10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2017
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________  to __________
	Commission File Number: 000-53498

CleanSpark, Inc.

(Exact name of Registrant as specified in its charter)

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

70 North Main Street, Ste. 105

Bountiful, Utah 84010

(Address of principal executive offices)

(801) 244-4405

(Registrant’s telephone number)

 _______________________________________________________________

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

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

[X] Yes [ ] 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 (§ 229.405 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

[  ] Large accelerated filer	[  ] Accelerated filer
[  ] Non-accelerated filer	[X] Smaller reporting company

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

[ ] Yes [X] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 33,063,471  common shares as of May 5, 2017.  

 

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	7
Item 4:	Controls and Procedures	7
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	8
Item 1A:	Risk Factors	8
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3:	Defaults Upon Senior Securities	8
Item 4:	Mine Safety Disclosure	8
Item 5:	Other Information	9
Item 6:	Exhibits	9

2

PART I - FINANCIAL INFORMATION

Item 1.     Financial Statements

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

F-1   Consolidated Balance Sheets as of March 31, 2017 and September 30, 2016 (unaudited);

F-2   Consolidated Statements of Operations for the three and six months ended March 31, 2017 and 2016 (unaudited);

F-3   Consolidated Statements of Cash Flow for the six months ended March 31, 2017 and 2016 (unaudited);

F-4   Notes to Consolidated Financial Statements.

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the interim period ended March 31, 2017 are not necessarily indicative of the results that can be expected for the full year.

3

CLEANSPARK, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED) 

	March 31, 2017			September 30, 2016
ASSETS
Current assets
Cash	$	238,406		$	436,529
Accounts receivable		187,678			57,095
Due from Shareholder		—			53,020
Prepaid expense		49,191			57,722
Total current assets		475,275			604,366
Flexpower system		19,061,961			19,675,986
Goodwill		4,919,858			4,919,858
Microgrid Assets		4,123,628			4,567,838
Intangible assets		2,351,945			2,467,930
Fixed Assets		711,791			782,975
Deposits		6,331			589
Total assets		31,650,789			33,019,542
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities	$	92,572		$	291,187
Customer deposits		15,000			—
Due to related parties		105,869			63,973
Loans		20,564			2,261
Total current liabilities		234,005			357,421
Total liabilities		234,005			357,421
Stockholders' equity (deficit)
Common stock; $0.001 par value; 100,000,000 shares authorized;   32,969,721 and 27,834,415 shares issued and outstanding as of March  31, 2017 and  September 30, 2016, respectively		32,970			27,834
Preferred stock;  $0.001 par value; 10,000,000 shares authorized; 1,000,000 and 1,000,000 shares issued and outstanding as of March 31, 2017 and September 30, 2016, respectively		1,000			1,000
Additional paid-in capital		39,824,492			39,068,127
Accumulated earnings (deficit)		(8,441,678	)		(6,434,840)
Total stockholders' equity (deficit)		31,416,784			32,662,121
Total liabilities and stockholders' equity (deficit)	$	31,650,789		$	33,019,542

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

F-1

CLEANSPARK, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED) 

	For the Three Months Ended						For the Six Months Ended
	March 31, 2017			March 31, 2016			March 31, 2017			March 31, 2016
Revenues	$	200,749		$	—		$	284,633		$	—
Cost of revenues		174,614			—			192,588			—
Gross profit		26,135			—			92,045			—
Operating expenses
Professional fees		225,600			167,795			514,944			214,157
Payroll expenses		9,289			—			9,289			—
Research and development		—			368			368			1,826
General and administrative expenses		78,137			9,551			145,402			26,619
Depreciation and amortization		809,786			13,357			1,298,544			20,485
Total operating expenses		1,122,812			191,071			1,968,547			263,087
Loss from operations		(1,096,677	)		(191,071	)		(1,876,502	)		(263,087)
Other income (expense)
Loss on settlement of debt		(104,597	)		—			(117,414	)		—
Interest expense		(105	)		—			(105	)		—
Loss on disposal of assets		—			721			(12,817	)		721
Total other income (expense)		(104,702	)		721			(130,336	)		721
Net income (loss)	$	(1,201,379	)	$	(190,350	)	$	(2,006,838	)	$	(262,366)
Basic income (loss) per common share	$	(0.04	)	$	(0.01	)	$	(0.06	)	$	(0.01)
Basic weighted average common shares outstanding		32,522,221			20,939,514			31,108,394			20,734,481

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

F-2

 CLEANSPARK, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED) 

	For the Six Months Ended
	March 31, 2017			March 31, 2016
Cash Flows from Operating Activities
Net loss	$	(2,006,838	)	$	(262,366)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on disposal of fixed assets		12,817			—
Stock based consulting		50,130			143,401
Depreciation and amortization		1,298,544			20,485
Stock issued for acquisition		—			—
Loss on settlement of debt		117,414			—
Cash received in acquisition		—			—
Changes in assets and liabilities
(Increase) decrease in prepaid expense		(41,599	)		(850)
(Increase) decrease in deposits		(5,742	)		1,769
Increase in accounts receivable		(130,583	)		—
Increase in shareholder receivable		—			—
Increase in customer deposits		15,000			—
Increase (decrease) in accounts payable		(50,509	)		(42,029)
Increase (decrease) in accounts payable related party		41,896			—
Net cash from operating activities		(699,470	)		(139,590)
Cash Flows from investing
Purchase of intangible assets		(22,487	)		(3,225)
Purchase of fixed assets		(97	)		(9,750)
Investment in Flexpower system		(50,373	)
Cash received on sale of assets		7,000			721
Net cash used in investing activities		(65,957	)		(12,254)
Cash Flows from Financing Activities
Payments on short-term loans		(7,403	)		—
Proceeds from short term notes		25,706			—
Proceeds from issuance of common stock		549,001			215,000
Net cash from financing activities		567,304			215,000
Net increase (decrease) in Cash		(198,123	)		63,156
Beginning cash balance		436,529			88,533
Ending cash balance	$	238,406		$	151,689
Supplemental disclosure of cash flow information
Cash paid for interest	$	105		$	—
Cash paid for tax	$	—		$	—
Non-Cash investing and financing transactions
Cashless exercise of options	$	4,399		$	—
Stock issued to settle debt	$	212,500		$	—
Shares for services	$	—		$	11,666
Options and warrants for services	$	—		$	138,005

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

F-3

CLEANSPARK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 
1. ORGANIZATION AND LINE OF BUSINESS

Organization

CleanSpark, Inc. (the "Company") was incorporated in the state of Nevada on October 15, 1987 as SmartData Corporation. SmartData conducted a 504 public offering in the State of Nevada in December 1987 and began trading publicly in January 1988. Due to a series of unfortunate events, including the untimely death of the founding CEO, SmartData discontinued active business operations in 1992.

On March 25, 2014, the Company entered into an Asset and Intellectual Property Purchase Agreement pursuant to which the Company acquired: (i) all Intellectual Property rights, title and interest in Patent # 8,105,401 'Parallel Path, Downdraft Gasifier Apparatus and Method' and Patent # 8,518,133 'Parallel Path, Downdraft Gasifier Apparatus and Method' and (ii) all of the Property rights, title and interest in a 32 inch Downdraft Gasifier ("Gasifier”) and (iii) assumed of $156,900 in liabilities.

In December 2014, the Company changed its name to Stratean Inc. through a short-form merger in order to better reflect the new business plan.

On July 1, 2016, the Company entered into an Asset Purchase Agreement, as amended (the “Purchase Agreement”), with CleanSpark Holdings LLC, CleanSpark LLC, CleanSpark Technologies LLC and Specialized Energy Solutions, Inc. (together, the “Seller”). Pursuant to the Purchase Agreement, the Company acquired CleanSpark, LLC and all the assets related to Seller and its line of business and assumed $200,000 in liabilities.

In October 2016, the Company changed its name to CleanSpark, Inc. through a short-form merger in order to better reflect the brand identity.

Line of Business

Through the acquisition of CleanSpark, LLC, the Company provides microgrid solutions to military, commercial and residential properties.

The services offered consist of turn-key microgrid implementation services, microgrid 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. The Company performed all of its work in California during 2016 and the first quarter of 2017.

The Company also continues to pursue the development of its gasification technologies for commercial deployment. The Company has been granted multiple patents protecting what it believes to be a breakthrough design for the next generation in waste-to-energy technology. The increased efficiency compared to existing solutions results in a significantly lower cost per watt of electricity produced. The Company has completed a commercial prototype and has completed preliminary testing and it is currently working with its manufacturing partners to improve durability and efficiency. Upon completion of product development, The Company intends to deploy its gasification solutions to the Company’s pipeline of commercial microgrid customers in order maximize the conversion of its customer waste streams into electricity.

2. BASIS OF PRESENTATION AND GOING CONCERN

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

F-4

Going concern – The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $8,441,678 since its inception and requires capital for its contemplated operational and marketing activities to take place. The Company’s ability to raise additional capital through future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 3. SUMMARY OF SIGNIFICANT POLICIES

This summary of significant accounting policies of CleanSpark Inc. is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the consolidated financial statements.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of CleanSpark, Inc., and its wholly owned operating subsidiaries, CleanSpark, LLC, and CleanSpark, II, LLC. All material intercompany transactions have been eliminated upon consolidation of these entities.

Use of estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s goodwill, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition – The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. For the six months ended March 31, 2017 and 2016 the Company reported revenues of $284,633 and $0, respectively.

F-5

Revenues and related costs on construction contracts are recognized using the “percentage of completion method” of accounting in accordance with ASC 605-35, Accounting for Performance of Construction-Type and Certain Production Type Contracts (“ASC 605-35”). Under this method, contract revenues and related expenses are recognized over the performance period of the contract in direct proportion to the costs incurred as a percentage of total estimated costs for the entirety of the contract. Costs include direct material, direct labor, subcontract labor and any allocable indirect costs. All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts, which require the revision, become known.  Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.  Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

The Asset, “Costs in excess of billings”, represents revenues recognized in excess of amounts billed on contracts in progress. The Liability, “Billings in excess of costs”, represents billings in excess of revenues recognized on contracts in progress. At March 31, 2017 and September 30, 2016, the costs in excess of billings balance were $0 and $0, and the billings in excess of costs balance were $0 and $0, respectively.

Accounts receivables are recorded on contracts for amounts currently due based upon progress billings, as well as retention, which are collectible upon completion of the contracts.  Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract.  General and administrative expenses are charged to operations as incurred and are not allocated to contract costs. Retention receivable is the amount withheld by a customer until a contract is completed. Retention receivables of $0 and $0 were included in the balance of trade accounts receivable as of March 31, 2017 and September 30, 2016, respectively.

Accounts Receivable – Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms. The Company performs ongoing credit evaluation of its customers and management closely monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded. Accounts receivable are presented net of an allowance for doubtful accounts of $9,000 and $0 at March 31, 2017, and September 30, 2016, respectively.

Cash and cash equivalents – For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There was $238,406 and $436,529 in cash and cash equivalents as of March 31, 2017 and September 30, 2016, respectively.

Concentration Risk

At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. As of March 31, 2017, the cash balance in excess of the FDIC limits was $0. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.

Fair Value of Financial Instruments – The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

F-6

Warranty Liability – The Company establishes warranty liability reserves to provide for estimated future expenses as a result of installation and product defects, product recalls and litigation incidental to the Company’s business.  Liability estimates are determined based on management’s judgment, considering such factors as historical experience, the likely current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with the Company’s general counsel and outside counsel retained to handle specific product liability cases.  The Company’s manufacturers and service providers currently provide substantial warranties between ten to twenty-five years with full reimbursement to replace and install replacement parts.  Warranty costs and associated liabilities for the periods ended March 31, 2017 and September 30, 2016 were $0 and $0, respectively.

