What changed in this filing

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Item 3. Legal Proceedings

2021-12-14 compared with 2020-12-17 · 4 added, 63 removed, 3 unchanged (96% of the section changed)

Legal Proceedings

We are subject to litigation, claims,

investigations and audits arising from time to time in the ordinary course of our business.

CleanSpark, Inc.

Growth Fund, LLC

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”).

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.

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

competing forum selection clauses was controlling, and that therefore the Court’s personal jurisdiction over Investor had

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.

We are subject to litigation, claims, investigations

and audits arising from time to time in the ordinary course of our business.

For a description of our material pending

legal proceedings, please see footnote 15 pertaining to commitments and contingencies included elsewhere in this Annual Report.

Mine Safety Disclosures

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings