What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2021-02-12 · 798 added, 771 removed, 803 unchanged (66% of the section changed)

2 unchanged sentences

this Form 10-Q are as follows:

Consolidated Balance Sheets as of December 31, 2020 (unaudited) and September 30, 2020;

Consolidated Statements of Operations for the three months ended December 31, 2020 and 2019 (unaudited);

Consolidated Statements of Stockholders’ Equity for the three months ended December 31, 2020 and 2019 (unaudited);

Consolidated Statements of Cash Flows for the three months ended December 31, 2020 and 2019 (unaudited);

Consolidated Balance Sheets as of March 31, 2021 (unaudited) and September 30, 2020;

Consolidated Statements of Operations for the three and six months ended March 31, 2021 and 2020 (unaudited);

Consolidated Statements of Stockholders’ Equity for the three and six months ended March 31, 2021 and 2020 (unaudited);

Consolidated Statements of Cash Flows for the six months ended March 31, 2021 and 2020 (unaudited);

Notes to Consolidated Financial Statements (unaudited).

This report on Form 10-Q for the quarter ended December 31, 2020,

should be read in conjunction with the Company's annual report on Form 10-K for the year ended September 30, 2020, filed with the

Securities and Exchange Commission (“SEC”) on December 17, 2020.

The accompanying consolidated financial statements and footnotes

have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial

information and the SEC instructions to Form 10-Q.

In the opinion of management, all adjustments considered necessary for a fair

presentation have been included.

Operating results for the interim period ended December 31, 2020 are not necessarily indicative

This report on Form 10-Q for the quarter ended

March 31, 2021, should be read in conjunction with the Company's annual report on Form 10-K for the year ended September 30, 2020,

filed with the Securities and Exchange Commission (“SEC”) on December 17, 2020.

The accompanying consolidated financial statements

and footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America for

interim financial information and the SEC instructions to Form 10-Q.

In the opinion of management, all adjustments considered necessary

for a fair presentation have been included.

Operating results for the interim period ended March 31, 2021 are not necessarily indicative

of the results that can be expected for the full year.

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CONSOLIDATED BALANCE SHEETS

December 31, 2020

March 31, 2021

September 30, 2020

Current assets

Cash and cash equivalents

$ 157,274,542

Accounts receivable, net

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Total current assets

Fixed assets, net

$ 178,459,063

Property and equipment, net

Operating lease right of use asset

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Intangible assets, net

Deposits on mining equipment and related assets

Other long-term asset

$ 292,612,596

LIABILITIES AND STOCKHOLDERS' EQUITY

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Contract liabilities

Operating lease liability

Finance lease liability

Contingent consideration

Operating lease liability, current portion

Finance lease liability, current portion

Acquisition liability

Contingent consideration, current portion

Dividends payable

Total current liabilities

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Loans payable

Operating lease liability, non-current

Finance lease liability, non-current

Operating lease liability, net of current portion

Finance lease liability, net of current portion

Contingent consideration, net of current portion

Total liabilities

Stockholders' equity

Common stock;

$ 0.001 par value;

50,000,000 shares authorized;

33,874,152 and 17,390,979 shares issued and outstanding as of March 31, 2021 and September 30, 2020, respectively

Preferred stock;

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Series A shares;

and 1,750,000 issued and outstanding as of December 31, 2020 and September 30, 2020, respectively

Common stock;

shares authorized;

and 17,390,979

shares issued and outstanding as of December 31, 2020 and September 30, 2020, respectively

1,750,000 and 1,750,000 issued and outstanding as of March 31, 2021 and September

30, 2020, respectively

Additional paid-in capital

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Total liabilities and stockholders' equity

The accompanying notes are an integral

part of these unaudited consolidated financial statements.

$ 292,612,596

The accompanying notes are an integral part

of these unaudited consolidated financial statements.

CLEANSPARK, INC.

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For the Three Months Ended

December 31, 2020

December 31, 2019

For the Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Revenues, net

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Service, software and related revenues

Digital currency mining revenue

Cryptocurrency mining revenue

Total revenues, net

Cost of revenues

Product sale revenues

Service, software and related revenues

Cost of mining and data center revenue

Total cost of revenues

Operating expenses

Costs and expenses

Cost of revenues (exclusive of depreciation and amortization shown below)

Professional fees

Payroll expenses

Product development

General and administrative expenses

Depreciation and amortization

Total operating expenses

Total costs and expenses

Loss from operations

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( 2,272,052 )

( 8,667,070 )

( 5,263,513 )

Other income (expense)

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Unrealized gain/(loss) on equity security

Unrealized gain/(loss) on derivative security

Unrealized gain on derivative security

( 1,441,763 )

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( 1,891,283 )

( 3,451,598 )

Total other income (expense)

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( 2,467,839 )

Loss per common share - basic and diluted

Weighted average common shares outstanding - basic and diluted

Net Income/(loss) attributable to the Company

$ ( 5,815,098 )

$ ( 7,731,352 )

Preferred stock dividends

Net Income (loss) attributable to the Company’s common shareholders

$ ( 5,815,098 )

$ ( 7,731,352 )

Earnings/(loss) per common share - basic

Weighted average common shares outstanding - basic

Earnings/(loss) per common share - diluted

Fully diluted weighted average common shares

The accompanying notes are an integral

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

the Three months Ended December 31, 2020

For the Six Months ended March 31, 2021

Preferred Stock

Additional Paid-in

Additional Paid-in Capital

Accumulated Deficit

Stockholders' Equity

Total Stockholders' Equity

Balance, September 30, 2020

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$ ( 123,570,136 )

the Three months Ended December 31, 2019

Shares issued for services

Options and warrants issued for services

Shares issued for business acquisition

Exercise of options and warrants

Shares issued under underwritten offering, net of offering costs

Shares returned in relation to business acquisition

Preferred stock dividends accrued

Balance, March 31, 2021

( 116,347,601 )

For the Six Months Ended March 31, 2020

Preferred Stock

Additional Paid-in

Additional Paid-in Capital

Accumulated Deficit

Stockholders' Equity

Total Stockholders' Equity

Balance, September 30, 2019

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Options and warrants issued for services

Shares issued upon conversion of debt and accrued interest

Shares issued for stock split

Beneficial conversion feature and shares issued with convertible debt

Rounding shares issued for stock split

( 1,916,254 )

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( 94,972,717 )

Shares returned and cancelled

Options issued for business acquisition

Options and warrants issued for services

Shares issued for business acquisition

Beneficial conversion feature and shares issued with convertible debt

( 5,815,098 )

The accompanying notes are an integral part of these

unaudited consolidated financial statements.

( 5,815,098 )

Balance, March 31, 2020

( 100,787,815 )

The accompanying notes are an integral

part of these unaudited consolidated financial statements.

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

December 31, 2020

December 31, 2019

For the Six Months Ended

March 31, 2021

March 31, 2020

Cash Flows from Operating Activities

$ ( 7,167,530 )

Net income (loss)

$ ( 7,731,352 )

Adjustments to reconcile net loss to net cash used in operating activities:

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

Stock based compensation

Unrealized (gain) loss on equity security

Unrealized gain on equity security

Realized gain on sale of digital currency

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Depreciation and amortization

Amortization of capitalized software

Amortization of debt premium

Unrealized (gain) loss on derivative asset

Provision for bad debts

Gain on derivative asset

( 7,380,135 )

PPP loan forgiveness

Amortization of debt discount

Changes in operating assets and liabilities

Decrease (increase) in prepaid expenses and other current assets

(Increase) decrease in prepaid expenses and other current assets

( 1,130,741 )

Decrease (increase) in contract assets

(Increase) decrease in contract liabilities, net

Increase in accounts receivable

Increase (decrease) in accounts payable

Decrease in contract assets

Increase in contract liabilities

Decrease (increase) in accounts receivable

(Decrease) increase in accounts payable

( 2,890,270 )

Increase in digital currency

Increase in digital currency from mining

( 7,449,202 )

Decrease in lease liability

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( 11,686,460 )

( 1,263,055 )

Cash Flows from investing

Proceeds from sale of digital currencies

Increase in deposits on mining equipment and related assets

( 45,488,258 )

Sale of digital currencies

Investment in infrastructure development

( 2,830,560 )

Purchase of fixed assets

Cash acquired from ATL acquisition

Purchase of property and equipment

( 9,058,011 )

Acquisition of ATL Data Center, net of cash received

Acquisition of p2KLabs, net of cash received

( 1,141,990 )

Acquisition of Solar Watt Solutions, net of cash received

( 1,000,337 )

Investment in capitalized software

Investment in debt and equity securities

1 unchanged sentence

( 55,909,101 )

( 2,001,825 )

Cash Flows from Financing Activities

1 unchanged sentence

( 5,865,476 )

Proceeds from exercise of warrants

Proceeds from underwritten offering

Net cash received/(used) in financing activities

Net increase (decrease) in Cash

Proceeds from exercise of options and warrants

Proceeds from underwritten offerings

Net cash received/(provided) by financing activities

Net increase (decrease) in cash and cash equivalents

( 3,332,347 )

Cash, beginning of period

Cash, end of period

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$ 157,274,542

Supplemental disclosure of cash flow information

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Day one recognition of right of use asset and liability

Shares issued for conversion of debt

Shares and options issued for business acquisition

Shares issued as collateral returned to treasury

Preferred stock dividends accrued

Cashless exercise of options/warrants

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ORGANIZATION AND LINE OF BUSINESS

Organ ization

The Company - CleanSpark, Inc.

CleanSpark, Inc.

(“CleanSpark”,

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

under the name, SmartData

(“CleanSpark”, “we”, “our”, the "Company") was incorporated in the state of

Nevada on October 15,

1987 under the name, SmartData Corporation.

In October 2016, the Company changed its name to CleanSpark, Inc.

in order to better reflect the Company’s

brand identity.

order to better reflect the Company’s brand identity.

The Company, through itself and

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CleanSpark Critical Power Systems,

On January 22, 2019, CleanSpark

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

client lists.

On January 22, 2019, CleanSpark entered

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

As a result of the transaction, Pioneer Critical Power Inc.

became a wholly owned subsidiary of the Company.

February 1, 2019, Pioneer Critical Power, Inc.

On February 1, 2019,

Pioneer Critical Power, Inc.

was renamed to CleanSpark Critical Power Systems, Inc.

On January 31, 2020, the Company entered

into a Stock Purchase Agreement with p2klabs, Inc (“p2k”), and its sole stockholder, whereby the Company purchased

all of the issued and outstanding shares of p2k from its sole stockholder.

