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15. COMMITMENTS AND CONTINGENCIES - USD ($)
 12 Months Ended
Sep. 30, 2021
Dec. 09, 2020
Commitments and Contingencies Disclosure [Abstract]    
15. COMMITMENTS AND CONTINGENCIES

15.   COMMITMENTS AND CONTINGENCIES

 

The Company has purchase commitments that are cancellable of approximately $144.04 million related to purchase of miners as of September 30, 2021, and the Company has paid $85.11 million towards these commitments as of the end of this period. As of September 30, 2021, the remaining commitment for future payments was $58.93 million.

 

The Company has purchase commitments for infrastructure assets and other mining equipment of approximately $6,512,000 as of September 30, 2021 and the Company has paid $4,576,000 towards these commitments as of end of this period.

 

The following table sets forth certain information concerning our obligations to make contractual future payments towards our agreements as of September 30, 2021:

 

  2022 2023 2024 2025 2026 Thereafter Total
Recorded contractual obligations:              
Operating lease obligations $316,908 $324,948 $333,234 $341,767 $299,039 $50,659 $1,666,555
Finance Lease obligations    449,431    321,887    142,428      12,320        1,853              —    927,919
Miner equipment 58,930,880           58,930,880
Infrastructure assets 1,936,000           1,936,000
Total $61,633,219 $646,835 $475,662 $354,087 $300,892 $50,659 $63,461,354

 

Contingent consideration

 

GridFabric: On August 31, 2020, the Company acquired GridFabric, LLC. Pursuant to the terms of the purchase agreement, additional shares of the Company’s common stock valued at up to $750,000 were issuable if GridFabric achieves certain revenue and product release milestones. On September 30, 2021, the contingent consideration was re-measured to $500,000.

 

Subsequent to September 30, 2021, the Company settled all contingent consideration due to GridFabric resulting in a payment of 8,404 shares of common stock valued at $150,000.

 

Solar Watt Solutions: On February 24, 2021, the Company acquired Solar Watt Solutions, Inc. Pursuant to the terms of the purchase agreement, additional cash consideration of up to $2,500,000 (fair valued at $155,000 at acquisition date) in cash held back by the Company and only payable pro rata to Sellers upon meeting certain future milestones and subject to satisfaction of any amounts owing from SWS to the Company resulting from damages required to be indemnified under the SWS Merger Agreement. The contingent cash consideration was re-measured to $320,802 at September 30, 2021.

 

 

Legal contingencies

 

From time to time we may be subject to litigation. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. We have acquired liability insurance to reduce such risk exposure to the Company. Despite the measures taken, such policies may not cover future litigation, or the damages claimed may exceed our coverage which could result in contingent liabilities.

 

Bishins v. CleanSpark, Inc. et al.

 

On January 20, 2021, Scott Bishins (“Bishins”), individually, and on behalf of all others similarly situated (together, the “Class”), filed a class action complaint (the “Class Complaint”) in the United States District Court for the Southern District of New York against the Company, its Chief Executive Officer, Zachary Bradford (“Bradford”), and its Chief Financial Officer, Lori Love (“Love”) (the “Class Action”). The Class Complaint alleges that, between December 31, 2020 and January 14, 2021, the Company, Bradford, and Love “failed to disclose to investors: (1) that the Company had overstated its customer and contract figures; (2) that several of the Company’s recent acquisitions involved undisclosed related party transactions; and (3) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.” (the “Class Allegations”). The Class Complaint seeks: (a) certification of the Class, (b) an award of compensatory damages to the Class, and (c) an award of reasonable costs and expenses incurred by the Class in the litigation. To date, no class has been certified in the Class Action. Currently, there is a pending motion to appoint lead class plaintiff, at which point dispositive motions may be filed.

 

Although the ultimate outcome of the Class Action cannot be determined with certainty, the Company stands behind all of its prior statements and disclosures and believes that the claims raised in the Class Complaint are entirely without merit. The Company intends to both defend itself vigorously against these claims and to vigorously prosecute any counterclaims.

 

Notwithstanding the Class Allegations’ lack of merit, however, the Class Action may distract the Company and cost the Company’s management time, effort and expense to defend against the claims made in the Class Complaint. Notwithstanding the Company’s belief that the Company and its management have complied with all of their obligations under applicable securities regulations, no assurance can be given as to the outcome of the Class Action, and in the event the Company does not prevail in such action, the Company, its business, financial condition and results of operations would be materially and adversely affected.

