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What changed in CLEANSPARK, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CLEANSPARK, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+453 added−372 removedSource: 10-K (2023-12-01) vs 10-K (2022-12-15)

Top changes in CLEANSPARK, INC.'s 2023 10-K

453 paragraphs added · 372 removed · 286 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

56 edited+36 added−29 removed8 unchanged
Biggest changeCurrent New York regulation, including a recent moratorium on certain bitcoin mining operations that run on carbon-based power sources signed into law on November 22, 2022, in our view, do not impact our decision to operate our miners at the Coinmint facility in New York in the foreseeable future; however, if the regulatory landscape changes, we would have to evaluate whether to relocate our hosted miners to one of our facilities in Georgia or to other facilities outside of New York State, which could be costly and we would not be able to operate the miners while they are being relocated.
Biggest changeCurrent New York regulation, including a recent moratorium on certain bitcoin mining operations that run on carbon-based power sources signed into law on November 22, 2022, in our view, does not impact our decision to operate our miners at the Coinmint facility in New York in the foreseeable future; however, if the regulatory landscape changes, we would evaluate whether to relocate our hosted miners to one of our facilities in Georgia or to other facilities outside of New York State, which could be costly and cause us to not be able to operate the miners while they are being relocated. 10 Further, in March 2022, the United States announced plans to establish a unified federal regulatory regime for cryptocurrency, and a group of United States Senators sent a letter to the United States Treasury Department (the “Treasury”) asking Treasury Secretary Janet Yellen to investigate the Treasury’s ability to monitor and restrict the use of cryptocurrencies to evade sanctions imposed by the United States.
Intellectual Property We do not currently own any patents in connection with our existing and planned bitcoin mining related operations. We do rely, and expect to continue relying, upon trade secrets, trademarks, service marks, trade names, copyrights and other intellectual property rights. Government Regulation Bitcoin Mining Cryptocurrency mining is largely an unregulated activity at both the state and federal level.
Intellectual Property We do not currently own any patents in connection with our existing and planned bitcoin mining-related operations. We do rely, and expect to continue relying, upon trade secrets, trademarks, service marks, trade names, copyrights and other intellectual property rights. Government Regulation Bitcoin mining is largely an unregulated activity at both the state and federal level.
In addition to ASICS, mining equipment includes networking equipment, power cords, racking, other specialized storage, transformers, and energy equipment. We rely on utility providers for our power needs. These utilities buy into local energy mixes to source power.
In addition to ASICs, mining equipment includes networking equipment, power cords, racking, other specialized equipment, transformers and energy equipment. We rely on utility providers for our power needs. These utilities buy into local energy mixes to source power.
The chair expressed a need for the SEC to have additional authorities to prevent transactions, products, and platforms from “falling between regulatory cracks,” as well as for more resources to protect investors in “this growing and volatile sector.” The chair called for federal legislation centering on digital asset trading, lending, and decentralized finance platforms, seeking “additional plenary authority” to write rules for digital asset trading and lending.
The chair expressed a need for the SEC to have additional authority to prevent transactions, products, and platforms from “falling between regulatory cracks,” as well as for more resources to protect investors in “this growing and volatile sector.” The chair called for federal legislation centering on digital asset trading, lending, and decentralized finance platforms, seeking “additional plenary authority” to write rules for digital asset trading and lending.
The bitcoin network is the first decentralized peer-to-peer payment network, powered by users participating in the consensus protocol, with no central authority or middlemen, that has wide network participation. The authenticity of each bitcoin transaction is protected through digital signatures that correspond with addresses of users that send and receive bitcoin.
The bitcoin network is the first decentralized peer-to-peer payment network powered by users participating in the consensus protocol, with no central authority or intermediaries, that has wide network participation. The authenticity of each bitcoin transaction is protected through digital signatures that correspond with addresses of users that send and receive bitcoin.
We anticipate that cryptocurrency mining will be a focus for increased regulation in the near- and long-term, and we cannot predict how future regulations may affect our business or operations. State regulation of cryptocurrency mining is important with respect to where we conduct our mining operations.
We anticipate that bitcoin mining will be a focus for increased regulation in the near- and long-term, and we cannot predict how future regulations may affect our business or operations. State regulation of bitcoin mining is important with respect to where we conduct our mining operations.
While some macro-economic indicators available as of the date of this filing suggest that inflation may be slowing, inflationary pressures impact virtually all aspects of our materials and suppliers, including power prices, and are likely to impact our fiscal year 2023.
While some macro-economic indicators available as of the date of this filing suggest that inflation may be slowing, inflationary pressures impact virtually all aspects of our materials and suppliers, including power prices, and are likely to impact our fiscal year 2024.
The majority of our mining facilities are located in Georgia, which is one of the most favorable regulatory environments for cryptocurrency miners. However, we also have co-location operations in New York, which has generally been more aggressive in its regulation of cryptocurrency.
The majority of our mining facilities are located in Georgia, which is one of the most favorable regulatory environments for bitcoin miners. However, we also have co-location operations in New York, which has generally been more aggressive in its regulation of bitcoin mining.
Within North America, our major competitors include: • Marathon Digital Holdings 8 • Riot Blockchain, Inc. • Core Scientific, Inc. • Bitfarms LTD. • Iris Energy Limited In addition to the foregoing, we compete with other companies that focus all or a portion of their activities on mining activities at scale.
Within North America, our major competitors include: • Marathon Digital Holdings • Riot Blockchain, Inc. • Core Scientific, Inc. • Bitfarms LTD. • Iris Energy Limited • Cipher Mining Inc. • Terawulf Inc. In addition to the foregoing, we compete with other companies that focus all or a portion of their activities on mining activities at scale.
Environmental Issues No significant pollution or other types of hazardous emission result from the Company’s direct operations and it is not anticipated that our operations will be materially affected by federal, state or local provisions concerning environmental controls. Our costs of complying with environmental, health and safety requirements have not been material.
Environmental Issues No significant pollution or other types of hazardous emission result from our direct operations and it is not anticipated that our operations will be materially affected by federal, state or local provisions concerning environmental controls. Our costs of complying with environmental, health and safety requirements have not historically been material.
Distribution, Marketing and Strategic Relationships We have developed strategic relationships with well-established companies in key areas including traditional and renewable energy, infrastructure, construction, and bitcoin mining equipment procurement. In addition to operating our own mining facilities, we may engage with third-parties to host and operate mining equipment on behalf of the Company.
Distribution, Marketing and Strategic Relationships We have developed strategic relationships with well-established companies in key areas, including utilities, traditional and renewable energy, infrastructure, construction, and bitcoin mining equipment procurement. In addition to operating our own mining facilities, we may engage with third-parties to host and operate mining equipment on our behalf.
Additionally, because we store and sell our bitcoin on exchanges, we may also be potentially impacted by exchange failures in that respect.
Additionally, because we sell our bitcoin on exchanges, we may also be potentially impacted by exchange failures in that respect.
For those reasons, we carefully vet our custodians 9 for adequate compliance with U.S. laws as well as liquidity, using the information available to us, but we cannot be certain that we will be able to avoid the negative effects of a large exchange failure.
For those reasons, we carefully vet the exchanges we use for adequate compliance with U.S. laws as well as liquidity, using the information available to us, but we cannot be certain that we will be able to avoid the negative effects of a large exchange failure.
We may be in control and possession of substantial holdings of bitcoin, and as we increase in size, we may become a more appealing target of hackers, malware, cyber-attacks or other security threats.
We may be in control and possession of substantial holdings of bitcoin, and as we increase in size, we may become a more appealing target of 11 hackers, malware, cyberattacks or other security threats.
Coinmint On July 8, 2021, CleanBlok entered into a services agreement with Coinmint, LLC (“Coinmint”). Pursuant to the agreement, Coinmint has agreed to house and power certain of our cryptocurrency mining equipment in its facilities, and to use commercially reasonable efforts to mine bitcoin on our behalf.
Coinmint On July 8, 2021, our subsidiary CleanBlok, Inc., a wholly owned subsidiary of the Company ("CleanBlok"), entered into a services agreement with Coinmint. Pursuant to the agreement, Coinmint has agreed to house and power certain of our bitcoin mining equipment in its facilities, and to use commercially reasonable efforts to mine bitcoin on our behalf.
“Risk Factors” beginning on page 11 of this Annual Report. Cybersecurity Our share of bitcoins mined from our pools are initially received by us in wallets we control, which are maintained by Coinbase Inc., a U.S. based digital assets exchange.
“Risk Factors” beginning on page 13 of this Annual Report on Form 10-K. Cybersecurity Our share of bitcoins mined from our pool are initially received by us in wallets we control, which are maintained by Coinbase Inc. (“Coinbase”), a U.S.-based digital assets exchange.
Human Capital Resources; Employees; Personnel We believe that our future success depends, in no small part, on our ability to continue to attract, hire, and retain qualified personnel. As of December 1, 2022, we had 130 staff members, 121 of which were full time and all located in the United States.
Human Resources We believe that our future success depends, in no small part, on our ability to continue to attract, hire, and retain qualified personnel. As of September 30, 2023, we had 131 staff members, all located in the United States, and 130 of which were full time.
Bitcoin was introduced in 2008 with the goal of serving as a digital means of exchanging and storing value. Bitcoin is a form of digital currency that depends upon a consensus-based network and a public ledger called a “blockchain”, which contains a record of every bitcoin transaction ever processed.
Bitcoin was introduced in 2008 with the goal of serving as a digital means of exchanging and storing value. Bitcoin depends on a consensus-based network and a public ledger called a “blockchain,” which contains a record of every bitcoin transaction ever processed.
The current market conditions have provided opportunities to purchase both new and used machines on the spot-market from other miners or retail-dealers of machines for better financial terms and delivery terms, but there can be no guarantee that such opportunities will continue on a long-term basis. Currently, we are purchasing more mining machines through re-sellers than direct through manufacturers.
In addition to purchasing directly from manufacturers, the current market conditions have provided opportunities to purchase both new and used machines on the spot-market from other miners or retail-dealers of machines for better financial terms and delivery terms, but there can be no guarantee that such opportunities will continue on a long-term basis.
We believe our principal competitive advantages include our energy background, a combination of owned, operated, and co-located miners and facilities, our strategic use of the bitcoin we mine to fund operations growth, and our commitment to sustainable business practices, including sourcing renewable energy.
We believe our principal competitive advantages include our energy background, a combination of owned, operated, and co-located miners and facilities, our strategic use of the bitcoin we mine to fund operational growth and our commitment to responsible business practices, including building in communities that source renewable energy.
Historically, our methodology and operations have been efficient and resilient enough to withstand these market pressures and global events, but there can be no certainty that we will not be negatively affected in the future. We believe that there is significant risk that energy prices will continue to be elevated in 2023.
Historically, our methodology and operations have been efficient and resilient enough to withstand market pressures and global events, but there can be no certainty that we will not be negatively affected in the future.
Users have full control over remitting bitcoin from their own sending addresses. All transactions on the bitcoin blockchain are transparent, allowing those running the appropriate software to confirm the validity of each transaction.
Users have full control over remitting bitcoin from their own sending addresses. All transactions on the bitcoin blockchain are transparent, allowing those running the appropriate software to confirm the validity of each transaction. To be recorded on the blockchain, each bitcoin transaction is broadcast across the network and validated by nodes.
We cultivate trust and transparency among our employees, the communities we operate in, and the people around the world who depend on Bitcoin as we jointly strive to leave the world better than we found it, build the infrastructure of the future, and value growth for the greater good.
We cultivate trust and transparency among our employees, the communities we operate in, and the people around the world who depend on bitcoin as we jointly strive to build the infrastructure of the future.
Hackers or malicious actors may launch attacks to steal, compromise or secure bitcoins, such as by attacking the bitcoin network source code, exchange miners, third-party platforms (including Coinbase), cold and hot storage locations or software, or by other means.
Bitcoins we mine or hold for our own account may be subject to loss, theft or restriction on access. Hackers or malicious actors may launch attacks to steal, compromise or secure bitcoins, such as by attacking the bitcoin network source code, exchange miners, third-party platforms (including Coinbase), cold and hot storage locations or software, or by other means.
Machine purchases require large down payments and miner deliveries often arrive many months after initial orders are placed. However, over the last 12 months, we have seen a significant improvement in the availability and pricing for bitcoin mining machines.
Working Capital Items The bitcoin mining industry is highly competitive and dependent on specialized mining machines that have few manufacturers. Machine purchases often require large down payments and miner deliveries often arrive many months after initial orders are placed. However, over the last 12 months, we have seen a significant improvement in the availability and pricing of bitcoin mining machines.
Starting in the fourth calendar quarter of 2021, we began to voluntarily purchase renewable energy credits to offset a significant portion of our energy usage that is derived from non-renewable sources. The Company has also engaged market professionals to enhance and build a comprehensive environmental, social and governance (“ESG”) strategy.
Starting in the fourth calendar quarter of 2021, we began to voluntarily purchase renewable energy credits to offset a portion of our energy consumption that is derived from non-renewable sources. We have engaged market professionals to enhance and build a comprehensive corporate social responsibility strategy, which we began executing in 2023.
We have established a Cybersecurity Committee, with the purpose of meeting at least semi-annually and providing recommendations to Executive Management with respect to our information technology use and protection, including but not limited to data governance, privacy, compliance and cybersecurity.
We have an established IT Steering Committee, formed of senior Company leadership, which evaluates all cybersecurity matters, with the purpose of meeting at least semi-annually and providing recommendations with respect to our information technology use and protection, including, but not limited to, data governance, privacy, compliance and cybersecurity.
Competition Bitcoin mining is a global activity. During fiscal year 2021, a majority of bitcoin mining occurred in China. After China banned bitcoin mining in May 2021, the center of mining moved to North America.
The table breaks out energy sources as reported to the Company by the grid operators. Competition Bitcoin mining is a global activity. During fiscal year 2021, a majority of bitcoin mining occurred in China. After China banned bitcoin mining in May 2021, the center of mining moved to North America.
Although bitcoin mining by its nature is not a directly competitive business, all miners compete for bitcoin rewards; based on this, we define competitors as other bitcoin miners. Our competitors include large, publicly-listed mining companies, large private mining companies, and, in some cases, independent, individual miners who pool resources.
Bitcoin mining by its nature is a competitive business; all miners compete for the same number of bitcoin rewards. Our competitors include large, publicly listed mining companies, large private mining companies, and, in some cases, independent, individual miners who pool resources.
Item 1. Business As used in this Annual Report on Form 10-K, the terms “we,” “us,” “our,” the “Company,” “CleanSpark, Inc.” and “CleanSpark” mean CleanSpark, Inc. and its consolidated subsidiaries, unless otherwise indicated. Overview CleanSpark, Inc. is a leading bitcoin mining company incorporated in Nevada, whose common stock is listed on the Nasdaq Capital Market.