As a result of the transaction, p2k became a wholly-owned

subsidiary of the Company.

GridFabric, LLC

On January 31, 2020, the Company

entered into a Stock Purchase Agreement with p2klabs, Inc (“p2k”), and its sole stockholder, whereby the Company

purchased all of the issued and outstanding shares of p2k from its sole stockholder.

As a result of the transaction, p2k

became a wholly owned subsidiary of the Company.

On August 31, 2020, the Company entered

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GridFabric a wholly owned subsidiary of the Company.

ATL Data Centers LLC

On December 9, 2020, the Company entered into

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the Company purchased all of the issued and outstanding membership units of ATL from its members.

As a result of the transaction, ATL became a wholly-owned subsidiary of the Company.

As a result of the transaction,

ATL became a wholly owned subsidiary of the Company.

(See Note 3 for details.)

Solutions, Inc.

On February 23, 2021, the Company entered into

an Agreement and Plan of Merger (the “Merger”) with Solar Watt Solutions, Inc.

(“SWS”), and its owners whereby

the Company purchased all of the issued and outstanding shares of SWS from its owners.

As a result of the transaction, SWS became

a wholly owned subsidiary of the Company.

(See Note 3 for details.)

Lines of Business

Energy Business

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

CleanSpark, LLC, we provide microgrid engineering, design and software solutions to military, commercial and residential customers.

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

The work is generally performed under fixed price bid contracts and negotiated price contracts.

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

military and commercial residential properties.

generally performed under fixed price bid contracts and negotiated price contracts.

CleanSpark Critical Power Systems, Inc., we provide custom hardware solutions for distributed energy systems that serve military

and commercial residential properties.

The equipment is generally sold under negotiated fixed price contracts.

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

protocol software solutions to commercial and utility customers.

ATL, the Company provides traditional data center services such as providing customers with rack space, power

and equipment, and offers several cloud services including, virtual services, virtual storage, and data backup services.

GridFabric, LLC, we provide Open Automated Demand Response (“OpenADR”) and other middleware communication protocol

software solutions to commercial and utility customers.

Solar Watt Solutions, Inc., which we acquired in February 2021, we provide solar and alternative energy solutions for

homeowners and commercial businesses in Southern California.

ATL Data Centers LLC, we provide traditional data center services, such as providing customers with rack space, power and equipment,

and offer several cloud services including, virtual services, virtual storage, and data backup services.

Agency Segment

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Currency Mining Segment

ATL Data Centers, LLC, the Company mines digital assets, namely Bitcoin.

ATL Data Centers LLC and our recently formed subsidiary, CleanBlok, LLC, we mine Bitcoin.

We entered the Bitcoin mining industry

through our recent acquisition of ATL Data Centers LLC, and we have recently acquired additional equipment and infrastructure capacity

in order to expand our Bitcoin mining operations.

SUMMARY OF SIGNIFICANT POLICIES

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10-K, have been omitted.

The Company has incurred losses for the past

several years while it develops its infrastructure and its software platforms.

As shown in the accompanying unaudited consolidated

financial statements, the Company incurred net losses of $ 7,167,530

during the three months ended December 31, 2020.

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

capital for ongoing operations for a minimum of 12 months we

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

(See Note 12 for additional details.) As of December 31, 2020, the Company had working capital of $ 28,711,558 .

Company has incurred losses in the past while it developed its infrastructure and software platforms.

As shown in the accompanying

unaudited consolidated financial statements, the Company incurred operating losses of $ 8.7

million and produced net income of $ 232,510

during the six months ended March 31,

The Company has sufficient capital for ongoing operations from raising additional capital through the registered sale of equity securities

pursuant to a registration statement on Form S-3.

(See Note 11 for additional details.) As of March 31, 2021, the Company had

working capital of $ 171,118,618 .

of Consolidation

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

Critical Power Systems Inc., p2kLabs, Inc, GridFabric, LLC, and ATL Data Centers LLC.

All material intercompany transactions have

been eliminated upon consolidation of these entities.

Use of estimates

The preparation of consolidated financial

statements in conformity with accounting principles generally accepted in the United States of America requires management to

make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and

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

reporting period.

Critical Power Systems Inc., p2kLabs, Inc, GridFabric, LLC, ATL Data Centers LLC, CleanBlok, LLC, and Solar Watt Solutions, Inc.

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

The preparation of consolidated financial statements in conformity with accounting principles generally accepted

in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets

and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the

reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates include estimates used to review the

Company’s goodwill impairment, intangible assets acquired, impairments and estimations of long-lived assets, revenue recognition

on percentage of completion type contracts,

allowances for

uncollectible accounts, and the valuations of non-cash capital stock issuances.

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

estimates include estimates used to review the Company’s goodwill impairment, intangible assets acquired, impairments and

estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible

accounts, and the valuations of non-cash capital stock issuances.

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

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

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including, but not limited to, the ultimate impact that COVID-19 may have on the Company’s operations.

Revenue Recognition

revenue in accordance with generally accepted accounting principles as outlined in the Financial Accounting Standard Board's (“FASB”)

Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers, which requires that five steps

be followed in evaluating revenue recognition:

We recognize revenue in accordance with generally accepted accounting principles as outlined in the Financial Accounting

Standard Board's (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers,

which requires that five steps be followed in evaluating revenue recognition:

(i) identify the contract with the customer;

(ii) identity the performance obligations

in the contract;

identity the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price;

and (v) recognize revenue when or

as the entity satisfied a performance obligation.

We did not have a cumulative impact

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

and (v) recognize revenue when or as the entity satisfied a performance obligation.

Our accounting policy on revenue recognition by type of revenue

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

Company recognizes energy (solar panel and battery) installation contract

revenue for residential customers at a point in time

upon completion of the installation.

The revenues associated with energy installations for commer cial

customers are recognized over a period of time as noted in the engineering and construction contract revenue disclosure above.

For service contracts (including maintenance

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

For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation

using an estimate of the stand-alone selling price of each distinct service in the contract.

Revenue recognized on service contracts

that have not been billed to clients is classified as a current asset under contract assets on the Consolidated Balance Sheets.

Amounts billed to clients in excess of revenue recognized on service contracts to date are classified as a current liability under

For contracts with multiple

performance obligations, the Company allocates the transaction price to each performance obligation using an estimate of the

stand-alone selling price of each distinct service in the contract.

Revenue recognized on service contracts that have not

been billed to clients is classified as a current asset under contract assets on the Consolidated Balance Sheets.

billed to clients in excess of revenue recognized on service contracts to date are classified as a current liability under

contract liabilities.

Customer payments on service contracts are typically due within 30 days of billing, depending on the contract.

Customer payments on service contracts are typically due within 30 days of billing, depending on the

Revenues from Sale of Equipment

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

in progress (typically for fixed-price contracts) of $ 906 and $ 4,103 as of December 31, 2020 and September 30, 2020, respectively.

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

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

Advances that are payments on account of contract assets

of $ 0 and $ 0 as of December 31, 2020 and September 30, 2020, respectively, have been deducted from contract assets.

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

The Company recorded $ 63,603 and $ 64,108

in contract liabilities as of December 31, 2020 and September 30, 2020, respectively.

in progress (typically for fixed-price contracts) of $ 0 and $ 4,103 as of March 31, 2021 and September 30, 2020, respectively.

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

receivable when they are billed under the terms of the contract.

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

$ 0 as of March 31, 2021 and September 30, 2020, respectively, have been deducted from contract assets.

Contract liabilities represent

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

The Company recorded $ 551,977 and $ 64,198 in contract liabilities

as of March 31, 2021 and September 30, 2020, respectively.

from software

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algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized.

transaction consideration the Company receives is noncash consideration, which the Company measures at fair value on the date received.

transaction consideration the Company receives is noncash consideration, in the form of digital currency, which the Company measures

at fair value on the date received.

The consideration is dependent on the number of digital assets mined on any given day.

digital Fair value of the digital currency

award received is determined using the spot price of the related digital currency at the time of receipt.

There is currently no specific definitive

guidance under GAAP or alternative accounting framework for the accounting for digital currencies recognized as revenue or held,

and management has exercised significant judgment in determining the appropriate accounting treatment.

In the event authoritative

guidance is enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s

consolidated financial position and results from operations.

Fair value of the digital currency award received is determined using the spot price of the related digital currency at the time

There is currently no specific definitive guidance

under GAAP or alternative accounting framework for the accounting for digital currencies recognized as revenue or held, and management

has exercised significant judgment in determining the appropriate accounting treatment.

In the event authoritative guidance is

enacted by the FASB, the Company may be required to change its policies, which could have an effect on the Company’s consolidated

financial position and results from operations.

Variable Consideration

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

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

(a) the contract or

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

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

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

For the three months ended December 31, 2020

and 2019, the Company reported revenues of $ 2,257,570

and $ 976,824 , respectively.

For the six months ended March 31, 2021 and

2020, the Company reported revenues of $ 10,377,258 and $ 4,635,107 , respectively.

Cash and cash equivalents

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

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

There was $ 25,631,913 and $ 3,126,202 in cash

and no cash equivalents as of December 31, 2020 and September 30, 2020, respectively.

For purposes of the consolidated statements

of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of

three months or less to be cash equivalents.

There was $ 157,274,542 and $ 3,126,202 in cash and cash equivalents as of March

31, 2021 and September 30, 2020, respectively.

Digital Currency

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Subsequent reversal of impairment losses is not permitted.

Digital currencies awarded to the Company

through its mining activities are included within operating activities on the accompanying consolidated statements of cash flows.

The sales of digital currencies are included within investing activities in the accompanying consolidated statements of cash flows

and any realized gains or losses from such sales are included in other income (expense) in the consolidated statements of operations.

The Company accounts for its gains or losses in accordance with the first in first out (FIFO) method of accounting.

Digital currencies awarded to the Company through

its mining activities are included within operating activities on the accompanying consolidated statements of cash flows.

of digital currencies are included within investing activities in the accompanying consolidated statements of cash flows and any

realized gains or losses from such sales are included in other income (expense) in the consolidated statements of operations.

Company accounts for its gains or losses in accordance with the first in first out (FIFO) method of accounting.

The following table presents the activities

of the digital currencies for the three months ended December 31, 2020:

Digital currencies at December 31, 2020:

of the digital currencies for the six months ended March 31, 2021:

Balance at September 30, 2020

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Sale of digital currencies

Balance at December 31, 2020

( 2,422,282 )

Balance at March 31, 2021

Accounts receivable

Accounts receivable is comprised of

uncollateralized customer obligations due under normal trade terms.

