Filed pursuant to Rule 424(b)(2)
Registration Statement No. 333-228063
PROSPECTUS SUPPLEMENT
(To Prospectus Dated November 20, 2018)
$5,250,000 Senior Secured Redeemable
Convertible Debenture
Common Stock Purchase Warrant to Purchase
up to 3,083,333 Shares of Common Stock
Shares of Common Stock Issuable Upon
Conversion of the Senior Secured Redeemable Convertible Debenture
Shares of Common Stock Issuable Upon
Exercise of the Warrant
100,000 Shares of Common Stock
We are offering an $5,250,000 face value Senior Secured Redeemable
Convertible Debenture (the “Debenture”), a Common Stock Purchase Warrant (the “Warrant”) to acquire up
to 3,083,333 shares (the “Warrant Shares”) of our common stock (our “Common Stock”), the shares of our
Common Stock underlying the Debenture and the Warrant Shares and 100,000 shares of common stock. The aggregate purchase price for
the Debenture and the Warrant is $5,000,000. The Debenture has a maturity date two years from the issuance date and we have agreed
to pay compounded interest on the unpaid principal balance of the Debenture at the rate equal to 7.5% per annum. Interest is payable
on the date the applicable principal is converted or on maturity. The interest must be paid in cash and, in certain circumstances,
may be paid in shares of our Common Stock. The Warrant is exercisable for a term of three years on a cash-only basis at an exercise
price of $2.00 per share with respect to 1,250,000 Warrant Shares, $2.50 with respect to 1,000,000 Warrant Shares, $5.00 with respect
to 500,000 Warrant Shares and $7.50 with respect to 333,333 Warrant Shares.
Prior to the maturity
date, provided that no trigger event has occurred, we will have the right at any time upon 30 trading days’ prior written
notice, in our sole and absolute discretion, to redeem all or any portion of the Debenture then outstanding by paying the holder
an amount equal to 140% of the face value of the Debenture.
The holder may convert
the Debenture into shares of
our
Common Stock
at a conversion
price
equal to 95% of the mathematical average of the 5 lowest individual daily volume weighted average prices of our Common
Stock, less $.05 per share, during the period beginning on the issuance date and ending on the maturity date. no conversion is
permitted at a price below $0.12 per share. In the event certain equity conditions exist, we may require that the holder convert
the Debenture. In no event shall the holder of the Debenture be allowed to effect a conversion if such conversion, along with all
other shares of our Common Stock beneficially owned by the holder and its affiliates would exceed 4.99% of the outstanding shares
of our Common Stock.
We do not intend
to apply to list the Debenture or Warrant on any national securities exchange or any automated dealer quotation system. Our Common
Stock is listed on the OTCQB marketplace under the symbol “CLSK.” On December 28, 2018, the last reported sale price
of our Common Stock was $2.19 per share.
We intend to use
the net proceeds received from the sale of the Debenture for general corporate purposes and the repayment of certain outstanding
debt. We will not receive any additional proceeds if and when the Debenture is converted, in whole or in part, into shares of our
Common Stock.
Our business
and an investment in our Common Stock involve significant risks. These risks are described under the caption “Risk Factors”
beginning on page S-3 of this prospectus supplement and in the documents incorporated by reference into this prospectus supplement.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date on this prospectus supplement
is December 31, 2018
We are responsible for the information contained
and incorporated by reference in this prospectus supplement, the accompanying prospectus and any related free writing prospectus
we prepare or authorize. We have not authorized anyone to provide you with different information, and we take no responsibility
for any other information that others may give you. We are not, and the placement agent is not, making an offer of our securities
in any jurisdiction where the offer is not permitted. The information in this prospectus supplement, the accompanying prospectus,
the documents incorporated by reference and any written communication from us specifying the final terms of the offering is only
accurate as of the date of the respective documents in which the information appears. Our business, financial condition, results
of operations and prospects may have changed since those dates. Information in this prospectus supplement updates and modifies
the information in the accompanying prospectus.
TABLE OF CONTENTS
Prospectus
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement and the accompanying
prospectus are part of a registration statement on Form S-3 (File No. 333-228063) that we filed with the Securities and
Exchange Commission (the "SEC") and that was declared effective by the SEC on November 20, 2018. Under this shelf registration
process, we may, from time to time, offer common stock, preferred stock, debt securities, warrants and units, of which this offering
is a part.
This document is in two parts. The first part is
this prospectus supplement, which describes the terms of this offering of common stock and warrants and also adds, updates and
changes information contained in the accompanying prospectus and the documents incorporated herein by reference. The second part
is the accompanying prospectus, which provides more general information about our common stock and warrants and other securities
that do not pertain to this offering. To the extent that the information contained in this prospectus supplement conflicts with
any information in the accompanying prospectus or any document incorporated by reference, the information in this prospectus supplement
shall control. The information in this prospectus supplement may not contain all of the information that is important to you. You
should read this entire prospectus supplement, the accompanying prospectus and the documents incorporated by reference carefully
before deciding whether to invest in our securities.
References to "our company," "we,"
"our" and "us" in this prospectus supplement and the accompanying prospectus are to CleanSpark, Inc. and
its consolidated subsidiaries, unless the context otherwise requires. This document may include trade names and trademarks of other
companies. All such trade names and trademarks appearing in this document are the property of their respective holders.
DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus, each prospectus supplement and
the information incorporated by reference in this prospectus and each prospectus supplement contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to as the Securities Act, and Section
21E of the Exchange Act of 1934, as amended, which we refer to as the Exchange Act, that involve a number of risks and uncertainties.
Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on
facts and factors currently known by us. Consequently, these forward-looking statements are inherently subject to risks and uncertainties,
and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.
Forward-looking statements can be identified by
the use of forward-looking words such as “believes,” “expects,” “hopes,” “may,”
“will,” “plan,” “intends,” “estimates,” “could,” “should,”
“would,” “continue,” “seeks,” “pro forma,” or “anticipates,” or other
similar words (including their use in the negative), or by discussions of future matters. These statements include but are not
limited to statements under the captions “Business,” “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and in other sections included in any applicable prospectus
supplement or incorporated by reference from our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as applicable,
as well as our other filings with the SEC. You should be aware that the occurrence of any of the events discussed under the heading
“Risk Factors” in any applicable prospectus supplement and any documents incorporated by reference herein or therein
could substantially harm our business, operating results and financial condition and that if any of these events occurs, it could
adversely affect the value of an investment in our securities.
The cautionary statements made in this prospectus
are intended to be applicable to all related forward-looking statements wherever they may appear in this prospectus or in any
prospectus supplement or any documents incorporated by reference herein or therein. We urge you not to place undue reliance on
these forward-looking statements, which speak only as of the date they are made. Except as required by law, we assume no obligation
to update our forward-looking statements, even if new information becomes available in the future.
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information
about CleanSpark, Inc. This summary does not contain all of the information that may be important to you in making an investment
decision. For a more complete understanding of CleanSpark, Inc. you should read carefully this entire prospectus supplement
and the accompanying prospectus, including the "Risk Factors" section and the other documents we refer to and incorporate
by reference. Unless otherwise indicated, "common stock" means our common stock, par value $0.001 per share.
CleanSpark Overview
We are in the business of providing
advanced energy software and control technology that enables a plug-and-play enterprise solution to modern energy challenges. Our
services consist of intelligent energy monitoring and controls, microgrid design and engineering, microgrid consulting services,
and turn-key microgrid implementation services. Our software allows energy users to obtain resiliency and economic optimization.
Our software is uniquely capable of enabling a microgrid to be scaled to the user's specific needs and can be widely implemented
across commercial, industrial, military and municipal deployment.
Integral to our business is
our mPulse and mVSO software platforms (the “Platforms”). When the Platforms are implemented on a customer’s
power system they are able to control the distributed energy resources on site to provide secure, sustainable energy often at significant
cost savings for our energy customers. The Platforms allows customers to efficiently manage renewable energy generation, and other
distributed energy technologies including energy generation assets, energy storage assets, and energy consumption assets. By having
autonomous control over the distributed facets of energy usage and energy storage, customers are able to reduce their dependency
on utilities, thereby keeping energy costs relatively constant over time. The overall aim is to transform energy consumers into
energy producers by supplying power that anticipates their routine instead of interrupting it.
We also own patented gasification technologies.
Our technology converts any organic material into SynGas. SynGas can be used as clean, renewable, environmentally friendly, warming
fuel for power plants, motor vehicles, and as feedstock for the generation of DME (Di-Methyl Ether).
As previously disclosed, we plan to continue our
focus on the CleanSpark side of the business in 2018, 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.
We recently entered into an asset purchase agreement
with Pioneer Custom Electric Products Corp., as amended, and will acquire the following assets:
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All accounts receivable, less appropriate allowance
for doubtful accounts;
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All trade accounts payable and accrued liabilities;
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Furniture and fixtures;
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Fee-Free license agreement for use of the Pioneer’s
brand name; and
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All purchase orders, customer contracts, and client
list(s).
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We agreed to assume certain liabilities under the
agreement, including, among others, all trade accounts that remain unpaid, all liabilities under the assumed contracts, and all
liabilities associated with the assets post-closing.
The Company intends to strategically use the assets
to increase its impact in the Microgrid market.
In exchange for the assets, we agreed to the following
consideration:
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an 18-month promissory note in the principal amount
equal to the net carrying value of the current assets and liabilities of the business;
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an equipment lease agreement, which shall provide
for the lease of the equipment;
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7,000,000 shares of our Common Stock based on an
agreed upon value of $0.80 per share, for a total agreed upon value of $5,600,000;
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a five-year warrant to purchase 1,000,000 shares
of our Common Stock at an exercise price of $1.60 per share; and
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a five-year warrant to purchase 1,000,000 shares
of our Common Stock at an exercise price of $2.00 per share.
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The closing of the transactions contemplated by
the Purchase Agreement is currently expected to occur on January 16, 2018 (the “Closing Date”).
Our principal executive offices are located
at 70 North Main Street, Ste. 105 Bountiful, Utah 84010, and our telephone number is (801) 244-4405. Our website is located at
www.cleanspark.com
. Information contained on our website or that can be accessed through our website is not incorporated
by reference into this prospectus supplement.
We are an “emerging growth company,” as defined
in the Jumpstart Our Business Startups Act of 2012. As an emerging growth company we are eligible for exemptions from various reporting
requirements applicable to other public companies that are not emerging growth companies, including not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and reduced disclosure obligations
regarding executive compensation. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal
year (a) following the fifth anniversary of the closing of our initial public offering in February 2014, (b) in which
we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer,
which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th,
and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We refer to the Jumpstart Our Business Startups Act of 2012 herein as the “JOBS Act,” and references herein to “emerging
growth company” shall have the meaning associated with it in the JOBS Act.
For additional information as to our business, properties
and financial condition, please refer to the documents cited in "Where You Can Find More Information."
The Offering
The following summary is provided solely for
your convenience and is not intended to be complete. You should read the full text and more specific details contained elsewhere
in this prospectus supplement and the accompanying prospectus. For a more detailed description of our common stock, see "Description
of Securities – Common Stock" in the accompanying prospectus.
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Issuer
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CleanSpark, Inc.
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Purchase Price
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The aggregate purchase price for the Debenture and the Warrant is $5,000,000.
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Debenture
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$5,250,000 face value Senior Secured Redeemable Convertible Debenture due two years from the date of issuance.
This prospectus supplement also relates to the offering of
the shares of our Common Stock issuable upon conversion or repayment of the Debenture.
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Maturity Date
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Two years from the date of issuance.
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Interest
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The Debenture accrues compounded interest on the unpaid principal balance of the Debenture at the rate equal to 7.5% per annum.
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Conversion Rights/Conversion Price
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The holder may convert the Debenture into shares of our Common
Stock at a conversion price equal to 95% of the mathematical average of the 5 lowest individual daily volume weighted average prices
of the Common Stock, less $.05 per share, during the period beginning on the issuance date and ending on the maturity date. In
the event certain equity conditions exist, we may require that the holder convert the Debenture. In no event shall the holder of
the Debenture be allowed to effect a conversion if such conversion, along with all other shares of our Common Stock beneficially
owned by the holder and its affiliates would exceed 4.99% of the outstanding shares of our Common Stock.
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Prepayment
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Prior to the maturity date, provided that no trigger event has occurred, we will have the right at any time upon 30 trading days’ prior written notice, in our sole and absolute discretion, to redeem all or any portion of the Debenture then outstanding by paying the holder an amount equal to 140% of the face value of the Debenture.
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Use of Proceeds
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We will receive gross proceeds of $5,000,000 from the sale
of the Debenture in this offering. We plan to use the net proceeds received in such sale for general corporate purposes and the
repayment of certain outstanding debt. We will not receive any additional proceeds from the conversion of the Debenture, whether
in whole or in part. For more information, see the section titled “Use of Proceeds.”
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Risk Factors
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You should read the “Risk Factors” section
of this prospectus supplement beginning on page S-5 for a discussion of factors to consider carefully before deciding
to invest in shares of our Common Stock.
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Events of Default
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If an event of default on the Debenture occurs, the face
value of the Debenture, plus any accrued and unpaid interest and late payments, may become immediately due and payable. See “Description
of Debenture” for additional information.
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Governing Law
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The Debenture will be governed by, and construed in accordance
with, the laws of the US Virgin Islands, without regard to the principles of conflict of laws thereof.
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Warrant
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The Warrant is exercisable for a term of three years on a
cash-only basis at an exercise price of $2.00 per share with respect to 1,250,000 Warrant Shares, $2.50 with respect to 1,000,000
Warrant Shares, $5.00 with respect to 500,000 Warrant Shares and $7.50 with respect to 333,333 Warrant Shares
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No Listing
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We do not intend to apply for listing for the Debenture or
Warrant on any national securities exchange or any automated dealer quotation system.
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OTC Markets Group, Inc.’s OTCQB marketplace
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Our shares of Common Stock are quoted on the OTC Markets Group, Inc.’s OTCQB marketplace under the symbol “CLSK.”
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RISK FACTORS
An investment in our securities involves a high
degree of risk. You should carefully consider the risks described below, as well as the other information included or incorporated
by reference in this prospectus supplement, before making an investment decision. Our business, financial condition, results of
operations and cash flows could be materially adversely affected by any of these risks. The market or trading price of our securities
could decline due to any of these risks. In addition, please read "Disclosure Regarding Forward-Looking Statements" in
this prospectus supplement, where we describe additional uncertainties associated with our business and the forward-looking statements
included or incorporated by reference in this prospectus supplement. Please note that additional risks not presently known to us
or that we currently deem immaterial may also impair our business and operations.
Risks Related to
Our Business
We lack an established
operating history and have incurred losses in prior periods, expect to incur losses in the future and we can give no assurance
that our operations will result in profits.
We have a limited operating
history that makes it difficult to evaluate our business. Historical sales pertaining to our System have been in low volume, and
we cannot say with certainty when we will begin to achieve profitability. We have not sold any of our Gasifiers.
Since inception through
June 30, 2018, we have sustained $28,472,653in net losses and we had a net loss for the year ended September 30, 2017 of $13,498,526.
We expect to have operating losses at least until such time as we have developed a substantial and stable revenue base. We cannot
assure you that we can develop a substantial and stable revenue base or achieve or sustain profitability on a quarterly or annual
basis in the future.
If we do not obtain
such financing, we may have to scale back or cease our activities, which will significantly harm our chances of success.
Because we have generated
only a small amount of revenue and currently operate at a significant loss, we are completely dependent on the continued availability
of financing in order to continue our business. There can be no assurance that financing sufficient to enable us to continue our
operations will be available to us in the future. Moreover, even if we are able to obtain financing, it could be on terms that
causes our company’s stock price to suffer or further dilutes shareholder interests in our company. Most of our financing
in 2017 and 2018 was from the issuance of our common stock with some funding from loans and related party advances. Our failure
to obtain future financing, financing on terms that are acceptable to us, or to produce levels of revenue to meet our financial
needs could result in our inability to continue as a going concern and, as a result, our investors could lose their entire investment.
