Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The following discussion of our financial
condition and results of operations for the years ended September 30, 2021 and 2020 should be read in conjunction with our consolidated
financial statements and the notes to those statements that are included elsewhere in this Annual Report on Form 10-K. Our discussion
includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors. We use words such as anticipate, estimate, plan, project, continuing, ongoing, expect,
believe, intend, may, will, should, could, and similar expressions to identify forward-looking statements.
Results of Operations for the Year Ended
September 30, 2021 and 2020
Revenues
We earned $49,438,115 in revenues during the
year ended September 30, 2021, as compared with $10,028,701 in revenues for the year ended September 30, 2020.
For the year ended September 30, 2021, our
revenue was derived from cryptocurrency mining revenues, the sale of equipment, solar panels, batteries, design, engineering, and services
revenue. Income from our mining segment is a result of bitcoin mining activities in the United States. Income from our Energy segment
is the result of contracts to sell switchgear equipment, perform engineering design, and provide software for distributed energy and microgrid
systems. For the year ended September 30, 2021, we also generated services revenue from p2kLabs. We hope to generate more significant
revenue from customers through the sale and licensing of our Software platforms and services in the future. However, we
are unable to estimate with any degree of certainty the amount of future revenues, from existing or future software contracts.
Also, we do not anticipate earning significant revenues from our Gasifier business until
such time that we have fully developed our technology and are able to market our products.
Costs and Expenses
We had costs and expenses of $78,015,168 for
the year ended September 30, 2021, as compared with $25,171,817 for the year ended September 30, 2020.
Our cost of revenues were $13,964,711 for
the year ended September 30, 2021, as compared with cost of revenues of $7,907,849 for the year ended September 30, 2020.
Our cost of revenues in 2021 was mainly the
result of mining energy costs, hosting fees, contract manufacturing expenses, and hardware materials. Our cost of revenues in 2020 was
mainly the result of contract manufacturing expenses and hardware materials.
Mining expenses incurred during the year ended
September 30, 2021 is $4,889,996. It consisted mainly of energy costs and hosting fees paid to Coinmint.
Contract
manufacturing expenses decreased to $3,926,060 for
the year ended September 30, 2021, from $6,704,075 for
the year ended 2020. Our manufacturing expense consisted of the cost of contract manufacturing of switchgear equipment.
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Hardware
material purchases increased to $3,205,547 for the year ended September 30, 2021, from $824,665
in hardware expenses for the
year ended September 30, 2020. Our materials expense for the years ended September 30, 2021 and 2020 consisted mainly of the cost of energy
storage and solar panels.
Professional fees increased to $8,272,966
for the year ended September 30, 2021 from $6,521,016 for the same period ended September 30, 2020. Our professional fees expenses for
the year ended September 30, 2021 consisted mainly of legal fees of $4,570,216, accounting and tax fees of $1,070,174 consulting fees
of $818,741, investor relations and external marketing consulting fees of $959,717, director fees of $177,084, recruitment and conference
fees of $251,183, subcontract fees of $185,980 and audit and review fees of $214,100.
Our professional fees expenses for the year
ended September 30, 2020 consisted mainly of consulting fees of $607,392 paid to management of the Company, stock-based compensation for
consulting of $2,265,194, sales consulting of $278,547, legal fees of $1,472,421, investor relations and external marketing consulting
of $725,347, director fees of $442,000, consulting for software and engineering of $82,031, accounting and tax fees of $186,969 and audit
and review fees of $135,060.
Payroll expenses increased to $25,355,684
for the year ended September 30, 2021 from $6,813,641 for the same period ended September 30, 2020. Our payroll expenses for the year
ended September 30, 2021 consisted mainly of salary and wages expense of $17,624,078 and employee and officer stock-based compensation
and related bonuses of $7,731,605. Our payroll expenses for the year ended September 30, 2020 consisted mainly of salary and wages expense
of $4,293,559 and employee and officer stock-based compensation of $2,520,083.
