What changed in this filing

/stocks — the workspaceLOADING

Item 1. Legal Proceedings

2021-05-06 compared with 2021-02-12 · 67 added, 77 removed, 16 unchanged (90% of the section changed)

5 unchanged sentences

On August 5, 2020, the Company filed

a verified complaint (the “Complaint”) in the Supreme Court of the State of New York against Discover Growth Fund,

LLC (“Investor”).

a verified complaint (the “Complaint”) in the Supreme Court of the State of New York against an investor (“Investor”).

Among other things, the Complaint seeks:

declaratory relief against Investor in response to Investor’s

claim that a Form 8-K filed by the Company in relation to a July 20, 2020 securities purchase agreement needed pre-approval by

Investor prior to filing, and injunctive relief in response to conversion notices sent by Investor claiming trigger events and

defaults arising out of the failure to obtain the Form 8-K pre-approval.

The case was subsequently removed to

the United States District Court for the Southern District of New York, which then determined that the parties’ agreements

required a JAMS arbitrator sitting in the U.S.

declaratory relief against Investor in response to Investor’s claim that a Form

8-K filed by the Company in relation to a July 20, 2020 securities purchase agreement (the “July 2020 SPA”) needed

pre-approval by Investor prior to filing, and injunctive relief in response to conversion notices sent by Investor claiming trigger

events and defaults arising out of the failure to obtain the Form 8-K pre-approval.

The case was subsequently removed to the United

States District Court for the Southern District of New York, which then determined that the parties’ agreements required

a JAMS arbitrator sitting in the U.S.

Virgin Islands to resolve the parties’ dispute over which of their agreements’

1 unchanged sentence

not been established.

While the New York action was pending,

Investor filed a demand for arbitration with JAMS in the U.S.

Virgin Islands, alleging breach of the Securities Purchase Agreement

dated December 31, 2018, and the Purchase Agreement dated April 17, 2019 between Investor and the Company (the “Arbitration”)

and seeking issuance of additional shares of the Company.

The Company then filed a response to Investor’s claims, denying

Investor’s claims and asserting counterclaims against Investor, and also filed for emergency injunctive relief in the Arbitration

seeking, among other things, an order enjoining Investor from continuing to pursue certain remedies based on the allegations in

the Arbitration between Investor and the Company.

On September 21, 2020, the arbitrator

granted the Company’s motion for emergency interim relief in the Arbitration.

The arbitrator issued his interim award on

September 22, 2020, (the “Interim Award”), which restrains Investor from:

(i) proceeding with an asset sale or taking

any actions in furtherance of the asset sale;

(ii) pursuing any remedies in connection with the purported trigger events, conversion

notices, notices of default, or sale notices that Investor issued;

(iii) claiming or issuing any additional trigger events, conversion

notices, delivery notices, notices of default, or sale notices pursuant to the debenture, note, or prior securities purchase agreements

between the parties that relate to or arise out of the facts and allegations at issue in the Arbitration;

and (iv) pursuing any

other remedies that relate to or arise out of the facts and allegations at issue in the Arbitration.

Following the Interim Award, the Company

completed an underwritten public offering with HC Wainwright (the “Offering”).

In connection with the Offering, the

Company provided notice to Investor of the Offering in compliance with a right of first refusal provision (the “ROFR”)

in the parties’ agreements with the Company.

Investor responded to the notice claiming that the notice was not sufficient

and the ROFR was not satisfied by the notice and, as a result, proceeding with the Offering constituted a trigger event under the

parties’ prior securities purchase agreements.

Investor included the preceding allegations regarding the ROFR in its statement

of claim in the Arbitration, and they are now at issue in that proceeding.

The Company forcefully denies those claims.

Although the ultimate outcome of this

matter cannot be determined with certainty, the Company believes that the claims raised by Investor in and related to the Arbitration

are completely without merit, and the Company intends to both defend itself vigorously and to vigorously prosecute its counterclaims.

Additionally, the Company believes that it has fully complied with its obligations under the right of first refusal and public

disclosure review provisions of the parties’ prior securities purchase agreements.

Notwithstanding the merits of Investor’s

claims, however, the Arbitration may distract the Company and cost the Company’s management time, effort and expense to defend

against the claims and threats made by Investor.

Notwithstanding the Company’s belief that it has complied with all of its

obligations under the parties’ agreements, no assurance can be given as to the outcome of the Arbitration, and in the event

the Company does not prevail in such action, the Company, its business, financial condition and results of operations would be

materially and adversely affected.

While the New York action was pending, Investor filed a demand for arbitration with JAMS in the U.S.

Islands, alleging breach of the Securities Purchase Agreement dated December 31, 2018, and the Purchase Agreement dated April 17,

2019 (the “Prior SPAs”) between Investor and the Company (the “Arbitration”) and seeking issuance of additional

shares of the Company.

The Company then filed a response to Investor’s claims, denying Investor’s claims and asserting

counterclaims against Investor, and also filed for emergency injunctive relief in the Arbitration seeking, among other things,

an order enjoining Investor from continuing to pursue certain remedies based on the allegations in the Arbitration between Investor

and the Company.

On September 21, 2020, the arbitrator granted the Company’s motion for emergency interim relief in the Arbitration.