In order to maximize our potential for success, we required a total of $5,000,000 in additional financing. As explained in this
report, this funding is needed for continued upgrades to our software, expand on further commercialization of our products and
services, marketing and sales of both sides of our business operations and for working capital.
Our future success
is difficult to predict because we operate in emerging and evolving markets, and the industries in which we compete are subject
to volatile and unpredictable cycles.
The renewable energy,
microgrid and related industries are emerging and evolving markets which may make it difficult to evaluate our future prospects
and which may lead to period to period variability in our operating results. Our products and services are based on unique technology
which we believe offers significant advantages to our customers, but the markets we serve are in a relatively early stage of development
and it is uncertain how rapidly they will develop. It is also uncertain whether our products will achieve high levels of demand
and acceptance as these markets grow. If companies in the industries we serve do not perceive or value the benefits of our technologies
and products, or if they are unwilling to adopt our products as alternatives to traditional power solutions, the market for our
products and services may not develop or may develop more slowly than we expect, which could significantly and adversely impact
our operating results.
As a supplier to the
renewable energy, microgrid and related industries, we may be subject to business cycles. The timing, length, and volatility of
these business cycles may be difficult to predict. These industries may be cyclical due
to sudden changes in
customers’ manufacturing capacity requirements and spending, which depend in part on capacity utilization, demand for customers’
products, inventory levels relative to demand, and access to affordable capital. These changes may affect the timing and amounts
of customers’ purchases and investments in technology, and affect our orders, net sales, operating expenses, and net income.
In addition, we may not be able to respond adequately or quickly to the declines in demand by reducing our costs.
To meet rapidly changing demand in each of the industries
we serve, we must effectively manage our resources and production capacity. During periods of decreasing demand for our products,
we must be able to appropriately align our
cost structure with prevailing market conditions,
effectively manage our supply chain, and motivate and retain key employees. During periods of increasing demand, we must have sufficient
inventory to fulfill customer orders, effectively manage our supply chain, and attract, retain, and motivate a sufficient number
of qualified individuals. If we are not able to timely and appropriately adapt to changes in our business environment or to accurately
assess where we are positioned within a business cycle, our business, financial condition, or results of operations may be materially
and adversely affected.
The industries
in which we compete are highly competitive and we may be unable to successfully compete to survive.
We compete in the market
for renewable energy products and microgrid technology and associated services that is intensely competitive. Evolving industry
standards, rapid price changes and product obsolescence also impact the market. Our competitors include many domestic and foreign
companies, most of which have substantially greater financial, marketing, personnel and other resources than we do. Our current
competitors or new market entrants could introduce new or enhanced technologies, products or services with features that render
our technologies, products or services obsolete, less competitive or less marketable. Our success will be dependent upon our ability
to develop products that are superior to existing products and products introduced in the future, and which are cost effective.
In addition, we may be required to continually enhance any products that are developed as well as introduce new products that keep
pace with technological change and address the increasingly sophisticated needs of the marketplace. Even if our current technologies
prove to be commercially feasible, there is extensive research and development being conducted on alternative energy sources that
may render our technologies and protocols obsolete or otherwise non-competitive.
There can be no assurance
that we will be able to keep pace with the technological demands of the marketplace or successfully develop products that will
succeed in the marketplace. As a small company, we will be at a competitive disadvantage to most of our competitors, which include
larger, established companies that have substantially greater financial, technical, manufacturing, marketing, distribution and
other resources than us. There can be no assurance that we will have the capital resources available to undertake the research
that may be necessary to upgrade our equipment or develop new devices to meet the efficiencies of changing technologies. Our inability
to adapt to technological change could have a materially adverse effect on our results of operations.
To date we have
had only sixteen customers for our Microgrid services and System and none for our Gasifiers so we cannot assure you that our customer
base will increase.
We had revenue from
fourteen customers in our fiscal year ending September 30, 2017. We cannot assure you that our customer base will expand or that
any decline in net revenue attributable to customer losses will be replaced in a timely manner. If we fail to commercialize our
products and services and increase our customer base, our business will fail.
Product development
is an inherently uncertain process, and we may encounter unanticipated development challenges and may not be able to meet our product
development and commercialization milestones.
Product development
and testing may be subject to unanticipated and significant delays, expenses and technical or other problems. We cannot guarantee
that we will successfully achieve our milestones within our planned timeframe or ever. We develop prototypes of planned products
prior to the full commercialization of these products. We cannot predict whether prototypes of future products will achieve results
consistent with our expectations. A prototype could cost significantly more than expected or the prototype design and construction
process could uncover problems that are not consistent with our expectations. Prototypes of emerging products are a material part
of our business plan, and if they are not proven to be successful, our business and prospects could be harmed.
More generally, the
commercialization of our products may also be adversely affected by many factors not within our control, including:
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the willingness of market participants to try a new product and the perceptions of these market participants of the safety, reliability, functionality and cost effectiveness of our products;
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the emergence of newer, possibly more effective technologies;
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the future cost and availability of the raw materials and components needed to manufacture and use our products; and
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the adoption of new regulatory or industry standards that may adversely affect the use or cost of our products.
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Accordingly, we cannot
predict that our products will be accepted on a scale sufficient to support development of mass markets for them.
We rely on patents
and proprietary rights to protect our technology, and enforcing those rights could disrupt our business operation and divert precious
resources that could ultimately harm our future prospects.
We rely on a combination
of trade secrets, confidentiality agreements and procedures and patents to protect our proprietary technologies. We own patent
number 9,941,696 entitled ‘Establishing Communication and Power Sharing Links Between Components of a Distributed Energy
System’ – which covers our microgrid software technology. We also own patent numbers 8,518,133 and 8,105,401 ‘Parallel
Path, Downdraft Gasifier Apparatus and Method'’ and patent number 9,359,567 ‘Gasification Method Using Feedstock Comprising
Gaseous Fuel’– which covers our Gasifier technology. We also own patent number 8,342,829 entitled ‘Electrolytic
Reactor and Related Methods for Supplementing the Air Intake of an Internal Combustion Engine.’
The claims contained
in any patent may not provide adequate protection for our products and technology. In the absence of patent protection, we may
be vulnerable to competitors who attempt to copy our products or gain access to our trade secrets and know-how. In addition, the
laws of foreign countries may not protect our proprietary rights to this technology to the same extent as the laws of the U.S.
If a dispute arises
concerning our technology, we could become involved in litigation that might involve substantial cost. Litigation could divert
substantial management attention away from our operations and into efforts to enforce our patents, protect our trade secrets or
know-how or determine the scope of the proprietary rights of others. If a proceeding resulted in adverse findings, we could be
subject to significant liabilities to third parties. We might also be required to seek licenses from third parties to manufacture
or sell our products. Our ability to manufacture and sell our products may also be adversely affected by other unforeseen factors
relating to the proceeding or its outcome.
We
may become involved in a matter that may divert attention away from our business operations and which may subject us to expend
significant resources. Prior to acquiring CleanSpark, LLC, several employees of the company
left
to start a competing firm. We have been in discussions with this group about
the nature of their activities and the intellectual property they are currently developing in their business. We believe there
may be potential claims against this firm. If we pursue these claims, we may be involved in litigation of the type described above
with uncertain potential outcomes.
As we continue
to grow and to develop our intellectual property, we could attract threats from patent monetization firms or competitors alleging
infringement of intellectual property rights.
Some of our competitors
may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater
resources. If we do not prevail in this type of litigation, we may be required to: pay monetary damages; stop commercial activities
relating to our product; obtain one or more licenses in order to secure the rights to continue manufacturing or marketing certain
products; or attempt to compete in the market with substantially similar products. Uncertainties resulting from the initiation
and continuation of any litigation could limit our ability to continue some of our operations.
A material part
of our success will depend on our ability to manage our suppliers and contract manufacturers. Our failure to manage our suppliers
and contract manufacturers could materially and adversely affect our results of operations and relations with our customers.
We rely upon suppliers
to provide the components necessary to build our products and on contract manufacturers to procure components and assemble our
products. There can be no assurance that key suppliers and contract manufacturers will provide components or products in a timely
and cost efficient manner or otherwise meet our needs and expectations. Our ability to manage such relationships and timely replace
suppliers and contract manufacturers, if necessary, is critical to our success. Our failure to timely replace our contract manufacturers
and suppliers, should that become necessary, could materially and adversely affect our results of operations and relations with
our customers.
If we are the
subject of future product defect or liability suits, our business will likely fail.
In the course of our
planned operations, we may become subject to legal actions based on a claim that our products are defective in workmanship or have
caused personal or other injuries. We currently maintain liability insurance but there can be no guarantee that such coverage may
not be adequate to cover all potential claims. Moreover, even if we are able to maintain sufficient insurance coverage in the future,
any successful claim could significantly harm our business, financial condition and results of operations.
We may be exposed
to lawsuits and other claims if our products malfunction, which could increase our expenses, harm our reputation and prevent us
from growing our business.
Any liability for damages
resulting from malfunctions of our products could be substantial, increase our expenses and prevent us from growing or continuing
our business. Potential customers may rely on our products for critical needs and a malfunction of our products could result in
warranty claims or other product liability. In addition, a well-publicized actual or perceived problem could adversely affect the
market’s perception of our products. This could result in a decline in demand for our products, which would reduce revenue
and harm our business. Further, since our products are used in systems that are made up on components made by other manufacturers,
we may be subject to product liability claims even if our products do not malfunction.
Any failure by
management to properly manage growth could have a material adverse effect on our business, operating results and financial condition.
If our business develops
as expected, we anticipate that we will grow rapidly in the near future. Our failure to properly manage our expected rapid growth
could have a material adverse effect on our ability to retain key personnel. Our expansion could also place significant demands
on our management, operations, systems, accounting, internal controls and financial resources. If we experience difficulties in
any of these areas, we may not be able to expand our business successfully or effectively manage our growth. Any failure by management
to manage growth and to respond to changes in our business could have a material adverse effect on our business, financial condition
and results of operations.
The lack of management
experience in the renewable energy and microgrid industries could adversely affect our company.
Some members of management
and the board of directors may not have prior experience in the energy industry. Some members do, however, have extensive work
experience in the reclamation, environmental industries, energy industries, financial/accounting industries, and business management.
The lack of experience in the alternative energy industry may impair our managements’ and directors’ ability to evaluate
and make decisions involving our current operations and any future projects we may undertake in the alternative energy industry.
Such impairment and lack of experience could adversely affect our business, financial condition and future operations.
If we are unable
to attract and retain a sufficient number of skilled experts and workers our ability to pursue projects may be adversely affected
and our costs may increase.
Our rate of growth
will be confined by resource limitations as competitors and customers compete for increasingly scarce resources. We believe
that our success depends upon our ability to attract, develop and retain a sufficient number of affordable trained experts
that can execute our operational strategy. The demand for trained software engineers, electrical engineers and other skilled
workers is currently high. If we are unable to attract and retain a sufficient number of skilled personnel, our ability to
pursue projects may be adversely affected and the costs of performing our existing and future projects may increase, which
may adversely impact our margins.
We have engaged
in and may engage in acquisitions that could disrupt our business, cause dilution to our stockholders and reduce our financial
resources.
We have been involved
in significant acquisitions in our lifespan. In the future, we may enter into transactions to acquire other businesses, products
or technologies. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms or at all.
Any acquisitions we have made or plan to make may not strengthen our competitive position, and these transactions may be viewed
negatively by customers or investors. We have and may decide in the future to incur debt in connection with an acquisition or issue
our common stock or other securities to the stockholders of the acquired company, which would reduce the percentage ownership of
our existing stockholders.
We
could incur losses
resulting from undiscovered liabilities of the acquired business that are not covered by the indemnification we may obtain from
the seller. In addition, we may not be able to successfully integrate the acquired personnel, technologies and operations into
our existing business in an effective, timely and non-disruptive manner. Acquisitions may also divert management from day-to-day
responsibilities, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number,
timing or size of future acquisitions or the effect that the acquisition we have engaged in or any such future transactions might
have on our operating results.
Our business is
substantially dependent on utility rate structures and government incentive programs that encourage the use of alternative energy
sources. The reduction or elimination of government subsidies and economic incentives for energy-related technologies would harm
our business.
We believe that near-term
growth of energy-related technologies, including power conversion technology, relies partly on the availability and size of government
and economic incentives and grants (including, but not limited to, the U.S. Investment Tax Credit and various state and local incentive
programs). These incentive programs could be challenged by utility companies, or for other reasons found to be unconstitutional,
and/or could be reduced or discontinued for other reasons. The reduction, elimination, or expiration of government subsidies and
economic incentives could harm our business.
A combination of utility
rate structures and government subsidies that encourage the use of alternative energy sources is a primary driver of demand for
our products. For example, public utilities are often allowed to collect demand charges on commercial and industrial customers
in addition to traditional usage charges. In addition, the federal government and many states encourage the use of alternative
energy sources through a combination of direct subsidies and tariff incentives such as net metering for users that use alternative
energy sources such as solar power. California also encourages alternative energy technology through its Self-Generation Incentive
Program, or SGIP, which offers rebates for businesses and consumers who adopt certain new technologies. Other states have similar
incentives and mandates which encourage the adoption of alternative energy sources. Notwithstanding the adoption of other incentive
programs, we expect that California will be the most significant market for the sale of our products in the near term. Should California
or another state in which we derive a substantial portion of our product revenues in the future change its utility rate structure
or eliminate or significantly reduce its incentive programs, demand for our products could be substantially affected, which would
adversely affect our business prospects, financial condition and operating results.
Risks Related to Our
Securities
If a market for
our common stock does not develop, shareholders may be unable to sell their shares.
Our common stock is
quoted under the symbol “CLSK” on the OTCQB operated by OTC Markets Group, Inc., an electronic inter-dealer quotation
medium for equity securities. We do not currently have an active trading market. There can be no assurance that an active and liquid
trading market will develop or, if developed, that it will be sustained.
Our securities are thinly
traded. Accordingly, it may be difficult to sell shares of our common stock without significantly depressing the value of the stock.
Unless we are successful in developing continued investor interest in our stock, sales of our stock could continue to result in
major fluctuations in the price of the stock.
Our common stock
price may be volatile and could fluctuate widely in price, which could result in substantial losses for investors.
The market price of
our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which
are beyond our control, including:
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technological innovations or new products and services by us or our competitors;
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government regulation of our products and services;
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the establishment of partnerships with other technology companies;
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§
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intellectual property disputes;
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§
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additions or departures of key personnel;
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sales of our common stock
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§
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our ability to integrate operations, technology, products and services;
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§
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our ability to execute our business plan;
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operating results below expectations;
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loss of any strategic relationship;
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economic and other external factors; and
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§
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period-to-period fluctuations in our financial results.
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Because we have limited
revenues to date, you should consider any one of these factors to be material. Our stock price may fluctuate widely as a result
of any of the above.
In addition, the securities
markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance
of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
We have the right
to issue shares of preferred stock. If we were to issue preferred stock, it is likely to have rights, preferences and privileges
that may adversely affect the common stock.
We are authorized to
issue 10,000,000 shares of “blank check” preferred stock, with such rights, preferences and privileges as may be determined
from time-to-time by our board of directors. Our board of directors is empowered, without stockholder approval, to issue preferred
stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption
prices, conversion rights, voting rights, and other rights, preferences and privileges for the preferred stock. We currently have
1,000,000 shares of our preferred stock outstanding, the features of which are contained elsewhere in this annual report.
The issuance of shares
of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could reduce the voting
rights and powers of the common stock and the portion of our assets allocated for distribution to common stockholders in a liquidation
event, and could also result in dilution in the book value per share of the common stock we are offering. The preferred stock could
also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing
a change in control of the Company, to the detriment of the investors in the common stock offered hereby. We cannot assure you
that we will not, under certain circumstances, issue shares of our preferred stock.