Stock-based compensation – The Company follows the guidelines in FASB Codification Topic ASC 718-10 “Compensation-Stock Compensation,” which provides investors and other users of financial statements with more complete and neutral financial information, by requiring that the compensation cost relating to share-based payment transactions be recognized in the financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. ASC 718-10 covers a wide range of share-based compensation arrangements, including share options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As of March 31, 2017, the Company has not implemented an employee stock based compensation plan.

Non-Employee Stock Based Compensation – The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50. The Company may issue compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

Earnings (loss) per share – The Company reports earnings (loss) per share in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10 “Earnings Per Share,” which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.

Long-lived Assets – In accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property, Plant and Equipment," the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill at September 30, 2016, and determined there was no impairment of indefinite lived intangibles and goodwill.

F-7

Business Combinations

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer lists, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Income taxes – The Company accounts for its income taxes in accordance with FASB Codification Topic ASC 740-10, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 

Segment Reporting – Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company's core business.

Recently Issued Accounting Pronouncements –The Company has evaluated the all recent accounting pronouncements through ASU 2017-08, and believes that none of them will have a material effect on the Company's financial position, results of operations or cash flows. 

4.     BUSINESS ACQUISITION

On July 1, 2016, the Company entered into the Purchase Agreement with Seller. Pursuant to the Purchase Agreement, the Company acquired all the assets related to Seller and its line of business and assumed certain liabilities.

The Assets the Company purchased from Seller include:

• Equipment and other tangible assets;

• Domain names, websites and intellectual property;

• All rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by the Seller;

• Contracts to which Seller is bound;

• Current and future customer accounts, including accounts receivable;

• The holdings that CleanSpark Holdings LLC has in CleanSpark LLC, and any investments it has as well; and

• Any other assets of any nature whatsoever that are related to or used in connection with the business of Seller and its goodwill.

F-8

On July 20, 2016, the parties to the Purchase Agreement entered into an amendment (the “Amendment”) that revised the assets to be acquired under the Purchase Agreement. Specifically, the parties decided on the following:

• Specialized Energy Solutions, Inc. would transfer and assign the ability to use its name and all of its Intellectual Property to CleanSpark II, LLC, and thereafter Specialized Energy Solutions, Inc. will not be included in the Assets acquired; and

• Clean Spark Technologies, LLC agrees to transfer and assign all of its Intellectual Property to CleanSpark II, LLC, and thereafter Clean Spark Technologies, LLC will not be included in the Assets acquired.

The Amendment also included an option to acquire Specialized Energy Solutions, Inc. and Clean Spark Technologies, LLC, which the parties agreed upon as follows:

• CleanSpark II, LLC is hereby granted a 3-year exclusive option to purchase Specialized Energy Solutions, Inc. for 1,000 shares of CleanSpark Inc. Common Stock; and

• CleanSpark II, LLC is hereby granted a 3-year exclusive option to purchase Clean Spark Technologies, LLC for 1,000 shares of CleanSpark Inc. Common Stock.

On August 19, 2016, the parties to the Purchase Agreement entered into a second amendment that revised the Closing Date of the transaction.

The Assumed Liabilities, consisted of certain accounts payable amounting to approximately $262,873 arising out of the Assets. Per the agreement the liabilities were to be limited to $200,000 therefore $62,873 must be reimbursed by CleanSpark Holdings, LLC. Subsequently the balance due was fully settled. See Note 9 for additional details.

As consideration, the Company issued to Seller six million (6,000,000) shares of common stock with a fair value of $18,420,000 and five-year warrants to purchase four million five hundred thousand (4,500,000) shares of common stock at an exercise price of $1.50 per share. The warrants were valued at $13,675,500 using the Black Scholes option pricing model based upon the following assumptions: term of 5 years, risk free interest rate of 1.0%, a dividend yield of 0% and volatility rate of 218%. The warrants were fully earned and vested on July 1, 2016. 

Simultaneously with the Purchase Agreement, the Company entered into certain ancillary agreements (the “Ancillary Agreements”) with Seller, consisting of a bill of sale, intellectual property assignment and lock-up agreement. The lock-up agreement prevents Seller from selling the Company’s securities in the public market for a year.

The Purchase Agreement contained customary representations, warranties and covenants. In addition, the Company and Seller agreed to appoint one (1) candidate chosen by Seller to the board of directors of the Company. As a result, Bryan Huber was appointed as a member of the board of directors. The term of the appointment of shall be in accordance with the Company’s bylaws.

CleanSpark provides microgrid, design, engineering, installation and consulting services to military, commercial and residential customers. The acquisition is designed to enhance the Company’s services for renewable technology and provide a pipeline for deployment of its gasification technology. As a result of the Purchase Agreement, CleanSpark, LLC became a wholly-owned subsidiary of the Company.

The acquisition was accounted for under ASC 805 and the transaction was valued for accounting purposes at $32,095,500, which was the fair value of the Assets acquired at time of acquisition. The assets and liabilities of the Seller were recorded at their respective fair values as of the date of acquisition. Since the Company determined there were no other separately identifiable intangible assets, any difference between the cost of the acquired entity and the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The acquisition date estimated fair value of the consideration transferred consisted of the following:

Shares of Common Stock	$	18,420,000
Stock warrants		13,675,500
Total purchase price	$	32,095,500
Tangible assets acquired	$	4,911,367
Liabilities assumed		(262,573)
Net tangible assets		4,648,794
Intangible assets acquired		22,526,847
Goodwill		4,919,859
Total purchase price	$	32,095,500

Key factors that make up the goodwill created by the transaction include knowledge and experience of the acquired team and infrastructure.

F-9

Pro forma results

The following tables set forth the unaudited pro forma results of the Company as if the acquisition of Seller had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented.

	Three Months ended,		Six Months ended,
	March 31, 2016		March 31, 2016
Total revenues	$	25,148	$	1,888,875
Net Income (loss)		(1,710,257)		(2,667,416)
Basic net income (loss) per common share	$	(0.06)	$	(0.10)

5. FIXED ASSETS

During the six months ending March 31, 2017, the Company disposed of fixed assets with a net book value of $19,817 in exchange for consideration of $7,000. As a result, the company reported a $12,817 loss on disposal of assets for the six months ending March 31, 2017.

Fixed assets consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017			September 30, 2016
Machinery and equipment	$	747,931		$	769,276
Furniture and fixtures		72,253			72,484
Total		820,184			841,760
Less: accumulated depreciation		(108,490	)		(58,785)
Fixed assets, net	$	711,791		$	782,975

Depreciation expense for the six months ended March 31, 2017 and 2016 was $51,464 and $19,126, respectively.

6. MICROGRID ASSETS

Microgrid assets consist of the combined assets at CleanSpark’s FractalGrid Demonstration Facility located at Camp Pendleton Marine Corps Base. The California Energy Commission awarded a grant to Harper Construction Company, Inc. in July 2013 to support a microgrid technology demonstration project. CleanSpark was 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 Microgrid control infrastructure and related components of the Project was subsequently transferred to CleanSpark for consideration and an agreement to indemnify Harper Construction for all future responsibilities of maintenance, operations and warranty.

The project included integration of CleanSpark’s proprietary software and controls platform with a variety of energy storage technologies. The system utilizes solar energy generated by the Marine Corps fixed-tilt solar photovoltaic panels and fifteen dual axis tracking concentrated photovoltaic units. CleanSpark’s 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.

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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, CleanSpark’s 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.

The microgrid assets were acquired as part of the CleanSpark acquisition and have been capitalized at $4,625,339, which was deemed to be the fair value of the assets at the time of the acquisition.

The microgrid assets consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017			September 30, 2016
Camp Pendleton FractalGrid	$	4,625,339		$	4,625,339
Less: accumulated depreciation		(501,711	)		(57,501)
Fixed assets, net	$	4,123,628		$	4,567,838

Depreciation expense for the six months ended March 31, 2017 and 2016 was $444,210 and $0, respectively.

7.    FLEXPOWER SYSTEM

A microgrid is comprised of any number of generation, energy storage, and smart distribution assets that serve single or multiple loads, both connected to the grid and islanded. The FlexPower system is an 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 is able to interoperated with the local utility grid and allows users the ability to obtain the most cost effective power for a facility. The FlexPower system is 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.

The FlexPower System proprietary software and methodology was acquired as part of the CleanSpark acquisition and the project was capitalized at $20,007,624, which was the fair value of the assets at the time of the acquisition.

The FlexPower system consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017			September 30, 2016
FlexPower System	$	20,057,997		$	20,007,624
Less: accumulated amortization		(996,036	)		(331,638)
Intangible assets, net	$	19,061,961		$	19,675,986

Amortization expense for the six months ended March 31, 2017 and 2016 was $664,398 and $0, respectively.

8.    INTANGIBLE AND OTHER ASSETS

Intangible assets consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017			September 30, 2016
Patents	$	84,991		$	82,641
Websites		12,582			9,777
Brand and Client lists		2,497,472			2,497,472
Trademarks		5,928			4,858
Software		26,990			10,728
Less: accumulated amortization		(276,018	)		(137,546)
Intangible assets, net	$	2,351,945		$	2,467,930

Amortization expense for the six months ended March 31, 2017 and 2016 was $138,472 and $1,359, respectively.

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9. RELATED PARTY TRANSACTIONS

On October 1, 2014, the Company entered into a Consulting agreement with Matthew Schultz, its Chief Executive Officer for management services. In accordance with this agreement, Mr. Schultz provides services to the Company in exchange for $7,500 to $15,000 per month plus additional reimbursable expenses incurred. The term of the agreement was one month and automatically renewed each month until cancelled by either party. During the six months ending March 31, 2017, Mr. Schultz was paid $71,954 in accordance with this agreement and is owed $38,546 in accrued compensation as of March 31, 2017.

On July 1, 2016, the Company entered into a Consulting agreement with Zachary Bradford, its President and Chief Financial Officer for management services. In accordance with this agreement, Mr. Bradford provides services to the Company in exchange for $15,000 per month plus reimbursable expenses incurred. During the six months ending March 31, 2017, Mr. Bradford was paid $65,971 under this this agreement and was owed $59,829 in accrued compensation as of March 31, 2017.

On July 1, 2016, the Company entered into a Consulting agreement with Bryan Huber, its Chief Operating Officer for management services. In accordance with this agreement, Mr. Huber provided services to the Company in exchange for $2,000 to $2,250 per week plus reimbursable expenses incurred. During the six months ending March 31, 2017, Mr. Huber was paid $68,344 under this this agreement and was owed $2,000 in accrued compensation and $4,020 as a reimbursement for expense incurred as of March 31, 2017.

On February 6, 2017, the Company and CleanSpark Holdings, LLC (“Holdings”) entered into an Assumption of Debt Agreement to settle Debts Holdings owed the Company related to the June, 30, 2016 Purchase Agreement. Pursuant to the Purchase Agreement, the Company agreed to assume up to $200,000 in liabilities arising out of the assets. In the course of due diligence, CleanSpark discovered that they had actually assumed $275,586 in liabilities. As a result of the overage in assumed liabilities, Holdings had paid the Company $25,000 and remained indebted to CleanSpark for the overage amount of $50,586. Holdings agreed to reassume $44,919 in settlement of the full amount of the debt overage and the Company agreed to accept the assumption of $44,919 in settlement of the full amount of the Debt overage. A loss on settlement of debt of $5,667 was recorded by the Company as a result of the agreement.

10. PREPAID EXPENSES

Prepaid expenses consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017		September 30, 2016
Prepaid stock compensation	$	-	$	50,130
Prepaid rents		1,700		850
Prepaid dues and subscriptions		12,443		-
Prepaid insurance and bonds		30,798		6,742
Total prepaid expenses	$	44,941	$	57,722

On January 22, 2016, the Company appointed Mr. Greg Gohlinghorst as a member of the Company’s board of advisors. He was issued 35,000 shares of common stock for his appointment.  The shares were valued at $105,000 or $3.00 per share. The amount was capitalized as a prepaid expense and amortized over a twelve-month term; during the six months ended March 31, 2017, the Company recorded an expense of $32,705. 