On April 30, 2021, the Arbitrator granted

in part the Company’s motion for partial summary judgment and denied the Investor’s motion for partial summary judgment,

and ordered the following:

July 2020 SPA is a fully merged and integrated agreement and its publicity clause supersedes the publicity clauses of the Prior

SPAs between Company and Investor with respect to securities filings relating to the July 2020 SPA transaction;

Company had no obligation to allow the Investor to review and approve certain 8-K’s and 10-Q’s concerning the July

2020 SPA transaction and the purported failure to allow the Investor to review and approve such filings was not a breach of the

Prior SPAs between the Company and Investor;

Company’s obligations under the parties’ prior debenture and note (the “Debenture” and “Note”)

were discharged when the Investor fully converted those instruments on or before June 30, 2020;

subsequent delivery notices sent by the Investor were void ab initio and the Company no longer has any obligations under the Debenture

Investor’s claim for liquidated damages arising from the Company’s alleged failure to deliver conversion shares under

the Debenture and Note was denied on the grounds that (1) the Investor’s right to issue delivery notices had expired, and

the Company’s obligations under the Debenture and Note had been discharged prior to June 30, 2020, and (2) all the Investor’s

delivery notices rely at least in part on the Company’s alleged breach of the Prior SPAs’ publicity clause with respect

to securities filings relating to the July 2020 SPA transaction, a claim to which the Arbitrator ruled in the Company’s favor.

In so holding, the Arbitrator also

denied, as a matter of law, the Investor’s claims for breach of contract (Counts 1 and 2) and its claim seeking specific

performance of delivering additional shares (Count 4).

Certain claims remain for trial in

the Arbitration and the ultimate outcome of this matter cannot be determined with certainty.

As it has stated previously, the Company

believes that claims raised by the Investor in and related to the Arbitration are without merit, and the Company intends to continue

to both defend itself vigorously and to vigorously prosecute its counterclaims.

It is possible that actions related

to this dispute with the Investor may yet be filed in the same or other forums.

The Company does not intend to file further Current

Reports on Form 8-K describing the additional lawsuits, or provide updates, except as required by law.

CleanSpark, Inc.

On January 20, 2021, Scott Bishins

(“Bishins”), individually, and on behalf of all others similarly situated (together, the “Class”), filed

a class action complaint (the “Class Complaint”) in the United States District Court for the Southern District of

New York against the Company, its Chief Executive Officer, Zachary Bradford (“Bradford”), and its Chief Financial

Officer, Lori Love (“Love”) (the “Class Action”).

The Class Complaint alleges that, between December 31,

2020 and January 14, 2021, the Company, Bradford, and Love “failed to disclose to investors:

(1) that the Company had overstated

its customer and contract figures;

(2) that several of the Company’s recent acquisitions involved undisclosed related party

transactions;

and (3) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business,

operations, and prospects were materially misleading and/or lacked a reasonable basis.” (the “Class Allegations”).

The Class Complaint seeks:

(a) certification of the Class, (b) an award of compensatory damages to the Class, and (c) an award

of reasonable costs and expenses incurred by the Class in the litigation.

a class action complaint (the “Class Complaint”) in the United States District Court for the Southern District of New

York against the Company, its Chief Executive Officer, Zachary Bradford (“Bradford”), and its Chief Financial Officer,

Lori Love (“Love”) (the “Class Action”).

The Class Complaint alleges that, between December 31, 2020 and

January 14, 2021, the Company, Bradford, and Love “failed to disclose to investors:

(1) that the Company had overstated its

customer and contract figures;

(2) that several of the Company’s recent acquisitions involved undisclosed related party transactions;

and (3) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations,

and prospects were materially misleading and/or lacked a reasonable basis.” (the “Class Allegations”).

Complaint seeks:

(a) certification of the Class, (b) an award of compensatory damages to the Class, and (c) an award of reasonable

costs and expenses incurred by the Class in the litigation.

To date, no class has been certified in the Class Action.

Although the ultimate outcome of

the Class Action cannot be determined with certainty, the Company stands behind all of its prior statements and disclosures and

believes that the claims raised in the Class Complaint are entirely without merit.

The Company intends to both defend itself vigorously

against these claims and to vigorously prosecute any counterclaims.

the ultimate outcome of the Class Action cannot be determined with certainty, the Company stands behind all of its prior statements

and disclosures and believes that the claims raised in the Class Complaint are entirely without merit.

The Company intends to both

defend itself vigorously against these claims and to vigorously prosecute any counterclaims.

Notwithstanding the Class Allegations’

1 unchanged sentence

to defend against the claims made in the Class Complaint.

Notwithstanding the Company’s belief that the Company and its

management have complied with all of their obligations under applicable securities regulations, no assurance can be given as to

the outcome of the Class Action, and in the event the Company does not prevail in such action, the Company, its business, financial

condition and results of operations would be materially and adversely affected.

Notwithstanding the Company’s belief that the Company and its management

have complied with all of their obligations under applicable securities regulations, no assurance can be given as to the outcome

of the Class Action, and in the event the Company does not prevail in such action, the Company, its business, financial condition

and results of operations would be materially and adversely affected.

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. Legal Proceedings