Cleanspark, Inc 10-Q for FY2021 Q3

Cleanspark, Inc. (CLSK)

10-Q 2021-08-16 For: 2021-06-30

Added on April 12, 2026

About this 10-Q

Cleanspark, Inc filed this 10-Q on August 16, 2021, covering the quarter ended June 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $11.92M; up 246.5% from $3.44M a year earlier
Net loss: $16.68M; compared with a net loss of $8.55M a year earlier
Diluted EPS: -$0.49; compared with -$0.77 a year earlier

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

For the quarterly period ended June 30, 2021

☐	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

Nevada	87-0449945
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

☐ Large accelerated filer	☐ Accelerated filer
☒ Non-accelerated Filer	☒ Smaller reporting company
	☐ Emerging growth company

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4:	Controls and Procedures	16
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	17
Item 1A:	Risk Factors	18
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3:	Defaults Upon Senior Securities	18
Item 4:	Mine Safety Disclosures	18
Item 5:	Other Information	18
Item 6:	Exhibits	19


	June 30, 2021			September 30, 2020
ASSETS
Current assets
Cash and cash equivalents	$	22,209,870		$	3,126,202
Accounts receivable, net		2,340,435			1,047,353
Contract assets		—			4,103
Inventory		4,040,407			—
Prepaid expense and other current assets		4,462,712			998,931
Digital currency		10,388,432			—
Derivative investment asset		7,434,630			2,115,269
Investment equity security		473,823			460,000
Investment debt security, AFS, at fair value		500,000			500,000
Total current assets	$	51,850,309		$	8,251,858

Property and equipment, net		64,753,143			117,994
Operating lease right of use asset		559,182			40,711
Capitalized software, net		850,113			976,203
Intangible assets, net		15,391,345			7,049,656
Deposits on mining equipment		125,855,501			—
Other long-term asset		6,431,664			—
Goodwill		31,797,564			5,903,641
Total assets	$	297,488,821		$	22,340,063

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	9,941,420		$	4,527,037
Contract liabilities		596,873			64,198
Operating lease liability		76,467			41,294
Finance lease liability		345,257			—
Acquisition liability		300,000			—
Contingent consideration		650,000			750,000
Total current liabilities	$	11,910,017		$	5,382,529

Long-term liabilities
Loans payable		—			531,169
Operating lease liability, non-current		478,202			—
Dividends payable		177,505			—
Finance lease liability, non-current		527,483			—
Contingent consideration, non-current		2,600,000			—
Total liabilities	$	15,693,207		$	5,913,698

Stockholders' equity
Common stock: $0.001 par value; 50,000,000 shares authorized; 34,697,943 and 17,390,979 shares issued and outstanding as of June 30, 2021 and September 30, 2020, respectively		34,696			17,391
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 June 30, 2021 and September 30, 2020, respectively		1,750			1,750
Additional paid-in capital		414,783,896			132,809,830
Accumulated deficit		(133,024,728	)		(116,402,606)
Total stockholders' equity		281,795,614			16,426,365

Total liabilities and stockholders' equity	$	297,488,821		$	22,340,063


	For the Three Months Ended							For the Nine Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020

Revenues, net
Digital currency mining revenue	$	8,649,440		$	—		$	16,098,643		$	—
Energy hardware, software and services revenue		2,863,997			3,080,833			4,985,062			7,484,079
Other services revenue		402,628			357,841			1,209,616			589,702
Total revenues, net		11,916,065			3,438,674			22,293,321			8,073,781

Costs and expenses
Cost of revenues (exclusive of depreciation and amortization shown below)		3,848,817			2,852,062			6,728,014			6,609,324
Professional fees		2,047,654			709,367			6,216,931			3,231,945
Payroll expenses		11,830,196			996,555			18,406,494			2,692,474
General and administrative expenses		1,430,339			279,045			3,623,632			820,837
Impairment expense		3,720,481			—			3,720,481			—
Depreciation and amortization		3,656,757			745,244			6,883,020			2,126,313
Total costs and expenses		26,534,244			5,582,273			45,578,572			15,480,893