General
and administrative fees increased to $5,291,652 for
the year ended September 30, 2021 from $1,093,062 for the same period ended September 30, 2020. Our general and administrative expenses
for the year ended September 30, 2021 consisted mainly of marketing related expenses of $1,488,933, travel expenses of $367,632, rent
expenses of $445,944, insurance expenses of $720,053, dues and subscriptions of $1,129,963, repairs and maintenance of $174,192, supplies
of $134,163, utilities of $184,232 and bad debt expense of $246,453. Our general and administrative expenses for the year ended September
30, 2020 consisted mainly of travel expenses of $82,407, rent expenses of $117,223, insurance expenses of $232,043, dues and subscriptions
of $362,887, marketing related expenses of $153,091, and bad debt expense of $36,924.
Depreciation and amortization expense increased
to $12,244,368 for the year ended September 30, 2021, from $2,836,249 for the same period ended September 30, 2020.
Impairment expenses were recorded for the
year ended September 30, 2021 for $12,885,776, and no impairment expenses were recorded for the same period ended September 30, 2020.
Impairment expense for the year ended September 30, 2021 consisted primarily of bitcoin impairment of $6,608,076, goodwill impairment
of $5,723,388 and software impairment of $554,322, which represents a write down of our GridFabric product line of $250,000 and our mVSO
platform of $304,322.
Other Income/Expenses
We
had net other income of $6,765,043 for the year ended September 30, 2021, compared with other expenses of $8,203,027 for the year ended
September 30, 2020. Other income for the year ended September 30, 2021 consisted mainly of other income of $544,778, change in fair value
of contingent consideration of $84,198, gains on derivative assets of $2,790,387, realized gains on the sale of digital currency of $3,104,378,
realized gains on the sale of equity securities of
$179,046, interest income of $221,488 and interest expense of $154,079. Our other income/expenses for the year ended September 30, 2020
consisted mainly of other income of $20,000, unrealized gains on equity security and derivative security of $116,868 and $2,115,269 respectively,
interest income of $308,804, and interest expense of $10,758,750.
Net Loss
Net loss for the year ended September 30,
2021 was $21,812,010 compared to net loss of $23,346,143 for the year ended September 30, 2020.
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Non-GAAP Measures
Adjusted EBITDA and Adjusted EPS is not a measurement
of financial performance under generally accepted accounting principles in the United States, or GAAP. Because of varying available
valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company's non-cash operating expenses,
CleanSpark management believes that providing a non-GAAP financial measure that excludes non-cash and non-recurring expenses allows for
meaningful comparisons between the Company's core business operating results and those of other companies, as well as providing the Company
with an important tool for financial and operational decision making and for evaluating its own core business operating results over different
periods of time.
The Company's adjusted EBITDA measure may not provide
information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate
non-GAAP financial results differently, particularly related to non-recurring, unusual items. The Company's adjusted EBITDA is not a measurement
of financial performance under GAAP and should not be considered as an alternative to operating income or as an indication of operating
performance or any other measure of performance derived in accordance with GAAP. Our management does not consider adjusted EBITDA to be
a substitute for, or superior to, the information provided by GAAP financial results.
We are providing supplemental financial measures for
(i) non-GAAP adjusted earnings before interest, taxes, depreciation and amortization, or (“adjusted EBITDA”) that excludes
the impact of interest, taxes, depreciation, amortization, our share-based compensation expense, and impairment of assets, unrealized
gains/losses on securities, certain financing costs, other non-cash items, certain non-recurring expenses, and impacts related to discontinued
operations; and (ii) non-GAAP adjusted EBITDA and non-GAAP earnings per share that excludes the impact of interest, taxes, depreciation,
amortization, our share-based compensation expense, and impairment of assets, unrealized gains/losses on securities, certain financing
costs, other non-cash items, and impacts related to discontinued operations. These supplemental financial measures are not measurements
of financial performance under generally accepted accounting principles in the United States (“GAAP”) and, as a result, these
supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP
financial measures internally to help understand, manage, and evaluate our business performance and to help make operating decisions.
