Welcome everyone On behalf of CleanSpark, Inc. I welcome you to our Second Quarter 2021 Financial Results Conference Call. My name is Natasha Betancourt. I'm CleanSpark's Chief of Staff. With us today with prepared remarks are CleanSpark's Chief Executive Officer, Zach Bradford; and Lori Love, our Chief Financial Officer. Before beginning, I would like to remind everyone that with the exception of historical information, the matters discussed in this presentation are forward-looking statements that involve a number of risks and uncertainties. The actual results of the company could differ significantly from those statements. Factors that can cause or contribute to such differences include, but are not limited to continued demand for the company's products, competitive factors, the company's ability to achieve future growth, the company's ability to produce and market new products in a timely fashion, the company's ability to continue to attract and retain skilled personnel and the company's ability to sustain or improve the current levels of productivity. These forward-looking statements are subject to risk and uncertainties and actual results may vary – differ materially. When used in this call, the words anticipate, could, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to CleanSpark, Inc. are as such a forward-looking statement. Investors are cautioned that all forward-looking statements involve risks and uncertainties that may cause actual results to differ from those anticipated by CleanSpark, Inc. at this time. Further information on the company's risk factors is contained in the company's quarterly and annual reports and filed with the Securities and Exchange Commission. Finally, please note that on today's call management will refer to non-GAAP financial measures in which CleanSpark excludes certain expenses from its GAAP financial results. Please refer to CleanSpark's press release for May 06, 2021 for a full reconciliation of its non-GAAP performance measures to the most comparable GAAP financial measures. On May 06, 2021, the company filed its Form 10-Q, which is available on sec.gov and the company's website. We also issued a press release announcing our financial results. Participants on this call, who may not have already done so, may wish to look at the press release as the company provides a summary of the results on this call. The press release may be found at cleanspark.com/investor-relations/news-releases. Following the prepared remarks, we will open up for a short Q&A. Please feel free to enter your questions under the ask a question section at the bottom of your screen. With that said, I would like to turn the call over to our CEO, Zach Bradford.

Thank you very much, Natasha. Good afternoon everyone and thank you for joining our call. As Natasha noted, I am joined today by Lori Love, our Chief Financial Officer. I will begin with our 2021 second fiscal quarter highlights and business development activities. And then I will let Lori run through our financial results before a brief Q&A. This was another record breaking quarter for CleanSpark, including a significant milestone achievement of the company reaching its first profitable quarter. Achieving profitability has been our guiding principle since we began the company. We were pleased to continue our trend of more than doubling revenues over the comparable reporting periods of the prior year. The addition of Bitcoin mining has dramatically enhanced our business and revenue growth. We also believe that we are the only publicly traded cryptocurrency mining company in the United States that mines 95% carbon neutral, and we're on a path to improve that. Not only are we approaching carbon neutral, we are doing so at some of the lowest energy costs for Bitcoin mining in the nation. I will speak further about our ESG goals later in the call. Revenues in our Bitcoin mining and energy segments continue to show very strong growth trends, achieving profitability for both the quarter and the fiscal year-to-date gives us even more confidence in our long-term business strategy. This growth necessitates an increase in guidance, which Lori will speak to later in the presentation. I first want to comment on our energy segment. The energy segment of our business is strong and we are seeing a rapid increase in sales. The energy industry as a whole is still encountering some global supply chain constraints surrounding specifically battery energy storage, which has temporarily impacted the timing of certain deployments. Fortunately, the flexibility of…

Thank you, Zach, and good morning, everybody. Let me make a few brief comments specific to our operating segments and growth. For the quarter ended March 31, 2021 our revenue was derived from three business segments that I will discuss individually. The first segment I want to discuss is our Energy segment, which provide software including our most recently launched and built residential sales solution – switch solutions, switch gear equipment, and services. For further detail on our product offerings in the segment, I encourage you to review the MD&A section of our recently filed 10-Q or visit our website. This segment produced $2.3 million in revenue for the six months ended March 31, 2021 compared to $4.4 million for the six months ended March 31, 2020. This decrease is attributable to the reduction of commercial projects, which we attribute to the pandemic. For the three months ended our revenues from this segment were $1.1 million, compared to $3.4 million in 2020 for the same period. As discussed earlier the reason for the decrease was our commercial line of business. We expect commercial projects in our backlog that were delayed to largely resume in the coming quarter. The company's wholly owned subsidiary, p2klabs is our Digital Agency Segment. They provide design, software development and other technology-based consulting services with internal design and marketing services to all CleanSpark companies. Revenues associated with this segment for the six months ended was $800,000 compared to $300,000 for the six months ended March 31, 2020. For the three months ended March 31, 2021 revenue was $426,000 compared to $296,000 for March 31, 2020. We expect to only see moderate growth in this segment, as we continue to focus on the utilization of the resources of p2k internally. Finally, our Digital Currency Mining segment produced…