We have not paid
dividends in the past and have no immediate plans to pay dividends.
We plan to reinvest
all of our earnings, to the extent we have earnings, in order to market our products and to cover operating costs and to otherwise
become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future.
We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the
holders of our common stock as a dividend. Therefore, you should not expect to receive cash dividends on our common stock.
If securities
or industry analysts do not publish or do not continue to publish research or reports about our business, or if they issue an adverse
or misleading opinion regarding our stock, our stock price and trading volume could decline.
The trading market for
our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business.
If any of the analysts who cover us now or in the future issue an adverse opinion regarding our stock, our stock price would likely
decline. If one or more of these analysts ceases coverage of our company or fail to publish reports on us regularly, we could lose
visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Provisions in the Nevada
Revised Statutes and our Bylaws could make it very difficult for an investor to bring any legal actions against our directors or
officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers
in any such actions.
Members of our board of directors
and our officers will have no liability for breaches of their fiduciary duty of care as a director or officer, except in limited
circumstances, pursuant to provisions in the Nevada Revised Statutes and our Bylaws as authorized by the Nevada Revised Statutes.
Specifically, Section 78.138 of the Nevada Revised Statutes provides that a director or officer is not individually liable to the
company or its shareholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director
or officer unless it is proven that (1) the director’s or officer’s act or failure to act constituted a breach of his
or her fiduciary duties as a director or officer and (2) his or her breach of those duties involved intentional misconduct, fraud
or a knowing violation of law. This provision is intended to afford directors and officers protection against and to limit their
potential liability for monetary damages resulting from suits alleging a breach of the duty of care by a director or officer. Accordingly,
you may be unable to prevail in a legal action against our directors or officers even if they have breached their fiduciary duty
of care. In addition, our Bylaws allow us to indemnify our directors and officers from and against any and all costs, charges and
expenses resulting from their acting in such capacities with us. This means that if you were able to enforce an action against
our directors or officers, in all likelihood, we would be required to pay any expenses they incurred in defending the lawsuit and
any judgment or settlement they otherwise would be required to pay. Accordingly, our indemnification obligations could divert needed
financial resources and may adversely affect our business, financial condition, results of operations and cash flows, and adversely
affect prevailing market prices for our common stock.
There is currently no established trading
market for the Debenture and Warrant and we do not expect that one will develop.
There currently is no established trading
market for the Debenture or the Warrant. In addition, we do not intend to apply for listing of the Debenture or Warrant on any
national securities exchange or to arrange for their quotation on any automated dealer quotation system, and we do not intend to
make a market in the Debenture or Warrant and do not expect that one will develop. As a result, we cannot assure you that an active
trading market will develop for the Debenture or the Warrant. If an active trading market does not develop or is not maintained,
the liquidity of the Debenture or the Warrant may be adversely affected. In that case, you may not be able to sell your Debenture
or Warrant at a particular time, or you may not be able to sell your Debenture or Warrant at a favorable price.
You will experience immediate and substantial
dilution upon conversion of your Debenture.
Assuming a market price of $2.19 as of today
of the Debenture exceeds the net tangible book value per share of our Common Stock outstanding prior to this offering. The Company
will be issuing 100,000 shares of common stock and assuming that an aggregate of 3,260,870 shares of our Common Stock are issued
upon conversion of the Debenture at the Conversion Price of $1.61 per share, the holder of the Debenture will experience immediate
dilution of $1.511 per share, representing the difference between our as adjusted net tangible book value per share as of June
30, 2018, after giving effect to this offering and the conversion of the Debenture, and the conversion price as of today. The
exercise of outstanding stock options and warrants, and the conversion of other outstanding preferred stock or convertible promissory
note will result in further dilution of your investment. See the section entitled “Dilution” on page S-13
of this prospectus supplement for a more detailed illustration of the dilution you would incur if you convert your Debenture.
In addition, you may experience further dilution upon the Company’s election to repay the Debenture in shares of Common
Stock. See “Description of Debenture.” In the prior 52-weeks the
Company’s five low daily volume weighted
average price was $0.90, if the Company’s stock experiences a low trade of the same amount during the measurement period
the effective conversion price would be $0.805 resulting in the issuance of 6,521,739 shares of Common stock.
The sale or availability for sale of
shares issuable upon conversion or repayment of the Debenture may depress the price of our Common Stock and encourage short sales
by third parties, which could further depress the price of our Common Stock.
To the extent that the purchaser of the Debenture
sells shares issued upon conversion or repayment of the Debenture, the market price of our shares may decrease due to the additional
selling pressure in the market. In addition, the risk of dilution from issuances of shares upon conversion or repayment of the
Debenture may cause stockholders to sell their shares, which could further contribute to any decline in the price of our Common
Stock. Any downward pressure on the price of our Common Stock caused by the sale or potential sale of shares issuable upon conversion
or repayment of the Debenture could encourage short sales by third parties. In a short sale, a prospective seller borrows shares
from a stockholder or broker and sells the borrowed shares. The prospective seller hopes that the share price will decline, at
which time the seller can purchase shares at a lower price for delivery back to the lender. The seller profits when the share price
declines because it is purchasing shares at a price lower than the sale price of the borrowed shares. Such sales could place downward
pressure on the price of our Common Stock by increasing the number of shares being sold, which could further contribute to any
decline in the market price of our Common Stock.
Holders of the Debenture will not be
entitled to any rights with respect to our Common Stock, but will be subject to all changes made with respect to our Common Stock.
Holders of the Debenture will not be entitled to
any rights with respect to our Common Stock (including, without limitation, voting rights and rights to receive any dividends or
other distributions on our Common Stock), but holders of the Debenture will be subject to all changes affecting our Common Stock.
For example, if an amendment is proposed to our Articles of Incorporation requiring stockholder approval and the record date for
determining the stockholders of record entitled to vote on the amendment occurs prior to the relevant holder acquiring shares of
our Common Stock as a result of conversion of such holder’s Debenture or the repayment of such Debenture in the form of Common
Stock, such holder will not be entitled to vote on the amendment, although such holder will nevertheless be subject to any changes
in the powers, preferences or special rights of our Common Stock.
Our management will have broad discretion
over the use of the net proceeds from this offering, you may not agree with how we use the proceeds and the proceeds may not be
invested successfully.
We have not designated any portion of the net proceeds
from this offering to be used for any particular purpose. Accordingly, our management will have broad discretion as to the use
of the net proceeds from any offering by us and could use them for purposes other than those contemplated at the time of this offering.
You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity,
as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that the proceeds
will be invested in a way that does not yield a favorable, or any, return for our company.
USE OF PROCEEDS
We will retain broad discretion over the use of
the net proceeds from the sale of the securities offered hereby. We currently intend to use the net proceeds from the sale of the
securities offered hereby for working capital and the repayment of certain outstanding debt. We may also use a portion of the net
proceeds to invest in or acquire businesses or technologies that we believe are complementary to our own, although we have no current
plans, commitments or agreements with respect to any acquisitions as of the date of this prospectus supplement.
Our management will retain broad discretion over
the use of proceeds, and we may ultimately use the proceeds for different purposes than what we currently intend. Until we use
the proceeds for any purpose, we expect to invest them in short-term investments.
DILUTION
Our net tangible book value as of June 30, 2018
was approximately $(1,228,530), or approximately $(0.035) per share of common stock. Net tangible book value represents total tangible
assets less total liabilities less derivative liabilities. Net tangible book value per share represents net tangible book value
divided by the total number of shares of common stock outstanding.
Dilution in net tangible book value per share represents
the difference between the conversion price per share of our common stock issuable under the convertible debenture and the adjusted
net tangible book value per share of our common stock after giving effect to this offering of 100,000 shares common stock and
the assumed sale of an estimated 3,260,870 shares of our common stock that would be issued under this offering assuming all $5,250,000
dollars of principal are converted at an estimated conversion price of $1.61, which is 95% of the lowest trade of our common stock
on December 28, 2018 less $0.05, our adjusted net tangible book value per share of our common stock at June 30, 2018 would have
been approximately $3,771,470, if the debenture had been converted in full, or $0.099 per share of common stock. This represents
an immediate increase in net tangible book value per share of our common stock of approximately $0.134 per share to existing stockholders
and an immediate dilution of approximately $1.509 per share to purchasers in this offering. The following table illustrates this
per-share dilution:
Assumed
Conversion price per share
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|
|
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$
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1.61
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Net
tangible book value per share as of June 30, 2018
|
|
$
|
(0.035)
|
|
|
|
Increase
per share attributable to this new investor
|
|
$
|
0.134
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|
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Proforma
net tangible net tangible book value per share as of June 30, 2018 after giving effect to this offering
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$
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0.099
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Dilution
per share to new investors
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|
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$
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1.511
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The foregoing table is based on 34,919,362 shares
of common stock outstanding at June 30, 2018, which excludes, as of that date:
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§
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297,337 shares issuable upon the exercise of outstanding
options;
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§
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8,144,299 shares issuable upon the exercise of outstanding
warrants; and
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§
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400,000 estimated shares issuable upon the conversion
of outstanding convertible notes.
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§
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3,083,333 shares of common stock issuable upon exercise
of the warrants to be issued under this offering which are exercisable for a term of three years on a cash-only basis at an exercise
price of $2.00 per share with respect to 1,250,000 Warrant Shares, $2.50 with respect to 1,000,000 Warrant Shares, $5.00 with respect
to 500,000 Warrant Shares and $7.50 with respect to 333,333 Warrant Shares.
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To the extent any of the outstanding options or
warrants are exercised, or any conversion of outstanding convertible notes, there will be further dilution to new investors.
PRICE RANGE OF COMMON STOCK
AND DIVIDEND POLICY
Our common stock is quoted on the OTCQB under the
symbol "CLSK." The last reported sale price of our common stock on December 28, 2018 on the OTCQB was $2.19 per share.
The following table sets forth the high and low bid quotations for our common stock for the periods indicated as reported on the
OTCQB.
Fiscal Year Ending September 30, 2018
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Quarter Ended
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High $
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Low $
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September 30, 2018
|
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15.01
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|
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|
1.85
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June 30, 2018
|
|
|
|
3.01
|
|
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0.90
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|
March 31, 2018
|
|
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2.44
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0.90
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December 31, 2017
|
|
|
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3.45
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1.70
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Fiscal Year Ending September 30, 2017
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Quarter Ended
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High $
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Low $
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September 30, 2017
|
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3.45
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3.45
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June 30, 2017
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5.00
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2.55
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March 31, 2017
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5.00
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3.00
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December 31, 2016
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5.00
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3,00
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We have never declared or paid any cash dividend
on our common stock, nor do we currently intend to pay any cash dividend on our common stock in the foreseeable future. We expect
to retain our earnings, if any, for the growth and development of our business.
DESCRIPTION OF CAPITAL STOCK
The description below of our capital stock and provisions
of our amended and restated certificate of incorporation and amended and restated bylaws are summaries and are qualified by reference
to the amended and restated certificate of incorporation, the amended and restated bylaws, and the applicable provisions of Nevada
law.
General
Our articles of incorporation authorizes us to issue up to
100,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of preferred stock, $0.001 par value per
share.
As of December 28, 2018, there were 36,524,197 shares of
common stock outstanding, and 1,000,000 shares of preferred stock outstanding.
Common Stock
Voting rights
.
Each holder of our common stock
is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors.
Our stockholders do not have cumulative voting rights in the election of directors. As a result, the holders of a majority of the
shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they
should so choose.
Dividends
.
Subject to preferences that may
be applicable to any then-outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends,
if any, as may be declared from time to time by our board of directors out of legally available funds. We have never declared or
paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
Liquidation
.
In the event of our liquidation,
dissolution or winding up of the Company, holders of common stock are entitled to share ratably in the net assets legally available
for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation
preference granted to the holders of any then-outstanding shares of preferred stock.
Rights and preferences
.
Holders of common stock
have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the
common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected
by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.
Fully paid and nonassessable
.
All
of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering, if any, will be, fully
paid and nonassessable.
Preferred Stock
Under our amended and restated certificate of incorporation,
our board of directors has the authority, without further action by the stockholders (unless such stockholder action is required
by applicable law or the rules of any stock exchange or market on which our securities are then traded), to designate and issue
up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included
in each such series, to fix the designations, voting powers, preferences and rights of the shares of each wholly unissued series,
and any qualifications, limitations or restrictions thereof, and to increase or decrease the number of shares of any such series,
but not below the number of shares of such series then outstanding.
We will fix the designations, voting powers, preferences
and rights of the preferred stock of each series, as well as the qualifications, limitations or restrictions thereof, in a certificate
of designation relating to that series. We will file as an exhibit to the registration statement of which this prospectus is a
part, or will incorporate by reference from reports that we file with the SEC, the form of any certificate of designation that
describes the terms of the series of preferred stock we are offering before the issuance of that series of preferred stock. This
description will include:
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the title and stated value;
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§
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the number of shares we are offering;
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§
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the liquidation preference per share;
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§
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the dividend rate, period and payment date and method of calculation for dividends;
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§
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whether dividends will be cumulative or non-cumulative and, if cumulative, the date from which dividends will accumulate;
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§
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the procedures for any auction and remarketing, if any;
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§
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the provisions for a sinking fund, if any;
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§
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the provisions for redemption or repurchase, if applicable, and any restrictions on our ability to exercise those redemption and repurchase rights;
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§
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any listing of the preferred stock on any securities exchange or market;
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§
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whether the preferred stock will be convertible into our common stock, and, if applicable, the conversion price, or how it will be calculated, and the conversion period;
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§
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whether the preferred stock will be exchangeable into debt securities, and, if applicable, the exchange price, or how it will be calculated, and the exchange period;
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§
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voting rights, if any, of the preferred stock;
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§
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preemptive rights, if any;
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§
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restrictions on transfer, sale or other assignment, if any;
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§
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whether interests in the preferred stock will be represented by depositary shares;
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§
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a discussion of any material U.S. federal income tax considerations applicable to the preferred stock;
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§
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the relative ranking and preferences of the preferred stock as to dividend rights and rights if we liquidate, dissolve or wind up our affairs;
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§
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any limitations on the issuance of any class or series of preferred stock ranking senior to or on a parity with the series of preferred stock as to dividend rights and rights if we liquidate, dissolve or wind up our affairs; and
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§
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any other specific terms, preferences, rights or limitations of, or restrictions on, the preferred stock.
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Nevada law provides that the holders of preferred stock will
have the right to vote separately as a class (or, in some cases, as a series) on an amendment to our certificate of incorporation
if the amendment would change the par value or, unless the certificate of incorporation provided otherwise, the number of authorized
shares of the class or change the powers, preferences or special rights of the class or series so as to adversely affect the class
or series, as the case may be. This right is in addition to any voting rights that may be provided for in the applicable certificate
of designation.
Our board of directors may authorize the issuance of preferred
stock with voting, exchange or conversion rights that could adversely affect the voting power or other rights of the holders of
our common stock. Preferred stock could be issued quickly with terms designed to delay or prevent a change in control of our company
or make removal of management more difficult. Additionally, the issuance of preferred stock may have the effect of decreasing the
market price of our common stock.
Series A Preferred Stock
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.
Stock Options
The Company sponsors a stock-based incentive
compensation plan known as the 2017 Incentive Plan (the “Plan”), which was established by the Board of Directors of
the Company on June 19, 2017. A total of 3,000,000 shares were initially reserved for issuance under the Plan.
