UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $65,004,260$25,096,771

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 33,908,89439,740,596 shares as of January 11,9, 2018

 TABLE OF CONTENTS

PART I

Item 1. Business

Our Business

We are in the business of acquiring, licensingproviding advanced energy software and marketing patentscontrol technology that enables a plug-and-play enterprise solution to modern energy challenges. Our services consist of intelligent energy monitoring and technologycontrols, microgrid design and engineering, microgrid consulting services, and turn-key microgrid implementation services. Our software allows energy users to createobtain resiliency and economic optimization. Our software is uniquely capable of enabling a microgrid to be scaled to the user's specific needs and can be widely implemented across commercial, industrial, military and municipal deployment.

Integral to our business is our mPulse and mVSO software platforms (the “Platforms”). When the Platforms are implemented on a customer’s power system they are able to control the distributed energy resources on site to provide secure, sustainable energy often at significant cost savings for our energy customers. Our missionThe Platforms allows customers to efficiently manage renewable energy generation, other distributed energy generation technologies including energy generation assets, energy storage assets, and energy consumption assets. By having autonomous control over the distributed facets of energy usage and energy storage, customers are able to reduce their dependency on utilities, thereby keeping energy costs relatively constant over time. The overall aim is to lead a revolution in transforming globaltransform energy consumers into a clean, affordable, and sustainable infrastructureenergy producers by supplying power that promotes socio-economic upliftment.anticipates their routine instead of interrupting it.

Last yearWe also own patented gasification technologies. Our technology converts any organic material into SynGas. SynGas can be used as clean, renewable, environmentally friendly, warming fuel for power plants, motor vehicles, and as feedstock for the generation of DME (Di-Methyl Ether).

As previously disclosed, we entered into an asset purchase agreement and amendment thereto (the “Purchase Agreement”), and acquired substantially allplan to continue our focus on the CleanSpark side of the assets of CleanSpark Holdings, LLC. As a resultbusiness in 2019, as opposed to expending significant efforts on the Gasifier side of the Purchase Agreement and the acquisition of the assets, we have taken over the CleanSpark business as another opportunity in the energy sector, along with our existing Gasifier business. We believeplan to continue our efforts to better our technology, service existing customers and market our System (defined below) to prospective clients. We feel that that synergies created from these businesses will strengthen our overall capacity to obtain financing, increase our customer base, open new distribution channels and increase our competitive strength inthis focus would provide the energy market, all to the ultimate benefit ofbest opportunity for our shareholders.

Our Flex Power SystemDistributed Energy Management Business

Integral to CleanSpark’sour business is the Flex Power Systemour Distributed Energy Management Business (the “System”“DER Business”), which is composed. The main assets of our DER Business include our propriety software systems (“Systems”) and microgridalso our engineering and methodology trade secrets, which we acquired in the acquisition of the assets.secrets. The MicrogridDistributed Energy systems and Microgrids that utilize our SystemSystems are capable of providing secure, sustainable energy with significant cost savings for its energy customers. The SystemSystems allows customers to design, engineer, construct and then efficiently manage renewable energy generation, storage and consumption. By having autonomous control over the multiple facets of energy usage and storage, customers are able to reduce their dependency on utilities, thereby keeping energy costs relatively constant over time. The overall aim is to transform energy consumers into intelligent energy producers by supplying and managing power in a manner that anticipates their routine instead of interrupting it.

Around the world, the aging grid is becoming unstable and unreliable due to increases in loads and lack of new large-scale generation facilities. This inherent instability is compounded by the push to integrate a growing number and variety of renewable but intermittent energy generators and advanced technologies into outdated electrical systems. Simultaneously, defense installations, industrial complexes, communities, and campuses across the world are turning to virtual power plants and microgrids as a means to decrease their reliance from the grid, reduce utility costs, utilize cleaner power, and enhance energy security and surety.

The convergence of these factors has createdis creating a “perfect storm” in the power supply optimization and energy management arena. Efficiently building and operating the macro-distributed energy management systems and microgrids of tomorrow, while maximizing the use of sustainable energy to produce affordable, stable, predictable, and reliable power on a large scale, is a significant opportunity that first-movers can leverage to capture a large share of this emerging global industry.

A microgrid is comprised if any number of generation, energy storage, and smart distribution assets that serve a single or multiple loads, both connected to the utility grid and separate from the utility grid “islanded.” In the past, distributed

energy management systems and microgrids have consisted or off-grid generators organized with controls to provide power where utility lines cannot run. Today, modern distributed energy management systems and microgrids integrate renewable energy generation systems (REGS) with advanced energy storage devices and interoperate with the local utility grid. Advanced autonomous cyber-secure microgrids controls relay information between intelligent hardware and localized servers to make decisions in real-time that deliver optimum power where it is needed, when it is needed.

Our System isSystems create an integrated microgriddistributed energy management control platform that seamlessly integrates all forms of energy generation with energy storage devices and controls facility loads to provide energy security in real time free of cyber threats. Able to interoperate with the local utility grid, the System bringsSystems bring users the ability to choose when to buy or sell power to and from the grid, enabling what we believe is the most cost effective power solution that exists on the current market.

Our System isSystems are ideal for commercial, industrial, mining, defense, campus and residential users and ranges in size from 4KW to 100MW and beyond and can deliver power at or below the current cost of utility power.

Our services consist of turn-key distributed energy and microgrid implementation services, microgiddistributed energy microgrid system design and engineering, project development consulting services and solar photovoltaic installation and consulting. The work is performed under fixed price bid contracts, and negotiated price contracts.

mPulse Software Suite

mPulse is a modular platform that enables fine-grained control of a Microgrid based on customer operational goals, equipment and forecasts of load and generation. mPulse performs high-frequency calculations, threshold-based alarming, execution of domain-specific business rules, internal and external health monitoring, historical data persistence, and system-to-operator notifications. The modular design increases system flexibility and extensibility. In addition, the deployment of the mPulse system follows a security-conscious posture by deploying hardware-based firewalls as well as encryption across communication channels. mPulse allows configuration for site-specific equipment and operation and provides a clean, informative user interface to allow customers to monitor and analyze the data streams that describe how their microgrid is operating.

mPulse supports CleanSpark’sour innovative fractal approach to microgrid design, which enables multiple microgrids on a single site to interact in a number of different ways, including as peers, in a parent-child relationship, and in parallel or completely disconnected. Each grid can have different operational objectives, and those operational objectives can change over time. Any microgrid can be islanded from the rest of the microgrid as well as the larger utility grid. The mPulse software can control the workflow required in both the islanding steps as well as the reconnecting steps of this maneuver and coordinate connected equipment such that connections are only made when it is safe to do so. The mPulse software has proven to be robust and reliable, operating successfully at the Camp Pendleton FractalGrid installation continuously for over 3 years with minimal maintenance and support required.

