CLSK

MKT CAP $2BP/E —DIV YIELD —FCF YIELD -30.64%REV TTM —NET INCOME −$997.8M −429.1%NET DEBT $1.6B52W 7.88 – 20.20NEXT EARNINGS Nov 24 EST.SEC XBRL · TTM TO Invalid Date

How CLSK rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

48%

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291

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+4,852

words, now 23,153

New in FY2025

Risks Related to Our Business • volatile and unpredictable cycles in the emerging and evolving industries in which we operate; • our reliance on our management team, and any failure by management to properly manage growth; • our increasing focus on diversification into constructing and operating data centers for AI and HPC companies, as well as bitcoin mining, and the potential regulatory issues with entering into this new business; • future strategic acquisitions and other arrangements that we engage in, which could disrupt our business, cause dilution to our stockholders, reduce our financial resources and harm our operating results; • our ability to timely complete our future strategic growth initiatives or within our anticipated cost; • increased compliance costs as a result of our strategic acquisitions; • our need for financing in the future to sustain and expand our operations and any inability to obtain such financing on acceptable terms, or at all; • our business expansion into AI and HPC services may be capital intensive; • our current dependence on the price of bitcoin to achieve profitability, which has historically been volatile; • our limited operating history and history of operating losses and negative cash flow; • our exposure to pricing risk and volatility associated with the value of bitcoin; • our reliance on a third-party mining pool service provider for our mining revenue payouts; • the possibility that banks and financial institutions may not provide services to businesses that engage in cryptocurrency-related activities; • bitcoins we mine or hold for our own account may be subject to loss, theft or restriction on access; • potential actions of malicious actors or botnets; • the loss or destruction of private keys required to access our bitcoins and potential data loss relating to our bitcoins; • potential failures of digital asset exchanges and custodians; • our ability to adopt technology in response to changing security needs or trends and reliance on a third party, Coinbase, for custody of our bitcoin holdings; • the limited rights of legal recourse available to us following any loss of our bitcoins; • the possibility that our mining costs may exceed our mining revenues; • damage to the properties included in our mining operation and potential inability to get adequate insurance coverage for same; • our need for significant electrical power to support our mining operations; • increased scrutiny and changing expectations from stakeholders with respect to Environmental, Social, and Governance (“ESG”) practices and the impacts of climate change; • the possibility that large holders of bitcoin may sell bitcoin into the market in large amounts all at once, thereby impacting the growth of the price of bitcoin; • the potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof; • the limited precedent for financial accounting of digital assets, and the possibility of future accounting requirements for transactions involving digital assets; • our limited insurance protection exposes us and our stockholders to the risk of loss of our bitcoin for which no person is liable; • our mining operations are subject to risks of technological obsolescence, reliance on a vulnerable global supply chain for cryptocurrency hardware, potential trade restrictions and difficulty in obtaining new hardware, each of which could materially impact our business and increase our costs; and • our bitcoin treasury function exposes us to speculative trading activities, dependence on financial intermediaries, lack of exchange protections in over-the-counter transactions and heightened counterparty and insolvency risks when using both U.S. and non-U.S. counterparties.