The Company performs ongoing credit evaluation of its customers

and management closely monitors outstanding receivables based on

factors surrounding the credit risk of specific customers, historical

trends, and other information.

Accounts receivable is comprised of uncollateralized

customer obligations due under normal trade terms.

The Company performs ongoing credit evaluation of its customers and management

closely monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends,

and other information.

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

If management

determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not

be collected is recorded.

Accounts receivable are presented net of an allowance for doubtful accounts of $ 42,970 and $ 42,970 at

December 31, 2020, and September 30, 2020, respectively.

If management determines

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

Accounts receivable are presented net of an allowance for doubtful accounts of $ 693,508 and $ 42,970 at March 31, 2021,

and September 30, 2020, respectively.

Retention receivable is the amount withheld

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Retention receivables of $ 0 and $ 615 were included in the balance of trade accounts

receivable as of December 31, 2020 and September 30, 2020, respectively.

receivable as of March 31, 2021 and September 30, 2020, respectively.

Inventories are stated at the lower of cost

or net realizable value on a first-in, first-out basis.

For solar panel and battery installations, the Company transfers component

parts from inventories to cost of goods sold once installation is complete.

The Company periodically reviews inventories for unusable

and obsolete items based on assumptions about future demand and market conditions.

Based on this evaluation, provisions are made

to write inventories down to their net realizable value.

Investment securities

securities include debt securities and equity securities.

Debt securities are classified as available for sale (“AFS”)

and are reported as an asset in the Consolidated Balance Sheet at their estimated fair value.

As the fair values of AFS debt securities

change, the changes are reported net of income tax as an element of OCI, except for other-than-temporarily-impaired securities.

When AFS debt securities are sold, the unrealized gains or losses are reclassified from OCI to non-interest income.

classified as AFS are securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity.

Any decision to sell a security classified as AFS would be based on various factors, including significant movements in interest

rates, changes in the maturity mix of the Company’s assets and liabilities, liquidity needs, decline in credit quality, and

regulatory capital considerations.

Investment securities include debt

securities and equity securities.

Debt securities are classified as available for sale (“AFS”) and are reported as

an asset in the Consolidated Balance Sheet at their estimated fair value.

As the fair values of AFS debt securities change, the

changes are reported net of income tax as an element of OCI, except for other-than-temporarily-impaired securities.

When AFS debt

securities are sold, the unrealized gains or losses are reclassified from OCI to non-interest income.

Securities classified as

AFS are securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity.

to sell a security classified as AFS would be based on various factors, including significant movements in interest rates, changes

in the maturity mix of the Company’s assets and liabilities, liquidity needs, decline in credit quality, and regulatory capital

considerations.

Interest income is recognized based

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been suspended is recognized in income on a cash basis.

The Company holds investments in

both publicly held and privately held equity securities.

However, as described in Note 1, the Company primarily operates in the

alternative energy sector and in the digital currency mining sector, and thus, it is not in the business of investing in securities.

The Company holds investments in both

publicly held and privately held equity securities.

However, as described in Note 1, the Company primarily operates in the alternative

energy sector and in the digital currency mining sector, and thus, it is not in the business of investing in securities.

Privately held equity securities are

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

As of December 31, 2020, the cash balance in excess of

the FDIC limits was $ 25,379,232 .

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

any significant credit risk in these accounts.

The Company had certain customers whose revenue individually represented 10% or

more of the Company’s total revenue.

As of March 31, 2021, the cash balance in excess of the

FDIC limits was $ 157,024,542 .

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

significant credit risk in these accounts.

The Company had certain customers whose revenue individually represented 10% or more

of the Company’s total revenue.

(See Note 15 for details.)

Warranty Liability

The Company establishes warranty liability reserves to provide

for estimated future expenses as a result of installation and product defects, product recalls, and litigation incidental to the

Company’s business.

Liability estimates are determined based on management’s judgment, considering such factors as

historical experience, the likely current cost of corrective action, manufacturers’ and subcontractors’ participation

in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with the Company’s

general counsel and outside counsel retained to handle specific product liability cases.

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

years with full reimbursement to replace and install replacement parts.

Warranty costs and associated liabilities were $ 0 and $ 0

at December 31, 2020 and September 30, 2020, respectively.

The Company establishes warranty liability

reserves to provide for estimated future expenses as a result of installation and product defects, product recalls, and litigation

incidental to the Company’s business.

Liability estimates are determined based on management’s judgment, considering

such factors as historical experience, the likely current cost of corrective action, manufacturers’ and subcontractors’

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

with the Company’s general counsel and outside counsel retained to handle specific product liability cases.

The Company’s

manufacturers and service providers currently provide substantial warranties between ten to twenty-five years with full reimbursement

to replace and install replacement parts.

Warranty costs and associated liabilities were $ 0 and $ 0 at March 31, 2021 and September

30, 2020, respectively.

Stock-based compensation

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

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

on the grant-date fair value of the award.

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

service period.

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

operations, corporate communication, financial and administrative consulting services.

The Company follows the guidelines in FASB

Codification Topic ASC 718-10 “Compensation-Stock Compensation,” which requires companies to measure the cost of employee

and non-employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award.

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

The Company may issue

compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication,

financial and administrative consulting services.

Earnings (loss) per share

The Company reports earnings (loss) per share

in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)

260-10 “Earnings Per Share,” which provides for calculation of “basic” and “diluted” earnings

Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders

by the weighted average common shares outstanding the period.

Diluted earnings per share reflect the potential dilution of securities

that could share in the earnings of an entity.

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

(“FASB”) Accounting Standards Codification (“ASC”) 260-10 “Earnings Per Share,” which

provides for calculation of “basic” and “diluted” earnings per share.

Basic earnings per share

includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average

common shares outstanding the period.

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

share in the earnings of an entity.

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

however, potential common shares are excluded if their effect is anti-dilutive.

As of December 31, 2020, there are 1,562,092 shares

issuable upon exercise of outstanding options and warrants which have been excluded as anti-dilutive.

As of March 31, 2021, there are 1,522,604 shares issuable upon exercise of outstanding options and warrants,

the dilutive effect of which is computed using the treasury stock method.

The following table sets forth the computation

of basic and diluted Net income (loss) attributable to the Company’s common shareholders:

three months ended

six months ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Net Income (Loss) attributable to the Company

$ ( 5,815,098 )

$ ( 7,731,352 )

Numerator for basic and diluted EPS - Income (loss) attributable to the Company's common shareholders

$ ( 5,815,098 )

$ ( 7,731,352 )

Denominator for basic EPS - Weighted average shares

Dilutive effect of warrants and options

Dilutive effect of preferred stock conversions

Denominator for diluted EPS - Adjusted weighted average shares

Basic Income (Loss) per common share

Diluted Income (Loss) per common share

Property and equipment

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Standards Board ("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property, Plant and Equipment,"

the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or

circumstances that may suggest impairment.

The Company recognizes impairment when the sum of the expected undiscounted future cash

flow is less than the carrying amount of the asset.

Impairment losses, if any, are measured as the excess of the carrying amount

of the asset over its estimated fair value.

For the three months ended December 31, 2020 and 2019, the Company did not record an

impairment expense.

the carrying value of intangible assets and other long-lived assets is reviewed on a regular

basis for the existence of facts

or circumstances that may suggest impairment.

The Company recognizes impairment when the sum of the expected undiscounted

future cash flow is less than the carrying amount of the asset.

Impairment losses, if any, are measured as the excess of the

carrying amount of the asset over its estimated fair value.

For the six months ended March 31, 2021 and 2020, the Company did

not record an impairment expense.

Intangible Assets and Goodwill

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In accordance with its policies, the Company performed an assessment

of indefinite lived intangibles and goodwill and determined there was no impairment for the three months ended December 31, 2020

of indefinite lived intangibles and goodwill and determined there was no impairment for the six months ended March 31, 2021 and

Software Development Costs

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Commencing upon a product's release,

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

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

seven years for our current product offerings.

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

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

years for our current product offerings.

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

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derivative asset

The carrying value of cash, accounts

payable and accrued expenses, and debt (See Notes 8 and 9) approximate their fair values because of the short-term nature of

these instruments.

Management believes the Company is not exposed to significant interest or credit risks arising from these

financial instruments.

The carrying amount of the Company’s long-term debt is also stated at fair value of $ 531,169

since the stated rate of interest approximates market rates.

The carrying value of cash, accounts payable

and accrued expenses, and debt (See Note 8) approximate their fair values because of the short-term nature of these instruments.

Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments.

Fair value is defined as the exchange price

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

and their level within the fair value hierarchy as of December 31, 2020 and September 30, 2020, respectively:

Fair value measured at December 31, 2020

and their level within the fair value hierarchy as of March 31, 2021 and September 30, 2020, respectively:

Fair value measured at March 31, 2021:

Derivative asset

Investment in equity security

Investment debt security

Investment in debt security

Fair value measured at September 30, 2020:

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Investment in debt security

The below table presents the change in the fair value

of the derivative asset and investment in debt security during the three months ended December 31, 2020:

The below table presents the change

in the fair value of the derivative asset and investment in debt security during the three months ended March 31, 2021:

Balance at September 30, 2020

Gain/(loss) on derivative asset

( 1,020,494 )

Balance at December 31, 2020

Balance at March 31, 2021

Reclassifications

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three reportable segments for financial reporting purposes.

issued accounting pronouncements

Recently issued accounting pronouncements

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.

The new standard did not have a material impact on the Company’s results of operations or cash

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.

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

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

ASU 2018-13 is effective for for fiscal years beginning

ASU 2018-13 is effective for fiscal years beginning

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

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

ASU 2017-04 is effective for fiscal years beginning

after December 15, 2019.

The new standard did not have a material impact on the Company’s results of operations or cash

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

ASU 2016-13 is effective for fiscal years beginning after December 15, 2022.

We are currently evaluating the impact

the adoption of this new standard will have on our financial position and results of operations.

ASU 2017-04 is effective for fiscal years beginning after

December 15, 2019.

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

In June 2016, the FASB issued guidance within

ASU 2016-13, Financial Instruments – Credit Losses.

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

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

ASU 2016-13 is effective for fiscal years

beginning after December 15, 2022.

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

position and results of operations.

The Company has evaluated all other

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results of operations, or cash flows.

SOLAR WATT SOLUTIONS, INC

On February 23, 2021, the Company entered into

an Agreement and Plan of Merger (the “Merger Agreement”) with SWS (“SWS”) and its owners (the “Sellers”).

the closing on February 24, 2021, SWS became a wholly owned subsidiary of the Company.