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On January 15, 2016, the Company entered into an Investor Relations Consulting Agreement with Hayden IR (“HIR”) to serve as our investor relations firm for a period of twelve months. Under the Agreement, HIR’s responsibilities include: implementing and maintaining an ongoing market support system to expand awareness of the Company in the investment community; arranging conference calls and interviews; providing feedback on expectations of results and company value; assisting with the presentation of periodic results of operations; monitoring newswires and industry publications; drafting and coordinating press releases, among other services.

As compensation for the services under the Agreement, the Company agreed to pay HIR a cash monthly fee of $3,500 for the first six months of the agreement. The monthly fee increased to $6,500 starting in the seventh month. The Company also agreed to issue to HIR 20,000 shares of restricted common stock within 30 days of execution. The shares were valued at $60,000 or $3.00 per share. The Stock compensation has been recorded as a prepaid expense and is being amortized evenly over the twelve-month service period. During the six months ending March 31, 2017, the Company recorded $17,425 in stock based compensation associated with this agreement.

11. STOCKHOLDERS’ EQUITY (DEFICIT)

Overview

The Company’s authorized capital stock consists of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock, par value $0.001 per share. As of March 31, 2017, there were 32,969,721 shares of common stock issued and outstanding and 1,000,000 shares of preferred stock issued and outstanding. 

Description of Common Stock

The Company’s common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law or provided in any resolution adopted by the Company’s board of directors with respect to any series of preferred stock, the holders of common stock will possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of common stock that are present in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock. Holders of the Company’s common stock representing fifty percent (50%) of the Company’s capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders. A vote by the holders of a majority of the Company’s outstanding shares is required to effectuate certain fundamental corporate changes such as a liquidation, merger or an amendment to the Company’s articles of incorporation.

Subject to any preferential rights of any outstanding series of preferred stock created by the Company’s board of directors from time to time, the holders of shares of common stock will be entitled to such cash dividends as may be declared from time to time by the Company’s board of directors from funds available therefor.

Subject to any preferential rights of any outstanding series of preferred stock created from time to time by the Company’s board of directors, upon liquidation, dissolution or winding up, the holders of shares of common stock will be entitled to receive pro rata all assets available for distribution to such holders.

In the event of any merger or consolidation of the Company with or into another company in connection with which shares of the Company’s common stock are converted into or exchangeable for shares of stock, other securities or property (including cash), all holders of the Company’s common stock will be entitled to receive the same kind and amount of shares of stock and other securities and property (including cash). Holders of the Company’s common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to the Company’s common stock.

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 Description of Preferred Stock

The Company’s board of directors is authorized to divide the authorized shares of the Company’s preferred stock into one or more series, each of which must be so designated as to distinguish the shares of each series of preferred stock from the shares of all other series and classes. The Company’s board of directors is authorized, within any limitations prescribed by law and the Company’s articles of incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock, including, but not limited to, the following:

• the rate of dividend, the time of payment of dividends, whether dividends are cumulative, and the date from which any dividends accrue;

• whether shares may be redeemed, and, if so, the redemption price and the terms and conditions of redemption;

• the amount payable upon shares in the event of voluntary or involuntary liquidation;

• sinking fund or other provisions, if any, for the redemption or purchase of shares;

• the terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion;

• voting powers, if any, provided that if any of the preferred stock or series thereof have voting rights, such preferred stock or series shall vote only on a share for share basis with the common stock on any matter, including, but not limited to, the election of directors, for which such preferred stock or series has such rights; and,

• subject to the foregoing, such other terms, qualifications, privileges, limitations, options, restrictions, and special or relative rights and preferences, if any, of shares or such series as the board of directors may, at the time so acting, lawfully fix and determine under the laws of the State of Nevada.

On April 15, 2015, the Company filed a Certificate of Amendment to the Company’s Articles of Incorporation (the “Certificate of Amendment”) with the Nevada Secretary of State. The Certificate of Amendment authorized ten million (10,000,000) shares of preferred stock. The Company’s Board of Directors and a majority of its shareholders approved the Certificate of Amendment.

On April 15, 2015, pursuant to Article IV of our Articles of Incorporation, the Company’s Board of Directors voted to designate a class of preferred stock entitled Series A Preferred Stock, consisting of up to one million (1,000,000) shares, par value $0.001. Under the Certificate of Designation, holders of Series A Preferred Stock will be entitled to quarterly dividends on 2% of our earnings before interest, taxes and amortization. The dividends are payable in cash or common stock. The holders will also have a liquidation preference on the state value of $0.02 per share plus any accumulated but unpaid dividends. The holders are further entitled to have the Company redeem their Series A Preferred Stock for three shares of common stock in the event of a change of control and they are entitled to vote together with the holders of the Company’s common stock on all matters submitted to shareholders at a rate of forty-five (45) votes for each share held.

Common Stock issuances

During the period commencing October 1, 2016 through March 31, 2017, the Company received $549,000 from 19 investors pursuant to private placement agreements with the investors to purchase 686,250 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.80 for each share of Common stock.

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

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

On February 9, 2017, the Company entered into a Debt Settlement Agreement with Webcor Construction LP (“Webcor”) to settle $158,753 in debt owed to Webcor. The Company agreed to pay Webcor $58,000 on or before February 28, 2017 and to issue 50,000 shares of the Company’s common stock within 4 days of execution. Upon receipt of payment, Webcor agreed to release the full amount of the debt. The shares issued were deemed to have a fair value of $212,500 on the date of the transaction and a loss on settlement of debt of $111,747 was recorded as a result of the Debt Settlement Agreement. The cash payment was made per the agreement on February 28, 2017.

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12. STOCK WARRANTS

The following is a summary of stock warrants activity during the year ended September 30, 2016 and 2015. 

	Number of Shares		Weighted Average Exercise Price
Balance, September 30, 2015	8,097,600	$	0.10
Warrants granted and assumed	5,014,500	$	1.38
Warrants expired	—		—
Warrants canceled	—		—
Warrants exercised	—		—
Balance, September 30, 2016	13,112,100	$	0.59
Warrants granted and assumed	—	$	—
Warrants expired	—		—
Warrants canceled	—		—
Warrants exercised	4,500,000		0.083
Balance, March 31, 2017	8,612,100	$	0.85

As of March 31, 2017, there are warrants exercisable to purchase 8,612,100 shares of common stock in the Company.

13. COMMITMENTS AND CONTINGENCIES

On January 22, 2016, the Company relocated its corporate office to 70 North Main Street, Suite 105, Bountiful, Utah 84010. The Company executed a one-year lease agreement that calls for the Company to make payments of $850 per month. The Company has prepaid rent for January 2017. Future minimum lease payments under the operating leases for the facilities as of March 31, 2017, are $0. The Company continues to occupy the leased space on a month to month basis at a rate of $850 per month.

CleanSpark, LLC has agreed to warranty and maintain the microgrid assets located on the Fractalgrid Demonstration Facility to Camp Pendleton Marine Corp Base. In exchange, the Company has been granted the permission to locate its system on the base and the access to conduct guided tours of the Fractalgrid Demonstration Facility for the Company’s potential customers.

On December 16, 2016, the Company executed an 18-month lease agreement at 6365 Nancy Ridge Drive, 2^nd Floor, San Diego California. The Company executed a one-year lease agreement that calls for the Company to make payments of $2,375 per month through December 31, 2017 and $2,446 per month from January 1, 2018 through May 31, 2018. Future minimum lease payments under the operating leases for the facilities as of March 31, 2017, are $21,375 and $12,230 for the fiscal years ending December 31, 2017 and 2018, respectively.

14.   MAJOR CUSTOMERS AND VENDORS

For the six months ended March 31, 2017 and 2016, the Company had the following customers that represented more than 10% of sales.

	March 31, 2017			March 31, 2016
Bethel-Webcor JV-1		12.3	%		—
Jacobs/ HDR a joint venture		18.7	%		—
Macerich		11.2	%		—
Cintas		11.3	%		—
Firenze		25.3	%		—

For the six months ended March 31, 2017 and 2016, the Company had the following suppliers that represented more than 10% of direct material costs.

	March 31, 2017			March 31, 2016
CED Greentech		62.1	%		—
Simpliphi Power		32.1	%		—

15.    SUBSEQUENT EVENTS

During the period commencing April 1, 2017 through May 5, 2017, the Company received $75,000 from 2 investors pursuant to private placement agreements with the investors to purchase 93,750 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.80 for each share of Common stock.

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Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Company Overview

We are in the business of acquiring, licensing and marketing patents and technology to create sustainable energy for our energy customers. Our mission is to lead a revolution in transforming global energy into a clean, affordable, and sustainable infrastructure that promotes socio-economic upliftment.

We recently entered into an asset purchase agreement and amendment thereto (the “Purchase Agreement”), and acquired substantially all of the assets of CleanSpark Holdings, LLC. As a result 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 believe 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 in the energy market, all to the ultimate benefit of our shareholders.

Integral to CleanSpark’s business is the Flex Power System (the “System”), which we acquired in the acquisition of the assets. The System provides secure, sustainable energy with significant cost savings for its energy customers. The System allows customers to efficiently manage renewable energy generation, other distributed energy generation technologies including waste to energy, energy storage systems, and consumption. By having autonomous control over the 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 transform energy consumers into energy producers by supplying power that anticipates their routine instead of interrupting it.

Integral to our existing business is the Gasifier. 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 plan to continue our focus on the CleanSpark side of the business in 2017, as opposed to expending significant efforts on the Gasifier side of the business. We plan to continue our efforts to better our technology, service existing customers and market our System to prospective clients. We feel that this focus would provide the best opportunity for our shareholders.

In line with that focus, on February 21, 2017, we were awarded a high-level, microgrid feasibility study and pilot project design by one of the country’s largest REIT’s, which is a leading owner, operator and developer of high-end retail real estate. We are hopeful that our pilot design work for this new client will expand into the deployment of several System projects, which have the potential to generate several million dollars per project.

4

Results of operations for the three and six months ended March 31, 2017 and 2016

Revenues

We earned revenues of $200,749 during the three months ending March 31, 2017, as compared with no revenues for the same period ended 2016. We earned revenues of $284,633 during the six months ending March 31, 2017, as compared with no revenues for the same period ended 2016.

Most of our revenue for the three and six months ended March 31, 2017 was in the form of design income from the CleanSpark side of our business. This income was the result of a contract to perform engineering designs for a microgrid layout. While we benefit from the revenues generated from this type of service, we hope to generate more significant revenue from customers that hire us to construct, operate and maintain our System. We hope to have more news on these efforts in future reports. However, because we only just acquired CleanSpark and given the contractual contingencies with CleanSpark’s customers and its early stage of operation, we are unable to estimate with any degree of certainty the amount of future revenues, if any, from existing or future contracts. Also, we do not anticipate earning significant revenues from our Gasifier business until such time that we have fully developed our technology and are able to market our products.

Operating Expenses

We had operating expenses of $1,122,812 for the three months ended March 31, 2017, as compared with $191,071 for the three months ended March 31, 2016. We had operating expenses of $1,968,547 for the six months ended March 31, 2017, as compared with $263,087 for the six months ended March 31, 2016. Our operating expenses for all periods was mainly the result of professional fees, general and administrative fees and depreciation and amortization.

Professional fees increased to $225,600 and $514,944 for the three and six months ended March 31, 2017, respectively, from $167,795 and $214,157 for the same periods ended March 31, 2016, respectively. Our professional fees expenses for the three and six months ended March 31, 2017 consisted mainly of officer and stock-based fees for consulting and investor relations fees. Our professional fees expenses for the three and six months ended March 31, 2016 consisted mainly of legal and accounting fees and officer fees for consulting.

