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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

For the quarterly period ended March 31, 2022

 

 

Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

For the transition period from __________ to __________

 

 

Commission File Number: 001-39187

 

CleanSpark, Inc.

(Exact name of Registrant as specified in its charter)

 

Nevada

87-0449945

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

2370 Corporate Circle, Suite 160

Henderson, NV 89074

(Address of principal executive offices)

 

(702) 989-7692

(Registrant’s telephone number, including area code)

 

 _______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.001 per share

 

CLSK

 

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days

Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

☐ Accelerated filer

☐ Non-accelerated Filer

  Smaller reporting company

 

  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 41,290,065 shares as of May 10, 2022.

 


 

TABLE OF CONTENTS

 

 

 

 

Page

 

PART I – FINANCIAL INFORMATION

 

Item 1:

Financial Statements

5

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

6

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

12

Item 4:

Controls and Procedures

13

 

PART II – OTHER INFORMATION

 

Item 1:

Legal Proceedings

15

Item 1A:

Risk Factors

15

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

15

Item 3:

Defaults Upon Senior Securities

15

Item 4:

Mine Safety Disclosures

15

Item 5:

Other Information

15

Item 6:

Exhibits

16

 

2


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, equity compensation, business strategy, plans, market growth and our objectives for future operations.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to: the success of its digital currency mining activities; the volatile and unpredictable cycles in the emerging and evolving industries in which we operate, increasing difficulty rates for bitcoin mining; bitcoin halving; new or additional governmental regulation; the anticipated delivery dates of new miners; the ability to successfully deploy new miners; the dependency on utility rate structures and government incentive programs; the successful deployment of energy solutions for residential and commercial applications; the expectations of future revenue growth may not be realized; ongoing demand for the Company's software products and related services; the impact of global pandemics (including COVID-19) on logistics and shipping and the demand for our products and services; and other risks described in the Company's prior press releases and in its filings with the Securities and Exchange Commission (SEC), including under the heading "Risk Factors" in the Company's Annual Report on Form 10-K and any subsequent filings with the SEC. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context requires otherwise, references to “CleanSpark,” the “Company,” “we,” “us,” and “our,” refer to CleanSpark, Inc. and its consolidated subsidiaries.

GENERAL

We may announce material business and financial information to our investors using our investor relations website at https://www.cleanspark.com/investor-relations/. We therefore encourage investors and others interested in CleanSpark to review the information that we make available on our website, in addition to following our filings with the SEC, webcasts, press releases and conference calls. Information contained on our website is not part of this Quarterly Report on Form 10-Q.

3


 

WHERE YOU CAN FIND MORE INFORMATION

All reports we file with the SEC are available for download free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC’s website at www.sec.gov. We also make electronic copies of our reports available for download, free of charge, through our website at https://www.cleanspark.com/investor-relations/ as soon as reasonably practicable after filing such material with the SEC. Information contained on our website is not part of this Quarterly Report on Form 10-Q.

4


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our consolidated financial statements included in this Form 10-Q are as follows:

 

Consolidated Balance Sheets as of March 31, 2022 (unaudited) and September 30, 2021;

F-1

Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended March 31, 2022 and 2021 (unaudited);

F-3

Consolidated Statements of Stockholders’ Equity for the three and six months ended March 31, 2022 and 2021 (unaudited);

F-5

Consolidated Statements of Cash Flow for the six months ended March 31, 2022 and 2021 (unaudited);

F-7

Notes to Consolidated Financial Statements (unaudited).

F-9

 

This report on Form 10-Q for the quarter ended March 31, 2022, should be read in conjunction with the Company's annual report on Form 10-K for the year ended September 30, 2021, filed with the Securities and Exchange Commission (“SEC”) on December 14, 2021.

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, 2022 are not necessarily indicative of the results that can be expected for the full year.

5


 

CLEANSPARK, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

March 31, 2022 (Unaudited)

 

 

September 30, 2021

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents, including restricted cash

 

$

1,912,947

 

 

$

18,040,327

 

Accounts receivable, net

 

 

6,836,253

 

 

 

2,619,957

 

Inventory

 

 

1,259,423

 

 

 

2,672,744

 

Prepaid expense and other current assets

 

 

10,316,242

 

 

 

5,129,047

 

Digital currency

 

 

17,045,640

 

 

 

23,603,210

 

Derivative investment asset

 

 

3,794,359

 

 

 

4,905,656

 

Investment in equity security

 

 

250,000

 

 

 

260,772

 

Investment in debt security, AFS, at fair value

 

 

541,200

 

 

 

494,608

 

Total current assets

 