Dynamic Network Analysis Software Suite (DNA)Microgrid Value Stream Optimizer (mVSO)

The Dynamic Network Analysis (DNA) Microgrid Value Stream Optimizer(mVSO)tool provides a robust distributed energy and microgrid system modeling solution. DNAmVSO takes utility rate data and load data for a customer site and helps automate the sizing and analysis of potential microgrid solutions as well as providing a financial analysis around each grid configuration. DNAmVSO uses historical weather data to generate projected energy generation from PV arrays and models how storage responds to varying operational modes and command logics based upon predicted generation and load curves. DNAmVSO analysis multiple equipment combinations and operation situation to determine the optimal grid configuration for a site based on the financials, equipment outlay, utility cost savings, etc., to arrive at payback and IRR values. This ultimately provides usthe user with data to design a distributed energy and/or microgrid system that will meet the customers’ performance benchmarks.

We recently increased our internal team of software developers in August of 2017.  Our existing systems (mPulse1.0/DNA1.0) works well, but integrates a number of codes and requires some custom engineering for each client implementation. Our upgraded software (mPulse 2.0/DNA2.0) is expected to provide a more streamlined, maintainable, self-configuring, and scalable solution for our clients and allow us to more quickly and profitability implement our solution across multiple and rapidly increasing customer sites. We are developing a solution that can be implemented with either basic or advanced features to meet the needs of our customers and will be launching the features across our platform upon completion.  We expect the Version 22.0 improvements upon Version 1 software features to be completed as outlined below:

Planned improvements

On September 27, 2017, the Companywe launched itsthe development of mPulse 2.0 and DNAmVSO 2.0. These improvements are being built into our existing software platforms and add significant improvements, which focus on positioning, integration, focus and quality, as outlined below.

Positioning

When mPulse originally was developed, a main focus of the platform and the industry was resiliency of microgrid operation, specifically in military contexts. Since that time, the microgrid landscape has continued to evolve, and there is growing opportunity within the commercial and industrial space as the markets in these spaces desire microgrids capable of obtaining the highest economic advantage.

Further, this growing focus on economic advantage is in line with the continued market evolution toward an open energy market at regional levels. CleanSpark wantsWe want to be well positioned to enter into this market at each step of its availability, from responding to demand response requests all the way through participating in ancillary grid service markets and fully open transactive energy markets as regulation matures. To position ourselves, the mPulse platform operation is being improved to mirror the predicted energy market progression by implementing internal markets at each level of the system.

In these internal markets, energy producing assets are modeled as sellers, and energy consuming assets are modeled as buyers, with the market playing matchmaker between the two and virtually “selling” available energy to the highest bidder, thereby satisfying the energy loads at the highest economic advantage for both participants at any given moment.

The internal energy market running at our customers’ sites will take daily feeds of production and load forecasts from the platform to set up the daily market parameters, then ingest a stream of current positions of both buyers and sellers as well as their individual pricing information, which is calculated based on the details of the energy rate under which those consumers operate. Consumers bid into the market along the schedule of the specific rate structure under which those loads operate, with bids including the calculated value of energy and power based on that rate and the predicted total use and power profile during the time period of that bid. Based on the predicted generation profile and the other active bids currently being satisfied, the market either fills or cannot fill the newly received bid, and based on the market’s feedback, the consumer’s operation mode and setpoint will change, which will determine the actual control commands sent to related equipment.

This market scenario is mirrored at every level, from an individual node potentially consisting of only one producer and one consumer (power source and meter, respectively), to a higher-level node, in which other nodes participate as either net producers or net consumers, to the site level, and even up to regional level, where sites may participate in the market directly. At each level, details of the level below are aggregated and abstracted away, so each level operates in a simple and self-similar way, mirroring the physical construction of the FractalGrid. These markets shine in optimization scenarios, especially around times of just enough supply or even slight scarcity, which are expected to allow CleanSparkus to reap the maximum economic value for our customers even in the case of undersized grids. . In addition, this flexibility allows for ease of integration for new market participants at each level as regulation matures to support further Demand Response programs, ancillary service markets, and eventually peer-to-peer transactive energy.

Integration

While DNA has been invaluable in evaluating sites for potential solutions and then creating detailed proposals for those sites, it currently exists as a siloed application. The two tools will be integrated and share fundamental portions of the platform, which will enable increased consistency, performance, feedback and overall system improvements.

At its root, DNA is a simulation platform that models the interactions of generation, load, and storage. This simulation uses customer-supplied or CleanSpark-derived load data, generation forecasts, and modeled storage behavior to take a virtual site step by step through a time period with different operation and equipment scenarios. Ultimately, this gives us data to produce a proposal and performance benchmarks that we may be obligated to meet during actual site operation. In order to maximize the probability of meeting those performance obligations, we will use the very same operational logic within the virtual site simulation, which will enable us to embed the economic optimization market functionality within our proposal tool. This not only will help ensure our ability to produce the results we predict, it will also help us understand the maximum value our system can provide to the customer from the start, which may increase the number of opportunities open to us to pursue, unlocking more business.

By integrating the architectural patterns and cloud operating platform of DNA and mPulse we will increase performance of both tools, which will enable us to run large numbers of simulation scenarios in parallel, increasing our analysis throughput. The elastic nature of the cloud will facilitate our storing much more data which includes both information used as inputs to DNA simulations as well as the simulation results. This data will quickly grow into a wealth of data that will enable feedback into the model as well as continuous refinement of the parameters that define optimal sites we should pursue, allowing us to target our business development efforts.

Focus

For mPulse 2.0, we are focusing on furthering the development of the economic optimization logic in the platform, including an increased push toward deep learning algorithms and more effective forecasting both on solar generation and facility load.

Quality

We employ a quality-first mindset in all aspects of our software design. From a software architecture point of view, this translates in designing for the maintainability, extensibility, scalability, availability, accessibility, and deployability of the system.

These planned improvements paired with our design and engineering methods and experience are intended to help keep us on the leading edge of the microgrid industry. As of the date of this filing, we have offered a beta release of mPulse 2.0 to a limited number of customers and we are testing system performance with these customers as feature sets are released of the next two quarters. We plan to make a full release of mPulse to all customers in the first quarter of 2019. As of the date of this filing, we intend to release VSO 2.0 to customers in the second quarter of 2019.

These planned improvements paired withWe were granted a new United States Patents on April 10, 2018 protecting our designsoftware systems.  The patent, "Establishing Communication and Power Sharing Links Between Components of a Distributed Energy System, US 9,941, 696 B2," is a patent that specifically addresses our engineering methods and experience should help keep CleanSpark on the cutting edgedata-analytics technologies, processes and procedures.  The patent covers our ability to receive data from a plurality of sources within a microgrid, which is then analyzed to forecast power needs across the microgrid, industry.or a combination of multiple 'fractal' microgrids, and then determining whether or when to share power with the requesting module.

MicroGrid Development Projects

The California Energy Commission awarded a grant to Harper Construction Company, Inc. in July 2013 to support a microgrid technology demonstration project. CleanSpark wasWe were subcontracted to provided design, development, integration, and installation services for the FractalGrid at the School of Infantry in the 52 Area of Marine Corps Base Camp Pendleton. The Project was subsequently transferred to CleanSparkus for consideration and an agreement to indemnify Harper Construction for all future responsibilities of maintenance, operations and warranty.