General and administrative fees increased to $78,137 and $145,402 for the three and six months ended March 31, 2017, respectively, from $9,551 and $26,619 for the same periods ended March 31, 2016, respectively. Our general and administrative expenses for the three and six months ended March 31, 2017 consisted mainly of travel and entertainment expenses, rent, insurance and office expenses. Our general and administrative expenses for the three and six months ended March 31, 2016 consisted mainly of office and rent expenses and general expenses incurred as a result of fundraising efforts.

Depreciation and amortization expense increased to $809,786 and $1,298,544 for the three and six months ended March 31, 2017, respectively, from $13,357 and $20,485 for the same periods ended March 31, 2016, respectively.

We expect that our operating expenses will increase in future quarters as we further implement our business plan. If we obtain deployment contracts for our System, we will be required to hire and compensate additional personnel and support increased operations.

Other Expenses

We had other expenses of $104,702 and $130,336 for the three and six months ended March 31, 2017, respectively, compared with other income of $721 for each of the three and six months ended March 31, 2016. Our other expenses for the three and six months ended March 31, 2017 consisted mainly of the loss on the settlement of debt.

5

Net Loss

We recorded a net loss of $1,201,379 and $2,006,838 for the three and six months ended March 31, 2017, respectively, as compared with a net loss of $190,350 and $262,366 for the three months ended March 31, 2016.

Liquidity and Capital Resources

As of March 31, 2017, we had total current assets of $475,275, consisting of cash, accounts receivable, and prepaid expenses, and total assets in the amount of $31,650,789. Our total current liabilities as of March 31, 2017 were $234,005. We had working capital of $241,270 as of March 31, 2017.

Operating activities used $699,470 in cash for the six months ended March 31, 2017. Our net loss of $2,006,838 was the main component of our negative operating cash flow, offset mainly by depreciation and amortization of $1,298,544.

Cash flows used by investing activities during the six months ended March 31, 2017 was $65,957 as a result of the purchase of fixed and intangible assets and investments in our System, offset by cash received on the sale of assets.

Cash flows provided by financing activities during the six months ended March 31, 2017 amounted to $567,304 and consisted of $549,001 in proceeds from our private offering of securities and $25,706 in short term loans, offset by $7,403 in payments on short-term loans.

Despite the efforts we have made to raise money and to settle debt, based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Off Balance Sheet Arrangements

As of March 31, 2017, there were no off balance sheet arrangements.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred cumulative net losses of $8,441,678 since our inception and require capital for our contemplated operational and marketing activities to take place. Our ability to raise additional capital through future issuances of common stock is unknown. The obtainment of additional financing, the successful development of our contemplated plan of operations, and our transition, ultimately, to the attainment of profitable operations are necessary for us to continue operations. The ability to successfully resolve these factors raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

Recently Issued Accounting Pronouncements

We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

6

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our accounting policies are discussed in detail in the footnotes to our financial statements included in this Annual Report on Form 10-K for the year ended September 30, 2016, however we consider our critical accounting policies to be those related to revenue recognition, long-lived assets, accounts receivable, fair value of financial instruments, cash and cash equivalents, accounts receivable, warranty liability, stock-based compensation, non-employee stock based compensation.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4.     Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2017. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2017, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2017, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending September 30, 2017: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2017 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

7

PART II – OTHER INFORMATION

Item 1.     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 1A. Risk Factors

See risk factors included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 30, 2016 for 2016.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a an Annual Report on Form 10-K, Quarterly Report on Form 10-Q or Current Report on Form 8-K.

During the period commencing October 1, 2016 through March 31, 2017, we received $549,000 from 19 investors pursuant to private placement agreements with the investors to purchase 686,250 shares of our common stock at a purchase price equal to $0.80 for each share of common stock.

Subsequent to the reporting period, we received $95,000 from 4 investors pursuant to private placement agreements with the investors to purchase 118,750 shares of our common stock at a purchase price equal to $0.80 for each share of common stock.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were 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.

Item 3.     Defaults upon Senior Securities

None

Item 4.     Mine Safety Disclosures

Not applicable.

8

Item 5.     Other Information

None

Item 6.      Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 formatted in Extensible Business Reporting Language (XBRL).
**Provided herewith

9

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:	May 11, 2017
	By: /s/ S. Matthew Schultz S. Matthew Schultz Title:    Chief Executive Officer
Date:	May 11, 2017
	By: /s/Zachary K. Bradford Zachary K Bradford Title:    Chief Financial Officer

10

EX-31.1

CERTIFICATIONS

I, S. Matthew Schultz, certify that;

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2017 of CleanSpark, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2017

/s/ S. Matthew Schultz

By: S. Matthew Schultz

Title: Chief Executive Officer

EX-31.2

CERTIFICATIONS

I, Zachary Bradford, certify that;

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2017 of CleanSpark, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 11, 2017

/s/ Zachary Bradford

By: Zachary Bradford

Title: Chief Financial Officer

EX-32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly Report of CleanSpark, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017 filed with the Securities and Exchange Commission (the “Report”), I, S. Matthew Schultz, Chief Executive Office, and I, Zachary Bradford, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented.

By:	/s/ S. Matthew Schultz
Name:	S. Matthew Schultz
Title:	Principal Executive Officer, and Director
Date:	May 11, 2017
By:	/s/ Zachary Bradford
Name:	Zachary Bradford
Title:	Principal Financial Officer
Date:	May 11, 2017

This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

XML

Document and Entity Information - shares	6 Months Ended
	Mar. 31, 2017	May 05, 2017
Document And Entity Information
Entity Registrant Name	CleanSpark, Inc.
Entity Central Index Key	0000827876
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		33,063,471
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2016

XML

Balance Sheets - USD ($)	Mar. 31, 2017	Sep. 30, 2016
Current assets
Cash	$ 238,406	$ 436,529
Accounts receivable	187,678	57,095
Due from Shareholder		53,020
Prepaid expense	49,191	57,722
Total current assets	475,275	604,366
Flexpower system	19,061,961	19,675,986
Goodwill	4,919,858	4,919,858
Microgrid Assets	4,123,628	4,567,838
Intangible assets	2,351,945	2,467,930
Fixed Assets	711,791	782,975
Deposits	(6,331)	(589)
Total assets	31,650,789	33,019,542
Current liabilities
Accounts payable and accrued liabilities	92,572	291,187
Customer deposits	15,000
Due to related parties	105,869	63,973
Loans	20,564	2,261
Total current liabilities	234,005	357,421
Total liabilities	234,005	357,421
Stockholders' equity (deficit)
Common stock; $0.001 par value; 100,000,000 shares authorized; 32,969,721 and 27,834,415 shares issued and outstanding as of March 31, 2017 and September 30, 2016, respectively	32,970
Preferred stock; $0.001 par value; 10,000,000 shares authorized; 1,000,000 and 1,000,000 shares issued and outstanding as of March 31, 2017 and September 30, 2016, respectively	1,000	1,000
Additional paid-in capital	39,824,492	39,068,127
Accumulated earnings (deficit)	(8,441,678)	(6,434,840)
Total stockholders' equity (deficit)	31,416,784	32,662,121
Total liabilities and stockholders' equity (deficit)	$ 31,650,789	$ 33,019,542

XML

Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 01, 2016	Nov. 01, 2016	Sep. 30, 2016
Statement of Financial Position [Abstract]
Common Stock, par value	$ 0.001			$ .001
Common Stock, Shares authorized	100,000,000			100,000,000
Common Stock, shares issued	32,969,721	1,466,352	2,932,704	27,834,415
Preferred Stock, par value	$ 0.001			$ .001
Preferred Stock, Shares authorized	10,000,000			10,000,000
Preferred Stock, shares issued	1,000,000			1,000,000

XML

Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Income Statement [Abstract]
Revenues	$ 200,749		$ 284,633
Cost of revenues	174,614		192,588
Gross profit	26,135		92,045
Operating expenses
Professional fees	225,600	167,795	514,944	214,157
Payroll expenses	9,289		9,289
Research and development		368	368	1,826
General and administrative expenses	78,137	9,551	145,402	26,619
Depreciation and amortization	809,786	13,357	1,298,544	20,485
Total operating expenses	1,122,812	191,071	1,968,547	263,087
Loss from operations	(1,096,677)	(191,071)	(1,876,502)	(263,087)
Other income (expense)
Loss on settlement of debt	(104,597)		(117,414)
Interest expense	(105)		(105)
Loss on disposal of assets		721	(12,817)	721
Total other income (expense)	104,702	721	130,336	721
Net income (loss)	$ (1,201,379)	$ (190,350)	$ (2,006,838)	$ (262,366)
Basic income (loss) per common share	$ (0.04)	$ (0.01)	$ (0.06)	$ (0.01)
Basic weighted average common shares outstanding	32,522,221	20,939,514	31,108,394	20,734,481

XML

Statements of Cash Flows - USD ($)	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash Flows from Operating Activities
Net loss	$ (2,006,838)	$ (262,366)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on disposal of fixed assets	12,817
Stock based consulting	50,130	143,401
Depreciation and amortization	1,298,544	20,485
Stock issued for acquisition
Loss on settlement of debt	117,414
Cash received in acquisition
Changes in assets and liabilities
(Increase) decrease in prepaid expense	(41,599)	(850)
(Increase) decrease in deposits	(5,742)	1,769
Increase in accounts receivable	(130,583)
Increase in shareholder receivable
Increase in customer deposits	15,000
Increase (decrease) in accounts payable	(50,509)	(42,029)
Increase (decrease) in accounts payable related party	41,896
Net cash from operating activities	(699,470)	(139,590)
Cash Flows from investing
Purchase of intangible assets	(22,487)	(3,225)
Purchase of fixed assets	(97)	(9,750)
Investment in Flexpower system	(50,373)
Cash received on sale of assets	7,000	721
Net cash used in investing activities	(65,957)	(12,254)
Cash Flows from Financing Activities
Payments on short-term loans	(7,403)
Proceeds from short term notes	25,706
Proceeds from issuance of common stock	549,001	215,000
Net cash from financing activities	567,304	215,000
Net increase (decrease) in Cash	(198,123)	63,156
Beginning cash balance	436,529	88,533
Ending cash balance	238,406	151,689
Supplemental disclosure of cash flow information
Cash paid for interest	105
Cash paid for tax
Non-Cash investing and financing transactions
Cashless exercise of options	$ 4,399
Stock issued to settle debt	212,500
Shares for services		11,666
Options and warrants for services		$ 138,005

XML

ORGANIZATION AND LINE OF BUSINESS

6 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Line of Business

1. ORGANIZATION AND LINE OF BUSINESS

Organization

CleanSpark, Inc. (the "Company") was incorporated in the state of Nevada on October 15, 1987 as SmartData Corporation. SmartData conducted a 504 public offering in the State of Nevada in December 1987 and began trading publicly in January 1988. Due to a series of unfortunate events, including the untimely death of the founding CEO, SmartData discontinued active business operations in 1992.

On March 25, 2014, the Company entered into an Asset and Intellectual Property Purchase Agreement pursuant to which the Company acquired: (i) all Intellectual Property rights, title and interest in Patent # 8,105,401 'Parallel Path, Downdraft Gasifier Apparatus and Method' and Patent # 8,518,133 'Parallel Path, Downdraft Gasifier Apparatus and Method' and (ii) all of the Property rights, title and interest in a 32 inch Downdraft Gasifier ("Gasifier”) and (iii) assumed of $156,900 in liabilities.

In December 2014, the Company changed its name to Stratean Inc. through a short-form merger in order to better reflect the new business plan.

On July 1, 2016, the Company entered into an Asset Purchase Agreement, as amended (the “Purchase Agreement”), with CleanSpark Holdings LLC, CleanSpark LLC, CleanSpark Technologies LLC and Specialized Energy Solutions, Inc. (together, the “Seller”). Pursuant to the Purchase Agreement, the Company acquired CleanSpark, LLC and all the assets related to Seller and its line of business and assumed $200,000 in liabilities.