The following is a summary of stock
option activity during the nine months ended June 30, 2018 and year ended September 30, 2017.
|
|
Number
of Shares
|
|
Weighted
Average Exercise Price
|
Balance, September 30, 2016
|
|
—
|
|
—
|
Options granted and assumed
|
|
|
6,902
|
|
|
$
|
3.45
|
Options expired
|
|
|
—
|
|
|
|
—
|
Options canceled
|
|
|
—
|
|
|
|
—
|
Options exercised
|
|
|
—
|
|
|
|
—
|
Balance, September 30, 2017
|
|
|
6,902
|
|
|
$
|
3.45
|
Options granted and assumed
|
|
|
290,435
|
|
|
$
|
1.01
|
Options expired
|
|
|
—
|
|
|
|
—
|
Options canceled
|
|
|
—
|
|
|
|
—
|
Options exercised
|
|
|
—
|
|
|
|
—
|
Balance, June 30, 2018
|
|
|
297,337
|
|
|
$
|
1.06
|
As of June 30, 2018, there are options
exercisable to purchase 124,049 shares of common stock in the Company. As of June 30, 2018, the outstanding options have an intrinsic
value of $533,313. As of June 30, 2018, the weighted average remaining term of the outstanding options was 1.83 years.
During the nine months ended June 30,
2018, the Company issued 40,435 options to purchase shares of the common stock to employees, the shares were granted at quoted
market prices ranging from $1.57 to $3.45. The shares were valued at issuance using the Black Scholes model and stock compensation
expense of $75,001 was recorded as a result of the issuances.
On March 10, 2018 the Company issued
a total of 250,000 options to four consultants for advisory services. The Options vest evenly 12 months from issuance. The options
expire 24 months after issuance and require a cash investment to exercise. The options were valued at issuance using the Black
Scholes model at $342,500, as of June 30, 2018 of which $105,096 has vested and been expensed as stock compensation.
The Black-Scholes model utilized
the following inputs to value the options during the nine months ended June 30, 2018:
Fair value assumptions – Options:
|
|
June 30, 2018
|
Risk free interest rate
|
|
|
1.46-2.61%
|
Expected term (years)
|
|
|
2-3
|
Expected volatility
|
|
|
120%-182%
|
Expected dividends
|
|
|
0%
|
The Plan allows the Company to
grant incentive stock options, non-qualified stock options, stock appreciation right, or restricted stock. The incentive stock
options are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option
is granted. The incentive stock options are limited to persons who are regular full-time employees of the Company at the date of
the grant of the option. Non-qualified options may be granted to any person, including, but not limited to, employees, independent
agents, consultants and attorneys, who the Company’s Board believes have contributed, or will contribute, to the success
of the Company. Non-qualified options may be issued at option prices of less than fair market value on the date of grant and may
be exercisable for up to ten years from date of grant. The option vesting schedule for options granted is determined by the Board
of Directors at the time of the grant. The Plan provides for accelerated vesting of unvested options if there is a change in control,
as defined in the Plan.
Warrants
The following is a summary of stock
warrant activity during the nine months ended June 30, 2018 and year ended September 30, 2017.
|
|
Number
of Shares
|
|
Weighted
Average Exercise Price
|
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, September 30, 2017
|
|
|
8,612,100
|
|
|
$
|
0.85
|
Warrants granted and assumed
|
|
|
216,600
|
|
|
$
|
0.80
|
Warrants expired
|
|
|
—
|
|
|
|
—
|
Warrants canceled
|
|
|
—
|
|
|
|
—
|
Warrants exercised
|
|
|
(684,401
|
)
|
|
|
0.29
|
Balance, June 30, 2018
|
|
|
8,144,299
|
|
|
$
|
0.90
|
As of June 30, 2018, there are warrants
exercisable to purchase 8,144,299 shares of common stock in the Company. 4,500,000 of the outstanding warrants require a cash investment
of $1.50 per share to exercise and 3,644,299 of the outstanding warrants contain a provision allowing a cashless exercise. As of
June 30, 2018, the outstanding warrants have an intrinsic value of $10,998,676. As of June 30, 2018, the weighted average remaining
term of the outstanding warrants was 4.53 years.
On December 13, 2017, an investor exercised
warrants to purchase 27,548 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for
each share of Common stock. The Company received $10,000 as a result of this exercise.
On January 1, 2018, the Company issued
warrants to purchase 100,000 shares of common stock at an exercise price of $0.80 per share to an advisor for business advisory
services. The warrants were valued at $234,095 using the Black Scholes option pricing model based upon the following assumptions:
term of 5 years, risk free interest rate of 2.01%, a dividend yield of 0% and volatility rate of 158%. The warrants vest evenly
over the six-month service period ended June 30, 2018.
On January 19, 2018, an investor exercised
warrants to purchase 180,000 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.083 for
each share of Common stock. The Company receive $14,940 as a result of this exercise.
On January 19, 2018, an investor exercised
warrants to purchase 15,000 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for
each share of Common stock. The Company receive $5,445 as a result of this exercise.
On January 29, 2018, an investor exercised
warrants to purchase 4,500 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for
each share of Common stock. The Company receive $1,634 as a result of this exercise.
On February 8, 2018, an investor exercised
456,000 warrants to purchase shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.367 for
each share of Common stock. The investor elected to use the cashless exercise option and as a result the Company issued 387,475
shares of common stock.
On May 10, 2018, Bryan Huber the Company’s
Chief Operations Officer exercised warrants to purchase 1,353 shares of the Company’s $0.001 par value common stock at a
purchase price equal to $1.50 for each share of Common stock. The Company receive $2,030 as a result of this exercise.
On June 15, 2018, the Company issued
116,600 5-year warrants exercisable at $0.80 to a lender in connection with a promissory note agreement. (see Note 8 for additional
details.)
Registration Rights
We have not granted registration rights to any party.
Anti-Takeover Laws
Nevada Revised Statutes sections 78.378 to 78.379 provide
state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles of incorporation
or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of incorporation and bylaws
do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person or entity
to acquire control of a Nevada company by setting down certain rules of conduct and voting restrictions in any acquisition attempt,
among other things. The statute is limited to corporations that are organized in the state of Nevada and that have 200 or more
stockholders, at least 100 of whom are stockholders of record and residents of the State of Nevada; and does business in the State
of Nevada directly or through an affiliated corporation. Because of these conditions, the statute currently does not apply to our
company.
Transfer Agent and Registrar
The transfer agent and registrar for our common
stock is Action Stock Transfer. Its address is 2469 E. Fort Union Blvd, Suite 214 Salt Lake City, UT 84121. The transfer agent
for any series of preferred stock, debt securities or warrants that we may offer under this prospectus will be named and described
in the prospectus supplement for that series.
Quotation
Our common stock is quoted on the OTCQB under the
symbol "CLSK."
DESCRIPTION OF THE DEBENTURE AND THE WARRANT
We are offering the $5,250,000 face value Senior Secured Redeemable
Convertible Debenture (the “Debenture”), a Common Stock Purchase Warrant (the “Warrant”) to acquire up
to 3,083,333 shares of Common Stock and the shares of our Common Stock underlying the Debenture and the Warrant Shares. The Debenture
has a maturity date
two years from the issuance date and we have agreed to pay compounded
interest on the unpaid principal balance of the Debenture at the rate equal to 7.5% per annum. Interest is payable on the date
the applicable principal is converted or on maturity. The interest must be paid in cash and, in certain circumstances, may be paid
in shares of our Common Stock. The Warrant is exercisable for a term of three years on a cash-only basis at an exercise price of
$2.00 per share with respect to 1,250,000 Warrant Shares, $2.50 with respect to 1,000,000 Warrant Shares, $5.00 with respect to
500,000 Warrant Shares and $7.50 with respect to 333,333 Warrant Shares.
The purchase price for the Debenture and the Warrant is $5,000,000.
As of the initial closing, the number of warrant shares is to be 3,083,333.
Prior to the maturity date of the Debenture, provided that no trigger
event has occurred, we will have the right at any time upon 30 trading days’ prior written notice, in our sole and absolute
discretion, to redeem all or any portion of the Debenture then outstanding by paying the holder an amount equal to 140% of the
face value of the Debenture.
The holder may convert the Debenture into shares of
our
Common Stock
at a conversion price
equal to 95% of the mathematical average of the 5
lowest individual daily volume weighted average prices of our Common Stock, less $.05 per share, during the period beginning on
the issuance date and ending on the maturity date. There is a floor price of $0.12 per share. In the event certain equity conditions
exist, we may require that the holder convert the Debenture. In no event shall the holder of the Debenture be allowed to effect
a conversion if such conversion, along with all other shares of our Common Stock beneficially owned by the holder and its affiliates
would exceed 4.99% of the outstanding shares of our Common Stock.
We do not intend to apply to list the Debenture or Warrant on any
national securities exchange or any automated dealer quotation system. Our Common Stock is listed on the OTCQB marketplace under
the symbol “CLSK.” As of December 28, 2018, there were 36,524,197 shares of common stock outstanding, and 1,000,000
shares of preferred stock outstanding.
We intend to use the net proceeds received from the sale of the
Debenture for general corporate purposes and the repayment of certain outstanding debt. We will not receive any additional proceeds
if and when the Debenture converted, in whole or in part, into shares of our Common Stock.
LEGAL MATTERS
The validity of the common stock and warrants offered
hereby has been passed upon for us by The Doney Law Firm, Las Vegas, NV.
EXPERTS
The consolidated financial statements of CleanSpark, Inc.
for the fiscal years ended December 31, 2017 and December 31, 2016 incorporated by reference herein have been audited
by AMC Auditing, LLC, independent registered public accounting firm, as set forth in their report, incorporated by reference herein,
and are incorporated by reference in reliance upon that report given on the authority of AMC Auditing, LLC as experts in accounting
and auditing.
On July 17, 2017, we dismissed AMC Auditing, LLC
as our independent registered public accounting firm. On July 17, 2018, we engaged MaloneBailey, LLP as our independent registered
public accounting firm.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any reports, statements or other information that we file
at the SEC's public reference room at 100 F Street, N.E., Washington, District of Columbia 20549. Please call the SEC at 1-800-SEC-0330
for more information on the public reference room. Our SEC filings are also available to the public from commercial retrieval services
and at the website maintained by the SEC at
www.sec.gov
. The reports and other information filed by us with the SEC are
also
available at our website. The address of the Company's
website is
www.cleanspark.com
. Information contained on our website or that can be accessed through our website is not incorporated
by reference into this prospectus supplement or the accompanying prospectus.
INFORMATION INCORPORATED
BY REFERENCE
The SEC allows us to incorporate information into
this prospectus supplement "by reference," which means that we can disclose important information to you by referring
you to another document that we file separately with the SEC. The information incorporated by reference is deemed to be part of
this prospectus supplement, except for any information superseded by information contained directly in this prospectus supplement.
These documents contain important information about the Company and its financial condition, business and results.
We are incorporating by reference the Company's
filings listed below and any additional documents that we may file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act on or after the date we file this prospectus supplement and prior to the termination of the offering, except
we are not incorporating by reference any information furnished (but not filed) under Item 2.02 or Item 7.01 of any Current
Report on Form 8-K and corresponding information furnished under Item 9.01 as an exhibit thereto:
|
§
|
Our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, and filed with the SEC on January 16, 2018;
|
|
§
|
Our Annual Report on Form 10-K/A for the fiscal year ended September 30, 2017, and filed with the SEC on April 5, 2018;
|
|
§
|
Our Quarterly Report on Form 10-Q for the quarter ended December 31, 2017, and filed with the SEC on February 14, 2018;
|
|
§
|
Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, and filed with the SEC on May 17, 2018;
|
|
§
|
Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, and filed with the SEC on August 20, 2018;
|
|
§
|
Our Current Reports on Form 8-K and Form 8-K/A filed with the SEC on December 28, 2018, October 5, 2018, September 25, 2018, September 11, 2018, July 18, 2018, July 17, 2018, July 3, 2018, May 8, 2018 and April 2, 2018; and
|
|
§
|
the description of the our common stock contained in our registration statement on Form 10 (No. 000-53498), filed with the SEC on November 17, 2008, including any amendments or reports filed for the purpose of updating such description.
|
We will provide, without charge, to each person
to whom a copy of this prospectus supplement has been delivered, including any beneficial owner, a copy of any and all of the documents
referred to herein that are summarized in this prospectus supplement, if such person makes a written or oral request directed to:
CleanSpark, Inc.
70 North Main Street, Ste. 105
Bountiful, Utah 84010
(801) 244-4405.
Attn: Corporate Secretary
PROSPECTUS
$50,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
From time to time, we may offer, issue and sell up to $50,000,000
of any combination of the securities described in this prospectus in one or more offerings. We may also offer securities as may
be issuable upon conversion, redemption, repurchase, exchange or exercise of any securities registered hereunder, including any
applicable antidilution provisions.
This prospectus provides a general description of the securities
we may offer. Each time we offer securities, we will provide specific terms of the securities offered in a supplement to this prospectus.
We may also authorize one or more free writing prospectuses to be provided to you in connection with these offerings. The prospectus
supplement and any related free writing prospectus may also add, update or change information contained in this prospectus. You
should carefully read this prospectus, the applicable prospectus supplement and any related free writing prospectus, as well as
any documents incorporated by reference, before you invest in any of the securities being offered.
This prospectus may not be used to consummate a sale of
any securities unless accompanied by a prospectus supplement.
Our common stock is quoted on the OTCQB under the symbol
“CLSK.” On December 28, 2018, the last reported sales price of our common stock was $2.19 per share.
We will sell these securities directly to investors, through
agents designated from time to time or to or through underwriters or dealers, on a continuous or delayed basis. For additional
information on the methods of sale, you should refer to the section entitled “Plan of Distribution” in this prospectus.
If any agents or underwriters are involved in the sale of any securities with respect to which this prospectus is being delivered,
the names of such agents or underwriters and any applicable fees, commissions, discounts or option to purchase additional securities
will be set forth in a prospectus supplement. The price to the public of such securities and the net proceeds we expect to receive
from such sale will also be set forth in a prospectus supplement.
Investing in our securities involves a high degree
of risk. You should review carefully the risks and uncertainties described under the heading “Risk Factors” contained
in the applicable prospectus supplement and any related free writing prospectus, and under similar headings in the other documents
that are incorporated by reference into this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is a part of a registration statement on
Form S-3 that we filed with the Securities and Exchange Commission, or SEC, utilizing a “shelf” registration process.
Under this shelf registration process, we may sell any combination of the securities described in this prospectus in one or more
offerings up to a total aggregate offering price of $50 million. This prospectus provides you with a general description of the
securities we may offer.
Each time we sell securities under this prospectus, we will
provide a prospectus supplement that will contain specific information about the terms of that offering. We may also authorize
one or more free writing prospectuses to be provided to you that may contain material information relating to these offerings.
The prospectus supplement and any related free writing prospectus that we may authorize to be provided to you may also add, update
or change information contained in this prospectus or in any documents that we have incorporated by reference into this prospectus.
You should read this prospectus, any applicable prospectus supplement and any related free writing prospectus, together with the
information incorporated herein by reference as described under the heading “Incorporation of Certain Information By Reference,”
before investing in any of the securities offered.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE A SALE OF
SECURITIES UNLESS IT IS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
Neither we, nor any agent, underwriter or dealer has authorized
any person to give any information or to make any representation other than those contained or incorporated by reference in this
prospectus, any applicable prospectus supplement or any related free writing prospectus prepared by or on behalf of us or to which
we have referred you. This prospectus, any applicable supplement to this prospectus or any related free writing prospectus do not
constitute an offer to sell or the solicitation of an offer to buy any securities other than the registered securities to which
they relate, nor does this prospectus, any applicable supplement to this prospectus or any related free writing prospectus constitute
an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction.
You should not assume that the information contained in this
prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate on any date subsequent to the
date set forth on the front of the document or that any information we have incorporated by reference is correct on any date subsequent
to the date of the document incorporated by reference, even though this prospectus, any applicable prospectus supplement or any
related free writing prospectus is delivered, or securities are sold, on a later date.