Loss from operations		(14,618,179	)		(2,143,599	)		(23,285,251	)		(7,407,112)

Other income (expense)
Other income		1,441			20,000			543,017			20,000
Realized gain on sale of digital currency		36,438			—			672,065			—
Realized gain on sale of equity securities		105,908			—			105,908			—
Unrealized gain (loss) on equity security		(170,586	)		(80,500	)		98,914			78,368
Unrealized gain (loss) on derivative security		(2,060,774	)		719,294			5,319,361			1,544,185
Interest income (expense), net		28,625			(7,066,496	)		101,367			(10,518,094)
Total other income (expense)		(2,058,948	)		(6,407,702	)		6,840,632			(8,875,541)

Net loss	$	(16,677,127	)	$	(8,551,301	)	$	(16,444,619	)	$	(16,282,653)

Preferred stock dividends	$	—		$	—		$	177,505		$	—

Net loss attributable to common shareholders	$	(16,677,127	)	$	(8,551,301	)	$	(16,622,124	)	$	(16,282,653)

Loss per common share - basic	$	(0.49	)	$	(0.77	)	$	(0.60	)	$	(2.32)


Weighted average common shares outstanding - basic		34,014,221			11,119,288			27,355,111			7,003,927

Loss per common share - diluted	$	(0.49	)	$	(0.77	)	$	(0.60	)	$	(2.32)

Fully Diluted weighted average common shares outstanding		34,014,221			11,119,288			27,355,111			7,003,927


For the Nine Months ended June 30, 2021
	Preferred Stock				Common Stock
	Shares		Amount		Shares			Amount			Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity
Balance, September 30, 2020		1,750,000	$	1,750		17,390,979		$	17,391		$	132,809,830		$	(116,402,606	)	$	16,426,365
Shares issued for services		—		—		501,437			501			3,011,133			—			3,011,634
Options and warrants issued for services		—		—		—			—			1,339,009			—			1,339,009
Shares issued for business acquisition		—		—		1,618,285			1,618			21,181,733			—			21,183,351
Exercise of options and warrants		—		—		115,385			116			192,540			—			192,656
Shares issued under underwritten offering, net of offering costs		—		—		4,444,445			4,445			37,045,160			—			37,049,605
Net loss		—		—		—			—			—			(7,167,530	)		(7,167,530)
Balance, December 31, 2020		1,750,000	$	1,750		24,070,531		$	24,071		$	195,579,405		$	(123,570,136	)	$	72,035,090
Shares issued for services		—		—		19,429			19			71,478			—			71,497
Options and warrants issued for services		—		—		—			—			777,517			—			777,517
Shares issued for business acquisition		—		—		477,703			478			13,246,226			—			13,246,704
Exercise of options and warrants		—		—		223,650			223			3,153,680			—			3,153,903
Shares issued under underwritten offering, net of offering costs		—		—		9,090,910			9,091			187,204,122			—			187,213,213
Shares returned in relation to business acquisition		—		—		(8,072	)		(8	)		8			—			—
Preferred stock dividends accrued		—		—		—			—			—			(177,505	)		(177,505)
Net income		—		—		—			—			—			7,400,040			7,400,040
Balance, March 31, 2021		1,750,000		1,750		33,874,151			33,874			400,032,436			(116,347,601	)		283,720,459
Shares issued for services		—		—		112,486			112			2,712,813			—			2,712,925
Options and warrants issued for services		—		—		—			—			686,447			—			686,447
Exercise of options and warrants		—		—		48,310			48			384,955			—			385,003
Shares issued under ATM offering, net of offering costs		—		—		731,190			730			11,859,836			—			11,860,566
Shares returned in relation to business acquisition		—		—		(68,194	)		(68	)		(892,591	)		—			(892,659)
Net loss		—		—		—			—			—			(16,677,127	)		(16,677,127)
Balance, June 30, 2021		1,750,000		1,750		34,697,943			34,696			414,783,896			(133,024,728	)		281,795,614