In October 2016, the Company changed its name to CleanSpark, Inc. through a short-form merger in order to better reflect the brand identity.

Line of Business

Through the acquisition of CleanSpark, LLC, the Company provides microgrid solutions to military, commercial and residential properties.

The services offered consist of turn-key microgrid implementation services, microgrid 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. The Company performed all of its work in California during 2016 and the first quarter of 2017.

The Company also continues to pursue the development of its gasification technologies for commercial deployment. The Company has been granted multiple patents protecting what it believes to be a breakthrough design for the next generation in waste-to-energy technology. The increased efficiency compared to existing solutions results in a significantly lower cost per watt of electricity produced. The Company has completed a commercial prototype and has completed preliminary testing and it is currently working with its manufacturing partners to improve durability and efficiency. Upon completion of product development, The Company intends to deploy its gasification solutions to the Company’s pipeline of commercial microgrid customers in order maximize the conversion of its customer waste streams into electricity.

XML

BASIS OF PRESENTATION AND GOING CONCERN

6 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION AND GOING CONCERN

2. BASIS OF PRESENTATION AND GOING CONCERN

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

Going concern – The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $8,441,678 since its inception and requires capital for its contemplated operational and marketing activities to take place. The Company’s ability to raise additional capital through future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

XML

SUMMARY OF SIGNIFICANT POLICIES

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT POLICIES

3. SUMMARY OF SIGNIFICANT POLICIES

This summary of significant accounting policies of CleanSpark Inc. is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, and have been consistently applied in the preparation of the consolidated financial statements.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of CleanSpark, Inc., and its wholly owned operating subsidiaries, CleanSpark, LLC, and CleanSpark, II, LLC. All material intercompany transactions have been eliminated upon consolidation of these entities.

Use of estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s goodwill, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition – The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. For the six months ended March 31, 2017 and 2016 the Company reported revenues of $284,633 and $0, respectively.

Revenues and related costs on construction contracts are recognized using the “percentage of completion method” of accounting in accordance with ASC 605-35, Accounting for Performance of Construction-Type and Certain Production Type Contracts (“ASC 605-35”). Under this method, contract revenues and related expenses are recognized over the performance period of the contract in direct proportion to the costs incurred as a percentage of total estimated costs for the entirety of the contract. Costs include direct material, direct labor, subcontract labor and any allocable indirect costs. All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts, which require the revision, become known.  Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.  Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

The Asset, “Costs in excess of billings”, represents revenues recognized in excess of amounts billed on contracts in progress. The Liability, “Billings in excess of costs”, represents billings in excess of revenues recognized on contracts in progress. At March 31, 2017 and September 30, 2016, the costs in excess of billings balance were $0 and $0, and the billings in excess of costs balance were $0 and $0, respectively.

Accounts receivables are recorded on contracts for amounts currently due based upon progress billings, as well as retention, which are collectible upon completion of the contracts.  Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract.  General and administrative expenses are charged to operations as incurred and are not allocated to contract costs. Retention receivable is the amount withheld by a customer until a contract is completed. Retention receivables of $0 and $0 were included in the balance of trade accounts receivable as of March 31, 2017 and September 30, 2016, respectively.

Accounts Receivable – Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms. The Company performs ongoing credit evaluation of its customers and management closely monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded. Accounts receivable are presented net of an allowance for doubtful accounts of $9,000 and $0 at March 31, 2017, and September 30, 2016, respectively.

Cash and cash equivalents – For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There was $238,406 and $436,529 in cash and cash equivalents as of March 31, 2017 and September 30, 2016, respectively.

Concentration Risk

At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. As of March 31, 2017, the cash balance in excess of the FDIC limits was $0. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.

Fair Value of Financial Instruments – The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Warranty Liability – The Company establishes warranty liability reserves to provide for estimated future expenses as a result of installation and product defects, product recalls and litigation incidental to the Company’s business.  Liability estimates are determined based on management’s judgment, considering such factors as historical experience, the likely current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with the Company’s general counsel and outside counsel retained to handle specific product liability cases.  The Company’s manufacturers and service providers currently provide substantial warranties between ten to twenty-five years with full reimbursement to replace and install replacement parts.  Warranty costs and associated liabilities for the periods ended March 31, 2017 and September 30, 2016 were $0 and $0, respectively.

Stock-based compensation – The Company follows the guidelines in FASB Codification Topic ASC 718-10 “Compensation-Stock Compensation,” which provides investors and other users of financial statements with more complete and neutral financial information, by requiring that the compensation cost relating to share-based payment transactions be recognized in the financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. ASC 718-10 covers a wide range of share-based compensation arrangements, including share options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As of March 31, 2017, the Company has not implemented an employee stock based compensation plan.

Non-Employee Stock Based Compensation – The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50. The Company may issue compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

Earnings (loss) per share – The Company reports earnings (loss) per share in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10 “Earnings Per Share,” which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.

Long-lived Assets – In accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property, Plant and Equipment," the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill at September 30, 2016, and determined there was no impairment of indefinite lived intangibles and goodwill.

Business Combinations

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer lists, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Income taxes – The Company accounts for its income taxes in accordance with FASB Codification Topic ASC 740-10, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 

Segment Reporting – Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company's core business.

Recently Issued Accounting Pronouncements –The Company has evaluated the all recent accounting pronouncements through ASU 2017-08, and believes that none of them will have a material effect on the Company's financial position, results of operations or cash flows. 

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BUSINESS ACQUISITION

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Business Acquisition

4.     BUSINESS ACQUISITION

On July 1, 2016, the Company entered into the Purchase Agreement with Seller. Pursuant to the Purchase Agreement, the Company acquired all the assets related to Seller and its line of business and assumed certain liabilities.

The Assets the Company purchased from Seller include:

• Equipment and other tangible assets;

• Domain names, websites and intellectual property;

• All rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by the Seller;

• Contracts to which Seller is bound;

• Current and future customer accounts, including accounts receivable;

• The holdings that CleanSpark Holdings LLC has in CleanSpark LLC, and any investments it has as well; and

• Any other assets of any nature whatsoever that are related to or used in connection with the business of Seller and its goodwill.

On July 20, 2016, the parties to the Purchase Agreement entered into an amendment (the “Amendment”) that revised the assets to be acquired under the Purchase Agreement. Specifically, the parties decided on the following:

• Specialized Energy Solutions, Inc. would transfer and assign the ability to use its name and all of its Intellectual Property to CleanSpark II, LLC, and thereafter Specialized Energy Solutions, Inc. will not be included in the Assets acquired; and

• Clean Spark Technologies, LLC agrees to transfer and assign all of its Intellectual Property to CleanSpark II, LLC, and thereafter Clean Spark Technologies, LLC will not be included in the Assets acquired.

The Amendment also included an option to acquire Specialized Energy Solutions, Inc. and Clean Spark Technologies, LLC, which the parties agreed upon as follows:

• CleanSpark II, LLC is hereby granted a 3-year exclusive option to purchase Specialized Energy Solutions, Inc. for 1,000 shares of CleanSpark Inc. Common Stock; and

• CleanSpark II, LLC is hereby granted a 3-year exclusive option to purchase Clean Spark Technologies, LLC for 1,000 shares of CleanSpark Inc. Common Stock.

On August 19, 2016, the parties to the Purchase Agreement entered into a second amendment that revised the Closing Date of the transaction.

The Assumed Liabilities, consisted of certain accounts payable amounting to approximately $262,873 arising out of the Assets. Per the agreement the liabilities were to be limited to $200,000 therefore $62,873 must be reimbursed by CleanSpark Holdings, LLC. Subsequently the balance due was fully settled. See Note 9 for additional details.

As consideration, the Company issued to Seller six million (6,000,000) shares of common stock with a fair value of $18,420,000 and five-year warrants to purchase four million five hundred thousand (4,500,000) shares of common stock at an exercise price of $1.50 per share. The warrants were valued at $13,675,500 using the Black Scholes option pricing model based upon the following assumptions: term of 5 years, risk free interest rate of 1.0%, a dividend yield of 0% and volatility rate of 218%. The warrants were fully earned and vested on July 1, 2016. 

Simultaneously with the Purchase Agreement, the Company entered into certain ancillary agreements (the “Ancillary Agreements”) with Seller, consisting of a bill of sale, intellectual property assignment and lock-up agreement. The lock-up agreement prevents Seller from selling the Company’s securities in the public market for a year.

The Purchase Agreement contained customary representations, warranties and covenants. In addition, the Company and Seller agreed to appoint one (1) candidate chosen by Seller to the board of directors of the Company. As a result, Bryan Huber was appointed as a member of the board of directors. The term of the appointment of shall be in accordance with the Company’s bylaws.

CleanSpark provides microgrid, design, engineering, installation and consulting services to military, commercial and residential customers. The acquisition is designed to enhance the Company’s services for renewable technology and provide a pipeline for deployment of its gasification technology. As a result of the Purchase Agreement, CleanSpark, LLC became a wholly-owned subsidiary of the Company.

The acquisition was accounted for under ASC 805 and the transaction was valued for accounting purposes at $32,095,500, which was the fair value of the Assets acquired at time of acquisition. The assets and liabilities of the Seller were recorded at their respective fair values as of the date of acquisition. Since the Company determined there were no other separately identifiable intangible assets, any difference between the cost of the acquired entity and the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The acquisition date estimated fair value of the consideration transferred consisted of the following:

Shares of Common Stock	$	18,420,000
Stock warrants		13,675,500
Total purchase price	$	32,095,500
Tangible assets acquired	$	4,911,367
Liabilities assumed		(262,573)
Net tangible assets		4,648,794
Intangible assets acquired		22,526,847
Goodwill		4,919,859
Total purchase price	$	32,095,500

Key factors that make up the goodwill created by the transaction include knowledge and experience of the acquired team and infrastructure.

Pro forma results

The following tables set forth the unaudited pro forma results of the Company as if the acquisition of Seller had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the companies been combined as of the first day of the periods presented.

	Three Months ended,		Six Months ended,
	March 31, 2016		March 31, 2016
Total revenues	$	25,148	$	1,888,875
Net Income (loss)		(1,710,257)		(2,667,416)
Basic net income (loss) per common share	$	(0.06)	$	(0.10)

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FIXED ASSETS

6 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

FIXED ASSETS

5. FIXED ASSETS

During the six months ending March 31, 2017, the Company disposed of fixed assets with a net book value of $19,817 in exchange for consideration of $7,000. As a result, the company reported a $12,817 loss on disposal of assets for the six months ending March 31, 2017.

Fixed assets consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017			September 30, 2016
Machinery and equipment	$	747,931		$	769,276
Furniture and fixtures		72,253			72,484
Total		820,184			841,760
Less: accumulated depreciation		(108,490	)		(58,785)
Fixed assets, net	$	711,791		$	782,975

Depreciation expense for the six months ended March 31, 2017 and 2016 was $51,464 and $19,126, respectively.

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MICROGRID ASSETS

6 Months Ended

Mar. 31, 2017

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

MicroGrid Assets

10. PREPAID EXPENSES

Prepaid expenses consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017		September 30, 2016
Prepaid stock compensation	$	-	$	50,130
Prepaid rents		1,700		850
Prepaid dues and subscriptions		12,443		-
Prepaid insurance and bonds		30,798		6,742
Total prepaid expenses	$	44,941	$	57,722

On January 22, 2016, the Company appointed Mr. Greg Gohlinghorst as a member of the Company’s board of advisors. He was issued 35,000 shares of common stock for his appointment.  The shares were valued at $105,000 or $3.00 per share. The amount was capitalized as a prepaid expense and amortized over a twelve-month term; during the six months ended March 31, 2017, the Company recorded an expense of $32,705. 