Item 1. Business As used in this Annual Report on Form 10-K, the terms “we,” “us,” “our,” the “Company,” “CleanSpark, Inc.” and “CleanSpark” mean CleanSpark, Inc. and its consolidated subsidiaries, unless otherwise indicated.
Pursuant to the agreement, as consideration for the services, we pay Coinmint certain services fees, which are based on the operating costs incurred by Coinmint in performing the services, and a variable fee calculated based on the profitability of the bitcoin mined during the relevant payment period, subject to uptime performance commitments.
As of the date of this filing, we have deployed approximately 16,400 total miners pursuant to the co-location mining services agreement at Coinmint’s facility in New York. 8 Pursuant to the agreement, as consideration for its services, we pay Coinmint certain services fees, which are based on the operating costs incurred by Coinmint in performing its services, and a variable fee calculated based on the profitability of the bitcoin mined during the relevant payment period, subject to uptime performance commitments.
Other business activities Through ATL, we also provide traditional data center services to a small number of remaining clients, such as providing customers with rack space, power and equipment, and offer several cloud services including virtual services, virtual storage, and data backup services. ATL is in the process of offloading these customers.
Other Business Activities Through our wholly owned subsidiary ATL Data Centers LLC ("ATL"), we previously provided traditional data center services to a small number of remaining clients, such as providing customers with rack space, power and equipment, and offered several cloud services including virtual services, virtual storage, and data backup services.
We actively manage these risks through activities such as deployment of advanced software solutions to increase unit efficiency and energy curtailment when appropriate. These energy market prices are also significantly impacted by ongoing inflation and the war in Ukraine.
We have exposure to market fluctuations in energy prices through our power providers. We actively manage these risks through activities such as the deployment of advanced software solutions to increase unit efficiency and energy curtailment when appropriate. These energy market prices may be significantly impacted by market conditions and geopolitical events.
We currently sell the majority of the bitcoin we mine and utilize hot wallets to hold this bitcoin immediately prior to selling for working capital purposes. We hold any remainder of our bitcoin in cold storage. Bitcoins we mine or hold for our own account may be subject to loss, theft or restriction on access.
We sell portions of the bitcoin we mine and utilize hot wallets to hold this bitcoin immediately prior to selling for working capital purposes. We hold any remainder of our bitcoin in cold storage.
We are unable to predict the impact that any new regulations may have on our business at the time of filing this Annual Report. We continue to monitor and proactively engage in dialogue on legislative matters related to our industry.
We are unable to predict the impact that any new regulations may have on our business at the time of filing this Annual Report on Form 10-K.
We have not been notified of, and has no knowledge of any event or condition that could result in, any security breach or incident, unauthorized access or disclosure or other compromise to their IT Systems and Data, and we have implemented appropriate controls, policies, procedures, and technological safeguards to maintain and protect the integrity, continuous operation, redundancy and security of our IT Systems and Data reasonably consistent with industry standards and practices, or as required by applicable regulatory standards.
We have implemented controls, policies, procedures and technological safeguards to maintain and protect the integrity, continuous operation, redundancy and security of our IT systems and data that we believe to be reasonably consistent with industry standards and practices, or as required by applicable regulatory standards.
As of June 30, 2022, we deemed our energy operations to be discontinued operations due to our strategic decision to strictly focus on its bitcoin mining operations and divest of our energy assets. We are currently working on developing a long-term sustainability and clean energy plan with respect to our bitcoin mining operations.
Discontinued Operations As of June 30, 2022, we deemed our energy operations to be discontinued operations due to our strategic decision to strictly focus on bitcoin mining operations and to divest or dispose of the remaining energy assets.
We are presently in material compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification.
We are also required to comply with applicable laws, rules, regulations and contractual obligations relating to the privacy and security of our IT systems and data and to the protection of such IT systems and data from unauthorized use, access, misappropriation or modification.
We make every effort to establish our facilities in locations serviced by utilities that generate a substantial portion of their energy from clean and renewable sources.
We make every effort to establish our facilities in locations serviced by utilities that source a substantial portion of their energy from clean and renewable sources. We supplement a portion of the energy mix provided by our utility providers by purchasing renewable energy credits as the precise ratio of renewable energy in local energy mixes is not within our control.
There are increasing concerns over the large energy usage of bitcoin mining and its effects on the environment. Many media reports focus exclusively on the energy requirements of bitcoin mining and cite it as an environmental concern.
Some policymakers have expressed concerns over the high energy consumption of data centers, including bitcoin miners, and the ancillary effects on the environment from that energy consumption. Many media reports focus exclusively on the energy requirements of bitcoin mining and cite it as an environmental concern.
Company Websites We maintain a corporate website at: www.cleanspark.com. The contents of these websites are not incorporated in, or otherwise to be regarded as part of, this Annual Report. We file reports with the SEC, which are available on our website free of charge.
The Company was formerly known as Stratean Inc. and changed its name to CleanSpark, Inc. in November 2016. We maintain a corporate website at: www.cleanspark.com. The contents of our website are not incorporated in, or otherwise to be regarded as part of, this Annual Report on Form 10-K.
We have since sold the majority of oursoftware and intellectual property assets related to the Energy Segment (including mPulse, mVoult and GridFabric LLC), and we are in the process of selling additional inventory and other assets. We still own patented gasification energy technologies and are not currently planning to sell or market these technologies.
We have since sold or disposed of the majority of our software and intellectual property assets related to the Energy Segment (including mPulse, mVoult and GridFabric LLC) and sold all additional inventory and other assets.
Discontinued Operations As of June 30, 2022, we deemed our energy operations to be discontinued operations due to our strategic decision to strictly focus on bitcoin mining operations and divest of the majority of our energy assets. 10 Through our discontinued operations segment, we previously provided energy solutions through our wholly-owned subsidiaries CleanSpark, LLC, CleanSpark Critical Power Systems, Inc., GridFabric, LLC, and through ATL Solar Watt Solutions, Inc.
Through our discontinued operations segment, we previously provided energy solutions through our wholly owned subsidiaries CleanSpark LLC, CleanSpark II, LLC, CleanSpark Critical Power Systems, Inc., GridFabric, LLC, and ATL Solar Watt Solutions, Inc.
Our wholly-owned mining operations are located in the State of Georgia in the United States. We also have a relationship with a facility located in New York State that hosts a portion of our miners. Working Capital Items The bitcoin mining industry is highly competitive and dependent on specialized mining machines that have few manufacturers.
We own and operate our own facilities and do not lease mining space to other mining companies or private individuals that mine. Our wholly-owned mining operations are located in the State of Georgia in the United States. We also have a relationship with a facility located in New York State that hosts a portion of our miners.
We expect to continue increasing our computing power through 2023 and beyond as we expand our infrastructure at our owned sites in the State of Georgia, seek strategic acquisition targets, and through strategic co-location agreements. A company’s computing power measured in Hashrate is generally considered to be one of the most important metrics for evaluating bitcoin mining companies.
In fiscal year 2023, we mined 6,903 bitcoins, an 84% increase over the 3,752 bitcoins we mined in fiscal year 2022. We expect to continue increasing our computing power through 2024 and beyond as we expand our infrastructure at our owned sites in the State of Georgia, seek strategic acquisition targets, and through strategic co-location agreements.
The Company, through itself and its wholly owned subsidiaries, has operated in the bitcoin mining sector since December 2020. The only cryptocurrency we mine is bitcoin. From March 2014 to June 30, 2022, we provided advanced energy technology solutions to commercial and residential customers to solve modern energy challenges in the alternative energy sector.
From March 2014 to June 30, 2022, we provided advanced energy technology solutions to commercial and residential customers to solve modern energy challenges in the alternative energy sector. As of June 30, 2022, we discontinued our energy operations due to our strategic decision to strictly focus on our bitcoin mining operations.
Miners are rewarded with bitcoins, both in the form of newly-created bitcoins and fees in bitcoin, for successfully solving the mathematical problems and providing computing power to the network. Factors such as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining.
Factors such as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining. In bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the bitcoin network.
In addition, it is possible the failure of FTX Trading Ltd. (“FTX”) in November 2022 and the resulting market turmoil could lead to increased SEC, CFTC, or criminal investigations, enforcement, and/or other regulatory activity. While these statements are focused on digital asset exchanges (not bitcoin miners), the failure of large exchanges may impact the adoption and value of bitcoin.
(“FTX”) in November 2022 and the resulting market turmoil that failure caused. While these statements tend to focus more on digital asset exchanges and other players in the digital asset space and less on bitcoin miners, the failure of large exchanges may impact the adoption and value of bitcoin.
The Company expects to enter into additional agreements to purchase more miners and infrastructure in the coming year. The majority of miners we operate and expect to operate once received are the latest generation of miners manufactured by Bitmain, including the S19, S19-Pro, S19j-Pro and S19 XP.
The Company entered into an additional agreement to purchase 4.4 EH/s of S21 miners in October 2023 and is scheduled to receive these miners beginning in January 2024. Most miners we operate and expect to operate once received are the latest generation of miners manufactured by Bitmain Technologies Ltd. (“Bitmain”), including the S19-Pro, S19j-Pro, S19j-Pro+, S19 XP and S21.
However, we do not believe that existing or pending climate change legislation, regulation, or international treaties or accords are reasonably likely to have a material effect in the foreseeable future on our business or markets that we serve, nor on our results of operations, capital expenditures or financial position. We continue to monitor emerging developments in this area.
We carefully monitor existing and pending climate change legislation, regulation, and international treaties or accords for any material effect on our business or markets that we serve, our operational results, our capital expenditures or our financial position.
Through our wholly owned subsidiaries CSRE Properties, LLC, CSRE Property Management Company LLC, CSRE Properties Norcross, LLC, CSRE Properties Washington, LLC and CSRE Properties Sandersville, LLC we maintain real property holdings. Markets, Geography and Major Customers Bitcoin is a global store and exchange of value used by people across the world as an asset and to conduct daily transactions.
Markets, Geography and Major Customers Bitcoin is a global store and exchange of value used by people across the world as an asset and to conduct daily transactions. Mining bitcoin supports the global bitcoin blockchain and the millions of people that depend on it for economic security and other benefits.
Whether re-sellers or manufacturers have better purchase and delivery terms or more/superior inventory available is likely to change from time to time. At the time we acquired ATL in December 2020, we had approximately 3,471 bitcoin mining units with application-specific integrated circuits (“ASICs”) in operation, which produced approximately 190 petahash/s.
We purchase mining machines through re-sellers and directly from manufacturers. Whether re-sellers or manufacturers have better purchase and delivery terms or more/superior inventory available is likely to change from time to time.
The agreement had an initial term of one year, after which it renews automatically for three-month periods until terminated in accordance with the terms of the agreement. Lancium On March 29, 2022, the Company entered into a hosting agreement with Lancium LLC (“Lancium”).
The agreement had an initial term of one year, after which it renews automatically for three-month periods until terminated in accordance with its terms. Materials and Suppliers We engage in high efficiency bitcoin mining by using ASICs. These specialized computers, often called mining rigs, have few manufacturers.
Materials and Suppliers We engage in high efficiency bitcoin mining by using ASICs. These specialized computers, often called mining rigs, have few manufacturers. A majority of the machines we purchased this year were manufactured by Bitmain, MicroBT 7 or Canaan, the top three preeminent manufacturers of bitcoin mining rigs. All three companies are headquartered in China and manufacture throughout Asia.
Most of the machines we purchased this year were manufactured by Bitmain, one of the top three preeminent manufacturers of bitcoin mining rigs. Bitmain manufactures ASICs throughout Asia, and is headquartered in China with subsidiaries in the United States, Singapore, Malaysia, Kazakhstan and other locations.
Mining bitcoin supports the global bitcoin blockchain and the millions of people that depend on it for economic security and other benefits. Strictly speaking, there is no customer market for mining bitcoin but we consider our mining pool operators as customers because they compensate us for providing processing power to the mining pool (see Item 1A.
Strictly speaking, there is no customer market for mining bitcoin but we consider our mining pool operator a customer because it compensates us for providing processing power to the mining pool (see Part I, Item 1A., “Risk Factors”—“Our reliance on a third-party mining pool service provider for our mining revenue payouts may adversely affect an investment in us . ”).
Currently, we do not use a formula or specific methodology to determine whether or when we will sell bitcoin that we hold, or the number of bitcoins we will sell. Rather, decisions to hold or sell bitcoins are currently determined by management by analyzing forecasts and monitoring the market in real time.
Decisions to hold or sell bitcoins are determined by management by analyzing forecasts and monitoring the market in real time. Through our wholly owned subsidiaries CSRE Properties, LLC, CSRE Property Management Company, LLC, CSRE Properties Norcross, LLC, CSRE Properties Washington, LLC, CSRE Properties Sandersville, LLC, CSRE Properties Dalton, LLC, and CleanSpark HQ, LLC, we maintain real property holdings.
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We are using clean and renewable energy resources that we currently have reasonable access to in our bitcoin mining locations in order to further support our sustainability efforts. Lines of Business Bitcoin Mining Through CleanSpark, Inc and our wholly owned subsidiaries ATL Data Centers LLC (“ATL”), CleanBlok, Inc. (“CleanBlok”), CleanSpark DW, LLC, and CleanSpark GLP, LLC, we mine bitcoin.
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Dollar amounts presented in this Annual Report on Form 10-K are presented in thousands, except per share amounts, bitcoin price, and information set forth under the heading “Bitcoin Mining Operations”. Overview CleanSpark is a bitcoin mining company. We independently own and operate five data centers in Georgia for a total developed capacity of 230 megawatts (“MW”).
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We entered the bitcoin mining industry through our acquisition of ATL in December 2020, acquired a second data center in August 2021, a third data center and mining equipment in August 2022, a fourth data center and mining equipment in October 2022, and have had a co-location agreement with New York-based Coinmint in place since July 2021.
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We are developing an additional 150 MW at our data center in Sandersville, GA, which is expected to energize in early 2024. We do not currently host miners for any other companies. A partner in Massena, NY, hosts 50 MW for us.
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Bitcoin mining has now become our principal revenue generating business activity. We currently intend to continue to acquire additional facilities, equipment and infrastructure capacity to continue to expand our bitcoin mining operations.
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We design our proprietary infrastructure to responsibly support bitcoin, the world’s most important digital commodity and an essential tool for financial independence and inclusion. Through CleanSpark and our wholly owned subsidiaries, we have operated in the bitcoin mining sector since December 2020.