The project included integration of our proprietary software and controls platform with a variety of energy storage technologies. The system utilizes solar energy generated by pre-existing existing fixed-tilt solar photovoltaic panels and fifteen dual axis tracking concentrated photovoltaic units. Our distributed controls combine the generation with energy storage technologies to create four separate microgrids that self-align together to create a larger microgrid that ties directly into the larger utility grid at the 12kV level, allowing the base to consume energy from the most reliable, affordable source at any given time. The system provides a 100% renewable and sustainable solution to energy security.

In the event of an outage or other energy surety threat, the software can autonomously separate the microgrids from the utility and the controls operate them independently in “island” mode, without interrupting service to critical circuits. Once energy from the grid is stabilized, our platform reconnects the microgrid to the utility. Each individual fractal microgrid can work independently or in concert as the larger 1.1MW FractalGrid, sharing data and energy throughout the group to improve efficiency, protect critical circuits, manage supply and demand, and allow for maintenance or repairs, as needed. The entire installation provides the Marine Corps and Department of the Navy with reliable energy security with built in cyber defense.

In May of 2017 we completed the first and second stages of a contract for $75,000 for engineering and design and $60,000 for optimization and control logic development. In July of 2017, we were awarded the contract to construct the Microgrid we designed. The $900,000 sub-contract awarded by Bethel-Webcor JV is to install a turn-key advanced microgrid system at the U.S. Marine Corps Base Camp Pendleton. The contract is in direct support of the United States Department of Navy's communication information system (CIS) operations complex that was recently awarded to the Joint-Venture. We anticipate the requirement

The Company begin on-site work for this project in February of $150,000 in project financing, line of credit or similar funding2018 and expects to complete this project. Asits scope of the date of this filing we anticipate the Company will execute on the $900,000 construction contract between February 2018 and October 2018.work in early 2019.

In May of 2017, we were able to engineer, design and install a fully off-grid, triple-redundant power system at a private, residential estate in Southern California.

InOn October of 2017, Green Dragon,2, 2018, we executed a Controlled Environment Agriculture Cannabis Company basedProfession Services Agreement with Macerich to perform engineering, design and consultation services and follow-on construction work to install a Microgrid designed by our engineering team which utilized our mVSO software in North Hollywood, California, has contracted us as theircreating the system design. The system will be controlled by our mPulse controller upon completion. The microgrid solutions provider. is expected to be located at Macerich’s Thousand Oaks facility in California.

The first phaseAgreement provides that we will be compensated in stages, and each stage requires that Macerich provide written authorization to proceed. The agreement further requires that an additional Design Build Contract be executed for the construction portion of the Green Dragon microgrid will employ solar, energy storage,project. At this time this agreement only specifically authorizes an initial $88,250 for consultation and advanced controls to immediately reduceengineering services, the monthly electricity billbalance of the indoor grow facility$18 million microgrid installation contract falls under later stages. These additional stages require Macerich’s written authorization to proceed with the overall project. This amount may be subject to further adjustment if the customer requires a change in scope prior to providing written authorization to proceed with construction. A change in scope could be triggered by upa variety of reasons not limited to 82%. Keypermitting restrictions, utility restrictions and other unforeseen circumstances. We expect to receive written permission to proceed on all stages of the system's aggressive payback schedule is CleanSpark's mPulse software that will virtually eliminatecontract in the demand charges which previously accounted for almost 50%first quarter of Green Dragon's monthly bill.2019.

These projects are examples of the far reaching capabilities of our System and the variety of applications that are available as plug and play solutions. We are pursuing additional microgrid projects and anticipate executing on the need for additional short-term project line of credit or other similar financing of upprojects being pursued in 2019 and 2020. There is no assurances, however, that we will obtain contracts to $750,000 over the next twelve months to effectively execute on these proposals.sustain our operations.

Our Gasifier BusinessAcquisitions

As an energy technology company, part of our business model is to assess our technologies, product offerings and business direction and determine whether any strategic acquisitions would benefit us.

As previously disclosed, on May 2, 2018, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Pioneer Custom Electric Products Corp., a Delaware corporation.

On December 27, 2018, the parties to the Purchase Agreement entered into a letter amendment (the “Amendment”) to extend the Termination Date from December 31, 2018 until on or before January 16, 2019. Under the Amendment, the parties agreed that, in addition to the other Closing conditions set forth in the Purchase Agreement, the obligation of the Company to consummate the transactions contemplated by the Purchase Agreement, is subject to Bank of Montreal releasing any Liens it holds on the Acquired Assets. The parties further agreed that they are entering into the extension to, amongst other things, allow the parties sufficient time to negotiate amendments to the business terms and structure of the transactions set forth in the Purchase Agreement.

We are still in discussions and negotiations with Pioneer, and we plan to disclose the final business arrangement in the coming days.

Our Gasifier Business

Integral to our existing business is the Gasifier. We own Patent Nos. 9,890,340B2, 9,359,567, 8,518,133 8,105,401 and 8,347,829protecting our gasification technology and process for using feedstock comprising gaseous fuel. Our technology converts any organic material into SynGas. SynGas can be used as clean, renewable, environmentally friendly, warming fuel for power plants, motor vehicles, and as feedstock for the generation of DME (Di-Methyl Ether). DME is the premier energy carrier and offers a range of important benefits:

Our Gasifier converts the following materials into clean, reusable, renewable, and affordable energy:

The process involves the grinding, drying, separating, mixing, and then pelletizing of solid waste. These pellets constitute the feedstock for the Gasifier. Gasifying the pellets produces SynGas. SynGas can be converted into multiple forms of energy including motor vehicle and jet fuels. The SynGas produced is so clean that it generally does not require hot-gas cleanup. SynGas is mostly hydrogen and carbon monoxide. Hydrogen and carbon monoxide are primary building blocks for fuels and chemicals. SynGas is a clean burning fuel suitable for use in duel-fuel diesel engines, gas turbines, and steam boilers.

We believe that our process willis capable of turn the world’s waste problem into an abundant, renewable resource of energy. Our production can be adapted to the specific energy requirements of a given area. Communities are expected to benefit from the countless options created including inexpensive green electric power for homes, clean-burning fuel for garbage trucks, street maintenance equipment, or for resale to other municipalities. Because of the modular nature of the components intrinsic to the process, the plant could provide one energy source, then be converted to provide a different energy product. Our facility could produce additional electric power during the peak demand part of the day and produce fuels during the rest of the day.

Our market segmentation is vast as we expect to apply our technology to anything that is carbon based. The markets for which we have focused our efforts include: the electric utility market, municipal waste, processing plants, the refining sector, stranded natural gas fields, and Canadian oil sands.

We have begun pursuing opportunities to utilize the assets and intellectual properties purchased. We aim to further develop these technologies in order to pursue licensing, manufacturing and direct sales agreements for our Gasifier technology.