Thank you, Lori. I would like to initially open up questions from our analysts and then open up to our audience. Our first question is from Amit Dayal, an analyst from H.C. Wainwright. The question is: How does the company plan to use the balance sheet? Will you continue to pursue M&A, if so, will those be mostly targeted to the micro-grid side of the business or the Bitcoin side?

Thanks, Natasha. I'll go ahead and take that question. Great question, Amit. We definitely are interested in pursuing additional M&A. We're always looking for things that can be creative, and there are certain times when there is no quicker way to grow than through M&A. We are interested actually in both sides from an M&A perspective. We really like to see actually where we can have an impact on an M&A strategy that has an impact on both the energy and the Bitcoin. So the acquisition we did in December will lead to us entering the Bitcoin space is the perfect example. A facility that has an energy need that we can make an impact on whether it's through utility negotiations or whether it's through our microgrid services. So absolutely we're keeping an eye on M&A. We're very conscious evaluations and seeking value though. So as things develop and as we have ability to report that to the market, we will do so, but absolutely we're interested in using our balance sheet for M&A purposes.

Thank you, Zach. We have another question from Amit. What will operating expenses be once all planned equipment expansion is deployed?

That's a great question. And actually – I think we have a good answer and that is it, it actually, we expect it to remain fairly flat with the exception of the energy costs. So the number one cost of Bitcoin mining is energy. And so obviously as we plug more miners in, as we make more active, it will absolutely use more energy. But otherwise the good – the best thing about Bitcoin as we mine Bitcoin 24 hours a day, seven days a week, on weekends while we're sleeping and we're still generating value, but it does not take any additional expense. The personnel we have already works. We have different shifts that work around the clock and we really shouldn't need any additional expansion or significant at least additional OpEx expenses.

Thank you, Zach. Our next analyst question is from Shawn at Water Tower Research. Are you actively looking for additional mining sites? And what do the energy profiles look at, at these facilities?

Absolutely. We are very active in the space and looking for additional facilities. We clearly have an interest in expanding beyond this. The energy profiles that we're paying attention to actually have to – have everything to do with cost, and how much carbon impact the energy sources have. So this is a case-by-case scenario and frankly every site that we look at looks a little bit different. But those are the two main factors that we're judging sites on. Now some sites are not going to be immediately 95% carbon neutral, but we have to have a path to get them there or to get them close to their, or to full carbon neutrality. And on the same side when we look at the cost per power there are certain benchmarks that we're using that I'm going to keep confidential for our purposes. But based on those, it's of course based on low energy costs.

Thank you, Zach. Another question from Shawn. How quickly do you think the difficulty will increase in Bitcoin mining? And how do you foresee it impacting yields?

That's a great question. Obviously none of us can truly predict the way that Bitcoin difficulty and how quickly it will change. But the interesting thing about difficulty is it's always being adjusted. And difficulty was designed into the block-chain to seek out efficiencies and low costs. And I think that we're going to see a decent increase over the next 12 months. If I was to throw a dart at the wall, I'd say 20% to 40%. Now with that said, when that difficulty increases, we will also see participants to have expensive power exit the market, because the same profits that are here today won't be there when difficulty increases. And it will be the users that are using the latest equipment, which is the most efficient that has the lowest energy costs like ours, like ours and it's really paying attention to the underlying costs that are going to succeed long-term. So even though we think difficulty will increase on those metrics, we think that there's going to be at least some, it's not going to completely offset that's for sure, but there's going to be at least some offsets that actually where certain participants in the market will exit, and we'll still be profitable long-term. Again we're thinking about this in the sense of years and decades, not months from a profitability point of view, and that's why we're focusing on long-term sustainability, making sure we're being responsible corporate citizens from an ESG perspective. And that way we know that we're going to from a regulatory and a profitability point of view, be there long-term, even when other parties may not be.