In exchange, the Company issued (i) 477,703

shares of restricted common stock based on the average closing price of the Company’s common stock (as reflected on Nasdaq.com)

for the five trading days including and immediately preceding the closing date of $ 32.74 per share to the sellers, of which (a)

167,685 shares would be fully earned on closing, and (b) an additional 310,018 shares

were issued and held in escrow, subject to holdback pending Sellers’ satisfaction of certain future milestones with all such

shares subject to a lock up of no less than 180 days and a leak out of no more than 10% of average daily trading value of the prior

30 days for a period of 36 months following the closing, and (ii) up to $3,850,000 in cash was remitted to the Sellers, of which:

(c) $1,350,000 was remitted to Sellers on a pro rata basis at closing, less payment of $500,000 in Sellers’ debt at closing,

(d) $200,000 in cash was held back by the Company for a period of nine months to satisfy potential damages from indemnification

claims and any amounts owed pursuant to post-closing adjustments, (e) an additional $100,000 in cash was held back by the Company

for a period of 90 days to satisfy any amounts owed pursuant to post-closing adjustments, and (f) up to $2,500,000 in cash was

held back by the Company pending the Sellers’ satisfaction of certain future milestones.

The Company determined the fair value of the

consideration given to the sellers of SWS in connection with the transaction in accordance with ASC 820 was as follows:

Consideration:

Contingent consideration

477,703 shares of common stock

Total Consideration

The total purchase price was allocated

to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair values as indicated below.

combination accounting is not yet final and the amounts assigned to the assets acquired and the liabilities assumed are provisional.

Therefore, this may result in future adjustments to the provisional amounts as new information is obtained about the facts and

circumstances that existed at the acquisition date.

Purchase Price Allocation:

Customer List

Other assets and liabilities assumed, net

ATL DATA CENTERS, LLC

On December 9, 2020, the Company entered into an Agreement and Plan

of Merger (the “Merger”) with ATL Data Centers LLC (“ATL”) and its members.

At the closing, ATL became a wholly-owned subsidiary of the Company.

In exchange, the Company issued 1,618,285 shares

of restricted common stock based on the

average closing price of the Company’s common stock (as reflected on Nasdaq.com) for the five trading days including and

immediately preceding the closing date of $ 11.988 per share, to the selling members of ATL, of which:

(i) 642,309 shares were fully

earned on closing, and (ii) an additional 975,976 shares issued to escrow and subject to holdback pending satisfaction of certain

future milestones, with all such shares subject to a lock up of no less than 180 days and a leak out of no more than 10% of the

average daily trading value of the prior 30 days.

The consideration remitted in connection with the Merger is subject

to adjustment based on post-closing adjustments to closing cash, indebtedness, and transaction expenses of ATL within 90 days of

On December 9, 2020, the Company entered into

an Agreement and Plan of Merger (the “Merger”) with ATL Data Centers LLC (“ATL”) and its members.

the closing, A TL

became a wholly owned subsidiary of the Company.

In exchange, the Company issued 1,618,285 shares of restricted common stock based

on the average closing price of the Company’s common stock (as reflected on Nasdaq.com) for the five trading days including

and immediately preceding the closing date of $ 11.988 per share, to the selling members of ATL, of which:

(i) 642,309 shares were

fully earned on closing, and (ii) an additional 975,976 shares were issued and held in escrow, subject to holdback pending satisfaction

of certain future milestones, with all such shares subject to a lock up of no less than 180 days and a leak out of no more than

10% of the average daily trading value of the prior 30 days.

The consideration remitted in connection with

the Merger is subject to adjustment based on post-closing adjustments to closing cash, indebtedness, and transaction expenses of

ATL within 90 days of closing.

The Company also assumed approximately $6.9 million in debts of ATL at closing.

As part of the transaction costs, the

Company issued 41,708 shares of common stock for an aggregate value of $ 545,916 to the broker.

The Company accounted for the acquisition of ATL as an

acquisition of a business under ASC 805.

The Company determined the fair value of the consideration

given to the selling members of ATL in connection with the transaction in accordance with ASC 820 was as follows:

As part of the transaction

costs, the Company issued 41,708 shares of common stock for an aggregate value of $ 545,916 to the broker.

The Company accounted for the acquisition

of ATL as an acquisition of a business under ASC 805.

The Company determined the fair

value of the consideration given to the selling members of ATL in connection with the transaction in accordance with ASC 820 was

Consideration:

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The total purchase price was allocated

to identifiable assets deemed acquired, and liabilities assumed, based on their estimated

fair values as indicated below.

The business combination accounting is not yet final and the amounts assigned to the assets acquired

and the liabilities assumed are provisional.

Therefore, this may result in future adjustments to the provisional amounts as new

information is obtained about the facts and circumstances that existed at the acquisition date.

to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair values as indicated below.

combination accounting is not yet final and the amounts assigned to the assets acquired and the liabilities assumed are provisional.

Therefore, this may result in future adjustments to the provisional amounts as new information is obtained about the facts and

circumstances that existed at the acquisition date.

Purchase Price Allocation:

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million in digital currency mining equipment and notes payable related to this equipment, which was settled by the Company during

the current quarter ended December 31, 2020.

The following is the unaudited pro forma

information assuming the acquisition of GridFabric, p2k Labs, and ATL occurred on October 1, 2019:

For the Three Months Ended

December 31, 2020

December 30, 2019

$ ( 6,458,903 )

$ ( 1,890,994 )

Loss per common share - basic and diluted

Weighted average common shares outstanding - basic and diluted

The unaudited pro forma consolidated

financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations

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

results of the consolidated entities.

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

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

All transitions that would be considered

inter-company transactions for proforma purposes have been eliminated.

the six months ended March 31, 2021.

P2K LABS, INC

On January 31, 2020, the Company, entered into

an Agreement with p2k, and its sole stockholder, Amer Tadayon, whereby the Company purchased all of the issued and outstanding

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

The transaction closed simultaneously

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

As a result of the transaction, p2k is now

an Agreement with p2k, and its sole stockholder, Amer Tadayon (the “Seller”), whereby the Company purchased all of

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

The transaction closed simultaneously upon the execution of the Agreement by the parties on January 31, 2020.

As a result of the transaction, p2k became

a wholly owned subsidiary of the Company.

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$ 115,500 in cash was paid to an independent third-party escrow where such cash is subject to offset for adjustments to the purchase price and indemnification purposes;

restricted shares of the Company’s common stock, valued at $ 300,000 , were issued to an independent third-party escrow (the

“Holdback Shares”).

The Holdback Shares will be released to Seller once p2k achieves certain revenue milestones for

the future performance of p2k.

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

The Shares and Holdback Shares were deemed to have a fair market

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

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

at $ 300,000 , were issued to an independent third-party escrow agent (the “Holdback Shares”) and will be released to

the Seller upon achievement of certain revenue milestones.

As of March 31, 2021, based on actual revenue milestones achieved, 56,444

restricted shares of the Company’s common stock were released to the Seller and the balance of 8,072 shares of the Company’s

common stock were returned and cancelled.

The Holdback Shares are subject to the Leak-Out Terms.

The Shares and Holdback Shares were deemed

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

26,950 common stock options which were deemed to have a fair market value of $ 88,935 on the date of the closing of the transaction.

The Company accounted for the acquisition of p2k as an

acquisition of a business under ASC 805.

The Company determined the fair value of the consideration

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

The Company accounted for the acquisition

of p2k as an acquisition of a business under ASC 805.

The Company determined the fair

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

Consideration:

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Total Consideration

The total purchase price was allocated

to identifiable assets deemed acquired, and liabilities assumed, of the Company’s acquisition of p2k, based on their estimated

The total purchase price of the Company’s acquisition

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

fair values as indicated below.

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GRIDFABRIC, LLC

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

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

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

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

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

On August 31, 2020, the Company entered into

a Membership Interest Purchase Agreement (the “Agreement”) with GridFabric, and its sole member, Dupont Hale Holdings,

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

from the Seller (the “Transaction”) in exchange for an aggregate purchase price of cash and stock of up to $ 1,400,000 (the

“Purchase Price”).

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

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

As a result of the Transaction,

GridFabric, became a wholly owned subsidiary of the Company.

Pursuant to the terms of the Agreement, the

Purchase Price was as follows:

cash was paid to the Seller at closing;

was delivered to an independent third-party escrow where such cash is subject to offset

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

shares of the Company’s common stock, valued at $ 250,000 ,

were issued to the Seller (the “Shares”).

The Shares are subject to certain

leak-out provisions whereby the Seller

may sell an amount of Shares equal to no more than ten percent (10%) of the daily dollar

trading volume of the Company’s common stock on its principal market for the prior

“Leak-Out Terms”);

d) additional

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

will be issuable to Seller if GridFabric achieves certain revenue and product release

milestones related to the future performance of GridFabric (the “Earn-out Shares”).

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

$ 400,000 in cash was delivered to an

independent third-party escrow agent where such cash is subject to offset for adjustments to the Purchase Price and

indemnification purposes for a period of 12 months;

26,427 restricted shares of the Company’s common stock, valued at $ 250,000 , were issued to the Seller (the “Shares”).

The Shares are subject to certain leak-out provisions whereby the Seller may sell an amount of Shares equal to no more than ten percent (10%) of the daily dollar trading volume of the Company’s common stock on its principal market for the prior 30 days (the “Leak-Out Terms”);

additional shares of the Company’s common stock, valued at up to $ 750,000 , will be issuable to Seller if GridFabric achieves certain revenue and product release milestones related to the future performance of GridFabric (the “Earn-out Shares”).

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

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

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

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

The Agreement contains standard representations, warranties, covenants,

indemnification and other terms customary in similar transactions.

In connection with the transaction, the Company also entered into

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

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

The Company accounted for the acquisition of GridFabric

as an acquisition of a business under ASC 805.

The Company determined the fair value of the consideration

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

The Shares were issued at a fair

market value of $ 9.46 per share.

The Earn-Out Shares are accounted for as contingent consideration and the number of

shares to be issued will be determined based on the closing price of the Company’s common stock on the date such milestone

event occurs.

The Agreement contains standard

representations, warranties, covenants, indemnification and other terms customary in similar transactions.

In connection with the transaction,

the Company also entered into employment relationships and non-compete agreements with GridFabric’s key employees for a period

of 36 months and plans to issue future equity compensation to said employees, subject to approval of the Company’s board

of directors.