The technologies and prototype will begin undergoingneed to undergo additional clinical lab testing to further establish its capability of producing large volumes of clean, renewable energy from any carbon compound (Municipal Solid Waste (MSW), Coal, Sewage Sludge) into clean Synthesis Gas. Our Gasifier is still under development and a commercially viable Gasifier is not expected to be sellable until the fourth quarter of 2018.we are able to expend additional resources on its testing and development. In December of 2014, we executed an agreement with Combustion Resources, LLCa third party to independently test our production model prototype. Combustion was engaged to independently test the Gasifer's performance and certify the results of its performance. Combustion Resources completed the initial stages of testing. Upon completion of the testing an initial white paper was published outlining the results and suggested improvements. We are preparing the suggested improvements and anticipate that the cost to complete these improvements will be between $150,000$250,000 and $250,000.$500,000. Upon completion of the improvement we will conduct an extended test run with an independent third party. We believe the results of these independent tests will provide the results needed to prove its commercial viability, at which time we would begin to actively market our Gasifier units.

We have not engaged in any significant negotiations to sell our Gasifier products to any major customers. Once completed, we intend to distribute our products through advertisements and sales calls on potential customers withdemonstrations of how the products work. We anticipate the need for a project financing partner, which we have not yet identified to support manufacturing and at least $250,000 in financing to support the required sales activities. The failure to acquire customers to generate revenues will negatively affect our financial performance and anticipate the need for at least $500,000 in financing over the next twelve months to execute on our business plans.

Competition

We face significant competition in the alternative energy and microgrid markets. Some of our competitors have substantially larger financial and other resources. Factors that affect our ability to further test a commercially viable Gasifier and upgrade our System include available funds,resource limitations, available information and our standards established for projected return on investment.

Integral to our business is its Distributed Energy Management Business (the “DER Business”), the main assets of our DER Business include our propriety software systems (“Systems”) and also our engineering and methodology trade secrets. The Distributed Energy systems and Microgrids that utilize our Systems are capable of providing secure, sustainable energy with significant cost savings for its energy customers. The Systems allows customers to design, engineer, construct and then efficiently manage renewable energy generation, storage and consumption. By having autonomous control over the multiple facets of energy usage and storage, customers are able to reduce their dependency on utilities, thereby keeping energy costs relatively constant over time. The overall aim is to transform energy consumers into intelligent energy producers by supplying and managing power in a manner that anticipates their routine instead of interrupting it.

MicrogridDistributed Energy Management Business Competition

Our FlexPower system assets isDER Business and software platforms are set up to compete against larger companies. The System is anOur integrated microgrid control platform that seamlessly integrates energy generation with energy storage devices and controls facility loads to provide energy security in real time. The system issystems are able to interoperate with the local utility grid and allows users the ability to obtain the most cost effectivecost-effective power for a facility. The system issystems are technology agnostic and can incorporate into multiple vendors and manufacturers products and legacy systems. The FlexPower system issystems are ideal for commercial, industrial, mining, defense, campus and community users ranging from 4 kw to 100 MW and beyond and can deliver power at or below the current cost of utility power. All of these attributes contribute to our ability to compete with the larger, more established competitors that have rely on their own manufactured products and hardware solutions.

Distributed Energy and Microgrid control technologies are new to the market and can be deployed in various formats. Eight technologies that are predominantly used in commercial applications and/or have been extensively studied are:

These current technologies of our competitors have a number of inherent problems:

The principal advantages of our System are:

Gasifier business competition

Our Gasifier system is set up to compete against larger gasification projects. Our modular concept allows for parallel processing so a facility could be easily expanded or reduced without risk or changing the basic structure by simply adding or removing module units; it also allows for multiple end product processing, producing electricity, ethanol, and fuels simultaneously, and for universal parts which reduces maintenance costs. This design factor solves repair and maintenance problems by simply shutting down the unit(s) to be repaired and bringing the reserve unit(s) online. All of these attributes contribute to our ability to compete with the larger, more established competitors that have large systems that require significant downtime for maintenance and repair.

Gasification technologies can incorporate any one of a number of Gasifiers. Eight gasification technologies that are predominantly used in commercial applications and/or have been extensively studied are:

These current technologies of our competitors have a number of inherent problems:

The principal advantages of our Gasifier are:

Intellectual Property

In relation to our Gasifier business, we own the following patents: Patent No. 9,359,567 ‘Gasification Method Using Feedstock Comprising Gaseous Fuels’; Patent No. 8,518,133 ‘Parallel Path, Downdraft Gasifier Apparatus and Method’; and Patent No. 8,105,401 ‘Parallel Path, DowndraftGasifier Apparatus and Method.’ ; Patent No. 8,347,829 Electrolytic Reactor and Related Methods for Supplementing the Air Intake of an Internal Combustion Engine

In relation to our microgrid business, we intend to file forown the following patents: Patent No. 9,941,696 B2 "Establishing Communication and Power Sharing Links Between Components of a Distributed Energy System, awarded April 10, 2018, is a revolutionary patent protection on our System. We continue to increase our internal software team to assist with improvementsthat specifically addresses CleanSpark's engineering and upgrades to our technology.data-analytics technologies, processes and procedures. The ability of ourstaff and outside consultants to improve the system will likely affect our continuedpatent covers CleanSpark's ability to apply for'receive data from a plurality of sources within a microgrid, which is then analyzed to forecast power needs across the microgrid, or a combination of multiple 'fractal' microgrids, and then determining whether or when to share power with the requesting module.

The second Patent, "Parallel Path Downdraft Gasifier Apparatus and Method, US 9,890, 340 B2", awarded February 13, 2018, further enhances CleanSpark's patent protection. There is no assurance that we will be able to obtain a patent on our System.

portfolio surrounding its proprietary gasification and waste-to-energy technologies.

Government Regulation

We are subject to federal, state and local laws and regulations governing environmental quality and pollution control. It is anticipated that, absent the occurrence of an extraordinary event, compliance with existing federal, state and local laws, rules and regulations concerning the protection of the environment and human health will not have a material effect upon

us, our capital expenditures, or earnings. We cannot predict what effect additional regulation or legislation, enforcement policies thereunder and claims for damages for injuries to property, employees, other persons and the environment resulting from our operations. Our operations are subject to environmental regulation by state and federal authorities including the Environmental Protection Agency (“EPA”). This regulation has not increased the cost of planning, designing and operating to date. Although we believe that compliance with environmental regulations will not have a material adverse effect on our operations or results of these operations, there can be no assurance that significant costs and liabilities, including criminal penalties, will not be incurred. Moreover, it is possible that other developments, including stricter environmental laws and regulations, and claims for damages for injuries to property or persons resulting from our activities could result in substantial costs and liabilities.

In the conduct of our activities our operations will be subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes. The OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the federal Superfund Amendment and Reauthorization Act and similar state statutes require us to organize information about hazardous materials used, released or produced in its operations. Certain of this information must be provided to employees, state and local governmental authorities and local citizens. We are also subject to the requirements and reporting set forth in OSHA workplace standards.

Other than the above regulations and maintaining our good standing in the State of Nevada, complying with applicable local business licensing requirements, complying with all state and federal tax requirements, preparing our periodic reports under the Securities Exchange Act of 1934, as amended, and complying with other applicable securities laws, rules, and regulations, we do not believe that existing or probably governmental regulations will have a material effect on our operations. We do not currently require the approval of any governmental agency or affiliated program for our operations.