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In August 2022, we completed the acquisition of certain real property located in Wilkes County, Georgia, and approximately 3,400 S19 and S19j Pro series bitcoin miners capable of providing computing power of approximately 341,000 terahash per second.
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Business Activity Bitcoin mining is our principal revenue generating business activity. As of September 30, 2023, we operated 88,954 bitcoin mining machines, with a hashrate capacity of approximately 9.6 exahashes per second (“EH/s”) and a fleetwide efficiency of 28.4 joules per terahash (“J/TH”).
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The property acquired provided us with a turn-key data center campus capable of supporting approximately 1 exahash per second of computing power, upon closing of the acquisition. We expect to expand the campus to support approximately 2.6 exahash per second of computing power (collectively, the “WAHA and SPRE Assets”).
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Miners then compete, using a proof-of-work consensus method, to find a target hash value, or output of a cryptographic function, and thereby add a new block and its transactions to the blockchain. This process is called mining. Miners are rewarded with bitcoins, in the form of newly-created bitcoins from the block subsidy and transaction fees included in that block.
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In October 2022, we acquired the lease for 16.35 acres of real property located in Sandersville, Washington County, Georgia, all personal property situated on such property, and 6,349 application specific integrated circuit miners (“ASICs”) capable of providing computing power of approximately 530,000 terahash per second from subsidiaries of Mawson Infrastructure Group, Inc.
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A company’s hashrate determines its market share and is therefore generally considered one of the most important metrics for evaluating bitcoin mining companies. We obtain bitcoin as a result of our mining operations by contributing all of our computing power (both owned locations and hosted locations) to one mining pool operator who is our sole customer.
Removed
The property acquired provided the Company with a turn-key data center campus capable of supporting approximately 2.4 exahash per second of computing power, upon closing of the acquisition. The company expects to expand the campus to support approximately 7.0 exahash per second of computing power (collectively, the “Mawson Assets”).
Added
The contract with our mining pool operator is terminable at any time by either party.
Removed
To be recorded on the blockchain, each bitcoin transaction is validated through a proof-of-work consensus method, which entails solving complex mathematical problems to validate transactions and post them on the blockchain. This process is called 5 mining.
Added
In exchange for providing computing power to the mining pool, we are entitled to bitcoin rewards from the mining pool operator, which is a variable consideration calculated based on a predetermined formula agreed to by us and the mining pool operator as a part of the arrangement.
Removed
As of the date of this filing, our operating mining units are currently capable of producing over 5.75 exahash per second (“EH/s”) of computing power. In bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the bitcoin network.
Added
The variable consideration is constrained until we can reasonably estimate the amount of mining rewards by the end of a 6 given day based on the actual amount of computing power provided to the mining pool operator.
Removed
We are actively expanding our bitcoin mining business and as of the date of this filing reached 5.75 EH/s in computing power, which exceeded our target guidance as set in August, 2022 of reaching 5.0 EH/s in computing power by December 31, 2022.
Added
By then, we consider it a high probability that a significant reversal in the amount of revenue will not occur and include such variable consideration in the transaction price. Providing computing power is an output of our ordinary activities and the only performance obligation in our contracts with our mining pool operator.
Removed
We obtain bitcoin as a result of our mining operations, and we sell bitcoin from time to time, to support our operations and strategic growth.
Added
We recognize the revenue when the variable consideration is no longer constrained and the performance obligation of providing computing power has been satisfied. As a result, we do not present disaggregated revenue information on block rewards and transaction verification fees. We sell bitcoin from time to time, to support our operations and strategic growth.
Removed
Risk Factors- “Our reliance on a third-party mining pool service provider for our mining revenue payouts may adversely affect an investment in us . ”). We own and operate our own facilities and do not lease mining space to other mining companies or private individuals that mine.
Added
College Park, GA Facility CleanSpark’s first ever bitcoin mining facility is in College Park, GA. It sits on six acres near the Hartsfield-Jackson Atlanta International Airport and features at its heart 48 new generation air-cooled pods. Machines are also housed in 20 Ant boxes, an annex building and within the original data center.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

154 edited+64 added−31 removed147 unchanged
Biggest changeRisks Related to Our Business • our dependence on the price of bitcoin to achieve profitability, which has historically been volatile; • our limited operating history and history of operating losses and negative cash flow; 11 • supply chain and shipping disruptions have resulted in shipping delays, a significant increase in lead times and shipping costs, and could increase expansion costs and result in lower or delayed bitcoin production; • volatile and unpredictable cycles in the emerging and evolving industries in which we operate; • competition in the markets in which we operate; • our reliance on and ability to manage our construction contractors and suppliers to meet our expansion efforts in keeping with planned timelines and cost estimates; • our reliance on our management team, and any failure by management to properly manage growth; • future strategic acquisitions and other arrangements that we engage in, which could disrupt our business, cause dilution to our stockholders, reduce our financial resources and harm our operating results; • our ability to timely complete our future strategic growth initiatives or within our anticipated cost; • increased compliance costs as a result of our strategic acquisitions; • our need for financing in the future to sustain and expand our operations and any inability to obtain such financing on acceptable terms, or at all; • we maintain our cash at financial institutions, which at times, exceed federally insured limits; • the uncertain impact of geopolitical and economic events on the demand for bitcoin; • our exposure to pricing risk and volatility associated with the value of bitcoin because we do not hedge our investment in bitcoin; • the development and acceptance of competing blockchain platforms or technologies; • the reward for successfully solving a block will halve in the future and its value may not adjust to compensate us for the reduction in the rewards we receive from our mining efforts; • our reliance on a third-party mining pool service provider for our mining revenue payouts; • forks in the bitcoin network; • the open-source structure of the bitcoin network protocol and any failure to properly monitor and upgrade the protocol; • the possibility that banks and financial institutions may not provide services to businesses that engage in cryptocurrency-related activities; • the lack of limitations of FDIC or SIPC protections for the bitcoin we hold; • bitcoins we mine or hold for our own account may be subject to loss, theft, or restriction on access; • potential actions of malicious actors or botnets; • the loss or destruction of private keys required to access our bitcoins and potential data loss relating to our bitcoins; • potential failures of digital asset exchanges and custodians; • inadequate sources of recovery if our digital assets are lost, stolen or destroyed; • the irreversibility of incorrect or fraudulent bitcoin transactions; • potential Internet disruptions; • the limited rights of legal recourse available to us following any loss of our bitcoins; • the sale of our bitcoins to pay for expenses a time of low bitcoin prices; • the possibility that a cryptocurrency other than bitcoin could be more desirable to the digital asset user base; • the possibility that our mining costs may exceed our mining revenues; • damage of the properties included in our mining operation and potential inability to get adequate insurance coverage for same; • our need for significant electrical power to support our mining operations; • increased scrutiny and changing expectations from stakeholders with respect to ESG practices and the impacts of climate change; • our operations and profitability may be adversely affected by competition from other methods of cryptocurrencies; • the possibility that large holders of bitcoin may sell bitcoin into the market in large amounts all at once, thereby impacting the growth of the price of bitcoin; • potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof; • risks related to technological obsolescence, the vulnerability of the global supply chain for cryptocurrency hardware disruption, and difficulty in obtaining new hardware; 12 • the limited precedent for financial accounting of digital assets, and the possibility of future accounting requirements for transactions involving digital assets; • possibility of failure to grow our hashrate; • risks arising from pandemics, epidemics or an outbreak of diseases, such as the recent outbreak of the COVID-19 pandemic; • global economic conditions, including continuing or worsening inflationary issues and associated changes in monetary policy and potential economic recession, and geopolitical events such as the Russia-Ukraine conflict, the subsequent imposition of sanctions as a result of the Russia-Ukraine conflict could adversely affect our business, financial condition and results of operations; • potential product defect or liability suits, or any recall of our products, particularly those in the discontinued operations; Risks Related to Governmental Regulation and Enforcement Operations • potential changes in laws and regulations applicable to mining bitcoin, bitcoin itself, or interpretations thereof, including, without limitation, banking regulations and securities regulations and regulations governing mining activities, both in the U.S. and in other countries; • we may incur additional compliance costs if deemed subject to the Commodity Exchange Act; • the risk that the SEC or another regulatory body considers bitcoin or any other cryptocurrency to be a security; • changing environmental regulation and public energy policy; • future developments regarding the treatment of digital assets for U.S. federal income and applicable state, local and non-U.S. tax purposes; • potential exposure to specifically designated nationals or blocked persons as a result of our interactions with the bitcoin network; Risks Related to Our Securities • the price of our common stock may be volatile and could fluctuate widely in price; • any future issuance of preferred stock may adversely affect holders of our common stock, as shares of preferred stock may have additional rights, preferences and privileges as compared to the common stock; • we are currently the subject of a shareholder class action, and may be subject to shareholder litigation in the future; our costs of defending such litigation, arbitration and other proceedings and any adverse outcome of such litigation, arbitration or other proceeding may have a material adverse effect on our business and the results of our operations; • we have financed our strategic growth primarily by issuing new shares of our common stock, which dilutes the ownership interests of current stockholders; • we have not, and do not intend to, pay dividends on shares of our common stock; • if securities or industry analysts do not publish or do not continue to publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline; • our indebtedness could adversely affect our financial health and prevent us from fulfilling our debt obligations; • significant costs and demands upon management as a result of complying with the laws and regulations affecting public companies, and the possible failure to comply with internal control over financial reporting requirements under Section 404 of the Sarbanes-Oxley Act of 2002; • we qualify as a smaller reporting company and are subject to scaled disclosure requirements; and • provisions in the Nevada Revised Statutes and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
Biggest changeRisks Related to Our Business • our dependence on the price of bitcoin to achieve profitability, which has historically been volatile; • our limited operating history and history of operating losses and negative cash flow; • volatile and unpredictable cycles in the emerging and evolving industries in which we operate; • competition in the markets in which we operate; • our reliance on and ability to manage our construction contractors and suppliers to meet our expansion efforts in keeping with planned timelines and cost estimates; • our reliance on our management team, and any failure by management to properly manage growth; • future strategic acquisitions and other arrangements that we engage in, which could disrupt our business, cause dilution to our stockholders, reduce our financial resources and harm our operating results; • our ability to timely complete our future strategic growth initiatives or within our anticipated cost; • increased compliance costs as a result of our strategic acquisitions; • our need for financing in the future to sustain and expand our operations and any inability to obtain such financing on acceptable terms, or at all; • we maintain our cash at financial institutions, often in balances that exceed federally insured limits; • the uncertain impact of geopolitical and economic events on the demand for bitcoin; • our exposure to pricing risk and volatility associated with the value of bitcoin because we do not hedge our investment in bitcoin; 13 • the development and acceptance of competing blockchain platforms or technologies; • the reward for successfully solving a block will halve in the future, and its value may not adjust to compensate us for the reduction in the rewards we receive from our mining efforts; • our reliance on a third-party mining pool service provider for our mining revenue payouts; • forks in the bitcoin network; • the open-source structure of the bitcoin network protocol and any failure to properly monitor and upgrade the protocol; • the possibility that banks and financial institutions may not provide services to businesses that engage in cryptocurrency-related activities; • the lack of limitations of FDIC or SIPC protections for the bitcoin we hold; • bitcoins we mine or hold for our own account may be subject to loss, theft, or restriction on access; • potential actions of malicious actors or botnets; • the loss or destruction of private keys required to access our bitcoins and potential data loss relating to our bitcoins; • potential failures of digital asset exchanges and custodians; • risks due to disruptions in the digital asset markets, including, but not limited to, the risk from depreciation in our stock price, financing risk, risk of increased losses or impairments in our investments or other assets, risks of legal proceedings and government investigations, and risks from price declines or price volatility of digital assets; • inadequate sources of recovery if our bitcoin holdings are lost, stolen or destroyed; • our ability to adopt technology in response to changing security needs or trends and reliance on a third party, Coinbase, for custody of our bitcoin holdings; • security threats to us; • a loss of confidence in our security systems, or a breach of our security systems; • the irreversibility of incorrect or fraudulent bitcoin transactions; • potential Internet disruptions; • the limited rights of legal recourse available to us following any loss of our bitcoins; • the sale of our bitcoins to pay for expenses a time of low bitcoin prices; • the possibility that a cryptocurrency other than bitcoin could be more desirable to the digital asset user base; • the possibility that our mining costs may exceed our mining revenues; • damage to the properties included in our mining operation and potential inability to get adequate insurance coverage for same; • our need for significant electrical power to support our mining operations; • increased scrutiny and changing expectations from stakeholders with respect to ESG practices and the impacts of climate change; • our operations and profitability may be adversely affected by competition from other methods of investing in cryptocurrencies; • the possibility that large holders of bitcoin may sell bitcoin into the market in large amounts all at once, thereby impacting the growth of the price of bitcoin; • the potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof; • risks related to technological obsolescence, the vulnerability of the global supply chain for cryptocurrency hardware disruption and difficulty in obtaining new hardware; • the limited precedent for financial accounting of digital assets, and the possibility of future accounting requirements for transactions involving digital assets; • the possibility of our failure to grow our hashrate; • risks arising from pandemics, epidemics or an outbreak of diseases, such as the COVID-19 pandemic; • global economic conditions, including continuing or worsening inflationary issues and associated changes in monetary policy and potential economic recession, and geopolitical events such as the Russia-Ukraine conflict and the subsequent imposition of sanctions as a result of the Russia-Ukraine conflict, and the Israeli-Palestinian conflict, could adversely affect our business, financial condition and results of operations; 14 • potential product defect or liability suits, or any recall of our products, particularly those in the discontinued operations; and • our limited insurance protection exposes us and our stockholders to the risk of loss of our bitcoin for which no person is liable.
Risk Factors Summary Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face.
Risk Factors Summary Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks we face.
If those parties experience delays, cannot access adequate capital, are exposed to inflation pressures or supply chain disruptions, our expansion efforts will be similarly impacted. We rely heavily on our management team, whose continued service and performance is critical to our future success.
If those parties experience delays, cannot access adequate capital, or are exposed to inflation pressures or supply chain disruptions, our expansion efforts will be similarly impacted. We rely heavily on our management team, whose continued service and performance is critical to our future success.
This is known as a “fork.” In the event a developer or group of developers proposes modifications to the bitcoin network that are not accepted by a majority of miners and users, but that is nonetheless accepted by a substantial plurality of miners and users, two or more competing and incompatible blockchain implementations could result.
This is known as a “fork.” In the event a developer or group of developers proposes modifications to the bitcoin network that are not accepted by a majority of miners and users, but that are nonetheless accepted by a substantial plurality of miners and users, two or more competing and incompatible blockchain implementations could result.