The Company accounted for the

acquisition of GridFabric as an acquisition of a business under ASC 805.

The Company determined the fair value

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

Consideration:

26,427 shares of common stock

Contingent consideration - common stock issuable upon achievement of

Contingent consideration - common stock issuable upon achievement of milestone(s)

Total Consideration

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Customer list

The following is the unaudited pro forma information assuming the

acquisition of GridFabric, p2k Labs, ATL, and SWS occurred on October 1, 2019:

the Three Months Ended

the Six Months Ended

Net income/ (loss)

$ (5,531,940 )

$ (7,962,293)

Earnings/(loss) per common share - basic

average common shares outstanding - basic

Earnings/(loss) per common share - diluted

average common shares outstanding - diluted

The unaudited pro forma consolidated financial

results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that

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

of the consolidated entities.

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

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

All transitions that would be considered inter-company

transactions for proforma purposes have been eliminated.

INVESTMENT IN INTERNATIONAL LAND ALLIANCE

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

Pursuant to the terms of the ILAL SPA,

ILAL sold, and the Company purchased 1,000 shares

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

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

The Company also received 350,000 shares

(“commitment shares”) of ILAL’s common stock.

Preferred Stock will accrue cumulative in-kind accruals at a rate of 12% per annum and may increase upon the

occurrence of certain events.

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

under the agreement terms.

The commitment shares are recorded at

fair value as of December 31, 2020 of $ 136,500 .

The Preferred Stock is recorded as an AFS

debt security and is reported at its estimated fair value as of December 31, 2020.

The Company identified

a derivative instrument in accordance with ASC Topic No.

Pursuant to the terms of the ILAL SPA, ILAL

sold, and the Company purchased 1,000 shares of Series B Preferred Stock (the “Preferred Stock”) of ILAL

for an aggregate purchase price of US $ 500,000 (the “Stock Transaction”), less certain expenses and fees.

The Company also received 350,000 shares (“commitment shares”) of ILAL’s common stock.

The Preferred

Stock will accrue cumulative in-kind accruals at a rate of 12% per annum and may increase upon the occurrence of certain events.

Preferred is now convertible into common stock at a variable rate as calculated under the agreement terms.

The commitment shares are recorded at fair

value as of March 31, 2021 of $ 729,500 .

The Preferred Stock is recorded as an AFS debt

security and is reported at its estimated fair value as of March 31, 2021.

The Company identified a derivative instrument in accordance

with ASC Topic No.

815 due to the variable conversion feature.

815 requires the

Company to account for the conversion feature on its balance sheet at fair value and account for changes in fair value as a derivative

gain or loss.

815 requires the Company to account for the conversion

feature on its balance sheet at fair value and account for changes in fair value as a derivative gain or loss.

The Black-Scholes model utilized the following

inputs to value the derivative asset at the date in which the derivative asset was determined through December 31, 2020.

inputs to value the derivative asset at the date in which the derivative asset was determined through March 31, 2021.

Fair value assumptions:

December 31, 2020

March 31, 2021

Risk free interest rate

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Capitalized software consists of the following

as of December 31, 2020 and September 30, 2020:

December 31, 2020

as of March 31, 2021 and September 30, 2020:

March 31, 2021

September 30, 2020

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Capitalized Software, net

software amortization recorded as cost of revenues and product development expense for the three months ended December 31, 2020

and 2019 was $ 39,286 and $ 39,286 , respectively.

software amortization recorded as cost of revenues and product development expense for the six months ended March 31, 2021 and

2020 was $ 83,983 and $ 79,705 , respectively.

INTANGIBLE ASSETS

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Customer list and non-compete agreement

1.5 - 4 years

Design assets

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Intangible assets consist of the following

as of December 31, 2020 and September 30, 2020:

December 31, 2020

as of March 31, 2021 and September 30, 2020:

March 31, 2021

September 30, 2020

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Intangible assets, net

Amortization expense for the three months

ended December 31, 2020 and 2019 was $ 867,205 ,

including $ 12,683 recorded to cost of revenues, and $ 613,115 ,

respectively.

Amortization expense for the six months ended

March 31, 2021 and 2020 was $ 2,225,991 and $ 1,269,293 , respectively.

The Company expects to record amortization

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

Fixed assets consist of the following as of

December 31, 2020 and September 30, 2020:

December 31, 2020

2021 (six months remaining)

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of

the following as of March 31, 2021 and September 30, 2020:

March 31, 2021

September 30, 2020

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accumulated depreciation

( 1,020,034 )

Fixed assets, net

Depreciation expense for the three months ended

December 31, 2020 and 2019 was $ 223,907 and $ 13,662 , respectively.

Depreciation expense for the six months ended

March 31, 2021 and 2020 was $ 930,324 and $ 32,071 , respectively.

Company has purchase commitments for approximately $146.5 million related to purchase of miners as of March 31, 2021, and the

Company has paid $42.8 million towards these commitments as of the end of this period.

Long-term loans payable consists of the following:

December 31, 2020

March 31, 2021

September 30, 2020

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Promissory Notes

On May 7, 2020, the Company applied for a

loan from Celtic Bank Corporation, as lender, pursuant to the Paycheck Protection Program of the Coronavirus Aid, Relief, and

Economic Security Act (the “CARES Act”) as administered by the U.S.

Small Business Administration (the

On May 15, 2020, the loan was approved and the Company received the proceeds from the loan in the amount of $ 531,169

(the “PPP Loan”).

The PPP Loan, which took the form of a promissory note issued by the Company (the “PPP

Note”) matures on May

7, 2022 and bears interest at a rate of 1.0 %

Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), will commence on June 7, 2021.

The PPP Note provides for customary events

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

The Company may prepay the principal

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

The PPP Loan is non-recourse against any individual shareholder,

except to the extent that such party uses the loan proceeds for an unauthorized purpose.

All or a portion of the PPP Loan may

be forgiven by the SBA and lender upon application by the Company beginning 8 weeks after loan approval and upon documentation

of expenditures in accordance with the SBA requirements.

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

during the eight-week period beginning on the date of loan approval.

For purposes of the CARES Act, payroll costs exclude compensation

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

Not more than 25% of the forgiven amount may be for non-payroll

Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000

or less annually are reduced by more than 25%.

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

to the CARES Act, the amount forgiven is applied to outstanding principal.

Paycheck Protection Program Flexibility Act

of 2020 (the “PPP Flexibility Act”), enacted on June 5, 2020, amended the Paycheck Protection Program, among others,

(i) extended the covered period from 8 weeks to 24 weeks from the date the PPP Loan is originated, during which PPP

funds needed to be expended in order to be forgiven.

A borrower may submit a loan forgiveness application any time on or before

the maturity date of the loan – including before the end of the covered period – if the borrower has used all of the

loan proceeds for which the borrower is requesting forgiveness, (ii) at least 60% of PPP funds must be spent on payroll costs,

with the remaining 40% available to spend on other eligible expenses, (iii) payments are deferred until the date on which the

amount of forgiveness determined is remitted to the lender.

If a borrower fails to seek forgiveness within 10 months after the

last day of its covered period, then payments will begin on the date that is 10 months after the last day of the covered period.

In addition, the PPP Flexibility Act modified the CARES Act by increasing the maturity date for loans made after the effective

date from two years, to a minimum maturity of five years from the date on which the borrower applies for loan forgiveness.

PPP loans made before the new legislation retain their original two-year term, but may be renegotiated between a lender and a

borrower to match the 5-year term permitted under the PPP Flexibility Act.

Company intends to apply for loan forgiveness

within the required timeframe.

No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in

The Company recorded

interest expense of $ 3,987 and $ 0 for the three months ended December 31, 2020 and 2019, respectively.

CONVERTIBLE NOTES PAYABLE

Short-Term convertible notes

Purchase Agreement – December 31, 2018

On December 31, 2018, the Company

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

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

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

The note was secured by all assets of the Company.

The Debenture has a maturity date of two

years from the issuance date and the Company agreed to pay compounded interest on the unpaid principal

balance of the Debenture at the rate equal to 7.5 % per

Interest is payable on the date the applicable principal is converted or on maturity.

The interest must be paid in

cash and, in certain circumstances, may be paid in shares of common stock.

The transactions described above closed

on December 31, 2018.

In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued

to the Investor 10,000 shares of common stock and a Common Stock Purchase Warrant to acquire up to 308,333 shares of common stock

for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $ 20.00 per share with respect

to 125,000 Warrant Shares, $ 25.00 with respect to 100,000 Warrant Shares, $ 50.00 with respect to 50,000 Warrant Shares and $ 75.00

with respect to 33,333 Warrant Shares.

The warrants and shares issued were fair valued and a debt discount of $ 4,995,000 was recorded

as a result of the issuance of the warrants and shares and the recognition of a beneficial conversion feature on the Debenture.

The Company also paid a $ 5,000 due diligence fee prior to receiving the funding which was also recorded as a debt discount.

Pursuant to the terms of the SPA, the

Investor agreed to tender to the Company the sum of $ 5,000,000 , of which the Company received the full amount as of the closing.

Prior to the maturity date, provided

that no trigger event has occurred, the Company will have the right at any time upon 30 trading days’ prior written notice,

in its sole and absolute discretion, to redeem all or any portion of the Debenture then outstanding by paying to the Investor an

amount equal to 140% of the of the portion of the Debenture being redeemed .

The Investor may convert the Debenture

into shares of the Company’s common stock at a conversion price equal to 95% of the mathematical average of the 5 lowest

individual daily volume weighted average prices of the common stock, less $0.50 per share, during the period beginning on the issuance

date and ending on the maturity date subject to certain floor price restrictions.

In the event certain equity conditions exist,

the Company may require that the Investor convert the Debenture.

In no event shall the Debenture be allowed to affect a conversion

if such conversion, along with all other shares of Company common stock beneficially owned by the Investor and its affiliates would

exceed 4.99% of the outstanding shares of the common stock of the Company.

While the Debenture is outstanding,

if triggering events occur, the conversion rate may be decreased by 10% and the interest rate increased by 10% for each triggering

event which may result in the issuance of additional shares.

On March 4, March 13, and May 1, 2020

the Company entered into amendments (the “Amendments”) with the Investor.

The Amendments amended the SPA and

Debenture, as follows:

1) A Floor Price of $ 1.50 per share of Common Stock was placed on conversions

by the Investor under the Debenture, with the Floor Price on the First Debenture not applying in the occurrence of an event of

2) Lowered the closing price of the Common Stock which may trigger an

event of default from $ 5.00 per share to $ 1.75 per share for 5 consecutive trading days provided that any event of default will

not be triggered, if at all, until after September 29, 2020;

3) Deleted the requirement that the Investor convert the Debenture at

maturity and;

4) Allowed the Company, to not reserve or issue to the Investor more

shares of Common Stock than were reserved for the Investor prior to the amendment date until September 29, 2020.