Risks Related to Governmental Regulation and Enforcement Operations • potential changes in laws and regulations applicable to mining bitcoin, bitcoin itself or interpretations thereof, including, without limitation, banking regulations and securities regulations and regulations governing mining activities, both in the U.S. and in other countries; • we may incur additional compliance costs if deemed subject to the Commodity Exchange Act; • the risk that the SEC or another regulatory body considers bitcoin or any other cryptocurrency to be a security; • changing environmental regulation and public energy policy; • if we fail to qualify for certain state government tax incentives or to comply with local tax regulations, we may suffer financial losses; • future developments regarding the treatment of digital assets for U.S. federal income and applicable state, local and non-U.S. tax purposes; • potential exposure to specifically designated nationals or blocked persons as a result of our interactions with the bitcoin network; • the U.S. political and economic environment could materially impact our operations, including uncertainty surrounding potential regulatory and policy changes by the current presidential administration, such as the establishment of a strategic bitcoin reserve, laws and regulations pertaining to the digital asset markets, changes to mining difficulty or network rules, and new tariffs or trade restrictions on imported mining equipment; • regulations and taxes that target energy could increase our cost and adversely affect our business; and • regulatory developments surrounding AI and HPC may negatively impact our efforts to expand into AI and HPC hosting.
Risks Related to Our Securities • the price of our common stock may be volatile and could fluctuate widely in price; • any future issuance of preferred stock may adversely affect holders of our common stock, as shares of preferred stock may have additional rights, preferences and privileges as compared to our common stock; • we are currently the subject of a shareholder class action, and may be subject to shareholder litigation in the future; our costs of defending such litigation, arbitration and other proceedings and any adverse outcome of such litigation, arbitration or other proceeding may have a material adverse effect on our business and the results of our operations; • we have financed our strategic growth primarily by issuing new shares of our common stock, which dilutes the ownership interests of current stockholders; • 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; • the capped call transactions entered into in connection with the 2030 Notes (as defined below) may affect the value of the 2030 Notes and the market price of our common stock; • we are subject to counterparty risk with respect to the capped call transactions, as the option counterparties are financial institutions whose default or insolvency could materially harm us; • the issuance, conversion, or exercise of convertible notes and other convertible securities, options, and warrants will dilute our stockholders’ ownership; and • the accounting treatment for convertible debt securities such as the Notes, including recognition of higher non-cash interest expense, inclusion of shares in diluted earnings per share, and potential reclassification of the Notes as a current liability, may materially impact our reported results of operations and financial condition.
Risks Related to Our Business Our future success is difficult to predict because we operate in emerging and evolving industries that are subject to volatile and unpredictable cycles.
The bitcoin mining, data center and related industries are emerging and evolving, which may lead to period-to-period variability in our operating results and may make it difficult to evaluate our future prospects.
The markets in which we participate are highly competitive, and as we enter new markets, we are competing against companies with greater resources and capitalization.
As we enter the HPC and AI services market, we face significant competition, which may adversely affect the occupancy and rental rates of our data centers.
We now compete with numerous data center providers globally.
Some of our competitors and potential competitors have significant advantages over us, including more ready access to capital which allows them to respond more quickly to new or changing opportunities.
Our growth depends in part on external sources of capital which are outside of our control.
We have an evolving business model and strategy, which includes an increasing focus on diversifying into constructing and operating data centers for AI and HPC companies, in addition to our bitcoin activities.
To remain current in a digital assets industry that is rapidly evolving, we expect the services and products associated with such activities to continue to evolve and accordingly, our business model may also need to evolve.
Our growth strategy includes exploring expansion and diversification of our revenue sources into new markets.
For example, we are increasing our focus on diversifying into constructing and operating data centers for AI and HPC companies, including through our acquisition of properties and assets in Texas.
We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business, damage our reputation or limit our growth.