On January 15, 2016, the Company entered into an Investor Relations Consulting Agreement with Hayden IR (“HIR”) to serve as our investor relations firm for a period of twelve months. Under the Agreement, HIR’s responsibilities include: implementing and maintaining an ongoing market support system to expand awareness of the Company in the investment community; arranging conference calls and interviews; providing feedback on expectations of results and company value; assisting with the presentation of periodic results of operations; monitoring newswires and industry publications; drafting and coordinating press releases, among other services.

As compensation for the services under the Agreement, the Company agreed to pay HIR a cash monthly fee of $3,500 for the first six months of the agreement. The monthly fee increased to $6,500 starting in the seventh month. The Company also agreed to issue to HIR 20,000 shares of restricted common stock within 30 days of execution. The shares were valued at $60,000 or $3.00 per share. The Stock compensation has been recorded as a prepaid expense and is being amortized evenly over the twelve-month service period. During the six months ending March 31, 2017, the Company recorded $17,425 in stock based compensation associated with this agreement.

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FLEXPOWER SYSTEM

6 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Flexpower System

7.    FLEXPOWER SYSTEM

A microgrid is comprised of any number of generation, energy storage, and smart distribution assets that serve single or multiple loads, both connected to the grid and islanded. The FlexPower system is an 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 is able to interoperated with the local utility grid and allows users the ability to obtain the most cost effective power for a facility. The FlexPower system is 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.

The FlexPower System proprietary software and methodology was acquired as part of the CleanSpark acquisition and the project was capitalized at $20,007,624, which was the fair value of the assets at the time of the acquisition.

The FlexPower system consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017			September 30, 2016
FlexPower System	$	20,57,997		$	20,007,624
Less: accumulated amortization		(996,036	)		(331,638)
Intangible assets, net	$	19,061,961		$	19,675,986

Amortization expense for the six months ended March 31, 2017 and 2016 was $664,398 and $0, respectively.

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INTANGIBLE AND OTHER ASSETS

6 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE AND OTHER ASSETS

8.    INTANGIBLE AND OTHER ASSETS

Intangible assets consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017			September 30, 2016
Patents	$	84,991		$	82,641
Websites		12,582			9,777
Brand and Client lists		2,497,472			2,497,472
Trademarks		5,928			4,858
Software		26,990			10,728
Less: accumulated amortization		(276,018	)		(137,546)
Intangible assets, net	$	2,351,945		$	2,467,930

Amortization expense for the six months ended March 31, 2017 and 2016 was $138,472 and $1,359, respectively.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Mar. 31, 2017

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

9. RELATED PARTY TRANSACTIONS

On October 1, 2014, the Company entered into a Consulting agreement with Matthew Schultz, its Chief Executive Officer for management services. In accordance with this agreement, Mr. Schultz provides services to the Company in exchange for $7,500 to $15,000 per month plus additional reimbursable expenses incurred. The term of the agreement was one month and automatically renewed each month until cancelled by either party. During the six months ending March 31, 2017, Mr. Schultz was paid $71,954 in accordance with this agreement and is owed $38,546 in accrued compensation as of March 31, 2017.

On July 1, 2016, the Company entered into a Consulting agreement with Zachary Bradford, its President and Chief Financial Officer for management services. In accordance with this agreement, Mr. Bradford provides services to the Company in exchange for $15,000 per month plus reimbursable expenses incurred. During the six months ending March 31, 2017, Mr. Bradford was paid $65,971 under this this agreement and was owed $59,829 in accrued compensation as of March 31, 2017.

On July 1, 2016, the Company entered into a Consulting agreement with Bryan Huber, its Chief Operating Officer for management services. In accordance with this agreement, Mr. Huber provided services to the Company in exchange for $2,000 to $2,250 per week plus reimbursable expenses incurred. During the six months ending March 31, 2017, Mr. Huber was paid $68,344 under this this agreement and was owed $2,000 in accrued compensation and $4,020 as a reimbursement for expense incurred as of March 31, 2017.

On February 6, 2017, the Company and CleanSpark Holdings, LLC (“Holdings”) entered into an Assumption of Debt Agreement to settle Debts Holdings owed the Company related to the June, 30, 2016 Purchase Agreement. Pursuant to the Purchase Agreement, the Company agreed to assume up to $200,000 in liabilities arising out of the assets. In the course of due diligence, CleanSpark discovered that they had actually assumed $275,586 in liabilities. As a result of the overage in assumed liabilities, Holdings had paid the Company $25,000 and remained indebted to CleanSpark for the overage amount of $50,586. Holdings agreed to reassume $44,919 in settlement of the full amount of the debt overage and the Company agreed to accept the assumption of $44,919 in settlement of the full amount of the Debt overage. A loss on settlement of debt of $5,667 was recorded by the Company as a result of the agreement.

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PREPAID EXPENSES

6 Months Ended

Mar. 31, 2017

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

PREPAID EXPENSES

10. PREPAID EXPENSES

Prepaid expenses consist of the following as of March 31, 2017 and September 30, 2016:

	March 31, 2017		September 30, 2016
Prepaid stock compensation	$	-	$	50,130
Prepaid rents		1,700		850
Prepaid dues and subscriptions		12,443		-
Prepaid insurance and bonds		30,798		6,742
Total prepaid expenses	$	44,941	$	57,722

On January 22, 2016, the Company appointed Mr. Greg Gohlinghorst as a member of the Company’s board of advisors. He was issued 35,000 shares of common stock for his appointment.  The shares were valued at $105,000 or $3.00 per share. The amount was capitalized as a prepaid expense and amortized over a twelve-month term; during the six months ended March 31, 2017, the Company recorded an expense of $32,705. 

On January 15, 2016, the Company entered into an Investor Relations Consulting Agreement with Hayden IR (“HIR”) to serve as our investor relations firm for a period of twelve months. Under the Agreement, HIR’s responsibilities include: implementing and maintaining an ongoing market support system to expand awareness of the Company in the investment community; arranging conference calls and interviews; providing feedback on expectations of results and company value; assisting with the presentation of periodic results of operations; monitoring newswires and industry publications; drafting and coordinating press releases, among other services.

As compensation for the services under the Agreement, the Company agreed to pay HIR a cash monthly fee of $3,500 for the first six months of the agreement. The monthly fee increased to $6,500 starting in the seventh month. The Company also agreed to issue to HIR 20,000 shares of restricted common stock within 30 days of execution. The shares were valued at $60,000 or $3.00 per share. The Stock compensation has been recorded as a prepaid expense and is being amortized evenly over the twelve-month service period. During the six months ending March 31, 2017, the Company recorded $17,425 in stock based compensation associated with this agreement.

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STOCKHOLDERS EQUITY (DEFICIT)

6 Months Ended

Mar. 31, 2017

Equity [Abstract]

STOCKHOLDERS EQUITY (DEFICIT)

11. STOCKHOLDERS’ EQUITY (DEFICIT)

Overview

The Company’s authorized capital stock consists of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock, par value $0.001 per share. As of March 31, 2017, there were 32,969,721 shares of common stock issued and outstanding and 1,000,000 shares of preferred stock issued and outstanding. 

Description of Common Stock

The Company’s common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law or provided in any resolution adopted by the Company’s board of directors with respect to any series of preferred stock, the holders of common stock will possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of common stock that are present in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock. Holders of the Company’s common stock representing fifty percent (50%) of the Company’s capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders. A vote by the holders of a majority of the Company’s outstanding shares is required to effectuate certain fundamental corporate changes such as a liquidation, merger or an amendment to the Company’s articles of incorporation.

Subject to any preferential rights of any outstanding series of preferred stock created by the Company’s board of directors from time to time, the holders of shares of common stock will be entitled to such cash dividends as may be declared from time to time by the Company’s board of directors from funds available therefor.

Subject to any preferential rights of any outstanding series of preferred stock created from time to time by the Company’s board of directors, upon liquidation, dissolution or winding up, the holders of shares of common stock will be entitled to receive pro rata all assets available for distribution to such holders.

In the event of any merger or consolidation of the Company with or into another company in connection with which shares of the Company’s common stock are converted into or exchangeable for shares of stock, other securities or property (including cash), all holders of the Company’s common stock will be entitled to receive the same kind and amount of shares of stock and other securities and property (including cash). Holders of the Company’s common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to the Company’s common stock.

 Description of Preferred Stock

The Company’s board of directors is authorized to divide the authorized shares of the Company’s preferred stock into one or more series, each of which must be so designated as to distinguish the shares of each series of preferred stock from the shares of all other series and classes. The Company’s board of directors is authorized, within any limitations prescribed by law and the Company’s articles of incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock, including, but not limited to, the following:

• the rate of dividend, the time of payment of dividends, whether dividends are cumulative, and the date from which any dividends accrue;

• whether shares may be redeemed, and, if so, the redemption price and the terms and conditions of redemption;

• the amount payable upon shares in the event of voluntary or involuntary liquidation;

• sinking fund or other provisions, if any, for the redemption or purchase of shares;

• the terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion;

• voting powers, if any, provided that if any of the preferred stock or series thereof have voting rights, such preferred stock or series shall vote only on a share for share basis with the common stock on any matter, including, but not limited to, the election of directors, for which such preferred stock or series has such rights; and,

• subject to the foregoing, such other terms, qualifications, privileges, limitations, options, restrictions, and special or relative rights and preferences, if any, of shares or such series as the board of directors may, at the time so acting, lawfully fix and determine under the laws of the State of Nevada.

On April 15, 2015, the Company filed a Certificate of Amendment to the Company’s Articles of Incorporation (the “Certificate of Amendment”) with the Nevada Secretary of State. The Certificate of Amendment authorized ten million (10,000,000) shares of preferred stock. The Company’s Board of Directors and a majority of its shareholders approved the Certificate of Amendment.

On April 15, 2015, pursuant to Article IV of our Articles of Incorporation, the Company’s Board of Directors voted to designate a class of preferred stock entitled Series A Preferred Stock, consisting of up to one million (1,000,000) shares, par value $0.001. Under the Certificate of Designation, holders of Series A Preferred Stock will be entitled to quarterly dividends on 2% of our earnings before interest, taxes and amortization. The dividends are payable in cash or common stock. The holders will also have a liquidation preference on the state value of $0.02 per share plus any accumulated but unpaid dividends. The holders are further entitled to have the Company redeem their Series A Preferred Stock for three shares of common stock in the event of a change of control and they are entitled to vote together with the holders of the Company’s common stock on all matters submitted to shareholders at a rate of forty-five (45) votes for each share held.

Common Stock issuances

During the period commencing October 1, 2016 through March 31, 2017, the Company received $549,000 from 19 investors pursuant to private placement agreements with the investors to purchase 686,250 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.80 for each share of Common stock.

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

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

On February 9, 2017, the Company entered into a Debt Settlement Agreement with Webcor Construction LP (“Webcor”) to settle $158,753 in debt owed to Webcor. The Company agreed to pay Webcor $58,000 on or before February 28, 2017 and to issue 50,000 shares of the Company’s common stock within 4 days of execution. Upon receipt of payment, Webcor agreed to release the full amount of the debt. The shares issued were deemed to have a fair value of $212,500 on the date of the transaction and a loss on settlement of debt of $111,747 was recorded as a result of the Debt Settlement Agreement. The cash payment was made per the agreement on February 28, 2017.

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STOCK WARRANTS

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

STOCK WARRANTS

12. STOCK WARRANTS

The following is a summary of stock warrants activity during the year ended September 30, 2016 and 2015. 