This prospectus contains summaries of certain provisions
contained in some of the documents described herein, but reference is made to the actual documents for complete information. All
of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have
been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus
is a part, and you may obtain copies of those documents as described below under the heading “Where You Can Find More Information.”
SUMMARY
This summary highlights selected information from this prospectus
and does not contain all of the information that you need to consider in making your investment decision. You should carefully
read the entire prospectus, the applicable prospectus supplement and any related free writing prospectus, including the risks of
investing in our securities discussed under the heading “Risk Factors” contained in the applicable prospectus supplement
and any related free writing prospectus, and under similar headings in the other documents that are incorporated by reference into
this prospectus. You should also carefully read the information incorporated by reference into this prospectus, including our financial
statements, and the exhibits to the registration statement of which this prospectus is a part.
Unless the context indicates otherwise, as used in this prospectus,
the terms “CleanSpark,” “the Company,” “we,” “us” and “our” refer to
CleanSpark, Inc., a Nevada corporation, and, where appropriate, our consolidated subsidiaries.
Company Overview
We are in the business of providing advanced energy software
and control technology that enables a plug-and-play enterprise solution to modern energy challenges. Our services consist of intelligent
energy monitoring and controls, microgrid design and engineering, microgrid consulting services, and turn-key microgrid implementation
services. Our software allows energy users to obtain resiliency and economic optimization. Our software is uniquely capable of
enabling a microgrid to be scaled to the user's specific needs and can be widely implemented across commercial, industrial, military
and municipal deployment.
Integral to our business is our mPulse and mVSO software
platforms (the “Platforms”). When the Platforms are implemented on a customer’s power system they are able to
control the distributed energy resources on site to provide secure, sustainable energy often at significant cost savings for our
energy customers. The Platforms allows customers to efficiently manage renewable energy generation, other distributed energy generation
technologies including energy generation assets, energy storage assets, and energy consumption assets. By having autonomous control
over the distributed facets of energy usage and energy storage, customers are able to reduce their dependency on utilities, thereby
keeping energy costs relatively constant over time. The overall aim is to transform energy consumers into energy producers by supplying
power that anticipates their routine instead of interrupting it.
We also own patented gasification technologies. Our technology
converts any organic material into SynGas. SynGas can be used as clean, renewable, environmentally friendly, warming fuel for power
plants, motor vehicles, and as feedstock for the generation of DME (Di-Methyl Ether).
As previously disclosed, we plan to continue our focus on
the CleanSpark side of the business in 2018, 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.
Corporate Information
CleanSpark, Inc. (“we”, “our”, 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 $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.
We maintain our principal executive offices at 70 North Main
Street, Suite 105, Bountiful, Utah 84010. Our telephone number is (801) 244-4405. Our website is www.cleanspark.com. Information
contained on our website is not incorporated by reference into this prospectus, and such information should not be considered to
be part of this prospectus.
We are an “emerging growth company,” as defined
in the Jumpstart Our Business Startups Act of 2012. As an emerging growth company we are eligible for exemptions from various reporting
requirements applicable to other public companies that are not emerging growth companies, including not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and reduced disclosure obligations
regarding executive compensation. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal
year (a) following the fifth anniversary of the closing of our initial public offering in February 2014, (b) in which
we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer,
which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th,
and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We refer to the Jumpstart Our Business Startups Act of 2012 herein as the “JOBS Act,” and references herein to “emerging
growth company” shall have the meaning associated with it in the JOBS Act.
The Securities We May Offer
We may offer shares of our common stock and preferred stock,
various series of debt securities and warrants to purchase any of such securities, up to a total aggregate offering price of $50,000,000
from time to time in one or more offerings under this prospectus, together with any applicable prospectus supplement and any related
free writing prospectus, at prices and on terms to be determined by market conditions at the time of the relevant offering. This
prospectus provides you with a general description of the securities we may offer.
Each time we offer a type or series of securities under this
prospectus, we will provide a prospectus supplement that will describe the specific amounts, prices and other important terms of
the securities, including, to the extent applicable:
|
§
|
designation or classification;
|
|
§
|
aggregate principal amount or aggregate offering price;
|
|
§
|
maturity, if applicable;
|
|
§
|
original issue discount, if any;
|
|
§
|
rates and times of payment of interest or dividends, if any;
|
|
§
|
redemption, conversion, exchange or sinking fund terms, if any;
|
|
§
|
conversion or exchange prices or rates, if any, and, if applicable, any provisions for changes to or adjustments in the conversion or exchange prices or rates and in the securities or other property receivable upon conversion or exchange;
|
|
§
|
ranking, if applicable;
|
|
§
|
restrictive covenants, if any;
|
|
§
|
voting or other rights, if any; and
|
|
§
|
important United States federal income tax considerations.
|
The prospectus supplement and any related free writing prospectus
that we may authorize to be provided to you may also add, update or change information contained in this prospectus or in documents
we have incorporated by reference. However, no prospectus supplement or free writing prospectus will offer a security that is not
registered and described in this prospectus at the time of the effectiveness
of the registration statement of which this prospectus is a part.
This prospectus may not be used to consummate a sale of
securities unless it is accompanied by a prospectus supplement.
We may sell the securities directly to investors or through
underwriters, dealers or agents. We, and our underwriters or agents, reserve the right to accept or reject all or part of any proposed
purchase of securities. If we do offer securities through underwriters or agents, we will include in the applicable prospectus
supplement:
|
§
|
the names of those underwriters or agents;
|
|
§
|
applicable fees, discounts and commissions to be paid to them;
|
|
§
|
details regarding option to purchase additional securities, if any; and
|
|
§
|
the estimated net proceeds to us.
|
Common stock
. We may issue shares of our common stock
from time to time. The holders of our common stock are entitled to one vote for each share held of record on all matters submitted
to a vote of stockholders. Subject to preferences that may be applicable to any outstanding shares of preferred stock, the holders
of common stock are entitled to receive ratably such dividends as may be declared by our board of directors out of legally available
funds. Upon our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all assets
legally available for distribution to stockholders remaining after payment of liabilities and the liquidation preferences of any
outstanding shares of preferred stock. Holders of common stock have no preemptive rights and no right to convert their common stock
into any other securities. There are no redemption or sinking fund provisions applicable to our common stock. When we issue shares
of common stock under this prospectus, the shares will be fully paid and non-assessable. The rights, preferences and privileges
of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series
of preferred stock which we may designate in the future. In this prospectus, we have summarized certain general features of our
common stock under “Description of Capital Stock-Common Stock.” We urge you, however, to read the applicable prospectus
supplement (and any related free writing prospectus that we may authorize to be provided to you) related to any common stock being
offered.
Preferred stock
. We may issue shares of our preferred
stock from time to time, in one or more series. Under our articles of incorporation, our board of directors has the authority,
without further action by the stockholders (unless such stockholder action is required by applicable law or the rules of any stock
exchange or market on which our securities are then traded), to designate and issue up to 10,000,000 shares of preferred stock
in one or more series and to fix the privileges, preferences and rights of each series of preferred stock, any or all of which
may be greater than the rights of the common stock. We are not offering previously designated series of preferred stock, if any,
under this prospectus. If we sell any new series of preferred stock under this prospectus and any applicable prospectus supplement,
our board of directors will determine the designations, voting powers, preferences and rights of the preferred stock being offered,
as well as the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, preemptive rights,
terms of redemption or repurchase, liquidation preferences, sinking fund terms and the number of shares constituting any series
or the designation of any series. Convertible preferred stock may be convertible into our common stock or exchangeable for our
other securities. Conversion may be mandatory or at the holder’s option and would be at prescribed conversion rates. We will
file as an exhibit to the registration statement of which this prospectus is a part, or will incorporate by reference from reports
that we file with the SEC, the form of the certificate of designation that describes the terms of the series of preferred stock
that we are offering before the issuance of the related series of preferred stock. In this prospectus, we have summarized certain
general features of the preferred stock under “Description of Capital Stock-Preferred Stock.” We urge you, however,
to read the applicable prospectus supplement (and any related free writing prospectus that we may authorize to be provided to you)
related to the series of preferred stock being offered, as well as the complete certificate of designation that contains the terms
of the applicable series of preferred stock.
Debt securities
. We may issue debt securities
from time to time, in one or more series, as either senior or subordinated debt or as senior or subordinated convertible
debt. The senior debt securities will rank equally with any other unsecured and unsubordinated debt. The subordinated debt
securities will be subordinate and junior in right of payment, to the extent and in the manner described in the instrument
governing the debt, to all of our senior indebtedness. Convertible debt securities will be convertible
into our common stock or preferred stock. Conversion may be mandatory or at the holder’s option and would be at prescribed
conversion rates.
The debt securities will be issued under one or more documents
called indentures, which are contracts between us and a national banking association or other eligible party, as trustee. In this
prospectus, we have summarized certain general features of the debt securities. We urge you, however, to read the applicable prospectus
supplement (and any free writing prospectus that we may authorize to be provided to you) related to the series of debt securities
being offered, as well as the complete indentures that contain the terms of the debt securities. A form of indenture has been filed
as an exhibit to the registration statement of which this prospectus is a part, and supplemental indentures and forms of debt securities
containing the terms of the debt securities being offered will be filed as exhibits to the registration statement of which this
prospectus is a part or will be incorporated by reference from reports that we file with the SEC.
Warrants.
We may issue warrants for the purchase of
common stock, preferred stock and/or debt securities in one or more series. We may issue warrants independently or together with
common stock, preferred stock and/or debt securities, and the warrants may be attached to or separate from these securities. In
this prospectus, we have summarized certain general features of the warrants. We urge you, however, to read the applicable prospectus
supplement (and any free writing prospectus that we may authorize to be provided to you) related to the particular series of warrants
being offered, as well as the complete warrant agreements and warrant certificates that contain the terms of the warrants. Forms
of the warrant agreements and forms of warrant certificates containing the terms of the warrants being offered have been filed
as exhibits to the registration statement of which this prospectus is a part, and supplemental warrant agreements and forms of
warrant certificates will be filed as exhibits to the registration statement of which this prospectus is a part or will be incorporated
by reference from reports that we file with the SEC.
We will evidence each series of warrants by warrant certificates
that we will issue. Warrants may be issued under an applicable warrant agreement that we enter into with a warrant agent. We will
indicate the name and address of the warrant agent, if applicable, in the prospectus supplement relating to the particular series
of warrants being offered.
RISK FACTORS
Investing in our securities involves a high degree of risk.
You should carefully review the risks and uncertainties described under the heading “Risk Factors” contained in any
applicable prospectus supplement and any related free writing prospectus, and under similar headings in our Annual Report on Form
10-K for the year ended September 30, 2017, as updated by our annual, quarterly and other reports and documents that are incorporated
by reference into this prospectus, before deciding whether to purchase any of the securities being registered pursuant to the registration
statement of which this prospectus is a part. Each of the risk factors could adversely affect our business, operating results and
financial condition, as well as adversely affect the value of an investment in our securities, and the occurrence of any of these
risks might cause you to lose all or part of your investment. Additional risks not presently known to us or that we currently believe
are immaterial may also significantly impair our business operations. Please also read carefully the section below titled “Special
Note Regarding Forward-Looking Statements.”
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus, each prospectus supplement and the information
incorporated by reference in this prospectus and each prospectus supplement contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, which we refer to as the Securities Act, and Section 21E of
the Exchange Act of 1934, as amended, which we refer to as the Exchange Act, that involve a number of risks and uncertainties.
Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on
facts and factors currently known by us. Consequently, these forward-looking statements are inherently subject to risks and uncertainties,
and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.
Forward-looking statements can be identified by the use of
forward-looking words such as “believes,” “expects,” “hopes,” “may,” “will,”
“plan,” “intends,” “estimates,” “could,” “should,” “would,”
“continue,” “seeks,” “pro forma,” or “anticipates,” or other similar
words (including their use in the negative), or by discussions of future matters. These statements include but are not limited
to statements under the captions “Business,” “Risk Factors” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and in other sections included in any applicable prospectus supplement
or incorporated by reference from our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as applicable, as
well as our other filings with the SEC. You should be aware that the occurrence of any of the events discussed under the heading
“Risk Factors” in any applicable prospectus supplement and any documents incorporated by reference herein or therein
could substantially harm our business, operating results and financial condition and that if any of these events occurs, it could
adversely affect the value of an investment in our securities.
The cautionary statements made in this prospectus are intended
to be applicable to all related forward-looking statements wherever they may appear in this prospectus or in any prospectus supplement
or any documents incorporated by reference herein or therein. We urge you not to place undue reliance on these forward-looking
statements, which speak only as of the date they are made. Except as required by law, we assume no obligation to update our forward-looking
statements, even if new information becomes available in the future.
USE OF PROCEEDS
We will retain broad discretion over the use of the net proceeds
from the sale of the securities offered hereby. Except as described in any prospectus supplement or any related free writing prospectus
that we may authorize to be provided to you, we currently intend to use the net proceeds from the sale of the securities offered
hereby for general corporate purposes, which may include capital expenditures, working capital and general and administrative expenses.
We may also use a portion of the net proceeds to acquire or invest in businesses that are complementary to our own, although we
have no current plans, commitments or agreements with respect to any outlay of cash for acquisitions as of the date of this prospectus.
We do have an asset purchase agreement signed with Pioneer Custom Electric Products Corp., a Delaware corporation, but we do not
expect any proceeds to be used in connection with that transaction. We will set forth in the applicable prospectus supplement
or free writing prospectus our intended use for the net proceeds received from the sale of any securities sold pursuant to the
prospectus supplement or free writing prospectus. Pending these uses, we intend to invest the net proceeds in short-term obligations
of the U.S. government and its agencies.
DESCRIPTION OF CAPITAL STOCK
The description below of our capital stock and provisions
of our amended and restated certificate of incorporation and amended and restated bylaws are summaries and are qualified by reference
to the amended and restated certificate of incorporation, the amended and restated bylaws, and the applicable provisions of Nevada
law.
General
Our articles of incorporation authorizes us to issue up to
100,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares of preferred stock, $0.001 par value per
share.
As of December 28, 2018, there were 36,524,197 shares of
common stock outstanding, and 1,000,000 shares of preferred stock outstanding.
Common Stock
Voting rights
.
Each holder of our common stock
is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors.
Our stockholders do not have cumulative voting rights in the election of directors. As a result, the holders of a majority of the
shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they
should so choose.
Dividends
.
Subject to preferences that may
be applicable to any then-outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends,
if any, as may be declared from time to time by our board of directors out of legally available funds. We have never declared or
paid any cash dividends on our common stock. We currently intend to retain future earnings, if
any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
Liquidation
.
In the event of our liquidation,
dissolution or winding up of the Company, holders of common stock are entitled to share ratably in the net assets legally available
for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation
preference granted to the holders of any then-outstanding shares of preferred stock.
Rights and preferences
.
Holders of common stock
have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the
common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected
by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.
Fully paid and nonassessable
.
All
of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering, if any, will be, fully
paid and nonassessable.
Preferred Stock
Under our amended and restated certificate of incorporation,
our board of directors has the authority, without further action by the stockholders (unless such stockholder action is required
by applicable law or the rules of any stock exchange or market on which our securities are then traded), to designate and issue
up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included
in each such series, to fix the designations, voting powers, preferences and rights of the shares of each wholly unissued series,
and any qualifications, limitations or restrictions thereof, and to increase or decrease the number of shares of any such series,
but not below the number of shares of such series then outstanding.
