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COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

15. COMMITMENTS AND CONTINGENCIES

 

Office leases

 

The Company’s corporate offices are located at 70 North Main Street, Suite 105, Bountiful, Utah 84010. The Company occupies the leased space on a month to month basis at a rate of $850 per month. Future minimum lease payments under the operating leases for the facilities as of June 30, 2018, are $0.

 

On May 15, 2018, the Company executed a 37-month lease agreement, which commenced on July 1, 2018 at 4360 Viewridge Avenue, Suite C, San Diego, California. The agreement calls for the Company to make payments of $4,057 in base rent per month through July 31, 2021 subject to an annual 3% rent escalation. The Company has prepaid the rent for the month ending July 31, 2018. Future minimum lease payments under the operating leases for the facilities as of June 30, 2018, are as follows:

 

Fiscal year ending September 30, 2018 $8,114
Fiscal year ending September 30, 2019 $49,049
Fiscal year ending September 30, 2020 $50,521
Fiscal year ending September 30, 2021 $43,170

 

Contracts and awards

 

The Company was awarded a $900,000 contract from Bethel-Webcor JV. Under the contract terms we will install a turn-key advanced microgrid system at the U.S. Marine Corps Base Camp Pendleton. The contract is in direct support of the United States Department of Navy's communication information system (CIS) operations complex at the U.S. Marine Corps Base Camp Pendleton that was recently awarded to the Joint-Venture. The Company begin on-site work for this project in February of 2018.

Asset Purchase - Pioneer Customer Electrical Products Corp.

 

On May 2, 2018, CleanSpark, Inc. and Pioneer Custom Electric Products Corp., a Nevada corporation and wholly-owned subsidiary of CleanSpark, Inc. (together, the “Company”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Pioneer Custom Electric Products Corp., a Delaware corporation (the “Seller”). On June 29, 2018 the Company extended the closing date of the transaction to July 31, 2018 and subsequently extended the closing to be on or earlier than December 31, 2018. The amendments were executed as the seller was unable to meet all closeting conditions as of June 30, 2018. The transaction has not yet closed, the closing of the transactions contemplated by the Purchase Agreement is currently expected to occur on October 31, 2018 (the “Closing Date”).

 

On the Closing Date, pursuant to the Purchase Agreement, the Company will acquire all the assets (the “Assets”) and assume certain liabilities (the “Assumed Liabilities”) related to Seller and its line of business. The Assets the Company purchased from Seller include:

 

  • All accounts receivable held by the Seller at Closing, less appropriate allowance for doubtful accounts;
  • All trade accounts payable and accrued liabilities held by the Company at Closing;
  • All inventory held by the Seller at Closing;
  • Small tools;
  • Furniture and fixtures; and
  • Fee-Free license agreement for use of the Seller’s brand name; and
  • All purchase orders, customer contracts, and client list(s).

 

We agreed to assume the Assumed Liabilities under the Purchase Agreement, including, among others, all trade accounts of the Seller that remain unpaid as of the Closing Date, 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, the Seller shall receive the following consideration on the Closing Date:

 

  • an 18-month promissory note in the principal amount equal to the net carrying value of the current assets and liabilities of the business at the Closing;
  • an equipment lease agreement, which shall provide for the lease of the equipment from Seller to the Company;
  • 7,000,000 shares of Purchaser Common Stock based on an agreed upon value of $0.80 per share, for a total agreed upon value of $5,600,000;
  • a five-year warrant to purchase 1,000,000 shares of the Company’s Common Stock at an exercise price of $1.60 per share; and
  • a five-year warrant to purchase 1,000,000 shares of the Company’s Common Stock at an exercise price
  • of $2.00 per share.

The Purchase Agreement contains customary representations, warranties and covenants.