Thank you for that. So we have another few questions from analysts, Greg Lewis at BTIG. His first question is: what is the market opportunity for buying mining equipment with near-term deliveries?

That's a great question. We actually did a lot of I'll call it the secondary and the dealer market purchasing. And that's actually how we acquired all the mining machines that are going to be started being delivered. In March all the way through what we had delivered coming up all the way through, I'd say our deliveries through the end of July were really through the secondary market. Getting the newest machines is very difficult and there's very high premiums that are paid for those. We actually entered the market and what I feel was a very good time. We timed it well. So we were able to still miners in the secondary market, and although we were paying a premium or mark-up of what the dealers has to as compared to direct from the manufacturers, it wasn't as aggressive as it is now. So for example, right now we would have had to pay maybe double of what we paid just two months ago in the market. And that's why it's important that we have secured everything we need to outfit our current facility and actually more the supply that we have delivered from about October of 2022 and beyond we expect to put in a new facility. So I guess to suffice it to say it's difficult, but we have key strategic partners. We also have made some moves with those dealers to get preferential pricing. So where we have agreements that if we buy things, their entire supply in bulk, we're going to get better pricing that they would then they would offer to the market. Because in the market, they're selling maybe a dozen at a time or a hundred at a time instead of in the thousands at a time. So we feel that we've kind of positioned ourselves with a few of the dealers to have, that the first dibs on everything, but also we have also secured a long-term supply. So although it's constrained, we're not finding the same constraints as some of the other participants. And we're really happy with what we're seeing in our ability to buy things now, but also secure supply long-term.

Thank you. Another question from Greg at BTIG. On the cost side, you changed the reporting structure a little bit. Is there any breakout you can provide in terms of the cost and the mining side on the microgrid side of the quarter?

Yes. Absolutely. I can give some insights on that. We just to give some insight on the changes; obviously you'll see it in the reporting – at Jason reporting cost of goods that really aligns us with how the current industry is in the space reporting things. But in general, what I can say is, we're still mining at over 85% profit margins and actually doing better. That's what we use that term because it's fairly conservative, obviously Bitcoin fluctuates and our margin is measured between our costs and the COVID Bitcoin price on the day we mine it, and how our revenues and costs to report it. So again, our all in costs are below $6,000. Our energy costs are below $45,000 or sorry, $4,500 and $6,000. And with that, we believe we're going to actually make quite a to push those down even further with some plans that we have that we'll discuss with more broadly with the market in the coming month, but we're taking certain steps to make our operations much more efficient. As it relates to the energy side, what I can do is say, our blended margin that we're targeting right now is around 30%. We are seeing margin improvements in the energy business all in across the board. And I think by our next earnings call, we'll break those out a little bit more. Obviously the way that we reported was a little different and we'll give further insight in the future, but our margin profile is very strong right now across all segments.

Thank you for that. We will now be moving on to questions from the audience. What is the competitive advantage over the Bitcoin miners?

That's actually a really interesting question. Especially when you consider that we're not necessarily competing in the same way someone would be competing for customers if like – like we do on the energy side, for example. And so how I position that is it really has to do with your own internal metrics that you're using. So our competitive advantage against other Bitcoin miners is really found I think in two areas. One is our all-in costs. We have low energy costs. We've disclosed what those are. They're $0.0285 to kilowatt. And – but also it comes in the balance of the, the other costs that go into it. We run very efficient. So cost I think we compete extremely. But secondly I think you have to look at how we are managing our ESG initiatives. Let's look at what was announced in California just last week. A bill was proposed that all Bitcoin miners in New York may have to shut down until they pass an environmental review because of the carbon impact. Our position has always been this. You can either self-govern and be responsible, or you can be governed, and that's what's happened. I think that some parties in the Bitcoin space may have been a little too boisterous about their intentions to turn on carbonaceous, you know, creating energy plants, whether it be coal people are starting back up or natural gas or things like that. And that just doesn't sit well with the public. So again, I think companies like us that take an active and responsible approach in how we're being a corporate citizen to the world will succeed long-term, because we won't have to navigate the same issues and even if we do, we'll be first in-line to tell in our cases Georgia. If Georgia was to do the same thing, we'd be first in-line to say we're doing it at 95% plus carbon free, and we'd be waved through and I think you can either prepare for that or you can wait for to catch up. So I think we have a very significant competitive advantage because that's a big risk that we don't have to worry about. We don't have to worry about somebody trying to shut us down over our carbon footprint.