	Amount
Balance at September 30, 2020	$	—
Additions of digital currencies		16,098,643
Realized gain on sale of digital currencies		672,065
Sale of digital currencies		(2,499,757)
Digital currencies issued for services		(162,038)
Impairment loss		(3,720,481)
Balance at June 30, 2021	$	10,388,432


Inventory	Amount
Batteries and solar panels		3,033,075
Supplies and other materials		1,007,332
Balance at June 30, 2021		4,040,407

	Useful life
Building		30 years
Machinery and equipment		1 - 7 years
Mining equipment		3 - 15 years
Leasehold improvements		Shorter of estimated lease term or 5 years
Furniture and fixtures		1 - 5 years

	Amount		Level 1		Level 2		Level 3
Derivative asset	$	7,434,630	$	—	$	—	$	7,434,630
Investment in equity security		223,823		223,823		—		—
Investment in debt security		500,000		—		—		500,000
Total	$	8,158,453	$	223,823	$	—	$	7,934,630

	Amount		Level 1		Level 2		Level 3
Derivative asset	$	2,115,269	$	—	$	—	$	2,115,269
Investment in equity security		210,000		210,000		—		—
Investment in debt security		500,000		—		—		500,000
Total	$	2,825,269	$	210,000	$	—	$	2,615,269

Consideration:	Fair Value
Cash	$	1,350,000
Contingent consideration		2,500,000
477,703 shares of common stock		13,246,704
Total Consideration	$	17,096,704

Purchase Price Allocation:
Customer List	$	5,122,733
Goodwill	$	12,499,248
Other assets and liabilities assumed, net	$	(525,277)
Total	$	17,096,704

Consideration:	Fair Value
1,550,091 shares of common stock	$	20,290,692
Total Consideration	$	20,290,692

Purchase Price Allocation:
Strategic contract	$	7,457,970
Goodwill	$	13,394,675
Other assets and liabilities assumed, net	$	(561,953)
Total	$	20,290,692


	b)	31,183 restricted shares of the Company’s common stock, valued at $145,000, were issued to the Seller (the “Shares”). The Shares are subject to certain lock-up and leak-out provisions whereby the Seller may sell an amount of Shares equal to 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”);

	c)	$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; and

	d)	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. During the nine months ended June 30, 2021, 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.

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

Purchase Price Allocation:
Customer list	$	730,000
Design and other assets	$	123,000
Goodwill	$	957,388
Other assets and liabilities assumed, net	$	(121,453)
Total	$	1,688,935

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

	b)	$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;

	c)	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”); and

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

Purchase Price Allocation:
Software	$	1,120,000
Customer list	$	60,000
Non-compete	$	190,000
Goodwill	$	26,395
Net Assets	$	3,605
Total	$	1,400,000


	For the Three Months Ended						For the Nine Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Net sales	$	11,916,065		$	4,824,897		$	24,883,292		$	11,522,066

Net loss	$	(16,677,127	)	$	(8,464,370	)	$	(17,050,808	)	$	(16,467,306)

Net loss per common share – basic and diluted	$	(0.49	)	$	(0.64	)	$	(0.58	)	$	(1.80)

Weighted average common shares outstanding – basic and diluted		34,014,221			13,173,509			29,382,905			9,145,775

Fair value assumptions:	June 30, 2021
Risk free interest rate		0.05	%
Expected term (months)		1.5
Expected volatility		141.80	%
Expected dividends		0	%

	June 30, 2021			September 30, 2020
mVSO software	$	437,135		$	437,135
mPulse software		741,846			741,846
Less: accumulated amortization		(328,868	)		(202,778)
Capitalized Software, net	$	850,113		$	976,203

Useful life
Patents			13-20 years
Websites			3 years
Customer list and non-compete agreement			1.5-4 years
Design assets			2 years
Trademarks			14 years
Engineering trade secrets			1-7 years
Strategic contract			5 years
Software			4 years


2021 (three months remaining)	$	1,941,474
2022		7,072,469
2023		2,492,479
2024		2,065,344
2025		1,495,888
Thereafter		323,691
Total	$	15,391,345