If a malicious actor or botnet, a collection of computers controlled by networked software coordinating the actions of the computers, obtains over 50% of the processing power dedicated to mining bitcoin, such actor may be able to construct fraudulent blocks or prevent certain transactions from completing in a timely manner, or at all.
If a malicious actor or botnet, a collection of computers controlled by networked software coordinating the actions of the computers, obtains over 50% of the processing power dedicated to mining bitcoin, such actor or botnet may be able to construct fraudulent blocks or prevent certain transactions from completing in a timely manner, or at all.
These measures impacted, and may further impact, our workforce and operations, as well as the operations of our customers, our partners and our vendors and suppliers. Our critical business operations, including our headquarters, and many of our key suppliers, are located in regions which have been and continue to be impacted by COVID-19.
These measures impacted, and may further impact, our workforce and operations, as well as the operations of our customers, our partners and our vendors and suppliers. Our critical business operations, including our headquarters, and many of our key suppliers, are located in regions which have been and may continue to be impacted by COVID-19.
Bitcoin and other cryptocurrency market prices, which have historically been volatile and are impacted by a variety of factors (including those discussed herein), are determined primarily using data from various exchanges, over-the-counter markets and derivative platforms.
Bitcoin and other cryptocurrency market prices, which have historically been volatile and are impacted by a variety of factors (including those discussed herein), are determined primarily by using data from various exchanges, over-the-counter markets and derivative platforms.
The holders of our Series A Preferred Stock entitled to have the Company redeem each share of Series A Preferred Stock for three shares of our common stock only if a change of control event (as defined in the certificate of designation) occurs, and they are entitled to vote together with the holders of the Company’s common stock on all matters submitted to stockholders at a rate of forty-five (45) votes for each share of Series A Preferred Stock held.
The holders of our Series A Preferred Stock are entitled to have the Company redeem each share of Series A Preferred Stock for three shares of our common stock only if a change of control event (as defined in the certificate of designation) occurs, and they are entitled to vote together with the holders of the Company’s common stock on all matters submitted to stockholders at a rate of forty-five (45) votes for each share of Series A Preferred Stock held.
The issuance of shares of Preferred Stock, depending on the rights, preferences and privileges attributable to the Preferred Stock, could reduce the voting rights and powers of the common stock and the portion of our assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution in the book value per share of the common stock.
The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could reduce the voting rights and powers of our common stock and the portion of our assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution in the book value per share of our common stock.
Utilizing those sources may be more challenging in the current financial market conditions, in particular where trading volume is diminished. We may not be able to obtain additional debt or equity financing on favorable terms, if at all, which could impair our growth and adversely impact our existing operations.
Utilizing those sources may be more challenging in the current financial market conditions, in particular where trading volume is diminished. We may not be able to obtain additional debt or equity financing on favorable terms, if at all, which could impair our growth and adversely impact our existing operations.
We have not paid dividends on shares of our common stock in the past and have no immediate plans to pay do so in the future. We have not paid, and do not plan to pay, any cash dividends with respect to our common stock in the immediate future.
We have not paid dividends on shares of our common stock in the past and have no immediate plans to do so in the future. We have not paid, and do not plan to pay in the immediate future, any cash dividends with respect to our common stock.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including, without limitation: • technological innovations or new products and services by us or our competitors; • government regulation of our products and services; • the establishment of partnerships with other technology companies; • intellectual property disputes; • additions or departures of key personnel; • sales of our common stock; • our ability to integrate operations, technology, products and services; • our ability to execute our business plan; • operating results below expectations; • loss of any strategic relationship; • industry developments; 30 • economic and other external factors; and • period-to-period fluctuations in our financial results.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including, without limitation: • technological innovations or new products and services by us or our competitors; • government regulation; • the establishment of partnerships with other technology companies; • intellectual property disputes; • additions or departures of key personnel; • sales of our common stock; • our ability to integrate operations, technology, products and services; • our ability to execute our business plan; • operating results below expectations; • loss of any strategic relationship; • industry developments; • economic and other external factors; and • period-to-period fluctuations in our financial results.
Future acquisitions may also expose us to potential risks, including risks associated with entering markets in which we have no or limited prior experience, especially when competitors in such markets have stronger market positions, the possibility of insufficient revenues to offset the expenses we incur in connection with an acquisition and potential loss of, or harm to, our relationships with employees and suppliers as a result of integration of new businesses.
Future acquisitions may also expose us to 17 potential risks, including risks associated with entering markets in which we have no or limited prior experience, especially when competitors in such markets have stronger market positions, the possibility of insufficient revenues to offset the expenses we incur in connection with an acquisition and the potential loss of, or harm to, our relationships with employees and suppliers as a result of integration of new businesses.
Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm. In an event referred to as bitcoin “halving,” the bitcoin reward for mining any block is cut in half. For example, the mining reward for bitcoin declined from 12.5 to 6.25 bitcoin on May 11, 2020.
Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm. In an event referred to as bitcoin “halving,” the bitcoin reward for mining any 19 block is cut in half. For example, the mining reward for bitcoin declined from 12.5 to 6.25 bitcoin on May 11, 2020.
If we are unable to generate sufficient revenues to operate and/or expand our business, we will be required to raise additional capital to fund operating deficits (if applicable) and growth of our business, pursue our business plans and to finance our operating activities, including through equity or debt financings, which may not be available to us on favorable terms, or at all.
If we are unable to generate sufficient revenues to operate and/or expand our business, we will be required to raise additional capital to fund operating deficits (if applicable) and the growth of our business, pursue our business plans and to finance our operating activities, including through equity or debt financings, which may not be available to us on favorable terms, or at all.
While we believe that bitcoin is unlikely to be considered an investment contract, and thus a security under the investment contract definition, we cannot provide any assurances that digital assets that we mine or otherwise acquire or hold for our own account, including bitcoin, will never be classified as securities under U.S. law.
While we believe that bitcoin is unlikely to be considered an investment contract, and thus a security under the investment contract definition, we cannot provide any assurances that digital assets that we may mine or otherwise acquire or hold for our own account, including bitcoin, will never be classified as securities under U.S. law.
The Class Complaint alleges that, between December 31, 2020 and January 14, 2021, we and certain members of our executive management team failed to disclose certain material information to investors and that, as a result of the foregoing, our positive statements about our business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
The Class Complaint alleges that, between December 31, 2020 and January 14, 2021, we and 34 certain members of our executive management team failed to disclose certain material information to investors and that, as a result of the foregoing, our positive statements about our business, operations and prospects were materially misleading and/or lacked a reasonable basis.
We currently utilize several types of ASIC miners as part of our mining operation, including Bitmain Antminers, Canaan Avalon miners and MicroBT WhatsMiners, all of which are produced in China, Malaysia, Indonesia and Thailand. Geopolitical matters, including the U.S. relationship with China, may impact our ability to import ASIC miners.
We currently utilize several types of ASIC miners as part of our mining operation, including Bitmain Antminers, Canaan Avalon miners and MicroBT WhatsMiners, all of which are produced in China, Malaysia, Indonesia or Thailand. Geopolitical matters, including the relationship of the U.S. with China, may impact our ability to import ASIC miners.
A recession or financial market correction resulting from the lack of containment and spread of COVID-19 could impact overall spending, adversely affecting demand for bitcoin, our business, and the value of our common stock. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.
A recession or financial market correction resulting from the lack of containment and spread of COVID-19 or a similar 28 health epidemic could impact overall spending, adversely affecting demand for bitcoin, our business and the value of our common stock. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.
We may curtail the energy used by our mining operations in times of heightened energy prices or in the case of a grid-wide electricity shortage either voluntarily or by agreement with utility providers. We may also encounter other 22 situations where utilities or government entities restrict or prohibit the provision of electricity to mining operations.
We may curtail the energy used by our mining operations in times of heightened energy prices or in the case of a grid-wide electricity shortage either voluntarily or by agreement with utility providers. We may also encounter other situations where utilities or government entities restrict or prohibit the provision of electricity to mining operations.
Such factors include, but are not limited to, the worldwide growth in the adoption and use of bitcoins, the maintenance and development of the software protocol of the bitcoin network, changes in consumer demographics and public tastes, fraudulent or illegitimate actors, real or perceived scarcity, and political, economic, regulatory or other conditions.
Such factors include, but are not limited to, the worldwide growth in the adoption and use of bitcoin, the maintenance and development of the software protocol of the bitcoin network, changes in consumer demographics and public tastes, fraudulent or illegitimate actors, real or perceived scarcity, and political, economic, regulatory or other conditions.
As a result, we may suffer a loss with respect to our bitcoins that is not covered by insurance, and we may not be able to recover any of our carried value in these bitcoins if they are lost or stolen or suffer significant and sustained reduction in conversion spot price.
As a result, we may suffer a loss with respect to our bitcoins that are not covered by insurance, and we may not be able to recover any of our carried value in these bitcoins if they are lost or stolen or suffer significant and sustained reduction in conversion spot price.
While current IRS guidance creates a potential tax reporting requirement for any circumstance where the ownership of a bitcoin passes from one person to another, it preserves the right to apply capital gains treatment to those transactions, which is generally favorable for investors in bitcoin.
While current IRS guidance creates 32 a potential tax reporting requirement for any circumstance where the ownership of a bitcoin passes from one person to another, it preserves the right to apply capital gains treatment to those transactions, which is generally favorable for investors in bitcoin.
Our expansion could also place significant demands on our management, operations, systems, accounting, internal controls and financial resources. If we experience difficulties in any of these areas, we may not be able to expand our business successfully or effectively manage our growth.
Our planned expansion could also place significant demands on our management, operations, systems, accounting, internal controls and financial resources. If we experience difficulties in any of these areas, we may not be able to expand our business successfully or effectively manage our growth.
We may also be subject to lawsuits and other claims in the future if our legacy products or installed systems malfunction, including, for example, if any of our energy system offerings (such as installed racking systems, photovoltaic modules, batteries, inverters, or other products) causes injuries.
We may also be subject to lawsuits and other claims in the future if our legacy products or installed systems malfunction, 29 including, for example, if any of our energy system offerings (such as installed racking systems, photovoltaic modules, batteries, inverters, or other products) causes injuries.
Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment in the Company. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect an investment in the Company.
Such additional registrations may result in extraordinary, non-recurring expenses, thereby potentially materially and adversely impacting an investment in the Company. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect an investment in the Company.
At this time, we do not engage in contractual or financial hedging activities related to our bitcoin holdings to mitigate potential decreases in the price of bitcoin. See the above risk factor entitled, “The value of bitcoin has historically been subject to wide 21 swings.
At this time, we do not engage in contractual or financial hedging activities related to our bitcoin holdings to mitigate potential decreases in the price of bitcoin. See the above risk factor entitled, “The value of bitcoin has historically been subject to wide swings.
As a result, any mine we establish can only be successful if we can obtain sufficient electrical power for that mine on a cost-effective basis, and our establishment of new mines requires us to find locations where that is the 28 case.
As a result, any mine we establish can only be successful if we can obtain sufficient electrical power for that mine on a cost-effective basis, and our establishment of new mines requires us to find locations where that is the case.
Rather, decisions to hold or sell bitcoins are currently determined by management by analyzing forecasts and monitoring the market in real time. Such decisions, however well-informed, 17 may result in untimely sales and even losses, adversely affecting an investment in us.
Rather, decisions to hold or sell bitcoins are currently determined by management by analyzing forecasts and monitoring the market in real time. Such decisions, however well-informed, may result in untimely sales and even losses, adversely affecting an investment in us.
The malicious actor or botnet could control, exclude or modify the order of transactions, though it could not generate new units or transactions using such control. The malicious actor could also “double-spend,” or spend the same bitcoin in more than one transaction, or it could prevent transactions from being validated.
The malicious actor or botnet could control, exclude or modify the order of transactions, though it could not generate new units or transactions using such control. The malicious actor or botnet could also “double-spend,” or spend the same 21 bitcoin in more than one transaction, or it could prevent transactions from being validated.
It is possible that a cryptocurrency other than bitcoin could have features that make it more desirable to a material portion of the digital asset user base, resulting in a reduction in demand for bitcoins. Bitcoin holds a “first-to-market” advantage over other cryptocurrencies.
It is possible that a cryptocurrency other than bitcoin could have features that make it more desirable to a material portion of the digital asset user base, resulting in a reduction in demand for bitcoin. Bitcoin holds a “first-to-market” advantage over other cryptocurrencies.
Our operations and profitability may be adversely affected by competition from other methods of investing in cryptocurrencies. We compete with other users and/or companies that are mining cryptocurrencies and other potential financial vehicles, including securities backed by or linked to cryptocurrencies.
Our operations and profitability may be adversely affected by competition from other methods of investing in cryptocurrencies. We compete with other users and/or companies that are mining bitcoin and other potential financial vehicles, including securities backed by or linked to bitcoin.
The emergence of other financial vehicles and exchange-traded funds have increased scrutiny on cryptocurrencies, and such scrutiny could be applicable to us and impact our ability to successfully establish or maintain a public market for our securities.
The emergence of other financial vehicles and exchange-traded funds have increased scrutiny on cryptocurrencies, and such scrutiny could be applicable to us and impact our 26 ability to successfully establish or maintain a public market for our securities.
We have raised capital to finance our strategic growth of our business through public offerings of our common stock, including through our at-the-market offering program, and we expect to need to raise additional capital through similar public offerings to finance the completion of current and future expansion initiatives.
We have previously raised capital to finance our strategic growth of our business through public offerings of our common stock, including through our at-the-market offering program, and we expect to need to raise additional capital through similar public offerings to finance the completion of current and future expansion initiatives.
The success of our bitcoin mining business will be dependent upon our ability to 14 purchase additional miners, adapt to changes in technology in the industry, and to obtain sufficient energy at reasonable prices, amongst other things.
The success of our bitcoin mining business will be dependent upon our ability to purchase additional miners, adapt to changes in technology in the industry, and to obtain sufficient energy at reasonable prices, amongst other things.
A small group of contributors can propose refinements or improvements to the bitcoin network’s source code that alter the protocols and software that govern the bitcoin network and the properties of bitcoin, including the 18 irreversibility of transactions and limitations on the mining of new bitcoin.
A small group of contributors can propose refinements or improvements to the bitcoin network’s source code that alter the protocols and software that govern the bitcoin network and the properties of bitcoin, including the irreversibility of transactions and limitations on the mining of new bitcoin.
Such circumstances could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin we mine or otherwise acquire or hold for our own account, and harm investors.
Such circumstances could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin we mine or otherwise acquire or hold for our own account and therefore harm investors.
We rely on third-party manufacturing warranties, warranties provided by our manufacturing partners and our general liability insurance to cover product liability claims and have not obtained separate product 26 liability insurance. Such warranties and insurance coverage may not be adequate to cover all potential claims.