Employees, Consultants and Contractors

We currently have 57 employees, and also contract the services of consultants in the various areas of expertise as required. The way in which our business currently operates is as follows:

Our Chief Executive Officer, S. Matthew Schultz, currently manages our day-to-day operations. He is responsible for the negotiation of contracts, oversees the design, marketing and implementation of the products and processes, and manages licenses, patents, and other intangible assets. In addition to daily management tasks, Mr. Schultz also researches financing and potential investors.

Our CFO, Zachary K. Bradford, is responsible for implementing our strategic goals and objectives. He is also in charge of managing our financial risks, financial planning, accounting records, SEC filings, reviewing financial data, reporting financial performance, preparing budgets, and monitoring expenditures and costs.

Our COO, Bryan Huber, is responsible for implementing and overseeing our general operations and research and development activities. In addition, he is responsible for determining the feasibility and marketability of our technology and future technologies that we may acquire.

The amount of time devoted to us currently by officers may be limited by the resources we have available. However, we feel the time devoted to operations is enough to cover our current operational requirements.

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. In evaluating an investment in shares of our common stock, you should carefully consider the risks described below, together with the other information included in this report.

The risks described below are not the only risks we face. If any of the events described in the following risk factors actually occurs, or if additional risks and uncertainties later materialize, that are not presently known to us or that we currently deem immaterial, then our business, prospects, results of operations and financial condition could be materially adversely affected. In that event, the trading price of our common stock could decline, and you may lose all or part ofyour investment in our shares. The risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.

Risks Related to Our Business

We lack an established operating history and have incurred losses in prior periods, expect to incur losses in the future and we can give no assurance that our operations will result in profits.

We have a limited operating history that makes it difficult to evaluate our business. Historical sales pertaining to our System have been in low volume, and we cannot say with certainty when we will begin to achieve profitability. We have not sold any of our Gasifiers.

Since inception, we have sustained $19,933,366$66,939,531 in cumulative net losses and we had a net loss for the year ended September 30, 20172018 of $13,498,526.$47,006,165. We expect to have operating losses at least until such time as we have developed asubstantial and stable revenue base. We cannot assure you that we can develop a substantial and stable revenue base or achieve or sustain profitability on a quarterly or annual basis in the future.

IfAlthough we have obtained sufficient funding for the year ending September 30, 2019, if we do not obtain such financing,increased revenues in 2019, we may have to scale back or cease our activities or seek additional financing, which willmay significantly harm our chances of success.

Because we have generated only a small amount of revenue in prior years and currently operate at a significant loss, we are completely dependent on generating additional revenue in the coming year or we may need to seek the continued availability of financing in order to continue our business. There can be no assurance that our revenues will develop as planned or that financing sufficient to enable us to continue our operations will be available to us in the future. Moreover, even if we are able to obtain financing in the future, it could be on terms that causes our company’s stock price to suffer or further dilutes shareholder interests in our company. Most of our financing in 20172018 was from the issuance of our common stockconvertible notes along with some funding from loansthe sale of our common stock and related party advances. OurWe obtained approximately $5,000,000 in connection with the sale of a secured convertible promissory note. While this financing is expected to carry us through 2019, our failure to obtain future financing, financing on terms that are acceptable to us, or to produce levels of revenue to meet our financial needs could result in our inability to continue as a going concern and, as a result, our investors could lose their entire investment. In order to maximize our potential for success, we required a total ofneed to generate cashflows from revenues totaling $2,000,000 to $4,000,000 to support our current operations or we may need a similar amount in additional financing.financing in 2020. As explained in this annual report, this money isthese cashflows are needed for ourcontinued upgrades to our software, testing and refinement of our Gasifier, marketing and sales of both sides of our business operations and for working capital. An additional $2,500,000 would be needed approximately 12 to 18 months thereafter, to expand further commercialization of our products and services.

Our future success is difficult to predict because we operate in emerging and evolving markets, and the industries in which we compete are subject to volatile and unpredictable cycles.

The renewable energy, microgrid and related industries are emerging and evolving markets which may make it difficult to evaluate our future prospects and which may lead to period to period variability in our operating results. Our products and services are based on unique technology which we believe offers significant advantages to our customers, but the markets we serve are in a relatively early stage of development and it is uncertain how rapidly they will develop. It is also uncertain whether our products will achieve high levels of demand and acceptance as these markets grow. If companies in the industries we serve do not perceive or value the benefits of our technologies and products, or if they are unwilling to adopt our products as alternatives to traditional power solutions, the market for our products and services may not develop or may develop more slowly than we expect, which could significantly and adversely impact our operating results.

As a supplier to the renewable energy, microgrid and related industries, we may be subject to business cycles. The timing, length, and volatility of these business cycles may be difficult to predict. These industries may be cyclical due to sudden changes in customers’ manufacturing capacity requirements and spending, which depend in part on capacity utilization, demand for customers’ products, inventory levels relative to demand, and access to affordable capital. These changes may affect the timing and amounts of customers’ purchases and investments in technology, and affect our orders, net sales, operating expenses, and net income. In addition, we may not be able to respond adequately or quickly to the declines in demand by reducing our costs.

To meet rapidly changing demand in each of the industries we serve, we must effectively manage our resources and production capacity. During periods of decreasing demand for our products, we must be able to appropriately align ourcost structure with prevailing market conditions, effectively manage our supply chain, and motivate and retain key employees. During periods of increasing demand, we must have sufficient inventory to fulfill customer orders, effectively manage our supply chain, and attract, retain, and motivate a sufficient number of qualified individuals. If we are not able to timely and appropriately adapt to changes in our business environment or to accurately assess where we are positioned within a business cycle, our business, financial condition, or results of operations may be materially and adversely affected.

The industries in which we compete are highly competitive and we may be unable to successfully compete to survive.

We compete in the market for renewable energy products and microgrid technology and associated services that is intensely competitive. Evolving industry standards, rapid price changes and product obsolescence also impact the market. Our competitors include many domestic and foreign companies, most of which have substantially greater financial, marketing, personnel and other resources than we do. Our current competitors or new market entrants could introduce new or enhanced technologies, products or services with features that render our technologies, products or services obsolete, less competitive or less marketable. Our success will be dependent upon our ability to develop products that are superior to existing products and products introduced in the future, and which are cost effective. In addition, we may be required to continually enhance any products that are developed as well as introduce new products that keep pace with technological change and address the increasingly sophisticated needs of the marketplace. Even if our current technologies prove to be commercially feasible, there is extensive research and development being conducted on alternative energy sources that may render our technologies and protocols obsolete or otherwise non-competitive.

There can be no assurance that we will be able to keep pace with the technological demands of the marketplace or successfully develop products that will succeed in the marketplace. As a small company, we will be at a competitive disadvantage to most of our competitors, which include larger, established companies that have substantially greater financial, technical, manufacturing, marketing, distribution and other resources than us. There can be no assurance that we will have the capital resources available to undertake the research that may be necessary to upgrade our equipment or develop new devices to meet the efficiencies of changing technologies. Our inability to adapt to technological change could have a materially adverse effect on our results of operations.