$

41,956,064

 

 

$

57,726,321

 

 

 

 

 

 

 

 

Property and equipment, net

 

$

276,330,089

 

 

$

137,674,739

 

Operating lease right of use asset

 

 

1,353,557

 

 

 

1,488,240

 

Intangible assets, net

 

 

10,262,761

 

 

 

12,699,177

 

Deposits on mining equipment

 

 

69,902,321

 

 

 

87,959,910

 

Other long-term assets

 

 

5,943,314

 

 

 

875,536

 

Goodwill

 

 

19,049,198

 

 

 

19,049,198

 

Total assets

 

$

424,797,304

 

 

$

317,473,121

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

21,385,732

 

 

$

7,975,263

 

Contract liabilities

 

 

188,929

 

 

 

296,964

 

Operating lease liability

 

 

321,600

 

 

 

256,195

 

Finance lease liability

 

 

345,817

 

 

 

413,798

 

Acquisition liability

 

 

-

 

 

 

300,000

 

Contingent consideration

 

 

-

 

 

 

820,802

 

Dividends payable

 

 

335,439

 

 

 

-

 

Total current liabilities

 

 

22,577,517

 

 

 

10,063,022

 

Long-term liabilities

 

 

 

 

 

 

Operating lease liability, net of current portion

 

 

1,043,931

 

 

 

1,235,325

 

Finance lease liability, net of current portion

 

 

257,952

 

 

 

458,308

 

Total liabilities

 

$

23,879,400

 

 

$

11,756,655

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common stock; $0.001 par value; 100,000,000 shares authorized; 41,290,587 and
   
37,395,945 shares issued and outstanding as of March 31, 2022 and
   September 30, 2021, respectively

 

 

41,291

 

 

 

37,394

 

Preferred stock; $0.001 par value; 10,000,000 shares authorized; Series A
   shares;
2,000,000 authorized; 1,750,000 and 1,750,000 issued and outstanding
   as of March 31, 2022 and September 30, 2021, respectively

 

 

1,750

 

 

 

1,750

 

Additional paid-in capital

 

 

525,246,200

 

 

 

444,074,832

 

Accumulated other comprehensive income (loss)

 

 

41,200

 

 

 

(5,392

)

Accumulated deficit

 

 

(124,412,537

)

 

 

(138,392,118

)

Total stockholders' equity

 

 

400,917,904

 

 

 

305,716,466

 

 

F-1


 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

424,797,304

 

 

$

317,473,121

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-2


 

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

 

 

 

For the three months ended

 

 

For the six months ended

 

 

 

March 31,
2022

 

 

March 31,
2021

 

 

March 31,
2022

 

 

March 31,
2021

 

Revenues, net

 

 

 

 

 

 

 

 

 

 

 

 

Digital currency mining revenue, net

 

$

36,965,739

 

 

$

6,715,792

 

 

$

73,940,317

 

 

$

7,449,202

 

Energy hardware, software and services revenue

 

 

4,585,971

 

 

 

1,313,530

 

 

 

8,556,181

 

 

 

2,827,233

 

Other services revenue

 

 

86,282

 

 

 

90,366

 

 

 

383,463

 

 

 

100,824

 

Total revenues, net

 

 

41,637,992

 

 

 

8,119,688

 

 

 

82,879,961

 

 

 

10,377,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

12,127,120

 

 

 

1,537,683

 

 

 

20,925,046

 

 

 

2,879,197

 

Professional fees

 

 

900,976

 

 

 

2,456,554

 

 

 

4,218,795

 

 

 

4,169,277

 

Payroll expenses

 

 

10,542,025

 

 

 

3,262,097

 

 

 

19,425,072

 

 

 

6,576,298

 

General and administrative expenses

 

 

3,182,946

 

 

 

1,243,154

 

 

 

5,071,046

 

 

 

2,193,293

 

(Gain) on disposal of assets

 

 

(920,861

)

 

 

 

 

 

(642,691

)

 

 

 

Other impairment expense (related to Digital Currency)

 

 

811,345

 

 

 

 

 

 

7,033,691

 

 

 

 

Depreciation and amortization

 

 

11,661,633

 

 

 

2,117,172

 

 

 

19,359,201

 

 

 

3,226,263

 

Total costs and expenses

 

 

38,305,184

 

 

 

10,616,660

 

 

 

75,390,160

 

 

 

19,044,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

3,332,808

 

 

 

(2,496,972

)

 

 

7,489,801

 

 

 

(8,667,070

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

308,038

 

 

 

541,576

 

 

 

308,038

 

 

 

541,576

 