We rely on third-party manufacturing warranties, warranties provided by our manufacturing partners and our general liability insurance to cover product liability claims and have not obtained separate product liability insurance. Such warranties and insurance coverage may not be adequate to cover all potential claims.
If the liquidity of the digital assets markets continues to be negatively impacted by these events, digital asset prices (including the price of bitcoin) may continue to experience significant volatility and confidence in the digital asset markets may be further undermined.
If the liquidity of the digital asset markets continues to be negatively impacted by these events, digital asset prices (including the price of bitcoin) may continue to experience significant volatility and confidence in the digital asset markets may be further undermined.
Further, the global supply of miners is unpredictable and presently heavily dependent on manufacturers headquartered in China, with manufacturing in Asia, which was severely affected by the emergence of the COVID-19 coronavirus global pandemic.
Further, the global supply of miners is unpredictable and presently heavily dependent on manufacturers headquartered in China, with manufacturing in Asia, which was severely affected by the emergence of the COVID-19 pandemic.
This would obligate us to comply with registration and other requirements by the SEC and, therefore, cause us to incur significant, non-recurring expenses, thereby materially and adversely impacting an investment in the Company.
This would obligate us to comply with registration and other requirements by the SEC and, therefore, cause us to incur significant, non-recurring expenses, thereby potentially materially and adversely impacting an investment in the Company.
The lack of guaranteed financial incentives for contributors to maintain or develop the bitcoin network and the lack of guaranteed resources to adequately address emerging issues with the bitcoin network may reduce incentives to address the issues adequately or in a timely manner.
The lack of guaranteed financial incentives for contributors to maintain or develop the bitcoin network and the lack of guaranteed resources to adequately address 20 emerging issues with the bitcoin network may reduce incentives to address the issues adequately or in a timely manner.
Any failure by management to manage growth and to respond 15 to changes in our business could have a material adverse effect on our business, financial condition and results of operations.
Any failure by management to manage growth and to respond to changes in our business could have a material adverse effect on our business, financial condition and results of operations.
While no provision of the CEA, or CFTC rules, orders or rulings (except as noted herein) appears to be currently applicable to our business, this is subject to change. If the SEC or another regulatory body considers bitcoin to be a security under U.S. securities laws, we may be required to comply with significant SEC registration and/or other requirements.
While no provision of the CEA or CFTC rules, orders or rulings (except as noted herein) appear to be currently applicable to our business, this is subject to change. If the SEC or another regulatory body considers bitcoin to be a security under U.S. securities laws, we may be required to comply with significant SEC registration and/or other requirements.
In addition, the physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supply of energy, demand for bitcoin and other cryptocurrencies, and could increase our insurance and other operating costs, including, potentially, to repair damage incurred as a result of extreme weather events or to renovate or retrofit facilities to better withstand extreme weather events.
In addition, the physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supplies of energy, and demand for bitcoin and other cryptocurrencies, and could increase our insurance and other operating costs, including, potentially, to repair damage incurred as a result of extreme weather events or to renovate or retrofit facilities to better withstand extreme weather events.
We will continue to monitor for developments in state-level legislation, guidance or regulations applicable to us. Such additional federal or state regulatory obligations in the United States or obligations that could arise under the regulatory frameworks of other countries may cause us to incur significant expenses, possibly affecting its business and financial condition in a material and adverse manner.
We will continue to monitor for developments in state-level legislation, guidance or regulations applicable to us. Such additional federal or state regulatory obligations in the United States or obligations that could arise under the regulatory frameworks of other countries may cause us to incur significant expenses, possibly affecting our business and financial condition in a material and adverse manner.
This may, however, also increase the likelihood of a subsequent price swing in the opposite direction as crisis-driven purchasing behavior dissipates, ultimately decreasing the value of bitcoins or any other digital asset in our possession. Such risks are similar to the risks of purchasing commodities in generally uncertain times, such as the risk of purchasing, holding or selling gold.
This may, however, also increase the likelihood of a subsequent price swing in the opposite direction as crisis-driven purchasing behavior dissipates, ultimately decreasing the value of bitcoin or any other digital asset in our possession. Such risks are similar to the risks of purchasing commodities in generally uncertain times, such as the risk of purchasing, holding or selling gold.
There can be no assurance that the IRS will not alter its existing position with respect to digital assets in the future or that other state, local and non-U.S. taxing authorities or courts will follow the approach of the IRS with respect to the treatment of digital assets such as bitcoins for income tax and sales tax purposes.
There can be no assurance that the IRS will not alter its existing position with respect to digital assets in the future or that other state, local and non-U.S. taxing authorities or courts will follow the approach of the IRS with respect to the treatment of digital assets such as bitcoin for income tax and sales tax purposes.
If one or more of these analysts ceases coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Our indebtedness could adversely affect our financial health and prevent us from fulfilling our debt obligations.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Our indebtedness could adversely affect our financial health and prevent us from fulfilling our debt obligations.
If we are unable to consistently obtain accurate proportionate rewards from our pools, we may experience reduced rewards for our efforts, which would have an adverse effect on our business and operations. Forks in the bitcoin network may occur in the future, which may affect the value of bitcoins held by us.
If we are unable to consistently obtain accurate proportionate rewards from our pool, we may experience reduced rewards for our efforts, which would have an adverse effect on our business and operations. Forks in the bitcoin network may occur in the future, which may affect the value of bitcoins held by us.
In addition, the stock markets in general have often experienced volatility, including, most recently, in the wake of COVID-19, that has sometimes been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations have caused, and may continue to cause, the trading price of our common stock to decline.
In addition, the stock markets in general have often experienced volatility, including in the wake of COVID-19, that has sometimes been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations have caused, and may continue to cause, the trading price of our common stock to decline.
The development and acceptance of competing blockchain platforms or technologies may cause consumers to abandon bitcoin. As we exclusively mine, and expect to exclusively mine bitcoin, we could face difficulty adapting to emergent digital ledgers, blockchains, or alternatives thereto. This could prevent us from realizing the anticipated profits from our investments.
The development and acceptance of competing blockchain platforms or technologies may cause consumers to abandon bitcoin. As we exclusively mine bitcoin, and expect to exclusively mine bitcoin in the future, we could face difficulty adapting to emergent digital ledgers, blockchains or alternatives thereto. This could prevent us from realizing the anticipated profits from our investments.
Global economic conditions, including continuing or worsening inflationary issues and associated changes in monetary policy and potential economic recession, and geopolitical events such as the Russia-Ukraine conflict, the subsequent imposition of sanctions as a result of the Russia-Ukraine conflict could adversely affect our business, financial condition and results of operations.
Global economic conditions, including continuing or worsening inflationary issues and associated changes in monetary policy and potential economic recession, and geopolitical events such as the Russia-Ukraine conflict, and the subsequent imposition of sanctions as a result of the Russia-Ukraine conflict, and the Israeli-Palestinian conflict, could adversely affect our business, financial condition and results of operations.
General economic and political conditions such as economic recessions, interest rates, rising inflation, commodity prices, foreign currency fluctuations, international tariffs, social, political and economic risks, hostilities or the perception that hostilities may be imminent, military conflict and acts of war, including further escalation of the Russia-Ukraine conflict and the related response, including sanctions or other restrictive actions, by the United States and/or other countries could adversely impact our business, supply chain or partners.
General economic and political conditions such as economic recessions, interest rates, rising inflation, commodity prices, foreign currency fluctuations, international tariffs, social, political and economic risks, hostilities or the perception that hostilities may be imminent, military conflict and acts of war, including further escalation of the Russia-Ukraine conflict and the related response, including sanctions or other restrictive actions, by the United States and/or other countries, as well as the Israeli-Palestinian conflict, could adversely impact our business, supply chain or partners.
If we are deemed to be subject to such additional regulatory and registration or licensing requirements, we may be required to substantially alter our bitcoin mining activities and possibly cease engaging in such activities. Any such action may adversely affect our business operations and financial condition and an investment in our company.
If we are deemed to be subject to such additional regulatory oversight and registration 30 or licensing requirements, we may be required to substantially alter our bitcoin mining activities and possibly cease engaging in such activities. Any such action may adversely affect our business operations and financial condition and an investment in our company.
Any failure to maintain an effective system of internal controls (including internal control over financial reporting) could limit our ability to report our financial results accurately and on a timely basis, or to detect and prevent fraud and could expose us to regulatory enforcement action and shareholder claims.
Any failure to maintain an effective system of internal controls (including internal control over financial reporting) could limit our ability to report our financial results accurately and on a timely basis, or to detect and prevent fraud and could expose us to regulatory enforcement action and stockholders claims.
Moreover, although current IRS guidance addresses the treatment of certain forks, there continues to be uncertainty with respect to the timing and amount of income inclusions for various crypto asset transactions, including, but not limited to, staking rewards and other crypto asset incentives and rewards products.
Moreover, although current IRS guidance addresses the treatment of certain forks, there continues to be uncertainty with respect to the timing and amount of income inclusions for various digital asset transactions, including, but not limited to, staking rewards and other digital asset incentives and rewards products.
Specifically, the manufacture of components of our products, the final assembly of our products, and other critical operations are concentrated in China and other geographic locations that have been impacted by COVID-19 and in which local governments continue to take measures to try to contain the pandemic.
Specifically, the manufacture of components of our miners, the final assembly of our miners and other critical operations are concentrated in China and other geographic locations that have been impacted by COVID-19 and in which local governments continue to take measures to try to contain the pandemic.
Because energy systems and many of our other current and anticipated products are electricity-producing devices, it is possible that customers or their property could be injured or damaged by our products, whether due to product malfunctions, defects, improper installation or other causes.
Because energy systems and many of our other products are electricity-producing devices, it is possible that customers or their property could be injured or damaged by our products, whether due to product malfunctions, defects, improper installation or other causes.
Moreover, if our mining activities or transactions in bitcoin were deemed by the CFTC to constitute a collective investment in derivatives for our shareholders, we may be required to register as a commodity pool operator with the CFTC through the National Futures Association.
Moreover, if our mining activities or transactions in bitcoin were deemed by the CFTC to constitute a collective investment in derivatives for our stockholders, we may be required to register as a commodity pool operator with the CFTC through the National Futures Association.
When we keep our bitcoin in cold storage, we may experience lag time in our ability to respond to market fluctuations in the price of our cryptocurrency assets. We currently mine bitcoin by contributing to and benefiting from our pools’ processing power.
When we keep our bitcoin in cold storage, we may experience lag time in our ability to respond to market fluctuations in the price of our cryptocurrency assets. We currently mine bitcoin by contributing to and benefiting from our pool’s processing power.
Furthermore, while we receive daily reports from our pools detailing the total processing power provided to the pools and the proportion of that total processing power, we provided to determine the distribution of rewards to us, we are dependent on the accuracy of our pool’s record keeping.
Furthermore, while we receive daily reports from our pool detailing the total processing power provided to the pool and the proportion of that total processing power we provided to determine the distribution of rewards to us, we are dependent on the accuracy of our pool’s record keeping.
If we are not otherwise able to recover damages from a malicious actor in connection with these losses, our business and results of operations may suffer, which may have a material negative impact on our stock price. Bitcoins we mine or hold for our own account may be subject to loss, theft or restriction on access.
If we are not otherwise able to recover damages in connection with these losses, our business and results of operations may suffer, which may have a material negative impact on our stock price. Bitcoins we mine or hold for our own account may be subject to loss, theft or restriction on access.
Although currently cryptocurrencies generally are not regulated or are lightly regulated in most countries, several countries, such as China, India and Russia, may continue taking regulatory actions in the future that could severely restrict the right to mine, acquire, own, hold, sell or use these cryptocurrency assets or to exchange for local currency.
Although currently cryptocurrencies generally are not regulated or are lightly regulated in most countries, several countries, such as China, India and Russia, may continue taking regulatory actions in the future that could severely 31 restrict the right to mine, acquire, own, hold, sell or use cryptocurrency assets or to exchange any such cryptocurrency assets for local currency.
Our reliance on a third-party mining pool service provider for our mining revenue payouts may adversely affect an investment in us. We currently rely on Foundry Digital’s (“pool”), open access mining pool that support bitcoin, to receive our mining rewards and fees from the network.
Our reliance on a third-party mining pool service provider for our mining revenue payouts may adversely affect an investment in us. We currently rely on Foundry Digital’s open access mining pool ("pool") that supports bitcoin to receive our mining rewards and fees from the network.
This means that if one were able to enforce an action against our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the lawsuit and any judgment or settlement they otherwise would be required to pay.
This means that if one were able to enforce an action against our directors or officers, in all likelihood, we would be required to pay any expenses our directors or officers incur in defending the lawsuit and any judgment or settlement they otherwise 37 would be required to pay.
The sale of our bitcoins to pay for expenses at a time of low bitcoin prices could adversely affect an investment in us. We sell our bitcoins to pay for operating expenses and growth on an as-needed basis. Consequently, we may sell our bitcoins at a time when bitcoin prices are low, which could adversely affect an investment in us.
We sell our bitcoins to pay for operating expenses and growth on an as-needed basis. Consequently, we may sell our bitcoins at a time when bitcoin prices are low, which could adversely affect an investment in us.
Current IRS guidance indicates that for U.S. federal income tax purposes digital assets such as bitcoins should be treated and taxed as property, and that transactions involving the payment of bitcoins for goods and services should be treated in effect as barter transactions.
Current Internal Revenue Service ("IRS") guidance indicates that for U.S. federal income tax purposes digital assets such as bitcoins should be treated and taxed as property, and that transactions involving the payment of bitcoins for goods and services should be treated in effect as barter transactions.
Item 1A. Risk Factors We are subject to various risks that may materially harm our business, prospects, financial condition and results of operations. An investment in our common stock is speculative and involves a high degree of risk.
Item 1A. Risk Factors We are subject to various risks that may materially harm our business, prospects, financial condition and results of operations. An investment in our common stock is speculative and involves risk.
The successful assertion of product liability claims against us could result in potentially significant monetary damages that could require us to make significant payments, as well as subject us to adverse publicity, damage our reputation and competitive position.
The successful assertion of product liability claims against us could result in potentially significant monetary damages that could require us to make significant payments, as well as subject us to adverse publicity, thereby damaging our reputation and competitive position.
Because there has been limited precedent set for the financial accounting of cryptocurrencies and related revenue recognition and no official guidance has yet been provided by the Financial Accounting Standards Board or the SEC, it is unclear how companies may in the future be required to account for cryptocurrency transactions and assets and related revenue recognition.