As of September 30, 2020, the Debenture

was fully converted into shares of the Company’s common stock.

The aggregate debt discount has been accreted and charged

to interest expenses as a financing expense in the amount of $ 0 and $ 157,379 during the three months ended December 31, 2020 and

2019, respectively.

Securities Purchase Agreement –

April 17, 2019

On April 17, 2019, the Company entered

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

(the “Investor”), pursuant to which the Company agreed to issue to the Investor a $ 10,750,000 face value Senior Secured

Redeemable Convertible Promissory Note (the “Note”) with a 7.5 % original issue discount, 215 shares of our Series

B Preferred Stock with a 7.5 % original issue discount, a Common Stock Purchase Warrant (the “Warrant”) on a cash-only

basis to acquire up to 230,000 shares (the “Warrant Shares”) of our common stock and 125,000 shares of our Common Stock.

The aggregate purchase price for the Note, the Series B Preferred Stock the Warrant and the Common Stock is $ 20,000,000 .

The Note was secured by all assets of the Company.

Pursuant to the first closing of

the Agreement, which occurred on April 18, 2019, the Investor agreed to tender to the Company the sum of $ 10,000,000 ,

for the Note, the Common Stock and the Warrant.

No additional closings to sell the preferred stock have occurred and the

Series B preferred stock was removed under the amendments to the Agreement discussed below.

The Note has a maturity date of two

years from the issuance date and the Company has agreed to pay compounded interest on the unpaid principal balance of

the Note at the rate equal 7.5 %

Interest is payable on the date the applicable principal is converted or on maturity.

The interest must be paid in

cash and, in certain circumstances, may be paid in shares of common stock.

Prior to the maturity date, provided

that no trigger event has occurred, the Company will have the right at any time upon 30 trading days’ prior written notice,

in its sole and absolute discretion, to redeem all or any portion of the Note then outstanding by paying to the Investor an

amount equal to 145% of the of the portion of the Note being redeemed.

The Investor may convert the Note

into shares of the Company’s common stock at a conversion price equal to 90% of the mathematical average of the 5 lowest

individual daily volume weighted average prices of the common stock, less $0.75 per share, during the period beginning on the issuance

date and ending on the maturity date subject to certain floor price restrictions.

In the event certain equity conditions exist,

the Company may require that the Investor convert the Note.

In no event shall the Note be allowed to effect a conversion

if such conversion, along with all other shares of Company common stock beneficially owned by the Investor and its affiliates would

exceed 4.99% of the outstanding shares of the common stock of the Company.

While the Note is outstanding if triggering

events occur the conversion rate may be decreased by 10% and the interest rate increased by 10% for each triggering event which

may result in the issuance of additional shares.

On March 4, March 13, and May 1, 2020

the Company entered into amendments (the “Amendments”) with the Investor.

The Amendments amended the Agreement and Note, as

1) A Floor Price of $ 1.50 per share of Common Stock was placed on conversions

by the Investor under the Note, not applying in the occurrence of an event of default;

2) Lowered the closing price of the Common Stock which may trigger an

event of default from $ 5.00 per share to $ 1.75 per share for 5 consecutive trading days provided that any event of default will

not be triggered, if at all, until after September 29, 2020;

3) Deleted the requirement that the Investor convert the Note at maturity;

4) Allowed the Company, to not reserve or issue to the Investor more shares of Common Stock than

were reserved for the Investor prior to the amendment date until September 29, 2020;

5) The Company and the Investor also agreed to remove

the Second Closing and Company Option to sell an aggregate of an additional $10,000,000 in securities under the Note.

result of these changes, the Company was authorized to terminate any and all documentation related to the 100,000 shares of Series

B Preferred Stock that the Company's Board of Directors had previously voted to designate back on April 16, 2019.

As of September 30, 2020, the Note

was fully converted into shares of the Company’s common stock.

The aggregate debt discount has been

accreted and charged to interest expenses as a financing expense in the amount of $ 0 and $ 1,354,795 during

the three months ended December 31, 2020 and 2019, respectively.

On May 7, 2020, the Company applied for a loan

from Celtic Bank Corporation, as lender, pursuant to the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic

Security Act (the “CARES Act”) as administered by the U.S.

Small Business Administration (the "SBA").

May 15, 2020, the loan was approved and the Company received the proceeds from the loan in the amount of $ 531,169 (the “PPP

The PPP Loan, which took the form of a promissory note issued by the Company (the “PPP Note”) matures

on May 7, 2022 and bear interest at a rate of 1.0 % per annum.

The Company applied for and received loan forgiveness

from the SBA on March 23, 2021.

The entire principal balance and interest charges were forgiven.

Effective October 1, 2019, the Company

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which it leases its branch offices, corporate headquarters, and data center, one of which is with a related party.

As of December

31, 2021, the Company's operating lease right of use asset and operating lease liability totaled $ 713,158 and $ 713,023 ,

respectively.

A weighted average discount rate of 10 % was

used in the measurement of the right of use asset and lease liability.

As the rate implicit in the lease is not readily determinable,

the Company's incremental collateralized borrowing rate is used to determine the present value of lease payments.

This rate gives

consideration to the applicable Company collateralized borrowing rates and is based on the information available at the commencement

The Company has elected to apply the short-term lease measurement and recognition exemption to leases with an initial term

of 12 months or less;

therefore, these leases are not recorded on the Company’s Consolidated Balance Sheet, but rather,

lease expense is recognized over the lease term on a straight-line basis.

A weighted average discount rate of 10 % was used in the measurement of the right of use asset and lease

As the rate implicit in the lease is not readily determinable, the Company's incremental collateralized borrowing rate

is used to determine the present value of lease payments.

This rate gives consideration to the applicable Company collateralized

borrowing rates and is based on the information available at the commencement date.

The Company has elected to apply the short-term

lease measurement and recognition exemption to leases with an initial term of 12 months or less;

therefore, these leases are not

recorded on the Company’s Consolidated Balance Sheet, but rather, lease expense is recognized over the lease term on a straight-line

The Company's operating leases have

remaining lease terms between one year to two years , with a weighted average lease term of 1.15 years

at December 31, 2020.

at March 31, 2021.

Some leases include multiple year renewal options.

The Company’s decision to exercise these renewal

options is based on an assessment of its current business needs and market factors at the time of the renewal.

Currently, the Company

has no leases for which the option to renew is reasonably certain and therefore, options to renew were not factored into the calculation

of its right of use asset and lease liability as of December 31, 2020.

The Company’s decision to exercise these renewal options

is based on an assessment of its current business needs and market factors at the time of the renewal.

Currently, the Company has

no leases for which the option to renew is reasonably certain and therefore, options to renew were not factored into the calculation

of its right of use asset and lease liability as of March 31, 2021.

These operating leases also have a weighted average discount

rate of 10 % at December 31, 2020.

rate of 10 % at March 31, 2021.

The following is a schedule of the

Company's operating lease liabilities by contractual maturity as of December 31, 2020:

Fiscal year ending September 30, 2021

Company's operating lease liabilities by contractual maturity as of March 31, 2021:

Fiscal year ending September 30, 2021 (six months remaining)

Fiscal year ending September 30, 2022

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Total present value of lease liabilities

Total operating lease costs of $ 117,223 and $ 21,318 for

the three months ended December 31, 2020 and 2019, respectively, were included as part of administrative expense.

Total operating lease costs of $

208,536 and $48,459 for the six months ended March 31, 2021 and 2020, respectively, were included as part of

administrative expense.

The Company has financing leases in relation

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The following is a schedule of the Company’s financing lease liabilities by contractual

maturity as of December 31, 2020:

maturity as of March 31, 2021:

Fiscal year ending September 30, 2021 (six months remaining)

Fiscal year ending September 30, 2022

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These financing leases have a weighted average

lease term of 3.02 years and a weighted average discount rate of 8.6 % at December 31, 2020.

lease term of 3.13 years and a weighted average discount rate of 10.0 % at March 31, 2021.

RELATED PARTY TRANSACTIONS

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Executive Officer and Director

During the three months ended

December 31, 2020, the Company paid Blue Chip Accounting, LLC (“Blue Chip”) $ 30,000 for accounting,

tax, administrative services and reimbursement for office supplies.

During the six months ended March 31,

2021, the Company paid Blue Chip Accounting, LLC (“Blue Chip”) $ 90,365 for accounting, tax, administrative

services and reimbursement for office supplies.

Blue Chip is 50 % beneficially owned by Mr.

None of the services were associated with work performed by Mr.

The services consisted of bookkeeping,

accounting, and administrative support assistance.

The Company also sub-leases office space from Blue Chip (see Note 15 for

additional details).

During the three months ended December 31, 2020, $ 4,575 was paid to Blue Chip for rent.

Schultz - Chairman of the Board

None of the services

were associated with work performed by Mr.

The services consisted of bookkeeping, accounting, and administrative support

The Company also sub-leases office space from Blue Chip (see Note 15 for additional details).

During the six months

ended March 31, 2021, $ 9,150 was paid to Blue Chip for rent.

Matthew Schultz - Chairman of

The Company entered into an agreement

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Schultz is affiliated

The Company paid the organization $ 27,000 in fees plus $ 85,150 in expense reimbursements for the three months ended December

The Company paid the organization $ 49,500 in fees plus $ 176,000 in expense reimbursements for the six months ended March

The agreement was terminated in March 2020.

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stock consists of 50,000,000 shares of common stock and 10,000,000 shares of preferred stock, par value $ 0.001 per share.

December 31, 2020, there were 24,070,531 shares of common stock issued and outstanding and 1,750,000 shares of preferred stock

issued and outstanding.

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

value $ 0.001 per share.

On December 10, 2019, the Financial Industry Regulatory Authority (“FINRA”) approved

the Company’s 1:10 reverse stock split of the Company’s common stock.

The reverse stock split took effect

on December 11, 2019.

Unless otherwise noted, impacted amounts and share information in the consolidated financial statements

and notes thereto as of and for the interim period ended December 31, 2019 and fiscal year ended September 30, 2020, have been

adjusted for the stock split as if such stock split occurred on the first day of the first period presented.

March 31, 2021, there were 33,874,152 shares of common stock issued and outstanding, and 1,750,000 shares of preferred stock issued

and outstanding.