To date we have had only sixteen customers for our Microgrid services and System and none for our Gasifiers so we cannot assure you that our customer base will increase.

We had revenue from fourteen customers in our fiscal year ending September 30, 2017.2018. We cannot assure you that our customer base will expand or that any decline in net revenue attributable to customer losses will be replaced in a timely manner. If we fail to commercialize our products and services and increase our customer base, our business will fail.

Product development is an inherently uncertain process, and we may encounter unanticipated development challenges and may not be able to meet our product development and commercialization milestones.

Product development and testing may be subject to unanticipated and significant delays, expenses and technical or other problems. We cannot guarantee that we will successfully achieve our milestones within our planned timeframe or ever. We develop prototypes of planned products prior to the full commercialization of these products. We cannot predict whether prototypes of future products will achieve results consistent with our expectations. A prototype could cost significantly more than expected or the prototype design and construction process could uncover problems that are not consistent with our expectations. Prototypes of emerging products are a material part of our business plan, and if they are not proven to be successful, our business and prospects could be harmed.

More generally, the commercialization of our products may also be adversely affected by many factors not within our control, including:

Accordingly, we cannot predict that our products will be accepted on a scale sufficient to support development of mass markets for them.

We rely on patents and proprietary rights to protect our technology, and enforcing those rights could disrupt our business operation and divert precious resources that could ultimately harm our future prospects.

We rely on a combination of trade secrets, confidentiality agreements and procedures and patents to protect our proprietary technologies. We own patent numbers 8,518,133 and 8,105,401 ‘Parallel Path, Downdraft Gasifier Apparatusand Method'’ and patent number 9,359,567 ‘Gasification Method Using Feedstock Comprising Gaseous Fuel’– which covers our Gasifier technology. We also own patent number 8,342,829 entitled ‘Electrolytic Reactor and Related Methods for Supplementing the Air Intake of an Internal Combustion Engine.’

The claims contained in any patent may not provide adequate protection for our products and technology. In the absence of patent protection, we may be vulnerable to competitors who attempt to copy our products or gain access to our trade secrets and know-how. In addition, the laws of foreign countries may not protect our proprietary rights to this technology to the same extent as the laws of the U.S.

If a dispute arises concerning our technology, we could become involved in litigation that might involve substantial cost. Litigation could divert substantial management attention away from our operations and into efforts to enforce our patents, protect our trade secrets or know-how or determine the scope of the proprietary rights of others. If a proceeding resulted in adverse findings, we could be subject to significant liabilities to third parties. We might also be required to seek licenses from third parties to manufacture or sell our products. Our ability to manufacture and sell our products may also be adversely affected by other unforeseen factors relating to the proceeding or its outcome.

We may become involved in a matter that may divert attention away from our business operations and which may subject us to expend significant resources. Prior to acquiring CleanSpark, LLC, several employees of the companyleft to start a competing firm. We have been in discussions with this group about the nature of their activities and the intellectual property they are currently developing in their business. We believe there may be potential claims against this firm. If we pursue these claims, we may be involved in litigation of the type described above with uncertain potential outcomes.

As we continue to grow and to develop our intellectual property, we could attract threats from patent monetization firms or competitors alleging infringement of intellectual property rights.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. If we do not prevail in this type of litigation, we may be required to: pay monetary damages; stop commercial activities relating to our product; obtain one or more licenses in order to secure the rights to continue manufacturing or marketing certain products; or attempt to compete in the market with substantially similar products. Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to continue some of our operations.

A material part of our success will depend on our ability to manage our suppliers and contract manufacturers. Our failure to manage our suppliers and contract manufacturers could materially and adversely affect our results of operations and relations with our customers.

We rely upon suppliers to provide the components necessary to build our products and on contract manufacturers to procure components and assemble our products. There can be no assurance that key suppliers and contract manufacturers will provide components or products in a timely and cost efficient manner or otherwise meet our needs and expectations. Our ability to manage such relationships and timely replace suppliers and contract manufacturers, if necessary, is critical to our success. Our failure to timely replace our contract manufacturers and suppliers, should that become necessary, could materially and adversely affect our results of operations and relations with our customers.

If we are the subject of future product defect or liability suits, our business will likely fail.

In the course of our planned operations, we may become subject to legal actions based on a claim that our products are defective in workmanship or have caused personal or other injuries. We currently maintain liability insurance but there can be no guarantee that such coverage may not be adequate to cover all potential claims. Moreover, even if we are able to maintain sufficient insurance coverage in the future, any successful claim could significantly harm our business, financial condition and results of operations.

We may be exposed to lawsuits and other claims if our products malfunction, which could increase our expenses, harm our reputation and prevent us from growing our business.

Any liability for damages resulting from malfunctions of our products could be substantial, increase our expenses and prevent us from growing or continuing our business. Potential customers may rely on our products for critical needs and a malfunction of our products could result in warranty claims or other product liability. In addition, a well-publicized actual or perceived problem could adversely affect the market’s perception of our products. This could result in a decline in demand for our products, which would reduce revenue and harm our business. Further, since our products are used in systems that are made up on components made by other manufacturers, we may be subject to product liability claims even if our products do not malfunction.

Any failure by management to properly manage growth could have a material adverse effect on our business, operating results and financial condition.

If our business develops as expected, we anticipate that we will grow rapidly in the near future. Our failure to properly manage our expected rapid growth could have a material adverse effect on our ability to retain key personnel. 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. 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.

The lack of management experience in the renewable energy and microgrid industries could adversely affect our company.

Some members of management and the board of directors may not have prior experience in the energy industry. Some members do, however, have extensive work experience in the reclamation, environmental industries, energy industries, financial/accounting industries, and business management. The lack of experience in the alternative energy industry may impair our managements’ and directors’ ability to evaluate and make decisions involving our current operations and any future projects we may undertake in the alternative energy industry. Such impairment and lack of experience could adversely affect our business, financial condition and future operations.

If we are unable to attract and retain a sufficient number of skilled experts and workers our ability to pursue projects may be adversely affected and our costs may increase.

Our rate of growth will be confined by resource limitations as competitors and customers compete for increasingly scarce resources. We believe that our success depends upon our ability to attract, develop and retain a sufficient number of affordable trained experts that can execute our operational strategy. The demand for trained software engineers, electrical engineers and other skilled workers is currently high. If we are unable to attract and retain a sufficient number of skilled personnel, our ability to pursue projects may be adversely affected and the costs of performing our existing and future projects may increase, which may adversely impact our margins.

We have engaged in and may engage in acquisitions that could disrupt our business, cause dilution to our stockholders and reduce our financial resources.

We have been involved in significant acquisitions in our lifespan. In the future, we may enter into transactions to acquire other businesses, products or technologies. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms or at all. Any acquisitions we have made or plan to make may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. We have and may decide in the future to incur debt in connection with an acquisition or issue our common stock or other securities to the stockholders of the acquired company, which would reduce the percentage ownership of our existing stockholders.