Such modifications may increase the complexity of our business and place significant strain on our management, personnel, operations, systems, technical performance, financial resources and internal financial control and reporting functions.
Moreover, we may not be able to manage growth effectively, which could damage our reputation, limit our growth and adversely affect our operating results.
Further, we cannot provide any assurance that we will successfully identify all emerging trends and growth opportunities within the digital assets industry, the AI and HPC market or other markets we seek to expand into, and we may lose out on such opportunities.
Additionally, any such changes to our business model or strategy could subject us to additional regulatory scrutiny and requirements, including licensing and permitting requirements.
Any of the foregoing could have a material adverse effect on our business, prospects, financial condition and operating results.
Our expansion into AI and HPC may divert resources from our core bitcoin mining operations, limit our power capacity for mining, and introduce operational complexity.
While we intend to continue our bitcoin mining operations, the allocation of resources to support AI and HPC development may reduce the capital, personnel, infrastructure and power capacity available for our mining business.
In particular, diverting future power capacity to AI and HPC workloads may limit our ability to deploy that power for mining, which is a highly competitive and capital-intensive industry.
As a result, we may be unable to expand our deployed hash rate (EH/s) at the pace of our competitors, potentially diminishing our market share and profitability.
Managing multiple distinct lines of business may increase operational complexity and place additional demands on our management, technical, and support teams, which could negatively affect our overall performance, strategic execution and profitability.
It may take significant time and expenditure to develop an AI and HPC hosting business through continued development at our facilities, and our efforts may not be successful.
The continued development of our facilities is subject to various factors beyond our control.
There may be difficulties integrating new equipment into existing infrastructure, constraints on our ability to connect to or procure the expected electricity supply capacity at our facilities, defects in design, construction or installed equipment, diversion of management resources, insufficient funding or other resource constraints.
Actual costs for development may exceed our planned budget.
In particular, our strategy to expand and diversify into AI and HPC hosting may require retrofits, alterations or other customized solutions to enable an operating environment for AI and HPC tenants.
Such changes may be cost-prohibitive, or the sites may be incapable of supporting such requirements.
These alterations may also require collaboration with cooling experts, engineers and specialized vendors to ensure thermal management aligns with specific hardware requirements.
We intend to expand by acquiring and developing additional facilities, taking into account factors such as availability of electrical capacity and infrastructure and related costs, geographic location and the local regulatory environment.
We may have difficulty finding sites that satisfy our requirements at a commercially viable price or within our timing requirements.
Furthermore, there may be significant competition for suitable data center sites, and government regulators, including local permitting officials, may restrict our ability to establish data center operations in certain locations.
Leveraging sites that we have contractually secured may ultimately fail due to factors beyond our control.
In addition, securing agreements to connect to power sources, and obtaining permits, approvals and/or licenses to construct and operate facilities, could be delayed in regulatory processes, may not be successful or may be cost prohibitive.
Actions by government regulators, or the issuance of new regulations that restrict AI and HPC hosting or bitcoin mining operations, may reduce the availability of electricity, increase its cost, or otherwise adversely impact our business.
Development and construction delays, cost overruns, changes in market circumstances, environmental or community constraints, inability to continue finding suitable data center locations, and other factors may adversely affect our operations, expansion plans, financial position and financial performance.
We will continue to review our expansion plans in light of evolving market conditions.

