Company: CLSKW
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0000950170-25-015470
Chunk: 159

Company: CLEANSPARK, INC.
Filing Date: 2025-02-06
Form: 10-Q
Item: Item 8
Chunk 159
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18

Material Weakness in Internal Control over Financial Reporting 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses that have been previously reported have been identified and included in management's assessment: 

•The Company did not design and maintain effective information systems general controls over program change management, logical access and segregation of duties for our general ledger. Specifically, we did not maintain documentation to support the operation of our controls over change management for the Company’s general ledger, and the assignment or permissions  to users which allowed certain users to create new users and assign those users existing predefined roles in the general ledger, which could result in an override of existing internal controls over financial reporting. The existence of this material weakness affected the design of internal controls related to various assertions in certain financial statement line items such that internal controls were not effective for cash and cash equivalents, bitcoin, receivable from bitcoin collateral, note receivable from GRIID, property and equipment, deposits on miners, accounts payable, accrued liabilities, loans payable, deferred income taxes, stockholders' equity, bitcoin mining revenue, cost and expenses, share-based payments, and income tax expense.

•The Company did not design and maintain effective controls to address the accounting for property plant and equipment, and deposits on miners.   

•The Company did not design and maintain effective controls over payroll, including controls over the use of information from its third-party payroll service provider, maintaining appropriate segregation of duties and processing of payroll. 

•The Company did not design and maintain effective controls to safeguard cash that could result in the issuance of cashier's checks without any independent oversight.

These material weaknesses did not result in any identified material misstatements to the condensed consolidated financial statements, and there were no changes to previously released financial results. 

Remediation Efforts to Address the Material Weaknesses

The Company’s Board of Directors and management take internal control over financial reporting and the integrity of its condensed consolidated financial statements seriously. 

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include the following: 

Material weakness over design of information systems general controls 

The remediation actions include the following:  

•Removed users’ access within the general ledger system that allowed a