 

Ciceri, derivatively on behalf of CleanSpark, Inc., v. Bradford, Love, Schultz, Beynon, McNeill, and Wood (consolidated with Perna, derivatively on behalf of CleanSpark, Inc., v. Bradford, Love, Schultz, Beynon, McNeill, and Wood)

 

On May 26, 2021, Andrea Ciceri (“Ciceri”), derivatively on behalf of CleanSpark, Inc., filed a verified shareholder derivative action (the “Ciceri Derivative Action”) in the United States District Court in the District of Nevada against Chief Executive Officer, Zachary Bradford (“Bradford”), Chief Financial Officer, Lori Love (“Love”) and Directors Matthew Schultz, Roger Beynon, Larry McNeill and Tom Wood (Bradford, Love and Directors collectively referred to as “Defendants.”) On June 22, 2021, Mark Perna (“Perna”) filed a verified shareholder derivative action (the “Perna Derivative Action”) in the same Court against the same Defendants making substantially similar allegations. On June 29, 2021, the court consolidated the Ciceri Derivative Action with the Perna Derivative Action in accordance with a stipulation among the parties (the consolidated case referred to as the “Derivative Action”). The Derivative Action alleges that Defendants: (1) made materially false and misleading public statements about the Company’s business and prospects; (2) did not maintain adequate internal controls; and (3) did not disclose several related party transactions benefitting insiders, questionable uses of corporate assets, and excessive compensation. The claims asserted against all Defendants include breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. A claim for contribution under Sections 10(b) and 21D of the Securities and Exchange Act is asserted against only Bradford and Love. The Derivative Action seeks declaratory relief, monetary damages, and imposition of adequate corporate governance and internal controls. Plaintiffs were given the opportunity to submit an Amended Complaint by November 25, 2021, but elected not to. Defendants’ Motion to Dismiss will be due by January 20, 2022.

 

 

Although the ultimate outcome of the Derivative Action cannot be determined with certainty, the Company stands behind all of its prior statements and disclosures, and believes that the claims raised in that case are entirely without merit. The Company intends to both defend itself vigorously against these claims and to vigorously prosecute any counterclaims.

 

Notwithstanding the Derivative Action’s lack of merit, however, it may distract the Company and cost the Company’s management time, effort and expense to defend against the claims. Notwithstanding the Company’s belief that the Company and its management have complied with all of their obligations under applicable securities regulations, no assurance can be given as to the outcome of the Derivative Action, and in the event the Company does not prevail in such action, the Company, its business, financial condition and results of operations would be materially and adversely affected. 

 

  
Long-term Purchase Commitment [Line Items]    
Lessee, Operating Lease, Liability, to be Paid $ 316,908  
Lessee, Operating Lease, Liability, to be Paid, Year Two 324,948  
Lessee, Operating Lease, Liability, to be Paid, Year Three 333,234  
Lessee, Operating Lease, Liability, to be Paid, Year Four 341,767  
Lessee, Operating Lease, Liability, to be Paid, Year Five 299,039  
Lessee, Operating Lease, Liability, to be Paid, after Year Five 50,659  
Lessee, Operating Lease, Liability, Undiscounted Excess Amount 1,666,555  
Finance Lease, Liability, Payment, Due 449,431  
Finance Lease, Liability, to be Paid, Year Two 321,887  
Finance Lease, Liability, to be Paid, Year Three 142,428  
Finance Lease, Liability, to be Paid, Year Four 12,320  
Finance Lease, Liability, to be Paid, Year Five 1,853  
Finance Lease, Liability, to be Paid, after Year Five  
Finance Lease, Liability, Undiscounted Excess Amount 927,919  
[custom:MinerEquipmentLiabilityPaymentsDue-0] 58,930,880  
[custom:InfrastructureAssetsLiabilityPaymentsDue-0] 1,936,000  
Contractual Obligation, to be Paid, Year One 61,633,219  
Contractual Obligation, to be Paid, Year Two 646,835  
Contractual Obligation, to be Paid, Year Three 475,662  
Contractual Obligation, to be Paid, Year Four 354,087  
Contractual Obligation, to be Paid, Year Five 300,892  
Contractual Obligation, to be Paid, after Year Five 50,659  
Contractual Obligation 63,461,354 $ 7,457,970
Total [Member]    
Long-term Purchase Commitment [Line Items]    
[custom:MinerEquipmentLiabilityPaymentsDue-0] 58,930,880  
[custom:InfrastructureAssetsLiabilityPaymentsDue-0] $ 1,936,000