We believe that these non-GAAP financial measures
are also useful to investors and analysts in comparing our performance across reporting periods on a consistent basis. The first supplemental
financial measure excludes (i) impacts of interest, taxes, and depreciation; (ii) significant non-cash expenses such as our share-based
compensation expense, unrealized gains/losses on securities, certain financing costs, other non-cash items that we believe are not reflective
of our general business performance, and for which the accounting requires management judgment, and the resulting expenses could vary
significantly in comparison to other companies; (iii) significant impairment losses related to long-lived and digital assets, which include
our bitcoin for which the accounting requires significant estimates and judgment, and the resulting expenses could vary significantly
in comparison to other companies; and (iv) and impacts related to discontinued operations that would not be applicable to our future business
activities.
Non-GAAP financial measures are subject to material
limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP. For example, we expect
that share-based compensation expense, which is excluded from the first two non-GAAP financial measures, will continue to be a significant
recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers, and directors.
We have also excluded impairment losses on assets,
including impairments of our digital currency our non-GAAP financial measures, which may continue to occur in future periods as a result
of our continued holdings of significant amounts of bitcoin. Our non-GAAP financial measures are not meant to be considered in isolation
and should be read only in conjunction with our Consolidated Financial Statements, which have been prepared in accordance with GAAP. We
rely primarily on such Consolidated Financial Statements to understand, manage, and evaluate our business performance and use the non-GAAP
financial measures only supplementally.
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The following is a reconciliation of our non-GAAP
adjusted EBITDA to the most directly comparable financial measure stated in accordance with GAAP, which excludes the impact of (i) interest,
taxes, depreciation, amortization; (ii) our share-based compensation expense; (iii) impairment expense; (iv) unrealized gains/losses on
securities; (v) and (vi) impacts related to discontinued operations, to its most directly comparable GAAP measures for the periods indicated:
Years Ended September 30,
2021
2020
Reconciliation
of non-GAAP adjusted EBITDA
Net Loss:
$ (21,812,010 )
$ (23,346,143)
Interest and taxes
(67,409 )
10,449,946
Depreciation and amortization
12,244,368
2,836,249
Share-based compensation
expense
8,546,712
2,053,232
Digital asset impairment
losses
6,608,076
—
Energy & other goodwill
impairment losses
6,277,710
—
Unrealized (gains)/losses
of securities and derivatives
(2,785,234 )
( 2,232,137)
Discontinued
operations
—
—
non-GAAP
adjusted EBITDA
9,012,213
(10,238,853)
The following is a reconciliation of our non-GAAP
adjusted EBITDA earnings per share, in each case excluding the impact of (i) interest, taxes, depreciation, amortization; (ii) our share-based
compensation expense; (iii) impairment expense; (iv) unrealized gains/losses on securities; (v) certain financing costs and other non-cash
items; (vi) certain non-recurring expenses; and (vii) impacts related to discontinued operations:
Reconciliation of non-GAAP adjusted EBITDA per share:
Non-GAAP adjusted EBITDA
$ 9,012,213
$ (10,238,853)
Interest and taxes (per diluted share)
—
1.09
Depreciation and amortization (per share)
0.42
0.30
Share-based compensation expense
0.29
0.21
Digital asset impairment losses (per share)
0.22
—
Energy & other goodwill impairment losses
0.21
—
Unrealized (gains)/losses of securities and derivatives (per share)
(0.09 )
(0.23)
Discontinued operations
—
—
Non-GAAP EBITDA per share
$ 0.31
$ (1.07)
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The following is a reconciliation of fair
market value of our digital currency holdings to the current carrying value at September 30, 2021. We did not hold any digital currency
as of September 30, 2020:
Carrying Value (1)
Fair Market Value (2)
Number of Bitcoins held
$ 627
$ 627
Value per coin (1) (2)
37,645
43,929
Total
$ 23,603,415
$ 27,543,483
(1) Value per coin is the average book value
per coin determined by the number of coins held as of the balance sheet date divided by the carrying value.
(2) Value per coin is the quoted market price
as of the balance sheet date.
Liquidity and Capital Resources
For the year ended September 30, 2021, our
primary sources of liquidity came from existing cash and proceeds from share offerings. On March 18, 2021, the Company consummated a
fully underwritten public offering of shares of its common stock, which resulted in net proceeds to the Company of approximately $187,200,000.