Change in fair value of contingent consideration

 

 

290,249

 

 

 

 

 

 

345,791

 

 

 

 

Realized gain (loss) on sale of digital currency

 

 

(2,733,882

)

 

 

585,709

 

 

 

7,260,909

 

 

 

635,627

 

Realized gain on sale of equity security

 

 

 

 

 

 

 

 

665

 

 

 

 

Unrealized gain (loss) on equity security

 

 

 

 

 

343,000

 

 

 

(1,847

)

 

 

269,500

 

Unrealized gain (loss) on derivative security

 

 

(1,410,146

)

 

 

8,400,629

 

 

 

(1,111,297

)

 

 

7,380,135

 

Interest income

 

 

51,782

 

 

 

54,479

 

 

 

85,253

 

 

 

102,463

 

Interest expense

 

 

(9,584

)

 

 

(28,381

)

 

 

(62,293

)

 

 

(29,721

)

Total other income (expense)

 

 

(3,503,543

)

 

 

9,897,012

 

 

 

6,825,219

 

 

 

8,899,580

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax (expense) or benefit

 

 

(170,735

)

 

 

7,400,040

 

 

 

14,315,020

 

 

 

232,510

 

Income tax (expense) or benefit

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(170,735

)

 

$

7,400,040

 

 

$

14,315,020

 

 

$

232,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

20,828

 

 

$

177,505

 

 

 

335,439

 

 

$

177,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

 

$

(191,563

)

 

$

7,222,535

 

 

$

13,979,581

 

 

$

55,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

28,479

 

 

 

 

 

 

46,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss) attributable to common shareholders

 

$

(163,084

)

 

$

7,222,535

 

 

$

14,026,173

 

 

$

55,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share - basic

 

$

(0.00

)

 

$

0.28

 

 

$

0.34

 

 

$

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

F-3


 

Weighted average common shares outstanding - basic

 

 

41,336,342

 

 

 

25,925,259

 

 

 

40,802,319

 

 

 

24,025,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share - diluted

 

$

(0.00

)

 

$

0.22

 

 

$

0.34

 

 

$

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - diluted

 

 

41,336,342

 

 

 

32,697,863

 

 

 

40,861,052

 

 

 

30,798,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-4


 

CLEANSPARK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)

 

 

 

Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Accumulated
Deficit

 

 

Total
Stockholders'
Equity

 

Balance, September 30, 2021

 

 

1,750,000

 

 

$

1,750

 

 

 

37,395,945

 

 

$

37,394

 

 

$

444,074,832

 

 

$

(5,392

)

 

$

(138,392,118

)

 

$

305,716,466

 

Options and restricted stock units issued for services

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,749,107

 

 

 

-

 

 

 

-

 

 

 

5,749,107

 

Shares issued for settlement of contingent consideration related to business acquisition

 

 

 

 

 

-

 

 

 

8,404

 

 

 

8

 

 

 

150,003

 

 

 

-

 

 

 

-

 

 

 

150,011

 

Exercise of options and warrants

 

 

 

 

 

-

 

 

 

52,061

 

 

 

52

 

 

 

281,564

 

 

 

-

 

 

 

-

 

 

 

281,616

 

Shares issued under equity offering,
net of offering costs

 

 

 

 

 

-

 

 

 

4,017,652

 

 

 

4,021

 

 

 

67,984,972

 

 

 

-

 

 

 

-

 

 

 

67,988,993

 

Preferred stock dividends accrued

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(314,611

)

 

 

(314,611

)

Net income

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,485,755

 

 

 

14,485,755

 

Other comprehensive income

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

18,113

 

 

 

-

 

 

 

18,113

 

Balance, December 31, 2021

 

 

1,750,000

 

 

$

1,750

 

 

 

41,474,062

 

 

$

41,475

 

 

$

518,240,478

 

 

$

12,721

 

 

$

(124,220,974

)

 

$

394,075,450

 

Options, restricted stock units and shares issued for services

 

 

 

 

 

-

 

 

 

1,874

 

 

 

2

 

 

 

6,553,982

 

 

 

-

 

 

 

-

 

 

 

6,553,984

 

Shares returned for settlement of contingent consideration and holdbacks related to business acquisition

 

 

 

 

 

-

 

 

 

(232,518

)

 

 

(233

)

 

 

233

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of options and warrants

 

 

 

 

 

-

 

 

 

47,169

 

 

 

47

 

 

 

451,507

 

 

 

-

 

 

 

-

 

 

 

451,554

 

Preferred stock dividends accrued

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(20,828

)

 

 

(20,828

)

Net loss

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-