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Gone since FY2024

Risks Related to Our Business • our dependence on the price of bitcoin to achieve profitability, which has historically been volatile; • our limited operating history and history of operating losses and negative cash flow; • volatile and unpredictable cycles in the emerging and evolving industries in which we operate; • our reliance on our management team, and any failure by management to properly manage growth; • future strategic acquisitions and other arrangements that we engage in, which could disrupt our business, cause dilution to our stockholders, reduce our financial resources and harm our operating results; • our ability to timely complete our future strategic growth initiatives or within our anticipated cost; • increased compliance costs as a result of our strategic acquisitions; • our need for financing in the future to sustain and expand our operations and any inability to obtain such financing on acceptable terms, or at all; • our exposure to pricing risk and volatility associated with the value of bitcoin because we do not hedge our investment in bitcoin; • our reliance on a third-party mining pool service provider for our mining revenue payouts; • the possibility that banks and financial institutions may not provide services to businesses that engage in cryptocurrency-related activities; • bitcoins we mine or hold for our own account may be subject to loss, theft, or restriction on access; • potential actions of malicious actors or botnets; • the loss or destruction of private keys required to access our bitcoins and potential data loss relating to our bitcoins; • potential failures of digital asset exchanges and custodians; • our ability to adopt technology in response to changing security needs or trends and reliance on a third party, Coinbase, for custody of our bitcoin holdings; • the limited rights of legal recourse available to us following any loss of our bitcoins; • the possibility that our mining costs may exceed our mining revenues; • damage to the properties included in our mining operation and potential inability to get adequate insurance coverage for same; • our need for significant electrical power to support our mining operations; • increased scrutiny and changing expectations from stakeholders with respect to ESG practices and the impacts of climate change; • the possibility that large holders of bitcoin may sell bitcoin into the market in large amounts all at once, thereby impacting the growth of the price of bitcoin; • the potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof; • the limited precedent for financial accounting of digital assets, and the possibility of future accounting requirements for transactions involving digital assets; and • our limited insurance protection exposes us and our stockholders to the risk of loss of our bitcoin for which no person is liable.
Risks Related to Governmental Regulation and Enforcement Operations • potential changes in laws and regulations applicable to mining bitcoin, bitcoin itself or interpretations thereof, including, without limitation, banking regulations and securities regulations and regulations governing mining activities, both in the U.S. and in other countries; • we may incur additional compliance costs if deemed subject to the Commodity Exchange Act; • the risk that the SEC or another regulatory body considers bitcoin or any other cryptocurrency to be a security; • changing environmental regulation and public energy policy; • if we fail to qualify for certain state government tax incentives or to comply with local tax regulations, we may suffer financial losses; • future developments regarding the treatment of digital assets for U.S. federal income and applicable state, local and non-U.S. tax purposes; and • potential exposure to specifically designated nationals or blocked persons as a result of our interactions with the bitcoin network.
Risks Related to Our Securities • the price of our common stock may be volatile and could fluctuate widely in price; • any future issuance of preferred stock may adversely affect holders of our common stock, as shares of preferred stock may have additional rights, preferences and privileges as compared to our common stock; • we are currently the subject of a shareholder class action, and may be subject to shareholder litigation in the future; our costs of defending such litigation, arbitration and other proceedings and any adverse outcome of such litigation, arbitration or other proceeding may have a material adverse effect on our business and the results of our operations; • we have financed our strategic growth primarily by issuing new shares of our common stock, which dilutes the ownership interests of current stockholders; and • provisions in the Nevada Revised Statutes and our bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
Risks Related to Our Business Our ability to achieve profitability is dependent on the price of bitcoin, which has historically been volatile.
Our primary focus on our bitcoin mining operations and our associated expansion efforts is largely based on our assumptions regarding the future value of bitcoin, which has been subject to significant historical volatility and may be subject to influence from malicious actors, real or perceived scarcity, political, economic, and regulatory conditions, and speculation making its price more volatile.
Our limited operating history, in particular our recent entry into the bitcoin mining business, makes it difficult to evaluate our business and predict our future results of operations.
From the Company’s inception through September 30, 2024, we sustained $479,218 in cumulative net losses, and we had a net loss from our continuing operations for the fiscal year ended September 30, 2024 of $145,777.
We have generated these losses as we execute our business plan and expand on our bitcoin mining activities as bitcoin prices have at times been in a bear market.
Our future success is difficult to predict because we operate in emerging and evolving industries that are subject to volatile and unpredictable cycles.
The bitcoin mining and related industries are emerging and evolving, which may lead to period-to-period variability in our operating results and may make it difficult to evaluate our future prospects.
The markets in which we participate are highly competitive, and we may be unable to successfully compete.
Supply chain disruptions resulting from factors such as inflation, labor supply and shipping container shortages and the COVID-19 pandemic have impacted, and may continue to impact, us and our third-party manufacturers and suppliers.