Amendment to Articles of Incorporation

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On October 7, 2020, the Company

filed a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State to increase its authorized

shares of common stock to 35,000,000 .

On October 7, 2020, the Company

executed that certain first amendment to 2017 Equity Incentive Plan to increase its option pool from 300,000 to 1,500,000 shares

of common stock (the “Plan Amendment”).

Certificate of Preferred Stock Designation

On April 16, 2019, pursuant to Article

IV of our Articles of Incorporation, the Company’s Board of Directors voted to designate a class of preferred stock entitled

Series B Preferred Stock, consisting of up to one hundred thousand ( 100,000 ) shares, par value $ 0.001 .

Shares of the Series B Preferred

Stock were never issued and on March 6, 2020, the Company withdrew the Certificate of Designation for the Series B Preferred Stock.

At the time of withdrawal, no shares of Series B Preferred Stock were issued and outstanding.

Common Stock issuances during the three

months ended December 31, 2020

The Company issued 4,444,445

shares of the Company’s common stock in connection with its underwritten equity offering at a price of $ 9.00 per share

for net proceeds of $ 37.05 million.

The Company issued 236,000 shares

of common stock as settlement of accrued bonus compensation related to the year ended September 30, 2020.

The fair value of these

shares is $ 1.9 million and was fully expensed for in the prior year.

The Company also issued 222,249 shares of common stock for

the current year and the fair value of these shares is $ 546 thousand and has been fully expensed during the three months ended

December 31, 2020.

On March 16, 2021, the Company filed a Certificate of

Amendment to its Articles of Incorporation with the Nevada Secretary of State to increase its authorized shares of common stock

to 50,000,000 .

Common Stock issuances during the six months

ended March 31, 2021

The Company issued 4,444,445 shares

of common stock in relation to the acquisition of ATL Data Centers LLC (See Note 3 for additional details.)

of the Company’s common stock in connection with its underwritten equity offering at a price of $ 9.00 per share for net proceeds

of $ 37.05 million.

The Company issued 236,000

shares of common stock as settlement of accrued bonus compensation related to the year ended September 30, 2020.

value of these shares is $ 1.9

million and was fully expensed for in the prior year.

The Company issued 222,725

shares of common stock for the current year related to bonus compensation.

The fair value of these shares is $ 1.07

million and $ 582

thousand has been expensed during the six months ended March 31, 2021.

The Company issued 1,618,285 shares

of common stock for services rendered for a total fair value of $ 561 thousand and has been fully expenses during the three months

ended December 31, 2020.

of common stock in relation to the acquisition of ATL (See Note 3 for additional details.)

The Company issued 43,749 shares of

common stock for services rendered for a total fair value of $576 thousand and has been fully expensed during the six months ended

March 31, 2021.

The Company issued 339,035 shares of

common stock in relation to the exercise of stock options and warrants.

(See Notes 12 and 13 for additional details.)

Common Stock issuances during the three

months ended December 31, 2019

The Company issued 187,100 shares in

accordance with the terms of the convertible debt agreement due to the decrease in stock price.

The Company issued 2,000 shares for

services rendered to an independent consultant.

The Company issued 793 shares for stock

split true up due to rounding.

The Company issued 477,703 shares of

common stock in relation to the acquisition of SWS (See Note 3 for additional details.)

The Company issued 18,392 restricted

stock units for a total fair value of $ 510,000 of common shares to certain SWS employees as part of the transaction to incentivize

the employees for retention purposes.

These restricted stock units vest over a period of one year and we have expensed $ 42,500

during the six months ended March 31, 2021.

Company issued 9,090,910 shares

of the Company’s common stock in connection with its underwritten public equity offering at a price of $ 22.00 per

share for net proceeds of $ 187.2 million.

Common stock returned during the six months

ended March 31, 2021

As a result of an adjustment of holdback

shares to actual milestones earned in relation to the p2k acquisition, 8,072 shares were returned and cancelled.

(See Note 3 for

additional details.)

Common Stock issuances during the six months

ended March 31, 2020

The Company issued 997,605 shares of

common stock in accordance with the terms of the convertible debt agreement due to the decrease in stock price.

The Company issued 2,000 shares of

common stock for services rendered to an independent consultant.

The Company issued 793 shares of common

stock as a result of rounding related to the reverse stock split.

The Company issued 95,699 shares of

common stock in relation to the acquisition of p2k

Common stock returned during the six months

ended March 31, 2020

As a result of a note payoff on December

5, 2019, 5,000 shares common stock were returned to treasury and cancelled on January 13, 2020.

As a result of the cancellation of

an investor relations services contract, 25,000 shares were returned to treasury and cancelled on February 10, 2020.

Series A Preferred Stock issuances during

the three months ended December 31, 2019

the six months ended March 31, 2020

4, 2019, the Company authorized the issuance of a total of seven hundred and fifty thousand ( 750,000 ) shares of its designated

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Director fees of $ 15,000 was recorded as a result of the stock issued.

We accrued $ 177,505 in preferred stock

dividends payable for the three months ended March 31, 2021.

STOCK WARRANTS

The following is a summary of stock warrant

activity during the three months ended December 31, 2020.

activity during the six months ended March 31, 2021.

Number of Warrant Shares

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Warrants exercised

Balance, December 31, 2020

During the three months ended December 31,

2020, a total of 31,096 shares of the Company’s common stock were issued in connection with the exercise of warrants at exercise

prices ranging from $ 3.63 and $ 8.00 .

On December 31, 2020, a total of 73,906 shares

Balance, March 31, 2021

During the six months ended March 31, 2021,

a total of 166,396 shares of the Company’s common stock were issued in connection with the exercise of 166,396 common stock

warrants at exercise prices ranging from $ 3.36 and $ 20.00 , for a total consideration of $ 2,774,812 .

On March 31, 2021, a total of 74,437 shares

of the Company’s common stock were issued in connection with the cashless exercise of 76,800 common stock warrants

at an exercise price of $ 0.83 .

As of December 31, 2020, the outstanding warrants

at exercise prices ranging from $ 0.83 to $ 3.67 .

As of March 31, 2021, the outstanding warrants

have a weighted average remaining term of was 0.77 years and an intrinsic value of $ 6,073,392 .

As of December

31, 2020, there are warrants exercisable to purchase 1,191,769 shares of common stock in the

Company and 18,571 unvested

As of March 31,

2021, there are warrants exercisable to purchase 1,048,012 shares of common stock in the Company

and 7,857 unvested

warrants outstanding that cannot be exercised until vesting conditions are met.

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to exercise as follows, 2,500 require a cash investment of $ 8.00 per share, 439,865 require a cash investment of $ 15.00 per share,

125,000 require a cash investment of $ 20.00 per share, 103,000 require a cash investment of $ 25.00 per share, 200,000 require an

investment of $ 35.00 per share, 10,000 require an investment of $ 40.00 per share, 60,000 require an investment of $ 50.00 per share,

38,333 require a cash investment of $ 75.00 per share and 5,000 require a cash investment of $ 100.00 per share.

198,070 of the outstanding

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

103,000 require a cash investment of $ 25.00 per share, 200,000 require an investment of $ 35.00 per share, 10,000 require an investment

of $ 40.00 per share, 60,000 require an investment of $ 50.00 per share, 38,333 require a cash investment of $ 75.00 per share and

5,000 require a cash investment of $ 100.00 per share.

197,170 of the outstanding warrants contain provisions allowing a cashless

exercise at their respective exercise prices.

STOCK OPTIONS

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the Company on June 19, 2017.

On October 7, 2020, the Company executed a first amendment to thePlan to increase its share pool

On October 7, 2020, the Company executed a first amendment to the Plan to increase its share pool

from 300,000 to 1,500,000 shares of common stock.

As of December 31, 2020, there were 553,190 shares available

As of March 31, 2021, there were 461,767 shares available

for issuance under the Plan.

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of unvested options if there is a change in control, as defined in the Plan.

The following is a summary of stock option

activity during the three months ended December 31, 2020.

Number of Option Shares

Weighted Average Exercise Price

The following is a summary of stock option activity during

the six months ended March 31, 2021.

of Option Shares

Average Exercise Price

Balance, September 30, 2020

3 unchanged sentences

Options exercised

Balance, December 31, 2020

As of December 31, 2020, there are options

exercisable to purchase 388,895 shares of common stock in the Company.

As of December 31, 2020, the outstanding options have a

weighted average remaining term of was 2.60 years and an intrinsic value of $ 11,800,257 .

Option activity for the three months ended

December 31, 2020

During the three months ended December 31,

2020, the Company issued 291,500 options to purchase shares of common stock to employees.

The shares were granted at quoted market

prices ranging from $ 8.07 to $ 12.48 .

The options were valued at issuance using the Black Scholes model and stock compensation expense

of $ 385,883 was recorded as a result of the issuances, with the balance of $ 953,126 offset against bonuses accrued in the prior

Balance, March 31, 2021

As of March 31, 2021, there are options exercisable to purchase

338,191 shares of common stock in the Company.

As of March 31, 2021, the outstanding options have a weighted average remaining

term of was 2.43 years and an intrinsic value of $ 7,345,720 .

Option activity for the six months ended

March 31, 2021

During the six months ended March 31, 2021,

a total of 98,202 shares of the Company’s common stock were issued in connection with the exercise of 98,202 common stock

options at exercise prices ranging from $ 4.65 and $ 24.40 , for a total consideration of $ 571,747 .

During the six months ended

March 31, 2021, the Company issued 298,500 options with a total fair value of $ 2,696,715 to purchase shares of common stock to

The Company offset $ 953,125 of stock compensation expense against bonuses accrued during the prior year.

were granted at quoted market prices ranging from $ 7.55 to $ 34.67 and were valued at issuance using the Black Scholes model.

The Black-Scholes model utilized the following

inputs to value the options granted during the three months ended December 31, 2020:

inputs to value the options granted during the six months ended March 31, 2021:

Fair value assumptions – Options:

December 31, 2020

March 31, 2021

Risk free interest rate

4 unchanged sentences

Expected dividends

of December 31, 2020, the Company expects to recognize $ 1,040,030 of

stock-based compensation for the non-vested outstanding options over a weighted-average period of 1.01 years.

Option activity for the three months ended

December 31, 2019

During the three months ended December 31,

2019, the Company issued 136,697 options to purchase shares of common stock to employees, the shares were granted at quoted market

prices ranging from $ 4.50 to $ 8.50 .