On June 3, 2021, the Company entered into an At the Market Offering Agreement (the “ATM”) with H.C. Wainwright & Co.,
LLC (“HCW”), pursuant to which it may, from time to time, offer and sell up to an aggregate of $500,000,000 of shares of
its common stock to or through HCW. During the fiscal year ended September 30, 2021, the Company issued an aggregate of 3,443,379 shares
of the Company’s common stock under the ATM for net proceeds of $46.4 million. The shares were sold pursuant to a prospectus dated
March 15, 2021 and a prospectus supplement dated June 3, 2021 filed with the SEC. Based on our current plans and business conditions,
we believe that existing cash, cash generated from operations and our ATM will be sufficient to satisfy our anticipated cash requirements
until we reach profitability, and we are not aware of any trends or demands, commitments, events or uncertainties that are reasonably
likely to result in a decrease in liquidity of our assets. However, our future capital requirements will depend on many factors including
our growth rate, the timing and extent of spending to support development efforts, the expansion of our sales and marketing, the timing
of new product introductions and the continuing market acceptance of our products and services. If cash generated from operations is
insufficient to satisfy our capital requirements, we may open a revolving line of credit with a bank, or we may have to sell additional
equity or debt securities or obtain credit facilities. In the event such financing is needed in the future, there can be no assurance
that such financing will be available to us, or, if available, that it will be in amounts and on terms acceptable to us. If cash flows
from operations became insufficient to continue operations at the current level, and if no additional financing was obtained, our business,
operating results and financial condition would be adversely affected.
As of September 30, 2021, we had total current
assets of $57,726,321, consisting of cash, accounts receivable, inventory, digital currency, investments, prepaid expenses and other current
assets, and total assets in the amount of $317,473,121. Our total current liabilities as of September 30, 2021 were $10,063,022. We had
a working capital surplus of $47,663,299 as of September 30, 2021.
Operating
activities used $35,429,342 in cash for the year ended September 30, 2021, as compared with $6,642,734 for the same period ended September
30, 2020. Our net loss of $21,812,010 was the main component of our negative operating cash flow for the year ended September 30, 2021,
offset mainly by stock-based compensation of $8,546,712, impairment expense of $12,885,786 and depreciation and amortization of $12,244,368.
Our net loss of $23,346,143 was the main component of our negative operating cash flow for the year ended September 30, 2020, offset mainly
by amortization of debt discount of $9,010,547, depreciation and amortization of $2,672,331, shares issued as interest of $2,050,000,
amortization of capitalized software of $163,918 and stock-based compensation of $2,053,232.
Cash
flows used by investing activities during the year ended September 30, 2021 was $217,714,926, as compared with $2,383,623 for the year
ended September 30, 2020. Our acquisitions of Solar watt Solutions for $1,000,136,
purchase of fixed assets of $139,234,948, and deposits on mining equipment of $87,959,910 were the main components of our negative investing
cash flow for the year ended September 30, 2021. The negative cash flow from investing activities is offset by sale of digital currencies
of $11,443,132, acquisition of ATL Data
Center, net of cash received of $45,783 and sale of equity securities of $373,121.
For the year ended September 30, 2020, our
investment in the capitalized software of $84,924, acquisition of P2K Labs of $1,141,990, acquisition of Grid Fabric of $371,812, purchase
of fixed assets of $34,897, and investment in equity and debt security of $750,000 were the main components of our negative investing
cash flow.
Cash
flows provided by financing activities during the year ended September 30, 2021 amounted to $268,058,393, as compared with $4,313,702
for the year ended September 30, 2020. Our positive cash flows from financing activities for the year ended September 30, 2021 consisted
of $270,656,118 in proceeds from offerings, $3,750,932 in proceeds from the exercise of warrants and
options offset by repayments of $5,882,553 on promissory notes and $288,602 in finance leases. Our positive cash flows from financing
activities for the year ended September 30, 2020 consisted of $4,000,000 in proceeds from the sale of common stock, $531,169 in proceeds
from promissory notes offset by repayments of $217,467 on promissory notes.