Because there has been limited precedent set for the financial accounting of cryptocurrencies and related revenue recognition and no official guidance has yet been provided by the Financial Accounting Standards Board or the SEC as to bitcoin miners, it is unclear how bitcoin miners may in the future be required to account for cryptocurrency transactions and assets and related revenue recognition.
In particular, on January 20, 2021, a purported shareholder of our company, individually and on behalf of all others similarly situated (together, the “Class”), filed a putative class action complaint (the “Class Complaint”) in the United States District Court for the Southern District of New York against us and certain members of our executive management team.
In particular, on January 20, 2021, a purported stockholder of the Company, individually and on behalf of all others similarly situated, filed a putative class action complaint (the “Class Complaint”) in the United States District Court for the Southern District of New York against us and certain members of our executive management team.
As our mining facility operates, our miners experience ordinary wear and tear, and may also face more significant malfunctions caused by a number of extraneous factors beyond our control. The degradation of our miners will require us to, over time, to repair or replace miners which are no longer functional.
As our mining facilities operate, our miners experience ordinary wear and tear and may face more significant malfunctions caused by a number of extraneous factors beyond our control. The degradation of our miners will also require us, over time, to repair or replace miners which are no longer functional.
In addition, while the extent and duration of the COVID-19 pandemic on the global economy and our business in particular are difficult to assess or predict, the pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, which may reduce our ability to access capital or our customers’ ability to pay us for past or future purchases, which could negatively affect our working capital and liquidity.
In addition, while the extent of the COVID-19 pandemic's continued effect on the global economy and our business in particular are difficult to assess or predict, the pandemic has historically resulted in, and may continue to result in, significant disruption of global financial markets, which may reduce our ability to access capital or our customers’ ability to pay us for past or future purchases, which could negatively affect our working capital and liquidity.
As a result of such dispositions, bitcoin mining is now the sole driver of our business and revenues and is expected to continue to be the source of substantially all of our revenues for the foreseeable future, which has the effect of increasing our exposure to the risks described in this Annual Report.
As a result of such dispositions, bitcoin mining is now the sole driver of our business and revenues and is expected to continue to be the source of substantially all of our revenues for the foreseeable future, which has the effect of increasing our exposure to the risks described in this Annual Report on Form 10-K.
Therefore, we have little means of recourse against our pools’ operators if we determine the proportion of the reward paid out to us by the mining pool operator is incorrect, other than leaving the pools.
Therefore, we have little means of recourse against our pool's operator if we determine the proportion of the reward paid out to us by the mining pool operator is incorrect, other than leaving the pools.
Changes in the CEA or the regulations promulgated by the CFTC thereunder, as well as interpretations thereof and official promulgations by the CFTC, may impact the classification of bitcoins and, therefore, may subject them to additional regulatory oversight by the agency.
Changes in the CEA or the regulations promulgated by the CFTC thereunder, as well as interpretations thereof and official promulgations by the CFTC, may impact the classification of bitcoin and, therefore, may subject bitcoin to additional regulatory oversight by the agency.
Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our shares of common stock, making investments, incurring additional debt, making capital expenditures or declaring dividends. We maintain our cash at financial institutions, which at times, exceed federally insured limits.
Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our shares of common stock, making investments, incurring additional debt, making capital expenditures or declaring dividends. We maintain our cash at financial institutions, often in balances that exceed federally insured limits.
Specifically, Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the company or its shareholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that (1) the directors or officers act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud or a knowing violation of law.
Specifically, Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the company or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that (1) the director's or officer's act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud or a knowing violation of law.
An extended period of global supply chain and economic disruption as a result of the COVID-19 pandemic, even after the pandemic subsides worldwide, could have a materially adverse impact on our business, results of 25 operations, access to sources of capital and financial condition, though the full extent and duration of any such impact is also uncertain.
An extended period of global supply chain and economic disruption as a result of the COVID-19 pandemic could have a materially adverse impact on our business, results of operations, access to sources of capital and financial condition, though the full extent and duration of any such impact is also uncertain.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe total purchase price was $4,711,799 and the seller conveyed fee simple title by limited warranty deed. The Godby Road Property consists of an office/warehouse building of approximately 41,387 square feet on approximately 6 acres of land. The Godby Road Property is utilized by ATL and CleanBlok to conduct bitcoin mining activities.
Biggest changeThe College Park Property consists of an office/warehouse building of approximately 41,387 square feet on approximately six acres of land. The College Park Property is utilized by ATL and CleanBlok to conduct bitcoin mining activities. On June 15, 2021, the Company entered into a lease for warehouse and office space at 2042 Corte Del Nogal, Suite C, Carlsbad California, 92011.
The total purchase price was $15,000,000 and the seller conveyed fee simple title by limited warranty deed. The property is located in Wilkes County, Georgia and contains approximately 27 acres. The Company intends to utilize the property to conduct its bitcoin mining activities.
The total purchase price was $15,000 and the seller conveyed fee simple title by limited warranty deed. The property is located in Wilkes County, Georgia and contains approximately 27 acres. The Company intends to utilize the property to conduct its bitcoin mining activities.
On August 6, 2021, the Company, through its wholly owned subsidiary CSRE Properties Norcross, LLC, closed on the purchase of real property located at 5295 Brook Hollow Parkway, Norcross, Georgia, 30071 (the “Norcross Property”). The total purchase price was $6,550,000 and the seller conveyed fee simple title by limited warranty deed.
On August 6, 2021, the Company, through its wholly owned subsidiary CSRE Properties Norcross, LLC, closed on the purchase of real property located at 5295 Brook Hollow Parkway, Norcross, Georgia 30071 (the “Norcross Property”). The total purchase price was $6,550 and the seller conveyed fee simple title by limited warranty deed.
The Company intends to utilize the property to conduct its bitcoin mining activities. On August 17, 2022, the Company, through its wholly owned subsidiary, CSRE Properties Washington, LLC, closed on the purchase of real property located at 197 Dixie Wood Road, Washington, Georgia, 30673 (the "Washington Property").
The property is located in Washington County, Georgia and consists of 41 existing modular data centers. The Company intends to utilize the property to conduct its bitcoin mining activities. On August 17, 2022, the Company, through its wholly owned subsidiary, CSRE Properties Washington, LLC, closed on the purchase of real property located at 197 Dixie Wood Road, Washington, Georgia 30673.
Item 2. Properties On October 8, 2022, the Company, through its wholly owned subsidiary, CSRE Properties Sandersville, LLC, closed on the acquisition of a lease for real property and the purchase of tangible property located at 2015 George J. Lyons, Sandersville, Georgia 31082. The property is located in Washington County and consists of 41 existing modular data centers.
The Company intends to utilize this office space as its new corporate headquarters. On October 8, 2022, the Company, through its wholly owned subsidiary CSRE Properties Sandersville, LLC, closed on the acquisition of a lease for real property and the purchase of tangible property located at 2015 George J. Lyons Parkway, Sandersville, Georgia 31082.
On June 15, 2021, the Company entered into a lease for warehouse and office space at 2042 Corte Del Nogal, Suite C, Carlsbad, California, 92011. The 5-year lease is for an approximately 12,704 square foot industrial unit and part of a larger 47,744 square foot multi-tenant industrial flex building and requires monthly base rent payments of $11,307.
The 5-year lease is for an approximately 12,704 square foot industrial unit and part of a larger 47,744 square foot multi-tenant industrial flex building and requires monthly base rent payments of $11.
The Norcross Property consists of an office building of approximately 86,000 square feet on approximately 7 acres of land.
The Norcross Property consists of an office building of approximately 86,000 square feet on approximately seven acres of land. The Norcross Property is utilized by CleanBlok to conduct bitcoin mining activities.
The Norcross Property is utilized by CleanBlok to conduct bitcoin mining activities. 34 On May 20, 2021, the Company, through its wholly owned subsidiary ATL, closed on the purchase of real property located at 2380 Godby Road, College Park, Georgia, 30349 (the “Godby Road Property”), which it had been leasing prior to the purchase.
On May 20, 2021, the Company, through its wholly owned subsidiary ATL, closed on the purchase of real property located at 2380 Godby Road, College Park, Georgia 30349 (the “College Park Property”), which it had been leasing prior to the purchase. The total purchase price was $4,712 and the seller conveyed fee simple title by limited warranty deed.
The 65-month lease is for 4,552 rentable square feet an initial base rent of $10,925 and increases 3% each year. The Corporate Circle space is utilized as the CleanSpark corporate and executive headquarters. We also have an office located at 1185 S. 1800 W, Suite 3, Woods Cross Utah 84087.
On August 26, 2021, the Company entered into a lease for office space at 2370 Corporate Circle, Suite 160, Henderson, Nevada 89074. The 65-month lease is for 4,552 rentable square feet and an initial base rent of $11, increasing 3% each year. The Corporate Circle space is currently utilized as the CleanSpark corporate and executive headquarters.
We are currently on a year-to-year lease agreement that calls for us to make payments of $2,300 per month. This property is utilized by corporate employees. The Company believes its existing facilities and equipment are in good operating condition and are suitable for the conduct of its business.
We also have an office located at 1185 S. 1800 W, Suite 3, Woods Cross, Utah 84087. We are currently on a year-to-year lease agreement that calls for us to make payments of $2 per month. This property is utilized by corporate employees.
Removed
The leased property was utilized by our energy business, and we intend to identify a suitable sublessor once we are no longer utilizing the space. On August 26, 2021, the Company entered into a lease for office space at 2370 Corporate Circle, Suite 160, Henderson, Nevada, 89074.
Added
Item 2. Properties On June 21, 2023, the Company acquired the outstanding membership interest in Coinmaker Miners LLC, a Georgia limited liability company that holds two lease agreements for real property in Dalton, GA and certain tangible property.
Added
Coinmaker Miners LLC was later renamed to CSRE Properties Dalton LLC. 38 On April 7, 2023, CleanSpark HQ, LLC, a single member limited liability company and subsidiary wholly owned by the Company, purchased certain real property located at 10424 South Eastern Avenue, Suite 200, Henderson, Nevada 89052 for $4,100. The property consists of approximately 15,000 square feet of office space.
Added
The leased property was previously utilized by our energy business, and in September 2023, we entered into a lease termination agreement with the lessor for approximately $200, which is recorded in "Current liabilities held for sale" in our consolidated balance sheets and the amount was paid in full in October 2023.
Added
The Company believes its existing facilities and equipment are in good operating condition and are suitable for the conduct of its business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 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. Item 4. Mine Safety Disclosures Not applicable. 35 PART II
Biggest changeItem 3. Legal Proceedings For a description of our material pending legal proceedings, refer to Note 17—Commitments and Contingencies included in our Notes to Consolidated Financial Statements. The Company is subject to other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business.
Added
The Company routinely is subject to and resolves matters that do not individually or in the aggregate have a material impact on the Company’s financial condition or operating results. The outcome of litigation is inherently uncertain.
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If one or more legal matters were resolved against the Company in a reporting period 39 for amounts above management’s expectations, the Company’s financial condition and operating results for that reporting period could be materially adversely affected. Item 4. Mine Safety Disclosures Not applicable. 40 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends There are no restrictions in our articles of incorporation, bylaws or agreements to which are currently party that prevent us from declaring dividends.
Biggest changeDividends There are no restrictions in our articles of incorporation and bylaws or agreements to which we are currently party, that prevent us from declaring dividends.
The shares had a deemed aggregate value of $150,000. The shares of common stock were issued in a transaction not involving a public offering in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder.
The shares had a deemed aggregate value of $150. The shares of common stock were issued in a transaction not involving a public offering in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder.
The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend: 1. we would not be able to pay our debts as they become due in the usual course of business, or; 2. our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend: 1. we would not be able to pay our debts as they become due in the usual course of business, or; 2. our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.
During the quarter ended September 30, 2022, there were no other unregistered sales of our securities that were not reported in a Current Report on Form 8-K or our Quarterly Reports on Form 10-Q.
During the quarter ended September 30, 2023, there were no other unregistered sales of our securities that were not reported in a Current Report on Form 8-K or our Quarterly Reports on Form 10-Q.
Repurchases The Company has not made any repurchases of shares or other units of any class of the Company’s equity securities during the fourth quarter of the fiscal year covered by this Annual Report. Item 6. [Reserved] 36
Repurchases The Company has not made any repurchases of shares or other units of any class of the Company’s equity securities during the fourth quarter of the fiscal year covered by this Annual Report. Item 6. [Reserved] 41
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock, par value $0.001 per share, is listed on The Nasdaq Capital Market under the ticker symbol “CLSK.” Holders of Our Common Stock As of December 14, 2022, we had 177 registered holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock, par value $0.001 per share, is listed on The Nasdaq Capital Market under the ticker symbol “CLSK.” Holders of Our Common Stock As of December 1, 2023, we had 195 registered holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe rely primarily on such Consolidated Financial Statements to understand, manage, and evaluate our business performance and use adjusted EBITDA only supplementally. 40 The following is a reconciliation of our non-GAAP adjusted EBITDA, 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; and (v) impacts related to discontinued operations, to its most directly comparable GAAP measure (i.e., net loss) for the periods indicated: Years Ended September 30, 2022 2021 Reconciliation of non-GAAP adjusted EBITDA Net loss $ (57,326,354 ) $ (21,812,010 ) Loss on discontinued operations 17,236,961 13,582,848 Other impairment loss (related to bitcoin) 12,210,269 6,608,076 Impairment expense - other 250,000 - Impairment expense - goodwill 12,048,419 - Depreciation and amortization 49,044,877 8,982,123 Share-based compensation expense 31,464,994 8,546,712 Other income (308,036 ) (544,777 ) Change in fair value of contingent consideration (305,731 ) (84,198 ) Realized gain on sale of bitcoin (2,567,101 ) (3,104,378 ) Realized gain on sale of equity security (665 ) (179,046 ) Unrealized loss of equity security 1,847 5,153 Unrealized loss (gain) of derivative security 1,949,770 (2,790,387 ) Interest income (190,540 ) (221,488 ) Interest expense 1,077,827 145,728 Gain on disposal of assets (642,691 ) - Legal fees related to litigation 522,338 2,577,555 Legal fees related to financing & business development transactions 827,136 46,760 Severance expenses 404,749 PPP debt forgiveness — $ (531,169 ) Non-GAAP adjusted EBITDA $ 65,698,069 $ 11,227,502 The following is a reconciliation of fair market value of our bitcoin holdings to the current carrying value at September 30, 2022 and 2021: September 30, 2022 September 30, 2021 Carrying Value (1) Fair Market Value (2) Carrying Value (1) Fair Market Value (2) Number of Bitcoins held 595 595 627 627 Value per coin (1) (2) $ 18,735 $ 19,403 $ 37,645 $ 43,929 Total $ 11,147,478 $ 11,544,785 $ 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.