Wecould incur losses resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into our existing business in an effective, timely and non-disruptive manner. Acquisitions may also divert management from day-to-day responsibilities, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing or size of future acquisitions or the effect that the acquisition we have engaged in or any such future transactions might have on our operating results.

Our business is substantially dependent on utility rate structures and government incentive programs that encourage the use of alternative energy sources. The reduction or elimination of government subsidies and economic incentives for energy-related technologies would harm our business.

We believe that near-term growth of energy-related technologies, including power conversion technology, relies partly on the availability and size of government and economic incentives and grants (including, but not limited to, the U.S. Investment Tax Credit and various state and local incentive programs). These incentive programs could be challenged by utility companies, or for other reasons found to be unconstitutional, and/or could be reduced or discontinued for other reasons. The reduction, elimination, or expiration of government subsidies and economic incentives could harm our business.

A combination of utility rate structures and government subsidies that encourage the use of alternative energy sources is a primary driver of demand for our products. For example, public utilities are often allowed to collect demand charges on commercial and industrial customers in addition to traditional usage charges. In addition, the federal government and many states encourage the use of alternative energy sources through a combination of direct subsidies and tariff incentives such as net metering for users that use alternative energy sources such as solar power. California also encourages alternative energy technology through its Self-Generation Incentive Program, or SGIP, which offers rebates for businesses and consumers who adopt certain new technologies. Other states have similar incentives and mandates which encourage the adoption of alternative energy sources. Notwithstanding the adoption of other incentive programs, we expect that California will be the most significant market for the sale of our products in the near term. Should California or another state in which we derive a substantial portion of our product revenues in the future change its utility rate structure or eliminate or significantly reduce its incentive programs, demand for our products could be substantially affected, which would adversely affect our business prospects, financial condition and operating results.

Acquisitions could disrupt our operations and harm our operating results.

We may seek additional opportunities to expand our product offerings or the markets we serve by acquiring other companies, product lines, technologies and personnel. Acquisitions involve numerous risks, including the following:

Acquisitions may also cause us to:

Mergers and acquisitions are inherently risky. No assurance can be given that our acquisitions will be successful. Further, no assurance can be given that an acquisition will not adversely affect our business, operating results, or financial condition. Failure to manage and successfully integrate an acquisition could harm our business and operating results in a material way. Even when an acquired company has already developed and marketed products, there can be no assurance that enhancements to those products will be made in a timely manner or that pre–acquisition due diligence will identify all possible issues that might arise with respect to such products or the acquired business.

Risks Related to Our Securities

If a market for our common stock does not develop, shareholders may be unable to sell their shares.

Our common stock is quoted under the symbol “CLSK” on the OTCQB operated by OTC Markets Group, Inc., an electronic inter-dealer quotation medium for equity securities. We do not currently have an active trading market. There can be no assurance that an active and liquid trading market will develop or, if developed, that it will be sustained.

Our securities are very thinly traded. Accordingly, it may be difficult to sell shares of our common stock without significantly depressing the value of the stock. Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to result in major fluctuations in the price of the stock.

Our common stock price may be volatile and could fluctuate widely in price, which could result in substantial losses for investors.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including:

Because we have limited revenues to date, you should consider any one of these factors to be material. Our stock price may fluctuate widely as a result of any of the above.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

We have the right to issue shares of preferred stock. If we were to issue preferred stock, it is likely to have rights, preferences and privileges that may adversely affect the common stock.

We are authorized to issue 10,000,000 shares of “blank check” preferred stock, with such rights, preferences and privileges as may be determined from time-to-time by our board of directors. Our board of directors is empowered, without stockholder approval, to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights, and other rights, preferences and privileges for the preferred stock. We currently have 1,000,000 shares of our preferred stock outstanding, the features of which are contained elsewhere in this annual report.

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 we are offering. The preferred stock could also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing a change in control of the Company, to the detriment of the investors in the common stock offered hereby. We cannot assure you that we will not, under certain circumstances, issue shares of our preferred stock.

We have not paid dividends in the past and have no immediate plans to pay dividends.

We plan to reinvest all of our earnings, to the extent we have earnings, in order to market our products and to cover operating costs and to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our common stock as a dividend. Therefore, you should not expect to receive cash dividends on 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.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us now or in the future issue an adverse opinion regarding our stock, our stock price would likely decline. 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.

Because we are subject to the “Penny Stock” rules, the level of trading activity in our stock may be reduced.

The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any listed, trading equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about

penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase the difficulty Purchasers may experience in attempting to liquidate such securities.

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.

Members of our board of directors and our officers will have no liability for breaches of their fiduciary duty of care as a director or officer, except in limited circumstances, pursuant to provisions in the Nevada Revised Statutes and our Bylaws as authorized by the Nevada Revised Statutes. 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 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. This provision is intended to afford directors and officers protection against and to limit their potential liability for monetary damages resulting from suits alleging a breach of the duty of care by a director or officer. Accordingly, you may be unable to prevail in a legal action against our directors or officers even if they have breached their fiduciary duty of care. In addition, our Bylaws allow us to indemnify our directors and officers from and against any and all costs, charges and expenses resulting from their acting in such capacities with us. This means that if you 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. Accordingly, our indemnification obligations could divert needed financial resources and may adversely affect our business, financial condition, results of operations and cash flows, and adversely affect prevailing market prices for our common stock.

Item 2. Properties

Currently, we do not own any real estate. Our corporate offices are located at 70 North Main Street, Suite 105, Bountiful Utah 84010. We executed a one-year lease agreement that calls for us to make payments of $850 per month.

We operate our California operations out of leased office space located at 6365 Nancy Ridge Drive, 2nd Floor4360 Viewridge Avenue, Suite C, San Diego, CA 92121.California. On DecemberMay 15, 20162018, we executed an 18-montha 37-month lease agreement, thatwhich commenced on July 1, 2018. The agreement calls for us to make payments of $2,375$4,057 in base rent per month in 2017 and $2,446 per month in 2018.through July 31, 2021 subject to an annual 3% rent escalation. Future minimum lease payments under the operating leases for the facilities as of September 30, 2018, are as follows:

Item 3. Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 4.Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Mattersand Issuer Purchases of Equity Securities

Market Information

Our common stock is quoted under the symbol “CLSK” on the OTCQB operated by OTC Markets Group, Inc. 

There is currently no active trading market for our securities. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder may be unable to resell his securities in our company.

The following table sets forth the range of high and low bid quotations for our common stock for each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Penny Stock

The Securities Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system.  The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized

risk disclosure document prepared by the Commission, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;(b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask  price;(d) contains a toll-free telephone number for inquiries on disciplinary actions;(e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and;(f) contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with; (a) bid and offer quotations for the penny stock;(b) the compensation of the broker-dealer and its salesperson in the transaction;(c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock if it becomes subject to these penny stock rules. Therefore, because our common stock is subject to the penny stock rules, stockholders may have difficulty selling those securities.

Holders of Our Common Stock

As of January 11, 2018,9, 2019, we had 238282 holders of record of our common stock, with others in street name.

The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.

Dividends

There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:

We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.