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Contractual Obligations
The
Company has purchase commitments for approximately $203.6 million related to purchase of miners as of September 30, 2021, and the Company
has paid $144.7 million
towards these commitments as of the end of this period.
The
Company has purchase commitments for infrastructure assets and other mining equipment of approximately $6,512,000 as of September 30,
2021 and the Company has paid $4,576,000 towards these commitments during this
period.
The following table sets forth certain information
concerning our obligations to make contractual future payments towards our agreements as of September 30, 2021:
2022
2023
2024
2025
2026
Thereafter
Total
Recorded
contractual obligations:
Operating
lease obligations
$316,908
$324,948
$333,234
$341,767
$299,039
$50,659
$1,666,555
Finance
Lease obligations
449,431
321,887
142,428
12,320
1,853
—
927,919
Miner
equipment
58,930,880
58,930,880
Infrastructure
assets
1,936,000
1,936,000
Total
$61,633,219
$646,835
$475,662
$354,087
$300,892
$50,659
$63,461,354
Contingent consideration
GridFabric: On August 31, 2020, the Company acquired GridFabric, LLC. Pursuant
to the terms of the purchase agreement, additional shares of the Company’s common stock valued at up to $750,000 were issuable if
GridFabric achieves certain revenue and product release milestones. On September 30, 2021, the contingent consideration was re-measured
to $500,000.
Subsequent to September 30, 2021, the Company settled all contingent consideration
due to GridFabric resulting in the issuance of 8,404 shares of Company common stock valued at $150,000.
Solar Watt Solutions: On February 24, 2021, the Company acquired Solar
Watt Solutions, Inc. Pursuant to the terms of the purchase agreement, additional cash consideration of up to $2,500,000 and up to 310,018
shares of the Company’s common stock may be payable if Solar Watt Solutions achieves certain revenue milestones. As of September
30 2021, none of the contingent consideration had been earned.
Known Trends or Uncertainties
Although we have not seen any significant
reduction in revenues to date, we have seen some consolidation in our industry during economic downturns. These consolidations have not
had a negative effect on our total sales; however, should consolidations and downsizing in the industry continue to occur, those events
could adversely impact our revenues and earnings going forward.
As discussed in the Risk Factors section of
this Annual Report on Form 10-K, the world has been affected due to the COVID-19 pandemic. Until the pandemic has passed, there remains
uncertainty as to the effect of COVID-19 on our business in both the short and long-term.
We believe that the need for improved productivity
in the research and development activities directed toward developing new products and/or software will continue to result in increasing
adoption of energy solution tools such as those we produce. New product and/or software developments in the energy business segment could
result in increased revenues and earnings if they are accepted by our markets; however, there can be no assurances that new products and/or
software will result in significant improvements to revenues or earnings. For competitive reasons, we do not disclose all of our new product
development activities.
Our continued quest for acquisitions could
result in a significant change to revenues and earnings if one or more such acquisitions are completed.
The potential for growth in new markets is
uncertain. We will continue to explore these opportunities until such time as we either generate sales or determine that resources would
be more efficiently used elsewhere.
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Inflation
We have not been affected materially by inflation
during the periods presented, and no material effect is expected in the near future.
Recently
Issued Accounting Pronouncements
In
October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized
and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it
had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer
at fair value on the acquisition date. This new guidance is effective for the Company for its fiscal year beginning February 1, 2023 and
interim periods within that fiscal year, and early adoption is permitted. The Company is evaluating its potential impact but
does not expect the new standard to have a material impact on the Company's results of operations or cash flows .
In March 2020, the FASB issued ASU 2020-04,
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and issued subsequent amendments
to the initial guidance (collectively, “Topic 848”). Topic 848 became effective immediately and expires on December 21, 2022.
Topic 848 allows eligible contracts that are modified to be accounted for as a continuation of those contracts, permits companies to preserve
their hedging accounting during the transition period and enables companies to make a one-time election to transfer or sell held-to-maturity
debt securities that are affected by rate reform. Topic 848 provides optional expedients and exceptions for contracts, hedging relationships
and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be
discontinued because of reference rate reform if certain criteria are met. The adoption of ASU 2020-04 is not expected to have a material
impact on the Company’s financial statements or disclosures.