Biggest changeThe following is a reconciliation of our non-GAAP adjusted EBITDA to its most directly comparable GAAP measure (i.e., net (loss) income) for the periods indicated: For the Year Ended September 30, ($ in thousands) 2023 2022 Reconciliation of non-GAAP adjusted EBITDA Net loss $ (136,589 ) $ (57,326 ) Loss on discontinued operations 4,429 17,237 Impairment expense - other — 250 Impairment expense - goodwill — 12,048 Depreciation and amortization 120,728 49,045 Share-based compensation expense 24,142 31,466 Other income (11 ) (308 ) Change in fair value of contingent consideration (2,484 ) (306 ) Realized gain on sale of equity security — (1 ) Unrealized loss of equity security — 2 Unrealized loss of derivative security 259 1,950 Interest income (481 ) (190 ) Interest expense 2,977 1,078 Loss (gain) on disposal of assets 1,931 (643 ) Income tax expense 857 — Legal fees related to litigation & settlement related expenses 7,872 522 Legal fees related to financing & business development transactions 697 827 Severance expenses 701 405 Non-GAAP adjusted EBITDA* $ 25,028 $ 56,056 49 The following is a reconciliation of the fair market value of our bitcoin holdings to the current carrying value at September 30, 2023 and 2022: September 30, 2023 September 30, 2022 Carrying Value (1) Fair Market Value (2) Carrying Value (1) Fair Market Value (2) Number of bitcoins held 2,243 2,243 595 595 Value per bitcoin (1) (2) $ 25,075 $ 26,961 $ 18,735 $ 19,426 Total $ 56,241 $ 60,471 $ 11,147 $ 11,559 (1) Value per bitcoin is the average book value per bitcoin determined by the number of bitcoins held as of the balance sheet date divided by the carrying value.
If we are unable to 41 obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.
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.
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.
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, 2022 and 2021 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.
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, 2023 and 2022 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.
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. Item 7A.
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.
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.
The Company's adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to operating (loss) income or any other measure of performance derived in accordance with GAAP.
The increase in miners in operation increases our hashrate, which is our total computational power, and which when understood in the context of global hashrate, determines how much bitcoin we are able to mine.
This increase in miners in operation increased our hashrate, which is our total computational power, and which when understood in the context of global hashrate, determines how much bitcoin we are able to mine.
For the year ended September 30, 2022, our primary sources of liquidity came from existing cash and cash equivalents, and bitcoin.
For the year ended September 30, 2023, our primary sources of liquidity came from existing cash and cash equivalents and bitcoin.
Based on our current plans and business conditions, we believe that existing cash and cash equivalents and bitcoin, together with cash generated from operations 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.
Based on our current plans and business conditions, we believe that existing cash and cash equivalents and bitcoin, together with cash generated from operations, will be sufficient to satisfy our anticipated cash requirements for the next 12 months and for the reasonably foreseeable future 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.
Adjusted EBITDA is 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.
Accordingly, adjusted EBITDA is not meant to be considered in isolation of, and should be read in conjunction with, the information contained in our Consolidated Financial Statements, which have been prepared in accordance with GAAP.
(2) Value per coin is the quoted market price as of the balance sheet date. Liquidity and Capital Resources Our primary requirements for liquidity and capital are working capital, inventory management, capital expenditures, public company costs and general corporate needs. We expect these needs to continue as we further develop and grow our business.
(2) Value per bitcoin is the quoted closing market price from our principal market Coinbase as of the balance sheet date. Liquidity and Capital Resources Our primary requirements for liquidity and capital are working capital, capital expenditures, loan payments, public company costs and general corporate needs. We expect these needs to continue as we further develop and grow our business.
Decreases in bitcoin prices for periods subsequent to the mining date are recorded as impairment expense. ASC Topic 350 - Goodwill and Other requires subsequent increases in bitcoin prices are not allowed to be recorded (unrealized gains) unless the bitcoin is sold, at which point the gain is recognized.
ASC Topic 350 - Goodwill and Other that requires subsequent increases in bitcoin prices are not allowed to be recorded (unrealized gains) unless the bitcoin is sold, at which point the gain is recognized.
Investing Activities from Continuing Operations Cash flows used by investing activities during the year ended September 30, 2022 was $210,981,538 as compared with $228,157,922 for the year ended September 30, 2021.
Investing Activities from Continuing Operations Cash flows used by investing activities during the year ended September 30, 2023 was $334,179 as compared with $210,981 for the year ended September 30, 2022.
We expect the adoption of ASU 2020-06 to not 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.
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.
For example, we expect that share-based compensation expense, which is excluded from the adjusted EBITDA, 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.
For example, we expect that share-based compensation expense, which is excluded from adjusted EBITDA, 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. Additionally, management does not consider any of the excluded items to be expenses necessary to generate our bitcoin-related revenue.
General and administrative expenses General and administrative fees increased to $10,422,716 for the year ended September 30, 2022 from $5,716,465 for the same period ended September 30, 2021, representing an increase of $4,706,251. This increase was primarily attributable to increases in corporate overhead including, but not limited to, insurance premiums, travel expenses and rent expenses.
General and administrative expenses General and administrative fees increased to $20,823 for the year ended September 30, 2023 from $10,423 for the same period ended September 30, 2022, representing an increase of $10,400. This increase was primarily attributable to increases in corporate overhead, including but not limited to, taxes and licenses, insurance premiums, travel expenses and rent expenses.
Net Loss Net loss for the year ended September 30, 2022 was $57,326,354, in increase of $35,514,344 compared to net loss of $21,812,010 for the year ended September 30, 2021. Non-GAAP Measure We present adjusted EBITDA, which is not a measurement of financial performance under generally accepted accounting principles in the United States, or GAAP.
Net Loss Net loss for the year ended September 30, 2023 was $136,589, an increase of $79,263 compared to a net loss of $57,326 for the year ended September 30, 2022. Non-GAAP Measure We present adjusted EBITDA, which is not a measurement of financial performance under generally accepted accounting principles in the United States ("GAAP").
Critical Accounting Policies and Estimates 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, 2022 however we consider our critical accounting policies to be those related to revenue recognition, long-lived assets, fair value of financial instruments, bitcoin, and stock-based compensation.
Critical Accounting Policies and Estimates Our accounting policies are discussed in detail in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for the year ended September 30, 2023 however we consider our critical accounting policies to be those related to revenue recognition, property and equipment, business combinations, intangible assets and goodwill, bitcoin, and stock-based compensation.
During the fiscal year ended September 30, 2022, we mined 3,752 bitcoin with an average bitcoin price of $34,916 as compared to 899 bitcoin with an average bitcoin price of $43,232 during the year ended September 30, 2021.
During the fiscal year ended September 30, 2023, we mined 6,903 bitcoins with an average bitcoin price of $24,355 as compared to 3,752 bitcoins with an average bitcoin price of $34,916 during the year ended September 30, 2022.
Financing Activities from Continuing Operations Cash flows generated by financing activities during the year ended September 30, 2022 amounted to $141,959,688, as compared with $268,058,393 for the year ended September 30, 2021.
Financing Activities from Continuing Operations Cash flows generated by financing activities during the year ended September 30, 2023 amounted to $371,075, as compared with $141,960 for the year ended September 30, 2022.
Material Cash Requirements We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the consolidated balance sheet as of September 30, 2022, while others are considered future commitments.
These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the consolidated balance sheet as of September 30, 2023, while others are considered future commitments.
Other services revenues Other services revenues pertain to our data center operations for which we earned $524,759 in revenue from our data center operation for the year ended September 30, 2022, which is an increase of $84,287, or 19% as compared to $440,472 for the year ended September 30, 2021.
Other services revenues Other services revenues pertain to our data center operations for which we earned $287 in revenue from our data center operation for the year ended September 30, 2023, which is a decrease of $238, or 45% as compared to $525 for the year ended September 30, 2022.
We believe that adjusted EBITDA is also useful to investors and analysts in comparing our performance across reporting periods on a consistent basis.
In addition to management's internal use of non-GAAP adjusted EBITDA, management believes that adjusted EBITDA is also useful to investors and analysts in comparing our performance across reporting periods on a consistent basis.
These costs were primarily related to energy costs to operate the mining equipment within our owned facilities, which was $13,554,648 for the 37 year ended September 30, 2022, an increase of $10,610,995 as compared to $2,943,653 for the year ended September 30, 2021.
These costs were primarily related to energy costs to operate the mining equipment within our owned facilities, which was $65,824 for the year ended September 30, 2023, an increase of $52,490 as compared to $13,334 for the year ended September 30, 2022.
Our payments on miner equipment purchase and deposits of $171,181,268, purchase of fixed assets of $19,285,904, and sale of miners of $3,497,654 were the main components of our investing cash flow for the year ended September 30, 2022.
Our purchase of fixed assets of $19,286, payments on mining equipment (including deposits) of $171,181 and purchase of WAHA of $19,772 were the main components of our negative investing cash flow for the year ended September 30, 2022.
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 this non-GAAP financial measure that exclude 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.
Management believes that providing this non-GAAP financial measure that excludes these items allows for meaningful comparisons between the Company's core business operating results and those of other companies, and provides 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 measure may not be directly comparable to similar measures provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently.
Results of Operations for the Year Ended September 30, 2022 and 2021 Bitcoin Mining Operations Bitcoin mining revenue We earned $130,999,686 in revenues during the year ended September 30, 2022, which was an increase of $92,153,053, or 237%, as compared with $38,846,633 in revenues for the year ended September 30, 2021 primarily due to increase in revenues from our bitcoin mining operations.
Results of Operations Bitcoin mining revenue We earned $168,121 in revenues during the year ended September 30, 2023, which was an increase of $37,121, or 28%, as compared with $131,000 in revenues for the year ended September 30, 2022 primarily due to increase in revenues from our bitcoin mining operations.
The increase in the quantity of bitcoin mined is primarily based on the increased number of miners in operation which increased to approximately 42,000 as of September 30, 2022.
The increase in the quantity of bitcoin mined was primarily driven by the increased number of miners in operation which almost doubled to approximately 88,000 as of September 30, 2023 from 47,000 as of September 30, 2022.
The total costs and expenses for the year ended September 30, 2022 increased to $26,900,776 from $23,725,506 for the year ended September 30, 2021 primarily due to impairment expenses related to the energy business and severance related payroll expenses.
The total costs and expenses for the year ended September 30, 2023 decreased to $6,071 from $26,901 for the year ended September 30, 2022 primarily due to impairment expenses related to the energy business and severance-related payroll expenses recognized in the prior year.
Cost of revenues (exclusive of depreciation and amortization expense) Our cost of revenues were $41,233,650 for the year ended September 30, 2022, an increase of $35,970,621, or 683%, as compared with cost of revenues of $5,263,029 for the year ended September 30, 2021.
Cost of revenues (exclusive of depreciation and amortization expense) Our cost of revenues were $93,580 for the year ended September 30, 2023, an increase of $52,346, or 127%, as compared with cost of revenues of $41,234 for the year ended September 30, 2022.
Interest expense in the current fiscal year ended September 30, 2022 also increased by $932,099 to $1,077,827 from $145,728 in the prior year comparable period.
Interest expense in the fiscal year ended September 30, 2023 also increased by $1,899 to $2,977 from $1,078 in the prior year comparable period.
Our contractual obligations primarily consist of cancelable purchase commitments with various parties to purchase goods or services, primarily miners and equipment, entered into in the normal course of business and operating leases. The Company also has contractual obligations outside the normal course of business related to acquisitions deemed to be business combinations.
Our contractual obligations primarily consist of cancelable purchase commitments with various parties to purchase goods or services, primarily miners and equipment, entered into in the normal course of business, loans and both finance and operating leases. We regularly evaluate opportunities to expand our business, including through potential acquisitions of businesses or assets.
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 years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.
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 interim and fiscal year ended September 30, 2024.
Our management does not consider adjusted EBITDA to be a substitute for, or superior to, the information provided by GAAP financial results.
Although management utilizes internally and presents adjusted EBITDA, we only utilize that measure supplementally and do not consider it to be a substitute for, or superior to, the information provided by GAAP financial results.
Payroll expenses Payroll expenses increased to $40,920,163 for the year ended September 30, 2022 from $21,181,905 for the same period ended September 30, 2021. Our payroll expenses include all compensation related expenses for our employees and mainly includes salaries, wages, payroll related taxes and benefits and non-cash stock-based compensation.
Our payroll expenses include all compensation related expenses for our employees and mainly includes salaries, wages, payroll-related taxes and benefits and non-cash stock-based compensation. Payroll expenses, excluding non-cash stock-based compensation, were $21,572 the year ended September 30, 2023, representing an increase of 127% from $9,493 in the prior year ended September 30, 2022.
Other impairment expense (related to bitcoin) Impairment expense in the amount of $12,210,269 was recognized for the year ended September 30, 2022 an increase of $5,602,193 as compared to $6,608,076 for the year ended September 30, 2021. The impairment expense consists of bitcoin impairments due to the general decrease in bitcoin prices during the year.
Other impairment expense (related to bitcoin) Impairment expense in the amount of $7,163 was recognized for the year ended September 30, 2023 a decrease of $5,047 as compared to $12,210 for the year ended September 30, 2022.
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. See "Forward-Looking Statements." Business Overview We are a sustainable bitcoin mining operator that owns and operates facilities as well as holds contracts with co-location and hosting operators.
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. See "Forward-Looking Statements." Business Overview We are a bitcoin mining company. We independently own and operate five data centers in Georgia for a total developed capacity of 230 MW.
Adjusted EBITDA 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 39 in comparison to other companies; and (iv) and impacts related to discontinued operations that would not be applicable to our future business activities.
Our non-GAAP "Adjusted EBITDA" excludes (i) impacts of interest, taxes, and depreciation; (ii) our share-based compensation expense, unrealized gains/losses on securities, and changes in the fair value of contingent consideration with respect to previously completed acquisitions, all of which are 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) non-cash impairment losses related to long-lived assets (including goodwill); (iv) realized gains and losses on sales of equity securities, the amounts of which are directly related to the unrealized gains and losses that are also excluded; (v) legal fees related to litigation and various transactions, which fees management does not believe are reflective of our ongoing operating activities; (vi) gains and losses on disposal of assets, the majority of which are related to obsolete or unrepairable machines that are no longer deployed; (vii) gains and losses related to discontinued operations that would not be applicable to our future business activities; and (viii) severance expenses. 48 We previously excluded non-cash impairment losses related to bitcoin and realized gains and losses on sales of bitcoin from our calculation of adjusted EBITDA but have determined such items are part of our normal ongoing operations and will no longer be excluding them from our calculation of adjusted EBITDA.