Recent Sales of Unregistered Securities

ForCommon Stock

During the year, weperiod commencing October 1, 2017 through September 30, 2018, the Company received $880,000$271,900 from 3816 investors pursuant to private placement agreements with the investors to purchase 1,101,000339,875 shares of ourthe Company’s $0.001 par value common stock at a purchase price equal to $0.80 per share.

Subsequent to the reporting period, we received $147,500 from 11 investors pursuant to private placement agreements with the investors to purchase 184,375 sharesfor each share of our common stock at a purchase price equal to $0.80 per share.

In November of 2016, we issued 2,932,704 shares of common stock to two officers for the cashless exercise of 3,000,000 options.

In December of 2016, we issued 1,466,352 shares of common stock to a director for the cashless exercise of 1,500,000 options.

On February 9, 2017, we entered into a Debt Settlement Agreement with Webcor Construction LP and issued 50,000 shares of our common stock.

On April 13, 2017, we

In connection with the issuance of the March 23, 2018, Labrys Fund, LP Convertible Note, the Company issued 25,000to the Purchaser, as a commitment fee, 137,500 shares of its common stock (the “Returnable Shares”) as well as 100,000 shares of its common stock (the “Non-Returnable Shares”). The agreement was amended on June 29, 2018 and as a result the returnable shares were no longer returnable. Consequently, the fair value of the returnable shares of $218,626 was charged to interest expense. On September 19, 2018, all principal and accrued interest of $220,000 and $12,730, respectively was converted into 258,589 shares of the Company’s common stock. (See Note 8 to the audited financial statements for additional details.)

In connection with the issuance of a consultantthe Auctus Fund, LLC Convertible Note, the Company issued to Auctus, as a commitment fee, 137,500 shares of its common stock (the “Returnable Shares”) as well as 150,000 shares of its common stock (the “Non-Returnable Shares”). On September 21, 2018, all principal and accrued interest of $225,000 and $5,474, respectively was converted into 256,082 shares of the Company’s common stock. Subsequent to September 30, 2018, as a result of the conversion the 137,500 returnable shares were returned to the Company and cancelled. (See Note 8 to the audited financial statements for additional details.)

In connection with the issuance of a the EMA Financial, LLC Convertible Note, the Company issued to EMA, as a commitment fee, 137,500 shares of its common stock (the “Returnable Shares”) as well as 100,000 shares of its common stock (the “Non-Returnable Shares”). Subsequent to September 30, 2018, the Company repaid all obligations under the note. As a result of the repayment the returnable shares were returned to treasury and cancelled on January 8, 2019. (See Note 8 to the audited financial statements for additional details.)

On September 11, 2018, the Company entered into an agreement with Regal Consulting, LLC for investor relations services. Under this agreement the Company agreed to issue 30,000 shares of the Company’s common stock per month as compensation for services plus $20,000 per month in cash. As of September 30, 2018, the Company had issued 30,000 shares of its common stock in accordance with the agreement. Stock compensation of $55,100 was recorded as a result of the stock issued under the agreement.

Warrants Issued

On December 15,13, 2017, an investor exercised warrants to purchase 27,548 shares of ourthe Company’s $0.001 par value common stock at a purchase price equal to $0.363 per share. We receivedfor each share of Common stock. The Company receive $10,000 as a result of this exercise.

On January 1, 2018, wethe Company issued warrants to purchase 100,000 shares of common stock at an exercise price of $0.80 per share to an advisor for business advisory services. The warrants were valued at $234,095 using the Black Scholes option pricing model based upon the following assumptions: term of 5 years, risk free interest rate of 2.01%, a dividend yield of 0% and volatility rate of 158%. The warrants vest evenly over the six-month service period ended September 30, 2018. 

On January 19, 2018, an investor exercised warrants to purchase 180,000 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.083 for each share of Common stock. The Company receive $14,940 as a result of this exercise.

On January 19, 2018, an investor exercised warrants to purchase 15,000 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for each share of Common stock. The Company receive $5,445 as a result of this exercise.

On January 29, 2018, an investor exercised warrants to purchase 4,500 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for each share of Common stock. The Company receive $1,634 as a result of this exercise.

On February 8, 2018, an investor exercised 456,000 warrants to purchase shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.367 for each share of Common stock. The investor elected to use the cashless exercise option and as a result the Company issued 387,475 shares of common stock.

On May 10, 2018, Bryan Huber the Company’s Chief Operations Officer exercised warrants to purchase 1,353 shares of the Company’s $0.001 par value common stock at a purchase price equal to $1.50 for each share of Common stock. The Company receive $2,030 as a result of this exercise.

On June 15, 2018, the Company issued 116,600 5-year warrants exercisable at $0.80 to a lender in connection with a promissory note agreement. (See Note 7 to the audited financial statements for additional details.)

On July 23, 2018, an investor exercised 100,000 warrants to purchase shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for each share of Common stock. The investor elected to use the cashless exercise option and as a result the Company issued 72,414 shares of common stock.

On August 1, 2018, the Company issued 25,000 5-year warrants exercisable at $0.80 to a lender in connection with a promissory note agreement. (See Note 7 to the audited financial statements for additional details.)

On August 6, 2018, an investor exercised warrants to purchase 9,000 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for each share of Common stock. The Company receive $3,267 as a result of this exercise.

On August 28, 2018, in connection with the Consulting agreement executed with Zero Positive, LLC Company issued warrants to purchase 900,000 shares of common stock at an exercise price of $0.80 per share to an Zero Positive. The warrants were valued at $2,607,096 using the Black Scholes option pricing model based upon the following assumptions: term of 10 years, risk free interest rate of 3.05%, a dividend yield of 0% and volatility rate of 191%. The warrants vest as follows: 300,000 warrants vested immediately, the balance vest evenly on the last day of each month over the forty-two months beginning August 31, 2018. As of September 30, 2018, 328,571 warrants had vested, and the Company recorded an expense of $951,797 during the year ended September 30, 2018. (See Note 10 to the audited financial statements for additional details.)

On September 20, 2018, the Company issued 25,000 5-year warrants exercisable at $0.80 to a lender in connection with a promissory note agreement. (See Note 7 to the audited financial statements for additional details.)

On September 21, 2018, the Company issued 25,000 5-year warrants exercisable at $0.80 to a lender in connection with a promissory note agreement. (See Note 7 to the audited financial statements for additional details.)

On September 28, 2018, an investor exercised warrants to purchase 15,000 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for each share of Common stock. The Company receive $5,445 as a result of this exercise.

On September 28, 2018, an investor exercised warrants to purchase 6,000 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for each share of Common stock. The Company receive $2,178 as a result of this exercise.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The investor represented his intention to acquire the securities for investment only and not with a view towards distribution. The investor was given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Securities Authorized for Issuance under Equity Compensation Plans

In June of 2017, our Board of Directors adopted the 2017 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain the best available personnel for positions of substantial responsibility with us, to provide additional incentive to employees, directors and consultants, and to promote our success. Under the initial Plan, we were able to issue up to an aggregate total of 3,000,000 incentive or non-qualified options to purchase our common stock, or stock awards.

CLEANSPARK, INC.

CONSOLIDATED BALANCE SHEETS

(AUDITED)