We will fix the designations, voting powers, preferences
and rights of the preferred stock of each series, as well as the qualifications, limitations or restrictions thereof, in a certificate
of designation relating to that series. We will file as an exhibit to the registration statement of which this prospectus is a
part, or will incorporate by reference from reports that we file with the SEC, the form of any certificate of designation that
describes the terms of the series of preferred stock we are offering before the issuance of that series of preferred stock. This
description will include:
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the title and stated value;
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§
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the number of shares we are offering;
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§
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the liquidation preference per share;
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§
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the dividend rate, period and payment date and method of calculation for dividends;
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§
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whether dividends will be cumulative or non-cumulative and, if cumulative, the date from which dividends will accumulate;
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the procedures for any auction and remarketing, if any;
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§
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the provisions for a sinking fund, if any;
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the provisions for redemption or repurchase, if applicable, and any restrictions on our ability to exercise those redemption and repurchase rights;
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any listing of the preferred stock on any securities exchange or market;
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whether the preferred stock will be convertible into our common stock, and, if applicable, the conversion price, or how it will be calculated, and the conversion period;
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§
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whether the preferred stock will be exchangeable into debt securities, and, if applicable, the exchange price, or how it will be calculated, and the exchange period;
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voting rights, if any, of the preferred stock;
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preemptive rights, if any;
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restrictions on transfer, sale or other assignment, if any;
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whether interests in the preferred stock will be represented by depositary shares;
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a discussion of any material U.S. federal income tax considerations applicable to the preferred stock;
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the relative ranking and preferences of the preferred stock as to dividend rights and rights if we liquidate, dissolve or wind up our affairs;
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any limitations on the issuance of any class or series of preferred stock ranking senior to or on a parity with the series of preferred stock as to dividend rights and rights if we liquidate, dissolve or wind up our affairs; and
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any other specific terms, preferences, rights or limitations of, or restrictions on, the preferred stock.
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Nevada law provides that the holders of preferred stock will
have the right to vote separately as a class (or, in some cases, as a series) on an amendment to our certificate of incorporation
if the amendment would change the par value or, unless the certificate of incorporation provided otherwise, the number of authorized
shares of the class or change the powers, preferences or special rights of the class or series so as to adversely affect the class
or series, as the case may be. This right is in addition to any voting rights that may be provided for in the applicable certificate
of designation.
Our board of directors may authorize the issuance of preferred
stock with voting, exchange or conversion rights that could adversely affect the voting power or other rights of the holders of
our common stock. Preferred stock could be issued quickly with terms designed to delay or prevent a change in control of our company
or make removal of management more difficult. Additionally, the issuance of preferred stock may have the effect of decreasing the
market price of our common stock.
Series A Preferred Stock
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 $0.02 per share
plus any accumulated but unpaid dividends. The holders are further entitled to have the Company redeem their Series A Preferred
Stock for three shares of common stock in the event of a change of control and they are entitled to vote together with the holders
of the Company’s common stock on all matters submitted to shareholders at a rate of forty-five (45) votes for each share
held.
Stock Options
The Company sponsors a stock-based incentive
compensation plan known as the 2017 Incentive Plan (the “Plan”), which was established by the Board of Directors of
the Company on June 19, 2017. A total of 3,000,000 shares were initially reserved for issuance under the Plan.
The following is a summary of stock
option activity during the nine months ended June 30, 2018 and year ended September 30, 2017.
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Number
of Shares
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Weighted
Average Exercise Price
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Balance, September 30, 2016
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—
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—
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Options granted and assumed
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6,902
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$
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3.45
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Options expired
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—
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—
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Options canceled
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—
|
|
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—
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Options exercised
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—
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—
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Balance, September 30, 2017
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6,902
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$
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3.45
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Options granted and assumed
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290,435
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$
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1.01
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Options expired
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|
|
—
|
|
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—
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Options canceled
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|
—
|
|
|
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—
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Options exercised
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|
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—
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|
|
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—
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Balance, June 30, 2018
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297,337
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$
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1.06
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As of June 30, 2018, there are options
exercisable to purchase 124,049 shares of common stock in the Company. As of June 30, 2018, the outstanding options have an intrinsic
value of $533,313. As of June 30, 2018, the weighted average remaining term of the outstanding options was 1.83 years.
During the nine months ended June 30,
2018, the Company issued 40,435 options to purchase shares of the common stock to employees, the shares were granted at quoted
market prices ranging from $1.57 to $3.45. The shares were valued at issuance using the Black Scholes model and stock compensation
expense of $75,001 was recorded as a result of the issuances.
On March 10, 2018 the Company issued
a total of 250,000 options to four consultants for advisory services. The Options vest evenly 12 months from issuance. The options
expire 24 months after issuance and require a cash investment to exercise. The options were valued at issuance using the Black
Scholes model at $342,500, as of June 30, 2018 of which $105,096 has vested and been expensed as stock compensation.
The Black-Scholes model utilized
the following inputs to value the options during the nine months ended June 30, 2018:
Fair value assumptions – Options:
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June 30, 2018
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Risk free interest rate
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1.46-2.61%
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Expected term (years)
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2-3
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Expected volatility
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120%-182%
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Expected dividends
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0%
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The Plan allows the Company to
grant incentive stock options, non-qualified stock options, stock appreciation right, or restricted stock. The incentive stock
options are exercisable for up to ten years, at an option price per share not less than the fair market value on the date the option
is granted. The incentive stock options are limited to persons who are regular full-time employees of the Company at the date of
the grant of the option. Non-qualified options may be granted to any person, including, but not limited to, employees, independent
agents, consultants and attorneys, who the Company’s Board believes have contributed, or will contribute, to the success
of the Company. Non-qualified options may be issued at option prices of less than fair market value on the date of grant and may
be exercisable for up to ten years from date of grant. The option vesting schedule for options granted is determined by the Board
of Directors at the time of the grant. The Plan provides for accelerated vesting of unvested options if there is a change in control,
as defined in the Plan.
Warrants
The following is a summary of stock
warrant activity during the nine months ended June 30, 2018 and year ended September 30, 2017.
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Number
of Shares
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Weighted
Average Exercise Price
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Balance, September 30, 2016
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13,112,100
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|
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$
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0.59
|
Warrants granted and assumed
|
|
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—
|
|
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$
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—
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Warrants expired
|
|
|
—
|
|
|
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—
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Warrants canceled
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|
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—
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|
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—
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Warrants exercised
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(4,500,000
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)
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|
|
0.083
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Balance, September 30, 2017
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8,612,100
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$
|
0.85
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Warrants granted and assumed
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216,600
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|
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$
|
0.80
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Warrants expired
|
|
|
—
|
|
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—
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Warrants canceled
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—
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|
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—
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Warrants exercised
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(684,401
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)
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0.29
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Balance, June 30, 2018
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8,144,299
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$
|
0.90
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As of June 30, 2018, there are warrants
exercisable to purchase 8,144,299 shares of common stock in the Company. 4,500,000 of the outstanding warrants require a cash investment
of $1.50 per share to exercise and 3,644,299 of the outstanding warrants contain a provision allowing a cashless exercise. As of
June 30, 2018, the outstanding warrants have an intrinsic value of $10,998,676. As of June 30, 2018, the weighted average remaining
term of the outstanding warrants was 4.53 years.
On December 13, 2017, an investor exercised
warrants to purchase 27,548 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for
each share of Common stock. The Company receive $10,000 as a result of this exercise.
On January 1, 2018, the Company issued
warrants to purchase 100,000 shares of common stock at an exercise price of $0.80 per share to an advisor for business advisory
services. The warrants were valued at $234,095 using the Black Scholes option pricing model based upon the following assumptions:
term of 5 years, risk free interest rate of 2.01%, a dividend yield of 0% and volatility rate of 158%. The warrants vest evenly
over the six-month service period ended June 30, 2018.
On January 19, 2018, an investor exercised
warrants to purchase 180,000 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.083 for
each share of Common stock. The Company receive $14,940 as a result of this exercise.
On January 19, 2018, an investor exercised
warrants to purchase 15,000 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for
each share of Common stock. The Company receive $5,445 as a result of this exercise.
On January 29, 2018, an investor exercised
warrants to purchase 4,500 shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.363 for
each share of Common stock. The Company receive $1,634 as a result of this exercise.
On February 8, 2018, an investor exercised
456,000 warrants to purchase shares of the Company’s $0.001 par value common stock at a purchase price equal to $0.367 for
each share of Common stock. The investor elected to use the cashless exercise option and as a result the Company issued 387,475
shares of common stock.
On May 10, 2018, Bryan Huber the Company’s
Chief Operations Officer exercised warrants to purchase 1,353 shares of the Company’s $0.001 par value common stock at a
purchase price equal to $1.50 for each share of Common stock. The Company receive $2,030 as a result of this exercise.
On June 15, 2018, the Company issued
116,600 5-year warrants exercisable at $0.80 to a lender in connection with a promissory note agreement. (see Note 8 for additional
details.)
Registration Rights
We have not granted registration rights to any party.
Anti-Takeover Laws
Nevada Revised Statutes sections 78.378 to 78.379 provide
state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles of incorporation
or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of incorporation and bylaws
do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person or entity
to acquire control of a Nevada company by setting down certain rules of conduct and voting restrictions in any acquisition attempt,
among other things. The statute is limited to corporations that are organized in the state of Nevada and that have 200 or more
stockholders, at least 100 of whom are stockholders of record and residents of the State of Nevada; and does business in the State
of Nevada directly or through an affiliated corporation. Because of these conditions, the statute currently does not apply to our
company.
Transfer Agent And Registrar
The transfer agent and registrar for our common stock is
Action Stock Transfer. Its address is 2469 E. Fort Union Blvd, Suite 214 Salt Lake City, UT 84121. The transfer agent for any series
of preferred stock, debt securities or warrants that we may offer under this prospectus will be named and described in the prospectus
supplement for that series.
OTC Markets
Our common stock is quoted on the OTCQB under the symbol
“CLSK.”
DESCRIPTION OF DEBT SECURITIES
We may issue debt securities from time to time, in one or
more series, as either senior or subordinated debt or as senior or subordinated convertible debt. While the terms we have summarized
below will apply generally to any debt securities that we may offer under this prospectus, we will describe the particular terms
of any debt securities that we may offer in more detail in the applicable prospectus supplement. The terms of any debt securities
offered under a prospectus supplement may differ from the terms described below. Unless the context requires otherwise, whenever
we refer to the indenture, we also are referring to any supplemental indentures that specify the terms of a particular series of
debt securities.
We will issue the debt securities under the indenture that
we will enter into with the trustee named in the indenture. The indenture will be qualified under the Trust Indenture Act of 1939,
as amended, or the Trust Indenture Act. We have filed the form of indenture as an exhibit to the registration statement of which
this prospectus is a part, and supplemental indentures and forms of debt securities containing the terms of the debt securities
being offered will be filed as exhibits to the registration statement of which this prospectus is a part or will be incorporated
by reference from reports that we file with the SEC.
The following summary of material provisions of the debt
securities and the indenture is subject to, and qualified in its entirety by reference to, all of the provisions of the indenture
applicable to a particular series of debt securities. We urge you to read the applicable prospectus supplements and any related
free writing prospectuses related to the debt securities that we may offer under this prospectus, as well as the complete indenture
that contains the terms of the debt securities.
General
The indenture does not limit the amount of debt securities
that we may issue. It provides that we may issue debt securities up to the principal amount that we may authorize and may be in
any currency or currency unit that we may designate. Except for the limitations on consolidation, merger and sale of all or substantially
all of our assets contained in the indenture, the terms of the indenture do not contain any covenants or other provisions designed
to give holders of any debt securities protection against changes in our operations, financial condition or transactions involving
us.
We may issue the debt securities issued under the indenture
as “discount securities,” which means they may be sold at a discount below their stated principal amount. These debt
securities, as well as other debt securities that are not issued at a discount, may be issued with “original issue discount,”
or OID, for U.S. federal income tax purposes because of interest payment and other characteristics or terms of the debt securities.
Material U.S. federal income tax considerations applicable to debt securities issued with OID will be described in more detail
in any applicable prospectus supplement.
We will describe in the applicable prospectus supplement
the terms of the series of debt securities being offered, including:
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the title of the series of debt securities;
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any limit upon the aggregate principal amount that may be issued;
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the maturity date or dates;
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§
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the form of the debt securities of the series;
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the applicability of any guarantees;
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§
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whether or not the debt securities will be secured or unsecured, and the terms of any secured debt;
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§
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whether the debt securities rank as senior debt, senior subordinated debt, subordinated debt or any combination thereof, and the terms of any subordination;
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§
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if the price (expressed as a percentage of the aggregate principal amount thereof) at which such debt securities will be issued is a price other than the principal amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof, or if applicable, the portion of the principal amount of such debt securities that is convertible into another security or the method by which any such portion shall be determined;
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the interest rate or rates, which may be fixed or variable, or the method for determining the rate and the date interest will begin to accrue, the dates interest will be payable and the regular record dates for interest payment dates or the method for determining such dates;
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§
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our right, if any, to defer payment of interest and the maximum length of any such deferral period;
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§
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if applicable, the date or dates after which, or the period or periods during which, and the price or prices at which, we may, at our option, redeem the series of debt securities pursuant to any optional or provisional redemption provisions and the terms of those redemption provisions;
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§
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the date or dates, if any, on which, and the price or prices at which we are obligated, pursuant to any mandatory sinking fund or analogous fund provisions or otherwise, to redeem, or at the holder’s option to purchase, the series of debt securities and the currency or currency unit in which the debt securities are payable;
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the denominations in which we will issue the series of debt securities, if other than denominations of $1,000 and any integral multiple thereof;
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any and all terms, if applicable, relating to any auction or remarketing of the debt securities of that series and any security for our obligations with respect to such debt securities and any other terms which may be advisable in connection with the marketing of debt securities of that series;
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whether the debt securities of the series shall be issued in whole or in part in the form of a global security or securities; the terms and conditions, if any, upon which such global security or securities may be exchanged in whole or in part for other individual securities; and the depositary for such global security or securities;
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if applicable, the provisions relating to conversion or exchange of any debt securities of the series and the terms and conditions upon which such debt securities will be so convertible or exchangeable, including the conversion or exchange price, as applicable, or how it will be calculated and may be adjusted, any mandatory or optional (at our option or the holders’ option) conversion or exchange features, the applicable conversion or exchange period and the manner of settlement for any conversion or exchange;
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additions to or changes in the covenants applicable to the particular debt securities being issued, including, among others, the consolidation, merger or sale covenant;
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additions to or changes in the events of default with respect to the securities and any change in the right of the trustee or the holders to declare the principal, premium, if any, and interest, if any, with respect to such securities to be due and payable;
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additions to or changes in or deletions of the provisions relating to covenant defeasance and legal defeasance;
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additions to or changes in the provisions relating to satisfaction and discharge of the indenture;
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additions to or changes in the provisions relating to the modification of the indenture both with and without the consent of holders of debt securities issued under the indenture;
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the currency of payment of debt securities if other than U.S. dollars and the manner of determining the equivalent amount in U.S. dollars;
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whether interest will be payable in cash or additional debt securities at our or the holders’ option and the terms and conditions upon which the election may be made;
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the terms and conditions, if any, upon which we will pay amounts in addition to the stated interest, premium, if any, and principal amounts of the debt securities of the series to any holder that is not a “United States person” for federal tax purposes;
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any restrictions on transfer, sale or assignment of the debt securities of the series; and
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any other specific terms, preferences, rights or limitations of, or restrictions on, the debt securities, any other additions or changes in the provisions of the indenture, and any terms that may be required by us or advisable under applicable laws or regulations
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Conversion Or Exchange Rights
We will set forth in the applicable prospectus supplement
the terms on which a series of debt securities may be convertible into or exchangeable for our common stock or our other securities.
We will include provisions as to settlement upon conversion or exchange and whether conversion or exchange is mandatory, at the
option of the holder or at our option. We may include provisions pursuant to which the number of shares of our common stock or
our other securities that the holders of the series of debt securities receive would be subject to adjustment.
Consolidation, Merger Or Sale
Unless we provide otherwise in the prospectus supplement
applicable to a particular series of debt securities, the indenture will not contain any covenant that restricts our ability to
merge or consolidate, or sell, convey, transfer or otherwise dispose of our assets as an entirety or substantially as an entirety.
