of $1,141,990, investment in International Land Alliance and other equity

securities of $750,000, investment in Contractual Joint Venture of $660,000, and purchase of fixed assets of $30,787 were the

main components of our negative investing cash flow for the nine months ended June 30, 2020.

Our investment in the capitalized

software of $569,043 and purchase of fixed assets of $27,570 were the main components of our negative investing cash flow for

the nine months ended June 30, 2019.

flows provided by financing activities during the nine months ended June 30, 2020 amounted to $463,702, as compared with $13,994,092

for the nine months ended June 30, 2019.

Our cash flows from financing activities for the nine months ended June 30, 2020 consisted

of repayments of ($67,467) on promissory note and proceeds from promissory notes of $531,169.

Our positive cash flows from financing

activities for the nine months ended June 30, 2019 consisted of $361,800 in

proceeds from the sale of common stock, $14,995,000 in net proceeds from convertible notes and $75,030 from related party debts

off-set by repayments of $507,876 on promissory note, repayments of $555,000 on convertible debts and repayments of $457,820 on

related party debts.

Our future capital

requirements will depend on many factors including our growth rate, the timing and extent of spending to support development efforts,

the expansion of our sales and marketing, the timing of new product introductions and the continuing market acceptance of our

products and services.

Management believes

that the Company has sufficient liquidity to satisfy its anticipated cash requirements for the next twelve months.

However, there

can be no assurance that our operations will become profitable or that external sources of financing, including the issuance of

debt and/or equity securities, will be available at times and on terms acceptable to us, or at all.

The Company’s

management prepares budgets and monitors the financial results of the Company as a tool to align liquidity needs to the recurring

business requirements.

We may be required

to seek additional equity or debt financing.

In the event that additional financing is required from outside sources, we may not

be able to raise monies on terms acceptable to us or at all.

If we are unable to raise additional capital when desired, our business,

operating results and financial condition would be adversely affected.

activities used $6,833,578 in cash for the three months ended December 31, 2020, as compared with $885,386 for the same period

ended December 31, 2019.

Our net loss of $7,167,530 was

the main component of our negative operating cash flow

for the three months ended December 31, 2020, offset mainly by stock based compensation of $4,350,643 unrealized loss on equity

security of $73,500, loss on derivative asset of $1,020,494, depreciation and amortization of $1,078,429, and amortization of capitalized

software of $39,286.

Other components of our negative operating cash flow are the changes in operating assets and liabilities including

prepaid expenses and other current assets of ($2,329,318), accounts payable of ($2,366,531), digital currency of ($733,410), accounts

receivable of ($463,199), and inventory of ($276,750).

Our net loss of $1,916,254 was the main component of our negative operating

cash flow for the three months ended December 31, 2019, offset mainly by unrealized gain on equity security of ($368,868), gain

on derivative asset of ($2,266,654), depreciation and amortization of $626,777, amortization of capitalized software of $39,286,

amortization of debt discounts of $1,512,174, and stock-based compensation of $636,269.

Investing Activities

Investing activities used $(2,427,972) during

the three months ended December 31, 2020, as compared with ($509,447) for the same period ended December 31, 2019.

digital currencies of $375,887, acquisition of ATL Data Centers, LLC of $45,783, investment in infrastructure development of $(2,830,560),

and purchase of fixed assets of ($19,082) were the main components of our investing cash flow for the three months ended December

Our investment in International Land Alliance of $(500,000) and purchase of fixed assets of $(9,447) were the main components

of our negative investing cash flow for the three months ended December 31, 2019.

Financing Activities

flows received/(used) in financing activities during the three months ended December 31, 2020 amounted to $31,767,261, as compared

with ($67,467) for the three months ended December 31, 2019.

Our cash flows from financing activities for the three months ended

December 31, 2020 consisted of repayments of ($5,475,000) on promissory notes, proceeds from exercise of warrants of $192,656,

and proceeds from underwritten offering of $37,049,605.

Our negative cash flows from financing activities for the three months

ended December 31, 2019 consisted of repayments of $(67,467) on promissory notes.

Our future capital requirements will depend

on many factors including our growth rate, the timing and extent of spending to support development efforts, the expansion of our

sales and marketing, the timing of new product introductions and the continuing market acceptance of our products and services.

Management believes that the Company has sufficient

liquidity to satisfy its anticipated cash requirements for the next twelve months.

However, there can be no assurance that our

operations will become profitable or that external sources of financing, including the issuance of debt and/or equity securities,

will be available at times and on terms acceptable to us, or at all.

The Company’s management prepares budgets

and monitors the financial results of the Company as a tool to align liquidity needs to the recurring business requirements.

We may be required to seek additional equity

or debt financing.

In the event that additional financing is required from outside sources, we may not be able to raise monies

on terms acceptable to us or at all.

If we are unable to raise additional capital when desired, our business, operating results

and financial condition would be adversely affected.

Off Balance Sheet Arrangements

As of December 31, 2020, there were no off-balance

sheet arrangements.

As of June 30,

2020, there were no off-balance sheet arrangements.

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.

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

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 adoption or prospective

adoption to all implementation costs incurred after the date of adoption.

ASU 2018-15 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 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 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

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, 2020.

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

position and results of operations.

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.

Accounting Policies

2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion

and Analysis.

The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal

of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments,

often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our accounting

policies are discussed in detail in the footnotes to our financial statements included in our Annual Report on Form 10-K for the

year ended September 30, 2019, however we consider our critical accounting policies to be those related to revenue recognition,

long-lived assets, accounts receivable, fair value of financial instruments, cash and cash equivalents, accounts receivable, warranty

liability and stock-based compensation.

and Qualitative Disclosures About Market Risk

Not applicable

to a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

Recently Issued Accounting Pronouncements

The Company has evaluated all 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.

Critical Accounting Policies

In December 2001, the SEC requested that all

registrants list their most “critical accounting polices” in the Management Discussion and Analysis.

The SEC indicated

that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial

condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the

need to make estimates about the effect of matters that are inherently uncertain.

Our accounting policies are discussed in detail

in the footnotes to our financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2020.

However, we consider our critical accounting policies to be those related to revenue recognition, long-lived assets, accounts receivable,

fair value of financial instruments, cash and cash equivalents, accounts receivable, warranty liability and stock-based compensation.

Quantitative and Qualitative Disclosures

About Market Risk

Not applicable to a “smaller reporting

company” as defined in Item 10(f)(1) of Regulation S-K.

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-Q

Item 2. Management’s Discussion and Analysis