	June 30, 2021		September 30, 2020

Promissory notes	$	—	$	531,169

Total	$	—	$	531,169


Fiscal year ending September 30, 2021 (three months remaining)	$	22,613
Fiscal year ending September 30, 2022		136,696
Fiscal year ending September 30, 2023		140,797
Fiscal year ending September 30, 2024		145,021
Fiscal year ending September 30, 2025		149,372
Thereafter		114,531
Total Lease Payments		709,030
Less: imputed interest		(154,361)
Total present value of lease liabilities	$	554,669


Fiscal year ending September 30, 2021 (three months remaining)	$	104,698
Fiscal year ending September 30, 2022		414,998
Fiscal year ending September 30, 2023		321,154
Fiscal year ending September 30, 2024		135,180
Fiscal year ending September 30, 2025		12,320
Thereafter		1,851
Total lease payments		990,201
Less: imputed interest		(117,461)
Total present value of lease liabilities	$	872,740

	Number of Warrant Shares			Weighted Average Exercise Price
Balance, September 30, 2020		1,299,215		$	21.82
Warrants granted		—			—
Warrants expired		(432,721	)		15.00
Warrants canceled / forfeited		—			—
Warrants exercised		(250,790	)		11.77
Balance, June 30, 2021		615,704		$	30.71

	Number of Option Shares			Weighted Average Exercise Price
Balance, September 30, 2020		277,948		$	6.34
Options granted		636,750			14.98
Options expired		(11,928	)		9.13
Options canceled / forfeited		(3,751	)		21.21
Options exercised		(138,918	)		6.10
Balance, June 30, 2021		760,101		$	13.50

Fair value assumptions – Options:	June 30, 2021
Risk free interest rate		0.10-0.41%
Expected term (years)		1.7 – 5.3
Expected volatility		142%-240%
Expected dividends		0%

	June 30, 2021		June 30, 2020
Customer A		10.0%		60.3%
Customer B		—		14.1%

	June 30, 2021		June 30, 2020
Vendor A		28.77%		85.7%
Vendor B		24.83%		—

Exhibit Number	Exhibit Description	Form	File No.	Exhibit Filing Date	Filing Date	Filed Herewith
10.1	Non-Fixed Price Sales and Purchase Agreement between CleanSpark, Inc. and Bitmain Technologies Limited	10-Q	001-39187	10.1	May 6, 2021
10.2	Form of Hardware Purchase & Sales Agreement	10-Q	001-39187	10.2	May 6, 2021
10.3	Form of Future Sales and Purchase Agreement	10-Q	001-39187	10.3	May 6, 2021
10.4	Form of Agreement for Sale of Equipment	10-Q	001-39187	10.4	May 6, 2021
10.5	Amendment to Employment Agreement by and between CleanSpark, Inc., and Zachary K. Bradford, dated April 16, 2021	10-Q	001-39187	10.5	May 6, 2021
10.6	Amendment to Employment Agreement by and between CleanSpark, Inc. and Lori Love, dated April 16, 2021	10-Q	001-39187	10.6	May 6, 2021
10.7	Amendment to Employment Agreement by and between CleanSpark, Inc. and S. Matthew Schultz, dated April 16, 2021.	10-Q	001-39187	10.7	May 6, 2021
10.8+	Amendment to Amended and Restated Employment Agreement by and between CleanSpark, Inc. and Amer Tadayon, dated June 9, 2021.	8-K	001-39187	10.1	June 15, 2021
10.9	Lease, by and between ATL Data Centers LLC and Arkhos Property Group Holdings,LLC, dated June 5, 2020.					X
10.10	At the Market Offering Agreement, by and between CleanSpark, Inc. and H.C. Wainwright & Co., LLC, dated June 3, 2021	8-K	001-39187	10.1	June 3, 2021
10.11†	Coinmint Collection Mining Services Agreement, by and between CleanBlok, Inc. and Coinmint, LLC, dated July 8, 2021.					X
10.12	Purchase Agreement, by and between CSRE Properties, LLC and MDRE-Norcross, LLC					X