However, any successor to or acquirer of such assets (other than a subsidiary of ours) must assume all of our obligations under
the indenture or the debt securities, as appropriate.
Events Of Default Under The Indenture
Unless we provide otherwise in the prospectus supplement
applicable to a particular series of debt securities, the following are events of default under the indenture with respect to any
series of debt securities that we may issue:
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if we fail to pay any installment of interest on any series of debt securities, as and when the same shall become due and payable, and such default continues for a period of 90 days; provided, however, that a valid extension of an interest payment period by us in accordance with the terms of any indenture supplemental thereto shall not constitute a default in the payment of interest for this purpose;
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if we fail to pay the principal of, or premium, if any, on any series of debt securities as and when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise, or in any payment required by any sinking or analogous fund established with respect to such series; provided, however, that a valid extension of the maturity of such debt securities in accordance with the terms of any indenture supplemental thereto shall not constitute a default in the payment of principal or premium, if any;
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if we fail to observe or perform any other covenant or agreement contained in the debt securities or the indenture, other than a covenant specifically relating to another series of debt securities, and our failure continues for 90 days after we receive written notice of such failure, requiring the same to be remedied and stating that such is a notice of default thereunder, from the trustee or holders of at least 25% in aggregate principal amount of the outstanding debt securities of the applicable series; and
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if specified events of bankruptcy, insolvency or reorganization occur.
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If an event of default with respect to debt securities of
any series occurs and is continuing, other than an event of default specified in the last bullet point above, the trustee or the
holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series, by notice to us in writing,
and to the trustee if notice is given by such holders, may declare the unpaid principal of, premium, if any, and accrued interest,
if any, of such series of debt securities due and payable immediately. If an event of default specified in the last bullet point
above occurs with respect to us, the principal amount of and accrued interest, if any, of each issue of debt securities then outstanding
shall be due and payable without any notice or other action on the part of the trustee or any holder.
The holders of a majority in principal amount of the outstanding
debt securities of an affected series may waive any default or event of default with respect to the series and its consequences,
except defaults or events of default regarding payment of principal, premium, if any, or interest, unless we have cured the default
or event of default in accordance with the indenture. Any waiver shall cure the default or event of default.
Subject to the terms of the indenture, if an event of default
under an indenture shall occur and be continuing, the trustee will be under no obligation to exercise any of its rights or powers
under such indenture at the request or direction of any of the holders of the applicable series of debt securities, unless such
holders have offered the trustee reasonable indemnity. The holders of a majority in principal amount of the outstanding debt securities
of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to
the trustee, or exercising any trust or power conferred on the
trustee, with respect to the debt securities of that series, provided that:
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the direction so given by the holder is not in conflict with any law or the applicable indenture; and
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subject to its duties under the Trust Indenture Act, the trustee need not take any action that might involve it in personal liability or might be unduly prejudicial to the holders not involved in the proceeding.
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A holder of the debt securities of any series will have the
right to institute a proceeding under the indenture or to appoint a receiver or trustee, or to seek other remedies only if:
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the holder has given written notice to the trustee of a continuing event of default with respect to that series;
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the holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series have made written request;
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such holders have offered to the trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred by the trustee in compliance with the request; and
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the trustee does not institute the proceeding, and does not receive from the holders of a majority in aggregate principal amount of the outstanding debt securities of that series other conflicting directions within 90 days after the notice, request and offer.
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These limitations do not apply to a suit instituted by a
holder of debt securities if we default in the payment of the principal, premium, if any, or interest on, the debt securities.
We will periodically file statements with the trustee regarding
our compliance with specified covenants in the indenture.
Modification Of Indenture; Waiver
Unless we provide otherwise in the prospectus supplement
applicable to a particular series of debt securities, we and the trustee may change an indenture without the consent of any holders
with respect to specific matters:
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to cure any ambiguity, defect or inconsistency in the indenture or in the debt securities of any series;
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to comply with the provisions described above under “Description of Debt Securities—Consolidation, Merger or Sale;”
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to provide for uncertificated debt securities in addition to or in place of certificated debt securities;
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to add to our covenants, restrictions, conditions or provisions such new covenants, restrictions, conditions or provisions for the benefit of the holders of all or any series of debt securities, to make the occurrence, or the occurrence and the continuance, of a default in any such additional covenants, restrictions, conditions or provisions an event of default or to surrender any right or power conferred upon us in the indenture;
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to add to, delete from or revise the conditions, limitations, and restrictions on the authorized amount, terms, or purposes of issue, authentication and delivery of debt securities, as set forth in the indenture;
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to make any change that does not adversely affect the interests of any holder of debt securities of any series in any material respect;
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to provide for the issuance of and establish the form and terms and conditions of the debt securities of any series as provided above under “Description of Debt Securities—General” to establish the form of any certifications required to be furnished pursuant to the terms of the indenture or any series of debt securities, or to add to the rights of the holders of any series of debt securities;
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o evidence and provide for the acceptance of appointment under any indenture by a successor trustee; or
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to comply with any requirements of the SEC in connection with the qualification of any indenture under the Trust Indenture Act.
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In addition, under the indenture, the rights of holders of
a series of debt securities may be changed by us and the trustee with the written consent of the holders of at least a majority
in aggregate principal amount of the outstanding debt securities of each series that is affected. However, unless we provide otherwise
in the prospectus supplement applicable to a particular series of debt securities, we and the trustee may make the following changes
only with the consent of each holder of any outstanding debt securities affected:
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extending the fixed maturity of any debt securities of any series;
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reducing the principal amount, reducing the rate of or extending the time of payment of interest, or reducing any premium payable upon the redemption of any series of any debt securities; or
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reducing the percentage of debt securities, the holders of which are required to consent to any amendment, supplement, modification or waiver.
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Discharge
The indenture provides that we can elect to be discharged
from our obligations with respect to one or more series of debt securities, except for specified obligations, including obligations
to:
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register the transfer or exchange of debt securities of the series;
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replace stolen, lost or mutilated debt securities of the series;
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pay principal of and premium and interest on any debt securities of the series;
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maintain paying agencies;
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hold monies for payment in trust;
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recover excess money held by the trustee;
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compensate and indemnify the trustee; and
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appoint any successor trustee.
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In order to exercise our rights to be discharged, we must
deposit with the trustee money or government obligations sufficient to pay all the principal of, any premium, if any, and interest
on, the debt securities of the series on the dates payments are due.
Form, Exchange And Transfer
We will issue the debt securities of each series only in
fully registered form without coupons and, unless we provide otherwise in the applicable prospectus supplement, in denominations
of $1,000 and any integral multiple thereof. The indenture provides that we may issue debt securities of a series in temporary
or permanent global form and as book-entry securities that will be deposited with, or on behalf of, The Depository Trust Company,
or DTC, or another depositary named by us and identified in the applicable prospectus supplement with respect to that series. To
the extent the debt securities of a series are issued in global form and as book-entry, a description of terms relating to any
book-entry securities will be set forth in the applicable prospectus supplement.
At the option of the holder, subject to the terms of the
indenture and the limitations applicable to global securities described in the applicable prospectus supplement, the holder of
the debt securities of any series can exchange the debt securities for other debt securities of the same series, in any authorized
denomination and of like tenor and aggregate principal amount.
Subject to the terms of the indenture and the limitations
applicable to global securities set forth in the applicable prospectus supplement, holders of the debt securities may present the
debt securities for exchange or for registration of transfer, duly endorsed or with the form of transfer endorsed thereon duly
executed if so required by us or the security registrar, at the office of the security registrar or at the office of any transfer
agent designated by us for this purpose. Unless otherwise provided in the debt securities that the holder presents for transfer
or exchange, we will impose no service charge for any registration of transfer or exchange, but we may require payment of any taxes
or other governmental charges.
We will name in the applicable prospectus supplement the
security registrar, and any transfer agent in addition to the security registrar, that we initially designate for any debt securities.
We may at any time designate additional transfer agents or rescind the designation of any transfer agent or approve a change in
the office through which any transfer agent acts, except that we will be required to maintain a transfer agent in each place of
payment for the debt securities of each series.
If we elect to redeem the debt securities of any series,
we will not be required to:
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issue, register the transfer of, or exchange any debt securities of that series during a period beginning at the opening of business 15 days before the day of mailing of a notice of redemption of any debt securities that may be selected for redemption and ending at the close of business on the day of the mailing; or
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register the transfer of or exchange any debt securities so selected for redemption, in whole or in part, except the unredeemed portion of any debt securities we are redeeming in part.
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Information Concerning The Trustee
The trustee, other than during the occurrence and continuance
of an event of default under an indenture, undertakes to perform only those duties as are specifically set forth in the applicable
indenture. Upon an event of default under an indenture, the trustee must use the same degree of care as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this provision, the trustee is under no obligation to exercise
any of the powers given it by the indenture at the request of any holder of debt securities unless it is offered reasonable security
and indemnity against the costs, expenses and liabilities that it might incur.
Payment And Paying Agents
Unless we otherwise indicate in the applicable prospectus
supplement, we will make payment of the interest on any debt securities on any interest payment date to the person in whose name
the debt securities, or one or more predecessor securities, are registered at the close of business on the regular record date
for the interest.
We will pay principal of and any premium and interest on
the debt securities of a particular series at the office of the paying agents designated by us, except that unless we otherwise
indicate in the applicable prospectus supplement, we will make interest payments by check that we will mail to the holder or by
wire transfer to certain holders. Unless we otherwise indicate in the applicable prospectus supplement, we will designate the corporate
trust office of the trustee as our sole paying agent for payments with respect to debt securities of each series. We will name
in the applicable prospectus supplement any other paying agents that we initially designate for the debt securities of a particular
series. We will maintain a paying agent in each place of payment for the debt securities of a particular series.
All money we pay to a paying agent or the trustee for the
payment of the principal of or any premium or interest on any debt securities that remains unclaimed at the end of two years after
such principal, premium or interest has become due and payable will be repaid to us, and the holder of the debt security thereafter
may look only to us for payment thereof.
Governing Law
The indenture and the debt securities, and any claim, controversy
or dispute arising under or related to the indenture or the debt securities, will be governed by and construed in accordance with
the laws of the State of Nevada, except to the extent that the Trust Indenture Act of 1939 is applicable.
DESCRIPTION OF WARRANTS
The following description, together with the additional information
we may include in any applicable prospectus supplements and free writing prospectuses, summarizes the material terms and provisions
of the warrants that we may offer under this prospectus, which may consist of warrants to purchase common stock, preferred stock
or debt securities and may be issued in one or more series. Warrants may be issued independently or together with common stock,
preferred stock or debt securities offered by any prospectus supplement, and may be attached to or separate from those securities.
While the terms we have summarized below will apply generally to any warrants that we may offer under this prospectus, we will
describe the particular terms of any series of warrants that we may offer in more detail in the applicable prospectus supplement
and any applicable free writing prospectus. The terms of any warrants offered under a prospectus supplement may differ from the
terms described below. However, no prospectus supplement will fundamentally change the terms that are set forth in this prospectus
or offer a security that is not registered and described in this prospectus at the time of its effectiveness.
We have filed forms of the warrant agreements and forms of
warrant certificates containing the terms of the warrants being offered as exhibits to the registration statement of which this
prospectus is a part. We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate
by reference from reports that we file with the SEC, the form of warrant agreement, if any, including a form of warrant certificate,
that describes the terms of the particular series of warrants we are offering. The following summaries of material provisions of
the warrants and the warrant agreements are subject to, and qualified in their entirety by reference to, all the provisions of
the warrant agreement and warrant certificate applicable to the particular series of warrants that we may offer under this prospectus.
We urge you to read the applicable prospectus supplements related to the particular series of warrants that we may offer under
this prospectus, as well as any related free writing prospectuses, and the complete warrant agreements and warrant certificates
that contain the terms of the warrants.
General
We will describe in the applicable prospectus supplement
the terms relating to a series of warrants being offered, including:
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the title of such securities;
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the offering price or prices and aggregate number of warrants offered;
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the currency or currencies for which the warrants may be purchased;
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if applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued with each such security or each principal amount of such security;
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if applicable, the date on and after which the warrants and the related securities will be separately transferable;
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if applicable, the minimum or maximum amount of such warrants which may be exercised at any one time;
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in the case of warrants to purchase debt securities, the principal amount of debt securities purchasable upon exercise of one warrant and the price at which, and currency in which, this principal amount of debt securities may be purchased upon such exercise;
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in the case of warrants to purchase common stock or preferred stock, the number of shares of common stock or preferred stock, as the case may be, purchasable upon the exercise of one warrant and the price at which, and the currency in which, these shares may be purchased upon such exercise;
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the effect of any merger, consolidation, sale or other disposition of our business on the warrant agreements and the warrants;
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the terms of any rights to redeem or call the warrants;
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the terms of any rights to force the exercise of the warrants;
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any provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
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the dates on which the right to exercise the warrants will commence and expire;
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the manner in which the warrant agreements and warrants may be modified;
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a discussion of any material or special United States federal income tax consequences of holding or exercising the warrants;
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the terms of the securities issuable upon exercise of the warrants; and
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any other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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Before exercising their warrants, holders of warrants will
not have any of the rights of holders of the securities purchasable upon such exercise, including:
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in the case of warrants to purchase debt securities, the right to receive payments of principal of, or premium, if any, or interest on, the debt securities purchasable upon exercise or to enforce covenants in the applicable indenture; or
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in the case of warrants to purchase common stock or preferred stock, the right to receive dividends, if any, or, payments upon our liquidation, dissolution or winding up or to exercise voting rights, if any.
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Exercise Of Warrants
Each warrant will entitle the holder to purchase the securities
that we specify in the applicable prospectus supplement at the exercise price that we describe in the applicable prospectus supplement.
Unless we otherwise specify in the applicable prospectus supplement, holders of the warrants may exercise the warrants at any time
up to the specified time on the expiration date that we set forth
in the applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Unless we otherwise specify in the applicable prospectus
supplement, holders of the warrants may exercise the warrants by delivering the warrant certificate representing the warrants to
be exercised together with specified information, and paying the required amount to the warrant agent in immediately available
funds, as provided in the applicable prospectus supplement. We will set forth on the reverse side of the warrant certificate and
in the applicable prospectus supplement the information that the holder of the warrant will be required to deliver to the warrant
agent in connection with the exercise of the warrant.
Upon receipt of the required payment and the warrant certificate
properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable
prospectus supplement, we will issue and deliver the securities purchasable upon such exercise. If fewer than all of the warrants
represented by the warrant certificate are exercised, then we will issue a new warrant certificate for the remaining amount of
warrants. If we so indicate in the applicable prospectus supplement, holders of the warrants may surrender securities as all or
part of the exercise price for warrants.
Governing Law
Unless we provide otherwise in the applicable prospectus
supplement, the warrants and warrant agreements, and any claim, controversy or dispute arising under or related to the warrants
or warrant agreements, will be governed by and construed in accordance with the laws of the State of Nevada.
Enforceability Of Rights By Holders Of Warrants
Each warrant agent will act solely as our agent under the
applicable warrant agreement and will not assume any obligation or relationship of agency or trust with any holder of any warrant.
A single bank or trust company may act as warrant agent for more than one issue of warrants. A warrant agent will have no duty
or responsibility in case of any default by us under the applicable warrant agreement or warrant, including any duty or responsibility
to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant may, without the consent
of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action its right to exercise, and
receive the securities purchasable upon exercise of, its warrants.
LEGAL OWNERSHIP OF SECURITIES
We can issue securities in registered form or in the form
of one or more global securities
.
We describe global securities in greater detail below
.
We refer to those persons who have securities registered in their own names on the books that we or any applicable trustee
or depositary maintain for this purpose as the “holders” of those securities
.
These
persons are the legal holders of the securities
.
We refer to those persons who, indirectly through
others, own beneficial interests in securities that are not registered in their own names, as “indirect holders” of
those securities
.