The Company adopted ASU 2016-13, Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on October 1, 2020 (“ASU 2016-13”).
ASU 2016-13 requires entities to use a new forward-looking “expected loss” model that reflects expected credit losses, including
credit losses related to trade receivables, and requires consideration of a broader range of reasonable and supportable information to
inform credit loss estimates, which generally will result in the earlier recognition of allowances for losses. As the Company was a Smaller
Reporting Company at the time of issuance of the ASU, the Company expects to adopt the ASU effective October 1, 2023, including the interim
periods within the fiscal year. In August 2020, the FASB issued ASU2020-06, “Debt - Debt with Conversion and Other Options (subtopic
470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (subtopic 815-40),” which reduces the number of accounting
models in ASC 470-20 that require separate accounting for embedded conversion features. As a result, a convertible debt instrument will
be accounted for as a single liability measured at its amortized cost as long as no other features require bifurcation and recognition
as derivatives. By removing those separation models, the effective interest rate of convertible debt instruments will be closer to the
coupon interest rate. Further, the diluted net income per share calculation for convertible instruments will require the Company to use
the if-converted method. The treasury stock method should no longer be used to calculate diluted net income per share for convertible
instruments. The amendment will be effective for the Company with annual periods beginning January 1, 2022 and early adoption is permitted.
The adoption of ASU 2020-06 is not expected to have a material impact on the Company’s financial statements or disclosures.
In August 2020, the FASB issued Account Standard
Update (“ASU”) 2020-06, “Debt - Debt with Conversion and Other Options (subtopic 470-20) and Derivatives and Hedging
- Contracts in Entity’s Own Equity (subtopic 815-40),” which reduces the number of accounting models in ASC 470-20 that require
separate accounting for embedded conversion features. As a result, a convertible debt instrument will be accounted for as a single liability
measured at its amortized cost as long as no other features require bifurcation and recognition as derivatives. By removing those separation
models, the effective interest rate of convertible debt instruments will be closer to the coupon interest rate. Further, the diluted net
income per share calculation for convertible instruments will require the Company to use the if-converted method. The treasury stock method
should no longer be used to calculate diluted net income per share for convertible instruments. The amendment will be effective for the
Company with annual periods beginning January 1, 2022 and early adoption is permitted. The adoption of ASU 2020-06 is not expected to
have a material impact on the Company’s financial statements or disclosures.
The Company has evaluated all other recent
accounting pronouncements and believes that none of them will have a material effect on the Company's financial position, results of operations
or cash flows.
Critical Accounting Policies
In December 2001, the SEC requested that all
registrants list their most critical accounting policies in the Management Discussion and Analysis. The SEC indicated that a critical
accounting policy is one which is both important to the portrayal of a Company’s financial condition and results, and requires managements
most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain.
Our accounting policies are discussed in detail
in the footnotes to our financial statements included in this Annual Report on Form 10-K for the year ended September 30, 2021 however
we consider our critical accounting policies to be those related to revenue recognition, long-lived assets, accounts receivable, fair
value of financial instruments, cash and cash equivalents, digital currency and stock-based compensation.
Our
significant estimates include estimates used to review the Company’s goodwill and digital currency impairment, intangible assets
acquired, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, revenue recognition
from digital currency mining, valuation of derivative assets and liabilities, available-for-sale investments, allowances for uncollectible
accounts, valuation of digital currencies, valuation of contingent consideration, warranty, and the valuations of share based awards.
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 are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions including, but not limited to, the ultimate impact that COVID-19 may have on the Company’s
operations.
Off Balance Sheet Arrangements
As of September 30, 2021, there were no off-balance
sheet arrangements.
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Item 7A. Quantitative and Qualitative Disclosures
About Market Risk
As a first time large accelerated filer, we
are not required to provide the information required by this Item until the first quarter after the fiscal year in which it is first determined
that we have become a large accelerated filer.