Thank you, Zach. Our next question is how is the cost per Bitcoin being forecasted in the guidance? Are there opportunities to improve? What's the risk for higher cost?

That's a great question. Again, right now, we're actually using 6,000 a Bitcoin as kind of a baseline cost. Our energy costs, again, we expect to go down for two reasons. One is we expect to have an impact long-term in our energy solutions that we add to our systems, but also we are taking steps to use the most efficient miners. So, we actually expect to see an improvement on our costs per coin as we have the new S19 Pro, or I should say more of the S19 Pros come online. We will also likely take steps in the future to sell lower performing minors in exchange for replacing them with higher performing miners. And what I mean by performance, it's not just the terahash, but it's really an energy efficiency metric and the newer generation miners are more efficient. And right now the majority of our fleet is going to be run on those most efficient miners and the ones that are less efficient. Like I said, we will take steps of selling those into a very robust market, which we believe we can do so at a large gain actually in the market, but those are things we're going to do, so we expect it to be improved. As far as risks for higher costs, there is always a risk, for example, that at some point in the future energy costs could change. We have a five-year contract in place of which we're in the first year, so that's a pretty far out that risk. We're obviously looking for a new facility that facility could have different cost metrics. We, of course, are very conscious of that. So there are risks of that Bitcoin pricing, cost per Bitcoin increasing that can't be avoided, but we are actively managing it. That's also why we think it's an advantage of ours that we're an energy company at our core. So we understand the energy. So when we walk into a new facility and we accept a power purchase agreement for that facility, we know what it means. We're not going to get caught by the gotchas. So there is absolutely risk, anything can happen, but we – those are the main ones I see we're actively managing those and we feel like we're in a great spot in actually decreasing those in the future.

Thank you, Zach. Our next question is if you lose power for one hour, how much of that in Bitcoin in income do you lose for that hour that it's out?

Great question. And it's actually fairly simple if you make the comparison for one hour and I'm going to use kind of some broad things, as we of course intend to not only imply this in our facilities, but we would then intend to take it to other miners and offer it to them, so it really comes down to how large and how much production it may impact. So I'll use round numbers and say if somebody was producing $24,000 a day in revenue and they were down for one hour, they just lost $1,000. If you're a facility like us, that's about 4.5x that it means that we could lose $4,500 in a single hour of outage and as we grow and that number gets bigger, remember some of the numbers I said earlier, if it's $400,000 a day, if you're out for an hour, now you're losing $10,000, $15,000 in a single hour or more. So it's going to depend on your size, but – and the reason we chose the switches actually is that is actually probably the area that it takes is the easiest to backup. There is a lot more that can go into creating an entire site and its full resiliency, but that's kind of the low hanging fruit we're addressing first as we analyze how Bitcoin miners can make an impact on resiliency, but everybody cares about cost, so what's going to give everybody the largest bang for their buck. And as we solve that problem with a microgrid, we're going to move to try and solve other problems in addition to that.

Thank you, Zach. The next question is, is a long-term goal to use the Bitcoin revenue to help fund the microgrid side of the business?

Absolutely. That's an easy answer for me. We intend to grow two very large businesses side-by-side. We'd used in past presentations that we consider ourselves a true dual threat and we really do believe that. I mentioned it in the beginning of the call. We've seen some delays and the pandemic have off and on had an impact on how energy projects are deployed. We really expect that to pick back up. I mentioned earlier $14 million to $18 million of projects we expect to deploy over the next this quarter and next quarter. Things are lining up really well. We expect to take the energy company into profitability on its own inside the coming a quarter or two. And with that having two profitable businesses side-by-side, where we absolutely intend to grow it, but to the extent that we want to leverage that balance sheet to grow the energy business we're going to do so. That's a big benefit we have. Frankly, if you look at the funding and the Bitcoin we have on the balance sheet now, on this balance sheet we have now to leverage it positions us completely different in the market, we're so much stronger. We have access to secure, as I mentioned, larger energy storage contracts because of the balance sheet. None of that happens without really strong balance sheets. We are now so much better positioned as an energy company because of our Bitcoin participation than we were before that it's going to – this is going to go hand in hand. And our intention again is to create a real behemoth of a dual threat company.