The options were valued at issuance using the Black Scholes model and stock compensation expense

of $ 478,022 was recorded as a result of the issuances.

the six months ended March 31, 2021 and 2020, the Company recognized of $ 1,163,401 and $ 716,740

of stock compensation expense respectively.

As of March 31, 2021, the Company expects to recognize $ 742,865 of

stock-based compensation for the non-vested outstanding options over a weighted-average period of 1.01

Option activity for the six months ended

March 31, 2020

During the six months ended March 31, 2020,

the Company issued 233,233 options to purchase shares of common stock to employees, the shares were granted at quoted market prices

ranging from $ 4.50 to $ 8.50 .

The options were valued at issuance using the Black Scholes model and stock compensation expense of

$ 716,740 was recorded as a result of the issuances.

The Black-Scholes model utilized the following

inputs to value the options granted during the three months ended December 31, 2019:

inputs to value the options granted during the six months ended March 31, 2020:

Fair value assumptions – Options:

December 31, 2019

March 31, 2020

Risk free interest rate

2 unchanged sentences

Expected volatility

124 % - 144 %

Expected dividends

2 unchanged sentences

Utah Corporate Office

On November 22, 2019, the Company

entered into a lease to relocate the corporate office to 1185 South 1800 West, Suite 3, Woods Cross, UT 84047.

The agreement calls

for the Company to make payments of $ 2,300 in base rent per month through February 28, 2021.

The lease term is on an

annual basis beginning on March 1, 2020.

On November 22, 2019, the Company entered

into a lease to relocate the corporate office to 1185 South 1800 West, Suite 3, Woods Cross, UT 84047.

The agreement calls for

the Company to make payments of $ 2,300 in base rent per month through February 28, 2021.

The lease renewed and is on

an annual basis through February 28, 2022.

San Diego Office

On May 15, 2018, the Company executed a 37

On May 15, 2018, the Company executed

month lease agreement, which commenced on July 1, 2018 at 4360 Viewridge Avenue, Suite C, San Diego, California.

The agreement

calls for the Company to make payments of $ 4,057 in base rent per month through July 31, 2021 subject to an annual 3 % rent

agreement calls for the Company to make payments of $ 4,057 in base rent per month through July 31, 2021 subject to

an annual 3 % rent escalation.

Las Vegas Offices

On January 2, 2020, the Company

entered into a sublease agreement with Blue Chip for office space at 8475 S.

On January 2, 2020, the Company entered

into a sublease agreement with Blue Chip for office space at 8475 S.

Eastern Ave., Suite 200, Las Vegas, NV 89123.

agreement calls for the Company to make monthly payments of $ 1,575 in base rent through January 1, 2021.

The lease term

is on an annual basis beginning January 2, 2020.

The agreement

calls for the Company to make monthly payments of $ 1,575 in base rent through January 1, 2021.

The lease term is on an

annual basis beginning January 2, 2020.

The Company assumed p2k’s lease

6 unchanged sentences

Atlanta Offices

The Company assumed ATL’s

lease agreement entered into on June 6, 2020 at 2380 Godby Road, Atlanta GA 30349.

The agreement calls for $ 52,958 in base rent

through June 4, 2022.

Contractual contingencies

On April 6, 2020, the Company entered

into a joint venture agreement with a third party to procure, distribute, and supply Personal Protective Equipment (PPE) for hospitals

and frontline medical personnel.

The agreement expired on December 31, 2020.

The Company assumed ATL’s lease

agreement entered into on June 6, 2020 at 2380 Godby Road, Atlanta GA 30349.

The agreement calls for $ 52,958 per month in base

rent through June 4, 2022.

Contingent consideration

On August 31, 2020, the Company

acquired GridFabric.

Pursuant to the terms of the purchase agreement, additional shares of the Company’s common stock

valued at up to $ 750,000 will be issuable if GridFabric achieves certain revenue and product release milestones.

On August 31, 2020, the Company acquired

Pursuant to the terms of the purchase agreement, additional shares of the Company’s common stock valued at up

to $ 750,000 will be issuable if GridFabric achieves certain revenue and product release milestones.

On February 24, 2021, the Company acquired

Pursuant to the terms of the purchase agreement, additional cash consideration of $ 2,500,000 will be payable if Solar Watt

Solutions achieves certain revenue milestones.

Legal contingencies

5 unchanged sentences

Despite the measures taken, such policies may not cover future litigation, or the damages claimed may exceed our coverage which

could result in continent liabilities.

could result in contingent liabilities.

For a description of our material pending

1 unchanged sentence

MAJOR CUSTOMERS AND VENDORS

For the three months ended December 31, 2020

and 2019, the Company had the following customers that represented more than 10% of our sales.

December 31, 2020

December 31, 2019

For the three months ended December 31,

2020 and 2019, the Company had the following suppliers that represented more than 10% of our direct material costs.

Internally developed product costs and labor for services rendered are excluded from the calculation.

December 31, 2020

December 31, 2019

For the six months ended March 31, 2021 and

2020, the Company had the following customers that represented more than 10% of our sales.

March 31, 2021

March 31, 2020

For the three months ended March 31, 2021 and

2020, the Company had the following suppliers that represented more than 10% of our direct material costs.

Internally developed

product costs and labor for services rendered are excluded from the calculation.

March 31, 2021

March 31, 2020

SEGMENT REPORTING

3 unchanged sentences

Energy Segment – Consisting of our CleanSpark,

LLC, CleanSpark Critical Power Systems, Inc., and GridFabric, LLC lines of business, this segment provides services, equipment,

LLC, CleanSpark Critical Power Systems, Inc., GridFabric, and SWS.

lines of business, this segment provides services, equipment,

and software to the energy industry.

Digital Agency Segment – p2kLabs, Inc.

Digital Agency Segment – p2k provides

design, software development, and other technology-based consulting services.

Digital Currency Mining Segment – Consisting of ATL

Data Centers, LLC, this segment mines digital assets, namely Bitcoin.

SEGMENT REPORTING - Segmnent Reporting Assets

Currency Mining

and CleanBlok, LLC, this segment mines digital currency assets, namely Bitcoin.

Three Months Ended March 31, 2021

Digital Agency

Digital Currency Mining

Inter-segment

Cost of revenues

Operating expenses

Income/(loss) from

$ ( 125,353 )

Total cost and expenses

Income/(loss) from operations

( 9,223,830 )

( 2,496,972 )

Capital expenditures

Depreciation and amortization

Three Months Ended March 31, 2020

Digital Agency

Currency Mining

Digital Currency Mining

Inter-segment

Total cost and expenses

Income/(loss) from operations

( 2,323,911 )

( 2,272,052 )

Capital expenditures

Depreciation and amortization

Six Months Ended March 31, 2021

Digital Agency

Digital Currency Mining

Inter-segment

$ ( 207,141 )

Total cost and expenses

Income/(loss) from operations

( 15,853,096 )

( 8,667,070 )

Capital expenditures

Depreciation and amortization

Months Ended March 31, 2020

Digital Agency

Digital Currency Mining

Inter-segment

Total cost and expenses

Income/(loss) from operations

( 5,315,372 )

( 5,263,513 )

Capital expenditures

Depreciation and amortization

Digital Agency

Digital Currency Mining

Accounts Receivable

$ 232,380,406

$ 292,612,596

September 30, 2020

Digital Agency

Digital Currency Mining

Accounts Receivable

SUBSEQUENT EVENTS

On January 7, 2021, the Company issued 26,000 shares of Common

Stock in connection with employee Common Stock Option exercises at exercise prices ranging from $ 4.65 - $ 10.00 per share.

received $ 150,262 in consideration as a result of these exercises.

On January 8, 2021, the Company issued 10,000 shares of Common Stock

in connection with a Common Stock warrant exercise at an exercise price of $ 15.00 per share.

The Company received $ 150,000 in consideration

as a result of the exercise.

On January 11, 2021, the Company issued 125,000 shares of Common

Stock in connection with a Common Stock warrant exercise at an exercise price of $ 20.00 per share.

The Company received $ 2,500,000

in consideration as a result of the exercise.

On January 15, 2021, the Company issued 300 shares of Common

Stock in connection with a Common Stock warrant exercise at an exercise price of $ 3.36 per share.

The Company received $ 1,008 in

consideration as a result of the exercise.

On January 31, 2021, the Company issued 423 shares of Common Stock

in connection with an employee Common Stock Option exercise at an exercise price of $ 24.40 per share.

The Company received $ 10,321

in consideration as a result of the exercise.

On February 9, 2021, the Company issued 268 shares of Common Stock

in connection with the cashless exercise of 300 Common Stock warrants at an exercise price of $ 3.36 per share.

On April 1, 2021, the Company issued 7,144

shares of common stock in connection with a Common Stock warrant exercise at an exercise price of $ 15.00 per share.

received $ 107,160 as a result of the issuance.

During April 2021, the Company received approximately 900 S19 pro

mining servers against the orders it placed during the months of March and April 2021.

April 2, April 6, April 9, April 14, and April 29, 2021 the Company

entered into agreements with cryptocurrency mining equipment suppliers to purchase an aggregate of approximately 23,900 mining

servers for an aggregate purchase price of $ 192,307,550 .

paid $ 90,164,750 towards these miner purchases in April 2021.

On April 16, 2021, as more specifically

described in that certain Current Report on Form 8-K filed by the Company with the SEC on April 16, 2021, at the recommendation

of the Company’s Compensation Committee, the Company’s board of directors approved certain executive compensation matters

with key executives Zachary Bradford, Lori Love and S.

Matthew Schultz (the “Executives”).

Specifically, amendments

to the employment agreements of the Executives were approved which provided (i) an additional cash bonus incentive for Ms.

based on the Company achieving certain annual gross revenues plus realized gains/losses for the current fiscal year, (ii) the addition

of non-cash components to the base salaries of Mr.

Bradford and Mr.

Schultz in the form of certain monthly payments of Bitcoin,

and (iii) additional cash and equity bonus incentives for Mr.

Bradford and Mr.

Schultz based on the Company achieving certain annual

gross revenues plus realized gains/losses in the current fiscal year as well as certain market capitalization milestone targets

for the current fiscal year.

Additionally, the Executives received (i) one-time cash incentive bonuses, (ii) one-time grants of

fully vested RSUs and (iii) option grants to acquire shares of common stock that vest over 36 months.

Certain of the additional equity

incentive grants set forth above will be granted to the extent there are available shares under the Company’s 2017 Equity

Incentive Plan (the “Plan”) with any remaining equity grants to be granted when the Company obtains shareholder approval

to increase the shares available under the Plan.

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 1. Financial Statements