Our cash flows from financing activities for the year ended September 30, 2022 consisted primarily of proceeds from underwritten offering of $125,047,987 and proceeds from equipment backed loan of $19,620,356.
Our cash flows from financing activities for the year ended September 30, 2022 consisted of $125,048 in proceeds from offerings (17,740,081 shares at a weighted average price of $7.05 per share), and proceeds from equipment backed loan of $19,620.
Amortization expense for the year ended September 30, 2022 was $1,963,328, a decrease of $386,230, or 24%, from $1,577,098 for the prior year ended September 30, 2021 Other Income (Expenses) Other expense was $2,224,472 for the year ended September 30, 2022, compared with other income of $3,669,015 for the year ended September 30, 2021, which is a variance of $5,893,487.
Amortization expense for the year ended September 30, 2023 was $2,113, an increase of $150, or 8%, from $1,963 for the prior year ended September 30, 2022. Other Income (Expenses) Other expense was $260 for the year ended September 30, 2023, compared with $2,225 for the year ended September 30, 2022, which is a variance of $1,965.
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 June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on October 1, 2020 (“ASU 2016-13”).
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on October 1, 2020 (“ASU 2016-13”).
Our total current liabilities and total liabilities as of September 30, 2022 were $34,040,775 and $48,612,961, respectively. We had a working capital of $16,735,199 as of September 30, 2022. In addition, we have access to equity financing through our At-the-Market ("ATM") offering facility and debt financing through the lending arrangement we entered into in April 2022.
We had a working capital of $28,117 as of September 30, 2023. In addition, we have access to equity financing through our at-the-market offering facility and debt financing through the lending arrangement we entered into in April 2022. Material Cash Requirements We are a party to many contractual obligations involving commitments to make payments to third parties.
The cash used in the operating activities of the energy segment (discontinued operations) for the year ended September 30, 2022 was $6,362,067, as compared to cash used of $11,827,102 for the year ended September 30, 2021.
In fiscal year ended September 30, 2022, we experienced significant cash outflows from our energy segment, which is a significant reason the Company decided to exit the energy business segment. The cash used in the operating activities of the energy segment (discontinued operations) for the year ended September 30, 2022 was $6,362.
Depreciation expense increased by $39,676,525, or 536%, during the year ended September 30, 2022, to $47,081,550 from $7,405,025 due to increase in mining related equipment being placed in service during the comparative period.
Depreciation and amortization Depreciation and amortization expense increased to $120,728 for the year ended September 30, 2023 from $49,045 for the same period ended September 30, 2022, an increase of $71,683. 47 Depreciation expense increased by $71,533, or 152%, during the year ended September 30, 2023, to $118,615 from $47,082 due to an increase in miners and mining-related equipment being placed in service during the comparative period.
Our use of net cash in operating activities during the year ended September 30, 2021 were primarily driven by net loss from continuing operations for the period of $8,229,162, bitcoin mining of $38,846,633, and unrealized gain on derivative asset of $2,790,387, offset by stock based compensation of $8,546,712, depreciation and amortization of $9,336,941, impairment of bitcoin of $6,608,076, sale of bitcoin of $11,443,132, and increase in accounts payable and accrued liabilities of $4,246,445.
Our net cash provided by operating activities during the year ended September 30, 2022 was primarily driven by net loss from continuing operations for the period of $40,089, bitcoin mining of $131,000, and unrealized gain on derivative asset of $1,950, offset by stock based compensation of $31,466, depreciation and amortization of $49,045, impairment of bitcoin of $12,210, proceeds from the sale of bitcoin of $133,201, and an increase in accounts payable and accrued liabilities of $16,040.
Other expense for the year ended September 30, 2022 consisted primarily of an unrealized loss on derivative security of $1,949,770 as compared to gain for the same prior year period of $2,790,387. This change between the periods is the result of a change in fair value of the underlying instrument.
We recognized a gain on the change in fair value of contingent consideration of $2,484 for the year ended September 30, 2023 relating to the Mawson acquisition. Unrealized loss on derivative security of $259 was recorded for the year ended September 30, 2023 as compared to loss for the same prior year period of $1,950.
Cash provided by operating activities increased significantly primarily due to increased sales of bitcoin. During the fiscal year ended September 30, 2022, the Company mined significantly more bitcoin than the prior year, resulting in greater cash proceeds generated.
Cash provided by operating activities decreased significantly primarily due to an increase in the number of bitcoin held as of the year ended September 30, 2023 compared to as of the year ended September 30, 2022.
Realized gain on sale of bitcoin Realized gain on sale of bitcoin decreased to $2,567,101 for the year ended September 30, 2022 from a realized gain of $3,104,378 for the year ended September 30, 2021 due to the decrease in bitcoin prices during the period.
Realized gain on sale of bitcoin Realized gain on sale of bitcoin decreased to $1,357 for the year ended September 30, 2023 from a realized gain of $2,567 for the year ended September 30, 2022. Realized gains on sale of bitcoin is the difference between the sales proceeds of bitcoin and the carrying amount.
Other professional fees, namely accounting, audit and consulting, were $3,755,338 for the year ended September 30, 2022 as compared to $2,041,580 for the year ended September 30, 2021 an increase of $1,713,758. This increase was primarily attributable to additional activity in litigation and transactional costs.
Legal expenses were $7,676 for the year ended September 30, 2023, as compared to $2,714 in the prior year. This increase was primarily attributable to $3,800 in litigation settlement with Darfon America Corp and additional activity in litigation and transactional costs.
Our sale of bitcoin of $133,201,006, depreciation and amortization of $49,044,877, stock-based compensation of $31,464,994, and impairment of bitcoin of $12,210,269 were the main components of our operating cash flow for year ended September 30, 2022, offset primarily by the increase in bitcoin mining of $130,999,686, net loss of $57,326,354, and increase in prepaid and other current assets of $2,393,320.
Our proceeds from the sale of bitcoin of $116,271 and adding back non-cash expenses, such as depreciation and amortization of $120,728, stock-based compensation of $24,142 and impairment of bitcoin of $7,163 were the main components of net cash provided by operating activity for the year ended September 30, 2023, offset primarily by the net cash used in operating activities of bitcoin mining of $168,121, net loss of $136,589, and increase in prepaid and other current assets of $4,320.
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.
As the Company was a smaller reporting company at the time of issuance of the ASU, the Company adopted the ASU effective October 1, 2023, and the adoption of the new standard did not have a material impact on the Company's results of operations or cash flows.
Operating Activities from Continuing Operations Operating activities provided $77,806,160 in cash for the year ended September 30, 2022, as compared to cash outflows of $12,159,108 for the same period ended September 30, 2021.
For information regarding our contractual obligations, see Contractual Obligations below and refer to Note 17, Commitments and Contingencies included elsewhere in our Notes to Consolidated Financial Statements. 50 Operating Activities from Continuing Operations Net cash used in operating activities was $31,720 for the year ended September 30, 2023, as compared to net cash provided by operating activities of $77,806 for the same period ended September 30, 2022.
We grant stock-based awards to certain employees as a significant portion of our payroll related costs. Stock-based compensation, which is a non-cash expense, was $31,464,994 for the year ended September 30, 2022, an increase of $22,918,282, or 268%, from $8,546,712 the prior year ended September 30, 2021.
Stock-based compensation, which is a non-cash expense, was $24,142 for the year ended September 30, 2023, a decrease of $7,324, or 23%, from $31,466 the prior year ended September 30, 2022.
As of September 30, 2022, we had total current assets of $50,775,974, consisting of cash and cash equivalents, bitcoin, accounts receivable, inventory, prepaid expenses and other current assets, investment in debt security and related derivative asset, current assets held for sale, and total assets in the amount of $452,624,772.
As of September 30, 2023, we had total current assets of $102,172, primarily consisting of cash and cash equivalents, bitcoin, inventory, and prepaid expenses and other current assets, and total assets in the amount of $761,578. Our total current liabilities and total liabilities as of September 30, 2023 were $74,055 and $84,351, respectively.
Professional fees Professional fees, which consists primarily of legal, accounting and consulting fees, were $6,469,064 for the year ended September 30, 2022, a slight decrease of $68,998, or 1%, from $6,538,062 for the year ended September 30, 2021. Legal expenses were $2,713,726 for the year ended September 30, 2022, as compared to $4,496,482 in the prior year.
The hosting fees remained consistent for both fiscal years since the increase in KWHs utilized was offset by the decrease in the rate charged per KWH. 46 Professional fees Professional fees, which consists primarily of legal, accounting and consulting fees, were $10,869 for the year ended September 30, 2023, an increase of $4,400, or 68%, from $6,469 for the year ended September 30, 2022.
As a result, the net loss from discontinued operations for the year ended September 30, 2022 increased to $17,236,961 from $13,582,848 in the prior year ended September 30, 2021. The Company expects that most costs related to discontinued operations have been incurred as of the period ended September 30, 2022 and future period costs will significantly decline in subsequent periods.
As a result, the net loss from discontinued operations for the year ended September 30, 2023 decreased to $4,429 from $17,237 in the prior year ended September 30, 2022. The Company does not expect any substantial activity to be recorded to discontinued operations in subsequent periods.
We also incurred hosting fees of $22,707,539 for the year ended September 30, 2022, an increase of $20,761,197 as compared to $1,946,342 for the year ended September 30, 2021, which was the result of our co-location agreement with Coinmint.
We also incurred hosting fees of $22,974 and profit sharing fees of $3,991 for the year ended September 30, 2023, an increase of $266 and a decrease of $37, respectively, as compared to $22,708 and $4,028, respectively for the year ended September 30, 2022.
Results of Discontinued Operations Revenues from our former energy segment, which is now classified as discontinued operations remained fairly consistent for fiscal year ended September 30, 2022 from fiscal 2021, $9,667,290 and $10,151,010 respectively.
Net Loss from Continuing Operations Net loss from continuing operations for the year ended September 30, 2023 was $132,160 as compared to net loss of $40,089 for the year ended September 30, 2022 for the reasons discussed above. Results of Discontinued Operations Revenues from our former energy segment decreased year over year as expected to $158 from $9,667.
Removed
A bitcoin mining company uses specialized computers to verify transactions on the bitcoin blockchain. Without mining, there would be no bitcoin. Prior to June 2022, we also operated in a specialized energy industry that provided advanced energy technology solutions to commercial and residential customers.
Added
We are developing an additional 150 MW at our data center in Sandersville, GA. We have a partner in Massena, NY, that hosts 50 MW for us. We design our infrastructure to responsibly support bitcoin, the world’s most important digital commodity and an essential tool for financial independence and inclusion.
Removed
Effective June 30, 2022, the Company deemed its energy operations to be discontinued operations due to its strategic decision to strictly focus on its bitcoin mining operations and divest of its energy assets. Accordingly, the Company now solely operates in one business segment.
Added
We strive to leave the planet better than we found it by investing in communities that source low-carbon energy, like wind, solar, nuclear, and hydro. We endeavor to cultivate trust and transparency among our employees, the communities we operate in, and the people around the world who depend on bitcoin.
Removed
The energy segment has now been classified as held-for-sale and will be discussed in this management discussion & analysis within the "Results of Discontinued Operations" section. On November 18, 2022, we disposed of the majority of our intellectual property and software related to the energy segment.
Added
Bitcoin Mining Bitcoin was introduced in 2008 with the goal of serving as a digital means of exchanging and storing value. Bitcoin is a form of digital currency that depends upon a consensus-based network and a public ledger called a “blockchain,” which contains a record of every bitcoin transaction ever processed.
Removed
We are currently working to sell the remaining assets and inventory of the energy segment, but currently plan to maintain ownership of the patents related to the gasifier technology.
Added
The bitcoin network is the first decentralized peer-to-peer payment network, powered by users participating in the consensus protocol, with no central authority or middlemen, that has wide network participation. The authenticity of each bitcoin transaction is protected through digital signatures that correspond with addresses of users that send and receive bitcoin.
Removed
This increase was due to a full year of data center operations during the fiscal year ended September 30, 2022, whereas the prior fiscal year saw data center operations begin in December 2020 as the result of the ATL acquisition.
Added
Users have full control over remitting bitcoin from their own sending addresses. All transactions on the bitcoin blockchain are transparent, allowing those running the appropriate software to confirm the validity of each transaction.
Removed
The increases in both utilities and hosting fees were due to the increases in the volume of mining equipment installed in both our owned and co-locations as well as a general increase in the cost of each MW utilized.
Added
To be recorded on the blockchain, each bitcoin transaction is validated through a proof-of-work consensus method, which entails solving cryptographic functions to validate transactions and post them on the blockchain. This process is called mining.
Removed
Payroll expenses were $9,492,676 the year ended September 30, 2022, representing a decrease of 29% from $13,450,299 in the prior year ended September 30, 2021. This decrease was primarily due to the Company’s exit from the energy business, some costs of which were classified as discontinued operations.
Added
Miners are rewarded with bitcoins, both in the form of newly created bitcoins and fees in bitcoin, for successfully solving for the cryptographic function and providing computing power to the network. Factors such as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining.
Removed
Depreciation and amortization 38 Depreciation and amortization expense increased to $49,044,877 for the year ended September 30, 2022, from $8,982,123 for the same period ended September 30, 2021, an increase of $40,062,754.
Added
As of September 30, 2023, our operating mining units were capable of producing over 9.6 EH/s of computing power. In bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a computer processes transactions on the bitcoin network.
Removed
This increase was due to the Company increasing the amount of long-term debt during the fiscal year ended September 30, 2022 Net Loss from Continuing Operations Net loss from continuing operations for the year ended September 30, 2022 was $40,089,393 as compared to net loss of $8,229,162 for the year ended September 30, 2021.
Added
We expect to continue increasing our computing power through 2024 and beyond as we expand our infrastructure at our owned sites in the State of Georgia, seek strategic acquisition targets, and through strategic co-location agreements. As of the date of this filing, December 1, 2023, we are capable of producing 10.0 EH/s of computing power.
Removed
We are providing non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (“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; Adjusted EBITDA is a supplemental financial measure and is not a measurement of financial performance under generally accepted accounting principles in the United States (“GAAP”) and, as a result, this supplemental financial measure may not be comparable to similarly titled measures of other companies.
Added
A company’s computing power measured in hashrate is generally considered to be one of the most important metrics for evaluating bitcoin mining companies. We owned approximately 113,500 miners as of September 30, 2023, of which approximately 88,000 were in service and the remainder mainly pertains to new machines ready to install in the Sandersville expansion.
Removed
Management uses adjusted EBITDA, a non-GAAP financial measure internally to help understand, manage, and evaluate our business performance and to help make operating decisions. 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.

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