Thank you. Our next question is, do you anticipate installing microgrids for other crypto miners and/or providing consulting services? Is this included in the revenue guidance and would it fall under digital currency revenue or other energy revenue?

Great question. Absolutely we plan to offer services to other mining companies, whether it would be for microgrids, whether it would be for energy consulting or a variety of other ways I think that we can work together. Right now, it's funny, and you're talking about what's in guidance. There's a lot of things. There's a lot of variables. So I'm not going to dive into how much or what part of it, it may relate to, but I'll just leave it at that that we do intend to offer our energy services to other miners. Now as it relates to the revenue side that would fall under the energy revenue buckets. So, our digital currency revenues are just going to be mining revenues. So everything else on that side would be related to energy, so anything we do would fall under that bucket.

Thank you. The next question is, can you speak to the Russell 2000 in inclusion process?

Yes. I can speak a little bit to it. My understanding is that that cutoff from a market cap point of view as measured at the end of the day today is the preliminary cutoff. And obviously then there is going to be some different timings and public announcements that occur in June and the buy-in requirements and so forth. From my point of view and my understanding, I anticipate that we will be included in the Russell 2000. I anticipate that that – if that occurs, it could have a very positive effect on the company. And based on my understanding, I'll just say I'm excited about the possibility of being included. Outside of that, I can't comment too much. We don't have control over the process and the full public results don't get published for about a month.

Thank you. And now to our final question, could you provide some color around the microgrid deployment at your facility in Atlanta? Is this a multi-phase process and how should we think about the microgrid CapEx builds out at this location?

Great question. It's absolutely going to be a multi-stage process and that can happens for a variety of reasons both what we're doing, but also then from about permitting point of view with the local utilities and stuff or the interconnections. So our intention actually with the switches and the microgrid that I mentioned before, our intention is to make that happen as close to the completion of our energy expansion we're currently doing as possible. We're actually trying to get it done it as part of it. So permits depending, that first microgrid could be complete by the end of this summer. And then from that point, we do intend to start adding additional solar throughout the facility. Our real intention and time will tell how the design works out is the utility is shifting out and they're shutting off one of the coal-fired power plants, and we expect as a result and working with them on this that what we'll be at that point at 98% carbon free. What we would like to do is add solar that at least offsets 2% of our power, so that we are truly a carbon neutral facility. Based on what we think that means we need at least a megawatt of solar and we have a great data center with a big empty roof on top of it. So it's about 44,000 square feet of roof space we have. So with that I think that we're going to be able to achieve that. So phase one is going to be smaller microgrid, switch backups. Phase two is going to be to add solar and some additional energy backup to reach carbon neutrality. And then from that point forward, it's going to be about how we have the – how we can best design the microgrid to interact for cost savings. We've been working on different designs for that. I won't comment on any further details there, because we are still testing out some of the ways that we make that work, but absolutely I really see it as a two to three stage phased approach for how we'll deploy microgrid technologies at our Atlanta facilities.

Thank you, Zach, and thank you everyone for your participation in our Q&A. I would like to now pass over the mic to our CEO, Zach, for closing remarks.

Thank you. So to close, let me reiterate our focus on profitability and growth while being disruptive to both the energy and Bitcoin industries as we seek out best-in-class solutions. As the microgrid and distributed energy industry further develops, we expect there to be significant industry-wide growth post-pandemic and the quality market participants and the trusted companies such as CleanSpark will be positioned to lead this wave of growth. We again want to express our commitment to our ESG strategy of responsible profits in cryptocurrency mining. We remain confident with our long-term growth strategy as we continue to focus on building the business to capitalize on our opportunities or being good corporate citizens. We remain deeply grateful for the continued support of all stakeholders of CleanSpark, most importantly, the investors that have entrusted us with their investment dollars. On behalf of our entire organization, we thank you for your support and appreciate you being on the call with us today.

Thank you, Zach. That concludes the Q&A portion of our call. Before we end today's earnings call, I would like to remind everyone that this call will be available for replay later today. Please refer to today's press release for dial-in and replay instructions available via the company's website. You can find this at www.cleanspark.com/investor-relations. Thank you for joining us today. This concludes our earnings call. You may now disconnect.