We rely heavily on our management team, whose continued service and performance is critical to our future success.
We currently have six executive officers — our Chief Executive Officer and President, Zachary Bradford, our Chief Financial Officer, Gary Vecchiarelli, our Executive Chairman, S.
Matthew Schultz, our Chief Operating Officer, Scott Garrison, our Chief Technology Officer, Taylor Monnig, and our Chief Accounting Officer, Brian Carson — who are responsible for our management functions and are responsible for strategic development, financing and other critical functions.
The demand for professionals familiar with bitcoin mining and other skilled workers is currently high.
We have regularly engaged in strategic transactions, including acquisitions of companies, technologies and personnel, such as our recent asset and business acquisitions related to our Georgia, Mississippi, Wyoming and Tennessee properties, and, as part of our growth strategy, in the future, we expect to seek additional opportunities to grow our mining operations, including through purchases of miners and facilities from other operating companies, including companies in financial distress.
As part of our efforts to grow our hashrate and remain competitive in the market, we have acquired facilities, entered into new and re-negotiated purchased power agreements and invested in additional new and used mining equipment.
We are also reliant on third parties for our expansion efforts, including construction contractors and providers of infrastructure equipment, who may be burdened by delays in manufacturing, supply chain problems, less access to capital due to macro-economic conditions, or inflation.
If we are unable to complete our planned expansions or acquisitions on schedule and within our anticipated cost estimates, our deployment of newly purchased miners may be delayed, which could affect our competitiveness and our results of operation, which could have a material adverse effect on our financial condition and the market price for our securities.
Cash held in these accounts often exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
The value of bitcoin has historically been subject to wide swings.
Because we do not currently hedge our investment in bitcoin and do not intend to for the foreseeable future, we are directly exposed to bitcoin’s price volatility and surrounding risks.
The market price of one bitcoin in our principal market ranged from approximately $26,500 to $73,800 during the fiscal year ended September 30, 2024, $15,500 to $31,900 during the fiscal year ended September 30, 2023 and ranged from approximately $17,600 to $69,000 during the fiscal year ended September 30, 2022.
Currently, we do not use a formula or specific methodology to determine whether or when we will sell bitcoin that we hold, or the number of bitcoins we will sell.
Rather, decisions to hold or sell bitcoins are currently determined by management by analyzing forecasts and monitoring the market in real time.
Such decisions, however well-informed, may result in untimely sales and even losses, adversely affecting an investment in us.
At this time, we do not anticipate engaging in any hedging activities related to our holding of bitcoin; this would expose us to substantial decreases in the price of bitcoin.
As of September 30, 2024, we held approximately 99% of our bitcoin in cold storage and 1% in hot wallets.
Due to our usage of in cold storage, we may experience lag time in our ability to respond to market fluctuations in the price of our cryptocurrency assets.
In addition, our borrowings under the Master Loan (as defined below) are collateralized by approximately $78,125 of bitcoin as of September 30, 2024.
Pursuant to the terms of the Master Loan and related security agreement, Coinbase has the right to sell, pledge, rehypothecate, assign, use or otherwise dispose of the bitcoin collateralizing our borrowings under the Master Loan.
This could increase our exposure to the risk of a counterparty default since, under such circumstances, we may be unable to recover the posted collateral promptly or may be unable to recover all of the posted collateral Any of these events may adversely affect our operations and, consequently, our investments and profitability.
If the liquidity of the digital asset markets continues to be negatively impacted by these events, digital asset prices (including the price of bitcoin) may continue to experience significant volatility and confidence in the digital asset markets may be further undermined.
These events are continuing to develop and it is not possible to predict at this time all of the risks that they may pose to us, our service providers or on the digital asset industry as a whole.
Although we had no direct exposure to FTX or any of the above-mentioned cryptocurrency companies (with the exception of Coinbase, which is discussed in “—Potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof”), nor any material assets that may not be recovered or may otherwise be lost or misappropriated due to the above-mentioned bankruptcies, the failure or insolvency of large exchanges like FTX or other significant players in the digital asset space may cause the price of bitcoin to fall and decrease confidence in the ecosystem, which could adversely affect an investment in us.
See “–Our limited insurance protection exposes us and our stockholders to the risk of loss of our bitcoin for which no person is liable.” Our ability to adopt technology in response to changing security needs or trends and reliance on a third party, Coinbase, for custody pose a challenge to the safekeeping of our bitcoin holdings.
Any potential use of emerging technologies like artificial intelligence, machine learning and generative artificial intelligence could lead to unintended consequences and result in reputational harm and litigation.
We continue to evaluate emerging technologies like artificial intelligence, machine learning and generative artificial intelligence for incorporation into our business.
Any failure to accurately identify and address our responsibilities and liabilities in this new environment could negatively affect any solutions we develop incorporating such technologies and could subject us to reputational harm, regulatory action or litigation, any of which may harm our financial condition and operating results.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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