As we discuss below, indirect holders are not legal holders, and investors in
securities issued in book-entry form or in street name will be indirect holders.
Book-Entry Holders
We may issue securities in book-entry form only, as we will
specify in the applicable prospectus supplement
.
This means securities may be represented by one
or more global securities registered in the name of a financial institution that holds them as depositary on behalf of other financial
institutions that participate in the depositary’s book-entry system
.
These participating
institutions, which are referred to as participants, in turn, hold beneficial interests in the securities on behalf of themselves
or their customers.
Only the person in whose name a security is registered
is recognized as the holder of that security
.
Global securities will be registered in the
name of the depositary or its participants
.
Consequently, for global securities, we will
recognize only the depositary as the holder of the securities, and we will make all payments on the securities to the
depositary
.
The depositary passes along the payments it receives to its participants, which
in turn pass the payments along to their customers who are the beneficial owners
.
The
depositary and its participants do so under agreements they have made with one another or with their customers;
they are not obligated to do so under the terms of the securities.
As a result, investors in a global security will not own
securities directly
.
Instead, they will own beneficial interests in a global security, through
a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds an interest
through a participant
.
As long as the securities are issued in global form, investors will be
indirect holders, and not legal holders, of the securities.
Street Name Holders
A global security may be terminated in certain situations
as described under “—Special Situations When A Global Security Will Be Terminated,” or issue securities that
are not issued in global form
.
In these cases, investors may choose to hold their securities in
their own names or in “street name.” Securities held by an investor in street name would be registered in the name
of a bank, broker or other financial institution that the investor chooses, and the investor would hold only a beneficial interest
in those securities through an account he or she maintains at that institution.
For securities held in street name, we or any applicable
trustee or depositary will recognize only the intermediary banks, brokers and other financial institutions in whose names the securities
are registered as the holders of those securities, and we or any such trustee or depositary will make all payments on those securities
to them
.
These institutions pass along the payments they receive to their customers who are the
beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required to do
so
.
Investors who hold securities in street name will be indirect holders, not holders, of those
securities.
Legal Holders
Our obligations, as well as the obligations of any applicable
trustee or third party employed by us or a trustee, run only to the legal holders of the securities
.
We do not have obligations to investors who hold beneficial interests in global securities, in street name or by any other
indirect means
.
This will be the case whether an investor chooses to be an indirect holder of
a security or has no choice because we are issuing the securities only in global form.
For example, once we make a payment or give a notice to the
legal holder, we have no further responsibility for the payment or notice even if that legal holder is required, under agreements
with its participants or customers or by law, to pass it along to the indirect holders but does not do so
.
Similarly, we may want to obtain the approval of the holders to amend an indenture, to relieve us of the consequences of
a default or of our obligation to comply with a particular provision of an indenture, or for other purposes
.
In such an event, we would seek approval only from the legal holders, and not the indirect holders, of the securities
.
Whether and how the legal holders contact the indirect holders is up to the legal holders.
Special Considerations For Indirect Holders
If you hold securities through a bank, broker or other financial
institution, either in book-entry form because the securities are represented by one or more global securities or in street name,
you should check with your own institution to find out:
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how it handles securities payments and notices;
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whether it imposes fees or charges;
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how it would handle a request for the holders’ consent, if ever required;
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whether and how you can instruct it to send you securities registered in your own name so you can be a holder, if that is permitted in the future;
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how it would exercise rights under the securities if there were a default or other event triggering the need for holders to act to protect their interests; and
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if the securities are in book-entry form, how the depositary’s rules and procedures will affect these matters.
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Global Securities
A global security is a security that represents one or any
other number of individual securities held by a depositary
.
Generally, all securities represented
by the same global securities will have the same terms.
Each security issued in book-entry form will be represented
by a global security that we issue to, deposit with and register in the name of a financial institution or its nominee that we
select
.
The financial institution that we select for this purpose is called the depositary
.
Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York, known
as DTC, will be the depositary for all securities issued in book-entry form.
A global security may not be transferred to or registered
in the name of anyone other than the depositary, its nominee or a successor depositary, unless special termination situations arise
.
We describe those situations below under “—Special Situations When A Global Security Will Be Terminated.”
As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and legal holder of all securities
represented by a global security, and investors will be permitted to own only beneficial interests in a global security
.
Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn
has an account with the depositary or with another institution that does
.
Thus, an investor whose
security is represented by a global security will not be a legal holder of the security, but only an indirect holder of a beneficial
interest in the global security.
If the prospectus supplement for a particular security indicates
that the security will be issued as a global security, then the security will be represented by a global security at all times
unless and until the global security is terminated
.
If termination occurs, we may issue the securities
through another book-entry clearing system or decide that the securities may no longer be held through any book-entry clearing
system.
Special Considerations For Global Securities
As an indirect holder, an investor’s rights relating
to a global security will be governed by the account rules of the investor’s financial institution and of the depositary,
as well as general laws relating to securities transfers
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We do not recognize an indirect holder
as a holder of securities and instead deal only with the depositary that holds the global security.
If securities are issued only as global
securities, an investor should be aware of the following:
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an investor cannot cause the securities to be registered in his or her name, and cannot obtain non-global certificates for his or her interest in the securities, except in the special situations we describe below;
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an investor will be an indirect holder and must look to his or her own bank or broker for payments on the securities and protection of his or her legal rights relating to the securities, as we describe above;
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an investor may not be able to sell interests in the securities to some insurance companies and to other institutions that are required by law to own their securities in non-book-entry form;
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an investor may not be able to pledge his or her interest in the global security in circumstances where certificates representing the securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective;
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the depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to an investor’s interest in the global security;
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we and any applicable trustee have no responsibility for any aspect of the depositary’s actions or for its records of ownership interests in the global security, nor will we or any applicable trustee supervise the depositary in any way;
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the depositary may, and we understand that DTC will, require that those who purchase and sell interests in the global security within its book-entry system use immediately available funds, and your broker or bank may require you to do so as well; and
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financial institutions that participate in the depositary’s book-entry system, and through which an investor holds its interest in the global security, may also have their own policies affecting payments, notices and other matters relating to the securities.
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There may be more than one financial
intermediary in the chain of ownership for an investor
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We do not monitor and are not responsible
for the actions of any of those intermediaries.
Special Situations When A Global Security Will Be Terminated
In a few special situations described below, a global security
will terminate and interests in it will be exchanged for physical certificates representing those interests
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After that exchange, the choice of whether to hold securities directly or in street name will be up to the investor
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Investors must consult their own banks or brokers to find out how to have their interests in securities transferred to their
own names, so that they will be direct holders
.
We have described the rights of holders and street
name investors above.
Unless we provide otherwise in the applicable prospectus
supplement, a global security will terminate when the following special situations occur:
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if the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for that global security and we do not appoint another institution to act as depositary within 90 days;
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if we notify any applicable trustee that we wish to terminate that global security; or
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if an event of default has occurred with regard to securities represented by that global security and has not been cured or waived.
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The applicable prospectus supplement may also list additional
situations for terminating a global security that would apply only to the particular series of securities covered by the applicable
prospectus supplement
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When a global security terminates, the depositary, and neither we nor any
applicable trustee, is responsible for deciding the names of the institutions that will be the initial direct holders.
PLAN OF DISTRIBUTION
We may sell the securities covered hereby from time to time
pursuant to underwritten public offerings, direct sales to the public, negotiated transactions, block trades or a combination of
these methods. A distribution of the securities offered by this prospectus may also be effected through the issuance of derivative
securities, including without limitation, warrants and subscriptions. We may sell the securities to or through underwriters or
dealers, through agents, or directly to one or more purchasers. We may distribute securities from time to time in one or more transactions:
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at a fixed price or prices, which may be changed;
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at market prices prevailing at the time of sale;
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at prices related to such prevailing market prices;
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at varying prices determined at the time of sale; or
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We may also sell equity securities covered by this registration
statement in an “at the market offering” as defined in Rule 415 under the Securities Act. Such offering may be made
into an existing trading market for such securities in transactions at other than a fixed price, either:
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on or through the facilities of The Nasdaq Capital Market or any other securities exchange or quotation or trading service on which such securities may be listed, quoted or traded at the time of sale; and/or
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to or through a market maker otherwise than on The Nasdaq Capital Market or such other securities exchanges or quotation or trading services.
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Such at-the-market offerings, if any, may be conducted by
financial institutions acting as principal or agent.
A prospectus supplement or supplements (and any related free
writing prospectus that we may authorize to be provided to you) will describe the terms of the offering of the securities, including,
to the extent applicable:
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the name or names of any underwriters, dealers or agents participating in the offering, if any;
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the purchase price of the securities sold by us to any underwriter or dealer and the net proceeds we expect to receive from the offering;
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any option, under which underwriters may purchase additional securities from us;
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any agency fees or underwriting discounts or commissions and other items constituting agents’ or underwriters’ compensation;
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any public offering price;
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any discounts or concessions allowed or reallowed or paid to dealers; and
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any securities exchange or market on which the securities may be listed.
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Only underwriters named in the prospectus supplement are
underwriters of the securities offered by the prospectus supplement.
If underwriters are used in the sale, they will acquire the
securities for their own account and may resell the securities from time to time in one or more transactions at a fixed public
offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase the securities
will be subject to the conditions set forth in the applicable underwriting agreement. We may offer the securities to the public
through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. Subject to certain
conditions, the underwriters will be obligated to purchase all of the securities offered by the prospectus supplement, other than
securities covered by any option to purchase additional securities. Any public offering price and any discounts, commissions or
concessions allowed or reallowed or paid to dealers may change from time to time. We may use underwriters with whom we have a material
relationship. We will describe in the prospectus supplement, naming the underwriter, the nature of any such relationship.
We may sell securities directly or through agents we designate
from time to time. We will name any agent involved in the offering and sale of securities, and we will describe any commissions
and other compensation we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our
agent will act on a best-efforts basis for the period of its appointment.
We may authorize agents or underwriters to solicit offers
by certain types of institutional investors to purchase securities from us at the public offering price set forth in the prospectus
supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. We will
describe the conditions to these contracts and the commissions we must pay for solicitation of these contracts in the prospectus
supplement.
We may provide agents and underwriters with indemnification
against civil liabilities related to this offering, including liabilities under the Securities Act, or contribution with respect
to payments that the agents or underwriters may make with respect to these liabilities. Agents and underwriters may engage in transactions
with, or perform services for, us in the ordinary course of business.
All securities we may offer, other than common stock, will
be new issues of securities with no established trading market. Any agents or underwriters may make a market in these securities,
but will not be obligated to do so and may discontinue any market making at any time without notice. We cannot guarantee the liquidity
of the trading markets for any securities. There is currently no market for any of the offered securities, other than our common
stock. We have no current plans for listing of the debt securities, preferred stock, warrants or subscription rights on any securities
exchange or quotation system; any such listing with respect to any particular debt securities, preferred stock, warrants or subscription
rights will be described in the applicable prospectus supplement or other offering materials, as the case may be.
Any underwriter may engage in overallotment, stabilizing
transactions, short covering transactions and penalty bids in accordance with Regulation M under the Exchange Act. Overallotment
involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase
the underlying security so long as the stabilizing bids do not exceed a specified maximum. Short covering transactions involve
purchases of the securities in the open market after the distribution is completed to cover short positions. Penalty bids permit
the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased
in a stabilizing or covering transaction to cover short positions. Those activities may cause the price of the securities to be
higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time. These transactions
may be effected on any exchange or over-the-counter market or otherwise.
Any agents and underwriters who are qualified market makers
on The Nasdaq Capital Market may engage in passive market making transactions in the securities on The Nasdaq Capital Market in
accordance with Rule 103 of Regulation M, during the business day prior to the pricing
of the offering, before the commencement of offers or sales of the securities. Passive market makers must comply with applicable
volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its
bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive
market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded.
Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the
open market and, if commenced, may be discontinued at any time.
In compliance with guidelines of the Financial Industry Regulatory
Authority, Inc., or FINRA, the maximum compensation to be received by any FINRA member or independent broker dealer may not exceed
8% of the aggregate amount of the securities offered pursuant to this prospectus and any applicable prospectus supplement.
LEGAL MATTERS
Unless otherwise indicated in the applicable prospectus supplement,
certain legal matters in connection with the offering and the validity of the securities offered by this prospectus, and any supplement
thereto, will be passed upon for us by The Doney Law Firm.
EXPERTS
The financial statements incorporated in this Prospectus
by reference to the Annual Report on Form 10-K for the year ended September 30, 2017, have been so incorporated in reliance on
the report of AMC Auditing, an independent registered public accounting firm given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed
with the SEC. This prospectus does not contain all of the information set forth in the registration statement and the exhibits
to the registration statement. For further information with respect to us and the securities we are offering under this prospectus,
we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Neither
we nor any agent, underwriter or dealer has authorized any person to provide you with different information. We are not making
an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front page of this prospectus, regardless of the time of delivery
of this prospectus or any sale of the securities offered by this prospectus.
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy the registration statement, as well as any other document filed by us
with the SEC, at the SEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. You can also request copies
of these documents by writing to the SEC and paying a fee for the copying cost. You may obtain information on the operation of
the Public Reference Room by calling the SEC at (800) SEC-0330. The SEC maintains a website that contains reports, proxy statements
and other information regarding issuers that file electronically with the SEC, including us. The address of the SEC website is
www.sec.gov.
We maintain a website at www.CleanSpark.com. Information
contained in or accessible through our website does not constitute a part of this prospectus.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference”
information into this prospectus, which means that we can disclose important information to you by referring you to another document
filed separately with the SEC. The SEC file number for the documents incorporated by reference in this prospectus is 000-53498.
The documents incorporated by reference into this prospectus contain important information that you should read about us.
The following documents are incorporated
by reference into this document:
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Our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, and filed with the SEC on January 16, 2018;
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Our Annual Report on Form 10-K/A for the fiscal year ended September 30, 2017, and filed with the SEC on April 5, 2018;
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Our Quarterly Report on Form 10-Q for the quarter ended December 31, 2017, and filed with the SEC on February 14, 2018;
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Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, and filed with the SEC on May 17, 2018;
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Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, and filed with the SEC on August 20, 2018;
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Our Current Reports on Form 8-K and Form 8-K/A filed with the SEC on October 5, 2018, September 25, 2018, September 11, 2018, July 18, 2018, July 17, 2018, July 3, 2018, May 8, 2018 and April 2, 2018; and
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the description of the our common stock contained in our registration statement on Form 10 (No. 000-53498), filed with the SEC on November 17, 2008, including any amendments or reports filed for the purpose of updating such description.
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We also incorporate by reference into this prospectus all
documents (other than current reports furnished under Item 2.02, Item 7.01 or Item 8.01 of Form 8-K and exhibits filed on such
form that are related to such items) that are filed by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act (i) after the date of the initial filing of the registration statement of which this prospectus forms a part and prior to effectiveness
of the registration statement, or (ii) after the date of this prospectus but prior to the termination of the offering. These documents
include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
as well as proxy statements. Information in these documents updates and supplements the information provided in this prospectus.
Any statements in these documents will automatically be deemed to modify and supersede any information in any document we previously
filed with the SEC that is incorporated or deemed to be incorporated herein by reference to the extent that statements in the later
filed document modify or replace such earlier statements.
We will provide to each person, including any beneficial
owner, to whom a prospectus is delivered, without charge upon written or oral request, a copy of any or all of the documents that
are incorporated by reference into this prospectus but not delivered with the prospectus, including exhibits which are specifically
incorporated by reference into such documents. You should direct any requests for documents by writing us at 70 North Main Street,
Ste. 105,
Bountiful, Utah 84010 or telephoning us at (801) 244-4405.
Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference into this document will be deemed to be modified or superseded for purposes of the document
to the extent that a statement contained in this document or any other subsequently filed document that is deemed to be incorporated
by reference into this document modifies or supersedes the statement.