	Number of Shares		Weighted Average Exercise Price
Balance, September 30, 2015	8,097,600	$	0.10
Warrants granted and assumed	5,014,500	$	1.38
Warrants expired	—		—
Warrants canceled	—		—
Warrants exercised	—		—
Balance, September 30, 2016	13,112,100	$	0.59
Warrants granted and assumed	—	$	—
Warrants expired	—		—
Warrants canceled	—		—
Warrants exercised	4,500,000		0.083
Balance, March 31, 2017	8,612,100	$	0.85

As of March 31, 2017, there are warrants exercisable to purchase 8,612,100 shares of common stock in the Company.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

13. COMMITMENTS AND CONTINGENCIES

On January 22, 2016, the Company relocated its corporate office to 70 North Main Street, Suite 105, Bountiful, Utah 84010. The Company executed a one-year lease agreement that calls for the Company to make payments of $850 per month. The Company has prepaid rent for January 2017. Future minimum lease payments under the operating leases for the facilities as of March 31, 2017, are $0. The Company continues to occupy the leased space on a month to month basis at a rate of $850 per month.

CleanSpark, LLC has agreed to warranty and maintain the microgrid assets located on the Fractalgrid Demonstration Facility to Camp Pendleton Marine Corp Base. In exchange, the Company has been granted the permission to locate its system on the base and the access to conduct guided tours of the Fractalgrid Demonstration Facility for the Company’s potential customers.

On December 16, 2016, the Company executed an 18-month lease agreement at 6365 Nancy Ridge Drive, 2^nd Floor, San Diego California. The Company executed a one-year lease agreement that calls for the Company to make payments of $2,375 per month through December 31, 2017 and $2,446 per month from January 1, 2018 through May 31, 2018. Future minimum lease payments under the operating leases for the facilities as of March 31, 2017, are $21,375 and $12,230 for the fiscal years ending December 31, 2017 and 2018, respectively.

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MAJOR CUSTOMERS AND VENDORS

6 Months Ended

Mar. 31, 2017

Notes to Financial Statements

MAJOR CUSTOMER

14.   MAJOR CUSTOMERS AND VENDORS

For the six months ended March 31, 2017 and 2016, the Company had the following customers that represented more than 10% of sales.

	March 31, 2017			March 31, 2016
Bethel-Webcor JV-1		12.3	%		—
Jacobs/ HDR a joint venture		18.7	%		—
Macerich		11.2	%		—
Cintas		11.3	%		—
Firenze		25.3	%		—

For the six months ended March 31, 2017 and 2016, the Company had the following suppliers that represented more than 10% of direct material costs.

	March 31, 2017			March 31, 2016
CED Greentech		62.1	%		—
Simpliphi Power		32.1	%		—

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SUBSEQUENT EVENTS

6 Months Ended

Mar. 31, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

15.    SUBSEQUENT EVENTS

During the period commencing April 1, 2017 through May 5, 2017, the Company received $75,000 from 2 investors pursuant to private placement agreements with the investors to purchase 93,750 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.80 for each share of Common stock.

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SUMMARY OF SIGNIFICANT POLICIES (Details)

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of CleanSpark, Inc., and its wholly owned operating subsidiaries, CleanSpark, LLC, and CleanSpark, II, LLC. All material intercompany transactions have been eliminated upon consolidation of these entities.

Use of Estimates

Use of estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s goodwill, impairments and estimations of long-lived assets, revenue recognition on percentage of completion type contracts, allowances for uncollectible accounts, inventory valuation, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

Cash And Cash Equivelents

Cash and cash equivalents – For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term debt instruments with original maturities of three months or less to be cash equivalents. There was $238,406 and $436,529 in cash and cash equivalents as of March 31, 2017 and September 30, 2016, respectively.

Accounts Receivable

Accounts Receivable – Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms. The Company performs ongoing credit evaluation of its customers and management closely monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded. Accounts receivable are presented net of an allowance for doubtful accounts of $9,000 and $0 at March 31, 2017, and September 30, 2016, respectively.

Fair Value of Financial Instruments

Fair Value of Financial Instruments – The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

Revenue recognition

Revenue Recognition – The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. For the six months ended March 31, 2017 and 2016 the Company reported revenues of $284,633 and $0, respectively.

Revenues and related costs on construction contracts are recognized using the “percentage of completion method” of accounting in accordance with ASC 605-35, Accounting for Performance of Construction-Type and Certain Production Type Contracts (“ASC 605-35”). Under this method, contract revenues and related expenses are recognized over the performance period of the contract in direct proportion to the costs incurred as a percentage of total estimated costs for the entirety of the contract. Costs include direct material, direct labor, subcontract labor and any allocable indirect costs. All un-allocable indirect costs and corporate general and administrative costs are charged to the periods as incurred. However, in the event a loss on a contract is foreseen, the Company will recognize the loss as it is determined.

Revisions in cost and profit estimates during the course of the contract are reflected in the accounting period in which the facts, which require the revision, become known.  Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.  Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

The Asset, “Costs in excess of billings”, represents revenues recognized in excess of amounts billed on contracts in progress. The Liability, “Billings in excess of costs”, represents billings in excess of revenues recognized on contracts in progress. At March 31, 2017 and September 30, 2016, the costs in excess of billings balance were $0 and $0, and the billings in excess of costs balance were $0 and $0, respectively.

Accounts receivables are recorded on contracts for amounts currently due based upon progress billings, as well as retention, which are collectible upon completion of the contracts.  Accounts payable to material suppliers and subcontractors are recorded for amounts currently due based upon work completed or materials received, as are retention due subcontractors, which are payable upon completion of the contract.  General and administrative expenses are charged to operations as incurred and are not allocated to contract costs. Retention receivable is the amount withheld by a customer until a contract is completed. Retention receivables of $0 and $0 were included in the balance of trade accounts receivable as of March 31, 2017 and September 30, 2016, respectively.

Long-lived Assets

Long-lived Assets – In accordance with the Financial Accounting Standards Board ("FASB") Accounts Standard Codification (ASC) ASC 360-10, "Property, Plant and Equipment," the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

Stock-based compensation

Stock-based compensation – The Company follows the guidelines in FASB Codification Topic ASC 718-10 “Compensation-Stock Compensation,” which provides investors and other users of financial statements with more complete and neutral financial information, by requiring that the compensation cost relating to share-based payment transactions be recognized in the financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. ASC 718-10 covers a wide range of share-based compensation arrangements, including share options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As of March 31, 2017, the Company has not implemented an employee stock based compensation plan.

Income taxes

Income taxes – The Company accounts for its income taxes in accordance with FASB Codification Topic ASC 740-10, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. 

Non-Employee Stock Based Compensation

Non-Employee Stock Based Compensation – The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASC 505-50. The Company may issue compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

Earnings (loss) per share

Earnings (loss) per share – The Company reports earnings (loss) per share in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 260-10 “Earnings Per Share,” which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.

Recent Accounting Pronouncements

The Company has evaluated all other recent accounting pronouncements through September 30, 2015, and believes that none of them will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

Warranty Liability

Warranty Liability – The Company establishes warranty liability reserves to provide for estimated future expenses as a result of installation and product defects, product recalls and litigation incidental to the Company’s business.  Liability estimates are determined based on management’s judgment, considering such factors as historical experience, the likely current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with the Company’s general counsel and outside counsel retained to handle specific product liability cases.  The Company’s manufacturers and service providers currently provide substantial warranties between ten to twenty-five years with full reimbursement to replace and install replacement parts.  Warranty costs and associated liabilities for the periods ended March 31, 2017 and September 30, 2016 were $0 and $0, respectively.

Goodwill

Indefinite Lived Intangibles and Goodwill Assets

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

The Company tests for indefinite lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed a qualitative assessment of indefinite lived intangibles and goodwill at September 30, 2016, and determined there was no impairment of indefinite lived intangibles and goodwill.

Business Combinations

Business Combinations

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer lists, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Segment Reporting

Segment Reporting – Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding the method to allocate resources and assess performance. The Company currently has one reportable segment for financial reporting purposes, which represents the Company's core business.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements –The Company has evaluated the all recent accounting pronouncements through ASU 2017-08, and believes that none of them will have a material effect on the Company's financial position, results of operations or cash flows. 

Concentration Risk

Concentration Risk

At times throughout the year, the Company may maintain cash balances in certain bank accounts in excess of FDIC limits. As of March 31, 2017, the cash balance in excess of the FDIC limits was $0. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in these accounts.

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BUSINESS ACQUISITION (Tables)

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Fair Value of the consideration transferred

Shares of Common Stock	$	18,420,000
Stock warrants		13,675,500
Total purchase price	$	32,095,500
Tangible assets acquired	$	4,911,367
Liabilities assumed		(262,573)
Net tangible assets		4,648,794
Intangible assets acquired		22,526,847
Goodwill		4,919,859
Total purchase price	$	32,095,500

Pro Forma Results

	Three Months ended,		Six Months ended,
	March 31, 2016		March 31, 2016
Total revenues	$	25,148	$	1,888,875
Net Income (loss)		(1,710,257)		(2,667,416)
Basic net income (loss) per common share	$	(0.06)	$	(0.10)

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FIXED ASSETS (Tables)

6 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

Schedule of Fixed Assets

	March 31, 2017			September 30, 2016
Machinery and equipment	$	747,931		$	769,276
Furniture and fixtures		72,253			72,484
Total		820,184			841,760
Less: accumulated depreciation		(108,490	)		(58,785)
Fixed assets, net	$	711,791		$	782,975

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MICROGRID ASSETS (Tables)

6 Months Ended

Mar. 31, 2017

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Microgrid Assets

	March 31, 2017			September 30, 2016
Camp Pendleton FractalGrid	$	4,625,339		$	4,625,339
Less: accumulated depreciation		(501,711	)		(57,501)
Fixed assets, net	$	4,123,628		$	4,567,838

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FlEXPOWER SYSTEM (Tables)

6 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Flexpower System

	March 31, 2017			September 30, 2016
FlexPower System	$	20,057,997		$	20,007,624
Less: accumulated amortization		(996,036	)		(331,638)
Intangible assets, net	$	19,061,961		$	19,675,986

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INTANGIBLE AND OTHER ASSETS (Tables)

6 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

	March 31, 2017			September 30, 2016
Patents	$	84,991		$	82,641
Websites		12,582			9,777
Brand and Client lists		2,497,472			2,497,472
Trademarks		5,928			4,858
Software		26,990			10,728
Less: accumulated amortization		(276,018	)		(137,546)
Intangible assets, net	$	2,351,945		$	2,467,930

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PREPAID EXPENSES (Tables)

6 Months Ended

Mar. 31, 2017

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaid Expenses

	March 31, 2017		September 30, 2016
Prepaid stock compensation	$	-	$	50,130
Prepaid rents		1,700		850
Prepaid dues and subscriptions		12,443		-
Prepaid insurance and bonds		30,798		6,742
Total prepaid expenses	$	44,941	$	57,722

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STOCK WARRANTS (Tables)

6 Months Ended

Mar. 31, 2017

Accounting Policies [Abstract]

Schedule of Warrant Summary

	Number of Shares		Weighted Average Exercise Price
Balance, September 30, 2015	8,097,600	$	0.10
Warrants granted and assumed	5,014,500	$	1.38
Warrants expired	—		—
Warrants canceled	—		—
Warrants exercised	—		—
Balance, September 30, 2016	13,112,100	$	0.59
Warrants granted and assumed	—	$	—
Warrants expired	—		—
Warrants canceled	—		—
Warrants exercised	4,500,000		0.083
Balance, March 31, 2017	8,612,100	$	0.85

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MAJOR CUSTOMER (Tables)

6 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Major Customers

For the six months ended March 31, 2017 and 2016, the Company had the following customers that represented more than 10% of sales.

	March 31, 2017			March 31, 2016
Bethel-Webcor JV-1		12.3	%		—
Jacobs/ HDR a joint venture		18.7	%		—
Macerich		11.2	%		—
Cintas		11.3	%		—
Firenze		25.3	%		—

For the six months ended March 31, 2017 and 2016, the Company had the following suppliers that represented more than 10% of direct material costs.

	March 31, 2017			March 31, 2016
CED Greentech		62.1	%		—
Simpliphi Power		32.1	%		—

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ORGANIZATION AND LINE OF BUSINESS (Details Narrative) - USD ($)	6 Months Ended
	Mar. 31, 2017	Sep. 30, 2016	Jul. 01, 2016	Mar. 25, 2014
Date of Incorporation	Oct. 15, 1987
Date began publically trading	Jan. 22, 2016
Common Stock, par value	$ 0.001	$ .001
Liabilities Assumed			$ 200,000	$ 156,900
Date of Name Change to Stratean	Dec. 01, 2014
Date of Name Change to CleanSpark	Oct. 01, 2016

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BASIS OF PRESENTATION AND GOING CONCERN (Details Narrative) - USD ($)	Mar. 31, 2017	Sep. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated earnings (deficit)	$ (8,441,678)	$ (6,434,840)

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SUMMARY OF SIGNIFICANT POLICIES (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016	Sep. 30, 2016
Accounting Policies [Abstract]
Cash	$ 238,406		$ 238,406		$ 436,529
Revenues	200,749		284,633
Cost in excess of billings

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BUSINESS ACQUISITION (Details) - USD ($)	3 Months Ended	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2017
Accounting Policies [Abstract]
Shares of Common Stock		18,420,000
Stock Warrants		13,675,500
Total Purchase Price		$ 32,095,500
Tangible Assets Acquired		4,911,367
Liabilities Assumed		(262,573)
Net Tangible Assets		4,648,794
Intangible Assets Acquired		22,526,847
Goodwill		4,919,589
Total Purchase Price		32,095,500
Total Revenues	$ 25,148	1,888,875
Net Income (Loss)	$ (1,710,257)	$ (2,667,416)
Basic and dilutedincome (loss) per common share	(6.00%)	(10.00%)

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BUSINESS ACQUISITION (Details narrative)

6 Months Ended

Mar. 31, 2017

USD ($)

$ / shares

shares

Accounting Policies [Abstract]

Date of Transaction

Aug. 19, 2016

Accounts Payable

$ 262,873

Liabilities limited to

200,000

Liabilities to be Reimbursed

$ 62,873

Shares issued to Seller | shares

6,000,000

Fair Value of Shares Issued

$ 18,420,000

Exercise Price Per Share | $ / shares

$ 1.5

Warrants to purchase shares | shares

4,500,000

Value of Warrants Issued

$ 13,675,500

details

As consideration, the Company issued to Seller six million (6,000,000) shares of common stock with a fair value of $18,420,000 and five-year warrants to purchase four million five hundred thousand (4,500,000) shares of common stock at an exercise price of $1.50 per share. The warrants were valued at $13,675,500 using the Black Scholes option pricing model based upon the following assumptions: term of 5 years, risk free interest rate of 1.0%, a dividend yield of 0% and volatility rate of 218%. The warrants were fully earned and vested on July 1, 2016. 

Fair Value of Asset Acquired

$ 32,095,500

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FIXED ASSETS - Schedule of Property Pant and Equipment (Details) - USD ($)	Mar. 31, 2017	Sep. 30, 2016
Property, Plant and Equipment [Abstract]
Machinery and equipment	$ 747,931	$ 769,276
Furniture and fixtures	72,253	72,484
Total	820,184	841,760
Less: accumulated depreciation	(108,490)	(58,785)
Fixed assets, net of accumulated depreciation	$ 711,791	$ 782,975

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FIXED ASSETS (Details Narrative) - USD ($)	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accounting Policies [Abstract]
Depreciation Expense	$ 51,464	$ 19,126
Disposed of Fixed Assets	19,817
Consideration for Disposal	7,000
Loss on Disposal of Assets	$ 12,817

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MICROGRID ASSETS (Details) - USD ($)	6 Months Ended	12 Months Ended
	Mar. 31, 2017	Sep. 30, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Camp Pedleton FractalGrid	$ 4,625,339	$ 4,625,339
Less Accumulated Depreciation	(501,711)	(57,501)
Fixed Assets, net	$ 4,123,628	$ 4,567,838

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MICROGRID ASSETS (Details narrative) - USD ($)	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Capitalization of Project	$ 4,625,339
Depreciation Expense	$ 444,210	$ 0

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FLEXPOWER SYSTEM (Details) - USD ($)	6 Months Ended	12 Months Ended
	Mar. 31, 2017	Sep. 30, 2016
Fair Value Disclosures [Abstract]
FlexPower System	$ 20,257,997	$ 20,007,624
Less: Accumulated Depreciation	(996,036)	(331,638)
Intangible Assets Net	$ 19,061,961	$ 19,675,986

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FLEXPOWER SYSTEM (Details Narrative)	6 Months Ended
	Mar. 31, 2017 USD ($)
Fair Value Disclosures [Abstract]
Project Capitalization	$ 20,007,624
Amortization Expense	$ 664,398

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INTANGIBLE AND OTHER ASSETS - Schedule of Intangible Assets (Details) - USD ($)	Mar. 31, 2017	Sep. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Patents	$ 84,991	$ 82,641
Websites	12,582	9,777
Brand and Client List	2,497,472	2,497,472
Trademarks	5,928	4,858
Software	26,990	10,728
Less: accumulated depreciation	(276,018)	(137,546)
Fixed assets, net of accumulated depreciation	$ 2,351,945	$ 2,467,930

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INTANGIBLE AND OTHER ASSETS (Details Narrative) - USD ($)	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Accounting Policies [Abstract]
Amortization Expense	$ 138,472	$ 1,359

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RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016	Sep. 30, 2016
Professional fees	$ 225,600	$ 167,795	$ 514,944	$ 214,157
Common Stock, Issued			686,250
Common Stock, Par Value	$ 0.001		$ 0.001		$ .001
Common Stock, Fair Value	$ 32,970		$ 32,970
Assumption of Debt
Date of Agreement			Feb. 06, 2017
Trade Payables not to exceed			$ 200,000
Assumed Liabilities			275,586
Reimbursable Liabilities			25,000
Overage Amount of Liablilites			50,586
Reassumption of Debt			44,919
Debt assumption accepted			44,919
Loss on Settlement of Debt			$ 5,667
Consulting Agmt
Date of Agreement			Oct. 01, 2014
Monthly Fee Min			$ 7,500
Monthly Fee Max			$ 15,000
Term of Agreement			1 month
Professional fees			$ 71,954
Professional fees owed			$ 38,546
Consulting Agmt 2
Date of Agreement			Jul. 01, 2016
Monthly Fee Min			$ 15,000
Professional fees			65,971
Professional fees owed			$ 59,829
Consulting Agmt 3
Date of Agreement			Jul. 01, 2016
Monthly Fee Min			$ 2,000
Monthly Fee Max			2,250
Professional fees			68,334
Professional fees owed			2,000
Reimbursable Liabilities			$ 4,020

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PREPAID EXPENSES - (Details) - USD ($)	Mar. 31, 2017	Sep. 30, 2016
Prepaid Expenses - Schedule Of Fixed Assets Details
Prepaid Stock Compensation		$ 50,130
Prepaid rents	1,700	850
Prepaid Dues and Subcription	12,443
Prepaid Insurance and Bonds	30,798	6,742
Total prepaid expenses	$ 44,941	$ 57,722

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PREPAID EXPENSES (Details Narrative)	6 Months Ended
	Mar. 31, 2017 USD ($) $ / shares shares
Date of Agreement	Jan. 22, 2016
Consulting Agmt
Date of Agreement	Jan. 15, 2016
Options Granted, Fair Value	$ 6,720
Value Per Share | $ / shares	$ 3
Options Term	1 year
Shares Issued | shares	20,000
Value of Shares Issued	$ 60,000
Cash Monthly Fee First Six Months	3,500
Cash Monthly Fee First Last Months	$ 6,500
Board Advisor
Date of Agreement	Jan. 22, 2016
Value Per Share | $ / shares	$ 3
Prepaid expense	$ 32,705
Shares Issued | shares	35,000
Value of Shares Issued	$ 105,000
Consulting Agmt
Stock Based Compensation	$ 17,425

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STOCKHOLDERS EQUITY (DEFICIT) (Details Narrative) - USD ($)	6 Months Ended	12 Months Ended
	Mar. 31, 2017	Sep. 30, 2014	Feb. 28, 2017	Dec. 01, 2016	Nov. 01, 2016	Sep. 30, 2016
Common Stock, Shares authorized	100,000,000					100,000,000
Common Stock, par value	$ 0.001					$ .001
Preferred Stock, Shares authorized	10,000,000					10,000,000
Preferred Stock, par value	$ 0.001					$ .001
Common Stock, shares issued	32,969,721			1,466,352	2,932,704	27,834,415
Preferred Stock, Shares issued	1,000,000					1,000,000
Series A Preferred Stock, Shares	1,000,000
Series A Preferred Stock, Par Value	$ 0.001
Shares issued for direct investment	686,250
Shares issued for direct investment, value	$ 549,000	$ 200,000
Purchase Price per share issued for Direct Investment	$ .80
Warrant, exercise price				$ 1,500,000	$ 3,000,000
Dividend Rate	2.00%
Liquidation Preference Per Share	$ 0.02
Date of Certificate of Amendment	Apr. 15, 2015
Voting rates for shareholders	45
Payment to Webcor Agreement			$ 58,000
Officers Options
Date of Issuance	Nov. 01, 2016
Director
Date of Issuance	Dec. 01, 2016
DebtSettlement
Date of Issuance	Feb. 09, 2017
Shares issued for direct investment, value	$ 121,500
Debt Owed to Webcor	158,753
Loss on Settlement of Debt	$ 111,747
Shares to be issued to settle debt	50,000

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STOCK WARRANTS - Schedule of Warrant Summary (Details) - $ / shares	6 Months Ended	12 Months Ended
	Mar. 31, 2017	Sep. 30, 2016
Stock Warrants - Schedule Of Warrant Summary Details
Beginning Balance, number of shares	13,112,100	8,097,600
Beginning Balance, weighted average exercise price	$ 0.59	$ 0.10
Warrants Granted and Assumed, number of shares		5,014,500
Warrants Granted and Assumed, weighted average exercise price		$ 1.38
Warrants exercised, number of shares	4,500,000
Warrants exercised, weighted average exercise price	$ 0.083
Ending Balance, number of shares	8,612,100	13,112,100
Ending Balance, weighted average exercise price	$ 0.85	$ 0.59

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COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	6 Months Ended
	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Future minimum lease payments		$ 12,230	$ 21,375
Lease Agreements
Monthly Rent Expense	$ 850
Term of Agreement	1 year
Date of Lease Termination	Jan. 22, 2016
Lease Agreements 2
Monthly Rent Expense Minimum	$ 2,375
Monthly Rent Expense Maximum	$ 2,446
Term of Agreement	1 year
Term of Agreement After Year One	1 month
Date of Agreement	Dec. 16, 2016

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MAJOR CUSTOMER (Details)	Mar. 31, 2017	Mar. 31, 2016
Notes to Financial Statements
Bethel-Webcor	1230.00%
Jacobs/HDR a joint venture	1870.00%
Macerich	1120.00%
Cintas	1130.00%
Firenze	2530.00%
CED Greentech	6210.00%
Simpliphi Power	3210.00%

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MAJOR CUSTOMER (Details Narrative)	6 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Notes to Financial Statements
Customer Representation Percentage	10.00%	10.00%
Supplier Representaion Percentage	10.00%	10.00%

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SUBSEQUENT EVENTS (Details Narrative) - Private Placement	1 Months Ended
	May 05, 2017 USD ($) $ / shares shares
Shares purchased by investors | shares	93,750
Par Value Per Share | $ / shares	$ 0.001
Purchase Price Per Share Value	80.00%
Cash Received on Investment | $	$ 75,000